Calm Compared to Chaos

Canadian personal injury litigation may be trending upwards gradually, but don’t expect the number of Canadian lawsuits — or the level of settlements or damage awards — to reach anywhere near the rarified heights seen in the United States, according to speakers at Swiss Re’s 2007 Casualty Seminar in Toronto on Oct.24.

Canada’s legal and social culture is much different than that of the United States, panelist Kathy Ricketts, the vice president of casualty underwriting for Swiss Reinsurance Company Canada, observed. For this and related reasons, she said, personal injury litigation in Canada would not likely follow the same trajectory as that of the United States, as outlined in a presentation by fellow panelist Tony Mormino, the senior legal counsel for Swiss Re.

“It’s my firm belief that I don’t think we will ever see the excesses that Tony described this morning, but nevertheless there are trends that we need to be mindful of,” Ricketts said.

Certainly, the path of U.S. litigation has gone the way of high punitive damage awards, delivered in a proliferation of jury trials, and “judicial hell holes” that routinely decide against insurers, noted Gerard Anaszewicz, the facultative casualty leader for Swiss Re Americas. What’s more, personal injury lawsuits in the United States are increasingly reflecting a social culture that can see a small personal sleight mushroom into a large-scale legal campaign seeking entitlement, Mormino noted.

For example, Mormino showed a series of slides in his presentation that referenced U.S. cases featured in the 2005 Stella Awards, which recognize “wild, outrageous or ridiculous” U.S, lawsuits, according to the Stella Web site. There has been some public discussion as to the authenticity of some of the cases purported to be Stella-worthy.

Be that as it may, Mormino’s slides referenced a case in which a U.S. man sued Michael Jordan and Nike co-founder Phil Knight for US$862 million for defamation and permanent injury because he found it distressing to look like and be confused with the basketball star.

In another case, a man was found only one-third responsible for injuries he sustained after drinking 12-14 beers and sleeping it off under an 18-wheel truck parked in the lot of the store where he bought the beer. The truck driver, who did not see the man under the truck, drove over the sleeping man’s leg, and the truck company and the store were found to be two-thirds responsible for the man’s crushed leg.

Ricketts said universal access to medical care in Canada is one among several reasons why the country’s personal injury claims have not reached the same levels as those of the United States. “If a person is seriously injured in Canada using a product, they don’t face financial ruin to recoup their medical costs,” Ricketts said, noting some U.S. plaintiffs cannot afford medical insurance and therefore must make a legal claim to cover medical expenses. “The injured Canadian is less likely to consider to sue.”

Also, Ricketts noted, Canadian judges are appointed, not elected. “In order to be elected, you have to make a campaign promise, and at some point in time, you will probably choose to be re-elected,” she observed. “And that may mean there is a greater emphasis on producing case law and popular decisions that will appeal to your electorate.”

The number of jury trials illustrates another difference between the two countries’ legal cultures, Ricketts noted. In the United States, jury trials are far more common than they are in Canada. And it is more common for juries to empathize with an injured plaintiff, particularly if a child is harmed, than with insurers defending the claim, she said.

“A jury system is good, but the jury system is not always well-versed in the true issues of liability,” Anaszewicz said. “Deep pockets: there is a feeling that the insurance companies are sitting on bars of gold, and if there’s a loss, what’s the difference? They can pay it. They’re this Evil Empire making money at our expense anyways.”

In Canada, bench trials, in which a judge presides over a trial instead of a jury, are usually the order of the day, although recent litigation may have modified the standard for having a judge hear the case, Ricketts noted. Traditionally, the standard for holding a bench trial is that the legal areas may be too complex for a jury panel.

But that may be changing, Ricketts noted. “It is interesting to note that there was a [2007] challenge in Ontario…to that whole idea that a jury is not able to figure out the complex events [in the law] of loss, and it will be interesting to see how that goes,” she said.

Still, Ricketts said, “one of the most important things [to realize is that] a jury trial doesn’t necessarily give you a winning Lotto 649 ticket in Canada” when it comes to awards and damages. In the past, Canadian judges have shown more restraint in awarding damages, capping general damages at Cdn$100,000, for example (or the modern-day equivalent, given inflation, of Cdn$320,000).

Punitive damages, she added, have rarely reached the ceiling of Cdn$1 million. The judicial standard for awarding punitive damages in Canada is high, Ricketts observed. A defendant’s conduct must be proven to be vindictive, reprehensible, malicious and harsh. That’s “colourful language,” Ricketts noted, adding that to reach those levels “the conduct has to be pretty woeful.”

Keith Gallagher, the vice president of casualty facultative reinsurance for Swiss Reinsurance Company Canada, says structured settlements — as opposed to lump-sum payments — are a far more common way to resolve legal issues in Canada. And the amounts of Canadian settlements are generally only a fraction of what U.S. settlements might be in the same or a similar scenario.

Gallagher noted a specific U.S. out-of-court settlement in the case of a car accident in Texas involving a child. The US$4-million settlement in that case 10 years ago would probably be settled in Canada for Cdn$100,000, he noted.

In another example, Gallagher outlined an incident in Texas in the 1990s in which a car tire blew out and the resultant accident killed eight people. The lawsuit that arose from the incident settled at US$50 million. A similar scenario in Canada would probably have settled in the Cdn$10-million range, Gallagher estimated.

And mould cases seen in the United States — two of which resulted in settlements totalling US$52 million — are not as likely in Canada, due to the nature of the northern climate, Gallagher observed.

Ricketts said she thought the plaintiff’s bar in Canada was not as organized as that in the United States, although there have been some signs lately that the Ontario trial lawyers are going to become more political. She noted Canadian lawyers as a whole have been more disciplined about following rate tariffs than their American counterparts, which means legal fees are lower in Canada than they would be in the United States.

By the same token, she noted, the Canadian insurance defence bar is “sadly not what it used to be,” Ricketts added, by way of a personal observation. “I think we as an industry perhaps need to recognize that fact, and maybe acknowledge that, like in most things, you tend to get exactly what you pay for.”