Over the last 10 – 15 years or so, many companies have commenced offering litigation loans to individuals who are involved in litigation, specifically in personal injury litigation. In essence, these companies will lend money to injured parties to pay for such things as ongoing medical treatment, rehabilitation, living expenses and disbursements. On the one hand, the main benefit of a litigation loan is that the injured person obtains funding to assist him while they go through the litigation process. On the other hand, there is a very high interest rate charged on the litigation loan advanced. Litigation loans can be and are often very expensive. For instance, the interest charge on litigation loans are often similar to or higher than rates charged by banks on credit cards (15%-26%). In addition to interest, some lenders charge administration and processing fees and charges.
It is not uncommon in cases of serious personal injuries that the injured person is unable to their financial obligations, unable to pay for medical treatment and support their families. In some cases, these injured party pressure the injury lawyer to accept lower offers than what would amount to fair compensation simply because they are in dire financial need and desperate to get their life back on track. It’s not surprising that seriously injured parties are unable to work due to their injuries and may feel that they have no option but to accept lower offers/compensation than what they would be otherwise be entitled to receive because they need to support their families and feel desperate and lost. In complicated personal injury actions, there are many issues that take a long time to resolve and the litigation process can be extremely slow, often taking many years to reach settlement or trial. Most injury victims cannot wait months or years to receive income.
While there is no doubt that obtaining funding to pay for ongoing medical treatment, disbursements, living expenses etc… can make a significant difference in an injured person’s daily life, the downside to litigation loans are the extremely high interest rates that chip away at the settlement funds that ultimately become available if the file is settled or successful at trial, and there is no assurance the defendant or their insurer will pay for that interest.
As indicated, one of the benefits of obtaining litigation loan is that it provides the person with the necessary funding for medical expenses, disbursements and living expenses and affords the client the luxury of time lowering the pressure of accepting a lower offer as a result of being desperate for money and avoid bankruptcy. In many cases, the litigation loan provides the necessary support and the client is less likely to accept a low offer believing that is the only way out of their financial problems. Litigation loans can also assist in hiring the various medical and non-medical experts the injury lawyer needs to advance the claim properly and maximize the amount of compensation the client will receive. If the litigation loan funds are used properly, it can assist the client in the litigation process, assist them in their daily living, promote healing and reduce some of the stresses associated with the consequences of suffering a serious injury.
In law, every injured person has an obligation to mitigate their losses and damages. A benefit in the litigation process when obtaining a litigation loan is that it allows the injured person to obtain the necessary medical treatment to heal or improve their medical condition and hence mitigate their losses and damages.
One issue that arises when obtaining litigation loans is whether or not the interest paid on the loans is a recoverable loss in the court action? Whether or not you, as an injured party, can claim interest on litigation loans as a head of damages or as a disbursement is still an open question in Ontario. Some cases out of British Columbia have allowed plaintiffs to claim interest on loans as a recoverable loss providing it was “necessarily incurred” for the conduct of the litigation. The Court of Appeal in New Brunswick also ordered one defendant to pay interest on the litigation loan that was used to fund disbursements on the basis that the expenses were “necessarily incurred” to secure the just determination of the proceeding and the interest rates were reasonable.
However, in Ontario the cases have not been favorable to plaintiffs claiming litigation loan interest. The legal test that appears to be developing is whether or not the interest incurred on the loan was reasonable, what the interest rate reasonable and whether the interest was necessarily incurred to advance the plaintiff’s case. It seems that a plaintiff in Ontario will have to prove that he or she could not advance or fund the litigation without the loan being obtained.
In litigation, there are often advantages and disadvantages to all steps in the proceeding. Litigation loans can assist the client in the litigation process especially whether his financial difficulty. In the end, the main disadvantage to litigation loans is the extremely high interest rates charged.
If you have been injured in an accident in Ottawa or anywhere in Ontario and require the assistance of a qualified and experienced personal-injury lawyer, our team of accident and injury lawyers offer free consultations and work on a no fee until you win basis. Our lawyers will gladly assist you with your matter and answer any questions you have without charge. Call us today at 613-315-4870.
Marc Quinn, Ottawa injury and accident lawyer firstname.lastname@example.org