Auto Insurers Keep Eye on Cross-Border Claims with Canada

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 U.S. is 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) discussed the problem of cross-border claims and the complications that may arise under Ontario’s statutory accident benefit schedule (SABS).

Cirino said U.S. carriers are bound to comply with Canadian standards. “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 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’s statutory accident benefit schedule 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 U.S. that is involved in an accident in Canada 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: 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 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 U.S. 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 insurers 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. Overall, Cirino from GEICO said his company spends $20,000-$30,000 in expenses investigating each suspicious claim from north of the border.