Key DCPD Considerations for Insurers + Drivers

Overview

This article is presented for general information. It should not be construed as legal advice. Should an insured person have any concerns with respect to a claim against an Insurance Company, or being brought by an insured person under an insurance policy in Alberta, they should contact appropriate legal counsel.

This article is meant for anyone interested in Direct Compensation for Property Damage (“DCPD”) insurance coverage in Alberta. This includes anyone who owns and operates an automobile in Alberta (subject to some very narrow exceptions). This also includes any Insurer who is registered in Alberta or who has given an undertaking to be bound by the DCPD regime in Alberta.

The reasons for this article are perhaps best summarized in reading early decisions from other jurisdictions that have adopted DCPD. In MacCallum v. Gamache, the Nova Scotia adjudicator opined that, “it is possible… even [the plaintiff’s] own insurer did not appear to understand this” and that “clearly word of this new regime has not fully penetrated the legal community.”

The goal of this article is to explain to people what DCPD is and how it has been interpreted by the Courts in Alberta to date. This article is not meant to address all possible issues in DCPD claims, particularly with respect to sophisticated insureds who have negotiated different terms to their DCPD policy.

Where does DCPD come from?

DCPD is insurance regime that was enacted in Alberta as of January 1, 2022. This regime was created through amendments to the Insurance Act by the addition of s. 585.1, and through amendments to the statutorily mandated Standard Policy Form No. 1 by the addition of Section A.1.

Section A.1 of the Policy is the DCPD section of the Policy.

The January 1, 2022 version of the DPF No. 1 Policy (the "Policy") can be found here. Contrary to some belief, Insurance Companies in Alberta don’t get to write automobile policies. All regular auto policies written in Alberta are mandated to be issued in the same SPF No. 1 policy form, although what coverages people have may vary under that SPF No. 1 policy. In Alberta, insurance companies can provide some different additions or exclusions to policies through the approved Standard Endorsement Forms (“SEFs”).  Even the SEFs must be approved by the Superintendent (or conditionally approved by the Superintendent in the case of Conditionally Approved Endorsements (“CAEs”).

In addition to Section A.1, DCPD is governed by S. 585.1 of the Insurance Act. Similar legislation has been in place in Ontario and Nova Scotia for some time.

The Policy, including all SEFS or CAEs, and the Insurance Act will govern the relationship between insurance companies and their insureds.

What is DCPD?

DCPD is an insurance regime that relates only to property damage claims as between automobiles and their contents.

Where DCPD applies, an individual who has been involved in an accident does not need to deal with the other side’s insurance company, they simply report the accident to their insurance company and obtain what coverage they have available to them under Section A.1 of the Policy. If they have an injury claim, that is something different. This article does not address injury claims.

The coverage that people have available under Section A.1 depends on their degree of fault. If someone is deemed 50% at fault for the collision, they should expect to receive 50% of the repair cost or actual cash value of their vehicle (whichever is smaller). If someone is deemed 0% at fault for the collision, they should expect to receive 100% of the repair cost or actual cash value of their vehicle (whichever is smaller).

It should be clear, however, that DCPD does not replace Section C coverage – such as collision coverage, all perils, or specified perils. Collision coverage is a different type of insurance coverage that applies to direct and accidental damage regardless of fault when an accident happens. In other words, if an insured is 50% at fault for an accident, they may wish to look at their Section C coverage, rather than their DCPD coverage as they might do better with Section C. If, on the other hand, a person is not at fault, they might want to advance the claim under DCPD as that may not have a negative effect on their insurance rating, and depending on the insurance policy they negotiated, there may be a lower, or in many cases, no deductible.

The benefit to DCPD is that, for good drivers, they don’t have to deal with another person’s insurance company, who may be getting information about the accident from their own insured, which might be in dispute. This means that individuals deal with the insurance company that they selected and that they have a relationship with. At fault drivers, who don’t pay the higher premiums for Section C coverage, get nothing out of DCPD, whereas not-at-fault drivers, don’t have to worry about paying a higher Section C deductible or having to try to negotiate with someone else’s insurance company.

When DCPD applies, in exchange for getting to deal with one’s own insurance company, s. 585.1(7) of the Insurance Act, bars insureds from suing the other driver for the damage to their vehicle, damage to the contents of their vehicle (unless those contents are carried for reward), for loss of use of their vehicle, and for loss of use of their contents (unless carried for reward). This bar has been applied for both direct and indirect damage. This bar has been upheld in the Court of Justice of Alberta in two cases: Hupper v. Howatt and an unreported decision of Justice Shannon from May 2025.

Even when someone is dealing with their own insurance company, disputes may arise, and the Insurance Act provides for mechanisms to determine: (1) degree of fault and (2) settlement value.

What happens when a DCPD claim is reported?

For anyone who has previously brought a claim under Section C of their policy, the process will look and feel almost identical. There may not even be a discussion as to what Section of the policy is responding to the loss, other than that there is no deductible.

In general, the claims adjuster will hear from their insured as to what happened in the accident, and begin investigating the claim. They may reach out to the other person’s insurance company to see if there is a different version of events, or they might not. They might conclude their investigation on the phone with the insured during the first call, or they might continue the investigation and use tools available to them under the Policy or the Insurance Act to determine the merits of the claim.

Both the insurance company and the insured person should seek to comply with all requirements under the Statutory Conditions in the Policy. The Statutory Conditions can be found starting on page 20 of the Policy, but also at s. 556 of the Insurance Act. Statutory Conditions are conditions of the Policy that are passed by the legislature. These are contained in every SPF No. 1 auto policy.

Insurers and Insureds may also consider whether the claim might be better suited under Section C of the Policy (assuming the insured has that coverage) in cases where the insured may benefit from the broader no-fault coverage.

How is fault determined?

This might lead a reader to wonder how insurance companies determine fault under the DCPD. Well, in the first instance, this is dealt with through the Direct Compensation for Property Damage Regulation (the "Regulation"). This is a lengthy regulation with many pictures and descriptions of various types of accidents and how insurance companies must determine fault in accordance with s. 585.1(4) of the Insurance Act. Generally, insurance companies are obligated to determine fault under the Regulation, unless the Regulation does not apply to that type of accident, or there is insufficient information. This exception can be found at s. 4 of the Regulation.

If an insured person is not happy with the degree of fault established by the insurer, the insured is given the right to sue their insurance company and have fault determined under the ordinary rules of law. If fault is disputed, the insurer and insured would need to go through the Court process, call witnesses, and prove the appropriate degree of fault at law.

Upon the insured bringing an action, the Regulation no longer applies. This means that the action would be at risk of the insurance company and the insured. There is no guarantee that either party will do better at a trial than what the Regulation says. For example, if the Regulation would provide an insured 50% coverage, either party could do worse. The insurer could be required to pay anywhere from 0% to 100% of the claim value.

This process has not been tested in the Courts in Alberta to this author’s knowledge. There is some Ontario case law, which may be persuasive in Alberta.

Nothing in DCPD changes when coverage will be afforded to insureds in relation to non-accidental losses. An insured cannot destroy their own vehicle and claim coverage under DCPD.

Further, DCPD does not apply in relation to damage where both vehicles are owned by the same person or where one person crashes a vehicle into a vehicle they own. This is addressed in s. 585.1(15) and (16). If someone is driving into their garage and their vehicles are damaged, that claim should not be covered under DCPD.

How is the amount of settlement determined?

Assuming there is no dispute over the degree of fault, an insurer has two options, (1) they can pay for the cost of the repairs or the actual cash value of the vehicle, or (2) they can repair, rebuild or replace the property damaged or lost with another of similar kind and quality.

The second option is quite rare, despite how the claims process may feel.

Often, insurance adjusters will help people through the claims process. They will provide names of preferred vendors and organize to pay those preferred vendors directly. Despite the fact that insurance companies might have arranged the repairs, obtained the estimate, and approved the repairs, that doesn’t mean that they have agreed to repair, rebuild or replace the vehicle. Courts have generally held that insurance companies providing these services are doing so as agents for their insureds. An insurer arranging for repairs does not remove the obligation on an insured to authorize the repairs with the auto-body shop. There are good reasons for this: if the contract for the repairs was with the insurance company and the auto-body shop, then, if there were faulty repairs, the insured may not have recourse against the auto-body shop for those repairs, and the insured might not have coverage for the faulty repairs.

Unless the insurance company elects to repair, rebuild, or replace the property damaged, there is no obligation on insureds to go with their insurance company’s preferred vendor, but, there may be perks with proceeding with a preferred vendor, most notably, the insurer will generally approve the estimate by their preferred vendor, but might only approve the amount of the estimate by their preferred vendor at the alternative shop of their insureds choice, even if the actual repairs costs more.

An insurance company may not have to pay the amounts at an insured’s chosen vendor as the insurance company’s liabilities are limited under Statutory Condition 4(5) (which can be waived with certain SEFs or CAEs).  For example: if it would cost $5,000 to perform the repairs at their preferred vendor, they may not agree to pay $6,000 at another shop. The insurer may offer their insured $5,000 as a settlement, and the insured can then elect whether to personally fund the remaining repairs, or dispute the settlement amount through the Dispute Resolution Process (the “DRP”).

Using a preferred vendor may also include other perks such as an insurance backed warranty on the work. This may save an insured time and money in the event that the vehicle isn’t repaired properly in the first place, or if there are problems with the repair.  Before an insured elects to have a vehicle repaired at a non-preferred vendor or at a preferred vendor, they should make sure they are aware of what would happen if the vendor damages their vehicle, doesn’t fix things appropriately, overbills them, or if the vehicle has subsequent problems as a result of the repair.

On the flip side, some people believe that a preferred vendor may not have specialized expertise with respect to certain vehicles, or people may simply have their own relationship with a vendor they like or trust. An individual’s own piece of mind regarding a vehicle can be a significant factor – but one that such person must balance with the potential issues that arise with their choice.

If an insurance company elects to repair or replace a vehicle under Statutory Condition 4(6) the insurance company generally provides their insured with written notice of their intention to do so within 7 days of their receipt of a proof of loss. If an insurance company does so, they are then at risk for the cost of the repairs or replacement. Despite how the claims process may feel, proceeding in this manner is relatively rare.

If there is a dispute over the cost of repairs or the actual cash value of the vehicle, s. 585.1(6) and Statutory Condition 4(9) both requires such a dispute to be resolved through the Dispute Resolution Process (which is detailed in s. 519 of the Insurance Act).

What happens if there is no agreement or settlement on the amount of the loss?

The Dispute Resolution Process (the “DRP”) is provided for under s. 519, s. 585.1(6) and Statutory Condition 4(6) to deal with disputes regarding the amount of the damage or loss. The DRP is not able to deal with a fault determination – that is reserved for the Courts. The DRP is not able to deal with a coverage issue – that is reserved for the Courts. DRP is used to determine the amount that could be claimed through the Courts, but, will not determine entitlement to that payment if there is a dispute regarding fault or coverage. Fault refers to who is in the wrong for the accident. Coverage refers to whether the Policy provides for an indemnity for the loss or whether the loss is excluded.

For example, an adjudicator under the DRP may find that the actual cash value of a vehicle is $10,000, but the insurance company may be only willing to pay $5,000 because of their fault determination.  If the insured doesn’t agree with the fault determination, the insured would need to sue the insurance company for a different fault determination (which could go either way). This does not mean that the amount does not need to be determined by the DRP. The DRP determines amounts, the Courts determine fault and/or coverage.

The Dispute Resolution Process (the “DRP”) is set out in s. 519 of the Insurance Act. Either party may demand DRP at any time after a proof of loss is provided. There is nothing in the Insurance Act that prevents parties from proceeding with the DRP without the insured providing a proof of loss, by consent, but it can only be demanded by a party after the proof of loss is provided. It would generally be advisable to both the insurer and the insured that the parties know what the dispute is over (e.g. providing a proof of loss) before the DRP is engaged.

A proof of loss is an insurance document that is required to be provided by insureds to their insurance company before the insured can demand payment for a loss. If an insured person does not provide a proof of loss, they may be barred from suing their insurer under Statutory Condition 6(1) and s. 524 of the Insurance Act, although if an Insurance Company doesn’t provide their insured with a blank proof of loss form to complete, the insurer may lose their defence under s. 523(2) of the Insurance Act. S. 523 does not provide relief from the rights insurance companies have under Statutory Condition 6(1) or Statutory Condition 6(2). The important reminder is that, on automobile claims, a proof of loss should be provided before the parties engage in dispute resolution or reference to the Courts. Failure to provide a proof of loss may limit an insured’s ability to advance their action in Court or in the DRP.

What in the Policy applies to a claim in DCPD?

On our review of the Policy, we note that there are some important blue lines contained in the Policy which indicate the different parts or sections of the policy. At the outset of the Policy, there is the Insuring Agreement which states:

In consideration of the payment of the premium specified and of the statements contained in the application and subject to the limits, terms, conditions, provisions, definitions and exclusions herein stated and subject always to the condition that the Insurer shall be liable only under the section(s) or subsection(s) of the following Insuring Agreements A, A.1, B, C for which a premium is set out in the Policy or in the Certificate of Automobile Insurance and no other

As indicated in the Insuring Agreement, where an insurer has issued someone an SPF No. 1 Auto Policy, subject to any limits, terms, conditions, exclusions, etc., the insurance company is only liable for those sections that an individual obtained. In other words, if a person does not purchase Section C coverage or does not pay Section C premiums, they should not expect the insurance company to be liable for amounts only covered under Section C.

The Insuring Agreement, applies to all parts of the Policy, including the relatively new Section A.1 – as do the limits, terms, conditions, provisions, definitions, and exclusions, by virtue of the Insuring Statement.

For example, Section A.1 would only apply where the automobile is used, stored, or parked within Canada, the United States or upon a vessel plying trade between ports of those countries. If the insured vehicle is in, for example, Mexico, the insured would not have DCPD coverage (among others).

It is important that things like the definitions and statutory conditions apply to DCPD under Section A.1, as otherwise, there would be no coverage or more limited coverage. While s. 585.1(3) provides that an insured is suing as though they were a “third party” that claim is still “under the coverage described in s. 559(1)” of the Insurance Act. Given this, while the claim may be advanced as a third party, the remedies available to an insured are still restricted to the rights provided under the Policy. Section 585.1(3) provides is that an insured’s own insurance company can be named for the losses and damages.

When and for what can an individual sue for?

An insured person can sue their insurance company in relation to their DCPD Claim in the following circumstances:

1. An insured can sue their insurance company for coverage under the policy, e.g. that they are entitled to coverage if it was denied;
2. An insured can sue their insurance company for a different fault determination than what is provided for under the Regulation or than what may have been determined by the insurer; and
3. An insured can sue their insurance company if there has been a determination through the DRP and the insurer is still not paying the insured.

Subject to any rights for relief from forfeiture, s. 520, and/or s. 523 of the Insurance Act, an insured may be barred from suing their insurance company if:

1. The insured is not happy with the amount of the settlement, e.g. the valuation of the vehicle or the valuation of the repairs, and if they have not proceeded through the DRP first; and
2. The insured has not complied with their obligations under the Insurance Act or the Statutory Conditions, e.g. by not providing a proof of loss.

An insured person, or their insurance company seeking to subrogate, can not sue the other driver/owner if:

1. The other vehicle had DCPD coverage or their insurer signed an undertaking to be bound by the DCPD regime, and they are seeking to recover losses or damages related to: the automobile, the contents of the automobile, the loss of use of the automobile, or the loss of use of the contents of the automobile.
2. As above, but, in the case of a multiple vehicle collision, where at least one other vehicle has DCPD coverage, even if the claim is sought to be brought against a vehicle that did not have DCPD coverage.

Insurance companies registered in Alberta, as of April 9, 2025, can be found here.

Insurance companies who have signed the undertaking, as of July 9, 2024 can be found here.

An insured person (and for #2, an insurer) can sue the other driver/owner if:

1. They are suing for personal injuries, and not for damages related to the vehicle, its contents, or the use of the vehicle or its contents (although new legislation may limit this in the future); and
2. They are suing a driver/owner who did not have coverage under the DCPD, and where there is no other vehicle involved in the collision that had DCPD coverage.

If an insured is seeking to sue their insurance company, it is important that they seek out legal advice from an appropriate lawyer. An insurance policy, even a standard form SPF No. 1 Policy is a technical document with technical requirements.

Recent Alberta Authority

The two decisions known to Field Law regarding DCPD both involved Plaintiffs attempting to sue other drivers/owners for diminished value, and other losses, associated with the accident. In each decision, Justices of the Alberta Court of Justice summarily dismissed the claims relying on s. 585.1 of the Insurance Act to do so.

In Hupper v. Howatt, the Justice held that diminished value claims were captured by the bar on damages under s. 585.1, writing:

The section contains an absolute prohibition in stating that an insured “has no right of action .. for damages to the insured’s automobile”. While the Plaintiff argues that damages are not defined and do not specifically refer to depreciation, this interpretation would “overwhelm the statute’s plain language”. Such an interpretation should be avoided.

In a May 9, 2025 unreported decision, Justice Shannon, following his brother in Hupper v. Howatt, dismissed a claim for diminished value, among other things, under s. 585.1. Justice Shannon stated:

The plaintiff’s claim for damages is against the defendant in this situation is barred by the operation of 585.1(7)(a)…. The Court agrees diminished value or DV is not a separate and defined tort, it is part and parcel of a damage claim under a negligence claim…

Costs were awarded against the Plaintiffs in that action by Justice Shannon.

Justice Shannon did not determine the exposure of the Plaintiffs’ own insurance company, as that issue was not before him on May 9, 2025. However, Justice Shannon did provide some non-binding commentary in delivering his oral reasons:

“And the insurer liable for cash value of [the] automobile… - section 4(5) provides some limitations. People who buy expensive cars should know what their insurance is all about and they should look at procuring any and all insurance that results in diminished [] value as well. So, there is some… onus on the plaintiff here to properly protect their property…”

He also cautioned the Plaintiffs with respect to whether they had complied with s. 519 of the Insurance Act regarding the Dispute Resolution Process.

Takeaways

Insurance companies and insureds should be aware that s. 585.1, the auto Policy, and the Insurance Act, provide some very specific rights and obligations. Before suing an insurance company, insured people should look at those rights and obligations.

More importantly, many of the issues that arise in litigation over DCPD (or diminished value) could be avoided at the time the policy is formed.

Vehicle owners can obtain Section C collision coverage to avoid disputes over fault determination.

Vehicle owners can seek out a limited waiver of Statutory Condition 4(5) under SEF 43R, or SEF 18 for replacement coverage, or such other SEFs or CAEs may be on offer. People can and should talk to their insurance company (if direct agency) or a broker to get more information about what coverages may be offered – particularly if they have a particularly expensive or unique vehicle.

Navigating the complexities of Alberta's Direct Compensation for Property Damage Regime can be challenging. For advice, please contact John Gilbert in Calgary, Christine Pratt, KC in Edmonton, or any member of Field Law’s Insurance Group.