On November 24, 2014, the Alberta Court of Appeal
released its decision in Shannon v 1610635 Alberta Inc,
2014 ABCA 393 ["Shannon"]. The decision sets out
the legal test to be met in an application for an advance payment
pursuant to the Insurance Act.
In Shannon, the plaintiff had few savings and much
debt. He was injured in a rear-end motor vehicle collision. He
applied to the Court for an order of advance payment under section
581 of Alberta's Insurance Act, RSA 2000, c I-3 [the
"Act"]. That section provides the Court with
discretion to make an order requiring an insurer to make payment to
a claimant in advance of any judgment. Section 5.6 of Alberta's
Fair Practices Regulation, Alta Reg 128/2001 [the
"Regulation"], sets out the circumstances under
which an order under Section 581 of the Act may be made. Section
5.6 came into force on July 1, 2012. It reads as follows:
5.6(3) The Court may make an order
under section 581 of the Act, on any conditions it considers
appropriate, requiring the insurer to make a payment to a claimant
who applies to the Court under subsection (2) of this section where
the Court is satisfied that
as a result of the injuries of the claimant, the claimant is
unable to pay for the necessities of life, or
the payment is otherwise appropriate.
In Shannon, the chambers judge allowed the application
and ordered the defendants' insurance company to pay the
plaintiff $10,000 immediately and $4,000 on the first of each month
until further order of the Court. The Court also imposed a
condition that two pieces of unimproved land owned by the plaintiff
be mortgaged to the defendants to secure repayment of any excess of
the advance payments above his ultimate trial award or settlement.
The defendants appealed this order.
The Alberta Court of Appeal dismissed the appeal and held that
the chambers judge appropriately balanced the competing
considerations and removed most of the risk to the appellants.
The Court also clarified the test required to obtain an order of
advance payment. First, the applicant must satisfy two
preconditions, on a balance of probabilities standard:
That the defendant is probably liable to the plaintiff for the
amount requested (or more); and
Without that payment, the plaintiff is likely to go without
necessities of life (or things broadly analogous) or unlikely to be
able to prosecute his or her claim for damages.
If the two preconditions are satisfied, the Court will then
weigh the plaintiff's likely loss without an advance payment
against the defendant's risk of overpaying. In both cases, the
Court will analyze probabilities and monetary amounts. Explained
another way, an order will likely be granted in cases where the
plaintiff is likely to lose a strong (%) and worthy ($) claim
without advance payment and the defendant is not likely (%) to
overpay ($) if advance payment is awarded.
To diminish risks to both parties, the Court may impose terms
and conditions on an order for advance payment. For example, the
applicant may need to promise to repay any ultimate overpayment
with interest, or the Court may set a fixed date on which advance
payments will be reviewed to ensure they are still accurate and
reflective of the case.
While the Court did not provide a detailed analysis of
subsection 5.6(3)(b), providing for payment when it is
"otherwise appropriate", we view that subsection as a
catch all provision providing the Court with broad discretion to
allow advance payments when justifiable.
This decision has not been appealed to the Supreme Court of
Canada and therefore will remain as an important decision which
could impact insurers and Alberta insurance policies. Please feel
free to contact any one of our BLG professionals if you have
questions or concerns.
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