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Monday, March 31, 2014

Reforms to Ontario’s Dispute Resolution System Are Long Overdue

Full disclosure here. I worked with Justice Douglas Cunningham on his review of Ontario's Dispute Resolution System (DRS) and fully support his recommendations. In the process of coming up with his recommendations, Justice Cunningham listened to a lot of users of the system, ADR experts and other interest parties. He spent considerable time analyzing what he heard before making his conclusions and recommendations. Obviously, not everyone is going to agree with all the recommendations.

 The current system is definitely broken despite some suggesting to the contrary. The system is too slow, which adds unnecessary costs and hardship. The culture within the system contributes to the problems. Justice Cunningham's report proposes a culture change starting with pulling the DRS out of FSCO and significantly speeding up the process. Should all his recommendations be adopted, we will have a much more responsive and efficient system. In 1990, the government created the DRS specifically to provide accident victims with a cost effective and timely alternative to the courts. The proposed reforms are intended to return the system to those first principles.

A number of stakeholders have come out against Bill 171 which is unfortunate. Some have suggested that Justice Cunningham's report requires more consultation. I've been working in this system a long time and that is just a stall tactic to provide more time to lobby to protect your interests. Trial lawyers are opposed to Justice Cunningham's recommendation to end accident victims' ability to choose to go to court or arbitration to resolve a dispute. However, Justice Cunningham was of the view that a simpler and quicker DRS would provide appropriate access to justice and therefore, the court option would no longer be necessary.

Accident victim groups are understandably disappointed that Justice Cunningham did not address their long-term complaints regarding the independent assessment industry. They believe that unless independent assessment providers are regulated, all other reforms are pointless. I disagree. Many accident victims will benefit from the reforms. Settlements or the restoration of benefits will occur sooner. Justice Cunningham indicated that the type of regulatory system proposed by stakeholders was clearly outside the scope of his review. As such it will have to wait for another day.

The Opposition parties have been critical of Bill 171 but they have shown a willingness to allow the bill to pass at second reading and go to a Standing Committee for review. I believe beyond the rhetoric the Legislature recognizes changes are needed.

Saturday, March 8, 2014

Will the February 1st SABS Changes Reduces Claim Costs?

On February 1st, three amendment to the SABS became effective. These changes were met with criticism by some stakeholders because the Ontario government chose not to consult on the amendments before introducing them.  The reaction of stakeholders was predictable with respect to these particular changes, which may have been a factor in moving ahead without consulting.  The other contributing factor is the government's rate reduction strategy.  Following an initial round of rate filings, FSCO was able to only squeeze an average of about 5% rate reductions.  The next 10% are likely to be much more difficult to find.

The February 1st, SABS amendments are:

  • those seeking an exemption from the $3,500 minor injury cap based on a pre-existing condition must provide medical documentation that precedes the accident;
  • those providing attendant care services can only be paid up to any income loss incurred; and
  • the section 35 election can only be used once by a claimant.

These amendments are part of a strategy to tighten up the system so that perhaps some savings trickle down and contribute to the promised 15% rate reduction.

Will there be any savings and, if there are, will they be significant enough to have an impact?

In a previous post, I had noted that the minor injury cap appears to be holding.  Those claims attempting to escape the cap either have a psychological component or pre-existing condition.  In the absence of arbitration decisions regarding the scope of the minor injury definition, there is still cost uncertainty regarding the current product.  Because of the number minor injury claims, the cost impact of a decision regarding the definition could be significant one way or the other.  Therefore, this amendment could lead to insurers re-evaluating their claim costs over time and lower premiums.

The attendant care amendment may not produce any real savings.  Let's say a claimant is eligible to claim  a monthly attendant care benefit of $2,000.  A family member has quit their job to provide the care and has been submitting invoices totaling $2,000.  If that family member was only earning $250 per week at their job, that person would only be able to invoice up to $1,000 per month under the SABS amendment.  The family is still eligible for another $1,000 per month and will more than likely use it purchase care either from a company or another family member or friend.  I suspect this change will produce no savings.

As for the third amendment, I don't have access to data that would indicate how many elections take place after an initial election is made.  Prior to 2010, there were claimants who would elect to receive the caregiver benefit and later elect to receive income replacement benefit or non-earner benefit when they no longer qualified as a caregiver.  However, since the caregiver benefit is now optional coverage except for those with catastrophic injuries, this scenario is likely quite rare.  The savings would have to be negligible.

Wednesday, March 5, 2014

Ontario Government Introduces Legislation to Begin Implementing the Cunningham Report

On March 4, 2014, the Ontario government introduced Bill 171 for first reading, which, if passed, would begin the process of implementing the recommendations made by Justice Cunningham in his review of the auto insurance dispute resolution system.

The Bill would amend the Insurance Act to change how disputes relating to statutory accident benefits will be resolved. Currently these disputes are dealt with by the director of arbitrations appointed under section 6 and arbitrators and mediators provided for under sections 8 and 9. Those sections are to be repealed and regulations will deal with proceedings going to the Tribunal [Cunningham Recommendations #4, 13, 24].   Regulation making authority would be added to the Insurance Act to cover the introductions of time limits and limitation periods. [Recommendation #6]

New section 280 provides that disputes will be dealt with by the Licence Appeal Tribunal under the Licence Appeal Tribunal Act, 1999. [Recommendation #1]  The new section 280 also prohibits taking SABS disputes to the courts except for appeals of arbitration decisions. [Recommendations #9, 28]

 The protection of benefits after a dispute is resolved, currently in section 287, is continued under the new section 281. 

 Under the new section 282, the Lieutenant Governor in Council will be able to assess insurers for the costs of the Licence Appeal Tribunal relating to these disputes. That power is similar to the assessment power under section 25 of the Financial Services Commission of Ontario Act, 1997. 

The new section 283 authorizes regulations for various transitional matters, ie, disputes that arise before the transition date.  Regulations may provide for the continuation of director of arbitrations and existing arbitrators and mediators during transition. 

The Bill only sets out a framework for a new dispute resolution system with nuts and bolts to be set out in regulations.