Ontario appeal court clarifies definition of catastrophic impairment

The Ontario Court of Appeal has restored clarity on when catastrophic impairment should be considered for accident victims and it could have an impact on what the government may do regarding how the definition is treated by the insurance industry.

On Dec. 23, the Ontario Court of Appeal confirmed in Kusnierz v. The Economical Mutal Insurance Co. that psychological impairments should be combined with physical impairments to determine whether a car accident victim has suffered a catastrophic impairment.

The case involved Robert Kusnierz who suffered serious physical injuries in a 2001 car accident, including a below-knee amputation. He also suffered from psychological problems including depression. The Court of Appeal found the judge at Kusnierz’ 2010 trial against his insurance company, Economical, erred when he concluded that Kusnierz’ psychological impairments should not be combined with his physical impairments, and that Kusnierz had therefore not sustained a catastrophic impairment.

Under Ontario’s motor vehicle legislation, an accident victim who meets the definition of catastrophic impairment is entitled to claim greater accident benefits, and for life or until the maximum benefits have been paid out. In tort lawsuits arising from car accidents occurring between Nov. 1, 1996 and Sept. 30, 2003, the accident victim must prove he or she sustained a catastrophic impairment to recover health care expenses. A determination of catastrophic impairment often makes a crucial difference to an accident victim’s recovery and quality of life.

In allowing Kusnierz’s appeal it was the first time an appellate court weighed in on the issue of combining psychological and physical impairment.

“On the issue of whether someone has the right to have psychological impairment combined with physical it is clear cut just as it was prior to the Kusnierz trial decision,” says Neil Wheeler, a partner with Lerners LLP in Toronto who acted for plaintiffs Phillipe and Cecille Desbiens in  2004’s Desbiens v. Mordini, which first established the definition for catastrophic impairment combining psychological and physical impairment, which had been adopted by the courts and Financial Services Commission (which regulates accident benefits) up until the Kusnierz case in late 2010.

In that trial Justice Harvey Spiegel found that an accident victim’s psychological impairments should be combined with physical impairments when considering whether he or she suffered a “55 per cent whole person impairment” (one of the definitions of catastrophic impairment). Desbiens confirmed that catastrophic impairment status could be sought by a broader group of accident victims than many in the insurance industry maintained.

Desbiens had been followed by the court and the FSCO until the judge at Kusnierz’s October 2010 trial disagreed. In its ruling in Kusnierz, the Court of Appeal stated that it preferred Spiegel’s conclusion and reasons in Desbiens to those of the trial judge in Kusnierz.

“It really boiled the issue down to as clear as a scenario as one could get,” says Wheeler. “It eliminates some uncertainty on the issue which had been a challenge not just for injured people and their lawyers, but also insurance companies because in the period between the Kusnierz trial decision and appeal court’s decision — about one year — there was a tremendous amount of uncertainty as to what the proper approach to the issue was and whether someone was going to meet the definition or not.

“Uncertainty is not a good thing for insurers or injured people.”

Wheeler says one issue still unresolved is that the government may give some consideration to the definition of catastrophic impairment in the course of amending the Insurance Act.

“The government has been giving consideration to this issue. There was a report put together earlier this year advising potential modifications to the definition. It will be interesting to see what impact the Court of Appeal’s decision has on any future attempts the government may decide to initiate to amend the definition, say Wheeler.

Given the uncertainty surrounding the issue introduced by Kusnierz, the government had been soliciting input on how to modify the definition. In an advisory report issued by the FSCO in April, a suggestion was that physical and psychological impairments not be combined.

“However, now we have some clear guidance on this issue it ought to have a tremendous impact on what, if anything, the government decides to do,” adds Wheeler.

He says the Kusnierz trial decision created uncertainty for both accident victims and insurers about the meaning of catastrophic impairment. “It confirms that an accident victim does not have to establish catastrophic impairment on the basis of physical impairments alone, or psychological impairments alone.”

Wheeler says the appeal decision should not open the floodgates to others who think they can claim catastrophic impairment.

“A person has to demonstrate and prove medically and to the court’s satisfaction that they have suffered very severe physical and psychological impairment — that has to be substantiated and proven. The other point is simply being designated catastrophically impaired, in and of itself entitles you to nothing — it simply gives you opportunity in the accident benefits context to access a potentially greater source of benefits and potentially for life. You still have to establish entitlement.”

ed note: updated Dec. 30 to fix name of judge and law firm.

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