Collateral Benefits: An Update and Refresher

The following article provides an update to a 2013 post published on OatleyVigmond.com, “Collateral Benefits – What Is Deductible, What Isn’t?”. Please click here to access it.

COLLATERAL BENEFITS: AN UPDATE AND REFRESHER

Protected Defendants in a motor vehicle action are entitled to deduct, from a damages award, certain payments a Plaintiff receives before trial, commonly referred to as collateral benefits. The Insurance Act, RSO 1990, c I.8 provides that an income loss award is to be reduced by:

1 – Payments received or available before the trial from the statutory accident benefits insurer for income loss;

2 – Payments received or available before the trial for income loss “under the laws of any jurisdiction” or under an income continuation benefit plan;

3 – Payments in respect of the incident received before the trial under a sick leave plan

There is no reduction of the credit to account for contributory negligence. The deductions are also not limited to 70% of the gross amounts received prior to trial, unlike the Plaintiff’s income loss claim. Plaintiffs with average income will have modest past income loss awards as a result.

Protected Defendants also receive a deduction for health care benefits a Plaintiff receives prior to trial. In many MVA trials up until recently, a past health care claim would not be advanced, because the Plaintiff would have been fully compensated by the time of trial by their Accident Benefit provider. However, the recent Court of Appeal decision, Cadieux v Cloutier, 2018 ONCA 903, changes how benefits are being deducted, and makes it imperative that a Plaintiff advance both past income loss and past health care claims, even if they have been fully compensated at the time of Trial.

WHAT HAS CHANGED IN COLLATERALS AFTER CADIEUX?

No more distinction between past/future benefits when deducting. In the past, Plaintiff counsel often did not advance claims at trial for past health care expenses that the accident benefit insurer already paid. The Court of Appeal has made it clear that counsel now needs to include these claims, as deductions will not distinguish between past and future benefits.

Apples to apples is over. Health care expenses are to be lumped into one category (“silo”), from which all medical and rehabilitation benefits and attendant care benefits paid to date will be deducted.

For example:

Prior to trial, during the course of her open claim, Jane’s Accident Benefit Insurer pays;

– $30,000 in Medical Rehabilitation Benefits
– $10,000 in Attendant Care Benefits-
– $50,000 in Income Replacement Benefits

Prior to trial, Jane settles her Accident Benefits claim for an additional $19,000. The Settlement Disclosure Notice breaks down the settlement as follows;

– $10,000 for future Medical Rehabilitation Benefits
– $5,000 for past/future Attendant Care
– $4,000 for past Income Replacement Benefits

Following trial, the Jury awards Jane $640,000, comprised of the following;

– $150,000 in pain and suffering
– $100,000 for past and future income loss
– $100,000 for future personal support services
– $100,000 for future medical and assistive devices
– $100,000 for future rehabilitation services
– $90,000 for past medical and assistive devices

For the purpose of deduction, the last four categories are lumped together as “health care expenses”, creating a “silo” of $390,000.

The Accident Benefits paid to date and received through settlement are also lumped together, resulting in a deduction of $55,000 in “health care expenses” and a deduction of $54,000 for Income Replacement Benefits.

As a result, and assuming the Tort Defendant is 100% liable for the MVA, after deduction the Tort Defendant pays the following;

– $150,000 for pain and suffering
– $46,000 for past and future income loss
– $335,000 for health care expenses

Total:   $531,000

WHAT ABOUT CONTRIBUTORY NEGLIGENCE?

The Insurance Act provides for a deduction of 100% of the benefits paid, regardless of whether the Plaintiff may face a reduction in her damages due to contributory negligence. For example:

Using the earlier example, Jane is found 50% at fault (contributory negligence) for the MVA.

Jane’s award of $640,000, net of contributory negligence, is $320,000, comprising of:

– $75,000 in pain and suffering
– $50,000 for past and future income loss
– $50,000 for future personal support services
– $50,000 for future medical and assistive devices
– $50,000 for future rehabilitation services
– $45,000 for past medical and assistive devices

Jane’s awards for past and future care costs are placed in the same silo:

– $75,000 in pain and suffering
– $50,000 for past and future income loss
– $195,000 for health care expenses

The Tort Defendant still receives 100% credit for the benefits received prior to trial (in Jane’s case, $55,000 in health care expenses and a deduction of $54,000 for income replacement benefits)

As a result, after deducting for collateral benefits received, the Tort Defendant pays the following;

– $75,000 in pain and suffering
– $0 in past and future income loss
– $140,000 in health care expenses

Total:       $215,000

REFRESHER: WHICH BENEFITS ARE DEDUCTIBLE FOR PROTECTED DEFENDANTS?

Income Replacement Benefits All income replacement benefits paid by the Accident Benefits Insurer are deductible from a Plaintiff’s income award[1].

Non Earner Benefits Non-earner benefits are not deductible from any head of damage in Tort[2].

Long Term Disability All long term disability benefits paid by a private insurer (such as an employer) are deductible from a Plaintiff’s income award.[3]

Canada Pension Plan Payments of disability pension benefits under the Canada Pension Plan (CPP) are deductible from a Plaintiff’s income award.[4]

Ontario Disability Plan Benefits Tort Defendants cannot claim a deduction of ODSP[5], but recipients of ODSP are typically required to sign an agreement to reimburse[6] ODSP when they receive money due or owing that would qualify as income or capital when determining eligibility for ODSP[7]. As a result, ODSP recipients who receive damages past or future income loss or future health care are required to reimburse ODSP for benefits paid to them from that award. However, awards for pain and suffering, loss of care guidance and companionship, and incurred out of pocket expenses do not trigger reimbursement.[8]

Employment Insurance cannot be claimed by a Tort defendant as a deduction[9], but EI benefit recipients are required to repay the government when they receive a damages award or settlement. [10]

WSIB Benefits are not deductible from any head of damage in Tort[11]. However, certain Plaintiffs who are eligible for WSIB may not be able to bring a Tort action at all, or may be required to elect between a Tort action or a claim for WSIB benefits.[12]

Ontario Works These benefits are considered a form of wage replacement and are deductible at common law from a Tort award to prevent double recovery.[13]

Medical and Rehabilitation Benefits are deductible from both past and future awards for health care costs.[14]

Attendant Care Benefits are deductible from both past and future awards for health care costs.[15]

Extended Health Care Benefits either through an employer, spouse’s employer, or a privately funded plan are deductible from both past and future awards for health care costs.[16]

 ———————————————————————————————————-

[1] Insurance Act, RSO 1990, c I.8, s. 267.8(1)

[2] Walker v Ritchie, [2006] 2 S.C.R. 428, 2006 SCC 45

[3] Ontario Regulation 312/03, s. 5.2

[4] Ibid.

[5] Moss v. Hutchison (2007), 85 O.R. (3d) 604; Grajqevci v. Rustaie, 2017 ONSC 2535

[6] Ontario Disability Support Program Act, 1997 SO 1997, c. 25, Sched. B, s. 13(1)

[7] Ibid, s.13(7), 43(1)

[8] Ibid, s. 28 (1) ss.14-14.2.

[9] Jorgensen v. Jack Cewe Ltd, [1980] 1 SCR 812

[10] Employment Insurance Act, S.C. 1996 c. 23, s. 45

[11] Insurance Act, RSO 1990, c I.8, s. 267.8(15)

[12] Workplace Safety and Insurance Act, 1997, s. 29, 30

[13] M.B. v. British Columbia, 2003 SCC 53; Grajqevci v. Rustaie, 2017 ONSC 2535

[14] Insurance Act, RSO 1990, c I.8, s. 267.8(4)

[15] Ibid

[16] Ibid