The starting point to determine whether a loss transfer claim can be made is to look at the type of vehicles involved in the automobile accident. A loss transfer will not be triggered unless there is a difference in the types of vehicles that are covered.
Most people are familiar with loss transfer as it applies to accidents between cars and motorcycles or for accidents involving heavy commercial vehicles; but it can also apply to single vehicle accidents, as well as accidents involving pedestrians and cyclists.
The loss transfer regime was established in an effort to equalize the imbalance in payment of accident benefits from the insurers of small vehicles who pay disproportionately high amounts, to the insurers of large and heavy commercial vehicles who pay disproportionately lower amounts. As the Court of Appeal noted in Jevco v. York Fire, (1996) 133 D.L.R. (4th) 592, "the purpose of the legislation is to spread the load among insurers in a gross and somewhat arbitrary fashion, favouring expedition and economy over finite exactitude".
This regime is set out by section 275 of the Insurance Act, R.S.O. 1990, C.I.8. Specifically, this section allows the insurer of one class of vehicle to make a claim for indemnification from the insurer for another class of vehicle. There are certain specific additional considerations:
- The amount of indemnification that can be sought is determined in accordance with the respective fault of each driver as determined in accordance with the Fault Determination Rules;
- There is a $2,000.00 deductible for any accident benefits that were paid out;
- If the two insurers cannot agree on the respective amount of fault of each of the drivers, this dispute shall be resolved through an arbitration under the Arbitrations Act.
- The matter cannot be arbitrated if either of the insurers are parties to a mediation (section 280), an arbitration (s. 282), an appeal (s.283) or a proceeding in court for accident benefits.
The rights and obligations of the various parties, including exactly what kinds of vehicles may be able to make these claims are further clarified by s.9 of R.R.O. 1990, Reg 664 to the Insurance Act. Specifically, under s.9(2) and (3):
An insurer for any class of vehicle other than a motorcycle, off road vehicle or motorized snow vehicle is obligated to indemnify another insurer if the person receiving accident benefits is making a claim pursuant to a motorcycle or motorized snow vehicle policy if:
- The motorcycle or motorized snow vehicle was involved in the accident in question or
- If motorcycles and motorized snow vehicles are the only kind of vehicles under the policy.
- An insurer for a heavy commercial vehicle must indemnify another insurer unless that other insurer also insures a heavy commercial vehicle.
Once it is established that the types of vehicles involved trigger a loss transfer claim, the amount of indemnification is determined in accordance with the respective degree of fault of the parties as determined in accordance with the Fault Determination Rules, R.R.O. 1990, Reg 668 to the Insurance Act, which sets out various detailed scenarios, and the respective liability for same. In the event that the circumstances of the accident do not fall within the Fault Determination Rules, section 5 allows for a determination of fault in accordance with common law principles of negligence.
Application to Other Circumstances
The Fault Determination Rules deal with collisions involving two motor vehicle accidents. It is not, however, an exhaustive list. Various other circumstances have been subjected to arbitration in order to determine whether or not loss transfer can apply.
In Allstate v. Old Republic, 1997, Arbitrator Griffiths was asked to consider whether or not loss transfer could apply in the case of a single vehicle accident. The claimant was a passenger in a heavy commercial vehicle when it was involved in a single vehicle accident. Unfortunately, the claimant died as a result of his injuries. He had been insured pursuant to a standard automobile policy with Allstate. Allstate paid out various accident benefits to the claimant's estate and sought indemnification from Old Republic; the insurer of the heavy commercial vehicle in which he had been travelling. Arbitrator Griffiths noted that there is no specific wording in the regulations requiring there to be more than one vehicle involved in the accident for a claim for loss transfer to be made. He specifically noted that in accidents involving cyclists, pedestrians or passengers in a single heavy commercial vehicle, liability will be determined in accordance with common law principles. He concluded that there was a valid claim for loss transfer.
Similarly, pedestrians may also be able to make a claim for loss transfer depending on the nature of the insurance policies responding to the claim. In ING v. Zurich, July, 2009, Arbitrator Novick was asked to consider this issue in an accident involving a pedestrian and a heavy commercial vehicle. One of the central issues was whether or not a pedestrian can have a valid claim given section 3 of the Fault Determination Rules, which read:
- The degree of fault of an insured is determined without reference to,
- the circumstances in which the incident occurs, including weather conditions, road conditions, visibility or the actions of pedestrians; or
- the location on the insured's automobile of the point of contact with any other automobile involved in the incident.
Arbitrator Novick distinguished between factors such as those listed in section 3, which can be considered to be "external distractions" to the individuals involved in the accident, and the actions of the participants to the accident. As such, the respective degree of negligence of the pedestrian claimant could be considered as part of the application of the common law principles of negligence in apportioning liability between the parties, and the loss transfer claim was allowed.
Whether loss transfer applies to a given accident depends solely on the types of policies responding to the accident. As such, there may be a claim for loss transfer in the case of a pedestrian or cyclist insured only under a motorcycle policy seeking to make a claim against either an automobile policy or a heavy commercial vehicle policy or various other circumstances. The starting place is always to find out what kinds of policies are involved.