An Alberta court judge has surprised insurers by ruling that the province’s cap on pain and suffering for soft-tissue injuries sustained in car accidents is unconstitutional because it treats victims differently, depending on how the injury occurred.

If the ruling is upheld on appeal, auto insurance premiums could rise substantially, insurers say. Lawyers across the country, however, argue that the Alberta cap, and others like it in some other provinces, are unfair to car-accident victims and should be removed.

Associate chief justice Neil Wittmann of the Alberta Court of Queen’s Bench ruled last month that the province’s minor-injury regulation, which limits non-pecuniary damages for minor injuries to $4,000, is contrary to the Canadian Charter of Rights and Freedoms. The Alberta government is appealing the decision.

The two plaintiffs in Morrow v. Zhang were in separate car accidents in 2004 and 2005, and each suffered several soft-tissue injuries. Damages for this type of injury — common examples include whiplash and chronic back pain — were capped by the provincial government at $4,000 in October 2004.

But, Wittmann wrote, the MIR “sacrifices the dignity of minor-injury victims at the altar of reducing insurance premiums. Specifically, the message is that their pain is not as worthy of conventional non-pecuniary damages because of the nature of their injuries, despite that their injuries may be more painful and enduring than other types of injuries. The deleterious effect of furthering a prejudice against a defined group on the basis of a disability and burdening that group with the lion’s share of reducing mandatory insurance premiums outweighs the reduced premiums that have resulted for Alberta drivers.”

Wittmann awarded the plaintiffs damages of $21,000 and $15,000.

Although most of those contacted in the Alberta insurance industry declined to comment on the decision pending the outcome of the appeal, Jim Rivait, spokesman for the Insurance Bureau of Canada in Edmonton, says his organization was pleased when Premier Ed Stelmach quickly announced that the ruling will be appealed.

“IBC will be participating as an intervener in that appeal,” Rivait says, “because we believe firmly that maintaining reasonable limits on the cost of minor injuries is the best way to provide affordable, competitive and accessible auto insurance to the people of Alberta. We are confident that there are sufficient grounds to have this lower court decision overturned.”

The Alberta appeal is being watched with great interest by observers in other jurisdictions that have similar caps on soft-tissue injuries. New Brunswick, Prince Edward Island and Nova Scotia all have $2,500 caps on recovery for non-pecuniary losses.

Denis Daigle, president of the New Brunswick Insurance Brokers Association, says his members are concerned about what the Morrow decision may mean for insurance costs. New Brunswick currently has dozens of cases before the courts, challenging the constitutionality of the cap on soft-tissue injuries. The N.B. cap was put in place in 2003.

“In New Brunswick, they are certainly going to bring that case in their defence,” says Daigle. If higher courts ultimately rule against caps, insured drivers will be affected, he says: “You’re certainly going to see insurance premiums increasing in the next couple of years. [Insurance rates] have been decreasing on average probably in the vicinity of 25% over the past three years.”

Daigle says that his association’s overall concern is for consumers, who will pay more for insurance. “Naturally if the cap is removed, it’s going to be to the benefit of a few consumers but to the detriment of all consumers,” he says. “We don’t see any problem compensating for soft-tissue injuries; it’s just that the amounts seemed to be exaggerated sometimes.”

According to Daigle, in cases in which injuries are not permanent and there is a full recovery: “There should only be a limited amount of compensation allowed.”

The Canadian Bar Association has also weighed in on the Morrow decision. Tom Achtymichuk of the association’s Alberta branch says the association is pleased with the ruling, describing it as “a victory for all Canadians.”

Arthur Wilson, president of the Alberta Civil Trial Lawyers Association, says, “The legal profession has a professional obligation to try to provide access to justice and to defend access to justice. Unfortunately, the minor injury regulation took that away to a large extent.”

@page_break@Despite predictions of insurance premium increases as a result of the decision, Wilson is not convinced that will be the case. “Given the profits the insurance companies have been making in recent years,” he says, “I don’t think it necessarily follows that there will be an increase in rates. Or, if there is an increase in rates, that it will be significant. The IBC has been suggesting a $200 increase in rates on average. Certainly, conventional experience has been that the average good driver’s insurance premiums did not fall by $200 in 2004.”

While there may have been large premium increases for those in high-risk groups, Wilson says, “The average driver saw a change in rates or a deduction in rates of, say, $10 to $15. So, it appears that the number of $200 is not factually based, that the insurance industry has used premium increases as a scare tactic in the past and an opportunity to create a crisis that has motivated political parties to introduce legislation that pleases the insurance industry.”

Members of the ACTLA hope to sit down with the government, he adds, to discuss “an automobile insurance product for Albertans that works for consumers, works for victims, and also is fair for those that provide automobile insurance.”

Richard Halpern, president of the Ontario Trial Lawyers Association, believes that the reasoning in the Alberta decision would also apply to other jurisdictions. He says that if the Alberta cap is unconstitutional, then the Ontario threshold and deductible would be, as well. He foresees multiple decisions across Canada that will challenge the constitutionality of these provisions.

“In the end, the solution lies in a negotiated outcome with government,” Halpern says, “with co-operation between the insurance industry and those of us who represent innocent accident victims.”

Halpern is a member of several lawyers’ groups that are working on insurance reform and he is involved in discussions at both the national and provincial levels. In Ontario, he says, “We’re trying to make the Liberal government understand that the appropriate thing here for the insurance industry, for the public, is to reform auto insurance — and to do it now.” IE