Caps Protect
By Irene Bianchi | May 18
A stable pricing environment is the intended result of minor injury regulation (MIR), prompting carriers to question recent court decisions.
At a time of wide-spread belt-tightening and cautionary spending by consumers, the removal of caps on minor injury claims would likely lead to extra costs for policyholders and a less affordable auto insurance system.
The issue of caps was thrust to the forefront recently because of two high-profile court cases with contrasting results.
Alberta and Nova Scotia court decisions:
On February 2008 in Alberta, a judge struck down the province’s Minor Injury Regulation (MIR), and ruled that placing a cap of approximately $4,000 on damage awards for minor injuries was unconstitutional because it discriminated against victims of soft-tissue injuries. The judge’s decision led to the immediate removal of the cap on pain and suffering damages for minor injury claims and essentially changed the claims environment in that province.
On the other side of the country, in Nova Scotia, a provincial Supreme Court judged ruled the opposite in a similar case. In the case of Hartling v. Nova Scotia, Justice Walter Goodfellow argued that the definition of minor injury in Nova Scotia is far broader than Alberta’s and that the cap of $2,500 in Nova Scotia doesn’t exclusively refer to just soft-tissue injuries and is therefore not unconstitutional.
Both the Alberta and Nova Scotia cases have gone on to the respective provincial courts of appeal. The Nova Scotia appeal case is just beginning whereas the Alberta decision is anticipated any day now.
Few decisions have been waited on as eagerly by the insurance industry and although the Alberta decision won’t have a binding impact on any other province, the Court of Appeal decision is sure to carry weight. The contrasting decisions means that case law on minor injury auto caps is now all over the map and as such the final ruling on the issue now fits within the mandate of the Supreme Court of Canada.
Real reason for caps:
What seems to have been lost, however, in the debates surrounding constitutionality is how the caps actually protect people.
The MIR in Alberta allows for immediate treatment of minor injuries. Medical statistics have proven that the earlier an injury is treated, the faster the recovery time. The MIR expedites the delivery of treatment because coverage, up to a certain limit, is immediately approved. This allows for a decrease in treatment costs, legal fees and unnecessary assessment fees.
What the caps have also done is allowed for a stable pricing environment that keeps auto insurance costs affordable for the public.
The removal of the caps in Alberta essentially unravels all the efforts that went into establishing auto insurance reforms, which was responsible for reduced claims costs and premiums, in the province in 2004.
The insurance reforms, put in place by the Alberta government, were a direct response to public concerns over auto insurance premium increases.
The government’s reforms allowed for the creation of a premium grid, resulting in less expensive rates for basic coverage and the implementation of a cap on damage rewards for soft-tissue injuries.
How caps work:
According to the IBC, insurance premiums have been reduced on average by 18% in Alberta since the implementation of the MIR.
The insurance industry is now in a state of limbo awaiting the Alberta Court of Appeal decision, which could no doubt influence legislation elsewhere in the country. If the case then goes on to the Supreme Court, the prolonged wait could essentially leave Alberta’s insurance rates in a state of flux.
If the cap is permanently removed, it is almost certain that the industry will see a premium increase and considering these economic times, it is crucial that the legislators, with the support of insurers and the IBC, work towards affordable insurance.
The caps provide the fairest solution. They ensure that people can afford insurance but also protect them in the unfortunate event that they are injured.
Irene Bianchi is the vice president Claims & Corporate Services at RSA
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