In The Eye Of The Storm

Insurers in Nova Scotia started 2009 with a huge sigh of relief when Supreme Court of Nova Scotia Justice Walter Goodfellow upheld the constitutionality of the province’s Cdn$2,000 cap on minor injuries.

Similar constitutional challenges have been launched across the country. But until January 2009, only one had entirely worked its way through a court: the Alberta Court of Queen’s Bench in 2008 decided in Morrow v Zhang that Alberta’s Cdn$4,000 cap on minor soft tissue injuries was unconstitutional. Alberta Court of Queen’s Bench Justice Neil Wittmann ruled that the cap in Alberta discriminated against soft-tissue injury victims, and the decision is now under appeal.

To some, Goodfellow’s decision in Hartling v Nova Scotia et al. might be viewed as evening the score in a national battle between insurers and trial lawyers over the legitimacy of capping auto insurance claims payments to people who suffer minor injuries. Insurers say the caps are necessary to stem the tide of rising premiums and claims costs. Trial lawyers say the caps limit the tort rights of their clients (minor injury claimants).

One of the lawyers in the centre of the maelstrom is Geoffrey Machum, a partner at Stewart McKelvey in Halifax. He represented Aviva Canada, one of the insurers, in the landmark Hartling case.

Machum has practiced law since 1985. In the late 1980s and early 1990s, he cut his teeth on Coughlan et al v. Westminer Canada Ltd., a six-year- long case that involved the take-over of a Nova Scotia mining company by an Australian mining company.

Machum’s involvement in Coughlan essentially led to his making partner at Stewart McKelvey. In 2003, he earned the appointment of Queen’s Counsel by the ripe age of 43. (A ‘Q. C.’ designation goes to select lawyers who have had at least 10 years of professional experience.)

Although his portfolio includes an array of commercial cases, Machum elected to focus on insurance after teaching insurance law at Dalhousie University for three years in the 1990s. “When you go to law school, not a lot of people are sitting there saying: ‘When I graduate, I want to become an insurance law practitioner,'” he says. “But what you realize very quickly is that every major part of life is underwritten in some fashion; it has an insurance implication.”

Machum says he would begin each of his lectures by asking students to set aside their textbooks and look at the day’s headlines to determine their relevance to insurance. “It really got the students engaged in the fact that insurance is a part of everyday life,” he says. “It’s a little bit of a hidden practice in that you don’t see it in the headlines, but it’s there.”

The “human element” of insurance continues to interest him in the practice of insurance law. “That’s really important to me,” he says. “It underlies all of these very interesting, day-to-day factual situations and it gets you involved in some really interesting cases.”

Machum is at a point in his career when he can pick and choose his cases. So when the cap challenge came across his desk, he realized the importance of the decision, enlisted the help of junior partner Christa Hellstrom and took on the case.

THE CHALLENGE

Machum is fully steeped in the background of his case. Nova Scotia auto insurance premiums in 2003 were swelling to as much as the Cdn$1,000 to Cdn$1,500 range, he says, making it difficult for young people or seniors to afford the mandatory coverage. Steep premiums tend not to curry favour with the public; eventually, they catch the eye of regulators, he notes. As well, insurers were expressing concern about growing claims costs. Therefore, in order to reduce insurers’ costs (and thus allow them to pass the savings on to consumers in the form of decreased premiums), the province instituted a Cdn$2,500 cap on general damages for pain and suffering related to minor injuries arising from a vehicle collision.

Following the legislation, regulations were passed that defined a minor injury. Rather than targeting specific types of injuries such as sprains, strains and whiplash, the Nova Scotia definition of a minor injury hinges on whether there is a “serious impairment” and whether or not that impairment resolves within a 12-month time frame.

“That regulation was the subject of an attack by a group of plaintiffs that argued these amendments to the legislation were not constitutional; that they violated the Charter; and that they discriminated against accident victims,” Machum says.

The allegations included that the regulation perpetuated the stereotype that accident victims were malingerers. Also, the plaintiffs claimed, the cap discriminated against women and young people as well as people with pre-existing and psychological conditions.

“The judge found on all counts that neither the evidence nor the law supported the arguments of discrimination,” Machum says. “He found that not only did [people challenging the legislation] not prove [the legislation to be discriminatory], but they fell ‘far short’ in proving their case.”

The victory was quite significant for the province of Nova Scotia and the Canadian insurance industry at large, Machum acknowledges. It comes as Wittmann’s decision in Alberta is still at play, and while Prince Edward Island and New Brunswick have similar challenges working their way through those provinces’ courts. In addition, Ontario insurers and trial lawyers are now asking the Government of Ontario to reform its auto insurance legislation.

When asked about the differences between the Alberta decision in Morrow v Zhang and Hartling v Nova Scotia et al., Machum says that he was “heartened by the fact that whether [Morrow] was a right or wrong decision, [Justice Goodfellow] found that there were differences in how Nova Scotia approached the problem [of rising insurance premiums] and how Alberta approached the problem.”

In Nova Scotia, the cap legislation focussed less on labelling the characteristics or locations of minor injuries, and more on the time it took for the symptoms of an injury to “resolve.”

But the legal battle is far from over, he says. Shortly after the victory in court, counsel for all plaintiffs’ in the Nova Scotia cap challenges have now confirmed their intention to appeal the decision.

The court date for the appeal has yet to be determined, but Machum remains confident the decision handed down by Justice Goodfellow provides a solid foundation for the insurance industry and province of Nova Scotia to emerge successful once again at a higher court.

“Justice Goodfellow gave a very thorough and well-considered decision,” Machum says. “He wrote extensively about the evidence that was before him and he had the benefits of daily transcripts before him, eliminating any guess work or having to work from memory alone. Needless to say, in any appeal, we the respondents will be endorsing this decision. It’s clear he put a lot of thought into this decision and wrote extensively on both the evidence and the law.”

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“What you realize very quickly [as an insurance lawyer] is that every major part of life is underwritten in some fashion; it has an insurance implication.”