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Accident Benefits

Should you indemnify? You better you better you bet.

 Aug 20, 2018 9:00 AM
by Kevin Mitchell

With tension like The Who’s iconic song, the July 17, 2018 loss transfer private arbitration award of Fred Sampliner in State Farm v. Economical dealt primarily with a dispute over the quantum of State Farm’s claimed indemnity and included issues. Economical admitted 100% liability for the February 4, 2010 accident. A confounding issue was the fact there was a live SABS claim from a prior January 22, 2008 accident, which was not loss transferable. Both claims, on the verge of trial, were settled together in April 2016. The onus shifted to Economical to show gross negligence or bad faith handling once State Farm proved the payments had been made. Depending upon the quantum at issue, this can be a costly and/or time consuming exercise for any Applicant.

Economical primarily took exception to the manner in which State Farm settled the second claim via lump sum. It also rejected various medication expenses, which were similar to those prescribed in respect of the first accident. Economical enjoyed success only with its third argument respecting repayment of hourly rates for OCF-18s paid by State Farm above the rates contained in the Professional Services Guidelines. Only one OCF-18 was clearly in excess of the posted rates. For the other five impugned OCF-18s, it involved the hourly rate for a psychiatrist, which is not subject to the Guidelines. Economical argued the rate for a psychologist should inform the decision. The arbitrator disagreed, noting differences between the two disciplines, but in accepting OHIP’s hourly rate of $176.25 still found State Farm had overpaid, which rose to the level of gross negligence but not bad faith.

In an indemnity claim of just shy of $275,000.00, less than $10,000.00 was disallowed. State Farm was awarded interest, albeit reduced in duration, and required to equally fund the arbitrator’s account, presumably as part of the umbrage felt by the arbitrator over State Farm’s agreement before the hearing to accept less than it had paid for the OCF-18s. Unfortunately, his ‘brinkmanship’ comment and the noted exceptions seem a bit out of balance when compared to State Farm’s relative success and the fact that had it settled in advance it would have achieved an indemnity recovery of about 50% rather than the 96.4% it now enjoys. The issue of costs was reserved. Neither party intends an appeal.

Without authority/evidence to support paying a psychiatrist more than OHIP does, you better bet your life a loss transfer Respondent will cut you like a knife.

Kevin is a Partner of Samis+Company. Throughout his career, he has practiced almost exclusively in the area of accident benefit and bodily injury matters arising from motor vehicle accidents. He has also defended various non-motor vehicle bodily injury claims. Kevin carries on a robust practice involving privately arbitrated disputes between insurers in both priority and loss transfer matters. 

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