An Insurance Nightmare

Catastrophically-injured child’s 11-year legal odyssey to determine her rights

By Alan Shanoff ,Toronto Sun

First posted: Saturday, October 20, 2012

A five-year old girl was struck by a car and pushed through a store window on August 5, 2001.

It was a parent’s nightmare. It also turned into an insurance nightmare with the child’s accident benefits not being determined until last month, 11 years after the accident.

This child, called M.M. in the arbitration decision released September 19, was initially found not breathing and turning blue. She was given mouth to mouth resuscitation.

The fire crew found M.M. in severe distress, semi-conscious, with bluish or purple discolouration due to lack of oxygen.

Her initial hospital diagnosis included a pelvic fracture, small bowel perforation, sciatic nerve laceration, lower extremity lacerations and internal bleeding.

She was operated on for over six hours and intubated for 40 days.

She was discharged from the hospital after 90 days and was an inpatient at Toronto’s Bloorview hospital for an additional two months, followed by about six months of out-patient treatment.

There’s little doubt M.M. has required and will require substantial help, including tutorial, vocational and counseling support, to overcome neurocognitive deficits.

But that costs a great deal of money and her $100,000 medical rehabilitation benefits limit at the time (since reduced to $50,000 as of September 2010) isn’t sufficient for her needs.

She requires enhanced benefits, only available if she is categorized as having suffered a catastrophic impairment.

As happens all too often, her insurance company, Guarantee Company of North America, fought her on that issue.

The severity of her initial injuries notwithstanding, the only way M.M. could be classified as having suffered a catastrophic impairment required her to establish that she suffered a significant brain impairment as a result of the accident.

This as measured on an accepted neurological scale within a reasonable time after the accident.

That’s where the insurance games began.

M.M.’s measurement of brain impairment, taken within a reasonable period following the accident, clearly showed she fit the criteria for a catastrophic impairment designation.

But her insurer raised many arguments against that designation: The measurement was transient or isolated, there was no permanent brain injury, the measurement was primarily due to a temporary lack of oxygen or blood circulation.

In doing so, her insurer attempted to add qualifiers to the definition of catastrophic impairment which do not appear in the definition of catastrophic impairment. They were intended to disqualify M.M. from receiving enhanced benefits.

The Financial Services Commission of Ontario arbitrator, Judith Killoran, released her decision in September, ruling in favour of M.M., concluding she indeed sustained a catastrophic impairment as a result of the motor vehicle accident.

Killoran pointed out that many of the insurer’s experts “imported qualifying language” into the definition of catastrophic impairment and “based on that qualifying language, opined that she (M.M.) did not meet … the criteria.” In other words, the insurers’ experts changed the rules of the game so they could conclude the insurer had won the game.

In the 11-year-odyssey to determine her rights, I can only wonder how many adjusters, investigators, doctors, experts and lawyers were employed by the insurer to investigate and dispute M.M.’s claim.

How much money was incurred to fight this little girl’s claim?

There was little doubt she qualified for enhanced catastrophic impairment benefits under the plain wording of the definition of catastrophic impairment yet it seems no expense was spared to dispute the case.

And for what reason? As the arbitrator pointed out “the catastrophic impairment designation of itself does not entitle the insured to any benefits. Benefits are only available for medical, rehabilitation and care expenses that are reasonable and necessary.”

This is another example of how Ontario’s so-called “overly generous” car insurance coverage works in practice.

It’s worthy of investigation by Ontario’s Standing Committee on Finance and Economic Affairs in its review of the car insurance industry.

Or it would be but for Dalton McGuinty’s resignation and prorogation of the legislature. 

Net income up, loss ratios down for Canadian insurance firms for first six months

DAILY NEWS Oct 10, 2012 2:49 PM

2012-10-10

Financial results for the Canadian property and casualty insurance sector improved year-over-year during the first six months of 2012, according to industry experts.

Net income for the industry increased 57.5% (to $2.100 billion during the first six months of 2012 from $1.333 billion during the same period in 2011), according to a table published by MSA Research Inc. in its MSA Quarterly Output report Q2-2012.

Toronto-based MSA’s results for the industry excluded government insurers, Lloyd’s and Genworth. 

According to MSA, the net loss ratios decreased in three categories of insurers. The net loss ratio for personal and multi-line writers (excluding the Insurance Corporation of British Columbia, Manitoba Public Insurance and the Society of American Foresters) dropped from 70.28% during the first six months of 2011 to 60.63% during the same period this year.

The net loss ratio for commercial lines writers (excluding Lloyd’s) was 57.22% in the first six months of 2012, compared to 60.44% during the same period in 2011.

The net loss ratio for reinsurers was 62.67% during the first half of this year, down from 72.93% during the first six months of 2011.

“Commercial lines writers continued to exhibit impressive bottom line numbers despite continued erosion in top line revenue,” Baker wrote in the MSA quarterly outlook. “The soft commercial market lives on.”

Statistics from the Insurance Bureau of Canada show mid-year financial results for the Canadian industry have improved. Loss ratios decreased year-over-year to 62.4% this year, from 68.4% in the first six months of 2011, according to an article written by Gregor Robinson, IBC’s senior vice-president and chief economist, scheduled for publication this month in Canadian Underwriter.

According to a graph published with the article, national direct loss ratios decreased year-over-year in four of five categories (personal property, commercial property, auto and personal property-auto). The national direct loss ratio increased (to 56% during the first half of this year from 52% in the first half of 2011) in the commercial liability category.

MSA’s numbers show that underwriting income in the category of commercial lines writers (excluding Lloyd’s) increased 57.4% year over year for the first six months, from $231.9 million to $365.1 million, while net income rose 37.5%, from $377.059 million to $518.487 million. Across the industry as a whole (excluding Lloyd’s and Genworth), net claims and adjusted expenses dropped 5.3%, from $12.758 billion in 2011 to $12.078 billion this year.

“Headwinds still linger,” Baker wrote, “Among them, the overhang of tends of thousands of claims awaiting dispute resolution” with the Financial Services Commission of Ontario.

Ontario auto insurance industry could be tougher on fighting fraudulent claims: lawyer

Canadian Underwriter.ca 

2012-10-04

Ontario’s auto insurance industry isn’t in as bad a situation as than many may think, but it should take a much tougher stance when taking on fraudulent claims, according to one Toronto lawyer.  

“I think with the last reforms for Ontario auto in September 2010, (the industry is) almost there in terms of a dream product,” John McLeish, a partner with personal injury firm McLeish Orlando LLP said during a panel discussion on the issue at the National Insurance Conference of Canada in Quebec City on Oct. 1.

In the first half of 2011, accident loss benefits have improved over the previous year, as has the industry financial loss ratio, he said, citing data from a Financial Services Commission of Ontario’s report to a government committee earlier this year.

Still, the auto insurance has admitted problems, with the highest average premiums in the country and high costs for insurers, according to an August 2012 report commissioned by the Insurance Bureau of Canada. 

Studies suggest that 10% to 15% of costs in Ontario auto product relate to fraud, said George Cooke, CEO of The Dominion and another panelist at the NICC. Much of that fraud is concentrated in the Greater Toronto Area (GTA), he said.

“In Ontario, an infrastructure for fraud has developed,” the IBC report notes, with health professionals and legal professionals among those defrauding the system. Exaggerated claims behaviour is something McLeish said he has seen, and he noted that those people unfortunately often do find lawyers to work on their behalf.  

The insurance industry, though, needs to fight harder against exaggerated claims, according to McLeish. “In a way the insurance industry is (its) own worst enemy,” he said. “I think that the P&C industry in auto in Ontario could take a much tougher line than they do.”

He said he has spoken to insurers who know from their own investigations that exaggerated claims are being made, but pay out “nuisance claims” anyway to avoid the larger legal costs of a trial. “I think that’s a huge mistake.”

He pointed to the Canadian Medical Protective Association (CMPA), which represents physicians, as an example for fraud being fought successfully. “If you start a lawsuit against a doctor, you have to absolutely assume that case is going to go to trial,” he said, which can be costly for defence lawyers and plaintiffs.

“They will spend two dollars to save a dollar,” if they don’t think a claim is right, he said. “It’s worked wonderfully well for them.”

LawTimesNews.com – Personal Injury Law: Pastore completes trilogy of cases protecting accident victims

Monday, October 01, 2012 – Written by Darcy Merkur

Only one marked or extreme functional impairment due to a mental or behavioural disorder is necessary to qualify accident victims for enhanced catastrophic impairment benefits, the Ontario Court of Appeal ruled in a welcome decision last week in Pastore v. Aviva Canada Inc.

The Pastore case deals with the proper interpretation of the marked or extreme impairment test within the definition of catastrophic impairment under what had been s. 1.1(g) of the Ontario statutory accident benefits schedule (it’s currently s. 3(2)(f)).

The test requires the motor vehicle accident claimant to have suffered “a class four impairment (marked impairment) or class five impairment (extreme impairment) due to mental or behavioural disorder.”

In Pastore, a pedestrian hit by a car suffered a fractured ankle that did not heal properly, resulting in multiple surgeries and major life impacts. When Anna Pastore was assessed for a potential catastrophic impairment, she was diagnosed with various mental or behavioural disorders and consideration was given to the impact they had on the four categories of functional limitation.

The four categories of functional limitation are activities of daily living; social functioning; concentration, persistence, and pace; and deterioration or decompensation in work or work-like settings.

Using the required five-level scale to evaluate the extent of the impacts on these four categories of functional limitation, the assessors concluded that Pastore suffered from a marked impairment, one that “significantly impedes useful functioning,” in her activities of daily living. In the other three spheres, she qualified as having only a moderate impairment in that she had some, but not all, useful functioning.

The assessors concluded that this scenario, with one marked impairment, still qualified Pastore as having suffered a catastrophic impairment.

While the Ontario Divisional Court concluded that an overall impairment at the marked or extreme level was necessary and that one marked impairment was not usually enough, the Ontario Court of Appeal disagreed and concluded that an impairment in one of the four spheres would suffice.

Justice Kathryn Feldman, writing for the court, offered her thoughts when she stated: “In my view, the decision of the delegate, in which he concludes that the use of ‘a’ in the definition of “catastrophic impairment’ in cl. (g) refers to a single functional impairment due to mental or behaviour disorder at the marked level, constituting a catastrophic impairment, is a reasonable decision.”

The Ontario Court of Appeal also addressed the role of pain within the marked or extreme impairment test. The court concluded that a cumulative approach should be taken when it is not possible to factor out the impact of discrete physical impairment and associated pain limitations.

In other words, pain can be considered within the marked or extreme test in cases in which the pain is not clearly related to physical causes and may be related to a mental disorder.

As a result, the Ontario Court of Appeal set aside the decision of the Divisional Court and reinstated the original order made by the Financial Services Commission of Ontario arbitrator.

Plaintiffs’ personal injury lawyers throughout Ontario are applauding the well-reasoned and clear decision of the Ontario Court of Appeal. Insurers, meanwhile, are once again disappointed that their attempt to adopt an interpretation that would raise the catastrophic impairment threshold has been thwarted.

The Pastore decision is the third in a trilogy of key rulings by the Ontario Court of Appeal relating to the important definition of catastrophic impairment. All three reversed lower court decisions (see Kusnierz v. Economical Mutual Insurance Co., Liu v. 1226071 Ontario Inc., and now Pastore).

In Smith v. Co-operators General Insurance Co., the Supreme Court of Canada made it clear that consumer protection is a key goal of automobile insurance. The reasoning of the Ontario Court of Appeal in the trilogy of cases mentioned above strongly supports that important goal.

The trilogy of cases will go a long way to protect accident victims in Ontario, at least until the Ontario government makes its expected announcement regarding major changes to the definition of catastrophic impairment. Hopefully, any announced changes will support, rather than challenge, the decisive reasoning in the trilogy of cases.

Darcy Merkur is a partner at Thomson Rogers in Toronto who practises plaintiff-side personal injury litigation, including motor vehicle matters. He is a certified specialist in civil litigation and the creator of the personal injury damages calculator.