Inflation’s big bite on personal injury cases

Hear from leading plaintiff PI lawyers on the impact of the rising cost of living

INFLATION IN Canada hit 8.1 percent in June, the highest level in four decades, and may stay around this level for at least the next few months. Personal injury lawyers for plaintiffs say it’s hard not to worry about the impact this will have on settlements in an environment in which policy limits have remained stagnant. Lawyers say that a catastrophically injured victim, especially one whose care needs already exceed policy limits, is already disadvantaged – even more so now because of inflationary pressures and rising health care costs.

“The government could update the statutory benefit schedule at any time,” says Stephen Birman, partner with Thomson Rogers Personal Injury Lawyers, “and it should absolutely be updated to consider inflation, especially as it continues to increase.” However, plaintiff lawyers such as Birman note that statutory benefits were actually reduced with changes to the system in 2016. The most significant change was the level of medical, rehabilitation, and attendant care funds available to a catastrophically injured accident victim. Until the changes came in June 2016, a person who sustained a catastrophic impairment was eligible to receive up to $1 million in medical and rehabilitation benefits and up to $1 million for attendant care. However, these benefits were effectively cut in half when combined medical, rehabilitation, and attendant care benefits maxed out at $1 million.

And yet there seems to be no urgency on the part of the insurance industry or government to raise that mandatory minimum in third-party liability. One area of PI awards where indexing for inflation works like a charm While inflation indexing isn’t always baked into damage awards or statutory benefits for motor vehicle accidents, one area in which it is applied consistently – to the disadvantage of plaintiffs – is the statutory deductible threshold under Ontario’s Insurance Act. The Insurance Act states that unless the non-pecuniary damages are more significant than the amount prescribed in the Insurance Act, a deductible is automatically applied to the award. Juries are not told about the existence of this deductible before delivering their verdicts, and if they are told, a mistrial is the result. Heidi Brown, a senior partner at Bogoroch and Associates LLP, says the threshold and deductible amounts increase yearly with inflation, even as damage awards have stayed relatively stable. For 2021, the indexation percentage was 0.5 percent. The threshold increased to $132,513.28 from $131,854.01 in 2020 and to $66,256.09 from $65,926.46 for Family Law Act claims. General damages that did not meet the threshold were subject to a $39,754.31 deductible, up from $39,556.53 in 2020.

The tort system Accident victims also have access to the tort system based on fault and negligence. The tort lawsuit process provides compensation to those who have sustained serious and permanent injuries. The awards for damages come in two categories – pecuniary and non-pecuniary losses. Pecuniary losses can be measured monetarily and are designed, in theory, to put the injured party back into the position in which they would have been before the injury. These include the costs of future care and loss of earning capacity. There is no cap on compensation for pecuniary losses. However, the amounts must be “legitimate and justifiable.” Non-pecuniary losses cannot be calculated based on monetary value. The intention is to provide the injured person with some compensation for loss of amenities, loss of life expectancy, and “reasonable solace” for the injured person’s misfortune. The Supreme Court of Canada has capped the amount of the award for non-pecuniary damages, deciding in 1978 that damage awards must consider individual circumstances, but with an upper limit. Set at $100,000 in 1978 and tied to inflation, that upper limit was, at the end of June 2022, $435,000.

Pain and suffering damages may be indexed to inflation, but … Every province and territory requires a minimum of $200,000 in third-party liability coverage, except for Quebec, where the minimum is $50,000, and Nova Scotia, where it is $500,000. Most insurers don’t offer policies with such low third-party liability; most drivers choose to pay for policies with coverage between $1 million and $5 million, with most typically purchasing $1 million or $2 million in insurance. While there is some comfort in having pain and suffering tied to the cost of living, personal injury lawyers point out that it is taking up a bigger portion of the $1 million or $2 million pie. For example, with a million-dollar liability policy, that $435,000 limit means less than $600,000 left for those other areas intended to support a catastrophically injured person with dignity for the rest of their life. Patrick Brown of McLeish Orlando LLP says inflation must be seen within the bigger picture of overall insurance coverage, which hasn’t changed much in decades. “When you’ve got inflation increasing at the rates that we’re seeing, you would hope that the government would step in to raise the minimum third-party insurance limits, increase the cap on income replacement benefits, and restore the medical rehabilitation/attendant care benefit cap back to the previous two million dollars,” Brown says.

Neinstein Personal Injury Lawyers is a boutique law firm based in Toronto specializing in transforming the lives of catastrophically injured people across Canada. The firm has leading expertise in personal injury law, focusing on catastrophic motor vehicle accidents and medical negligence. The lawyers at Neinstein have been recognized by Lexpert®, Best Lawyers®, and Martindale-Hubbell®; they hold a variety of specialist designations; and the firm is consistently recognized as a top-10 personal injury law firm. The Neinstein legal team, first established by founding partner Gary Neinstein, has long been recognized for its advocacy and trial savvy. In the past year alone, the team has conducted five complex medical malpractice trials, two appeals, and an application for leave to the Supreme Court of Canada.

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Since it was founded in 1935, Thomson Rogers has evolved into one of the largest personal injury law firms in Ontario and has been recognized and awarded as a leading law firm. Thomson Rogers' personal injury, family law, class action, and land-use litigation teams are regularly sought out for their experience and advocacy skills. The firm's lawyers represent clients before the Superior Court of Justice, the Ontario Court of Appeal, and the Supreme Court of Canada, and, often, before administrative boards and tribunals across the province. The personal injury lawyers at Thomson Rogers navigate complex personal injury issues that often require prompt action due to strict time limits. They have a reputation for taking on the most complex and challenging personal injury cases and delivering results.

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But the signs of inflation are starting to show. Since January 1, 2022, the monetary threshold and deductible for determining the pain and suffering damages for a plaintiff injured in a motor vehicle accident have increased considerably. An indexation rate of 4.4 percent was applied, so the monetary threshold is now $138,343.86, and the deductible is $41,503.50. For Family Law Act claims, for those family members whose loved ones were injured in a motor vehicle accident, the monetary threshold is $69,171.36, and the deductible is $20,751.76. So, for instance, Brown says, if a jury awards a plaintiff $100,000.00 for pain and suffering, the insurance company would only have to pay out $58,496.50 ($100,000.00 – $41,503.50), and “that deductible does not go away until the jury awards at least $138,343.86.” She adds, “And remember that juries are not allowed to be told about the existence of the statutory deductible and how it automatically reduces pain and suffering damages, despite the information being readily available on the internet, which isn’t right and should be changed.” It’s a David and Goliath battle Part of the problem in dealing with the relatively stagnant levels of awards relative to rising inflation costs, personal injury plaintiff lawyers say, is that there is a considerable power imbalance between the insurance industry lobby and the lawyers who represent accident victims. And many of the adjustments to reduce or cap benefits came with the promise from governments and the insurance industry that drivers in Ontario would see substantially lower rates.

McLeish Orlando Lawyers is a Toronto-based personal injury law firm representing people who have been seriously injured and family members who have lost loved ones through the negligence of others. The firm is a recognized leader in wrongful death and personal injury law, and represents people who have suffered brain injuries, spinal cord injuries, and serious orthopaedic injuries. The goals of all the professionals at McLeish Orlando Lawyers are to ensure that every client obtains a fair settlement that will provide security for the future. The firm has locations in Toronto, Barrie, Hamilton, Kitchener, St. Catharines, and Sault Ste. Marie.

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“When you’ve got inflation increasing at the rates that we’re seeing, you hope ... government would step in to raise the minimum third-party insurance limits”

Patrick Brown, McLeish Orlando LLP

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The current system of supporting accident victims through statutory benefits All auto insurance policies in Ontario must include a no-fault program. Under the Statutory Accident Benefits system, those hurt in an accident have access to medical and rehabilitation benefits, income replacement, and other financial assistance to help get them on the road to recovery. This is not necessarily compensatory, but offers some financial assistance during recovery. These benefits may include income replacement; non-earner benefits; caregiver benefits; medical and rehabilitation benefits based on level of injury; and expenses for some reasonable and necessary services.

“If current rates of inflation hold, even for a while, that is simply not sustainable for people, even if they are given a full payout”

Jeff Neinstein, Neinstein Personal Injury Lawyers

Inflation has been relatively stable over the past two decades – as low as 0.3 per cent in 2009 and never higher than three percent since 2000. A basket of goods that cost $100 in 2000 would cost more than $152 today, calculated on a yearly average rate of 1.93 percent over that period. But that has changed in recent months. Says Jeff Neinstein of Neinstein Personal Injury Lawyers in Toronto, “If current rates of inflation hold, even for a while, that is simply not sustainable for people, even if they are given a full payout.” Most people are already inadequately covered by insurance, and it will be even more challenging to meet the care needs of those injured if inflation continues to rise.

Industry experts

Heidi Brown

Bogoroch & Associates LLP

Patrick Brown

McLeish Orlando Lawyers LLP

Stephen Birman

Thomson Rogers Lawyers

Jeffrey Neinstein

Neinstein Personal Injury Lawyers

Industry experts

Jeffrey is a partner and the head of the personal injury group at Neinstein. He specializes in helping severely injured victims and their families get the care and compensation they require and deserve. Jeffrey's focus is on handling complex medical trauma and guiding victims through the difficult rehabilitation process. Specializing in claims arising out of motor vehicle accidents, occupiers' liability, and professional negligence, Jeffrey's practice includes handling catastrophic accident benefits claims, regardless of fault, and ensuring his clients' medical needs are met. He has been voted by his peers as a leading expert in his field since 2013 in the Canadian Lexpert Directory.

Neinstein Personal Injury Lawyers

Jeffrey Neinstein

Stephen Birman joined Thomson Rogers as an associate in 2009. His practice has focused largely on personal injury litigation and class action litigation. He has successfully litigated significant claims as lead counsel in the Ontario Superior Court and at the License Appeals Tribunal and Financial Services Commission of Ontario. Stephen prides himself on his ability to help clients understand and feel informed and in control throughout the various stages of the litigation process. He is a certified litigation specialist as recognized by the Law Society of Ontario and has been recognized as a leading lawyer in the Canadian Legal Lexpert Directory.

Thomson Rogers Lawyers

Stephen Birman

Patrick Brown has been practicing law for over 25 years and has dedicated his career to helping those who have suffered serious and catastrophic personal injuries, as well as families that have lost loved ones due to the fault of someone else. In addition, Patrick has extensive experience advocating for those suffering from hospital negligence and medical malpractice. During his career, he has successfully conducted jury and non-jury trials and is recognized widely for his advocacy skills. Patrick is one of a select set of lawyers certified as a specialists in civil litigation in Ontario, and is listed as Most Frequently Recommended by other lawyers in Lexpert®.

McLeish Orlando Lawyers LLP

Patrick Brown

Heidi R. Brown is a partner at Bogoroch & Associates LLP and is certified by the Law Society of Upper Canada as a specialist in civil litigation. Called to the Ontario Bar in 1993, Heidi practiced for seven years as counsel to the Children’s Lawyer in the litigation department, representing the interests of minors. Since joining Bogoroch & Associates LLP in November of 1999, Heidi has exclusively practiced personal injury and medical malpractice litigation, and has appeared as counsel in complex medical malpractice trials. She was a board member of the Ontario Trial Lawyers’ Association of Ontario from 2012 to 2021, and recently sat on its executive committee. Throughout her nearly 30 years of practice, Heidi has presented and taught at personal injury and related programs and conferences organized by the Advocates’ Society, LSO, Osgoode Hall, and OTLA, among others.

Bogoroch & Associates LLP

Heidi Brown

Bogoroch & Associates LLP

Patrick Brown

McLeish Orlando Lawyers LLP

Stephen Birman

Thomson Rogers Lawyers

Jeffrey Neinstein

Neinstein Personal Injury Lawyers

Industry experts

Neinstein Personal Injury Lawyers

Jeffrey Neinstein

Thomson Rogers Lawyers

Stephen Birman

McLeish Orlando Lawyers LLP

Patrick Brown

Bogoroch & Associates LLP

Heidi Brown

Jeffrey Neinstein

Neinstein Personal Injury Lawyers

Stephen Birman

Thomson Rogers Lawyers

Patrick Brown

McLeish Orlando Lawyers LLP

Heidi Brown

Bogoroch & Associates LLP

Heidi Brown

McLeish Orlando Lawyers LLP

Patrick Brown

Thomson Rogers Lawyers

Stephen Birman

Neinstein Personal Injury Lawyers

Jeffrey Neinstein

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Founded by Richard M. Bogoroch, Bogoroch & Associates LLP is a Toronto-based law firm that concentrates on civil litigation. The firm focuses on serious personal injury, medical malpractice, wrongful death, product liability, and disability claims throughout Ontario. Victims of motor vehicle accidents, medical malpractice, and other traumatic events face many difficulties. Not only must they cope with the profound pain and loss resulting from their injuries, but they and their families must also navigate a complex and confusing maze of legal and insurance-related issues. At Bogoroch & Associates LLP, we are committed to helping our clients through their difficult times by providing caring, compassionate, and effective legal representation.

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“The government could update the statutory benefit schedule at any time, and it should absolutely be updated to consider inflation, especially as [that] continues to increase”

Stephen Birman, Thomson Rogers Personal Injury Lawyers

“Juries are not allowed to be told about the existence of the statutory deductible and how it automatically reduces pain and suffering damages, despite the information being readily available on the internet”

Heidi Brown, Bogoroch and Associates LLP

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“The government could update the statutory benefit schedule at any time, and it should absolutely be updated to consider inflation, especially as it continues to increase”

Stephen Birman, Thomson Rogers Personal Injury Lawyers

“When you’ve got inflation increasing at the rates that we’re seeing, you hope ... government would step in to raise the minimum third-party insurance limits”

” Patrick Brown, McLeish Orlando LLP

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“The government could update the statutory benefit schedule at any time, and it should absolutely be updated to consider inflation, especially as it continues to increase”

Jeff Neinstein, Neinstein Personal Injury Lawyers

“When you’ve got inflation increasing at the rates that we’re seeing, you hope ... government would step in to raise the minimum third-party insurance limits”

Jeff Neinstein, Neinstein Personal Injury Lawyers

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ONTARIO Private Passenger Vehicles excluding Farmers

2016

2017

2018

2019

2020

78%

$1,800

$1,600

$1,400

$1,200

$1,000

$800

$600

$400

90%

80%

70%

60%

50%

40%

30%

20%

10%

77%

78%

73%

50%

1,442

1,432

1,466

1,564

1,636

1,131

1,098

1,139

1,143

824

Ratio of losses to earned premium*

Average pro-rated premium per vehicle

Pure premium**

Source: General Insurance Statistical Agency

Auto insurers rake it in as premiums rise

Losses on policies drop, increasing profits

*A ratio of a 100% means that losses paid equals premium earned **Cost of claims and loss adjustment expenses before general expenses and profit

100

108

106

104

102

104

Q1 2019

Q1 2020

Q2 2020

125

120

115

110

105

100

Auto Insurance Price Index - Ontario

*Index set to 100 in Q1-2019; a one-point change on the Index represents a 1% change from the benchmark

Source: LowestRates.ca

Plans to slash auto rates have been in the works for years in Ontario. For example, Kathleen Wynne’s Liberal government vowed to cut prices by 15 percent between 2013 and 2015. It never happened. And between 2017 and 2019, insurance premiums in Ontario went up 20 percent. Meanwhile, insurance companies have been making record profits. The Office of the Superintendent of Financial Institutions, an independent federal agency, revealed that Ontario auto insurance companies made profits of $3.63 billion in 2020, a time when the number of drivers on the road dropped thanks to COVID-19. Even something as simple as mandating or strongly recommending that drivers top up their third-party liability to $2 million or more has not been a priority. In 2019, the Ontario Ministry of Finance asked for submissions on automobile insurance and whether to return to a $2 million limit for medical, rehabilitation, and attendant care benefits for catastrophically injured people. Several Ontario automobile insurers provided numbers on how many drivers take more than the $1 million in third-party liability. No company’s figure was higher than 20 percent, and at one insurer, Desjardins, only 2.5 percent of policyholders opted for more than $1 million. At the very least, plaintiff lawyers say, insurers need to better educate customers on the importance of this optional benefit or increase the mandatory level. Bogoroch and Associates LLP, Neinstein Personal Injury Lawyers, McLeish Orlando LLP, and Thomson Rogers Personal Injury Lawyers, all based in Ontario, are four of Canada’s leading personal injury law firms. For assistance, feel free to contact us.