New Policy or OPCF 16: There is no In-Between

15 February 16, 2016 at 11:26 am by

car on the road with motion blur background.The Ontario Superior Court has released its first-ever decision on whether the notorious OPCF 16 (Suspension of Coverage) endorsement form is mandatory when an insured wishes to remove road coverage from their policy.

Why would an insured want to remove their road coverages?

Suppose an insured parks her soft-top convertible every winter. She knows that she won’t be using her vehicle for several months, so she doesn’t want to pay full premiums to cover the vehicle. Removing the road coverage allows her to save a substantial amount of cost on her insurance premiums while the vehicle is “parked” for the winter. More importantly, it allows her to maintain comprehensive coverage on her vehicle in case it is damaged by fire, vandalism, earthquakes, missiles, etc. or it is stolen. It also allows her to maintain a relationship with her insurer without having any breaks in her insurance (a factor that could impact her if she tries to apply for insurance later).

What is the OPCF 16?

The OPCF 16 endorsement is a form that was approved by the Superintendent of Insurance pursuant to section 227 of the Insurance Act. The purpose of the OPCF 16 is outlined at paragraph 1 of the form, namely, to cancel coverage for the use or operation of the described vehicle until coverages are reinstated. The endorsement cancels the “road coverage” (liability, accident benefits, uninsured, direct compensation) on the policy — but only “for the use or operation of the described automobile…” The endorsement effectively removes all road coverages from the policy but maintains residual road coverage where the described vehicle is not in use or operation.

Why would an insured purchase the OPCF 16?

At first blush, the OPCF 16 makes little sense. An insured who removes road coverage from her vehicle and is involved in an accident in Ontario would still have access to all of the accident benefits under the SABS. Pursuant to section 268 (2) of the Insurance Act, she would have recourse  from the insurer of the vehicle she is in at the time of the accident, or the insurer of the vehicle that struck her, or from the insurer of any other vehicle involved in the accident, or from the Motor Vehicle Accident Claims Fund. In other words, without having an OPCF 16 on her policy, the insured would still have full accident benefits coverage if she is involved in an accident in Ontario that doesn’t involve the use or operation of her vehicle (we trust that our fictional insured is wise enough not to drive the vehicle from which she removed the road coverage).

Likewise, an insured causing an accident while driving her friend’s vehicle would still be covered under the friend’s policy for third party liability.

So why would any reasonable insured person decide to purchase the OPCF 16 when she knows she will not be driving her vehicle and knows that she would have coverage from other insurers? Take the following examples:

  • The insured spends the winters in Florida and leaves her vehicle parked in Ontario. If she gets into an accident in Florida involving non-Ontario vehicles, she would not have access to any Ontario accident benefits because her Ontario policy contains only road coverage. Moreover, Ontario’s priority scheme/coverage provisions would not apply against a foreign insurer. Having the OPCF 16 on her Ontario policy would allow her to claim accident benefits from her Ontario insurer as a result of an accident that occurs outside Ontario.
  • If the insured has optional benefits, she will want to purchase the OPCF 16 to maintain those optional benefits if she gets into an accident.
  • The OPCF 16 would provide excess third-party liability protection if the insured is driving another vehicle.
  • The OPCF 16 likely provides residual collision, upset, and/or Direct Compensation coverage if the parked vehicle is involved in an accident with another vehicle (i.e., a vehicle crashes into the parked car while it’s not in use).

What if the insured doesn’t want (or is never offered) the OPCF 16?

Historically, the OPCF 16 form has rarely been used in practice. I have had many cases over the years where an insured called his broker/insurer asking to remove the road coverage and the broker/insurer did so without even mentioning the OPCF 16 (I acted in a case where the broker had never even heard of the OPCF 16). In reality, most insureds would likely admit that they would not have agreed to pay the extra premium for the OPCF 16 anyway.

However, in Certas v. CGU/Aviva (December 5, 2005, Arbitrator Samis), the arbitrator held that the insurer who failed to use the OPCF 16 to “suspend” the road coverage was liable to pay accident benefits under the policy. The arbitrator held that the OPCF 16 form is mandatory. Certas v. CGU/Aviva was followed in Enterprise Rent-a-Car v. Ing (November 2006, Arbitrator Jones) and in Jevco v. State Farm (July 23, 2013, Arbitrator Bialkowski).

Conversely, in State Farm v. TD General Insurance Co. (August 2011, Arbitrator Scott), the arbitrator held that the OPCF 16 is not mandatory. The arbitrator held that the insured could not be forced to purchase an endorsement that provides coverage that they do not wish to have. The arbitrator held that when an insured seeks to reduce coverage to comprehensive only, an insurer and/or a broker likely has an obligation to the injured to describe the availability of an OPCF 16 and the enhanced coverage it provides. As long as the endorsement and the provisions are adequately explained, an insured can then make an informed decision. If enhanced coverage is chosen, the approved form must be used.

Dominion v. Optimum

Dominion v. Optimum involved two unrelated priority disputes between the same companies involving the OPCF 16. The facts were similar but not identical. In both matters, the claimants were occupants of vehicles insured with Optimum. The claimants’ spouses were the named insureds on policies that were issued by Dominion. Prior to the accidents, the named insureds reduced their coverage on their respective policies to comprehensive-only. The OPCF 16 form was not used to reduce coverages. Before the accident, both policies had been renewed with comprehensive coverage only, and in one of the matters, the comprehensive only policy had been renewed for a second time. The accidents occurred after the renewals of the insurance policies as comprehensive coverage policies.

The arbitrator held that the OPCF 16 was mandatory and that Dominion’s failure to use the form saddled it with accident benefits coverage on both policies.

On appeal, Dominion argued that a motor vehicle liability policy, which has SABS coverage, can be later renewed as a comprehensive policy without SABS coverage. In other words, Dominion argued that the OPCF 16 is not necessary once the policy renews as a comprehensive-only policy. Dominion relied on the Supreme Court decision of Patterson v. Gallant, which held that each successive renewal of a motor vehicle insurance policy constitutes a new contract.

In other words, Dominion argued that even if the OPCF 16 is mandatory to remove road coverage from a policy, the obligation to use the form disappears when the policy is renewed with comprehensive coverage only.

Justice Perell delved through the line of arbitral decisions comprehensive coverage and the use of the OPCF 16. He agreed with the arbitrator indicating that there were sound policy reasons for requiring the use of the OPCF 16 mid-term, even if this means the insured cannot cancel all of her liability coverages. Justice Perell agreed that the arbitrator’s reasons were sound, confirming that automobile insurance is highly regulated, where the legislature has restricted the choices available to insureds. He also agreed with the arbitrator that there were policy reasons which justify a continuation of liability coverages mid-term when the insured has reduced his or her coverage to comprehensive.

Justice Perell agreed with the line of cases stemming from Certas v. CGU/Aviva, finding that there is no inconsistency in the legislative scheme between an insured who initially purchases “comprehensive” coverage, affording him no SABS coverage, and an insured who wants to change his policy mid-term to “comprehensive” coverages only. An insured who wants to change his policy mid-term, needs to terminate his policy and start fresh by just applying for a policy that provides for comprehensive coverage, otherwise there will be a continuation of liability coverages.

The court held that the public policy advantage for supporting the use of the OPCF 16 midterm or starting a fresh policy is that it allows for the insured to better understand his coverages, and it allows for insurers to clearly limit their exposure.

The Aftermath

Going forward, if an insured wants to remove road coverage from her policy, the insurer must offer her an OPCF 16 form that will provide residual road coverage (at an additional premium) and the insured must agree to pay for that residual coverage.

Alternatively, the insured/insurer can cancel the policy mid-term and re-issue a new one with comprehensive-only coverage. Presumably the road coverages can be added to the new policy at a later date when the insured requests that coverage.

All this might be easier said than done. Some insurers do not issue new comprehensive-only policies, so cancelling an existing policy with road coverage and issuing a new comprehensive-only policy might not always be an option.

In any event, insurers/brokers need to review their existing inventory of comp-only policies where road coverage was removed without using the OPCF 16. In most cases, the insurers will need to work with their insureds to add the road coverage back to those policies and then use the OPCF 16 form to remove the road coverage. Alternatively, those insureds will have to terminate their policies and the insurers will need to reissue comprehensive-only policies in their places.

See Dominion v. Optimum, 2016 ONSC 985

See the OPCF 16

        • Thanks to Monika Bolejszo of Samis+Company for contributing to this article.

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15 Comments » for New Policy or OPCF 16: There is no In-Between
  1. Peter Martire says:

    How about if you have more than one vehicle, and have them all a garaged but one?

    You can definitely save money by removing road coverages from vehicles you do not use, and still retain your entitlement to Accident Benefits, as long as one vehicle is insured.

    Also, it states right on the endorsement that entitlement to accident benefits would be cancelled for the respective vehicle.

    Peter Martire, CIP, CRM

    • Daniel Strigberger says:

      Hi Peter — You’re right that the OPCF 16 applies to specific vehicles. The issues we (us lawyers) see is when an insured asks to remove the road coverage from their policy (for all vehicles) and doesn’t otherwise have access to a policy that has the SABS coverage on it.

  2. Snuffles says:

    In Ontario, as in other provinces, there is an Alteration Endorsement, the OPCF 25A which is intended to be used to make mid-term changes to a policy, including the deletion of coverage.

    As this is also an approved form under Section 227 of the act, would an Insurer not be able to use this approved form to remove all but comprehensive coverage from a vehicle rather than cancelling the existing “motor vehicle liability policy” and reissuing a new “comprehensive only” policy?

    • Daniel Strigberger says:

      Hi Snuffles — Thanks for pointing out the 25A. I agree that the form is designed to be used to make changes to the policy. It’s not clear though whether the availability of the 25A negates the purpose/effect of the 16. One could argue that where an insured takes the OPCF 16 when removing coverage, the changes should be documented on the 25A too. Interesting issue.

  3. Marc de Montigny says:

    Understand the concept and logic of OPCF16 for a single vehicle policy/individual, but what are the requirements on multi vehicle policies and households, where drivers are listed on all/multiple policies? Would the SABS and liability not be offered by the remaining “full road coverage” policy, and the OPCF16 be an additional charge to the insured (vs. comp only)? Or does the above case law, now mandate that OPCF16 is the only proper way to proceed? What about times when Comp only coverage is requested for less than 45 days? Do we as broker advise the insured that this is no longer possible?

    • Daniel Strigberger says:

      Hi Marc — Most of the cases I’ve seen involve people who want to remove road coverage from all of their vehicles. It’s less of an issue if they remove the coverage for only one vehicle (or not all of their vehicles) because there is still access to SABS coverage under the policy. I’m not sure whether the OPCF 16 would be mandatory if there were two cars on a policy and the insured wanted to remove road coverage on only one of those vehicles. Clearly they wouldn’t benefit from the OPCF 16 for accident benefits.

      On the 45-day issue, I’m not sure this case distinguishes between +/- 45 days. Seems like the requirement to offer the OPCF 16 arises as soon as the request to remove road coverage is made.

  4. Bruce Powell says:

    When an auto owner purchases their vehicle sticker / tag, does it not state either directly or indirectly that they will take out and maintain minimum statutory coverages whilst the sticker is “live”?

    I didn’t quite “get” the conclusion…so, as a broker, I read that we should recommend the 16…I have had confrontation with RIBO over the removal of road coverages, as we have tried to enforce the take out and maintain, or use the 16, and RIBO was non-supportive of our stance when a client complained of our insistence of using the 16. They stated that it is our role to inform but to not press the issue with the client.


  5. Daniel Strigberger says:

    Hi Bruce — Not sure about the sticker issue, but the Compulsory Auto Insurance Act requires road coverage on vehicles only if they are being used on highways. There isn’t a requirement to put road coverage on vehicles that are parked on your driveway or in your garage.

    I think the point of the conclusion is that if the insured doesn’t want to pay for the OPCF 16 (I imagine most won’t), the alternative is to cancel the policy and then issue a new, Comp-only policy. It’s a headache but it beats having to pay $1 million in SABS benefits on a policy the insurer thought was Comp-only.

  6. Peter says:

    Hi Daniel,

    The OPCF 16 is not an insurance coverage, There is no peril that would trigger that endorsement. It’s merely a warranty expressed and agreed in writing to limit coverage. The OPCF 17 reinstates the previous coverage.
    From my experience there is no cost to add or remove the OPCF 16, or the OPCF 17 and the administration cost should already be priced in for that customer.

    Peter Martire, CIP, CRM

  7. Lee Waddell says:

    What does Peter mean? “There is no peril that would trigger that endorsement”

  8. Cameron McBride says:

    He means that the OPCF 16 doesn’t actually cost the insured money, unlike say, the OPCF20 (loss of use cover).

    Instead of issuing the decrease in premium/premium return for reducing coverage immediately, the insurer agrees to reimburse the insured at the end of the period when the vehicle was to be “parked”. If you think about it, they’re keeping your cover in full, but once you actually complete your end of the agreement (having not driven the described vehicle) the insurance company agrees to reimburse you for that reduction of coverage.

    Essentially they’re saying “don’t tell us, show us” – so, if you say you won’t drive (and therefore won’t have any losses to the vehicle) from November-May, prove it to us and once May rolls around and you’ve had no losses, we will give you the credit as if we had reduced the cover at the time of the vehicle being parked.

    It allows you access to your SABS while still giving you a discount in cover. There is no “additional charge” for the OPCF16 – which is something brokers (and the Lawyer above) should understand, as that shouldn’t really be a deterrent to offering to insureds.

    Cameron McBride RIB Ont

  9. ” The endorsement effectively removes all road coverage from the policy but maintains residual road coverage where the described vehicle is not in use or operation.”

    Not from the policy but from the described vehicle where coverage is being suspended. It’s not a blanket endorsement but follows the specific vehicle.

    Reliance on SABS coverage is blanket coverage offered in the Ontario Automobile Policy, OAP 1, and I see no problem with removing road coverage on described vehicles no longer used or being garaged, within a reasonable time frame.

    Auto insurance in Ontario is expensive enough, and if you can save money when you should or can, it only makes sense.

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