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Author: M. Steven Rastin1
What happens when an injured employee approaches you for advice on how to proceed with benefits? How does the person decide whether to proceed by way of tort claim and accident benefits and/or long term disability and short term disability and/or WSIB? In order to help the injured employee decide, you must understand how the benefits offset and work against, and potentially with, one another, such that the potential benefits of proceeding one way or another can be understood.
The following analysis will consider an employee who is involved in a car accident. The reality is that due to the particular legislative and jurisprudential nuances of the area of insurance motor vehicle litigation, any meaningful analysis is almost forced to consider it in isolation. This paper should be read in conjunction with the companion paper presented by my co-panellist who will focus on the issues arising in the non-motor vehicle claim. In situations where an employee is injured in a car crash, is that employee best off accepting disability benefits from his employer and perhaps pursuing a tort claim against the party who caused his accident? What then about WSIB benefits? The interactivity of all of these benefits is a tricky, complex and much misunderstood area of the law. This paper will attempt to dispel some of the myths surrounding how to deal with such a claim.
It is well known that the fundamental goal of the tort law system is to ensure that a plaintiff be restored to the position s/he would have been in absent the tortfeasor’s negligence. However, the system is also designed to prevent a windfall accruing to the injured plaintiff; while s/he should be put into the position s/he would have been had no accident occurred, s/he is also not supposed to enjoy any greater benefit for having been involved in the accident. This is complicated by the situation of a protected defendant who enjoys not only the deductibility of collateral benefits but other statutory protections that its non-protected counterpart does not, which inevitably leads to the question – where’s the fairness in that?
The Collateral Source Rule
At common law, the collateral source rule serves as an exception to the rule against double recovery. The rule has two components: first, that 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 capacity3
The second exception to the rule against double recovery is the private insurance exception established in Bradburn v Great Western Railway Co4. , in which case the 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 .
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 maybe a total loss. Yet the policy provides security.
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.
Statutory Modifications to the Collateral Source Rule
The introduction of no fault automobile insurance legislation in the Insurance Act10 has considerably modified the collateral source rule for motor vehicle related injuries.
The OMPP Regime11
The first no fault regime in Ontario, the OMPP regime introduced a dual system of tort and accident benefits, meaning that accident victims lost their right to sue in certain circumstances, in exchange for no fault accident benefits12. It also introduced a threshold that restricted recovery of non-pecuniary general damages where injuries failed to satisfy a certain threshold. Section 267.1 of the Insurance Act was contemporaneously created to credit tort defendants for certain payments the plaintiff had either received or was entitled to receive from other sources.
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", defined to include (i) the owner of an automobile; (ii) the occupants of an automobile; and (iii) 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.
The Bill 59 regime took effect on November 1, 1996 and once again dictated that a plaintiff could not sue a protected defendant unless his/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 in section 267.8(1), which provides a list of all collateral benefits by which any amount awarded for income loss and loss of earning capacity must be reduced, including payments received by the plaintiff before trial of the action under a sick leave plan arising by reason of the plaintiff’s employment.
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, 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.
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.
Interplay of Long Term Disability 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.
Future Collateral Benefits
Section 267.8(9) provides for the treatment of future collateral benefits and dictates which collateral benefits must be deducted from any tort award, including but not limited to any payments received after the trial of the action under any medical, surgical, dental, hospitalization, rehabilitation or long term care plan or law.
Workplace Safety and Insurance Benefits (WSIB)
As a general rule, a person elects to receive either WSIB benefits or long term disability benefits, but cannot opt to receive both. Where LTD benefits have been elected but the person has already received some WSIB benefits, the person is obligated to repay the WSIB benefits, or vice versa. Even where entitlement to LTD benefits has survived the election for WSIB payments, the WSIB quantum would likely wipe out any obligation of the LTD insurer to pay.
The central issue to be decided was the proper interpretation of the phrase "receives, or is entitled to receive", as used in the policy. Justice Himel applied the principles of interpretation relating to insurance contracts as set out by Mr. Justice Sopinka in Brissette v. Westbury Life Insurance Company21. These principles include the idea that ambiguities should be construed against the insurer. After a lengthy analysis he concluded that the contract was not clear and should be interpreted in favour of the insured. He found that since the plaintiff elected to proceed in tort, the WSIB benefit was not available to him.
17 As the appellant made an application to the WSIB and that application remains before it, the condition precedent has been satisfied. I would answer the first question in the affirmative — the plaintiff is eligible to receive LTD benefits under the policy.
The Court of Appeal continued to find that it was satisfied that the plaintiff had made his WSIB claim as required by the policy and, though the claim had not yet been determined, entitlement to receive payments was not dependent upon an application for compensation being approved, since the terms of the policy in question allowed for deduction of WSIB benefits.
The issue was recently revisited in RBC Life Insurance Co v Janson24, but in the context of whether it is the net or gross amount which a plaintiff must repay to WSIB. The case involved a plaintiff who had suffered injuries in the workplace, resulting in a claim to both the insurer, the WSIB and CPP. After having received benefits from his insurer, the plaintiff’s appeal to the WSIB was successful and he was retroactively paid a large sum of money ($64,459.29), of which his counsel claimed fees of $31,405, based on a percentage of total recovery (which was $314,059). The insurer sought payment of the entire amount paid by WSIB, without deduction of the legal costs incurred by the plaintiff, and the application was allowed. The court was satisfied that, based on the language of the insurance policy in play, the insurer was indeed entitled to the gross amount paid by WSIB on account of lost earnings, without any deduction for counsel fees:
26 As noted, RBC Life was entitled to "[s]ubtract 100% of direct deductible sources of income" in calculating the amount payable to Mr. Janson. Specifically identified were amounts that Mr. Janson received or was "entitled to receive under any Workers' Compensation Act or similar legislation". Ontario's Workplace Safety and Insurance Act is the successor to the Workers' Compensation Act.
This emphasizes the need for counsel to carefully review and consider the specific language used in the policy relevant to their client before making any determination as to which way a client should proceed. Counsel should also be mindful of the investment they make in a client who may end up with a legal bill s/he is unable to pay, due to deductions from the amount awarded the client.
Canada Pension Plan Income Disability Payments (CPP)
Where a person receives Canada Pension Plan Disability benefits (CPP), then, pursuant to the wording found in every policy, the LTD carrier gets a credit for the CPP payments. The manner of the deduction is generally dealt with under either the “offset” or the “coordination of benefits” section contained in all group LTD policies. The offset can arise in one of two ways: either a direct deduction of benefit, as specifically listed in the policy; or, through an all source maximum clause that dictates that the policy benefit, when added to the income from all other sources, cannot exceed a certain percentage of pre-disability earning.
Hospitals of Ontario Pension Plan (HOOPP)
Deductibility of Hospitals of Ontario Pension Plan (HOOPP) benefits from a tort award was most recently considered in the Ontario Court of Appeal decision Demers v B.R. Davidson Mining & Development Ltd.26, which involved determination of whether such benefits were deductible from damages awarded on account of loss of income or loss of earning capacity. The motions judge found that the benefits were not deductible because they had not been recovered for loss of income or loss of earning capacity, and the Court of Appeal upheld that decision on the basis that the addition of the term “loss of earning capacity” in section 267.8(1) of the Insurance Act did not change the non-deductibility of benefits at common law. Since the benefits had been paid not in respect of the accident, but in respect of the plaintiff’s disability, so no deduction was necessary.
Ontario Disability Support Program (ODSP)
Moss v. Hutchinson27 is a case involving a plaintiff who, after suffering injury in a car accident and subsequently being forced to abandoned his employment due to the injuries arising therefrom, commenced a claim for loss of income, amongst other damages. The plaintiff, who had been receiving monthly benefits under the ODSP, had agreed, in writing, to reimburse the Ministry of Community and Social Services (which administered the ODSP benefits) for any amount of ODSP benefits he received as a result of his tort action. The defendants argued that, pursuant to s. 267.8 of the Insurance Act, any ODSP benefits received by the plaintiff should be deducted from any amount he obtained under the heads of damage for loss of income and/or loss of competitive advantage. The court dismissed the defendants’ motion on the basis that the ODSP Act created an exception to s. 267.8 of the Insurance Act and that recovery of the benefit payments was achieved by the plaintiff’s voluntary assignment to the Ministry. Thus, where ODSP benefits are subject to repayment, they are distinguishable from other social assistance benefits and are thus not deductible. Howden J was satisfied that this interpretation satisfied the dominant purpose of s. 267.8 and stated that, “[t]o do otherwise is to allow the defendants a windfall”.
Income Replacement Benefits (IRB) and Caregiver Benefits (CGB)
The 2011 decision of the Court of Appeal in Sutherland v. Singh28 addressed whether income replacement benefits (IRBs) could be deducted from a tort award when the plaintiff had never received such benefits. When faced with a choice, the plaintiff had elected to receive caregiver benefits instead of IRBs, which should have answered the question, but the defendant creatively argued that the value of both IRBs and CGBs should properly be deducted from any tort award for damages addressing income, since the plaintiff could have chosen IRBs, thus making such payments “available” to him within the meaning of section 267.8(1). The Court of Appeal found, without hesitation, that to allow such a deduction would effectively permit the defendant benefit of double recovery (the CGBs, which the plaintiff had received, and the IRBs, which the plaintiff had never received), resulting in an impermissible windfall.
15 Lump sum awards to settle law suits regarding future I.R.B.'s or other wage continuation plans have been held not to be deductible because such payments are a compromise made to settle a legal obligation one party sought to enforce by litigation against another and therefore fall outside the scope of s. 267.8(1)2. They cannot be considered weekly payments for loss of income in the future but rather a lump sum negotiated as a compromise to resolve the risks to both parties of the law suit. (Tsiaprailis v. R.,  1 S.C.R. 113 (S.C.C.); Cromwell v. Liberty Mutual Insurance Co. (2008), 89 O.R. (3d) 352 (Ont. S.C.J.); Vanderkop v. Personal Insurance Co. of Canada,  O.J. No. 1937 (Ont. S.C.J.))
Thus, lump sum payments made to settle lawsuits regarding future income continuation plans are not deductible from tort damage awards because they fall outside the scope of s. 267.8(1)2.
In discerning whether severance payments will be deductible from LTD benefits, the wording of the policy will be paramount. Generally speaking, most LTD contracts stipulate that they are entitled to deduct money paid by the employer to the employee by way of severance. Employers, on the other hand, have tried to claim a set off for LTD payments when paying out severance packages. It is very common for employers to terminate workers that have been off for an extended period of time, with or without a severance. Plaintiffs’ lawyers running LTD actions will almost certainly be asked to provide advice on the interaction between LTD payments and severance packages.
With respect to the question of employer cooperation, plaintiffs should not be surprised that most employers are reluctant to cooperate with litigants attempting to collect long-term disability benefits from insurance companies. In the first place, the employer and long-term disability company likely have a long-standing relationship.
PROTECTED AND UNPROTECTED DEFENDANTS
Who is protected
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 trial36 and are immune from liability for health care expenses, non pecuniary general damages and damages under the Family Law Act37, unless the plaintiff surpasses the threshold requirement. Thus, unless the injured person has died or has sustained a permanent serious disfigurement or a permanent, serious impairment of an important physical, mental or psychological function, the protected defendant will not be liable for the above noted damages.
Treatment of Collateral Benefits Among Protected and Unprotected Defendants
The Ontario Superior Court of Justice has held that both protected and unprotected defendants are entitled to s. 267.8 deductions for long term disability benefits, because s. 267.8 does not distinguish between protected and unprotected defendants. In Burhoe v Mohammed40, the plaintiff was rear ended by the defendant parking valet in front of a hotel in December, 2001 (Bill 59). The plaintiff received LTD 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 hotels policy was to act as an excess insurer only.
OHIP and Subrogated Claims
Section 267.8(17) limits the right of subrogation for anyone who has paid collateral benefits and s. 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 then, even if the automobile policy is not called upon to respond to a claim, the tavern is nonetheless immune from OHIP’s subrogated claim41.
It is not a novel concept to treat the same person differently in the same case. Counsel will undoubtedly 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.
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 persons 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 liability44. 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 approach to apportionment and s. 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.
(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;
As a result of Sullivan, cases involving protected and unprotected defendants will vary payments owing to the plaintiff based on differing degrees of fault. The unprotected defendant will be solely liable for the portion of the statutory deductible if its liability substantially exceeds that of the protected defendant.
1 I would like to thank and acknowledge the outstanding work of research lawyer Catherine Mahoney in the planning, research and drafting of this paper. Her contribution was invaluable. Catherine is responsible for most of the scholarly content and insight found in the paper. Any errors or omissions are, of course, my own.
2 (1973), 3 OR 69 CA.
3 Ibid at para 12. But see MB v British Columbia (2003), 2 SCR 477 (SCC), 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 ER Rep 195 (Ex Div).
5 (1990),1 SCR 940 (SCC).
6 (1994), 1 SCR 359 (SCC).
7 (1978), 2 SCR 229 (SCC).
8 (1978), 2 SCR 267 (SCC).
9 (1978), 2 SCR 287 (SCC).
10 RSO 1990, c I 18.
11 For accidents occurring on or after June 22 1990.
12 see Lento v Castaldo (1993) 15 OR 3d 129 (CA).
13  OJ No. 1628 (CA).
14 (2005) 27 CCLI 4th 134 (OSCJ).
15 , OJ No. 1169 (OSCJ).
16 (1984), 45 OR 2d 326 (HCJ).
17 see Confederation Life Insurance Co v Causton,  BCJ No. 1172 (CA), 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
18  BCJ No. 1960 (BCSC).
19 see Stitzinger v Imperial Life Assurance Co of Canada (1998), 39 OR 3d 566 (Gen Div), at para 21.
20 (2003), 65 OR (3d) 543 (SCJ).
21  3 SCR 87 at 92-93.
22 (2007), 85 OR (3d) 598 (ONCA).
23 Ibid at para 16.
24 2013 ONSC 3154.
25 Ibid at paras 26-29.
26 2012 ONCA 384.
27 (2007), 85 OR (3d) 604 (OSCJ).
28 2011 ONCA 470.
29 2013 ONSC 7177.
30 Ibid, at paras 15, 16.
31  2 SCR 315.
32 (2001), 53 OR (3d) 577 (CA).
33 Cunningham v. Wheeler,  1 SCR 359.
34 At para. 45.
35 RSO 1990, c H 8.
36 S .267.5(1).
37 Damages for loss of care, guidance and companionship under section 61(2)(e) of the Family Law Act, RSO 1990 c F 3.
38 S. 267.6(1).
39 267.5(6). Note this does not apply to vicariously liable defendants discussed later
40 (2008), 97 OR 3d 391 (OSCJ).
41 See Georgiouv Scarborough City (2002), 61 OR 3d 285 (ONCA).
42 see for example Harrison v Toronto Motor Car Ltd and Krug (1945), OR 1 (ONCA); Co-operators Insurance Association v Kearney (1964), 48 DLR 2d 1 (SCC).
43 (2005), 75 OR 3d 621 (ONCA).
44 2003. See Carter Litigation Guardian of v Sanders,  OJ No. 3558 (OSCJ).
45 (2001), 55 OR 3d 97, 148 OAC 86 (ONCA).