Automobile Negligence Claims
I have considered negligence claims arising out of the ownership, use or operation of an automobile separately from other types of claims simply because there are so many of them. They represent the most common case type commenced in the Superior Court of Justice (21%). 104 Although a substantial majority of automobile negligence actions settle, these claims are a major consumer of institutional and judicial resources. They are frequently complicated by accident benefit and verbal threshold issues. Many of them are tried with a jury.
As matters now stand, through Bill 198 amendments to the Insurance Act in 1996 and regulations thereunder, these claims are subject to a $30,000 deductible unless the judgment exceeds $100,000. 105 Where applicable, this deductible is a tax on damages, obviously intended to lower loss costs and thus premiums by discouraging plaintiffs and their counsel from pursuing smaller claims. Put crassly, no one of sound mind is likely to pursue a $30,000 or $40,000 claim if $30,000 of it is to be deducted at the end. I am certain that insurers can provide estimates of the impact of the $30,000 deduction on premiums. That exercise is beyond the scope of this Review.
In addition to the $30,000 deduction, through amendments to Regulation 461/96, 106 Ontario introduced a verbal threshold that seems to require that plaintiffs must prove that their injuries are serious and permanent. The verbal threshold, through s. 4.2(1) of the regulation, requires that plaintiffs establish that they sustained a permanent serious impairment of an important physical, mental or psychological function. The regulation sets out: a detailed definition of the criteria for impairment hinging on a test of substantial interference; detailed criteria for determining when a function that is impaired may be considered an important function; and further detailed criteria for assessing whether the impairment is permanent. Section 4.3(1) then sets out the medical evidentiary requirements that must be met to support a claim of permanent serious impairment.
The threshold issue is for the trial judge, not the jury. When the threshold is an issue, and where the trial is by jury, the trial judge typically will deal with the threshold issue after the jury charge and while the jury is deliberating. If the trial judge concludes that the plaintiff has not met the threshold test, the plaintiff has no right to sue. This is simple enough except for the fact that this revelation occurs after the entire trial has been completed with its attendant costs.
I should note that the new threshold (under Bill 198 and the amended regulation 461/96) is relevant to what, I was told, is a large number of cases in the pipeline. To date, the Bill 198 threshold has not been considered by the Court of Appeal. It has, of course, been applied in settlement negotiations in many cases in which it is an issue.
I think that it is clear that the objective of the verbal threshold is to keep smaller cases out of the system by denying plaintiffs the right to sue in such cases. If that sounds familiar, it is because that is generally the purpose of the $30,000 deductible. I accept that there is a substantial public and government interest in keeping automobile premiums under control. I also accept the inevitable correlations between insurers' bodily injury loss costs and premiums – as one goes up, so does the other. What automobile claims costs are, and whether automobile insurers are making or losing money, is not for me to determine.
I thus limit the expression of my concern to the efficacy of the verbal threshold. In that context I ask two questions. First, and in light of the generally similar purposes of the deductible and the verbal threshold, what claims are excluded by the verbal threshold that would not be excluded by the deductible? Second, one direct beneficiary of the verbal threshold regulation is the medical profession that provides medical-legal reports on the threshold issue. It would be interesting to know what costs are incurred by both plaintiffs and insurers in developing evidence relevant to the threshold issue. I have no idea exactly what those costs are. However, I feel safe in saying many millions of dollars are involved. By contrast, the $30,000 deductible carries almost no transaction costs since it essentially involves an arithmetic exercise.
Both the deductible and the verbal threshold have access to justice implications. Both work to restrict access to the courts by providing an economic disincentive to making a claim. At the end of the day, for those cases that do proceed, the deductible where applicable saves claims costs (by lopping $30,000 from the plaintiff's damages) and the verbal threshold, if not met, means that the plaintiff's action is dismissed.
Under s. 289.1 of the Insurance Act, the Superintendent of Financial Services is required to undertake at least every five years (or more often as requested by the Minister of Finance) a review of Part VI of the Act and regulations and to recommend “any amendments that the Superintendent believes will improve the effectiveness and administration” of Part VI and the regulations. It seems to me that this would be the appropriate avenue for a more thorough study of all elements of Bill 198, including the deductible and the threshold.
I would urge the Superintendent to include in his deliberations what net benefit accrues from the existence of the verbal threshold in circumstances given the existence of the $30,000 deductible. If there are claims excluded by the verbal threshold that would not have been excluded by the deductible, is it in the public interest that such claims be excluded? If, for example, claims of children or the unemployed elderly are excluded, considerable thought might be given to the integrity of that exclusion.
Recommendations (Automobile Negligence Claims)
- The Superintendent of Financial Services, in conducting the
next review of Part VI of the Insurance Act and the regulations
under it, should consider the following questions:
- What has been the actual impact on loss costs and premiums of the transition from the earlier verbal threshold to the current threshold?
- If it is found that some claims were excluded by the verbal threshold that would not be excluded by the deductible, who are the claimants excluded from pursuing remedies in the civil justice system and what are their injuries? These are both important public interest considerations; and
- Should the deductible, now $30,000, applicable to some actions be increased, decreased or abandoned?