January 2018

Emerging Trends in Personal Injury Damage Awards

Van Krkachovski
Partner

By Van Krkachovski

In recent years, there have been a number of developments in the law which have resulted in escalating damage awards, particularly in catastrophic injury cases. The paper will outline some of these developments relating to:

I. Future Care Costs;
II. Guardianship and Management Fees; and
III. Risk Premiums.

Before we begin, we must caution that the road to the conclusion of a lawsuit is often long. There is a significant delay in getting a matter to trial in most jurisdictions within Ontario. For trials that are expected to take more than two weeks, it could take two years or more to reach trial after the parties indicate their readiness for trial to the court. Two responses to this institutional delay in obtaining trial dates have emerged – (A) private arbitration and (B) partial summary judgment motions for an advance payment. By way of introduction, we will outline these two responses before exploring the emerging trends in damage awards.

A. Private Arbitration

Private arbitration has become a viable option since an arbitration date can typically be secured in a matter of months rather than years.

In addition to the timelines of private arbitrations, there are a number of factors which make it a favourable alternative to the court system:

1. The parties can choose their decision-maker rather than a judge being forced upon them, and therefore choose an individual with experience in the subject matter of the lawsuit.
2. Arbitrations are typically undertaken on a confidential basis such that there is no reported decision from the arbitrator and for that reason, the ultimate outcome does not become public knowledge.
3. The arbitration process is typically less formal than a trial which makes witnesses feel more at ease.
4. One or more pre-arbitration meetings are held in order to discuss how the arbitration will unfold and, more importantly, what can be done to streamline the process and therefore reduce cost. For example, parties can agree to exchange, will say, statements from the witnesses to be called which will avoid the necessity for an examination in chief and instead, the witnesses will only be cross-examined.

The one negative aspect of a private arbitration which parties must bear in mind is the cost. Unlike a trial judge, a private arbitrator will charge a significant fee for his or her service. Including preparation and attendance, an arbitrator's fee could exceed $100,000 depending on the length and complexity of the matter. Further, arbitrators often require a significant deposit towards the cost of the arbitration and will charge a significant cancellation fee if the arbitration is cancelled for any reason close to the date.

B. Advance Payments

It is open to a defendant to make an advance payment on a claim to reduce the amount of prejudgment interest that it must pay when the matter concludes, and where the plaintiff is in financial need on a meritorious claim. Defendants are often reluctant to do so out of concern that the advance payment will at least in part serve to finance the litigation as some of the money may be diverted to the lawyer.

It is also open to the court to grant a partial summary judgment on a motion brought by the plaintiff, but it will only do so in the clearest of cases, particularly in which liability is no longer in issue. For example, if the trial date is well off but the plaintiff requires additional treatment or care in the meantime to prevent regression of the medical condition and the future care cost claim is significant, the court will order the defendant to make a significant advance payment against those future care costs.

I. Future Care Costs

Overview of Future Cost of Care Claims

Plaintiffs in personal injury cases will frequently claim for future care costs. Such costs may include, but are not limited to:

• Assisted living costs;
• Modification of home or vehicle costs;
• Caregiver costs or other home maintenance service costs;
• Special transportation costs;
• Medication costs; and
• Uninsured health-care service costs (physiotherapy, acupuncture, massage, chiropractic treatment).

Assessing the quantum of damages is difficult because of the speculative or forward-looking nature of the future care cost quantification. The precise amount of damages will not be quantifiable at the time of the settlement or the trial. Such costs are really "contingencies" in that the Claimant may or may not incur these costs.

The Importance of Experts

Expert evidence is essential when quantifying future care costs. Both plaintiff and defence counsel will retain Life Care Planning experts to assess the plaintiff ("future care cost experts"). Upon examination, the future care cost expert will extrapolate and provide recommendations about what products and services the plaintiff will require.

Often, the future care cost experts are not certified, medical doctors. Instead, these experts have backgrounds in rehabilitation and occupational therapy. Their recommendations are generally based on:

1. an examination/interview of the plaintiff, and
2. the existing expert opinions of various medical practitioners such as physiatrists, orthopaedic surgeons, neurologists, neuropsychiatrists, etc.

From a Defence standpoint, it is imperative that various Defence medical reports are obtained prior to the expert's future care cost assessment. That way, the future care cost expert can base his or her recommendations on firm medical analysis and evidence.

Once the future care cost expert has provided his or her recommendations, the present value cost of those recommendations is then calculated by an expert accountant. In coming to a present value figure, the expert accountant will consider the cost of the recommendations, various contingencies and the life expectancy of the plaintiff.

In awarding damages for future care costs, the court should take into account a discount for the plaintiff's shortened life expectancy.¹ Therefore, it is often necessary to retain a medical expert to opine on the plaintiff's life expectancy.

Life expectancy experts review the plaintiff's extensive medical history and provide an opinion as to how the injuries suffered may ultimately affect the plaintiff's life expectancy. The purpose of this exercise is to demonstrate that the number of years that care is to be provided is diminished. From a Defence perspective, this may result in a significant reduction of the plaintiff's future care cost claim.

Calculation of Future Cost of Care Awards

When calculating damages, a plaintiff must only show that there is a reasonable chance (not probable chance) that the plaintiff will suffer a future loss or damage. This was articulated by the Ontario Court of Appeal in Schrump v Koot. ² This was an appeal by the Defendants from a judgment awarding one of the plaintiffs $20,000 for a severe back injury resulting from a motor vehicle accident. The issue on appeal concerned the trial judge's failure to direct the jury to disregard the possibility that the plaintiff may later require surgery. At trial, the plaintiff's expert testified that there was a 25-50% chance that the plaintiff would require future surgery. The Defendant's expert felt that possibility of future surgery was very remote. The Appellants contended personal injury damages are to make allowance for probable future developments but are to exclude merely possible outcomes. The appeal was ultimately dismissed.

The Court set out the following guiding principles:

• Though it may be necessary for a plaintiff to prove on the balance of probabilities that the tortious act or omission was the cause of the harm suffered, it is not necessary for him or her to prove that future care loss or damage will occur, but only that there is a reasonable chance that the loss or damage will occur;
• Speculative and fanciful possibilities unsupported by expert or other cogent evidence can be removed from the consideration of the trier of fact and should be ignored, whereas substantial possibilities based on such expert or cogent evidence must be considered;
• This principle applies as long as there is a substantial possibility (irrespective of the precise percentage chance) regardless of whether the possibility is favourable or not;
• Thus, future contingencies which are less than probable are regarded as factors to be considered, provided they are shown to be substantial and not speculative.

It should also be noted that the principles as articulated in Schrump also apply to future income loss claims.

Escalating Costs Associated with Future Care

There have been a number of cases recently in which Claimants have been awarded unprecedented amounts for costs associated with future care. For example:

Sandhu (Litigation Guardian of) v Wellington Place Apartments³

• A Jury Trial;
• a two-year-old boy who fell from the window of a fifth-story apartment;
• awarded $13 million in damages and interest; and
• awarded almost $11 million for future care for the severely brain-injured plaintiff, whose life expectancy was determined not to be diminished by his injuries.

Gordon v Greig⁴

• Two young men catastrophically injured in a motor vehicle accident;
• the plaintiff Morrison was awarded $8,880,000 for future care, plus $374,800 for housing;
• the plaintiff Gordon awarded $8,646,900 for future care;
• the Judge refused to reduce any portion on the basis that the plaintiff would not use the proposed goods or services (defence sought a 20% reduction);
• a witnesses testified that he must have that level of service; and
• the Judge concluded that he would require the care whether or not he wanted it.

Marcoccia (Litigation Guardian of) v Gill⁵

• A Jury Trial;
• an MVA in which the plaintiff suffered traumatic brain injury which would require intensive lifelong care; and
• awarded $14 million for costs of future care.

Aberdeen v Langley (Township)⁶

• The plaintiff was riding his bicycle downhill towards a blind curve when he veered to avoid a cube van, lost control of his bicycle, travelled through a gap between two barriers at the side of the road, and fell down a ravine;
• the 50-year old suffered a spinal cord injury, chronic neuropathic pain, and a mild brain injury; and
• awarded $4,151,504 in future care costs.

Brodeur (Litigation Guardian of) v Provincial Health Services Authority⁷

• The plaintiff, Tianna, suffered a significant brain injury during her birth in 1999 because of medical negligence;
• her mother suffered a uterine rupture during an attempted vaginal birth after caesarean (VBAC) delivery – the child was delivered by emergency caesarean;
• one doctor and one nurse were found liable; and
• awarded $3,339,615 in future care costs.

Cojocaru (Guardian ad litem of) v British Columbia Women's Hospital Health Center⁸

• The plaintiffs, Ms. Cojocaru and her son Eric, suffered injuries during the child's birth because of medical negligence;
• Ms. Cojocaru was not warned of the risks of VBAC delivery. She suffered a uterine rupture. Eric was delivered by emergency caesarean and suffered permanent brain damage;
• two doctors and one nurse were found liable; and
• Eric, who was in grade 1 at trial, was awarded $2,665,000 in future care costs.

Why are Costs Associated with Future Care so Expensive?

Cases in which Claimants sustain brain injuries are often the cases that give rise to high damage awards for future care costs. Traumatic brain injuries often result in a number of impairments related to the following:

The management of these impairments may require the assistance of various professionals and the use of various devices and services, which can be quite costly. The following list outlines approximate costs that may be associated with such care:

It is also likely that the Claimant will incur costs for supplies, equipment, and home modifications.

II. Guardianship and Management Fees

Guardianship and Management fees consist of three main components:

1. Compensation for the non-corporate guardian;
2. Compensation for the corporate guardian;
3. Legal fees for guardianship.

In a personal injury case, a lump sum award is typically given to the plaintiff to provide for the remainder of his/her life. The calculation of this award assumes that the amount will be invested. As noted above, financial awards can be large (in the millions) and often the appointed noncorporate guardian (such as a parent) lacks the financial expertise to know how to invest such a large sum. Therefore, investment and management of the funds become a joint venture between the non-corporate guardian and a corporate guardian, such as a trust company.

In Arnold v. Teno the Supreme Court of Canada confirmed that, in many cases, plaintiffs will require the services of skilled financial advisors to assist them in the management of their capital sum. ⁹ It is appropriate, therefore, to provide a sum for financial services or a management fee (for both the corporate and non-corporate guardians).

The Supreme Court elaborated on this concept in Mandzuk v. Vieira.¹⁰ The award of a management fee is not automatic, but rather it is based on evidence that financial assistance is, in fact, necessary in the circumstances.

Where damages for guardianship and management fees have been awarded, they have tended to be on the larger side:

• Sandhu (Litigation Guardian of) v Wellington Place Apartments - $1,127,000
• Gordon v Greig - $447,164 (Morrison) & $525,925 (Gordon)
• Marcoccia (Litigation Guardian of) v Gill - $1,265,816

1. Non-Corporate Guardians

A non-corporate guardian will have the following responsibilities:

• Fiduciary duty to act in the best interests of the plaintiff;
• Meet with the corporate guardian to review performance of investments and investment strategy;
• Receive and review reports from corporate guardian;
• Seek direction from the court for any changes that fall outside the investment plan; and
• Liaise with the case manager.

The amount of the award for management fees for non-corporate guardians is not fixed. Rather, it will be determined on a case-by-case basis by looking at the following factors:

• The severity of the plaintiff's injuries;
• The size of the award (accordingly, the management fee is assessed after the jury renders the verdict or after the trial judge calculates the amount of the award);
• The remaining lifespan of the plaintiff;
• The care and responsibility involved;
• Time required to perform duties;
• Skill and ability shown;
• The plaintiff's abilities to fend for himself/herself; and
• Success resulting from the administration.

2. Corporate Guardians

Corporate Guardians will be responsible for creating an investment and management plan. A portion of the damage award is usually invested in a structured annuity and the balance is invested in the capital market. A capital fund allows flexibility to respond to changes in the future (i.e. advances in medicine).

The amount of compensation that they are entitled to for doing so is determined by the Substitute Decisions Act.¹¹ A regulation made under the Act has a fee scale which provides for the following:

• 3% on capital income and receipts;
• 3% on capital and income disbursements; and
• 3/5 of 1% on the annual average value of the assets.¹²

3. Legal Fees

In addition to management fees, a court may award legal fees which are incurred in managing the plaintiff's finances. Legal fees are often incurred as a result of the following:

• Initial application for guardianship;
• Regular passing of accounts;
• Motions to court for advance and direction;
• Amendments to investment and management plan;
• Appointments of new guardian; and
• If the plaintiff is a minor, involvement of a children's lawyer until the plaintiff reaches age 18.

III. Risk Premiums

A "risk premium" refers to the concept of awarding plaintiff's counsel a cost premium for their risk in taking on the case.

The Supreme Court of Canada considered this issue in Walker v Ritchie.¹³ In that case, counsel for the impecunious plaintiffs carried a personal injury suit arising from a motor vehicle accident through its four-year duration without remuneration despite the defendants' denial of liability. The defendants rejected an offer to settle but were found liable at trial. The plaintiffs' award exceeds the offer and they were entitled to partial indemnity costs up to that point and substantial indemnity costs from that point onward. On the basis of the risk of non-payment, the trial judge awarded a premium of $192,600 to plaintiffs' counsel. The Ontario Court of Appeal upheld the risk premium. The issue before the Supreme Court was whether the plaintiffs' cost award should have been increased to take into account the risk of non-payment to the plaintiffs' counsel.

The SCC allowed the appeal and rejected the risk premium award. The Court held that:

• While it may have been proper for the plaintiffs' lawyer to charge a risk premium to the clients, the defendants would have no way to assess such a premium and could not include the risk of incurring such a premium into their decision of whether or not to settle.
• Having defendants pay risk premiums was not considered to be an effective means to encourage counsel to take on the cases of impecunious clients.
• Threat of a risk premium may lead defendants with a meritorious defence to settle.
• It would also encourage plaintiffs to pursue a claim that is not meritorious.

The issue was considered again a few months later in Ward v Manulife Financial.¹⁴ The trial level court found that the Supreme Court's decision in Walker was no longer applicable. This was so because of legislative changes to Rule 57, which the trial court found permits the award of risk premiums. This decision was overturned on appeal and the risk premium was set aside. The Ontario Court of Appeal found that the concerns of Justice Rothstein in Walker apply equally to the new wording of Rule 57, namely:

• That the factors to consider in ordering costs are neutral. Risk premiums would only be applied against defendants, which would go against the neutral wording of Rule 57; and
• That a risk premium is a private arrangement between plaintiffs and their counsel and is not a matter about which the defendant is entitled to or has knowledge of.

The Ontario Superior Court considered risk premiums again in Spiteri Estate v Canada (AG).¹⁵ The court opined that as a general rule, neither the benefit of a reduced legal fee nor the burden of a risk premium should be passed to the other party.¹⁶

Since the Supreme Court has not ruled on the availability of risk premiums, there may still be an opening for successful plaintiff lawyers to argue that they should be awarded a risk premium as part of the cost award. Notably, the Rules of Civil Procedure vary from province to province which means that risk premiums may be available in other jurisdictions. This is an important consideration for defendants contemplating settlement.

Summary

Damage awards in personal injury actions are on the rise. Plaintiffs will also make a claim for future care costs which are notoriously difficult to quantify. This necessitates the involvement of a variety of experts who will be called upon to assist with the quantification of future care costs. Guardianship and Management fees are also becoming more common to ensure that the financial assets of the injured plaintiff will be well managed throughout the plaintiff's life. Risk premiums are part of the legal costs that a defendant may be responsible for paying, although the availability of this type of cost award is less likely now, at least in Ontario.

For parties who are eager to speed up what has become an extremely lengthy litigation process, private arbitration is available albeit at a significant cost to the parties. In rare cases, courts will acknowledge the necessity for the plaintiff to get access to funds before the litigation concludes. In these instances, advance payments may be available. Given these trends in personal injury litigation, early resolution of disputes is often advisable. That is particularly so as the cap on nonpecuniary general damages continues to rise. It increases annually with the cost of inflation and now stands at $380,000.

¹ Monych v Beacon Community Services Society, 2009 BCSC 562, 177 ACWS (3d) 400.
² (1977), [1978] OR (2d) 337, 1 ACWS 16.
³ [2006] 81 OR (3d) 307, varied on another issue in 2008 ONCA 2015, 291 DLR (4th) 220.
⁴ [2007] 154 ACWS (3d) 865, 46 CCLT (3d) 212.
⁵ [2006] 153 ACWS (3d) 1067, 2006 CarswellOnt 7870.
⁶ 2008 BCCA 420, 173 ACWS (3d) 1097.
⁷ 2016 BCSC 968, 267 ACWS (3d) 219.
⁸ 2009 BCSC 494, 177 ACS (3d) 519.
⁹ Arnold v Teno, [1978] 2 SCR 287, 83 DLR (3d) 609.
¹⁰ [1988] 2 SCR 650, 53 DLR (4th) 606.
¹¹ SO 1992, c 30.
¹² O Reg 26/95, s 1.
¹³ 2006 SCC 45, 2 SCR 428.
¹⁴ 2007 ONCA 881, 162 ACWS (3d) 867.
¹⁵ 2014 ONSC 6167, 256 ACWS (3d) 769.
¹⁶ 2014 ONSC 6167 at para 60, 256 ACWS (3d) 769.

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