The recent Court of Appeal decision in Hunks v. Hunks¹ draws favourable attention to one particular feature of the unrivaled protection offered by structured settlements for personal injury claimants in preserving their settlement funds for their intended purpose.

Donna Hunks had years earlier, shortly after her marriage, suffered significant personal injuries as a result of being hit by a pallet while shopping. Her settlement with the supermarket consisted, in part, of a structured settlement.  Years later she found herself in an equalization dispute over her structure payments in the family law proceedings that followed her separation.

In its decision, the Court of Appeal concluded that structured settlement payments are not property and, therefore, should not be included in Ms. Hunks' Net Family Property for purposes of equalization.  Instead, the Court of Appeal found that her structure payments are income (more closely analogous to disability benefits rather than to pension payments) that provide her with financial support because she cannot work.  Notably, the Court of Appeal observed that:

Annuities are usually purchased with savings. Not so the structured settlement annuity.  As we have seen an individual cannot purchase a structured settlement annuity.  Furthermore, structured settlements can only arise from a settlement for a damages
claim based on personal injury or death. Clearly, [Ms. Hunks'] S[tructured] S[ettlement] Annuity was not purchased from personal savings nor is it a form of savings.  [Ms. Hunks'] S[tructured] S[ettlement] Annuity, as a structured settlement, is designed to provide income to Ms. Hunks that she would have been able to earn, had she not been injured.

As welcome as the Court of Appeal's decision is, it is nevertheless limited by the particular fact situation at hand.  Specifically, of Ms. Hunks’ $571,051.88 personal injury settlement, only a relatively modest $16,500.00 was allocated toward future care expenses, whereas $302,100.00 (almost the entire amount of the $302,306.00 used to fund Ms. Hunks' structure) was allocated toward future income loss.

Given these facts, the Court of Appeal, having concluded that Ms. Hunks' structure payments were not property, had little choice but to find that they were income loss payments.  As income, they will be taken into account when calculating spousal support.

However, in many of the settlements of which structures form a part, the lion's share of the settlement is for future care damages.  It is those future care damages that are often funded by way of a structured settlement.  Future care structure payments (provided that they are not compromised by their use) should not be included in spousal support determinations.^2,3,4,5

How then, can counsel best try to avoid this structure "income" characterization in future separation and divorce cases?  Plaintiff counsel may wish to ensure that Minutes of Settlement clearly outline how much of the recovery is for future care damages; that the structure payments are funded by same; and that they are intended for a claimant's future care expenses.  Further, counsel may wish to caution a claimant to use future care structure payments only to pay for future care expenses, so that a future Family Court could not find that structure payments are being put to a non-future care use, such as paying for general family expenses.^6,7  Finally, if future income loss damages are also to be structured, separate future care and future income loss structures may be advisable so as to clearly identify the differently purposed structure funds, so that they are clearly distinguished and not all treated as income.

To view the decision click here: http://www.ontariocourts.ca/decisions/2017/2017ONCA0247.pdf
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1. Hunks v. Hunks, 2017 ONCA 247 (CanLII)
2. M.K. v. R.A.S., 2004 BCSC 1798 (CanLII)
3. Rivard v. Hankiewicz, 2007 ONCJ 180 (CanLII)
4. Jennifer Lyn Mason v. Daniel Mark Mason, 2013 ONSC 5974 (CanLII)
5. Lukovnjak v. Weir, 2016 ONSC 6893 (CanLII)
6. Fequet v. Fequet, 2008 CanLII 30284 (ON SC)
7. Tookenay v. Laframboise, 2015 ONSC 2898 (CanLII)