No-fault insurance is a system of insurance whereby each party is entitled to compensation through their own insurer. No-fault insurance removes one’s ability to sue the party responsible for personal injury. In contrast, the traditional tort based system allows you to sue the person(s) at fault for your personal injury. A tort is a civil wrongdoing (other than a breach of contract) which permits the victim to compensation in the form of damages which are in large part monetary and paid for by the wrongdoer (for more information, see my FAQ What Is My Personal Injury Claim Worth?). In a traditional tort based insurance system (a fault-based model), if you purchase liability insurance and cause injury to someone (meaning you are the wrongdoer), your insurer is obligated to pay for those damages covered by your insurance policy up to a certain specified amount. In a traditional tort based insurance system (a fault-based model), the victim sues the person(s) at fault for damages and the at fault person(s) insurer pays for those damages subject to various contractual terms iterated in the insurance policy.
In a system of No-fault insurance, a victim who is not at fault for civil wrongdoing forfeits a legal right (partially or completely) to compensation from the at fault party. In Alberta, the Minor Injury Regulation caps a person’s damages for “minor” soft tissue injuries. In Alberta, the Fatal Accidents Act disentitles the deceased’s estate to sue for the deceased’s future loss of income. The Act defines the types of damages, the amounts, and the persons entitled to sue for damages. Other Canadian provinces have caps, thresholds, and deductibles in various forms. A threshold is a monetary amount the claim must be worth in order to sue. A deductible is a monetary amount subtracted from a claim for damages. The purpose of a cap, threshold or deductible is to provide a disincentive to bring a lawsuit.