Legal fights are one of the reasons ICBC is losing big bucks, costing a quarter of every dollar the public auto insurer spends – and observers say a smarter approach could lower costs and stop lawsuits before they start.
More crash victims are lawyering up, and they’re getting bigger settlements, even as the number of crashes is on the rise – a perfect storm for ICBC that has resulted in a premium hike this week.
That has one political leader pushing to ditch ICBC’s adversarial system for a lower-cost no-fault insurance model.
Green Party Leader Andrew Weaver says payouts for minor body injuries are going too high and need to be capped.
“We need to follow the lead of other jurisdictions and limit pain and suffering damages that have gone up over 300 per cent in recent years. We know what the problem is and we need bold decisions now,” he said.
But personal injury lawyer and former Vancouver City Councillor Tim Louis told CTV News that ICBC can still save money while keeping a fair system that offers claimants a chance to sue if they aren’t satisfied with the payout.
“A no fault insurance policy is another name for WCB,” he said, referring to the Workers Compensation Board. “You aren’t going to get fair compensation from a bureaucracy.”
B.C.’s Attorney General David Eby announced a 6.4 per cent increase in ICBC’s basic insurance rate as a short-term reaction to the almost-billion dollar hole the corporation finds itself in. ICBC lost more than $500-million last year.
“This is a crisis that ICBC is facing right now,” Eby said Tuesday, blaming the previous Liberal government for ICBC’s dire straits. When ICBC was profitable, the government took more than $1-billion out of its coffers, he said.
“That was a cavalier and reckless attitude towards ICBC’s financial stability within the previous government,” he said. Eby has ruled out a full change to “no-fault” insurance but left the door open to smaller shifts.
Distracted driving is one reason ICBC claims are up, as fender-benders that would have been minor with drivers paying attention have sometimes become major crashes after the distracted driver doesn’t brake.
But settlements are also up for other reasons, according to an Ernst and Young report commissioned by the Liberal government and released in July by the NDP.
Of all of ICBC’s costs for its basic insurance product, 24 per cent are spent on legal costs, the report says. That’s more than minor injury claims (20 per cent), major injury claims (17 per cent) and even more than ICBC’s operating expenses (15 per cent). That includes legal fees, third party costs, and plaintiff contingency fees.
That report recommended moving away from litigation to cap claims and offer higher initial settlements.
ICBC’s 2015 public accounts show several law firms billing millions, including QA Law at $7.8 million, Kane Shannon and Weiler at $6.9 million, and Pacific Law Group at $5.18 million.
Observers say a change in legal culture about a decade ago pushed ICBC to be more cutthroat in its approach to claimants, offering smaller settlements and using more aggressive legal tactics.
Then about five years ago, the organization – in response to a government audit – commenced a hiring freeze, which resulted in lost front-line staff through attrition.
The end result, according to ICBC statistics, was that the proportion of people represented by a lawyer grew from 40 per cent in 2010 to 50 per cent now.
“Claims with legal representation are more expensive as they incur additional legal costs, have more expert reports ordered and there is an increased use of medical services,” said Adam Grossman, an ICBC spokesman.
He said ICBC was working hard to keep cases out of trial, saying that despite a 20 per cent increase in claims, the number of cases in the courts had dropped by half.
Last year, the agency hired some 500 new claims employees, bringing it back to the 5,200 full-time equivalent staff it had in 2012.
ICBC should also reverse its policy and come to the table with fair offers that don’t encourage legal battles, Louis said.
“ICBC needs to stop being adversarial, and look at it from a perspective of fairness,” he said. “Increasing the initial offers in the long run will save ICBC money. It will mean they end up paying out what they would have paid out anyway, but they won’t need to spend a bucket load of money on legal fees getting that money.”
