With Bill 15, introduced in July 2014, the government has brought forward amendments that were initially introduced earlier this year. OTLA welcomes the new legislation which would bring forward Justice Douglas Cunningham’s much-needed reforms to the auto insurance dispute resolution system.
While we welcome the majority of the recommendations, there are two outstanding issues that we ask MPPs to address through amendments at committee:
- ensuring accident victims have access to the Courts and,
- setting a fair prejudgment interest rate to ensure timely access to justice.
The Right to Sue
Currently, accident victims have the right to go to Court or to arbitration to dispute decisions made by their own insurance companies that deny them necessary benefits, including income replacement benefits and medical and rehabilitation treatments. But under the proposed Legislation, claimants will only be able to advance claims to the Licence Appeal Tribunal. The removal of access to the court is going to lead to huge amounts of wasted dollars and duplicated efforts.
If a person is injured and it was someone else’s fault, and that person also has a dispute with his or her insurance company about benefits, the injured person will now have to pay a lawyer to handle two different legal claims, in two entirely different systems: a lawsuit in Court against the person who caused the injury, and a totally separate dispute through the Licence Appeal Tribunal for benefits that were wrongfully refused. This dual system is going to add tremendous unnecessary costs to the system. Doesn’t it make sense to allow accident victims the right (that they currently have) to bring the two claims together before the court and to vastly reduce the costs they have to incur? The province will also benefit by allowing victims to use one process instead of paying for the cost of two hearings and two decision makers.
Our complex system of benefits already makes it extremely difficult for people to access the benefits to which they are reasonably entitled. This proposed change that takes away the right to sue and will result in more victims just giving up because they can’t afford the fight. Maybe that’s why the insurance sector wants to push this change through.
Prejudgment Interest for Innocent Victims
Bill 15 also proposes to change a 30-year-old rule that has been so important to those who have suffered injuries in Ontario. “Prejudgment interest” on pain and suffering damages is intended to compensate an innocent victim when the negligent person’s insurance company delays paying those damages. Basically, it ensures timely payment for damages by insurance companies to innocent victims. No one can argue with the fact that timely resolutions are in the best interest of both sides of any dispute, and the Court system.
Currently, insurance companies are required to pay 5% interest on whatever sum injured people are owed for pain and suffering. For example, if an injured person has a serious injury and his or her injury is ultimately assessed at $50,000, but the insurance company delays paying the claim for 3 years, the insurer would have to pay $7,500 in interest. That’s not a lot, but at least it is something to compensate for the delay, and it serves as an important incentive for insurers not to purposely delay settlement of claims!
The Ontario Trial Lawyers Association is urging MPPs to consider changes to this section of the legislation because, as it stands now, the bill would give insurers an economic incentive to delay providing compensation to innocent victims.
Insurers invest their money and, according to the federal regulator, they made about 4% on these investments in 2012, and 3% in 2013. Under the proposed legislation, prejudgment interest would be slashed to 1.3%. The insurance companies would therefore stand to earn 1.7% profit on the innocent victim’s money for every year that they put off settling with that victim. It’s really just simple math! Don’t forget – that money belongs to the injured person. If the prejudgment interest rate is reduced to 1.3%, insurance companies will directly profit from NOT paying injured people the money they are entitled to for years. With the proposed reduction in prejudgment interest, there is no incentive whatsoever for insurance companies to settle cases on a timely basis. If the government wants to look more closely at this issue, it should simply determine how much money insurers have been making on their investments, and set the prejudgment interest rate at a level that doesn’t create any incentive to delay. In comparison, injured people who can’t work and have to borrow money to get by are certainly paying interest at a rate much higher than 5%!
The insurance companies would stand to earn 1.7% profit on the innocent victim’s money for every year that they put off settling with that victim.
It Denies Justice To Innocent Accident Victims!
In addition to continuing to line the pockets of profitable insurance companies, the reduction of the prejudgment interest rate will delay the cases in the system. If you have heard how backlogged some of our Courts are now, imagine what will happen if insurers can delay payments for years with no financial penalty! It means that fewer cases will settle at an early stage, more cases will have to be set for trial, more judges will be needed to conduct extra pre-trial conferences, and this will lead to even longer backlogs in the courts. All of this, of course, will come at a significant cost to our justice system.
We urge MPPs to consider minor amendments to address these outstanding issues in Bill 15. We look forward to bringing these concerns forward again when the bill is referred to committee.