Changes to Ontario Accident Benefits: The E&O implications for agents and brokers

In an earlier blog, I discussed the impending changes to the Ontario automobile insurance product and the opportunity for brokers to demonstrate to their customers the value of a broker’s expert advice. There is another side to that coin. It is that brokers who fail to offer their customers sound advice, or who offer the advice but fail to document their files properly, run the risk of finding themselves on the wrong end of an Errors and Omissions lawsuit.

These risks are well articulated in the MSA Quarterly Outlook Report, Q4-2015. The Report contains an article written by Lee Samis and Jenna Meth of Samis & Company. In their article, Mr. Samis and Ms. Meth discuss some of the impending reductions in coverage, the options to increase coverage, and the responsibility of insurance intermediaries to offer professional advice. As noted in the article, ‘Legal counsel who represent accident victims are being vocal about their intentions to litigate when they find themselves dealing with injured victims who do not have adequate coverage on their auto policies. The assertion is that compensation will be sought on the basis of broker or intermediary breach of duty for not ensuring that policy coverage includes enhanced coverage. One expects that such claims would be made against insurers as well as intermediaries’.

Both the Registered Insurance Brokers of Ontario and the Financial Services Commission of Ontario have published bulletins outlining the upcoming changes and the responsibility of insurance intermediaries – both agents and brokers – to advise their clients of the impact of these changes and of the options for increased coverage.

Given the wide scope of the reductions in coverage and of the options for additional coverage, it will be a real challenge for insurance agents and brokers to have an informed discussion with their clients. And, as pointed out in the above-mentioned article, it isn’t enough to discuss only the Accident Benefits section of the policy. In the event of an accident, the Third Party Liability section of the at-fault driver’s policy will pick up where the injured party’s Accident Benefits leaves off. To the extent that the limits for Accident Benefits are being reduced, the Liability limits should be reviewed to ensure they are adequate.

If an automobile accident results in injuries that exhaust the limits provided under the Standard Accident Benefits Schedule, it is not hard to imagine the injured party’s lawyer asking questions about what advice the injured driver received from her/his insurance intermediary as to the options for increased coverage. As well, if the Third Party Liability limit under the at-fault driver’s policy is insufficient to pick up the slack, the at-fault driver’s agent or broker may be asked some tough questions about what advice the at-fault driver was given as to increasing the Liability limit.

Merely giving the advice on these topics isn’t sufficient. The other piece of the puzzle is being able to produce documentation that shows what was discussed. This is especially the case for clients who have previously purchased increased coverage when given the opportunity or advice to do so. Although the courts have given some leeway to insurance intermediaries when it comes to clients who have consistently refused to purchase anything other than the most basic coverage, it still behooves agents and brokers to provide expert advice to all their clients.

No one said the job of a professional agent or broker was easy. With the upcoming changes to the Ontario automobile insurance policy, that job just got harder.