Major Changes to Ontario Auto Insurance and What They Mean

In 2015, the average annual premium for auto insurance in Ontario was $1,458. In the rest of Canada, the average was $930. Over the past few decades, successive governments in Ontario have sought to reduce Ontarians’ premiums in various ways. Unfortunately, many of those efforts have come at the expense of accident victims in the form of reduced benefits and increased hurdles to recovery.

That dangerous trend looks set to continue with a new round of reforms currently under consideration. In this post, we review the basics of auto insurance in Ontario, discuss recent attempts to reform the system, and explain why the latest proposals are a bad idea for auto accident victims.

Auto Insurance in Ontario: The Basics

First, the basics: Every Ontarian who owns a vehicle must purchase auto insurance that includes two primary components:

• Fault-Based Third-Party Liability Coverage: This coverage protects drivers when they are sued for causing injuries or property damage. Drivers must carry a minimum of $200,000 in third-party liability coverage.
• No-Fault Statutory Accident Benefits Coverage: The statutory accident benefits coverage protects drivers regardless of fault. These benefits include:
  —Medical Rehabilitations. Medical rehabilitations benefits cover the costs of such things as physiotherapy, chiropractic services, medical devices, and various forms of counseling.
  —Attendant Care. Attendant care benefits pay for an aide or attendant at home or in a long-term care facility.
  —Income Replacement. The income replacement benefits provide 70% of a driver’s gross income (up to $400 per week) if he or she is unable to work following an accident.

Ontarians injured in an auto accident through no fault of their own often have recourse under both components. When an accident victim successfully sues the driver at fault in causing his or her injuries, the at-fault driver’s third-party liability coverage will compensate the victim for, among other things, pain and suffering (provided their injuries meet the statutory threshold and exceed the statutory deductible of over $37,500) and any lost income over $400 per week.

How Ontario’s Auto Insurance has Already Changed for the Worse

Recent efforts to reduce Ontario premiums have had some success. In August 2013, the Ontario government announced that it would be reforming the province’s auto insurance system over the next two years, targeting a rate reduction of 15% by August 2015.

In April 2015, those reforms had achieved a rate reduction of only 7%. In an attempt to lower rates still further, the budget enacted that month made several changes to Ontario’s auto insurance:

• Catastrophic injuries. The maximum payout for medical rehabilitations and attendant care for catastrophic injuries was reduced to a combined $1 million. Prior to this change, the maximum payout was $1 million for each category.
• Other injuries. The maximum benefits payable for medical rehabilitations and attendant care were reduced to a combined $65,000. Before this, the benefits were limited to $50,000 for medical rehabilitations and $36,000 for attendant care — a total of $86,000.
• Duration of benefits. Finally, the maximum duration for medical rehabilitations benefits was cut by a full 50%, from 10 years to 5 years.

These changes became effective starting June 1, 2016. Drivers could pay extra for coverage that was comparable to what had previously been standard, but in all, these reforms served only to injure Ontarian drivers by reducing their benefits. This is where the law currently stands.

What’s next for Ontario’s auto insurance system?

In April 2017, the Ontario Ministry of Finance published a report by David Marshall. The Marshall Report offered broad criticisms of Ontario’s auto insurance system and proposed more than three dozen specific recommendations for reform, which are currently under consideration by the government. David Marshall’s conclusions are alarming and will only serve to hurt accident victims for the benefit of insurance companies.

The Report’s broad criticisms are captured in the following excerpt:

Ontario’s benefits . . . are not being fairly delivered. The main cause is that the system does not promote a timely, conflict-free means of deciding what care is needed and providing it to accident victims. The system allows participants to work at cross purposes to its original goals:

• Insurers . . . focus on controlling costs.
• Accident victims may seek to maximize their entitlement rather than address their needs.
• Lawyers working on contingency fees work to boost the value of claims.

We’ll consider some of Marshall’s specific criticisms momentarily, but a few things bear mentioning at this point.

First, about those “cross purposes”: Insurance companies are businesses that seek to maximize their profits. Because their rates are regulated, their ability to do so by increasing their income is limited. Instead, they focus on minimizing costs — largely by denying claims or improperly classifying injuries as less severe than they really are.

Consequently, accident victims are forced to fight with the insurance companies to recover what the law and their insurance policies entitle them to. This is what Marshall refers to as “maximiz[ing] their entitlement” — drivers insisting that insurance companies keep their promises.

And Marshall’s criticism of lawyers is misplaced. Lawyers are obligated to act in the client’s best interests. In this context, that means fighting alongside accident victims to ensure they are not shortchanged by their insurers. “Boosting the value” of a claim means a greater recovery for victims. David Marshall seems to overlook the fact that if insurance companies delivered what they had agreed to in the first place, a lawyers involvement would not be necessary in the first place.

Given Marshall’s misdiagnosis of the problem with Ontario’s auto insurance, it is no surprise that his specific recommendations often miss the mark. Here are just two by way of example:

1. “Independent examination centres” should be established to provide a definitive medical diagnosis for accident victims.

Marshall repeatedly laments the use of “competing expert opinions” from insurers and accident victims regarding the extent of the victim’s injuries. To “solve” this, he proposes that a new regulatory agency maintain a list of hospitals serving as “independent examination centres” (IECs). These IECs would diagnose accident victims’ injuries, and their conclusions would control in court unless there is “compelling reason” to doubt them.

This is not a real solution. The whole purpose behind the regulator-and-IEC system is to reduce costs in auto insurance claims — i.e., the same purpose insurers bring to claims. In other words, Marshall’s proposal merely hides the insurer’s cost-reduction incentives behind a façade of neutrality and declares the result unassailable.

This can only hurt accident victims, who under Marshall’s reform would be unable to effectively challenge any biased or inaccurate medical conclusions reached by the IEC.

2. Contingency fees should be restricted in personal injury cases.

As noted above, Marshall argues that contingency-fee arrangements give lawyers an inappropriate incentive to “boost the value of claims.” Contingency-fee arrangements are a method of paying lawyers in which:

• The lawyer bears the costs of pursuing an accident victim’s claim. These claims can take several years to resolve, meaning that the lawyer is out those funds in the meantime.
• The lawyer receives a percentage of his or her client’s recovery. Contrary to Marshall’s insinuation, this feature of contingency fees actually aligns the lawyer’s and client’s interests.
• The lawyer is only paid if the claim succeeds. If the claim fails, the lawyer is paid nothing.

Marshall proposes restricting contingency fees in personal injury cases. He doesn’t provide more specific details than this, but neither is he alone in making such proposals. In March 2017, MPP Mike Colle introduced Private Member’s Bill 103 in the Legislative Assembly. Among other changes, Bill 103 would cap contingency fees at 15% of a client’s recovery.

Such limits threaten accident victims’ ability to obtain justice. At such a low rate, lawyers may find it more difficult to justify incurring costs while the claim is pending. Likely, they will only accept the most straightforward or most serious cases on a contingency basis. In other cases, victims will have to pay lawyers an hourly fee and cover their own costs, which for many will not be feasible. This would only benefit insurance companies.

Bottom Line: Rights of Accident Victims in Danger

There is no denying that Ontarians pay more for their auto insurance than residents of other provinces. Although reducing those premiums is a worthwhile goal, the government should not elevate that goal over the rights of accident victims. Unfortunately, this is the path it has been following over the last few years, and the Marshall Report represents a continuation of that strategy.

The government should reject Marshall’s misdiagnosis and misguided prescriptions, and instead seek to reform the auto insurance system in a way that respects accident victims’ rights.

For nearly 60 years, the personal injury lawyers of Preszler Injury Lawyers have been fighting for the rights of accident victims. If you’ve been injured in an auto accident in Ontario, check out our free guide to accident benefits, then give us a call at 1-800-JUSTICE or fill out our online contact form to see how we can help.