Introduction
In Ontario motor vehicle litigation, mediation has become an indispensable tool for resolving complex claims in an efficient, cost-effective, and humane manner. Yet, among the many strategic decisions facing counsel, few are as fraught as the question of whether to mediate a tort claim before a catastrophic impairment (CAT) determination has been made under the Statutory Accident Benefits Schedule (SABS).
This question becomes even more complex in cases involving statutory third-party insurers who have denied coverage to their insureds, thereby limiting their exposure to the statutory minimum of $200,000 under s. 258(14) of the Insurance Act, and where plaintiffs invoke underinsured motorist coverage through the OPCF 44R endorsement.
This blog commentary explores these overlapping considerations by examining a recent case I mediated involving all three elements: a tort claim involving minor property damage, a plaintiff alleging a CAT impairment due to psychological deterioration, a statutory third-party insurer, and a disputed underinsured motorist claim. The factual matrix of that case serves as the basis for this analysis and offers critical insight into the pros and cons of mediating in “CAT limbo.”
A Real-World Example
The case I recently mediated began with a rear-end accident that appeared minor from a property damage perspective. However, the plaintiff had a history of psychological and family challenges that allegedly left them vulnerable as a potentially thin skull. Within months of the incident, the plaintiff began manifesting symptoms of major depressive disorder, cognitive dysfunction, and chronic pain syndrome. A catastrophic impairment (CAT) determination had been initiated but was still pending at the time of mediation.
Complicating the matter further, the defendant’s insurer denied coverage due to alleged non-cooperation from its insured. As permitted under s. 258(14) of the Insurance Act, the insurer added itself as a statutory third-party, limiting its liability to the $200,000 statutory cap. In response, the plaintiff amended the statement of claim to add their own insurer under the OPCF 44R endorsement, asserting a claim for underinsured motorist coverage.
Prior to the mediation, the statutory third-party insurer argued that the accident benefits (AB) insurer—who was also the underinsured motorist carrier—should be invited to participate. Plaintiff counsel resisted. Ultimately, the mediation proceeded without the AB insurer, but the session ended in adjournment. The parties recognized that meaningful progress could only occur once the CAT determination had been completed and further AB documentation became available.
This real-life scenario exposed the intersection of medical uncertainty, procedural complexity, and strategic timing—a combination that increasingly defines high-stakes tort litigation in Ontario.
Legal Framework
Under O. Reg. 34/10 (SABS), a person may be deemed catastrophically impaired if they meet any of several serious criteria, including:
- Paraplegia or tetraplegia
- Loss of vision in both eyes
- Severe impairment of mobility or use of limbs
- Brain impairment with Glasgow Outcome Scale 2 or 3
- A whole person impairment rating of 55% or more
- Marked or extreme psychological impairment
CAT designation increases the AB med-rehab ceiling from $65,000 to $1,000,000, and unlocks further entitlements. In tort, a CAT finding bolsters the plaintiff’s credibility, enhances claims for general and future care damages, and increases the chance of meeting the threshold under s. 267.5(5) of the Insurance Act.
Statutory third-party involvement under s. 258(14) permits an insurer to deny coverage while still defending the action and limiting its exposure to $200,000. This defence creates added uncertainty: is the insurer truly at risk, or are they “participating defensively” while awaiting a judicial declaration?
The OPCF 44R endorsement provides additional protection for insureds injured by inadequately insured tortfeasors. Yet, as Ontario courts have held (e.g., Maccaroni v. Kelly), underinsured exposure only arises if the tortfeasor’s policy is legally reduced—a factual and legal issue that may not be resolved before mediation.
Case Law Guidance
Ontario case law provides meaningful insight into the strategic and evidentiary implications of mediating tort claims before a catastrophic impairment (CAT) designation has been rendered. While no single case definitively resolves the issue, a growing body of decisions offers clear cautionary signals about the risks of early resolution when the plaintiff’s medical and legal status remains unsettled.
In Liu v. 1226071 Ontario Inc., 2019 ONSC 5405, the trial court initially found that the plaintiff, who suffered a serious brain injury, did not meet the threshold for catastrophic impairment. However, on appeal, the Ontario Court of Appeal clarified that the legal test for CAT cannot be reduced to a rigid checklist divorced from the underlying medical realities. The appellate court emphasized that the adjudicator must consider the full medical evidence in light of the statutory definition, implicitly warning that premature conclusions about CAT status—especially in the absence of fulsome expert input—can lead to flawed outcomes. This case underscores the need for parties to approach mediation with care if CAT remains an open question, particularly because an eventual CAT designation could significantly increase the plaintiff’s entitlement to future care damages.
The Court of Appeal’s decision in Walker v. Ritchie, 2006 CanLII 17745 (ON CA), although primarily addressing costs, speaks more broadly to the evidentiary weight that robust medical opinions carry in the quantification of future losses. The plaintiff in that case sustained severe injuries, including brain trauma, and the court reiterated the foundational principle that future care and income loss claims must be supported by solid expert analysis. The case reinforces that mediation should ideally proceed only after expert opinions—including any addressing CAT—are available, so that settlement negotiations are grounded in reliable medical forecasts rather than conjecture.
In Arnone v. Best Theratronics, 2010 ONSC 2127, the court highlighted the challenges associated with valuing general damages and future income loss where the plaintiff’s long-term prognosis had not yet been medically defined. Although not a CAT case per se, the judgment speaks to the inherent difficulty of fair compensation in the absence of clear prognostic data. The implications are directly relevant to mediations conducted in “CAT limbo,” where uncertainty about the plaintiff’s trajectory can paralyze negotiations or lead to settlements that fail to reflect the full scope of the claim.
Mediating prior to a CAT determination is a legally permissible but strategically risky undertaking. They highlight that judicial scrutiny often focuses on whether the parties had access to reliable and complete medical evidence when attempting to settle. Mediation conducted without this evidentiary foundation risks either undervaluing the claim or failing to engage parties in meaningful resolution. For counsel, and for mediators alike, the message is clear: timing matters, and premature negotiation in the face of diagnostic uncertainty can have lasting consequences.
Strategic Pros and Cons of Mediating Before CAT
Mediating before a CAT determination offers both potential advantages and significant pitfalls. On the one hand, early mediation can provide a valuable opportunity to resolve a claim—either in whole or in part—before litigation costs escalate or positions harden. This is particularly attractive in cases where liability is clear or where the parties share mutual interest in early closure. Structured settlements or partial agreements on heads of damage may be facilitated even in the absence of a final CAT decision.
There are also efficiency gains to be had. Clients benefit from reduced legal fees, earlier access to settlement funds, and relief from the emotional burden of ongoing litigation. Counsel may strategically use early mediation as a discovery tool or as a reality check for clients on both sides.
On the other hand, mediating too early carries real risks. Chief among them is the potential undervaluation of the plaintiff’s future care and general damages in the absence of a confirmed CAT designation. If the CAT determination ultimately supports the plaintiff’s case, the damages award could be substantially higher than what was contemplated at mediation. Settling prematurely can therefore compromise the plaintiff’s long-term needs.
Furthermore, the outcome of the CAT assessment can significantly impact whether the plaintiff meets the threshold under s. 267.5(5) of the Insurance Act. Without clarity on this point, defendants may argue the claim is non-compensable, reducing bargaining power and limiting realistic settlement potential. There may also be exposure to collateral benefits clawback arguments and disputes over whether OPCF 44R coverage is even engaged.
When the accident benefits insurer is also the plaintiff’s underinsured motorist insurer, as is often the case, internal coordination between tort and AB adjusters is critical. Plaintiffs can expect a unified front resisting generous valuation until all facts are in.
Practical Takeaways for Counsel
When considering mediation prior to a catastrophic impairment determination, counsel must first assess whether the medical file is sufficiently developed. This includes ensuring that all relevant diagnostic reports, treatment summaries, and any preliminary assessments related to the CAT criteria have been obtained and disclosed. Mediation without this foundation risks speculation, rather than informed negotiation.
Where appropriate, counsel should explore the possibility of convening a global mediation that includes both the accident benefits insurer and the OPCF 44R underinsured motorist carrier. Doing so enables the parties to address all potential sources of compensation in one coordinated session and prevents the inefficiencies of piecemeal negotiation.
Even where mediation proceeds without a confirmed CAT status, counsel can protect their client’s interests by crafting conditional minutes of settlement. These agreements may include clauses that permit supplemental payments if a CAT designation is subsequently confirmed, preserving the plaintiff’s access to full compensation.
Finally, caution must be exercised around valuation. Defence counsel will typically push for a non-CAT valuation if the designation is unresolved, which may significantly understate the plaintiff’s long-term needs. Settling too early and without appropriate safeguards can lead to irrecoverable compromises—particularly where the true extent of impairment has not yet been medically validated.
Conclusion
Mediating a tort claim before a CAT determination has been finalized demands not only delicacy and insight, but a comprehensive understanding of the legal, medical, and procedural complexities at play. The temptation to settle early—particularly when a plaintiff is facing financial strain, psychological distress, or long procedural delays—is both understandable and common. However, as this blog has explored, proceeding to mediation without a clear medical picture introduces significant risks: potential undervaluation of claims, incomplete understanding of future care needs, and exposure to strategic missteps regarding coverage limits and threshold arguments.
Through this reflection, one of the clear takeaways is that timing and preparation are everything. The presence or absence of a CAT designation can fundamentally alter the parties’ valuation frameworks and risk tolerances. In cases involving layered insurer dynamics—such as statutory third parties operating under a s. 258(14) cap and concurrent claims under the OPCF 44R—the mediation table often becomes a venue for tactical positioning rather than productive resolution. It takes structure, patience, and experience to guide the parties past these barriers.
At Patey Mediations, we bring more than just procedural neutrality to the table. As a mediator with deep experience on both the plaintiff and defence sides of complex personal injury litigation, I understand the pressure points that influence settlement decisions on each side. That perspective allows me to cut through posturing and encourage principled negotiation. Working in tandem with my Online Dispute Resolution (ODR) coordinator, Dan, we ensure that the process itself is tight, well-organized, and tailored to the unique variables of each file—whether that’s coordinating the attendance of multiple insurers, identifying where the gaps in evidence lie, or structuring conditional minutes of settlement to reflect ongoing medical or procedural uncertainty.
Mediation can still be productive even when final determinations are pending. Even when a file is in diagnostic limbo, a well-timed session can be used to map out settlement frameworks, identify deal-breakers, and soften adversarial positions in anticipation of a future reconvening. In our experience, laying the groundwork in this manner accelerates final resolution once the medical and legal fog has lifted. The key is knowing when to push forward, when to pause, and how to structure the process to preserve the value of the claim while keeping parties constructively engaged.
Ultimately, mediation in this context is not about rushing to settlement, but about staging resolution in a way that reflects both the present uncertainty and the future potential of the claim. Done right, it can turn a stalled litigation into a file on the cusp of closure.
Disclaimer: This blog is for informational purposes only and does not constitute legal advice. For guidance specific to your file, please consult a qualified lawyer.