Changing the Game Plan

Ontario insurers will be re-visiting their defence strategies in accident benefit claim disputes based on the province’s recent changes to the Rules of Civil Procedure and court and arbitration decisions, said Kadey B.J. Schultz of Hughes Amys LLP.

Schultz spoke on recent court decisions and changes to legislation affecting AB claims at the Ontario Insurance Adjusters’ Association conference in Toronto on Feb. 3.

CHANGES TO CIVIL PROCEDURE

Prior to the January 2010 changes to the Rules of Civil Procedure, the monetary jurisdiction of small claims courts in Ontario was $10,000. The new amendments raised that to $25,000.

The expanded jurisdiction may make the Small Claims Court a more appealing venue for plaintiff lawyers and paralegals to take an accident benefits dispute, Schultz said. Prior to Jan. 1, many typical AB disputes would be heard by arbitrators at the Financial Services Commission of Ontario (FSCO), or under the Simplified Procedure in the Superior Court of Justice.

“I suspect if we tried to gather some empirical evidence concerning specific firms — paralegal and plaintiff firms — we may see the majority of the claims handled by those specific firms are under $25,000,” Schultz said. “We now have a whole new opportunity for litigation. Paralegal and plaintiff firms are going to choose not to go to FSCO, where they have an educated decision maker on the subject of AB — both substantive and procedural. They may avoid the Superior Court of Justice, either under the Simplified Procedure (which has an increased monetary jurisdiction of $100,000 since Jan. 1) or through the normal course. Rather, they are likely to choose to proceed in the Small Claims Court.”

But the Small Claims Court is not necessarily best-suited for handling the complexities of an accident benefits dispute, Schultz suggested. “In the Small Claims Court, we have nothing like a pre-hearing or serious pre-trial conference. Nor do we have an arbitrator or an experienced judge. We have, for the most part, deputy judges who work a few days a month in the Small Claims Court, and may rarely or never have dealt with a motor vehicle file before — let alone one with accident benefits issues.”

To succeed in the Small Claims Court, Schultz suggested defence counsel should view the situation as a sort of teaching opportunity. “We’re going to have to get the decision-maker up to a certain level of understanding the subject matter to to move forward — particularly because the case law right now, unfortunately, is so against insurers that the only thing we can often win on is a technical argument,” she says. “So we need to be up to speed on the technical arguments, and then we need to empower our decision makers.”

CATASTROPHIC IMPAIRMENT

When it comes to defending catastrophic impairment disputes, Schultz suggested that in many cases insurers should focus their legal efforts on disputing the entitlement to benefits instead of on challenging the actual catastrophic impairment designation.

“The bar for qualifying for catastrophic impairment is getting easier and easier and easier with every decision that comes out of FSCO,” Schultz said, explaining why defence counsel might want to shy away from challenging the designation. She noted in Aviva and Pastore, a recent FSCO arbitration, the claimant had suffered one single Class 4 mental and behavioural impairment, while her physical and psychological injuries fell well below the 55% threshold for a person to be classified as catastrophically impaired by combining ss. 2(1.1)(f) and (g) of the SABS.

In that decision, Schultz further observed, the FSCO director delegate imparted to the insurance industry at large to reconsider bringing in American experts to comment on the intent, appropriate interpretation and application of the American Medical Association Guides for determining catastrophic impairment. Rather, we are encouraged to accept that the application of the AMA Guides is a legal test, subject to Ontario law.

Schultz said “while the SABS says that we will use the 4th edition of the Guides to interpret catastrophic impairment, that doesn’t mean the lawmakers in Ontario are bound by the original intent and purposes of the AMA Guides.” This, Schultz submits, has created an opportunity for incongruence, misunderstanding and a resultant significant increase in catastrophic claims.

There are significant costs associated with bringing up “the intelligentzia” from south of the border, Schultz continued, and these costs, together with other expected litigation expenses, need to be weighed against the idea of accepting catastrophic impairment but then disputing entitlement to benefits. Of course, this is more easily applied to medical and rehabilitation benefit disputes than attendant care.

“The Pastore decision encourages us to step back and think strategically: do we want to be fighting the catastrophic impairment designation, or do we want to be fighting the entitlement to the specific benefit?”

A recent Ontario Court of Appeal case highlights the potential success of fighting entitlement instead, she said.

In Heath v. Economical Mutual Insurance Company, David Heath was involved in a motor vehicle accident that resulted in chronic pain. He made an application for non-earner benefits and the trial judge awarded the benefit. On appeal, the court overturned the lower court’s decision.

“For non-earner benefits, we know that you have to have a complete inability to carry out your pre-accident activities of normal life,” Schultz said. “In this case, it was found that, based on the chronic pain and the pain arguments, Mr. Heath did not qualify for a non-earner benefit. That is significant.”

Since the Heath decision, FSCO made a similar ruling in Mangallon and TTC Insurance Company. In this case, the applicant, Jasmin Mangallon, claimed a non-earner benefit after the rear doors of a TTC bus closed on her while she was attempting to board. As a result, Mangallon claimed, she experienced headaches, dizziness, whole body pain and depression that resulted in a significant deterioration in her ability to lead a normal life.

The FSCO arbitrator ruled that accident-related pain, suffering or disability that interferes with daily living, or that makes daily living difficult, may not be sufficient for a person to qualify for a non-earner benefit — even though it might entitle a person to damages for pain and suffering in a tort action.

“For many reasons, this is a very sad case,” Schultz told delegates. “However, it rules in the favour of the insurer, supporting that the chronic pain argument may not result in a finding of a complete inability to carry out your pre-accident activities. We’re getting [decisions that support this] from the Court of Appeal and FSCO, which is a good thing. My suggestion to you: fight not the catastrophic designation, fight the benefit.”

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The Pastore decision encourages us to step back and think strategically: do you want to be fighting the catastrophic impairment designation, or do you want to be fighting the entitlement to the specific benefit?