Claim for Mental Distress Puts Pressure on Insurance Companies

Appeal court awards $25,000 in damages to plaintiff
Monday, January 09, 2012  Law Times Article
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. 

The case involved a plaintiff who had been in a motor vehicle accident in which she sustained injuries. Prior to the accident, she was already suffering from bipolar disorder and upper back pain.

After the incident, the defendant insurer refused to pay for some of the benefits applied for and limited the plaintiff’s access to medical assessments. In fact, there were 21 denials of 16 separate benefits over a period of three years. 

As well as the benefits, the plaintiff claimed extra contractual damages, bad faith, mental distress, aggravated damages, and punitive damages.

In supporting the trial court’s finding that the mental distress warranted compensation, the Court of Appeal declared: “People purchase motor vehicle liability policies to protect themselves from financial and emotional stress and insecurity. 

An object of such contracts is to secure a psychological benefit that brought the prospect of mental distress upon breach within the reasonable contemplation of the parties at the time the contract was made. 

As an insured person entitled to call on the policy, Ms. McQueen was entitled to that peace of mind and to damages when she suffered mental distress on breach.”

Lou Ferro of Ferro and Co. in Hamilton, Ont., who represented the plaintiff, notes that it has been easier to get damages for mental distress since Fidler v. Sun Life Assurance Co. of Canada. 

As well, he says there are five or six other Court of Appeal and Supreme Court cases that laid the foundation for this judgment. “It takes advantage of what’s gone before,” he says.

Ferro argues that although the insurance industry is slow to change, it would be foolhardy not to take notice of the decision. “This case points out that the claims process is now under scrutiny. 

The fairness component applies to the adjuster, and individual decisions made by the adjuster are subject to review.”

Ferro believes the case also confirms that insurance companies can’t be adversarial to the policyholder. “Some insurers just throw their cases into litigation as a standard response. 

They use the courts as a profit centre. That’s not wise. You can’t dispute that you should treat the policyholder fairly. It’s like motherhood and apple pie. They go together. 

If the adjuster makes an arbitrary or unsupported decision or is derisive or adversarial, it’s difficult to defend it. There will be lots more cases like this to come.”

Laura Hillyer of Martin & Hillyer Associates sees a lot to like in this decision as well. “The Court of Appeal affirmed the messages that insurers use to sell insurance: slogans like, ‘We’ve got you covered’ and ‘You’re in good hands.’ They use peace of mind to sell the product. 

This decision confirms that that is what they do. I think of that as obvious, but it’s nice to hear the Court of Appeal saying it.”

Hillyer is happy to see the court holding the insurer to the standard it advertises and not just with the person it contracts with. “Echelon’s contract was not with Mrs. McQueen,” she says. 

“It was her husband’s policy. The court chose not to draw a line between people who actually entered into the policy and people covered by the policy. It’s inclusive.”

The judgment criticizes a number of insurance industry practices, such as giving a denial without a reason. “Since Sept. 1, 2010, we are seeing a lot more of that,” says Hillyer. 

“The insurer says it is not reasonable or necessary with no explanation. This decision calls on insurers to give more details if the decision is contrary to medical recommendations, which is what the treatment plan really is.”

Another insurance industry practice that the judgment criticizes is choosing to rely on a particular report that supports a denial of benefits. “If there are two reports and one says you should pay and one says you shouldn’t, they will need to think twice before denying it,” says Hillyer. 

“That’s very, very helpful, especially if they are relying on what they should know is a short, perfunctory insurer examination. Often, the client says they sat in the waiting room for an hour, they saw the doctor for 10 minutes, and he hadn’t read the file yet.”

Hillyer also likes the fact that the Court of Appeal is sending those messages in relation to a modest claim. “Often, the denials aren’t for a large amount and you wonder if it’s cost-effective to proceed. 

This decision makes it cost-effective, assuming you have a true link between the insurer’s behaviour and the claimant’s mental state.”

Hillyer notes that while people who have family and savings are less likely to suffer from mental distress, there are others who aren’t as fortunate and don’t have those fallbacks. 

“If insurers engage in these behaviours with them and it detrimentally affects them, they are on the hook,” she says.

Ferro attributes some of the success in the action to the fact that the application didn’t go too far. “We asked the judge for $25,000. That’s not a great deal, but it represents the beginning of a process that has set the floor on damages.”

Hillyer also hopes the decision will change the use of the minor injury guidelines. “The [guideline] is very challenging. It’s very difficult to get someone out of [it] once they are in. 

It shouldn’t be, but it is and our remedy is so far away. It’s very frustrating. If you take notice of some of these comments, I’d say keep sending information to the insurer. Indicate that the medical background is there. If they persist with a blanket refusal, they may be in hot water.”

For his part, Ferro is astounded by the practices of insurers who tell their adjusters to throw everything into the minor injury guidelines and then hunker down. Ferro personally knows an adjuster who has resigned upon receiving that instruction.

“He thought it was crazy,” says Ferro. “Eventually, adjusters will have to defend their decisions.” 

Ontario Auto Insurance Changes Affecting Rehab Coverage

 By Mike Crawley, CBC News

Ontarians injured in car accidents are finding out that in many cases, the rehab prescribed by their health providers will not be covered by their insurance.

Dr. Donna Ouchterlony, the director of the brain injury clinic at Toronto’s St Michael’s Hospital, says insurance companies are declining more and more treatment plans.
“They no longer have to have a doctor review [in order] to refuse [treatment],” she said. “The impact is profound.”
“An insurance adjuster with very little training can refuse the treatment plan of a specialized team. They apparently have to have a medical reason, but they’re not a doctor, they’re not even a nurse … they don’t have any medical training,” she said.
Some suggest that as many as 40 per cent of claims are being turned down.
In September 2010 the Ontario government introduced new auto insurance regulations in an attempt to put an end to fraud and rising premiums — fraud costs alone are estimated at more than $1 billion per year.
The changes to the insurance benefits came into effect in September 2010 to combat fraud and rising premiums. (Mark Bradley/CBC )
For what is deemed a catastrophic injury, the level of coverage remains at $1 million.
But benefits for non-catastrophic injuries were cut in half to $50,000. Benefits for minor injuries were capped at $3,500.
Andrew Ryan is one of the people who had the treatment recommended by his health-care provider rejected.
Ryan was cycling toward his home in Toronto’s east-end two summers ago when a car ran a red light and smashed into him.
“My bike collapsed under me, sending me head-first into the ground,” he recalled.
His head injury stopped him from working as a web designer and it affected his speech.
But his car insurance company rejected the speech and occupational therapies recommended by his health-care providers.
Dr. Ouchterlony said most patients can go through benefits very quickly.
But the Insurance Bureau of Canada, which represents the insurance companies, says too many therapists are recommending unnecessary treatments.
“I do have a difficult time accepting a blanket statement — a broad generalization — that a lot, that most [therapy recommendations] are being declined,” said IBC spokesman Ralph Palumbo.
“There are too many of them frankly that are putting in claims that should never see the light of day,” he said.
Fast-rising fraud costs
Insurance companies point to the fraudulent claims that eat up Ontario drivers’ premiums every year — a statistic backed up by Ontario’s auditor general in a recent report, which sets the fraud figure at $1.3 billion.
That report also said Ontarians pay the highest auto insurance premiums in the country in part because the average cost of accident injury claims is five times higher than other jurisdictions.
Palumbo says anyone injured in an auto accident should be confident they will be cared for.
“Where there are legitimate claims, absolutely they should be approved and the person should get treatment. But there’s too much of the other, which is, people trying to milk the system. I can’t say it any blunter than that.”
But Dr. Ouchterlony says the provincial government needs to make changes to the program. “[T]hey don’t understand what they’re doing — the predicament that they’re putting patients in is absolutely horrible, and it must be that they don’t understand what’s going on,” she said.

“I want to see the government restore the program the way     

Car Injury Claims Increasingly Denied

By Mike Crawley, CBC News

A Hamilton speech therapist says car insurance companies are increasingly rejecting her recommended treatments for people who’ve been hurt in accidents.

Deidre Sperry helps her clients recover from brain injuries. Those who have been hurt in car accidents represent 95 per cent of her client base.

Car insurance companies rejected five of Sperry’s recommended treatment plans this year. She said that is more rejections than in her previous 11 years of practice combined.

“I have to be far more adversarial,” she told CBC News. “The treatment plans I’m asking for are only being partially approved when they are approved. There’s more denials and I can’t do the work in the way that I used to be able to do my work.”

Sperry had one client who was hit by a driver who ran a red light.

Insurance changes affecting rehab coverage

Click here to read Mike Crawley’s previous story in his series examining how Ontario’s auto insurance changes are affecting those hurt in accidents.

She expected the man’s insurance company to pay for his entire rehab, but that did not happen.

“The treatment plans that were submitted for his physiotherapy, his occupational therapy and his speech therapy have all been declined,” she said. “He’s a good guy. A wife, two kids in college, paying his taxes.”

“It seems they’re trying to deny more and wear people down so they aren’t going to fight back,” she said.

Rehab patients feeling like they’re ‘under the gun’

Now, she said, patients already struggling to get through rehab and return to work are made to feel like they are somehow trying to cheat the system.

“They feel like their integrity is being questioned,” she said. “It sets them up to being under the gun and they’ve already got a host of problems to live with.”

Those who decide to fight back are facing a tougher battle than ever before.

All disputed insurance claims must first go to mediation but the average wait time for a hearing has swollen to nearly a year.

Adam Wagman, who represents the Ontario Trial Lawyers Association said the current backlog is “in the tens of thousands”.

“If I were to apply for mediation today, my client might be able to have that mediation heard 10 or 11 months from now,” he said. “By that point in time the physiotherapy treatment that’s been recommended and rejected is almost useless.”

Ontario’s auditor general is calling on the province’s insurance mediator to come up with a plan for reducing the wait time. 

Ontario Insurers Leave Catastrophically Injured at risk


While the insurance industry has loudly proclaimed the pervasiveness of insurance fraud, it has been quietly leading a battle to deny benefits to the most seriously injured car accident victims.

That battle is being waged over the definition of catastrophic impairment.

Accident victims in this category are entitled to enhanced medical and rehabilitation accident benefits of up to $1 million.

As of September 2010, those seriously but not catastrophically impaired are entitled to reimbursement of medical and rehabilitation benefits to a maximum of only $50,000 (although this can be doubled to $100,000 for an additional premium).

Prior to September 2010, the limit was $100,000.

But none of this money goes into the pockets of accident victims; the money is to be used solely for reasonable and necessary expenses.

Robert Kusnierz was injured in a 2001 car accident resulting in significant injuries. His left leg was amputated below the knee.

Due to cysts and deterioration of the stump, he often uses a walker or wheelchair rather than a prosthesis.

He has had 10 different prostheses. Even with them, he can walk well only on flat surfaces.

He suffers from headaches and pain in his shoulders, neck, back, hips, knees and right ankle.

He lost his job and suffers from “severe” psychological symptoms, likely meeting the diagnostic criteria for a major chronic depressive disorder.

Not surprisingly with such significant injuries, Kusnierz exhausted his $100,000 medical and rehabilitation limit as of late 2005.

That’s because prostheses, wheelchairs, assistance devices, attendant care, housekeeping services, medication expenses, home modifications and other costs all come out of the accident benefit limits.

It’s easy to exhaust them, particularly in cases of serious but not catastrophic impairment.

You’d be hard pressed to find many people to argue Kusnierz’s injuries don’t constitute catastrophic impairment.

Even his insurer, The Economical Mutual Insurance Company, agreed if his physical and psychological injuries were combined, Kusnierz would have satisfied the definition of catastrophic impairment.

Didn’t meet definition

But ignoring years of precedent, his insurer argued combining physical injuries with psychological injuries is not permitted in making a catastrophic impairment designation, and neither the physical injuries nor the psychological injuries alone satisfied the definition of catastrophic impairment.

In late 2010, Justice P.D. Lauwers of the Ontario Superior Court accepted that argument, ruling in favour of the insurer.

Kusnierz launched an appeal to the Ontario Court of Appeal.

The Insurance Bureau of Canada (IBC), the national industry association representing Canada’s home, car and business insurers, intervened in the appeal, trying to uphold the pro-insurance decision.

It’s hard to overestimate the parsimonious nature of such conduct since there are very few cases where physical or psychological impairments would not be considered catastrophic when assessed separately, but would be considered catastrophic when combined.

Happily for Kusnierz, the Court of Appeal’s decision, released in late December, reversed the lower court ruling, concluding that allowing physical and psychological injuries to be combined in making a catastrophic impairment assessment “promotes fairness and the objectives of the statutory scheme.”

But the battle isn’t over.

The Ontario government is sitting on a report by a panel of experts to the Financial Services Commission of Ontario. FSCO is responsible for the regulation of car insurance in Ontario.

This report, prepared by a group comprised of eight members, two of whom have been consultants to the IBC and two of whom have received research grants from the insurance industry, argues against combining physical and psychological impairment.

These experts argue there isn’t “sufficient evidence that combined impairment ratings are more clinically meaningful than using separate criteria.”

Try telling that to Robert Kusnierz. – Crash Victims are being denied in Ontario

Toronto, Ontario – Insurance companies in Ontario are turning down an increasing percentage of requests for the assessment and treatment of serious injuries sustained by motor vehicle crash victims, according to a new survey.

The survey, spearheaded by the Alliance of Community Medical and Rehabilitation Providers, found that 42 per cent of requests of treatment are now being rejected, up from 11 per cent prior to the government’s changes to the insurance system in September 2010, a jump of 282 per cent. The survey looked at 1,143 rehabilitation providers, including 889 sole practitioners and 254 company/practice owners.

The denial rate for initial assessment is now also 42 per cent, compared to 27 per cent a little more than a year ago. For those who want to challenge their insurance company’s denial, the wait is now at least a year for mediation, and in some instances, two years for arbitration. “Literature clearly shows that rehabilitation is most effective immediately following the accident,” said Alliance president Nick Gurevich. “Our concern is that by the time the matter is addressed in dispute resolution, it is simply too late for many of our clients.”

The Alliance said that it commissioned the survey after requesting information about the insurance industry’s denial rates from Health Claims for Auto Insurance, an initiative of Ontario auto insurers that transmits claim forms between insurers and health care facilities, but was turned down.

The province now permits insurers to deny assessment and treatment without having to obtain a second medical opinion, the Alliance said, which means that an insurance adjuster with no medical training decides whether or not the rehabilitation therapy or equipment recommended by a health care professional is accepted. The survey found that only about half of the requests for assessment and treatment now being turned down are referred to an independent examination. Prior to the government changes, all such denials had to be referred for a second medical opinion.

Other key findings include insurers which are now automatically classifying many cases as “minor injury” even though health care providers have identified the injury as serious, and that survey respondents said that more than half their patients who have been slotted into the minor injury category will run out of benefits before they recover.