Background

In November 2014, the Alberta Court of Appeal examined the law regarding advance payment to a plaintiff for damages pursuant to the Fair Practices Regulation of the Insurance Act. In Shannon,1 the Court held that advance payment could be made upon the following conditions:

  1. [defendant liability] the defendant is probably liable to the plaintiff for the amount requested (or more); and
  2. [plaintiff hardship] without that payment, the plaintiff is likely to go without necessities (or things broadly analogous), or unlikely to be able to prosecute his or her claim for damages.

Once these two conditions are met, the plaintiff's likelihood of loss must be weighed against the defendant's likelihood of overpaying. In so doing, the Court should flexibly "consider imposing terms and conditions on one of the parties, to mitigate the risk to one or both parties."

Judicial Consideration Post-Shannon

Two cases have since interpreted Shannon: Siemens2 and Humphrey.3 Humphrey is of little use to Alberta lawyers for the interpretation of Shannon as it is governed by a different set of Rules, and modifies the Shannon test criteria for the Yukon jurisdiction only.

Siemens fleshes out the Shannon test, and provides guidance for determining defendant liability and plaintiff hardship.

Liability

The Court in Siemens determined that liability of the defendant must be "probable...or 51% or better". This determination can only be made upon the evidence before the Court.

The Court emphasized that the advance payment application is an action separate and apart from the tort claim as the application is brought directly against the defendant's insurer. As such, the disclosure materials, including the pleadings, in the tort action do not form part of the advance payment application unless they are submitted by affidavit evidence.

Hardship

When determining plaintiff hardship, the Court outlines three considerations to be weighed.

First, hardship does not equate with poverty. The plaintiff must establish that they will "go short... and endure financial hardship occasioned by the action" while the matter proceeds to trial. The timeline for the litigation will affect this determination, specifically: timelines related to expert reports and Independent Medical Examinations as well as anticipated trial dates.

Second, the Court must be mindful that an advance payment is an unusual pre-judgment remedy. A balance must be struck to acknowledge the prejudgment remedy but not to frustrate the legislative intent of Fair Practices Regulation. Put another way, safeguards must be built in; however, the Court does not elaborate further.

Third, an advance payment is a piecemeal approach to compensation. Therefore, the circumstances must be "extraordinary or compelling" before this prejudgment relief is awarded.

Conclusion

The cautious and measured approach taken in Siemens may limit the ability of all plaintiffs in motor vehicle accidents to apply for advance payments. Specifically, the requirement for extraordinary or compelling circumstances to award relief should ease the concern that plaintiffs will use the mechanism of advance payments to circumvent the court process and obtain payments before they have established their case.

Siemens provides a useful framework regarding Shannon applications. Nonetheless it is important for adjusters and counsel to give careful thought to admitting liability prior to Questioning in order to avoid unwittingly paving the way for a successful advance payment application.

Footnotes

1 Shannon v 1610635 Alberta Inc., 2014 ABCA 393.

2 Siemens v Co-Operators General Insurance Company, 2015 ABQB 578.

3 Humphrey v. Tanner, et al & McDougall, 2015 YKSC 27.zzzz

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This article is intended to be an overview and is for informational purposes only.