Law Times

Law Times • December 2, 2013 Page 11 FOCUS OTLA emphasizes mandatory mediation in insurance review BY CHARLOTTE SANTRY Law Times M andatory mediation should remain the default requirement for auto insurance claims, trial lawyers are urging. The Ontario Trial Lawyers Association hopes a review of the automobile dispute resolution system carried out by former Superior Court associate chief justice Douglas Cunningham will take up its recommendation. Finance Minister Charles Sousa appointed Cunningham to head the review on Aug. 23, 2013, in response to a large backlog of auto insurance claims. The government released Cunningham's interim findings on Nov. 8, 2013. His report recommends "mediation no longer be mandatory in its current form." Instead, there would be a "more compressed, speedier process" in which mediation would take place at the same time as a pre-arbitration hearing before an arbitrator. Disputes not settled at this stage would move directly to arbitration. Cunningham wrote: "I see a gatekeeper function as being an important feature of a new model. "Each incoming case would be reviewed to determine: if the parties are ready to enter the system; if there are jurisdictional issues to be addressed; if there are multiple applications from the claimant that might be consolidated; and if the production of documents has taken place." The association has submitted its own response to the review. The response highlights the fact that settlement occurs in up to 75 per cent of mediation applications to the Financial Services Commission of Ontario. "For that reason alone, FSCO mediation is useful and should remain a compulsory part of the dispute resolution system," the association said. However, the current mediation process can't effectively resolve certain types of disputes, the submission suggests. For example, if insurers and applicants hold firmly to their positions without any prospect for resolution at an early juncture, FSCO mediation can "be seen as a barrier to resolution." The association proposed that all claims should be subject to a "mediation opt-out" alternative available to the claimant but not to the insurer. "This would leave the current system in place, whereby mediation remains the 'default' requirement," it said. "Where claimants wish to go forward with mediation, insurers would continue to be required to participate in mediation." The issue of mandatory mediation is one of the main questions the government has asked Cunningham to consider. The other considerations include: • How best to deliver auto insurance dispute resolution in Ontario: through government, the private sector or a combination of both. • Systemic causes of and solutions to the mediation backlog. • Potential changes to the current structure, delivery model, and process. • The addition of a dispute prevention process and other issues related to the viability of the dispute resolution system. Despite a series of reforms to the auto insurance system in Ontario, costs have continued to increase. Between 2006 and 2010, the number of accidents reported to the police decreased, but claims costs increased by more than 100 per cent. There have been very few changes to the dispute resolution system during that period, Cunningham's report notes. Although the idea was to have a system in which legal representation wasn't necessary, 98 per cent of claimants in mediation and 99 per cent of those in arbitration have someone acting for them. "Contrary to the original intent, FSCO's dispute resolution system has turned into a system parallel to the courts," wrote Cunningham. The use of supplementary services provided by ADR Chambers has helped clear a large mediation backlog. But the move has led to an increased arbitration backlog partly because a greater proportion of failed mediations are moving on to arbitration. Settlement rates have dropped significantly to 42 per cent in the fourth quarter of 2012-13 from 64 per cent during the same period in 2011-12. These factors are combining to create a "perfect storm," according to Cunningham's report. But Cunningham and the association take a slightly different approach when it comes to some of the ways of tackling these problems. Cunningham wants FSCO's dispute resolution adjudicative functions turned over to an independent public sector tribunal or the private sector. That approach would provide better separation between the commission's role as a regulator of the insurance industry and its current adjudicative function, he believes. But the association wants arbitrations to remain at FSCO. "Arbitrations should be determined by dedicated FSCO arbitrators rather than outsourced arbitrators," it says. In a complex area of law, it is "unrealistic to expect that a temporary 'rental arbitrator' would be capable of mastering the vast body of law in the same fashion as a dedicated full-time FSCO arbitrator." Cunningham also appears to criticize certain legal practices. For example, he points out that many lawyers work on a contingency basis when it comes to auto insurance claims. That means "there are no financial risks for the claimant who wishes to challenge an insurer's decision regarding benefit entitlement," he wrote. He added: "I would not necessarily like to see the introduction of financial barriers, which might dissuade an individual with a legitimate claim from accessing the system. "Perhaps if the costs were at the back end of the process instead of the front end, they could provide some balance to the system by penalizing those who abuse it." Cunningham was also "troubled by the practice of some legal representatives who choose to shield claimants from insurers." But writing in Law Times last month, Darcy Merkur, a partner at Thomson Rogers, said that line of thinking "fails to recognize" the "underlying issue of mistrust." Lawyers for accident victims have developed a deep distrust of many insurers, he said, having seen "how previously unrepresented accident victims, despite clear needs and entitlement, received a fraction of the benefits they should have." LT Congratulations to our GPLLM Class! We are proud to announce the 2013 GPLLM graduates: For more information and to apply: http://www.law.utoronto.ca/programs/GPLLM.html Supported by the Association of Corporate Counsel (ACC) - Ontario Chapter and in partnership with Carswell, a Thomson Reuters business. UofT-GPLLM_LT_Dec2_13.indd 1 www.lawtimesnews.com 13-11-25 7:14 PM

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