Many insurance industry professionals are predicting a deluge of litigation over the many uncertainties associated with the application of the minor injury guidelines.
The lack of consensus over which cases legitimately fall within the criteria cries out for judicial commentary that appears to be years away, which means that even matters that settle are at risk of being reopened when that guidance finally comes.
John Norton of McCall Dawson Osterberg Handler LLP in London, Ont., concludes that the definition of minor injury is going to cause a big debate with significant consequences.
“First, you tell people their entitlement has shrunk from $100,000 to $50,000 and then tell them it’s gone all the way down to $3,500. That’s going to have a huge impact.”
Brian Goldfinger, directing lawyer at Goldfinger Personal Injury Law, believes the definitions under the guidelines are too open to interpretation. He notes that “99.99 per cent of the time, the insurance company will interpret an injury as coming within the [minor injury guidelines].
To get out of it, your doctor needs to provide compelling evidence, which is also open to interpretation. Insurance companies are more often than not going to interpret that as, ‘We need more.’”
Goldfinger’s experience with the few clients who have managed to escape the cap is that it takes a long time and a lot of effort. There’s also concern that there appears to be no way to appeal an insurer’s decision.
“The question is raised as to what people will do when they think it’s unfair,” says Norton. “I believe the effect will be to transfer the claim over to the tort side. If the goal is to cut down on costs and expenses, will that in fact happen? I wonder if there will be any savings at all.”
In the recent experiences of Charles Flaherty of Flaherty Sloan Hatfield in Hamilton, Ont., he has observed that the insurance companies are making maximum use of the guidelines to eliminate their responsibility to pay first-party benefits.
“In four or five years’ time from now, the tort insurers are going to go to the government saying they are getting bankrupted because of the tort costs,” he says. “They are shifting it from one pocket to another.”
According to lawyers, it’s evident that the guidelines don’t give parties enough guidance, leaving both sides exposed to ongoing and costly disputes.
“There is an inconsistency in the application of the guidelines, not just between insurer and insurer, but also between adjuster and adjuster as to what is defined as a minor injury and what constitutes a pre-existing condition that warrants removing someone from the [minor injury guidelines] and the $3,500 hard cap,” says Kadey Schultz, a partner at Hughes Amys LLP.
In addition, there’s also uncertainty over whether the guidelines can apply before policy renewal. A bulletin issued by the Financial Services Commission of Ontario noted they applied as of Sept. 1, 2010.
“There is a lack of consensus on whether that can be valid or legal,” says Schultz. “The [minor injury guideline] is a substantive change to the regulations. A procedural change comes in right away, but in a normal case, a substantive change wouldn’t apply until the policy is renewed because it impacts the rights of the claimant.”
Schultz is concerned about the length of time it will take before there’s any case law to give some guidance on these issues.
“There is such a significant delay in reaching mediation. Even if you had an accident in October last year where an insurer put your client in the [minor injury guideline] and you had applied for mediation to dispute it, it wouldn’t be until right now that you would be receiving an acknowledgment.
Then it has to be scheduled, occur, and a mediator’s report issued. If you then apply for arbitration, that’s another two years, so it will be 2012-2013 before we get any case law. By then, we are in the early stages of the five-year review.”
Schultz is adamant that there needs to be more resources to allow for faster mediations and that when any disputes of this nature get to arbitration, they should receive special attention.
“There is no benefit for the insurer or the injured person for this dispute to linger,” she says.
There has been some movement on the mediation backlog in recent weeks. In addition to the online calendar that will be available in December, two new measures were announced on Sept. 16.
First, they allow for consent failures where parties can show they’ve made their best efforts to settle and there’s no reasonable prospect of resolution. In addition, there will be three months of weekly settlement blitz days, commencing in October, where claimant and insurer representatives have multiple common files.
But Charles Gluckstein of Gluckstein & Associates LLP doesn’t anticipate that disputes related to the guidelines are likely to proceed through a consent failure. “The cap of $3,500 is having a dramatic effect on what legal representatives can do for a claimant,” he says.
“If you allege multiple disabilities or a psychiatric injury that would take them out of the [minor injury guideline], an insurer might be more flexible at mediation and say they have $10,000 to resolve the matter. Why wouldn’t you mediate it when you get the face time with the mediator that you need?”
Even if the cases move more swiftly through mediation, Schultz is concerned that the mediation caseload will turn into an arbitration backlog in a year’s time and that case law will be even further away.
“If there is a decision three or four years from now that guides insurers to conduct themselves differently on the [guidelines], particularly on the issue of the renewal date, they will have to reopen a lot of settlements,” she says.
“The [guideline] is a short time frame and a small amount of money. The insurer won’t have adjusted the claim since the settlement, so there will be no evidence on the merits of entitlement after the [guideline] expired.”
Goldfinger is very worried about the effect on a claimant’s health and other circumstances during the waiting period. “What do you do in the meantime for treatment and rehab? Time is of the essence when it comes to rehabilitation.
When rehabilitation restarts, who knows what coping mechanisms people will have adopted to make ends meet and get by? All the painkillers in the world can’t replace active range-of-motion exercises. But if you have one assessment and physiotherapy three times a week, $3,500 will be gone in a blink of an eye.”
Flaherty, meanwhile, wonders what benefit consumers and insurers will have got from all of the past and proposed changes in insurance law.
“If the insurance companies are successful in reducing payments to $3,500, they will have effectively eliminated all the compromises they got in the late ’80s and moved everything back to the tort system,” he says.