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Ralph Nader > In the Public Interest > A Canadian Lesson: Stop Insurance Industry’s Gouging

By engaging in massive premium gouging, arbitrary cancellations and reduced coverage, the liability insurance industry is trying to enlist legions of panicking small businesses, city governments and professional firms in its drive to pressure legislators to restrict the rights of injured people to sue for damages. Obviously manufacturers in the auto, drug, chemical and other industries, who have been taken to court for their defective or toxic products, are joining in the hoopla to place obstacles in the courtroom door and inside the courtroom for regular citizens.
This is not a poor insurance industry. Its profits are soaring. Its stocks on the New York Stock Exchange boomed by 50% in 1985, double that of the Dow Jones Index. As a whole these companies have made over $70 billion in the last ten years, according to the General Accounting Office, and paid negative federal income tax. Nonetheless its trade associations and company lobbyists are pushing for what they call “reform of the civil justice system.”

Only by accepting these restrictions on injured or sick victim’s rights against perpetrators of their harm in industry and commerce, the casualty insurers say, will rates and coverage become reasonable again.

Well let’s see. North of the United States is a land called Canada. For decades, the province of Ontario, which has over one-third of the country’s population, has had the so-called “reforms” that the U.S. insurance industry wants to have imposed on our country. In Ontario, punitive damages

against companies in tort cases are almost impossible for plaintiffs to obtain. Contingent fees, where your lawyer takes the cases and only gets paid if you win, are prohibited. Also plaintiffs who lose their cases, must pay the defendants’ attorneys’ fees as well as their own — a major impediment to using the courts. There are severe caps on recovering money for pain and suffering.

Also in Ontario there are restrictions on the jury’s role and most trials are conducted by the judge without jury. There is no constitutional right, as there is in our country, of a right to a jury trial in such personal injury cases.

So you would expect that the casualty insurance industry would be behaving in Canada, providing businesses with fair, adequate and nondiscriminatory coverage. Well you should see the headlines in the Ontario newspapers these days. It is as if you never left the U.S. For the insurance industry is raising premiums in various sectors by 400%, canceling coverage in mid-term and in increasing instances refusing to provide coverage at any price. Maybe they want to drive Canadian law, now below that of the U.S. in this personal injury area, to the lowest Korean denominator.

Specifically, the insurance industry has gouged or cancelled day care centers mercilessly. The same treatment is being given School Boards. The insurance companies are turning their backs on liability insurance for Toronto and many other cities. Premiums have gone up 1000%, with reduced coverage, for the Ontario intercity bus industry. Hospitals in Toronto can still get insurance, but only at “greatly increased” premiums.

Government officials in Canada are outraged and are blaming some of the problem on foreign reinsurance firms like Lloyd’s of London which is pulling the strings on domestic insurance companies in -Canada. These officials are demanding that the federal government in Ottawa establish a reinsurance company.

Whatever the turn of the events in Canada, that country’s experience demonstrates that even if the insurance industry gets away with undermining victims rights in the U.S., the avariciousness and power plays will continue to come from their executive suites unless there is a business revolt against such transparent manipulation.