Thursday, 26 May 2016

LAT Have Mercy

On April, 1, 2016, Ontario's Licence Appeal Tribunal's (LAT) Automobile Accident Benefits Service (AABS) was officially open for business. After 26 years, the Financial Services Commission of Ontario (FSCO)'s Dispute Resolution Group stopped accepted new applications. The transfer of responsibility has created considerable apprehension among its users. FSCO was flooded with new applications in the weeks leading up to April 1st. For many, it's a matter of 'better the devil you know.' What will this change mean for stakeholders? Will it really be different?

How did we get here?

The establishment of the AABS at LAT brings to a conclusion a process that began with the appointment of the Honourable J. Douglas Cunningham in August, 2013. Justice Cunningham was asked to review the auto insurance dispute resolution system. He was asked to make recommendations to the government to address a significant backlog, in disputed autoinsurance claims pending mediation and arbitration, that existed at the time - and to propose system improvements. His report - delivered in February 2014 - included 28 recommendations. As a result, Bill 15, the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 included a provision transferring responsibility for resolving disputes over statutory accident benefits from FSCO to LAT. Regulation changes filed by the government on March 7, 2016 - which came into effect on April 1 - was the final step in implementing the new dispute resolution system.


What are the changes?
  • The only dispute resolution process available to parties is an arbitration through LAT.
  • Mandatory mediation is no longer part of the dispute resolution process.
  • No court action can be commenced for statutory accident benefits disputes, even where there is a companion tort action.
  • There is no right of appeal, other than a reconsideration option with the Executive Chair of the Safety, Licensing Appeals and Standards Tribunals of Ontario (SLATSTO) for exceptional circumstances and the Divisional Court on a question of law.
  • A total of 22 new full-time and part-time LAT adjudicators have been appointed to date. Auto insurance stakeholders will be interacting with a largely unknown group of adjudicators as only three have had experience resolving disputes at FSCO.
  • LAT is committed to resolving most (90%) disputes within six months.


What happens to FSCO?

Applications for mediation, neutral evaluation and arbitration have not been accepted since March 31, 2016. A mediation, arbitration, court proceeding, appeal, variation or revocation that was commenced before April 1, 2016 may be continued at FSCO after that date. If a mediation fails before April 1, 2016 , an application for arbitration can only be made to the LAT on or after April 1, 2016. Applications to the Director of Arbitrations - for appeals, variation or revocation - may only be made where the application for arbitration was received by FSCO before April 1, 2016.

How does LAT work?

Since there is no longer mandatory mediation, an applicant will be able to apply for arbitration following the denial or termination of statutory accident benefits. The applicant (an insured or insurer) files an Application for Arbitration with LAT. The other party files a response.

It is intended that all procedural issues, lack of production, or failures to attend insurer examinations are to be dealt with upfront by the Registrar. LAT may dismiss an application without a hearing if (1) the claim is an abuse of process, (2) the matter is outside the Tribunal's jurisdiction, (3) the statutory requirements for bringing the application have not been met, or (4) the party filing the application has abandoned the process. This is a significant departure from the FSCO process which included preliminary hearings. However, if LAT is reluctant to dismiss these applications, then the gatekeeper function, envisioned by Justice Cunningham, will not be put into practice.

The first step in the arbitration process is a case conference. This is the settlement meeting described in Justice Cunningham's report. It must take place within 45 days of the date LAT receives an application. The case conference is analogous to a FSCO pre-arbitration meeting except most will take place over the phone instead of in-person. Prior to the case conference, the parties are required to outline the documents to used at a hearing, any production issues, the preference for the type of hearing (written, video/telephone or in-person), a list of witnesses and details of the most recent settlement offer.

Should the dispute not be resolved at a case conference, then a hearing will take place within 60 days. The type of hearing will be decided by the adjudicator at the case conference. Decisions will be issued within 30 days for written hearings, within 45 days for video/telephone hearings and 60-90 days for in-person hearings.

Lingering concerns

There is no LAT appeal process other than the possibility of a reconsideration by the Executive Chair of SLATSTO if there is a clear error that was made by the adjudicator. Appeals based on merit are not available. A party can apply for judicial review where there is a question of law.

Is this a significant departure from the FSCO process?

 The simple answer is yes. But how much different can only be determined over time. The forms and practice rules are simpler. In an attempt to create a different culture, very few FSCO arbitrators have been appointed to LAT. Some see this as a good thing while others are concerned. But it does add an element of uncertainty for an initial period. 

There are other elements of the new process to be concerned about. Justice Cunningham recommended the creation of statutory timelines and sanctions regarding settlement meetings (case conferences), arbitration hearings and the release of arbitration decisions. He felt that there need to be strict adherence to timelines and that creating statutory obligations was the most effective way of accomplishing this. However, no statutory timelines have been created and instead LAT will manage timeline requirements. This is essentially how things existed at FSCO. What will happen if the parties are not ready for a quick hearing? Will adjournments become common occurrences? Stakeholders will be waiting to see if the promised timelines will be met or erode over time.  

In response to criticism of FSCO practices in conducting mediations, Justice Cunningham recommended that settlement meetings (case conferences) be conducted in-person or by video conferencing. He rejected telephone meetings.  LAT will predominantly be conducting case conferences over the phone. Considering that FSCO pre-arbitration meetings are in-person, this is really a step backwards.

Justice Cunningham wanted hearings to follow three streams: paper reviews, expedited in-person hearings and full in-person hearings. He recommended criteria be adopted to determine which stream a case falls under. Those criteria have not been adopted. Instead, the LAT adjudicator will exercise his or her discretion to determine the format of a hearing. At FSCO, similar discretion existed but all hearings were in-person.  Although LAT has suggested that many hearing will be paper reviews, will stakeholders pressure adjudicators to provide more in-person hearings? 

A number of other recommendations by Justice Cunningham seemed to have been abandoned. The settlement of future medical and rehabilitation benefits were to have been prohibited until two years after the date of the accident. The SABS have not been amended and settlements will still be permitted one year after the date of the accident. In addition, every insurer was to establish an internal review process as the first step in the new dispute resolution process. It does not appear that all companies have established an internal review process.

Conclusion

A lot of time and effort has gone into creating the AABS at LAT to replace the dispute resolution process at FSCO. One of the problems identified by Justice Cunningham has been the culture surrounding the previous system.  LAT has made a considerable effort to create a new culture. However, the new adjudicators will be dealing with the same clientele and will need to interpret the same complex and frustrating statutory accident benefits. It will take some time to determine how much different the new system is.


Tuesday, 26 April 2016

Benefit Cuts Lead To Modest Rate Reductions

FSCO's latest quarterly rate approval numbers have been released and suggest that some savings have been accrued from the statutory accident benefit cuts that become effective on June 1.

FSCO approved 50 private passenger automobile insurance rate filings during the first quarter of 2016. All 50 filings were automobile insurance reform filings. These 50 insurers represent 83.36% of the market based on premium volume. Approved rates decreased on average by 3.07% when applied across the total market.  This is the largest drop in rates since the fourth quarter of 2013 when approved rates decreased on average by 3.98% when applied across the total market.

Although the government has begun to distance itself from the 15% rate reduction promise made in August 2016 (likely an admission that it can't be achieved), most people are, at least, curious how close the latest round of cuts got us to 15%.  If you aggregate all the rate changes since the 2013 announcement, the total rate reduction is 10.17% when applied across then total market.  There may be further reductions in the next quarter but it's safe to say that this is about it.    

Friday, 18 March 2016

LAT Will Not Be Following All of the Cunningham Recommendations

The Licence Appeal Tribunal (LAT) begins accepting applications to resolve auto insurance disputes on April 1, 2016.  LAT has completed a first round of recruitment for adjudicators and case management staff.  Adjudicators are Order-in-Council appointments.  Training of adjudicators and staff is underway.

FSCO will continue to operate beyond April 1, 2016.  If mediation has been completed, but the arbitration process has not begun, a party can apply to LAT and begin the new process.  If the case already has been assigned an arbitration case number by FSCO, the case remains at FSCO.  Existing cases will not be transferred from FSCO to LAT.

Although the new system follows the recommendations put forth by Justice Cunningham in 2016, a number of recommendations have been modified: 

Justice Cunningham recommended that mandatory mediation (along with pre-arbitration hearings) be eliminated and that a settlement meeting be held before arbitration (Recommendations #4 and #13).  LAT has created a case conference prior to arbitration which follows the intent of settlement meetings proposed by Cunningham.

Justice Cunningham recommended that statutory timelines and sanctions regarding settlement meetings, arbitration hearings and the release of arbitration decisions be created (Recommendation #6).  However, no statutory timelines have been created and LAT will manage timeline requirements.  This is essentially the status quo.

Justice Cunningham recommended that the policy of no application fees for claimants at the settlement meeting stage be continued (Recommendation #7).  LAT has introduced a $100 application fee.

Justice Cunningham recommended that settlement meetings be conducted by video conferencing rather than by telephone in cases where it is not feasible for the parties to meet in person (Recommendation #14).  LAT is continuing the current practice and most case conferences will take place over the phone.

Justice Cunningham recommended an adjournment fee be charged to the party requesting an adjournment in the absence of exceptional circumstances (Recommendation #16).  No adjournment fee has been established.

Justice Cunningham recommended that the settlement of future medical and rehabilitation benefits be prohibited until two years after the date of the accident (Recommendation #17).  The SABS have not been amended and settlements will still be permitted one year after the date of the accident.

Justice Cunningham recommended that each insurer establish an internal review process (Recommendations #19, #20 and #21).  A company internal review process has not yet been established.

Justice Cunningham recommended criteria for streaming disputes to paper reviews, expedited in-person hearings and full in-person hearings (Recommendations #25, #26 and #27).  The criteria have not been adopted.  LAT adjudicators will exercise his or her discretion to determine the format of a hearing, which is the status quo.

Below is the full dispute resolution process: 



Friday, 19 February 2016

Electronic Proof...Still Not in Canada

Three years ago, I wrote an article about the status of electronic insurance cards.  Despite the fact that smartphones, tablets and other technological gadgets are now part of everyday life, providing proof of auto insurance coverage is like a nostalgic trip back to the days of our parents or grandparents.  In Canada,insurance companies and brokerages continue to mail, fax and e-mail copies of the standard pink insurance slips to policyholders upon renewal or policy changes.

Back in 2012, the Property Casualty Insurers Association of America (PCIAA) reported that 11 U.S. states had laws or regulations on the books that allow for electronic insurance cards to be used for both vehicle registration and when being pulled over by the police.  The PCIAA now reports that 43 U.S. states have enacted legislation which permits some form of electronic proof of insurance including electronic delivery and the use of an electronic image as evidence of coverage.  Clearly, electronic insurance cards are well accepted in the U.S.

Why is the U.S. and Canadian experience so different?

For one thing, not all Canadian jurisdictions use the standard 'pink slip.'   The public insurers in British Columbia, Manitoba and Saskatchewan have combined the insurance card with and the provincial motor vehicle registration card.  Quebec is a little different because private insurers sell physical damage coverage and must provide an insurance certificate.  There is no colour requirement and the document can be emailed, although electronic proof of insurance is still not permitted.

In Canada, there has been a perception that electronic delivery of insurance cards or electronic proof of insurance might be more at risk to fraud.  In fact, the paper insurance card is quite susceptible to fraud.  Police officers have no way to validate whether a pink slip provided by a driver is valid and unexpired, and therefore are inclined to just accept it.  

There are also concerns regarding privacy and liability.  When a driver hands over his or her mobile device to a police officer to show proof of insurance, can the officer access other information on the device?  What happens if the police officer drops and damages a mobile device while verifying insurance coverage?  Who Is liable for damages?

The U.S. experiences provide numerous examples of statutory or regulatory approaches to addressing these issues.  In Canada, many legal barriers to e-commerce have been eliminated.  Yet the insurance sector has clung to paper insurance cards. 

In Ontario, there is no legislative requirement that insurance cards be in paper form.   The Compulsory Automobile Insurance Act (sections 3 and 6) requires that a driver must always have an insurance card in their vehicle and must make it available to a police officer for inspection.  It does not stipulate what the card is to look like.  The Ontario Superintendent of Financial Services sets out the content, size and colour of the insurance card through a bulletin.  Consequently, the Superintendent has the authority to approve an electronic insurance card.  No statutory amendment is likely required.


It is inevitable that electronic proof of insurance will come to Canada. The technology exists.  It just seems that no one particularly wants to be the first to make the move.

Friday, 12 February 2016

Insurance News - Friday, February 12, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, February 12, 2016:

Wednesday, 20 January 2016

Ontario's Failed Rate Reduction Strategy

The promise to reduce auto insurance premiums by 15% is a failure.  

In August 2013 the Ontario government announced a two-year rate reduction strategy. What has ensued since that announcement has been a series of reforms to bring down the cost of insurance. Many of those reforms include no-fault accident benefit reductions.  

So how successful has the strategy been?  Last week FSCO posted the fourth quarter rate approvals for 2015. The FSCO post indicates that rates fell a minuscule 0.15% in the quarter. For the entire year, rates fell by just 1.0%.  Since August 2013, rates have only come down by 7.1%.  That's not even half of what the government has been trying to achieve.

Premier Kathleen Wynne now calls the 15% rate reduction strategy a "stretch goal".  That's as close as you're going to get a government to admit to failure.  

Another round of no-fault accident benefit cuts are to be introduced on June 1 of this year but don't expect them to bring down rates by a significant amount. The accident benefits portion of the Ontario in 2014 was only 33.5% of claim costs (see the chart below).  That would mean for a further 8% reduction in premiums, accident benefit costs would have to go down by about 24%.  Meanwhile, some of the accident benefit cuts will drift over to third party liability costs since not at-fault accident victims will be able to sue for benefits no longer available through no-fault.

It's time the government undertake a comprehensive review of the auto insurance system and resolve the systemic problems plaguing the system.  Half measures lead to "stretch goals" and chronically high insurance premiums.



% of Claim Costs by Coverage for Accidents in 2014