History and definition of caps
| May 18
 Definitions & Systems
Caps, verbal thresholds, deductibles and minor injury regulation (MIR) are all devices intended to limit claims of innocent accident victims in less serious auto collisions.
Alberta, Nova Scotia, New Brunswick & PEI have different definitions of a “minor injury.” For example, Alberta’s definition of minor injury is directed to a more narrow class of whiplash and chronic pain sufferers; Nova Scotia has a much broader definition that encompasses largely temporary and less severe injuries.
Since auto insurance regulation is under provincial jurisdiction, each province has a slightly different system. In Ontario, Newfoundland and Labrador, Nova Scotia, PEI and New Brunswick there is a threshold no-fault systems with caps as low as $2,500 for minor injuries (some of which are also being challenged constitutionally). Alberta’s system as a “threshold no-fault” system is characterized by a cap on the level of damages that can be awarded in private lawsuits for particular injuries (typically minor injuries). Other provinces have either “pure no-fault” systems, or “add-on no-fault” systems which permit no-fault benefits as well as the right to sue third parties for pain and suffering.
Court Cases
Nova Scotia
On January 12, 2009, Justice Goodfellow of the Nova Scotia Supreme Court released his much anticipated decision with respect to the challenge to the so-called “minor injury cap” on general damages arising from auto accidents contained in the Nova Scotia Insurance Act and the related regulations. Justice Goodfellow dismissed the challenge issued in Hartling v. Nova Scotia on all grounds and held that both the legislation and the regulations are valid. His decision held that the $2,500 cap on general damages was constitutional and did not violate the Canadian Charter of Rights and Freedoms on the grounds of gender, physical/mental disability, and age.
Alberta
On February 8, 2008, associate chief justice Neil Wittmann of the Alberta Court of Queen’s Bench struck down the $4,000 cap on non-pecuniary damages for soft tissue injuries incurred in motor vehicle accidents. The cap was imposed in October 2004 through Minor Injury Regulation (MIR). The challenge to the cap was based on cases by two different plaintiffs who argued that the MIR cap violated their rights under sections 7 and 15 of the Canadian Charter of Rights and Freedoms.
On February 25, 2008, Justice Wittmann denied the stay application—his original ruling, which struck down the cap without providing time for the government to amend the MIR, takes immediate effect.
Alberta’s provincial election was on March 3, 2009. After that an appeal by the provincial government, of Justice Wittman’s decision, is expected.
New Brunswick
In New Brunswick, there are three ongoing cases involving challenges to MIR legislation. However, these cases are still at the discovery stage and are unlikely to proceed to trial until 2010.
Legislation
Nova Scotia
The 2003 reforms on Nova Scotian auto insurance meant that as of Nov. 1, 2003, auto insurance would be reduced by 20% (applied to the last rate filed by the insurance companies before the May 1, 2003 came into effect). It also meant that the auto insurance package for this province was changed. The changes included an increase in minimum liability protection from $200,000 to $500,000; all benefits for economic loss and pain and suffering awards for serious injuries remained the same, as did the benefits for economic loss for minor injuries. The main change was that pain and suffering for minor injuries were now capped—at a maximum of $2,500. Also, all future applications for increases in auto insurance premiums would have to be reviewed and approved by the new Nova Scotia Insurance Review Board.
Along with these pricing reforms came new provincial rules to protect auto insurance consumers against unfair discrimination. The rules will ban companies from refusing to issue or renew auto insurance for an existing or potential customer on any of the following grounds: age, gender, marital status, age of vehicle, previous coverage by Facility Association, a previous refusal of insurance coverage, previous not-at-fault accidents, making a late payment, a lapse in auto insurance coverage less than two years long.
Proponents for the removal of Nova Scotia’s minor injury regulation (MIR) consider the cap legislation unconstitutional because it discriminates against persons on the basis of gender, physical disability, mental disability, and age.
The argument is that the legislation discriminates on the basis of gender because women, as a percentage of the population, are more likely to be unemployed. Therefore their compensation is more likely to be limited to non-pecuniary damages, which are capped at $2,500.00. The legislation discriminates against persons with a physical disability because it subjects them to stigmatization and discrimination from uneducated members of the public, certain employers, and insurance companies. The legislation eliminates compensation for psychological injuries, which discriminates on the basis of mental disability. The legislation discriminates on the basis of age because seniors and young persons are more likely to be unemployed and therefore have their claims limited to non-pecuniary damages, which are capped at $2,500.00.
Alberta
In November of 2003 the Provincial Government of Alberta tabled legislation aimed at reforming the auto insurance industry. The claimed reasoning for the new legislation was a demand by Albertans for more affordable auto insurance premiums. Bill 53, the Insurance Amendment Act, was passed very quickly. The most significant changes to the Insurance Act as a result of Bill 53 are: a cap on damage awards for minor injuries set at $4,000 (for non-pecuniary loss of minor injuries); the bill also defined what is to be considered a minor injury; increases in Section B benefits with overall medical payment awards increased to $50,000 (from $10,000).
In February 2008, the Associate Chief Justice presiding over a case before the Alberta courts ruled that the $4,000 cap on damages for pain and suffering for minor injuries resulting from motor vehicle collisions was unconstitutional because it treated those with minor injuries, specifically whiplash, different from those with other injuries.
The decision was a legal blow against no-fault auto insurance and a huge victory for coalitions against no-fault insurance across the country, who have opposed various no-fault auto laws on the grounds that they deny fair compensation to victims of automobile accidents.
Ontario
Ontario does not have caps or MIRs. Ontario has two distinct limits on an innocent victim’s right to compensation—a verbal threshold and a deductible. It is the only jurisdiction in North America with both.
The history of legislation governing auto insurance pre-dates 1990 when the province relied solely a tort system, which gave claimants the unrestricted right to compensation for all economic and non-economic losses. In 1978, the Supreme Court of Canada released three decisions, which set a cap on non-pecuniary general damages at $100,000. Large claims settlements, especially for soft tissue injuries, delays in treatment by insurers and excessive litigation (especially for bodily injury) characterized auto insurance during this period. This led to increased premiums for drivers and across-the-board availability issues. As a result, insurance rates were increasing in the latter half of the 1980’s at double-digit levels per year on average, especially from 1987 to 1989.
Then in June 1990, the first extensive no-fault plan, the Ontario Motorist Protection Plan (OMPP) was released. This plan introduced a “threshold” system whereby claimants could only obtain compensation for the tortuous act if the injury was of a “permanent” and “serious” physical nature.
On Jan. 1, 1994, Bill 164 was passed, which limited the right of injured people to sue for economic losses, it further increased the amount of medical and rehabilitation benefits available to claimants. The threshold under this protocol was greatly relaxed as it no longer required that the injury be physical in nature. Under this regime a plaintiff was required to show that the injury must have been a serious disfigurement or serious impairment of an important physical, mental or “psychological function.” The requirement of permanency was removed and psychological injuries were now compensable.
Bill 164 also introduced a $10,000 deductible on claims by injured persons and a $5,000 deductible for claims under the Family Law Act. This deductible was subject to inflationary adjustments.
Then on November 1, 1996, the Ontario Auto Insurance Rate Stability Act, known as Bill 59, was passed. This bill allowed accident victims to be compensated for their losses through the courts in a “tort” action and/or from their own insurer through “no-fault” coverage.
Known as Bill 59, this legislation offered a number of changes from the former legislation, Bill 164. The word “permanent” made once again added to the threshold qualification and the deductible increased by 50%; also the rights of an innocent accident victim to recover economic losses were partially restored. A $15,000 deductible for claims of injured persons was added as well as a $7,500 deductible for claims under the Family Law Act. Also, lawsuits for economic loss were available for all injuries, minus other insurance benefits received. The maximum award is 80% of after-tax income after-tax income before trial, 100% of gross income after trial.
On Oct. 1, 2003, Bill 198 brought another host of changes to the Ontario auto insurance legislation. There was an expansion of a not-at-fault injured person’s right to sue for excess health care expenses. The new bill increased the monetary deductible for pain and suffering awards from $15,000 to $30,000 for claims under $100,000 (as well as increasing the monetary deductible for Family Law Act claims under $50,000, from $7,500 to $15,000).
In November 2007, former associate chief justice of Ontario, Coulter Osborne released his findings on the use of Ontario’s verbal threshold. He found that small auto negligence represented 21% of the province’s Superior Court of Justice claims. In his report, Osborne noted that Bill 198 was intended to minimize smaller auto negligence claims but that the redundancy of a verbal threshold in Ontario and a $30,000 deductible and that one should eliminated.
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