B.C. Finance Minister Carole James’s surplus budget this year is on shaky footing as a court ruling and other pending legal challenges threaten to undo the province’s efforts to rein in costs at the Crown-owned Insurance Corp. of B.C.
Just weeks ago in her quarterly economic update, Ms. James downgraded economic growth forecasts amid declining revenues and reduced contingency funds by $300-million to offset changing revenues owing to slowing global growth. At the time, she maintained the province remains on solid fiscal footing, but cautioned that ICBC remains a significant risk to the province’s finances.
Property tax revenues have slumped and the forest sector is in a downturn, but the state of the publicly-owned insurance corporation remains a primary risk. "I continue to be very concerned about the situation at ICBC,” Ms. James said.
The Supreme Court of B.C. has declared unconstitutional new restrictions on the use of medical experts that were imposed through a cabinet order earlier this year. The province already booked a decade’s worth of projected savings from the measure – a total of $400-million – in this year’s budget. Now, Ms. James may have to fill that hole in a year where she is posting a razor-thin surplus of just $179-million.
The decision of the court is still under review and its financial impact on the budget is too early to determine, she told reporters on Monday. “Obviously that has an impact now on the budget,” she said. "We have money in contingencies and in the forecast allowance to cover some of those ‘what-ifs’, but we’ll need to see [what happens with] the economic situation as well.”
In February, the cabinet set new limits on the use of duelling experts in insurance cases, effective immediately. B.C. Attorney-General David Eby said at the time that he needed to take action because of skyrocketing costs that were putting the public auto insurer at financial risk. Mr. Eby cited a Globe and Mail investigation into the lucrative, little-known growth industry that generates “independent medical evaluations.”
In a judgment released Thursday, Christopher Hinkson, Chief Justice of the Supreme Court of B.C., ruled those limits are unconstitutional because they encroach on the court’s ability to control its process.
The limit on the use of experts was just one of a suite of changes introduced by the Attorney-General, who described the Crown corporation’s books as “a financial dumpster fire" in 2018.
If last week’s court judgment stands, B.C. will have to reverse its anticipated savings, Mr. Eby said. “The government booked the $400-million as a savings last year, so that savings no longer exists because the rule no longer exists. So it has to come back on the books somehow.”
The B.C. government is still considering whether it will appeal that ruling or seek to introduce the changes in a different manner, but Mr. Eby warned Monday that there are two other court challenges still pending that could blow a far more significant hole in B.C.'s budget.
The Trial Lawyers Association of B.C. is taking the provincial government to court over other ICBC changes that the province introduced to stop the financial bleeding at the Crown corporation. Those changes include a cap on payments for pain and suffering in minor injury cases, and the shift of small settlement cases out of the courts to the Civil Resolutions Tribunal.
Losing the case on limiting experts is bad, Mr. Eby said, “but if we lost on the Civil Resolutions Tribunal and the cap on pain-and-suffering awards, it would be catastrophic.” Those changes were expected to reduce ICBC’s expenses by $1-billion annually.
Mr. Eby said Monday that he is confident his government will not lose on those two cases – but conceded it is in the hands of the courts.