Are Caps off the Endangered Species List?

As the auto insurance cap issue grinds slowly and inexorably towards the Supreme Court of Canada, and even as courts seem to be aligning with insurers on the constitutional validity of caps (thus far, at least), it’s still hard to know under exactly what circumstances a cap is acceptable to the courts or the public.

Reading the various judgments coming out of Alberta and Nova Scotia, here is a sampling of what judges have said so far about minor auto injury caps.

• Caps on insurance payouts for minor auto injuries are constitutional, as long as they are part of a broader, comprehensive legislative package that offers some sort of compensation and/or treatment for the victims.

• Caps can be implemented in and of themselves, so long as the statutory language mentions time limits for recovery instead of being specific about — and here trial lawyers here would say “stereotyping” — certain classes of injuries.

• Caps on insurance payments discriminate (or not) against minor injury claimants, depending upon the case law you are reading and whether or not the trial judge in question, upon hearing all of the evidence, “reasonably” finds them to be (un) constitutional.

As you can tell from the above, the legal status of cap legislation remains murky at best. Much remains to be sorted out.

One outstanding issue is whether the politicos will sort out the situation before the courts do. For example, the NDP government in Nova Scotia is fresh from an electoral victory following a campaign in which its leader, Darrell Dexter, openly talked of replacing the province’s cap with a deductible. Ontario also has a deductible regime, which the trial lawyers in Ontario have threatened to challenge in court.

So you can see where this is going, right? It’s not hard to imagine a whole new round of litigation calling into question the future of deductibles, in much the same way that a morass of litigation has created uncertainty about caps — and on it goes, with each new alternative to a cap being tested for its validity in the courts.

And even if the cap litigation goes the distance and insurers ultimately lose, at least one regulator has suggested governments will more than likely simply write up the legislation in a new way, so that the ultimate endgame of lower claims costs –and therefore, cheaper insurance — will be achieved. That’s something to keep in mind, since the industry may be guilty to some degree of presuming that the cap legislation represents the battle royale that will settle the claims costs issues once and for all. In fact, the uncertainty is even greater than the suspense around the 50/50 split on whether the courts will accept the caps, yes or no. The uncertainty now is whether politics in Canadian society at large will obviate whatever the Supreme Court decides down the road.

This whole exercise is begging a much more important question than merely whether the Canadian courts or politicians will accept caps or not. It’s begging the question of whether the public would ever agree in principle to any method of reducing insurers’ claims costs. The dynamic thus far is pretty clear: whatever barriers to unlimited claims payments insurers might erect, personal injury lawyers are bound and determined to tear them down. The question is this: would lawyers’ efforts be for naught if the public actually sat down with insurers and hashed out a deal with which the public is satisfied, thus undermining the lawyers’ argument that they are acting in the public’s best interests?

This might be the kind of dialogue that the Insurance Bureau of Canada (IBC) might want to start with the public. Perhaps the bureau could get the ball rolling by initiating public opinion surveys and/or focus groups that asked the public directly what kind of caps on insurers’ costs they might be willing to accept? This kind of dialogue would provide the IBC with the opportunity to discuss with the public why some means of controlling costs are necessary to keep premiums down. In this way, a much-needed, meaningful dialogue might take place between insurers and the public that would seek to achieve consensus on a thorny issue that is clearly not well-suited to the slow-as-molasses public arenas of litigation and/or legislation.

If you want an alternative to caps or deductibles — something that will withstand the withering scrutiny of the public –best ask the public to participate in its creation.

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The whole exercise begs the question of whether or not the public would ever agree in principle to any method of reducing insurers’ claims costs.