Canadian Underwriter

Adjusting for Angst

January 31, 2012   by

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With numbers of psychological injury claims on the rise, claims adjusters need to be aware of the potential pitfalls in assessing the validity of these claims.

Shifting claim patterns

In recent years, personal injury claims have increasingly included claims not just for physical injuries but also for psychological or psychiatric impairment, such as anxiety, stress and depression disorders.

In many auto insurance cases, the psychological injury forms the main basis of the claim for compensation. For example, following a fender-bender accident involving a few hundred dollars’ worth of damage to a car bumper, the claim might include a psychological injury claim for post-traumatic stress disorder. Determining the validity of such psychiatric disorders and the merit of the claims can be a challenging exercise.

On the accident benefits side of auto insurance, insurance companies and lawyers have seen a significant rise in the number of psychological injury claims, especially in Ontario, where there is also a condensed time period for filing psychological claims. In some cases an initial claim for anxiety or depression may now turn up just two or three weeks after an accident takes place.

There are certainly cases where legitimate psychological injury claims do arise from automobile accidents. At the same time, public awareness of psychological conditions such as depression and anxiety has been increasing, and pharmaceutical companies have increasingly promoted medications as solutions — factors which may be contributing to the increase in claims of this kind. In addition, there is concern in the industry that some automobile injury compensation models may effectively be providing economic incentives to pursue these types of claims.

Determining injury

Some psychological injuries are compensable and others are not. It is often up to adjusters, insurance companies, lawyers and medical experts to determine which are which. When a claim is litigated, a claimant’s credibility in court can be the determining factor.

The main challenge with psychological claims is determining the cause and scope of the disorder. Psychological conditions often involve multiple causes (some of which may have existed before the accident) and overlapping types of impairment. The injuries are subjective in nature and can’t be seen on an x-ray or other imaging test. Instead, psychological assessments often involve an element of self-reporting and an exercise of judgment on the part of the assessing professional. In this sense, psychological assessments are less objective than some other forms of injury assessment.

Comments from the courts

Courts have rendered judgments in several psychological injury cases, but uncertainty remains about questions such as what a “recognized” psychiatric impairment is, how “reasonably foreseeable” a given psychiatric injury should have been, and what level of mental fortitude is expected of the average person.

On the tort side, courts have attempted to clarify which kinds of psychological claims are compensable through negligence. In Mustapha v. Culligan (2008) — known as the “fly in the water bottle” case — the Supreme Court of Canada held that “the law expects reasonable fortitude and robustness of its citizens and will not impose liability for the exceptional frailty of certain individuals.” The court also ruled that Culligan could not be found liable because the company could not have “reasonably foreseen” the psychiatric injury suffered by the customer.

On the other hand, more recent rulings have cast doubt on the issue. For example, in Frazer v. Haukioja (2010), the claimant, Frazer, allegedly suffered an initial misdiagnosis of his physical injury and a delay in informing him of its true severity. He grew distressed and consulted a psychiatrist, who found that he suffered from an anxiety disorder with features of panic disorder. A trial judge found that Frazer’s psychiatric diagnosis was the result of Dr. Haukioja’s failure to properly treat him for his physical injury, and awarded more than $2.6 million in damages and costs. The Ontario Court of Appeal upheld the judgment.

So far, the legal principles are being interpreted on a case-by-case basis, lending some unpredictability in the application of negligence concepts in psychiatric injury cases.

Claims handling issues

For adjusters and insurance companies, the implications are that psychological claims need to be dealt with proactively — and using a different set of skills and approaches than are used for physical injury claims.

One of the first steps in any psychological claim is to better understand the history and situation of the claimant, as well as the severity of the accident. The claim file should include information about any pre-existing mental health issues the claimant may have had before the accident, so that the adjuster can develop a broad understanding of the situation.

Surveillance may be appropriate if there are potential inconsistencies in a psychological claim — for example, if the claimant claims to be too anxious to drive a car. The investigation may also need to consider where an auto accident injury claim originates from: some assessment and treatment facilities have reputations for turning out suspiciously high numbers of claimants assessed with psychological disorders.

Expert reports

In most psychological claims, especially in tort, the opinions of medical experts are required, whether for examinations, reports or testimony. Medical reports from experts representing the defendant may be used for various purposes such as to minimize damages, prove no breach of standards, or demonstrate no causation.

Some insurers may have concerns about the heightened costs of medical expert reports and examinations, particularly when specialized fields such as neuropsychiatry are involved. Factors to consider when retaining a medical expert include:
• identifying the specific purpose or situation where an expert is needed (for example, to rebut the plaintiff’s expert, establish no causation, etc.);
• selecting the right expert by considering reputation, technical expertise and impartiality;
• evaluating timing considerations such as the sequencing of experts and reports;
• instructing experts clearly; and
• controlling costs.

Whether a psychological injury claim is for accident benefits or tort in an auto accident, or even for a personal injury, using effective claims handling techniques to distinguish between legitimate disorders and exaggerated psychiatric injuries is critical. It’s important to remember that legitimate psychological injuries do occur. However, such claims need to be supported by credible information.

This article is based on excerpts from ADVANTAGE Monthly, a series of topical papers on emerging trends and issues provided to members of the CIP Society. The Chartered Insurance Professionals’ (CIP) Society is the professional organization representing more than 15,000 graduates of the Insurance Institute’s Fellow Chartered Insurance Professional (FCIP) and Chartered Insurance Professional (CIP) programs.

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