Catastrophic Claims in Ontario
Presented by :
Stephen Moore, based on an
earlier presentation by Jess
Bush
Why are Catastrophic Claims so
Expensive?
The cost of catastrophic claims is increasing at
an alarming rate;
This presentation will attempt to explain why;
This presentation will focus on auto claims in
Ontario because they raise more and more
complex issues than other types of tort claims;
The Usual Tort Heads of Damages
General damages;
Family Law Act damages*;
Past loss of income;
Future loss of income;
Past medical care;
Future medical care*;
Loss of interdependent relationship*;
Tort Damages, continued
Guardianship Fees and Management Costs*;
General Damages
Catastrophic general damage cap is $100,000 in
1978 dollars;
With inflation that cap is now approximately
$325,000;
FLA general damages tend to cap at $100,000;
Parents of catastrophically impaired children
usually receive about $75,000 each;
Past Loss of Income
Pre-trial loss of income claims are capped at
80% of net income;
Unless that number exceeds $400 per week,
the past loss of income claim is usually very
small;
Future Loss of Income
Future loss of income is based on 100% of the
gross loss;
Even if the SABs insurer cashes out there is
almost always a big gap between the available
future collateral benefits and the tort claim;
Medical Care
Most of the past medical care is covered by the
SABs unless they have run out;
There are a myriad of future care items that
can really increase the cost of future care and
they include:
Attendant care;
OT and Rehabilitation;
Community Integration;
Medical Care Continued
Equipment including computers,
communication devices etc.;
Transportation expenses;
Home modifications;
Attendant Care*
Will it be provided privately or by an agency?
Agency care is usually about double the cost of
privately provided care;
Will it be provided by a PSW, RSW or RNA?
PSWs cost about $24 per hour, RSWs about
$40-45 per hour and RNAs are over $50 per
hour;
How much is overnight care costing?
Rehabilitation*
The rehabilitation expense is often one of the
most abused heads of damages;
One needs the input of a physiatrist and an OT
to combat these claims;
OTs and RSWs tend to cost 2-4 times as much
as PSWs;
Community Integration*
Special workers are appointed to help the
person re-integrate;
They tend to be RSWs or the equivalent and do
things like take the plaintiff to the movies or
the library or out to a bar;
Equipment*
Often very expensive but often unproven home
environmental controls are recommended;
Expensive computers and programs are
recommended that are never used or used only
sparingly;
Equipment and expensive software is often
recommended to assist in communication;
Watch for duplication and lack of credit;
Transportation
Usually a claim for an expensive van with no
credit for another vehicle the plaintiff would
buy anyway;
Claims for drivers in addition to attendants;
Home Modifications
Elaborate home modifications are
recommended usually without giving any
credit for housing expenses that would
normally be paid out of a person’s salary;
Claim is often for 3 or 4 modifications during a
lifetime;
Loss of Interdependent Relationship
What is it?
It is worth between $50 and $150,000 but the
reports can put the number up much higher;
Attack the number or attack the theory?
Guardianship and Management Fees
Required if the plaintiff lack competency;
Covers the charges by the corporate guardian
(usually a trust company) and the personal
guardian plus the legal costs for passing
accounts;
Can easily add 15% to the future care costs;
Shop for better rates on these items;
Who Pays for What
Pre-trial claims are reduced by any available
collateral benefits;
Most collateral benefit payors have no rights of
subrogation;
Tort defendants pay all future losses and
receive an assignment of all future collateral
benefits;
What Collateral Benefits are
Available
OHIP pays for all hospital expenses and most
medical treatment provided by MDs;
It generally does not cover care provided by
physiotherapists, OTs, chiropractors, massage
therapists etc.;
OHIP has no right of subrogation unless the
automobile is from out-of-province;
Statutory Accident Benefits
First party coverage available from an insurer
or the government for all persons injured in a
motor vehicle collision in Ontario;
For non-catastrophic claims it provides up to
$400 per week in income replacement benefits
based on 80% of the person’s pre-accident net
income;
SABs, continued
It provides up to $3,500/$50,000 or $100,000 of
medical/rehabilitation benefits for a period of
10 years;
It provides up to $36,000/$72,000 of attendant
care ($3,000 max per month) benefits for a
maximum period of 104 weeks;
It provides other benefits including caregiver,
visitor expense, housekeeping and home
maintenance and other expenses;
SABs Catastrophic Impairments
The med/rehab max jumps to $1 million and
is payable for life;
The attendant care benefit maximum moves to
$1 million with a monthly maximum of $6,000;
Case manager services;
Other Collateral Benefits
The tort defendant also gets to deduct other
collateral benefits such as:
some LTD payments;
amounts available under EHC insurance; and
CPP disability pensions;
Future Collateral Benefits
Tort defendants pay full future damages and,
in exchange, receive an assignment of all
future collateral benefits;
This means the tort defendant must front the
cash for all future costs and income losses;
SABs carriers will often cash out their future
obligation and if this is done the tort defendant
can deduct the cash out;
Future SABs, continued
The deductions must be deducted head by
head;
For example, the future IRB must be deducted
from the future loss of income claim; excess
benefits cannot be deducted;
Some SABs are not deductible such as the nonearner benefit;
What is Driving the Numbers Up?
Increasing costs of medical care;
Changes in the discount rates;
Professor Coyte and discount rates for medical
expenses;
The courts preference for home over
institutional care;
Discount Rates
As recently as 2003 the partially mandated
discount rate was 2.5%
It is now 0.75% for the first 15 years and 2.5%
thereafter;
This allow will drive up the cost of future care
for a period of 25 years by 18.6 %;
Professor Coyte
Evidence can be lead to vary the regulated
discount rate;
Professor Coyte provides evidence that the cost
of medical care rises faster than the cost of
other goods by about 1%;
This lowers the discount rate to -0.25% for the
first 15 years and to 1.5% thereafter;
This alone can increase future care costs by
25%
Combined Impact on Future Care
Costs
The drop in discount rates since 2003 plus
Professor Coyte’s reduction to discount rates
when combined can increase the cost of future
care by over 40% over what they were in 2003;
This increase ignores that actual increase in
the cost of such services since 2003.
Home Care vs. Institutional Care
The courts prefer home care to institutional
care regardless of the increased cost;
Strategies to Reduce Claims
Try and get the SAB carrier to cash out-invite
them to the mediation;
Have the appropriate experts review all of the
recommendations of the plaintiff’s experts;
Make sure someone investigates the plaintiff’s
life expectancy;
Try and demonstrate that institutional care is
desirable and inevitable;
Strategies, continued
Watch for duplication and attempts to claim
costs that are not extraordinary;
Where there is contributory negligence make
sure you deduct it before deducting collateral
benefits;
Where there is contrib consider making the
plaintiff prove past losses;
Consider using Professor Manga.
Structures
They can be used to avoid gross up for taxes
on future care costs;
Be careful, if the future care claim is based on
CPI or CPI plus 1%, then the cost of the
structure can be greater than the actuarial
number;
Trying to sell a structure to an Ontario plaintiff
represented by a good lawyer is usually a waste
of time;