Dealing With Capacity and Guardianship in Personal Injury Claims:  Some Practical Tips

As personal injury lawyers we deal with many clients who struggle to understand information relevant to making decisions and who cannot appreciate the reasonable consequences of those decisions.   We see this most frequently in traumatic brain injury cases.   But psychological impairments can impede decision making too.  

As lawyers we have a duty to ensure that the people who are instructing us have the capacity to do so and that we are never settling a case where there is an unresolved concern about a client’s capacity to manage property.   A personal injury lawyer must be careful to consider capacity issues and the need for a properly authorized substitute maker, if necessary, at all stages of a claim.

Key Takeaways

• Capacity is an important issue in many serious personal injury cases, particularly those involving traumatic brain injuries or significant psychological impairments.
• Ontario’s Substitute Decisions Act sets out the legal test for determining whether a person can manage their property and make informed decisions.
• When there are concerns about capacity, lawyers should address them early and may need to arrange a formal capacity assessment.
• Powers of Attorney can play an important role after a serious injury, but potential conflicts of interest must always be considered.
• An incapable person involved in a court proceeding generally requires a Litigation Guardian, and court approval is required for settlements involving parties under disability.
• Guardianship planning can continue well beyond settlement and may require ongoing legal, financial, and estate planning support.

Capacity Concerns at the Outset of The Case

In some cases, a client’s lack of capacity is clear.   Imagine a case involving a severe brain injury.   We get a call from our client’s family a couple of days after a catastrophic injury.   The client is in a coma at a trauma hospital.   We meet with the family.   Steps need to be taken.   There is a need for a retainer to be signed.  Important insurance forms need to be completed.   Authorizations need to be signed to obtain records and permit sometimes urgent investigation to proceed.   How do we proceed when our primary client cannot instruct us or assist with these steps?

In other cases, a client’s capacity is less clear.  Even with a moderate or severe brain injury a client can recover to a level which makes capacity unclear before we can meet with them.  Many people with brain injuries present well at first blush.  But there may be significant issues with insight, or significant cognitive challenges that aren’t immediately apparent.   How do we know whether a brain injured client has capacity and needs a substitute-decision maker? 

           Tip #1:   Familiarize yourself with the Substitute Decisions Act and the Rules of Civil Procedure relevant to capacity.

As personal injury lawyers we don’t specialize in estates and guardianship law like the lawyers who practice exclusively in that area of the law.   But we need to be familiar with the Substitute Decisions Act (“SDA”) and the Rules of Civil Procedure relevant to capacity issues in personal injury cases.

Section 6 of the SDA sets out the test for incapacity to manage property:

6 A person is incapable of managing property if the person is not able to understand information that is relevant to making a decision in the management of his or her property, or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision.

The Rules of Civil Procedure define a party under disability with reference to the definition in section 6 of the SDA.   A person is a party under disability is he or she is mentally incapable within the meaning of section 6 of the SDA in respect of an issue in the proceeding.   A party under disability must be represented by a Litigation Guardian in a Court proceeding (Rule 7.01).   Any settlement of a claim for a party under disability must be approved by the Court (Rule 7.08).  

           Tip #2:   Consider capacity at the outset of every case.  

Because we cannot enter a retainer agreement with an incapable person or start a claim for an incapable person without a Litigation Guardian it is important to think about capacity at the beginning of every case.  Always yourself, is there a concern about the injured client’s capacity?  

In the clear-cut case of a severely brain injured client in a coma the answer is obvious (at least for the intermediate future).   In other cases, the answer may not be obvious.  But it is crucial to consider the issue at the outset of your lawyer-client relationship.

           Tip #3:   Ask About Powers of Attorney

When estates lawyers prepare wills they very often prepare Powers of Attorney for Property and Personal Care in the event of incapacity.   So, some of our brain-injured clients will have taken the proactive step, before their injury, of designating a Power of Attorney in the event of their incapacity.   It is important to identify whether there is a Power of Attorney and who it is early on.   The person acting under the Power of Attorney will have the authority to sign agreements and authorizations and is usually the best choice for Litigation Guardian.   

           Tip #4:   If there is a Power of Attorney, does that person have any conflict?

There are situations, however, where a person acting under a Power of Attorney, cannot act as Litigation Guardian.   Imagine a husband is driving with his wife in the passenger seat.    They have Powers of Attorney naming each other as Attorneys in the event of incapacity.    But in this accident, the husband runs a red light, and his wife suffers a severe brain injury.  The wife is going to have to sue the husband.   Obviously, he cannot be her Litigation Guardian.  

Sometimes the conflict may be less stark.  Imagine this same husband and wife were passengers in a vehicle driven by a friend who runs a red light.  The husband has a broken hip.  The wife has a catastrophic brain injury.   The at-fault driver has only $1,000,000 in liability limits.  But this may be inadequate to cover the damages of both the husband and wife.   While the wife appointed the husband to be her substitute-decision maker in the event of incapacity and he remains mentally capable of acting as her substitute-decision maker there is a potential conflict of interest because they may be competing for limited insurance money.  

           Tip #5:   If there is a concern about capacity don’t ignore it.  Get a capacity assessment done.

The legal test for capacity in section 6 of the SDA is fairly easy to read and understand conceptually.   But sometimes it can be a challenge for a lawyer to determine whether a person meets the test.   The second part of the test (is the person able to reasonably appreciate the consequences of a decision) can be particularly difficult.  I have had brain injured clients who appear to understand a lot of information about the claim and their property generally.   But they are so lacking in insight into their own impairments that they struggle to appreciate the consequences of decisions relating to them specifically. 

Where a personal injury lawyer has a concern about capacity the prudent thing to do is to arrange a capacity assessment.   The goal of our cases is to resolve them, through settlement or trial.  But most cases settle.  And we cannot settle a case with unresolved concerns about capacity.   Capacity assessors are specially trained to assess people and determine whether they meet the test for capacity to manage property.  They are not expensive.  And in car accident cases, the cost is typically covered by the Statutory Accident Benefits (“SABS”)  insurer.

           Tip #6:   Don’t delay your client’s benefits or your investigation.

Where we have an incapable client with no Power of Attorney, there is a need for guardianship.   But getting a guardian appointed by the Court can take several months.   If we wait months to take steps in a personal injury case our client’s interests will suffer.

In car accident cases, clients are entitled to substantial benefits/compensation through a combination of the SABS claim and a tort claim.  The SABS benefits provide immediate income replacement and cover care costs.   Those claims cannot be delayed by several months while we wait for a Court order appointing a guardian.   Insurers will accept these claims with applications signed by family members.  

In traumatic brain injury cases we routinely have family members sign an initial retainer and authorizations so that our investigation can move forward pending the appointment of a substitute-decision maker.   A claim can be commenced with a Litigation Guardian before a Court appointed guardian is put in place.

Court Appointed Guardianship Before Settlement

           Tip #7:   Get a Court ordered Guardianship when necessary. 

Where we have an incapable client without a Power of Attorney our client will typically need a Court appointed guardian.   Institutions like banks and other third parties will not allow family members to deal with our client’s finances without a properly authorized substitute-decision maker.  

Personal injury lawyers can prepare these applications or refer clients to estates counsel to do them.   The reality is that many of our injured clients cannot afford to pay lawyers by the hour.   This is why contingency fee agreements are necessary in personal injury law.   So, getting our clients to pay an estates lawyer by the hour to bring an application to the Court is often a non-starter.   Many personal injury firms provide this service to their clients as part of their contingency fee.

           Tip #8:   Look to the SABS insurer to cover costs

If you are dealing with a motor vehicle case it is important to be aware of the case of Stukic (Litigation Guardian of) v. Personal Insurance Co. of Canada, [2005] O.J. No. 3325 (S.C.J.).  In that case, the Court ruled that the insurer was liable under the SABS to pay the expense of obtaining a guardianship order.  

           Tip #9:   Follow the Procedure in the SDA for appointing a Guardian

If you are a personal injury lawyer and taking on the task of preparing an application to appoint a Guardian for your client, carefully review the requirements in the SDA.   Some of the key provisions are as follows:

• There must be evidence establishing incapacity (typically a capacity assessment although evidence from treating health care provides can provide the requisite evidence) – section 25.

• The proposed guardian must be a resident of Ontario or they will have to provide security – section 24(3).

• The application must be served on the incapable person, a power of attorney if one exists and the Public Guardian and Trustee – section 69(1).

• The application must be served on specified family members – section 69(6).

• A management plan for property, in the prescribed form, must be included – section 70.

           Tip #10:   Ensure the Guardian understands their duties and obligations.

Many of our clients are unsophisticated.   Many will have never acted as the executor of a will, an attorney under a Power of Attorney or a Guardian before.   The Office of the Public Guardian and Trustee’s office has published a document entitled Duties and Powers of a Guardian of Property, which is included with this paper.   Counsel preparing the Guardianship Application should review these duties with the proposed guardian and provide a letter setting out those duties with a copy of the PGT’s document so that the obligations are well understood.

Considerations Upon Settlement

Most of the pre-settlement guardianship applications that personal injury lawyers prepare are relatively straight-forward.  Most of our clients do not have substantial assets and income to manage until after settlement.   But with large settlements guardianships can become much more complicated.   The initial guardianship order will typically require an amended management plan to be filed within a set period after settlement.   Sometimes, guardianship orders will require passing of accounts.   The level of work that goes into these guardianships often outstrips the capacity and, frankly, experience of a personal injury lawyer.  

           Tip #11   Consider Guardianship Costs in Damages Assessment

It is crucial for personal injury lawyers to consider guardianship costs as part of their damages claims.    There are ongoing legal costs associated with guardianships.   Sometimes professional guardians, who charge fees, are required.  These costs can be recoverable in the damages claim if they are proven:  see Sandhu v. Wellington Place Apartments (2008) ONCA 215 (C.A.).   Where an injured client is likely to incur these costs it is imperative to get evidence to define them.   Without retaining a lawyer expert in estates litigation to give an opinion on the quantum of future legal costs there will be no evidentiary basis for an award of this type.

           Tip #12:   Consider getting help from an Estates Lawyer

As lawyers we must know our limitations.   Lawyers who specialize in estates and guardianship litigation have a much higher level of experience in guardianship planning than most personal injury lawyers.  They often have expertise relevant to important considerations like preserving OSDP entitlement.  They are better positioned to prepare management plans for significant sums of money.  And they can provide advice to the guardian on keeping accounts so that the passing of accounts does not become a nightmare.   

The best time to get help from an experienced estates lawyer is when the settlement approvals motion is being prepared.   If we wait to get help until after the settlement approvals motion we lose the opportunity to get their advice around investing and structuring the settlement to minimize issues with the ODSP and minimize post-settlement guardianship headaches.  

Frequently Asked Questions

What does it mean to lack capacity to manage property in Ontario?

Under Ontario’s Substitute Decisions Act, a person may be considered incapable of managing property if they cannot understand information relevant to making decisions about their property or cannot appreciate the reasonably foreseeable consequences of those decisions. Capacity is not determined solely by a diagnosis or injury. Instead, the focus is on a person’s ability to understand and appreciate decision making related to their finances and property. In personal injury cases, this issue often arises when someone has suffered a traumatic brain injury or significant psychological impairment that affects judgment, insight, or decision making.

Why is capacity an important issue in personal injury cases?

Capacity is important because lawyers must ensure that the person providing instructions has the legal ability to make decisions about their claim. If a client lacks capacity, important legal documents, court proceedings, and settlement decisions may need to be handled through a properly authorized substitute decision maker. Capacity concerns can affect every stage of a personal injury case, from signing a retainer agreement to approving a settlement. Addressing these issues early helps protect the injured person’s interests and ensures the legal process proceeds appropriately.

What is a Litigation Guardian?

A Litigation Guardian is a person who acts on behalf of someone who is legally incapable of managing their own legal proceeding. Under Ontario’s Rules of Civil Procedure, a party under disability must generally be represented by a Litigation Guardian in court proceedings. The Litigation Guardian makes decisions relating to the litigation, works with legal counsel, and helps protect the interests of the injured person. In many cases, a family member may serve in this role, provided there is no conflict of interest and they are suitable to act on the person’s behalf.

How can a lawyer determine whether an injured person has capacity?

In some situations, incapacity is obvious, such as when an individual is in a coma following a catastrophic injury. In other cases, the issue can be much more difficult to assess. A person may appear capable during a conversation while still struggling with insight, judgment, memory, or the ability to appreciate the consequences of decisions. When there is uncertainty, lawyers often arrange for a formal capacity assessment conducted by a qualified assessor. This can provide independent evidence regarding whether the legal test for capacity has been met.

What role does a Power of Attorney play after a serious injury?

A Power of Attorney may allow a trusted individual to make decisions on behalf of someone who becomes incapable. Many people create Powers of Attorney as part of their estate planning before any injury occurs. In a personal injury case, the person named under a valid Power of Attorney may be able to sign documents, authorize access to records, and assist with legal and financial matters. Identifying whether a Power of Attorney exists is often an important early step after a serious injury because it can help facilitate decision making while capacity issues are being addressed.

Can a person acting under a Power of Attorney have a conflict of interest?

Yes. A person who has authority under a Power of Attorney may not always be an appropriate choice to act on behalf of the injured individual. Conflicts can arise when the proposed decision maker has interests that may differ from those of the injured person. For example, in a motor vehicle accident in Toronto or elsewhere in Ontario, a family member who may share in limited insurance proceeds could potentially face competing interests. Lawyers must carefully assess these situations to ensure the injured person’s interests remain fully protected.

What is a capacity assessment?

A capacity assessment is an evaluation conducted by a qualified assessor to determine whether a person meets the legal test for managing property. The assessment focuses on the individual’s ability to understand relevant information and appreciate the consequences of decisions. Capacity assessments are often used when there are concerns about traumatic brain injuries, cognitive impairments, or other conditions that may affect decision making. According to the article, these assessments can be valuable because they provide objective evidence that helps resolve uncertainty and support appropriate legal decision making.

What happens if someone needs a guardian but does not have a Power of Attorney?

If an incapable person does not have a valid Power of Attorney, a court application may be required to appoint a guardian. A court appointed guardian can manage financial matters and make decisions that require legal authority. The process involves specific requirements under Ontario’s Substitute Decisions Act, including evidence of incapacity and a management plan. Because obtaining a guardianship order can take time, lawyers often take interim steps to protect the injured person’s interests while the application is being completed.

Can guardianship costs be part of a personal injury claim?

In some circumstances, guardianship related expenses may form part of a damages claim. The article notes that guardianship can involve ongoing legal, administrative, and professional costs, particularly in cases involving significant settlements or long term incapacity. Some individuals may require professional guardians or continuing legal assistance to manage their affairs. Where these future costs can be properly proven with supporting evidence, they may be considered as part of the overall assessment of damages in an appropriate case.

Should a personal injury lawyer work with an estates lawyer on guardianship issues?

In many cases, collaboration can be beneficial. Estates and guardianship lawyers often have specialized knowledge regarding guardianship applications, management plans, estate planning considerations, and issues involving ODSP eligibility. This can be particularly important in cases involving large settlements or long term financial management needs. For families in communities such as Barrie, Vaughan, or throughout the Greater Toronto Area, obtaining advice from both personal injury and estates professionals can help ensure that legal, financial, and guardianship issues are addressed in a coordinated and effective manner.