Insurance companies owe a duty to act in good faith toward their insured. They are required to evaluate their own position based on a consideration of all the available information, and to re-evaluate their position when they receive new information.
Unfortunately, in advancing claims for accident benefits, injured parties often face denial or delay in payment of benefits. Sometimes, even in the face of compelling evidence, insurance companies remain unwilling to pay.
Prior to legislative changes in 2016, a special award was available, in addition to costs, to a party whose insurer unreasonably withheld or delayed payment of benefits. The Insurance Act previously stated:
282(10) If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the [Statutory Accident Benefits] Schedule.[1]
A special award punished insurers who unreasonably failed to pay accident benefits promptly, as required by the Statutory Accidents Benefit Schedule.[2] Unreasonable behaviour by an insurer is “behaviour which was excessive, imprudent, stubborn, inflexible, unyielding or immoderate.”[3] Arbitrators were required to consider, “what amount is large enough to further the goals of punishment and deterrence?”[4] These awards ranged from $20,000[5] to over $100,000[6] based on the insurer’s misconduct. Misconduct included relying on bad medical reports in the face of conflicting opinions or denying a reasonable and payable benefit.
Although special awards will continue to be considered in disputes in which parties have applied for arbitration prior to April 1, 2016, the future remains unclear.
Starting April 1, 2016, changes to the Insurance Act eliminated the arbitration process and transferred all accident benefits disputes to the Licence Appeal Tribunal. Consequently, the special award provision of the Insurance Act was also eliminated. The new adjudication process through the Licence Appeal Tribunal follows the Licence Appeal Tribunal’s Rules of Practice and Procedure (“LAT Rules”). Rule 19.1 provides:
Where a party believes that another party in a proceeding has acted unreasonably, frivolously, vexatiously, or in bad faith, that party may make a request to the Tribunal for costs.[7]
The new rules on costs ignore the policy intentions of what was previously section 282(1) of the Insurance Act, which punished insurers for bad conduct and served to deter similar bad behaviour in the industry. However, the Licence Appeal Tribunal website refers to revised sections 278-288 of the Insurance Act regarding disputes over motor vehicle accident insurance benefits, and section 280(6) of the Insurance Act states:
Orders for costs, other amounts
280(6) Without limiting what else the regulations may provide for and govern, the regulations may provide for and govern the following:
- Orders, including interim orders, to pay costs, including orders requiring a person representing a party to pay costs personally.
- Orders, including interim orders, to pay amounts even if those amounts are not costs or amounts to which a party is entitled under the Statutory Accident Benefits Schedule.[8]
Arguably, between the Insurance Act and the LAT Rules, there remains an opportunity for an additional award to be ordered by the tribunal in addition to the costs outlined in rule 19.1.
Future application of the new section 280(6) of the Insurance Act may further determine whether insurance companies will be held accountable for unreasonable withholding and denial of benefits.
Insurance Companies should be held accountable for their conduct in adjudicating claims of injured parties. It may be prudent to continue to advance claims for a special award until the Licence Appeal Tribunal provides its interpretation of the law and treatment of unreasonable, frivolous, vexatious or bad faith behaviour of insurance companies.
Bogoroch & Associates LLP has extensive experience in motor vehicle accident litigation and accident benefits. Bogoroch & Associates LLP strongly believes that victims of motor vehicle accidents are entitled to access to justice. Please contact Richard Bogoroch (rbogoroch@bogoroch.com) or Yoni Silberman (ysilberman@bogoroch.com) for further information on how we can assist you or your family member.
Bogoroch & Associates LLP
150 King St W #1901
Toronto, Ontario
M5H 1J9
Phone: 416-599-1700
Website: www.bogoroch.com
Footnotes:
[1] Insurance Act, RSO 1990, c I.8, s 282(10), prior to amendments from Fighting Fraud and Reducing Automobile Insurance Rate, 2014, S.O. 2014, c. 9, Sched 3 (effective April 1, 2016).
[2] Statutory Accident Benefits Schedule, O Reg 34/10.
[3] Plowright v Wellington Insurance Co., 1993 CarswellOnt 4786, OIC A-003985, October 29, 1993 at para 56.
[4] Michalski v Wawanesa Mutual Insurance Co., 2007 CarswellOnt 8415 at para 50.
[5] Hoang (Litigation Guardian of) v Personal Insurance Co. of Canada, 2014 ONSC 81 (Divisional Court) – A 6-year-old boy sustained a catastrophic brain injury and was required to attend a specialized private school. For over two years, the insurance company denied his claim for tuition and expenses to attend the specialized school. It was determined that the benefit was reasonable and necessary and properly payable. Justice Nolan of the Divisional Court upheld the decision granting a special award and ordered an award in the amount of $20,000.
[6] Waldock v State Farm Mutual Automobile Insurance Company (2014), FSCO 4315 upheld on appeal FSCO 4315 – A special award of $108,456.09 was awarded against an insurer who blindly relied on flawed medical reports.
[7] Licence Appeal tribunal Rules of Practice and Procedure, Version 1 (April 1, 2016).
[8] Insurance Act, RSO 1990, c I.8, s 280(6), as amended.