Use of lawyers to fight insurers shows ‘failure’ in Ontario’s auto insurance system, report says
The widespread use of personal injury lawyers to battle insurance companies indicates a “failure” in Ontario’s auto insurance system, says a government-commissioned report.
“There is clear urgency to make the accident benefits system simple and accessible without the need for legal representation,” says the report, written by David Marshall, former CEO of the Workplace Safety and Insurance Board. “In many ways, the need to have lawyers involved to negotiate settlements in what should be a straightforward, no-fault, accident benefits system signals a failure in the system.”
Marshall’s report, titled “Fair Benefits Fairly Delivered: A Review of the Auto Insurance System in Ontario,” looks at the costs associated with Ontario’s auto insurance system and makes 35 recommendations to improve it. The report calls for faster and more efficient delivery of care to accident victims to avoid protracted legal disputes over benefits all too common under the current system.
Marshall states that personal injury lawyers charge approximately half a billion dollars in contingency fees annually, while in-
surance companies spend roughly the same in legal fees and expenses to defend claims. Every year between 25 per cent and 35 per cent of claimants, about 15,000 to 20,000 people, hire lawyers to deal with their insurance companies, the report says.
“Clearly, a better way to deliver fair benefits to accident victims needs to be found,” the report says.
Claire Wilkinson, a Burlington personal injury lawyer and president-elect of the Ontario Trial Lawyers Association, which represents about 1,200 personal injury lawyers, said she agrees that if the accident benefits system functioned properly, people wouldn’t need lawyers.
“It’s always felt like a David versus Goliath battle,” Wilkinson said. “Individuals don’t have the financial ability to fight the power and financial resources of the insurance industry. So they turn to personal injury lawyers because we give them a voice and the ability to fight, to try to level the playing field.”
Marshall was appointed by the provincial government in February 2016 to review Ontario’s auto insurance industry and his report was quietly posted online this month. He is not giving media interviews, according to the Ministry of Finance.
As reported in the Toronto Star last week, Marshall’s study found that the rates of death and injuries in the province are among the lowest in Canada, yet Ontarians pay the highest auto insurance premiums in the country.
In the report, he singles out personal injury lawyers as contributing to increasing costs and recommends that contingency fees — “you don’t pay unless we win” — be limited, while advertising and referral fees be banned or restricted.
A Star investigation published in January found that clients were often in the dark about how the contingency system works, including what fees their lawyers were taking versus what fees the lawyers were actually allowed to take. In one case, the Star found a woman injured in a car accident hired a lawyer on contingency and ended up with just 25 per cent of the total settlement paid out by the insurance company. Marshall recommends measures to improve transparency surrounding contingency fee arrangements, including making insurance settlement cheques payable jointly to lawyers and their clients so victims understand how much of the total payout they will receive. Additionally, Marshall says clients should be informed in writing of their right to appeal fees charged by their lawyers and where to do so. The Star found many personal injury lawyers do not inform their clients in writing that they are entitled to appeal their legal fees to the provincial fee assessment office. Marshall recommends that contingency fee agreements also be filed with the province’s insurance regulator, which would perform spot checks to ensure fairness.