NSSC Upholds Cap on General Damages

In October 2008, Justice Walter R.E. Goodfellow of the Supreme Court of Nova Scotia presided over an almost month-long hearing respecting the validity of the $2,500 cap on general damages for “minor injuries,” as provided by s. 113(B) of the Nova Scotia Insurance Act and associated regulations. The challenge was considered in the joint hearing of two separate actions, which have been referred to as the test cases. The challenge raised two main issues: (1) the Charter validity of provisions in the Insurance Act and the Nova Scotia Automobile Insurance Tort Recovery Limitation Regulations (the Regulations); and (2) whether the Regulations are ultra vires the Insurance Act.

The first issue was raised by Melissa Gionet and Anna Marie MacDonald on the basis of physical disability and sex (the Hartling plaintiffs) and Saquoia McKinnon on the basis of mental disability and age (the McKinnon plaintiff). Only the Hartling plaintiffs raised the second issue (on vires).

Justice Goodfellow released his decision in two parts, the first on January 12, 2009, dismissing both challenges and upholding the cap (2009 NSSC 2). In a later decision released on February 9, 2009 (2009 NSSC 38), Justice Goodfellow released his alternative reasons on s. 1 of the Charter, under which a Charter violation can be upheld as being justified in a free and democratic society.

The Hartling plaintiffs were represented by Barry Mason and Glenn Jones of Pressé Mason. Their challenge was defended by the Attorney General of Nova Scotia, represented by Alex Cameron. The Insurance Bureau of Canada (IBC) acted as an intervenor, represented by Jeff Galway of Blake, Cassels & Graydon LLP in Toronto.

The Hartling plaintiffs claimed that the cap discriminates against motor vehicle accident victims on the basis of physical disability and sex. This group also brought forward the vires challenge. In essence, they argued as follows: firstly, that the cap discriminates on the basis of physical disability, because individuals suffering from chronic pain and soft-tissue injuries have been historically stereotyped in society as “fakers.” The plaintiffs thus argued that a cap on their general damages further perpetuates this stereotype and the resulting marginalization.

Secondly, they argued that the cap discriminates on the basis of sex, because women generally receive the majority of their damages in the form of non-pecuniary damages. Therefore, the plaintiffs argued that the cap disproportionately affects a woman's right to compensation.

Thirdly, they argued that the definition of “resolves” in the regulations is contrary to the “plain and ordinary” meaning that was intended by the Legislature in the Insurance Act. Effectively, the plaintiffs argued that the government does not have the power to define the word “resolves” used in the Act.

In defending these claims, the AG and the IBC focused on the automobile insurance crisis that existed in Nova Scotia at the time the cap was enacted, arguing that the cap was a rational and necessary measure to lower automobile insurance premiums in Nova Scotia. The AG and IBC also focused on the particular role that general damages play in the overall tort recovery scheme and argued that limiting such damages was not discriminatory on the basis of sex or physical disability. In this context, the AG and IBC relied on the Supreme Court of Canada's comments in a trilogy of cases from the 1970s, which characterized general damages as “arbitrary” and subject to policy. Notably, the Supreme Court of Canada had imposed a judicial cap on general damages, to avoid an American-style result of outrageous jury awards. The AG and IBC also argued that the legislature granted the government the broad authority to define “resolves” as it did.

Justice Goodfellow dedicated approximately 50 pages of his 92-page decision to the issue of physical disability. He found that the plaintiffs had focused their case on trying to prove an historical stereotype, under the first contextual factor of discrimination, arising from Law v. Canada (Minister of Employment and Immigration), and modified in R. v. Kapp. This alone, however, is insufficient for a finding of discrimination under the Charter. Justice Goodfellow went on to find that the Hartling plaintiffs had failed to meet their evidentiary burden to establish an infringement — there was no evidence of stigmatization or marginalization of the claimant group. Rather, Justice Goodfellow noted that any concerns in this regard (if any) arise from the adversarial and compensatory nature of the tort law system, which pre-existed the amendments to the Insurance Act regime.

In response to the allegation of discrimination on the basis of sex, Justice Goodfellow found that the plaintiffs had not selected the appropriate comparator group. In his view, the appropriate comparator group for consideration is men with similar injuries to women (i.e. minor injuries). On this comparator group, there is no difference in treatment and therefore no discrimination against women. In other words, the cap treats both men and women the same.

With respect to the vires argument, Justice Goodfellow disagreed with the Hartling plaintiffs' position and their argument that the third definition of a minor injury in the Auto Insurance Reform Act was intended to protect accident victims. He relied on the Hansard debates and the Insurance Act to conclude that “[t]he overall intention of the legislation was the reduction of automobile insurance premiums by controlling claims costs with respect primarily to automobile accidents and the desire to strengthen the consumer protection provisions of the Insurance Act.” Justice Goodfellow found that the definition of “resolves” did not take away any substantive rights, but was merely a definition of a term used in a statute that was consistent with the objectives of the Act.

On his alternative s. 1 analysis, Justice Goodfellow ultimately concluded that if he had found a violation of s. 15 of the Charter, the impugned legislation would not be otherwise justifiable.

The McKinnon plaintiff was represented by Jamie MacGillivray and Janus Siebrits of MacGillivray Law. The plaintiff claimed that because she had suffered post-traumatic stress disorder (PTSD) from a motor vehicle accident (as opposed to what she characterized as a “physical injury”), her general damages were automatically capped at $2,500. This is because, in her view, the legislation does not allow for general damages above $2,500 for any mental injury.

The McKinnon matter was defended by the defendant driver, Roy McKinnon, represented by D. Geoffrey Machum, QC, and Christa M. Brothers of Stewart McKelvey, the AG and IBC. In response to the mental disability claim, evidence was led to establish that the plaintiff was not suffering from a purely mental injury. Rather, the uncontroverted expert evidence at trial demonstrated that McKinnon's PTSD injury was a physical injury that manifested itself physically in the brain. Therefore, as the plaintiff's injury was “physical in nature,” the plaintiff was found not to be discriminated against in the manner alleged, because no distinction was actually drawn. The responding parties urged the court to find that there was no proper factual foundation for the McKinnon plaintiff to allege discrimination on the basis of mental disability more broadly.

With respect to the argument that the cap discriminates on the basis of mental disability, Justice Goodfellow found the expert evidence of the responding parties to be persuasive. He accepted their opinion that structural changes happen to the brain in moderate to severe PTSD and concluded that “the brain is part of the body and PTSD has been established as an injury ‘physical in nature.'”

The McKinnon plaintiff provided no evidence to the contrary. Therefore, if the McKinnon plaintiff had a permanent, serious impairment of an important bodily function which had not “resolved” within 12 months, she would not be restricted in terms of her claim for general damages. As such, no distinction was made with respect to her injury on the basis of mental disability, and Justice Goodfellow did not need to further consider the four contextual indicators of discrimination.
Both the Hartling plaintiffs and the McKinnon plaintiff are appealing Justice Goodfellow's decision and the appeals are scheduled for October 13 to 15, 2009.