The British Columbia government is demanding the manufacturer, operator and pilot of a hot air balloon that burst into flames three years ago, killing two people and injuring several others, pay the health-care bills associated with the crash.

The province filed the lawsuit this week in B.C. Supreme Court under a recent piece of legislation that allows it to recover health-care costs in cases where someone is injured because of negligence or wrongdoing.

Two women were killed and 11 others injured when a fire broke out on a balloon operated by Fantasy Balloon Charters on Aug. 24, 2007, sending the flaming basket skyward before it plummeted into a nearby RV park.

A statement of claim filed in B.C. Supreme Court targets Fantasy Balloon Charters, company owner and pilot Stephen Pennock, balloon manufacturer Aerostar International Inc., maintenance engineer Doug Scott, and the Canadian government.

The province is asking for the past and future costs associated with treating five of the passengers, who suffered a long list of injuries including traumatic brain damage, severe burns, broken bones and psychological illness.

The lawsuit says every one of the defendants was negligent or breached a duty in care of some way.

It alleges Fantasy Balloon Charters, Pennock and Scott made unsafe modifications to the balloon such as adding an extra propane tank, failing to properly inspect or maintain the balloon and allowing it to be operated while carrying too much weight.

It blames Fantasy Balloon Charters and Pennock for failing to ensure staff or passengers were properly trained and operating a balloon that the company and the pilot should have known was unsafe.

The document alleges Aerostar designed and manufactured a dangerous balloon, and it should have known the balloon was capable of catching fire.

Lastly, the province's lawsuit alleges Transport Canada wrongly issued operating certificates for the balloon and its operators and failed to conduct adequate inspections of the balloon and the company to ensure the passengers were safe.

"The incident was caused by the negligence and/or breach of contract of the defendants," says the statement of claim.

The document contains allegations that have yet to be tested in court, and none of the defendants have filed a statement of defence.

Pennock has also filed his own lawsuit targeting the balloon's manufacturer and half a dozen U.S. firms involved in making or maintaining the balloon's components, as well as several unnamed firms that made or supplied parts for the burner system.

Pennock said through a spokesperson that he believed the ongoing lawsuits will help get to the bottom of what caused the crash -- and he was confident he would not be found at fault.

His spokesman, John Kageorge, said the government's claims that the balloon wasn't properly maintained or inspected were "unsupported allegations." He also said the maintenance was provided by the manufacturer, and all repairs and modifications were approved by a Transport Canada-certified engineer.

"Three years ago, the lives of my passengers as well as some people at Hazelmere RV Park changed forever," Pennock said in a written statement.

"Transport Canada has verified that the aircraft had been properly maintained and inspected. Not a day goes by that I don't feel extreme sadness about the horrific accident."

Kageorge said the Transportation Safety Board investigation, which noted several deficiencies with the balloon, its operation and existing federal regulations, was making recommendations to improve the hot air balloon industry, rather than laying blame for the crash.

Transport Canada issued a brief statement saying the "safety and security of the travelling public" are its top priorities, but declined to comment on the province's lawsuit.

The family of the two people who died have launched a lawsuit, as have several homeowners whose units were gutted by the resulting fire.

The Health Care Cost Recovery Act was introduced in 2008 and took effect April 1, 2009, allowing the province to recover health-care costs by suing or joining existing lawsuits in cases where injuries were caused by negligence or wrongdoing.

The provincial government has recovered about $3.2 million and opened more than 5,000 such cases, although not all of those cases would have resulted in judgments.

Lawyers and insurers must notify the government whenever a lawsuit is launched that involves someone who was injured and treated in the provincial health-care system because of possible negligence. The province can then join those lawsuits or launch its own.

A Transportation Safety Board investigation found numerous problems with the balloon and called for stricter regulations for the hot air balloon industry and greater oversight by Transport Canada.

The safety board's report, released in September 2008, found the balloon had been modified to accept a fourth propane tank and an additional auxiliary tank.

The line to the fourth tank somehow came loose, igniting the propane and causing a fire that engulfed the basket as the passengers and pilot prepared for takeoff.

The investigation also found there was no master shut-off for the fuel tanks, more than 65 per cent of the balloon fabric had been replaced over time and the balloon "substantially" exceeded the maximum allowable weight at the time of the crash.

The TSB report said the safety issues that contributed to the crash might have been identified by periodic Transport Canada inspections.

Forty-nine-year-old Shannon Knackstedt and her 21-year-old daughter Gemma were killed in the crash.