Vehicle insurance issues and impaired driving.

• Date: 01 January 2009
• Author: Vail, Brian A.

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The Problem

Drinking and/or doing drugs and driving is criminal behavior in Canada. Under the Criminal Code, it is a crime to operate a motor vehicle while one's ability to do is impaired by alcohol or drugs or while one has an illegally high blood alcohol level. It is also a crime to refuse to provide a roadside breath sample or a breathalyzer sample. Conviction for these offences can result in a fine and/or imprisonment, a court-ordered prohibition from driving and suspension of the driver's licence.

Despite the fact that drinking and driving is criminal and the sanctions for offending are significant, it is a problem of epidemic proportions. Canada-wide, the most common criminal traffic offence is impaired driving (64%). Accordingly, it is not surprising that impaired driving gives rise to a host of commonly-occurring insurance issues in the context of the standard automobile insurance policy.

The S.P.F. No. 1--Standard Alberta Insurance Policy

The S.P.F. No. 1 is divided into three sections. Section A relates to third party liability for injury and property damage coverage and such coverage is mandatory pursuant to the Insurance Act. Section B provides for various no-fault benefits and such coverage is also mandatory. Section C of the Policy provides for various types of property coverage relating to vehicle damage. Section C coverage is optional.

The three different sections are considered to be three separate insurances, combined in one policy documents.

Section A Coverage

Who is the insured with respect to Section A coverage? The Policy defines the term as including the named insured and anyone who drives or operates the vehicle with his/her consent.

The current situation with respect to Section A coverage relating to impaired driving is a hard, sad reality for insurers. The insurer must indemnify the insured for injury or property damage to third parties for which the insured is liable up to the policy limits, regardless of whether or not the insured's liability arises from impairment by alcohol or a drug. To fully understand the current situation, a review of the historical development of the current form of S.P.F. No. 1 is instructive.

Before 1 June 1982, the S.P.F. No. 1 contained statutory conditions prohibiting an insured from driving while impaired or having an illegal blood alcohol level, or permitting others to do so.

The existence of these statutory conditions gave rise to two important principles for insurers. First, the insurer had to indemnify third parties for damages up to the minimum statutory limits, regardless of the insured's impairment. The insured's breach of policy was no defence to claims against the insurer up to that limit; however, the insurer could defend third party claims for amounts in excess of those limits.

Secondly, the insurer could recover what it had to pay to third parties from its insurers. This achieved a legislative objective of ensuring that innocent vehicle accident victims would receive a certain level of compensation for their damages, regardless of the insurance "sins" of the at-fault driver. The motoring public was protected from the risk that an insured at-fault drive who breached his/her policy would not have sufficient assets to cover the losses, up to the statutory minimum limits. Protection from the risk of an uninsured at-fault driver having insufficient assets to cover the loss was accomplished by the creation of the Motor Vehicle Accident Claims Fund. At the same time, the Legislature balanced the impact of these provisions on automobile insurers by providing them with the right to recover what they would pay out in such claims from their insured, if the insured had sufficient assets to cover it.

Effective 1 June 1982, the Alberta government significantly changed the situation by amending the Insurance Act of the day to delete altogether Statutory Conditions prohibiting impaired driving from automobile policies: Insurance Amendment Act, S.A. 1981, c. 49, s. 5.

Since driving while impaired, or allowing others to do so, is no longer a breach of policy condition, this has had two major impacts on insurers:

1. they are now liable to third party claims to the full policy limits, regardless of the insured's impaired driving; and

2. they can no longer pursue the insured to recover what they pay out to third parties as a result of the insured's impaired driving.

   The...