Catastrophic Claims in Ontario

1. Catastrophic Claims in Ontario Stephen Moore, based on an earlier presentation by Jess Bush

2. 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;

3. 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*;

4. Tort Damages, continued • Guardianship Fees and Management Costs*;

5. 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;

6. 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;

7. 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;

8. 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;

9. Medical Care Continued • Equipment including computers, communication devices etc.; • Transportation expenses; • Home modifications;

10. 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?

11. 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;

12. 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;

13. 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;

14. 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;

15. 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;

16. 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?

17. 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;

18. 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;

19. 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;

20. 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;

21. 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;

22. 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;

23. 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;

24. 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;

25. 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 non-earner benefit;

26. 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;

27. 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 %;

28. 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%

29. 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.

30. Home Care vs. Institutional Care • The courts prefer home care to institutional care regardless of the increased cost;

31. 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;

32. 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.

33. 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;