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| Atherton Barristers Home > What's New? > Right of Recovery | ||||||||||||
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Rights
of Recovery & The Bottom Line The last decade has spawned three major attempts at reforming the system to reduce the cost of automobile insurance and allow insurers to make a reasonable profit. Unfortunately, this change has not had the desired effect. The end result has forced some insurers out of the market entirely, while others have expended significant amounts on alternative cost-cutting measures. One often overlooked source of additional revenue is recovery from other sources through subrogation, loss transfer and claims for priority of payment. Subrogation Subrogation is not available for statutory accident benefits by virtue of section 267.8 (17) of the Insurance Act. The only exception to this provision is if the Minister of Health has made a payment, and the right to recovery is against a person other than a person insured under a motor vehicle liability policy issued in Ontario. The Court of Appeal has affirmed this recently in the case of Wawanesa v. O.P.P. Similarly, as a result of the direct compensation provisions of the Insurance Act, there is no right to subrogate against other insurers for property damage. However this prohibition only applies where the damage is caused “directly” (since Bill 59) by another motor vehicle. If an insurer can look to an “unprotected defendant” (that is, someone whose actions have caused the damage and who is not insured by a motor vehicle liability policy issued in Ontario), then insurers may still subrogate against the at-fault individual. The recent decision of Aqua/Tara Warehousing Inc. v. ABC Group is an example of how the legislation has been interpreted in this fashion. Avoid Losing Subrogation Rights
Unfamiliarity with recent changes in the law can also hinder subrogation. For example, losses that occur in a shopping plaza or strip mall require a careful review of all policies from the landlord, tenant and sub-tenant to determine whether there is an obligation on someone other than the insurer of first instance to cover the loss. Another impediment to subrogation is its potential cost. Many claims are not pursued as they are deemed to be too expensive and have little prospect of a return. However, recent changes to the monetary limits of the Small Claims Court (now $10,000) and the implementation of the Simplified Rules (permitting claims up to $50,000), combined with recent proposed changes to the Solicitors Act, now make such actions more economically viable. Arbitration Is Another Option
Arbitration should be used in almost every situation where there are two insurers. However it can also be used in situations where, for example, an “unprotected defendant” is not covered by insurance, but may have sufficient resources to cover the loss. The Arbitration Act permits parties, by agreement, to refer virtually any matter to arbitration. Arbitration has numerous benefits including being able to tailor the procedure to the needs of the parties (to include Affidavit of Documents, Examinations for Discovery and Motions), but without the cumbersome bureaucracy that is characteristic of litigation. The parties also have the added comfort of being able to choose, by agreement, an arbitrator who is familiar with the law. The time-line for completion of an arbitration is usually much less then in litigation, which translates into further cost savings. Loss Transfers
In the first case, the insurer of the heavy commercial vehicle must reimburse the second insurer for all statutory accident benefits paid to the insured, subject to liability as determined under the Fault Chart, or the ordinary rules of negligence, less an initial $2,000 deductible. In the second instance, the insurer of the of the individual operating the motorcycle or snowmobile looks to the other insurer for indemnification, again subject to the Fault Chart and the deductible. Some items are not recoverable under loss transfer such as the cost of investigators, private adjusters, and some medical reports, which are used solely for the benefit of the insurer. However, this would comprise a small portion of an insurer’s expenses that would not be recovered under loss transfer. There are many situations that would lend themselves to loss transfer but which are not being pursued simply sue to an unfamiliarity with the law. Such actions are, by statute, arbitrated and decisions are not published, except by choice, on the Financial Services Commission website. As these decisions are considered “private” between the parties, a decision does not have precedent value except if it is appealed to a Judge of the Superior Court, or further to the Divisional Court. However, most arbitrators will give consideration to decisions from one of their peers. Accordingly, insurers may not be familiar with the “state of the law” as it pertains to loss transfers. For example, it is now well-settled law that a vehicle that imparts force to another stationary object or vehicle is considered the “striking vehicle”. Therefore, in multi-vehicle chain reaction collisions, you must look to the vehicle that starts the chain reaction as the “striking vehicle”. If the chain reaction was caused by a heavy commercial vehicle, there will be a right to loss transfer. It is easy to imagine situations where insurers somewhat further down the chain would not be aware of their right to recover. A further example is the actual definition of a “heavy commercial vehicle”. While a basic definition is provided in the Regulations, the case law is constantly dealing with unique situations to determine whether a vehicle has commercial value. Another unique feature of loss transfer claims is that they have a six-year limitation period (York Fire & Casualty Insurance Co. v. Co-Operators). Therefore, claims extending back as far as 1998 still offer a prospect of recovery. It should be noted that the projected changes to the Limitations Act would not appear to apply to loss transfers. There is no limitation period for loss transfer specifically set out in the Insurance Act. A recent decision has established that loss transfer is similar to the old “action on a case” which has a six-year limitation period. The proposed amendments to the Limitation Act apply to “claims” which, based on the simple reading of the language in the Act, would appear to apply to litigation as opposed to “private arbitration”. The courts will have to address this problem in the future, but at this point it appears that the limitation period for loss transfer remains six years. Extra-Provincial Loss Transfers
There is a possibility that loss transfer would apply where the accident occurs in the United States, but the insured claimant has the right to be paid Ontario Statutory Accident Benefits. While the Supreme Court of Canada has recently determined that the law of the jurisdiction of the accident has general application, this is by no means a universal rule. There remains a real prospect of recovery from United States Insurers utilizing the loss transfer provisions, notwithstanding the fact that the accident occurred south of the border. Priority Of Payments
As with loss transfer, priority disputes are subject to private arbitration and are not frequently published. However there have been recent developments which place the onus on the first insurer to pay the benefits so long as there is a “nexus” between the insurer and the insured person. These decisions have held that the first insurer that receives a “completed application” must pay Statutory Accident Benefits to the insured even if it is subsequently determined that there was no actual insurance policy issued by the first insurer on the date of loss. However, all priority disputes are subject to the limitation periods found in Regulation 283/95 which states that the Notice must be issued within 90 days of receipt of the completed application or at some point thereafter if, in the opinion of the Arbitrator, it was not reasonable for the insurer to have made the determination within 90 days. Again, recent case law has determined that there is no time limit beyond 90 days within which an Arbitrator may determine that it was “unreasonable” to have discovered the other insurer was first in priority. While it would be difficult to convince an Arbitrator to extend the time frame beyond 90 days, there are fact situations in which it would be virtually impossible to discover that the other insurer was first in priority (e.g. where the insured is in a prolonged coma). It is always a matter of fact in each case as to whether an Arbitrator will grant the extension. Simply because notice was not made within 90 days does not mean that there is no possibility of recovery. Insurers in today’s market must take advantage of every opportunity to improve their bottom line. Atherton Barristers offers a plan designed to maximize recovery with minimal or no risk resulting in a true “win-win” situation. For more information on how we can assist you, please contact us at Atherton Barristers at (416) 365-1030 or toll free at (866) 237-1030. |
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Atherton
Barristers
| 357 Bay Street, Suite 703, Toronto, Ontario M5H 2T7 |
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