Alberta Auto Payouts Cap Back!

The cap is back to stay! News update December 17, 2009

The Supreme Court of Canada has announced it will not hear an appeal regarding Alberta's minor injury cap. This means that the judgment rendered earlier this year by the Alberta Court of Appeal, stating that the minor injury cap is constitutional. This is the final decision on the case.

With the refusal to hear any further appeal of the Alberta Court of Appeal's decision, which found the province's cap on minor auto injuries was constitutional, Canada's top court has the door for appeal against an important component of the province's auto reforms of 2004.

Alberta Minister of Finance and Enterprise Iris Evans said, “We are pleased the Supreme Court of Canada has decided not to hear this case, therefore finally putting to rest any questions about the constitutional validity of Alberta’s auto insurance system and helping ensure auto insurance remains affordable and accessible for Albertans."

Evans went on to say, “We believe we have a well-functioning auto insurance system that strikes a fair balance between those who pay insurance premiums and those who are injured in automobile accidents.

Below you will see the saga of the auto cap in Alberta. The tale is done. The cap is back and it is likely for a long time.

October 3, 2009
Here we go again! Alberta’s minor injury cap question is back. This time it is the docket of the Supreme Court of Canada.

The original cap challenge accident victims have filed leave to appeal the Alberta Court of Appeal’s decision upholding the $4,504 cap. Now the Supreme Court decides if that they will grant the leave or deny it.

If the Surpeme court panel decides to review the decision then the hearing will likely not take place until 2010. If the answer is no, then that is the end of the matter. The cap continues without concern of court overturn.

Alberta's cap on minor injury claims reinstated

Once again the courts have overturned a prior judgment. Alberta now has the cap back in place. The cap has been adjusted to $4,504. It will possibly be presented to the Supreme Court but this will not be decided until mid-September.

The mid-June decision came during a time when the Alberta auto insurers were making threats of increasing rates by 40%. Rates are going up, the hearings for how much and when will be determined by the Alberta Insurance Rate Board (AIRB).

The AIRB has announced a 5% decrease for the PLPD (liability) mandatory coverage. This is helpful to all drivers and a welcome announcement.

To review the judgement on the minor injury claims reinstatement click here

Turner's Tips will update as new information comes in.

Prior to this most recent news…

The Alberta government regulation that imposes a $4,000 cap on damages for pain and suffering for minor injuries arising from motor vehicle accidents that do not result in serious impairment has been struck down as unconstitutional.

Associate Chief Justice Neil Wittmann concluded that the Minor Injury Regulation (MIR) “sacrifices the dignity of Minor Injury victims at the altar of reducing insurance premiums.”

His decision was based on the MIR breached S.15(1) of the Charter and was not saved by S.1.

Justice Wittmann outlined his explanation on the plaintiffs Peari Morrow and Brea Pedersen, who had suffered soft tissue injuries arising out of two separate automobile accidents.

The judge decided to “first determine the appropriate damage awards for each Plaintiff individually as though the MIR did not apply,” and he came up with $15,000 for Pedersen and $20,000 for Morrow.

He then considered the constitutional challenges and started with the evidence of Prof. Michael Trebilcock, who “segregates the different [insurance] systems into two categories: the supplementation of the tort system, and its replacement. The first category includes the add-on no-fault schemes under which an insured driver is entitled to some first-party no-fault benefits, but under which the "right to sue" negligent third parties is preserved. The second category includes threshold and pure no-fault schemes. Under threshold schemes, there is total exclusion or a limitation of tort actions below some defined threshold, either verbal or monetary. A verbal threshold relates to the type or severity of the injury. Thus, when there is a verbal threshold, the injury must meet certain criteria in order to trigger the right to sue. Finally, in pure no-fault schemes, in return for first-party benefits, the "right to sue" in tort is extinguished…”

Justice Wittmann explained that Quebec, Manitoba, and Saskatchewan “have a publicly run pure no-fault regime [where,] in return for relatively generous first party no-fault benefits, the… accident victims forego the right to sue negligent drivers for their injuries….”

Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Alberta and Ontario “have adopted a threshold no-fault system…”

Prince Edward Island and New Brunswick, like Nova Scotia, “have $2,500 caps on recovery for non-pecuniary losses that are tied to a definition of minor injury….

“In Ontario, the right to sue for pain and suffering is permitted only if the verbal threshold is met….

In B.C. and the three territories, “the regime in place is an add-on no-fault system which provides for a range of first-party no-fault benefits and an unconstrained right to sue negligent third parties for pain and suffering…”

Prior stories on this topic are shown below

Canadian Press

See what the government proposes below this article
EDMONTON — A complex legal challenge is winding its way through Alberta's courts that could have a major impact on auto insurance policies across Canada.

The case revolves around a trade-off the Alberta government made four years ago after a public outcry over a series of hefty premium increases by private insurance companies.

The government's auto insurance reforms gave most Albertans cheaper rates for basic coverage, but put a $4,000 cap on payouts for soft-tissue injuries, including whiplash.

But a year ago, two injured drivers successfully challenged this cap. Court of Queen's Bench Justice Neil Wittmann ruled it was a charter violation and therefore unconstitutional to single out drivers with minor injuries under the new rules.

But the province appealed the ruling, and Alberta's Appeal Court is expected to decide within days whether to uphold Wittmann's decision.

Fred Kozak, the lawyer for the two accident victims, says the rate cap ended up forcing people with minor injuries to subsidize insurance rates for other drivers.

"You're essentially suffering through this injury and helping to reduce the cost of insurance for the driver that hit you," Kozak said in an interview.

The veteran lawyer also argues that the testimony in this case exposed that insurance rates in Alberta, are being set using unverified information from the insurance industry on their profits and administration costs. Kozak says this speaks to the whole issue of how rates are set and whether there was ever a need to impose a $4,000 cap in the first place.

"The evidence at trial disclosed that there are no real rules as to how insurance companies determine what their administrative costs are," he says. "So you have a huge question mark about the validity and reliability of that component of the information that the rate board ultimately relies upon."

Alberta's insurance reforms took effect in 2004 and premiums for most drivers dropped by a total of 18 per cent in the following three years. But a further premium reduction of five per cent slated for last fall was replaced by a five-per-cent increase after the Automobile Insurance Rate Board factored in the impact of the court ruling striking down the cap.

The insurance industry had made a case at the board's hearings for a rate increase of nearly 40 per cent to reflect higher payouts for soft-tissue injuries. But the board settled on a 20 per cent increase.

However, the board held back half of the increase until all legal appeals are exhausted.

"So this year, there's still that additional 10 per cent that hasn't been funded," said Del Dyck, the rate board's executive director. "That will be something the board will struggle with and determine whether it should provide any more relief in that area or not."

Most of the major players in this case agree there's no way of knowing if the Supreme Court will even agree to hear arguments once the appeal court ruling is handed down. But the continued legal wrangling could leave Alberta's insurance rates in a state of flux for years.

"It's probably going to go to the Supreme Court and it's not until that decision is made, that we'll really know what we're dealing with," said Dyck. "It's a fairly significant issue across Canada."

The insurance industry is already signalling that it will be looking for another rate increase at the rate board's annual public hearings in June.

Jim Rivait, spokesman for the Insurance Bureau of Canada, said the removal of the rate cap could end up costing insurers $350 million a year in additional payouts unless the ruling is overturned. He says this would have to be reflected in higher premiums at some point.

"I think there's an obligation to put in the proper premiums that are going to keep an industry solvent," says Rivait, who expects the Appeal Court ruling will have "national implications" because there are similar legal challenges ongoing in Ontario and Nova Scotia.

Finance Minister Iris Evans, who is responsible for insurance regulation in Alberta, was reluctant to comment because the case is still before the courts. But she offered a brief statement.

"The reforms strike the right balance between Albertans who pay for insurance and Albertans who are injured in accidents," said Evans.

Ministry spokesman Bart Johnson added that Alberta was responding to "an insurance crisis" when it agreed to the $4,000 cap on minor injuries claims.

"A number of drivers couldn't afford insurance, particularly young drivers," he said. "From the government's perspective, it's about making sure people can afford insurance and that they're covered in the event of an accident."

But Rick Mallett, president of the Alberta Civil Trial Lawyers Association, said there's now serious doubt as to whether the cap was ever needed in the first place.

"The insurance companies were very profitable and have become extraordinarily profitable since the cap was put into place," Mallet said in an interview. "There wasn't the type of crisis that required legislative intervention."

Alberta's New Democrats say Alberta's insurance reforms are very questionable when you consider that the Canadian insurance industry has more than tripled its profits since 1997.

"This industry rakes in billion-dollar profits while Alberta drivers get gouged at every turn," said NDP Leader Brian Mason.

The NDP points out that Statistics Canada figures showed the industry had $6.5 billion in profit in 2005 and a record $7.2 billion the following year.

"The Tories should put an end to this profiteering and cut corporate interests out of the system," said Mason. "Public auto insurance saves drivers money."

Proposed changes to the minor injury cap
The Alberta Government reports the following: Re: Minor Injury Regulation

The purpose of this Bulletin is to provide information concerning the amendment to the minor injury amount, calculated in accordance with the Minor Injury Regulation (Regulation).

The Minor Injury Regulation was struck down by Associate Chief Justice Wittmann of the Alberta Court of Queen’s Bench on February 8, 2008. It was found to be inconsistent with the Constitution Act, 1982 and is of no force or effect. The government appealed the decision, and was heard by the Court of Appeal on September 12, 2008.

If Justice Wittmann’s decision to strike down the Minor Injury Regulation is overturned, then the following notice will be deemed to be in effect.

In accordance with the regulation, effective January 1, 2009, the minor injury amount of $4,339 will be adjusted by 3.8 percent, to $4,504. The new amount relates to minor injuries caused in motor vehicle accidents that occur in Alberta on or after January 1, 2009.

The regulation requires an annual adjustment to the total amount recoverable as damages for non-pecuniary loss for all minor injuries sustained by a claimant, as a result of a motor vehicle accident. The annual adjustment is effective January 1 of each year. The amount of any adjustment is related to the annual change in the Alberta Consumer Price Index.

If there are any questions in relation to the adjustment to the minor injury amount, you may contact Mr. Arthur Hagan, Deputy Superintendent of Insurance - Regulation and Market Conduct, at (780) 422-1592.
[Original Signed]
Dennis Gartner
Superintendent of Insurance