Can an Insurance Company Reverse a Paid Claim?

Car insurance is supposed to provide a financial safety net. Anyone seriously injured in a motor vehicle accident depends on auto insurance to cover medical bills, missed wages, out-of-pocket expenses, and other losses. 

Unfortunately, Ontario auto insurance companies don’t always play fair. Our Sault Ste. Marie and Elliot Lake personal injury lawyers have previously discussed insurance claim denials and how to fight an insurance company’s decision to deny a claim.

In today’s post, we’ll talk about whether an auto insurance company can reverse a paid claim and what you can do if an insurer notifies you that your claim payout is being reversed. If you’ve been told that your insurance claim is being reversed and need assistance, we welcome you to reach out to our Sault Ste. Marie and Elliot Lake law firm for advice.

Claiming Compensation After an Ontario Motor Vehicle Accident 

There are two types of compensation that can be claimed after an Ontario car accident. First, a Statutory Accident Benefits claim is available to anyone injured in a crash, regardless of who was at fault. A “no fault accident benefits claim” covers many out-of-pocket expenses including medication, treatment costs, hospital bills, and income replacement. 

Second, a tort claim is available to anyone injured in a crash caused by someone else’s fault or negligence. A tort claim (also known as a negligence claim or personal injury lawsuit) is to recover losses and damages including pain and suffering, loss of past and future income, and future care costs.  

Reversal of a Paid Accident Benefits Claim

It is possible for an insurance company to reverse a paid claim, but they must have a legitimate reason for doing so. Overpayment, miscalculation, and administrative error are common reasons for reversal of a paid claim. 

For example, imagine you submitted receipts in your no-fault benefits claim, and received reimbursement from your insurer. The insurer later realizes that they mistakenly overpaid you. In that situation, the insurer has the right to recover the overpayment, however, only if they are claiming repayment of benefits that were paid within the last 12-months.  

Other Reasons for Reversal of a Paid Accident Benefits Claim

There are other more serious reasons why a paid claim may be reversed. If the insurer receives new information or evidence that impacts the validity of your claim or the amount paid, they may use that as the basis for reversing payment. The information may come from the insurer’s own investigations, what you report to the insurer, what the other driver or eyewitnesses say, and/or the contents of medical records or employment records. 

An insurer may also rely on fraud, misrepresentation, or some other violation of terms of the insurance policy as the reason to reverse a paid claim. If the insurance company discovers that a policyholder or claimant has lied or withheld critical information about how the accident occurred or the extent of their injuries, for example, they may attempt to reverse what has been paid out, and they are not limited to the 12-month.  

What to Do When an Insurance Company Reverses a Paid Claim

If your insurer reverses or denies a previously paid Statutory Accident Benefits (SABS) claim under the no-fault system in Ontario, it can be both confusing and financially stressful. Fortunately, there are steps you can take to understand and potentially challenge the insurer’s decision. 

The first place to start is understanding the reason for the reversal. Insurers are typically required to provide written notice and reasons for their decisions, such as an Explanation of Benefits Form (OCF-9) or in a formal letter. If you have not received a written explanation, you have the right to request it. The insurer must explain which benefit(s) have been reverses, the reason(s) for doing so, and the evidence or legislation relied upon.

Once you know the reason(s), you can devise a strategy for next steps, which may include gathering relevant documentation such as medical records, treatment plans, assessments, and invoices. Contacting the insurance company, either directly or through your insurance claims lawyer, may be enough to clear up issues (e.g., providing new or additional evidence or documents to support payment of your claim). 

Many insurers have an internal review process. You or your legal representative can request that the insurer review its decision based on new or supporting evidence. This is often the quickest and least adversarial option. You may also file a complaint with the Financial Services Regulatory Authority of Ontario (FSRAO), if you believe that the insurer acted unfairly, unreasonably, or in breach of the SABS. The FSRAO protects insurance holders from unfair practices and breaches of the Insurance Act. Filing a complaint with the FSRAO does not necessarily mean the insurance company will be obligated to reverse the denial or request for repayment of benefits.

If the dispute remains unresolved after proceeding through the insurance company’s internal review process, you have the right to apply to the License Appeal Tribunal (LAT) – Automobile Accident Benefit Services (AABS). The LAT is the authorized decision-making body for resolving accident benefit disputes in Ontario. This is a formal adjudicative process where evidence and legal arguments are presented before a tribunal adjudicator.  

Re-Opening Settled Insurance Claims

What about a situation where you’ve settled your tort lawsuit out-of-court or received a judgment following a trial in your personal injury case? Can the insurer attempt to reverse payment or re-open your claim?

There are limited grounds to appeal a court order awarding damages in a personal injury case. The insurance company can’t simply refuse to pay because it doesn’t like or agree with the outcome. 

Similarly, in most cases, a settled accident benefits claim can’t be reopened. That’s one of the primary reasons to not rush to accept an initial settlement offer from an insurance company. Once a full and final release has been signed, it is binding on all parties and there are very limited reasons that a claim could be reopened. Significant mistake, duress, fraud, unconscionability, or some defect in the release may form the basis of overturning a final settlement. It is important to know there is a 48-hour “cooling off” period, in which you have the right to rescind the settlement if you change your mind. 

If an insurance company is refusing to pay you despite settlement of your claim, reach out to our Sault Ste. Marie and Elliot Lake car accident lawyers as soon as possible. We can explain your rights and options, advocate on your behalf to secure payment, and if needed, pursue legal recourse to ensure payment.

ADVICE FROM LAWYERS SERVING SAULT STE. MARIE AND ELLIOT LAKE

No fault accident claims and tort claims are there to provide accident victims with financial compensation when they need it most. If you need help filing an auto insurance claim or disputing an unfair reversal of a paid claim, Feifel Gualazzi can help. 

Our team of accident lawyers will assist you in gaining the compensation you’re entitled to as quickly as possible. We’re one of the largest personal injury law firms in Sault Ste. Marie, serving residents of Algoma District, including but not limited to Wawa, Blind River, and Elliot Lake. Car accident lawyers at Feifel Gualazzi are committed to providing you with affordable legal services. Contact us today to schedule a free consultation.