A year, if a day: What insurers are talking about one year after the introduction of the "New Regs"

November 10, 2011

To date, the experience of the September 2010 changes to the Statutory Accident Benefits Schedule is the experience of front-line claims handlers, adjusters and health care professionals primarily. To date, the experience of the September 2010 changes is the experience of a ramped-up HCAI system, the aggressive anti-fraud task force, the often imposing monetary limits on insurer assessments, the imposing mediation and arbitration back-log at FSCO, the paperwork and, of course, the MIG.

We have chosen a few key topics that have been repeating themselves in conversations with our clients, adjusters, claims handlers and risk managers over the course of the past year. In the absence of any defining or guiding arbitral or court decisions arising from the 2010 Regulations, it has been an opportunity to think creatively with clients whether discussing what is needed to prove economic loss, or the effect of changes to loss transfer regulations. Following are some thoughts distilled from the past year.

1. $2,000 Limit on Insurer Assessments

The $2,000 limit imposed on insurers at section 25(5)(a) in respect of fees and expenses for conducting any one assessment or examination and for preparing the reports has been discussed at length. This section becomes potentially problematic for insurer’s who must assess an insured person outside of a major centre. For example, consider an insured person, catastrophically impaired, in a remote area of Ontario, who requires the assistance of an interpreter. With transportation costs and interpreter costs being included in the $2,000, how does an insurer effect a proper, fulsome assessment? To transport a specialist from a larger centre will consume most of the $2,000.

One option has been to consider conducting ‘tele-health’ assessments, with the physical assessment conducted by a local nurse while on camera to a linked-in specialist assessor.

2. Incurred Expenses and Economic Loss

The New Regulations included a new definition of "incurred", aimed particularly at claims for housekeeping and home maintenance expenses. Under the regulation an expense in respect of goods or services is not incurred by an insured person unless:

1. the insured has received the goods and services to which the expense relates,

2. the insured has paid the expense or is otherwise legally obligated to pay the expense, and

3. the person who provided the goods or services,

   1. did so in the course of the employment, occupation or profession in which he or she would ordinarily have been engaged, or

   2. sustained an economic loss as a result of providing the goods or services to the insured person.

In other words, in order for a housekeeping or home maintenance expense, for example, to be "incurred", there must be a corresponding "economic loss" by a person providing the housekeeping or home maintenance. In determining whether a person has sustained an economic loss, adjusters and handlers must request sufficient information and documentation to support the claim, such as:

1. the name and contact information of any employer from whom the person is missing time from work in order to conduct housekeeping and home maintenance;

2. the individual’s normal hours of work; in other words, if a person usually works 9 am until 5pm Monday to Friday, but conducts the housekeeping from noon until 2pm on a Saturday, then it is more questionable that an economic loss has occurred;

3. request supporting financial information ie. the normal hourly rate of pay, salary, and income.

In a recent discussion with a client, an insured person claimed expenses for goods and services conducted by an unemployed individual who claimed an economic loss arising from her inability to accept an offer of employment or to continue her job search. We encouraged the client to request a copy of the job offer if written, the name and contact information of the individual who extended the job offer, the anticipated start date, the rate of pay, etc.

The quantum of the housekeeping and home maintenance benefit is capped at $100 per week. We believe that the quantum is determined by the quantifiable amount of a demonstrable economic loss.

3. Motor Vehicle Accident Claims Fund and Priority Issues

Ontario Regulation 283/95 which governs the determination of priority disputes as between insurers was amended effective September 1, 2010. Many of the changes are with respect to the Motor Vehicle Accident Claims Fund. These changes seem to import recent case law, including Minister of Finance v. Pilot Insurance (2010) ONSC 5361 Canlii, in which Justice Cumming concluded that the Motor Vehicle Accident Claims Fund is not to be strictly held to the 90 day notice provision contained in section 3 of the Regulation.

Ontario Regulation 283/95 has been specifically amended to included provisions that MVACF may give notice after the 90 day investigative period if the accident occurred after September 1, 2010, an insurer must complete a reasonable investigation before giving notice to the Fund, and that the Fund can commence arbitration more than one year after the section 3 notice is given.

If you are an insurer who believes that the Fund is higher in priority to respond to a claim for benefits, it is mandatory for you to conduct a ‘reasonable’ investigation before giving notice to the Fund. It will be necessary to have received the motor vehicle accident report, perhaps autoplus reports and statements, all in support of the priority issue.

If you are an insurer responding to a priority claim from the Fund, you are no longer able to rely on the section 3 notice provisions or the section 7 requirement to commence arbitration within one year.

4. Fraud

Efforts to control fraudulent statutory accident benefit claims continue. FSCO Auto Bulletin A-02/11 entitled "Insurer Rights and Responsibilities to Challenge Questionable or Abusive Claims" reminds insurers:

"FSCO recognizes that an overwhelming majority of stakeholders are fair and responsible participants in the auto insurance system. However, FSCO is also aware that a small group of service providers and representatives continue to abuse the system."

Insurers are reminded to take steps to verify treatment expenses and invoices, to be aware of treatment providers who attempt to flood an insurer with treatment and assessment plans in an effort to cause adjusters to miss approval timelines, and to take steps to educate treatment providers if necessary of the appropriate application of the MIG.

The provincial government has also introduced the Auto Insurance Anti-Fraud Task Force. Focusing on prevention, detection, investigation and enforcement, the task force will make recommendations after a series of consultations as early as this fall.

5. Some Concluding Thoughts

It is too early to determine whether the goal of the September 2010 regulation changes—to control the soaring costs of auto claims—is achievable. It is too early to know how the courts and FSCO will interpret some of the more controversial amendments. While we remain at the early stages of this particular statutory accident benefit regime, however, it is not too early for insurers and their adjusters and claims handlers to think creatively within the new regulations.

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