How Much Have Ontario No-Fault Accident Benefits Been Eroding?

The recently announced auto insurance reforms included in the 2015 Ontario Budget will again reduce accident benefits as part of the government's efforts to reduce premiums in Ontario.  The government insists that benefits available are still generous.  I decided to compare the accident benefits available prior to the OMPP (Schedule C) under tort and the OMPP accident benefits with the new proposed limits announced in the Budget.  I used the Bank of Canada inflation calculator to convert past benefits into 2015 dollars.

The Schedule C accident benefits existed under the tort system prior to the introduction of no-fault.  Compensation was quite limited.  Income replacement benefits were available for 104 weeks, caregiver benefits for 12 weeks and medical benefits for 4 years.  The benefits aren't quite analogous but when converted into 2015 dollars, it tells an interesting story. Keep in mind there was no second tier of benefits under Schedule C for catastrophic injuries.  Those not at-fault would need to start an action to access additional compensation.

The table below shows that the Schedule C benefits are not that far off from the benefit levels announced in the Budget.  Not only are benefits being cut but inflation has also eroded them.

	pre-OMPP	pre-OMPP	2015 Budget
	(1989 $)	(2015 $)
IRB	$140.00/week	$240.24/week	$400.00/week
caregivers	$70.00/week	$120.12/week	N/A*
non-earners	N/A	N/A	$185.00/week
medical/rehab	$25,000.00	$42,900.82	$65,000.00
medical/rehab (cat)	$25,000.00	$42,990.82	$1,000,000.00
attendant care	N/A	N/A	N/A**
* caregiver benefit currently only available for catastrophic injuries
** attendant care included in medical/rehabilitation cap

The indexed OMPP numbers are also revealing.  The table below shows that the accident benefits proposed in the recent provincial budget are, in some cases, less generous than the OMPP accident benefits even before adjusting for inflation.  Even those with catastrophic injuries are likely better off under the OMPP even though there was no higher tier of accident benefits available.  The OMPP provided all claimants with up to $1 million in combined medical, rehabilitation and attendant care benefits.  In 2015 dollars that works out to approximately $1.6 million in benefits.

	OMPP	OMPP	2015 Budget
	(1990 $)	(2015 $)
IRB	$600.00/week	$977.81/week	$400.00/week
caregivers	$250.00/week	$407.42/week	N/A*
non-earners	$185.00/week	$301.49/week	$185.00/week
medical/rehab	$500,000.00	$814,838.71	$65,000.00
med/rehab (cat)	$500,000.00	$814,838.71	$1,000,000.00
attendant care	$500,000.00	$814,838.71	N/A**
* caregiver benefit currently only available for catastrophic injuries
** attendant care included in medical/rehabilitation cap

Plaintiffs May Provide Corroborating Evidence of Threshold Impairment

The Insurance Act provides that in order to prove they meet threshold, plaintiffs must lead evidence from a qualified physician as well as “adduce evidence that corroborates the change in the function that is alleged to be a permanent serious impairment of an important physical, mental or psychological function.”  The Court of Appeal recently held that plaintiffs may provide such corroboration themselves. 

In Gyorffy v. Drury, 2015 ONCA 31 (C.A.), the plaintiff was in a car accident in November 2003.  The defence brought a threshold motion while the jury was deliberating.  The plaintiff and three physicians testified.  The trial judge ruled the plaintiff's injuries has satisfied the impairment threshold, but held that the plaintiff could not provide the corroborating evidence that ss. 4.2 and 4.3 of Ontario Regulation 461/96 required.  Accordingly, the action was dismissed.

The Divisional Court allowed the appeal, and the Court of Appeal dismissed a further appeal.  It confirmed that a plaintiff can provide corroborating evidence in order to prove he or she meets threshold.  The evidence that has to be corroborated is the physician's, not the plaintiff's.

Given the conclusion in Gyorffy, it is perhaps more important to focus on the quality of the evidence provided by the plaintiff rather than on the need for corroboration.

 

 

 

More Benefit Cuts Coming for Ontario Auto Insurance Consumers

It seems the road to more affordable auto insurance once again winds its way through further benefit cuts.  Those aren't the only changes proposed in the 2015 Ontario Budget but it remains an ongoing piece of controlling the cost of Ontario premiums.  Many of the changes announced by Finance Minister Charles Sousa on April 23rd lack any details so how they would be applied or implemented is very much in the air.

Mandatory medical, rehabilitation and attendant care benefit coverage has again been lowered.  The combined coverage will be $65,000.  The combined mandatory coverage had been $172,000 since 1996.  In 2010 it was reduced to $86,000.  For catastrophic injuries, the combined coverage has been $2 million since 1996.  The coverage will now be $1,000,000.  With exception of children and catastrophic injuries, medical and rehabilitation benefits will only be able to be claims for a period of five years instead of ten.  Optional coverage will continue to be available but few consumers purchase and many brokers and insurers discourage consumers from purchasing them.

Subsections 15 (h) and 16 (l) of the SABS are basket clauses to cover medical and rehabilitation goods and services not specifically listed in the schedule.  The government proposes to change the entitlement test for these to clauses from "reasonable and necessary" to "essential". Yet a new term and complexity is to be introduced to the SABS and be subject to years of disputes.

The Superintendent of Financial Services recommended changes to the SABS definition of catastrophic impairment in a report back in 2010.  The recommended changes have been a contentious issue and the government has indicated an intention to make changes in the past few budgets.  This commitment has again been announced as part of the 2015 Ontario Budget.

Finally, the non-earner benefit is to be restricted.  The benefit was introduced in 1990 with the OMPP, the first no-fault system in Ontario.  Since that time, entitlement has been gradually been restricted.  The proposed change will limit entitlement to two years.

Some of the cost savings introduced by reducing standard SABS coverage will shift to the tort just as it did following the 2010 reforms.  However, the government is also looking to introduce cost savings on the tort side.  Changes will be made to the compensation available through a court action. The non-pecuniary deductible (for pain and suffering) was increased in 2003 and has not been changed since then.  It will be increased to reflect inflation since 2003 and indexed in the future.  Also adjusted will be the monetary thresholds beyond which the tort deductible does not apply (e.g., the $100,000 threshold at which the deductible no longer applies).   Finally, judges will be able to take int account the effect of the tort deductible when determining a party's entitlement to costs in an action.

Insurers will be expected to provide some additional cost savings for consumers.  The maximum interest rate that can be charged on premiums paid on a monthly basis is to be reduced from three percent to 1.3 percent.  All insurers will be required to offer a discount for the use of winter tires.  The budget announcement does not stipulate the amount of the discount but some insurers already offer such a discount and it is typically in the three to five percent range.

The most appealing change for consumers is a commitment to prohibit premium increases for minor at-fault accidents that meet certain criteria.  Those criteria have not been identified but I would expect the circumstance to be quite limited.  For example, it would not included any accidents where an injury was reported.  The question to be asked is where will those costs migrate to?  If insurers cannot increase premiums to drivers with minor accidents, will those costs shift to drivers with more serious accidents or all drivers which would include those with no accidents?

Finally, the standard deductible for comprehensive coverage will increase from $300 to $500.  A meaningless change based on past experience.  A number of years ago the government increased the standard deductible for direct compensation property damage (DCPD) coverage from $0 to $300.  However, brokers and agents continued to recommend the $0 deductible to consumers.  The opportunity to reduce premiums by accepting a higher deductible has always existed but many consumers do not take advantage of it.

There is a small obscure reference on page 103 to support regulatory and tax environment can help innovation thrive. This partly is aimed at transportation network companies such as Uber.  To help emerging sectors thrive, the government commits to working with firms and industries to help them comply with existing obligations and to consulting on an ongoing basis to ensure those obligations reflect a changing economy.

The government continues to tinker with the Ontario auto insurance product, which has been the order of the day since the OMPP was introduced on June 22, 1990.  In the May 2015 issue of Canadian Underwriter, I will look back at the past 25 years and discuss what has gone wrong. Please look out for it.

The Calculation of Pre-judgment Interest in Motor Vehicle Claims

On January 1, 2015, s. 258.3(8.1) of the Insurance Act was amended to change the rate at which pre-judgment interest ("PJI") in motor vehicle claims.  A recent Superior Court of Justice decision held that the change is retrospective, meaning it will apply to all motor vehicle claims, regardless of the date of loss.

The effect of the amendment is that the provision in r. 53.10 which sets PJI for non-pecuniary loss at 5% no longer applies.  Accordingly, PJI is to be calculated at the rates set out for each quarter in s. 127(1) of the Courts of Justice Act.

In Cirillo v. Rizzo, 2015 ONSC 2440 (S.C.J.), the plaintiff was in a motor vehicle accident on October 1, 2005.  In January 2015 the plaintiff accepted the defendant's offer of $50,000.  The question was how PJI should be calculated.  The defendant argued the amendment should have retrospective application because it is procedural in nature; the plaintiff argued it should not, as it is substantive in nature.

Justice MacKenzie agreed with the defendant.  Although entitlement to interest is a substantive right, the means by which the entitlement can be quantified are procedural.  As a result, the rates set out in s. 127 applied, which had the effect of reducing PJI from 5% to 4.5%.

Given the low interest rates in recent years, the changes to the way PJI is calculated could have a substantial impact on the amount of interest defendants must pay.

Ridesharing Bill Proceeds Through Ontario Legislature

Bill 53, Protecting Passenger Safety Act, 2015 received second reading this past week and has been referred to the Standing Committee on Social Policy.

The bill was introduced to address transportation network companies such as Uber and Lyft which have been operating in Toronto since 2012.  The bill was introduced by Liberal John Fraser and considered a private member's bill which rarely get passed.  However, there is broad support for the bill and the Conservatives introduced a similar private bill (Bill 51) in December.

Bill 53 if passed would amends the Highway Traffic Act with respect to the offences related to picking up a passenger for the purpose of transporting him or her for compensation without a required licence, permit or authorization in section 39.1 of the Act.  The licence or permit may fall under the Public Vehicles Act, an airport authority, the Department of Transport Act (Canada) or a municipal by-law.  The bill does not address insurance requirements.

The fine for these offences is increased to a maximum of $30,000. A person who picks up a passenger for the purpose of transporting him or her for compensation without a required licence, permit or authorization also receives three demerit points. 

If a police officer believes on reasonable and probable grounds that a person has committed this offence after having been convicted of the same offence within the preceding five years, the officer shall suspend the driver’s licence and impound his or her motor vehicle for 30 days.

Insurance News - Tuesday, April 21, 2015

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Tuesday, April 21, 2015:

• Ontario's finance minister says auto insurance rates in Ontario have declined seven per cent since 2013 -- less than halfway to meeting a Liberal government promise in four months.
• Progressive Insurance U.S. survey says nearly 80 percent of consumers think bad drivers based on telematics should pay more for auto insurance.
• Like life insurance, the Canadian market for property & casualty insurance - for personal and small commercial lines - will eventually be "dominated" by two or three major firms according to the head of Desjardins General Insurance Group Inc.
• The IBC would like to see referral fee and contingency fee arrangements from personal injury lawyers filed with the FSCO Superintendent of Insurance.
• A National Post article on how Canadian insurance companies are trying to crack down on fake claims.

Ontario Rates Continue to Decrease Slowly

Just in advance of the Ontario Budget announcements which are expected to include new auto insurance changes, FSCO has released the rate filing approvals for the first quarter of 2015.

A total of 39 insurers submitted filings which represents 73.48 percent f the market based on premium volume. Approved rates decreased on average by 0.95 percent when applied across the total market. 

In the fourth quarter of 2014, approved rates decreased by 0.54 percent on average.  Rate changes since 2013 now total 7.05 percent.  The government rate reduction strategy calls for a 15 percent reduction by August of this year.

Insurance News - Monday, April 13, 2015

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Monday, April 13, 2015:

• The Ajusto smartphone app By Desjardins Insurance is a significant step forward and is capable of tracking more of a driver's habits.
• Uber looks to beef up staff for self-driving car project at its newly created Advanced Technologies Center in Pittsburgh.
• A new study finds 12% of people will likely experience severe nausea while riding in a fully autonomous vehicle.
• While Uber is locked in an ongoing dispute with the City of Toronto over its right to operate, Toronto Police have cracked down on the ride-share service in their own way. In March, officers charged at least 11 UberX drivers with violations of the Highway Traffic Act.
• U.S. insurance regulators issue guidelines for ridesharing coverage gap.
• Every industry has a doomsday scenario. Usually it involves technology. For auto insurers, it's the driverless car.

Who Is Profiting Most From Ontario Auto Insurance?

If you are involved in the auto insurance sector, yesterday was an interesting day.  The Ontario Trial Lawyers Association released a study conducted on their behalf by two York University professors suggested that insurance companies make too much money.  The Insurance Bureau of Canada countered with accusations that trial lawyers make too much money.  Who do you believe?

A lot of people have profited from Ontario's auto insurance system over the past 25 years.  Few insurance companies have exited the Ontario market in that period of time so profits must be good.  In addition, there is no shortage of lawyers working in the system both on the accident benefits side and in tort.  There are rehabilitation clinics dying for more referrals.  Tow trucks drive around our highways ready to pounce on someone after a collision.  Yet everyone complains.  Drivers in this province continue to pay high premiums. They are the true victims in the system.

On June 22, 2015 it will be 25 years since the introduction of the Ontario Motorist Protection Plan or OMPP, the first no-fault auto insurance plan in Ontario.  It has been a rocky road.  In the May 2015 issue of Canadian Underwriter, I will look back at those 25 years and discuss what has gone wrong.  Please look out for it. 

Insurance News - Friday, April 10, 2015

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, April 10, 2015:

• Report funded by Privacy Commissioner raises serious concerns about telematics and what cars know about drivers.
• Hackers looking to breach insurance carriers according to New York Department of Financial Services report.
• Michigan police can check whether you have car insurance by running your plate.
• Uber is the subject of new auto insurance regulations that may go into effect in the U.S., of which it is opposed to.
• Progressive Insurance in the U.S. announces that for the first time it is increasing rates for some bad drivers based on telematics data.
• Legislation in Georgia increases auto insurance requirements for ride-share firms.

U.S. District Court holds insurer's removal to federal court untimely based on information in underlying complaint

Addison Automatics filed a lawsuit in Suffolk Superior Court seeking a declaration that defendant Netherland Insurance Company had a duty to defend and indemnify Precision Electronic Glass Company in a class action lawsuit.  In the underlying action Addison alleged that Precision violated the law by sending junk faxes. 




Netherlands removed the case to the United States District Court for the District of Massachusetts.  Addison filed a motion to remand the case to state court, contending that the removal was untimely because it was not done within 30 days of service of the complaint.  Netherlands asserted that it was not until a decision of the Superior Court on a motion to dismiss that it knew that the suit was a class action suit that could be removed.


In Addison Automatics, Inc. v. Netherlands Ins. Co., 2015 WL 461958 (D. Mass.), the court held that there was enough information in the initial complaint for the defendants to ascertain that it was a class action suit.  Among other things, it referred to the complaint in the underlying litigation, which was a class action.  The defendants could have determined from that that Addison was seeking relief not just for itself but as a representative of the class. 

The Standard of Care for Grocery Stores

The Court of Appeal has once again confirmed that the standard of care for occupiers is reasonableness, not perfection.

In Saisho v. Loblaw Companies Ltd., 2015 ONCA 172 (C.A.) the elderly plaintiff was hit in 2007 by a customer pushing an overloaded shopping cart.  One customer (Beardy) paid for his purchases and loaded his cart.  His friend, Sakakeep, paid for his purchases independently as he was paying, Beardy loaded Sakakeep's purchases into the same cart.  As they moved toward the exit, Beardy bumped into the plaintiff.  The plaintiff suffered severe injuries and was in hospitalized from the date of the incident to his death in 2010.  The claim was dismissed at trial and the plaintiff appealed, alleging that the store should have had a specific policy on overloaded carts and required cashiers to specifically look to ensure customers did not overload the carts.

The Court of Appealed disagreed.  The store had a general policy to be alert for potentially dangerous activities.  Staff were aware that overloaded carts had the potential to cause injury or harm, and if they saw one, they would intervene.  The Court held that to require a standard specifically addressing the problem of overloaded shopping carts would present a standard of perfection, which is not what the law requires.

The trial judge concluded that it was not reasonable to expect a cashier to look behind her to ensure that two distinct customers were not loading their purchases into one cart.  He concluded it was reasonable for the cashier not to have intervened.   The Court of Appeal upheld the decision, holding that the standard of care is reasonableness in the circumstances, and the store met the standard.

Full Costs Awarded to Defendant Where Plaintiff Abandoned Case at Trial

Plaintiffs who make unsubstantiated allegations of fraud may be liable for substantial costs if they later decide to abandon their claim.

In Sienna v. State Farm, 2015 ONSC 786 (S.C.J.), the plaintiff sued her own insurer for failing to pay non-earners benefits.  The Statement of Claim sought $900,000 for punitive and aggravated damages caused by the defendant's bad faith.  It made allegations of "unlawful claims practices" and a "conspiracy" aimed at the plaintiff and other policyholders.  The matter was set for trial commencing January 26, 2015.  On January 14th, the plaintiff advised she was abandoning her case and would call no evidence.

The issue then became costs.  The defendant sought costs on a substantial indemnity basis, arguing the claim was without merit, it made a reasonable offer to settle, and the allegations against it were akin to fraud.  The plaintiff argued the allegations in her Statement of Claim were not outrageous and are commonly plead in accident benefits cases, that the defendant should have brought a motion to strike the allegations, and that the defendant should have ceased its trial preparation after a similar case ruled favourably for another insurer.

Justice Arrell did not accept the plaintiff's arguments.  He did not agree the allegations are common, when there is no foundation or evidence to support them.  They were akin to fraud.  The defendant should not be put to the expense of striking allegations made in the Statement of Claim; on the contrary, the plaintiff should have withdrawn the offensive portions.  There was no merit to the argument the defendant should have ceased trial preparation as the favourable analogous decision was being appealed, and the plaintiff had not abandoned her claim.

Justice Arrell awarded the defendant the total amount of its bill of costs, plus $2,000 for the costs motion, for a total of $35,92.97.