The Auto Redefined

The Auto Redefined

January 2012    |    By Craig Harris

What, exactly, is an automobile for insurance purposes? It’s a simple question, with complicated answers depending on the province and the legislation at hand. What many had thought previously uninsurable, such as golf carts and pocket motorcycles, may now qualify for auto insurance coverage in some provinces.

There’s an adage that a “camel is a horse designed by committee.” So what is an automobile defined by multiple legislation in various provinces? A golf cart? A pocket motorcycle? A go-kart? An e-bike?

These questions have been recently put before courts and arbitrators to determine what precisely is an automobile for insurance. In every Canadian province, there are multiple statutes that govern the definition of an automobile, including legislation for highway traffic, insurance (also compulsory auto insurance) and off-road vehicles, in addition to the federal Motor Vehicle Safety Act. In many cases, more than one definition may apply.

In Ontario, an arbitrator for the Financial Services Commission of Ontario (FSCO) ruled in February that a woman, Wilhelmina Margaret Buckle, who was injured in Ontario while driving a golf cart illegally on a public highway was eligible for accident benefits under an auto insurance policy. Arbitrator Robert Kominar ruled that the golf cart fit the provincial Highway Traffic Act definition of a motor vehicle as “any other vehicle propelled or driven otherwise than by muscular power.” Ontario’s Compulsory Automobile Insurance Act also states: “all motor vehicles shall be insured under a policy of insurance when operating on a highway.” Thus, the golf cart was involved in a motor vehicle accident and the driver qualified for insurance benefits.

“If you look at the Buckle case, there was a lot of subjectivity in the interpretation,” says Bryan Yetman, chairman of the board for the Insurance Brokers Association of Ontario. “If the arbitrator rules that golf carts are motorized vehicles for insurance purposes, can insurers collect premiums to offset this exposure? The answer right now is, no. Clearly, there is no intent on the part of insurers in Ontario to cover golf carts under an auto insurance policy.” Doug O’Toole is an associate with law firm Pacquette Travers & Deutschmann who argued the case before FSCO on behalf of Buckle. He says there is “a fair bit of congruence” on the definition of an automobile, with the government “trying to thread the definition through various pieces of legislation to keep it as broad as possible.”

The uncertainty, however, lies in the intent of the various statutes. “The hard part is that the definition of what is a motor vehicle is applied in different Acts,” O’ Toole says. “These Acts have different goals and purposes, sometimes working at cross-purposes. For example, the police would look at a golf cart in a different context under the Highway Traffic Act. Our purpose in this case was to ask if the golf cart was an auto under the Insurance Act and, if so, was coverage available?”

A similar case was heard by the Court of Queen’s Bench in Manitoba in 2010. Jeff Hruska was injured while a passenger in a golf cart driven on a golf course. He filed a negligence claim against the golf club, which, in turn, said that Hruska’s injury was covered by Part II of the Manitoba Public Insurance Corporation (MPIC) Act. In Hruska v. Bridges Golf Club Ltd., the court held that the bodily injury was caused by an accident involving an automobile as defined in the MPIC Act. The plaintiff was thus entitled to no-fault compensatory benefits under an auto insurance policy.

Jim Hylands, vice president of Simmlands Insurance Services Ltd., specializes in wholesaling specialty insurance products, including to the golf industry. He says the court’s ruling in Manitoba essentially means that golf carts are now vehicles in that province and entitled to first-party insurance coverage. But that doesn’t necessarily provide clarity across Canada.

“The current situation with regards to golf carts, maintenance vehicles and various pieces of mobile equipment is absolutely ridiculous and varies from province to province,” Hyland says. “This situation is made worse by the fact that multiple pieces of legislation apply to these vehicles, exceptions abound, and, due to the complexity, the authorities themselves can’t keep track of all the rules. So, many of the regulations are just not enforced or followed.”

In Ontario, courts have developed a three-part test to “address the maze of regulations to be considered in defining an automobile,” according to Jennifer Pereira, a lawyer with Robertson Stromberg Pedersen. The test, which was applied in Adams v. Pineland Amusements Ltd. (2007), asks:

  1. Is the vehicle an “automobile” in ordinary parlance?
  2. Is the vehicle defined as an “automobile” in the wording of the insurance policy?
  3. Does the vehicle fall within any enlarged definition of “automobile” in any relevant statute?

Any affirmative answer would qualify the vehicle as an automobile. In the Adams v. Pineland case, a motions court judge originally ruled that a go-kart operated on a private track was an automobile for insurance purposes. That decision was later overturned by the Ontario Court of Appeal.

“Needless to say, that whenever the courts are required to create a test to decipher the definition of a term, facts can be manipulated to suit an outcome that fits the court’s goal of achieving fairness,” Pereira observes. “I suspect that achieving such fairness will come at a cost to insurers.”

Indeed, many sources say that recent decisions have left the insurance industry in a quandary when it comes to the definition of an automobile. Brokers and insurers cannot insure or collect premiums for certain types of vehicles due to safety requirements set out by legislation, yet they are potentially on the hook for claims.

“The question is how are we going to address these differences and the uncertainty?” says Yetman, who adds that he has not heard from brokers that this is an ”epidemic” issue. “One way is to have stricter definitions under the auto insurance policy, including specific exclusions. The other is to standardize regulations. Right now, there is not a clear, standard definition of what an automobile is.”

In British Columbia, the provincial auto insurer has taken the step of requiring licensing and insurance for golf carts and other types of vehicles in certain situations, particularly when they are used on or around highways and on islands that are not accessible by bridge or scheduled ferry service. In that sense, the Insurance Corporation of British Columbia (ICBC) is collecting premiums to offset the exposure.

Maurice Poulin, president of the Insurance Brokers Association of British Columbia, says one benefit in B.C. is that "there is a much closer relationship between insurance and vehicle registration through ICBC. There are strict definitions of what is and what is not an automobile. In certain island communities, golf carts are an acceptable form of transportation, but there are safety requirements for these vehicles.”

In its golf cart requirements, ICBC classified the public parking lots of golf courses as “highways,” creating confusion for golf course owners about licensing and insuring their fleet of carts, according to Hylands. However, in a May 19 press release, the insurer announced it would no longer require golf course owners to “register, license or insure their golf carts and utility vehicles through ICBC to operate in parking lots or cross public roads.”

The issue of how to define an automobile is not restricted to golf carts. As newer types of transportation, such as ebikes, low-speed electric vehicles and segways, become more prominent, what is the interpretation when the inevitable accidents occur? What about pocket bikes, motorized scooters or battery-operated toys?

“With new types of transportation, such as e-bikes, many people look to the Highway Traffic Act for the definition of what is an automobile,” says Yetman. “I view an e-bike as an automobile under that Act, but it does not need to be licensed or insured. It is a catch-22: how do you rate for something that is not covered?”

In provinces, certain vehicles, such as pocket bikes, dirt bikes, dune buggies and motorized scooters, are prohibited from traveling on roads and highways because they don’t meet federal or provincial safety standards. Yet if these venture onto public roads and are involved in an accident, they could fall under the definition of “any other vehicle propelled or driven otherwise than by muscular power.” It is far from clear which types of vehicles could be potentially classified as an “automobile.”

“I think that the government has tried to stay on top of these new methods of conveyance,” O’Toole says. “But there is potential for holes in the legislation. There is room for new vehicles to slip through the cracks.” 

A case in point was the January ruling from FSCO arbitrator Denise Ashby that a pocket bike, or miniature motorcycle, met the definition of an automobile. In this case, a woman, Ms. Bouchard, was riding a pocket bike on a friend’s property when she collided with another pocket bike, sustaining injuries. Bouchard applied to her insurance company for accident benefits, which denied the claim on the grounds that a pocket bike is not an automobile.

The two statutes involved were the Insurance Act and the Off-Road Vehicles Act. Section 224(1)(a) of the Insurance Act states that a vehicle is an automobile if it is required to be insured by any Act. Bouchard argued that the pocket bike is an off-road vehicle as defined in section 1 of the Off-Road Vehicles Act. Section 15 of this Act requires that an off-road vehicle be insured under a motor vehicle liability policy pursuant to the Insurance Act unless driven on land occupied by the owner. The FSCO arbitrator agreed that the pocket bike thus fit this enlarged definition of an automobile for insurance purposes.

“Decisions such as Bouchard v. Motors Insurance Corp illustrate how insurance companies may have to pay for losses they never contemplated, and likely did not collect premiums for as well,” notes Pereira.

Hylands contends that automobile definitions could also become a dangerous issue for brokers when it comes to recommending coverage. “Obviously brokers and agents should be concerned,” he says. “Failure to provide or recommend the appropriate type of coverage for all of the various vehicles poses an errors & omissions exposure to these professionals.”

While courts and arbitrators will continue to rule on which types of vehicles meet the definition of an automobile in what one judge termed “legal gymnastics,” Hylands says a simpler solution may be available today.

“Unfortunately, the solution to these questions would require a major leap of thought at the provincial government level – stop the outdated practice of insuring ‘vehicles’ and start insuring ‘licensed drivers,’” Hylands concludes. “When auto insurance was introduced in the 1930s and 1940s, motorized vehicles came in limited forms and if a family owned a vehicle it was invariably driven by one person in that family. Vehicles and drivers were inseparable. That’s not the case today and it is going to get worse as technology creates new types of vehicles.”


Please note a version of this trends paper has previously been published in an industry publication.

ADVANTAGE Monthly trends papers

This paper is part of an open online library of ADVANTAGE Monthly trends papers, published by the CIP Society for the benefit of its members and of the p&c insurance industry. The trends papers provide a detailed analysis of emerging trends and issues, include context and impact, and commentary from experts in the field.

The CIP Society represents more than 18,000 graduates of the Insurance Institute’s Fellowship (FCIP) and Chartered Insurance Professional (CIP) programs. As the professionals’ division of the Insurance Institute of Canada, the Society’s mission is to advance the education, experience, ethics and excellence of our members. The Society provides a number of programs that promote the CIP and FCIP designations, continuous professional development, professional ethics, mentoring, national leaderships awards, and research on the issues impacting the p&c insurance industry in Canada.