In a much anticipated decision (Morrow v. Zhang), Associate Chief Justice Whittmann of the Alberta trial division ruled that Alberta's government-imposed cap compensation in car accident cases was unconstitutional. Justice Whittmann held the cap on injury claims violated the Charter of Rights and Freedoms because it discriminated against people with so-called "minor injuries".

Nova Scotia has a similar cap on injuries in car accident cases. The trial over Nova Scotia's $2,500 cap is scheduled for 3 weeks in October 2008.

As my friends will tell you, nothing gets my blood pressure rising more than when someone cites "that McDonald's Hot Coffee Case", as a reason for why personal injury lawyers in particular, and the court system in general, are out of control.

The actual case is Liebeck v. McDonalds, Dist. Ct. New Mexico (Aug. 18, 1994). The media characterized it as "Woman gets millions after burning herself with McDonald's hot coffee". The story got international attention. It was even mocked by Sienfeld, which was the most watched TV comedy of the time. Remember the Episode? Kramer tried to sue Starbucks after spilling coffee on himself. He suffered a red mark on his leg. Jackie Chiles took on his case. In the end, Kramer's lawsuit fell apart when his burn fully healed after he put balm on his leg.  Most people think the actual case was similar to this - it was not.

The real case involved a 79 year-old grandmother who bought a coffee at a McDonald's drive thru in Albequreue New Mexico. She was a passenger in a car driven by her grandson. She placed the coffee between her legs while trying to remove the lid. The coffee spilled, causing her to suffer 3rd degree burns to her genitals, groin, inner thighs and legs. Ms. Liebeck was hospitalized for eight days and underwent multiple surgeries, including skin grafts, to treat her injuries. It took her 2 years to recover from her injuries.

The jury who heard the case awarded Ms. Liebeck $200,000 in compensatory damages, but reduced to $160,000 to account for the fact it found her 20% responsible for her injuries. The jury then awarded Ms. Liebeck $2.7 million in punitive damages to punish McDonald's for its reprehensible behavour.

Punitive damages are awarded to punish a company for bad behaviour. The purpose is to denounce the bad behavour and to discourage the company, or others, form engaging in similar conduct in the future. To be effective, punitive damages must be proportional to the wealth of the wrongdoer - otherwise, punitive damages will not serve as a deterrent. They will simply become a cost of doing business. McDonald's was a multi-billion dollar organization, therefore, the jury decided that punitive damages of $2.7 million were necessary to make McDonald's change its behaviour.

Several days later the judge lowered the punitive damages from $2.7 million to $480,000. Both sides appealed. However, they reached a confidential settlement before the appeal could be heard.

Why was the jury so angry at McDonalds? Following are some of testimony that came out during the trial:

• Ms. Liebeck initially offered to settle her case for $20,000 (cost of her medical bills) but McDonalds offered her only $800;

• McDonald's admitted to knowing about the risk of serious burns for about 10 years. From 1982-92 McDonalds had received more than 700 complaints of people, including children and infants, suffering serious burns from its coffee;

• McDonald required its francises to serve coffee at 80-88 degrees celcius, which its own expert said was a burn hazzard;

• McDonald's own quality assurance manager testified that a burn hazard exists with any food substance served at 140 degrees or above and that McDonald's coffee was not fit for consumption because it would burn the mouth and throat;

• The quality assurance manager further testified that the company actively enforces a requirement that coffee be held in the pot at 185 degrees, plus or minus five degrees. He also testified that while burns would occur, McDonald's had no intention of reducing the "holding temperature" of its coffee;

• Plaintiff's expert, a scholar in thermodynamics as applied to human skin burns, testified that liquids at 180 degrees will cause a full thickness burn to human skin in two to seven seconds;

• Other testimony showed that as the temperature decreases toward 155 degrees, the extent of the burn relative to that temperature decreases exponentially. Thus, if Liebeck's spill had involved coffee at 155 degrees, the liquid would have cooled and given her time to avoid a serious burn;

• McDonald's also argued that consumers know coffee is hot and that its customers want it that way. The company admitted its customers were unaware that they could suffer third-degree burns from the coffee and that a statement on the side of the cup was not a "warning" but a "reminder" since the location of the writing would not warn customers of the hazard.

It is difficult to get reliable information about the Liebeck Case. The above facts are cut and pasted from a fact sheet provided by the Association of Trial Lawyers of America (of which I am a member) - you can access ATLA's fact sheet by clicking here.

There is also a good summary of the case on the Online Encycolpedia Wikipedia, which you can access by clicking here.

I tried, without success, to speak with the actual lawyer who represented Ms. Liebeck. I believe that he signed a confidentiality agreement that prevents him from speaking about the case.

On December 27, 2006, Mark Milke published a report called "Myths and Facts About Automobile Insurance in Canada". This report was sponsored by the Insurance Bureau of Canada and will certainly add to the debate over publicly vs. privately delivered automobile insurance. This report comes down strongly in favour of privately delivered automobile insurance.

This report presents a contrary position to that taken by the Consumers Association of Canada, which has produced several reports very critical of Canada's automobile insurance companies and privately delivered automobile insurance in general.

The public vs. private insurance debate has re-emerged as a public policy issue, particularly in Nova Scotia, where the official opposition NDP have supported publicly delivered automobile insurance. Given the difficulties of the current Tory government, a future NDP government in Nova Scotia is a real possibility. I note that the IBC has produced a brochure called "Nova Scotian's Deserve Competition and Choice in Auto Insurance", likely in anticipation of an upcoming provincial election in Nova Scotia, and given the real possibility of an NDP victory.

I haven't had a chance to analyze the Mark Milke Report, so I can't comment on it at this time. I though I would post a link for people who may be interested.