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Catastrophic Claims in Ontario

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, continuedGuardianship Fees and

Management Costs*;

General DamagesCatastrophic 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 IncomePre-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 IncomeFuture 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 CareMost 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 ContinuedEquipment 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;

TransportationUsually 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 ModificationsElaborate 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 RelationshipWhat 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 FeesRequired 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 WhatPre-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 AvailableOHIP 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 BenefitsFirst 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, continuedIt 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 ImpairmentsThe 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 BenefitsThe tort defendant also gets to

deduct other collateral benefits such as:some LTD payments; amounts available under EHC

insurance; andCPP disability pensions;

Future Collateral BenefitsTort 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, continuedThe 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 non-earner 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 RatesAs 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 CoyteEvidence 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 CostsThe 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 CareThe courts prefer home care to

institutional care regardless of the increased cost;

Strategies to Reduce ClaimsTry 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, continuedWatch 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.

StructuresThey 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;