What is the main purpose of third-party liability?
Third party liability coverage in an automobile insurance policy will cover you if you are at-fault in a motor vehicle accident. In addition to giving you peace of mind, the main purpose of third-party liability coverage is to protect your assets in the event damages are assessed against you.
Standard practice for insurance companies and insurance brokers in Alberta is to recommend $1 million in third-party liability coverage in an automobile insurance policy. As a personal injury law firm, we urge you not to default to this standard practice, rather purchase $2 million or more in third-party liability insurance.
Why risk protection is advisable for any motorist.
Such risk protection is advisable for any motorist who has significant assets — for example, substantial equity built up in a home, a healthy savings account balance, or even a well-paying job from which wages could be garnished.
There are many scenarios where a possible damage award against you could balloon well beyond $1 million. If you are in a motor vehicle accident, potential claims against you could be made by:
- a pedestrian
- a cyclist or motorcyclist
- the driver of the other vehicle
- the passengers in the other vehicle
- passengers within your own vehicle
- or perhaps you could be in a multi-vehicle collision.
Common misconceptions about damage awards.
The common argument is that you will only have to be worried about a significant damage award against you if the injured defendant or defendants are junior hockey players or medical students, or have the potential for another high-income earning profession. This Ontario case, was one of the highest damage awards in Canada and demonstrates that injuring anyone can lead to a very hefty damage award.
In the case of Gordon v. Greig, 2007, three friends were on their way to a party at one of their parents’ cottages in the lake country in Northern Ontario. They were young at the time of the accident, and 25 at the time of trial. The driver was trying to pass cars on a curve and speeding well in excess of the recommended speed limit. He turned in to avoid a collision and lost control of the vehicle. His two friends, both passengers, were not wearing seatbelts at the time and were thrown out of the vehicle. The driver of the vehicle was found to have a blood-alcohol level greatly in excess of the legal limit at the time.
One of the young men suffered a brain injury and an upper spinal injury and required 24-hour attendant care. He had aspirations to be a tool and die maker or perhaps to work with heating and ventilation. The other passenger was rendered paraplegic in the accident. This young man had difficulties in high school and aspirations to be a landscaper. They were granted damage awards of over $11 million and $8 million, respectively.
Thus, the potential for a substantial damage award against you, if you are at-fault in a motor vehicle accident, is real, despite the common misconception that high awards are only awarded to injured high-income earners.
The situation is of course compounded if there are multiple defendants with multiple injuries.
For this reason, we recommend that you purchase at least $2 million in third-party liability coverage for your automobile insurance policy. The relatively minimal extra expense will give you valuable security in the event the worst should happen, and you are found at-fault in a motor vehicle accident.
We hope this information has been useful in helping you make decisions about your insurance coverage. If you or a loved one has injured, please CONTACT the friendly, helpful, and knowledgeable lawyers at CAM LLP for a free consultation.