Law Times

Law Times • OcTOber 19, 2009 NEW An online resource tool 1.800.263.3269 Bestcase earlug.indd 1 3/26/08 11:52:01 AM Focus On INSURANCE LAW Courts grapple with claims caps But Alberta ruling delivers a major victory to insurance industry BY JULIUS MELNITZER For Law Times W hen Alberta's Court of Ap- peal upheld the constitution- ality of the province's minor injury regulation in June, the insurance industry dodged more than a bullet. Arguably, it avoided a steady dose of artillery fi re. Morrow v. Zhang, an appeal from Court of Queen's Bench Associate Chief Justice Neil Wittmann's decision striking down the province's $4,000 cap on damages for pain and suff ering for minor injuries, was the centrepiece of a developing national battle over the constitutionality of limits on damages in motor vehicle accidents. Morrow was the second important vic- tory for the insurance industry on the cap issue in 2009. Earlier this year, while Mor- row was on reserve, Justice Walter Goodfel- low of the Nova Scotia Supreme Court up- held that province's $2,500 damage cap in Hartling v. Nova Scotia (Attorney General). Th e insurance industry has long touted caps and similar measures as essential to preserving aff ordable premiums for Cana- dian drivers. But critics say caps restrict ac- cess to justice by limiting the assessment of injuries on an individual basis. Had the Court of Appeal upheld Witt- mann's ruling, the decision could have buttressed pending challenges in New Brunswick and British Columbia. "Each province has their own version of the cap but there are certain similarities throughout, so Morrow could well have an impact elsewhere," says Alan D'Silva of Stikeman Elliott LLP who represented State Farm Mutual Automobile Insurance Co. before the Court of Appeal. In any event, according to Fred Kozak of Reynolds Mirth Richards & Farmer LLP in Edmonton, who represented the plaintiff s in Morrow, the diffi culty with Al- berta's minor injury regulation was that it didn't apply equally to all such claims. "People with injuries far less signifi cant than victims with soft-tissue injuries were not aff ected by the cap," Kozak notes. "Th e cap, for example, wouldn't apply to some- one who broke a fi n- ger or suff ered a minor laceration or burn. In the end, the cap was designed to perpetuate the idea that whiplash suff erers and other soft- tissue victims weren't re- ally suff ering, and that notion is both wrong and discriminatory." Still, Wittmann ac- knowledged that ris- ing general damages were "a legitimate cause for concern" and that maintaining aff ordable automobile premiums was a "pressing and sub- stantial objective." "In sum, I fi nd that it was reasonable The court recognized the gov- ernment made a trade-off by introducing the cap along with enhanced medical benefits, says Alan D'Silva. for the Crown to perceive that an insur- ance crisis existed or was imminent and that mandatory automobile insurance was becoming inaccessible to many Al- bertans at the time that the insurance reforms were implemented," he wrote. Th e objective of the cap, then, was to reduce premiums. Evidence at trial indi- cated that the $4,000 cap reduced overall settlements by 15.5 per cent while cutting minor injury settlements by 44.3 per cent. But these costs were not the only factor contributing to premium increases. "Th is is evidenced by the fact that, al- though claims costs had been rising for some time, the insurance industry contin- ued to be profi table," Wittmann wrote. While the Insurance Bureau of Canada sought the cap to achieve what they be- lieved was a reasonable return on equity of 12.5 per cent, the evidence showed the sec- tor's profi ts had already been increasing. "Th ese profi ts continued to increase in the years following the imposition of the cap to the point where some of the companies had returns in excess of 33 per cent," Kozak says. While the government was entitled to choose from among a range of reasonable op- tions to deal with the in- surance crisis, the choice of a cap placed the bur- den of doing so primar- ily on the shoulders of minor injury victims. "In assessing whether the [regulation] impairs the [equality] rights of the claimant group no more than was necessary, I must focus on whether the Crown could have pursued its purpose of making mandatory au- tomobile insurance pre- miums more aff ordable without discriminating or in a manner that min- imized the discrimina- tion," Wittmann wrote. On this question, the government had failed to demonstrate the cap was a reason- able alternative, according to the judge. "In other words, the [regulation] 'plainly overshoots the mark' in terms of the inter- ference it entails in relation to the rights of the claimant group," Wittmann wrote. Th e appropriate remedy, he concluded, was to nullify the regulation. Th e Court of Appeal disagreed, howev- er, ruling instead that the cap didn't violate the Charter of Rights and Freedoms. In arguing against the cap, Kozak al- leged it infringed s. 7, which guarantees security of the person, because it required victims to proceed with treatment under the related diagnostic and treatment pro- tocols regulation. But a unanimous bench rejected that argument, noting that neither regulation forced accident victims to accept a defi ned course of treatment nor did they limit health-care practitioners' discretion as to the appropriate course of action. With respect to s. 15 of the Charter, which guarantees equality rights, the court upheld Wittmann's fi ndings that soft-tissue injury claimants suff ered from stereotyping October Specials Visit our web site and save 20% Business Interruption Insurance, Second Edition Sean Gosnell of Borden Ladner Gervais LLP and Bruce Webster and John Seigel of PricewaterhouseCoopers LLP Dispute Resolution in the Insurance Industry: A Practical Guide Anne E. Grant Good Faith in Canadian Insurance Law Roderick S.W. Winsor Property Damage Claims under Commercial Insurance Policies Richard Krempulec, Q.C. and that the regulation distinguished be- tween minor injury claimants and people with other types of complaints. But as the court saw it, that distinction didn't amount to discrimination. After an- alyzing the Alberta insurance reform pack- age as a whole, the court concluded it didn't perpetuate the stereotyping of people with minor soft-tissue injuries. "Th e trial judge failed to assess the measures in the [treatment protocols reg- ulation] which promote and assist treat- ment," the court wrote. "Legislation that provides for an individualized assessment of a claimant cannot normally be charac- terized as perpetuating a stereotype." Frank Foran of Borden Ladner Gervais LLP, who with colleague Julie Hopkins represented the Alberta government, says the court's approach accorded with reality. "Th e regulations that the court consid- ered were very interrelated," Foran says. D'Silva is of similar mind. "Th e court recognized that the govern- ment made a trade-off by instituting the cap in exchange for increasing the medical benefi ts available to claimants. Seen in to- tality, the legislation was responsive to those who suff ered from minor injuries." Still, Hopkins says the issue is diffi cult. "Whether the s. 15 analysis allows a court to isolate a provision or consider the entire context is a very complex question because it ties into the s. 1 analysis as well." But Kozak says the Court of Appeal mis- interpreted existing s. 15 jurisprudence. "I think the Court of Appeal's deci- sion refl ects widespread and fundamental confusion in applying the Supreme Court of Canada's pronouncements on equality rights," he says. "Th e diffi culty with the Court of Appeal's reasoning is that it allows governments to pass legislation or formu- late regulations that perpetuate prejudice or discrimination and it does so by the simple mechanism of improperly expand- ing the scope of inquiry to an ill-defi ned legislative scheme or package." Kozak has fi led an application for leave to appeal to the Supreme Court. LT PAGE 9 www.lawtimesnews.com Web Discount (LT 1-4x5).indd 1 10/14/09 10:13:18 AM

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