What Are Collateral Benefits?
The majority of injured plaintiffs have access to multiple claims and benefits as a result of an incident.
Possible claims include those in tort, Statutory Accident Benefits (“SAB”), Long Term Disability (“LTD”), and Wrongful Dismissal. If more then one of these claims are successful, then the plaintiff will obtain multiple collateral benefits that try to compensate for the same thing.
Compensatory Damages and Double Recovery
At a basic level, all benefits are compensatory in that they try to place this plaintiff in the financial position they would have been in had the injury or wrong not occurred. This fundamental principle entitles the plaintiff to recover only the full extent of their loss and nothing more. This is the ‘Rule Against Double Recovery’, that exists at common law, with the rationale that double recovery offends the principle of compensable damages. There are, however, two exceptions to this rule:
- Charity Exception: If a plaintiff receives a donation following the incident, the law will not deduct the value of the gift from the defendant’s damages.
- Private Insurance Exception: If a plaintiff has purchased private insurance policies, then those benefits are not deducted from the benefits owed by other sources (Bradburn v Great Western Railway Co. (1874), LR 10 Ex 1). This is because (A) the plaintiff has purchased these entitlements so they should not be punished for it and (B) the contract (i.e. policy) exists separate from the incident. This exception has been largely eliminated by the legislature.
Further to this goal of avoiding over-compensation, the legislature has developed mechanisms through which benefits are subtracted from one another in the form of a deductible.
Deductibles exist to avoid over-compensation from multiple benefit streams that result in double recovery. While legislative provisions exist across many combinations of compensatory systems, its effects are most common in motor vehicle accident litigation. Essentially, a tort defendant is entitled to deduct SAB benefits from their tort damages. In seeking deductions, the defendants bear the onus of establishing beyond dispute that a deduction should occur Bannon v. Hagerman Estate (1998), 38 OR (3d) 659 (Ont CA).
If a party is injured in a car accident, they may be able to receive compensation through two concurrent schemes. The first component is mandatory automobile insurance (i.e. SABs), which provides “no-fault” first-party benefits to anyone injured in an automobile accident. There are limits to this quantum depending on the classification of injuries and the time period. The second component is the right to sue the “at fault” driver in a civil tort action. This intends to put the plaintiff in the position they were in had the accident never occurred, subject to statute and regulation.
While these two forms of compensation exist are independent of one another, they inevitably overlap in what they attempt to compensate. As a result, legislative provisions have been enacted in the Insurance Act to avoid double recovery and deduct collateral benefits. While common law prohibits what is known as “double recovery,” it also allows for the “private insurance exception,” meaning that if a person has paid the premiums then they should not have the tort award reduced simply because he or she was wise enough to take out a policy. The Insurance Act effectively eliminates the private insurance exception in the motor vehicle accident realm. Section 267.8 states that:
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:
- All payments … for statutory accident benefits...
- All payments … under the laws of any jurisdiction or under an income continuation benefit plan.
- All payments … under a sick leave plan arising by reason of the plaintiff’s occupation or employment.
Insurance Act, RSO 1990, c I.8.
Therefore, a tort defendant is sometimes entitled to deduct SAB benefits from a tort award, subject to judicial approval. While these clauses only apply to income loss damages, similar provisions exist for all other types of damages (s. 267.8(1), (4), (6), and (7)).
Approaches for Deducting Collateral Benefits
The recent Ontario Court of Appeal decision, Cadieux v Cloutier, 2018 ONCA 903 (CanLII) dealt with the issue of how to apply motor vehicle accident deductions. To do so, they engaged two separate lines of jurisprudence:
- “Apples to Apples”/Strict Matching Approach: Collateral benefits should be deducted on an “apples to apples” basis, meaning that a damage quantum one head of tort damage can only be subtracted from that same SAB head (Bannon v McNeely (1998), 38 OR (3d) 659 (CA)). For example, if $50,000 was awarded in tort for attendant care, but the plaintiff already received $20,000, then they would only receive $30,000 from the tort. On the other hand, if they did not receive attendant care from the SABS, then the $50,000 is un-deductible and immune from the other categories of damages. Only attendant care can deduct from attendant care.
- “Silo” Approach: Collateral benefits should be deducted from a tort award, if the benefit received follows into the same general “silo” as the tort award (Basandra v Sforza, 2016 ONCA 251). There are three broad categories of benefits under the SABS: income replacement, health care, and all other pecuniary ones. This approach was confirmed as the process for deducting collateral benefits in Cadieux.
While similar, these approaches have vastly different consequences. After the plaintiff in Cadieux settled his SAB claim for $900,000 ($250,000 for med-rehab and $350,000 for attendant care), he went on to sue the at-fault driver and was awarded $2,309,413 at trial. If the “apples to apples” approach were to be used, the tort defendant would have only been entitled to deduct $250,000 through med-rehab. If, however, the “silo” approach was to be used, the tort defendant would be entitled to deduct $600,000 from both med/rehab and attendant care benefits. The Court of Appeal determined that the “silo” approach was correct, and that the defendant’s insurer is entitled to deduct the plaintiff’s attendant care benefits.
The plaintiff in Dunk v. Kremer, 2018 ONCA 274, who was represented by the lawyers at Littlejohn Barristers, successfully avoided any deductions for collateral benefits. After the plaintiff was awarded $41,494.00 for costs future health care, the tort defendants sought a $27,500 deduction under s. 267.8 of the Insurance Act. The Court determined that there was no overlap and therefore no deduction:
“The record does not allow this Court to conclude that Meaghan Dunk's future medical care benefits overlap with the jury's award for future care cost … In awarding damages for future health care, the jury was not asked to differentiate between medical and rehabilitation benefits and attendant care benefits, and was further not asked to quantify those expenses that might fall outside the prescribed limitation period for each benefit.”
Dunk v. Kremer, 2017 ONSC 1547.
Recent developments in the case law has increased scenarios with deductibles due to the broader “silo” approach. With legal counsel, however, strategies of structuring damages are available to avoid deductibles and maximize compensation.
When you need help collecting your collateral benefits, look to the experienced lawyers in Barrie at Littlejohn Barristers. We’ve been serving clients across the Greater Toronto Area with their personal injury legal needs. Call us today for more information.