Jul 18, 2016

It's Not a Winning Lottery Ticket

Clements v. Clements, 2012 SCC 32, [2012] 2 SCR 181

It’s Not a “Winning Lottery Ticket”: Understanding Compensation in Negligence Claims

A common grumble heard from those outside the civil litigation bar is that people pursuing a personal injury claim are somehow “milking the system”. Skeptics typically express their concern over an injured person “profiting” from their injury or loss, and I can understand why. It is exceedingly rare in society to have a negative event yield a seemingly positive result, and from the outside it can appear that pain equals profit. But are truly injured people somehow abusing the system by seeking compensation for their losses? And do injured people truly “profit” from their injuries? The aim of this post is to help explain how and why our system operates as it does.

Why Do Injuries Attract Compensation?

The fundamental concept behind our loss shifting system is the concept of duty. Simply put, people owe a duty of care to keep those close to them reasonably safe. The nature of the duty, who is affected by it, and the means by which breaches are corrected all fall under the umbrella of our tort system.

In Empire Strikes Back Yoda said to Luke: “Life creates it, makes it grow. Its energy surrounds us and binds us”. While Yoda was speaking of the Force he just as well could have been describing the tort system. Like the Force, tort law is a system that is difficult to define. It exists in the abstract, but finds expression in the interactions between people, places, and things. It binds people who are sufficiently connected. Its purpose is to adjust losses and afford compensation for injuries sustained by one person as a result of the conduct of another in our complex society. In the context of negligence claims, Chief Justice McLachlin has characterized it as “corrective justice”:

“Recovery in negligence presupposes a relationship between the plaintiff and the defendant based on the existence of a duty of care – a defendant who is at fault and a plaintiff who has been injured by that fault. If the defendant breaches this duty and thereby causes injury to the plaintiff, the law “corrects” the deficiency in the relationship by requiring the defendant to compensate the plaintiff for the injury suffered.”[1]

Injured people “milking the system” for compensation is a misnomer. Receiving compensation for losses suffered by someone else’s actions is the system. The tort system is inherently designed to shift the losses sustained from the shoulders of the person affected to the person who caused the loss. It is precisely this loss adjusting system that gave rise to insurance as a business. Insurers intercede on behalf of people who have caused the loss (when that person has previously obtained the proper coverage). In effect, a person is getting exactly what they paid for when they have to call upon an insurance policy to protect them.

Why Do Injured People Get Compensated With Money?

The liability of a person who has caused a loss is not unlimited. It is constrained by the simple concept that an injured party is entitled to be made whole again. But, what is “whole”? The only way to determine that is by examining the victim’s present situation with reference to the victim’s situation immediately before the loss. If a person was entirely healthy and employed before the injury occurred, then they are entitled to be put back into that position. If a person was partially disabled, or unemployed, or dealing with chronic illness, then they are only entitled to be put back to that position. Put another way, a person who causes loss is only liable for that loss, and nothing more.

The next obvious question is why money? The answer is that it is the best method available to compensate an injured party. In the case of lost income or treatment costs it is easy to understand why money compensates the loss, and the defendant can match that loss dollar for dollar. But what about the loss of health? If you suffer a broken arm in a grocery store slip and fall and you have to scrap your summer plans, what is the best way to compensate the loss of those summer plans? If you are a welder and your neck and back are constantly in pain after an accident, have you not lost the ability to work without pain? How do you compensate that welder? There is no means of turning back the clock; no way to give that welder’s health back. The defendant, or in most instances her or his insurer, does not have the means to give an injured person back her or his health. At best, they can provide financial compensation for that loss of health.

Money is a poor substitute for health, but it’s the only thing that comes close to approaching its value. Health is something that is often taken for granted, but it is the single most important asset a person has in terms of living a happy and fulfilling life. For those that have never been severely injured, it is difficult to understand the suffering that a person can go through. Injuries that sound relatively benign, like a soft tissue neck injury, can have devastating effects depending on severity and the person’s pre-accident activities.

In sum, being injured by someone else’s negligence is not “winning the lottery”. The injured person hasn’t lucked into a windfall after a positive trial result or a reasonable negotiated settlement. Rather, they have been made whole again by a system that is designed to correct that loss. In many instances the most viable form of correction is through monetary compensation because there is no way to give back an injured person’s health. If a person views her or his misfortune as a means to “cash in” or profit, then that person is probably not very injured. And if that person is not very injured, they cannot expect to receive much in the way of compensation.

[1] Clements v Clements, 2012 SCC 32 at para 7.