Province’s auto insurance plan deemed problematic by lawyers

Some of the Ontario government’s proposed changes to auto insurance laws will not reduce insurance costs and premiums, the Federation of Ontario Law Associations said.

In a Sept. 17 submission, FOLA said that both plaintiff personal injury lawyers and insurance defence lawyers had several concerns about the proposed policies.

“These lawyers are on the front lines of the justice system and see its triumphs and shortcomings every day,” FOLA’s report said. “To us, the Care, Not Cash model had no merit when it was first proposed, and it has no merit now.”

In a separate Sept. 16 submission, the Toronto Lawyers Association said it supported some aspects of the government’s plan — such as reinstating the $2 million benefit limit for catastrophic car crash injuries, allowing recipients to decide how to split the money between medical, rehab and attendant costs. But like FOLA, the government’s plan also raised concerns for the TLA, both on the plaintiff’s and defence side of the bar.

For instance, a proposal to let people lower their auto insurance premiums by reducing their coverage to $1 million is problematic, the TLA wrote.

“Auto insurance policies are difficult for consumers to understand,” the TLA said. “Consumers who opt for $1 million in coverage may be required to turn to Ontario’s already overburdened health care system and other social welfare systems . . . . or they may be forced to suffer without the treatment they need.”

Both FOLA and the TLA said the province will need to focus on insurance broker oversight, as well as extensive campaigns to raise consumer awareness of these issues.

FOLA’s response to the government’s consultation said it is not clear why the government would ban settling with an insurance company. While fraudsters do take advantage of cash settlements, the government’s proposal is a “sweeping” change that would only prevent a small amount of fraud, the TLA said.

“Of particular concern to the TLA was taking away the ability to receive a cash payment. That really does hamstring individuals’ ability to retain counsel to advocate for them — to get the best deal they can,” says Margaret Waddell, a partner at Waddell Phillips PC and president of the TLA.

Lawyers typically work on contingency fee basis in these cases, and are paid a percentage of the settlement, Waddell says.

“If you take that away and there aren’t cash payments, you are really taking away access to justice for individuals who have been injured because they won’t be able to afford, on their own, to retain a lawyer,” she says.

Contingency fee arrangements help people afford lawyers’ services, and without cash settlements, the government’s plan “effectively remove[s] the incentive of legal representatives to represent victims of auto collisions where such victims cannot afford to pay for legal services out of pocket,” the TLA submitted.

“The risk that Ontarians may effectively abandon legitimate claims for treatment would represent a serious failure in the administration of justice in Ontario,” the TLA said. “[T]here is a serious risk that the LAT will become overwhelmed with self-represented claimants.”

Waddell says that process could lead to really unfair outcomes.

“It leaves the behemoth insurers — who are looking to reduce costs and not necessarily ensuring the insured's get the full recovery to which they are entitled. They do challenge forms of care. They do push back,” she says. “So that is a very serious concern for us. It’s really taking away what was previously fairly level playing field, and it’s making it skewed highly in favor of the insurance companies.”

Injured people could have less access to treatment without cash settlements and cost recovery at the Licence Appeal Tribunal, FOLA said. If costs incurred at the LAT exceed the amount in dispute, it can pose a “serious access to justice” issue, said FOLA.

“This puts the insured person at a huge disadvantage,” FOLA said, suggesting the government consider changing the LAT system to provide for costs.

The TLA noted that all accident benefits claims would remain “open” for either five years or the end of the benefit payout under the proposed Care, Not Cash Default system.

“It really does increase administrative burdens for the insurers because they have to now look at every single receipt for every single physio appointment for however many years — rather than offloading that administrative burden by making a cash settlement and letting the insured person use the funds as they best see fit,” says Waddell. “That drives up premiums.”

FOLA echoed Waddell’s concerns, submitting that from the insurer perspective, “it may well be advantageous to settle the accident benefit claim, as it saves costs in keeping the file open,” while for the insured person and the insurer, “cash settlements are reached because it is the most sensible and practical way to resolve a dispute.”

The TLA also noted that when a dispute lands before the LAT, it could delay an injured person’s treatment.

“[A]n insured person cannot settle an accident benefit claim before the first anniversary of the accident. That being the law, we question how the Care, Not Cash default proposal could result in faster access to treatment and care,” FOLA said.

Plus, the TLA said, there is a risk that doctors might choose treatments that are “more in line with insurers’ interests” than with the patient’s interests.

“This risk is not illusory and has been regularly borne out of litigation of claims in the past,” the TLA’s submission said. “[T]here is a risk that Ontario’s health care system will face increased pressure from injured claimants.”

The TLA also said it was “unseemly” for the government to require an injured person to pay for the “privilege” of receiving the cash equivalent of their benefits. The policy “appears to be a form of the government assisting insurers in profiting,” the TLA said.

“It strikes me, personally, as premium grab by the insurers and its of no benefit at all to the insureds,” says Waddell. “They are entitled to what they are entitled to. They shouldn’t have to pay more to obtain it one way or another. The TLA thinks that’s unfair, and I, particularly, find that be an appropriate suggestion.”