Canada Puts Cap on Whiplash Claims

In February, Canada’s Minor Injury Regulation — which put a cap on pain and suffering compensation for minor soft-tissue injuries such as whiplash claims — was struck down in a Court of Queen’s Bench ruling. The decision was praised by lawyers and consumer advocates, but led to warnings from the insurance industry that it would lead to significantly higher premiums.

Costs to drivers will spike an average of 11% if a cap on compensation is not kept in place, a new report suggests, as Alberta’s car insurance rate board prepares to hear arguments on whether to change premiums or maintain the current rate.

The increase suggested in the report would mean a premium increase of between $60 and $75 per year for many Albertans, based on compulsory insurance rates of about $600 to $700.

The actuarial report, prepared for the Automobile Insurance Rate Board by the management consulting firm Oliver Wyman, will be part of the submissions presented at two days of board hearings in Calgary next week that will help determine new maximum premiums for compulsory insurance.

Jim Rivait of the Insurance Bureau of Canada said on Friday the report low-balls the costs. “Effectively, the savings over the last number of years are all attributed to the Minor Injury Regulation. So if you take that away, you’re taking away those savings,” said Rivait, who earlier this year predicted insurance costs could increase by as much as $200 a year without a limit on claim payouts. Other estimates put it in the range of $84 to $164 a year.

Rivait said the industry is also facing other higher expenses, such as huge leaps in the cost of auto-body work. “We’re starting to get to an unprofitable situation,” he said.

The case will go to the Alberta Court of Appeal in September.

So far, however, little has changed in the wake of the Queen’s Bench ruling. Rivait said everyone is in limbo waiting for the outcome of the appeal. “Why would people put a claim into the system while there’s uncertainty?” Rivait said.

After several years of rate decreases or freezes, the board is now in a difficult position as well. The board has yet to decide how it will deal with the cap being struck down, said Merle Taylor, a management consultant who sits as the consumer representative on the government-appointed board. “It’s very tricky,” Taylor explained, “it’s very difficult to evaluate what’s a fair adjustment when we’re in a sort of undecided period. We’re trying to be fair to industry and trying to be fair to the consumer.”

The new rates will take effect Nov. 1. The meetings are open to the public, but presentations to the board are coming mainly from insurance companies and lawyers. Tuesday, the insurance industry will be back in a Calgary court, to take another run at holding off the original decision striking down the cap.

State Farm is asking that Albertans continue to be subject to the cap until the issue has been resolved by appeals to higher-level courts. In its written stay of enforcement application, the insurance company argues that in the event the cap is found to be constitutional, it will have a hard time recovering claims it has already paid out to people. It notes that its premium rates have been based on the existence of the Minor Injury Regulation cap and “lowered accordingly.” The company said in its written statement that if the cap is found to be unconstitutional, it will pay back the resulting higher claims to injured parties, with interest.

Sofia is an author of several articles pertaining to No Win No Fee, Compensation Claims, Whiplash Claims, Personal Injury Claims and other legal articles.