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Personal Injury

Costs decision a warning to insurers to treat plaintiffs better

A judge’s decision to award a plaintiff more than 10 times her net damage award in costs should serve as a warning to insurers to treat injury victims with respect, Toronto personal injury lawyer David Derfel tells AdvocateDaily.com.

The elderly woman in the Ontario Superior Court of Justice case was awarded $67,500 by a jury following a 2009 accident in which she was rear-ended. However, she took home just over $20,000 in damages after the application of statutory deductibles.

Despite that, the judge awarded her $237,000 in legal costs, ruling that it would be “grossly unfair” to let “proportionality be the overriding, or even the predominant factor,” given the hardball tactics employed by the insurer throughout the proceeding.

“I think it’s a signal to insurers to treat plaintiffs properly and stop using the threshold and deductible as a means to be overly aggressive to accident victims,” says Derfel, founder and principal of Derfel Injury Lawyers.

“People who have been injured are entitled to their day in court. Many insurance companies react with indignation to accident victims when they should treat them respectfully.”

According to the decision, the 84-year-old plaintiff initially sued for $1 million but was warned by her insurer that she could expect much less. In fact, it took the position that only a zero-dollar settlement would be acceptable, reasoning that the woman had not suffered any significant injuries.

As a trial date approached, the woman offered to settle for $20,000, and later dropped her offer to just $10,000, but the company declined to accept, forcing a fiercely contested two-week trial.

The woman demanded costs of $268,000, arguing that she had exceeded both offers to settle and that the insurer should have appreciated the risks of its hard-line position. The company countered that the costs were out of all proportion, but its protest fell on deaf ears.

"Insurers can, of course, pursue whatever strategy options they deem fit,'' the judge wrote, noting that the jury’s verdict showed that it had acted unreasonably.

"But especially where such strategies may have wide-ranging and adverse implications involving widespread denial of access to justice, the use of such strategies should not be encouraged by the giving of cost breaks on foreseeable costs consequences,” she added.

Despite the outcome, Derfel suspects the victory may be short-lived.

“This decision may just become one more thing in the list of requests that the insurance lobby takes to the government. Insurers could demand a cap on costs or a statutory requirement that cost awards be proportionate to damages,” he says.

According to Derfel, insurance companies have a strong track record of getting what they want from the provincial government when it comes to auto insurance reform.

“That’s how deductible for general damages increased from $15,000 to $30,000 and again to $36,000, rising with inflation. Changes like this have greatly reduced the incentive for insurers to settle,” he says.

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