The Superintendent of Insurance has approved amendments to the Standard Auto Policy Form No. 1 (“SPF No. 1”) that will take effect January 1, 2022. The most significant amendments relate to Bill 41: Insurance (Enhancing Driver Affordability and Care) Amendment Act, 2020. The Insurance Act RSA 2000, c I-3 (“IA”), section 585.1 enables Direct Compensation for Property Damage (“DCPD”) coverage in respect of certain kinds of automobile property damage claims. It is recognized in section A.1 of the amended SPF No.1.
Section A.1 reads as follows:
Where section 585.1 of the Insurance Act applies, the Insurer agrees to indemnify the Insured under this section as though the Insured were a third party for loss of or damage to the automobile owned by the Insured, its equipment, and its contents if not carried for reward, and for loss of use of the automobile, equipment and contents in accordance with the Insurance Act and regulations made under the Insurance Act.
Nature of Changes
DCPD coverage changes the way certain kinds of automobile property damage claims are dealt with in Alberta. Under DCPD:
- A driver who is not at-fault for an accident occurring on or after January 1, 2022 will claim from their own insurer for damage to their vehicle and its contents instead of claiming from the at-fault driver's insurance – whether or not they have Section C coverage.
- A driver who is at-fault for an accident will continue to claim from their own collision coverage (if purchased).
- A partially at-fault driver for an accident will have their claim split between their DCPD coverage and their collision coverage (if purchased).
These changes will have the effect of reducing subrogation between insurers for automobile property damage.
DCPD covers damage to the vehicle (including loss of use) and damage to personal property in the vehicle during an accident. DCPD does not cover damage caused by an unidentified or uninsured vehicle and does not apply where the same person owns both vehicles. DCPD applies to all insurers licensed to provide auto insurance in Alberta or who have signed an undertaking to be bound by it.
The DCPD Regulation, AR 132/2021 (“DCPDR”) sets out the rules for determining fault in more than 40 different accident scenarios. Section 4 of the DCPDR dictates that if an accident does not resemble any of those listed, fault will be allocated according to the ordinary rules of law (e.g. according to the Use of the Highway and Rules of the Road Regulation, AR 304/2002). Similarly, section 21 dictates that if a driver is charged with a specific driving offence (e.g. impaired driving), fault will be allocated according to the ordinary rules of law, even where the driver not charged with the specific driving offence would otherwise be wholly or partly at-fault under DCPDR.
Premiums and Deductibles
Where an insured driver is 100% not at-fault, their DCPD rating and premiums will be unaffected. Insurers can use vehicle rate groups, among other variables, to determine DCPD premiums.
Insurers can introduce DCPD deductibles to reduce DCPD premiums but are not required to do so. The deductible will be pro-rated based on the degree of fault (i.e. deductible x % not at-fault) and cannot be recovered from the at-fault driver.
DCPD intends to streamline the claims process for consumers as it will allow applicable claims to be processed through a representative from one's own insurance company. However, DCPD does not prevent drivers from pursuing legal action for other damages (e.g. injuries arising from the accident or other property damage not included in DCPD coverage).
The addition of DCPD coverage to the SPF No. 1 brings Alberta in line with other provinces that have introduced similar coverage regarding automobile property damage claims. This change helps insurers set insurance premiums that better reflect actual repair costs and minimize the time spent pursuing subrogated claims.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.