What to Expect in Ontario Personal Injury Settlement Negotiations

Settlement negotiations can occur at any time during the legal process – for example, before your Statement of Claim is issued, after documentary evidence has been exchanged, once Discoveries have been conducted, or any time further evidence becomes available leading up to pre-trial and trial. Depending on the circumstances, either you or the defendant might be the motivated party pushing for resolution.  

Generally, offers to settle by the defendant either will be “low-ball” offers (also called nuisance value) or will be more reasonable, after the defendant has assessed the strengths and weaknesses of your case.

Low-balling a plaintiff sends a clear message that the defence insurer does not accept the extent of the plaintiff’s alleged impairments and losses and/or does not believe that the defendant caused the accident. It warns the plaintiff that they are in for a long fight that the insurer expects to win. Your lawyer might make a “best case” offer to the defendant to send a similar message. Neither party ordinarily expects the other to accept.

Working with your lawyer, you can determine if accepting a low-ball offer really is your best option. Because of the time and resources you have put into investigating and launching your lawsuit, you should feel confident that your claims are valid and can be supported by the evidence. Usually, therefore, you can reject this type of offer, recognizing that it is simply an intimidation tactic.

This does not mean you should reject an aggressive initial offer by the defendant without further consideration. Sometimes, bowing out gracefully makes sense. There will be occasions when new evidence identified after you issue your claim strengthens the defendant’s position or weakens yours. For example, the defendant could commission an engineering report that strongly suggests their actions were appropriate in the circumstances, or your health could improve significantly, clearing you to return to work. In the first case, your liability arguments might be undermined; in the second, the damages available could be far smaller than you previously understood. In cases like these, proceeding with the lawsuit might waste considerable energy that could be better invested in your recovery.

To summarize, initial low-ball offers are common but can usually be rejected without endangering your chances of receiving a more reasonable settlement at a later stage of the lawsuit.

As the lawsuit proceeds, the overall merits of your case usually become clear, which in turn should establish your reasonable settlement range. Insurers take the position that an impairment can only be described as permanent once your condition stabilizes, which can take up to two years depending on the type of injury*. They generally will not accept opinions about long-term impact unless there is strong evidence supporting permanent, serious impairment. So, for instance, a broken wrist that heals normally without ongoing symptoms will not help establish a claim for future income loss (although it can contribute to your “pain and suffering” damages). Of course, the opposite also holds – after two years, your medical and rehabilitative team usually can make accurate forecasts concerning your future needs and employability and can offer reasonable opinions about the impact the accident will have on your functional abilities and quality of life.

*Note: Some severe injuries are recognized as permanent and serious immediately for legal purposes (e.g.: paraplegia, blindness).

Once the evidence is well-established, it should be possible to establish a reasonable range for settlement. The defendant will argue for the low end of this range, supported by expert opinions. They might also argue that you are partially at fault for the accident. In general, the negotiations will be based on mutually accepted injuries and losses.

To illustrate:

The plaintiff continues to fight for compensation for future economic loss (which can include the inability to return to work, as well as forced early retirement, loss of business opportunities or career advancement, greater likelihood of unemployment). If this claim is based on credible evidence of ongoing functional limitations, the defendant probably will not reject it outright. Instead, the negotiations will revolve around the degree to which the impairments interfere with the plaintiff's ability to work, and the amount of the resulting financial loss. If, on the other hand, the evidence does not provide compelling support for the plaintiff's income loss arguments, at some point it will become prudent to withdraw or significantly reduce the damages claimed. Otherwise, there is a risk that the defendant could challenge your weak claim at trial, expecting a jury to agree with their position.

To reiterate, as the lawsuit develops, the parties usually can agree on the categories (or “heads”) of damages that should be compensated, because income loss, future care costs, pain and suffering, loss of housekeeping and home maintenance capacity, etc., must be supported by evidence. Thereafter, it is all about money – how much the defendant is willing to pay to avoid trial and resolve the claim vs. how little the plaintiff can accept as fair compensation for the losses caused by the defendant’s negligence.

In Ontario, the typical defendant will have liability insurance coverage of $1-2 million. The defence insurer’s goal is to minimize compensation, to maintain profitability for themselves and affordability for their customers. However, they will settle, up to the policy limits if necessary, to protect the defendant from personal exposure. Because of these competing interests, every element of the proposed settlement is closely scrutinized and must be justifiable based on the evidence. In fact, adjusting a car accident liability claim involves an ongoing reappraisal of the evidence so adequate reserves can be set aside to compensate the plaintiff. During settlement talks, when the defendant’s lawyer makes their “best” offer, it often means they have reached the limits of the current reserves authorized by the adjuster. To leverage more money out of the insurer after that, a plaintiff will need to provide new and better evidence supporting a larger reserve.

Suppose your settlement negotiations at mediation have reached a similar point: defence counsel has offered the “whole bag,” and his client (the insurer) is prepared to go to trial if you do not accept. Assuming there is no further evidence to support your claim, you need to address the following questions:

• -What are my needs and expectations?
• -Does the proposed settlement provide for my needs?
• -What are the consequences of rejecting the proposed settlement?

Separating your needs from your desires clearly and realistically is crucial for your peace of mind and to promote a successful resolution. You might desire a $2 million settlement so you can comfortably pay off your mortgage and put your kids through college while only being capable of working part-time as a supply teacher. On the other hand, you might need a source of supplementary income until you can retire while working part-time as a supply teacher for the next seven years and requiring ongoing assistance with winter maintenance and yard work. Understanding your actual financial needs allows you to be more flexible during negotiations. It also provides insight into the insurer’s point of view, which can seem harsh, unfair, and even insulting. They are, after all, only responsible for your provable losses.

Next, you must try to establish evidence-based expectations for your compensation from the lawsuit. After your serious car accident, everyone you meet seems to have a friend who knows someone who got $500,000 from a “fender bender.” Unfortunately, this exaggerated sense of personal injury damages is amplified by some law firms who make big promises that usually are not grounded in the facts of your case. Working together, you and your lawyer should have a good estimate of your reasonable range of recovery based on similar cases (especially similar settlements with the same insurer). This range will cover your best and worse case at trial, but usually falls somewhere in the middle. If your expectations are reasonable going into settlement talks, you are less likely to be shaken or overwhelmed by the defendant’s behaviour during negotiations. It is important, however, to remain objective about the strength of the defendant’s position and to be willing to adjust your expectations if necessary.

When the defendant’s offer satisfies your identified financial needs, negotiations usually proceed smoothly, especially when your expectations are also met. However, it is a frustrating fact that in some cases, your needs will not be met by the compensation you can reasonably expect from a settlement proposal. Sometimes the liability arguments are not strong enough to discourage the defendant from proceeding to trial. Other times, your available medical evidence does not paint a compelling portrait of your losses, or the connection between your ongoing impairments and the accident is weak. In this situation, or if the defendant simply refuses to provide a reasonable offer, you need to consider the consequences of rejecting settlement and continuing the litigation.

Insurance defence lawyers can behave arrogantly in settlement negotiations. It is a strategy authorized by their clients, the large insurance companies, that has worked often enough to become habitual. The fact that neither the lawyer nor his client appeared convinced by your case does not mean that an unbiased jury will also reject your claims. Your lawyer can help you understand the degree of risk you will face, and whether this risk is worth the potential reward.

Other settlement articles that may interest you:

Receiving a Settlement in Ontario Injury Lawsuits

Before You Settle Your Personal Injury Lawsuit

Evaluating the Risk vs. Reward of Proceeding to Trial