The Insurance Bureau of Canada has circulated a confidential memo alerting insurers across the country to an increase in fraudulent auto claims involving staged car accidents.  The problem appears to be particularly acute in Ontario, the country’s largest auto insurance market, where industry estimates indicate that $1.3 billion is paid out each year to fraudulent claimants or people abusing the system.

In Toronto, organized crime has been linked to several staged accidents.  “Project 92”, an unofficial task force set up by prosecutors, Toronto Police Services, and the IBC, has identified over 40 accidents staged by a single crime ring.  Police have laid nearly 300 charges as a result of the probe, resulting in the convictions of 20 individuals.  One technique commonly employed by the gangs is the “swoop and squat”, where the driver slams on his brakes, causing an innocent driver to rear end his vehicle.

The Insurance Corporation of British Columbia, the public auto insurer in that province, has successfully sued fraudulent claimants.  In one case ICBC obtained judgment in excess of $100,000 in punitive damages in addition to the recovery of benefits paid out.  The pursuit of punitive damages through civil litigation is less common in Ontario, perhaps because private insurers here find it more difficult to mount a collective effort to pursue fraudulent claimants through the courts.

Link:  http://www.theglobeandmail.com/report-on-business/insurers-beware-national-watchdog-raises-alarm-for-fraud/article1740676

See also, “Punitive Damages for Insurance Fraud”, Richard Hayles and Yasmin Visram, Canadian Journal of Insurance Law, Vol. 23, No. 2.

Richard Hayles, B.A., J.D.

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