What are the economics of hiring a lawyer for an ICBC claim & what are “taxable costs” for mva’s before April 1, 2019?

Taxable costs are a contribution towards your legal fees paid on final settlement or court award paid by ICBC. In British Columbia a claim has to be worth more than $35,000 before the claimant is entitled to receive any taxable costs.

This effects how much an injured person receives in their pocket in a settlement or court award. Lawyers are not permitted to charge percentage fees on taxable costs. So the entire amount goes to the client.

Please assume, for example:

  • you hire a lawyer who sues before the normal limitation date of 2 years (for adults) after your mva,
  • you recover damages in a settlement with ICBC of greater than $35,000,
  • this is after you have attended an “examination for discovery”,
  • your legal fees are $10,500 (30% of your damages settlement of $35,001),
  • you recover “taxable costs”of another $4,750 as part of your settlement,

In this example:

  • your net legal fees payable out of your damages settlement would be $5,750,
  • this is 16.4% of your damages award or settlement,
  • this is ignoring GST & PST payable on legal fees,
  • Calculation:
    • $10,500 fees less $4,750 taxable costs paid by ICBC = $5,750.
    • $5,750/$35,001 = 16.4%.

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Less than $35,000

In contrast, if an injured person recovers damages of less than $35,000 (the maximum jurisdiction of Small Claims Court in BC) in negotiations, then the law is that the claimant is not entitled to any “taxable costs” (contribution towards legal fees) from ICBC.

For example, if you eventually recover $34,000 in damages from ICBC after an examination for discovery, when legal fees usually rise, then:

  • ICBC does not have to pay you any taxable costs,
  • you would have to absorb out of your settlement your entire legal fees + taxes payable on your fees.
  • you would receive 66.4% of your damages settlement in your pocket.

This means that with a lawyer you would have to recover 150.6% as much as on your own just to get the same amount in your pocket if you recovered $35,000 or less . Here is the calculation:

  • 30% fees x $34,000 damages = $10,200 fees,
  • 12% PST & GST on $10,200 = $1,224 taxes on fees,
  • total fees and taxes = $11,424 (33.6% of $34,000),
  • balance of your damages award of $34,000 payable to you after legal fees & taxes on fees = $22,576
    • ($34,000 – $11,424).
  • This is 66.4% of your damages settlement.
  • 100% / 66.4% = 150.6%

This assumes that ICBC reimburses you all the expenses incurred by your lawyer related to your lawsuit. These are called disbursements since it is money the lawyer disburses. The major ones are usually expert treatment reports  & specialists hired to strengthen your case.

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Injury Level

For a person with serous injuries, which clearly will have long term consequences, it will be very obvious to a lawyer, early on, that the person’s claim will be worth substantially more than $35,000 and that the person will almost certainly recover taxable costs from ICBC.

For a less seriously injured person, deciding whether or not to hire a lawyer depends on their prognosis in the first few months. It is best to enter into negotiations once your future is clear. If you have a positive prognosis, it is likely not cost effective to hire a lawyer.

Three to five months after the accident, the injured person needs to evaluate their medical progress.   If the pain level of a less seriously injured person continues to rise to the moderate range (5 – 6 or more on a scale of 1 to 10) and treatment is not progressing it is quite likely that the claim for damages will eventually be worth more than $35,000.

A lawyer can give you advice on the specifics to your claim. Therefore, sometime within or soon after that period, would likely be a good time for the claimant to decide whether or not hiring a lawyer will be cost effective.

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Timing of negotiations

The optimal time to negotiate with ICBC may be some time from now if an injured person does not recover is not until:

  • his or her future is much clearer and
  • a specialist physician is able to make a long term prognosis (prediction) for legal purposes about his or her injury.

Specialist physicians are rarely willing to give a strong prediction of an injured person’s future if the person is still suffering symptoms until the person has exhausted all appropriate forms of treatment and at the very least two years have elapsed since the injury. So clearly it would not be optimal to negotiate if you are not better until at least 2 to 2.5 years after your injury.

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For further information on this issue please see our blog entitled:

Is it in my best economic interest to hire a lawyer now for my ICBC claim?