Alberta Is Going to a No-Fault System: What This Means for Albertans

Alberta’s provincial government has announced that, beginning on Jan. 1, 2027, Alberta will be transitioning to a no-fault auto insurance system, which they are calling a “Care-First” insurance system. But what does that actually mean for the average Albertan driver? In this blog post, we dive into what the existing system operates like now and what these future changes may look like for Albertans.

How Does Alberta’s Insurance System Work Now?

Alberta currently follows a hybrid liability insurance system (a “tort” system). Under this system, Alberta drivers who are injured in an accident are able to sue the other parties to the accident to get full and fair compensation for their injuries. Through the court process, the person determined to be at-fault for the accident is responsible for paying for the damages caused by the accident, including general damages for pain and suffering, wage loss, loss of earning capacity, loss of housekeeping ability, future costs of medical care, and out-of-pocket expenses paid. However, each individual will have medical treatment expenses covered through their own insurance (known as accident benefits), regardless of who is at fault for the accident (no-fault).

The benefit of the current system is that through this legal process, each claim can be addressed based on the specific facts and circumstances of the case, and on the unique needs of the injured party. This legal process is thorough and individualized, which means although it does take time and court resources, it can ensure a full and fair settlement for each claim.

What Is No-Fault Insurance?

In a no-fault insurance system, each driver’s insurance policy pays for the policyholder’s property damages and medical expenses, and it pays the compensation for their injuries and missed work, regardless of who is at-fault for the accident.

There are several different ways to administer a no-fault system and several provinces, such as British Columbia, Manitoba, and Saskatchewan, have already moved to some type of no-fault system.

As an example, in May 2021, British Columbia fully transitioned to a publicly administered no-fault system called “Enhanced Care.” This system is managed by the Insurance Corporation of British Columbia (ICBC), with a stated aim to reduce costs and improve care for those injured in an accident in the province, but which limits an individual’s right to sue for compensation. As one of the largest personal injury firms in B.C., Preszler Injury Lawyers has seen firsthand the effects that a no-fault system can have on individuals, and the issues that can arise when citizen’s right to sue in tort is limited.

How No-Fault Operates Based on Previous Systems

Generally, the stated purpose of the no-fault insurance system is to reduce insurance premiums and other costs related to the traditional and hybrid systems, and to streamline the process of making claims and receiving medical care.

What are the Advantages and Disadvantages of a No-Fault Insurance System?

The main advantages discussed in relation to a no-fault system are:

1. Faster, more streamlined claims processing – since there is no need to determine fault;
2. Reduced legal costs – since the number of lawsuits will be minimized, and;
3. Predictable compensation – since injured parties can rely on their own policy of insurance for compensation without the uncertainty of worrying about the other driver’s insurance coverage or co-operation with the claims process.

There are several serious potential disadvantages of a no-fault system in Alberta. Here are some examples based on cases we’ve managed:

1. Firstly, a no-fault system isn’t designed to tailor each claim to an individual’s needs and circumstances. Since individuals seriously injured in an accident will have their right to sue for damages limited, this can make it so the compensation they receive under the no-fault system is significantly less than under the current system, as their compensation will be based on pre-established limits and guidelines outlined in their insurance policy, and may not take into account, or be tailored to, the individual circumstances of each injured person.As Preszler has seen firsthand in B.C., this will lead to compensation that is unfair to individuals and that doesn’t account for the unique facts particular to their accident and resulting injuries. The examples below illustrate situations in which a no-fault system may fall short for individuals:
   • A young person, who has just graduated from high school with a bright future ahead of them, perhaps with plans for university and a rewarding career, is catastrophically injured in an accident. Unfortunately, they will be seen like any other student, and a no-fault system does not have the flexibility and nuance necessary to investigate this young person’s potential and ensure they receive fair and adequate compensation that accounts for their bright future.
   • For a young doctor, who has just graduated from their schooling and residency, but who doesn’t have an earning history as a doctor, no-fault will often deem them to have very little lost income or loss or earning capacity, despite it being patently obvious that this young person had significant earning potential and would have earned significantly more than they would receive as compensation under no-fault.
   • A young single mother, with children with special needs, is often treated by a no-fault system like any other injured party and may not receive the compensation necessary to ensure she can adequately care for her needs and the needs of her children, as the enhanced care needs of her family will not be taken into account.
   • An older individual, who was healthy prior to being injured and intended to work until 70 or 75 to ensure they can provide for their family, may be only compensated until 65, which could have devastating effects for an individual who should be saving for retirement and enjoying the golden years of their life.
2. Secondly, a no-fault system may actually result in higher premiums for Albertans. Critics of the no-fault system point to other provinces, such as British Columbia, where citizens may not have actually seen their premiums lowered, although this was pitched as a main reason for the change! Some argue that premiums have actually increased more than if they had not made the change to a no-fault system in the first place.
   • From personal experience, when my (the writer’s) father was trying to insure just one of his vehicles in B.C., he found that it cost more to insure that single vehicle than it cost to insure both of his vehicles in Alberta.
3. Finally, others argue that moving to a no-fault system will lessen the accountability of individual drivers, since the incentive to practice safe driving habits will be reduced. It is unclear whether this would happen in Alberta, but according to a report by the Insurance Bureau of Canada, the number of accidents in B.C. increased by 15% after the implementation of the “Enhanced Care” no-fault system (from 225,000 in 2020 to more than 260,000 in 2021).

What Will Change Under Alberta’s “Care-First” No-Fault Insurance System?

The stated focus of the “Care-First” system is to increase the ease and accessibility of medical, rehabilitation, and income support benefits for all Albertans injured in a car accident. This insurance system is proposed to be privately delivered, rather than through a public insurance company such as ICBC or Manitoba Public Insurance (MPI), allowing the existing competitive insurance market for Albertans to continue. The Government of Alberta has identified three main effects on Albertan drivers after the Jan. 1, 2027, change:

1. More Benefits – All Albertans would have access to improved benefits including medical treatment, rehabilitation, and income support. Those with serious or permanent impairments would receive a one-time permanent impairment benefit which would serve as their compensation for pain and suffering under the current system.
2. Faster Care – The new system would shift the focus of car accident claims from litigation in the courts to rehabilitation and recovery for the injured parties.
3. Lower Prices – Since litigation is reduced, the system will minimize the court and legal fees associated with litigation that can drive up premium costs, with the intent of providing a more affordable and stable vehicle insurance system for Albertans.

If You or a Loved One Have Been Injured in an Accident, Contact Our Calgary Car Accident Lawyers for a Free Consultation

Although it is unclear what the exact effects will be for Albertan drivers under the “Care-First” no-fault system in Alberta, it is important that drivers in Alberta know their rights and stay informed about the changes to the insurance system in the future. It is also important to note that the changes to the insurance system in Alberta are not final, and Albertans concerned about their freedoms and right to pursue an injury claim can still speak to their local legislative assembly member (MLA) or other government representative about their questions or concerns. If the changes are finalized, it will be crucial for Albertans to review their auto insurance policies to ensure they meet their coverage needs and can adequately protect and compensate them in case of an accident.

If you have been injured in a motor vehicle accident, please contact us at Preszler Injury Lawyers for a free consultation by calling 1-888-494-7191.