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Archive for March 2012

Ontario Budget Brings Announcement of Auto Insurance Reforms

Further reforms to Ontario’s Auto Insurance Industry are planned as part of the 2012 Budget announcement made yesterday in Toronto.  Two of these measures include changes to the
definition of catastrophic impairment and further enforcement of auto insurance fraud.

In 2010, the government made major changes to the auto insurance system. As a result, premiums are stabilizing for drivers across Ontario. Building on the success of the 2010 reforms, the government is taking action to tackle fraudulent and abusive practices, base insurance benefits on scientific and medical principles, and ensure its regulator continues to identify and respond to new and emerging issues. The government’s ongoing work in the area of auto insurance, including fraud, should continue to reduce the pressure on premiums.

Some of the key changes to be implemented include:

  • Regulation of health clinics;
  • Other gaps in regulation;
  • Establishment of a dedicated fraud unit;
  • Consumer education and engagement strategy;
  • A single web portal for auto insurance claimants;
  • Development of new Minor Injury Guideline;
  • Make the report of the Superintendent of Financial Services on catastrophic impairment public and move forward to propose regulatory amendments in this area;
  • Engage in a review of the automobile insurance dispute resolution system;
  • Strengthen the [FSCO] Superintendent’s authority regarding rate and risk classification approvals;
  • Support a Superintendent’s review of the profit provision benchmark in auto insurance rate change approvals;
  • Work with insurers to explore the implications of voluntary usage-based auto insurance policies;
  • Harmonize the timing of statutory automobile insurance reviews;
  • Improve solvency supervision of Ontario insurers
  • Update Ontario’s Insurance Act by:
    • Proposing amendments to the life insurance accident and sickness insurance parts of the Insurance Act to enhance consumer protection, reduce regulatory burden, and harmonize
      with other Canadian jurisdictions; and
    • Enhancing the effectiveness of its insurance regulation by proposing amendments to give the Superintendent of Financial Services the authority to impose administrative monetary penalties in the insurance sector.

You can read the Government’s comments on the insurance industry by clicking here.

The Attendant Care Needs Assessment (Form 1): It is what it is

In a recent Financial Services Commission of Ontario (FSCO) Arbitration ruling, Costel Sicoe and Jevco Insurance Company [FSCO A08-001173], Arbitrator Susan Sapin confirmed that the hourly rates indicated on the Attendant Care Needs Assessment (Form 1) are the rates which are to be used by insurers for paying the benefit.

Mr. Sicoe was catastrophically injured in a motorcycle accident on June 15, 2006.  As a result of this accident he required round-the-clock attendant care.  Jevco paid the attendant care to the maximum of $6,000.00 per month.

However, in February 2009 Mr. Sicoe moved to Romania.  Jevco reduced the monthly attendant care payments based on an argument that the basic supervisory care amount of $7.75 per hour is based on the minimum wage in Ontario at the time of the accident, but in Romania the minimum wage was $1.30 per hour.  Jevco paid $1.30 per hour for the basic supervisory services.  This resulted in Mr. Sicoe being paid less than the $6,000.00 per month that he was entitled to in accordance with the Form 1.

Arbitrator Sapin confirmed the interpretation of an “incurred expense” from previous case law:

It is well-established that an applicant need not actually receive the items or services claimed in order to be entitled to an expense. To do otherwise would allow the insurer to set up the inability of an insured to pay for a benefit as a shield from its obligation under the policy of insurance. It is sufficient that the reasonableness and necessity of the service be established and that the amount of the expenditure can be established with certainty.

This decision further confirms that insurers are bound to pay attendant care benefits in accordance with the Form 1 and that they do not have the discretion to pay below the rate established by the Form 1.  To that end, Arbitrator Sapin stated the following:

I note that the most recent Attendant Care Hourly Rate Guideline, dated June 2010 and available on the Commission website, establishes the maximum expense that automobile insurers are liable to pay under the Schedule for attendant care services (for accidents after September 1, 2010). The Guideline also states that “Insurers are not prohibited from paying above the maximum hourly rates established in this Guideline.” It does not say, however, that insurers can pay less.

State Farm to pay $23,000.00 Special Award for Unreasonably Withholding IRB’s

NOTE: This decision was overturned on appeal on October 1, 2012

In the decision Marcia Henry and State Farm Automobile Insurance Company [FSCO A09-000213] FSCO Arbitrator Denise Ashby ordered the insurer to pay a claimant’s income replacement benefits (IRB) with interest. The insurer was also ordered to pay a special award of $23,000.00 for unreasonably withholding the benefit.

Marcia Henry was a full-time emergency triage nurse in a hospital. The medical experts identified that she was only capable of engaging in sedentary work. Despite that, State Farm terminated her income replacement benefits prior to the 104-week mark, taking the position that she did not suffer a substantial inability to perform the essential tasks of her pre-accident work.

The Arbitrator also considered Ms. Henry’s entitlement to IRB’s after the 104-week mark, when the eligibility criteria changes to having to suffer a complete inability to engage in any employment for which she is reasonably suited, based on education, training and experience.

Although Ms. Henry took courses to upgrade her resume following the accident, it was determined that she still remained competitively unemployable when compared to her pre-accident job. The Arbitrator noted that, “It is unrealistic to believe that a woman of Ms. Henry’s age, disability and expected level of income would be hired over similarly educated, healthy and younger candidates who would likely have lower salary expectations.”

The Arbitrator went on to state that,

The accident occurred in February 2007. For the majority of her studies Ms. Henry was not engaged in employment and was able to work at her own pace. Notwithstanding this flexibility, it took four years to complete her degree. While Ms. Henry’s extensive experience and academic success might appear to make her an attractive candidate for employment as a nursing or public health instructor, her lack of teaching experience and accommodation requirements negate this. I accept that Ms. Henry enrolled in post-graduate studies as part of a career plan which would have seen her transition from the physically demanding role of emergency department nurse to a more sedentary role in public health. However, the injuries sustained in the accident prevented her from implementing her plan. Therefore, I find that Ms. Henry is entitled to post-104 week income replacement benefits.

With regard to a special award, the Arbitrator made the following comments:

State Farm stubbornly held to the opinion of its medical assessments of 2007 that Ms. Henry was not substantially disabled. Notwithstanding there was compelling evidence that Ms.
Henry continued to require significant medical intervention including shoulder surgery in June 2009.

An insurer has a continuing obligation to adjust a claim. State Farm failed to meaningfully revisit its opinion as the 104 week period elapsed and Ms. Henry had not returned to work.

I find that State Farm unreasonably withheld income replacement benefits from Ms. Henry and as a consequence she is entitled to a special award. As State Farm essentially abdicated its responsibility to adjust the file in respect of the post-104 week period, the award should be at the higher end of that available.

The full decision can be read by clicking below.

Henry and State Farm.

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