Lesson 6 Personal Automobile Insurance – Accident Benefits

Medical Payments—pays for miscellaneous medical expenses as a result of injuries in a vehicle accident. It pays reasonable expenses in the opinion of the insured’s physician or medical advisor. The expenses must not be covered elsewhere. The payments are for a two-year period after the accident.

1. $50,000 limit per person
2. $750 limit per person for chiropractic services
3. $250 limit for massage therapy and acupuncture services Death, Grief, Counselling, and Funeral Benefits—pays for the named expenses depending on the status of the insured at the time of the accident.
   1. $5,000 for funeral expenses
   2. $400 for the family for grief counselling
   3. $10,000 to the head of the household or the spouse or adult interdependent partner
   4. $3,000 to dependants as defined
   5. $1,000 for dependants under five years or over 69 years of age
   6. $3,000 for dependants between 10 and 17 years of age
   7. $2,000 for dependants of all other ages
   8. Benefit is increased when there are two or more survivors after the death of the head of the household; the death benefit is increased by  20% percent for each survivor other than the first.
   9. In addition, when there is a spouse or adult interdependent partner or dependent relative survivor living in the household, the benefit is increased:
      1. $15,000 for the first spouse or adult interdependent partner or dependent relative
      2. $4,000 for each remaining survivor
      3. Total Disability—is available to the insureds unable to work because of injuries sustained in the accident. They must prove they were either working at the time of the accident or prove they worked in six of the preceding 12 months. Total disability is paid for 104 weeks.
         • 80% percent of gross weekly income, less income available from all other sources
         • $400 per week (the maximum weekly benefit)
         • $135 per week for 26 weeks to a person not employed but unable to perform their household duties
         • Question: An insured has a standard auto policy with all coverages and is involved in a single vehicle accident. He damages some guard rails and badly damaged his vehicle. He was charged with impaired driving at the time of the accident. How would his auto policy respond to this loss?
           

            Answer : Impaired driving is only a breach of Section C of the policy. The policy would pay the expense of the guard rails under Section A—Third Party Liability. His collision damage would be denied.

           Questions : The insured lends her car to her neighbour, who goes out and has a serious accident that results in third-party damage and injuries, along with serious damage to the insured vehicle. How will the auto policy respond to this loss?

            Answer : The insured’s SPF 1 would respond to this loss under all coverages as Owner’s Policy is always first loss. If the neighbour has a vehicle, it would be excess coverage if the claim surpassed the limits on the insured’s policy. The neighbour could collect Accident Benefits from the insured’s policy.

           Question: Joe Moretti has an Alberta SPF 1 on his vehicle with the minimum limits for the province for Section A—Third Party Liability coverage. He is involved in a serious accident in which an injury claim totals $220,000 and property damage totals $15,000. What amounts will be paid under the respective coverage headings and by whom in this situation?

           Answer :  Priority of payments would come into play here. Joe’s Third Party Liability would pay it full limit of $10,000 for property damage and $190,000 for bodily injury. Joe would be personally responsible for the $35,000 over his minimum limits.

           Question : The head of the household is killed in a vehicle accident leaving a spouse and three children. What benefits will flow from the Accident Benefits coverage? (Note: Consider Accident Benefits in your answer.)

           Answer : The amounts paid would be $10,000 for the death of the head of the household, an increase of 20 percent for each of the three survivors after the first = 3 × $2,000 = $6,000, an increase for spouse (first dependant) of $15,000, and an increase for the remaining survivors = 3 × $4,000 = $12,000. TOTAL= $43,000.

           Question : The insured is injured in a car accident and was earning $600 per week as a laborer. She applies for weekly income benefits. What would you, as the adjuster, advise her regarding her entitlement?

           Answer : The insured would be entitled to 80 percent of $600 to a maximum of $400 per week, which would be paid for up to 104 weeks.

           Question : You carry Collision and Comprehensive coverage on your vehicle. Your licensed 17-year-old son takes the vehicle without your consent and has an accident. You charge him with theft. How would your collision and comprehensive coverage respond to this loss?

           Answer : The policy excludes theft and damage caused by theft by a person residing in the household. Thus, there is no coverage under collision or comprehensive.

            Question : Harold Jones is involved in a collision and finds out to his horror that the other party was uninsured. What does Harold do about the damage to his vehicle and his badly broken leg in the accident? Harold was not at fault.

           Answer : Harold can claim under his Collision coverage and also under his Accident Benefits for any injury-related expenses. He cannot claim for physical damage to his vehicle from Uninsured Motorist coverage but can claim for his injury up to $200,000.

           Question :

           You purchase a used vehicle for your spouse to drive and become a two-car family. You fail to report it to your broker for three weeks. What would be your status if an accident had occurred 17 days after you purchased the vehicle?

           Answer :

           This vehicle would be a newly acquired vehicle and automatically have coverage for 14 days. However, as the accident happened 17 days after purchase, coverage would not be extended.

           Question : The insurer is going to cancel your policy midterm because of a dispute between the two of you. What process does the insurer have to follow to have an effective cancellation?

           Answer :

           The insurer must follow the Statutory Condition entitled Termination. They must give 15 days of notice by registered mall or 5 days’ notice by personal delivery with a pro-rated refund of any unused premium.

           Question :Heather Inglis has a vehicle with an SEF 44 Family Protection Endorsement on it and carries a $500,000 TP liability limit. She is badly injured in an accident by a driver with minimum limits. How will this situation be handled in Alberta?

           Answer : Heather would claim the limits from the driver with minimum limits of $200,000. She could then go to her Family Protection coverage (SEF 44) and collect up to $300,000 from that source.

           Endorsements

           SEF 5—Permission to Rent or Lease: SEF 5 makes it possible to insure a non-owned vehicle on an owned vehicle policy. It would be required on any leased or rented vehicle if coverage is to follow.

           SEF 6—Passenger Risk Series: Carrying passengers for compensation is specifically excluded on the SPF 1. This series of endorsements allow the insured to do so. SEF 6 can be used for taxis or buses or simply by someone charging another person for a ride on a regular basis.

           SEF 18—Replacement Cost: This endorsement pays to replace the vehicle if damaged to a stated percentage of its actual cash value (ACV).

           SEF 20—Loss of Use: SEF 20 is a common endorsement used to pay for substitute transportation if the insured vehicle is damaged. The insured chooses the amount of daily coverage required.

           SEF 25—Alteration or Change Endorsement: This endorsement is wide open and the insurer fills it in with whatever the change might be. It could be used for a change of address, change of vehicle, deletion of automobile, change of coverage, and so on. It is a generally used endorsement.

           SEF 32—Motorized Recreational Vehicles: This endorsement waives compliance with Statutory Condition regarding qualification and age of the operator of the vehicle when it is being operated off the highway. It allows young operators to drive motorized recreation vehicles.

           SEF 43—Limited Waiver of Depreciation: If the vehicle is totalled within a set time, this endorsement allows settlement with no depreciation. In other words, the insured receives the purchase price of the vehicle and gets new for old.

         • SEF 44—Family Protection Endorsement: This is a valuable endorsement and could result in errors and omission claims if not properly offered and explained by the broker or agent. It allows badly injured insureds to be properly reimbursed for injuries suffered when the at-fault third party does not have sufficient coverage. The third-party limits serve as the deductible in situations such as this.