Appeal Court Upholds Alberta's $4,000 Cap on Payouts for Min

EDMONTON - Alberta's $4,000 cap on insurance payouts for whiplash injuries was revived Friday by an Appeal Court decision overturning a ruling last year that found the cap was discriminatory.

All sides agree the case will likely end up in the Supreme Court of Canada and the outcome could have a major impact on auto insurance rates, which got cheaper for most Alberta drivers when the cap was imposed five years ago.

The government plans to put the judgment into effect immediately by reinstating the cap at a higher rate of $4,504 to adjust for inflation, Justice Minister Alison Redford said.

"This government believes that a well-functioning auto insurance system strikes a fair balance between those who pay insurance premiums and those who are injured in automobile accidents and have a legitimate need to make a claim," she said.

"The court recognized the government's concern with the affordability of insurance and the potential increase of uninsured drivers."

The $4,000 cap was imposed in 2004 along with a new method of calculating rates. The move was designed to save insurers millions of dollars on injury claims in exchange for lower premiums for many drivers.

Rates had been climbing steadily for a couple of years prior to the cap and premiums of $5,000 or more were forcing some young drivers to simply go without insurance. Accidents involving uninsured drivers were becoming more common, leading to charges and lawsuits against these drivers.

Alberta's Progressive Conservative government, which has always shunned public insurance, created a new rate structure that rewarded good drivers. But the tradeoff was the $4,000 cap on soft tissue injuries such as whiplash, which had frequently led to six-figure lawsuits by people claiming to have chronic pain and suffering.

Fred Kozak, the lawyer for two injured woman who challenged the cap, said they're obviously disappointed by the ruling.

Peari Morrow was broadsided in her car at an intersection. The accident left her with chronic neck and back pain that has lasted for years. Brea Pederson was rear-ended in her car and suffered painful injuries to her neck, back, wrists and shoulders. Her wrists injuries were still causing problems two years later, he said.

Kozak would like to take the case to the Supreme Court, but said his clients may not be able to afford another costly appeal.

"They're both innocent motor vehicle accident victims," he said. "Both of them embarked on this challenge not for the money, but for the sake of fairness. "

"They discovered that they were being treated differently than other motor vehicle accident victims and they didn't think that was right. They still don't think it's right."

The insurance industry is applauding the ruling.

But Randy Bundus, a senior lawyer with the Insurance Bureau of Canada, said he expects to see a further appeal of the case, which has pitted the auto insurance industry against civil lawyers and accident victims.

"I think that the personal injury lawyers have lost a lot of contingency fees over the last few years since the cap has been in place," Bundus said from his Toronto office.

"That's a real incentive to try to get this case to the Supreme Court of Canada."

Without the rate cap insurers would be seeking a hefty rate increase to offset higher costs for injury claims, he said.

Rick Mallett of the Alberta Civil Trial Lawyers Association said there's plenty of evidence to suggest the rate cap on payments for pain and suffering is unfair to auto accident victims.

"The insurance industry was making record profits before there was any cap in place," said Mallett. "It's unfortunate that Albertans are now in this position where there is a cap in place, because it probably wasn't necessary to begin with at all."

The Canadian Bar Association issued a release Friday expressing disappointment with the appeal court ruling.

"A compensation cap denies the right of Albertans to access justice," said Tom Achtymichuk with the association's Alberta Branch.

"We strongly believe that it is every Albertan's right to access the justice system to determine fair compensation for their injuries."

The lawyers' group published an independent report a year ago that found the auto insurance industry would continue to be highly profitable even if the $4,000 cap on payments for soft tissue injuries was removed.

Similar minor injury payment caps also exist in Nova Scotia, New Brunswick and Prince Edward Island, but these caps are also being challenged in the courts. Nova Scotia's newly elected NDP government has promised to scrap the province's $2,500 cap.

Insurance rate hearings start next week in Alberta. The industry is seeking an increase of roughly seven per cent on the mandatory portion of auto insurance, but would have asked for close to 40 per cent if the cap was not reinstated, said Bundus.

Friday's ruling found that Justice Neil Wittmann of Court of Queen's Bench was wrong last year when he ruled that the cap violated the Charter of Rights. Wittmann had ruled that the cap discriminated against a specific group of Albertans by removing their right to sue for pain and suffering.

The parties in this case have until mid-September to seek leave to appeal to the Supreme Court.