As any Ontario personal injury lawyer knows, the common law of damages has been modified significantly in the context of motor vehicle accidents, to the benefit of defendants and their insurers. The legislature has enacted various measures to limit the ability of plaintiffs to recover in tort. It has done so for two reasons: 1) to help limit the number of frivolous claims and thus help reduce auto insurance rates, and 2) to reflect the fact that plaintiffs have access to no-fault benefits (though the scope of those benefits has been significantly reduced over the last several years).
This article discusses one aspect of these limitations – collateral benefits deductions provided for in s.267.8 of the Insurance Act, and the Court of Appeal’s recent decision in Cadieux v. Cloutier, 2018 ONCA 903 providing the definitive framework for how those deductions are to be calculated.
Collateral Benefits Deductions in MVA Litigation
A person who is injured in a motor vehicle accident cannot recover any damages for pain and suffering or health care expenses unless they sustain a “permanent serious impairment” of an important function. Even if they meet this “threshold,” they face a deductible of nearly $40,000, that comes directly off the jury’s award for pain and suffering. What is more, plaintiffs are not entitled to damages for lost income in the first 7 days after the accident, and thereafter are only entitled to 70% of any past loss (future loss of income is still calculated on a 100% basis).
The harsh application of these rules was evident in a recent decision, Debruge v. Arnold, in which the trial judge found the plaintiff did not meet the “threshold,” and consequently her jury award of $88,300 was reduced to just $8,300. My partner, Linda Matthews, and I successfully argued on appeal that the trial judge’s decision was correct as a matter of law, and that for costs purposes, the court must compare the defendant’s offer to settle with the net judgment as opposed to the gross jury award.
Even if a plaintiff is able to recover damages after these Insurance Act deductions, he or she will still face further deductions for collateral benefits received in respect of the accident. This, once again, is a modification of the common law. The common law prohibits what is known as “double recovery,” but it also allows for the “private insurance exception,” meaning that if a person has paid the premiums for, say, a long-term disability policy and is subsequently injured, that person should not have the tort award reduced simply because he or she was wise enough to take out a policy. The Insurance Act effectively does away with the private insurance exception in the motor vehicle accident realm.
The relevant provisions are as follows:
267.8(1) In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the damages to which a plaintiff is entitled for income loss and loss of earning capacity shall be reduced by the following amounts:
1. All payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for statutory accident benefits in respect of the income loss and loss of earning capacity.
2. All payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for income loss or loss of earning capacity under the laws of any jurisdiction or under an income continuation benefit plan.
3. All payments in respect of the incident that the plaintiff has received before the trial of the action under a sick leave plan arising by reason of the plaintiff’s occupation or employment.
(4) In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the damages to which a plaintiff is entitled for expenses that have been incurred or will be incurred for health care shall be reduced by the following amounts:
1. All payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for statutory accident benefits in respect of the expenses for health care.
2. All payments in respect of the incident that the plaintiff has received before the trial of the action under any medical, surgical, dental, hospitalization, rehabilitation or long-term care plan or law.
(6) In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the damages to which a plaintiff is entitled for pecuniary loss, other than the damages for income loss or loss of earning capacity and the damages for expenses that have been incurred or will be incurred for health care, shall be reduced by all payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for statutory accident benefits in respect of pecuniary loss, other than income loss, loss of earning capacity and expenses for health care.
In addition, subsection (9) states that once a plaintiff has obtained a judgment in tort, he or she must hold any subsequent benefits in trust for the defendant, who is entitled to take an assignment of those benefits, thereby effectively setting them off against the tort award.
The Court of Appeal’s Decision in Cadieux
The issue for the Court of Appeal in Cadieux was how collateral benefits deductions are to be calculated. The Court was faced with two competing lines of authority, including seemingly divergent cases from its own court, and consequently convened a five-member panel to address the issue once and for all.
One line of cases, beginning with Bannon v. McNeely (1998), 38 O.R. (3d) 659 (C.A.), stood for the proposition that collateral benefits should be deducted on an “apples to apples” basis. Thus, if a plaintiff previously received a benefit from his or her own insurer for “attendant care,” the tort defendant is only entitled to deduct that benefit if the jury makes an award for “attendant care.” The second line of authority emerged in the Court of Appeal’s recent decision in Basandra v. Sforza, 2016 ONCA 251. It is known as the “silo” approach, standing for the proposition that a tort defendant is entitled to deduct a benefit received provided it follows into the same general “silo” as the tort award.
These two approaches sound similar enough, but they can produce hugely divergent results. In Cadieux, it was the $350,000 question. The plaintiff settled his accident benefits claim before trial for $900,000, including $250,000 for medical/rehabilitation expenses and $350,000 for attendant care. The jury awarded the plaintiff $701,809 for an “Acquired Brain Injury” support worker. All sides agreed that such a worker provided med/rehab as opposed to attendant care. Under the “apples to apples” approach, the tort defendant would have only been entitled to deduct $250,000 for med/rehab, whereas under the “silo” approach, the tort defendant would be entitled to deduct $600,000 as both med/rehab and attendant care benefits broadly fall under the category of “health care expenses.”
The five-member panel of the Court of Appeal acknowledged that “the uncertainty in this imperfect area of law must be resolved” [a para 83]. It unanimously concluded that the silo approach is correct and that the defendant’s insurer was therefore entitled to deduct the plaintiff’s attendant care benefits.
The Court began, as it should, with the text of ss.267.8(1), (4) and (6) of the Insurance Act, which, as set out above, establish “silos” of income loss, health care expenses and other pecuniary losses. “There is no reasonable interpretation of the legislation,” the Court explained “that permits either a more generalized approach to deduction (that is, a deduction of SABs in one silo from a jury award for damages falling within another silo) or a more particularized approach to deduction (that is, the deduction of particular SABs within a silo only from damages for the identical head of damage awarded by the jury within the same silo)” [at para 22].
The panel noted that the decision in Bannon had been released under an earlier incarnation of the Insurance Act, which had lumped all accident benefits together and required their deduction from the tort award. Under this scheme, it was at least arguable that the Court could craft doctrine atop the statutory language that required an “apples to apples” set off. But under the present version of the Act, the legislature had clearly turns its mind to which benefits ought to be deducted from which tort award and had opted for a silo approach.
What is more, the Supreme Court of Canada’s decision in Gurniak v. Nordquist, had all but overruled a B.C. Court of Appeal decision called Jang v. Jang, which was the basis for the decision in Bannon. As such, Bannon was arguably no longer good law in any event, and in light of the changing legislative landscape, the Court of Appeal in Cadieux sealed its fate for good.
The Court of Appeal tackled a number of other issues, and with each issue employed a textualist and doctrinal approach. These included:
1) Whether past and future accident benefits should be combined in each silo before deducting them: The Court held there is no basis in the text of the Act to create a temporal distinction between past and future benefits. They should therefore be combined into a single silo.
2) Whether accident benefits paid to third party service providers and not the plaintiff should still be deducted from the award: The Court concluded that they should, noting that the language provides for deductions of benefits the plaintiff “has received or that were available before the trial of the action” [emphasis added]. Otherwise, plaintiffs could avoid s.267.8 of the Act simply by having the insurer pay the service providers directly.
3) Whether a non-settling defendant is entitled to the full deduction of accident benefits or only a proportionate share: The Court of Appeal once again considered the text and context of the Insurance Act, and held that the non-settling defendant is only entitled to its proportionate share of the collateral benefits deduction. The Court relied upon the age-old principle of statutory interpretation known as expressio unius est exclusion alterius (the inclusion of one thing is the exclusion of another). Subsection 267.8(8) states that the deduction of collateral benefits will be made after the apportionment of the plaintiff’s contributory negligence. It says nothing, however, about the apportionment of liability between two tortfeasors. As such, applying this canon, the collateral benefits should be deducted from the plaintiff’s award after the deduction for contributory negligence, but only then should the remaining damages be apportioned as between the two defendants in accordance with the determination of liability.
4) Whether the collateral benefits deduction should be reduced by the legal fees paid in the accident benefits claim: The Court of Appeal once again applied the ordinary meaning of the statute and correctly noted that it calls for a deduction of benefits on a gross basis, not a net basis. The Court clarified that the trial judge has residual discretion to make the tort defendant liable for the costs the plaintiff incurred in prosecuting the accident benefits claim in appropriate cases.
A Principled Decision
The Ontario Court of Appeal was presented in Cadieux with an opportunity to bring clarity to an area of law that had suffered from uncertainty. The Court should be commended for seizing this opportunity and settling the law on various issues in the area of motor vehicle accident litigation. With each issue, the Court employed a principled textualist analysis, interpreting the words in accordance with their ordinary meaning and statutory context. There can be little doubt the Court got it right.
The only issue that remains somewhat open-ended is whether a tort defendant (and its insurer) will be on the hook for the costs incurred by the plaintiff in prosecuting its accident benefits claim. But, in my view, the Court was wise not to establish a hard and fast rule, opting instead for what effectively amounts to a rebuttable presumption that the tort defendant will not be required to indemnify the plaintiff for these costs. This is the proper default position since the tort defendant is a stranger to the accident benefits claim and ordinarily should not be required to indemnify the plaintiff for costs incurred. By the same token, the trial judge has discretion to award the plaintiff these costs in special cases, a discretion which is itself grounded in statutory text (s.131 of the Courts of Justice Act and r. 57 of the Rules of Civil Procedure), along with the court’s inherent jurisdiction to control its own process.
One could certainly argue the decision was “unfair” as a matter of policy, as it will benefit insurance companies at the expense of injured plaintiffs. That may be true, but the Court’s role is not to correct perceived injustices, but to give effect to the intent of the legislature as manifested in its enactments. The Ontario Legislative Assembly is at liberty to amend the Insurance Act at any time, and, indeed, it has done so many times over the years.
Beyond that, in a meaningful way, personal injury litigants will benefit from this decision. The Court has now resolved “the uncertainty in this imperfect area of law” and this will enable both plaintiff and defence lawyers to provide their respective clients with better informed advice about the litigation risks they face. This will help crystalize the “settlement value” of the case and will ultimately mean more settlements and fewer costly (and often emotionally draining) trials. Both plaintiffs and defendants, in other words, benefit from a predictable legal order. The Court of Appeal in Cadieux has helped provide them with just that.