22 Jul The Easy Answer to ICBC’s Financial Troubles
ICBC’s Financial Troubles Could Be Solved By Cutting Unnecessary Costs
The recent Ernest and Young report on ICBC’s financial trouble was leaked to the media recently. While I have not have occasion to read the Ernest and Young report, it seems that they probably missed the easiest and most equitable way of placing ICBC in a positive financial position.
What I write might upset my fellow colleagues because if ICBC advances this angle, the amount paid out to ICBC claimants will dramatically decline and in turn, injury lawyers receiving a percentage fee of settlements, including my firm, will see a decline in their fees. Therefore, this is not a self-serving opinion.
In March 1994, the Supreme Court of Canada released a triology of cases called Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee. The essence of these cases is that ICBC cannot deduct benefits received by an injured claimant from other sources, such as government payouts, loans or insurance pay-outs. ICBC cannot even deduct payments made by EI or CPP.
Therefore, in most ICBC cases, the injured claimant gets double recovery, once from ICBC and once from another insurance company. However, these private insurance companies have realized the windfall an injured claimant can receive through an ICBC claim and so they now regularly demand reimbursement from the injured claimant of any benefits paid out. This process is called “subrogation”.
In a growing number of cases, the private insurance companies have gone so far as expect 100% reimbursement of the benefits they pay out plus interest from the injured claimant regardless of success in the ICBC claim. If the injured claimant does not receive 100% wage recovery from ICBC, or has to pay legal fees to recover from ICBC, the claimant is not receiving enough wage recovery in the settlement to repay the insurance company in its entirety. These private insurers then turn around and expect the injured claimant to pay them out of other heads of damages such as pain and suffering. In the result, the injured claimant loses out at the benefit of the private insurer. Simply put, the private insurer is taking advantage of the ICBC claim system at the cost of ICBC and the injured claimant.
It is an extremely simple fix for ICBC. All they have to do is pass legislation which allows ICBC to be a secondary insurer meaning that they only have to pay for medical expenses or wage loss if there are no other coverages for the injured party. They already have this legislation, in part, for Part VII benefits (medical and rehabilitation expense coverage).
It would be difficult for Ernst & Young to figure out the savings to ICBC of changing the law on subrogation as ICBC doesn’t get to find out what other insurance coverages a claimant has as the information is private. However being on the ground for this many years, I can tell you with great certainty that in almost every claim there is going to be an element of private insurance covering some of the wage loss or medical expenses because insurance plans through employers are very common in British Columbia. I would venture a guess that if ICBC made this one change, they would suddenly see a reduction in the average claim payout by 20% to 30% across-the-board. If you do a simple mathematical calculation, that means hundreds of millions of dollars in savings each year and suddenly, ICBC is in a position to be profitable again.
Of course, with any system comes a negative. The only negative is that the private insurance companies do not get their pay-outs back from ICBC indirectly and will have to increase their premiums paid by their plan members in order to maintain their profitability levels. That seems extremely justified given that the current recommendations of Ernest and Young impact every motorist in the Province of British Columbia whereas a change here would simply mean that employers and employees will have to pay a little bit more premiums for private insurance coverages.
This solution is an easy fix without taking draconian measures which have not seen much success in other provinces in Canada.
Written by Wes Mussio of Mussio Goodman Law Group