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What is no-fault insurance? Does it mean everybody’s equally at fault in an accident? Does Ontario have it? – Jerry, Oshawa

With no-fault insurance, you don’t have to fight the other driver – or their insurance company – for cash after a crash.

“It’s basically where you get compensation from your own insurance company in the event of an accident,” says Anne Marie Thomas, senior manager of partner relationships at rate-comparison site Insurance Hotline. “Before no-fault, you would have to fight my insurance company to get your claim paid and you, as an innocent driver, would be out of pocket while you were waiting for it all to get sorted out.”

In a pure no-fault system, if somebody hits you, your insurance company fixes your vehicle and their insurance company fixes theirs, Thomas says.

The driver who hit you would still be considered to be at fault and their insurance rates would go up.

if you weren’t at fault, your rates wouldn’t go up, even though your insurance company paid for your car’s damage.

Your insurance company wouldn’t go after the at-fault driver or their insurance company – that’s called subrogation – to get their money back.

“In Ontario, typically, there’s no subrogation,” Thomas says. “The way the province looks at it, at the end of the day, it all comes out in the wash.”

No fault of your own?

No-fault doesn’t just cover damage to vehicles, it also covers injuries and death.

Only Manitoba and Quebec have pure no-fault systems where you can’t ever sue another driver – or their insurance company – for pain and suffering or for economic losses.

In the other provinces, you can sue for economic losses that are over the threshold set by that province.

Ontario has had a partial no-fault system since 1990, says Pete Karageorgos, director of consumer and industry relations at the Insurance Bureau of Canada (IBC).

Before that, it was tort-based, which means you’d have to sue for damages in a crash.

“The idea of no-fault was launched over time as a way of reducing legal and administrative costs and a way of speeding up the process – before no-fault, it could take years to get a settlement,” Karageorgos says. “In 1989, I was a pedestrian struck by a vehicle on the sidewalk and I had to personally get a lawyer and sue for everything, including my broken glasses and my clothes that were damaged.”

Lower costs?

The cost of lawsuits does make insurance more expensive, says Werner Antweiler, professor of economics at the Sauder School of Business at the University of British Columbia.

“In tort-based systems, they’re all paying more because you’re paying legal costs and these settlements are a tremendously slow process,” Antweiler says.

In 2018, the most recent year with IBC numbers, the average rate in British Columbia was $1,832 – the highest in Canada. In Ontario, the second-highest, it was $1,505.

In Manitoba, it was $1,080 (IBC used 2017 numbers) and in was Quebec, it was $717.

In an attempt to lower its average insurance rates, British Columbia announced that it would mostly eliminate the ability to sue for serious injuries by next May.

The province hopes that the plan will cut rates by $400, on average, per person. Antweiler thinks the move to no-fault insurance could work to make insurance cheaper while still covering costs for victims of serious crashes.

“It will work like workers’ compensation,” says Antweiler. “The trial lawyers are vociferously arguing against it because it deprives them of a lot of income.”

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