It is hard not to notice the impact of raising inflation rates in Canada, with rising costs of living posing a challenge to everyday Canadians. This blog discusses the effect of inflation on your personal injury case.
But first, a quick recap of what inflation means. A simple definition of inflation is that it is “a general increase in prices and fall in the purchasing value of money.”
This means that the same basket of goods which used to cost less, now costs more as your money is worth less and has less purchasing power.
These raising prices of goods and services includes increasing costs of rehabilitative and medical treatment. For those involved in a motor vehicle accident who are eligible for accident benefits, their insurer will cover the costs of medical treatment up to a certain limit, whether that be the standard minor injury guideline limit of $3,500.00, non-catastrophic guideline of $65,000.00, or the catastrophic injury guideline limit of $1,000,000.00.
Inflation’s effect on your accident benefits claim is that despite your eligibility, you will likely receive less medical services for the same amount of money than someone would have received five years ago when inflation rates were lower. While the price of medical and rehabilitation services has gone up, the policy limits have stayed the same since 2016.
For almost all personal injury victims, the tort system can be used to get compensation for the negligence of wrongdoers who caused their injuries. This compensation can be broadly categorized into general and special damages. General damages are for your “pain and suffering” while special damages are for monetary losses (such as loss of income, out of pocket expenses, and future care costs).
General damages are capped by law in Canada at the amount of $100,000.00 which was set in 1978. This cap is designed to be adjusted for inflation each year, and as of June of 2022, it amounted to a limit of $435,000.00.
In Ontario, in addition to the cap on general damages, there is a ‘statutory threshold’ under the Insurance Act that states that if general damages do not reach a certain monetary threshold, a ‘vanishing’ deductible applies to lower the amount a jury may award an accident victim for general damages. The deductible ‘vanishes’, or no longer applies once that threshold is reached.
This deductible is also indexed for inflation every year. In 2021, the threshold that had to be met before the deductible vanished, was $132,513.28. The deductible itself was in the amount of $39,754.31.
As of January 1, 2022, the threshold became $138,343.86, and the deductible became $41,503.50.
It is important to note that juries are not allowed to be informed of the existence of the statutory deductible, despite the significant impact it would have on the decisions juries make to compensate accident victims for their injuries and suffering. This causes significant unfairness to victims of car accidents. It also provides a huge savings to insurance companies.
If you or someone you know has been injured in an accident, or have questions about how inflation could affect your financial recovery, please contact our team at JEWELL RADIMISIS JORGE LLP for a free initial consultation.