Health costs, discount rates increase tort awards in catastrophic injury cases

In eight years, tort awards in catastrophic cases have increased from the Cdn$600,000-$7000,000 range to between Cdn$10 million and Cdn$15 million, Jess Bush, partner with Blaney McMurtry LLP, told delegates at the Insurance Law: Spring Update 2008 in Toronto on May 15. Health care costs are “going through the roof,” he noted, by way of explanation. Further to that, discounts for future awards have decreased generally and on future care costs specifically. The discount rate is the rate applied to the value of a future stream of payments to reflect the fact that it is going to be paid now in a lump sum; it is assumed the lump sum will be invested and will earn income at a rate higher than inflation. Future health care costs are often the largest component of a damage award; thus a reduction of a discount rate creates a significant increase in the award, Bush noted. Guardianship and legal fees have also become a prominent component of these damage awards, he added. In addition, due to no-fault auto insurance, the plaintiff’s bar is better and more organized, Bush noted. Therefore, the onus is very much on the defense to marshal resources and strategies. A few strategies can be used to respond to the claims in an effort to reduce awards, Bush suggested. For example, new and sometimes expensive tools can be used to determine causation and liability, including black boxes and PC Crash. Additionally, accident benefits both past and future are offset from awards after the liability split. Therefore, it is important for defense counsel to add the accident benefits received to the assessment, reduce that assessment by contributory negligence and then offset both the past and future accident benefits, Bush noted. This produces a dramatic reduction in damage assessments, he added.