Forecasting the Future

Future Care Costs: Forecasting the future

May 2011    |    By Craig Harris

Unraveling the complexity of future care costs and life care plans can be a challenging task for insurers and adjusters in today’s legal environment of high personal injury awards. Paying close attention to key factors, such as working with a qualified life care planner and understanding potentially problematic areas, can help claims managers navigate the waters of catastrophic bodily injury claims.

While catastrophic injury claims in Canada have not necessarily increased in frequency in recent years, the numbers associated with court awards have raised several eyebrows in the insurance industry. Over the past five years, a "cluster" of high-profile serious bodily injury claims in Ontario has upped the ante for these types of losses to $15-20 million – or more.

The most recent large personal injury award, involving an Ontario woman who was severely injured in an August 2002 car accident, is only the latest in a series of settlements involving insurance companies. On Sept. 2, 2009 Ontario Superior Court Justice Peter Howden awarded Katherine-Paige MacNeil a record-setting $18.4 million after the car in which she was a back-seat passenger ran a stop sign, crossed a highway and landed in a ditch.

In April 2009, the Ontario Court of Appeal upheld a $17-million personal injury award –at the time, the largest in Canadian history – to Rob Marcoccia. In June 2000, Marcoccia suffered massive brain damage when he collided with a furniture truck at an intersection.

These cases build off several substantive court awards for future care costs involving two claimants with brain injuries (Sandhu v. Wellington Place Apartments – future care cost of $10.9 million, Gordon v. Greig – future care cost of $8.6 million) and one claimant with quadriplegia (Morrison v. Greig – future care cost of $8.8 million). In the Sandhu case, in which a 2-year-old boy fell through a screen window from a fifth floor apartment building and sustained a severe brain injury, the jury awarded about $1.3 million more in future care than the figure suggested by plaintiff counsel.

"The implication of these cases is that damage awards . . . involving a catastrophically injured claimant can reach upwards of $20 million," notes Michael Bennett, a lawyer with Thomson Rogers and the lead author of a recent report on future care costs. "If the evidence adduced from experts established that future care is reasonably necessary to preserve the plaintiff’s health and this care is proved to cost millions of dollars, the courts have been more than willing to award millions in future care."

Future care costs represent the biggest component underpinning these large damage awards in catastrophic bodily injury cases. As costs increase, there is emerging recognition from the insurance industry that the way these claims should be handled needs to change.

"I think the plaintiff’s bar has taken a more sophisticated and comprehensive approach to catastrophic injuries," says Gerry George, a lawyer with Samis & Company. "They have marshaled experts and gathered opinions to support future care costs. At the same time, I think defence lawyers and insurance companies have been caught a little flat-footed. They have not defended these claims as aggressively as they could."

This call for change and a more comprehensive approach to catastrophic injury claims filters down to adjusters and claims handlers. "What the insurance industry needs is experienced people who know how to separate the wheat from the chaff in these cases, so the injured person is getting what he or she needs, no more and no less," notes Fred Plant, president of Plant Hope Adjusters.

One of the key tools used to calculate accurate future care costs and quality of life for the catastrophically injured claimant is the life care plan. It has become more prominent in tort cases involving serious bodily injury claims within the last ten years, often used to assist plaintiff or defence lawyers in identifying total costs of future care.

"I would say that more and more lawyers are aware of the need to get a life care plan done to more accurately determine future care costs for those seriously injured," says Jamie Campbell, director of rehabilitation services for Rehab First. "These are being done more frequently than in the past."

A life care plan is a structured, researched plan that identifies and estimates an injured or disabled person’s current and future needs in areas of medical rehabilitation, equipment, home support and quality of life. These plans are customized to the individual’s situation and can include: home care/facility care, projected therapeutic treatments, diagnostic testing, wheelchair needs and mobile assistance devices, orthopedic equipment, orthotics/prosthetics, aids for independent function, home furnishings and accessories, medication, future medical care, transportation, architectural home modifications, leisure or recreational equipment and programs, and vocational/educational plans.

While sometimes referred to interchangeably, future care cost reports and life care plans are similar but not necessarily the same. Life care plans focus on catastrophic and permanent whole-body impairment from which the claimant will not recover over his or her lifetime, while future care cost reports may involve serious but less catastrophic injuries and treatment over a prescribed time period.

In life care plans, several factors are contributing to higher expenses in catastrophic injury claims – including predictable increases in inflation and market value of health care services and equipment, but also a greater use of private agencies for treatment.

"The life care plan has continued to evolve whereby there is less of a reliance on the health care system and government services and more on the private clinics who offer these services," notes Monique Besz, a certified life care planner with Kompass Lifecare. "This has led to increased costs of care for the injured individual, which in turn has led to increased awards in court."

Another evolution in life care plans is a more expansive view of quality of life issues for the catastrophically injured claimant, as opposed to the strict focus on medical treatment and care. "Sometimes, there is the perception from people in the insurance industry that ‘if we just get the person a wheelchair, he or she should be fine,’" says Phyllis Spencer, a vocational consultant with Crawford & Company (Canada) Inc. "That is not the case. There are many other aspects of a person’s life that you need to take into account, such as recreational, vocational, social and community interaction, family relations."

Life care plans are usually completed by registered nurses, occupational therapists, vocational consultants and rehabilitation management firms. More recently, courts have recognized the Certified Life Care Planning (CLCP) designation, which started in the U.S. but has expanded to include a Canadian designation (CCLCP). The Canadian program consists of eight courses that must be completed within a five-year period in order to write the Canadian certification exam. The International Commission on Health Care Certification, based in Virginia, is the agency that certifies life care planners in Canada.

"One thing adjusters and insurers should look at is whether the life care planner they choose is certified," says Judy Farrimond, technical advisor, catastrophic and legal services for Sibley & Associates. "There are lots of people who do life care plans who don’t have the training. They may have experience, but when you are trained and certified in life care planning, there are certain nuances you can pick up. It can make the process that much more objective."

"Certification in Life Care Planning is becoming increasingly important," adds Linda Walker, a certified life care planner and rehabilitation consultant with Linda Walker & Associates. "Both insurers and lawyers are requesting Certified Life Care Planners. Training, experience and additional qualifications are highlighted, in particular experience working with catastrophically injured clients."

Plant says he concurs with the importance of finding the right kinds of experts to conduct appropriate life care plans. "The quality of the expert comes into play and a good one will have an impact," he says. "Selecting the good one requires someone in the know making the recommendation and moving the file in the right direction."

George says he does not disagree with the importance of life care certification, but "it should be the icing on the cake. I think there should be more emphasis on the actual hands-on experience in rehabilitation and the medical background of the planner. My understanding of the designation requirements is that these are pretty light on actual course work and study hours."

The two most contentious areas of life care plans themselves seem to be attendant care and transportation, with some pointing to modification to housing as an increasingly costly issue. These are two among a wide range of quality of life determinants that could include ongoing treatments for physiotherapy, occupational therapy (among other therapies), medication, assistive devices, wheelchairs or mobility aids, recreational and vocational needs.

For many life care planners, their recommendation to adjusters and insurers is to look at the big picture. "I think adjusters, lawyers and insurance companies have to avoid the pitfall of being penny wise and pound foolish," says Spencer. "For example, there may be something like transportation costs in a life care plan that a company might see as unnecessary. But let’s say that transportation actually gets the client to a job. He or she starts to become a wage earner, becomes more independent and experiences the social and team aspects of work. That is a positive outcome."

Life care planners also have to be conscious of budgetary realities, according to Spencer. "The role of the life care planner is to create the best plan for the person first, and think of the budget second," she says. "Having said that, we live in the real world of cost constraints. There are some creative ways that life care planners can address cost issues without sacrificing the quality of the plan."

Spencer cites a specific example of how life care planners can approach expenses from a different perspective. In one case involving a claimant with mental health issues, a financial institution was designated as the administrator of the settlement, at a fairly high fee. However, the planner found that the office of the public guardian could provide the same administration for a lower fee. "On a huge settlement amount, such as $5-10 million, a few percentage points can make a big difference," she says.

Others contend that there is a long laundry list of items adjusters and insurers can do to help create effective life care plans – enabling correspondence with all treating practitioners, giving enough lead time for report completion and allowing the plan author to meet with the client. Thorough file documentation, a theme familiar to many adjusters, is also a crucial element of a successful life care plan, according to sources.

"The role of the life care planner is to educate and provide a report that identifies the client’s current and future needs," Besz observes. "In order to achieve this result, insurers should provide the life care planner with all medical documentation as it is available to them."

"It is better to have all the information in the file, particularly if there is a conflict between the plaintiff and defence lawyers," notes Farrimond. "The last thing you want is to be surprised by a kick in the teeth on a certain file."

An adversarial legal system and lengthy disputes of cost projections between plaintiff and defence lawyers can frustrate many in the field of life care planning and rehabilitation, with the claimant often caught in the middle. "The ongoing fighting between plaintiff lawyers and defence lawyers or adjusters can get very annoying," Campbell says. "The goal should be to ensure that clients get what they are entitled to, no more and no less. The role of the life care planner is to come up with that right number."

"My blanket advice for all involved is to try to be reasonable when it comes to costs," Spencer adds. "That may be more difficult if someone is working on a contingency fee basis, but there is a lot to be said for common sense when it comes to settlement and life care plans. I have seen files that are inches thick and the process has gone back and forth for five years. That is not necessary (because) it is usually the injured person that is stuck in limbo in this process."

This push-pull dynamic can lead to questions about the qualifications and potential bias of report providers. Sometimes the answer appears to depend on who is commissioning the future care report – the plaintiff or defence lawyer. Walker notes that Form 53, which was introduced in January 2010 and requires acknowledgement of an expert’s duty under rules of civil procedure in Ontario, must now accompany all life care plans. "Basically the author of the life care plan or future care report is stating that the report is fair, objective, non-partisan and our opinion related to only matters within area of expertise," she says. "In addition we are to provide additional assistance as the court may reasonably require."

If litigation does take place, George argues that insurers have to be better prepared to properly defend these types of claims. "The sophistication of the plaintiff’s bar is not going away on these claims," he notes. "They are spending more money on pursuing these claims in the form of disbursements. That is why it has gotten as far as it has. We need to increase our sophistication and resources in defending these claims."

George notes that there have been some favourable developments for the insurance industry in catastrophic injury claims and life care plans. The first is the regulatory change in recent Ontario auto insurance reforms that no longer require insurance companies to pay for life care plans or future care plans. While this decision applies only to accident benefits claims under SABS, George argues that it will still provide some relief for insurers.

Others are not sure this provision will actually help claimants or insurers. "I have to ask, why is this a good thing?" asks Campbell. "If someone buys enhanced benefits in med/rehab and attendant care and they suffer a serious injury, they could have up to $3 million in accident benefits funding. Shouldn’t there be someone working with the client, adjuster and lawyer to figure out a plan and determine costs? I think enlightened insurers and adjusters will still pay for life care plans because they see the value."

Another emerging trend in litigation for catastrophic injury claims is the move to a more level playing field for defence and plaintiff- requested life care plans, according to George. Several cases were heard in 2010, including Vanderidder v. Aviva Canada and Kozhani v. Gelbart, in which a judge held that insurance companies could require the plaintiff to participate in a life care assessment by a certified life care planner.

In Aviva v. Vanderidder, the plaintiff, Vanessa Vanderidder, was injured when rock fragments from a truck flew through her open car window and struck her in the head. She alleged serious injuries that caused permanent and serious disfigurement, as well as serious impairments of important physical, mental and psychological functions. A future care costs report was prepared for the plaintiff’s counsel, which placed the present value on Vanderidder’s future health care needs at just over $719,000.

Aviva requested that the plaintiff participate in a life care plan assessment by an occupational therapist and certified life care planner. In granting Aviva’s motion, Justice Granger noted that "it would seem to me that if Vanessa Vanderidder elects to place before the court evidence concerning her future care needs as determined by a non-health practitioner, she can hardly be heard to claim that it would be unfair to order her to submit to such an assessment by a person of the choosing of the defence."

"This is important because it puts the defence-requested life care plan on a similar footing as that of the plaintiff," notes George. "Previously, the insurer had to prove that the requested assessment or plan was necessary to aid a health care practitioner as a diagnostic tool."

For Plant, this confirms a long-held suspicion that life care plans recommended by insurers for defence purposes are frequently seen by courts as mere tactical maneuvers. "I think that often defence-commissioned reports tend to be looked upon as somehow tainted, less than valid and only there to beat down the oppressed plaintiff – no matter how bogus the plaintiff's case may be," he says.

Another litigation strategy for insurance companies to consider is the role of juries in catastrophic injury cases, George notes. "We used to look at judges as the enemy of the defence in personal injury cases, but I think now the reverse is true," he says. "Many of the high awards in Ontario were given by juries at trial. In contrast, in B.C. the personal injury awards given by judges have been more moderate. We may have to look at issues like whether these cases are too complex for juries. This will not be an easy process to change, but it is worth contemplating."

Catastrophic injuries represent a delicate balancing act for insurers and adjusters. The goal is to ensure that claimants receive the appropriate treatment, care and compensation to which they are entitled. But insurers and adjusters also have to recognize the trend of rising personal injury damage awards and an increasing sophistication on the part of plaintiff lawyers when it comes to future care costs. They can react appropriately to the claim by requesting a comprehensive life care plan by a qualified professional, either outright or in defence. But it has to be the right plan conducted by the right planner.

"To do a proper life care plan requires a certain amount of time and expense," Campbell says. "If someone spends a couple of hours with a client and then writes a report, it is probably not adequate. You get what you pay for. Insurers have to work closely with life care planners. It is in not only their client’s best interest, but in their interest as well."

"A life care plan is supposed to represent an objective evaluation of the client’s needs," Besz notes. "If a report is completed and insurance companies are relying upon it to settle, it is in their interest that (the report) is not only objective and complete, but also defendable."

For Plant, a crucial part of the appropriate handling of these serious injury cases comes down to the experience of the claims professional involved. "The biggest issue we have now is the (need for) people in the adjusting and insurer offices who can properly deal with these things, find the right medical experts and quarterback settlements, in litigation or not, to where they need to be," he concludes.

Please note a version of this trends paper has previously been published in an industry publication.

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This paper is part of an open online library of ADVANTAGE Monthly trends papers, published by the CIP Society for the benefit of its members and of the p&c insurance industry. The trends papers provide a detailed analysis of emerging trends and issues, include context and impact, and commentary from experts in the field.

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