Law Times

Law Times • January 7, 2013 Page 11 FOCUS Which is best: public, no-fault or tort insurance system? BY JUDY VAN RHIJN For Law Times I f last year's hearings into the auto-insurance industry held by the standing committee on finance and economic affairs served any purpose, it was to highlight the myriad of problems faced by both insurers and their customers in Ontario. With rampant fraud on the one hand and concerns over benefits and delays on the other, many stakeholders are looking to sweep the whole private system away but are wondering what to replace it with. The example set by provinces that have implemented public auto-insurance systems is resonating with some lawyers, while others yearn for the pure-tort days of the past. Kevin Marshall, a personal injury lawyer in Toronto, is just one of many lawyers who are deeply unhappy with the status quo. "We are not getting the bang for our buck as consumers. We have the minor injury guidelines, which are unbelievable — $3,500 no matter if there are any complications or not. We have half the benefits of Manitoba and a capped catastrophic impairment rating which is obviously very problematic. For all that, customers are not even paying lower rates." Victoria Cross has observed that in Windsor, Ont., where she practises, young people are deciding not to get their drivers licences because of the cost of insurance. She's not happy with the hybrid scheme that produces high costs for ever-decreasing benefits. "The government has one foot in the water and one foot on dry land and is trying to swim," she says. "You can't do that." Cross is a staunch advocate of a public system. Others agree, including Howard Pawley, the former premier of Manitoba who introduced the public scheme in that province and now lectures at the University of Windsor. Cross wants the government to dispense with committee meetings that she says lead to running in circles and are often about "getting the insurance industry all happy." "You are dealing with people who necessarily can't agree. The interest of the insurance companies is to make profits. They are choosing to limit recovery from traumatic injury because it doesn't fit their bottom line. The interest of consumer protection is diametrically opposed to that. The government can't mediate that." When appearing before the standing committee, Pawley boasted that Manitoba's public insurance system has provided more than a decade of rate stability and about $600 million in direct payments to Manitobans. He cited the huge savings probably have better systems than Ontario, but I do not favour more government involvement. The government is not engendering confidence on how they are regulating private auto insurance. They've botched it. Why would they do any better running the whole thing?" According to Marshall, the beauty of a pure tort system in which lawyers and insurers interact directly is that it's merit-based. "It cleanses out the weak claims and the fraudulent claims. Credibility is critical. Why would I take on a client who is lying or exaggerating when I know that the client's going to be eyeballed by defence counsel for a full day of discoveries? The insurers have plenty of money to hire capable and competent defence lawyers and plaintiff lawyers operate on a contingency fee, so they are not going to take a weak case." He points out that in the in administrative expenses, advertising, litigation, and adjusting costs of a public scheme and the ability of public institutions to weather uncertain economic times as key factors. Cross also points out that in the provinces with public schemes (British Columbia, Saskatchewan, Manitoba, and Quebec), dividends go to motorists or as investment in local infrastructure. Under the private system, meanwhile, the surplus goes to the shareholders. "In Manitoba, they have billions set aside in reserve that is put back into the province, into hospitals and rehabilitation. Doing the same in Ontario would move the goalposts in health care so that we have an expanded ability to respond to health problems." Marshall favours a return to the pure tort system and eliminating extensive government involvement altogether. "The public auto-insurance schemes Financial Services Commission of Ontario system, lawyers get paid for arbitrations even if they fail. "In the court system, if you lose you are basically out of luck and your clients pay the other side's costs." He also believes mandatory mediation in the civil system will resolve a lot of claims. "The system will eliminate the weak claims or if they do go forward, they will quickly fall apart. Unrepresented parties' claims that are without merit are addressed on summary motion." Many lawyers are already choosing to bypass FSCO as soon as the 60 days for mediation has passed, but Marshall points out that claimants still have to go through the regulator before going the court route. "FSCO is where the holdup is. There is no holdup in the courts compared to FSCO. Some jurisdictions are slower, but motor vehicle accidents are not the problem. It's the sheer volume of claims as a whole." Albert Conforzi of the Pace Law Firm believes the province has been moving in this direction to all practical effect anyway. "To a certain extent, the government in successive accident-benefit schemes has been reducing or eliminating the type of claims that can be brought in the no-fault system, increasing the exposure on the tort side. This is in keeping with the notion of returning to pure tort." However, Conforzi is mindful that a pure tort scheme rips away the social safety net provided by a no-fault system. "Keep in mind that in no-fault, the insurance companies have to compensate everyone," he says. "The at-fault driver receives the same as the not-at-fault driver. If insurers go back to compensating half the victims, there should be a savings but at a cost." LT STEVE NOYES I. T. Consultant Volunteer The McKellar Structured Settlement™ Financial security. Guaranteed payments. 100% tax free. Some decisions are easy. Untitled-1 1 www.lawtimesnews.com 12-05-08 11:11 AM

• Cover