by Joseph J. Sullivan, C.S., Sullivan Mediations

Under Ontario’s no-fault auto insurance regime, injured parties have legal rights for both first party accident benefits under his or her auto insurance policies and for tort claims against an at fault motorist.

An original tenet of no-fault insurance is a prohibition on “double dipping.” The plaintiff ordinarily is not to be over compensated for losses. As tort and accident benefits rights often overlap, mediated settlements of these claims present unique challenges.

For example, an injured party has rights to claim income replacement benefits under an accident benefits policy, but also would have tort loss of income claims against the negligent defendant.

The tort defendant is entitled, by operation of the Insurance Act to a deduction of past (and future) income replacement benefits paid under accident benefits or some other collateral source.

This paper will explore some of the issues that arise at private mediations in these cases. My comments generally apply equally to plaintiffs and defendants.

As often one insured has a right to a deduction for collateral source benefits, all counsel attempt to identify all possible sources with potentially deductible benefits.

For example, an injured party would typically have accident benefits rights (Statutory Accident Benefits under their no-fault policy-SABS), but also might have short and long term disability, Canada Pension Plan and other sources of income that might be deductible.

Typically, Employment Insurance, Workplace Safety Insurance Board payments, Ontario Disability Support Plan payments and welfare payments are not deductible.

These non deductible benefits files, however, are often produced and reviewed by counsel as there might be statements from the claimant and/or various medical practitioners.

If an accident benefit is claimed, yet not received by a plaintiff, ordinarily a tort defendant cannot deduct what might have been received.

Also, if an accident benefits case has been settled prior to a tort trial or settlement mediation, a tort defendant cannot allege an inprovident settlement unless that settlement was made in bad faith (by operation of the Insurance Act).

In the case of a mediation between an injured plaintiff and a tort defendant, decisions need to be made whether to invite collateral source payors such as accident benefit insurers or long term disability carriers.

Some of the factors that are 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; for example, accident benefit medical reports could help or hurt a plaintiff or tort defendant depending upon the conclusions reached by those assessors. 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 invited 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? Well prior to the mediation, counsel need to consider any potential barriers that might arise from parties that could be invited to the mediation and everyone could close their file.

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. Are 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. Is this a consideration?

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 be made aware of the mediation since they ultimately will be responsible for our 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.

Should the tort defendants insurer and the accident benefits insurer be in the same caucus room at mediation?

On occasion a plaintiff may request that two insurers be in separate rooms.

Should offers be made known to all the parties during the day at the mediation?

These issues should be addressed either before the mediation amongst counsel or at the outset on the morning of the mediation.

In my experience, where one insurer is entitled to a credit for the payment by another insurer, the sharing of information (and offers) facilitates easier settlement.

Next up: Mediating Complex Catastrophic Injury Cases.