The Cap’s Odyssey Continues

Does Alberta’s cap on non-pecuniary damages for minor auto injuries discriminate against whiplash victims? Yes, Alberta’s courts have ruled. But is the overall legislative package that introduced the auto cap constitutional? Yes, the Court of Appeal of Alberta has also determined, thus providing the latest ruling in a legal odyssey widely anticipated to end at the doors of the Supreme Court of Canada.

COURT OF APPEAL: THE BACKGROUND

Alberta Court of the Queen’s Bench Justice Neil Wittmann introduced a world of uncertainty into Alberta’s insurance industry in 2008, when he found that the province’s cap legislation was unconstitutional. More than a year later, in its June 12, 2009 decision, the Court of Appeal of Alberta gave deference to Wittmann’s finding that the province’s Minor Injury Regulation (MIR), which introduced a Cdn$4,000 cap on damage claims for minor auto injuries in 2004, discriminated against whiplash victims.

But the MIR represents only one aspect of a broader legislative package that introduced the caps, the Appeal Court further ruled. The Court of the Queen’s Bench of Alberta erred in examining just the MIR and not the entire legislative scheme of which the MIR was a part. That broader legislative scheme includes a treatment regimen that ultimately allows injury claimants to apply to insurers for benefits exceeding the cap, as long as the treatment regimen is followed and the injuries persist.

The Alberta Court of Appeal reviewed the history of Alberta’s cap legislation in Morrow v. Zhang. The case is based on injuries sustained by Peari Morrow and Brea Pedersen in two separate automobile accidents.

Morrow suffered soft tissue injuries to her neck and back, diagnosed as a Grade 2 whiplash associated disorder (WAD II), as a result of an auto collision in October 2004. As of the time of trial, in April and May 2007, she was still suffering from pain that was affecting every aspect of her life.

Pedersen suffered soft tissue injuries to her neck, shoulders, back and wrists from an auto collision in March 2005. Her neck, shoulder and back pain resolved a month after the accident, but at the time of trial, she still suffered pain in her wrist that affected her everyday life and household chores.

Wittmann found at trial that were it not for Alberta’s auto injury cap, both Morrow and Pedersen would be entitled to non-pecuniary damages in excess of Cdn$4,000. He assessed general damages of Cdn$20,000 for Morrow and Cdn$15,000 for Pedersen. He then considered their constitutional challenge that the cap infringed their Sections 7 and 15 Charter rights.

In considering the Section 15 challenge (which relates to the right not to be discriminated against on the basis of physical disability), the trial judge focused on the MIR because it was the only part of the legislative package being challenged. He sided with the plaintiffs in finding that the MIR treats minor injury victims differently by preventing them from claiming more than Cdn$4,000 for non-pecuniary damages. What’s more, this distinction was discriminatory because it strongly suggested minor injury victims — particularly those suffering from whiplash -associated disorders — are subjected to stereotyping and prejudice since they are portrayed as “malingerers.” He thus struck down the MIR as unconstitutional.

On the issue of the MIR’s discriminatory effect on minor injury victims, the Alberta Court of Appeal confirmed the trial judge’s finding. “In my view, the trial judge’s finding is entitled to some deference,” Alberta Court of Appeal Justice Patricia Rowbotham wrote on behalf of a unanimous panel of three judges. “While an appellate court can read the transcripts and reports, this is not the same as a trial judge who, after listening to days of evidence, forms an impression which leads him to making a finding of fact. The trial judge was entitled to weigh the evidence. I cannot say that his finding in this regard was incorrect.”

Rowbotham then goes on to acknowledge the Nova Scotia court’s decision came to the opposite conclusion on the matter of discriminatory effect. “In the recent decision in Hartling v. Nova Scotia, which considered the Nova Scotia cap on damages for non-pecuniary loss, the trial judge found that the claimants had not established a stereotype,” Rowbotham wrote. “Indeed, the trial judge [in Nova Scotia] saw the same IBC [Insurance Bureau of Canada] videos tendered as evidence [of stereotyping] in this case. However, the other evidence adduced in Hartling was not the same as in this case, and each trial judge was entitled to arrive at his decision based upon the evidence before him.”

OVERALL CAP LEGISLATION

But despite evidence of the MIR’s discriminatory effect in Alberta, the Alberta cap legislation is nevertheless constitutional because the MIR is only one piece of the broader legislative context, the Alberta Appeal Court found. “The trial judge erred when he ‘constitutionally assessed only the MIR’… and stated that ‘the distinction in the MIR was the focus of [his] analysis,'” Rowbotham wrote. “The correct approach was to assess the entire package of insurance reforms.”

That package included the introduction of the Diagnostic Treatment Protocols Regulation (DTPR), which provides for 10 to 21 treatment sessions in the first 90 days after an auto injury without the need to seek approval from the insurer. It pre-authorizes payment, thus eliminating any need for payment by an injured person. The DTPR also uses protocols for diagnosing and treating sprains, strains and other whiplash-associated disorders. Once the maximum number of treatments or 90 days has been reached, an injured person can apply for “Section B” coverage, which requires the approval of an insurer for further payments. The DTPR increased Section B coverage from Cdn$10,000 to Cdn$50,000.

“It is clear that when the court considers a Section 15 challenge to a section of one part of a legislative scheme, it must consider the whole scheme,” Row botham wrote. “In my view, the evidence supports the interrelationship of the insurance reforms. Indeed the evidence demonstrates that the MIR likely would have been instituted unless the DTPR was implemented with it.”

Rowbotham goes on to say that: “although the trial judge reviewed the entire scheme of the insurance reforms and was aware of their interrelationship, his method of analysis was to assess only the MIR, and then look to see if the other regulations would ‘offset’ the MIR.” This amounted to an error on the part of the trial judge, she concluded.

“In my view, the trial judge failed to assess the measures in the DTPR which promote and assist treatment. Legislation that provides for an individualized assessment of a claimant cannot normally be characterized as perpetuating a stereotype.”

INDUSTRY REACTION

The industry’s general reaction to the Court of Appeal’s decision is one of one of cautious optimism.

“We believe that a well-functioning auto insurance program strikes a balance between those who pay insurance premiums and those that are injured in automobile accidents to make a legitimate claim,” Alison Redford, minister of justice and attorney general of Alberta, said during a press conference.

“We feel our auto insurance system is a good system and today’s unanimous Court of Appeal decision supports this and confirms that the government’s auto insurance system as a whole responds to the needs and circumstances of those suffering from minor injuries.”

Randy Bundus, vice president, general counsel and corporate secretary at Insurance Bureau of Canada (IBC), hailed the decision as a definite positive step for the insurance industry, and a “victory for drivers and motorists of the province of Alberta.”

He says he’s delighted that the Court of Appeal accepted IBC’s argument that in order to analyse the validity of the MIR, “we have to look at the way that it fits into the ent
ire set of reforms.”

Ginny Bannerman, Insurance Brokers Association of Alberta’s CEO, says that the Court of Appeal’s decision to look at the reform package in its entirety was gratifying. “To take a look at any one of [the regulations] in isolation was to discount the benefit that they all brought as a package in working together,” Bannerman says.

Barb Addie, a principal at Baron Actuaries, agrees. “In this case, they brought in protocols to ensure that people got early intervention and that their treatments were paid for. It wasn’t like these people were left to dangle.”

Despite the victory, Bundus says he remains cautiously optimistic “but, deep in my stomach, I feel [the trial lawyers] will seek leave to appeal to the Supreme Court of Canada.”

If that is the case, and leave is granted, “it could be a long haul of uncertainty,” he adds.

In the meantime, Addie believes insurers’ claims costs will see a reduction now that the MRI is restored. According to figures from IBC, the impact of the cap challenge had resulted in a loss ratio 25% higher in 2008 than in 2007, increasing from just over 50% to slightly more than 76%.

“The difference between claims costs of those that settled in the interim [between the trial court’s decision in February 2008 and the Court of Appeal’s decision] would be pretty dramatic,” Addie says.

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The trial judge erred when he ‘constitutionally assessed only the MIR’… and stated that ‘the distinction in the MIR was the focus of [his] analysis.’ The correct approach was to assess the entire package of insurance reforms.