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More on Canadian Insurance Fraud: Looking Beyond The Claimants
An interesting question was posed earlier this month by Alan Shanoff of the Toronto Sun when he canvassed a recent Ontario case where an insurance adjuster reached an “unconscionable” settlement with a claimant which was eventually set aside by Court order.  After detailing this case he asked “just how prevalent is this sort of practice? Unlike the Canadian insurance industry’s wild claim of $1.3 billion of insurance fraud per year, there are no estimates of how widespread abusive adjuster practices might be.”
Alan hypothesized as follows “Based purely on anecdotal accounts I suspect for every claimant who tries to exaggerate his injuries there’s an adjuster trying to minimize a claimant’s true injuries or deny a rightful claim.”
I can’t say whether this 1:1 ratio is right or wrong, however Alan’s question could be the beginning of an interesting discussion. Â If anyone is aware of statistics addressing how often self-represented individuals receive unfair settlements and the global cost of “unconscionable” settlements on the public at large this information should be publicized. Â If unfair adjusting practices short change deserving claimants anywhere near the figures the Canadian insurance industry claims fraud costs them then that is a story that needs to be told.
Now I’m no fan of insurance fraud, however, when reading stories of the high cost of insurance fraud it’s worth keeping in mind that, unlike the insurance industry, claimants who get stuck with an unconscionable settlement don’t have hundreds of millions of dollars in profits to offset the cost of a raw deal.  Also, the insurance industry (to their credit) has a good track record of pursuing civil damages to punish and discourage fraudulent conduct.  The same likely cannot be said about individuals who have their insurance claims processed in bad faith.  As always, comments and feedback are welcome.
Tags: Insurance Fraud, Insurance Fraud in Canada, Jones v. Jenkins, Setting Aside Insurance Settlements, Unconscionable settlements
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March 24th, 2011 at 3:40 pm
Hi Erik:
I think there’s something to this. I represented the Coalition Against No-Fault before the UARB when N.S. was considering changes to our insurance legislation.
The basis for the I.B.C.’s claims of insurance fraud was based on a closed claims study that defined a potentially fraudulent claim as one that settled above what the insurer had reserved.
On cross examination I asked their expert if the insurer settled the claim for less than reserves did he consider that to be fraud by the insurer?
No, that’s just prudent business practice (surprise).
March 24th, 2011 at 3:52 pm
John, thanks for your comment. As your experience demonstrates, it’s always a good idea to look behind the headlines when the high costs of insurance fraud are discussed in press releases.
Yours truly,
Erik
March 25th, 2011 at 9:08 am
There appear to be only a handful of cases where the court set aside “unfair” or “improvident” settlements entered into between unrepresented claimants and insurance adjusters:
1. Pridmore v. Calvert et al. (1975), 54 D.L.R. (3d) 33 (B.C.S.C.)
2. Keewaticappo v. Clearsky reflex, (1992), 79 Man. R. (2d) 311 (Man. Q.B.)
3. Burkardt v. Gawdun, 2003 SKQB 100 (CanLII)(Sask Q.B.)
4. Williams v. Condon, 2007 CanLII 14925 (ON S.C.)
March 25th, 2011 at 9:34 am
Thanks for your comment Antonin. There are other cases but I agree that decisions setting aside a settlement on grounds of unconscionability are few and far between. That does not mean, however, that these represent how often unconscionable settlements are reached.
If the criteria for documenting fraud is reported caselaw then the high cost of Insurance fraud should be based on judgments where insurers successfully sue fraudulent claimants. That quantum is a far cry from $540 million annually.
As illustrated in some of the links in the above article, often times stories are published documenting the high cost of insurance fraud. Little scrutiny goes into the numbers used in these stories but they are often widely circulated. It would be interesting to know the criteria used. From there it would be interesting to see if that same criteria can be applied to scrutinize settlements where individuals do not get legal advice prior to resolving their tort claims or other insured losses. As illustrated by John’s comment, perhaps the underpayment of tort claims equals or exceeds the reported high cost of insurance fraud.
Thanks again for sharing your views.
- Erik
March 25th, 2011 at 10:41 am
The published statistics of number of dollars lost to insurance fraud have always struck me as nonsense. If the insurance companies recognized the claim as fraudulent, why would they pay it? If they didn’t recognize it as fraudulent, how would they know to include it in the statistics? Common sense dictates that these statistics fall in “The Big Lie” category.
March 25th, 2011 at 11:05 am
Erik,
Whenever there is an inequality of bargaining power, the strong will overpower the weak. Bad faith insurance litigation attempts to level the playing field. That said, the insurance industry rationalizes increasing premiums to offset the risk of insurance scams and fraud claims.
My own view is that improvident settlements are likely under-reported for a number of reasons:
-claimants’ financial pressures resulting in a quick settlement;
-claimants’ lack of understanding of the fair value of a claim for damages: i.e. if you can’t “name” it, then you can’t “blame” and “claim” it;
-lack of sophistication; or
-lack of interest.
Antonin
June 11th, 2011 at 5:28 am
June 30th, 2011 at 7:41 pm
I was lied to by an ICBC adjuster when I lived in BC. I didn’t have a laywer and was told that I could not file an injury claim based on the accident I was involved. Fault had been declered to be the other drivers. I am not sure what the logic was as this was some time ago. I later found out ICBC had already been opened since the adjuster that told me that I couldn’t file a claim worked in the injury claims department at ICBC.
Recently in Alberta my car was hit while it was parked and I was standing beside it. The adjustor told me I would be at fault as the door was open and in Alberta the traffic act says that the car with the door open into trafiic is at fault (or so the adjustor stated) When I suggested not going through with the claim she told me she had a duty to put the claim in, since there had been an accident, basically telling me I had to proceed. At that point she was thinking that I had no coverage on my car so they wouldn’t ahve to fix it and was trying to get the deductable out of the deal. Once she checked my policy she didn’t put the claim through. Insurance adjustors seem to misleed or lie frequently.
August 21st, 2011 at 6:53 am
[…] As previously discussed, insurance fraud from either side of the fence deserves rebuke.  When claimants are unlawfully deprived of their insurance benefits they don’t have the deep-pockets that insurers have access to in order to find a legal remedy.  Alan makes some interesting observations, particularly with respect to insurance funded medical “assessment mills“.  I suggest anyone interested in a full picture of the insurance fraud topic review Alan’s article. If you found this article useful please share with others: […]