CHANGING GEARS: THE SABS POST-SEPTEMBER 1, 2010 – James M. Brown Introduction: .................................................................................................................................... 1 Medical and Rehabilitation Benefits:.............................................................................................. 2 Case Manager Services: .................................................................................................................. 3 Cost of Assessments: ...................................................................................................................... 3 Minor Injury Guideline: .................................................................................................................. 5 Caregiver Benefits: ......................................................................................................................... 8 Housekeeping and Home Maintenance Benefits: ........................................................................... 9 Attendant Care Benefits: ................................................................................................................. 9 Income Replacement Benefits: ..................................................................................................... 11 Interest on overdue amounts: ........................................................................................................ 12 Definition of “Catastrophic Impairment”: .................................................................................... 12 Definition of “Incurred” ................................................................................................................ 14 Transition Provisions: ................................................................................................................... 22 Conclusion: ................................................................................................................................... 26 INTRODUCTION: September 1, 2010 ushered in yet another accident benefits regime, this time known as Bill 34, the Statutory Accident Benefits Schedule – Effective September 1, 2010 1 (hereinafter referred to as the “New SABS”). The underlying theme of the New SABS is: consumer choice. Many of the benefits available under the Old SABS 2 have been reduced, or in some cases eliminated, from the basic coverage. Although largely still available, these benefits or levels of coverage must now be purchased through additional endorsements. This article is intended to provide an explanation of the changes under the New SABS and the reasons behind them. Additionally, some practical issues to be considered by counsel on both sides of accident benefits disputes have been highlighted, as well as some problematic areas in which future litigation is anticipated. 1 Statutory Accident Benefits Schedule – Effective September 1, 2010, O. Reg. 34/10. 2 For the purposes of this paper, references to the “Old SABS” will refer to the Statutory Accident Benefits Schedule – Accidents On or After November 1, 1996, O. Reg. 403/96, as amended. MEDICAL AND REHABILITATION BENEFITS: One of the most significant changes contained in the New SABS is the reduction of the maximum amount of medical and rehabilitation benefits from the previous $100,000.00 payable over the course of 10 years in non-catastrophic cases. Under the New SABS, the basic coverage will be restricted to $50,000.00 in medical and rehabilitation benefits, over the course of 10 years. However, as before, claimants who meet the definition of “catastrophic impairment” will still be entitled to up to $1,000,000.00 in medical and rehabilitation benefits, over the course of their lifetime. While the basic coverage for medical and rehabilitation benefits has been reduced to $50,000.00, optional benefits are available to increase this coverage. The first tier of optional benefits restores coverage back at the previous $100,000.00 in non-catastrophic limits that was available under the Old SABS. 3 Claimants with a “catastrophic impairment” will continue to have higher levels available to them, at the same $1,000,000.00 maximum, spread over the course of their lifetime. As before, a second tier of optional benefits is available to increase coverage even further. In non-catastrophic cases, this second tier of benefits provides coverage up to a maximum of $1,100,000.00, over the course of the claimant’s lifetime. 4 For catastrophic cases, this maximum is increased up to $2,000,000.00. 5 It should be noted, however, that this second tier of optional benefits is subject to an overall cap between the medical and rehabilitation coverage and the attendant care benefits coverage. In non-catastrophic cases, the second tier coverage is capped at $1,172,000.00 between both medical and rehabilitation benefits and attendant care benefits. 6 For catastrophic cases, this overall cap is $3,000,000.00 between these two benefits. 7 Very few claimants purchased any of the optional benefits previously available under the Old SABS, and there is little reason to expect a sudden change in this regard. Presumably, the few 3 New SABS, supra, note 1, s.28(1)3. 4 New SABS, supra, note 1, s.28(1)5iA. 5 New SABS, supra, note 1, s.28(1)5iB. 6 New SABS, supra, note 1, s.28(1) 5iiiA. 7 New SABS, supra, note 1, s.28(1) 5iiiB. who will purchase the first tier of optional benefits, let alone the second tier, will largely be restricted to those who work in the field. It is expected that most claimants will only purchase the basic coverage in an effort to minimize their premiums. Given the potential implications for a severely injured claimant restricted to the basic coverage, an increase in the number of claims against insurance brokers for failing to properly advise claimants of their options would not come as a great surprise. In the appropriate circumstances, the advancement and settlement of such claims might allow claimants a form of “bridge financing” for rehabilitation expenses pending the resolution of a tort claim. Alternatively, tort insurers may well see an increase in the number of requests for advanced payments to cover the costs of ongoing treatment. CASE MANAGER SERVICES: Under the Old SABS, catastrophic claimants were entitled to the costs of a case manager to co- ordinate their treatment. 8 While case manager services are still available to catastrophic claimants under the New SABS, 9 these benefits are also included in the second tier of optional medical and rehabilitation benefits. 10 The costs of case manager services are capped at the rates established by FSCO, 11 and are now deducted from the limits of the medical and rehabilitation benefits. 12 COST OF ASSESSMENTS: Another significant change with respect to medical and rehabilitation benefits deals with a claimant’s ability to obtain assessments at the cost of the insurer. Under the Old SABS, claimants were able to obtain assessments that were reasonably required to determine entitlement to benefits at the insurer’s cost so long as the proper forms were submitted. Other than for 8 Old SABS, supra, note 2, s.17. 9 New SABS, supra, note 1, s.17(1)(a). 10 New SABS, supra, note 1, s.17(1)(b). 11 New SABS, supra, note 1, s.17(2). 12 New SABS, supra, note 1, s.17(1). rebuttal assessments, 13 no restrictions were imposed on either the cost of individual assessments, subject to reasonableness, or the total amount spent on assessments over the course of the claim. Under the New SABS, however, the cost of medical assessments 14 is now capped at $2,000.00 per assessment. 15 More importantly, however, any amounts incurred for assessments are now deducted from the limits of the claimant’s medical and rehabilitation benefits. 16 Although insurer’s examinations are capped at the same $2,000.00, these amounts are obviously not deducted from the claimant’s limits. In a related change, rebuttal assessments to respond to a denial of benefits have now been completely eliminated. Additionally, future cost of care reports are now specifically excluded from coverage. 17 These changes will now require greater diligence to ensure that only truly necessary reports are obtained at the insurer’s cost. The Old SABS prescribed a very tight time frame for an accident benefits carrier to respond to a proposed assessment, and obligated an insurer to pay for the assessment if that deadline was missed. As a result, various assessments were routinely submitted over the course of a claim. In some instances, the reasonableness and necessity of these assessments were dubious. Often reports were really being obtained for the primary purposes of building a claimant’s tort claim at the cost of the accident benefits insurer, rather than determining a claimant’s entitlement to accident benefits. The most hotly contested item was typically a future cost of care report which, arguably, bore no relationship to a claimant’s entitlement to benefits. Now that the costs of assessments are deducted from the limits of the claimant’s medical and rehabilitation coverage, multiple assessments can no longer been submitted as a matter of routine. Close communication with treatment providers will be required to ensure that they are aware of these changes, and to ensure that they appreciate the potential consequences to a claimant’s ability to obtain further treatment. 13 See Old SABS, supra, note 2, s.42.1. 14 Under a somewhat related change, the New SABS now allow a self-employed claimant to obtain an accountant’s report at the insurer’s cost in order to calculate the quantum of the claimant’s income replacement benefit (see supra, note 1, s. 7(4)). The costs of these reports are limited to $2,500.00 (s.7(5)), and are obviously not deducted from the claimant’s medical and rehabilitation limits (s.18(5)(b)). 15 New SABS, supra, note 1, s.25(5)(a). 16 New SABS, supra, note 1, s.18(5). 17 New SABS, supra, note 1, s.25(5)(b). Great care will also have to be taken in determining whether or not to obtain an assessment to consider the issue of “catastrophic impairment”, especially in borderline cases. Because of the complexity of the definition, such assessments typically involve a multi-disciplinary team of assessors. Even with a maximum cost of $2,000.00 per assessment, one team of four assessors (which would not be uncommon for a catastrophic assessment) could easily reduce the claimant’s medical and rehabilitation limits by one fifth if the team concluded that the claimant did not meet the definition. Of course there may also be practical difficulties in finding assessors willing to perform some assessments within the $2,000.00 limit, especially with respect to some of the more complex specialties, such as psychovocational assessments. MINOR INJURY GUIDELINE: Under the Old SABS, injuries perceived to be the most minor in nature (Whiplash Associated Disorder, Grades I and II) were segregated from other types of injuries through the Pre- Approved Framework (“PAF”). 18 The central idea behind the PAF was to ensure that treatment of these injuries was consistent with the prevailing medical literature. Additionally, limitations were imposed on the amounts of weekly benefits, medical and rehabilitation benefits and attendant care benefits that were available to claimants diagnosed with those injuries, so as to avoid fostering dependency on these benefits. In the event that the claimant did not recover within the mandated treatment regime, or presented with more complex symptomatology, then the claimant could be removed from the PAF, and would have standard accident benefits available. The New SABS has now refined and expanded upon the PAF with what is now called the Minor Injury Guideline (“MIG”). 19 The term “minor injury” is specifically defined under the New SABS as follows: “minor injury” means one or more of a sprain, strain, whiplash associated disorder, contusion, abrasion, laceration or subluxation and includes any clinically associated sequelae to such an injury. 20 18 Old SABS, supra, note 2, s.37.1. 19 New SABS, supra, note 1, s. 40. For clarity, each of these terms has also been provided with its own specific definition. 21 Claimants who fall under the MIG receive vastly reduced medical and rehabilitation benefits that are capped at $3,500.00. 22 Treatment is then prescribed in accordance with the “Minor Injury Guideline”, which has been published by the Financial Services Commission of Ontario (“the Guideline”). 23 The Guideline itself proposes three blocks of treatment, with each block consisting of a four week period. 24 The overall goal of the treatment is “functional restoration”, and is aimed at active forms of therapy. 25 As with the previous PAF, the MIG does allow for the claimant to be removed from the mandated treatment regime, although the basis upon which that a claimant can be removed from the MIG is more restrictive than the PAF. Under the PAF, a claimant was generally exempted where they either: (a) had a pre-existing condition that differentiated their WAD I or WAD II injury from the norm; 26 (b) developed additional symptoms that fell beyond a mere WAD I or WAD II injury; 27 or (c) did not recover within the prescribed timeframes. 28 The New SABS stipulates that the MIG is to apply to impairments that are “predominantly a minor injury”. 29 While the meaning of this phrase has yet to be interpreted, it would appear that it is intended to be more restrictive than the previous PAF. For example, in the case of Kieffer v. Economical Mutual Insurance Co., 30 the arbitrator determined that the additional presence of a psychological impairment requiring treatment would be sufficient to exclude a claimant from the PAF. Based on the wording of the New SABS, it would appear that a claimant with a similar presentation would stay within the MIG, even though the same claimant would have previously been exempted from the PAF. 20 New SABS, supra, note 1, s.3. 21 Ibid. 22 New SABS, supra, note 1, s.18(1). 23 FSCO Guideline No. 02/10. 24 Ibid. 25 Ibid, s.2(g). 26 FSCO Guideline No. 01/06. 27 See eg. Kieffer v. Economical Mutual Insurance Co., FSCO A05-000494 (Feldman). 28 Old SABS, supra, note 2, s.37.2. 29 New SABS, supra, note 1, s.18(1). 30 Supra, note 27. Additionally, the ability of a claimant to be exempted from the MIG due to a pre-existing condition appears to be far more restricted than under the previous PAF. Under the PAF, the existence of a substantial pre-existing condition was typically sufficient to remove the claimant from the framework. 31 Under the New SABS, however, a claimant will be treated under the MIG unless the claimant can present “compelling evidence” of a pre-existing condition that will prevent recovery within the MIG. 32 While the term “compelling evidence” is undefined under the New SABS, further guidance can 33 be obtained from the wording of the Guideline itself. First, the Guideline suggests that the overall intention of the MIG is to be restrictive. Exclusions are to be the exception, not the rule. Second, the requirement that the evidence of a relevant pre-existing condition be “compelling” suggests a standard beyond a mere prima facie case. While the jurisprudence will ultimately define this standard, the use of the qualifier “compelling” suggests a standard perhaps akin to that of a strong prima facie case, which is employed in some jurisprudence addressing mandatory injunctive relief. Third, the pre-existing condition must “prevent” a claimant from achieving “maximal recovery”. Presumably, the use of these terms is intended to convey something more than a mere delay in recovery. “Maximal recovery”, which itself will require some definition, must actually be “prevented” by the pre-existing condition. Fourth, the compelling evidence must originate with the treating health practitioner. Presumably, this will restrict any independent expert to merely a supporting role. It would appear that a claimant cannot be removed from the MIG unless their treating doctors are in agreement, regardless of the opinions of any experts. Fifth, both the wording of the MIG and the monetary limit it imposes suggests that any opinion that the claimant ought to be excluded should be obtained at the outset of treatment, and ideally with the first OCF-18 that is submitted. 31 Pre-approved Framework Guideline for Grade I and II Whiplash Associated Disorders, FSCO Guideline No. 02/09. 32 New SABS, supra, note 1, s.18(1) and (2). 33 Minor Injury Guideline, FSCO Guideline No. 02/10, s.4. CAREGIVER BENEFITS: Under the Old SABS, claimants were entitled to receive weekly caregiver benefits if their injuries caused a substantial inability to perform their pre-accident duties as a primary caregiver. 34 Under the New SABS, however, such benefits are now only available to claimants who have either sustained a “catastrophic impairment”, 35 or alternatively have purchased additional optional coverage for these benefits. 36 Furthermore, these benefits, to the extent that they are available, are further limited by the new definition of “incurred” expenses, discussed below. As a practical matter, the restricted availability of caregiver benefits may have a significant impact on a wide variety of unpaid caregivers, including: stay-at-home mothers; parents caring for disabled children; and children caring for their elderly parents. The elimination of caregiver benefits from the basic coverage will likely deprive most of these claimants from any weekly benefits during the first two years following the accident. While such claimants could opt to receive a non-earner benefit, this would be a poor substitute. Unless the claimant is a full-time student at the time of the accident, a non-earner benefit only pays $185.00 per week, 37 and is subject to 26-week deductible. 38 Conversely, caregiver benefits are available immediately, and pay up to a maximum of $250.00 per week for the first person in need of care, with up to an additional $50.00 per week for each person thereafter. 39 The disability test for caregiver benefits is also less stringent for the first 104 week period, as entitlement only requires a substantial inability to perform pre-accident caregiver activities. 40 Conversely, initial entitlement to a non- earner benefit requires a “complete inability to carry on a normal life”. 41 As a practical matter, most, if not all, of such claimants who would qualify for a non-earner benefit will similarly 34 Old SABS, supra, note 2, s.13(1). It should be noted that the disability test changed after 104 weeks had passed since the accident, and a claimant would only remain entitled to caregiver benefits if their injuries resulted in a “complete inability to carry on a normal life” (s.13(4)). 35 New SABS, supra, note 1, s.13(1). 36 New SABS, supra, note 1, s. 28(2)i. 37 New SABS, supra, note 1, s.12(2). Although full-time students can receive $320.00 per week if they remain entitled after the initial 104-week period (s.12(3)). 38 New SABS, supra, note 1, s.12(4)(a). 39 New SABS, supra, note 1, s.13(2). 40 New SABS, supra, note 1, s.13(1). 41 New SABS, supra, note 1, s.12(1). It should be noted, however, that the disability test is the same for both benefits after 104 weeks have passed. qualify for “catastrophic impairment”, which would then allow them to access a caregiver benefit in any event. Given the potential consequences for claimants, it is easy to imagine that the failure to properly explain these optional benefits could be a fertile ground for liability claims against insurer brokers in certain circumstances. HOUSEKEEPING AND HOME MAINTENANCE BENEFITS: Housekeeping and home maintenance benefits have received similar treatment under the New SABS. Under the Old SABS, claimants could receive up to $100.00 per week in assistance, for a period of up to 104 weeks, in order to replace such services if their injuries resulted in a substantial inability to perform their pre-accident tasks. 42 Like caregiver benefits, housekeeping and home maintenance benefits have been restricted under the New SABS to claimants who have either sustained a “catastrophic impairment”, 43 or have purchased the optional benefits. 44 The availability of these benefits will be similarly restricted by the new definition of “incurred” expenses, discussed below. ATTENDANT CARE BENEFITS: As with medical and rehabilitation benefits, the availability of attendant care benefits has similarly been reduced under the New SABS. Previously, attendant care benefits were available to a claimant in need of assistance with their activities of daily living, up to a maximum monthly rate of $3,000.00 for non-catastrophic cases, or $6,000.00 for catastrophic cases. 45 Attendant care benefits were payable for up to 104 weeks in non-catastrophic cases, 46 or the duration of the 42 Old SABS, supra, note 2, s.22. It should be noted that the 104 week limitation did not apply to claimants who had sustained a “catastrophic impairment”. 43 New SABS, supra, note 1, s.23. 44 New SABS, supra, note 1, s.28(1)2ii. 45 Old SABS, supra, note 2, s.16(5). 46 Old SABS, supra, note 2, s.18(2). claim for catastrophic cases, 47 and maximum amounts were prescribed at either $72,000.00 for non-catastrophic cases or $1,000,000.00 for catastrophic cases. 48 Under the New SABS, attendant care benefits are still available in non-catastrophic cases at a monthly maximum of $3,000.00 49 over the course of 104 weeks. 50 However, the maximum amount over the course of that period has now been reduced to $36,000.00. 51 Mathematically, of course, this means that a claimant who incurs monthly amounts at the maximum rate of $3,000.00 will exhaust their attendant care benefits after the first year, and may have to go without such benefits for up to a year until an application for “catastrophic impairment” can be made. As before, the New SABS prescribes that claimants who have sustained a “catastrophic impairment” will still have attendant care benefits available to them at the monthly maximum rate of $6,000.00, 52 subject to an overall maximum amount of $1,000,000.00 over the course of the claim. 53 As before, optional benefits are available under the New SABS to increase the overall amounts of attendant care benefits to $1,072,000.00 in non-catastrophic cases, 54 or up to $2,000,000.00 in catastrophic cases. 55 These optional benefits last for the claimant’s lifetime, and are subject to a monthly maximum of $6,000.00. As discussed above, these optional benefits are also subject to overall caps when combined with medical and rehabilitation benefits, and cannot exceed $1,172,000.00 in non-catastrophic cases, 56 or $3,000,000.00 in catastrophic cases. 57 Unless a claimant receives an early designation of “catastrophic impairment”, they may face a difficult choice as to whether they wish to consume their attendant care benefits at the maximum rate with the knowledge that their benefits will be exhausted after the first year. Claimants who are in need of significant levels of attendant care may need to contemplate submitting an early application for a catastrophic designation just prior to the 104-week mark, assuming that their 47 Old SABS, supra, note 2, s.18(3). 48 Old SABS, supra, note 2, s.19(2). 49 New SABS, supra, note 1, s.19(3)i. 50 New SABS, supra, note 1, s.20(2). 51 New SABS, supra, note 1, s.19(3)2. 52 New SABS, supra, note 1, s.19(3)1ii. 53 New SABS, supra, note 1, s.19(3)2i. 54 New SABS, supra, note 1, s.28(1)5iiA. 55 New SABS, supra, note 1, s.28(1)5iiB. 56 New SABS, supra, note 1, s.28(1)5iiiA. 57 New SABS, supra, note 1, s.28(1)5iiiB. condition has stabilized to allow for the designation to be made. Alternatively, claimants may wish to minimize the amount of care received in order to stretch that care further towards the 104-week mark. Furthermore, a claimant may need to refrain from obtaining in-home assessments because: (a) the costs of such reports will reduce the limits of their medical and rehabilitation benefits; and (b) even if favourable, such assessments might increase the rate at which the attendant care limits are exhausted, which could be detrimental later on in the claim. INCOME REPLACEMENT BENEFITS: For the most part, income replacement benefits remain unchanged under the New SABS. The disability tests remain the same (ie. to be entitled, the claimant must suffer from a substantial inability to perform the essential tasks of their pre-accident employment for the first 104 weeks post-accident, 58 followed by a complete inability to engage in any employment for which they are reasonably suited by way of education, training or experience thereafter). 59 The amount of benefits remain capped at a weekly maximum of up to $400.00,60 and the same optional benefits are available to increase this weekly maximum to $600.00, $800.00 or $1,000.00. 61 The 62 mandatory minimum amount after 104 weeks, the treatment of collateral benefits and post- accident income, 63 and the reductions surrounding age 65, 64 all remain largely the same. The most significant change comes with respect to the calculation of the benefit itself. Under the Old SABS, income replacement benefits were calculated at 80% of a claimant’s net pre-accident weekly income, subject to the maximum and minimum amounts.65 However, under the New SABS, income replacement benefits are instead calculated at 70% of a claimant’s gross pre- accident weekly income. 66 It should also be noted that there has also been a corresponding 58 New SABS, supra, note 1, s.5(1). 59 New SABS, supra, note 1, s.6(2). 60 New SABS, supra, note 1,s.7(1). 61 New SABS, supra, note 1, s.28(1)1. 62 New SABS, supra, note 1, s.7(2). 63 New SABS, supra, note 1, s.7(3) and s.7(1), respectively. 64 New SABS, supra, note 1, s.8 and s.9. 65 Old SABS, supra, note 2, s.6(1). 66 New SABS, supra, note 1, s.7(2). change to the tort regime under the Insurance Act, 67 so that tort claims for past income loss are now calculated on the same basis. 68 Additionally, the New SABS also specifically provide for self-employed claimants to obtain their own accountant report calculating the amount of their income replacement benefit. 69 The Old SABS did not provide for such a right, and while some insurers would voluntarily pay for the costs of an accountant report if it was obtained at the outset of the claim, most claimants had to fund their own reports in order to respond to those obtained by their insurer. INTEREST ON OVERDUE AMOUNTS: The Old SABS prescribed a large, and some have argued punitive, interest rate on insurers with respect to overdue payments. Under the Old SABS, overdue payments attracted interest at the rate of 2% per month, compounded monthly. 70 As a result, the amount of interest owed on outstanding benefits could frequently eclipse the amounts of the benefits themselves at the end of litigation or arbitration. Under the New SABS, the interest rate has been reduced to the more moderate of 1% per month, again compounded monthly. 71 DEFINITION OF “CATASTROPHIC IMPAIRMENT”: Rather surprisingly, the definition of “catastrophic impairment” remains largely unchanged under the New SABS. Despite much debate, Glasgow Coma Scale readings of 9 or less continue to result in a catastrophic designation. 72 The New SABS still prescribes the use of the 4th Edition of the American Medical Association’s Guides to the Evaluation of Permanent Impairment rather than the newer editions in order to determine whether a claimant has sustained 55% whole 67 R.S.O. 1990, c.I.8, as amended. 68 Supra, note 67, s.267.5(1). 69 New SABS, supra, note 1, s.7(4). 70 Old SABS, supra, note 2, s.46(2). 71 New SABS, supra, note 1, s.51(2). 72 New SABS, supra, note 1, s.3(2)(d)(i). person impairment and is therefore entitled to a catastrophic designation. 73 The New SABS are even silent on the issue of combining physical and psychological whole person impairment scores in accordance with the approach enunciated in the case of Desbiens v. Mordini,74 and since followed in multiple other decisions. 75 However, it should be noted that this approach has recently been rejected in the decision of Kusnierz v. Economical Mutual Insurance Co., 76 and the issue would appear destined for the Court of Appeal. There has been one significant change to the definition, however. Under the Old SABS, the definition of “catastrophic impairment” included amputation or total and permanent loss of use of both arms or both legs, or one arm and one leg. 77 While these sections of the definition were considered an improvement over the previous version (which only included the first portion of the definition cited above), it still did not address single limb amputees, most of whom required benefits at the enhanced levels that were only available to those with a catastrophic designation. While many single limb amputees were ultimately able to achieve catastrophic designations through the 55% whole person impairment portion of the definition, access to certain benefits, such as attendant care, were delayed by the waiting periods imposed on such designations under the Old SABS. 78 Under the New SABS, this previous anomaly has been removed, and the relevant portion of the definition of “catastrophic impairment” now reads: (b) the amputation of an arm or leg or another impairment causing the total and permanent loss of use of an arm or a leg; 79 73 New SABS, supra, note 1, s.3(2)(e). 74  O.J. No. 4735 (S.C.J.). 75 See eg. Arts (Litigation guardian of) v. State Farm Insurance Co.,  O.J. No. 2096 (S.C.J.), leave to appeal denied,  O.J. N. 5740 (Div. Ct.); and Bains v. R.B.C. General Insurance Co., FSCO File No.: P09-00005 (Blackman). 76  O.J. No. 4462 (S.C.J.). 77 Old SABS, supra, note 2, s.2(1.2)(b) and (c). 78 Section 2(2.1) of the Old SABS, supra, note 2, stipulated that an application under the 55% whole person impairment portion of the catastrophic definition could only be made after either the passage of two years since the accident or after the claimant had reached maximum medical recovery. In most cases, single limb amputees would be restricted to the $3,000.00 monthly attendant care benefits for the first two years following their accidents, and might be without attendant care benefits in between the second anniversary of their accident and the receipt of a catastrophic designation. 79 New SABS, supra, note 1, s.3(2)(b). As a result of this change, single limb amputees will now have immediate access to catastrophic limits for benefits without delay. Finally, this amendment will put an end to the anomalous, and it is respectfully submitted, illogical, manner in which single limb amputees were treated under the SABS. However, as discussed below concerning the transition rules, this change in definition causes some confusion for single limb amputees injured prior to September 1, 2010. DEFINITION OF “INCURRED” One of the other changes under the New SABS is the introduction of a specific definition of the term “incurred.” 80 The use of the term “incurred”, in and of itself, is not new. The Old SABS, as well as most of the previous versions of the SABS, have stipulated that benefits compensated for “incurred expenses”. 81 However, for the first time “incurred” is now defined under the New SABS. In the past, disputes over the requirement that expenses be “incurred” have typically arisen in two contexts: (a) where services are provided by a family member rather than a professional; and (b) where a claimant never actually received services that were later found to have been reasonably required. In the first context, judges and arbitrators were typically concerned with striking the appropriate balance between the competing interests of the claimant and the insurer. On the one hand, it would be unreasonable to force an injured claimant, who is likely experiencing a reduced income level as a result of their injuries, to hire professional service providers for housekeeping, caregiving assistance, or attendant care – especially when the SABS capped the indemnity for such services below market rates. On the other hand, the services provided by family members are typically more difficult to monitor, and raise the increased potential for fraud. In order to strike an appropriate balance, the past jurisprudence interpreted the “incurred” requirement under the Old SABS to allow claimants to create flexible legal obligations, such as “promises to pay”. This way, family members could provide services for claimants so long as 80 New SABS, supra, note 1, s.3(7)(e). 81 See eg. Old SABS, supra, note 2, ss. 13(2), 14(2), 16(2) and 22(1). the claimant “incurred” a legal obligation to pay for the services provided at some point in the future, typically after indemnity had been received from the insurer. The second situation, where the services were never actually provided, however, created a different set of difficulties. While a “promise to pay” could easily be interpreted as a means of “incurring” an expense, the same approach could not be taken when the services were never even received. Furthermore, the competing policy considerations were also considerably different. On the one hand, requiring an insurer to pay for services that were never received could be seen as a windfall to the claimant. Conversely, failing to require payment for services found to be necessary might encourage an insurer to take advantage of a claimant’s impecuniousity because the insurer may never have to indemnify the expenses even if they were required. In order to address this situation, judges and arbitrators determined that expenses could be “incurred” even though they were never received by the claimant, as occurred in the decision of Kennelly v. Wawanesa Mutual Insurance Co. 82 Decided under Bill 164, one of the issues in dispute in Kennelly was the claimant’s entitlement to past and ongoing speech therapy that had been denied by the insurer. Although the claimant had received speech therapy in the past, payment for this treatment had been discontinued by the insurer in accordance with a DAC opinion. The claimant was later re-assessed by her own assessor, who supported ongoing treatment. During the arbitration, one of the issues before the arbitrator was whether the claimant could be awarded payment for past treatment that was never received. The insurer argued that since the claimant could not travel back in time and obtain the benefit of the past treatment, payment for that treatment would be tantamount to a windfall. However, due to the potential ramifications of refusing to award the costs of treatment found to be reasonable, the arbitrator found that the treatment had been “incurred” even though it had not actually been obtained. 83 The same approach was followed under the Old SABS, as evidenced by the decision in McMichael v. Belair Insurance Co. 84 Part of the McMichael decision involved a claim for 82 FSCO A99-000139 (Baltman). 83 Supra, note 82, at 18 to 19. 84 FSCO A02-001081 (Muir), affirmed FSCO File No.: P05-00006 (Makepeace), application for judicial review dismissed,  O.J. No. 1972 (Div. Ct.). attendant care benefits for services that the claimant never received. In a rather unusual set of circumstances, the accident in issue was determined to have caused the claimant to progress from pre-accident recreational cocaine use to a post-accident addiction to crack cocaine. The claimant’s addiction was found, at arbitration, to be sufficiently severe for a designation of catastrophic impairment, which entitled the claimant to enhanced levels of attendant care benefits. The claimant had been assessed as requiring 24 hour a day care in order to control his addiction. However, the claimant had been unable to afford that level of care, and went without. During the hearing, the insurer argued that the benefits therefore had not been “incurred” within the meaning of the SABS, as the care had never been received. The insurer’s arguments were rejected, however, and the benefits were found to have been “incurred” nonetheless. 85 In addition to awarding the past attendant care services that were never received, the arbitrator also awarded interest on these amounts, at the prescribed rate of 2% per month, compounded monthly. The insurer appealed the initial decision on the several grounds, including what it alleged to be errors of law with respect to the awards of attendant care benefits and interest. In dismissing the appeal, the Director’s Delegate applied the same reasoning that had been previously applied in Kennelly and subsequent decisions. The Director’s Delegate concluded that a strict interpretation of the “incurred” requirement would create an absurdity, and, if applied, would render judges and arbitrators impotent with respect to ordering past services that had not been obtained, regardless of medical entitlement. 86 Ultimately, the Director’s Delegate upheld the initial award of past attendant care benefits and interest, and the insurer sought judicial review of the appeal decision. However, the application for judicial review was unsuccessful, as the appeal decision was found not to be patently unreasonable. In the course of dismissing the application for judicial review, Justice Lane adopted the reasoning of the Director’s Delegate, and similarly concluded that the application of a strict 85 Supra, note 84, at 66 to 67. 86 McMichael v. Belair Insurance Co., FSCO File No.: P05-00006 (Makepeace) at 22 to 23. interpretation to the “incurred” definition would render the dispute resolution process meaningless. 87 This reasoning was later adopted by the Ontario Court of Appeal in the decision of Monks v. ING Insurance Co. of Canada. 88 The appeal in that decision focused on several issues, one of which involved a declaratory order made at trial with respect to future medical and rehabilitation benefits. On appeal, the insurer argued, in part, that the declaratory order ought to be overturned because it would have the effect of removing the requirement that expenses be “incurred” prior to being recoverable as benefits. Citing both McMichael and Kennelly, the Court unanimously rejected the insurer’s argument. 89 Against this background, the New SABS includes a formal definition of the term “incurred” that purports to be far more restrictive than the definition that the term had previously received. 3. (7) For the purposes of this Regulation, […] (e) subject to subsection (8), an expense in respect of goods or services referred to in this Regulation is not incurred by an insured person unless, (i) the insured person has received the goods or services to which the expense relates, (ii) the insured person has paid the expense, has promised to pay the expense or is otherwise legally obligated to pay the expense, and (iii) the person who provided the goods or services, (A) did so in the course of the employment, occupation or profession in which he or she would ordinarily have been engaged, but for the accident, or 87 Belair Insurance Co. v. McMichael,  O.J. No. 1972 (Div. Ct.) at paras. 19-21. 88  O.J. No. 1371 (C.A.). 89 Supra, note 88, at paras. 49 to 52. (B) sustained an economic loss as a result of providing the goods or services to the insured person; 90 On its face, it would appear that the introduction of the definition of “incurred” into the New SABS is a direct response to decisions such as the ones cited above. The new definition strives to adopt some of the previous flexibility with respect to the arrangements created by claimants by specifically acknowledging a “promise to pay” arrangement. Similarly, the definition adopts the previous flexibility with respect to service providers, by allowing lay persons such as friends or family members to provide the services, so long as the service provider sustains an “economic loss”. Importantly, the requirement that the claimant actually receive the services appears to completely overrule the past decisions. At first glance, the “economic loss” requirement would seem to eliminate most claims for services provided by a lay person, unless of course the lay person took time away from work to perform the services. However, it must be noted that the drafters of the New SABS opted to use the term “economic loss” rather than the term “loss of income”, which appears in other portions of the New SABS, 91 and was frequently used in the Old SABS as well. Similarly, the term “income” appears throughout the New SABS, as it has in past versions. Given the prominent use of the term “income” and the past and present use of the term “loss of income”, one must presume that the drafters of the legislation intended a broader meaning for the term “economic loss” as it is used in the definition of “incurred”. Assuming that “economic loss” was intended to have a broader meaning than simply “loss of income”, practical questions arise as to the breadth to be given to the term. There would appear to be no question that a service provider who missed work to provide services to the claimant, and lost income as a result suffered an “economic loss”. But what about a service provider who used banked sick leave when providing the services, and thus did not lose any income? What if the banked sick leave had no monetary value to the service provider at retirement? A service provider in such a scenario would presumably have suffered a “loss”, but would that have been an “economic loss”? 90 New SABS, supra, note 1, s.3(7)(e). 91 The term “loss of income” can be found under s.3(7)(d) with respect to income continuation benefits and under the definition of “other income replacement assistance” contained in s.4(1). What about a service provider who was unemployed at the time they provided the services? Presumably, such a service provider would have suffered a “loss” of time that might have been used to seek out employment. Would that loss of opportunity amount to an “economic loss” for the purposes of the definition? What about the amount of the economic loss? Does it matter if the amounts to be received from the claimant’s benefits vastly exceed the amount of the “economic loss”? Should some proportional relationship exist between the “economic loss” and the benefits paid? Ultimately, these are questions that will have to be answered by the Courts and by arbitrators with the Financial Services Commission of Ontario when interpreting this new definition. However, even when these questions are answered, further questions will be raised with respect to the issue of evidence. What evidence can be required by an insurer to substantiate an “economic loss” on the part of the service provider? The New SABS (as with previous versions) contain certain mechanisms to compel the production of evidence in support of a claim. Documents or other information that is “reasonably required” can be requested in accordance with s.33, and benefits can be suspended if the documents are not produced. 92 A formal examination under oath can be conducted as well, similarly with the suspension of benefits being the sanction for non-compliance. 93 However, all of these mechanisms involve the claimant, and not a third party, such as a service provider. Presumably, an insurer will be able to request that the claimant obtain some evidence of “economic loss” by the service provider as being “reasonably required” given the wording of the “incurred” definition. But will the insurer be able to insist upon corroborating documentation? One would presume that the insurer will not be able to insist upon the production of income tax returns, employment records, or other private documents from a third party service provider, with whom the insurer has no contract. Presumably, some less invasive evidence will be satisfactory. However, we will have to wait and see where that line will ultimately be drawn. A related issue will be the remedy available to the insurer where the service provider refuses to provide sufficient details. As previously mentioned, s.33 of the New SABS allows for a suspension of benefits where the claimant fails to comply with a reasonable request, but, given 92 New SABS, supra, note 1, s.33. 93 New SABS, supra, note 1, s.33. the consumer protection purpose of the SABS and the goal of prompt payment of necessary benefits, it seems unlikely that an insurer would be able to suspend benefits as a result of the actions of a third party. Presumably a claimant will be obligated to adduce some evidence to satisfy the “incurred” definition, but once that obligation has been satisfied, an insurer’s ability to insist upon corroborating evidence from a third party by way of a suspension of benefits will likely be limited. In addition to the above issues, the new definition also appears to overrule past decisions which have allowed recovery despite the fact that the claimant never received the services in question. However, the underlying policy implications addressed in those cases still remain. How will judges and arbitrators reconcile the wording of the new definition with the policy concerns that have been identified? A partial answer can be found under the deeming provision that has been added to the New SABS. Under this provision, expenses that have not been received can still be deemed to have been incurred if the expenses were not obtained because of unreasonable withholding or delay on the part of the insurer: (8) If in a dispute to which sections 279 to 283 of the Act apply, a Court or arbitrator finds that an expense was not incurred because the insurer unreasonably withheld or delayed payment of a benefit in respect of the expense, the Court or arbitrator may, for the purpose of determining an insured person’s entitlement to the benefit, deem the expense to have been incurred. 94 On its face, the deeming provision would appear to be an attempt to alleviate the concerns raised in McMichael and other cases. Notwithstanding the requirements of the definition, it would be open to a judge or arbitrator to deem an expense to be incurred if there was a finding that the insurer “unreasonably withheld or delayed payment”. However, the wording “unreasonably withheld or delayed payment” has already been the subject of much arbitral interpretation, as nearly identical wording appears under s. 282(10) of the Insurance Act, 95 which provides FSCO arbitrators with the jurisdiction to levy a special award against an insurer that has “unreasonably 94 New SABS, supra, note 1, s.3(8). 95 Supra, note 67. withheld or delayed payment” of benefits. 96 In the arbitration context, a special award is akin to an award of aggravated or punitive damages, although it is limited in amount and does not require any evidence of high-handed conduct (although that can be a factor in calculating the amount of the special award). There is substantial case law interpreting the wording “unreasonably withheld or delayed payment” in the context of special awards, which, presumably, will guide the interpretation of the same wording under the deeming provision as well. Generally speaking, these cases have focused on the word “unreasonable” and have concluded that an insurer is entitled to be incorrect, without necessarily being “unreasonable”. 97 Similarly, other cases have held that an insurer is entitled to rely upon the opinions of the assessors it retains in the adjustment of the file without being “unreasonable”, even if the opinions of those assessors are ultimately rejected at an arbitration hearing. 98 Assuming that a similar approach will be adopted with respect to the deeming provision, it would appear that resort to the deeming provision will actually be far rarer than might first be anticipated. If the insurer and its assessors are entitled to be wrong without being unreasonable, one would presume that most claimants will be unable to satisfy the requirements of the deeming provision. As an aside, due to the wording of s. 282(10), any application of the deeming provision may have additional, unforeseen, consequences for an insurer, at least in the arbitration context. As cited above, s. 282(10) uses mandatory wording, and stipulates that an arbitrator “shall” make a special award where there is a finding that benefits have been “unreasonably withheld or delayed”. 99 Thus, at least in the arbitration context, any time expenses are deemed to have been incurred under s. 3(8), the insurer will face the additional sanction of a special award under s. 282(10). 96 Supra, note 67, s.282(10). 97 Melchiorre v. Wawanesa Mutual Insurance Company, FSCO A05-00491 and A05-00492 (Feldman) at 23, aff’d Wawanesa Mutual Insurance Co. v. Melchiorre et al., FSCO P07-00014 (Blackman). See also, eg. Yogesvaran v. State Farm Mutual Automobile Insurance Co., FSCO A08-001142 (Miller). 98 Carr v. TD General Insurance Co., FSCO A09-003154 (Killoran) at 19. 99 See Abrams v. Aviva Insurance Co. of Canada, FSCO A06-000806, A06-002535 and A06-002534 (Ashby), rev’d on other grounds, FSCO P08-00027 and P08-00028 (Blackman). Despite the deeming provision, there does not appear to be a readily available manner in which to reconcile the principles underlying the SABS, as outlined in decisions such as Kennelly, McMichael and Monks, with the new “incurred” definition. Barring a creative interpretation to the term “received”, or “unreasonable” conduct on the part of the insurer, it appears that an impecunious claimant will no longer be able to recover benefits for services that were never provided, notwithstanding the policy implications that arise from such a conclusion. TRANSITION PROVISIONS: The manner in which the New SABS have been implemented is also bound to cause some confusion. Unlike some of the changes to past regimes, the New SABS has not simply been made applicable to “accidents on or after September 1, 2010”. Instead, the New SABS are “effective September 1, 2010”. Rather than starting fresh for any and all accidents after this date, the New SABS will govern ongoing claims under the Old SABS (both Bill 59 and Bill 198), at least with respect to procedure. Similarly, and perhaps equally confusing, not all parts of the New SABS will apply to any accidents that occur after September 1, 2010, as some portions will depend in part on the renewal date for the claimant’s insurance policy. For ease of analysis, we will base our discussion on two scenarios: (1) Old Accidents – by which we mean accidents that occurred prior to September 1, 2010; and (2) New Accidents – by which we mean accidents that occurred after September 1, 2010. Starting with Old Accidents, it is intended that the New SABS will govern the procedural aspects of the claims process, however, the claimant’s substantive rights to benefits will be guided by the benefits available under the Old SABS: 2. (1) Except as otherwise provided in section 68, the benefits set out in this Regulation shall be provided under every contract evidenced by a motor vehicle liability policy in respect of accidents occurring on or after September 1, 2010. (2) Subsections 25 (1), (3), (4) and (5), Parts VIII and IX, other than subsections 50 (2) to (5), and Parts X, XI and XII apply with such modifications as are necessary in respect of benefits provided under the Old Regulation with respect to accidents that occurred on or after November 1, 1996 and before September 1, 2010 and, for that purpose, the following rules apply: 1. References in paragraph 2 of subsection 25 (1), subsections 38 (1), (5), (7), (9), (10), (11), (12) and (14), sections 40 and 41 and subsection 44 (3) to the Minor Injury Guideline shall be read as references to the Pre-approved Framework Guideline referred to in the Old Regulation that would apply. 2. An amount that would, but for subsection 3 (1.3) of the Old Regulation, be paid under the Old Regulation after August 31, 2010 shall be paid under this Regulation in the amount determined, i. under the Old Regulation, other than under section 24 of that Regulation, or ii. under subsections 25 (1), (3), (4) and (5). 3. An amount described under paragraph 2 that is paid under this Regulation shall not include any amount previously paid under the Old Regulation. 100 In the case of Old Accidents, claimants will still have their income replacement benefits calculated at 80% of their net income. Claimants will still have totals of medical and rehabilitation benefits in the amounts of $100,000.00 if non-catastrophic, or $1,000,000.00 if catastrophic. Claimants will still have access to caregiver and housekeeping benefits, regardless of a catastrophic designation. Claimants will still have access to up to 104 weeks of attendant care benefits at up to $3,000.00 per month if non-catastrophic, or up to $6,000.00 per month and an overall maximum of $1,000,000.00 if catastrophic. With respect to interest, any amounts that were overdue prior to September 1, 2010 continue to attract the old interest rate of 2% per month. 101 Any amounts that become overdue after September 1, 2010 attract the new interest rate of 1% per month. 102 Procedurally, claimants will have to follow the new procedures. The old treatment plans (OCF- 18s) and applications for approvals of assessments (OCF-22s) have now been combined into a 100 New SABS, supra, note 1, s.2. 101 See FSCO Bulletin No. A-04/10. 102 See FSCO Bulletin No. A-04/10. single “Treatment and Assessment Plan” (OCF-18), that must be submitted for pre-approval. Claimants will still be able to recover the costs of any examinations under what used to be s. 24 of the Old SABS (and is now s. 25 of the New SABS). As under the Old SABS, the costs of these examinations will not be subject to a specific reserve, and will not be deductible from the claimant’s medical and rehabilitation benefits. However, as of September 1, 2010, these assessments will be limited to the maximum amount of $2,000.00 applicable under the New SABS. Similarly, claimants will no longer be entitled to obtain a formal rebuttal assessment at the cost of the insurer, as was previously available. The applicability of some of the changes, however, is less clear. For example, will the definition of “incurred” expenses discussed above apply to Old Accidents? The transition provisions in s. 2(2) make specific reference to: (a) the costs of examinations under s. 25; (b) the procedures for claiming benefits under Part VIII; (c) the payment of benefits under Part IX; (d) the duty to mitigate under Part X; (e) the interaction with other systems under Part XI; and (f) various miscellaneous sections under Part XII. However, the transition provisions do not specifically address the general provisions under Part I, including the definitions contained in s. 3. Although FSCO has published a guideline intended to guide the transition between the two systems, 103 the guideline is silent on this issue. As a matter of statutory interpretation, legislation is presumed to be intended to apply prospectively, and not to interfere with vested rights. However, presumably, there is no vested right to the more flexible approach to the “incurred” requirement, except with respect to expenses that have already been submitted. Similarly, one would presume that the new definition applies to any expenses that are claimed after September 1, 2010, even if claims for those expenses had previously been accepted by the insurer. While one might be tempted to disregard the potential application of the “incurred” definition as an issue of relatively minor significance, the issue takes on a much greater significance when considering the change to the definition of “catastrophic impairment”, which now specifically includes single limb amputees. As with the “incurred” definition, the definition of “catastrophic impairment” is also found in s. 3 of the New SABS, which is not specifically addressed in s. 2. 103 Property & Casualty – Auto Bulletin A-04/10, “Transition to the New Statutory Accident Benefits Schedule – Effective September 1, 2010.” Do the new changes mean that claimants injured in Old Accidents are automatically considered to be catastrophic effective September 1, 2010? Alternatively, do claimants injured in Old Accidents now have a right to apply, or in some cases re-apply, 104 under the new definition? Could an insurer face some exposure to a claim for bad faith or a special award if it fails to automatically recognize a claimant’s status as catastrophic under the change in definition? Unfortunately, the answers thus far are not clear. Turning to New Accidents, the key transition provision is found at s. 68 of the New SABS, which provides for a presumption of the purchase of first tier optional benefits pending the renewal date on the policy: 68. (1) Despite any other provision of this Regulation and unless otherwise agreed in writing by the named insured and the insurer, subsection (2) applies to every motor vehicle liability policy that is in effect on September 1, 2010 until the earlier of, (a) the first expiry date under the motor vehicle policy; and (b) the day on which the motor vehicle liability policy is terminated by the insurer or the insured, if the policy is terminated before the day referred to in clause (a). (2) The following benefits are deemed to be included in the motor vehicle liability policy and are applicable to an insured person in respect of the motor vehicle liability policy: 1. The optional caregiver, housekeeping and home maintenance benefit referred to in paragraph 2 of subsection 28 (1). 2. The optional medical and rehabilitation benefit referred to in paragraph 3 of subsection 28 (1). 3. The optional attendant care benefit referred to in paragraph 4 of subsection 28 (1). 104 Although re-applications were disallowed by Director’s Delegate Blackman in Aviva Canada Inc. v. Wry, FSCO File No.: P09-00016, this decision did not address the availability of a re-application on a separate criterion under the definition that had not been addressed. 4. All optional benefits referred to in subsection 27 (1) or section 28 or 29 of the Old Regulation that were purchased and still in effect on September 1, 2010. 105 Thus, with any New Accident the New SABS are simply applied. However, if the accident occurred prior to the renewal date on the claimant’s policy, then the claimant automatically has the first tier of optional benefits available to them. CONCLUSION: The New SABS represents a marked departure from its most recent predecessors. Most of the benefits previously available under the basic accident benefits coverage have been reduced, or, in some cases, eliminated. Although essentially equivalent coverage remains available through optional benefits, history has shown that very few claimants purchase such coverage. It seems that most consumers are concerned with minimizing their premiums rather than maximizing their coverage. As outlined above, the New SABS will present various challenges for claimants and for counsel on either side of accident benefits disputes. How will claimants effectively manage their recovery within the drastically reduced limits of coverage under the basic benefits package? How will the MIG be applied in practice? How will the definition of “incurred” be interpreted? How will the new definitions be applied to existing claims? Will the reductions in coverage place a higher duty on brokers to properly explain the optional benefits available? The New SABS raises many questions, and many concerns. Unfortunately, very few answers are readily apparent at this time. Strategies will have to be developed to adapt to the new limits of the basic coverage. Interpretation of key terms will be needed. How these issues will be resolved is uncertain – only time will tell. However, one thing can be said with certainty – once these issues have been resolved, we will then be ready for the next round of changes. 105 New SABS, supra, note 1, s.68.
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