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The fine print behind million dollar and multi million dollar personal injury claims in Ontario

There are few moments in life where a person receives a million dollar lump sum of money. Here are but a few which come to mind.

A good investment.

Winning the lottery.

A very wealthy family member who left you a sizable inheritance.

Cashing in stock options which have appreciated over the years.

Sale of a real estate asset.

A successful personal injury claim.

In all of these scenarios, except for ONE; the money is yours to use as you please; notwithstanding applicable taxes.

The lone exception are the personal injury cases. There is fine print behind those million and multi million dollar settlements which we would like to share with you today.

This information does NOT apply to awards at trial. If a Plaintiff wins his/her case at trial, and there is no appeal; the money is theirs to use as s/he wishes. While this may sound nice, the prospect of going to trial doesn’t sound nice to the vast majority of Plaintiffs. Take the recent case of Lloyd v. Bush, 2020 ONSC 2892 (CanLII)

which was a 2003 car accident, which underwent 3 trials and 2 appeals. The first trial concluded in 2010.  The action was dismissed. On the first appeal, the Court of Appeal held that the plaintiffs had established a reasonable apprehension of basis on the part of the trial judge.  The appeal was allowed, and the matter remitted for a new trial. The second trial was heard in 2014. The plaintiffs’ damages were assessed by the judge at the second trial in the total amount of $4,149,158.50. The second appeal decision, reported at 2017 ONCA 252, upheld the assessment of damages at the second trial, but ordered a new trial on the issue of liability (and the related issues of causation and contributory negligence).  Costs of the second trial were remitted for determination at the third trial. The third trial was heard in April and May 2019, with reasons for decision released on 6 February 2020.

Once of the nice things about getting a case settled outside of Court, is that settlements (for the most part) are not subject to appeal, after appeal, after appeal.

But when cases settle for a considerable amount of money (like $1,000,000+), insurers generally want to attach some conditions to those funds. Our personal injury lawyers tend to see a lot of this with catastrophic accident benefit claims. This is for good reason. The accident benefit insurer is NOT under any legal obligation to pay out a lump sum on these files. The insurer can keep the claim open until the accident victim dies. Accident benefit funds for catastrophically injured accident victims are supposed to last them their lifetime.linkedin-2-300x300

But for most insurance companies, a closed file is a good file. Closing a file provides certainty so that the insurer can move forward and budget accordingly for the future instead of having an uncertain liability on the books in the form of an open catastrophic accident claim which can get expensive to handle.

So if an insurer gives a catastrophic accident victim $1,000,000+ to settle their claim; and that accident victim spends the money on a wild few nights in Las Vegas or Monte Carlo gambling; then those funds are not being put towards their intended use which is the future attendant care and rehabilitation costs of the accident victim. This is not good for anyone, nor is it good for the Ministry of Health as the rehab needs of the accident victim will flow to the public purse.

Here are a few strings which insurers love trying to attach to larger settlements in personal injury cases:

1.Capacity Assessments: Many insurers won’t settle a case with a catastrophically injured accident victim (particularly where there is a brain injury and/or psych issues) where there is no capacity assessment completed to determine if the accident victim can appreciate and understand the settlement. This serves many purposes, but mainly it’s to cover the insurance company’s position to ensure that the claimant can’t years down the road come back after the settlement and claim that the settlement was null and void because they didn’t have the capacity to settle in the first place. The capacity assessment also helps your personal injury lawyer in this regard as well.

2. Structured Settlement: Insurers may insist that a condition of the settlement is that a certain percentage of the settlement funds be placed in to a structure. A structure is an annuity whereby the funds are invested on the Plaintiff’s behalf. The Plaintiff receives the funds on a weekly, monthly, bi-monthly or quarterly basis; depending on what best suits the Plaintiff. This way, the funds are protected and can’t be spent on while night in Vegas or Monte Carlo. If the Plaintiff plays his/her cards right, normally they end up getting more money in the long term. Often the longer the Plaintiff lives, the more money they receive. Structured settlements are flexible to meet the Plaintiff’s needs and financial goals. But what a Plaintiff cannot do is reverse the structure. This option is available in the United States but not in Canada. This means that a Plaintiff cannot sell his/her interest in the structure for a lump sum to enjoy all of the money NOW. This option simply doesn’t exist. When a settlement is structured, a portion of the money will go to the Plaintiff in the form of lump sum payment, and another portion will be placed in to the structure and awarded to the Plaintiff on a predetermined schedule. It can be a win-win. However, many injured accident victims don’t expect this to happen because they expected to receive ALL of their settlement in one large lump sum with no strings attached. Unfortunately, there are normally strings attached to larger our of Court settlements.

3. Reversionary Interests: When a settlement is structured, that means the funds are to last a certain number of years in to the future. But what happens if the Plaintiff should die within year 1 of a 25 year structure plan? Where does that money go? Why should an insurer pay for 24 more years when someone dies after years 1? Instead of passing that money along to the Estate; insurers will take out a life insurance policy on the Plaintiff’s life, so that they get their money back should you die prematurely. They are essentially betting against you life to protect their financial interests. Sounds sick doesn’t it? But it’s another common example of one of the strings which insurers seek to attach to sizable settlements.





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