Ruling means better compensation for public health insurers

A recent Saskatchewan court decision is significantly improving the way public health insurers are compensated in class-action lawsuits, says Toronto class-action lawyer Margaret Waddell.

“I think it’s a great decision,” says Waddell, a partner with Waddell Phillips Professional Corporation. “It’s really righted the ship that was off course.”

Justice Brian Barrington-Foote, of the Court of Queen’s Bench for Saskatchewan, rejected a national settlement agreement in a class action against the manufacturers of OxyContin® and/or OxyNEO® on behalf of people who became addicted and suffered losses after being prescribed the painkillers.

The judge said he is not satisfied all of Canada’s provincial and territorial health insurers gave their approval for the settlement in accordance with their own subrogation legislation.

Subrogation legislation

Each province and territory has subrogation legislation to the effect that when health services provided by the provincial health insurer (PHI) to a person who has suffered a personal injury caused by negligence or another wrongful act, if the injured person brings an action, they are obliged to seek recovery of those costs on behalf of the PHI, the judge explained.

The effect of the subrogation legislation is that each PHI included in a national class-action settlement agreement must agree to compromise its claim; however, the legislative provisions relating to that agreement differs from jurisdiction to jurisdiction, the judge noted.

Although most of Canada’s PHIs approved the $20-million settlement in the OxyContin class action — including $2 million to be divided among themselves — the process was “rife with problems,” Barrington-Foote said.

Among the issues the judge identified was the fact the provincial health insurers were not parties to the settlement agreement negotiated between class counsel and the defendants. He also noted the agreement’s structure raises concerns about a conflict of interest between class counsel’s duty to class members, on the one hand, and provincial health insurers, on the other.

“It is remarkable … that PHIs were nowhere to be seen prior to the conclusion of the original agreement,” Barrington-Foote wrote. “Quite apart from the readily apparent potential for a conflict between the interests of PHIs and class members, who was protecting the public purse?”

Changes legal landscape

Waddell says Barrington-Foote’s decision changes the legal landscape for the better.

“What the Saskatchewan judgement in essence says is you absolutely have to pay attention to the subrogated claims of the provincial and territorial health insurers,” she says. “And they can’t be an afterthought when you’re negotiating a settlement.”

The judge is saying that not only are provincial and territorial health insurers entitled to participate, but they should be properly compensated for expenses they incur in treating injured people, she adds.

“It’s a decision that’s having repercussions across all class actions where there are personal injury aspects,” says Waddell.

She says her firm has already seen a change in the way public health insurers approach class-action lawsuits.

“They’re actively seeking out class counsel and saying, ‘Hey, if you’ve got actions in which we have subrogated interests you need to have us involved in the process from the outset.’”

Waddell anticipates PHIs will receive larger settlements in the future as a result of this decision.

‘Two separate numbers’

“Defendants are just going to have to accept that reality — that there’s going to be the compensation that they pay to the class members and then there’s going to be compensation that they have to pay to the health authorities, and those are two separate numbers,” she says.

Barrington-Foot held that you can’t mix them together and come up with a number that doesn’t properly consider them both, Waddell notes.

“He’s absolutely right,” she says.

However, Waddell says she doesn’t think the decision will lengthen or complicate future settlement negotiations.

“It’s the reality of the world that we’re dealing with, and defendants are just going to have to accept that reality when they’re coming to the table to talk settlement,” she says. “I think it’s a change for the better.”