The government was attempting to claw back a $1 million insurance settlement that Joellan Huntley received following the crash in 1996. The woman's family went to court in an effort to fight the move.
Community Services Minister Joanne Bernard originally defended the court action, saying there was an expectation that people should have to pay for care provided by the province.
Bernard said Wednesday it's now clear to her that there are flaws in her department's policy and the government needed to act in the best interests of Joellan and her family.
"This policy needed to be updated, it needed to be looked at from a family-centric point of view," said Bernard. "No other family should ever have to go to court over this situation again in the province."
Bernard and Raymond Wagner, Huntley's lawyer, said the terms of the settlement were confidential. Wagner said the agreement took into account Huntley's long-term care concerns and the fiscal interests of the province.
Bernard said it was likely the province would pay court costs although that hadn't been determined yet.
She announced in December that it would review the government's policy around insurance settlements for those who have suffered catastrophic injuries. She said she expects to announce changes during the current sitting of the legislature.
"In this case it really highlighted the deficiencies of that policy," said Bernard.
Huntley's mother Louise Misener said she hopes her daughter's case brings about positive changes so that no other families will have to endure a similar drawn-out fight.
"It is my hope that no other families have to go through what our family has been involved with over the last decade in trying to provide care and comfort for our child," said Misener in a statement.
"It has been a long and complicated process."