FSCO releases Cost of Goods guideline in response to Anti-fraud Task Force

Ontario’s insurance regulator, the Financial Services Commission of Ontario (FSCO), has released a Cost of Goods Guideline in response to a recommendation by the Auto Insurance Anti-fraud Task Force.
The Anti-fraud Task force released an interim report in early December, reflecting input received from the insurance industry, police, health care professionals and legal professionals. Among its recommendations, the task force suggested the creation of “a guideline to address the issue of insurers being invoiced for medical devices at prices considerably higher than their normal retail value.”
FSCO’s guideline will become effective upon its publication in The Ontario Gazette on Jan. 14, 2012. It will be effective for any Treatment and Assessment Plan (OCF-18) and Auto Insurance Standard Invoice (OCF-21) submitted under the new or old Statutory Accident Benefits Schedule (SABS).
Sections 15 and 16 of the new SABS (effective on Sept. 1, 2010) and sections 14 and 15 of the old SABS require insurers to pay for “reasonable and necessary” expenses incurred by or on behalf of an insured person for the types of goods described in those sections.
FSCO’s guideline provides direction concerning the appropriate interpretation of the term “reasonable” in these sections.
“For the purposes of this Guideline, the retail price is the lowest price, including delivery charges (if delivery is required), duties and taxes, that would be payable by or on behalf of an insured person to acquire an item of goods from a source that is available to a member of the general public in Ontario,” the guideline states. “Where a retail price exists for an item of goods, a ‘reasonable’ expense for that item…is that retail price, or the price actually paid or payable by or on behalf of the insured person to acquire the item, whichever is lower.”
The guideline goes on to say: “in the event of a dispute over whether an expense for an item is ‘reasonable,’ the onus is on the insurer to provide reasonable evidence of the retail price of the item.”
Reasonable evidence includes (but is not limited to) “an advertisement; written confirmation from a vendor; or any other reliable form of proof of the retail price.”
If the Canada Revenue Agency (CRA) considers the Harmonized Sales Tax (HST) to be applicable to an item for which an insurer is liable, then the insurer must pay the HST as part of the ‘reasonable’ expense for that item, the guideline says.
The full text of the guideline is available at:
http://www.fsco.gov.on.ca/en/auto/autobulletins/2012/Documents/A-01-12-1.pdf