How eliminating fixed amounts in Ontario’s new optional benefits could lead to broker E&O claims

Ontario’s new auto reforms may open up brokers to new errors and omissions exposure, since Ontario’s auto insurance reforms leave it open for insurers to negotiate with customers over the maximum benefit amounts for optional benefits, insurance defence counsel warn.

Once-mandatory benefits such as income replacement, housekeeping, and dependent care are converting to optional benefits as of July 1, 2026.

Currently, these benefits all have fixed maximum payment amounts under the Statutory Accident Benefits Schedule (SABS).

But once these benefits become optional in July, the new reforms say only that the payment amounts may “not exceed the amount fixed by the optional benefits.”

Those amounts will be “fixed” based on negotiations between the insurers and their customers. That leaves defence counsel saying it could potentially be a “Wild West,” “a bidding war,” or a “no-holds-barred” negotiation over who gets what payments for optional benefits.

And that kind of scenario could come back to bite brokers, cautioned Andrea Lim, a partner at Dutton Brock LLP. She spoke as a panellist at the Ontario Insurance Adjusters Association conference held in Toronto last Thursday.

“Potentially, there are going to be some inconsistencies in the market,” Lim told claims adjusters attending the conference. “Now we’re dealing with no standardized monetary or fixed amount for optional benefits….

“For insureds…it looks as though you’re going to have to negotiate. And this could potentially result in shopping around for different insurers. And they’re going to look for the best à la carte option.

“There’s going to be a possible increase in claims litigated at the LAT [Licence Appeal Tribunal] because of all this. And there is a good risk of broker liability insurance claims coming up.”

Current guidance from Ontario’s insurance regulator, the Financial Services Regulatory Authority (FSRA), notes there is a limit to changing the fixed amounts in non-renewed auto insurance policies when the mandatory benefits convert to optional benefits on July 1.

“Expiring policies must renew with pre-July 2026 coverages and limits until the consumer agrees to make changes in writing as per SABS regulation.”

Currently, the mandatory income replacement benefit includes a fixed, maximum weekly amount of $400. Consumers have an option to purchase increased limits of $600, $800, or $1,000.  

“That’s all going to be replaced now,” Lim said. “It’s essentially a figure that could be decided upon between the parties. It’s really up to the insured and the insurer to decide, and FSRA has to approve it.”

FSRA has published online Q&As regarding proposed changes to the optional benefits reforms. It confirms the ability of insurers to negotiate lower amounts than what are fixed in current benefits.

From FSRA’s Q&A: “Can an insurer file for lower limits than current ones? Example, income replacement of $300/week.”

To which FSRA responds: “Insurers have the flexibility to offer various benefit limits if the options are supported with evidence of consumer need provided that current limits are offered.”

Also, housekeeping, home maintenance, and caregiver benefits — which are currently available only to “catastrophically impaired” insureds — will be available to those who are simply “impaired.”

“The amendment here, of course, is that Cat [impairment] is no longer required,” Lim said. “It’s not a requirement for the application for entitlement to it. On top of that, it’s just somebody with an ‘impairment.’

“And so I’m sure that there’s going to be a lot of debate in terms of what would qualify as an impairment.”