Case involves court's exercise of 'parens patriae' jurisdiction in PI action
The Ontario Superior Court of Justice has ruled that placing or funding in escrow of a structure before court approval is both appropriate and necessary.
In Spicer v. Wawanesa Mutual Insurance Company, 2023 ONSC 3221, Timothy Spicer was driving a motorcycle when a school bus struck him. He sustained a severe traumatic brain injury as a result. He was 55 years old at the time of the accident and was a low-income earner.
Following the incident, his accident benefits insurer accepted that Spicer had sustained "catastrophic impairment" as defined in the Statutory Accident Benefits Schedule. In addition to the statutory accident benefits, the respondent Wawanesa Mutual Insurance Company, proposed to pay a settlement of $450,000 for medical, rehabilitation, income replacement, and attendant care benefits.
Spicer brought an application for court approval of the proposed full and final settlement of his statutory accident benefits claim. Court approval aims to protect the best interests of parties under disability. The Ontario Superior Court of Justice noted that when considering whether to approve the proposed settlement, the test is whether the settlement is in the best interests of the persons under disability. Approval does not depend on a comparison of what would have been awarded at trial but rather an assessment of whether the settlement is reasonable and, in the party's, benefit, given the risks of litigation and the desire of the party to settle.
The court pointed out that assessing whether a proposed settlement is in the best interests of a person under disability requires full and frank disclosure of the merits of a settlement. The court cannot properly exercise its "parens patriae" jurisdiction and make a meaningful and expeditious assessment of the proposed settlement without sufficient evidence on all materials and issues, including conflicting evidence. In the Toronto region, an applicant must bring motions and applications for court approval following the Best Practice's Guideline and Checklist. The guideline explicitly provides that if the settlement includes a structure, the draft judgment must show a printout of the structure proposal. Structured settlements are an investment tool for persons who suffered personal injury and losses. A structured settlement can be entered voluntarily upon settlement of a claim or by court order. They are safe and secure and provide guaranteed tax-free periodic and lump sum payments for life or a specific period.
Spicer's solicitor deposed that the proposed structure for $275,000 has been funded and can be collapsed if the court does not approve the proposed settlement. The court explained the acceptable and proper process of securing a structure pending court approval. It emphasized that the placing or funding in escrow of a structure before court approval is both appropriate and necessary.
The court explained that funding in escrow is not the same as implementing a settlement or structure before court approval. A broker in trust receives the structured settlement funds and holds them just long enough to determine the most favourable placement of funds. Once brokerage is finalized, the funds are placed in escrow with the life insurance company. Further, pending court approval, funds can be withdrawn or added to the structure, the payment schedule can be amended, or the structure can be collapsed completely.
The court ultimately confirmed that the proposed structure had been funded in escrow pending court approval. The rates have been secured by placing funds with Sun Life Assurance Company of Canada. The court approved the settlement after being satisfied that the proposed fee was fair and reasonable and that the proposed settlement was in the best interests of Timothy Spicer.
