Insurance News - Thursday, February 23, 2012

'Project Whiplash' Leads to Early Morning Arrests

More than three dozen people are in custody Thursday following multiple arrests across the Greater Toronto Area overnight which targeted a vehicle insurance fraud ring.

The investigation, code named "Project Whiplash" concentrated on an accident and insurance fraud ring allegedly run by members of the Tamil community. The 37 suspects arrested in Scarborough, Brampton and Markham face 130 charges.

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Toronto Police Services news release on Project Whiplash.

FSCO Lays Charges Against Rehabilitation Clinics

The Financial Services Commission of Ontario (FSCO) has charged four rehabilitation clinics and six individuals affiliated with these clinics with offences under Ontario’s Insurance Act. These clinics and individuals are alleged to have submitted false invoices to insurers as part of a staged auto accident ring.

On February 23, 2012, the following clinics were charged with one count each of knowingly making false or misleading statements to an auto insurer to obtain payment for goods and services provided to an insured and engaging in an unfair or deceptive act or practice:

• McCowan Rehabilitation Clinic (1583 Ellesmere Road, Suite 104, Scarborough, Ontario)
• Ontario Rehabilitation Clinic (3031 Markham Road, Suite 31, Scarborough, Ontario)
• Physiotherapy Clinic (1920 Ellesmere Road, Suite 110, Scarborough, Ontario)
• North York Health & Rehabilitation Centre (1280 Finch Avenue West, Suite 519, Toronto, Ontario)

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FSCO Arbitrator Recognizes 60-Day Timeline for Mediations

A recent decision by FSCO Arbitrator Jeffrey Rogers supports that a mediation can be deemed to have failed if it has not been mediated within the 60 day timeframe noted in both the Insurance Act as well as The Dispute Resolution Practice Code.

In the decision, Leone and State Farm, Arbitrator Rogers states the following:

There is no merit to State Farm’s submission that the Application is not filed until a mediator is appointed. The definition of “file” does not suggest that interpretation. The Insurance Act and the Rules themselves treat filing and appointing a mediator as separate events. Section 280(2) of the Act sets the requirement for filing the application. Section 280(3) then requires the Director to “ensure that a mediator is appointed promptly.” Rule 13.1 states that on “receipt of a completed Application for Mediation… a mediator will be appointed promptly.” The Commission recognized this separation when it advised Mr. Leone that “[C]omplete applications are taking longer to be assigned to a mediator as a result of the large volume of applications which we continue to receive.

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Insurance News - Friday, February 17, 2012

Police bust massive auto chop shop fraud ring

Police showed this BMW, that had its frame is welded together, which was part of a massive chop shop and insurance fraud racket operating out of Toronto and the Niagara Region on Thursday, Feb. 16, 2012. (Danny Pinto / CTV News)

Police in southern Ontario have arrested six men and laid more than 500 charges in connection to a massive chop shop and insurance fraud racket operating out of Toronto and the Niagara Region.

Five Toronto men and one from the Niagara Region were charged in connection to the theft of 100 stolen vehicles, many of which ended up back on the road after passing fraudulent structural safety inspections.

Police allege the suspects would steal vehicles and register them with vehicle identification numbers taken from cars and trucks that had been written off and purchased as salvaged parts.

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Staged Accident of the Week

The Swoop and Squat Fraud

This video illustrates the popular "Swoop and Squat" staged car accident. Staged traffic accidents are on the rise, endangering the lives and boosting the car insurance rates of innocent drivers who may unwittingly think they're at fault.

Which claims should be treated under the Minor Injury Guideline

The Statutory Accident Benefits Schedule (SABS) introduced in September 2010 expands on the previous definition of whiplash associated disorders (WADs) by including sprains, strains, dislocations, lacerations, contusions, abrasions and any clinically associated sequelae (secondary consequences or results of an injury) in a new minor injury definition. Including associated sequelae in the definition is meant to cover common complaints associated with soft tissue injuries such as pain, headaches, dizziness, difficulty sleeping, anxiety, depression and fatigue.

The Minor Injury Guideline (MIG) and a $3,500 cap on treatment and assessment expenses apply if the claimant sustains an impairment that is predominantly a minor injury. Currently there hasn’t been any guidance provided from the Superintendent, arbitrators or the courts on how to determine which impairment is predominant where the claimant sustains multiple impairments. However, another impairment may not necessarily create entitlement to medical and rehabilitation expenses in excess of $3,500.

In other jurisdictions over 80% of auto accident injuries fall under this description. That fact that the percentage is lower in Ontario suggests that some health care providers resist categorizing their patients as having a minor injury.

The MIG was not intended to cover complete tears of muscles or ligaments, fractures or serious psychological impairments. Still a minor fractured nose or finger may require little treatment in comparison to a WAD injury and therefore it could be argued that the WAD injury is the predominant one. Adjusters should seek independent medical advice when a claimant appears to have multiple impairments or a more serious impairment that would exclude them from treatment under the MIG. As well, the SABS does not set out that all claimants start out being treated under the MIG, only those with minor injuries. An insurer that insists on starting all claims in the MIG is providing clients with poor service and exposes themselves to special awards and bad faith claims.

The MIG and $3,500 cap do not apply to a claimant if his or her practitioner determines and provides compelling evidence that a pre-existing condition prevents the claimant from achieving maximal recovery if subject to the cap or the MIG. There is no guidance as yet as to what constitutes compelling evidence but these situations should be rare and an independent medical opinion would be appropriate.

Common diagnoses used by providers to escape the $3,500 cap are psychological impairment and WAD III (see below). Depression and anxiety are common complaints following an auto accident and often resolve themselves over time. That is not the case with post-traumatic stress disorder. Again, an independent medical opinion would be appropriate in these situations. Keep in mind that if the exam needs to determine whether a physical impairment or psychological impairment is predominant you need to select a provider with an appropriate background, who can properly weigh the impact of both impairments.

Can an Insurer Terminate Benefits When It Learns the Accident Was Staged?

Synopsis:

An insurer introduces a new internal policy where they review claims more carefully if they occur within six months of a newly created policy. The insurer in good faith pre-approves a number of treatment plans submitted on behalf of one of their policyholders while they investigate the accident. The investigation concludes that the accident was staged and did not occur. What can the insurer do?

The insurer could argue that although it may have agreed in good faith to pay certain amounts based on the representations it received about an accident having occurred and injuries having been sustained, once it learns that its agreement to pay was based on misrepresentation or fraud, it may rescind the agreement for that reason.

Section 53 of the Statutory Accident Benefits Schedule (SABS) states that:

“An insurer may terminate the payment of benefits to or on behalf of an insured person,

(a) if the insured person has wilfully misrepresented material facts with respect to the application for the benefit; and

(b) if the insurer provides the insured person with a notice setting out the reasons for the termination. O. Reg. 34/10, s. 53.”

So the insurer could invoke that section by providing notice under section 53 (b) that it refuses to pay anything not already paid including the outcome of their investigation.

Section 52 (1) of the SABS also says a person is liable to repay an insurer:

"Subject to subsection (3), a person is liable to repay to the insurer,

(a) any benefit described in this Regulation that is paid to the person as a result of an error on the part of the insurer, the insured person or any other person, or as a result of wilful misrepresentation or fraud;

(b) any income replacement or non-earner benefit under Part II that is paid to the person if he or she, or a person in respect of whom the payment was made, was disqualified from receiving the benefit under Part VII; or

(c) any income replacement, non-earner or caregiver benefit under Part II or any benefit under Part IV, to the extent of any payments received by the person that are deductible under this Regulation from the amount of the benefit. O. Reg. 34/10, s. 52 (1 )."

So if the insurer has already paid out amounts to a provider, this section gives it the right to claim it back by first invoking section52 (2) (a) and then following up in court if necessary.

"If a person is liable to repay an amount to an insurer under this section,

(a) the insurer shall give the person notice of the amount that is required to be repaid; and

(b) the insurer may, if the person is receiving an income replacement or caregiver benefit, give the person notice that the insurer intends to collect the amount by reducing each subsequent payment of the benefit by up to 20 per cent of the amount that would otherwise be the amount of the benefit. O. Reg. 34/10, s. 52 (2)."

In summary, an insurer is not obligated to continue to pay pre-approved treatment when it subsequently discovers that the claim is fraudulent. By law, any benefits already paid out should be repaid to the insurer.

Insurance News - Friday, February 10, 2012

NY Senate Passes Bill Making Forging Auto Insurance Card a Felony

The New York State Senate has passed legislation designed to ramp up penalties for those who commit automobile insurance fraud.

The bill, SB 578, would make it a felony to forge an auto insurance card, certificate of insurance or other documents that are required to legally operate a motor vehicle. Forged insurance cards and documents are often used to fraudulently register cars so that owners may operate them without paying auto insurance premiums. The bill also makes it a felony to sell 10 or more false insurance cards or documents.

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Hillsborough County's Crackdown Leads to 62% Decrease in Staged Auto Accidents

Crackdown on Personal Injury Protection (PIP) fraud - or staged auto accidents - yields dramatic results in just the first six months in Hillsborough County, Florida. Today, the National Insurance Crime Bureau and the County's Consumer Protection Agency are releasing numbers spotlighting a 62 percent decrease in staged auto accidents and questionable insurance claims. This is the first report since passage of the Hillsborough County PIP Medical Providers Ordinance last September.

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Judge Declares Mediation “Failed” if not Mediated within 60 Day

A decision from the Superior Court of Justice of Ontario was released that declares a mediation by the Financial Services Commission of Ontario (FSCO) failed if it has not been mediated within 60 days of the application being submitted.

Cornie v. Security National [2012 ONSC 905] was heard with three other similar cases.

Justice Sloan found the insurance companies’ postion that accident victims must simply wait to be ”preposterous” and suggests that FSCO can continue to try to comply with the 60 day period or seek a change and/or ask for some legislative direction to extend the 60 day period in appropriate circumstances.

He points out that it currently appears that FSCO’s Dispute Resolution Services’ Mediation Unit is functioning without timelines and has been doing so for years. No one wants to go to court for any sum under $10,000 if mediation can resolve the issue, but accident victims should not have to remain in perpetual limbo.

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Staged Accident of the Week

The Right Turn Fraud

This video illustrates the popular "Right Turn" staged car accident. Staged traffic accidents are on the rise, endangering the lives and boosting the car insurance rates of innocent drivers who may unwittingly think they're at fault.

Insurance News - Monday, February 6, 2012

P&C Industry Supports U.S. Crash Parts Law

The property and casualty insurance industry is supporting legislation that would alter patent law to allow for use of parts not made by the manufacturer in repairing damaged vehicles.

The Promoting Automotive Repair, Trade, and Sales or PARTS Act, was introduced by Rep. Darrell Issa (R) and Zoe Lofgren (D), both of California.

The bill amends currentU.S.design patent law to limit to 2 and half years the period during which car companies can enforce their design patents on collision-repair parts against alternative suppliers.

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Florida Auto Insurance Reforms Clear Senate Subcommittee

The automobile insurance industry scored a small victory Thursday when the Florida Senate banking and insurance subcommittee approved a bill that would limit the types of health care clinics that could get reimbursements under the state’s personal injury protection law.

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Claim for Mental Stress Puts Pressure on Insurers

The Ontario Court of Appeal has sounded a warning to insurers who deny benefits under a policy despite the medical evidence by awarding damages for the loss of the policyholder’s peace of mind.

Defence lawyers hope the decision may bring some balance to what they say is the current arbitrary treatment of minor injury claims.

In its judgment in McQueen v. Echelon General Insurance Co. on Nov. 16, the Court of Appeal refused to overturn an award of $25,000 for mental distress caused by the denial of benefits.

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Insurance News - Thursday, February 2, 2012

Insurance Benefits Backlog a Nightmare for Accident Victims

Getting hurt in a car crash is bad enough, but for many people in Ontario, it’s only the beginning of a lengthy nightmare.
People turned down for accident benefits by insurance face a wait of as long as two years before their appeals wind their way through the system administered by the Financial Services Commission of Ontario.
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Steps being taken by the Financial Services Commission of Ontario (FSCO) to address the mediation backlog include mandatory settlement blitz days, joint consent to fail mediation, and the introduction of an electronic scheduling process.
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FSCO also released a Request for Proposal on January 16, 2012 with the intention of contracting with up to four dispute resolution companies to provide high volume services to eliminate the file backlog. The companies would need to be able to provide arbitration services in addition to mediation services to prevent a backlog in arbitration cases as files work through the system. The deadline for proposals is February 24, 2012 and contracts are expected to be in place by May, 2012.
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FSCO Releases the Costs of Goods Guideline

The Financial Services Commission of Ontario (FSCO) has released a guideline on the costs of goods. The Guideline was developed as a result of a recommendation by the Auto Insurance Anti-fraud Task Force in its interim report regarding measures that should be undertaken as soon as possible.

The Guideline indicates that where an insurer has agreed to pay for a medical or rehabilitation good under sections 15 or 16 of the SABS, they are only required to pay the lowest retail price available to any member of the general public in Ontario. In the event of a dispute, the onus is on the insurer to provide evidence of the retain price of an item.

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Social Media Sleuthing

Social media has quickly become the foremost activity on the Internet. The explosive growth in user-generated content has been a boon for insurance claims adjusters and fraud investigators. Navigating the social media landscape, however, can be tricky.

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Ontario Court Finds Broker Failed to Properly Offer SABS Optional Coverage

The Ontario Superior Court has dismissed a plaintiff’s action against a broker, claiming the broker did not ‘properly’ offer him the chance to purchase optional income replacement benefits.

In Zefferino v. Meloche Monnex Insurance, the plaintiff was injured on a May 27, 2005 in a motor vehicle accident. The plaintiff had purchased standard coverage including income replacement benefits to a maximum of $400 per week.

The plaintiff alleged that the insurer failed to offer optional income replacement benefits which, if they had been offered, the plaintiff would have purchased. His income at the time of the accident would have qualified him for income replacement benefits of $1,000 per week.

The defendant claimed that their practices were consistent with industry practices which was to mention the availability and only follow up if the consumer showed some interest.  The judge found that the broker’s conduct fell below the required standard of care required of a seller of insurance as set out in the SABS.

However, the judge dismissed that action because the judge was not convinced that the plaintiff would  have purchased the optional benefits had they been properly offered. The plaintiff and his spouse purchased insurance from four other insurance companies during the ten years and never purchased more that the standard accident benefits coverage.

This case has some significance in light of the reforms introduced in Ontario on September 1, 2010.  With the reduction of standard accident benefits coverage and the expanded  optional coverage, brokers, agents and direct writers are vulnerable to similar actions if their practices fall below the standard of care expected. 

 Zefferino v. Meloche Monnex Insurance, 2012 ONSC 154

If the Shafia Family Lived in Ontario Would They Qualify for SABS Benefits?

The Montreal Gazette reports that despite some media reports the Shafia family, who resided in Montreal before they were convicted of first-degree murder, might receive payouts under Quebec's no-fault auto insurance system, there will be no payout, the board says.

The three Shafia family members convicted of four counts of first-degree murder made no request for auto insurance compensation for their four relatives found dead in a car in an Ontario canal, said Gino Desrosiers, a spokesperson for the Société de l'assurance automobile du Québec (SAAQ).

In any case, they would not be eligible, he said, because the Shafia case does not meet the criteria for compensation.

SAAQ rules state that the car involved must have been in an accident on a public roadway; that the vehicle must not have been used for anything other than its intended purpose (to transport people from A to B under its own power); and that the injuries or deaths that resulted were due to a car accident.

So if the Shafia family resided in Ontario, would they be able to claim death and funeral benefits under the Statutory Accident Benefits Schedule (SABS)?

Subsection 3(1) of the SABS defines an “accident” as “incident in which the use or operation of an automobile directly causes an impairment.” The Crown in this case contends that the four passengers in the vehicle were likely killed before it went into the lock. If that is the case then clearly there is no entitlement because the use or operation of an automobile did not directly cause their death.

Even if the four passengers had drowned in the lock, the evidence presented at trial was that the vehicle was not driven into the lock. The key in the ignition was on the off position and the front seats were reclined in a position that would have made it impossible to operate the automobile. The evidence suggested that the automobile had been pushed in by another vehicle owned by the family. Again, their death was not directly caused by the use or operation of an automobile.

This is consistent with Ontario Court of Appeal decision Chisholm v. Liberty Mutual Group. In that case the plaintiff had become a paraplegic while driving his wife’s car as a result of wounds from gun shots fired by an unknown assailant. Liberty Mutual denied SABS benefits because the use or operation of the automobile did not directly cause the impairment. The Court agreed and indicated that the provision in the SABS provided a restrictive causation requirement.