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Blood Injury Compensation Scheme

Adopted on February 7, 1995 by the Board of Directors (amended May, 1996)


General movement toward alternative compensation scheme:

Given all the faults with the tort system, where injury or wrong to an individual or group is assessed in court, and the looming medical malpractice crisis in many Commonwealth countries, it is not surprising that there has been discussion and some implementation of other types of compensation schemes for medically-related injuries.

Even some lawyers agree that legal settlement of medical malpractice claims is often not in the best interests of those who claim a wrong, defendants, or the public. One lawyer derides the tort system by stating that 'success or failure often turns on the skills of the lawyer...the attractiveness of the plaintiff, the perceived wealth of the defendant...1

More specific problems with the existing tort system tie into the particular difficulties faced in medical malpractice cases, and more particularly here, medical malpractice cases involving the utilization of contaminated blood and blood products. The finding of fault in these cases is heavily dependent on the quality and quantity of expert evidence which one can bring to bear in a lawsuit. The ability to lead such evidence is often a matter of money, time, and in-depth research into the underlying medical facts. Most who might claim for a medical wrong or injury are not in a position to conduct such in-depth research, and those who are weak with respect to even one of these factors, has a difficult time in presenting a successful case.

With specific reference to the Canadian blood system, there is also a problem in finding unbiased experts in a system that has traditionally been a quasi-monopoly. Moreover, even with the proposed functional changes to the blood system, it will still by its very nature be a relatively small closed system with extremely few informed experts within the system who would be willing to testify against the decisions reached by either themselves or their colleagues in that system.

Moreover, in wrongful injury suits one can still face the problem of not being able to prove a practice is 'negligent' simply because such a determination is usually reached by looking at how other medical experts in the same situation reacted. Put simply, this can lead to a situation where if the prevailing standard of the industry falls short in some large part, this will not be held to be 'negligence' as the defendant did in fact meet the prevailing standard of care at the time. To reduce this argument further, it can be put the following way 'if everyone is doing it, it is by definition, not negligent'.

In short, it can be argued that legal cases involving medical malpractice, with respect to the blood system, are extremely complicated cases to argue, and that they are not ideally suited to our traditional tort system. It is our submission that a system, such as the one existing now, which focuses on the determination of negligence can be inappropriate for complicated cases of this nature.

Much of the impetus for an altenative compensation scheme arises out of the difficulties our HIV-infected members experienced in attempting to gain compensation for the injury done to them in the mid-1980's. HIV was devastating in that most of our members lacked the energy, resources and more importantly, the time, to enter a traditional wrongful injury suit in search of compensation. Compensation gained after the initiation of a lawsuit did little good if the wronged person was dead before he ever saw any of it. Secondly, neither the continuing stress of 'proving your case', nor the resultant pressure to divert funds from drugs, therapies and dietary supplements to legal costs was likely helpful in any attempt to maintain good health. Finally, dying individuals might have spent their remaining life in more productive pursuits than in chasing numerous defendants through the court system, in a process where nothing was guaranteed. It is worth noting that even though a number of our members pursued the legal option, the vast majority proceeded to drop their lawsuits once an alternative compensation mechanism was proposed.

General goals

Of key importance is the fact that there exist several different no fault systems, each incorporating varying degrees of 'fault' (please see the section ahead on types of 'no fault' for details). In general, there are three major goals that can be identified in wrongful injury lawsuits: the distributive justice goal, the corrective (or retributive) justice goal, and the deterrence goal. Ideally, of course, all three goals would be achieved by the blood injury compensation system we are proposing.

A. Distributive justice
Under the distributive justice goal, of key importance is the well-being of the victim and the community (as opposed to individual) responsibility for the injury. That is to say, each individual's well-being is the collective resposibility of the community at large: for example, damage to an individual's health by a medically approved procedure, such as a vaccination, would be compensated by a financial package to the individual with no finding of direct fault on the part of any individual medical doctor, medical institution (a hospital or, for example, the Canadian Red Cross) or government agency. This goal is 'future-looking' and focuses on meaningful compensation to be provided at low cost.

B. Corrective (retributive) justice
Corrective justice emphasises the fact that an individual's autonomy has been violated by another's intentional or negligent wrong-doing and the fact that such individuals must be restored to their previous (pre-injury) status. That is to say, any injury suffered by an individual will be compensated for in some way by the individual or organization found legally responsible for that harm. This goal focuses on individual responsibility and is 'past-looking' in nature.

C. Deterrence
The deterrence objective focuses on cost minimization associated with injury. That is to say, an individual injury or wrong is compensated for with an amount large enough to scare any future potential wrong-doers from attempting the same act. It is a 'future-oriented' goal in that it induces potential injurers to avoid high risk activities. One note of caution must be exercised however, that we do not replace 'one flawed system with another in enthusiasm for change borne of dissatisfaction.'2 Carolyn Sappideen illustrates that advocates of (more or less pure) no fault liability regard the issue of equity (a distributive justice goal) between injured patients as critical. By definition, any no fault system strongly promotes the distributive justice goal. Although a no fault system is not opposed to the goal of deterrence, it would appear to seriously lack any strength to fulfil the corrective justice goal. Emphasis on 'fault' leads to a corrective justice ideal, which at its core, stresses the one-to-one (the 'eye for an eye') nature of the dispute between private parties that is separated from the larger concerns of society.3 Of course, the specific nature of the scheme is vital in order to be able to assess how well the three goals of distributive justice, corrective justice and deterrence are met. According to Richard A. Schmalz, 'every compensation system is a loss distribution mechanism...a more or less organized way of providing compensation for persons who are injured and then shifting the costs to others instead of leaving them where they first fall.'4

Specific no-fault sytem design goals

Keeton5 has suggested some very broad goals regarding the design of a no fault system

A. be equitable as between those who receive its benefits, those who bear its costs, among the different beneficiaries and among the different cost bearers;

B. contribute to the protection, enhancement and appropriate allocation of human and economic resources;

C. compensate promptly;

D. be reliable and predictable;

E. distribute losses;

F. be efficient in minimizing waste and cost;

G. avoid inducements and, if feasible, provide deterrence; and

H. minimize risk of exaggeration, fraud and opportunity for profit from such conduct.

Types of no-fault

A. Comprehensive no-fault

At the polar extreme from the wrongful injury lawsuit lies a comprehensive no fault system - a system which bars access to the common law system. Ideally, a pure (comprehensive) no fault system would provide compensation to victims, with a minimum of trauma and with greater speed than the present system. Comprehensive no fault would involve all medical injuries. There would be minimal notions of fault entailed.6 That is, finding of fault would be minimalized, and perhaps fault would never be assigned to any individual or organization. It has one simple goal: 'for every injury there should be compensation, regardless of circumstances, wholly without regard to fault of the injurer or person injured...We would not be trying directly to alter or improve the conduct or habits of individuals...but to raise the quality of life generally.'7 This is a very 'needs-based' concept. The focus of a comprehensive no fault system would be on the distributive justice goal. A pure no fault scheme would mean moving away from the wrongful injury suit-related corrective (retributive) justice ideal. A pure no fault system would also imply a movement away from the wrongful injury suit-related deterrence ideal which is an efficiency-oriented goal. That is, the deterrence ideal is effecient because it prevents, hopefully, such wrongful injury related suits in the future.

B. Neo-no-fault
Neo-no fault (i.e., 'new' no fault) encourages injured patients to settle claims in accordance with their net economic losses. This form allows for the injured party to proceed via the common law system if no offer of compensation is made.8

C. Administrative no fault
Administrative no fault also exists and would involve some modifications to the wrongful injury system. It provides compensation for net economic losses. Once an offer is made, 'the plaintiff would be foreclosed from suing for non-economic losses, and the defendant would be obliged to cover the plaintiff's economic losses as long as the injury persisted...Experienced and expert adjudicators employed by specialized medical boards'9 would review claims expeditiously. That is, a patient wrongfully injured would be prevented from suing for other damages once the defendant had made an offer of compensation for economic losses.

D. Designated compensable event (D.C.E.) Schemes
Designated compensable event schemes also exist, which 'provide no fault compensation for specific types of medical injuries, whether narrowly defined...or as part of a more general scheme for compensating medical injuries.'10

E. Elective no fault
Finally, an elective no fault system allows the injured to choose between a wrongful injury suit and a no fault option.11 Please note that one of our recommendations will be a proposal that this be the type of system implemented regarding injuries incurred through the blood supply.

Elective no fault allows for the deterrence objective to be fulfilled (at least with regards to the most clear-cut pro-plaintiff cases). This ensures that individuals or organizations causing injury will invest enough resources to prevent injury in future (because the wrongful injury suit system acts like 'a stick').

There are examples of no fault schemes which completely bar wrongful injury action such as the Virginia Birth-Related Neurological Injury Compensation Act, which is a pure no fault system and which therefore has no element of 'fault' directly associated with injury. Under that Act, according to David Duff,12 the individual or organization causing the injury is not capable of influencing the outcome. However, he points out that 'a knowledge of the person or persons causally responsible for the injury is essential to the identification of the entity (or entities) to be deterred.'13 In other words, in order for deterrence to happen, the individuals or organizations at fault will have to be acknowledged and named. He goes on to say that there is no way under the Virginia Act to measure the degree to which injury is avoidable under a suitable standard of medical care and therefore no way to measure the proper degree of injury prevention that was possible. In contrast, opening the door to the wrongful injury system under an elective no fault system, would directly link individual responsibility to injury and would therefore clearly induce deterrence in future.

Richard Mahoney discusses New Zealand's comprehensive no fault system, which effectively bars wrongful injury action and thus hurts particularly those victims who would have been able to (clearly) ascribe fault to another entity. He states that 'there is no theoretical or practical impediment to a 'dual' system which would allow for the continued existence of personal injury litigation for such plaintiffs alongside the scheme, thereby preserving traditional rights in tandem with those afforded to the no-fault victim.'14 In other words, he suggests that there is no reason why wrongful personal injury lawsuits cannot exist alongside the no fault scheme and thus preserve traditional legal rights along with those rights provided to a no fault victim.

Moreover, one advantage of elective no fault is that, unlike a comprehensive no fault scheme, valuable resources will not be wasted on claimants wanting to keep clear-cut cases out of a pure no fault scheme (again, one which bars worngful injury action completely) and potential defendants wanting to keep clear-cut cases within the no fault scheme (to avoid being sued).15

It is important to realize that a no fault system is being proposed here for reasons having nothing to do with the cost-control rationale often advanced in other situations. In the present case we are not arguing that escalating malpractice claims are threatening to bankrupt the providers of blood and blood products. Rather, an alternative compensation plan is being proposed as a compassionate plan to ensure that injured blood product recipients have an alternative that can provide quick and adequate compensation through a relatively non-adversarial process.

There should also be recognition that the wrongful injury system is not always inappropriate for people injured through the use of blood and blood products. There were, and there always will be, some individuals who because of their financial resources, or desire for retributive justice, or good state of health, or a relatively simple, factual situation, are in a position to pursue the traditional personal injury remedy. For all its failings, it does tend to be more generous and to provide a feeling of retributive justice, a feature often lacking in other alternative systems. In sum, individuals should have the right to pursue the remedy that is best for them, given their circumstances. While it is likely that the existence of a no-fault compensation system would discourage utilization of the regular judicial system, this should by no means become the raison d'etre for the creation of the alternative system.

For these reasons, we are strongly recommending that any proposed alternative compensation mechanism be an elective no fault system. It is absolutely essential that the traditional wrongful injury remedy be preserved for those individuals who might wish to pursue this option rather than an alternative compensation mechanism. Moreover, as will be proposed in more detail, the existing judicial system should also continue to play an important role as a mode of appeal on certain issues for those who did proceed under the alternative insurance scheme.

Design of no-fault

The question of cost in the design of a system is one of the most significant barriers to any new scheme. It is true that a no fault system may save on administrative costs compared to the present system of personal injury suits, as many such schemes have restrictions and CHSedules regarding non-financial losses, and most involve compensation based solely on causation.16 However, this could very well be outweighed by the sheer number of uncompensated victims of medical misadventure being compensated under a no fault system. Obviously, being more specific as to who qualifies for compensation in order to limit the numbers being compensated has to be weighed against the possibility of being too restrictive, a situation which would leave too many uncompensated. As with many important decisions, trade-offs (such as cost vs. equity) are inherent in the design of a no fault scheme.

One of the most difficult aspects of design is thus 'along with the level of benefits, the definition of the boundary line which distinguishes compensable from non-compensable results within the pool of claimants determines how much aggregate compensation will be paid.'17 Needless to say, moving in the direction of a comprehensive system, ceteris paribus, is likely to increase total costs.

In those circumstances where the insurance fund finds that no causal link is present, the applicant would have the right to appeal such a determination to a court of competent jurisdiction, for a finding in relation to that issue only.

Appeals would proceed as any case under a wrongful injury lawsuit albeit without the necessity of having to prove negligence.

D. Access to the wrongful injury (tort) system

As stressed in the section describing elective no fault, it is strongly recommended that the blood injury compensation scheme be an elective no fault scheme in which individuals injured through the use of blood, blood products, or their substitutes in the Canadian medical system have the choice of applying for compensation for their injury through the blood injury compensation scheme or alternatively, proceeding with their claim through the Canadian tort system. Should the injured individual accept benefits from the blood injury compensation scheme, they would automatically subrogate their rights to Transfusion Canada to bring suit against any negligent defendant.

It is further proposed that the claimant should be entitled to a proportion (i.e., ten per cent) of any claim successfully litigated by Transfusion Canada. The ten per cent received by the victim would be independent of any compensation received through the blood injury compensation scheme. Allowing Transfusion Canada to sue on behalf of the victim after that claimant has accepted compensation from the blood injury compensation scheme would satisfy the deterrence objective of wrongful injury law as it would directly link the injury to the injurer (i.e., it would determine fault). Thus, deterrence would be achieved in concert with the distributive justice goal since the claimant would simultaneously be receiving compensation through the blood injury compensation scheme. Moreover, by providing the claimant with a portion of a successfully litigated claim, the claimant would be provided with an incentive to cooperate in the litigation process as they would be compensated (by receiving ten per cent of the award) for their time and effort (provided Transfusion Canada wins, of course). It also seems equitable to provide the injured party with a share of an award which, but for their injury, would not have been awarded to Transfusion Canada and it would partially compensate in those situations where the court award is in excess of what Transfusion Canada pays the claimant.

E. Quantification of damages/determination of levels of compensation

The traditional legal methods of ascertaining costs should be used, and the potential recipient should have access to legal appeal if it is felt that the Insurance fund has inadequately assessed those costs. (In this way, the wrongful injury system acts as a 'competitor' to the proposed blood injury compensation scheme and vice versa).

Of key importance is the fact that under the new scheme, compensation levels would be based on the state of the health of the injured individual at the time of application. Moreover, either Transfusion Canada or the individual may make an application to vary the amount of the award if medical circumstances change. Therefore, if for example, the health status of the individual worsens, they may come back and apply for a higher level of compensation. (This is more flexible than the wrongful injury system in that compensation under the proposed scheme is more directly related to the continuing health status of the injured party.)

It is recommended that in most cases, payments be made to successful claimants on a periodic basis (i.e., once a year - as in an annuity). These payments should be indexed to inflation.

It is further proposed that there be a minimum level of compensation (i.e., $25,000 per year - 1995 dollars) as well as a maximum level (i.e., $100,000 per year - 1995 dollars). A capped amount for intangible losses such as pain and suffering might be included in the level of compensation as well.

There is an important caveat to this: if a claimant can show at any time that their life expectancy has fallen below five years, then they should be entitled to a lump sum payment (as expeditiously as possible) from the fund.

Therefore, lump-sum payments would be made if an individual can show their life expectancy has fallen below five years as well as for pain and suffering. Periodic payments would cover all other situations.

F. Timing of compensation

The legislation should dictate a time limit of three months to process a claim.

G. Geographic scope

The scheme should be available to all Canadians who were injured in Canada.


In short, it is proposed that an elective blood injury compensation scheme be implemented which includes: the proposed vital tie between the safety of the Canadian blood system and the compensation fund; the fund's availability to all Canadians injured in Canada through the use of blood, blood products, or their substitutes without the need to prove negligence; a right to appeal through a court of competent jurisdiction; access to the wrongful injury system with claimants accepting compensation from the fund subrogating their right to sue, to Transfusion Canada; damage assessment based on traditional legal methods but based on the health status of the claimant at time of application (with health status being updated as required); and finally, a maximum limit of three months for a claimant to receive compensation for their injury from the blood injury compensation scheme.

Appendix A: A comparison of foreign injury compensation schemes

The Swedish System

For more than a decade, an elective-based no fault medically-oriented scheme has been in place in Sweden, which according to the Pritchard Report, works well.20

The Swedes have two distinct schemes: the Patient Insurance scheme since 1975, and the Pharmaceutical Insurance scheme since 1978. They are voluntary schemes (not imposed by statute) and are universal (covering all aspects of health care and pharmaceutical products available in Sweden).

Only under the Patient scheme are patients allowed to sue in tort (wrongful injury) if they wish. The main principle of both schemes is that it is not necessary to prove negligence, only causation.21 To keep costs low, there are a number of exclusions.

The Patients scheme covers injuries caused in the course of medical treatments (not including those suffered due to public health measures). Under the Pharmaceutical scheme, compensation is awarded if, on the balance of probability, the victim can show he suffered an injury caused by a drug. Payments do include pain and suffering, and time off work.22

There is a cap on compensation (in 1987 dollars) of approximately $600,000 - with average payments being about $7,000 for the Patient Insurance scheme and $10,000 for the Pharmaceutical scheme.23

It must be emphasized that Sweden has 'what is probably the most extensive and generous social system in the world.'24 The compensation schemes top up these substantial benefits available to all Swedes. Any payments for economic loss are made on an annuity basis (not lump sum). Thus the bulk of payments are for non-economic loss (i.e., pain and suffering); they reached a maximum in 1987 of about $80,000. Advisory committees set standards for compensation for pain and suffering, while other damages are assessed according to legislation, theoretically they should be roughly equivalent to the award in a successful tort action.25

The system is very expeditious. 'It takes on average about four months from the moment an injury is reported to the time the paperwork is completed... Eighty percent will have received a decision within three months.'26 Also, there are no legal costs involved, whether or not the claim is successful.

Regarding disadvantages, under both schemes, there is some criticism that they fail to meet the expectation of providing damages available through successful litigation. The schemes do limit compensable incidents. Despite the full access to information before and after treatment as required by the legislation, the system does not always provide the full investigation and explanation demanded by the injured and their families. In fairness the scheme is not constructed to do such. Physician accountability is handled through a separate disciplinary system.27

Despite these apparent drawbacks the schemes appear generally popular in Sweden.


The Finnish program was introduced in 1984 and was set out in statute as the Patient Injury Act by 1987. The system is similar to the Swedish one in that there are two schemes: one for pharmaceutical injury insurance, paid for by taxes on pharmaceutical importers and manufactures, and one for patient treatment injury, funded through premiums on practitioners (the state may collect against practitioners for incidents of gross negligence though it has been uncommon).

The patient injury scheme 'provides that compensation is payable for personal injury caused to a patient in connection with health and medical care and that volunteers for medical research are to be classed as patients.' (p. 78.) Several injuries do not qualify, including trivial injuries, those related to shortage of resources, correct medical procedures which fail to produce the desired result, non-medically indicated treatment or cosmetic surgery, injuries resulting form a basic underlying condition and injuries due to necessary risk (except where the result is catastrophic).The statute also provides that contribution by patients to their injuries will be discounted against compensation. Patients maintain the right to sue. As of 1989 no one had exercised this right.

Under the pharmaceutical scheme individuals forfeit the right to sue and subrogate these rights under the Insurer's Association which administers the funding of the scheme. Application for funding must be made within one year of learning of the injury and within 15 years of discontinuation of use of the product in question. To qualify, the drug in question must be approved for use in Finland, and the injuries caused may be temporary or permanent disability, permanent bodily injury or death. It does not extend to reasonable side effects, failure to produce desired effects, illegal or improper use.

New Zealand

The New Zealand scheme, which compensates all `personal injury by accident', is regarded by the Swedes as too comprehensive (thus too expensive.) Apparently, they believe that this is why the New Zealand system is faltering.28 'Where a person has suffered `personal injury by accident' he cannot bring a claim in tort in respect of the damage, but is effectively forced to resort to the accident compensation scheme.'29

Three systems compensate for accidents. One covers traffic accidents. Medical misadventure is covered by two plans, one for wage earners which is funded by levies on employers and a supplementary scheme for non-earners funded through public taxes.30 In 1982 the legislation for these schemes was consolidated under the Accident Compensation Act.

In 1980, the percentage of claims declined in New Zealand was under 4%, significantly more claims (42%) were rejected under the Swedish system.31 However, that figure seems to be in direct contrast to another source which states that 'only 60% of `medical misadventure' claims are... granted...'32 This difference could be due to the definition of `medical misadventure' used in the legislation. 'The term `misadventure' coupled with the requirement of an `accident,' if read restrictively, can severely limit the range of potential claimants.'33 In 1992 the new National government (which replaced the Labour party who introduced the accident compensation scheme) made significant reforms to the system, particularly to the medical misadventure aspects of the scheme.

Miller describes that 'while the former Act merely stated that personal injury by accident included 'medical, surgical, dental or first aid misadventure,' without further definition, the new Act includes a definition of medical misadventure spanning nearly two pages. The result is that in cases in which claimants seek compensation for 'medical misadventure,' proceedings are likely to turn into actions to prove medical negligence or malpractice.'34 The scheme continues to preclude litigation for incidents covered by the scheme; however, 'a rule or court decision of no coverage opens the door to a possible claim for damages under the common law of torts.'35 Thus the scheme apparently fails to reduce the litigation associated with attempting to gain compensation for mistakes. Arguably the difficulties of making out a tort claim remain while the potential award obtainable is restricted to the scheme's limits. Miller concludes that 'one is tempted to characterize the new medical misadventure scheme as an unnatural union of fault and no-fault, grossly unfair to many victims of medical error.'36

Another significant change is the removal of lump sum payments for non-economic loss (which had previously capped at $27,000NZ) and replacing it with an 'independence allowance' which pays $40NZ per week for an individual with 100% disability (scaled down to 10% disability at which no payments are made). As Miller notes this 'moves the scheme away from its historical roots as a substitute for the civil tort action.'37

A victim receives up to 80% of pre-accident earnings (up to a cap), plus other reasonable expenses. These payments are periodic. A possible lump sum award (maximum $27,000) may be given for non-pecuniary losses. Medical injury compensation comes from an earner's scheme and a `supplementary scheme' financed from national taxation. Tort actions are precluded unless the harm does not constitute `personal injury by accident.'38

Miller concludes that the new legislation has reintroduced a deterrent element by introducing experience ratings for premiums paid by practitioners, tying economics to the practitioners' performance. However, the restriction on compensations which amount to demonstration of negligence introduces tort like requirements for the victim while limiting the benefits that are derived through tort litigation (i.e., larger awards).

Miller has held to the view that deterrence would be best introduced by returning an individuals right to sue and allowing the insurance schemes administration to obtain the plaintiff's right to sue if the plaintiff decided to accept and is eligible for the compensation scheme.