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The Case in Support of Contingency Fee Agreements (Ontario)

The National Post recently ran an article which highlighted a study financially backed by the Insurance Bureau of Canada (IBC) called “A Study of the Costs of Legal Services in Personal Injury Litigation in Ontario“. In case you didn’t know, the IBC is the industry or lobby group which represents the interests of large insurance companies. They are the ones who donate to political parties and influence the way the laws are shaped such that they sway in favour of large, deep pocketed insurers, rather than in favour of innocent accident victims (aka the general public who pay auto insurance premiums).

Here are a few examples of how those laws have been swayed in favour of insurers: It was at the request of insurers that catastrophic benefits were slashed in 2016/2017. It was at the request of insurers that accident benefits in Ontario have been cut year after year. It was at the request of insurers that a threshold and deductible which now sits around $36,920 was introduced for pain and suffering claims in Ontario car accidents.

I have NEVER met an individual who worked outside of the personal injury or insurance industry who was in favour of these changes to Ontario car insurance. I have never met an individual who worked outside of the insurance industry who actively lobbied their local MPP to slash accident benefits. I have never met an individual who worked outside of the insurance industry who was in favour of paying higher insurance rates, yet getting less coverage in accident benefits. But that’s beside the point. Let’s get back to this interesting report/study.

The report was prepared by Allan Hutchinson, of York University’s Osgoode Hall in Toronto.

Why a report would come out looking at the costs of legal services in personal injury cases in Ontario is beyond me.

There are two sides in any personal injury case. There’s the Plaintiff or injured, innocent accident victim. That person is represented by a Plaintiff side, personal injury lawyer. Then there’s the at fault Defendant driver. That person is represented by the insurance company and their lawyer of choice. They are referred to as insurance defence lawyers.

Any study which looks at “the Costs of Legal Services in Personal Injury Litigation in Ontario” must surely not only examine one side of the coin. They should look at both. Doesn’t that make sense? Where is the partiality?

This study only examines the cost of contingency fee agreements along with alternatives to contingency fee agreements. Contingency fee agreements are found almost exclusively on the Plaintiff side of the personal injury equation. They aren’t found on the Defense side. There is no, or little mention towards how much insurers are paying their lawyers in this study, or how they conduct their business affairs.

Perhaps the study was not properly named. Perhaps the title of the study ought to have been “A critical analysis of Contingency Fee Agreements by Plaintiff Lawyers for Personal Injury Cases in Ontario; *financially backed by the Insurance Bureau of Canada“.

Insurance companies pay their lawyers either via block fee for services rendered, or by an hourly rate. If an insurance company doesn’t like their lawyers’ hourly rates, or their block fee arrangement, they can certainly find another insurance defense law firm to handle their work, or negotiate a better deal. The Insurance Bureau of Canada did not need to commission a report telling them how to conduct their own business affairs when it comes to what they are being billed by their lawyers. Or did they? Perhaps this report, if it exists, wasn’t released to the public.0001r_Goldfinger-200x300

But what was conveniently released to the public was essentially a critique of how personal injury lawyers bill their clients via contingency fee agreement.

The author concludes that “as things stand now and as a result of the research done for this study, it cannot be reported that the present scheme in regard to Contingency Fee Agreements is operating to protect and advance the interests of clients in their dealing with lawyers“.

An insurance company has millions, if not billions of dollars at their disposal to fight a personal injury claim. In modern day personal injury litigation, the party with the deepest pockets and largest war chest often wins. Contingency fee agreements help level the playing field so that somebody without the financial means, knowledge, or resources to fight, can have to have their day in Court.

The balance of the playing field, trumps any argument against contingency fee agreements.

It should be noted that BEFORE contingency fee agreements were allowed in Ontario, Plaintiff lawyers billed on an hourly rate basis. But their clients could not afford the hourly rates. Thus, the lawyer would send the client their bill for hourly services, which often reflected 20-30% (or more) of the settlement upon settlement of the case (just like in modern day contingency fee agreements!!!). How this is different from a pure contingency fee agreement is beyond me. If the Law Society and the IBC wants all Plaintiff lawyers to go back to the dark ages for the provision of legal services and deny people access to the Courts, then by all means, go ahead and abolish contingency fee agreements. All it hopes to accomplish is hurt the general public (not only for personal injury matters, but also for commercial matters, estate litigation, employment litigation and tax litigation; where contingency fee agreements are often used).

I can think of no simpler, straight forward, or purer way of expressing to a client what their legal fees will be other than a contingency fee agreement.  If we don’t win, you don’t pay. That way, we are in the legal battle together as a team. I like that feeling. It keeps both client and lawyer incredibly invested in the case. And if the team as a whole doesn’t win; then the client does not have to pay their lawyer. Nice benefit. That means that the lawyer has to be good at what they do. Or perhaps the IBC would like personal injury lawyers to go back to the 1970’s when lawyers told their clients that their hourly rate was $750/hr and that based on decades of experience and knowledge, the law firm knew that their fees would be no greater than 20-30% of the total recovery in the personal injury case. Same outcome. Different methodology. But in that scenario, if the lawyer loses on the hourly rate retainer basis, the lawyer can still send the client a big fat legal bill and chase the client for their fees. I’ve seen a few non contingency fee lawyers who chose to operate like that. It’s not pretty and it’s hardly a service to the public.


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