In motor vehicle accident lawsuits, Plaintiffs are often faced with extremely difficult financial circumstances arising out of the accident, due to either their consequent inability to work, their treatment costs, or a combination of the two.
With respect to income loss, some insureds will have access to disability benefits provided through Section B insurance coverage. However, these benefits are only available for a period of 2 years, are not available to everyone, and can be significantly less than the income previously being earned. With respect to treatment costs, these are similarly covered through Section B, but are subject to the same limitations, including the 2 year-period, and not all treatments may be covered.
So what can you do if you find yourself in a difficult financial circumstance as a result of a motor vehicle accident for which you were not at fault?
One option is to negotiate, either directly, or through a lawyer, an advance on the settlement. However, such advances are at the discretion of the third-party insurance company and are not always provided, and must be deducted from the final settlement of your claim.
A second option is to negotiate with your treatment providers an Assignment. This allows you to defer paying your treatment costs until your lawsuit has settled. However, many providers don’t offer this to their clients, and it means incurring interest on your costs as imposed by the provider.
A third option is to obtain a litigation loan. These are loans, typically at a very high interest rate, offered to litigants to be repaid upon settlement. Typically, we strongly advise against obtaining a litigation loan. Oftentimes, the interest on such loans can mount so high, and so quickly, that the interest will eat up a significant portion, if not all of, the ultimate settlement obtained. This can have the unfortunate effect of causing undue pressure to the litigant to settle, as the longer their case goes on, the more the interest grows.
One example of this is a recent decision coming out of the Ontario Court of Justice, which can be found at https://www.canlii.org/en/on/onsc/doc/2019/2019onsc2292/2019onsc2292.html. In this case, a litigant who had been injured in a train derailment some 20 years previous, obtained multiple litigation loans totaling a principal amount of $247,210.18. These loans, taken out by the Plaintiff Mr. Zuber, had interest rates varying from 18 to 28.8%. Unfortunately for Mr. Zuber, it took nearly 20 years from the date of the accident for the matter to get to trial, and the trial itself lasted an incredible 26 weeks. By the time the trial concluded, resulting in a total recovery of $50,000 plus interest to Mr. Zuber, he had amassed interest on his litigation loans of a whopping $2,906,411.49. While not by any means the norm, this extreme case is a cautionary tale against entering into litigation loans, particularly where settlement or trial is a long way into the future.