Absence of adjudication may feed future tort in Ontario auto

A lack of adjudication relating to Ontario’s minor injury guideline (MIG) is creating uncertainty and could set the stage for a large increase in bodily injury (BI) tort, George Cooke, CEO of The Dominion of Canada General Insurance Company, suggested during a speech in downtown Toronto on Thursday.

“If I was looking for an issue to go forward with – that will be an interesting and a difficult issue for this industry – it will be the subsequent explosion of BI tort related to prior years post year-end 2012,” Cooke told attendees of the luncheon, sponsored by the Property Casualty Underwriters Club (PCUC).

“As a result of a severe backlog in mediation and arbitration, we don’t have adjudication [on MIG] yet and we’re over two years past date of reform,” he said. Without that arbitration to date, “we have absolutely no clue whether the definition as we understand it will hold or not.”

Ontario’s September 2010 auto reforms had two main components, Cooke noted. The first component revolved around unbundling a very complex product and offering more choice to consumers (which has been achieved); the second was cost containment related to first-party benefits (accident costs) and to tort.

“I think most companies would tell you they think that the minor injury guideline is working and that the $3,500 cap is countering an appropriate number of injuries as intended,” Cooke said. But the absence of arbitration around MIG’s definition – despite well-intentioned front-line claims people continuing to place injuries inside the guideline – is a concern.

On the tort side, Cooke said, the reforms included some assumptions about how much of what did not fit in first-party benefits would make its way into tort.

“We have a lot of people, claims adjusters and actuaries, guessing. But we have no way, at this point, to know how much will remain, or alternatively, what the quantum of that that remains will be,” he pointed out.

There are also issues around the definition of catastrophic injury, Cooke said. An expert panel came up with a definition, which was later adjusted by civil servants, and now there are outstanding issues around “whether you can decouple physical from psychological injury,” he said.

“My concern with this is by the time people are through playing with it – in particular, lawyers – you will have gone from the realm of science back into the realm of law and you will have something that will be, at best, unclear, and likely not resolved as to what it may or may not mean for several years,” Cooke commented. The resulting uncertainty “certainly isn’t good for people who are injured, it’s not good for actuaries, it’s not good for claims people who are trying to do their jobs.”

Cooke pointed out that the previous discussion around the catastrophic definition was articulated against a bundled auto product, which is no longer the case. He suggested casting aside the catastrophic definition and requiring companies selling the product to sell additional optional packages on first-party benefits.

Doing so would ensure complete clarity as to whether or not a person has coverage and would likely result in increasing policy limits. “Mom and dad would have clearer certainty as to what they bought, most people would pay less, the transaction costs would be reduced, the uncertainty in our results would be removed,” Cooke argued.