Things You Should Know If You Are Injured In A Motor Vehicle Accident: The Deductible

By Kevin Souch

If you have been injured in a motor vehicle accident caused by someone else’s negligence you have a right to claim damages from the at fault driver. This is common knowledge.  What is less well know is that there are limits on your ability to collect these damages included in the Insurance Act, RSO 1990, c. I.8. I refer you to the post regarding the Threshold Test for an example of how the government has enacted legislation that limits injured victim’s rights to collect damages in certain situations. This post will deal with another limiting provision, known as the deductible.

Anyone who is familiar with insurance understands what is meant by the term deductible, however, there is legislation in place in Ontario that passes the burden of the deductible from the at fault party to the innocent victim. At s. 267.5(7) of the Insurance Act there is a provision that reduces the amount an injured victim may be able to collect for non-pecuniary losses (also known as general damages or, in the U.S., pain and suffering damages). Known as the deductible, this provision allows the at fault driver’s insurance company to keep roughly the first $38,000.00 of what the Court or the Jury has determined the victim is entitled to. That’s right. You get injured through someone else’s fault and you have to pay that person’s insurance company almost $38,000.00 out of your general damages.  In many cases this wipes out the entire amount and leaves the innocent victim with nothing, sometimes worse than nothing as they may have to pay the other sides costs which aren’t assessed until after the deductible is applied.

To make the situation worse, the Courts in Ontario believe that juries cannot be trusted to adjudicate fairly if they know that an insurance company will be picking up the tab at the end of the trial. For this reason, juries are not informed that the deductible exists. A jury may believe that a victim should be compensated $50,000.00 for their injuries and make such an award at the conclusion of the trial. They will leave the Court under the impression that the victim will get that amount of money unaware that the first $38,000.00 will be clawed back by the insurance company and following costs, HST and disbursements the victim will end up with very little of the original award. It is unfortunate for all Ontarians that the Courts believe they are not equipped to adjudicate fairly and that vital information that could influence their decisions must be kept from them.

It should be noted that if your general damages are determined to be at least $127,000.00 or more, the deductible does not apply.  Unfortunately, for the vast majority of people injured in motor vehicle accidents their general damages will not reach that level. It should also be noted that, if you are able to pay more for your auto insurance, you can purchase an optional benefit to have your own insurance company refund you $10,000.00 of the deductible which will bring its own set of problems when trying to settle a claim outside of a trial.

The often stated purpose of this provision is to eliminate so-called nuisance claims. It is ridiculous to suggest that a general damages claim in the amount of $35,000 amounts to a nuisance claim. For many Ontarians this amount may be greater than their yearly income. It is often argued that Ontario has a generous Accident Benefits system that adequately compensates victims for less serious injuries, however, this argument has little merit as there is no provision in the Statutory Accident Benefits Schedule that provides damages for pain and suffering.

The true effect of the deductible is twofold. First, it provides significantly greater profits for the insurance industry at the expense of innocent victims. Second, it reduces access to justice to a great deal of potential claimants.  The Courts and the Government have long held access to justice out to be one of the most important elements of our justice system, but apparently not when it means lower profits for the insurance industry.