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COVID-19 shows why catastrophically injured should know about structured settlements

Tuesday, May 19, 2020 @ 2:57 PM | By Brittany Gillingham

Brittany Gillingham %>
Brittany Gillingham
More than 49,000 Ontarians are injured in auto accidents annually, and many of those people make claims against their insurers or other drivers as a result of those injuries.

The settlement of a personal injury claim can be a life-changing financial decision for any injured person, yet many will make that decision without having been informed of all aspects of the law and regulations that impact personal injury settlements before their settlement is finalized.

One example of this potential informational blind spot is a structured settlement — an option for the tax-free, virtually risk-free, guaranteed periodic payment of a portion of a personal injury settlement. Non-profit victims’ advocacy groups and the Ontario government have long known the value of structures, yet only a few hundred injured people benefit from them each year.

Structured settlements are a valuable tool for injured claimants interested in preserving their funds for long-term needs. With the endorsement of the Canada Revenue Agency (CRA), structured payments are not reported as income, so an injured person can receive their structured payments without jeopardizing their eligibility for many income-tested government benefits, credits and programs. In contrast, receiving a lump sum settlement may well impact eligibility.

Many seasoned personal injury lawyers understand the benefits of structures and inform their clients about them, but currently, the Law Society of Ontario (LSO) does not require any lawyer practising personal injury law to inform a client about the existence of structures prior to their accepting a settlement. In contrast, the LSO’s Rules of Professional Conduct require every real estate lawyer to inform their clients about title insurance prior to the closing of any real estate transaction.

The irony is that while title insurance can be purchased even after closing on a property, a structured settlement must be a term of settlement agreed upon by the parties before that settlement is finalized. Once a personal injury settlement has concluded absent a structure, a claimant is precluded from ever receiving one for that claim.

The value of structured settlements has never been more apparent than in our current climate: the economic fallout resulting from COVID-19. Once implemented, structured settlements are not impacted by future market losses or interest rate downturns.

A claimant who received a lump sum settlement without ever having been advised of the option of a structure may, at present, be forced to withdraw funds from an investment to meet their basic needs when the market is at its worst or may prematurely exhaust their much-needed settlement funds without the ability to earn an income in the future.

Seriously injured people are, by definition, vulnerable and are the least able to bear the risk associated with traditional financial products. It is with that reality in mind that CRA created structures more than 40 years ago.

COVID-19 has now demonstrated the real value of structures and why mandatory information about them should be provided to catastrophically injured people as part of the auto insurance reform. No Ontarian should ever make such an important decision without knowing that their lawyer, the claims professional handling their claim or the government is committed to ensuring they are fully informed.

With auto insurance legislation coming this fall, let’s be hopeful that lessons learned from COVID-19 will mean more catastrophically injured Ontarians can have access to this important resource. A key theme of the auto insurance reform is “Care, Not Cash,” and a structured settlement is exactly the embodiment of that mantra.

As Ontario starts reopening and shifting to economic recovery, it is now more important than ever that the minister of Finance, in leading the reform process, not forget the peace of mind that structures provide to thousands of Ontarians during the economic downturn that has followed COVID-19.

Brittany Gillingham is a principal at McKellar Structured Settlements Inc., a provider of structured settlements. She serves internal and external legal roles, serves as privacy officer and advocates for seriously injured Ontarians with the provincial government. Gillingham has been called to the bar in Utah and Ontario.


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