If the cap fits: Caps in Nova Scotia
By John McKiggan | May 18
For decades the insurance industry in North America has sought to increase insurance company profits, by lobbying for legislative changes to limit the ability of innocent accident victims to receive compensation.
The industries efforts had met with mixed results throughout Canada. In February 2003, George Anderson, past president of the Insurance Bureau of Canada (IBC) stated, “In insurance, crisis can come in many forms for the industry, but only one matters to governments and that is how voters are reacting to the price of the product. Price increase is the burning platform of political action on automobile insurance. But it is not enough to know that prices are going up. What is really needed is a crisis in pricing on the eve of an election. That is the opportune time, or so it seems, for change.”
Start of cap legislation in Nova Scotia
In 2002 the insurance industry was suffering the effects of the global financial meltdown as a result of the September 11, 2001 terrorist attacks, Nova Scotian’s were facing a provincial election.
It was an opportune time for the insurance industry to try to effect legislative change.
Automobile insurance rates increased dramatically across the board. Consumer’s turned to their politicians demanding action.
In the fall of 2002 the Nova Scotia’s conservative government ordered the Nova Scotia Utility and Review Board to hold hearings to examine insurance rates for a private passenger automobile insurance and to make recommendations to the province.
During the rate hearings the insurance industry claimed that automobile insurance rates were increasing because claim costs were increasing and auto insurance profits were decreasing.
On October 30, 2003, the legislature proclaimed the Automobile Insurance Reform Act, which limited the amount of compensation innocent accident victims were entitled to recover if they were injured. The legislation included, among other limits, a monetary cap of $2,500 on compensation for non-pecuniary damages for anyone that suffered a minor injury.
It is important to note the legislative history of the minor injury cap. The bill originally introduced in the legislature on September 26, 2003, did not define a minor injury. Rather the bill provided the legislature with the power to define minor injury by regulation.
There was a great deal of debate about the legislation, both inside the legislature and out. Nova Scotia’s newly elected Conservative government was in a minority and required the support of either the Liberals or the NDP to pass the legislation.
Danny Graham, leader of the Nova Scotian Liberal Party, stated that without significant changes to the legislation, his government would defeat the bill.
Significant changes were made. The definition of a minor injury was placed in the legislation itself.
The insurance industry was unhappy with amendments to the legislation.
Challenge to the legislation
Then in October 2008, Helen Hartling, Melissa Gionet, and Anna Marie MacDonald claimed the Auto Insurance Tort Recovery Regulations were a violation of the Canadian Charter of Rights and Freedoms on the grounds that the legislation and regulations discriminated on a basis of gender, physical disability, mental disability, and age.
The trial was heard in October 2008. On January 12, 2009, Justice Walter Goodfellow issued part one of his decision.
In Alberta, similar legislation which placed a cap on compensation for minor injuries was ruled unconstitutional in Morrow v. Zhang, a decision released in February 2008. The insurance industry and the Alberta government immediately filed an appeal. The industry’s application for a stay pending hearing of the appeal was denied. The appeal in Morrow v. Zhang was heard several months ago and a decision is expected shortly.
Goodfellow considered Whitman’s views expressed in Morrow v. Zhang on the prevalence of discrimination against accident victims and stated in his decision:
“The evidence before me suggests that minor injury victims, particularly those suffering from a whiplash associated disorder are subjected to stereotyping and prejudice. In sum, they are often viewed as malingerers who exaggerate their injuries or their effects in an effort to gain financially. The fact that these injuries are often not objectively verifiable may contribute to this perception Justice Goodfellow pointed out that the Alberta cap legislation was limited just to victims of soft tissue injuries while the Nova Scotia minor injury cap legislation applied to all injuries.
As a result, Goodfellow ruled that there was no stigmatization or marginalization resulting from the legislation. Goodfellow conceded that stigmatization and stereotyping that may exist “pre-dates the insurance cap legislation arising on a limited basis out of the adversarial system.”
In other words, injured victims may feel that they are discriminated against, and may in fact be discriminated against by uneducated people, employers and insurers, but the discrimination is the product of the adversarial tort system and has been going on for a lot longer than the minor injury cap legislation that was the subject of the constitutional challenge.
Despite decision, a review
Justice Goodfellow conducted an exhaustive review of the evidence submitted during the hearing with respect to the reasons why the legislation was created.
After reviewing the evidence, Goodfellow determined that, during the time period the legislation was introduced, insurance industry claim costs were decreasing, and corporate profits were increasing. Goodfellow J. indicated that the insurance industry had not provided this financial information to the government when the minor injury cap legislation was put in place.
Goodfellow also looked at the benefits of the legislation to the public as a whole. He determined that the legislation had resulted in insurance rate decreases and rate stability for the public. “There is no doubt that there has been considerable benefit to the citizens of Nova Scotia in the passing of this legislation.”
Goodfellow is of the opinion that the minor injury cap legislation does not discriminate against accident victims. But if it does, the object of the legislation is not one that justifies discrimination in a free and democratic society.
His comments appear to imply that, if the legislation is in fact discriminatory, then there is nothing that can be done to justify the discrimination.
Win one; lose one.
The province and the insurance industry come out ahead on the issue of whether the minor injury legislation is unconstitutional.
But Goodfellow sides with injured accident victims on the question of whether the benefits of the legislation justify discriminating against accident victims.
No doubt Nova Scotia’s Court of Appeal will not just be hearing an appeal from the plaintiffs. Lawyers for the IBC are already drafting their appeal factums seeking to justify discrimination against innocent accident victims.
John A. McKiggan is a founding partner of Arnold Pizzo McKiggan. McKiggan practices exclusively in the areas of serious personal injury law, medical malpractice and institutional liability.
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