August 2016

"Reasonable and Necessary":

Defining the elusive test from the Statutory Accident Benefits Schedule

Michael Kennedy
Partner

By Michael Kennedy, Partner

I. Introduction

Whether an expense or service is "reasonable and necessary" is an important legal test in the context of the Statutory Accident Benefits Schedule ("the Schedule"). It is used to determine entitlement to the majority of benefits available under the Schedule, including medical and rehabilitation expenses, examination and report costs, caregiver and dependant care expenses, case manager services, attendant care, housekeeping and home maintenance and visitor expenses. Yet despite its widespread application, the term "reasonable and necessary" remains a vague term of art that is not defined anywhere in the legislation.

The vagueness of the term "reasonable and necessary" is problematic, as it invites varying interpretations of its meaning. For example, treatment providers with medical backgrounds likely have a different idea of what is reasonable and necessary in comparison to adjusters, lawyers and adjudicators (who all have insurance and legal backgrounds). It is therefore not surprising that different people could review an identical set of facts yet arrive at opposite conclusions as to whether a proposed expense is reasonable and necessary. The undefined nature of the "reasonable and necessary" test can make adjusting claims a nightmare for adjusters who understandably want to rely upon their experts, but are left in the middle of competing opinions. Shedding some light on the important yet ambiguous "reasonable and necessary" test should help end the nightmare.

II. The Contextual Test

Determining whether treatment, services or expenses are "reasonable and necessary" requires a contextual analysis involving the following non-exhaustive list of questions:

1. Are the proposed expenses or services related to the accident-related impairments?
2. What are the goals and will they be achieved by the proposed expenses or services?
3. What is the cost (both financial and non-monetary) of the expenses or services?
4. What is the expected degree of success of the expenses or services and how will progress be monitored?
5. Are there any risks associated with the expenses or services?
6. Would other expenses or services be better alternatives to achieve the goals?

A starting point for considering and weighing the above questions would be by reviewing the treatment and assessment plan or claims form itself.¹ Conveniently, the treatment and assessment plan (OCF-18) form requires practitioners to clearly identify a claimant's injuries, prior and concurrent conditions, current limitations, plan goals, expected outcomes, progress evaluation methods and any barriers to success. In other words, a fully completed treatment and assessment plan should have most of the information required to conduct a preliminary assessment as to whether the proposed services are reasonable and necessary. However, it is important to then go on and complete a full assessment by considering all relevant factors, including those contained in the non-exhaustive list above.

i. Are the proposed services related to the accident-related impairments?

Perhaps the easiest way of determining whether a claim is reasonable and necessary is by determining whether the proposed services and expenses are even related to the accident-related impairments. For example, if a claimant suffers soft tissue injuries in an accident, then a claim for Cialis (used to treat erectile dysfunction) should be a red flag that the proposed expense may not be related to accident-related impairments.² Similarly, brain injury investigations are not likely required for individuals with no evidence of head injury.³ In short, if a claimant's health complaints are not clearly accident-related, then any services required as a result of those complaints are unlikely to be reasonable and necessary.⁴

That being said, it is important to not adjudicate claims in a vacuum. Each claim for an individual benefit must be assessed in context with all other known information in the claims file. Failing to do so could potentially lead to special awards and allegations of bad faith. Using the same example above (specifically a treatment plan prescribing Cialis for soft tissue injuries), it is possible the treatment plan's author simply failed to list psychological complaints in the "injuries" section of the claims form. If evidence outside the treatment and assessment plan proves that accident-related psychological complaints led to intimacy issues, then a medication to remedy this complaint may be considered reasonable in the circumstances.

If there is no evidence in the claims file linking the claimed services to any accident-related impairment, then requests for medical records (and possibly an insurer examination to assess impairment) should be considered. If sufficient evidence has been obtained and that evidence still does not link the claimed expenses to any accident-related impairment, then it is unlikely that particular claim will be reasonable and necessary.

ii. What are the goals and will they be achieved by the proposed expenses or services?

If the expenses or services seem related to accident-related impairments, then the next step in determining whether the claim is reasonable and necessary should be to identify the treatment or rehabilitation goals and determine whether they will be achieved by the proposed services.

Treatment and rehabilitation goals can vary widely. Among other things, they can include preventing further injury (which is a common goal of attendant care, housekeeping and home maintenance) and relieving relief (which is a common goal of passive treatment). It is worth noting that pain relief in itself is considered a legitimate goal, even if the proposed services will not necessarily improve the claimant's symptoms or lead to recovery.⁵ However, if the proposed services have an inconsequential goal or will render an insignificant benefit, then it is unlikely those services will be considered reasonable and necessary.⁶ For instance, active treatment (with an expected benefit of improved function) is more likely to be considered reasonable than ongoing passive therapy if there has been little reported improvement (as the former renders a significant benefit while the latter renders a comparatively insignificant benefit).⁷

iii. What is the cost (both financial and non-monetary) of the expenses or services?

While not determinative, cost is certainly a factor in assessing whether an expense is reasonable or necessary. Programs with a high cost and low success rate are much less likely to be considered reasonable and necessary than programs with a low cost and high success rate.⁸ For example, the cost of retraining for alternate employment may not be justified if the claimant's current skills could lead to employment similar in status and remuneration to his or her pre-accident position.⁹ In other words, it is more likely that a rehabilitation expense with a minimal or low cost is more likely to be favoured over a treatment plan with high cost (provided both have a similar chance of success).

With respect to what costs would be considered "reasonable", insurers should be aware that an average, realistic cost (versus the lowest cost on the market) is the standard of what cost will likely be considered reasonable.¹⁰ The "going rate" (as opposed to the minimum wage or "bargain basement" rate) is more likely to be awarded by an arbitrator should the expense be arbitrated.¹¹

With respect to non-financial costs, factors such as time investment should be considered when determining whether a claim is reasonable or necessary. For example, retraining for alternate positions could potentially require a substantial time commitment. A one-year college program may be more reasonable than a four-year university degree if the evidence suggests that the shorter program would lead to a similar job and salary (even if the shorter program is more expensive than the longer program).

iv. What is the expected degree of success of the expenses or services and how will progress be monitored?

Assessing a treatment and assessment plan's chance of success is when prognoses become very important. Do the treatment providers expect a full recovery if the claimant follows treatment recommendations? Do any doctors recommend a transition from passive to active treatment or a return to daily activities? If treatment is recommended with a poor prognosis, this should be an indication that the proposed services may not be reasonable and necessary.

A claimant's subjective belief in the benefit of treatment is unlikely enough to prove that the services are reasonable and necessary; objective medical evidence proving the efficacy of the claimed expense should accompany the claim.¹² However, effectiveness of the proposed expenses or services does not need to be proved with scientific certainty. A claimant's self-report of benefit along with the treatment provider's positive prognosis should be sufficient to prove that services will be effective in reaching their goal.¹³

It is reasonable to have an appropriate review process built into the particular claim for services.¹⁴ In this regard, the length, frequency and duration of treatment becomes an important factor. For example, a twelve week chiropractic program with re-evaluation at the end of the program is much more likely to be considered reasonable than a year's worth of services with no intermittent reviews whatsoever. Similarly, prescribed attendant care with a recommended reassessment after a certain time is much more credible than prescribed attendant care into the indefinite future.

v. Are there any risks associated with the expenses or services?

Risky treatment is unlikely to be considered reasonable. If the proposed course of treatment may risk further injury, then it becomes harder to justify such services as being sensible.¹⁵ On the other hand, if the services are risky but have a high degree of success, then it will likely be left in the claimant's discretion as to whether he or she wishes to pursue such treatment.¹⁶

The danger of the claimant becoming dependent upon the proposed services or treatment is also an important risk to take into account. Measures and treatment intended to relieve pain should not encourage an inappropriate or indefinite dependency, nor should they interfere with other aspects of rehabilitation.¹⁷ This is the reason why occupational therapists often find that a claimant is limited, yet should be encouraged to resume work and personal care. It is similarly the reason why most effective treatment plans include active modalities or home-based exercise in addition to passive, facility-based services.

vi. Would other expenses or services be better alternatives to achieve the goals?

Even if expenses or services seem reasonable, an important step in determining whether they are necessary is to assess whether any alternatives would be better suited to achieve the intended goals. Specifically, an investigation should be done to assess whether any other readily available treatment or rehabilitation options have an equal or higher degree of success.¹⁸ Availability of treatment alternatives is key, as a treatment option with a high success rate does little good if there are no practitioners available to offer the service to the claimant.

It is important to note that professional services will likely be preferred over non-professional services. For example, if support and counselling is provided by a lay person, then such services are likely to be seen as inferior to the same support being provided by a professional person.¹⁹ In such a situation, it is more likely the professional services will be considered reasonable and necessary.

If there are equally effective alternatives available to the claimant, the discretion of choosing between them will likely rest with the claimant as opposed to the insurer.²⁰ This seems especially true if the claimant has a strong and rational preference for one treatment option (such as physical therapy) over another (such as medication).²¹

III. Conclusion

It is important to remember that the above questions are not an exhaustive list of things that should be considered when assessing a claim. What is "reasonable and necessary" is contextual and will change depending on the circumstances. Even a single fact (such as the difference in a claimant's age, gender, geographic location or cultural background) may make an expense or service unreasonable when it would otherwise be reasonable.

The vague and undefined nature of the "reasonable and necessary" test is why it can be so widely applied across the majority of statutory accident benefits. However, as long as adjusters, lawyers and adjudicators ask the right questions in assessing each particular claim, then it should become much clearer and less of a nightmare when determining whether a proposed expense or services is reasonable, necessary and payable.

¹ See Rattan v Pilot Insurance Co, [2007] 54 CCLI (4th) 308, Carswell-Ont 6605 (WL Can) (FSCO App), in which Director's Delegate Evans determined that the content of treatment plans themselves are their own evidence as to whether they are reasonable and necessary.
² See Tam v Wawanesa Mutual Insurance Company, 2010 Carswell-Ont 4458 (WL Can) (FSCO Arb).
³ See Mendez v Axa Insurance (Canada), 2000 Carswell-Ont 896 (WL Can) (FSCO Arb)
⁴ See Nunes v St Paul Fire & Marine Insurance Co, 2002 Carswell-Ont 6047 (WL Can) (FSCO App), in which examination costs were denied where there was no evidence that the claimant's health problems were connected to accident.
⁵ See Cubello v Guidolin, [2000]19 CCLI (3d) 164, 96 ACWS (3d) 853 (Ont SCJ).
⁶ See Jaansoo v Canadian General Insurance Co, [2000] 95 ACWS (3d) 154, Carswell-Ont 531 (WL Can) (Ont CA).
⁷ See Moschonissios v York Fire & Casualty Insurance Co, 1999 Carswell-Ont 4680 (WL Can) (FSCO Arb); varied on other grounds, 2001 Carswell-Ont (WL Can) 5387 (FSCO App), in which claims for passive treatment were refused while claims for active treatment were allowed.
⁸ See Jaansoo v Canadian General Insurance Co, [2000] 95 ACWS (3d) 154, Carswell-Ont 531 (WL Can) (Ont CA).
⁹ See Philippe v Royal Insurance Co of Canada, 1996 Carswell-Ont 1063 (WL Can) (Ont Insurance Comm), which held that no retraining was required (despite the claimant's desire to become a doctor or lawyer) given current skills.
¹⁰ See Phan v Jevco Insurance Co, [2008] 176 ACWS (3d), Carswell-Ont 8754 (WL Can) (Ont SCJ), which held that individuals providing services should not be expect to do so at "ridiculously low rates".
¹¹ See Tarantino v Aviva Canada Inc, 2007 Carswell-Ont 8417(WL Can) (FSCO App), which held there was no authority to limit a housekeeping claim to minimum wage.
¹² See Leclerc v State Farm Mutual Automobile Insurance Co, 2009 Carswell-Ont 7565 (WL Can) (FSCO Arb).
¹³ See Violi v General Accident Assurance of Canada, [2000] OFSCID No 171, Carswell-Ont 3453 (FSCO Appeal)..
¹⁴ See Leclerc v State Farm Mutual Automobile Insurance Co, 2009 Carswell-Ont 7565 (WL-Can) (FSCO Arb).
¹⁵ See Little v Aviva Canada Inc, 2005 Carswell-Ont 8336 (WL Can) (FSCO Arb), which discussed that reasonable and necessary measures to return a claimant to the workforce should not cause the claimant further injury..
¹⁶ See Cubello v Guidolin, [2000] 19 CCLI (3d) 164, 96 ACWS (3d) 853 (Ont SCJ), in which a judge rejected the insurer's position that a claimant should discontinue physical therapy in favour of morphine. The judge held that it was not reasonable to insist on trial of medication as a precondition to continuing physical treatment.
¹⁷ See Amoa-Williams v Allstate Insurance Company of Canada, [2000] OFSCID No 93, Carswell-Ont (WL-Can) 5239 (FSCO Arb).
¹⁸ See Violi v General Accident Assurance of Canada, [2000] OFSCID No 171, Carswell-Ont 3453 (FSCO Appeal)..
¹⁹ See Adabi-Ghomi v Allstate Insurance Co, [2000] Carswell-Ont 3083 (WL Can) (FSCO Arb), in which a law clerk provided emotional support and advice at an hourly rate. The law clerk's expense claim was rejected for the reason (among others) that a case manager was already providing such services.
²⁰ See Violi v General Accident Assurance Co. of Canada, [1999] OFSCID No 148, Carswell-Ont 5193(WL Can) (FSCO Arb), which held that the choice of treatment modality is that of the claimant and his or her health practitioner..
²¹ See Cubello v Guidolin, [2000] 19 CCLI (3d) 172, 98 ACWS (3d) 34 (Ont SCJ), in which a judge rejected the insurer's position that a claimant should discontinue physical therapy in favour of morphine. The judge held that it was not reasonable to insist on trial of medication as a precondition to continuing physical treatment.

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