Statutory deductibles ‘revictimize’ people involved in accidents

By Paul Russell, LegalMatters Staff • Most Ontario drivers are aware that insurance policies come with a deductible, or the portion of the claim they are responsible for paying before the insurer covers the rest.

However, they may not be aware that they may also have to pay a deductible on any court or settlement award they receive for pain and suffering, says Ontario personal injury lawyer Joshua Goldberg.

“No one likes paying auto insurance deductibles but the statutory deductible taken from the total amount of damages awarded in a personal injury lawsuit is much larger,” says Goldberg, principal of Joshua Goldberg Law.

Deductible set at $44,367.24

The Financial Services Regulatory Authority of Ontario (FSRA) regularly updates the statutory deductible and the threshold above which it does not apply. In 2023 it is set at $44,367.24 when damages do not exceed $147,889.59.

“Let’s put these numbers into context,” Goldberg tells LegalMattersCanada.ca. “If you are injured in an auto accident due to the actions of someone else and awarded $100,000 by the court, you may think that is adequate to aid in your recovery. But you may not realize you will never see almost half of that amount, once the $44,367.24 statutory deductible is taken away.”

However, if you are awarded $160,000 in pain and suffering damages, “then you keep it all since the $147,8889.59 threshold has been met,” he says, adding that legal fees will have to be paid in both cases.

This deductible amount is also applied to any amounts that a family member might claim under the Family Law Act (FLA) for damages. The deductible for claims under the FLA is $22,183.63.

An increase of $4,000 in a year

According to FRSA, the statutory deductible has risen by more than $4,000 since last year. In addition, the monetary threshold that has to be met before the statutory deductible does not apply has increased by nearly $10,000 in the same period.

“Victims of auto accidents are being revictimized,” says Goldberg. “When I tell my clients that a large portion of many settlements goes back to the insurance companies, they naturally question the fairness of the system we are working under.”

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Under s.267.5(7) of the Insurance Act, if a personal injury case goes to trial, the judge is under no obligation to explain to jurors the impact of statutory deductibles when deciding on compensation.

“The court shall first determine the amount of damages for non-pecuniary loss for which the protected defendant would be liable without regard to [the statutory deductible],” according to the subsection.

Jurors not told about statutory deductibles

In 2021, a Super Court of Justice noted that “it would not be appropriate to include a jury instruction that explains the statutory deduction and what happens after they determine a proper quantum of damages. If their job is to determine that quantum without regard to later deductions, there is no need to instruct them on those deductions which are applied after their job is complete.”

The judge further stated that “if the jury was aware of the amount of the statutory deductible, or the amount of damages after which no statutory deductible is applied, the jury may be tempted to do some informal grossing up of the damages to take that into consideration.”

“The judge was following the letter of the law, but how is that fair to plaintiffs?” asks Goldberg. “Many jury members will not know that more than $40,000 of an award will go back to the insurance company instead of the accident victim who needs it.”

The purpose of deductibles

Statutory deductibles were introduced in Ontario in 2003 and are applied primarily to non-pecuniary damage awards.

“Non-pecuniary damages are awarded to compensate the plaintiff for intangible losses, such as pain, suffering, and loss of enjoyment of life, which are not easily quantifiable in monetary terms,” Goldberg says.

He says that “not all personal injury claims are subject to the statutory deductible, explaining the deductible primarily applies to claims for pain and suffering arising from motor vehicle accidents where the injuries are deemed to be “minor.”

‘Injuries that are considered to be serious and permanent are exempt from the deductible requirement,” Goldberg adds.

He says factors to be considered when evaluating whether an injury is minor include the nature and extent of the injury, the treatment required and its impact on the person’s daily life.

“Determining the extent of the injury often involves medical assessments,” Goldberg says. “It is also advisable that injured parties seek legal advice to maximize their award, possibly avoiding the statutory deductible altogether.”