Cross Border Claims Frustrate Auto Carriers

Staged automobile accidents in Canada’s most populated province of Ontario pose a unique problem for American auto insurers that must deal with Ontario’s stringent no-fault benefits.

Some U.S.-based adjusters may be unfamiliar with the Canadian insurance system and not understand how to adjust claims under that country’s or one of its province’s guidelines.

Though issues with the Mexican border have been highly publicized, the border between Canada and the United States is the actually the longest in the world, stretching 5,525 miles. The province of Ontario borders several states including Michigan, New York, Ohio, Minnesota and Pennsylvania.

During a recent webinar presented by the National Association of Insurance Commissioners, Jeffrey Cirino, Midwest field supervisor of GEICO’s Special Investigations Unit (SIU), and others discussed the growing problem of cross-border claims and the complications that may arise under Ontario’s statutory accident benefit schedule (SABS).

According to Cirino, U.S. insurance carriers such as GEICO must to comply with Canadian statutes. “When our vehicles cross the border and there’s an accident that occurs in Ontario, we are bound by their … statutory accident benefit,” he said.

In early 2009, Cirino began to notice a trend involving Ontario losses with Ohio-rated policies. He compiled a list of non-catastrophic claims.

“We pulled out nine claims that were Ohio-rated. Out of these nine claims, we found that four of these claims had losses within 60 days of the policy inception. All the losses had at least four eligible insured or injured occupants … you’ve got 16 claimants seeking coverage on four claims.”

State Farm, with operations in every U.S. state, has the benefit of having operations in three Canadian provinces: Alberta, New Brunswick and Ontario.

“We have an entire electronic network where we can communicate from one claims office to another,” said Terry O’Brien, an Ontario-based State Farm claims manager. He said accidents involving insureds can be transferred to the appropriate Canadian office for further claims handling. As a result, his company hasn’t noticed the uptick in these types of claims.

Ontario Auto Accident Benefits

Ontario has what’s called the Statutory Accident Benefits Schedule, which is “a government regulation that forms part of the Ontario automobile policy,” State Farm’s O’Brien said. “It’s written into our insurance act and that’s really the no-fault statute. Anyone who is involved in an accident in Ontario could access this.”

Thus, any vehicle insured in the United States that is involved in an accident in Ontario will be subject to the statute and bound to a higher standard of coverage than may have been written.

Three distinct weekly benefits are available under SABS: income replacement, non-earner benefit and a caregiver benefit.

GEICO said it has scrutinized losses involving the caregiver benefit because of the potentially fraudulent activity associated with it. The benefit provides $250 a week for 104 weeks. A claimant will claim he or she is unemployed and is also the primary caregiver to children, providing a physician’s declaration in order to claim the benefit, which allows an additional $50 per child. Other benefits include housekeeping, home maintenance, visitation expenses, loss of educational benefits and even damage to clothing.

In addition to SABS, Canada has an agreement that is known as the Non-Resident Inter-Province Motor Vehicle Liability Insurance Power of Attorney and Undertaking (PAU).

The PAU document is filed by insurers in the United States that issue motor vehicle liability policies outside of Canada. An insurer that files this form protects its insureds in the event they drive in Canada. Not all companies are signatories to the PAU. Carriers that don’t become signatories that have an insured who is involved in an accident in Ontario would breach Ontario’s Compulsory Automobile Insurance Act. A carrier’s breach could cost an insured, who may be fined, face vehicle impoundment, and could even lose the right to sue for damages.

“There’s an agreement between insurance companies that transact on both sides of the border. If you drive from Ohio to Ontario, you have that extra layer of coverage. They’re getting a higher level of protection than perhaps they have paid for. That doesn’t necessarily mean the insurance carrier is going to pay on it,” O’Brien said.

U.S.-based adjusters unfamiliar with Canada’s insurance ways may not know how to adjust claims under a province’s statutory guidelines. In addition, adjusters face the burden of having to move files in a timely fashion per statutory requirements, bound to pay benefits regardless of suspicions.

“There’s zero flexibility when it comes to delaying for suspected fraud,” Cirino said. “Our medical management team is spending a lot of money on fighting the treatment plans with peer reviews and personal examination to get these benefits cut off.”

GEICO spends upwards of $20,000-$30,000 in expenses investigating these claims, Cirino said.

Because carriers don’t typically send personnel across international borders to investigate losses, Cirino recommended insurers work with Homeland Security to use information compiled by license plate readers.

He also recommended carriers become members of the Insurance Bureau of Canada, the equivalent of the National Insurance Crime Bureau. He said the membership helps in the exchange of information. Lastly, he recommended insurers pursue examination under oath whenever possible.

GEICO addressed the questionable losses by establishing a specific claims team and assigning an SIU liaison to handle them. Utilizing a specific team that manages only Ontario claims, the company has been able to reduce the frequency of these types of claims. Team members can spot trends such as when the same names, addresses and clinics are being used. Cirino said perpetrators have noticed the team concept and this has resulted in fewer claims being filed.

Fraudulent Indicators

Common fraudulent indicators associated with staged accidents in Ontario, as seen by GEICO’s SIU include:

• Staged accidents/no witness accidents
• No police report
• Recent policy inception in relation to date of loss
• One U.S. policyholder and Canadian passengers
• Faked injuries
• Jump-ins
• Runners that direct accident victims to rehabilitation clinics
• Accident victims speak little English, unable to read forms that give a clinic the right to bill an insurer and receive payment
• Billing for services not rendered
• Treating with a variety of doctors/specialties
• Named insured driver is uninjured

One problem is that Ontario doesn’t require police reports to be completed on scene, so it is not abnormal for alleged victims to walk into a police station to file an accident report, according to Cirino.

While State Farm hasn’t seen an increase in this type of fraud, O’Brien acknowledges Ontario regulations have been reined in.

“What we’re finding is the typical thing in a lot of no-fault states where you’ve got overbilling or being billed for treatment that never took place. We have tightened up regulations that were perhaps being abused,” O’Brien said. “There has been evidence of rings that moved up to the province from New York and New Jersey. They hire people locally so where the company is registered, a clinic, it’s in someone else’s name but there’s a mastermind behind it.”