Toronto Fraud Forum: Taking a Stand

Changing auto legislation may be on the minds of some MPPs, but insurers should not hold their collective breath waiting for a rewrite, warns Michael Rubenstein, assistant vice president claims and accident benefits legal counsel at Kingsway General Insurance. As the featured speaker at the recent Annual Toronto Fraud Forum hosted by local chapters of the Canadian Association of Special Investigation Units (CASIU) and Association of Certified Fraud Examiners, Rubenstein told attendees that he does not expect to see change in Ontario legislation before the next provincial election.

Current regulations say that insurers must prove “willful” misrepresentation on the part of the claimant, and that this only applies to the benefit for which the misrepresentation occurred. In effect, if fraud is committed, the whole claim is not thrown out, just the portion that was misrepresented. “So the question is, is it possible to deny the entire claim?” asks Rubenstein. “If you’re going to deny the entire claim, you’re always taking a gamble.”

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Insurance fraud is not a high priority issue within the legal system, notes Rubenstein. Courts are focused on violent crime, and fraud squads are on the bottom rungs of the funding ladder. Proving fraud is extremely difficult, with a cultural bias against insurers in the courts, at the Financial Services Commission of Ontario (FSCO) and even in society at large. “Insurance companies are rich, they’ve got deep fraud pockets. They can afford all this fraud,” is all too often the public’s attitude, with little realization of the role fraud plays in escalating premiums.

“We should never take the attitude that we’re fighting fraud and we should be embarrassed about it,” Rubenstein observes. Fraud is rampant, and is not only found in accident benefits (AB) and bodily injury (BI) auto claims, but also in activities ranging from cargo theft to internal insurance company activities. “No area of a claim is immune to fraud. It’s a widespread insurance phenomenon.” And, insurers are sometimes their own worst enemy, he adds, as they fail to approach fraud in a cohesive manner. Particularly in accidents involving multiple parties, often one insurer who refuses to pay is met with others who want to simply pay out.

STACKED DECK

With all of these cards stacked against insurers, Rubenstein says that investigators must “line up their ducks” if they are going to proceed with investigation. This begins with taking copious photos at the accident scene, having experts put together accident reconstruction reports and not relying on surveillance which only provides weak evidence in court. Strong medical reports from doctors rather than practitioners are needed, as these reports are the strongest court evidence.

Thorough employment reference checks should be done as fraudsters may be claiming to work somewhere they do not. Drug histories must be carried out as a long list of meds is a red flag that the claim may be an attempt to get drugs. “There is no short cut in a claims investigation…get the information as early as possible, get experts involved as early as possible,” says Rubenstein. The cost of hiring these experts is justified in the end, he believes.

Adjusters and investigators may find themselves coming up against institutional stumbling blocks as well. Rubenstein is particularly skeptical of collision repair centers (CRCs) where he notes the potential for fraud is ripe and inaccuracy abounds. Adjusters should never assume that CRC reports are truthful or correct, he says. Similarly, designated assessment centers (DACs) are very inconsistent and not subject to a great deal of accountability. DACs tend to give the claimant the benefit of the doubt for the first 15 treatments, a costly practice for insurers. Rubenstein advises adjusters who know a claimant is going to a DAC to send all information to the DAC, including accident reconstruction reports and surveillance.

FSCO mediators are also a source of concern for Rubenstein, who used to work in that department himself. The turnover rate for mediators is high and FSCO is not required to disclose the qualifications of it mediators. “Bad players” will also use the threat of mediation, which is costly for insurers, to force insurers to settle. “Each company has to decide on a philosophical level if they are going to pay this ‘nuisance fee’ or are they going to fight it.”

TOUGH QUESTIONS

Fraudsters and those who represent them count on the unwillingness of insurers to enter into mediation or spend money fighting claims. They also count on adjusters to be non-compliant in any respect in order to win in mediation. “Plaintiffs’ lawyers depend on you [as adjusters] to be non-compliant, this is how they get their money even if the claimant is caught red-handed.”

Another tactic is to bring up the phrase “bad faith”, a frightening prospect for insurers in light of recent court judgements and the rise in lawsuits aimed at insurers and even adjusters personally. “Bad faith is a term plaintiffs’ lawyers use to intimidate you so you won’t adjust the claim,” Rubenstein observes.

In order to avoid this threat, adjusters must “always assume anything you put in writing can be subpoenaed by the third party”. Other troubling issues are confidentiality of claimant information, cultural bias on the part of an adjuster, or failing to provide a translator, all of which can land insurers in hot water. However, Rubenstein believes if adjusters “play it to a tee, the bad claimants will give up”.

FAULTY NO-FAULT

“The no-fault benefits program is not doing what it’s supposed to do,” he says. While the system was supposed to reduce fraud and cap skyrocketing premiums, it has become child’s play to commit fraud given some of the provisions and loopholes.

The act does, however, provide at least one tool for adjusters: section 33(1) says an insurer can suspend benefits until it receives all the information needed to adjust the claim. “We don’t use this enough…they like to use non-compliance on us, you use 33-1.” But, Rubenstein cautions that adjusters must be sure to have evidence in writing that information and assessments were requested if they are going to withhold payment of a claim.

There is some promise offered by proposed reforms to the auto insurance system in Ontario being reviewed by the Auto Insurance Review Committee. One such reform would create a two-tier medical program where policyholders would have to pay extra to pick treatment plan providers themselves. However, he adds, plaintiffs’ lawyers would likely have such a provision watered down in the final product, should there be one.