Right to Reimbursement, The
Canadian Underwriter, Sep 2009 by Bain, Belinda
When a personal injury action proceeds through to trial, who gets credit for income replacement benefits paid to a plaintiff by either the employer or insurer?
When a personal injury action proceeds through to trial, in many cases the plaintiff has had, and may continue to have, access to income replacement benefits – otherwise known as short-term and long-term disability benefits – from an employer or insurer. In circumstances in which the plaintiff has a valid claim against a third party for recovery of income loss, questions arise concerning who gets what credit in connection with those income replacement benefits.
Leaving aside specific statutory provisions that apply in the case of motor vehicle accidents, two main issues arise with respect to income replacement benefits paid and payable in this type of scenario. The first involves whether income replacement benefits the plaintiff has received ought to be deducted from any amount he or she recovers from the tort defendant on account of loss of income. The second issue involves whether the payor of those benefits is entitled to recover any portion of the benefits back from a plaintiff who recovers damages on account of income loss from the tort defendant.
DEDUCTIBILITY OF INCOME REPLACEMENT BENEFITS
In Ratych v. Bloomer1, the Supreme Court of Canada observed that the primary aim of the law of torts in road accident claim awarding damages for personal injury must always be to compensate victims for losses actually sustained. Accordingly, as a general rule, income replacement benefits received by a plaintiff ought to be brought into account and deducted from awards for lost earnings. This general rule is subject to two exceptions. The first relates to charitable gifts. The second exception is the “private insurance exception.” This bars the deduction from a tort damage award of benefits derived from private policies of insurance, funded independently by the plaintiff.
To prove that income replacement benefits are in the nature of “private insurance,” plaintiffs must cite evidence of some type of consideration given up by them in return for the benefits. Accordingly, the issue often boils down to who paid the premiums in respect of an income replacement policy – the plaintiff, or his or her employer
Nov 18, 2009
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