By M. Steven Rastin

Introduction

The fundamental goal of the tort law system is to ensure that the negligent defendant pays his dues and restores the plaintiff to the position she would have been in absent the tortfeasor's negligence. Put another way, an action for damages is not intended to create a windfall for injured plaintiffs. The Supreme Court of Canada has moved away from a punitive approach, steering itself toward the maxim of fair compensation for all parties by precluding injured plaintiffs from recovering more than which they are entitled. No doubt entrenched in principles of fairness and justice, this rule against double recovery can be construed as bestowing an unintended benefit on tort defendants by allowing for deductibility of collateral benefits. Enter now the protected defendant who enjoys not only the deductibility of collateral benefits, but other statutory protections that its non-protected counterpart does not. Some might ask, where is the fairness in that?

The Collateral Source Rule - Common Law

At common law, the collateral source rule serves as an exception to the rule against double recovery, bearing two components. First, public or private support benefits such as welfare, charitable gifts, etc. received by an injured plaintiff will not be deducted from an award for income loss or loss of earning capacity. The Ontario Court of Appeal in Boarelli v. Flannigan2 expressed that:

Moneys received by an injured party as a result of a private or public benevolence have never been taken into consideration in assessing damages for loss of income or earning capacity.3

The second exception to the rule against double recovery is the private insurance exception established in Bradburn v. Great Western Railway Co.4. In that case, receipt of benefits from a private insurer was held not to be deductible from damages for personal injury. The private insurance exception is rooted in the principle that a negligent defendant should not benefit from a plaintiff's forethought and wisdom in securing private insurance in the event of disability. The Supreme Court of Canada twice maintained this exception in Ratych v. Bloomer5 and Cunningham v. Wheeler6 .

Ratych involved a police officer who was injured in a motor vehicle accident. He required time off work due to his collision-related injuries, during which time he received his full salary. By an narrow 5-4 margin, the Supreme Court held that the officer was not entitled to claim lost wages from the tort defendant. In writing for the majority, Justice McLachlin stated the fundamental principle of recovery in a tort action is that an injured plaintiff is to be compensated "for the full amount of his loss, but no more"7 as conferred by the Supreme Court in the trilogy of Andrews v. Grand & Toy Alberta Ltd.8 , Thornton v. Prince George School Board9, and Arnold v. Tenol10 Upholding the principle of fair compensation, McLachlin J. felt it best served by focusing not on the tortfeasor but on restoring the plaintiff to his pre-accident state that is, to award him not a penny less nor more.11

In writing for the minority, Cory J. cited with approval the private insurance exception in Bradburn, stating at paras. 88-89:

The interrelationship of the tort system and other forms of compensation from private or public collateral sources has become a complex problem with the growth of legislation providing benefits for injured workers. Commentators have complained that the development of the law in this area has been characterized by instability, recurrent shifts in judicial thinking and the absence of underlying principle... Yet, despite any confusion that may have beset this issue, no court in Canada or England has questioned the principle enunciated in Bradburn, supra, that benefits awarded under a private insurance contract should not be deducted from damages awarded against a tortfeasor. [internal citations omitted]

The Court of Appeal [in Bradburn] held that the plaintiff was entitled to receive both the amount payable by the insurer and the damages for loss of income recoverable from the defendant. Pigott B. held at p. 197:

I think that there would be no justice or principle in setting off an amount which the plaintiff has entitled himself to under a contract of insurance, such as any prudent man would make on the principle of, as the expression is, "laying by for a rainy day". He pays the premiums upon a contract which, if he meets with an accident, entitled him to receive a sum of money. It is not because he meets with the accident, but because he made a contract with, and paid premiums to, the insurance company, for that express purpose, that he gets the money from them.

As discussed in Ratych, English courts have never questioned nor applied the deductibility rule to private insurance. Ratych was no different. In spite of McLachlin J.'s approval of the Bradburn rule and the non-deductibility of private insurance benefits, the majority of the Supreme Court did not find receipt of sick-leave benefits analogous to private insurance benefits and thus, held them deductible from an award for damages.

Ratych was drastically narrowed by Cunningham v. Wheeler12 which involved three appeals pertaining to the question of deductibility of disability benefits from a plaintiff's claim for lost wages. McLachlin J., now writing for the minority, reiterated her position on fair compensation

to both parties, focusing again on restorative, not punitive damages. On the private insurance exception issue in Bradburn, the minority felt it should not be extended to benefits paid under employment contracts stating that, where a loss is made good by employment benefits, the plaintiff suffers no parallel loss recoverable in tort.

Now writing for the majority in Cunningham, Cory J. firmly upheld the private insurance exception, stating at paras. 16-18:

I think the exemption for the private policy of insurance should be maintained. It has a long history. It is understood and accepted. There has never been any confusion as to when it should be applied. More importantly, it is based on fairness. All who insure themselves for disability benefits are displaying wisdom and forethought in making provision for the continuation of some income in case of disabling injury or illness. The acquisition of the policy has social benefits for those insured, their dependants and indeed their community. It represents forbearance and self-denial on the part of the purchaser of the policy to provide for contingencies. The individual may never make a claim on the policy and the premiums paid may be a total loss. Yet the policy provides security.

Recovery in tort is dependent on the plaintiff establishing injury and loss resulting from an act of misfeasance or nonfeasance on the part of the defendant, the tortfeasor. I can see no reason why a tortfeasor should benefit from the sacrifices made by a plaintiff in obtaining an insurance policy to provide for lost wages. Tort recovery is based on some wrongdoing. It makes little sense for a wrongdoer to benefit from the private act of forethought and sacrifice of the plaintiff

There is good reason why the courts should be slow to change a carefully considered long-standing policy that no deductions should be made for insurance moneys paid for lost wages. If any action is to be taken, it should be by legislatures. It is significant that in general no such action has been taken.

Cory J. found that, in effect, Ratych required plaintiffs to prove they had somehow paid for the disability benefits. To that end, the majority of the Supreme Court distinguished Cunningham from Ratych, construing the disability benefits involved as falling within the scope of private insurance benefits given that trade-offs had been made during the collective bargaining process. Thus, if the plaintiffs somehow directly or indirectly paid for the benefits, the benefits are considered to fall under the scope of private insurance and will not be deducted from tort damages.

In maintaining the private insurance exception to common law principles of double recovery, Ratych posits that collateral benefits are not deductible where a plaintiff can establish he has given something up in return for benefits. Cunningham narrows the scope of deductibility by finding that, in certain circumstances, a trade-off may be implied (e.g. through collective bargaining). Further, where a benefit provider retains a right of subrogation, no deduction is made for those benefits.

Statutory Modifications to the Collateral Source Rule

The introduction of no-fault automobile insurance legislation in the Insurance Act13 has considerably modified the collateral source rule for motor vehicle related injuries.

The OMPP Regime

The OMPP regime was the first no-fault regime in Ontario14, created in an effort to stabilize auto insurance rates. It introduced a dual system of tort and accident benefits. In short, accident victims lost their right to sue in certain cases in return for no-fault accident benefits.15 A verbal threshold was introduced that restricted the recovery of non-pecuniary general damages where injuries fell below the threshold.16 In addition, section 267(1) of the Insurance Act was created to give credit to tort defendants for certain payments the plaintiff received or was entitled to receive from other sources. Section 267(1) provided:

The damages awarded to a person in a proceeding for loss or damage arising directly or indirectly from the use or operation of an automobile shall be reduced by,

(a) all payments that the person has received or that were or are available for no-fault benefits and by the present value of any no-fault benefits to which the person is entitled;

(b) all payments that the person has received under any medical, surgical, dental, hospitalization, rehabilitation or long-term care plan or law and by the present value of such payments to which the person is entitled;

(c) all payments that the person has received or that were or are available for loss of income under the laws of any jurisdiction or under an income continuation benefit plan and by the present value of any such payment to which the person is entitled; and

(d) all payments that the person has received under a sick leave plan arising by reason of the person's occupation or employment.

An important decision under the OMPP regime pertaining to deductibility of collateral benefits is Cugliari v. Whiten17. There, the plaintiff was injured in a motor vehicle collision in 1990. At trial, the judge held that CPP disability benefits received by the plaintiff before trial should be deducted from the global award of damages. The Divisional Court reversed and the Court of Appeal upheld the Divisional Court's ruling, stating that CPP disability benefits were non-indemnity in nature as they did not require the recipient to be employed at the time of disability. The Court of Appeal found the legislative purpose of s. 267 was to eliminate double recovery; had the legislature intended CPP disability benefits to be deductible, it would have expressly done so.

Bill 164

Bill 164 replaced the OMPP regime for accidents occurring on or after January 1, 1994. A new class of protected defendants was introduced; no action for pecuniary losses could be brought against a protected person. A protected person was (i) the owner of an automobile, (ii) the occupants of an automobile and (ii) any person present at the incident. Non-pecuniary losses were only recoverable if the plaintiff met a verbal threshold. Section 267(1) amendments removed the defendant's right to deduct benefits previously allowed under the OMPP regime.

The collateral source rule once again became relevant but only in the context of a claim against an unprotected defendant for pecuniary losses.

Bill 59

The Bill 59 regime took effect on November 1, 1996. Once again, a plaintiff could not sue a protected defendant unless her damages surpassed the threshold, subject of course, to a monetary deductible. Bill 59 expressly allowed for the deduction of collateral benefits received before trial and also created a trust provision for future collateral benefits. Section 267.8(1) provides the following:

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 or 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.
  1. 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.
  1. 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.

Nearly identical to the provision under the OMPP regime, Bill 59 amendments added the deduction of benefits for "loss of earning capacity." Until Meloche v. McKenzie18, decided in 2005, it appeared the issue of deductibility of CPP disability benefits had been settled. Meloche re-raised the issue of deductibility of various benefits including CPP from a tort award against a protected defendant. The court found that the amendments under Bill 59 altered the private insurance exemption under common law by establishing the deductibility of collateral benefits from a tort award for loss of income and earning capacity. It also created a statutory trust in

favour of defendants for receipt of such collateral benefits. Favouring a broad approach to deductibility, the court stated at para. 19:

Since the original intent was to prevent double recovery by having the collateral benefits deducted from the tort award, the interpretation of these sections in my opinion, should be broad, inclusive and encompassing with respect to identifying those benefits which are the subject of deduction in tort law from an award for past loss and the subject of a trust for future receipt.

Having found that CPP disability benefits were "tied to a recipient's inability to engage in the act of gainful employment" or "as a result of a loss of earning capacity"19, the court held the benefits were deductible. It further noted that Bill 198, which explicitly makes CPP disability benefits deductible, was simply a clarification of the original legislation.

Recently, the Ontario Superior Court of Justice in Strickland v. Mistry20, another Bill 59 case, followed Meloche and found that long term disability payments received by the plaintiff were deductible and subject to the trust and assignment provisions of the Insurance Act. In that case, the plaintiff was in receipt of CPP, disability pension and long term disability benefits from her employer's group insurer. The court agreed that CPP disability benefits were intended to be among the class of benefits deductible from a tort award against a protected defendant.

Bill 198

Bill 198 applies to accidents occurring on or after October 1, 2003. Section 267.8(1) outlines three deduction provisions thereby explicitly removing the collateral source rule from income loss, health care costs and other pecuniary losses in motor vehicle accident claims. In essence, the tortfeasor receives a credit for all income replacement benefits received or available from the statutory accident benefits insurer prior to the trial of the action and also for payments received under a sick leave plan or any payments received or available to the plaintiff for income loss or loss of earning capacity under the laws of any jurisdiction before trial.

Section 267.8(2) provides that collateral benefit payments made in respect of any loss of income in the first seven days after the accident are not deductible. Section 267.8(3) gives protected defendants priority with respect to deduction of such benefits.

Cugliari involved a similar provision in the OMPP which allowed for the deductibility of collateral benefits that were considered indemnity payments. CPP disability benefits were found to be non-indemnity payments and thus, non-deductible under the OMPP. The regulations under Bill 198 now explicitly make CPP disability benefits deductible in tort.

As a result of the evolving no-fault legislation, it can be confusing when attempting to determine which benefits are properly deductible from a tort award for damages and which are not. The following chart should be of assistance

Type of Benefit Deductible? Comments
Long Term Disability (LTD) Yes Section 5.2 of O. Reg. 461/9621 provides that long term disability benefits are deductible from a tort award for income loss after October 1, 2003
Canada Pension Plan (CPP) Yes CPP disability benefits are explicitly made deductible from income loss awards in motor vehicle accident cases arising after October 1, 2003 (Bill 198).22 Also deductible under Bill 59.
Severance Packages Yes See Skinner v. Goulet23. TO be deductible, the defendant must prove which part of the severance package is considered to be payment of income (as opposed to other heads of damages).
Ontario Works Yes Social assistance benefits are a form of wage replacement and are deductible from damages for lost opportunity to earn income. Refusing deduction would amount to double recovery.24
Health Yes Section 267.8(4) of the Insurance Act provides that damages
insurance for healthcare will be reduced by all payments received by the accident benefits carrier for healthcare and all payments received before trial under any medical, surgical, dental, hospitalization, rehabilitation or long term care plan.
Medical/ rehabilitation benefits Yes The defendant receives a credit for past health care expenses and any amounts for future medical and rehabilitation costs already paid be the accident benefits carrier. The defendant receives a trust or assignment of future medical/rehabilitation benefits (see below)
Housekeeping/ home maintenance benefits Yes Benefits received from the accident benefits carrier before trial are deductible.25
WSIB No Section 267.8(15) of the Insurance Act provides that any payments of benefits received or that were or may become available to a person under the Workplace Safety and Insurance Act, 1997 do not reduce damage awards for income loss, health care or other pecuniary losses. The WSIB has a right of subrogation thus, benefits paid to a worker are not deductible.26
Sick-leave benefits No Under Cunningham,  employment benefits will not be deductible if paid for by the employee directly or directly.
Employment Insurance (E.I.) No See Jorgensen v. Jack Cewe Ltd.27 E.I. benefits are subject to repayment upon the settlement of a tort claim.28
ODSP No Section 8 of the Ontario Disability Support Program Act, 199729 provides for repayment to the Ministry of any damage award allocated to income loss or loss of earning capacity. By virtue of the repayment provision, ODSP payments are not credited to the tort defendant as there is no double recovery.30
General damages No Collateral benefits are not deductible from an award for non-pecuniary damages.31
Non-earner benefits No See Walker v. Ritchie.32
Gifts No Section 267.8 of the Insurance Act does not make reference to gifts. At common law, private or charitable gifts are not deductible.33

Interplay of Long Term Disability (LTD) Benefits with Motor Vehicle Accidents

In Ontario, LTD benefits are the primary source of recovery and must be exhausted before auto insurance benefits are payable. Whether tort damages can be offset against LTD payments ties into whether the LTD insurer has a right of subrogation.

In Gibson v. Sun Life Assurance Co. of Canada34 , the court held that in a disability contract of indemnity, the disabled claimant must account to the insurer for damages recovered from the tortfeasor, where the amount received exceeds the amount required for full indemnity.35 In Budnark v. Sun Life Assurance Co. of Canada36 , the court held Sun Life was entitled to repayment of a portion of disability benefits where the net past loss of income recovered plus the disability benefits received exceeded 100% of the claimant's past loss. Subrogation rights for past loss of income were calculable; they were not so easily determined with respect to the award for future loss of income therefore, the plaintiff was not required to account to Sun Life for her future loss of income.37

An insurer will thus be subrogated to a right of recovery where the claimant is fully compensated for his/her past losses. With regard to future losses, courts have held "the determination of an

amount of damages to compensate for future loss of earning capacity is subject to uncertainty"; this is relevant when considering whether the plaintiff has in fact been fully compensated.38

Future Collateral Benefits

Section 267.8(9) provides for the treatment of future collateral benefits:

A plaintiff who recovers damages for income loss, loss of earning capacity, expenses that have been or will be incurred for health care, or other pecuniary loss in an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile shall hold the following amounts in trust:

  1. All payments in respect of the incident that the plaintiff receives after the trial of the action for statutory accident benefits in respect of income loss or loss of earning capacity.
  1. All payments in respect of the incident that the plaintiff receives after 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.
  1. All payments in respect of the incident that the plaintiff receives after the trial of the action under a sick leave plan arising by reason of the plaintiff's occupation or employment.
  1. All payments in respect of the incident that the plaintiff receives after the trial of the action for statutory accident benefits in respect of expenses for health care.
  1. All payments in respect of the incident that the plaintiff receives after the trial of the action under any medical, surgical, dental, hospitalization, rehabilitation or long-term care plan or law.
  1. All payments in respect of the incident that the plaintiff receives after 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.

Protected and Unprotected Defendants

Who is protected?

As alluded to earlier, since the introduction of the no-fault regime, defendants have been placed into two categories: "protected" and "unprotected". A protected defendant is defined in section 267.3 of the Insurance Act as "a person who is protected from liability by subsections 267.5(1), (3) and (5)". These sections list the following as persons protected from liability. They are:

  • the owner of an automobile,
  • occupants of an automobile, and
  • any person present at the incident.

Section 267.3 defines an "owner" as "an operator as defined in subsection 16(1) of the Highway Traffic Act and a person who is a lessee for the purposes of section 192 of that Act”. Effective March 1, 2006, a lessee became a protected defendant. Where previously, a lessee could only be sued for his own negligence, a lessee can now be held vicariously liable for the negligent operation of a leased vehicle.

Section 224 defines an "occupant" of an automobile as a driver, passenger (carried in or on the automobile) and a person getting in to, out of or off an automobile.

Advantages of Having Protected Defendant Status

Protected defendants enjoy statutory immunity with respect to damages arising from income loss and loss of earning capacity suffered by the plaintiff in the first seven days after a motor vehicle accident. They are also shielded from payments in excess of 80% of the plaintiff's net income loss or loss of earning capacity after the first seven days and before trial.40 In addition, protected defendants are immune from liability for health care expenses, non-pecuniary general damages

and damages under the Family Law Act41 unless the plaintiff surpasses the threshold requirement42. Thus, unless the injured person has died or has sustained (a) a permanent serious disfigurement or (b) a permanent serious impairment of an important physical, mental or psychological function, the protected defendant will not be liable for the above-noted damages.

Only protected defendants are entitled to the statutory deductible which is $30,000 for non-pecuniary general damage claims and $15,000 for FLA loss of care, guidance and companionship claims. With the accident benefits amendments, effective September 1, 2010 (0. Reg. 34/10), amendments to the Insurance Act will also be made to reflect changes to the tort deductibles: if the insured purchases optional enhanced coverage, the deductibles can be reduced to $20,000 and $10,000 for general damage claims and FLA claims, respectively. Note also the "vanishing deductible" under Bill 198. If the plaintiff's general damages exceed $100,000 or if an FLA claimant's damages exceed $50,000, then no deductible is applied. See s. 267.5(8) and (8.1).

Finally, an uninsured person may not recover against a protected plaintiff.43

Where there is a mixture of protected and unprotected defendants, protected defendants are given a partial priority: collateral benefits are deducted first from the damages that protected and unprotected defendants are jointly and severally liable for and any excess is applied to the damages the unprotected defendants are solely liable for.44 This priority applies only to past losses and not to future losses.45

Note that a protected defendant loses his status if he is defended by an insurer that is not licensed to undertake automobile insurance in Ontario and has not filed an undertaking under section 226.1 of the Insurance Act.46

Treatment of Collateral Benefits Among Protected and Unprotected Defendants

Recently, the Ontario Superior Court of Justice held that both protected and unprotected defendants are entitled to s. 267.8 deductions for long term disability benefits. This is so, because s. 267.8 does not distinguish between protected and unprotected defendants.47 In Burhoe, the plaintiff was rear-ended by the Defendant, a parking valet in front of the Park Hyatt Hotel on December 21, 2001 (Bill 59). The plaintiff received long term disability benefits through his employer. The Defendant's vehicle was insured by Coachman Insurance Company which had excess coverage through Gerling Canada Insurance Company. These insurers were determined to be the first loss insurers and the hotel's policy was to act as an excess insurer only.

The only mention of protected defendants is in s. 267.8(3). Given the non-exclusionary language in the other subsections of s. 267.8, Justice Wein held there was no differentiation between protected and unprotected defendants. Accordingly, the unprotected defendant, the hotel, was entitled to the trust, assignment and deduction provisions of s. 267.8.

OHIP and Subrogated Claims

Section 267.8(17) limits the right of subrogation for anyone who has paid collateral benefits. Section 267.8(18) provides an exception for OHIP but only against a person not insured under a motor vehicle liability policy issued in Ontario. To complicate matters, if a tavern owns a vehicle, even if the automobile policy is not called upon to respond to a claim, the tavern is nonetheless immune from OHIP's subrogated claim.48

The Uninsured Plaintiff

Each no-fault insurance regime has been confronted with the impact of the Insurance Act on plaintiffs and the proper treatment of protected and unprotected defendants. Hernandez v. 1206625 Ontario Inc.49 dealt with the issue of an uninsured plaintiff who loses his right to sue for damages in tort. There, the plaintiff had been drinking at a bar prior to a motor vehicle collision. Section 267.6(1) of the Insurance Act serves as a bar to uninsured persons from claiming damages arising from a motor vehicle accident. Nonetheless, the defendant tavern's motion to dismiss the action was dismissed by both the lower court and Court of Appeal. The Court of Appeal found the plaintiff's claim against the tavern owner was in Taverner's negligence and despite the use of an automobile as the "instrument of his injuries," the automobile was incidental to his cause of action. The Court of Appeal stated at para. 46:

The specific purpose of s.267.6(1) is to address the problem of uninsured drivers. An interpretation of s.267.6(1) that precludes recovery of damages for vehicular negligence but permits a cause of action in Taverner's negligence promotes both the general and specific purposes of the statute and provision. A contrary interpretation leads to the absurd result that Taverners have a reduced responsibility toward patrons who happen not to have automobile insurance.

Applying a narrow interpretation of s. 267.6(1), the Court of Appeal found that the subsection did not absolve the defendant tavern from responsibility to its patrons who did not happen to have automobile insurance. Following Supreme Court of Canada authority as opposed to decisions under the OMPP and Bill 164, the Court of Appeal preferred to examine the precise cause of action against the defendant, holding that if the cause of action is not related to motor vehicles, the Insurance Act will not apply.50

Off-road vehicles present an interesting conundrum. Where a dirt bike or other off-road vehicle is operated on the vehicle owner's land, it need not be insured. Any off-road vehicle driven on

land not belonging to the owner must therefore, be insured.51 In case of injury arising from an uninsured off-road vehicle, s. 267.6(1) of the Insurance Act operates to preclude the uninsured injured party from bringing an action for damages arising from the use or operation of the vehicle. This was the case in New v. Liberatore52 . The plaintiff was driving an uninsured dirt bike at a city intersection when he collided with the defendant's motor vehicle. The defendant brought a motion for summary judgment on the basis that the plaintiff was precluded from bringing an action pursuant to s. 267.6(1) of the Insurance Act.

The court determined the dirt bike was an automobile under sections 1 and 224 of the Insurance Act. Having also found the dirt bike was a motorcycle pursuant to the Highway Traffic Act, the court held the dirt bike was required to be insured under s. 2 of the Compulsory Automobile Insurance Act53 . Additionally, regulation54 requires off-road vehicles to be insured in accordance with the CAIA as well as section 15 of the Off-Road Vehicles Act. Accordingly, the plaintiff's action was dismissed. Had the off-road vehicle been insured under a motor vehicle liability policy, the Insurance Act provisions would have been applicable.

Vicarious Liability

It is not a novel concept to treat the same person differently in the same case. Counsel will no doubt encounter situations involving a mixture of protected and unprotected defendants or where a defendant wears many hats as in cases of vicarious liability. A vicariously liable employer does not benefit from the negligent employee's protected status under the Insurance Act. 55 In Smyth, the plaintiff was a passenger in a vehicle owned by the defendant, her husband who was driving as an agent for his mother at the time of the accident. While at that time, a wife could not sue her

husband, she could nonetheless sue her mother-in-law for her husband's negligence. That the husband held two capacities (husband and agent) was recognized by the court.

In Harrison, the plaintiff was a nurse employed by the defendant, Krug who also owned the vehicle carrying the plaintiff. The driver was an employee of Krug. As a result of the driver's negligence during the course of his employment, the plaintiff was injured. Despite his immunity from liability under the Highway Traffic Act as owner of the vehicle, Krug, as the employer, was found to be vicariously liable for the driver's negligence.

The Supreme Court of Canada considered a similar issue of vicarious liability in Kearney. There, the plaintiff was a passenger injured in a vehicle operated by a co-worker and owned by their employer, the Co-operators. In its capacity as owner, the Co-operators had statutory immunity but it could not escape liability for the negligence of its employee.

Vollick v. Sheard56 involved a bicycle/motor vehicle collision under the Bill 59 regime. The defendant tow truck driver was in the course of his employment at the time of the collision. The plaintiff sued both the driver and the employer. The protection provisions under Bill 59 shielded only owners or occupants of a vehicle or people present at the scene. The plaintiff was not precluded from recovering against the employer towing company as it was not protected. The Ontario Court of Appeal confirmed the lower court's decision, holding that although the tow truck company was protected as owner, it was not protected as employer of the defendant driver.

The court in Linhares v. Seals57 followed Vollick, finding the employer was vicariously liable for its employees. Even though it was also the owner of the vehicle, it was an unprotected defendant.

The impact of Vollick was extensive. Municipalities could no longer rely on statutory protections in claims involving motor vehicles driven by municipal employees. Vollick has since been overruled for accidents occurring after October 1, 2003 (Bill 198). Under the Bill 198 regime, the

definition of "protected defendant" was left unchanged but s. 267.5(10.1) was introduced to end the damaging impact of Vollick on employers. It provides:

Despite any provision of this Part, a person vicariously liable for the fault or negligence of a protected defendant is not, in respect of the person's vicarious liability, liable for any amount greater than the amount of damages for which the protected defendant is liable.

If the employee is a protected defendant then the employer too becomes pseudo-protected by virtue of the amended section with respect to its vicarious liability.58 Going forward, a vicariously liable defendant is no more liable for damages than a protected defendant but only where they are found jointly liable. The provision does not extend to the employer's independent negligence

Apportionment of Liability & Damages Between Protected and Unprotected Defendants

Before the no-fault regimes, joint and several liability was imposed by the provisions of the Negligence Act. The "threshold" concept was introduced in the OMPP regime in 1990, modifying joint and several liability rules for non-motorists, who became severally liable for damages. Bill 164 shielded motorists from paying pecuniary losses and gaining the benefit of a deductible for non-pecuniary damages. It also introduced a provision for apportionment of damages (now s. 267.1) which was carried forward to Bill 198. Several liability no longer exists. Where there is a mixture of protected and unprotected defendants, section 267.7(1) prescribes the following approach to apportionment:

If, in an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, one or more protected defendants and one or more other persons are found to be liable for damages,

(a) the other persons,

(i) are jointly and severally liable with the protected defendants for the damages for which the protected defendants are liable, having regard to section 267.5, and

(ii) are solely liable for any amount by which the amount mentioned in

subclause (i) IS less than the amount that the other persons would have been liable to make contribution and indemnify the protected defendants in respect of damages in the absence of section 267.5;

(b) the other persons are liable to make contribution and indemnify the protected defendants in respect of damages to the same extent as if section 267.5 did not apply, up to the amount for which the protected defendants are liable having regard to section 267.5; and

(c) the protected defendants are liable to make contribution and indemnify the other persons for the amount that the protected defendants are liable, having regard to section 267.5, reduced by the amount that the other persons are liable to make contribution and indemnify the protected defendants under clause (b).

Subsection 267.7(3) ensures that liability is to be determined as though all parties responsible for the damages were parties to the action even where a person is not actually a party. This proviso thwarts a plaintiff's attempts to avoid the effects of s. 267.7 by failing to sue a protected defendant.

Sullivan Estate v. Bond59 outlines the proper approach to apportioning damages as between protected and unprotected defendants. Sullivan involved a single motor vehicle accident under the Bill 59 regime. Sullivan, one of the passengers, was killed; two others were injured. The injured passengers and estate of the deceased passenger claimed damages against the driver, the owner and lessee of the vehicle and two taverns in which the parties had been drinking prior to the accident. One of the taverns brought a motion seeking the proper interpretation and application of s. 267.7. The motions judge held that in the event the defendant tavern was found negligent, as an unprotected joint and several tortfeasor, it would be responsible for 100% of the deductibles.

On appeal, the Court of Appeal held that the protected defendants were not liable for any portion of the statutory deductible and the unprotected defendants were not liable for the full amount of the deductible, only the amount based on their percentage of liability. The Court of Appeal stated at paragraphs 31-32:

... [T]he legislature enacted provisions to ensure that unprotected defendants and their insurers would not be saddled with the entire burden of the benefits afforded to protected defendants and their insurers.., it is apparent that the purpose of the legislation was not to benefit protected defendants or their insurers at the expense of unprotected defendants and their insurers.

... The legislative intent is still that persons injured in motor vehicle accidents give up certain rights in tort in exchange for enhanced first party benefits from their insurer. [internal citations omitted]

The Court of Appeal found s. 267.7 should be properly interpreted to mean:

(a) the unprotected defendants are jointly and severally liable with the protected defendants for the damages for non-pecuniary loss for which the protected defendants are liable under the Act; and

(b) using the gross figure for non-pecuniary loss, the unprotected defendants are solely liable to the plaintiff for the amount, if any, by which the amount that they would have been liable to make contribution and indemnify the protected defendants under the Negligence Act, exceeds the figure calculated in (a) above.60

As a result of Sullivan, cases involving protected and unprotected defendants will vary payments owing to the plaintiff based on differing degrees of fault.61 The unprotected defendant will be solely liable for the portion of the statutory deductible if its liability substantially exceeds that of the protected defendant.

Contributory negligence is also a factor which can negatively impact a plaintiff's recovery in a motor vehicle accident claim. Section 267.8(8) provides that reductions for collateral benefits

shall be made after any apportionment of damages are required for contributory negligence. The combination of the deduction of collateral benefits and contributory negligence can effectually result in zero recovery to the plaintiff.

Conclusion

The no-fault auto insurance regimes have created a distinction between motorists and non-motorists that can be likened to a class system of sorts. While seemingly straightforward in placing defendants in one of two categories, that of protected and unprotected, in practice, the distinction is significant. For example, consider an injured motorist in a single motor vehicle collision. The motorist claims damages against the tavern owner for over-serving him alcohol. The tavern does not gain the benefits provided under the Insurance Act. The motorist is then able to claim his full losses. In the case of a two car collision involving a defendant motorist who is protected and the tavern that is unprotected62, damages are apportioned according to the joint and several liability provisions under the Insurance Act. Ultimately, the protected motorist enjoys certain statutory protections while the unprotected tavern owner does not. This disproportionate apportioning of damages in turn, affects the plaintiff's recovery.

1 The author would like to acknowledge the considerable assistance provided by TVA/The Legal Outsourcing Network in conducting primary research, citations check, and the initial drafts of this paper.

2 (1973), 3 O.R. 69 (C.A.).

3 Ibid. at para. 12.But see MB. v. British Columbia, [2003] 2 S.C.R. 477 (S.C.C.), where the Supreme Court held that social assistance benefits are a form of wage replacement and do not fall under the charitable benefits exception thus making them deductible.

4 [1974-80] All E.R. Rep. 195 (Ex. Div.).

5 [1990] 1 S.C.R. 940.

6 [1994] 1 S.C.R. 359.

7 Ratych, supra note 4 at para. 21.

8 [1978] 2 S.C.R. 229.

9 [1978] 2 S.C.R. 267.

10 [1978] 2 S.C.R. 287.

11 Ratych, supra note 4 at para. 23.

12 Cunningham, supra note 5.

13 R.S.O. 1990, c.I.8.

14 For accidents occurring on or after June 22, 1990.

15 See Lento v. Castaldo (1993), 15 O.R. (3d) 129 (C.A.).

16 The issue of threshold is beyond the scope of this paper.

17 [1998] O.J. No. 1628 (C.A.).

18 (2005), 27 C.C.L.I. (4th) 134 (S.C.J.).

19 Ibid. at para. 27.

20 [2009] O.J. No. 1169 (S.C.J.).

21 Court Proceedings for Automobile Accident that Occur on or After November 1, 1996, 0. Reg. 461/96, s. 5.2. LTD payments are also deductible from income replacement benefits.

22 Ibid. See Meloche, supra note 17; Strickland, supra note 19.

23 [1999] 0.J. No. 3209 (S.C.J.).

24 MB. v. British Columbia, [2003] 2 S.C.R. 477 (S.C.C.).

25 See s. 267.8(6).

26 Workplace Safety and Insurance Act, S.O. 1997, c. 16, Sched. A., s. 30(10)-(13).

27 (1980), 111 D.L.R. (3d) 577 at 581 (S.C.C.).

28 Employment Insurance Act, S.C. 1996, c. 23, S. 45.

29 S.O. 1997, c. 25, Sched. B.

30  Moss  v. Hutchinson (2007), 85 O.R. (3d) 604 (S.C.J.).

31 See s.267.8(7).

32 [2004] O.J. No. 787, rev'd on other grounds, [2006] 2 S.C.R. 428

33 See Cunningham, supra, note 5(accepting the exception to double recovery with respect to charitable 34 (1984), 45 O.R. (2d) 326 (H.C.J.).

35 See e.g. Confederation Life Insurance Co. v. Causton, [1989] B.C.J. No. 1172 (C.A.) (where the disabled claimant recovered full wage loss at trial but received only 75% of award after deduction of legal fees; Court held the claimant did not receive full indemnification for her loss thus, no money was owed to the disability insurer).

36 [1994] B.C.J. No. 1960 (B.C.S.C.).

37 Ibid. at paras. 51-52.

38 Stitzinger v. Imperial Life Assurance Co. of Canada (1998), 39  O.R. (3d) 566 (Gen. Div.), at para. 21.

39 s. 267.8(12).

40 s. 267.5(1).

41 Damages for loss of care, guidance and companionship under section 61(2)(e) of the Family Law Act, R.S.O. 1990, c.F.3.

42 SS. 267.5(3) and (5).

43 S. 267.6(1). See Hernandez, infra.

44. 267.8(3).

45 s. 267.8(3).

46 s. 267.5(6). Note this does not apply to vicariously liable defendants, discussed later.

47 Burhoe v. Mohammed (2008), 97 O.R. (3d) 391 (S.C.J.).

48 Georgiou v. Scarborough (City) (2002), 61 O.R. (3d) 285 (C.A.).

49 (2002), 61 O.R. (3d) 584 (C.A.).

50 See Heredi v. Fensom, [2002] 2 S.C.R. 741; Derksen v. 539938 Ontario Ltd., [2001] 3 S.C.R. 398.

51 Off-Road Vehicles Act, R.S.O. 1990, c.0.4, s. 15(4).

52 (2005), 33 C.C.L.I. (4th) 26 (Ont. S.C.J.).

53 R.S.O. 1990, c. C.25 ("CAIA").

54 Section 17 of 0. Reg. 316/03 entitled "Operation of Off-Road Vehicles on Highways".

55 See e.g. Harrison v. Toronto Motor Car Ltd. and Krug, [1945] O.R. 1 (C.A.); Smyth v. Moss, [1949] 1 K.B. 424; Co-operators Insurance Association v. Kearney (1964), 48 D.L.R. (2d) 1 (S.C.C.).

56 (2005), 75 O.R. (3d) 621 (C.A.).

57 (2006), 49 C.C.L.I. (4th) 296 (Ont. S.C.J.).

58 This amendment is not retroactive and does not apply to accidents that occurred between 1996 and October 1, 2003. See Carter (Litigation Guardian of) v. Sanders, [2004] O.J. No. 3558 (S.C.J.).

59 (2001), 55 O.R. (3d) 97, 148 O.A.C. 86 (C.A.).

60 Ibid. at para. 33.

61 Liability under s.267.7(1) is determined separately for the following damages: (i) loss of income and eaming capacity, (ii) health care expenses (past and future), (iii) other pecuniary loss, (iv) non-pecuniary general damages as well as loss of care, guidance and companionship FLA damages. See s. 267.7(2).

62 See e.g. Sullivan, supra note 58.