It is no secret that insurance fraud, especially fraud related to accident benefits claims, has unfortunately become common place in Ontario. Major media outlets recently covered the beginnings of what should prove to be very interesting criminal proceedings targeted to bring an end to insurance fraud in Ontario.
As you may recall from headlines at the end of February, the Toronto Police Service (traffic service division), the Insurance Bureau of Canada (IBC), and the Financial Services Commission of Ontario (FSCO), ran a joint investigation which led to the arrest of 37 people in what was termed “Project Whiplash”. The Toronto Star reported that State Farm Insurance had begun civil proceedings against the accused in December 2010, and that the investigation and eventual arrests were as a result of State Farm investigating the fraudulent behaviours conducted within their own claims.
When the criminal arrests were made, FSCO also announced that they had charged four treatment and assessment centres, and a number of individuals, as a result of the same investigations. The clinics were charged with knowingly making false or misleading statements to an auto insurer. The clinics charged by FSCO were, McCowan Rehabilitation Clinic, Ontario Rehabilitation Clinic, Physiotherapy Clinic, and North York Health & Rehabilitation Centre. While the administrative side of FSCO is clearly joined with insurers in fighting the battle against fraud, a recent decision shows that the dispute resolution side of FSCO is still focussed on the insureds and not the allegedly fraudulent clinics they attend.
Intact Insurance Company (along with three other related insurance companies, including Belair Insurance Company Inc.), brought a FSCO motion in January to stay arbitration proceedings on fifteen of its pending arbitration files. Intact argued that the arbitration proceedings should be stayed pending the outcome of a Superior Court Action it had brought against three clinics. The fifteen individual albeit identical decisions (except for two which also explored a separate ground for seeking a stay of proceedings) were released March 19, 2012 by Arbitrator Richard Feldman. Ultimately, Arbitrator Feldman determined that the fight against fraudulent clinics should not delay the right of individual insureds to receive the accident benefits they are entitled to, and therefore, he dismissed the motions to stay all fifteen of the FSCO arbitration proceedings.
The specifics of this case may be applied to any current ongoing FSCO arbitrations with issues involving clinics currently in litigation with insurers. Intact argued the motions simultaneously, and relied on the same argument in seeking the stay. The three clinics, Olser Rehabilitation Centre Inc., Assessment Direct Inc., and Metro Rehabilitation Centre Inc., were each involved in the fifteen pending arbitration proceedings. Intact is seeking $15,000,000 in general and punitive damages in relation to the cases of 218 separate insureds who “attended” the defendant clinics. None of those 218 insureds (including the fifteen insureds with arbitrations pending at FSCO) had been named as parties to the action by Intact.
Arbitrator Feldman was not blind to the ongoing battle against automobile insurance fraud in Ontario. He stated in his decision:
It is true that in the last year or so, the Superintendent of Financial Services and others have expressed concern over what appears to be widespread fraud and abuse of the no-fault insurance scheme and the resulting cost to Ontarians. The Superintendent has encouraged insurance companies to be pro-active in combating such fraud and abuse… Given that arbitrations at FSCO typically involve disputed claims made by a single more comprehensive and the presiding judge will be in a better position to see the alleged pattern of misconduct than will an arbitrator presiding over a single case at FSCO.
Without knowing the contents of the submissions made by Intact, Arbitrator Feldman was either explicitly informed or he inferred from the information provided, that Intact, “has not alleged that any insured person has conspired with the [clinics] in the alleged wrongful conduct.” By contrast, insureds were included in the group of 37 people arrested as a part of Project Whiplash. Arbitrator Feldman’s finding of innocence on the insureds part, at least with respect to the potentially fraudulent activities of the clinics, seems to have been part of his reasoning in his decision. Arbitrator Feldman remarked in his analysis:
The remedy [Intact] is seeking in this motion is extraordinary. This is especially so when one considers that [Intact] is seeking a stay of this proceeding because of alleged misconduct, not on the part of the [insured], but on the part of one or more other persons who are not even parties to the proceedings.
Although the clinics were not parties to the proceedings, Intact set out in its supporting materials that “in many cases, [Intact] had not yet been provided by the [insured] with any supporting medical or other documentation other than from the impugned [clinics] (or other companies related thereto).” Despite this, Arbitrator Feldman noted that each individual case should be heard on its merits alone. He noted that it was possible for an arbitrator to give little or no weight to evidence produced from the clinics and still find the insured credible in their own testimony, and therefore entitled to accident benefits. Ultimately Arbitrator Feldman agreed with the counsel for the fifteen insureds that Intact would not suffer irreparable harm if they had to proceed with the arbitration proceedings, while the fifteen insureds would be prejudiced if their matters were not dealt with before the court action. He stated:
I agree with counsel for the [insured] that prejudice is presumed when an applicant is prevented from pursuing his or her claim for statutory accident benefits in a timely fashion.
The take away message from this decision is that insureds should not be denied the right to proceed to an arbitration hearing while insurance companies try to have courts determine whether the clinics that created the issues in dispute have committed insurance fraud. While the Superintendent of FSCO supports and encourages the proactive approaches insurance companies are taking in the fight against insurance fraud, FSCO arbitrations are still decided on a case by case basis for the individual insured. Decisions are based on the insured’s evidence and credibility, and their right to receive accident benefits where reasonable and necessary, even if their case involves issues and evidence submitted by an allegedly fraudulent clinic. It is unknown whether Arbitrator Feldman’s decision would have been different if the clinics involved were the four charged by FSCO during Project Whiplash, but it seems unlikely due to his concern about the prejudices insureds suffer when faced with delays in the determination of their entitlement to accident benefits, and the precedence that takes over the determination of fraudulent practices on the part of the clinics.