UPDATE ON CHANGES TO ONTARIO AUTOMOBILE LEGISLATION (2014 and beyond)

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1 BACK TO SCHOOL with Thomson, Rogers and the Ontario Brain Injury Association UPDATE ON CHANGES TO ONTARIO AUTOMOBILE LEGISLATION (2014 and beyond) SEPTEMBER 11, 2014 DARCY R. MERKUR, Partner Thomson, Rogers

2 Page 2 Introduction Despite now having a majority provincial government, the Ontario Liberal party has chosen to reiterate, post election, their intention to adhere to the promised 15% reduction in auto insurance premiums by August, The government is already behind pace on the desired premium reductions after falling short of their promised 8% premium reduction by August 2014, having only achieved a 5% reduction. To date, the government has focussed most of their rate reduction efforts on fraud prevention, but as the government continues to fall short of their target, attention may shift to further benefit reductions and/or the implementation of a narrower catastrophic impairment definition. This paper and presentation will review the status of some important current government initiatives relating to changes in the auto insurance claims process, specifically: 1) The status of the proposed changes to the catastrophic impairment definition; 2) The new licence requirement for HCAI healthcare providers; 3) The newly revised definition of "incurred"; and, 4) Bill 15 and the planned changes to the Financial Services Commission of Ontario (FSCO) dispute resolution process and to the tort prejudgment interest rate. In short, the changes will result in accident victims receiving even less in no fault accident benefits, with healthcare providers earning less than ever for providing the same valued service. Update on CAT Definition Changes Under the pretence of modernizing the catastrophic impairment (CAT) definition to ensure that the definition only captures those with the most serious injuries, the government has been considering an overhaul of the definition of catastrophic impairment as set out in the Statutory Accident Benefits Schedule (SABS). The definition proposed would significantly narrow the CAT definition and would, most significantly, remove the ever popular GCS test. More information about the proposed definition is set out in my previous paper entitled Update on the Anticipated Changes to the Definition of Catastrophic Impairment (available online at impairment bts 2013). The proposed CAT definition resulted in an outcry of concern by stakeholders. The concerns raised included: the appropriateness of some of the medical tests proposed, the thresholds proposed, the practical implications resulting from the elimination of the GCS test, the

3 Page 3 challenges with interim designations, the delays with treatment that can result from a delayed designation and the need for upheaval in the face of stability, amongst other concerns. As a result of the overwhelming response, the government s initiative has been stalled. Stated simply, while the government has an interest in revising and narrowing the CAT definition they are uncertain as to how to do it in a way that responds to the valid concerns raised. It is unclear what will happen next with the catastrophic impairment definition. Will it be revisited again in the near future? Will the government simply adopt the proposed revised CAT definition with minimal amendments? It can be expected that the government s soon to be released Three Year Review on Auto Insurance will recommend that the changes to the CAT definition be revisited as soon as possible, in keeping with the recommendation in the previous Five Year Review. What will follow thereafter is unknown. FSCO Licences for Healthcare Providers As part of its anti fraud initiative, the government is requiring all HCAI (Health Claims for Auto Insurance) participants to be licensed through FSCO in order to continue to invoice through HCAI. While the idea of licensing is not in and of itself controversial, the fee structure and the fees themselves are seen by many as offensive and unnecessary the fees charged seem to have no intuitive connection to the laudable goal of fraud prevention. FSCO has advised that those that have applied for a license by August 31, 2014 will have their licenses addressed before the mandatory license date of December 1, As of December 1, 2014, only licensed providers can submit invoices through HCAI. The OCF forms have already been modified to include the new license information. Information about licensing, provided by FSCO, including their Frequently Asked Questions, is attached at Schedule A to this paper. The fees charged include a one time license fee of $337, plus a fee for each unique SABS file of $15, plus an additional $128 for each different business location (see fee information at page 20 of Schedule A ). The license fees may cause those with smaller motor vehicle practices to avoid HCAI altogether and to consider means to collect from patients while letting the patient seek recovery from the insurer.

4 Page 4 The per file fee will serve to reduce margins for healthcare providers and may dissuade providers from participating in claims, and paying the $15 per file fee, where they would have very minimal one time type involvement. While it is clear that the fees will serve to increase the cost of doing business for healthcare providers, it is unclear how and whether the fees will impact fraud in any way. The Newly Revised Definition of "Incurred" Without any consultation, the government implemented a change to the already new definition of incurred within the SABS, effective February 1, The change serves to reverse a court decision that had made it clear that any economic loss triggered entitlement to benefits in accordance with the new definition of incurred without regard to the extent of that economic loss. The amendments now require the person providing the care to establish the extent of their economic loss, as they are now only eligible to be compensated by the accident benefit insurer to the extent of that economic loss. Practically speaking, it is virtually impossible in most circumstances to prove the precise extent of the economic loss. The insurer is in an advantageous position to delay and deny benefits while pressing the already overwhelmed provider to substantiate the extent of their economic loss (knowing the challenges in proving missed available overtime, foregone work opportunities, bonus entitlement impacts, lost promotions and salary increases, etc.) The result of the change is that attendant care services must now, in most circumstances, be outsourced to professional attendant care providers in order to clearly meet the definition of incurred. Unfortunately, because the standard hourly rate of a professional care provider is much more significant than the minimal hourly rates available for attendant care services under the SABS, only some needed attendant care services can be professionally provided within the monthly attendant care maximums, leaving the family providing significant attendant care, without immediate pay. Of course, the value of attendant care services provided by family members can be claimed in lawsuits against at fault drivers but those claims often take years to resolve leaving the family uncompensated and struggling physically, financially and emotionally in the interim.

5 Page 5 Bill 15 and the Planned Changes to FSCO and Tort Prejudgment Interest (PJI) The government has been considering drastic changes to the FSCO dispute resolution process, having commissioned The Honourable Mr. Justice Douglas Cunningham to make recommendations for changes to the dispute resolution system. Justice Cunningham s report, entitled Ontario Automobile Insurance Dispute Resolution System Review, was released in February, The final report is available at final report.pdf. Immediately following the release of Justice Cunningham s report, the government introduced proposed changes to the FSCO dispute resolution process. And, as an unwelcome part of that initiative, the government snuck in an amendment to auto insurance legislation that removes the favourable 5% prejudgment interest rate that applied to damages for pain and suffering (replacing it with a fluctuating market based interest rate that has in the last several years been just 1.3%). The interest rate reduction will serve as an incentive for tort insurers to delay tort resolutions as insurers can expect to earn more investing their money compared to the miniscule 1.3% extra they will owe to the claimant on their general damage award for pain and suffering. The favourable 5% interest rate had previously influenced tort insurers to resolve claims early and efficiently, especially ones comprised primarily of general damages. While the FSCO dispute resolution changes along with the interest rate change were stalled when the election was called, now that the election is behind us the legislative changes are currently being advanced in Bill 15. Bill 15 has passed first reading and is expected to pass through the legislature and committee hearings without difficulty in the months to come. In addition to the reduction of the prejudgment tort interest rate (for general damages), Bill 15 serves to eliminate FSCO and replace it with the License Appeal Tribunal. In doing so, the legislation removes the right of accident victims to dispute accident benefit issues in the courts. The new process would eliminate the current right for accident victims to choose to raise their disputes with either FSCO or the courts, forcing the process into the Tribunal. The License Appeal Tribunal currently deals with a broad variety of issues including administrative driver s license suspensions. However, it is not currently well structured to deal with the volume of accident benefit disputes currently before FSCO nor the specialized nature of these accident benefit disputes. Bill 15 does not get into specifics as to how the dispute resolution process would change. A further Regulation will be required to outline the logistics of the new dispute resolution process.

6 Page 6 It remains unclear how this new dispute resolution process would be better for accident victims and whether it will in fact be better at all. Stakeholders are sceptical that a new dispute resolution process will be an improved process. The concern remains that a new process will lead to new problems, less certainty over outcomes and even more delays. Most importantly though, the elimination of access to the courts is a real source of frustration for plaintiff s personal injury lawyers. Unlike administrative bodies, the courts are seen as having significant discretion to do what is right under the circumstances. Accident victims have taken comfort knowing that they can ask a judge to hold an insurer accountable if they acted irresponsibly. Access to the courts is viewed as a fundamental right and is necessary in this context to ensure both fairness and the appearance of fairness. In addition, the court process allows for the possibility of the insurer being ordered to make significant legal cost contributions if the insurer is acting irresponsibly. Those significant cost contributions may not be available in the new dispute resolution process, resulting in possible further financial burden on claimants. Conclusion The new majority Ontario government is unfortunately in a strong position to make whatever changes it likes to auto insurance legislation. They need not fear a snap election. But lobbying must continue. Accident victims must continue to express concern and frustration with changes that reduce benefits, delay access to benefits and make it even harder to effectively stand up to the powerful insurers. Monitor for updates on auto insurance changes and for more information. DARCY R. MERKUR, Partner Thomson, Rogers dmerkur@thomsonrogers.com