Update: Requests For Voluntary Advance Payments From Insurers
In a recent email alert we considered the issue of advance payments under the Fair Practice Regulation and the Insurance Act (you can view the original alert by clicking here). In Shannon v. 1610635 Alberta Inc., 2014 ABCA 393 ("Shannon") the Alberta Court of Appeal once again addresses the same issue of pre-trial advance payments under both section 5.6 of the Fair Practice Regulation ("Regulation") and section 581 of the Insurance Act ("Act").
The Plaintiff in Shannon was involved in a rear-end motor vehicle collision. Injuries were sustained by the Plaintiff and he applied for an advance payment as he had no money, no way to raise money, and was unable to work to pay for medical treatments. The Plaintiff owned land in other provinces that could not be borrowed against. The Chambers Judge, in granting the Plaintiff a pre-trial advance, imposed a condition that the land be mortgaged to provide security for repayment of any advance payments that would be above the final award or settlement at trial.
In affirming the decision of the Chambers Judge, Justice Côté of the Court of Appeal clarified the law regarding advance payments under the Regulation and the Act by setting out a two part test which requires a Plaintiff to demonstrate:
- 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 (or things broadly analogous), or unlikely to be able to prosecute his or her claim for damages.
In addition to these requirements, Justice Côté suggested a court should weigh the Plaintiff's financial burden against the probability of overpayment, and consider imposing terms (such as the security required by the Chambers judge in this case) to mitigate risk to the Defendant.
Similar to the decision in Stewart, Shannon should provide a warning to insurers of the potential for increased applications for advances, particularly if liability is admitted early in the litigation process.