It all started with a scratch on a minivan in a Guelph parking lot.

Then came a trip to a body shop, a Toronto law firm, some time off work collecting accident benefits and weeks of hands-on care at a clinic.

The Hamilton driver and two of his three passengers squeezed all they could out of his insurer, before it investigated.

But now — a decade after the incident — they have a $150,000 bill to pay.

A photo of the nine-inch scratch and a chat with the owner of the red 1999 Dodge Caravan minivan brushed by the Hamilton car persuaded the insurer that it had been duped. The woman in the van said her baby didn't even wake up, and cups of coffee in the claimant's Pontiac did not spill.

Faking and defrauding is hardly new. Auto insurers consider Ontario's Golden Horseshoe the insurance fraud capital of Canada — a dubious distinction that helps to explain why drivers in the region pay such high auto insurance premiums.

What's new is how determined little Waterloo Insurance Co. was to recover the costs for its other policyholders.

Rather than shrug off the loss as just another cost of doing business, like shoplifting, the arm of the larger Economical Group launched a civil suit against Van Tuan Doan and his passengers, Thuy Nhan Ai Le and Quang Dat Nguyen.

Waterloo asked a jury to award it all the money it paid to the claimants, plus the cost of their treatments and its cost of handling and investigating their claims — more than $62,000 in total.

It also claimed a similar amount in legal fees, plus interest charges that bring the total to about $150,000.

“So far as I know it was the first time in Canada that an insurer went after people who had made claims and said: ‘Give us the money back, you cheated us,'” says lawyer Ian Kirby, a former president of the Ontario Bar Association.

The jury sat through a seven-day trial in Guelph in 2008, and ruled in Waterloo's favour. Only recently have appeals of that ruling been exhausted or abandoned.

The tenth anniversary of the Nov. 13, 2000, incident in the parking lot of a doughnut store has just passed.

Rocco Neglia, Economical's determined vice-president of claims, says the doctor who saw the three claimants found them “credible, straightforward; (and that) their injuries were consistent with the nature of the motor vehicle accident.”

Neglia's colleagues did not think so, and neither did the jury.

Kirby represented Waterloo in court.

He says he held up a photo of the scratch, and he called the driver of the van to describe what she saw and felt. (She declined to be interviewed for this story.)

Consulting engineer Sam Kodsi concluded in a report filed in court that the scratch on the van was so minor that contact between the two vehicles would have felt no more jarring than “hopping a step, plopping into a chair or looking over the shoulder.”

A doctor testified that such a low-speed impact could not have caused the injuries alleged by the three claimants.

“In insurance law there is the doctrine of good faith,” says Kirby. (The insurer must accept what a claimant says is true, unless it later finds evidence to the contrary.)

“But that is a two-way street,” he adds. “If you try to get something for nothing, this case stands for the proposition that the insurance company can get it back.”

Loading... Loading... Loading... Loading... Loading... Loading...

It won't be the last time Waterloo and Economical fight back. The insurance group is seeking the return of income and supplementary medical benefits paid in two other cases, and is preparing to sue medical clinics as well.

Insurers are rarely able to persuade busy police detectives to investigate and press criminal charges in cases of suspected fraud involving a few thousand dollars each. Criminal charges must be proven beyond a reasonable doubt. But civil courts only look at the balance of probabilities. So the chances of an insurer winning an award for damages are better.

While only a minority of consumers are suspected of submitting fraudulent or exaggerated claims, many think insurers have deep pockets. But the money comes from other consumers, and in the case of Economical, the profits it retains would legally belong to its participating policyholders if it were ever to become a stockholder company.

Neglia of Economical says Ontario regulations passed in 1996 limited the ability to deny or limit medical treatments that seem excessive.

A three-day deadline was imposed on insurers to respond to medical assessments proposing treatments eligible for coverage under policy accident benefits. Before Sept. 1, 2010, insurers could not deny proposals for treatment, no matter how extensive, without the backing of one or more independent medical examinations.

A new $3,500 cap and treatment protocols now apply to the sort of minor sprains and strains that the three Hamilton residents complained about. Insurers may deny treatment plans that seem excessive after a medical review of the plans, but without paying for a full medical assessment.

“Having controls in place that at least give us a fighting chance has been good,” says Neglia, adding: “If people are going to engage in fraudulent activity, we are going to go after them.”

Collecting on court awards will be another matter.

Property records show Doan sold a three-storey home in 2002, the month after he was sued, for 38 per cent less than he paid in 1998. The buyer has the same family name. Last year she used the house to secure a $164,000 loan, more than triple what she had paid, at the prime interest rate plus 6 percentage points, an unusually high rate.

The passenger Le declared bankruptcy in 2007, before the jury award. She declared she owed nearly $73,000 but had only $700 of her own, a search of records by the Toronto Star revealed.

But Kirby points out that debts resulting from fraud are not extinguished by a bankruptcy. The three claimants will owe money until the award is paid in full.

“What (Le) did was wipe all (of her) other debts and left us as the only debtor,” says Kirby, adding: “Some days are better than others.”

jdaw@thestar.ca