Potential Consequences of Driving Without Insurance

The consequences of driving without car insurance can be severe and life-altering. What follows is a description of just how bad it can get if you drive without insurance.

Civil Liability

Driving is one of the riskiest things we do. Accidents happen daily and injuries occur frequently. If someone is seriously injured in an accident, there’s a good chance that every driver involved and the owner of every involved vehicle will get sued, no matter who was at fault for the accident.

Defence Costs

Lawyers get a bad name for “suing everyone”, but they do it because it’s safer for the lawyer and the injured party to sue everyone and let the court sort out who is responsible, rather than leave out someone who does not appear to be to blame, only to find out later that the other defendants blame the person who wasn’t sued. At that point it might be too late to add this person into the lawsuit.

If you have car insurance, one of the benefits your policy provides is that your insurance company will hire a lawyer to defend you in a lawsuit arising from a car accident. As the cost of defending yourself costs can be very high even if you’re not at fault, this benefit is often the most important benefit under the policy. If you don’t have insurance, you may not be able to afford the legal bills that result from a lawsuit, and you may not be able to properly defend yourself.

Indemnity

The other obvious benefit that car insurance provides is indemnity in the event you are found to be at fault for an accident and you are liable to the injured person or his or her family. Serious injuries often give rise to settlements or judgments of hundreds of thousands of dollars and sometimes for millions of dollars. A six or seven figure judgment would be financially devastating to just about anyone. If you have valid insurance the insurance company will indemnify you, up to the limits of your policy, for whatever you are liable to pay to the victims of an accident. If you don’t have valid insurance, you would be liable to pay the judgment yourself.

Liability to Reimburse an Insurer or the MVACF

Uninsured individuals never have the kind of money needed to pay a large judgment or settlement. Thus car insurance policies contain uninsured motorist coverage. As a result, although the uninsured driver or owner will not be able to afford to pay compensation to the victims, the victims of the accident will likely receive compensation. The compensation will typically be payable by the victims’ own insurance companies,[1] or by the Motor Vehicle Accident Claims Fund.[2]  However, the victims’ insurance companies or the Fund may be able to claim reimbursement against the responsible uninsured persons.

Traditional Legal Remedies for Recovering Money

An insurer that has paid the victims, or the Fund if there is no insurer, will typically be entitled to obtain judgment against the uninsured at-fault driver and owner for the amount paid to the victim. The insurers or the Fund will become creditors and the at-fault driver and owner will become debtors for these amounts. The creditors will be entitled to use any legal process such as garnishment of wages or seizure of bank accounts, real estate, or other assets to try to collect the amount owing under a judgment.[3]

Driver’s Licence Suspensions

Once a judgment is obtained against the at-fault driver or owner, their driver’s licences may be subject to suspension until the judgment is paid. Section 198 of the Highway Traffic Act permits a suspension of the person’s driver’s licence if there is an unpaid judgment “for damages … occasioned by a motor vehicle”. Other provisions permit the driver or owner to apply to court to get their driver’s licence back if they make a payment plan; however, this leaves the prospect that the driver or owner will be making payments for many years, possibly even for life.

Moving Out of Ontario May Not be an Option for the Debtor

Moving from Ontario likely also will not assist the driver or owner (depending on where the person moves) because of reciprocal arrangements between provinces which permit mutual enforcement of driver’s licence suspensions.

Bankruptcy

Section 198 of the Highway Traffic Act says that upon suspension for non-payment of a judgment for “damages occasioned by a motor vehicle”, the debtor’s driver’s licence “shall remain so suspended and shall not at any time thereafter be renewed, nor shall any new driver’s licence be thereafter issued to the person, until the judgment is satisfied or discharged, otherwise than by a discharge in bankruptcy…” The use of the phrase “otherwise than by a discharge in bankruptcy” suggests that a bankruptcy won’t help the debtor. The licence remains suspended even if the judgment is discharged by a bankruptcy. You can go bankrupt but you won’t get your driver’s licence back. However, bankruptcy is regulated by the federal government, and provinces are not allowed to intrude on this federal power, and are not allowed to say which debts are discharged by bankruptcy and which are not. As a result, several courts have held that the phrase “otherwise than by a discharge in bankruptcy” is unconstitutional. It appears that uninsured driver’s have the option to go bankrupt. That said, creditors do have some remedies in a bankruptcy, and sometimes debtors are required to pay a portion of a judgment in order to get a discharge from bankruptcy. Two cases which are scheduled to be argued at the Supreme Court of Canada on January 15, 2015 may impact this area of the law.[4]  See our blog post on these cases and watch this blog for a report on the outcome of these cases.

Loss of Accident Benefits Coverage

Ontario insurance policies are required to include coverage for certain accident benefits, regardless of fault for the accident. Injured persons get these benefits from their own insurance company. If they do not have insurance, there are a series of priority rules so that other insurers or the Motor Vehicle Accident Claims Fund must pay the benefits. However, if the driver knew or ought to have known that he or she was operating the vehicle while it was not insured, many of the benefits, including income replacement benefits, are not payable to the injured driver. Medical and rehabilitation benefits remain payable.

Penal Consequences

In addition to the devastating civil consequences described above, a driver who is caught driving without insurance is liable under s. 2 of the Compulsory Automobile Insurance Act to pay a heavy fine of “not less than $5,000 and not more than $25,000 for a first conviction,” and on a subsequent conviction “not less than $10,000 and not more than $50,000 and, in addition, his or her driver’s licence may be suspended for a period of not more than one year.” Further, the vehicle being operated is subject to being impounded for three months.

Conclusion

“A whole lot of bad” can happen if you drive without insurance. Don’t mess around with your automobile insurance coverage.  Don’t let your loved ones drive without insurance or in circumstances where their coverage may be jeopardized.[5]

 

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[1] This assumes the victim has a motor vehicle and has his or her own insurance.

[2] Although the amount available to the victims from the fund is limited to $200,000 which may not be enough in some cases.

[3]  In reality these remedies are almost never used, because driver’s licence suspensions are available and are so effective as a collection tool.

[4] Moloney v Alberta (Administrator, Motor Vehicle Accident Claims Act), 2014 ABCA 68 and Canada (Superintendent of Bankruptcy) v. 407 ETR Concession Co., 2013 ONCA 769.

[5] For some unsettling examples of jeopardized auto insurance coverage, see our blog post “Novice and young drivers beware!”