Back to the Future?: The New Auto Insurance Regulations

The reforms made as a result of the first Five Year Review of Automobile Insurance have now been released to the public and the proposed changes come into effect Sept. 1, 2010. The changes are aimed at keeping insurance premiums affordable for Ontario drivers by providing consumers with more choice and flexibility to purchase coverage that best meets their protection needs and budgets.

In many respects these new regulations hearken back to the halcyon days of the Ontario Motorist Protection Plan (OMPP). Most insurers and plaintiff’s counsel now look back on the early 1990’s as a time when accident benefits, while still litigious, were not as highly regulated as under Bill 164 and Bill 59. Many of us over the past 10 years have dreamt of a time when they could go “back to the future.” One of the biggest changes under this new regime is a return to allowing claims handlers to make adjusting decisions without being forced to seek a medical opinion first.

The new Statutory Accident Benefits Schedule (SABS) contain several significant substantive reductions in the type and amount of benefits available, with greater scope given to the availability of optional benefits. The tort law amendments include mandatory optional coverage under an “Added Coverage to Offset Tort Deductibles” endorsement, which would reportedly reduce the deductible to $20,000 ($10,000 for family members). To a certain extent, this serves to counterbalance the narrowing of the benefits available under the standard SABS.

Minor injury guideline

In terms of substantive changes to the SABS, the pre-approved framework guideline for grade I and II whiplash associated disorders is replaced by the minor injury guideline. For those diagnosed with a “minor injury,” medical and rehabilitation and assessment expenses are limited to $3,500, attendant care or an in-home assessment is not available regardless of optional coverage. The guideline has not yet been released, but “minor injury” is defined broadly as a “sprain, strain, whiplash associated disorder, contusion, abrasion, laceration or subluxation and any clinically associated sequelae” and each of these terms are in turn defined in section 2.The definitions seem designed to medicalize the policy and will likely lead to increased litigation. In addition, the definition of “minor injury” continues to ignore the issue of psychological injury arising from minor injury and whether a psychological injury takes an insured out of the minor injury guideline. It will be interesting to see whether the changes are any more effective in providing a serious hard cap with respect to minor injuries than the former PAF guidelines.

Caregiving, housekeeping and attendant care

Caregiving and housekeeping benefits have become optional benefits for all insured’s with non-catastrophic injuries. These benefits continue to be available for the first 104 weeks to insured’s with catastrophic injuries and will be available beyond 104 weeks for the catastrophically injured who suffer a complete inability to carry on a normal life. Attendant care benefits continue to be available for the first 104 weeks at a maximum of $3,000 per month for non-catastrophic insureds, but unless optional coverage is purchased, the limit on attendant care for non-catastrophic insureds is $36,000. Attendant care for catastrophic insureds is unchanged at a maximum of $6,000 per month up to $1,000,000.

A definition of “incurred” has been provided in section 2(7)(e), which requires that the insured person receive the goods or services to which the expense relates, have paid the expense or promised to pay the expense, and requires that the person who provided the goods or services did so in the course of his or her employment or sustained an economic loss as a result of providing the goods or services to the insured person. The definition is somewhat troubling and depending on the interpretation, we see the possibility of unjustly excluding certain claimants. For example, if we take the case of a mother who was not working prior to the accident and who is providing attendant care to her brain injured child we have difficulty seeing how those services will be deemed incurred under this definition. The definition of incurred has relevance for caregiving and attendant care claims, as well as visitor’s expenses and medical and rehabilitation benefits.

Med-rehab benefits

The types of medical and rehabilitation benefits available to insureds does not change under the new SABS, aside from rehabilitation benefits specifically excluding housekeeping and caregiving services — presumably in response to the situation created by the “Ms. G” case. However, unless increased benefits are purchased, the limits for medical and rehabilitation benefits have been reduced to $50,000 for non-catastrophic insureds and remain at $1,000,000 for catastrophic insureds. Perhaps more significantly, the limits for medical and rehabilitation benefits will include all fees and expenses paid for assessments and examinations requested by the insured. Claims for medical and rehabilitation benefits continue to be limited to 10 years, unless the insured is catastrophically injured or optional coverage is purchased.

Examinations

The cost of examinations has been significantly limited and the new SABS limit the cost of each assessment to $2,000 for both insurer’s examinations and examinations requested by the insured. Rebuttal assessments are no longer available and future care cost reports are not considered assessments under the SABS.

Income replacement benefits will now be calculated at 70 per cent of gross income, with deductions also calculated on that basis. The cost of an accounting report up to a maximum of $2,500 is now also available to assist the insured with IRB calculations under certain circumstances. A definition has also been provided for “income continuation plan” to provide greater clarity as to what is deductible when looking at receipt of long term disability benefits. “Self-employed person” is also a defined term under the new SABS.

An election of weekly benefits is final. However, a catastrophic insured is permitted to re-elect once catastrophic impairment has been determined. This presents some practical problems in various scenarios. If an insured is not catastrophic until the 104-week mark and has not purchased the caregiving option, that individual will be forced to elect IRB or non-earner benefits. In the event the insured is deemed catastrophic, it is unclear whether a re-election for caregiving benefits would apply retroactively or whether interest would be payable if the amount is higher than the previous election. Questions are raised as to how this insured establishes incurred caregiving expenses for the period during which he or she was forced to elect IRB or non-earner benefits. These questions are compounded in a situation where an insured is not deemed catastrophic until the conclusion of litigation – which can take many years.

The definition of “catastrophic impairment” has changed slightly and now includes permanent loss of use or single limb amputation. In addition, an assessment or examination for determination of catastrophic impairment can only be conducted by a physician, unless the only impairment is a brain impairment, in which case the assessment can be completed by a neuropsychologist. This removes occupational therapists, social workers and several other assessors from the process.

Interest payments

Interest is now payable on overdue payments at the reduced rate of one per cent per month, compounded monthly. However, there has been no similar change to s. 282(10) of the Insurance Act which continues to allow an arbitrator to award up to 50 per cent of the amount together with interest at two per cent per month, compounded monthly.

In terms of procedural changes, claims for medical and rehabilitation benefits are merged with the application for
assessments into one process. A treatment or assessment plan signed by the insured and health practitioner is required before the good or service is incurred, except where the insurer agrees it is not required or where the expense is for prescribed medication or less than $250. If the insured has sustained a “minor injury” under the guideline the insurer may refuse any treatment or assessment plan during the period the guideline applies. This decision is final and not subject to review. The insurer has 10 business days to respond to a treatment or assessment plan with a determination. Failure to provide a determination of the applicability of the minor injury guideline or denial of the benefit means the insurer cannot rely on the minor injury guideline and must pay for the proposed treatment or assessment up to the date the insurer gives proper notice.

However, insurer’s examinations are no longer required in order to make a determination — whether it is with respect to a treatment plan, the applicability of the minor injury guideline, entitlement income replacement benefits or catastrophic impairment. The insurer has the discretion whether to request the insured submit to an in-person or paper review insurer’s examination to assess entitlement to a benefit. However, the insurer must now set out the medical and other reasons for the determination. Where there is no insurer’s examination the reasons for the determination will become more important. Nevertheless, what exactly is required in terms of “medical reasons” is somewhat unclear.

If an insured has unreasonably refused to attend an insurer’s examination, the insured cannot mediate.

Due to the reduced limits for medical, rehabilitation and attendant care benefits for non-catastrophic claims, the insurer must also send the insured a statement of benefits paid to date whenever these benefits are claimed or paid and at least once every two months after the application is first made. The statement of benefits must include the amounts paid to date for medical, rehabilitation and attendant care benefits and the amount remaining available under the limits if the insured was entitled. In addition, the statement must include the amounts paid to date for all insurer’s examinations. For catastrophic claims, the statement of benefits is required when claims are paid and at least once per year.

In terms of the transition provisions, for all accidents, section 24 and Parts X, XI, XII, XIII and XV (governing procedure for claiming benefits, DACs, responsibility to obtain treatment, interaction with other systems) of the SABS-1996 do not apply after Aug. 31, 2010. All amounts payable under the new Regulations after Aug. 31, 2010 will be paid in the amount of the old regulations, except with respect to section 24, which is replaced by the new regulation section 25 governing the cost of examinations. Otherwise, the corresponding provisions of the new regulations will become effective as of Aug. 31, 2010. After Sept. 1, 2010, insureds will be deemed to have purchased the optional caregiver, housekeeping, medical/rehabilitation and attendant care benefits under section 28 of the new regulations until the earlier of the first expiry date of the motor vehicle liability policy or the day on which the motor vehicle liability policy is terminated.

Changes have also been made to regulations governing disputes between insurers. An application has now been defined as an OCF-1. An insurer must supply an application to any insured who notifies the insurer he or she wishes to apply for benefits and cannot take any step to prevent the applicant from submitting that application. The focus appears to be on combating insurers deflecting claims where priority issues arise. However, the chosen language seems to preclude informal discussions with insureds with respect to identifying the appropriate insurer for accident benefits and seems to force an insurer with absolutely no connection with the insured to accept and process an application if it is received first. In addition, if a priority dispute is resolved on agreement as between insurers, an insured can dispute that agreement by way of private arbitration. There are also specific regulations dealing with claims to the Fund, more detailed rules to expedite the arbitration process and all private arbitration decisions must be made public.

There are certainly many more changes we have not canvassed and overall there are significant implications for claims. So strap on your seatbelts and climb into your newly “pimped” time-travelling DeLorean and starting Sept. 1, 2010 take that wild ride “back to the future.”

Carlie Smith is an associate at Dutton Brock LLP and practices a variety of insurance defence work.

Philippa G. Samworth is a partner at Dutton Brock LLP and her area of practice is exclusively insurance defence with a specialty in Accident Benefits.