Auto Claim Process in Ontario

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The purpose of investigating an auto claim is to confirm that auto insurance coverage exists by documenting, recording, and confirming relevant facts.  The investigation process allows the claims adjuster to record facts surrounding the accident, so damages can be assessed and entitlement under the auto policy can be determined. 

FNOL – First Notice of Loss

The first step in the auto claims process is investigating the First Notice of Loss from the claimant. This starts by informing the insurance company that you want to put in an auto claim – insurance adjusters call the initial application to claim the “First Notice of Loss”.  Simply put, inform your company or insurance broker that you wish to submit a formal claim.  This can be done in writing or by telephone, but the best practice is to fax your written notification to your insurance company’s claim department.  If insured through an insurance broker, notify them in writing, via email, or fax, and they, in turn, will notify the insurance company.   It’s best to notify either the insurance company or broker in writing, as it can save you from a dispute, should that insurance company or brokerage say that you did not report the accident!

What is the First Notice of Loss?

Not only is the FNOL a way to communicate to the car insurance company your intention to put in a claim, but it forms the first part of the auto claim investigation. 

The FNOL outlines the following details on the occurrence/accident which include the following:

Verify Coverage

The second step in the auto claims process is to determine if coverage exists. Based on the accident/occurrence details, the claims adjuster will investigate to see if the claim can be accepted.  The adjuster will go through the details of the motor vehicle accident with the claimant, speak to the driver, review vehicle damages, speak to witnesses, or anything else to come to a fair conclusion regarding the acceptance or rejection of the claim.  

Assess Vehicle Damages

Once insurance coverage is confirmed the claims adjuster will evaluate the damages to your vehicle, or any property damage to any third parties, as well. 

The insurance claims adjuster will determine if the damages to your vehicle are repairable or not. If the vehicle can be repaired the insurance company might recommend a repair shop of their choice, or send a vehicle damage appraiser to the location of the vehicle for evaluation.

If the vehicle is not drivable the adjuster will help to have it moved to a secure location (usually a repair shop). This could involve towing it from the accident scene, from the tow and storage facility, or a police impound.  If the adjuster thinks that the vehicle cannot be repaired, they might have the vehicle towed to a salvage yard.

Vehicle Appraisal Process

After the Appraiser has evaluated the damages to your vehicle, a formal report of the damages and the estimated time to repair those damages are passed along to your auto insurance company for review.  

Based on the appraisal of damages the insurance company will determine if your vehicle is a total loss or can be repaired.  Auto insurance companies pay the cost to repair or replace the vehicle, whichever is less.   This means that the insurance company will not repair your vehicle if the cost to repair is more than its value. 

Negotiating Settlement in the Claim Process

Once the investigation process is over and insurance coverage is confirmed, the claims adjuster will assess your entitlement under the automobile policy.

This stage in the auto-claim process is typically straightforward. The adjuster will advise if the vehicle is repairable or written off. If the vehicle is repairable the adjuster will evaluate a repair estimate submitted by either an in-house appraiser, repair shop, or independent appraiser.   After reviewing the repair estimate the adjuster will either approve or disapprove of the estimate.

If the vehicle is written off the claims adjuster will determine either the actual cash value or replacement cost of the vehicle, depending on the coverage you purchased.

Although the negotiation phase can be straightforward, it can also be emotional and conflictive, especially if you feel as though you’re not being fairly compensated. This is especially true for negotiating a total loss, but also occurs with a simple repair proposition.  However, there are measures outlined in the automobile policy for alternate dispute resolution!

Claim Settlement Payment Process

Provided there is a mutual agreement between you and your auto insurance company surrounding your claim settlement amount, payment or indemnification would be the last and final step in the auto claims process.  Payment or indemnification is based on Actual Cash Value or Replacement Cost.  The following will explain the differences between ACV and Replacement costs as they relate to both a total loss and repair proposition.

Replacement Cost Insurance Coverage

Replacement cost car insurance coverage can be purchased only if your vehicle meets certain criteria. Typically, you need to be the original owner of a new vehicle, or if a newer demo vehicle, kilometre restrictions apply.  For example, a demo vehicle with 10,000 kilometres might not be eligible for replacement cost, while a demo vehicle with 5,000 kilometres might qualify. It depends on the insurance company on the maximum kilometres a demo vehicle can have to qualify for replacement cost, but generally, most companies are in the same ballpark range.

Actual Cash Value or ACV

Actual cash value or ACV is defined as the cost to repair or replace the damaged property of like kind, and quality, less depreciation.  Some define it as simply, fair market value.

Most car insurance claims to repair or settle based on ACV. This is a legal principle of indemnification (to put someone in the same financial position immediately before the loss) that is used by most insurance companies in North America.  The ACV clause is part of the auto insurance policy wording.

ACV vs. Replacement Cost on a Vehicle Repair

Depending on the insurance coverage you have, the basis for claim settlement will be ACV (actual cash value) or Replacement cost.

ACV on a Vehicle Repair

If your auto claims adjuster decides that your vehicle can be repaired, the parts used for the repair will typically be after-market parts.  This doesn’t mean that the parts are old and used, (although this can be the case in certain situations), but are usually new and are made by companies other than the original vehicle manufacturer.  Sometimes this hits a sore spot with some claimants who complain that after-market parts are not the same and demand OEM (original equipment manufacturer) parts.  However, OEM parts of a repairable vehicle are only granted if replacement cost coverage is purchased or an after-market part cannot be obtained for whatever reason.

ACV on a Vehicle Total Loss

If your auto claims adjuster deems your vehicle a total loss, a settlement based on ACV will be offered. This means that the amount tendered for the settlement of your auto claim will be equivalent to a similar vehicle of the same year, brand, trim and geographic location.  If the vehicle is a private passenger vehicle, sales tax would be added to the settlement amount. If the vehicle is registered to a commercial business the insurance company would not be responsible for paying taxes, since it’s a tax credit for the businesses.

Replacement Cost on a Vehicle Repair

Replacement cost coverage on a vehicle repair means that OEM parts are used and that those parts are brand new. As far as a vehicle repair is concerned, replacement cost ensures that depreciation won’t be factored in.  For example, if you own a Toyota vehicle, you will also be getting new Toyota parts.

Replacement Cost on a Vehicle Total Loss

If your vehicle is rendered a total loss by your auto insurance adjuster, and you’ve purchased replacement cost coverage, the settlement would typically be the lesser of the following:

• The actual purchase price of the vehicle and its equipment
• The manufacturers’ retail list price and its equipment on the original date of purchase
• The cost of replacing the vehicle with a new vehicle of the same make, model, and similarly equipped.

Insurance is meant to put someone in the same financial position, immediately before the loss. Replacement cost insurance on a vehicle goes beyond the normal principle of indemnity to put the claimant in a better financial position compared to when started. The reason why replacement cost coverage is more substantial is that depreciation is not factored in. Here’s an example: you cause a write-off to your 2017 Honda Civic.  You purchased the vehicle brand new and also added a waiver of deprecation endorsement to your auto policy.  If the replacement cost insurance wasn’t purchased the settlement would be equivalent to a similar year vehicle, trim, less depreciation.

Since replacement cost was purchased, you would essentially get a newer vehicle of the same make, model, and similarly equipped.

Final Claim Payment

Before you receive the final settlement cheque from your insurance company a “proof of loss” form needs to be filled out by you, or your legal representative, and also requires notarization.   This typically applies to a write-off scenario but can also apply to a repair situation.

Write-Off Scenario

The settlement cheque will include the named insured on the auto policy and all lien holders, as well.  Therefore, a settlement cheque can be co-payable or even tri-payable.   But before the cheque can be released, a signed and notarized, formal proof of loss form is required by the registered owner of the vehicle and the policyholders.

The proof of loss is a legal declaration of your loss, stating the facts surrounding the accident and the amount of money you wish to claim.   In real practice, the insurance company will fill out most of the form and just ask you to have it notarized.   The form needs to be completed, signed, or notarized within 60 days of receiving the form. If the proof of loss isn’t received you may forfeit your right to claim which will negatively, affect your insurance rates in the future!  

Once the proof of loss is returned to the insurance company and has been properly signed and completed a settlement cheque will be either mailed to you or your insurance brokerage for pick up.

Repair Scenario

A “proof of loss” form usually isn’t required for a vehicle repair claim.  The legal requirement to provide a completed proof of loss is waived in a repair scenario, so long as repairs are carried out and completed.  

The insurance company will pay the repair shop, less the deductible if applicable. For a commercial vehicle claim, the taxes on the repair would also be your responsibility.    

Sometimes claims adjusters have no choice but to make a cheque for vehicle repairs co-payable to the named insured and the repair shop. Typically this is done if there are issues or disagreements between the repair shop and the claimant/insured.

Loss of Use (Rental) Coverage During the Claim Process

Provided that you have “Loss of Use” coverage under your auto insurance policy, and your vehicle is NOT drivable, the adjuster will assist you in getting into a rental vehicle of like, kind, and quality. This means you’re entitled to get a rental that is similar to yours!

Keep in mind that “loss of use” coverage applies only if your vehicle is NOT drivable.  If it is drivable coverage does not apply until it’s in for repairs, or until total loss settlement is tendered. If the vehicle is drivable, rental coverage starts once the vehicle is dropped off for repairs!

My car has been written off, how long can I keep the rental vehicle?

Knowing when to return a courtesy or rental vehicle after your vehicle has been written off can be a topic of controversy. Technically, loss of use coverage ends once the insurance company offers a settlement.  However, insurance companies do give an extra few days with the rental as a courtesy. This applies whether you agree with the settlement or not. Some insureds or claimants insist that rental coverage extend up until the point where the settlement cheque is finally received.  This is not the case and can potentially leave you out of pocket for a portion of the rental bill.  But what about your rental limit when you initially purchased loss-of-use coverage?

The rental limit on a loss-of-use endorsement doesn’t mean you’re entitled to exhaust that limit.  The rental limit applies only when your vehicle can no longer be used due to the incapacitation of the vehicle from an insured peril.  Once your vehicle is declared a write-off the loss of use coverage technically ends.

FAQ about the Auto Claims Process in Ontario

Questions that many people ask during the auto insurance claim:

When do you pay the deductible?

A car insurance deductible in auto insurance can be paid directly to the repair shop if the vehicle is repairable, and deducted from the final settlement amount if the vehicle is written off.

Can I keep my vehicle if the insurance company totals it?

If your auto insurance company writes off your vehicle, and the vehicle is still drivable, you may keep it.  You can decide to keep the written-off vehicle in any situation. After all, it is YOUR vehicle! However, depending on the salvage branding of the vehicle, it may make more or less sense to keep it.

The following examples show how a particular salvage branding may affect your decision to keep the vehicle.

1. If the vehicle is branded “none” that means that the vehicle doesn’t require proof of roadworthiness. The owner avoids paying a safety certification to prove to the ministry that the vehicle can be safely driven on the road.  However, if you had optional loss insurance coverage (collision, all-perils, specified perils, or comprehensive) you would need to show your auto insurance company that the damages have been repaired before you can have optional loss coverage again.
2. If the vehicle is branded “salvage” the vehicle would need to be repaired and pass safety certification before it can be put back on the road. The branding on the vehicle ownership would then change to “rebuilt”.  Having a “rebuilt” vehicle brand does affect your ability to get insurance on it after the fact.  Most insurance companies do not insure vehicles with a “rebuilt” vehicle registration status. This may force you into the non-standard auto insurance market where the cost may be very high! 
3. If the vehicle is branded “irreparable” that means the vehicle can never be put back on the road and can only be used for parts. In this situation, you can keep it for parts but that’s all!

Out of the three possible branding scenarios, the first one is likely the best situation in which to keep the written-off vehicle.  Keep in mind that the insurance company will deduct the post-salvage value of the vehicle and taxes (usually expressed as a percentage) from the total loss settlement. 

How does a write-off claim work with a leased vehicle?

If your vehicle is leased and is determined by your auto insurance company to be a write-off, the insurance company will settle directly with the lessor. The lessor is also required to fill out a proof of loss since they are the registered owner of the vehicle.

Keep in mind your responsibility to continue with your monthly lease payments until the claim has been resolved and received a financial release from the leasing company.  If the market value of the vehicle is less than the amount owed on the lease, you’d be responsible for the difference.  This is because insurance covers the vehicle, not the lease agreement or loan. Gap insurance would address any difference between the settlement amount and the remainder of the loan or what is owed on a lease agreement.  Gap insurance is purchased separately and is not part of the standard automobile policy.

How does an auto repair claim on a leased vehicle work?

The auto claim process for a repairable, leased vehicle is very similar to a vehicle owned outright or financed.  The only difference is that the leasing company chooses where the vehicle will be repaired. Since the Lessor is the registered owner of the vehicle, it’s up to them where the vehicle gets fixed.  However, you’d still be responsible for any deductibles to the repair shop once repairs are completed. Also, if you’re vehicle is commercially insured you probably will need to pay the tax on the total repair.

Can I keep the insurance claim money instead of fixing my car?

Yes, you can keep the claim money instead of fixing your vehicle, but it’s not advisable.  Since the vehicle isn’t getting repaired the insurance company will not include taxes in the final settlement. The insurance company will also deduct overhead profit on the parts that were originally intended to repair the vehicle.  Therefore by opting to not repair your vehicle, you lose out on a portion of the full repair cost.  If you decide to take the money the insurance company will also get you to sign a full and final release and proof of loss, which prevents you from claiming further damages if later discovered.  Moreover, you would need to prove that those damages have been repaired before optional loss coverage (collision, all-perils, comprehensive, specified perils) can be offered again by your insurance company.

How long do I have to repair my car after an accident?

You have two to six years to repair your vehicle after an accident claim has been submitted to your insurance company. Each province in Canada has different limitation periods which legally bar claimants from compensation, beyond that date.

It’s very important to know that regardless of the limitation period to claim, you should always report the accident to your insurance company right away so that you do NOT prejudice their ability to investigate the claim properly.  If you do report late and prejudice your insurance company’s ability to investigate the claim, you may be faced with a denial of the claim!

How long do you have to report an accident to Insurance in Ontario?

The Ontario Auto Policy states that you have seven days to report an accident, or if unable to do so within seven days, as soon as reasonably, possible thereafter. 

The requirement to notify your insurance company, within seven days, falls under Statutory condition number seven, “Time Limit” in the Ontario Automobile Policy (OAP #1). 

“7. The notice required by sub condition (1) of statutory condition 5 and sub condition (1) of statutory condition 6 shall be given to the insurer within seven days of the incident but if the insured is unable because of incapacity to give the notice within seven days of the incident, the insured shall comply as soon as possible thereafter. “

By not reporting your car accident to your insurance company promptly, you potentially put yourself and your insurance company at risk of not being able to investigate and/or mitigate a loss exposure. If your insurance company isn’t aware of the accident, how are they to take steps to remedy the situation?  

By not reporting your vehicle accident within a reasonable period, you’re leaving your insurance company, and yourself in a bad position.  This can be problematic if the late or non-reporting of an accident leads to third-party damages or injury claims that could have been avoided or less costly if the insurance company had been informed and provided an early opportunity to investigate and mitigate the claim.

Not reporting the accident, or reporting late, violates the Ontario Auto Policy and can result in a denial of the claim. If your claim is denied because you did not report the accident in time, you may have to pay for your damages and also compensate any third party for damages and injuries for which you’re liable. 

Does the collision centre report to insurance?

Yes, Collision Reporting Centres do report to your car insurance company, automatically.  However, the insurance company would require a paid subscription to the Collison Reporting Centre for this service.   

Collision Reporting Centres in Ontario are privately owned and managed by Accident Support Services International (ASSI), a company formed in partnership between Police and Insurance Companies. They have been in operation since 1994. They charge a yearly subscription fee to insurance companies that want collision reports to be automatically directed to them. 

Not all insurance companies subscribe to automatic reporting from a CRC (Collision Reporting Center). In that case, the insurance would order the report from the respective Collision Reporting Centre on a case-by-case basis. 

How long do you have to report an accident in Ontario?

There are different requirements for reporting a car accident in Ontario, depending on who the accident needs to be reported to; reporting to the police and reporting to your auto insurance company.  Both the police agency and your insurance company have different requirements. 

According to the Highway Traffic Act of Ontario, Canada, a vehicle accident needs to be reported immediately. This is especially true of the following circumstances noted below: 

You are still required to call the police if the criteria above do not apply to your accident situation.  The police agency will advise you to either remain on the scene of the accident until they show up or will instruct you to report the accident to the Collision Reporting Centre closest to the location of the accident.