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:
[defendant liability] the defendant
is probably liable to the plaintiff for the amount requested (or
[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.3Humphrey 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
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
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.
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.
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.
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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