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How Does Third-Party Liability (Tort) Work in Ontario?

by | Jun 24, 2021 | Legal

Third-party liability – also known as a tort claim – is mandatory for all Canadian drivers, yet many do not know that this aspect is adjustable based on personal needs. Take a moment to understand how this aspect of insurance works and to ensure you are always protected from car accidents.

In Ontario, third-party liability is a part of the mandatory car insurance coverage each driver must have. If you’re not familiar with the term third party, it really refers to any “tort” claims made by or against you. And it is one of the many parts that make up an auto insurance policy. Since most of us do not read all the paperwork assigned with our policy, it is no wonder that many have no idea what third-party liability means, or how it protects you in the real world. Let us explore the basics here.

How Does Third-Party (Tort) Liability Work?

If you have auto insurance in Ontario, you – by default – have built-in third-party liability coverage. It works together with other elements to offer protection across various claims. What does this mean?

In Ontario, auto insurance holders also have property damage and accident benefits working alongside third-party liability insurance. Property damage covers damage to your vehicle. Accident benefits provides no-fault benefits to you through your own policy, for such things as treatment costs, attendant care, and income replacement benefits.

When faced with a tort lawsuit – let’s say you hit someone with your car and may be at fault,  the third-party liability section of your car insurance can protect you from having to pay the plaintiff any damages they may be entitled to.

This coverage will protect the insured driver and/or vehicle owner for any injuries  they may have caused (even that causing death), and cover costs associated with legal fees and settling the lawsuit. People can sue you for pain and suffering, loss of income, and other kinds of damage. These tort claims are all covered under the third-party liability section of your policy. Plain and simple – it provides you with the protection you need if you are at fault for causing injury.

Third-Party Liability Protects your Pocketbook

Accidents happen and lawsuits follow. If you are involved in a lawsuit, it can be worrisome to see millions of dollars being claimed. Do not panic; many lawyers simply claim the maximum out of an abundance of caution. With third-party liability, you can rest assured that both your pocketbook and peace of mind will not be drastically affected if you are involved in an accident, whether you are at fault or not. 

What Does Third-Party Liability Cover?

Third-party liability will cover you in case you are at fault in an accident involving pedestrians, cyclists, motorcyclists, the driver (and passengers) of the other vehicle, the passengers in your vehicle, and any combination of all of these. As we now know, there are many other expenses beyond lawyer fees that third-party liability covers – including mental, emotional, economic, physical suffering etc.

How Do I Ensure Coverage?

A few caveats apply to third-party liability coverage. Although itis built into mandatory car insurance policies in Canada, this does not mean you can just ‘set it and forget it’. You cannot be oblivious to some of the most basic rules.

One example of things to avoid is: don’t let someone without a proper license borrow your car! Or someone who is an excluded driver under the policy! 

There are other smaller things you need to keep in mind. Make sure your insurance company does not have any reason or suspicion to not cover you. Make sure you have a valid license and do not continue driving if you have lost it. If you have recently moved cities or provinces and are arriving to Ontario as a new resident, make sure your insurance company is aware. 

Accidents happen in the blink of an eye, so make sure there are no issues with your coverage and that you are following these basic rules. 

Am I Getting the Right Amount of Coverage?

Third-party liability is mandated in most Canadian provinces. The minimum default coverage varies from province to province, and individuals can adjust this amount based on their own needs. So now you can ask yourself: “What do I need?”

In Ontario, the minimum coverage for third-party liability is $200,000, but most people have $1 million by default. It is not uncommon for workplaces to request that employees have a $2 million or higher limit if they use personal cars for commercial use or frequently carpool with coworkers.  This limit can be increased to cover an individual driver up to $5 million in Ontario – ask your insurance about the maximum. A higher limit will provide more protection but remember that you will have to pay slightly more for this premium. Your insurer will apply this extra cost based on your location, driving history and other factors.

So how do you decide what to set as your third-party liability limit? Consider your personal lifestyle to help answer this. If you use your car for work, carpool often, live in a large city, or regularly cross international borders, then consider a higher limit. This will protect you if an accident occurs where the damages exceed the minimum.

For example, if you get sued, and the claim is worth more than what you are insured for, then your insurance will not be able to help you cover the entire cost. If you cause an accident where an individual suffers serious injuries that require lifelong care, the claim could easily go into the multi-million-dollar range. Some will hire their own lawyer to protect their interests for the claim above the insured amount. Fortunately, these types of claims are few and far between, but nonetheless they do happen.

Final Thoughts

It is so important to understand how car insurance in Ontario works. Yes, you may be paying slightly more if you increase your third-party liability insurance, but it is easy to do (a simple phone call to your insurance) and the cost is modest compared to the protection you are getting. Consider your driving habits, geographic location, and how much you could afford if a lawsuit exceeds your coverage. Since you cannot ever know when an accident may happen, it is worthwhile to understand what options you have that can give more peace of mind on the road.

If you have questions about third-party liability claims or insurance issues, please feel free to contact our team for a free consultation. 


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