-by Joseph J. Sullivan, C.S., Sullivan Mediations
Mediation has been prominent in the injury and insurance field since the 1990s and has developed into a mainstay of this practice. Expansion of mediation seems to have coincided with the establishment of no-fault auto insurance in Ontario in 1990. No-fault car insurance significantly lengthened trials and made bodily injury tort and first party accident benefits’ claims much more complex. Many more experts testify at trials and, in my view, the courts have not done a good job in managing the length of trials or the number of experts.
Prolonged civil proceedings has led to an extraordinary increase in legal costs. Our law respecting Offers to Settle is designed to make the loser pay the winner’s legal fees and creates compelling risk in almost every personal injury case .
Because of the increased expense of trials, settlement at private mediation must almost always be considered.
This article will explore the following:
1) Global Private Mediations, Who to Invite.
2) Tips When Mediating Catastrophic Injury Claims.
3) Mediations Post June 1, 2016 and the Major Reductions Available for Catastrophic Injury Claims.
Global Private Mediations, Who to Invite
Under Ontario’s no-fault auto insurance regime, injured parties typically have legal rights for both first party accident benefits and for tort claims against a third party motorist. An original tenet of no-fault insurance is a prohibition on double-dipping. The plaintiff ordinarily is not to be overcompensated for losses. As tort and accident benefits’ rights often overlap, mediated settlements of these claims present unique challenges and opportunities.
Effective legal counsel attempt to identify all possible sources of first party weekly benefits from Statutory Accident Benefits, short and long term disability, Canada Pension and other sources of income that might be deductible. Typically, Employment Insurance, Workplace Safety and Insurance Board payments, Ontario Disability Support Plan payments and Ontario Works’ payments are not deductible.
In the case of a mediation between an injured plaintiff and a tort defendant, decisions need to be made as to whether to invite collateral source payors to mediation.
Some of the factors that should be considered by counsel include the following:
1. Is the collateral source payor still making payments under its policy? Sometimes counsel do not wish to “rock the boat” when there has been no dispute with the collateral source payor.
2. Do counsel wish to share evidence between the collateral source payor, the tort defendant and plaintiff counsel? This sharing of evidence usually takes place at private mediation and might include medical reports, surveillance and liability statements. This type of evidence might help or hurt either side; these are strategic considerations.
3. The plaintiff may wish to wrap up all legal issues at once whether they be tort, accident benefits or long term disability disputes. Many times injured parties grow weary of the insurance and legal proceedings, and private mediation with all parties present can bring a conclusion to all disputes and claims.
4. A defendant may wish to have all possible sources of settlement funds available at a private mediation to aid in the “bottom line” final offer that might be made to a Plaintiff. Multiple pockets can grow the pot and help settlement.
5. All parties may be concerned about inviting an intransigent collateral source insurer (if they are not paying their benefits) as this might interfere with a smooth settlement at mediation. A further consideration: Does the collateral insurer have some lengthy technical defence that might take a lot of time to sort at the private mediation (such as some unusual provision in a long term disability policy)?
6. Most times mediations are done on consent. Does the tort defendant insist upon a credit or deduction for unpaid accident benefits that are in litigation? Will this be a barrier at mediation? Prior to the mediation, counsel need to consider any potential barriers that might arise from parties that could be invited to the mediation.
7. The order of settlement might be of interest, especially to plaintiffs. An accident benefits payment is deductible (most times) by a tort defendant. On the other hand, a tort settlement is never deductible by an accident benefits insurer.
8. Is the accident benefits’ insurer and the tort insurer of the same company? If so, that insurer can close two files if there is global settlement of both claims.
9. Is there a loss transfer claim (Section 275 of the Insurance Act) where the accident benefits insurer is being reimbursed for all accident benefits paid? If so, it is wise to consider inviting the “loss transferee” or at least advise them of the mediation since they ultimately will be responsible for the settlement to the plaintiff.
10. The personalities involved. Parties and counsel often have varying degrees of investment in any given file and their personalities vary greatly. A party may decline to invite a collateral party out of concern it might interfere with the orderly settlement simply based on personality.
11. Counsel at private global mediations need to consider whether the tort defendant’s insurer and the accident benefits’ insurer can be in the same caucus room at mediation.
12. Should offers be made know to all parties during the course of the mediation? These issues need to be addressed either before the mediation or at the outset of mediation. In my experience, the sharing of information often becomes necessary because of the offsets.
Tips When Mediating Catastrophic Injury Claims
Global mediation frequently is utilized in catastrophic auto injury cases for tort and accident benefits’ claims. Of course, these are cases where the plaintiff’s injuries are so severe that they meet the definition of catastrophic injury within the meaning of the Statutory Accident Benefits Schedule.
When mediating catastrophic injury claims, plaintiff’s counsel must consider the following:
1. Will there be a barrier at a tort mediation if the accident benefits’ insurer is not present? Most tort defendants will want full credit for available accident benefits.
2. Paid-to-date figures under the accident benefits’ various categories must be readily available.
3. Are certain benefits still being paid on an ongoing basis and if so, at what rate? This is often referred to as a burn rate.
4. Is it likely medical/rehabilitation limits or attendant care limits will be exhausted under the Statutory Accident Benefits Schedule?
5. Do the parties need structured settlement quotations to assess the accident benefits maximum future exposure? If so, these should be obtained within 30 days of a private mediation so they are current. Structured settlement providers can also look at medical records to see if the plaintiff’s life expectancy is impaired. If so, this can make a significant difference in the cost of the structured settlement annuity.
6. In global tort/accident benefits mediations, astute plaintiff’s counsel may claim future tort medical or other services at market rates rather than the lower accident benefits rates permitted under the Statutory Accident Benefits Schedule. This discrepancy can be significant and should be identified early in the mediation proceedings (or ideally in the Mediation Briefs) so that the tort defendant has an opportunity to assess its exposure well in advance of the scheduled mediation.
7. Past accident benefits’ interest for overdue payments should be considered well prior to mediation. Such exposures can be significant and need to be calculated well in advance of the mediation so the defence can adequately assess authority requirements for settlement.
8. Plaintiff’s counsel circulate the disbursements list prior to the mediation (especially if they are significant). Most insurers need to factor those disbursements into authority requests. Such authority requests are often developed 4-6 weeks prior to a mediation.
9. Late-breaking developments such as new medical reports, unusually high disbursements and new economic loss reports can be problematical at a mediation and could lead to an insurer coming with inadequate authority to settle.
10. Precise terms of settlement should be developed if consensus is achieved at mediation. Tort cases often settle on a “final” basis for all claims in the Statement of Claim arising out of a particular auto accident and the litigation is dismissed without costs. Full and Final Releases are signed. Sometimes special terms, however, need to be considered in global mediations which include the following:
• Is the settlement subject to court approval?
• Is the settlement subject to Family Law Act claimants approving the resolution if they are not present at the mediation?
• Will a confidentiality clause be required in a Full and Final Release? (This is usual in long term disability claims and some tort claims).
• Is the settlement subject to a mental capacity assessment if there is any doubt that the plaintiff understands the settlement?
• In terms of accident benefits’ resolutions, is the settlement a full and final release of all past, present and future claims and all claims whether submitted, approved or incurred to date?
11. Prior to mediation, it is important to identify any treatment expenses that a medical provider has incurred, but have not yet been paid; for example, a physiotherapy Treatment Plan that is halfway exhausted. Such treatment providers should have statements prepared as to what might be owing. A barrier occurs at mediation when these inquiries are not made until late in the day because the treatment providers may not be able to provide a last minute statement of expenses owing.
Organized plaintiff’s lawyers contact the treatment providers prior to the day of mediation so there is no misunderstanding as to what might be owing for past treatment provided. Even insurance adjusters might not be aware of the progress of a medical provider’s invoicing.
Prudent plaintiff’s counsel will explain the nature of a full and final settlement of an accident benefits’ or long term disability claim. If there are any other expenses, past benefits, interest or other issues, these need to be addressed carefully.
In terms of short term and long term disability claims, income tax could be payable on a settlement. Sometimes these insurers can spread out a lump sum settlement over a number of years to minimize income tax in a perfectly legal and legitimate manner.
Many times in larger cases, weekly income benefits are continuing to be paid at the time of a private mediation as well as other benefits such as attendant care monthly benefits. It is important at a private mediation to be precise when these regular payments will be stopped if there is a full and final cash-out of all past, present and future claims.
Both plaintiffs and insurers need to be prepared by their counsel for the management of client expectations. Insurers must be careful to have their reserves set accurately and plaintiffs need to be keenly aware of the thrusts of the defence arguments so that the trial risk is adequately addressed.
Mediations Post June 1, 2016 and the Major Reductions Available for Catastrophic Injury Claims
Significant changes have occurred to the Ontario auto accident benefits regulation in 2016.
The dispute resolution system has been completely overhauled with:
(a) The elimination of the Financial Services Commission of Ontario (FSCO) as the body responsible for mediation and accident benefits’ disputes in Ontario effective April 1, 2016;
(b) The creation of a new process at the Licence Appeal Tribunal (LAT) for resolution of accident benefits’ disputes;
(c) The elimination of access to the Ontario courts for litigation of accident benefits’ disputes except for judicial review of LAT decisions (available on questions of law only);
(d) There will no longer be mandatory mediation as the first step (as existed at FSCO) for the resolution of these disputes. Adjudication before the LAT is the sole method of resolving accident benefits’ disputes and denials. There is some suggestion private arbitrations could be utilized down the road, but that remains to be seen;
(e) New Rules of Procedure have been promulgated by the LAT and the goal is to have 90% of accident benefits’ disputes resolved by the LAT 180 days from the date applied for dispute resolution .
(f) Onerous timelines come into effect to attempt quick resolution of these disputes. A case will be put into one of 3 streams by a case conference officer for hearing format: (i) written hearings, in which the parties can file Affidavits, documents and written arguments; (ii) electronic hearings (video or telephone conference); and (iii) full oral hearings.
Those practising in the accident benefits’ field question whether these disputes will be handled within 6 months on an ongoing basis.
At the initial case conference, the hearing officer will set timelines for the resolution of the dispute. More complex cases should be identified by counsel to have them removed from a fast tracked system, such as catastrophic injury disputes, post-104 week income disputes or other big dollar cases. Counsel might have tort claims running alongside in the Superior Court and global private mediation might be suggested before the LAT arbitration.
This takes planning.
It would be advisable for counsel to secure a private mediation date with your mediator of choice when the Application Form A is filed so that the case conference officer can consider the reasonableness to extend short time deadlines.
Major reductions have been implemented by the government for auto accidents on or after June 1, 2016 for catastrophic injury cases. The maximum benefit for medical/rehabilitation and attendant care will be $1 million, rather than the previous $1 million limit applicable to each benefit category . In the past, those handling these claims often utilized structured settlements to “stretch out” the accident benefits limits where it was clear the limits would be fully exhausted. Often times, this occurred with younger claimants with obvious catastrophic injuries. Cautious plaintiff’s counsel should quickly identify such files and organize orderly settlement discussions, perhaps with a companion tort claim. If possible, this should be done at an early stage before the smaller $1 million limit is exhausted.
Timely medical, future care costs and other reports should be sought so that effective settlement can be achieved. Private global mediations are often used to bring final settlements for all of these claims, but the reduced auto accident benefits limits should alter strategic thinking as to timing and organization of a private global mediation with the mediator of choice. Structured settlements often can provide a lifetime of financial security, but there must be money remaining in the auto accident benefits limits to provide adequate protection for a plaintiff.
Hopefully, this paper provides helpful considerations for counsel when considering global private mediations. A key watchword is early strategic planning so that all the parties can be present at global mediation, prepared, and the mediator of choice can be booked sooner rather than later.