FSCO releases Cost of Goods Guideline for Ontario auto insurers
In response to a recommendation from the Auto Insurance Anti-Fraud Task Force, the Financial Services Commission of Ontario (FSCO) has released a Cost of Goods Guideline. The Guideline addresses the Statutory Accident Benefits Schedule effective as of the date of the province’s auto insurance reforms on September 1, 2010 (referred to as the “new SABS”), as well as the “old SABS” – that is, dealing with accidents on or after November 1, 1996.
The Guideline confirms that Sections 15 and 16 of the new SABS (and sections 14 and 15 of the old SABS) require insurers to pay for “reasonable and necessary” expenses incurred by or on behalf of an insured person for the types of goods described in those sections and seeks to provide direction about what “reasonable” means.
The FSCO Cost of Goods Guideline says that the retail price is the “lowest price, including delivery charges (if delivery is required), duties and taxes, that would be payable by or on behalf of an insured person to acquire an item of goods from a source that is available to a member of the general public in Ontario.”
Where a retail price exists for an item of goods, a “reasonable” expense for that item for the purposes of sections 15 and 16 of the new SABS and sections 14 and 15 of the old SABS is that retail price, or the price actually paid or payable by or on behalf of the insured person to acquire the item, whichever is lower.
In the event of a dispute over whether an expense for an item is “reasonable”, the onus is on the insurer to provide reasonable evidence of the retail price of the item.
The Cost of Goods Guideline also addresses Harmonized Sales Tax (HST) when it is applied to goods.
“If the HST is considered by the CRA [Canada Revenue Agency] to be applicable to an item for which an insurer is liable under those sections, then the HST is payable by the insurer as part of the “reasonable” expense for that item.”
The full guideline, which comes into effect on January 14, 2012, can be read online. (PDF)
