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Why Should I Settle?

By Shalom Wise

If you have suffered a personal injury, you likely want both fair compensation as well as your day in court. It is quite understandable that you want more than a cheque: You may well want a public forum to tell your story.

Unfortunately, however, the Ontario justice system discourages use of the courts, and most personal injury lawyers will encourage you to settle. Why is this the case?

The simple answer is that the Ontario courts suffer from tremendous backlog. (Read this National Post article from June 2012 for more information on the backlog.) In order to help relieve this backlog, the Ontario legal system uses a number of tools to ensure most personal injury cases never get to trial.

First, the Rules of Professional Conduct that apply to all Ontario lawyers emphasize the importance of settlement. Specifically, Rule 2.02(2) obligates lawyers to encourage their clients to settle, comprise, and make use of alternative dispute resolution (ADR). “Alternative” dispute resolution simply means resolving a dispute in any way but going to court, and lawyers have a duty to use ADR as much as possible.

Second, Ontario’s Rules of Civil Procedure encourage settlement in a crucial way in Rule 49.10. In essence, if the defendant makes you a settlement offer, and you refuse – then unless the judgement award is a greater amount of money, you are liable to a significant portion of the defendant’s legal costs from the date of the offer and onward.

Of course, in a personal injury case you will likely hire your lawyer on a contingency fee basis – in other words, all you pay your lawyer is a portion of the award you get. However, if you insist on going to trial, your personal injury lawyer will likely demand that you assume the risk of having to pay the defendant’s costs – unless it is fairly clear that the court will award a higher amount than the defendant has offered.

Third, the fact that personal injury lawyers are hired on a contingency fee basis also discourages going to trial. Under a contingency fee arrangement, your lawyer invests a significant amount of time and money in the hope that your case will be successful. If your case is not successful, you are off the hook, but your lawyer loses everything he or she invested in your case. The amount of time and money your lawyer will need to spend to conduct a full trial is prohibitive, and so trials are usually not feasible under a contingency fee agreement.

Fourth, and finally, is a little known fact which has tremendously complicated the lives of automobile accident victims. Under Ontario’s Insurance Act.1 There is a deductible on personal injury general damages (that is, pain & suffering) that arise from car accidents. The only exception is where the general damages exceed $100,000. The vast majority of car accident victims do not break this $100,000 barrier. What does this mean?

It means that if you have been injured in a car accident, and are awarded $30,000 at trial, you get zero. If you are awarded $40,000 you only get $10,000, and so on. This $30,000 does not go to anyone, it simply is automatically subtracted from any and all car accident personal injury awards. Not only that, but the jury members who determine the amount of your award have probably never heard of this deductible, and your lawyer is strictly forbidden from telling them about it.

In other words, the people who fix the amount of your award will not be able to increase your award in order to make up for the deductible because they will almost certainly be ignorant of this deductible in the first place.

On top of all this, the judge decides at the end of trial whether you have a “permanent serious impairment of an important function.”2 If he or she decides you don’t, then you will get zero general damages even if the jury has awarded you way more than $30,000 in general damages. The deductible and verbal test were both established for the benefit of insurance companies, and give personal injury defendants a strong upper hand in court.

With such a complicated system in place, full of such potential pitfalls, it is extremely important to choose counsel thoroughly familiar with this system to help guide you to a successful result.


1 Section 5.1 of Ontario Regulation 461/96
2 Section 4.2 of Ontario Regulation 461/96