Mandatory mediation: Split decision?

When the Financial Services Commission of Ontario (FSCO) introduced mandatory mediation of statutory accident benefits disputes, insurance companies quietly rejoiced. Essentially, the new rules preclude plaintiffs from launching an action at law prior to mediating issues in dispute which fall under Ontario Regulation 403 to Bill 59 such as benefits for medical and rehabilitation costs, expenses incurred in providing attendant care for an insured, and all other reasonable costs incurred as a result of a motor vehicle accident.

The mandatory mediation program has altered the way insurers handle these claims and has cut the cost to insurers. Rather than heading immediately to their lawyers, insurers now have in-house personnel who build careers out of attending upon FSCO mediations. These homegrown mediation/arbitration specialists are adept at handling hundreds of files at a time.

Plaintiff lawyers, on the other hand, viewed the mediation program with suspicion — it seemed to be just another hurdle for tired claimants to jump, along with the already insuperable legal obstacles which motor vehicle accident victims face such as a strict injury threshold and an arbitrary statutory deductible. However, I recently represented a client upon a mediation which served one of the more noble purposes of the new rules: to assist the claimant in receiving the compensation to which he/she is entitled to under the Statutory Accident Benefits schedule.

In this particular case, the value of all claims was approximately $30,000.00. To the date of the mediation, the insurer had refused to pay a benefit of any kind to the claimant. The telephone call from the appointed mediator came right on time. Naturally, the mediator and the insurance company representative were familiar with one another — and were chatting like old friends — and I was sitting there with no expectation of cooperation. Instead, I was pleasantly surprised. We discussed the issues in sequence, and settled about half of them. In the three months following the mediation, the claim received more attention than it had in the last two years and was settled fully and finally.

From the perspective of both parties, I would say that mediation worked in the above instance. Essentially, with a claim of less than $60,000.00, a plaintiff may go to court and win barely enough to pay for the action. The insurer may also spend more than the value of the claim in assessments and legal fees.

So, am I a proponent of Ontario’s mandatory mediation programme? Not necessarily. The forementioned case was ideal for mediation largely due to the fortunate mathematics involved, the claims were settled notwithstanding the fact that the mediator mysteriously did not receive my carefully written mediation brief and therefore had very little knowledge of the claims and correspondence which preceded the mediation.

Aside from anecdotally, what effect has the mandatory mediation had on insurers and claimants? According to an independent study conducted by Hon. George W. Adams, the mediation program is generally well received by the parties and perceived to be effective, despite the fact that the settlement rate has declined by about 8% in the past three years. In Ontario’s automobile insurance industry, the gap between loss cost and premium continues to grow due to industry forces other than Bill 59 and the dispute resolution system. Of total loss costs for a typical policy, statutory accident benefits comprise about 35%. At any rate, the lasting effects of legislation and programs such as the FSCO mandatory mediation are not known until at least five to ten years into the program.

For the 24% of cases which do not settle at mediation, FSCO offers neutral evaluation, and arbitration, as well as an appeals process. All of these are designed to save the claimant money, as opposed to going to court. At arbitration, disputes are settled finally by an adjudicator adhering to established legal principles, but, again, without the attendant expenses of going to court. At first glance, this would appear to favor the claimant, however, Bill 59 changed the way in which arbitration expenses can be awarded.

Previously, expenses could only be awarded to the claimant, regardless of the outcome. Arbitrators now have the discretion to award expenses to insurers as appropriate. The mere disclosure of this fact will send potential plaintiffs into fits of fear.

Settling 74% of disputes to the general satisfaction of both parties is a seemingly impressive feat, particularly with a caseload that has consistently increased annually, in 1996-97, the mediation unit received 12,230 cases and closed 11,639 in the same year. Although most claimants used lawyers, contrast this with risky litigation which can take anywhere from one to ten years with a final “winner take all” result. Perhaps it is the elimination of this element of chance which also makes mediation attractive to both insurers and claimants.