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PROMOTING EXCELLENCE IN ADVOCACY
Submissions
Study of the Automobile Insurance IndustryDate: June 30, 2012
Submitted to: The Standing Committee on General Government, Legislative Assembly of Ontario
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INTRODUCTION
The Advocates’ Society is pleased to offer the following written submissions regarding changes that would improve the quality of the automobile insurance regime in Ontario.
The Advocates’ Society is a not-for-profit association of approximately 4,700 lawyers throughout Ontario who practice as advocates in the resolution of disputes involving the Courts, administrative tribunals including the Financial Services Commission of Ontario (FSCO), government bodies, arbitrations and other forums for dispute resolution. The mandate of the Society includes, amongst other things: a) the initiation of appropriate reforms to the legal system and to comment upon specific Acts of the legislature and regulations thereto; and b) addressing issues of access to justice.
Over 2000 of our members practice in the personal injury field, both as plaintiff’s counsel and as defence counsel. The members of the task force that drafted this submission (see list at the end of the submission) are members of both the plaintiff and defence bars in the personal injury field and this submission is the product of vigorous debate on the competing interests. As a result, we believe that our comments represent a balanced perspective in regard to possible changes to the automobile insurance compensation system. The suggestions are objective and reflect both the concerns of those injured in motor vehicle accidents and the insurers who must respond to their claims. The Society is mindful of the need to achieve a fair and reasonable automobile insurance compensation system that is also affordable, while maintaining price stability of the product.
The Society’s submissions will focus on the following aspects of the automobile insurance system in Ontario: the definition of catastrophic impairment under the Accident Benefit Schedule (SABS), tort reform, the mediation backlog at FSCO, and liability coverage for novice and young drivers.
THE DEFINITION OF CATASTROPHIC IMPAIRMENT UNDER
THE ACCIDENT BENEFIT SCHEDULE
Introduction
Any changes to the definition of catastrophic impairment should, as a starting point, reflect the direction of the government as set out in the Five Year Review of Auto Insurance.
The Five Year Review (dated March 31, 2009) stated that the purpose of the review was to provide recommendations to improve the effectiveness and the administration of the SABS. The review would focus on enhancing protection for auto insurance consumers and ensuring product affordability and availability to stabilize costs. Recommendations included:
1. With respect to any future regulatory changes, consideration should be given as to whether the change would increase complexity and regulatory burden. Absent a compelling reason, a change should not be made that would add complexity to the accident benefits system.
2. Consultation with experts in the field to look at amendments to the definition of catastrophic impairment. The goal for the review should be to ensure that the most seriously injured
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accident victims are treated fairly. It is noted that the integrity of such a model is “dependent on a clear and fair definition of catastrophic impairment”.1
3. Making necessary structural changes in order to stabilize costs. The government’s positive response to this issue is reflected in the reduction of the medical and rehabilitation benefit from $100,000.00 to $50,000.00 in non-catastrophic cases, the introduction of expanded optional benefits and the elimination of caregiver and housekeeping benefits for non-catastrophically injured individuals.
It is our strong view that any changes to the definition of catastrophic impairment must be assessed and analyzed in light of the above.
The CED and Superintendent of FSCO, Phil Howell, has released a report chronicling his recommendations to the government for changes to the definition of catastrophic impairment. His report is heavily based on the earlier work of a panel, described as the “CAT Expert Panel,” and indeed adopts most of the expert panel’s recommendations.
According to the final report of the expert panel, its mandate was to “review the definition of catastrophic impairment in the SABS and to make recommendations on the changes to the definition.” The expert panel’s report cites three guiding criteria to their deliberations and recommendations:
1. To ensure individuals who are most seriously injured in traffic accidents receive appropriate treatment;
2. To give precedence to scientific evidence and judgment; and
3. To ensure accuracy and fairness of determination.
Comments on assumptions made by the expert panel and Mr. Howell
The expert panel confirmed in their report that the definition of catastrophic impairment is a “legal term”. However the panel attempted to make the term “scientific”. While a scientific approach may be helpful in establishing objective protocols for assessments and testing, to try to put scientific evidence into a Regulation defining catastrophic impairment results in confusion and undue complexity. In fact, it opens up the Regulation to significant interpretive issues which will result in increased litigation. The backlog at the Financial Services Commission for compulsory mediation cannot withstand any further increase in mediations without significant changes and an increase in the number of mediators. Mr. Howell's report does not address this fundamental disconnect associated with a scientific description of a legal term.
There is no costing or analysis completed to assist stakeholders in understanding what effect the recommendations for catastrophic impairment will have on price stability. There is no statistical evidence and there is no reflection on past experience within the insurance industry to support these recommendations. There has been no effort to determine whether the proposed changes will increase
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or decrease the threshold for catastrophic impairment. There has been no effort to determine whether these recommendations will result in an increase in litigation and claims costs.
While efforts to apply scientific knowledge to assist in drafting a Regulation are helpful, it is abundantly clear that scientific evidence is not what ultimately determines entitlement to catastrophic impairment. Judges and arbitrators make their decisions based on their interpretation of the Regulation, not on scientific evidence in the broad sense. This will not change irrespective of any regulatory change. The last data presented by Mr. Howell for CAT claims ends in 2006. The lack of current data requires a moratorium on the implementation of any changes as the need for change cannot be determined absent detailed, accurate, and current financial numbers which includes the total number of CAT claims in the system (overall and as a percentage), the average cost per CAT claim, and a breakdown of the CAT claims by category (brain injury, spinal cord, 55% whole person impairment, amputation, etc.).
Comments on each proposed regulatory change 1. Paraplegia and quadriplegia
The panel recommended the use of the American Spinal Injury Association (ASIA) classification system. It recommended the elimination of the word quadriplegia and the addition of the word tetraplegia. Further, the proposed Regulatory change has numerous criteria that an insured must meet in order to qualify for catastrophic status irrespective of the diagnosis or the extent of the injury to qualify. This has been described as “an autonomous screening system.” By requiring that an individual, before being determined to be catastrophic, must have had some significant connection with the public healthcare system (public hospitals, in-patient rehabilitation, etc.). Mr. Howell accepted this recommendation. We do not support this proposed change. Our experience is that quadriplegia and paraplegia are relatively rare claims in the context of catastrophic injuries and rarely, if ever, result in the need for assessment or litigation. It makes no sense to change the wording of this aspect of the definition when there have been no statistics produced that this is an area “in crisis,” that it results in unfairness to accident victims or problems with price stability. Why change what has not been proven to be problematic?
Further, it must be recognized that naming external classification criteria in the Statutory Accident Benefit Regulation will result in it being incorporated into the regulation by reference. Not only would the American Spinal Injury Association classification be part of the regulatory regime, but the proposed changes would also incorporate by reference a multi-centre international study on spinal cord independent measures. This adds further complexity to the Regulation, which is contrary to the recommendations from the five year review.
If any consideration is to be given to this recommendation, additional studies must be completed and analysis made to determine how many additional insureds would now qualify for catastrophic impairment and/or how many would be excluded due to the “autonomous screening system”. Further costing needs to be completed to determine the costs of the assessment process that will be needed in order to reach conclusions on whether an individual is catastrophically impaired. An assessor would have to look at and collect information with respect to whether the insured attended a public hospital, whether the insured was an inpatient participating in treatment in a public rehabilitation facility, etc. It is respectfully submitted that a Regulation that goes beyond a definition and outlines evidence and protocols to be applied to that definition is not appropriate. It introduces complexity, a greater
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regulatory burden for both insureds and insurers, potential increased costs of assessments, and a real risk that seriously injured individuals will not get access to needed benefits.
2. Amputation of an arm or leg or another impairment causing the total and permanent loss of use of an arm or a leg (Severe impairment of ambulatory mobility)
Increased complexity of the Regulation and regulatory burden also applies to the panel’s proposal with respect to this definition, which has been adopted by Mr. Howell. It is to be noted the panel found no scientific evidence to assist in its deliberation on the determination of catastrophic impairment secondary to severe physical injuries. The panel suggested that the current definition does not accurately describe the range of injuries that can lead to catastrophic impairment. It is our position that no one definition can ever accurately describe the range of injuries that may or may not be catastrophic. It was for that very reason that the “catch all” definition on the AMA Guides was originally created (55%).
While we applaud the attempt to focus on scientific requirements that may result in less disagreement among physicians as to what impairments may satisfy this definition, we respectfully submit that the scientific requirements should not be set out in a complex, unreadable and unworkable Regulation, but should form part of a protocol or an assessment guide for those physicians found to be competent to conduct catastrophic assessments.
Historically, cases involving amputation have only posed problems with respect to coverage when the definition did not permit catastrophic status due to the loss of one limb. That has been amended already and it is our view that the present amended definition as it stands is clear and identifies the level of serious injury that one would expect to be designated as catastrophic impairment. There does not appear to be any historical statistical information that would support a need for any change to this definition. The proposed change would appear to result in uncertainly, increased assessments and a lack of clarity as to whether it will maintain the threshold for catastrophically impaired individuals with limb amputations, raise it, or lower it.
No change should be made to the SABS’s definition of catastrophic impairment without a full analysis as to how it will affect coverage and cost.
Considering one of the recommendations of the five year review was to ensure that the SABS contained clear, simple and easily understood language, there is little support for the types of changes proposed. How do any of these regulatory proposals provide a classification system for catastrophic impairment that is understandable and accessible to the consumers of automobile insurance of this province? We do applaud Mr. Howell for rejecting the panel's recommendation that a requirement in meeting the test be participation in an in-patient rehab program, as this was an unworkable approach.
3. Total loss of vision in both eyes
The panel suggested and Mr. Howell accepted the suggestion that only minor clarifications were required to this definition, but did not provide any scientific evidence or strong explanations as to why any change was needed. There is no statistical evidence to show that there is any issue with respect to this definition in the experience of consumers or insurers in this province over the last 15 years. It would appear, if anything, that the proposed amendment would lower the threshold for catastrophic impairment. There is no definition provided with respect to “legal blindness”. Does this mean total loss of vision or does it mean legal blindness in the context of the right to drive pursuant to the Highway
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Traffic Act? A legally blind individual does have the right to drive. Someone with a total loss of vision in
both eyes would not. The expert panel made recommendations that appear to be unnecessary, which were accepted by Mr. Howell. In our view, this proposed change is unnecessary.
We do not support this proposed change. 4. Brain Injury
We do not support the panel’s recommendations, accepted by Mr. Howell, that a Glasgow Coma Scale (GCS) reading of 9 or less be eliminated as a definition of catastrophic impairment due to brain injury. It has been the experience of both the plaintiff and the defence bar within our membership that the GCS 9 definition often captures potentially seriously impaired individuals at an early stage post-accident that may not otherwise become entitled to catastrophic impairment until a significant time later (at the 2 year mark). Declaration of catastrophic status does not mean automatic entitlement to medical and rehabilitation benefits. An insured must still establish that the medical and rehabilitation benefits he or she is claiming are reasonable and necessary and a result of the accident. Therefore, allowing the GCS 9 to remain does not necessarily mean there will be any variability in the present costs that an insurer experiences for catastrophic impairments under this heading.
In addition, GCS tests allow for early determination of catastrophic impairment for both adult and pediatric brain injury victims. Once this determination is made, an insured with brain injury becomes entitled to enhanced rehabilitation and medical intervention at an early stage, which reflects the medical literature that most recovery from a brain injury will take place within the first or second year. This benefits both insureds and insurers as early intervention and rehabilitation maximizes the chance for a better recovery from brain injury and will often reduce long term expense.
Further, the GCS 9 has been the subject matter of a significant number of cases over the past 15 years. From a legal perspective it is our belief that this is now a relatively settled area of law. It has been ruled on by the Court of Appeal: Liu v. 1226071 Ontario Inc. (Canadian Zhorong Trading Ltd.), 2009 ONCA 571. There have been cases that have looked at the relationship between proof of brain impairment and the GCS 9, as to what is a reasonable time after the accident and whether extraneous influences such as alcohol and/or drugs can be considered in the assessment/validity of the GCS 9.
We acknowledge from our own experience that sometimes the outcome of a brain injury can be good when the GCS is 9 or less, or poor when it is above 9. Thus to some extent the GCS is sometimes not a good basis for assessing catastrophic impairment. However, in our view this problem is adequately ameliorated by: (1) the benefit of the simplicity and immediacy of the GCS; and (2) the fact that a designation of catastrophic impairment does not equate to entitlement to benefits, but rather access to enhanced benefits
We do agree with the recommendation of the replacement of the GOS with the GOS-E. This was indeed recommended in a previous advisory panel on catastrophic impairment in a report of 2001. There does appear to be scientific evidence to support that the GOS-E is a more sensitive and reliable tool for assessing outcome in severe brain injuries. We also agree with Mr. Howell's recommendations with respect to the threshold categorizations of vegetative after 1 month, severe after 6 months and moderate after 1 year, but only as an additional test, supplementing a GSC of 9 or less test. Not every accident victim will have his or her GCS recorded by a person qualified to do so and the GOS-E is a valuable additional test in those circumstances.
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We do not agree with Mr. Howell's recommendation that the combining of mental and physical impairments be eliminated as a test for catastrophic impairment. This issue was the subject matter of a review by the Court of Appeal in Kusnierz v. The Economical Mutual Insurance Company, 2010 ONSC
5749 (CanLII). The Court of Appeal offered compelling reasons why mental and physical and impairment can and should be combined. Having so ruled, it would be inappropriate to reverse, by regulatory change, what the Court of Appeal has expressly stated is a fair and appropriate approach.
The conclusion of the expert panel was not that physical and psychiatric impairments cannot be combined. They rather conclude that at this juncture, further scientific evidence is required before the issue can be properly addressed.
Notwithstanding this, the exert panel went on to recommend that because they were unable to agree on the methodology to be applied to the issue, physical and psychiatric impairments not be combined for the purpose of the catastrophic determination. Mr. Howell appears to have accepted this rationale. We respectfully submit that it makes no sense to disallow combining at this juncture based on the catastrophic impairment expert panel’s flawed argument. They admit that their recommendations are incomplete on the issue and have deferred any consideration of the combination of physical and psychiatric impairments because further scientific evidence is needed.
We respectfully recommend that in the interim, the current system of combining ought to continue. This is especially so given that, as indicated above, there has been no data presented to indicate the breakdown in the number of various CAT claims by type, and certainly no date on the combining issue. It should be noted that combining of physical and psychiatric impairments for the purposes of the catastrophic definition was specifically recommended by the 2001 Advisory Panel on Catastrophic Impairment and further supported in the response of The Advocates’ Society, Ontario Trial Lawyers Association, Canadian Defence Lawyers, Metropolitan Lawyers Association and Ontario Bar Association to the Ministry of Finance’s consultation paper of September 2001. Nothing has changed the soundness of that consensus in the last decade.
It is imperative that combining remain at this juncture until further study is undertaken as recommended by the expert panel regarding necessary changes to the methodology and procedures to be employed in combining (E) and (F) of Section 3(2) of the Statutory Accident Benefits Schedule.
6. Psychiatric impairments
We do not agree with the recommendations of the committee to change the basis upon which a psychological impairment is determined. While from a policy perspective we appreciate that the panel is attempting to ensure that only those who are seriously injured are reflected in the definition, it is respectfully submitted that the proposal to deal with that is unworkable. We have the following concerns:
1. The proposed regulation sets out a series of diagnoses that one must meet as a condition precedent to being found catastrophically impaired due to a psychiatric impairment. It is our experience that it is not appropriate to focus on a diagnosis as the basis for determination of catastrophic impairment. We recommend that the focus should be on the level of impairment
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and function. We do not support a Regulation where a diagnosis is a condition precedent to a determination of catastrophic impairment.
2. The Regulation incorporates by reference the GAF (Global Assessment of Function). This is a subjective testing protocol with minimal direction as to how to assess where an individual falls within the various ranges of 1 to 100. While the GAF is useful for an assessor to consider when determining catastrophic impairment, it is respectfully submitted that a specific rating under the GAF should not be a condition precedent for a finding of catastrophic impairment under the Regulation.
3. The proposed wording within the Regulation is vague, wordy and unworkable. For example, “at a minimum there must be demonstrable and persuasive evidence that the impairment very seriously compromised independent and psychosocial functioning.” With respect to the panel, this is not the appropriate wording for a definition within a Regulation. While criteria or wording such as this may be helpful to assessors in determining what to look for in catastrophic impairment, it is not helpful to the consumers of Ontario to determine who is a catastrophically impaired individual and to help make decisions with respect to the purchase of the available optional benefits. The proposal does not help to simplify the accident benefit schedule, nor is it something that the average policyholder could understand.
4. The autonomous screening system is proposed in Part V (a through to f) of the proposed Regulation for psychiatric impairment. The list includes some conditions precedent which would significantly limit those individuals who would qualify for catastrophic status on a psychiatric injury alone. For example institutionalization, repeat hospitalization or loss of competence to manage finances and property are not necessarily found in catastrophically impaired individuals with psychiatric disorders. While this list may be relevant in terms of the evidence an assessor might look at to determine catastrophic impairment, it is submitted that this approach is too complex for a definition. It does not promote clarity or fairness to the consumer.
Paediatrics
It was recognized by the previous advisory committee appointed to review the issue of catastrophic impairment in 2001 that the issue of paediatrics needed to be addressed. They also noted that the question of geriatric victims should be addressed. That panel’s proposal to provide flexibility with respect to the assessment of paediatric cases was adopted and is presently reflected in Section 3 (3) and (4) of the definition of catastrophic impairment. It provides a flexible approach for individuals who are 16 years of age or less by analogizing impairments to other definition sections relating to the adult population and specifically requiring that the developmental implications of the child’s impairment be taken into consideration.
It has been our experience that paediatric catastrophic impairment is relatively rare in our insured population. Further, where we do have paediatric individuals with serious injuries, there is rarely, if ever, any dispute with respect to their catastrophic status. These cases do not proceed to litigation and are not a burden on the system, and there is little evidence to suggest there should be, at this time, any changes to the present wording.
The expert panel noted that they believe that a further expert panel should be created to deal specifically with the question of what definition of catastrophic impairment would be appropriate for the paediatric population. At page 13 of their report, the panel recommends that an expert paediatric
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working group should be convened as soon as possible to address the issue as to how catastrophic definitions apply to the paediatric population. Mr. Howell accepted this recommendation.
We agree with that recommendation but do not agree with the recommendation as to what should occur, pending further study, deliberation and additional recommendations. We do not agree with Mr. Howell that there should be new definitions relating to the paediatric population implemented immediately while at the same time the Holland Bloorview Kids Rehab Hospital is requested to conduct a study. This makes little business sense. It would be our recommendation that pending the further report from Holland Bloorview there be no change to the definition as it presently stands. It would not be cost effective to the consumers of this province or to the stakeholders in the system to have a Statutory Accident Benefits Schedule in which there are potentially three different definitions of catastrophic impairment for the paediatric population depending on the year the accident occurred. We should continue to work with the old system which has been relatively effective to date until more detailed analysis can be completed. Further, it would allow time for some costing studies. At the very least, the government should make efforts to determine how many children under the age of 16 are found to be catastrophically impaired under the present system in order to understand whether it would be cost effective to change the definition at all, and, if so, how it would affect the present threshold for paediatric catastrophically impaired individuals.
Interim Catastrophic Impairment Status
While the goal of delivering additional benefits for catastrophically impaired accident victims in a timely way, through interim benefits, is laudable, we do not agree with the recommendations put forward by Mr. Howell with respect to interim catastrophic status. The recommendations are vague and add a further degree of complexity that is not warranted in our already complex and regulatory-heavy system. There is no clear description in the panel’s report as to how “interim catastrophic status” would work. As far as it can be determined, it would appear that individuals will be awarded catastrophic status in the pre-104 week period pending a final determination post-104 weeks. During the interim catastrophic status, claimants would be allowed to have access to all catastrophic benefit limits including $6,000 attendant care per month, housekeeping, caregiving, and up to $1,000,000 in medical and rehabilitation benefits. If the insured is found not to be catastrophic at the 104-week mark there is no mechanism for repayment. Whereas the expert panel recommended an interim CAT status to bridge the gap for those in need of funds, Mr. Howell has suggested an arbitrary cap of a mere $50,000 in additional benefits for all aspects of CAT claims - attendant care, housekeeping, and medical/rehab. We note that an additional $50,000 would simply restore the level of benefits that were otherwise available to al accident victims—CAT and non-CAT—prior to the changes that took effect in September 2010. Mr. Howell has diverged from the spirit of the Expert Panel's recommendations. The entire approach appears flawed.
Interim catastrophic status would also add more cost in the system as there would have to be two applications for catastrophic impairment and two assessments flowing from that: the interim and the final. It would result in further litigation. In addition, the proposed definitions that would qualify an individual for interim catastrophic status are confusing, unclear, and, in our submission, unworkable. There have been no studies done as to what class of individuals would qualify for interim status, what costs may be incurred during that interim status and how that may affect the premium. If the government intends to give consideration to this proposal, it requires far more investigation. As it is
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now presently put forward, there is little doubt that this proposal would not result in price stability or price reduction.
STATED CASE NECESSARY TO CLARIFY “INCURRED”AND
“MINOR INJURY”AS CONTAINED IN THE STATUTORY
ACCIDENT BENEFITS SCHEDULE.
“Incurred”-Section 3(7)(e)-Statutory Accident Benefits Schedule Effective September 1,2010.
Effective September 1, 2010 Section 3(7)(e) of the “SABS” contains a new definition of “incurred”. Specifically Section 3(7)(e) (iii)(A) states that an expense is not “incurred” unless “the person who provided the goods and services" has “sustained an economic loss”.
This subsection is ambiguous and has created uncertainty concerning the correct interpretation to be given to the words “economic loss” This has led to increased costs to both insureds and insurers because of the disputes such unintended ambiguity has created. This, in turn, has led to unacceptable delay in the timely delivery of benefits to insured persons.
“Minor Injury”-Section 3(1)-Statutory Accident Benefits Schedule Effective September 1,2010.
Effective September 1,2010 the PAF(Pre-approved framework) system was replaced with the new concepts of “Minor Injury” and “Minor Injury Guideline”.
If an insured falls with in the definition of “minor injury” there is a fixed amount available for treatment. Certainty regarding when an insured does and does not fall within the definition is of fundamental importance.
As with the definition of “incurred” the definition of “minor injury” is ambigious.It has therefore created confusion for both insureds and insurers and has led to increased costs and untimely delay in the provision of necessary treatment .
Stated Case-Section 285.(1) Insurance Act R.S.O. 1990 C.I.8 Section 285(1) of the Insurance Act states:
“The Director may state a case in writing for the opinion of the Divisional Court upon any question that, in his or her opinion ,is a question of law”
It is respectively submitted that a Stated Case is both necessary and appropriate at this time. Serious problems for all stakeholders have been created as a result of the ambiguity regarding the definition of “incurred” and “Minor Injury” as indicated above.
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We believe that all stakeholders would support this request as it will stop the needless delay and added costs which currently exist as a result of the confusion regarding the proper interpretation to be applied.
Tort Reform: Eliminate the "Verbal Threshold" in Tort
Claims
In an apparent attempt to reduce the cost to the insurance industry of non-pecuniary loss (pain and suffering) claims, the Insurance Act has, since 1990, imposed upon tort claimants various, “verbal thresholds.” The current Act, at section 267.5 (7), states that:
the owner of an automobile, the occupants of an automobile and any person present at the incident are not liable in an action in Ontario for damages for non-pecuniary loss ... from bodily injury or death arising directly or indirectly from the use or operation of the automobile, unless ... the injured person has died or sustained,
(a) permanent serious disfigurement; or
(b) permanent serious impairment of an important physical, mental or psychological function.
Ontario Regulation 461/96 defines “permanent serious impairment of an important physical, mental or psychological function” by way of a lengthy statement of criteria that must be found to exist in order to meet the “threshold.” If not complicated enough, the Regulation also dictates the evidence required by a claimant to establish that the “threshold” criteria has been met. Specifically, the claimant “shall adduce evidence of one or more physicians” that speaks to a myriad of factors relating to the nature, permanency and importance of the claimant's impaired functions. To no one's surprise, the insurer in virtually every such case responds with “one or more physicians” of its own.
This “verbal threshold” operates in addition to a “monetary threshold,” which by current regulation imposes a $30,000 deductible on all non-pecuniary claims valued by a court at $100,000 or less.2
Clearly the intent of both the verbal and monetary thresholds was to eliminate from the tort system all lower-end claims, and at the same time, reduce the exposure (and thereby the claims costs) of Ontario insurers in the vast majority of motor vehicle litigation. Unfortunately, it is our view that the "verbal threshold" has proven itself to have the opposite result: namely:
1. It complicates and prolongs otherwise straight-forward claim resolution;
2. It forces both claimants and insurers to incur significant costs hiring medical experts to analyze either the applicability or non-applicability of the verbal threshold in most motor vehicle cases; and
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3. It creates a complicated, expensive and unnecessary procedural impediment to claims resolution without corresponding claim efficiency and cost reduction.
In short, the legal and procedural maneuvering over the applicability of the verbal threshold is expensive, ineffective and duplicative of the $30,000 deductible. A similar observation was made by the Honourable Coulter A. Osborne, Q.C. in his extensive 2007 Civil Justice Reform Project Report.3 It should
be noted that the "verbal threshold" has also had the unintended result of complicating the law of costs as well as creating uncertainty in determining the commencement of the 2 year limitation period during which motor vehicle litigation must commence.
FSCO MEDIATION BACKLOG
While all stakeholders would agree that measures must be undertaken to drastically reduce the FSCO mediation backlog, we believe that any initiatives in this regard should be respectful of the principal that mediation is most likely to be effective in situations where both parties have a true willingness to participate. In situations where one party has no desire to negotiate or settle a disputed issue, no useful purpose is served in having that dispute clog the system. In other words, requiring unwilling parties to engage in forced mediation is unlikely to be a beneficial use of FSCO's resources. With this in mind, we recommend the following:
1. The mediation procedure for unrepresented claimants should remain unchanged. We believe there is always value in giving unrepresented claimants and insurers an opportunity to discuss a disputed benefit with the assistance of a mediator. Unlike represented claimants, the unrepresented may be less aware of, or inclined to engage in other informal settlement procedures, including private mediation or even direct discussions. For unrepresented claimants, the mediation may be the first and best opportunity the parties have to exchange their positions and explore resolution.
2. Where Claimants are represented, the dispute resolution procedure should be amended to require the insurer and claimant representative to consult with each other within 60 days following notification by the claimant of a dispute. The parties should be required to determine their joint willingness to participate in the FSCO mediation process. Unless both parties are agreeable, the claimant may elect to opt out of the mediation process and proceed directly to litigation or arbitration as is presently the case only after a failed mediation. Interestingly, a requirement that the parties consult with each other shortly after the dispute arises may, in and of itself, serve to resolve or narrow areas of dispute or create opportunities to explore settlement.
3 "I thus limit the expression of my concern to the efficacy of the verbal threshold. In that context I ask two questions. First, and in light of the
generally similar purposes of the deductible and the verbal threshold, what claims are excluded by the verbal threshold that would not be excluded by the deductible? Second, one direct beneficiary of the verbal threshold regulation is the medical profession that provides medical-legal reports on the threshold issue. It would be interesting to know what costs are incurred by both plaintiffs and insurers in developing evidence relevant to the threshold issue. I have no idea exactly what those costs are. However, I feel safe in saying many millions of dollars are involved. By contrast, the $30,000 deductible carries almost no transaction costs since it essentially involves an arithmetic exercise."
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In serious and complex disputes, claimants are typically represented by lawyers or paralegals and more likely to be aware of the legal and factual complications involved in their dispute. If a consultation meeting between the claimant and insurer representatives discloses that even one party is unwilling to settle or negotiate (or has no desire to meaningfully participate in a mediation), no benefit is served by that dispute clogging the system – nor are the parties or the public served by the delay inherent in waiting for that mediation to fail before the dispute can proceed to litigation or arbitration. Absent a mutual agreement to mediate, nothing should preclude a represented claimant from pursuing any one of the following options:
1. proceeding to a FSCO mediation regardless of the outcome of the consultation meeting; 2. choosing to abandon his or her dispute;
3. proceeding immediately to arbitration or litigation.
Liability coverage for novice and young drivers
It is widely known that novice drivers4 must have a blood alcohol concentration of zero when driving. It
is also well known that since August 1, 2010, young drivers,5 regardless of licence status, must also have
a blood alcohol concentration of zero. However, it is not widely known that liability insurance coverage for such drivers is void if their blood alcohol concentration is not zero, whereas for fully licenced, fully experienced drivers, liability insurance coverage is not affected by alcohol use. Thus in Ontario we have a situation in which older, experienced drivers have valid liability insurance6 even when driving while
grossly impaired, whereas younger, inexperienced drivers have no liability coverage when driving with only trace amounts of alcohol in their blood.7
This circumstance arises out of the interplay between the licensing conditions in the Highway Traffic Act and its regulations, and statutory condition 4 of OAP1, Ontario’s standard auto policy. Statutory condition 4 states that an insured “shall not drive or operate or permit any other person to drive or operate the automobile unless the insured or other person is authorized by law to drive or operate it.” It is well-entrenched law that a violation of the “zero-alcohol” conditions of a driver’s licence renders the offending driver “not authorized by law” to drive, with the result that liability coverage will be unavailable to him or her.
It is clearly unfair that younger, inexperienced persons lose their liability coverage for minor violations of conditions to their licence, whereas older, experienced and presumably wiser persons maintain their liability coverage despite similar but more egregious conduct.
Violations of other licence conditions give rise to similar results. For instance, for G1 and G2 drivers, it is a condition that “The number of passengers in the motor vehicle must not exceed the number of operable seat belt assemblies installed in it.” The G1 or G2 driver is not authorized by law to drive if
4 G1 and G2 drivers are classed as “novice drivers” under Ontario Regulation 340/94, s. 29(1).
5 Section 44.1(8) of the Highway Traffic Act defines a “young driver” as a driver who is under 22 years old.
6 Collision coverage and certain accident benefits are not generally not available to drivers who drive while impaired, but your liability coverage
is not affected by drunk driving if you are over 21 and have a G licence.
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there are more people than seat belts in the vehicle, and thus the driver has no liability insurance coverage8 in such circumstances, whereas a fully licenced, fully experienced driver has no insurance
coverage issue despite engaging in the same conduct.9 Even very mild misconduct, such as driving after
midnight with more than one passenger in the vehicle,10 may give rise to no liability coverage and
therefore to devastating financial consequences for the offending driver.
The current rules unfairly impact young people. In addition, the rule likely increases costs to the industry and saves the industry very little on claims, because injured parties will claim to their own OPCF44R carrier if coverage to the novice or young driver is disputed. In those cases in which the injured party does not have their own policy to claim against, their recovery may be limited to $200,000 and they may therefore be inadequately compensated.
This circumstance would be best addressed through an amendment to statutory condition 4 of OAP1.
CONCLUSION
Thank you for the opportunity to provide submissions as the Ontario government embarks on its study of the automobile insurance agency. These submissions were drafted on behalf of the Society by Richard Shaheen (Nesbitt, Coulter LLP), Roger H. Chown (Carroll Heyd Chown LLP), Stephen E. Firestone (Lackman, Firestone), J. Daniel Dooley (Dooley Barristers Professional Corporation), Andrew C. Murray (Lerners LLP), and Phlippa G. Samworth (Dutton Brock LLP).
8 Indeed the driver has no collision coverage either: Certas Direct Insurance v. Strifler, [2005] O.J. No. 4293 (S.C.J.)
9 For other examples see: Vanderwal v State Farm Mutual Automobile Insurance Co. (1994), 20 O.R. (3d) 401 (Div Ct) (driver with only a class R
beginner licence drives motorcycle on highway with 100km/h limit – violation of condition – loses AB coverage – note that SABS were subsequently amended but OAP1 was not). For other consistent applications which on their specific facts did not result in a loss of coverage, see: Economical Insurance Group v Tatotmir, [2003] O.J. No. 972 (S.C.J.) (cross motions for summary judgment dismissed due to insufficient evidence – trial required); Lamsar v. Bajaj 2008 CanLII 20983 (ON S.C.) (G1 driver with no one beside her – was in a parking lot, not “on a highway” so “authorized” and coverage available); Tut v. RBC General Insurance Co., 2011 ONCA 644 (G2 driver involved in “morning after” accident while blood alcohol not zero – Court of Appeal creates “due diligence” defence); Kereluik v. Jevco Insurance Co., 2012 ONCA 338 (G driver was impaired and in violation of undertaking to police but liability coverage not affected).
10 Under Ontario Regulation 340/94, it is a condition of a G2 licence that: “Between the hours of midnight and 5 a.m., there must not be more
than one passenger in the motor vehicle who is under the age of 20, other than a person who is a member of the novice driver’s immediate family.” The limit changes to three passengers when the G2 driver “has held a valid G2 driver’s licence for at least six months.” The term “immediate family” is a defined term, which includes: “the novice driver’s guardian and immediate family who are related by blood, marriage, conjugal relationship outside marriage or adoption.”
