Settlements and You: A Primer

Pipella Law

June 1, 2017


When you are the victim of a debilitating or otherwise life-altering accident, successful personal injury litigation does not guarantee an end to your issues—lump sum settlements can quickly disappear, large payouts affect your eligibility for benefits programs, and the Alberta government, after heavy lobbying by the insurance industry, have expanded the definition of “minor injury” to include some very serious injuries. Any injury that is found to be a “minor injury” receives no more than the cap amount for pain and suffering. The capped amount for “minor injury” is currently $5,020 for 2017 accidents and less for accidents in earlier years.

”Minor” Injuries

As a direct result of protracted lobbying by the insurance industry, Alberta capped general damages for pain and suffering for minor injuries arising out of motor vehicle accidents as of October 1, 2004. The current Alberta cap is $5,020 for 2017 motor vehicle accidents (the amount increases for inflation each year, the 2016 cap was $4,956). Unfortunately, due to broadly written legislation, sprains, strains, and whiplash injuries that do not result in “serious impairment” are capped—even if your supposedly minor injury has long-term ramifications to your health, career, and/or personal life.

The indignity of being told that your pain is minor and unworthy of proper compensation may be avoided—proper legal representation can ensure that your case is successfully litigated so that you get the compensation you deserve. You may be able to get a settlement, or judgment, well over the cap amount with good legal advice and proper medical documentation. Remember that there are other heads of damages including loss of income, special damages, loss of housekeeping capacity and future cost of care that are not capped.

Structured Settlements: Secure, Guaranteed, and Tax-Exempt

Most personal injury actions are resolved with the payment of a lump sum amount by the at-fault insurer. Innocent victims who suffer catastrophic brain injuries, or other serious injuries including quadriplegia, paraplegia and hemiplegia, which impair their lifetime income earning capacity, will often receive a very large lump sum settlement. While the appeal of a single large payout is understandable, it is a classic case of short-term gain for long-term pain—studies show that within 5 years of receiving a large financial windfall (lottery win, inheritance, personal injury settlement, etc.), 90% of recipients have nothing left.

There is an alternative to accepting a lump sum payout, an injured Plaintiff can use their settlement proceeds to purchase a tax free annuity called a “Structured Settlement” which will enable them to get a steady stream of income for life in the form of monthly payments. Once your settlement funds are placed in a Structured Settlement, it cannot be collapsed into a single payout, meaning that you are provided with a guaranteed, secure amount of income that cannot legally be altered for the term specified in the Structured Settlement. At the time of settlement, we advise our clients to invest the lump sum (or a portion of it), into a “structured settlement” and receive tax free monthly cash payments for life, indexed to inflation, (meaning the payments will increase with time).

In addition to the financial security of guaranteed monthly payments, the tax-free nature of structured settlements allows you to access, or continue to access, other government benefits, including Alberta’s Assured Income for the Severely Handicapped (AISH) program. A key component of the AISH eligibility evaluation is taxable income—because structured settlements are non-taxable, you are able to receive income from both your settlement and programs like AISH.

A properly structured settlement means that you will get the financial compensation you are owed, in a stable, secure manner that will not limit your access to other financial aid. Structured settlements are incredibly safe investment vehicles but, due to this safety, the investment return is very modest. You should have a detailed discussion with your lawyer, the structured settlement advisor and your own financial advisors before placing all or some of your settlement proceeds in a structured settlement. Due to Pipella Law’s long history and our representation of many catastrophically injured Plaintiffs, we have extensive experience with structured settlements so can assist you in making the decision as to whether to place all, or part of your award, in a structured settlement. We work with many firms including Henderson Structured Settlements, McKellar Structured Settlements, and Smith Structured Settlements.

You deserve dignity, respect, and compensation for injustice. You deserve someone on your side that can help you navigate the world of structured settlements. You need someone who can help you earn the financial security you are due when tragedy strikes. You should never have to suffer due to the careless actions of others.

If you have suffered a personal injury, contact the personal injury lawyers at Pipella Law today to learn how they can help you recover from this traumatic experience.