Observations about the Marshall Report: Everything Old is New Again
Personal Injury Lawyer – Partner
Please click this LINK to view the Marshall report commissioned by the Provence titled Fair Benefits Fairly Delivered.
The report is fairly general but has some themes that will be familiar to those who, like me, have lived through what seems like a dozen attempts to tweak, revamp and overhaul auto insurance:
- Make the policy simpler.
- Have independent evaluators who are truly independent decide entitlement definitively.
- Chronic pain is in your head.
- One-size-fits-all medical care works.
- First, kill all the lawyers.
- Add transaction costs to reduce overall costs.
- Make the dispute resolution system faster and more fair.
- Reduce tort rights.
I characterize it as naïve for good reason. While having the appearance of an in-depth analysis, it demonstrates significant deficiencies in understanding how the insurance system works, and the cultural shift that would be required to achieve its high-minded goals. Mr. Marshall, unfortunately, expects that insurers will change their spots and become benevolent societies interested in the care of their insureds instead of management of claims costs. Thirty six years in this business makes me very doubtful.
A Simpler Policy
Mr. Marshall is right about simplification of the policy. We can all applaud that attempt. It requires a ground-up redraft with no sacred cows. Unlike Mr. Marshall’s understanding of the initial purpose of the policy of no-fault benefits which he sees as controlling costs of auto insurance, its initial purpose was to provide distributive compensation to those who were at fault and not at fault, and to tide innocent victims over until their cases could be tried or otherwise resolved.
If you have the time, one of many of Justice Linden’s articles from the 70s is an interesting view to the past and proof of my hypothesis that everything old is new again, including “disparag(ing) the role of lawyers in the resolution of accident claims”, reducing access to tort, having the poor subsidize the wealthy, and on.
Transaction Costs Will Increase
Missing from the analysis of the history of auto insurance changes is the observation that the expansion of accident benefits would necessarily increase transaction costs. Instead of a global assessment done once in a tort action, for better or worse, there would be a line by line, day after day, interminable need to assess, prove, reassess and reprove entitlement all with the attendant paperwork. With the expansion of accident benefits came a body of law interpreting these now-valuable benefits. That was inevitable. The point is that a not-at-fault injured person now had to deal with his or her insurer in an ever-increasingly detailed way. That simply had to increase costs.
Because that analysis is missing, Mr. Marshall makes the mistake of expecting that the additional transaction costs of his recommendation will somehow reduce costs. He is wrong. Mr. Marshall did not cost:
- Internal insurer appeal processes. Who will run it? Will it require nurses and physicians? Who will inform them of the issues, pay for the medical reports supporting the appeal? (To Mr. Marshall I have to ask, have you ever had to deal with a denial of a life insurance benefit, or a disability payment? The internal appeal process is similar to CPP: Deny first and see if the applicant can figure out how to engage the next level of appeal. It is an efficient and stealthy way to cut people off). This is a new layer of bureaucracy that will inevitably add transaction costs.
- IECs. These are to be hospital-based independent evaluators whose assessment of benefit entitlement will essentially be final. If there is to be confidence in such a system, it will be expensive. Hospitals don’t have excess room for this influx. Office space will have to be found. Presumably the work of the assessors will be paid for by the insurers. Complicated injuries will require multidisciplinary assessments, equipment and testing facilities. The cost of this overhead will be high. If the expertise and equipment lags behind that of others who are practicing and researching in the respective area, they will be devalued. Super-specialization is the direction medicine is headed down, which will again either devalue the reports of the evaluators or require expensive consultation. We have experienced the huge costs associated with Designated Assessment Centers. Everyone was glad to see the back of them, although for different reasons.
Chronic Pain and One-size-fits-all Care
Mr. Marshall makes some broad statements about sufferers of soft tissue injury that expose his bias and lack of knowledge. He asserts “ there are clear indications that accident victims are not receiving appropriate care, they are taking longer to recover and many report that they have developed permanent impairments from simple soft tissue injuries – that’s the value gap”. This supposes that provision of care prolongs disability, and that there is something such as a simple soft tissue injury that can be identified. To support this broad statement Mr. Marshall references a 2007 study of a 6 month period of claims in Saskatchewan from 1994 including chiropractic and family doctor care. I don’t propose to go through all of the possible limitations of that study but suffice to say that a 20 year old + treatment protocol cannot be compared to today’s therapies.
The bias this report demonstrates is that an injury is an injury is an injury. Treatment can be determined in advance without regard to whom the injury is visited upon, their age, pre-existing physical status, co-morbidities, responsibilities, emotional stamina and social supports. The naiveté of this assertion is as breathtaking as is the suggestion that the medical profession knows what to do with the injuries Mr. Marshall assumes are minor and indeed describes as mental. Equally breathtaking is the lack of appreciation of what a “strain” or “sprain” is. Treatment protocols that are evidence based should be considered, but let’s not forget that very often they are based on limited samples, and are often obsolete by the time they are published.
The injection of treatment protocols into the system I would predict will increase the costs without demonstrable benefit. A fully integrated insurance product must recognize that what is taken away in one area comes back to haunt you in another. Years ago I made representations to the government committee looking at auto insurance reform. I reminded them, much to the chagrin of the authors of that product, that if you take away my client’s right to sue for health care expenses, be careful what you wish for. They include vocational retraining. I would be able to go to the jury and say my client cannot work at his former job. Can’t do anything about that, because you can’t award the cost of retraining, so the income loss claim goes up, way up. I am happy to say that short- sighted amendment was not long for this world.
First, Kill All The Lawyers
Lawyers’ fee arrangements should be transparent. They are already required to be such and most of the suggestions made by Mr. Marshall are already in place. But the enforcement by our regulator (LSUC) is lagging behind. An auto insurance scheme is not the place to regulate lawyers. The holder of our licenses is the right body. I believe that where there is smoke, there is fire and improprieties in one area (fees) often lead to discovery of improprieties in another.
Lawyers will be necessary so long as insurers are retaining lawyers to represent them. Lawyers will be necessary so long as insurers train adjusters to decline payment in the case of any deficiency in filing at all. Lawyers will be necessary if there is room for interpretation that permits insurers to terminate or decline to pay a benefit. Look at a quarter century of litigation if you need proof.
In the words of Justice Linden:
I believe that injured people need the advice and protection that an independent bar can provide them. It is true that it costs something to supply this legal service, but this is money well spent. Injured people who receive legal advice usually receive all the compensation they are entitled to receive. Those without lawyers often do not. Many insurance companies seem to deal differently with represented claimants than they do with unrepresented ones. The statistics in the studies show that claimants receive more if they have legal advice than if they do not.
Mr. Marshall cites the anecdotal information obtained by Justice Campbell in his review of contingency fees charged by some lawyers as inordinately high. My fees are not as high as those cited by Justice Campbell. Perhaps fees should be limited. But if they are to be reined in then so too should those of insurers to keep the playing field level. Two examples from the files of my office illustrate the point. A catastrophically impaired man was denied $19,000 in benefits. The total cost of the assessments to deny those benefits: $21,000, in addition to legal fees. Another case was settled for over $1.2 million. It took almost a decade of litigation to move the insurer from a position where it would not pay benefits at a catastrophic level to settlement for this significant sum. I unapologetically assert that I earned my fee in that case and this a great example of why a restriction on cashing out medical rehab benefits would only hurt the victim.
It all sounds so simple and straightforward in Mr. Marshall’s report. What he over looks is that insurance companies are profit-motivated and will fight tooth and nail to avoid payment to even those who are clearly entitled. Just ask my client who is clearly quadriplegic but his housing modification funding will be held up while an insurer papers his file. In the meantime, a hospital bed is used up and a family awaits the return of a loved one.
I have never represented someone I thought was over-compensated by the tort system. It is by an order of magnitude more efficient and streamlined than the accident benefit system. It forces compromise and a once and for all assessment.
I can accept and agree that the AB system needs to be modified by simplifying it.
However, it must also be accepted and agreed that
- A rich system invites denials by insurers.
- Denials invite disputes.
- Disputes involve representation by competent lawyers.
- Health care costs will continue to go up, not down. As the intensification of services is combined with the ongoing delisting of publicly paid for services it is inevitable that private systems like auto insurance will be asked to pay for more.
- Every new agency created will increase base and transaction costs in the system.
At the end of the day, this is a broadly worded document that delivers little in the way of substance. I doubt that it can be costed and turned into a viable insurance product.