The Gloves are Off

With a mandatory five-year review of Ontario auto insurance starting later this year, and members of opposing camps wrangling about who has the public interest at heart, the gloves are already off.

Among those advocating change is Ontario’s former chief justice, the Honourable Coulter Osborne, who led Ontario’s Civil Justice Reform Project that submitted its findings and recommendations in November 2007. In his report, Osborne included recommendations concerning automobile negligence claims, which represent 21% of the cases commenced in the Ontario Superior Court of Justice. Osborne reiterated his findings in the review before 85 stakeholders at an Ontario Bar Association conference entitled “Drive to Better Auto Insurance,” held in Toronto on Apr. 29 and 30. Those invited to the conference, sponsored by the Ontario Bar Association, Ontario Trial Lawyers Association and United Senior Citizens of Ontario Inc., included insurers, the Insurance Bureau of Canada (IBC), plaintiff and defence lawyers, various victim, injury and senior citizens’ groups and government officials.

The stated purpose of the OBA conference was to “begin a constructive dialogue to address challenges and inequities under the current system, while identifying efficiencies which can be enacted to maintain affordable premiums.”

DEDUCTIBLE UNDER FIRE

In both his review recommendations and in his presentation to the OBA, Osborne argued that contingent fees and class actions afford access to justice, but the deductible and verbal threshold are direct barriers to justice. He called Ontario’s Cdn$30,000 deductible from general damages (which disappears if damages awarded are Cdn$100,000 or more) a “tax on pain.” In addition, he questioned the utility of the province’s verbal threshold, which requires plaintiffs to establish — in order to have the right to sue — that they have sustained a permanent serious impairment of an important physical, mental or psychological function.

Both the deductible and threshold are intended to lower loss costs, and thus premiums, by keeping smaller cases out of the system. But Osborne has urged Ontario’s insurance regulator, the Financial Services Commission of Ontario (FSCO), to study their impact and usefulness in the coming review. While noting in his report that there is substantial public interest in keeping auto premiums under control, Osborne nevertheless concluded: “What automobile claims costs are, and whether automobile insurers are making or losing money, is not for me to determine.”After the release of Osborne’s 1988 Report of the Inquiry into Motor Vehicle Compensation in Ontario — which recommended a hybrid no-fault and tort system, with a substantial expansion of no-fault benefits — the cap for medical and rehabilitation no-fault benefits rose from Cdn$25,000 to Cdn$500,000 per claim in 1990. (Prior to OMPP in 1990, auto accident compensation was provided primarily on the basis of tort, with limited no-fault benefits.)

INDEMNITY v. ENTITLEMENT

Speaking at the OBA conference, George Cooke, CEO of Dominion Insurance Company of Canada, said that in order for the system to be seen as fair by consumers, the system must be capable of being understood and not be unduly complex. He criticized “unnecessary treatment and excessive assessment, combined with cumbersome processes,” which he said increase costs for lesser injuries to the benefit of those abusing the system.

Ontario has a system that works, but could work better, Cooke told the conference. He stressed the need to preserve an acceptable balance between affordability, fairness and indemnification — and to encourage competition. He offered a Top 10 list of suggestions that included reducing no-fault benefits significantly, and permitting the use of preferred provider networks if the insured elects this approach at the time of purchase.

In an email interview after his speech,

when asked to comment further on Osborne’s proposed review of the deductible and threshold, Cooke said: “The deductible should be set at a level to discourage frivolous and low-end personal injury claims and the threshold wording should not be changed until the courts interpret what it means. The original intent of the combination of deductible and threshold was to exclude pain and suffering awards for minor injury. This was a public policy decision balancing affordability, fairness and other considerations. Remember all economic loss is covered and the deductible for pain and suffering is eliminated if the award is in excess of [Cdn]$100,000.” Cooke added that seriously injured people are not compromised by the deductible.

CHALLENGING THE DEDUCTIBLE

Richard Halpern, president of Ontario Trial Lawyers Association and chair of an OBA working group on auto insurance, said he believed insurers were ignoring the quality of the auto insurance product in favour of shareholders’ interests. Innocent accident victims should not be bailing insurers out of soft markets, he said in his OBA presentation.

In a subsequent interview, Halpern said the OTLA was prepared, if necessary, to challenge both the deductible and the verbal threshold. “We prefer not to go down that road, but if ultimately we decided to do that [a constitutional challenge], we would challenge both,” Halpern said. “Again, the solution lies in co-operation.”

Halpern was asked for his impressions about the province’s no-fault system. “The first-party system is very complex with lots of time limits, lots of forms to fill out and it’s in language that the ordinary member of the public can’t understand,” he said. “At the same time, insurers must create large bureaucracies to administer benefits and they make liberal use of medical assessments to determine entitlement.” By reducing these transaction costs and simplifying first-party benefits, Halpern suggested, there would be substantial cost savings that can further be

used to restore the rights of innocent accident victims [i. e. those that have had their rights limited, according to Halpern].

When asked if he was advocating the return to pure tort, Halpern replied: “It’s never going to happen. We need benefits in the acute phase to get people back to function and back to work. The current level of first-party benefits in Ontario is more generous than needed to achieve that goal.”

Cooke believes the pure tort system, which he views as excessively adversarial, was not working in the period immediately prior to the introduction of the first no-fault product. Any increased reliance on a tort regime in the future would, he said, “require judgments to be timely, information to be disclosed and a level of compensation earned by the legal community to be fair to lawyers and accident victims.” Cooke also advocates additional training of judges, so that they can handle complex personal injury cases, and/or the establishment of a specialized court.

Speaking at the OBA conference, Ontario’s minister of finance, Dwight Duncan, confirmed a statutory review of all aspects of the auto insurance system would take place this year. He said he was interested in what all sides could come up with together because compromise is the preferable route.

DEDUCTIBLE NOT A BARRIER TO ACCESS TO JUSTICE

IBC president and CEO Mark Yakabuski attended the conference, but was not a speaker. He was asked for comments by email after the conclusion of the conference. Specifically, he was asked about Osborne’s recommendations related to the deductible and verbal threshold

“IBC does not see the deductible and threshold as barriers to justice, since Ontario has by far the most generous automobile insurance system in the country,” Yakabuski said in a statement. “Any changes to the deductible and/or threshold that might be proposed by the personal injury bar can only be considered if they are accompanied by other counterweighing proposals that ensure affordability and stability of the Ontario a uto insurance system.

“IBC is working hard to develop proposals of its own to ensure that Ontario consumers do not pay more and more of their personal disposable income on what is a mandatory financial product. Our proposals will be designed to promote stability in the system so that the claims costs paid out by the Ontario auto insurance system are more predictable to everyone over a long period of time.

“If personal injury lawyers want to join us in this pursuit rather than merely pursuing their self-interest, they are welcome to join us in a real dialogue.”

The OBA conference featured numerous references to rights and fairness, but few discussed what consumers really want and can afford to pay. Cooke noted: “If we collectively are ever going to have a productive dialogue around the reform of the Ontario Auto insurance product, there needs to be a lot more time spent by all of us addressing real consumer concerns based on a factual and objective understanding of our collective circumstances.”