Recent automobile insurance reforms in Canada.

• Author: Miller, Shelley L.
• Position: Special Report on Insurance

Recent automobile insurance reforms in certain provinces of Canada are aimed at limiting recovery of non-pecuniary compensation for traffic injury claimants by means of capping. In Canadian provinces (except Quebec), motor vehicle liability evolved from tort law, particularly from the fault-based principles of negligence, which were first developed in England. Those principles have been adapted to suit local conditions. Today Canada has four models, with the standard fault-based scheme still in place in the east, west, and northern regions, pure no-fault in Quebec and Manitoba, a hybrid threshold no-fault model in Ontario, and now a choice model in Saskatchewan.

Legal commentators have recognized the close relationship between negligence law and insurance. The connection is nowhere more evident than in the area of auto insurance. Regulation of the auto insurance product has led to regulation of the conditions of entitlement to compensation. In personal injury claims under the general tort law of Canada, non-pecuniary general damages are recoverable as compensation for pain and suffering and for loss of the amenities of life.

Policy-makers in Canada have considered and tested various methods of controlling the social burden or premium cost of general damage awards for traffic injuries. One approach has been to exclude less severe injuries from entitlement to compensation, either by a verbal threshold of severity of injury or a monetary deductible from general damages recoverable. Another approach is to set an upper limit or cap on general damages, usually in conjunction with a verbally defined class of injury or injuries. Although capping has been the subject of recent attention, it is not a new mechanism. In 1978, the Supreme Court of Canada in the seminal case of Andrews v. Grand & Toy adopted as the appropriate award in the case of a young adult quadriplegic, the amount of $100,000 in general damages (indexed for inflation so that the current ceiling on non-pecuniary damage awards for the most serious injuries is now around $290,000) and stated that, save in exceptional circumstances, this should be regarded as an upper limit of non-pecuniary loss in cases of this nature.

The provinces actively discussing or implementing legislative change in 2003 included the tort jurisdictions in the Atlantic provinces and Alberta, which wanted to reduce what had become unaffordable premium rates. In Nova Scotia, the cost of insurance reportedly rose...