Statutory Deductibles in Motor Vehicle Cases Explained
On January 1st of each new year, while the rest of us are making New Year’s resolutions and setting (sometime lofty) goals, the Financial Services Regulatory Authority of Ontario (FSRA, formerly the Financial Services Commission of Ontario) publishes its updated list of statutory deductibles and the monetary thresholds which negatively impact survivors of auto accidents.
You might be asking “ what statutory deductible”? If you suffer injuries due to the fault of the driver of an automobile (whether you are also driving an automobile, or a passenger in one, or a pedestrian or cyclist, for example), your compensation for pain and suffering is subject to a number of limitations, including the ‘threshold’ which requires that you must have suffered a permanent and serious impairment of an important physical, mental, or psychological function in order to receive compensation for that pain and suffering and then, if you pass that hurdle, you must be awarded damages for pain and suffering (compensation) that is in excess of the statutory deductible in order to recover any money. Unlike the deductible for a broken windshield or other vehicular damage, you do not pay this deductible out of pocket. Instead, the insurance company for the at fault party (in other words, insurer for the person who hits you and causes your injuries) gets to keep the first $39,556.53 of your damages for pain and suffering.
Yes, you read that correctly. Another driver acts irresponsibly and injures you with their vehicle, and their insurer gets to keep the first $39,556.53 of your pain and suffering compensation.
Most Ontarians do not know this. What is worse, is that in a civil trial for damages for that injured person, we cannot enlighten the members of the jury about this deductible. Yes, you read that correctly too. While everyone is sworn to tell the truth, the whole truth and nothing but the truth in a court of law, there is an exception, and that exception is that we are barred from educating the jury that the at fault party is (a) insured by an insurance company and (b) that the insurance company gets to keep $39,556.53 of the injured person’s pain and suffering damages.
The statutory deductible is subject to indexation. The statutory deductible has been part of the motor vehicle insurance legislation since the 1990s, and it has gradually increased over time. In 2016, Premier Wynne, without any consultation with interested stakeholders, decided to tie the deductible to inflation. In 2016 the deductible was $30,000, but mid-way through 2016, it was tied to inflation, and therefore increased. To add insult to injury, the deductible is not tied to the year the accident occurred, but instead is tied to the date of settlement of the claim, or the date a judgment is entered.
In 2019, the deductible was $38,818.97; in 2020, it is now $39,556.53.
There is a monetary threshold, which means that damages assessed at a certain level will not be subject to the deductible. That monetary threshold is currently $131,854.01. In 2019 it was $129,395.49.
Let’s look at an example of how this works.
If you settle your claim for pain and suffering damages in 2020 and your damages are assessed at $135,000, you would not be subject to the deductible. You would get 100% of your pain and suffering damages – in other words, $135,000. If, however, your damages are assessed at $130,000 in 2020, you would not have passed the monetary threshold ($131,854.01) and therefore, you would be subject to the 2020 deductible of $39,556.53, which means that you would receive $90,443.47 ($130,000 – $39,556.53). This will increase again in 2021, in 2022 and on.
The motor vehicle insurance system is not fair, to be sure. If you are injured in a motor vehicle collision, it is important to reach out to a qualified personal injury lawyer for advice and representation as soon as possible. Motor vehicle litigation can easily take 3-5 years to reach a settlement or even longer if it must proceed to trial. The longer you wait to initiate the process, the higher the deductible will climb.