The Minor Injury Cap in Nova Scotia Personal Injury Law



Dean Jobb for The Lawyers Weekly

February 5, 2010

The Nova Scotia government is poised to scrap a controversial $2,500 cap on damages for minor injuries suffered in highway crashes - a restriction personal-injury lawyers contend is unfair to accident victims but insurers insist is keeping premiums affordable.

The Office of the Superintendent of Insurance has launched a review of the cap, seeking public input on alternative ways to control damage awards for pain and suffering. A discussion paper accompanying the call for submissions suggests changes to the six-year-old cap could be applied retroactively.

New Democrat Premier Darrell Dexter, elected last June, says the cap - imposed by the former Conservative government in 2003 - is preventing people who have been seriously injured from pursing compensation, and will not survive in its present form.

"Insurance is a product designed to protect people," he told reporters in December. "If you exclude people from protection[...] then by definition you're not delivering the product that has been paid for." He has floated the idea of an across-the-board deductible, similar to one used in Newfoundland and Labrador, that would weed out the minor injury claims the cap is supposed to target.

The review comes on the heels of a Nova Scotia Court of Appeal ruling that rejected a constitutional challenge to the cap. The court ruled last December that the restriction does not violate the Charter's s. 15 equality guarantee and regulations defining "minor injury" do not exceed the intent of the legislation's framers.

One of the lawyers who brought the constitutional challenge praised the government's decision to review the cap. "It's a good move," Barry Mason told The Lawyers Weekly. "I'm pleased that they're sticking to their position, before the election, that the cap is wrong and it's taken away too many rights for accident victims."

Mason, of Presse Mason Law Office in Bedford, N.S., says he will file a submission before the Feb. 15 deadline and will ask the government to take three simple steps: "Get rid of the cap, restore accident victims' rights and regulate the (insurance) industry to make sure they charge a fair premium."

Halifax lawyer Janus Siebrits, who represents one of the accident victims pursuing the constitutional challenge, estimates that hundreds of injury claims are being held in abeyance until the cap is struck down or rescinded. "They're simply hovering out there, and waiting to be resolved."

The definition of a minor injury is so restrictive that "unless you've got very severe injuries, just about every case is affected by this," added Siebrits, who practises with MacGillivray Law Office. He has clients who suffered spinal injuries and broken bones that are not considered serious injuries under the cap, which excludes injuries that don't result in "serious impairment of an important bodily function" beyond the first year after an accident.

But the manager of media relations for the Insurance Bureau of Canada points out that the cap has withstood the court challenge. Pete Karageorgos says it has been effective in reducing auto insurance rates in Nova Scotia and, if changes are made, they should not be retroactive.

"The challenge, obviously, applying anything retroactively is a great one from a business perspective, if you're asking to go back and pay out or even charge people retroactively - that's quite an onerous task and, to some extent, doesn't even seem to be fair."

Karageorgos says the cap has allowed the industry to reduce the average auto insurance premium in Nova Scotia by 27 percent, but Mason disputes this figure. He cites a consultant's report prepared for the Nova Scotia government, and produced as evidence during the constitutional challenge, that found modest decreases in private passenger automobile insurance premiums after the cap was introduced - three percent in 2004, six percent in 2005, two percent in 2006 and one percent in 2007.

The Oliver Wyman Consulting Ltd. report also concluded that Nova Scotia insurers earned an average after-tax return on equity of 12 percent over the decade ending 2007, with the largest returns coming in the years after the cap was introduced. Return on equity peaked at just over 30 percent in 2004 and remained at 20 percent in 2007.

Those returns show the industry can easily absorb the costlier settlements that would come with the removal of the cap, Mason says, even if it is made retroactive.

"It's not fair for an accident victim in 2004 to have lesser rights than someone who's involved in an accident in 2010. They should be treated in the same way," he said. "The industry has made a tremendous amount of money on the backs of accident victims, and that needs to change."

Karageorgos said he had not seen the Oliver Wyman report and could not comment on its contents. "In a nutshell, the industry believes that the current system is working well and is providing drivers in Nova Scotia with stable, affordable premiums and coverages."

Despite the review and the government's intention to rescind the cap, Mason and Siebrits will seek leave to appeal the Court of Appeal's constitutional ruling to the Supreme Court of Canada.

The Supreme Court refused leave in December after the Alberta courts rejected a Charter challenge to that province's $4,000 cap on damages for soft tissue injuries. But Siebrits says the Nova Scotia appeal raises new issues the court may want to consider, including the broad definition of minor injury and a failure to address post-traumatic stress disorder and other mental injuries.

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