Language Divide

The catastrophic impairment designation under Ontario’s Statutory Accident Benefits Schedule (SABS) has long been a contentious point for the insurance industry. Court decisions have created ambiguities in how this definition should be interpreted and essentially opened the floodgates to a much richer set of benefits, prompting abuse (particularly when it came to psychiatric impairments).

In its five-year review of auto insurance, completed in March 2009, the Financial Services Commission of Ontario (FSCO) announced it would be striking a panel of experts to examine and propose a new definition for catastrophic impairment, one that draws a clear line in the sand. FSCO named its panel experts in December 2010. Dr. Pierre Côté, an associate professor of epidemiology at the Dalla Lana School of Public Health at the University of Toronto, headed up the Catastrophic Impairment Expert Panel, which included the following members:• Arthur Ameis, M.D., Physiatrist (Toronto, Ontario);• Linda Carroll, Ph.D., Clinical Psychology/Epidemiology (Edmonton, Alberta);• J. David Cassidy, Ph.D., Dr.Med.Sci., Senior Scientist, Epidemiology (Toronto, Ontario);• Ronald Kaplan, Ph.D., C. Psych., Neuropsychologist (Hamilton, Ontario);• Michel Lacerte, M.D., Physiatrist (London, Ontario);• Patrick Loisel, M.D. Orthopedic Surgeon, Professor (Toronto, Ontario); and• Peter Rumney, M.D. Paediatrics (Toronto, Ontario).

The panel has prepared the first draft of its definition of catastrophic impairment, which has been met with mixed reviews from the insurance industry.

The panel took a hard line on how the calculation to reach the catastrophic threshold should be derived (i.e. physical injuries should not be mixed with psychological injuries to determine the 55% threshold for whole person impairment). But the panel introduced a new uncertainty by creating a new tier within the designation (i.e. an “interim” catastrophic designation). This is the first of many drafts before the definition becomes law, and insurance industry experts are proceeding with a cautious optimism.

Ambiguity and Mixed Messages

The definition of a catastrophic injury currently in use under the SABS was first drafted in 1996. Since that time, it has been subject to broad interpretations by the courts and FSCO arbitrators. Perhaps the most notable and hotly contested of these decisions was the 2004 Ontario Superior Court case Desbiens v. Mordini.

In Desbiens, Ontario Superior Court Justice Harvey Spiegel (as he then was) determined separate ratings for a claimant’s physical and psychological impairments – as defined in ss. 2(1.1)(f) and (g) of the SABS, respectively – could be combined to reach the 55% whole person impairment (WPI) threshold for catastrophic impairment designation.

Much to the consternation of the insurance industry, since Desbiens, a string of court and FSCO arbitration decisions have reinforced Justice Spiegel’s view.FSCO’s arbitration decision in Aviva and Pastore (2010) essentially widened the definition of catastrophic impairment further. In Pastore, FSCO director delegate Lawrence Blackman ruled there is no inconsistency in defining an auto injury victim as “catastrophically impaired” even though she suffered only a single Class 4 impairment and her physical and psychological injuries fell well below the 55% threshold.

In a bulletin released in the wake of Pastore, legal firm Dutton Brock likened the decision to ‘double-counting.’ “In other words, when assessing physical impairment, the impairment ratings have already taken into consideration issues relating to pain and therefore, when examining the mental behavioural impairments under Chapter 14, you cannot recount pain as a grounds for a mental behavioural disorder,” the bulletin said.

But later in the same year, the tide seemed to turn in favour of the insurance industry. In October 2010, the Ontario Superior Court of Justice handed down a decision in Kusnierz v The Economical Mutual Insurance Company that dealt with the combination of physical and psychological injuries. Kusnierz found that psychological and physical impairments could not be combined when calculating the WPI rating.

Ontario Superior Court Justice Peter Lauwers outlined three reasons for his decision. In a nutshell, they were:

“(i) The [4th edition of the American Medical Association] Guides deliberately do not permit the mental and behavioural disorders in Chapter 14 to be assessed in percent terms and combined with the percentage values derived from impairments assessed under the other chapters of the Guides for the purpose of determining whole person impairment;

“(ii) The structure of the SABS reinforces the bright line demarcation between mental and behavioural disorders referred to in Chapter 14 of the AMA Guides – specifically referred to in clause 2(1.1)(g) of the SABS – from the impairments assessed under the other chapters of the Guides which are referred to in clause 2(1.1)(f) of the SABS; and

“(iii) This interpretation is consistent with the purpose of the specific provisions of Bill 59 and the SABS that this issue engages,” Lauwers wrote in his decision.

The decision marked a victory for the insurance industry. But it wasn’t long before that sense of victory receded back to uncertainty. Within two months, FSCO released another arbitration decision, Jaggernauth and The Economical, that recognized Kusnierz but nonetheless carried on with the cross-rating method of calculation established in Desbiens. Both Kusnierz and Jaggernauth are under appeal.

As these interpretations of the catastrophic impairment definition filtered their way through the court and arbitration systems, industry loss ratios in Ontario personal auto accident benefits soared. According to the Insurance Bureau of Canada, the loss ratio for this line reached a staggering 172% in 2009 Q4. In other words, for every dollar the industry took in premium, the industry paid out $1.72 in claims. One year later, following the implementation of the provincial auto insurance reform package in 2010 Q4, this figure had been reduced to 155%. This drop marked an improvement, but not a good result by any industry standard.

Drawing the Bright Line

FSCO struck its panel of eight medical experts in December 2010 to review and, ideally, clarify the catastrophic impairment definition. The panel released its proposed revisions to the definition on Apr. 15, 2011. By the time the panel was through, not one element of the current definition was left untouched. Three major elements on the revisions included: • The panel found no basis for combining the physical and psychological impairments when determining the WPI.• The panel recommended doing away with the use of the Glasgow Coma Scale (GCS) score of less than nine to determine impairment. Instead, it recommends using tests and measures that focus on outcome and offer a greater sensitivity to the spectrum of injury. • The creation of an “interim” catastrophic determination designation.

Although the industry appreciates FSCO’s clear line in the sand against combining physical and psychological impairments to determine WPI, the overall report is receiving initial mixed reviews from industry. Industry members are relieved FSCO took a stance on the combining or cross-rating front, but Kusnierz and Jaggernauth are headed towards the higher courts, and that line in the sand might easily be blown away in the wind. In the meantime, the industry remains torn on the benefits of using different measures and the creation of a new tier within the system. The panel’s use of language and the approach it took to write the report have also generated debate.

Language Barriers

Even before addressing the specific provisions within the report, industry experts point to the fact that it is essentially a medical defini tion being used in a legal context.

“I like the fact that they [the panel] used a scientific approach,” says Steve Smith, president of the Farm Mutual Reinsurance Plan. “It’s not emotional, it’s not irrational. I think that, hopefully, will take some of the discretion away from the courts. [The definition] becomes much more consistent. And consistency is absolutely important for companies evaluating their reserves.”

George Cooke, president of The Dominion, agrees. He says using scientific evidence creates “cleaner, more certain edges” around the definition, which will in turn reduce costs for insurers by simplifying the determination process. For an insured, “they will very quickly know if they are in or out of that definition,” he says. “And perhaps, more importantly, now that we have a much wider selection of choice in the auto insurance product, it will be easier for someone to explain those optional coverages to a client, because we now have a much clearer definition.”

But whereas some see a clear-cut definition, others see muddy waters.

Philippa Samworth, partner at Dutton Brock, says she appreciates the panel’s scientific approach. But she expresses concern about the new complexity she thinks the panel’s draft report has introduced. “The five year review said to look at whether the changes will increase the complexity and regulatory burden,” she says. “This definition has basically more than doubled in length. And with the addition of the new tests to be used, it has introduced a whole new set of documents within it. I look at some of these things and we see phrases like ‘reasonable medical certainty,’ ‘public hospital,’ ‘participating as an in-patient,’ and these are all qualifying diagnosis. The more words we throw in, the more words that become subject to interpretation and the more complex and difficult it becomes to interpret the legislation.”

Although the panel experts are specialists in the medical field, writing “legs and regs” in the legal profession is a completely different matter, Samworth points out. Simple nomenclature – using an ‘or’ instead of an ‘and,’ for example – can have huge ramifications when interpreting the definition in the courts and before arbitrators. To illustrate her point, Samworth points to the panel’s draft psychiatric impairment definition and notes that there isn’t an “and” or “or” anywhere in the first draft.

Debbie Laxton, national client service manager, accident benefits, at Crawford & Company (Canada) Inc., says that it is still early in the process to determine whether or not the proposed definition will be sufficient. “As with any legislative changes, it takes time to review and analyze whether the proposals will meet or satisfy the ultimate goals.”

The next step of the process will be to bridge the language divide and figure out how to transfer the definition from its medical context into to an insurance context. FSCO has asked for stakeholder feedback, “backed by scientific evidence,” by mid-May of 2011.

“Although the first report is released, we’re still at the initial stages of this,” says Kadey B.J. Schultz, a partner at Hughes Amys LLP. “Stakeholders are now going to contribute to this definition and the criteria and it’s going to include lawyers and other vested parties to give their two cents about it. Starting with the medical practitioners was a perfectly appropriate starting point, but it certainly is not the ending point.”

Ultimately, as is the case with any new piece of legislation, litigation will be required to gain an understanding of new terminologies, Schultz observes. “We need the litigation to understand what the true definition is, and what the courts and FSCO believe is meant to be in effect. The same thing will happen with the new cat regime.”

Just Say ‘No’ to Cross-rating

In terms of substantive issues, the industry is praising the panel’s line in the sand against combining physical and psychological impairments to determine WPI.

“The expert panel did not find that combining physical and mental/behavioural conditions can be achieved in a valid and reliable way with the currently available methods of impairment cross-rating,” the report says. “Moreover, the expert panel did not find sufficient evidence that combined impairment ratings are more clinically meaningful than using separate criteria. While 55% physical impairment establishes paraplegia as a prime example of catastrophic impairment, we did not find evidence for an equivalent threshold when physical and mental/behavioural impairments are combined. The panel had difficulty understanding how combinations of physical impairments and psychological conditions that independently do not meet the criteria outlined in the revised version of 2(e) and 2(f) could be equated to a severe injury to the brain or, spinal cord or to blindness.”

Lisa Fazzari, The Economical’s accident benefits claims technical advisor, believes this stance is not necessarily a “revision,” so much as it represents a reinforcement of the SABS original intent. “It was clear the first time the SABS was written that it was always an ‘or,'” she says. “It was never an ‘and.'”

Claims manager Les Cabell, who heads up the risk management and auto claims Canada segment at Chartis, describes the decision as prudent. “I can’t see that the medical profession will ever be able to come up with any criteria that can adequately bring [physical and psychological impairment ratings] together,” he says. “They are too fraught with very distinct measurements and it has been a problem and it’s probably best that they be distinct.”

Smith says he believes this wording will lend itself to the Court of Appeal upholding Kusnierz. “But then FSCO’s arbitrators have to walk the walk and talk the talk, because if the arbitrators don’t approach it on a consistent basis, with the proper intent in mind, that’s where the fragmentation can lie.”

Samworth observes that whenever a piece of legislation is introduced, there is always a transition between what came before and what came after. “The new legisation would only apply to accidents that occur on or after the date of implementation. For all cat cases for accidents occurring prior to the implementation of the new reg, Kusnierz will likely be the defining case. Pastore is going to judicial review with intervention from the Ontario Trial Lawyers Association, so it will also be a defining case regarding the old regulations,” Samworth says.

New Tools in the Box

In addition to its instructions not to combine physical and psychological impairments, the panel’s draft definition significantly modifies how these categories of injuries are assessed. The new tools added to the assessment toolbox include the:• American Spinal Injury Association (ASIA) classification, to assist with assessing spinal cord injuries;• Extended Glasgow Outcome Scale (GOS-E), to assist assessing traumatic brain injury in adults;• King’s Outcome Scale for Childhood Head Injury (KOSHI), to assist with assessing traumatic brain injuries in children;• Spinal Cord Independence Measure, to assist with assessing ambulation dysfunction; and• Global Assessment of Functioning (GAF), to be used in assessing psychiatric disorders.

Section 2(d)(i) was the only section of the current definition escaping major revision. This section says that for traumatic brain injuries, a score of 9 or less on the Glasgow Coma Scale (GCS) automatically meets the catastrophic impairment threshold. In fact, rather than revising this section, the panel did away with it altogether. In doing so, the panel said it doubted the ability of the GCS to predict the long-term outcomes associated with catastrophic impairment. In its place, the panel suggests the use of the Extended Glasgow Outcome Scale (GOS-E) for adults and the KOSHI for children.

Laurie Walker, director of Ontario Auto Accident Benefits at McLarens Canada, n otes the GCS test was straightforward. This made it easy for a trained adjuster to find the relevant results within ambulance and hospital reports. “But if the medical team on this panel feel that this is a more accurate way to measure, then by all means change it,” she says. “It will be something for which adjusters will have to be trained internally.”

Samworth supports doing away with the GCS and replacing it with the GOS-E. The problem with the GCS is that the initial injury and not the long-term affect of that injury are taken into consideration, she says. But, someone who scored a ‘5′ on the GCS immediately following an accident may have a remarkable recovery from those injuries, Samworth continues. And a remarkable recovery no longer requires catastrophic impairment benefits.

Samworth also points to the new requirement of having a GAF 40 or under to meet the psychiatric catastrophic impairment threshold. Having such a score basically precludes being able to function outside of the home or making decisions for oneself about finances or treatments. Both claimants in Pastore and Jaggernauth had GAFs well over 50, she observes, so neither would meet these criteria.

Fazzari says the tools being recommended, like the language used to draft the proposed definition, are intended for a medical context and not an insurance context. “The problem with those tools, while they are validated in how they are used today in rehab medicine, they’re not validated in the context in which we’re going to be using them – which is to measure entitlement to benefits,” she says. The tools that would be required simply don’t exist, creating an ‘inherent’ problem in the system.”

Public Treatment

The potential for ambiguity also comes up in reference to the use of the term “public.” For example, the panel insists that insureds use ‘public’ rehabilitation programs. References throughout the report include:• “currently participated in, or has completed a period of, in-house spinal cord injury rehabilitation in a public rehabilitation hospital” (paraplegia/tetraplegia);• “currently participating in, or has completed a period of in-patient rehabilitation in a public rehabilitation facility” (severe impairment of ambulatory mobility);• “in-patient admission to a publicly funded rehabilitation facility” (paediatric traumatic brain injury); and• ongoing supervision and direction by public health agencies providing community support systems…” (psychiatric impairment).

Samworth suggests the intent of the emphasis on public programs and facilities is to create neutrality. Someone treated in a public facility is there because they need to be, not because a plaintiff’s lawyer suggested that they go. But there is no clear definition or description of what ‘public’ programs or facilities are, Walker and Samworth point out. Walker points to the terms “hospitalization” and “in-patient” program and wonders what they might entail. “A person could go to the hospital at midnight, and be checked out at 8 a.m. the next day, and technically that constitutes a hospitalization,” she says.

Fazzari says the heavy reliance on the “public” and acceptance into inpatient programs is problematic. “I just wonder if health facilities will be influenced to take in people that aren’t necessarily severely injured, as they were before, because now there are funding sources available outside of the Ontario Health Insurance Plan (OHIP) system [i.e. private insurers paying for a person’s accident benefits].” Economic incentives will drive admission acceptances.

The [Interim?] Grey Zone

Maybe the greyest zone in the report is the suggestion of an “interim” catastrophic designation. The panel’s intent is to “improve the fairness of the process of determination for catastrophic impairment,” particularly for “insured adults with traumatic brain injuries and for those with major physical impairments who unequivocally require intensive and prolonged rehabilitation.” The theory is that, by ensuring “these individuals have access to the rehabilitation services that are necessary to maximize their chance of achieving a lower final impairment level,” their injuries may not turn out to be catastrophic.

Cooke sees this as a measure that “responds to truly injured people.” He goes on to say that early intervention may prevent a small percentage of the people within this tier to become catastrophic, which is a win-win for both the insurer and the insured in the long run. “I think it helps the cat definition stay cleaner, more restrictive and more certain,” he adds.

Schultz agrees. “Front-end loading the file with rehab to a seriously injured person is absolutely the appropriate thing to do,” she says. “We know the vast majority of gains are made in the first two years or so. If you’re caught between a rock and a hard place in those two years before the designation can be made, then it’s problematic for the claimant’s recovery if resources are limited.”

But the issue with the interim designation is how it will be implemented. Controls need to be established so that benefits accruing from such a definition will not be “harvested,” as Schultz suggests.

“I have a difficult time seeing how this will be restrictive in any shape or form,” Fazzari says. “The interim cat designation becomes a real difficulty in managing those types of claims and [in defining] how many times you’re going to assess the people within it.”

Walker sees this as a critical issue. She envisions scenarios in which insureds are hospitalized and require 24-hour attendant care – care beyond the resources of the hospital staff to provide – so the insurer foots the bill. “If these individuals are on an interim designation, do they receive catastrophic rates – monthly attendant care rates of $6,000?” she asks.

And ultimately, if the insured is not deemed to be catastrophic, there is no recourse for insurers to recover the funds they paid out during that two-year period, Smith says. “I don’t like situations where people have to pay and then dispute later,” he says. At first glance, it seems that’s what this [interim definition] will lend itself to. That, to me, has all kinds of issues associated with it. It drives costs up. It creates ambiguity.”

Adding in another category to the cat definition only creates another opportunity for erosion and abuse, Smith adds. “With a tiered designation, all you’re going to have are people fighting to breach the next level. It becomes costly and then eventually that erodes and it becomes the norm.”

Mixed Reviews

Overall, based on a quick first impression of the report, the industry appears to be proceeding with cautious optimism. There is hope, they say, that the restrictions placed on the measurement of impairments and how the WPI is to be calculated will help to control costs and ensure those who really need the treatment receive it. But all agree that in order to prevent this line in the sand from being blown away in the courts and arbitration chambers, ambiguities around phrasing and terminologies need to be tightened up, so as not to leave the door open for the kind of abuse that catastrophically impaired the meaning of the current definition.