Courts Ignore Rules for Lump Sum Discount Rates
When assessing future pecuniary losses a court will award a lump sum to compensate the Plaintiff. That lump sum will be subject to a discount rate, which results in a discount to the award to reflect the rate of interest that the Plaintiff is expected to achieve on the lump sum before it is exhausted.
Two recent decisions of the Ontario Superior Court of Justice depart from the Rules of Civil Procedure discount rate for calculating future pecuniary damages. This departure is a response to expert evidence that future health care costs in Ontario are expected to rise faster than the rate of inflation.
The rate of increase in health care costs over the last several decades is astonishing. In 1960 health care expenditures represented 5.5% of Canada’s gross domestic product. These expenditures currently represent 10.7% of our GDP. Using inflation adjusted dollars, health care expenditure per capita in 1960 was $880; it is currently $5,170.
Awards for future monetary damages in Ontario are ordinarily calculated using the discount rate set out in R. 53.09(1). That rate is calculated based on the rate of interest of Government of Canada bonds for the first 15 years (currently in the range of 1%) and 2.5% for any year thereafter. It was previously thought that the court had no discretion to deviate from this method of calculation.
However, in Osborne (Litigation Guardian of) v. Bruce (County),  O.J. No. (Gen. Div.) and Desbiens v. Mordini,  O.J. No. 4735 (Sup. Ct.) the courts varied the discount rate in the Rules after the Plaintiffs led expert evidence on the subject, although Osborne and Desbiens did not lead to a flurry of personal injury decisions varying the applicable discount rate.
Two recent cases suggest that it is becoming much more commonplace for the court to award future health care costs using a discount rate that is more favourable to the Plaintiff than the one set out in R.53.09(1).
In Morrison v. Greig  O.J. No. 225 (S.C.J.) and MacNeil v. Bryant et al.  (S.C.J.) (Howden J.) (unreported) the court accepted the evidence of expert health care economist Dr. Peter Coyte that Canadian health expenditures are expected to increase dramatically in the next 30 to 40 years. Coyte is a health care economist at the University of Toronto. His evidence in Morrison and MacNeil was that health care expenditures in Ontario are expected to grow faster than the general rate of inflation by a margin of approximately 50% if inflation is expected to be 3.2% and by a margin of approximately 100% if inflation is expected to be 1.5%.
Coyte gave evidence that rapid growth in health expenditures over the last 50 years can be attributed to increased health care service intensity, which takes the form of additional health care provider consultations and services. This continued upward trend in the standard of care will result in increased health expenditures in the future. In addition, there is expected to be a scarcity of qualified professionals to provide health care in the future which will further drive up the cost beyond the expected rate of inflation.
In Morrison, two young men suffered catastrophic injuries in a motor vehicle accident which left them unemployable and requiring constant care. Plaintiffs’ counsel argued that the future price per unit of health care is expected to increase due to factors such as the aging of the population, population growth, the underlying rate of inflation and changes in service intensity. The trial judge, Justice Bruce Glass, accepted the evidence of Dr. Coyte on this topic and awarded the Plaintiffs future care costs at a discount rate of 0% for the first 15 years and 1.5% thereafter.
Justice Glass noted that during the past few decades the quality of services available has expanded considerably with innovations such as x-ray machines, CT scans, MRIs and PET scans. This trend of increasing available services and level of care is expected to continue into the future. The total assessment of damages in Morrison was more than $24,000,000.
In MacNeil, a 15 year old woman suffered catastrophic injuries in a motor vehicle accident.
Plaintiffs’ counsel entered Dr. Coyte’s report into evidence through an expert accountant. Justice Howden accepted Dr. Coyte’s evidence and applied a discount rate which was more favourable to the Plaintiff in terms of the future care award. The total verdict in MacNeil was more than $18,400,000.
The verdicts in these two cases reminds practitioners in this area that in cases involving very significant amounts of future care it would be sensible to attempt to recover damages for future care using a discount rate calculated by a health care economist and not the one set out in the Rules.
Roger Oatley and Ryan Murray practice Plaintiffs’ personal injury law at Oatley, Vigmond LLP in Barrie. Their firm represented the Plaintiffs in the Morrison case.
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