Motor Vehicle Insurance Policies in Alberta
There are several different types of automobile insurance policies end endorsements available to drivers in Alberta, and understanding the relationship between these policies is very important to ensuring that yourself and your family are properly protected. Unfortunately, this is often easier said than done, as insurance contracts are generally worded in dense technical language which can make it difficult for the average customer to compare apples with apples. This article will focus on the three primary forms of standard automobile insurance available in Alberta - mandatory coverage, physical damage policies, and Standard Endorsement Forms - and how the choice of insurance policies can affect the protection yourself and your family enjoy. Of course, there are an infinite combination of policies and endorsements which can be purchased depending on an individual’s specific situation, so it is wise to speak with your insurance company or broker to ensure that you have proper coverage in place.
A. Mandatory Coverage
In Alberta, all vehicles must carry a minimum level of insurance to lawfully be allowed on the road. This mandatory coverage includes both Third Party Liability and Accident Benefit coverage, and is intended to provide a level of protection to each and every driver and user of public highways. Specific details of the mandatory insurance policy required in Alberta can be found in the Alberta Standard Automobile Policy (SPF No. 1), available through the Government of Alberta website.
Third Party Liability provides coverage for instances where the insured driver is at-fault for property damage or physical injuries sustained by another party. For example, if you are found to be at fault for a rear-end motor vehicle collision, your insurance policy would provide coverage up to your policy limits (assuming there was no exclusion of coverage). Where the losses sustained by the injured party exceed the limits of the insurance policy, the at-fault driver may be held personally liable to compensate the injured victim for the additional damage over and above the limits paid by their insurance company. The minimum allowable policy limit for Third Party Liability in Alberta is $200,000.00, though additional coverage can, and often is, purchased by drivers. The most common levels of additional Third Party Liability insurance is $500,000.00, $1 million, and $2 million, though different options may be available depending on the individuals’s circumstances and insurance company.
In addition to Third Party Liability coverage, the mandatory insurance scheme in Alberta also requires that all drivers carry Accident Benefits coverage. Accident Benefits coverage (also called No-fault Benefits or Section B benefits) provides specific compensation to injured parties for various types of losses, regardless of fault for the collision. Most commonly, Section B benefits will provide coverage for necessary medical treatment, rehabilitation costs and aides, death benefits or funeral expenses, and a measure of income replacement where the injured party is unable to work as a result of their injuries. These Section B benefits extend to the insured driver and their passengers, and in some situations even the occupants of the other vehicle or pedestrians who were not in a vehicle at all. These Accident Benefits are subject to strict limits on the amounts to be paid, and the insurance company is given a wide discretion in determining what is and is not properly claimed under this section of the insurance policy.
B. Physical Damage Coverage
The mandatory coverage scheme in Alberta does not include any requirement for First Party property damage insurance (meaning property damage sustained by the insured’s own vehicle). Accordingly, where only minimum insurance coverage is purchased by a driver, they would not be entitled to receive any compensation for damage caused to their own vehicle as the result of an at-fault or 50/50 collision, nor other types of damage events, such as hail, theft, vandalism, etc… To ensure coverage for these types of events, the insured must purchase additional physical damage insurance.
In general terms, there are two primary types of physical damage coverage: Collision and Comprehensive. Collision insurance will provide compensation to the insured for physical damage sustained as the result of a motor vehicle collision. Comprehensive insurance provides compensation to the insured for physical damage sustained as the result of a non-collision event, such as theft, vandalism, or hail. There is an extremely wide range of physical damage policies available, each with their own benefits, drawbacks, and exclusions of coverage, so it is very important that prospective purchasers understand what it is that they are purchasing, and what the limits of that coverage are. As this type of insurance policy is not mandatory, rates are not controlled by the Government of Alberta (as they are with mandatory coverage) and premiums can therefore fluctuate greatly between insurance companies.
C. Standard Endorsement Forms
Standard Endorsement Forms (commonly referred to as SEFs or SEF policies) are additional coverage riders which can be added to existing insurance policies for an additional fee. These endorsements are intended to address a specific risk, or provide a specific benefit, based on the individual insured’s circumstances. Since not all insurance customers require the same type of insurance, these endorsements allow insurance companies to offer broad-based and cost-effective “standard” insurance policies, and then allow individuals who require more specialized coverage to purchase these additional endorsements. Some SEFs are quite common, while others apply to only small segment of users as they address a specific and relatively obscure risk. For example, SEF 20 (Loss of Use) is a very common endorsement added to many policies, which provides compensation for the use of a rental vehicle or taxi service when the insured vehicle is being repaired. On the other hand, SEF 9 (Marine Use Exclusion) is a very specific endorsement which excludes coverage for losses sustained by amphibious vehicles while they are being operated in the water, and is therefore only added in very limited circumstances. The complete list of approved endorsements is available through the Government of Alberta website.
While all endorsements may be beneficial in particular situations, SEF 44 (Family Protection Endorsement) is particularly relevant in the context of personal injury claims. The SEF 44 endorsement allows an insured driver (and in certain cases, their family members) who has been injured in a motor vehicle collision caused by the fault of another to collect compensation from their own insurance company if their losses exceed the policy limits provided by the at-fault driver’s policy. For example, assume that you are the faultless victim of a rear-end motor vehicle collision, and sustain losses of $900,000.00. If the at-fault driver carried only the mandatory minimum coverage of $200,000.00, their insurance company would only pay compensation up to the policy limits of $200,000.00, leaving you with a compensation “shortfall” of $700,000.00. Without the benefit of an SEF 44 endorsement, you would be limited to accepting this $200,000.00 and trying to recover the additional $700,000.00 from the at-fault driver personally - a process which can be extremely difficult, time consuming, and expensive. However, if your insurance policy included an SEF44 endorsement with a limit of $1 million, you could be entitled to claim this shortfall of $700,000.00 against your own insurance company, resulting in proper compensation for the full extent of your losses, despite the fact that the at-fault driver was under-insured. Accordingly, SEF 44 endorsements can be an extremely effective and proactive way to ensuring that yourself and your family are properly protected in the event of injury or loss, regardless of the policies carried by other users of the road.
With respect to SEF 44 endorsements, two factors are very important to keep in mind. First, in the vast majority of cases, the limits of the SEF 44 endorsement will match the limits of your Third Party Liability policy, as discussed above. Therefore, as you increase your Third Party Liability limits from the mandatory $200,000.00 to $1 million or $2 million, your SEF 44 limits should increase accordingly (however, though this is the general rule, it is important to confirm this detail with your insurance company, as each policy may be different). Secondly, SEF 44 coverage is only available where the limits of the SEF 44 endorsement are higher than the Third Party Liability coverage of the at-fault vehicle, and the losses are found to exceed the at-fault driver’s available compensation. For example, where Driver A has an SEF 44 endorsement of $1 million and is rear-ended by Driver B who has Third Party Liability coverage of $200,000.00, Driver A would be entitled to access their SEF coverage if their losses are determined to exceed the $200,000.00 available from Driver B’s policy. However, if both Driver A and Driver B have matching $1 million policies, then Driver A’s SEF 44 entitlement is nullified as both $1 million policies will offset each other.
No one ever plans to be in a motor vehicle collision. However, these accidents do happen, and in fact happen far more frequently than many believe. In the unfortunate case that you or a loved one is involved in such an event, it is important to ensure that you are prepared and protected with an insurance policy that best suits your needs. If you have any questions about a motor vehicle collision you or a loved one has been involved in, or about the insurance benefits that may be available to you following an accident, please do not hesitate to contact the experienced personal injury lawyers at Rodin Law Firm. We can be reached online, or by telephone at (403) 216-0385, and our consultation is without fee or obligation.