What happens when someone sues your car insurance in Ontario?

Have you ever wondered what happens when someone sues you after a car accident? Do they sue you or your car insurance directly? What happens? And how does it all work? Let's break it down.

Car accidents and personal liability explained

In Ontario, personal liability in a car accident means you're legally responsible if you cause damage or injury to someone else or their property. It's all about negligence—if you didn’t exercise reasonable care while driving and it led to an accident, you could be held accountable. This might mean covering things like medical bills, lost income, or other damages resulting from the incident.

Lawsuits and your car insurance company

If you have car insurance and get into a car accident, it’s important to let your insurance company know right away. Most insurance policies require you to notify them quickly about a claim or even a potential claim.

Once you’ve reported it, your insurance company will look into the details, gather evidence, and figure out who was at fault. If the accident was your fault, they’ll try to settle the claim with the injured party on your behalf. Sometimes, though, a settlement can’t be reached. This usually happens for one of the following reasons:

• Your insurance company and the claimant can’t agree on whether you were at fault or how much responsibility you bear for the accident.
• There’s a disagreement over the settlement amount—either side may feel the offer isn’t fair.
• If the statute of limitations (the legal deadline for filing a lawsuit) is approaching and there isn’t enough time to reach a deal.
• If the claim’s value is higher than your insurance coverage policy limit and you have significant assets (like a home, boat, or savings).

Car insurance coverage and policy limits

Every province in Canada has its own set of rules and insurance policy limits for car insurance. Here's how Ontario's mandatory coverage works:

Liability coverage

Car insurance in Ontario has a minimum third-party liability coverage of $200,000. This is your policy limit and how much your car insurance company can pay out in the event of a claim if you're found at fault or share fault for causing damage or injury to a third party.

While it may seem like a lot of money, once you factor in the amount it will cost to repair or replace the other driver's vehicle, cover any medical bills they have, and possibly any legal fees, it's really not as much as you think. So, if your $200,000 in liability isn't enough to cover everything, the victim may decide to sue you directly to cover the rest of their fees related to the car accident. That's why most insurance companies will recommend that drivers get $1 or $2 million in liability car insurance to make sure that they have sufficient coverage.

Accident benefits coverage

In Ontario, every car insurance policy includes statutory accident benefits coverage, as required by law. These benefits provide compensation no matter who’s at fault if you, your passengers, or even pedestrians are injured or killed in an accident. This includes compensation for things like:

• Income replacement if you cannot work following your accident
• Medical expenses for injuries sustained in the accident
• Rehabilitation costs
• Caregiver benefits
• Attendant care
• Funeral expenses

The standard benefit amount for non-catastrophic injuries is $65,000 and $1 million for catastrophic injuries (though drivers can opt to increase both). If someone sustains injuries in a car accident that you caused, and their medical expenses exceed either of these limits, they may decide to sue you for the rest of the costs.

Uninsured motorist coverage

Uninsured motorist coverage is there if you’re in an accident with a driver who doesn’t have insurance, doesn’t have enough insurance, or even if it’s a hit-and-run and the driver can’t be identified. If the other driver is at fault but can’t cover the costs, uninsured motorist coverage steps in to help with things like medical expenses, lost wages, and repairing or replacing your car. It also covers you and your passengers for injuries, making sure you’re not left footing the bill for someone else’s mistake. In Ontario, you're required to carry a minimum of $200,000 in coverage, though you can use an endorsement to increase it by up to $2 million.

Ontario's no-fault insurance system

In some parts of Canada, like provinces with a traditional fault-based insurance system, if you’re in an accident there, you’d need to sue the at-fault driver to get compensation for things like medical expenses, lost wages, and other damages. Until the legal case is resolved—which can take months or even years—you’d have to cover those costs yourself.

Ontario’s no-fault system, on the other hand, is meant to make things quicker and less stressful. Instead of waiting for a fault determination, you can claim certain benefits, like income replacement and rehab support, directly through your own insurance. No matter who is at fault, each driver’s insurer will handle their claim as long as you have direct compensation-property damage coverage.

For example, let's say you were involved in an accident with someone who ran a red light and hit you. Your insurance company would cover you for the repairs or replacement of your vehicle as well as any medical bills, like for prescriptions or rehabilitation, and then your insurer will request a claim in the same amount they paid you from the at-fault driver's insurance company. The goal of no-fault insurance is to help injured people recover faster and reduce the immediate financial strain after an accident.

Time limits for filing a lawsuit in Ontario

In Ontario, you generally have two years from the date of a car accident to file a personal injury claim. This time limit applies to most cases, whether it’s an accident that caused injuries or property damage.

The Ontario Limitations Act is there to keep things fair for both sides in a legal dispute. By setting a two-year time limit to file a claim, it helps ensure that important evidence doesn’t get lost over time. This gives the injured person the best possible shot at proving their case and winning.

Working with your car insurance company after a lawsuit

If someone sues after a car accident and the claim isn’t resolved early by the insurance adjuster, you might be served with a Statement of Claim, which kicks off the personal injury lawsuit process.

You'll notice you’re named personally in the lawsuit instead of your car insurance company. The reason is that the injured party can’t sue your insurance company directly because it wasn’t the company that caused the injuries or losses—you were. But as we mentioned earlier, this is where your insurance policy steps in because you bought it to protect yourself in case something like this happens. If you’re handed a Statement of Claim, get in touch with your insurance company and send them a copy—they’ll take care of it from there.

Note: If you’re sued for a car accident and have insurance, it’s crucial to contact your insurance company right away and cooperate fully. If you delay or fail to notify them, you could risk losing some of the coverage you’ve paid for because the company wouldn’t have the chance to investigate and respond to the claim on time.

Your insurance company will hire a lawyer to represent you (though technically, the lawyer works for them to minimize the payout on the claim).

You might have meetings with the insurance adjuster, the lawyer, or both. They’ll go over what happened in the accident, explain the other person’s injuries, and walk you through the legal process, starting with the Statement of Claim. They’re there to guide you, so you’re not handling this alone.

In most cases, the insurance company has the right to settle the case when and how they see fit, as long as the settlement is within your policy limits.

However, there are situations where the insurance company might defend you while disputing whether your coverage applies. In these cases, they may reserve the right to deny coverage later. If this happens, or if they refuse to defend you entirely, you’ll need to hire your own lawyer to protect your rights and interests.

Getting your own lawyer

If you’ve seriously injured someone in an accident, it’s worth considering hiring your own lawyer alongside the one provided by your insurance company. This way, you have someone fully focused on protecting your best interests—not just the insurance company’s bottom line. Your lawyer can advocate for you by writing to both the insurance company and their lawyer, urging them to do whatever it takes to settle the case and get you fully released from liability.

If settling the case means using every bit of your insurance policy limits, so be it—that’s what you paid for. Why worry about how much they settle for? Your insurance company has already decided you’re at fault, so they’re likely raising your rates anyway. Whether they settle for $10,000 or the full policy limit doesn’t change things for you. You paid 100% of your premium, so they owe you 100% of your coverage. Don’t hesitate to insist that they use your full policy limits to protect you from things going to court or a risk of being sued later on.

When someone settles with an insurance company, they usually sign a release form. This form releases the at-fault party—in this case, you—from any further responsibility for the incident. Once they sign it, they generally can’t go back and sue you for additional damages related to the same accident. Therefore, having your own lawyer may help convince your insurance company and their lawyer to use your full policy limit to reach a settlement.

What if you're sued for more than your policy limit?

In rare situations, someone injured in an accident might claim more than your insurance policy covers. For example, if you’re in an accident that leaves someone paralyzed, requiring lifelong medical care and unable to work, their claim would likely exceed your $200,000 minimum liability limit. In that case, you’d need to hire your own lawyer to protect your personal assets.

To avoid this kind of scenario, you may want to consider increasing your insurance coverage. For a little extra each month, you can bump up your liability limits to $2 million or even $5 million.

Another option is an umbrella insurance policy, which provides extra coverage for your car, offering several million dollars of protection in case someone is seriously injured in an accident. It’s a good idea to talk with a knowledgeable insurance broker like BrokerLink to help you explore these options.

Learn more from BrokerLink

If someone sues your car insurance in Ontario, it's important to know how that can and may affect you. It's also important to make sure you have the right amount of insurance coverage to protect you. BrokerLink can help with both. Our expert brokers can offer expert advice about what policy limits would benefit you as well as answer any additional questions you may have about what happens when someone sues your car insurance.

You can reach us by phone, email, or in person at any one of our locations throughout Canada. No matter how you choose to get in touch, a BrokerLink insurance advisor will be happy to assist you. We also encourage you to take advantage of our free online quote tool that can provide you with a competitive quote in minutes.

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FAQs about suing car insurance providers in Ontario

How long do most car accident settlements take in Ontario?

In Ontario, personal injury claims can sometimes take months—or even years—to fully resolve. Generally, cases with multiple parties or complex legal issues take longer to settle than straightforward ones where fault is obvious. Factors like the severity of your injury, the specifics of your case, and the type of injury can all impact how long it takes to reach a settlement.

What is the subrogation clause in insurance?

A subrogation clause allows your insurance company to reimburse you for a claim and then go after a third party to recover the costs. It’s basically a way for the insurance company to shift the financial responsibility from itself to the party that was actually at fault.

How often do I have to pay out of pocket for a car accident lawsuit?

Most car accident cases get settled without ever needing to file a lawsuit, so it’s very rare for you to pay anything out of pocket. In most cases, the lawyers work out a settlement, and your liability coverage takes care of the costs.

Does car insurance follow the vehicle or the driver?

Car insurance usually follows the car, not the driver. So, if you let someone borrow your car, your insurance will typically cover them just like it would if you were driving. When you lend your car, you also lend your insurance. That said, whether your insurance pays out after someone has an accident in your car depends on factors like who was at fault and how much damage was done.

If you have any questions, contact one of our local branches.