Can An Insurance Broker Be Sued For Improperly Insuring a Trailer?
Trailers Carry Property or Transport Passengers Are Legally Defined As Trailers While Chippers, Generators, Cement Mixers, Among Other Things, Are Towable Equipment Objects That Are Outside the Definition of Trailer. Insurance Professionals Should Know the Legal Definition.
Understanding the Insurance Coverage Structure For Trailers Including the Objects Defined As Trailers
Within Ontario, like most places, the ownership, the use, and the operation, of automobiles is highly regulated. In particular, laws are in place to govern the safe use and operation of automobiles and to govern the requirement of insurance to provide financial protection when automobile accidents unfortunately do occur. In particular, the Highway Traffic Act, R.S.O. 1990, c. H.8, the Compulsory Automobile Insurance Act, R.S.O. 1990, c. C.25, and the Insurance Act, R.S.O. 1990, c. I.8 govern the use of, and the insurance required for, automobiles, or as is technically defined as a "motor vehicle", as well as trailers when upon roadways.
In regards to insurance requirements, the Compulsory Automobile Insurance Act mandates that insurance coverage be in force for "motor vehicles" operated upon highways and the Insurance Act mandates the minimum insurance coverage requirements. Specifically, the Compulsory Automobile Insurance Act and the Insurance Act state, among other things:
2 (1) Subject to the regulations, no owner or lessee of a motor vehicle shall,
(a) operate the motor vehicle; or
(b) cause or permit the motor vehicle to be operated,
on a highway unless the motor vehicle is insured under a contract of automobile insurance.
251 (1) Every contract evidenced by a motor vehicle liability policy insures, in respect of any one accident, to the limit of at least $200,000, exclusive of interest and costs, against liability resulting from bodily injury to or the death of one or more persons and loss of or damage to property.
(2) The contract shall be interpreted to mean that where, by reason of any one accident, liability results from bodily injury or death and from loss of or damage to property,
(a) claims against the insured arising out of bodily injury or death have priority to the extent of $190,000 over claims arising out of loss of or damage to property; and
(b) claims against the insured arising out of loss of or damage to property have priority to the extent of $10,000 over claims arising out of bodily injury or death.
(3) The insurer may, instead of specifying a limit in the policy for an inclusive amount, specify a limit of liability of at least $200,000, exclusive of interest and costs, against liability resulting from bodily injury to or the death of one or more persons and a limit of liability of at least $200,000, exclusive of interest and costs, against liability for loss of or damage to property.
(4) Nothing in this Part precludes an insurer, with respect to a limit or limits in excess of those specified in subsection (1) or (3), from increasing or reducing the limit or limits specified in the contract with respect to the use or operation of the automobile by a named person, but no reduction is effective for a limit less than that required under subsection (1) or (3).
In addition to the minimum of $200,000 in Liability coverage prescribed within section 251 of the Insurance Act as above, other coverage is also mandatory by law. The other mandatory coverage is known and referred to as Accident Benefits, Uninsured Motorist, and Direct Compensation Property Damage. Furthermore, optional coverage is commonly available including, among other things, coverage referred to as Collision and Comprehensive. A full detailing, or even a brief overview, of these coverages in unnecessary for the purposes of this article.
What is a trailer is commonly confused whereas certain objects that are towed upon roadways may fall outside the legal definition of a trailer as is defined by the Highway Traffic Act. Although what is a trailer may appear plain and obvious at first glance, the legal definition does often provide fodder for surprise whereas even though an object may have a hitch, wheels, lights, and even a frame for a licence plate, and may indeed even be plated, the object may, legally, fall outside the definition of a trailer. Specifically, section 1 of the Highway Traffic Act defines a trailer as:
“trailer” means a vehicle that is at any time drawn upon a highway by a motor vehicle, except an implement of husbandry, a mobile home, another motor vehicle or any device or apparatus not designed to transport persons or property, temporarily drawn, propelled or moved upon such highway, and except a side car attached to a motorcycle, and shall be considered a separate vehicle and not part of the motor vehicle by which it is drawn;
Accordingly, per the definition, an object used to tow another automobile, tow a boat, tow a load of equipment, tow a load of material, among other things, is a "trailer"; however, objects such as a towable barbeque, wood chipper, generator, among other things, despite the presence of a hitch, wheels, lights, and perhaps even a licence plate, fail to fall within the legal definition of a "trailer".
Towing Vehicle, insurance extends therefrom
Liability and Accident Benefits coverage. This 'extending' of coverage from the towing vehicle to the trailer makes logical sense whereas an unpowered trailer is unable to tow itself; and therefore, injuries or damage resulting from an accident involving a trailer are, generally, caused by the negligent operation of the towing vehicle rather than the operation of the trailer. Specifically, with respect to a trailer being towed, the Ontario Automobile Policy (OAP 1) states:With respect to insurance coverage for trailers, protection for the mandatory insurance coverage is extended from the towing vehicle and at first glance appears adequate and satisfying of the risks for which mandatory insurance is prescribed. Essentially, the Ontario Automobile Policy (OAP 1) includes Liability, Accident Benefits, Uninsured Automobile, and with some exceptions Direct Compensation Property Damage for trailers when connected to the automobile that is towing the trailer. This included coverage remains effective even if the trailer becomes accidentally disconnected from the automobile. Accordingly, if a trailer were to strike and injure a person, or strike and damage property, perhaps while the trailer is being back up, the insurance coverage in place for the towing vehicle automobile provides inclusive protection for the relevant and mandatory
Any trailer used in connection with the automobile is insured for the following coverages:
• Accident Benefits, and
Special Conditions: Any trailer you own and that is not described in this policy is also covered for Direct Compensation - Property Damage Coverage under the following conditions:
• If it is attached to an automobile with a GVWR of not more than 4,500 kilograms, or if not attached, it is normally used with an automobile with a GVWR of not more than 4,500 kilograms.
• It is not designed or used for living in, to carry passengers, or for commercial purposes.
An automobile pulling one or more trailers will be treated as a single automobile when determining how much we will pay under Liability, Accident Benefits and Uninsured Automobile coverages. However, they will be treated as separate automobiles when determining the deductibles and how much we will pay under Direct Compensation - Property Damage and optional Loss or Damage Coverages.
As above, it is mentioned that the mandatory coverage, being Liability, Accident Benefits, Uninsured Automobile, and with some exceptions Direct Compensation Property Damage, is included when a trailer is being towed whereas such coverage extends from the towing vehicle. As stated in section 2.2.5 of the Ontario Automobile Policy (OAP 1), the Direct Compensation Property Damage coverage is subject to exception for trailers towed in connection with heavy vehicles (over 4,500 kgs), trailers used for living in, or trailers used for commercial purposes. These exceptions make for technicalities that could result in uninsured losses; such as, for example, where a towed trailer subject to the exceptions is struck by another automobile who driver is at blame for causing the accident.
In situations where the trailer owner was relying upon the extended Direct Compensation Property Damage and where the insurance broker or insurance agent relied upon by the trailer owner failed to adequately explain the three exceptions, the insurance broker or insurance agent may be liable for professional negligence.
In addition to failure to make proper insurance arrangements for a trailer, an insurance broker may also be professionally negligent for arranging automobile insurance coverage for towable equipment that fails to meet the definition of a trailer. As above, many towable equipment objects that fail to meet the definition of trailer; and accordingly, such objects may be insurable via forms of insurance other than automobile insurance. Whereas towable equipment may be insured with broader coverage, at lesser premiums, via forms of property insurance rather than as a trailer under an automobile insurance, such may also be a professional error or omission by an insurance broker or insurance agent.
Arranging proper insurance coverage for a trailer requires attention to the definition of what objects qualify as a trailer as well as attention to coverage extensions and special exceptions for trailers within the Ontario Automobile Policy (OAP 1) insurance coverage. Where an insurance broker or an insurance agent fails to arrange proper coverage or provide adequate information to a trailer owner, the insurance broker or insurance agent may be found liable for professional negligence within an errors and omissions litigation.