Over decades of reforms, the one constant in Ontario auto insurance is that the interests of accident victims always take a back-seat to insurer profits.
HISTORY OF THE MOTOR VEHICLE ACCIDENT SCHEMES IN THE PROVINCE OF ONTARIO
In Ontario, car insurance is mandatory. As a result, most Ontarians are forced to buy the exact same policy from one of over 100 different insurance companies. Although some options are available, 99% of motorists drive with the exact same insurance policy. Since 1990, successive governments have made changes to the car insurance laws in the hope of protecting both consumers and insurance companies. However, the most recent changes have focused on cost cutting for insurers at the expense of those injured in car crashes.
ONTARIO MOTORIST PROTECTION PLAN (OMPP) 1990
On June 23, 1990, the Liberal government passed a new car insurance law called Ontario Motorist Protection Plan (OMPP). The OMPP is commonly referred to as “No-Fault” car insurance. In reality, the government did not recreate a pure “no-fault” system but rather a hybrid. Prior to June 23, 1990, victims injured in a car crash would claim most of their losses in a negligence lawsuit against the at-fault driver. The Liberal government limited victims’ rights to make such claims against at-fault drivers in order to save insurance companies money. As a result, only those who suffered permanent serious disfigurement, permanent serious impairment, or death, could make claims against at-fault drivers. This was meant to eliminate minor lawsuits which were costing insurance companies a lot of money.
To balance the rights of victims the government set up a “no-fault” benefits schedule. The “no-fault” benefits were meant to pay car crash victims immediately by providing partial replacement of lost wages, medical and rehabilitation benefits, and attendant care benefits. These benefits were paid by the victim’s own insurance company (if the victim did not have car insurance, rules were used to determine the no-fault insurer). Regardless of who caused the car crash every person injured in Ontario was allowed to claim no-fault benefits.
BILL 164 CHANGES TO AUTO INSURANCE IN 1994
In 1994, the NDP government introduced Bill 164, moving the system closer to a true no-fault system. Bill 164 took away a victim’s right to sue the at-fault driver for any lost income, out of pocket expense or cost of care (even if catastrophically injured). So long as the injuries were considered permanent and serious, victims of a car crash could claim pain and suffering damages against the at-fault driver. However, Bill 164 established what is commonly referred to as the “deductible” for pain and suffering damages. Under this scheme, the first $10,000 of any pain and suffering award would be deducted from the injured person’s damages and revert back to the at-fault driver’s insurance company.
In exchange for a severely reduced right to sue the at-fault driver, the government established a complicated “no-fault” benefits system which became known as the Statutory Accident Benefits Schedule (SABS). This “accident benefits” system allowed for wage replacement, medical, rehabilitative, housekeeping, and attendant care benefits from the victim’s own car insurance company.
FURTHER CHANGES UNDER BILL 59 IN 1996
Insurers were extremely unhappy with Bill 164 because the complicated accident benefits scheme was difficult to administer. As a result, the Conservative government of Mike Harris once again amended the car insurance law on November 1, 1996, introducing what is commonly known as Bill 59. Bill 59 allowed those injured in motor vehicle accidents to make claims for all damages, including economic losses, against the at-fault driver. Victims would still have to prove that their injuries were both permanent and serious in order to obtain compensation for pain and suffering damages and healthcare expenses. In addition, there was now a $15,000 deductible on pain and suffering damages. In other words, if pain and suffering damages were assessed at $60,000 then the victim would only receive $45,000. The $15,000 deductible would go back to the at-fault driver or his insurance company. Lost income from the date of the accident to the date of trial was allowed up to 80% of net (after tax) lost income. For any future losses beyond the date of trial, victims could claim 100% of any gross loss.
In exchange for the improved right to sue at-fault drivers, the government severely reduced accident benefits. The maximum amount for wage replacement was reduced from $1,000 per week to $400 per week. Medical and rehabilitation coverage was reduced from a maximum of $1,000,000 over a victim’s lifetime to $100,000 for 10 years following the accident (except for those who were catastrophically injured). Attendant care benefits were reduced from a maximum of $10,000 per month to a maximum of $6,000 per month for those who were catastrophically injured and to $3,000 a month for those who were not catastrophically injured.
Under Bill 59, many auto insurers complained that the healthcare costs spiralled out of control.
BILL 198 CHANGES TO AUTO INSURANCE IN 2003
Effective October 1, 2003, the Conservative government made two changes to car insurance laws. Firstly, victims of a car crash, who claimed pain and suffering damages against the at-fault driver, would now have to pay a $30,000 deductible if the pain and suffering damages were $100,000 or less. In other words, if pain and suffering damages were assessed at $30,000 or less, the injured person would get nothing. If pain and suffering damages were assessed at $100,000, the injured person would get only $70,000 and the remainder would be returned to the at-fault driver’s insurance company. This was meant to encourage victims to not bring claims in the first place. Secondly, the Conservative government reduced the amounts that healthcare providers could charge and increased the insurance companies’ control over payment of medical and rehabilitation benefits. All of this was meant to reduce costs and increase profit for car insurers.
FURTHER “REFORMS” IN 2010
According to insurers, all of the previous changes did not lead to increased profits. As a result, on September 1, 2010, major changes were again made to the Statutory Accident Benefits Schedule (SABS). Most victims of accidents who did not suffer broken bones or significant neurological/psychological injuries would be left with a maximum of $3,500 for medical and rehabilitation benefits.
Since September 1, 2010, nearly 80% of victims injured in a car crash have been left with no more than $3,500 for rehabilitation services. This provides only a few months of regular physical therapy. Those who did suffer either broken bones or neurological injuries were given a maximum of $50,000 for rehabilitation, down from the $100,000 under the previous legislation. The 2010 reforms also eliminated housekeeping benefits for non-catastrophically injured victims and cut the attendant care limit for these victims in half, from $72,000 to $36,000.
However, the harshest change to the law occurred for those who were catastrophically injured in a car crash. Commonly, following a catastrophic injury the victim (given a choice) would be most comfortable receiving care from close family and friends. However, caring for a catastrophically injured person can be a 24 hour, 7 days a week job. Often times, family and/or friends of the catastrophically injured person must give up paid employment or other activities in order to take care of the injured person.
Previous accident benefit schemes would pay family members attendant care benefits to compensate them for the work they performed on behalf of their catastrophically injured loved one. However, the 2010 changes only allow family members who suffer an economic loss in the course of performing their attendant care to receive any compensation for their services. Suppose that you are catastrophically injured in an accident today and one of your family members (who is not presently in the workforce) decides to devote their life to your care.
Under the new accident benefit scheme that family members would receive no compensation. Previous legislation would have allowed that family member to be compensated up to $6,000 per month (which is still far less than minimum wage, if the catastrophically injured person requires 24 hours a day care).
Prior to September 1, 2010, both the insurance industry and government had justified reductions in car insurance benefits by alleging that they were trying to either reduce or eliminate smaller, less significant injury claims. The changes on September 1, 2010 represented not only an attack on smaller claims but those of catastrophically injured persons as well.
FURTHER RESTRICTIONS IN 2015
In 2015, the Ontario government made a small but significant change to how interest is calculated when insurance companies delay or wrongly deny benefits.
The previous system had created at least a bit of an incentive for insurance companies to live up to their obligations and to pay out benefits promptly, since insurers were forced to pay monthly compounding interest on overdue amounts - and that can add up quickly.
But after January 1, 2015, this incentive was significantly reduced: now, as soon as a person dares to dispute an insurance company’s wrongful denial, the interest immediately stops being calculated monthly and starts being calculated at a much lower annual rate. And this lower rate continues until the dispute is resolved.
It may seem like a minor detail, but since these disputes usually last for many months or even years, this change created huge savings for insurance companies and was another big blow to accident victims. Insurance companies were given one more reason to drag out disputes for as long as possible, holding onto their money until the last possible second while injured people are left to struggle without the benefits they need for months or even years.
JUNE 2016 AUTO INSURANCE REFORM
On June 1, 2016, accident benefits were once again reduced. Insurers continued to claim that despite all previous reductions in benefits, further reductions were necessary cost-cutting measures. These changes drastically reduced medical and rehabilitation benefits for those who sustained non-catastrophic injuries. Prior to the changes, entitlement to medical and rehabilitation benefits was $50,000 plus an additional $36,000 for attendant care benefits, a combined total of $86,000. These benefits were available to injured victims for up to 10 years. The 2016 changes combined these benefits and reduced the total amount to $65,000. In addition, these benefits are now only available to the injured person for 5 years.
The most severely injured, those who as a result of a car accident suffered from a catastrophic injury, saw a one million dollar reduction in benefits. Prior to the June 2016 changes a catastrophically injured person was entitled to $1,000,000 in medical and rehabilitation benefits and an additional $1,000,000 in attendant care benefits. As a result of the 2016 changes, these benefits were combined and reduced to a limit of $1,000,000 in total for the lifetime of the catastrophically injured person.
The non-earner benefit, which is a weekly indemnity benefit for those who suffer a complete inability to carry on a normal life as a result of an accident also saw a drastic reduction. Prior to June 2016, this benefit was payable at $185 per week after a 6 month waiting period and was payable for life with adjustments after age 65. If the injured person was a student at the time of the accident this benefit would increase to $320 per week after the first two years. The June 2016 changes reduced this benefit from a lifelong benefit to one only available for 2 years in total. This also eradicated the increase for those who were students at the time of the accident.
What is even more significant are the changes that were not made. The standard amount of the income replacement benefit is 70% of the accident victim’s gross earnings or $400 per week, whichever is less. This standard amount for income replacement benefits was established in 1996, approximately 22 years ago. Since that time, the amount has not increased to account for inflation. Government and many other disability benefits increase annually to take inflation into account. It is also notable that the pain and suffering deductible which reverts back to the at fault insurance company has steadily increased over the years to take inflation into account. This deductible was set at $30,000 in 2003 and is now nearly $40,000 as it continues to rise with inflation. If inflation was taken into account the standard amount of the income replacement benefit would be approximately $614 in 2020.
HELP REBALANCE THE SYSTEM
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