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ATE insurance helps level playing field for personal injury plaintiffs

There are several major hurdles facing personal injury plaintiffs in Ontario, which has stacked the deck against accident victims, says Joanna Milnes, of legal expense insurance company DAS.

That’s a major reason why DAS brought legal expense insurance to the Canadian market in 2012, she says, noting that after-the-event (ATE) insurance fully protects a client against their opponent’s adverse costs and their own disbursements should the case fail or be abandoned.

“Without that protection, a plaintiff who loses their case risks owing large sums of money, potentially losing their home or declaring bankruptcy,” says Milnes, ATE Business Development Specialist with DAS. “Legal expense insurance helps level the playing field.”

She says the first hurdle plaintiffs must face is the statutory threshold for pain and suffering damages. Section 267.5 of the Insurance Act indicates that for a plaintiff to be entitled to general damages, they have to meet a statutory threshold where their injuries must be permanent and cause a serious impairment of an important physical, mental or psychological function.

“Essentially, plaintiffs have to show they meet that test. When I was practising personal injury law prior to joining DAS, I saw many chronic pain cases that didn’t meet the threshold," Milnes tells AdvocateDaily.com. "While the case law is moving towards chronic pain meeting the test, it's still an issue that a plaintiff will have to deal with."

She says another obstacle is the statutory deductible that is applied to claims that do meet the threshold.

“It has gone up each year with inflation and currently hovers around $38,000,” Milnes says. “If a plaintiff is awarded damages for their case, that amount is automatically deducted from their award. If a jury awards less than $38,000, the plaintiff ends up with nothing.”

To add insult to injury, she says plaintiff lawyers are not permitted to address juries about this little-known deductible.

“Defendants will typically seek a jury trial, which tends to result in more conservative awards. The reality is most cases are heard before a jury rather than judge alone,” Milnes says. “Plaintiff lawyers are not allowed to address the jury with information about the deductible so they could have no idea that their $30,000 damages award to a plaintiff will result in zero compensation.”

A third hurdle is the sharp decrease in the prejudgment interest rate, she says.

“Each year your case goes on, you are entitled to collect prejudgment interest at the end when calculating your settlement. Over the past five years it has hovered at one per cent, whereas a decade ago it was at nearly five per cent, which is a big jump, and provides less incentive for insurance companies to settle,” Milnes says.

When you combine those hurdles with the backlog in Ontario courts, an accident victim often has to wait seven or eight years before they see their day in court, Milnes notes.

"When I was practising, so often the defendants would try to push a plaintiff into accepting an offer by threatening to keep the action going for years and racking up large costs in the process,” she says. “ATE insurance is a way to push back against those tactics.”

This unique insurance protects the plaintiff against the risk of losing at trial, which can result in large adverse costs awards and disbursements owing to their lawyer.

“DAS's standard $100,000 limit of indemnity Plaintiff Cost Insurance product allows plaintiffs to level the playing field when involved in personal injury litigation with a large auto insurer. Just like the retainer with their personal injury lawyer, the premium for the insurance is contingent on the success of the case and is not payable until the end of the action," Milnes says.

“If the case is lost, plaintiffs’ counsel can make a claim to DAS for the adverse costs and outstanding disbursements and the premium is waived,” she adds.

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