Lawyers, ICBC collide over switch to no-fault insurance

ICBC's fundamental shift

After more than a year of heated argument, about the only thing proponents and critics of ICBC's switch to no-fault “enhanced care” auto insurance can agree upon is that a change is needed.

But the specifics of the change as laid out in the program slated to launch May 1 remain highly contentious.

Government officials and ICBC blame B.C.’s legal profession for the Crown corporation’s escalating costs and annual deficits.

The government says it needed to make changes that essentially remove lawyers and the courts from the dispute-settlement process for drivers injured in car crashes.

But lawyers and insurance-industry advocates argue that those changes will reduce policy-holders’ rights and unfairly strengthen ICBC’s monopoly over B.C.’s auto insurance market.

B.C. Attorney General David Eby announced ICBC’s switch to enhanced care in February 2020, outlining a plan to cut $1.5 billion in costs (mostly legal fees for defending the government against lawsuits from injured motorists seeking greater compensation).

In the place of legal recourse, ICBC is changing its focus from a combative role in dealing with injury claims to a model in which adjusters work with motorists and health professionals directly to determine appropriate recovery plans and payouts.

The result, ICBC says, benefits everyone. Annual insurance premiums will drop 20% – or about $400 for the average British Columbian – the Crown corporation said. The savings in legal costs also allow ICBC to boost the upper limits of benefits available to a person injured in an auto accident: benefits for any injured person, regardless of fault, would have a ceiling of $7.5 million (up from $300,000 in the current system), and new personal care assistance of up to $10,000 a month and permanent impairment care of up to $250,000 would be available.

The scale of change required within the insurance corporation during the last year to accommodate the shift to enhanced care was monumental, said ICBC president and CEO Nicolas Jimenez.

“I’ve never experienced such transformation in my 45 years in business and politics,” said ICBC chair and former provincial finance minister Joy MacPhail. “We are a $6 billion operating company with a $20 billion investment arm. We have almost 6,000 employees in virtually every community in British Columbia, and we offer a product that three million policy holders require. And we needed to change almost everything about the corporation.”

Aaron Sutherland, vice-president of the Pacific region of the Insurance Bureau of Canada, noted that B.C. has Canada’s highest car insurance premiums ($1,832); Ontario has the second highest ($1,528).

Meanwhile, ICBC and provincial officials have warned that the Crown corporation racked up another deficit last year ($298 million), and premiums would have to jump by as much as 40% if no changes were made.

Prior to last year, ICBC posted deficits of more than $1 billion for each of the 2018-19 and the 2017-18 fiscal years – while barely missing that mark for a third year (2016-17, $889 million).

“We have the most expensive car insurance market in Canada under the ICBC monopoly,” Sutherland said, “so government deserves a lot of credit for the changes they are making to make that more affordable.”

But he added that enhanced care is unlikely to be “a panacea” for all that ails ICBC and the province’s auto-insurance sector.

Lindsay LLP lawyer Roger Watts, one of the province’s top experts in personal injury law, calls the Crown corporation’s increase of care benefits to $7.5 million from $300,000 a red herring, because the benefit – which is determined by an ICBC adjuster regardless of fault – is only one part of the compensation an injured person is eligible to get under ICBC’s current tort system.

Currently, in addition to the benefits, an injured person can claim against whoever is responsible for the accident and their third-party insurance policy (likely from ICBC) for additional compensation – which covers areas like pain and suffering as well as future income-earning capacity loss. If the injured person is unhappy with ICBC’s payout, he or she can sue.

“It’s wrong to imply that currently, $300,000 is the most an injured person can get on their claim,” Watts said. “It doesn’t work that way.… There’s no limit of what you can claim against somebody else, as long as you can prove that their negligence caused the loss you are claiming.”

Jimenez responds: “You’ll hear people on the other side of this debate … who will say, ‘Well, you are not giving people … access to the courts.’ And I say, ‘Well, to what end?’

“The reality is, this system is better in every single respect for the customers – particularly injured customers.”

ICBC spends about $170 million a year on defence counsel, and injury settlements through the courts cost almost $4 billion, with the average injury settlement court case lasting three to four years. That’s the money and time being saved by enhanced care, Jimenez said.

Jennifer Brun, president of the B.C. branch of the Canadian Bar Association, argued that the savings may seem big on paper, but the cost to injured people in terms of their lost rights to legal recourse is far higher.

One example, Brun said, is the new compensation benefit for lost income, which covers up to 90% of a person’s income up to $100,000. That means that income-loss protection will never exceed $90,000 no matter how much a person earns – and the amount can’t be disputed.

ICBC says that it is implementing a new Fairness Office for injured policy holders, and those who feel additional settlement is needed can escalate the case to an ombudsman, then to the Civil Resolution Tribunal.

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