PEI's New Direct Compensation for Property Damage (DCPD) Regime Effective October 1, 2015: 5 Insurer FAQs

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PEI’s New Direct Compensation for Property Damage (DCPD) Regime Effective October 1, 2015: 5 Insurer FAQs

October 21, 2015

By Alexandra Dalton, Articled Clerk at McInnes Cooper,
D. Shannon Farrell, Partner at McInnes Cooper

Effective October 1, 2015, PEI joined several other Provinces, including NB and NS, and adopted a new Direct Compensation for Property Damage (DCPD) regime. The new regime will change how insurers compensate their insureds for property damage incurred in automobile accidents for which the insured is not at fault and should reduce litigation with third party insurers over what are often relatively modest property loss claims.

Here are the answers to five frequently-asked insurer questions about PEI’s new Direct Compensation for Property Damage (DCPD) regime.

What’s different under the DCPD Regime? Under the prior regime, if an insured were in an automobile accident, the other party’s insurer paid for the portion of the damage to the insured’s vehicle’s for which the insured was not at-fault; if the insured had collision coverage, its own insurer paid for the portion of the insured’s vehicle damage for which she was at-fault. In contrast, under the new DCPD regime, te insured driver is compensated by her own insurer for property damage resulting from an automobile collision for which the insured was not at-fault.
Does DCPD always apply? No. DCPD only applies when:
- Jurisdiction. an automobile collision occurs in a jurisdiction where DCPD coverage is mandatory (PEI, NS, NB, Ontario and Quebec);
- Licensed. Both insurance companies insuring the involved motor vehicles are licensed in that DCPD jurisdiction; and
- Fault. Damages resulting from the automobile collision were at least partially caused by another party (if one driver is 100% at-fault, the damage is covered under that driver’s “collision coverage”).
How is financial compensation determined under DCPD? The financial compensation is based on the insured’s degree of fault, determined by fault determination Rules prescribed by regulation, and governed by these stipulations:
- Determining Fault. The insured’s degree of fault is determined without reference to circumstances such as weather conditions, road conditions, visibility, actions of pedestrians, or the point of contact between the vehicles (see Regulation 4 in the Royal Gazette).
- If More Than One Rule Applies. If more than one Rule applies to an insured, the Rule that attributes the least degree of fault to the insured will apply – with one exception: if one Rule would result in the insured being 100% at fault and another Rule would result in the insured not being at fault, the insured is 50% at fault (see Regulation 5 as published in the Royal Gazette).
- Ordinary Rules of Law. Fault will be determined using the ordinary rules of law if:
  - the accident is not described by any of the Rules; or
  - there’s not enough information to determine the degree of fault (see Regulation 6 as published in the Royal Gazette).
- Action By Insured. If an insured is unsatisfied with the degree of fault established by the Rules, she can bring an action against the insurer and the issue will be determined in accordance with the ordinary rules of law (see PEI Insurance Act s. 254.3(5)).
  
  Here are some examples of the Rules governing accident scenarios:
  - Rear-enders. Two automobiles are driving in the same direction and lane; Automobile A is in front; Automobile B is behind Automobile A. Automobile B is 100% at fault if the incident occurs while: Automobile A is stopped; Automobile A is driving forward; Automobile A is turning right or left.
  - Unsafe entry onto a roadway. Automobile B is entering a main road from a parking place, road, or driveway; Automobile A is on the main road. Automobiles A and B hit each other. Automobile B is 100% at fault.
  - Pile-ups. In incidents involving a series of impacts among three or more automobiles travelling in the same direction and in adjacent lanes, for each collision between two automobiles involved, the driver of each automobile is 50% at fault for the incident.
  Read the full list of Rules governing accident scenarios as published in the Royal Gazette here.
Does DCPD affect a person’s ability to sue for personal injury?
No; those rights are maintained under the existing tort system
How will DCPD affect PEI insurers? The principle – and most immediate – advantage of DCPD legislation to PEI insurers should be a reduction in litigation with third party insurers over what are often relatively modest property loss claims. On balance, with each insurer paying its own insureds’ property loss claims, the total number of property damage claims being paid out may be relatively unaffected. The ease with which insurers will be able to apply the new fault determination Rules remains to be determined, but presumably, it will be a faster process and may require less administrative resources than the former approach of negotiating – and potentially litigating – with a third party insurer. Theoretically, there is some new exposure to litigation based on the ability of individual insureds’ to challenge determinations of fault made under the Rules. Practically, however, this has not been a significant issue in other jurisdictions, such as NB, where DCPD legislation has been in effect for some time.

Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Insurance Defence Team to discuss this topic or any other legal issue.

McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.

© McInnes Cooper, 2015. All rights reserved. McInnes Cooper owns the copyright in this document. You may reproduce and distribute this document in its entirety as long as you do not alter the form or the content and you give McInnes Cooper credit for it. You must obtain McInnes Cooper’s consent for any other form of reproduction or distribution. Email us at publications@mcinnescooper.com to request our consent.

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