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Ontario Court of Appeal decision in El-Khodr & Cobb will save insurance companies millions of dollars

If you are hearing a roar of applause, and perhaps laughter in delight, it’s coming from high atop the corporate head quarters and legal offices of auto insurers across Ontario.

Insurers won large in two recent Court of Appeal decisions which were released earlier this month:

El-Khodr v. Lackie, 2017 ONCA 716

Cobb v. Long Estate, 2017 ONCA 717

In the Cobb decision, a Jury verdict of $220,000 in favour of the injured accident victim plaintiff, was reduced by the Ontario Court of Appeal to just $22,136.60. After applying the statutory deductible for pain and suffering claims, that meant the case had no value whatsoever.

This case took 19 days to try before a Jury. Costs were awarded to the Plaintiff in the amount of $409,098.48. That cost award by the trial judge was completely eliminated by the Ontario Court of Appeal, who ruled that “in the circumstances, in my view, the fairest result to both sides is that each party bears its own costs“.

The Insurance Act and car accident legislation is intended to be consumer protection legislation. There are reasons that there are (and were) cost provisions against large insurers to ensure that the scales of justice were not tipped in their favour when it comes to the money required to litigate disputes.

At law, often the party with the deepest war chest (the most money) will win. That party has the money to hire the best (and most) experts, can afford to wait out the litigation, and can grind the other side in to a pulp with motion after motion after motion. It’s a move frequently seen in commercial litigation to bleed their opponent dry though the Court system. Litigation is expensive. There is no way around it.

Cost consequences, or a loser the winner system, provided that even an accident victim of limited means could get whatever money they paid out in to the litigation recovered through our Court system. Personal Injury Lawyers and Accident Victims rarely saw decisions whereby party bore their own legal costs. How would it be fair to the average person to bear their own legal costs when they are facing a multi national, multi billion dollar insurer with their own in house legal department? That makes little sense when we are seeking fairness and access to justice in our legal system.

Still, the Ontario Court of Appeal opened the door to each party bear their own costs with their ruling to the Cobb decision.

The Cobb decision was also a drunk driving case. At trial, the injured Plaintiff and their personal injury lawyers sought to put the question of punitive damages to a jury.

Surely the question of punitive damages should be at the very least considered by a jury when drunk driving is at play, in particular when the Defendant in question had a history of drunk driving.

The Trial Judge refused to put the question of punitive damages to the Jury.

The Court of Appeal agreed with the Trial Judge, stating:

a factor of significant importance in assessing whether it would be appropriate to award punitive damages is whether punishment has already been imposed in a separate proceeding for the same misconduct…Here, there was no evidence to suggest that the defendant’s criminal sentence, consisting of a fine of $1,300 and a one-year driving prohibition, was insufficient to meet the objectives of retribution, deterrence and denunciation. I note that, in support of the common-law principles that I have discussed, in Ontario, s. 4(4) of the Victims’ Bill of Rights, 1995, S.O. 1995, c. 6 requires a trial judge in a civil case to “take the sentence, if any, imposed on a convicted person into consideration before ordering that person to pay punitive damages to a victim.” In my view, the trial judge’s decision not to put the question of punitive damages to the jury was reasonable in the circumstances, and his decision is entitled to deference in this court: B. (M.) v. 2014052 Ontario Ltd., 2012 ONCA 135 (CanLII), 109 O.R. (3d) 351, at paras. 51, 92. Therefore, I would not give effect to this ground of appeal

I’m not sure in what world a $1,300 fine, along with a one year driving prohibition is a penalty significant enough not even to consider the question of punitive damages. The emphasis in these cases remains the protection of at fault Defendants for the damage which they have caused, and not enough emphasis or empathy is passed along to the injured accident victim who has to live with their injuries for the rest of their lives. When we refer to the protected Defendant, they also have the benefit of a $36,920 deductible which gets paid back to the insurer, along with a threshold of injuries to meet in the form of a medico-legal test in order for the claim to be meritorious or not (regardless of fault). That emphasis on protecting the Defendant, and essentially saving insurers money should give you some idea of how tilted the scales of justice have tilted over the years in favour of deep pocketed insurers and against innocent car accident victims.Goldfinger-logo-icon-300x300

Pre-Judgment interest is an interesting technical issue which insurers love to tinker with. The higher the interest rate, the more money the case is worth and the greater incentive for the insurer to settle the matter quickly. The longer the case lags, the longer the interest runs and the more the insurer will be on the hook for the running interest. The swings can be large. 1-3 percentage points over thousands of cases can translate in the tens of millions of dollars for both active and future cases.

In the El-Khodr case, the Plaintiff was awarded pre-judgement interest at a rate of 5%. The rate was set that high to foster settlement in personal injury cases, so that the party with deeper pockets (the insurer) was penalized for grinding out the innocent injured accident victim. At at 5% interest rate, there is incentive to settle.

The Ontario Court of Appeal cut that interest rate in half down to just 2.5% . The net result on the case was that Mr. El-Khodr’s award was reduced by$44,583.90 to reflect an interest rate of 2.5% on the general damage award. For insurers across Ontario, cutting the pre-judgment interest rate in half amounts to a significant savings when spread over thousands of active and soon to be active claim files.

You may be asking yourself: why did the Court rule this way? It’s because the laws by the Ontario Government have been crafted and tweaked in such as way to favour insurers and penalize accident victims. This is all done to save insurers money. These savings are supposed to be passed along to the consumer in the form of lower car insurance premiums. Have your premiums gone down by half (like the interest rate awards did)? Have your premiums gone down at all? Likely not….



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