Canadian Underwriter

Slipping Into Chaos

April 1, 2007   by David Gambrill

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The title of the Canadian Insurance Claims Management Association/Canadian Independent Adjusters’ Association Ontario’s 40th annual joint conference, “Slipping into Chaos,” connotes the claims community’s general state of uncertainty when it comes to predicting the trajectory of Canadian claims trends.

Right across the country, a number of legal issues decided or in a state of flux might ultimately increase the number of claims or the amount of claims litigation the industry may face in the future. These issues arise in the following areas:

* the standardization of the statutes of limitations in the western provinces;

* the status of class actions lawsuits, based on Ice Storm claims in Quebec for additional living expenses;

* nagging questions about social host liability in the wake of the Supreme Court of Canada’s decision in the Childs v. Desormeaux case; and

* the increasing recognition by Canadian courts of vague, unspecified, auto-related injuries or conditions such as ‘Reflex Sympathetic Dystrophy.’


In Alberta, insurance limitation periods — i.e. the time a claimant is allowed to sue an insurer over a claim — are undergoing standardization, although how this will pan out is still very much in the air. The drive to standardize limitation periods derived in part from a decision by the Supreme Court of Canada in Churchland v. Gore Mutual Insurance Company. In this case court noted it required “interpretive gymnastics” to figure out which insurance policies had which limitation periods attached to them.

Conference guest speaker Sandra Corbett of Parlee McLaws LLP in Edmonton said Ontario is already “ahead of” the western provinces in terms of standardizing its insurance limitations periods. She notes Ontario has imposed a two-year limit on holding a discovery after a claimant first became aware of his or her injury and knew the conditions for a lawsuit existed, or, in the alternative, a 15-year limit after the claim arose.

In Alberta, however, the limitation periods follow a schedule outlined in the Classes of Insurance Regulation. “There are four one-year limits still out there,” Corbett observed, including one-year limitations for fire insurance and auto contents policies. These one-year limitations would go the way of the dodo bird, based on reforms recommended in 2003 by the Alberta Law Reform Commission. The recommendations included standardizing everything under the Limitations Act, with two-year limitations to sue for all policy lines and an ultimate 10-year alternative limit.

“Generally, when the Alberta Law Commission makes recommendations, the government will adopt them,” Corbett said.

One question that remains is whether B.C. would also follow the same type of format in its Insurance Act, which is also currently under review.

In Quebec, a class action related to additional living expenses claims arising out of the 1998 Ice Storm has defence lawyers wondering whether class actions have become far more powerful legal tools for plaintiffs than originally contemplated.

Conference panelist Marie Audren, a partner at Borden Ladner Gervais LLP in Montreal, spoke of her involvement in the ongoing claim, noting that the class action lawsuit threatens to add almost Cdn$1 billion more to what is already a record-breaking catastrophe. [Insured damages arising out of the Ice Storm are estimated at roughly Cdn$1.8 billion].

Quebec courts have already certified the class action lawsuit of Philippe Lavergne against 19 different insurers. The action argues that insurers should have paid out additional living expense claims to people who were forced to evacuate their homes when the hydro went down as a result of the 1998 Ice Storm.

At least two issues are at play in the Lavergne class action. First, a government evacuation order had to be in effect in order for claimants to be eligible to receive the additional living expense claims, and “there was not an evacuation order,” Audren said. There was confusion surrounding this fact, said Audren, because the Quebec premier at the time, Lucien Bouchard, had made a public plea for people without power to evacuate their homes for shelters, but there was no legislative action to back up his public address. Also, insurers said later, through a press release issued by the Insurance Bureau of Canada, that they would interpret Bouchard’s statement as an evacuation order for the purpose of resolving some claims. “This only proves that no good deed goes unpunished,” Audren said.


For many in the insurance industry, the Supreme Court of Canada issued the final word on social host liability in its 2006 Childs v. Desormeaux decision. Social hosts, the court ruled, don’t owe a duty of care to guests who attend bring-your-own-booze parties and later injure someone while driving on public roads while intoxicated.

But is the court’s ruling as clear-cut as it would first appear?

“The issue may come up again,” said Carmen Place, a partner at Lindsay Kenney LLP. He said the court didn’t have the right fact situation to answer several questions that arise from the Childs case. For example: When is a duty of care owed? What is a ‘social event?’ How much control must there be over alcohol consumption? When is a host implicated?

All of these issues are still outstanding following the Childs decision, Place noted. The courts may refine their answers to these questions in light of different fact situations that come before them.

Some of the court’s language in Childs could open the door for further review of the social host issue, Place said. He noted, for example, one section of the decision that says: “Suffice it to say that hosting a party where alcohol is served, without more [emphasis added], does not suggest the creation or exacerbation of risk of the level required to impose a duty of care on the host to members of the public who may be affected by a guest’s conduct…” Elsewhere, the court says, “as a general rule, a social host does not include a duty of care…”

“We all know about exceptions in insurance policies,” Place said, drawing a parallel between these exceptions and the language contained in the Supreme Court judgment. “What does the ‘without more’ mean [in the court’s decision]?”

Place said the court’s position on other types of ‘social hosts’ may be forthcoming as alternative fact situations arise. For example, what duty of care would social hosts owe to guests at stags or staguettes, Grey Cup or Super Bowl parties, sports team parties or grad parties held in a home, birthday parties or Bar Mitzvahs, funerals or wakes, weddings, or other kinds of receptions?


In fact, it’s getting to a point where not even injuries are clear anymore, Jamie Chipman, a partner at Stewart McKelvey Stirling Scales in Halifax, observed. Pointing to the example of ‘Reflex Sympathetic Dystrophy,’ Chipman said Canadian courts are blowing the doors open to award damages on the basis of sketchy injuries ostensibly caused by automobile injuries. “Nave judges want to believe in people’s tales of woe,” Chipman said.

Chipman noted people have made (RSD) claims, which include symptoms such as burning pain, sleep deprivation, swelling and joint loss of functioning — all of which, according to medical journals, “may develop spontaneously,” Chipman said, citing one such medical text.

“There is no universally accepted theory to explain the genesis of RSD,” he added, citing another medical textbook.

But, Chipman continued, there is a real question as to whether auto collision-related injuries are actually the cause of the symptoms experienced by RSD sufferers.

Nevertheless, in 2001 the courts awarded $150,000 in general damages to an RSD sufferer in a case called Teed v. Amaro. In one instance, Chipman observed, a “judge was brought to tears” when
testimony was given about an RSD sufferer’s pain. “When you see that [as an insurance defence counsel], you know your case is not going to go well,” Chipman said.

Chipman said defence lawyers in RSD cases should steer clear of juries because, he said, at the “mere mention of RSD, the courts start to ramp up the awards.”

He suggested that insurers would do well to protect themselves by: getting an independent medical examiner; documenting the injury carefully; documenting the original event; obtaining past employment, medical and school records of the person sustaining the injury (to provide some background history of their previous injury claims); keeping RSD sufferers away from juries; watching for any potential for mitigation arguments; and testing the credibility of the RSD through strong, independent adjustment.

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