Actuarial Notes

Tort Reform Tension

By Craig Harris · Canadian Underwriter · 2005

Study guide: Exam 6C

A Canadian Underwriter feature on tort reform, asking whether the time has come for amendments to Canada's legal rules. Some countries, such as the U.S. and Australia, have made headway on reforming tort systems that many perceive to be unfair, costly and inefficient, targeting joint and several liability, compensatory damages, collateral sources and vicarious liability; in Canada the wave of reform experiments "has barely caused a ripple". The article opens with IBC's figures — court awards and legal expenses of about $7.3 billion in 1998, rising to an estimated $10 billion by 2003 — and gathers the views of insurers, risk managers, defence counsel and trial lawyers.

On the syllabus

  • Exam 6C — objective A2; retired from the Fall 2026 syllabus (the Fall 2025 content outline assigned the whole article).

Attention to the Aussie Way

  • In 2003 the Australian government undertook what its treasury called "a program of unprecedented law reform", in three main areas — establishing liability, clarifying damages and procedural reform — changing how courts decide duty of care, foreseeability, causation and remoteness of damage.
  • In the U.S., a 2005 paper by the Insurance Information Institute, AIG and the U.S. Chamber of Commerce cited reforms taken or needed across states: capping non-economic damages, modifying joint and several liability, restricting punitive damage awards and revising the collateral source rule.

Reflecting on Reform

  • IBC vice president and general counsel Randy Bundus names the areas ripe for reform: joint and several liability, the collateral sources rule, net income as the basis for damages, and vicarious liability.
  • The president of the Canadian Defence Lawyers Association calls for proactive reform; the president of the Ontario Trial Lawyers Association answers that the number one rule of law is full compensation for the innocent party.

What Currently Counts in Court

  • Under joint and several liability a plaintiff can recover all of the damages from one of several wrongdoers, even one only partly at fault; IBC objects to a defendant 1% at fault paying 100% of the loss.
  • RIMS supports eliminating joint and several liability for all non-economic damages; a municipal insurer (OMEX) describes being the "deep pocket" plaintiffs look for.
  • Trial lawyers argue the rule promotes settlement, and that paying on a percentage basis would mean more trials; alternatives floated include a fund similar to PACICC and making the rule proportionate.

The Bigger Picture

  • Loss-of-income damages are based on gross earnings, which do not take into account taxation and other employment deductions; the collateral source rule lets plaintiffs recover from the wrongdoer and again from insurance, sick pay and disability plans (see Collateral Benefits).
  • Trial lawyers counter that not taxing future income is a tax break the government chose to give injured people.

Vesting Vicariously

  • The introduction of Bill C-45 into Ontario, which introduced criminal liability for employees and organizations for negligent conduct, has raised awareness of vicarious liability; its two main issues are sexual abuse claims and car leasing or renting.
  • IBC's further list includes disallowing gross-up for income tax, court-ordered structured settlements for future care or income losses, and changes to prejudgment interest; a school-board insurer adds class action reform, and risk managers add sanctions on frivolous lawsuits.
  • Trial lawyers note that caps on non-economic damages already exist in Canada and punitive damages are minimal compared with the U.S.
  • Because the common law, including negligence, is provincial (Quebec operates on the civil code), tort reform will have to be done province by province, coordinated with the attorneys general.

Sources