The Crown's Right of Recovery Act.

AuthorShelley, Jacob J.
PositionHealth care cost recovery


The government of Alberta recently passed the Crown's Right of Recovery Act (1) (the Act), which will enable the Province to recover the costs of health services from automobile accidents, convicted persons, and, perhaps most significantly, tobacco manufacturers. Alberta's legislation received Royal Assent in November of 2009. It is the second last province to enact legislation that enables the provincial government to litigate against tobacco manufacturers in order to recoup health care costs. (2) Over the last several decades, tobacco litigation has had a steadfast presence in the courts, both in Canada and internationally. Health care cost recovery is the latest and, arguably, most successful, trend in tobacco litigation. The Act has already garnered some attention, but not for its attempt to recover costs from tobacco manufacturers. (3) There has been little discussion concerning the power the Act confers upon the province of Alberta to sue tobacco companies. This may be a reflection of the fact that suing tobacco companies to recover health care costs, and the controversy that comes with such litigation, is "old news". Alberta's legislation was preceded over a decade earlier by legislation in British Columbia. (4) It may also reflect the growing recognition in society that tobacco use is associated with increased health care costs, even for non-smokers.

The following article intends to situate the Act within the context of tobacco litigation, particularly as it pertains to the state's right of recovery. It will begin with a brief examination of the Act before situating it within the broader context of right of recovery legislation and litigation. This will include a discussion of the origin and development of right of recovery statutes, the challenges and critiques that right of recovery statutes face, and of some of the possible outcomes and issues associated with litigation.

The Crown's Right of Recovery Act

In many respects, the Crown's Right of Recovery Act is identical to its predecessor in British Columbia, the Tobacco Damages and Health Care Costs Recovery Act. (5) The Supreme Court of Canada's ruling that British Columbia's legislation is constitutional (6) is undoubtedly the reason why Alberta and the majority of provinces have adopted legislation that is virtually identical. In light of the similarities, and the fact that British Columbia's legislation has been subject to considerable attention in the courts and in the literature, it is unnecessary to thoroughly review Alberta's legislation. Nevertheless, it is worthwhile to highlight some its key provisions.

The Act extends to the province of Alberta a "direct and distinct action against a manufacturer to recover the Crown's cost of health services caused or contributed to by a tobacco-related wrong" (s. 42(1)). The cost of health services is defined as the sum of the total expenditure by the province for health services provided for insured persons as well as the estimated expenditures that could be reasonably expected will be provided to insured persons that have resulted from tobacco-related disease or the risk of tobacco-related disease (s. 41(1)(a)). The term 'health services', in turn, is broadly defined and includes, among other things, in- and out-patient services, services as defined in Alberta Health Care insurance Act, and public health services. The parties that the province can seek recovery from are considered manufacturers.

Under the Act, manufacturers include any person who "manufactures or has manufactured a tobacco product" (s. 41(1)(i). This definition includes, among others, persons who cause the manufacturing of tobacco products (s. 41(1)(i)(i)), derive at least 10% of revenues from the manufacture or promotion of tobacco products (s. 41(1)(i)(ii)), or engage in or cause others to engage in the promotion of a tobacco product (s. 41(1)(i)(iii)). The legislation does not specifically address what is meant by disease. Instead, disease is defined simply as including "general deterioration of health" (s. 41(1)(c)).

Following British Columbia's lead, Alberta's legislation does not require the Crown, in an action, to identify particular individual insured persons, prove causation, or prove that they provided health services to a particular individual (s. 42(5)). Additionally, the legislation permits the Crown to use statistical, epidemiological, and sociological information as evidence "for the purposes of establishing causation and quantifying damages or the Crown's cost of health services respecting a tobacco related wrong in an action brought" (s. 45).

It is unclear when Alberta will file a lawsuit against the tobacco industry. (7) Although every province has enacted legislation permitting them to sue tobacco companies, only British Columbia, New Brunswick, and Ontario have filed lawsuits. (8) As could be expected, the tobacco companies implicated in the suits have mounted challenges and the parties are currently before the courts. Newfoundland and Labrador, the second province to enact legislation to recoup costs from tobacco companies, has not yet filed a lawsuit. In October 2002, Newfoundland and Labrador's government referred the constitutionality of its act to the Newfoundland and Labrador Supreme Court, but that issue was resolved with the Supreme Court of Canada ruling that British Columbia's legislation is constitutional. Manitoba's government is expected to initiate its lawsuit in 2010. Undoubtedly, Alberta and the other provinces that have not yet filed are awaiting the courts' decisions, particularly in British Columbia.

The Origin and Development of Right of Recovery Statutes

The enactment of cost recovery statutes by every Canadian province over the past decade illustrates the expectation that litigation against tobacco companies to recoup health care costs is a worthwhile undertaking. Undoubtedly, the settlement in the United States in 1998 for over $200 billion between the four largest US tobacco companies and the Attorney Generals of 46 states, known as the Master Settlement Agreement, has heightened expectations. But the Master Settlement Agreement, and the litigation that prompted it, was preceded by decades of unsuccessful litigation.

Because of its impact on health, tobacco has been in the courts for over half a century. (9) For the better part of that time, tobacco manufacturers did not pay a single penny to any plaintiffs alleging injury from tobacco use. Wave after wave of litigants ultimately failed to hold tobacco companies accountable. Arguably, the lack of success can be attributed to several factors, among them the fact that early tobacco cases in the US were often decided by juries. And, as Frank Vandall notes, "juries adopted the theory of assumption of risk: that the consumer knew the risk and voluntarily began to smoke and voluntarily continued to smoke." (10) Moreover, plaintiffs were alleging harm from the proper use of cigarettes, and not because of a harm or defect. It was feared that if the plaintiff's arguments were to succeed it would lead to a flood of product liability litigation. (11) Perhaps more pernicious, however, was the strategy adopted by tobacco manufacturers: "force the plaintiffs to spend all of their assets." (12)

Tobacco companies are estimated to have spent hundreds of millions of dollars in litigation, money undoubtedly considered well spent if it avoided the troublesome precedent of a ruling in favour of a plaintiff. Consider the following: in the nine year case of Cipollone v. Liggett Group, Inc., attorneys for Rose Cipollone spent approximately $6 million before deciding to abandon the case. (13) Some commentators attribute the success tobacco companies in the courts more to "out spending the plaintiff rather than the backing of persuasive law." (14) This strategy materialized in the continuous opposition to litigation that tobacco industry mounted through the filing of motions to delay or limit the proceedings. Although there were a few instances with favourable results, overall tobacco litigation had...

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