V602 – When Staged Collisions Result in Real Injuries

Fraudsters be warned… The LAT has taken a hard line position against staged collisions.

In 17-000532, M.D. and Intact Insurance Company, the Tribunal was asked to consider whether the applicant was involved in an “accident” and whether he wilfully made a material misrepresentation to the insurer when he applied for accident benefits. It was Intact’s belief that the claim involved a staged collision. The insurer had recognized many inconsistencies and red flags in relation to the claim. They had also obtained a reconstruction report which confirmed the collision could not have occurred in the manner described by the applicant.

As detailed in the decision:

“The respondent alleges that the applicant is not credible. It relies on a number of circumstances, connections and similarities that the applicant’s collision has in common with four other collisions that took place over a four month period to allege the collision was staged. Some of those factors are that all five accidents occurred after 10:00 p.m., rental vehicles were involved in 4 of the accidents, and some of the occupants or drivers of the vehicles were Facebook friends with other drivers or occupants in the other collisions, or they attended Seneca College at the same time. This includes the fact that the applicant’s collision took place at the same location as another accident that occurred about 5 weeks later and involved a passenger in a vehicle who was a Facebook friend with the driver of the Mazda involved in the applicant’s collision.”

As a result of its investigation, the insurer took the position that the applicant had wilfully misrepresented material facts when applying for accident benefits. In so doing, it invoked a complete termination of benefits as permitted by Section 53 of the SABS; such a termination is a powerful penalty as it bars a person from receiving any accident benefits even if injury has been sustained.

As defined in the SABS, an “accident” means an incident in which the use or operation of an automobile directly causes an impairment or directly causes damage to any prescription eyewear, denture, hearing aid, prosthesis or other medical or dental device. The Ontario Court of Appeal further extended the definition when it recognized the Amos purpose test as being applicable to the definition of an “accident”. The purpose test confirms that the applicant must prove on a balance of probabilities that the collision resulted from the ordinary and well-known activities to which automobiles are put.

In this present case, the applicant suggested that even if the accident had been staged, a staged collision would still meet this definition of “accident”. The applicant relied on a FSCO appeal decision, Madinei and Ebadi and TD General Insurance Company, where Director’s Delegate Evans determined that a staged collision did indeed meet the definition of an accident.

In considering the case before her at the LAT, Adjudicator Deborah Neilson confirmed she is not bound by past FSCO decisions. Indeed, she was not persuaded by the finding that a staged accident was an “accident” as detailed in the Madinei and Ebadi decision. She instead focused on Section 118 of the Insurance Act, which essentially states that a person shall not profit under an insurance policy from that person’s intentional or criminal act. She stated as follows:

“When the definition of “accident” in the Schedule is interpreted in light of s.118 of the Insurance Act , “accident” does not include a staged collision. The purpose of a staged collision is for the participants to profit from the insurance policy. A definition of “accident” that allows people to profit under the insurance policy because of their intentional acts is contrary to public policy and s.118 of the Insurance Act.”

Adjudicator Neilson next considered whether the accident in question was staged. She accepted that the applicant’s evidence was unreliable and she noted that he did not call any expert to refute the insurer’s accident reconstruction report. She also noted concern that the applicant failed to call any evidence to corroborate his version of the incident. She ultimately concluded that the collision had been staged and that it was, therefore, not an “accident”.

The adjudicator went on to confirm that the insurer had met its burden of proving that the applicant had made a wilful misrepresentation of material fact when applying for benefits. In so doing, she confirmed the insurer had the right to terminate benefits pursuant to Section 53 of the Schedule.

We recognize that the LAT was not asked in this case to consider whether the applicant would have to repay Intact for any benefits paid to the date of the claim termination. As is well recognized, insurers do have the right to invoke a requirement of repayment of benefits paid to a person if the payments were made as a result of wilful misrepresentation or fraud. Interestingly, Director’s Delegate Evans, who previously confirmed that a staged collision meets the definition of an “accident” in the Madinei and Abadi appeal, just released a June 26, 2018 appeal decision on this very point. Following the original appeal decision, the Madinei and Abadi couple pursued further arbitration. The couple sought payment of various denied benefits and the insurer sought repayment of all previously paid benefits given that they had been paid due to wilful misrepresentation or fraud. On appeal, Director’s Delegate Evans confirmed the denied benefits and confirmed the insurer had the right to repayment of any benefits paid directly to each claimant given that the payments were indeed released as a result of wilful misrepresentation or fraud.

Long story short – staged accidents will not be compensated. If discovered, and so long as the insurer is able to prove its case, benefits will be terminated and request for repayment of benefits paid to the person prior to the termination date will surely follow. Even if real injuries are suffered in the course of the collision, this is the harsh penalty that ought to be expected.

Official Decision:

17-000532, M.D. and Intact Insurance Company

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