Message from the President (April 01, 2008)

Spring has sprung, the grass is riz. There’s lots of talk about this “cap” biz!

Ever since Feb. 8, 2008 when Associate Chief Justice Neil Wittmann of Alberta’s Court of Queen’s Bench delivered his decision in Morrow v. Zhang [2008 ABQB 98] there has been much discussion as to what it all means. Add to that the Alberta Government’s pledge to appeal and the Court’s refusal to stay the decision pending the outcome of that appeal and you have the makings of what is destined be the hottest insurance topic in Canada since PIPEDA.

Whatever happens at the Alberta Court of Appeal will surely simply pave the way to the Supreme Court of Canada. Either way this one goes, you can be pretty certain the issue will not die in Alberta.

There is a lot at stake, not just in Alberta but in the other “cap” jurisdictions: Nova Scotia (where the rules are somewhat different), as well as Prince Edward Island and New Brunswick where the rules are mildly different on the matter of the type of injury involved, but not so different as to cause anyone to dismiss the potential of Morrow to have significant impact in those two provinces. The underlying constitutional issue in Morrow may apply regardless of how the classes of claimants are determined.

Insurers have been collecting premiums based on rates developed with the injury cap in mind. If they are left to pay higher than planned payments from that premium pool there is going to be a deficit that will only be overcome by, that’s right, higher premiums. And higher auto premiums mean nasty headlines and political meddling and before you know it, we will be right back where we started.

We are not unfamiliar with cycles in our industry but this one, unlike the soft-hard-softer-harder cycle we have come to know and hate, was not expected.

The Province of New Brunswick has just started the process to have up to five test cases tried together. There has already been a hearing to start the process for trying those test cases and in Nova Scotia, litiga- tion on that province’s modified cap legislation continues to inch its way along the painfully slow legal process there.

Regardless of what transpires in all of these cases it is going to be a long time before any of them are definitely resolved. So what’s an insurer to do? Hope is not a good strategy and status quo is fraught with peril.

If this thing does go south those who have not properly prepared will be eaten for lunch by a hungry and rather bitter plaintiff bar. Fortunately, there is still a significant force of loss adjusters — both staff and independent — who know what it takes to conduct a proper injury investigation.

Take advantage of those experienced adjusters and get them doing what they were trained to do. At a time of slumping revenue due to lower investment income and premium reductions associated with a soft market, advocating more spending on loss investigations is not going to be popular, but doing what is right seldom has anything to do with being popular. If that wasn’t the case we wouldn’t be in this situation.

Hope for the best, prepare for the worst. •