I want to address two areas in particular;

1. Firstly, I raise the question as to whether the insurance industry’s attitude to mediation and settlement, short of trial, has shifted since mediation became, “de rigeur”, back in the late 1980s and 1990s.
2. The second question I raise is whether juries are now a friend or foe to the insurance industry. Keep in mind that the insurers have always favoured them and viewed juries as a form of trial that gives them an advantage.

As is usually the case, at least in my opinion, the approach by insurers does not seem to make a great deal of sense. Several months ago, quite by accident, I had dinner with a number of executives from the insurance industry. The conversation, much to my surprise, was rather candid. In the course of our dialogue, the insurance executives admitted that the industry had probably made two major miscalculations approximately 15 years ago when they decided to go into their strategy of “cost containment”.

In practical terms, cost containment meant that the industry devalued lawyers and the litigation process – feeling legal and other related litigation expenses had spiraled out of control and that lawyers were really a necessary evil, but that the high end lawyers were no longer needed. They planned to settle at mediation and they, more so than their lawyers in their view, knew how to properly and effectively evaluate a claim.

They now admit that they should have retained their top end lawyers and paid more than the minimum hourly rates they were prepared to concede to them - in order to maintain their deterrent with respect to the plaintiff’s bar. In other words, to settle with them at their number or close to it or face a seasoned and experienced trial lawyer. That option is very rarely available today to any insurer.

The second mistake was that they underestimated the strength of the plaintiff’s bar, that is, that they had not anticipated that the educational arm of the ontario trial lawyer (otla), including the chat line, would preclude them from having their way with what had previously been an inexperienced and poorly informed (in settlement values), plaintiff’s bar.

In short, whereas up until 10 years ago, insurers always felt confident that their counsel were superior to the plaintiff’s bar – this is no longer the case.

Having made those preliminary comments, let us return to whether attitudes toward settlement, at mediation or otherwise, have actually changed. Many large players, such as aviva and co-operators and the recently dearly departed liberty mutual, would have us believe that they will no longer settle chronic pain type cases. Their reason – to see whether the new wording adopted in october 2003, defining the threshold, will have some impact and meaning.

To put it bluntly, this is simply a load of crap. Firstly, the vast majority of the cases and their inventory occurred before october 1, 2003 and will not be affected by the change, if any, brought about by the new wording. Secondly, very few plaintiff’s lawyers or insurers, can see general damages as the heart and soul of their law suit – it is clearly the economic loss which of course is not impacted by threshold. (on the other hand, our ability to claim the shortfalls in med rehab expenses will be impacted by the interpretation of the threshold).

So – if not for their stated reason, then why are insurers taking a tougher stand in these cases? Although the answer should have been obvious, it did not become so to me until I tried a case where the law of nova scotia applied to the calculation of damages and specifically, past economic loss.

In short, in nova scotia, past economic losses are 100% of gross and not 80% of net. On paper in that trial, my client’s losses up to the date of trial were $306,000.00. Out of curiosity, a calculation was done in my office of the value of the claim under ontario law. The swing was an eye-popping $130,000.00 or awfully close to 40%.

Therefore, put yourself in the shoes of an insurance executive. Your company, at least for public consumption, is losing money – at least that’s what you tell the government of the day when you’re trying to justify why insurance should be the only product on the market for which the price goes up and the consumer gets less. (certainly, since the industry cried poor last fall to the tory government, it was interesting to learn that canadian insurers made record profits of 2.7 billion in the fiscal year 2003).

In any event, your shareholders are clammering for higher profit. Do you accomplish this by taking all chronic pain cases to trial especially given that the plaintiff’s bar is stronger and the expenses substantial? Hardly! What you do is to say that your company is no longer settling these cases (these are the vast majority in their litigation portfolio) and that they must go to trial. However, all they seem to be doing now is to settle cases on the eve of trial.

What does this accomplish? Let’s assume that aviva has 1,000 chronic pain claims in litigation and that they were settling on average two to three years after the accident whereas trial dates occur four to five years after the accident.

Generally the responsibility to pay 80% of the net annual economic loss ends at the time they settled. If on the other hand, with this new approach, they gained one or two extra years of settlement value at 80% of net instead of 100% of gross, this could represent a savings of up to $10,000.00 per file, and at that rate, it would represent an improvement for a company like aviva of $10,000,000.00 to their profit picture.

While I can only offer anecdotal evidence gleaned from reading the otla chat line, it seems that these companies are settling chronic pain cases on the eve of trial to accomplish that end.

I personally believe it is time to call the industry’s bluff. First of all, while mediation may not be adversarial in style, they certainly are in substance. To provide you an extreme example, if I go to a mediation and my opponent is, and will likely remain throughout, a lawyer with five to ten years experience as in house counsel, I will not be paying much attention to what defence counsel, or the mediator suggests are conventional settlement figures for the injury and losses in question. I will generally take the position, either outwardly or at least to myself, that every claim has a range and to determine whether the case settles at the high, low or middle of the range, it seems the overriding question is which counsel is likely to prevail at trial.

The Use of Juries

Another factor is that since I started to practice in 1966, the insurance industry has almost, by knee jerk reaction, selected trial by jury. The most common reason was that the defence bar was more experienced and by extension, more comfortable with the jury. Another critical component in this decision to go with the jury was that it created uncertainty – a factor that a large and wealthy insurer can more readily withstand as opposed to an individual plaintiff.

While there will always be uncertainty with a jury to some extent, the ground has definitely shifted. Firstly, with a few notable exceptions, the plaintiff’s bar is now superior to the defence bar. The exceptions I refer to are generally speaking some very senior counsel who may not be practicing in another five or ten years.

There is, however, one thing of which we can now be certain when it comes to juries. Very few jurors come to the court room with neutral feelings about the insurance industry. Very few members of the public have escaped the outrageous premium increases or cancellations of coverage from the industry. Many are familiar with the ruthless tactics used by insurers, particularly in first party and in fire loss cases.

The whiten case was just the beginning. Juries have been hammering insurers through punitive damages, over the last few years. As well, a few years ago, I found it difficult to get toronto juries to award substantial damages for economic loss. Over the last year, I noted a tendency to be far more generous … and since toronto juries in my view are the toughest, the situation is clearly better in the 905 area. In short, if insurers persist in their use of juries, it should make trials even more inviting to the plaintiff’s bar.

Suggestions that may assist in achieving higher settlements at mediation

A. Demonstrative evidence
B. Shifting the burden under certain circumstances
C. Increasing the exposure

For years, my friend, roger oatley, has been preaching that people (juries) retain far more of what they see than what they hear. I have only become a recent convert to his way of thinking. Believe it or not, adjusters who attend mediations are also human beings just like jurors, and they can be impacted by demonstrative evidence at mediation, (not by power point), just as readily as your typical juror. In this regard, just simply imagine, in a simple fracture case where plates and screws were or are still in place, making regular photographs so that the jury can see what is sitting in somebody’s leg or arm.

In a recent trial involving a case of moderate brain injury, we used some very simple yet effective visual material.

Firstly, we used a coloured medical illustration demonstrating how a contra coup injury occurs. Secondly, we had our main medical witness use the model of the skull with a removable top that housed the brain. The expert was able to demonstrate to the jury how the front and back of the brain would come into contact with the sharp points and edges within the skull. In watching the jurors during this demonstration, it was clear to me that they far more clearly understood the mechanism of injury than they might have otherwise.

We also set out, on 2’ x 3’ boards, a chart which shows the amount of money one earns in a lifetime (assuming the same age as the plaintiff and the same working life expectancy) at 20, 30, 40, 50, 60, 70, 80, right up to $100,000.00 so that the numbers in this case ranged from a low of $400,000.00 to a high of 1.7 million. Despite objections by defence counsel, we were permitted by the trial judge, justice mcdonald, to use these items in our opening. As you can appreciate, cards as large as 2’ x 3’ are always visible during the course of the trial and as long as they are sitting face out, the jury will constantly be in visual contact with those numbers and it may help them cross the psychological threshold.

The question this begs is had this visual material been available and used at mediation, would it have improved my client’s chances to achieve a reasonable settlement at that stage? I believe with any insurer, other than for example the dearly departed liberty mutual, it would have and roger oatley, who has done this for quite some time, tells me that it does help immensely. As a matter of interest, roger has also told me not so long ago that he always has been paid his disbursements for the demonstrative evidence upon settlement, even when it is used only at mediation.

At the very least, it delivers the message to the insurer that you are ready, willing and able to go to trial and that is better than half the battle.

Will say statements

Another very effective tool I often see missing in plaintiff’s mediation memos are will say statements that are carefully and effectively drafted. Statements for example from a family doctor who is an experienced observer of the plaintiff before and after an accident, from someone credible such as a clergyman who is a before and after witness, statements from the plaintiff’s employer and fellow employees as well as family members are almost always helpful and are considered very useful if not more useful than medical evidence by many judges. It certainly delivers the message well to the other side. As stated previously with demonstrative evidence, it will show to the other side your preparedness to effectively try this case and of course demonstrate to the insurer that they are not only dealing with expert “hired guns” but credible lay witness evidence as well.

Increasing the exposure – tort and ab

A few years ago, I was discussing a dilemma which I had encountered in a case that involved a client who suffered an amputation below the knee. I must give credit to the participants in this conversation who gave me this idea, namely roger oatley and john mcleish. Given that under the sabs this was not catastrophic at that time, and that my client was in his early twenties when the injury occurred, the medical rehabilitation benefits had already been burned to the sum of $70,000.00 out of the $100,000.00 available before his first prosthesis had to be readied and fitted.

The cost of a decent appearing and fitting prosthesis including stump fees is almost $20,000.00 an occurrence and has to be replaced about once every three years. As can readily be seen, even if $100,000.00 was available, he would have run out of funding for prosthetics long before the expiry of his working life expectancy.

We did two things in an effort to shift the burden of this loss:

A) We pleaded in our tort statement of claim that once the funding ran out, his ability to work would be grossly limited or eliminated and therefore we argued that exposure on the tort defendant to economic loss increase as of that moment. (i don’t believe the defence can prevail by suggesting the provincial assistive devices program which pays 75% will be available to fund future prosthetic changes).

B)At the appropriate time, we sent our client to a highly credible physiatrist, who found him to have in excess of 55% whole body impairment and on that basis, we were able to reopen the discussion with the ab carrier as to whether their exposure was indeed limited to $100,000.00 or $1,000,000.00. The position we took was that it would be difficult for the trier of fact to not find this to be catastrophic (regardless of whatever a cat dac might say). An additional argument, which may not be available on another situation, was that if my client had suffered his injury after september 30, 2003, he would have been deemed catastrophic in any event. It would take a rather heartless trial judge to determine the issue against the interest of the plaintiff.

In any event, I hope I have given you a flavour of what has been developing over the last few years in this area of the law.