Toronto City struck down in bodyshop fight

The Supreme Court of Ontario has ruled in favour of insurers who mounted a challenge against a City of Toronto bylaw outlawing insurers from directing their insureds to preferred bodyshops. “This is a big victory for the industry and for the insureds,” remarks one stakeholder, CGU Group Ltd. claims manager Wayne Roth.

According to the court ruling, the bylaw — mandating insurers not direct insureds to preferred bodyshops when they are reporting their accident at Toronto collision reporting centres — is unconstitutional in that it denies the carriers’ right to freedom of expression under section 2(b) of the Canadian Charter of Rights and Freedoms. Market observers note a recent Competition Bureau report, concluding preferred bodyshops do not hamper competition and that the insurance industry is characterized by heavy competition, might have assisted in the ruling. “It’s interesting that the judges commented on the federal investigation and noted that preferred bodyshops are very healthy for the industry,” Roth maintains.

Steve Sanderson, president of Accident Support Services Ltd., says Toronto’s legal department, Metro Legal, had advised City Council not to implement the bylaw in the first place. Accident Support Services operates collision reporting centres (CRC) around Ontario, and Sanderson believes that in providing a mechanism for insurers to direct their customers, a link between unscrupulous tow driver drivers and unethical bodyshops is broken. “We help reduce fraud. We give insureds a free days storage in our lot just so that they can contact their insurer to find out where to get their car fixed.” Creative damage — fraud conducted by bodyshops by further damaging cars in order to elevate costs — was once estimated to cost $10 million annually in Ontario alone, a number that has dropped significantly since CRC began providing insurer-directed mechanisms, Sanderson adds.

Roth says the ruling will result in savings to Toronto insurers and convenience for insureds. “Partnerships allow us greater control over the repair process. Our partner bodyshops can get the customer in and out and control the costs on our behalf. The big key to this ruling is that we now restore more control over the claims process in Toronto, essential to keeping our claims expenses in check.”

Market Watch continues on page 40.