Lawyers advise against treatment loans

As governments have scaled back the insurance coverage available for medical treatments available to those who have been injured in accidents, treatment loans are becoming available to clients as a means of keeping treatments going until a trial or settlement. Many lawyers, however, are wary of these loans and will try to avoid them if possible.

Deanna Gilbert, partner with Thomson Rogers Lawyers in Toronto, says she personally doesn’t like litigation loans and almost never recommends them, and if the client insists on one, she warns them of what to expect.

“If they are going to proceed with one, there are a couple of things that we as personal injury lawyers should explain to them,” says Gilbert. “Number one is that litigation is not a quick process. An average personal injury case takes about three years.”

Gilbert advises lawyers to sit down with their clients to explain how the loans charge interest rates and how that amount can accrue over time.

“If this goes to trial, and this is a Toronto action where there’s a delay and it takes up to five years, do the math,” she says.

Gilbert says it’s important that lawyers also need to explain to their clients that the fact that there is a loan does not impact the assessment of the value of the case, which is something with which clients can struggle.

“Often, they have in their mind that they want to pay back the loan and still get money [from the settlement] for themselves,” says Gilbert.

“It’s important to explain to them that the value of the case is based solely upon the injury, your income loss, future care — the usual headings of damages, none of which includes whether you have to pay money to someone else.”

Ted Bergeron, founding partner with Bergeron Clifford LLP in Kingston, Ont., says that due to the rates and the state of the law around recovering the interest on treatment loans, his firm avoids them.

“Our practice is to press for an advance payment from tortfeasors or pay for care ourselves on an interim basis, where appropriate,” says Bergeron.

“Tort insurers seldom agree to advance payments, so, typically, we end up carrying cost ourselves.”

This is an option that is often not available to smaller firms, he says, which can limit the options for lawyers to help their clients avoid the loans.

Bergeron says he will insist that clients try traditional lenders, such as a line of credit from a bank, before a litigation or treatment loan — along with proof that they made the effort, so long as the law remains unsettled on the recovery of interest on litigation loans.

Bergeron says another tactic he has started using is to forgo examination for discovery of the defendant, particularly in instances where liability is relatively clear, preferring to get their assessments completed and set the matter down for trial.

“Court calendars have become so tilted against civil personal injury matters that to waste a year scheduling examinations that do no more than confirm what everyone already knows is prejudicial to disabled litigants,” says Bergeron.

He adds that while litigation financing can cover the costs of properly marshalling the evidence for a trial, it doesn’t put food on the plaintiff’s table or pay for their mortgage or utility bills while they wait.

“Setting actions down for trial at the first opportunity, sometimes at the close of pleadings, is going to become a common feature of the personal injury litigation landscape,” says Bergeron.

Gilbert says it can make it difficult for lawyers to get instructions from clients at the end of a file if they haven’t had the discussion early on and that the client is aware that the interest on these loans will absolutely reduce the amount of recovery at the end of the day.

“That’s money that otherwise would be paid to them,” says Gilbert.

She says it makes it incumbent on lawyers to find alternatives in order to ensure that treatment loans are the option of last resort. In some cases, Gilbert says, treatment providers will be willing to work on the basis of a protected account without interest, particularly if they have a good relationship with a law firm. That can become a cheaper alternative, she says, if the client signs a direction that instructs the lawyer to protect that account.

Gilbert says that in a motor vehicle case to which the Insurance Act applies, there is a specific section in the law regarding advanced payments, but that only deals with loss of income claims.

“If a client has been off work for a period of time and the income loss claim is not expected to be controversial, one strategy to avoid the client from having to take out a loan is to request an advance payment or a partial settlement of the past income loss claim,” says Gilbert.

“The advance or partial settlement would be for an amount meant to reflect the past income loss owed to the point of the advance or partial settlement,” says Gilbert.

Gilbert says that if they don’t agree to the advance, a lawyer could bring a summary judgment motion in cases of admitted liability, but she hasn’t needed to do so to date.

Lynn Turnbull, senior partner with Black Sutherland LLP in Toronto, says that, from a defence perspective, so long as the jurisprudence around recovery of interest remains unsettled, she will take the position that it’s not recoverable as a disbursement.

“A lot of times, a litigation loan might be threatened as a way to get an advance payment, and insurance companies don’t like to give advance payments so long as there’s no issue around liability and no issue regarding the threshold,” says Turnbull.

“In those circumstances, if we’re at fault and it’s clearly going to meet threshold, advance payments can certainly be considered to avoid getting caught up in a thorny issue around whether a litigation loan is or is not something that can be included as a disbursement at the end of the day,” says Turnbull.