Commercial Auto Insurance Ontario

The Ontario Automobile Policy, OAP (1) governs both personal and commercial auto insurance in Ontario. However, the standard auto policy leaves many gaps of coverage excluded from commercial use. How do insurers deal with this?

Insurance companies will modify the standard auto policy to meet the special requirements of the commercial vehicle operators/owners. They do this by adding and removing specific coverages that would otherwise be excluded under the regular Ontario Automobile Policy (OAP 1)

Definition of a Commercial Automobile

A commercial automobile is any class of vehicle used to transport equipment, tools, goods, or people in connection with the insured’s business. 

A commercial vehicle can be:

• Can be a truck, tractor, van, pick-up truck, jeep, SUV, or sedan-style body type
• A vehicle of a private passenger type used for carrying goods for commercial use
• A vehicle of a private passenger type used for driving school, conveyance of passengers of funeral, fire or police department services
• A trailer intended for use with a commercial vehicle 

A commercial vehicle is not:

• An automobile used strictly for personal use and has a gross weight of 4,500 kgs or less
• An automobile used for volunteer organizations and driven by volunteer drivers
• An automobile used for demonstration of test-driving purposes
• An automobile held for sale by an automobile dealership (under a Garage Policy)
• An automobile to transport samples and classified as a private passenger vehicle 

Classes of Commercial Auto Risk 

Commercial auto insurance in Ontario can be divided into different classes of risk. Classification is based on the size, weight, equipped equipment and configuration. 

For premium rating commercial vehicles are classified into the following:

• Operational radius
• Weight and type
• Type of cargo carried
• A combination of all these factors

Commercial vehicles are further divided into light, medium and heavy classes, based on their Gross Vehicle Weight (GVW). 

Exclusions under the Ontario Automobile Policy Excluded for Commercial Use.

Garage Workers Not Covered – the standard automobile policy of Ontario expressly excludes coverage to anyone who sells, repairs, maintains, stores, services or parks automobiles as part of a business.   

Example: you take your vehicle to a mechanic for repairs and while it is in their care, custody and control, a worker scratches it while parking it. 

Rented or Leased Vehicles – the OAP 1 specifically states that vehicles rented or leased by you, to another, are excluded from coverage. However, if an insured person is being paid to use a vehicle in connection to a business, the insurer will not consider that as renting or leasing. 

Weight Restriction – the OAP 1 does not cover automobiles that exceed 4,500 Gross Vehicle Weight Rating (GVWR),

Example – a transport truck easily weighs over the stated 4,500 GVWR excluded in the standard Ontario auto policy.  The truck would be excluded from coverage under a regular standard auto policy. 

Carrying Passengers –  carrying passengers for commercial purposes is excluded from coverage under the OAP 1. A special endorsement is required to override the exclusion and extend coverage. 

Example – someone operating a taxi or ridesharing vehicle is excluded from coverage under the standard Ontario auto policy.  Ridesharing and taxi vehicles require special commercial insurance for coverage to exist. 

Commercial Fleet and Individually Rated Commercial Vehicles

Insurers in Ontario split commercial automobile risk into two categories: Fleet and Individually Rated Commercial Automobiles (IRCA).

Fleet policies are typically a larger risk, with many vehicles on the policy. Vehicle deletions, additions and substitutions are continuously done throughout the policy term and reconciled at the end of the policy term, before renewal.  

Individually Rated Commercial Automobiles (IRCA) are typically much smaller risks, with fewer vehicles and each vehicle is specifically listed on the policy. There is no end-of-term reconciliation for vehicle additions, deletions and/or substitutions. 

Types of commercial auto policies

Commercial automobile insurance in Ontario requires customization. Not all businesses are alike, therefore auto insurance requirements will vary according to the nature of the business being underwritten. However, there are four types of commercial auto insurance policies, tailored specifically for commercial purposes: 

Garage Automobile Policy – covers garage personnel that the standard owner’s policy excludes. The garage policy covers non-owned and customer automobiles in the care, custody and control of the garage personnel. 

Non-Owned Automobile Policy – provides legal liability coverage to businesses for vehicles they do not own.  It can be sold as a stand-alone policy or often attached to a commercial general liability policy.  

Lessor’s Contingent Automobile Policy – created to protect the Lessor, to the extent that the Lessor is legally liable as the owner of the vehicle, should the primary policy be terminated or cannot respond. 

Excess Automobile Policy – adds to your existing liability limit from underlying auto policies. This type of commercial auto policy is typically written as a part of an Umbrella policy. 

Ride/Car Sharing – Car sharing allows users to use a vehicle for a set duration of time, while car sharing offers rides to passengers, from a specific pick-up and drop-off destination.