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Personal Injury

Contingency fee cap bill a knee-jerk reaction

A 15-per-cent cap on contingency fees is more likely to harm accident victims than help them, says Toronto personal injury lawyer Jessica B. Mahabir.

In March, Toronto MPP Mike Colle introduced a private member's bill, the Personal Injury and Accident Victims Protection Act, that, if passed, would enact amendments to Ontario’s Solicitors Act and its Law Society Act to limit lawyers’ fees to 15 per cent of the total settlement received by their personal injury clients. The bill, which passed first reading in the provincial legislature, would also ban referral fees paid between lawyers for files.

But Mahabir, a lawyer at Derfel Injury Lawyers, says the low cap would negatively affect access to justice by discouraging personal injury lawyers from taking marginal cases.

“Capping contingency-fee retainers at 15 per cent would see a massive drop in the number of lawsuits because it wouldn’t be cost effective for many lawyers to take on cases that may not be slam dunks,” she tells AdvocateDaily.com. “What doesn’t get reported much is that personal injury is a risky and expensive practice.”

When lawyers accept cases on a contingency fee basis, Mahabir explains, they are effectively gambling on being paid for their work. In the meantime, they pay for expert reports, filing fees and other disbursements that clients don't have to cover, and may not have been able to afford on their own.

“Lawyers may decide borderline cases that require more research aren't worth the risk under a 15-per-cent cap," she says“With higher contingency fees, you’re able to take on riskier matters because the stronger ones pay off, and the costs of practice are balanced across various cases.”

Mahabir says she understands the clamour for action on personal injury lawyers’ fees, especially given the spate of recent negative press surrounding advertising practices by some in the profession.

“I think this bill is a knee-jerk reaction," she says. "To take these exceptions as the rule is dangerous and concerning to lawyers who don’t practise that way, and work in this field because we’re committed to helping victims of accidents obtain fair compensation from insurance companies.”

In addition, Mahabir says contingency fees help level the playing field for accident victims going up against well-funded insurance companies who, she says, stand to benefit from artificially low limits on compensation for plaintiffs’ lawyers.

“There’s no legislated cap on how much insurers can pay their lawyers,” she says.

In a statement issued shortly after the introduction of Colle’s proposal, also known as bill 103, the Insurance Brokers Association of Ontario (IBAO) backed the move.

“A major cost driver on the auto insurance product has been zealous litigation incented by contingency and referral fees. IBAO is supportive of Bill 103, which would help to protect consumers and keep costs down,” said IBAO CEO Colin Simpson. “All other parties in auto insurance industries are already required to disclose their compensation – it’s time lawyers and paralegals do the same.”

But Mahabir says it’s possible to achieve those aims without a 15-per-cent cap. She says she doesn’t oppose a more reasonable figure, pointing out that B.C. adopted an upper limit for contingency fees of 33.3 per cent.  

“More education and transparency for accident victims is always a good thing. People should be completely aware of what they’re paying for and how much their lawyer will ultimately get from any settlement,” Mahabir says.

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