Brokers, do your auto insurers cover HST on capped benefits?

Brokers placing Ontario auto coverage should ask insurers whether they are including sales tax when they calculate caps on benefits, a lawyer told Canadian Underwriter Tuesday.

Ontario consumers must pay 13% Harmonized Sales Tax on many goods and services. Some – such as massage therapy – may be part of an accident benefits claim.

When dealing with accident benefits claims, auto insurers are not supposed to use HST when calculating restrictions or caps on benefits, says Paul Harte, a Richmond Hill based lawyer.

Auto insurance brokers “should be asking for written confirmation from the insurance companies” as to whether or not they are paying HST on accident benefits, Harte said Tuesday in an interview.

“A broker would be negligent in this environment if they were not advising their client as to whether the insurer they are going with is paying or is not paying the HST.”

Harte is representing several claimants who are suing their auto insurers in Ontario, alleging their insurers either included HST in the calculation of the benefit entitlements or the insurers only paid the cost of benefits without the HST. Those allegations have not been proven in court.

One defendant – Aviva Canada – told Canadian Underwriter it “actively sought clarification from the government regarding the tax treatment on claims payments to our customers.” Aviva would not comment in detail on the allegations because the case is before the courts.

Some health services – such chiropractic treatment or physiotherapy – do not have sales tax. Others, such as massage, do have HST, Harte said.

Attendant care has an “odd rule,” Harte reported.

Canada Revenue Agency reports that HST is not payable on “home care” (such as bathing and feeding) if that service is either supplied by a government or paid by a government or an organization that administers the home care for a government.

This means a catastrophically impaired auto claimant – whose attendant care is capped at $6,000 a month – could conceivably get only $5,310 in coverage. This could happen if the service is not provided by the government and the attendant care provider has to pay 13% HST but the insurer is only covering the attendant care before HST is added on. So this means a claimant could conceivably get $5,310 in coverage because the attendant care provider charged $5,310 plus HST for a total of $6,000.

In Ontario auto, the HST issue is mainly affecting claimants whose injuries fall under the minor injury guideline, Harte said. The MIG has a ceiling of $3,500 for treatment for soft-tissue injuries such as whiplash.

“It is shortchanging them often to the tune of $50. They are getting letters from their insurers saying ‘if you don’t like it, go to the licence appeal tribunal,’” but it costs $100 to take an insurer to the LAT, said Harte.

Some auto insurers “have been following the rules all along” while others are now following the rules, said Harte.

An Intact spokesperson told Canadian Underwriter Wednesday that Intact is currently “paying the HST and are not counting it towards the cap, as per current FSCO guidelines.” Intact and Belair are named as defendants in separate lawsuits arising from accidents in 2015.

Other defendants include Certas, Allstate and Unifund. A spokesperson for RSA (Unifund’s corporate parent) said the insurer is declining to comment. Desjardins (the corporate parents of Certas) declined comment because the case is before the courts. Allstate did not return calls from Canadian Underwriter.

The lawsuits were initially announced Oct. 31. They are separate lawsuits but with similar allegations. No court dates have been set. The plaintiffs are trying to get those lawsuits certified as class actions.

Harte said the plaintiffs are also seeking an injunction asking the court to order the insurers to stop including HST when calculating caps or restrictions on accident benefits.

In some cases, the plaintiffs are alleging that insurers included HST in the calculation of the benefit entitlement under the SABS. In some cases, the plaintiffs allege that although the insurers covered the cost of their goods and services provided under the SABS, they only provided the costs net of HST and not including HST.

Also named as a defendant is the Ontario government.  The plaintiffs alleged that Financial Services Commission of Ontario officials were “aware” of the insurers’ conduct, received complaints about that conduct and either took not steps to put a stop to it or took “insufficient” steps to put a stop to it.

“FSCO is aware of the statements of claim involving FSCO. As the matter is before the courts, FSCO is unable to comment further,” a FSCO spokesperson wrote to Canadian Underwriter.