Bogus Car Insurance Scams Revealed

This week Michele Henry at the Toronto Star revealed the existence of an estimated $1.3 billion car insurance scam operating in the Toronto region,

Doctors, chiropractors and physiotherapists are unwitting dupes in what some insurers claim is a $1.3-billion scam. Fraudsters steal their credentials to make fake invoices appear legitimate. The victims of the scam are drivers across the province, who annually see their rates hiked to pay for fraudulent claims.

Insurance investigators claim more than 300 clinics loosely connected in fraudulent rings are working this system…

Tow truck drivers or paralegals direct accident victims — drivers and passengers — to rehab clinics. They might get a finder’s fee of $1,000 cash or, in the case of paralegals, a percentage of the payout. It is not uncommon for a clinic to bill an insurer $40,000 over the life of a claim.

The involvement of paralegals indicates that claims are being made through the Statutory Accident Benefits Schedule (SABS). The Insurance Bureau of Canada has passed on suspected cases of fraud to the Financial Services Commission of Ontario (FSCO), resulting in four convictions. The article does not indicate any instances of discipline by the Law Society of Upper Canada (LSUC) of any licensed paralegals.

Although the article identifies higher policy rates as one adverse outcome from insurance fraud, there are other potential effects from it as well. Where a SABS claim is denied by an insurer a claimant must proceed to a FSCO mediation pursuant to s. 280 of the Insurance Act. Mediation is also a mandatory step before proceeding to a civil claim because s. 281(2) states,

No person may bring a proceeding in any court, refer the issues in dispute to an arbitrator under section 282 or agree to submit an issue for arbitration in accordance with the Arbitration Act, 1991 unless mediation was sought, mediation failed and, if the issues in dispute were referred for an evaluation under section 280.1, the report of the person who performed the evaluation has been given to the parties.

In addition to using the valuable time of FSCO, fraud cases involving paralegals have an obvious effect on lawyers pursuing civil actions because civil claims are not within the scope of practice for paralegals. They also effect defence lawyers, who may now have to treat all SABS claims in Toronto with greater skepticism than warranted. All of these challenges may also be extended to motor vehicle collision tort actions that often accompany SABS claims.

The entire legal community has an interest in ensuring that the reputation and standards of our community are maintained. Blatant and deliberate fraud clearly undermines this interest. Let’s hope the LSUC moves quickly to rectify this situation.

 

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