Presented by : 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, continued  Guardianship Fees and Management Costs*;

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;

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;

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;

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;

Medical Care Continued  Equipment 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;

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;

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;

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?

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;

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;

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;

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;

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;

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;

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;

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;

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;

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 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 %;

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%

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.

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

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;

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.

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;