What does fire insurance on a vehicle actually cover?

Q. I was informed by my auto insurer that fire insurance on a vehicle does not cover an engine fire as that is mechanical or electrical. Apparently, it exists in case my car is burned in a forest fire or the neighbour’s house goes up. Does that mean I’m not covered in case of an engine fire or something like that?
–Chuck

A. Vehicle fires happen more often than you might think. Most often, they come from the under-hood area or dashboard, where most of the mechanical and electrical parts are concentrated, and usually require the presence of heat, either from hot engine parts or a short circuit in the electrical system. Leaking fuel or oil can also be contributors. A vehicle fire spreads quickly and, frequently, the vehicle is destroyed before it can be extinguished—in which case the vehicle becomes a write-off and the person insured is compensated for the loss.

However, it’s important to note that fire damage isn’t automatically covered by insurance in all cases. “It would have to be sudden and accidental, and in no way caused by a mechanical breakdown,” explains Debbie Arnold, a licensed broker with Sound Insurance in Ontario.

The Ontario Automobile Policy (OAP 1) is the document outlining the rights and responsibilities of both you and your auto insurer, what’s covered and what’s not. And OAP 1 makes it clear that coverage “excludes repairs required because of mechanical breakdown of any part of the automobile, or consisting of, or caused by rusting, corrosion, wear and tear, freezing or explosion within the engine.”

So, if a part fails and starts a fire, that claim could conceivably be considered the responsibility of the vehicle owner (due to a grossly neglected maintenance item or, more commonly, suspected insurance fraud). Alternatively, perhaps the vehicle manufacturer would be responsible under a product warranty.

In most cases, a vehicle fire is considered spontaneous and is almost always covered by insurance; occasionally an insurance company will hire an expert to learn more about the causes of the fire, and either reject the owner’s claim or pursue the automaker to cover damages.

The consequences of a fire, including damage to the vehicle and property damage, are covered in different sections of OAP 1, depending on the circumstances:

1. Damage that occurs while your vehicle is parked. In Ontario, repairs to a parked vehicle are covered in Section 7 of OAP 1, which pays for damage caused by fire, theft, or collision if the automobile is insured against these perils. Typically, fire damage is covered as a “Specific peril,” or included as part of “Comprehensive” or “All Perils” coverage in Section 7 of OAP 1. Comprehensive coverage applies when the vehicle is stationary and is optional; but because it’s inexpensive, only owners of a vehicle with negligible value would forego it. Comprehensive insurance also covers events like a fire, flood or a falling tree branch.
2. Damage that occurs as a result of the vehicle operator’s actions. Collision insurance coverage applies for a fire resulting from an event for which the vehicle operator is responsible. This would involve contact with something else, most likely another vehicle, but it could involve hitting something other than another vehicle, such as a lamp post or a wall.
3. Damage from a fire that occurs after a collision where vehicle operator was not at fault. If a fire starts after a collision in which the driver was not responsible, the claim would be paid under Direct Compensation Property Damage coverage in Ontario because the cause of loss was not the fire, but the initial impact from the other vehicle.

An insurance company will write off a vehicle if the cost to repair it is more than the cost to replace it. When the cost of repairs exceeds the Actual Cash Value of the vehicle, the insurer will compensate the owner for the value of the vehicle instead of repairing it. (Note the Actual Cash Value may be significantly less than what you paid for the vehicle.) Insurance companies will usually opt to fix a vehicle when the estimated repairs are inferior to about 80% of its value; this calculation can vary.

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