The Insurance Bureau of Canada notes the conclusions of a new study that found the country’s home, car and business insurers believe that “the legal environment in Canada is becoming increasingly uncertain, and that organizations and individuals are more vulnerable to lawsuits than ever before.”
The study, “The Impact of Recent Legal Developments on Liability Insurance,” was conducted by researchers at the University of Western Ontario by Professors Craig Brown, Jason Neyers and Stephen Pitel. It focused on cases and legislation since 1990.
The study “suggests that uncertainty has increased due to several factors, including: expansion of the concept of bad faith and increased potential for punitive and aggravated damages; the development of class actions; and a greater likelihood that someone will be held accountable for another person’s actions,” said the IBC’s bulletin.
Randy Bundus, IBC VP, General Counsel and Secretary commented: “Insurers have been increasingly concerned that recent legal developments are making it more difficult for them to predict the cost of the insurance they are providing. So IBC sought an independent study to determine the causes of this unpredictability.”
He cited a recent case that wasn’t included in the study – Herbison v. Lumbermens Mutual Casualty Co. – in which a hunting mishap resulted in a redefinition of the concept of a “motor vehicle accident.” The facts of the case would probably be familiar to the U.S. insurance industry. The IBC summarized them as follows: “The hunter was driving his pick-up truck across a farmer’s field before sunrise when he spotted some movement in the distance. He stepped out of his truck, aimed his rifle and fired at what he thought was a deer. It wasn’t. Instead he hit a fellow hunter, wounding the man in the leg. The wounded man, Harold Herbison, sued. Lumbermens Mutual Casualty, which insured the defendant’s truck, was also added to the suit. The trial judge dismissed the claim against the insurer because it was the defendant’s rifle, not his truck, that caused the injury. However, the Ontario Court of Appeal overruled the trial judge. The appeal court found that the incident qualified as a motor vehicle accident because the hunter would not have been in a position to shoot the plaintiff if not for the use of the vehicle. Lumbermens was ordered to pay about $900,000 [U.S.$809,000].”
Bundus queried: “If that incident can fall within the definition of car accident under the policy – meaning the auto insurer must pay for the injuries – then what else could be a car accident? Clearly, we’ve gone well beyond the traditional understanding that a car accident is a collision involving a vehicle. When car owners pay for their auto insurance coverage, should they expect that close to a million dollars of their premiums could be used to pay for a hunting accident?”
The case is under appeal, and the IBC intends to intervene. Bundus noted that it “wants to participate on behalf of insurers, and all consumers who pay insurance premiums. We want to show the Court that decisions like this one raise claims costs and generate uncertainty for insurers trying to price their products.
“When insurers can’t predict what sort of claims they might be paying, it’s difficult to price the risk. At the same time, some plaintiff lawyers will continue to aggressively try to stretch the wording of insurance policies to achieve more and higher pay-outs, and this gets reflected in the premiums everyone will have to pay.”
The IBC is urging Government intervention to limit these types of claims in a number of areas, including, “protection from lawsuits for good Samaritans; a greater recognition that some recreational activities have inherent risks; and limits on awards for non-economic damages.”
“Access to the courts is important, but the trend toward new situations where insurers are made to pay ends up costing all of us,” Bundus continued. “There has to be a balance. Canadians have to decide whether they want this trend to continue or whether there should be some reasonable limits on what can be recovered in a lawsuit.”