‘Pervasive lawyer advertising’ singled out by ICBC as reason for rate hike

The Insurance Corporation of British Columbia has singled out “pervasive lawyer advertising” as a cause in the steady uptick of injury claimants obtaining legal representation.

In its recent revenue requirements application to the B.C. Utilities Commission, the provincial insurance provider delved into justifications for a 4.9-per-cent basic rate increase.

ICBC said litigation costs in 2015 hit almost $309 million and made up 20 per cent of total bodily injury claims costs.

“This is the highest level of litigation costs to date, and is expected to continue to grow in part due to the increase in the legal representation rate,” the application reads.

The insurer predicts the legal representation rate will continue to increase and hit 53 per cent in 2016. A chart in the application illustrates a steady rise of legal representation over the years, with the largest jump coming in 2012.

Ron Nairne, partner at Giusti Nairne in Burnaby, B.C., says there’s nothing lawyers or lawyer advertising have done differently in recent years.

“Remember that when ICBC says representative claims cost more, the main reason for that is that lawyers obtain fair and full-value settlements for their clients,” he adds.

“An unrepresented insured has no idea how much his case is fairly worth so ICBC can take advantage of that.”

Nairne, who is also on the board of governors at the Trial Lawyers Association of B.C., says the increase in the representation rate has occurred in the last six years — after ICBC has “centralized decision-making, taking away decision-making authority from adjusters and even their managers.

"Adjusters handle many more files than previously and the result is accident victims are not getting their medical expenses paid and are otherwise treated unfairly, so they turn to lawyers.”

The British Columbia Utilities Commission, in its 2015 decision regarding ICBC’s last revenue requirements application, encouraged ICBC to “explore all possible ways to address controllable as well as external factors that may lead claimants to seek legal representation. The outcome of a successful action plan and program could be that the [legal representation rate] returns to pre-2011 levels before the acceleration began.”  

The decision also said the panel was not convinced by ICBC’s claim of how the legal representation rate was affected by factors outside of ICBC’s control.

“. . . we view ‘perceived lawyer benefits’ as at least in part a function of the treatment that claimants believe they are likely to receive at the hands of ICBC in the absence of legal representation” the panel said, and the decision called for a followup customer satisfaction survey to be conducted by ICBC.

In answering the commission, the application looked at the results of a customer satisfaction survey conducted by ICBC in 2014, which shows “perceived lawyer benefits” as the most influential factor when it comes to customers making the decision to call a lawyer. Customers who completed the survey went on to say they see lawyers as increasing the chances of a better settlement, reducing the hassle of dealing with the insurer, providing access to more treatment and enabling customers to more fully focus on their recovery. 

“In addition, many customers feel that hiring a lawyer gives them a greater sense of control by having an expert fully ‘on their side,’” said the application.

The application went on to say these factors were far more influential on the legal representation rate than other factors ICBC might have more influence over, such as complex claims processes, biased adjustors or unfair treatment and compensation.

ICBC also pointed to the fact that 80 per cent of customers reporting an injury claim had no previous recent claims, indicating their decision to obtain a lawyer had more to do with outside factors such as advice from friends and family or marketing by legal firms.

“On a regular basis, these people come to me within a short period of time and they say, ‘I can’t get a response from ICBC, they won’t do anything for me, I’ve been treated rudely, I had no intention of coming to see a lawyer but . . .’ Those things are happening so clearly at the front line there’s plenty of room for improvement from ICBC,” Nairne says.

The insurer outlined changes meant to have long-term positive impact on the legal representation rate among its clients, including resolving claims effectively and quickly “in a fair and reasonable manner” through streamlining determination of coverage and payment of benefits, implementing initiatives improving access to benefits and providing education to customers so they have more control over the claims process.

Nairne says he sees very late settlements, with reasonable offers only being made “within a week, days, a few weeks of the trial date.” He says in previous years ICBC would make reasonable offers earlier on, and if that was still happening the cases would go away because “clients don’t want to wait forever.”

As for the prescribed followup customer satisfaction survey, ICBC said it aims to “undertake research to further clarify elements that are key to the customer’s decision to retain legal counsel and to what extent ICBC may be able to influence those elements.”

“Trial lawyers do share ICBC’s concerns about rising costs,” Nairne says. “The current system of compensation is one of the best in North America and we want to make sure it is preserved. We say if ICBC handled files efficiently and fairly, in the long run savings would be achieved.”

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