January 27, 2014

SABS Update – Credit where credit is due: The deductibility of accident benefit payouts

For the week of January 27 to January 31, 2014

Mikolic v. Tanguay and Albano (2013 ONSC 7177) 

Mikolic v. Tanguay and Albano (2013 ONSC 7177) involved a June 10, 2005 collision. At trial, the jury awarded the plaintiff amounts for past income loss, future income loss and cost of future care. The trial judge had to decide what, if any, deductions applied to the future awards made by the jury.

Prior to trial, the plaintiff resolved his accident benefits file on a full and final basis with lump sum amounts paid for past and future income loss, past and future medical benefits, past and future rehabilitation benefits, and past and future attendant care benefits. There was no demarcation in the settlement as between past benefits and future benefits.

The trial judge noted section 267.8(1) of the Insurance Act operates as an exception to the common law “collateral source” rule. However, as quoted by the trial judge: “any no-fault benefit deducted from a tort award…must be deducted from a head of damage or type of loss akin to that for which the no-fault benefits were intended to accommodate.” Apples should be deducted from apples, oranges from oranges.

The trial judge found lump sum awards to settle lawsuits regarding future IRB’s fall outside the scope of section 267.8(1), and are therefore not deductible. They are not weekly payments made for loss of income in the future, but rather lump sum payments negotiated as a compromise to resolve the risk to both parties in the lawsuit. There was no evidence before the court as to what amount of the total IRB settlement constituted future IRB payments. As such, the trial judge refused to deduct any amount from the future income loss awarded by the jury.

Similarly, there was no evidence before the court as to what amount of the medical benefits, rehabilitation benefits or attendant care benefits obtained from the settlement with the accident benefits insurer constituted future benefits. In addition, the jury did not break down its award for cost of future care into the three subcategories that would correspond to the settlement reached with the accident benefits insurer. In those circumstances, the trial judge refused to deduct any amount from the cost of future care awarded by the jury.

 

IMPLICATIONS

Accident benefit negotiations frequently result in one global number being paid to the insured for a variety of benefits. Although the insurer will parse out amounts under the various types of benefits for the purpose of the Settlement Disclosure Notice, the exercise is an artificial one. Insureds reach a settlement with their accident benefits insurer for a variety of reasons and after various criteria have been considered, including benefit entitlement, risk and costs. The global number is often as reflective of the risk involved as it is of the benefit entitlement. To divide out the number between the various benefits, for the purpose of the Settlement Disclosure Notice and the tort defendant, would give unfair credit to the tort defendant.

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