Personal Injury Blog

Mistake, Duress, Unconscionability: Can I Overturn A Bad Settlement?

Have you ever met someone who was in a car accident, settled his or her accident benefits claim or potential lawsuit but didn’t receive adequate compensation to cover ongoing medical treatment, lost time at work or personal or household assistance? Unfortunately, this happens far too frequently in Ontario- often, but not always, these accident victims are not represented by a lawyer, or by one who does not put their interest first.    

If this describes you someone you know, the good news is that there are several ways to challenge the settlement.  The bad news... it is very difficult to successfully challenge a contract in Ontario.


Generally, under our law, contracts are legally binding so that the parties can rely on them and take further actions based on this reliance.  This is called the principle of finality. The fact that one party accepted a bad deal, received poor advice, or ultimately discovered that they were more injured than they knew at the time is not sufficient justification for overthrowing the finality of the contract.

The courts have voided contracts where a mistake concerning significant terms of the agreement can be proven, or where a plaintiff can demonstrate that he or she entered the contract under physical, emotional or psychological duress.  As well, there are occasions when the terms of a contract are so one-sided and unfair that they offend common decency which can be voided for unconscionability.

To prove that a contract is unconscionable, a plaintiff must demonstrate the following:

1) A grossly unfair or improvident transaction; and

2) Lack of independent legal advice; and

3) An overwhelming imbalance in bargaining; and

4) The other party’s knowingly taking advantage of the weaker party’s vulnerability.

The court will look at the circumstances that were known at the time of settlement, and not with the benefit of hindsight.

In Hanna v. Polanski, the plaintiff, Hanna sued to set aside a settlement contract as unconscionable, between him and Old Republic Insurance Company, the insurer for the defendants.  A week after the collision, the plaintiff provided a written statement to Old Republic, although he had not hired a lawyer or discussed his potential lawsuit with one.  In the statement he advised that: he had not yet sought any medical attention, although he had an appointment with his family doctor that day; he had low back pain and headaches; and he had missed only two days from work as a drywall taper.  The family doctor did not make any treatment recommendations at the appointment.

Approximately a month later, the Old Republic adjuster called the plaintiff, who explained that he had not received any treatment or missed any additional time at work.  Based on this report, the adjuster concluded the plaintiff’s injuries were minor, and were unlikely to meet the legal threshold of permanent and serious impairment under the Insurance Act.  Therefore, she received instructions to offer $2,500 to settle the matter on a full and final basis. At this Summary Judgment motion, she stated that she informed the plaintiff of the threshold, and the $30,000 deductible that would apply if he was successful.  She also claimed she advised the plaintiff to seek legal advice.

The plaintiff denied being informed of these issues but testified that he rejected the offer and told the adjuster he would discuss the case with a lawyer. He did call a lawyer, who told him it as too early to settle and that he had 2 years to sue.  

Another month later, the plaintiff called the adjuster and counter-offered at $5,000, which was accepted by Old Republic.  

Years later, the plaintiff continued to suffer from back pain that limited his mobility.  He had not returned to full work capacity and was forced to hire an assistant. In this lawsuit, he claimed that he relied on the adjuster’s misleading opinion that his case was not worth much because he had not suffered long-term impairment.  He also claimed that he was under duress at the time of settlement because he had just broken up with his girlfriend and gone through personal bankruptcy.  Finally, he claimed that the adjuster had taken advantage of him, leading him to sign an unconscionable contract.

The motions judge reviewed the four-part test set out above and concluded:

1) Based on the information the plaintiff had provided up to the time of settlement the $5,000 offer cannot be considered improvident, especially when the $30,000.00 deductible and the threshold under the Insurance Act are factored in.

2) The plaintiff admitted speaking with a lawyer who told him it was too early to give an opinion on the value of his claim. He rejected that advice and negotiated a settlement.

3) In this case, there was no evidence that a power imbalance determined the course of negotiations.  The plaintiff knew he could continue to seek legal and medical advice and that he did not have to settle because he had 2 years to sue. He chose to approach the adjuster with a counter-offer.

4) There was no evidence that the adjuster knew of the plaintiff’s alleged vulnerability.

As a result, the motions judge dismissed the lawsuit.  Sadly, the overwhelming majority of similar lawsuits fail.

It is just as difficult to overturn a settlement between a car accident victim and his or her accident benefits insurer.  Regulation 664 under the Insurance Act specifies that an insurer must provide a claimant with a written disclosure notice in the standard form dictated.  The disclosure notice is designed to protect the claimant from entering a bad contract or accepting settlement under duress. It also protects insurance companies against unconscionable contract claims.  

The disclosure notice details the implications of settling the claim, recommends that the claimant seek independent legal advice, and provides a two day "cooling off" period during which the claimant is free to change his or her mind and cancel the settlement.  Prior to signing the settlement papers, the claimant is required to read and sign the disclosure notice, acknowledging that its terms have been read and understood.

However, this may not be the case for accidents that occurred between January 1, 1994 and October 31, 1996.  Under Bill 164, an earlier version of the Statutory Accident Benefits Schedule, many accident victims settled their claims using settlement documents that the courts subsequently declared invalid. Because of the elapsed time, the interest on these claims can be massive.

If you settled an accident benefits claim under Bill 164 between January 1, 1994 and October 31, 1996, or have any questions relating to your accident benefits or lawsuit settlement, please call Campisi LLP for a free consultation.  We pride ourselves on our "Clients First, Excellence Always" philosophy and practice it with every client we serve. Put us to work for you.

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