Proposed Changes to Auto Insurance Regime
Ontario Government is again planning to make changes to the auto insurance system. In its 2019 Budget the province announced a plan called “Putting Drivers First” which outlines the proposed changes: (a) Care, not Cash: eliminating the option for cash settlement of accident benefits claims and (b) restoring catastrophic limits to $2 million.
- Care not Cash
As you may be aware, most auto insurers would be amenable to, and often do, actively negotiate “lump out” settlement of accident benefit entitlements. Insurers are not required to offer cash settlements, but they are permitted to so if the insured agrees. These lump outs or cash settlements are essentially final agreements between the insurer and insured: in exchange for a lump sum payment, presumably to cover the cost of past, present and future accident benefits for which the insured may be eligible, the insured would sign a final agreement terminating his/her entitlement to those benefits, including the right to litigate his/her entitlement later.
The proposed changes would terminate the option to lump out entitlement to medical, rehabilitation and attendant care benefits, unless one or more of the following applies:
- Insurer decides that the insured meets the definition of catastrophic impairment;
- the injured party has access to optional benefits in the accident benefits policy that is responding to the claim. In other words, the insured had previously purchased an optional benefit that entitles him/her to negotiate a cash settlement for medical, rehabilitation, and attendant care benefits.
- extenuating circumstances apply that require an exception (e.g. the insured moves out of the country).
Keep in mind that the proposed changes will only prohibit cash settlements of medical, rehabilitation and attendant care benefits. Other benefits, such as income replacement benefits, will still be open to the settlement option.
The government hopes that the “care, not cash” default will encourage faster treatment and care; discourage fraud and abuse of the accident benefits; and reduce overall accident benefit claim costs.
Responding to the government’s invitation for feedback, the Ontario Trial Lawyers Association (“OTLA”) has laid out several important factors regarding cash settlements. For example, OTLA has argued why cash settlements are essential to allow victims of car accidents access the treatments they require in a timely manner. The accident benefits system as is currently in place, including the dispute resolution mechanism, allows insurers to deny benefits and wear down the injured party through onerous and repeated assessments that often seem designed to justify insurer’s denials, with the “inevitable impression that the insurer’s goal is not to provide care, but rather to minimize expense and maximize profit.” Therefore, final cash settlements allow the injured, frustrated, stressed victim of car accident to finally access some desperately-needed treatments.
OTLA suggests, therefore, that before removing the option of cash settlements the government must attend to fixing how insurer’s adjust the claims, and reduce those unfair denials. “The current dispute resolution process, a holdover from the previous government, lacks any consequence for delays and denials by insurers.” 
- Restoring catastrophic limits to $2 million
First let’s look at the history of catastrophic benefits in Ontario. The catastrophic impairment definition was first introduced to the Statutory Accident Benefits Schedule (SABS) in 1996. At that time, those who met the definition would have been entitled to up to $2 million – $1 million towards their medical and rehabilitation expenses and $1 million for attendant care.
In 2016, the previous Provincial government reduced the $2 million limit to $1 million, for both medical and rehabilitation and attendant care benefits for catastrophically injured victims of car accidents. Effectively, a person who sustained catastrophic injuries in a motor vehicle accident, on or after June 1, 2016, has only $1 million to spend towards attendant care AND medical and rehabilitation benefits. In exchange for an increase in premiums, however, consumers can purchase additional coverage. However, a large portion of Ontarians are not aware that the said option to increase the limits actually exists and many of those who know cannot afford to pay the higher premiums.
Those who have suffered serious injuries in motor vehicle accidents or have had friends or family members with catastrophic injuries know well that the reduced limits are not adequate to cover the mammoth cost of care.
The Provincial government is, therefore, proposing to increase the limits of catastrophic benefits to $2 million – for both attendant care and medical/rehabilitation benefits. If forced into law, all drivers would have the said $2 million coverage by default. The proposal is to include an option to reduce the limits, presumably in exchange for a reduction in premiums. Needless to say, the increase in limits of catastrophic benefits will prompt insurers to raise the premium but it is hoped that those increase will be “offset in the long-run by savings from reduced costs in court cases, since catastrophically injured claimants will be able to obtain more of their medical, rehabilitation and attendant care needs through accident benefits coverage.”
In response to the government’s invitation for consultation, OTLA has made submissions to the government arguing that the $2 million Catastrophic limit should be mandatory for all, with no option to reduce. OTLA argued that since catastrophic claims represent only less than 1% of all claims, the option to reduce the limits would not have any real impact on auto insurance premiums. Failure to increase the catastrophic limits to $2 million, OTLA argued, will result in inadequate insurance coverage for medical, rehabilitation, and attendant care needs for those most severely injured in car accidents, shifting the burden for additional expenses to the public health care and social service systems. OTLA submitted that if the government ultimately decides to proceed with putting in place an option to reduce catastrophic limits to $1 million in exchange for lower premium, this option should not be available to those under 30 and particularly not to minors under the age of 18.
Let’s wait and see if any of the changes, or
recommendations, are adopted into law. We’ll keep you posted.
 OTLA Submissions to the Ministry of Finance, “Care, not Cash” Consultations, September 17, 2019; Ontario Trial Lawyers Association.
 Putting Drivers First: $2 Million Catastrophic Impairment Default Benefit Limit, Consultation Paper: Ontario Ministry of Finance, Summer 2019.