How expert witness restrictions impact insurers

Insurance Corporation of British Columbia will save millions as a result of new auto injury lawsuit rules for the province, which will likely cut costs for other carriers as well, the provincial government says.

ICBC, which is losing over $1 billion a year, has a monopoly on basic mandatory auto insurance in the province. But motorists may buy additional liability coverage from private insurers.

Attorney General David Eby announced Monday that parties in auto injury lawsuits will be limited to three expert witnesses in most cases.

“This amended regulation will have a positive impact on ICBC’s bottom line,” the Ministry of the Attorney General told Canadian Underwriter Thursday. “Restricting the number of experts allowed in litigated cases will generate a one-time, $400-million saving for ICBC for this fiscal year, and an estimated $30 million annually thereafter.”

ICBC’s fiscal year ends March 31.

Private insurance companies can also benefit from the new rules because some write excess liability. B.C. motorists must buy $200,000 in liability coverage from ICBC but brokers and insurers alike recommend motorists have at least $1 million in liability coverage. By reducing the number of expert witnesses – and thereby reducing legal costs – some liability claims may not reach the excess layers, thus reducing claims costs for excess liability insurers.

ICBC wrote more than $5 billion in premiums in 2018, and the private market is a small fraction of that. In comparison, Economical wrote only $104 million in B.C. auto in 2018, while Intact wrote $92 million, RSA wrote $23.5 million, Aviva wrote $19 million and Lloyd’s wrote $13 million, Canadian Underwriter reported in its 2018 Statistical Guide.

The Ministry of the Attorney general could not predict exactly how much private insurers would save as a result of the new rules that took effect Feb. 11.

The change to the Supreme Court Civil Rules applies to claims for damages or personal injury arising from the use or operation of a motor vehicle. Only one witness will be allowed in claims of $100,000 or less. In claims of over $100,000, up to three expert witnesses will be allowed.

There are some exceptions. A judge could still admit more than three expert witnesses if “the court is satisfied that it would further the object of these Supreme Court Civil.”

Restricting the “unnecessary use of expert evidence” is one way of reducing ICBC’s costs, Ernst & Young wrote in an earlier report. Litigated claims are costing ICBC “significant amounts in costs, disbursements and legal fees,” the firm said in Affordable and Effective Auto Insurance – a New Road Forward for British Columbia. That report was released in July 2017 after it was leaked to the media.

ICBC’s loss ratios were 106.5% in 2014, 115.6% in 2015 and 110.3% in 2016, EY said in its report. ICBC reported earlier that its underwriting loss was $1.66 billion in the 12 months ending Mar. 31, 2018.

Eby has made several changes over the past year aimed at cutting ICBC’s claims costs. For example, a previously-announced cap of $5,500 limit on pain and suffering awards, for minor injury claims, takes effect Apr. 1.

B.C.’s government has thus far rejected calls from private insurers to open basic auto insurance to competition from the private sector.