Lawyers

INFORMATION FOR ATTORNEYS 

As a lawyer you deal with many complex legal and human issues daily. Whether you are perusing an accident or injury claim, malpractice suit or dealing with an inheritance claim it takes time to achieve the desirable outcome. Frequently for various reasons your client may not always have the luxury of time. Whether they are injured, bereaved or simply waiting for a real estate deal to close money NOW can become an issue. That’s when a settlement loan can make a lot of sense to prevent a client from being penny pinching and pound foolish. Discounting a claim to answer immediate money issues is seldom judged or considered a wise choice by clients only a few months later.

With settlement financing, the pressure is off. Your client has the funds needed to pay the bills. As a result, you have some breathing room to negotiate for the most favorable settlement you can get, instead of being compelled to accept early offers and deep discounts. As a result:

Lawsuit loans and Settlement loans often lead to larger settlements.

Settlement loans also can confer a tactical advantage if the related interest costs can be shifted to the defendant. As discussed in this article, recent decisions of Canadian courts support the argument that even where funds are borrowed to cover living expenses during litigation, the interest and related fees should be borne by the defendant. With the possibility of this liability hanging over their head, your opponent will have an added incentive to make a more favorable settlement offer in order to bring the case to a resolution quickly.

We understand that attorneys are extremely busy. Therefore, we make sure that your involvement in the settlement financing process is minimal. We only need to confirm a few details with you, and then you are free! Most assessments take less than 5 minutes of counsel’s time although you may find us so charming you want to continue talking. 

To refer a client to us, or to obtain more information, please complete and submit the form below.

Sample documents

RECOVERY OF SETTLEMENT LOANS AND OTHER COSTS IN LITIGATION

How Underfunded Plaintiffs Can Still Have Their Day in Court

When an ordinary person suffers an injury that keeps them from working, a financial crisis begins. Unfortunately for many, the crisis is a countdown to bankruptcy. And for those with little to no accessible savings, the countdown period is extremely short.

If the injury was caused by a third party, holding that party responsible can take months, even years, depending on the complexity of the case and the willingness of the party to avoid responsibility. The injured party simply cannot wait that long. Instead, a typical plaintiff is under tremendous pressure to accept some kind of personal injury claim settlement from the defendant. These plaintiffs are often willing to accept settlements that are grossly inadequate to compensate them for their injuries, just because they are desperate for funds to cover living expenses.

It doesn’t have to be that way.

The settlement loan industry has arisen to meet the needs of these plaintiffs and to preserve the value of their claims. Ordinarily, defendants are well-funded and can afford to prolong litigation while plaintiffs become increasingly more anxious to reach a settlement as legal costs add up. Even if an attorney is willing to work for a contingent fee, the plaintiff may still be unable to work and support him- or herself. With settlement loans, however, a plaintiff receives the funds needed to survive the long process of litigation and reach a more favorable resolution of his or her claim.

A personal injury settlement loan can come from many sources - third parties, medical providers, or even experts testifying in the plaintiff’s case. Settlement loans, however, have their costs, usually in the form of interest charged while the loan remains outstanding. Thankfully, however, in recent years courts have awarded plaintiffs the costs associated with such settlement funding, so that they don’t have to pay them out-of-pocket! These cases are discussed below.

McCreight v. Currie. 2008 BCSC 1751.

McCreight involved a young woman’s personal injury claim arising from an auto accident. After the judge had made an award to the plaintiff, the defendant challenged certain disbursements as “not properly or reasonably necessary” as is required by Rule 57(2). One of these disbursements was interest charges related to CDs of MRIs obtained by the plaintiff. The MRIs were necessary to support the plaintiff’s claim, but she did not have sufficient funds to pay for them. The defendant provided the CDs to the plaintiff on credit, and charged her interest on the debt. The court allowed the interest disbursement, reasoning as follows:

The plaintiff really had no choice but to pay the interest given that she did not have the funds to be retaining experts and paying for their reports up front. I suppose the defendant’s choice was that the defendant could have offered to pay for report up front once it was disclosed to him, but no offer was forthcoming. Given this was the only way to finance the obtaining of a report, I find this to be a reasonable expense and I will allow it.

Expenses such as these are allowed primarily due to a policy that favors granting underfunded plaintiffs increased access to justice. The primary obstacle for such plaintiffs is the heavy expense burden of litigation. Judges and arbitrators ease this burden through liberal awarding of reasonable and necessary disbursements at the conclusion of the case. Many plaintiffs cannot wait until case conclusion, however, and need to secure settlement financing at the outset. As we shall see below, cases such as McCreight support the argument that the costs associated with settlement financing should be refundable disbursements. Settlement financiers bridge the gap that exists for plaintiffs between the initial catastrophe (and the attendant financial ruin) to the future date at which they prevail at trial. This activity removes financial constraints on the average plaintiff and thereby greatly increases access to justice.

Milne v. Clarke, 2010 BCSC 317.

Milne confronted almost exactly the same issue as McCreight, this time in the context of an appeal. In Milne, the plaintiff was asserting an auto accident injury claim. The plaintiff sought allowance of a disbursement for interest on outstanding MRI imaging costs. The court below had denied the disbursement. Milne reversed this decision, stating:

The law in British Columbia is that interest charged by a provider of services where the disbursement has been paid by counsel for a party is recoverable as is the disbursement. The interest charge flows from the necessity of the litigation. If the disbursement itself can be assessed as an appropriate disbursement, so also can the interest owing as a result of the failure or inability of a party to pay for the service provided. In order to obtain the M.R.I., it was necessary to pay not only the $975.00 cost but also the interest on any unpaid balances that were not paid immediately. The cost plus interest was the cost of obtaining the M.R.I. The claim for interest should have been allowed.

The court thus considered the interest to be included as part of the cost of the disbursement, rather than a separate cost. The court also made it clear that if a disbursement is allowable under Rule 57(2), then so are related interest charges. Again, the necessary and reasonable costs associated with mounting a successful personal injury claim, including interest costs, are allowable disbursements. To place the cost burden on plaintiffs would prevent them from having their day in court.

Bourgoin v. Ouellette. [2009] N.B.R. (2d) TBEd. FE.013.

Bourgoin involved yet another auto peˆsonal injury claim, but this case goes further than McCreight and Milne. In this case, the plaintiff obtained financing at 2.4% monthly compound interest from a third party engaged in the business of providing personal injury insurance settlement loans. The plaintiff sought to have the interest disbursement refunded pursuant to s. 2(14) of Tariff “D” of the Rules of Court of New Brunswick. The court followed Williams et al. v. Saint John, New Brunswick and Chubb Industries Ltd. (1986), 71 N.B.R. (2d) 168, and held that the interest was indeed allowable. In considering the amount, the court cited the following words of The Right Honourable Beverly McLachlin, Chief Justice of Canada:

The history of the Bar Association and of the judiciary in Canada is that of the struggle to provide Canadians with an efficient and affordable justice system. However, the cost of legal services today is unfortunately a factor which limits access to justice for many Canadians. For the wealthy, and for large companies, access to justice is not a problem. The same applies to the very poor: despite the shortcomings which exist in some regions, they have access to legal aid, at least in cases of serious criminal charges which could lead to jail time. Rather, it is the most numerous group, that of middle- class Canadians, which is most affected. This is because these people have a certain income. They have a few assets, maybe a small house, and this disqualifies them for legal aid. The choices they have are none too encouraging: they can exhaust the family assets in a trial, represent themselves, or simply give up. The cost of justice, which could represent taking out a second mortgage on the house or using money saved for retirement or for the children’s education, should not be so high.

Following these words, the court observed that without settlement funding, the plaintiff could not have brought the action. He was a young university student and simply did not have the means to litigate. Accordingly, the court held that the entire amount of the interest was allowable under s. 2(14) of Tariff “D” under the Rules of Court of New Brunswick. Settlement financing is the critical element that enables plaintiffs like the one in Bourgoin to bring their cases in court.

Herbert v. City of Brantford, 2010 ONSC C04-12047.

In Herbert, a plaintiff was unable to pay an expert witness, who then charged the plaintiff interest on the outstanding fees. In considering whether such interest was an allowable disbursement, the court quoted the words of the Chief Justice that were cited in Bourgoin, and observed that settlement funding is often critical to access to justice. The court also relied upon an analogy, observing that Section 33(1) of the Solicitor’s Act, R.S.O. 1990 CS. 15, allows for interest to be charged on a solicitor’s account, arguing that experts were similarly situated toward the litigants that hire them. Unlike Bourgoin, however, the judge did not automatically allow the full amount of the interest. He ordered counsel to attempt to negotiate a deal, and if unable, to return to court. This twist puts plaintiffs on notice that not every interest amount will automatically sail through at final judgment. There is some risk of reduction, depending on the court.

These cases bring up a few ancillary issues. First, it can be argued that an expert who provides a settlement financing has a conflict of interest. While an award of interest costs related to such financing generally ensures payment, and therefore is desirable for experts, they might counter by arguing that they expect payment regardless of outcome (unless the personal injury settlement financing agreement specifies otherwise). Also, the addition of interest does little to heighten the apparent conflict that is created by paying experts for testimony in the first place. That is, when an expert already relies on payment from a litigant, an incremental addition to the sum of such payment in the form of interest has little additional tainting affect. A second issue is that attorneys who provide settlement loans to plaintiffs may be limited by statute to a maximum interest percentage. Practicioners should consult, as always, the law in their local jurisdiction.

Medical Expenses

Plaintiffs generally will struggle to cover their own medical costs, and sometimes incur great expenses out of their own pockets. When this happens after an insurer improperly denies a personal injury claim benefit, the insurer can be responsible for interest on the unpaid benefits accruing from the time of the denial. The reasoning is that the plaintiff has lost the use of a substantial sum for a long span of time, during which they could have invested the funds in an interest-bearing account.

Plaintiffs are also obligated to pay for medical expenses not just for practical reasons, but for legal reasons as well: injured parties in tort actions have a duty to mitigate their damages. For personal injury plaintiffs, this means obtaining treatment sooner rather than later, to avoid worsening their medical issues by non-treatment. The following cases show how payment of these expenses by plaintiffs can lead to increased judgments against insurers.

Hill v. Cogeco Insurance Co./HB Group/Direct Protect. 2006 FSCO A04-001991.

Hill involved a disabled individual who sought to purchase a new home that was properly outfitted to ease the burdens of her disability. She applied for home modification benefits under s.15(5)(i) of the Statutory Accident Benefits Schedule. Her insurer refused, arguing that she was able to move sufficiently throughout her current home. She purchased the home anyway and pursued arbitration. The arbitrator awarded her damages, plus interest at 2% per annum accruing from the date the insurer denied the benefit. The arbitrator said:

In making its determination an insurer is under an obligation to weigh the merits of the claim fairly, and not prefer its interests over those of an insured. It should make its decision on the whole of the information reasonably available to it at the time of the determination. Changing the reasons for refusal in such a situation should not happen in the absence of new and important information that was not available when the original determination was made. I see no evidence that the need for a treatment plan was unknown to the Insurer at the time it made its determination of entitlement.

Essentially, the benefit had been improperly denied, though the insurer had all the necessary information to support the claim. In such a situation, the arbitrator reasoned, it would be unjust to deprive the plaintiff of the lost time value of money. Thus, even where a plaintiff has not incurred interest costs arising from a formal settlement loan arrangement, he or she may still be entitled to interest to compensate for the lost value.

Sorokin v. The Wawanesa Mutual Insurance Company. 2008 CanLII 26265 (ON S.C.).

Sorokin involved yet another auto accident injury claim, this time with an insurance company as the defendant. The plaintiff sought benefits under the Statutory Accident Benefits Schedule. When the insurer refused to pay, the parties attempted mediation before the Financial Services Commission of Ontario. Failure to resolve the dispute then led to binding arbitration, at which the plaintiff prevailed. The plaintiff’s award included interest. The insurance company appealed portions of the award and, for the most part, lost. Thereafter, the company delayed payment on awarded sums outstanding. It was not until almost two years had passed from the date of the original award that the company made the necessary payment, and then only after the plaintiff commenced another proceeding to compel the transfer of funds.

In this new proceeding, the plaintiff sought interest, including on the interest portion of the arbitral award. The court considered whether such interest would constitute a “benefit” under section 46(2) of the Statutory Accident Benefits Schedule. The plaintiff argued that compound interest is indeed a “benefit,” because, “[T]he interest provisions are intended to be compensatory, designed to compensate the insured for the loss of the time value of the money owed to the insured, but unpaid by the insurer.” The court agreed, stating that:

The non-payment of the interest until December 13, 2005, allowed the Defendant to hold a significant sum of money owing to the Plaintiff for 19 months. The Defendant had the use of the Plaintiff’s funds and should compensate the Plaintiff for the time value of that money. To find otherwise would be to allow the insurer to delay payments to insureds without consequence, a result that is not in keeping with the design of the interest provisions of the SABS, as described by Mr. Justice Laskin in Attavar. To interpret s. 46(2) of the SABS as precluding the accrual of interest on overdue interest would effect a result that is, in my view, commercially unreasonable.

Taken together, Hill and Sorokin indicate that interest charged by a plaintiff’s third party financier may be recoverable from an insurer that improperly denies a benefit (and, although Sorokin pertains to Ontario’s Insurance Act, other jurisdictions with similar laws should take notice). Therefore, plaintiffs can use these charges to turn the tables on insurers. Instead of prolonged litigation building up pressure on the plaintiff, the interest meter will be running on the defendants. This creates a significant reason for defendants, whether they be insurance companies or tortfeasors, to bring litigation to an end sooner than they would otherwise like.

Plaintiffs and counsel considering use of settlement financing should take care to follow certain practical guidelines to give defendants the opportunity to make appropriate payments (and to create a record for court consideration that is favorable to the plaintiff). First, it must be demonstrated that the plaintiff has a legitimate need for benefits sought. Then, the full cost should be itemized and settlement financing for such cost should be sought out. Next, the plaintiff should present the insurer or defendant with the researched materials, to allow them an opportunity to review them, ask questions, and possibly make a settlement offer. If the claim is rejected, the settlement loan can be finalized and the funding should be used to cover necessary expenses.