The province of PEI recently enacted Bill 46, An Act to Amend the Insurance Act. The amendments to the PE Insurance Act (Act) are expected to apply to all motor vehicle accidents occurring after October 1, 2014, although the date on which the amendments will take effect is not yet set. The amendments include several significant changes that will impact both insurers and insureds, increasing costs and potentially litigation – but could encourage more settlements within the “cap” limits:

• Schedule B of S.P.F. No. 1 Standard Automobile Insurance Policy. The mandatory medical, rehabilitation and accident benefits recoverable under Schedule B are almost universally increased, and the age restriction for eligibility to the weekly payment benefit is eliminated.
• Minor Personal Injury Cap. The “cap” on the amount an injured plaintiff can recover for sustaining a minor personal injury in an automobile accident increases from $2,500.00 to $7,500.00, adjusted annually for inflation starting in 2016. There are also new – and narrower – definitions for a “minor personal injury”, “sprain, strain and whiplash-associated disorder” and “serious impairment”.

SCHEDULE B OF S.P.F. NO. 1 STANDARD AUTOMOBILE INSURANCE POLICY

There are two key changes to the benefits under Schedule B:

Increased Recoverable Amounts. Bill 46 almost universally increases the maximum amounts recoverable for the Schedule B benefits:

• The maximum for basic health or insured services required as a result of an injury or death sustained in an automobile accident increases from $25,000 to $50,000
• Payment toward funeral services for a person killed as a result of an automobile accident increases from $1,000 to $2,000 per person
• Death benefits for the following people killed in an automobile accident increase as follows:
  • for “Head of the Household”, from $10,000 to $50,000
  • for the “Spouse of the Head of the Household”, from $10,000 to $25,000
  • for a “Dependant”, from $2,000 to $5,000
• The maximum for weekly payments for loss of income for a person injured in an automobile accident increases from $140 to $250
• The maximum for a principal unpaid housekeeper injured in an automobile accident increases from $70/week for up to 12 weeks, to $100/week for up to 52 weeks

Weekly Payment Age Restriction Eliminated. Bill 46 effectively eliminates the current age restrictions in determining whether someone is employed and entitled to the benefit by under Subsection II, Part II, Amount of Weekly Payment (3)(a) of Schedule B.

MINOR PERSONAL INJURY CAP

Bill 46 increases the maximum “cap” on the non-pecuniary damages a person can recover for sustaining a minor personal injury in an automobile accident, and adds and changes some key definitions:

Cap Increase. The “cap” increases from $2,500.00 to $7,500.00, to be adjusted annually for inflation starting in 2016.

Test. Under the new definitions, the test to determine if an injury is a “minor personal injury” is:

1. Is the injury a “sprain, strain or whip-lash associated disorder injury” (as now defined in the Act)?
2. If yes, has it caused “serious impairment” (as now defined in the Act)?

“Minor Personal Injury”. A” minor personal injury” is currently defined as an injury that does not result in permanent serious disfigurement or the permanent serious impairment of an important bodily function, caused by continuing injury that is physical in nature. The amendments will significantly narrow the scope of which injuries will constitute “minor personal injuries”. A “minor personal injury” under section 254.2(1)(b) of the Act will be defined as any of the following injuries, including any clinically associated sequelae, that don’t result in “serious impairment”:

• sprain;
• strain; or
• whiplash-associated disorder injury.

“Sprain, Strain and Whiplash-Associate Disorder”. Bill 46 includes detailed definitions of what will constitute sprain, strain, and whiplash-associated disorders:

• “sprain” means an injury to one or more tendons, to one or more ligaments, or to both tendons and ligaments
• “strain” means an injury to one or more muscles
•  “whiplash-associated disorder injury” means a whiplash-associated disorder other than one that exhibits one or both of:
• neurological signs that are objective, demonstrable, definable, and clinically relevant
• a fracture to the spine or a dislocation of the spine

“Serious Impairment”. Bill 46 defines “serious impairment” as an impairment of a physical or cognitive function that meets all of these requirements:

1. it results in a substantial inability to perform any of the following
   • the essential tasks of the injured person’s regular employment, occupation, or profession, despite reasonable efforts to accommodate her impairment and her reasonable efforts to use the accommodation to allow her to continue her regular employment, occupation, or profession
   • the essential tasks of the injured person’s training or education in a program or course that she was enrolled in or had been accepted for enrolment in at the time of the accident, despite reasonable efforts to accommodate her impairment and her reasonable efforts to use the accommodation to allow her to continue her training or education
   • the normal activities of the injured person’s daily living
2. the impairment has been ongoing since the accident; and
3. the impairment is expected not to improve substantially.The determination of whether a sprain, strain or whip-lash associated disorder injury results in a “serious impairment” must also take into account the person’s pre-existing medical history, and it must also be the primary factor causing the impairment.

Separate Assessments. Each injury sustained in an automobile accident will require separate assessment in the determination of whether it is a “minor personal injury”.

Treatment Compliance. Bill 46 specifically states that a plaintiff injured as a result of an automobile accident must seek, and comply with, all reasonable treatment recommendations of a medical practitioner.  If an injured plaintiff fails to do so without reasonable excuse, and the injury results in a serious impairment, the injury will be deemed to be a minor personal injury, unless the plaintiff can establish the injury would have resulted in a serious impairment even if she had sought and complied with the recommendations.  This is consistent with the prevailing case law requiring plaintiffs to mitigate losses to the full extent possible.

MORE LITIGATION, SETTLEMENTS AND COSTS

The amendments, when they come into effect, will likely have an impact on both insurers and insureds:

Increased Costs. The Schedule B amendments represent a direct and immediate increase in costs to automobile insurers in terms of claims paid to their own insureds. However, it may also mean a modest decrease in the claims for past care costs from insured third parties under section A of their automobile insurance policies. Local media drew attention to the insufficiency of the medical and income replacement benefits under Schedule B, particularly for seriously injured plaintiffs, so the amendments will likely garner a positive public reception. However, for insurers the amendments represent a cost burden to be absorbed or perhaps covered with increased insurance premiums.

Increased Litigation and Settlements. The new definition of “minor personal injury”  may initially result in more litigation, but the increased cap could ultimately mean more claims settle within the cap limits. There has been no PE court decision considering the current definition of “minor personal injury”, but it has the potential to be interpreted broadly – perhaps broader than originally contemplated when PE first introduced its cap legislation. Plaintiffs and defendants have seemed cautious about litigating the issue under the former definition. The new definition is more restrictive, but clearer, which could – at least initially – result in more claims being litigated. However, the increased cap could encourage more plaintiffs to settle within it, particularly in clear cases of uncomplicated soft tissue injuries. The low cap may have discouraged plaintiffs from conceding their claim is “capped”, particularly given the lack of case law considering the issue and the vagaries of what constituted a “minor personal injury” under the current definition.

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Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Insurance Defence Team to discuss this topic or any other legal issue.

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