Deflecting Priority

Ontario’s auto insurance adjusters will have to change the way they handle priority payment claims based on the province’s new auto insurance regulations, which no longer allow insurers — or adjusters — to deflect priority claims to other insurers.

Ontario’s auto reforms are due to be implemented on Sept. 1, 2010. As of press time, prior to the reforms, a claims adjuster typically interviews vehicle passengers to receive a statement. During this time, the adjuster asks questions to determine whether or not passengers have insurance of their own, whether they are covered under a spouse’s policy, etc. These questions help determine whether or not there is a higher-priority insurer. If there is, the adjuster explains how priority works to the passenger(s), so that any claims are sent to the correct insurance company. In this sense, the adjuster was ‘deflecting’ claims to the appropriate insurers, based on a priority sequence outlined in the province’s auto insurance legislation.

Regulations introduced as part of the reforms will eliminate the deflection of claims. In the simplified scenario above, at the accident scene, the independent adjuster would simply open the accident benefits claim for each and every passenger who reports an injury; there would be no discussion of ‘priority’ insurer with the insureds. Basically, the insurers will work it out later among themselves.

Reimbursement of fees

Under the new reforms, if an insurer disputes a priority in arbitration or in court — if, for example, the company says its policy should not cover the claim — and the company disputing priority loses its case, the company losing the dispute could be required to reimburse a number of fees, including the adjuster’s fees.

The changes were based on the government’s belief that insurance companies were trying to deflect claims by telling insured persons that their accident benefits claims were the responsibility of another insurer. New priority rules require the insurer who first receives the application to commence the benefits the claimant is entitled to receive. After that point, the insurer has 90 days to put another insurer on notice, according to Laurie Walker, director of Ontario auto accident benefits at McLarens Canada.

“Regardless of how wrong or right it is that the person applied there, if [the insurance company has] the application, they have to commence benefits,” she says. “Then [the insurer] can seek recovery from another insurer if they feel that the other insurer is responsible for paying the primary accident benefits.”

If an insurance company does not pay accident benefits as the result of an initial deflection, that company will be subject to additional costs, including adjuster fees and legal expenses. “The changes to Disputes Between Insurers have been calcified to ensure deflection of claims are prohibited and penalties are outlined,” Walker says.

Higher number of priority claims expected

When dealing with an injured passenger, an adjuster is now required to send out an application package with all the information about the insurance company they represent. The adjuster is then responsible for managing the claim and subsequently initiating the priority dispute with the other insurance company. “In terms of workload, I would suspect we are going to see a much higher volume in priority dispute claims and a higher volume of claims in general,” says Michelle Baumann, accident benefits adjuster at Crawford & Company (Canada) Inc. “If you have a vehicle with four teenagers in it, rather than getting claim for just one teenager who is actually on your policy, you are more than likely going to get all four.” The incidence of people either borrowing cars or being passengers in them is quite high; this means priority dispute claims will become a more common issue for adjusters, since they are no longer allowed to direct claimants in the right direction.

“For the everyday adjuster who has 80 to 100 files on his or her desk, suddenly he or she has to do all of this additional investigation: setting up statements, trying to find drivers’ licenses, trying to find insurance companies, trying to find the phone number and the fax number, filling out paperwork to start the dispute, and then trying to convince the other insurance company to take the file,” Baumann observes. “That’s a lot of work.”

Hiring independents

If insurance companies see this change in priority disputes as a concern, both in terms of workflow and management of staffing levels, referring these claims to independent adjusters to do the legwork, handle the statements, determine the priority concern and complete the disputes can alleviate some of the worry, Baumann says.

“It’s good incentive to get an independent out right away to get all the information,” Deborah Neilson, a lawyer with Carroll Heyd Chown, agrees. “So, if there is a priority dispute, you can get it dealt with right away. The faster you get it dealt with, the faster the file is out of the office.”

Also, if an independent adjuster is working on the file, he or she can determine whether or not there is an issue with the Workplace Safety and Insurance Board, or if there is a loss transfer claim, Neilson says. “It’s all something that would be done at the same time,” Neilson says, adding an adjuster would obtain information from the insured and the broker, along with the motor vehicle accident report. “All of that would just come in at the same time,” she says. “I just can’t see an adjuster going out and asking questions or doing an investigation only for priority — it makes no sense. You do all three at the same time.”

Additionally, because of the potential to recoup adjuster fees associated with priority disputes, having a bill from an independent adjuster would facilitate this recovery. In-house adjusters, because they are salaried, would not be able to produce a bill for recovery of time allocated to a particular file as easily as an independent adjuster. “How do you quantify the cost of adjusting the claim for an inhouse adjuster?” Neilson asks. “If you have an independent adjuster who does the preliminary steps on a matter, then you would be able to quantify those costs much easier.”

Not to mention, it’s going to take insurance companies a while to recognize that they have to start paying and are no longer able to deflect — old habits die hard — and it’s going to take very little to prove that there was deflection, Neilson says. “I am quite confident in saying it’s a good idea for insurance companies to retain independent adjusters right off the bat, because for the first little while I think it’s going to be very hard for . . . an insurer to claim that they never deflected a claim, just because of old practices.”