Plaintiff lawyers call for a fair return in medical malpractice cases

However, two related decisions from the Court of Appeal for Ontario released on August 15 – one involving the CMPA, the other a personal injury case in which an insurer represented the defence – give medical malpractice lawyers optimism that their clients will more often receive fairer prejudgment interest payments. They also hope that prejudgment awards will better reflect the returns plaintiffs could earn in the markets if they had invested the money themselves as legal proceedings dragged on.

“We now feel more empowered as plaintiff lawyers, based on these court of appeal decisions, to put into evidence what the CMPA’s rates of return have been,” says Toronto-based Sonia Nijjar of Neinstein LLP. “We’ve never been able to do that before – ask a judge to consider the rates of return the CMPA is getting even though it argues at the same time that the prejudgment interest it should pay out be much less.”

Aleks Mladenovic, a medical malpractice lawyer with TR Law in Toronto, points to the impressive returns the CMPA has made on its investments over the past several years.

In its 2023 annual report, the CMPA says, “With favourable overall market performance, our investment portfolio earned 8.5 percent in returns, helping us close 2023 in a strong financial position.” The 2021 annual report notes that the investment portfolio produced a positive return of 12.8 percent that year. In the annual report for 2022, when the CMPA lost money on its investments (about $200 million that year), it still boasted, “Over the past 10 years, we have achieved exceptional returns on our investment portfolio – earning a 7.96 percent compound annual return.”

The longer that award money stays tied up as legal proceedings continue, the longer that money can be used by the CMPA to invest in its own portfolio, says Mladenovic. “So, when I say to you that they have no incentive to settle cases early and efficiently, that’s not my opinion. That’s just math.”

Michael Hodgins, a lawyer at MD Lawyers and part of the team representing the plaintiff in the case involving the CMPA, says the medical malpractice bar, for a long time, has tried to put before the courts the argument that the returns on investments earned by insurers and others who represent defendants in court cases are relevant. “How can you not consider those returns? What the court of appeal has said is that not only is this relevant – you should consider them.”

Lawyers like Nijjar, Mladenovic, and Hodgins hope the two recent decisions will lead to prejudgment interest awards for plaintiffs closer to what the CMPA or insurers earn on their investments.

In August, the Ontario appeal court reversed a lower court decision in Henry v. Zaitlen, which said the plaintiff’s prejudgment interest should be set at 1.3 percent, not the five percent interest the plaintiff felt he was entitled to under the Courts of Justice Act (CJA). The CMPA was part of the defence in this case.

The trial judge’s prejudgment interest order came after a jury verdict in a medical malpractice case that awarded Sean Omar Henry $204,000 in non-pecuniary damages. It also awarded $100,000 to the estate of Henry’s wife, who passed away before trial, for loss of care, guidance, and companionship under the Family Law Act.

Typically, plaintiffs in personal injury and malpractice cases are awarded prejudgment interest for non-pecuniary damages from the date of the cause of action, in this case, July 2010, to the date of the verdict, which in this instance was December 2021.

The defendant, Dr. Marshall Zaitlen, had successfully argued in the lower court that the 1.3 percent interest he was asking for was justified because the prescribed five percent rate does not reflect the current “reality of market interest rates” and would “unjustly overcompensate” Henry.

However, the court of appeal reversed the lower court order, with Justice Lois Roberts saying on behalf of the appeal panel: “In my view, the trial judge effectively exercised his discretion based on the incorrect principles that there is no presumptive statutory prejudgment interest rate [of five percent].”

In the second case, Aubin v. Synagogue and Jewish Community Centre of Ottawa, the defendant’s insurer asked for the prejudgment interest rate on non-pecuniary damages to be set at 1.3 percent instead of the CJA-prescribed five percent rate in actions for personal injury cases. It also asked that prejudgment interest for past pecuniary damages be set at 0.8 percent.

The plaintiffs responded with a cross-motion, asking that prejudgment interest for non-pecuniary and past pecuniary damages be set at 8.46 percent, reflecting the average rate of returns on Aubin’s portfolio over the litigation period.

Justice Heather Williams of the Superior Court of Justice granted the defendant’s motion and dismissed Aubin’s cross-motion, setting prejudgment interest rates for non-pecuniary and past pecuniary damages at 1.3 percent and 0.8 percent, respectively.

Again, the appeal court overturned this decision, with Justice Roberts saying, “It was an error in principle for the trial judge to reject as irrelevant the consideration of the benefits that accrued to the [community centre’s] insurer by retaining the monies that should have been paid to the appellants.

“This was a relevant factor in this case that should have been taken into account in the trial judge’s consideration of the overall justice of the case. Fairness requires the court to look at myriad factors, including the legislative purpose of the prejudgment interest scheme earlier referenced to deprive the wrongdoer of the use of the monies that should have been paid to the plaintiff.”

The appeal court also noted that the defendant’s insurer during the relevant period had returns of double the five percent presumptive rate for non-pecuniary damages under the CJA and more than 10 times the 0.8 percent for past pecuniary damages.

“The respondents’ insurer had the benefit of the use of the funds that were ultimately paid to the appellants to compensate and support Ms. Aubin,” Justice Roberts wrote. 

“Based on the averaged rate of return, the insurer still retains a substantial benefit, even if the prejudgment interest rate is raised to 8.46 percent as requested by the appellants.”

In support of her argument, Aubin’s lawyers noted that the defendant’s insurer had an average 12.99 percent rate of return on its investments, much higher than the portfolios of Aubin and her spouse.

For its part, the CMPA makes it clear that it is not an insurer, though it effectively performs the same duties as an insurer in defending physicians. It describes itself as a “not-for-profit, mutual medical defence physician organization whose mission is to protect the integrity of physicians and promote safe medical care in Canada.”

In a statement to Canadian Lawyer, CMPA CEO Dr. Lisa Calder said that while the association does not comment on specific cases before the courts, “the issue of the rate of applicable prejudgment interest is an important one.

“Any potential change in practice, which has been considered previously in both judicial and policy circles, should be fully debated in terms of its effect on efficiency and timeliness while fairly protecting the reasonable interests of all concerned.” 

She added that the CMPA provides “timely and appropriate compensation to patients when it’s proven they have been harmed by medical negligence.” When it’s clear that the standard of care was not met, CMPA “works toward resolution as quickly as possible.” As for how doctors are reimbursed for a portion of their CMPA membership fees, this is “based on provincial contract agreements,” and the CMPA is “not a party to these negotiations.”

CMPA investment portfolio (net value)

2021: $5.92B, up $356M due to investment gains              

2022: $5.4B, a drop of $485M due to investment loss and member fee cuts        

2023: $5.6B, up $169M from 2022 due to $468M investment gains

CMPA investment portfolio returns 

CMPA by the numbers