Unprotected Defendants

Collateral Benefits

Protected and

Unprotected

Defendants

M

Steven

Rastin

Rastin

Associates

16984

Highway

12

P

O Box 398

Midland ON L4R 4L1

Tel

705

528 7088

Introduction

The fundamental

goal

of the tort law

system

is to ensurethat the

negligent

defendant pays his

dues and restores the

plaintiff

to the

position

she would have been in absent the tortfeasors

negligence

Put another way an action for

damages

is not intended to create a windfall for

injured plaintiffs

The

Supreme

Court of Canada has moved away from a

punitive approach

steering

itself toward the maxim of fair

compensation

for all

parties

by

precluding injured

plaintiffs

from

recovering

morethan which

they

are entitled No doubt entrenched in

principles

of fairness and

justice

this rule

against

double recovery can be construed as

bestowing

an

unintended benefit ontortdefendants

by

allowing

for

deductibility

of collateral benefits Enter

now the

protected

defendant who

enjoys

not

only

the

deductibility

of collateral benefits but other

statutory

protections

that itsnon

protected

counterpart

does not Some

might

ask where is the fairness in that

The Collateral Source Rule Common Law

At commonlaw the collateral source rule serves as an

exception

to the rule

against

double

recovery

bearing

two

components

First

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 orloss of

earning capacity

The Ontario Court of

Appeal

in Boarelli v

Flannigan2

expressed

that

Moneys

received

by

an

injured

party

as aresult ofa

private

or

public

benevolence haveneverbeen taken into consideration in

assessing damages

for loss of income

or

earning

capacity

3

1

The author would like to

acknowledge

the considerable assistance

provided by

TVA The

Legal

Outsourcing

Network inconducting primaryresearch citations check and the initial drafts of this paper

2

1973 3 O R 69 C A

3

Ibid atpara 12 But seeMB v British Columbia 2003 2 S CR 477 S C C where theSupreme Court held that social assistance benefitsare aform of wage

replacement

and donotfall under the charitable benefitsexception

thus

making

them deductible

M StevenRastin

The second

exception

to the rule

against

double recovery is the

private

insurance

exception

established in Bradburn v Great Western

Railway

Co4 In thatcase

receipt

ofbenefitsfrom a

private

insurer was held not to be deductible from

damages

for

personal

injury

The

private

insurance

exception

is rooted in the

principle

thata

negligent

defendant shouldnotbenefitfroma

plaintiffs forethought

and wisdom in

securing private

insurance in the eventof

disability

The

Supreme

Court of Canada twice maintained this

exception

in

Ratych

v

Bloomer5

and

Cunningham

v Wheeler

Ratych

involveda

police

officer who was

injured

in amotor vehicle accident He

required

time off work duetohis collision related

injuries during

which time he received his full

salary By

an

narrow5 4

margin

the

Supreme

Court held that the officerwas not entitledto claim lost wages from the tort defendant In

writing

for the

majority

Justice McLachlin stated the fundamental

principle

of recovery inatortaction is thatan

injured plaintiff

is tobe

compensated

for the full

amountofhisloss butno more 7

asconferred

by

the

Supreme

Court in the

trilogy

ofAndrewsv

Grand

Toy

Alberta Ltd8 Thornton v Prince

George

School

Board9

and Arnold v

Tenol

Upholding

the

principle

of fair

compensation

McLachlin J felt it best served

by focusing

noton

the tortfeasor but on

restoring

the

plaintiff

to his preaccident state that is to award him not a

penny less nor more

11

4

1974 80 All E R

Rep

195 Ex Div

5

1990 1 S C R 940

6

1994 1 S C R 359

7

Ratych

supranote4atpara 21

8 1978 2 S C R 229 9 1978 2 S C R 267 19 1978 2 S C R 287 11

Ratych supranote4atpara 23

M StevenRastin

RASTIN ASSOCIATES

In

writing

for the

minority

Cory

J cited with

approval

the

private

insurance

exception

in Bradburn

stating

atparas 88 89

The

interrelationship

of the tort

system

and other forms of

compensation

from

private

or

public

collateral sources has become a

complex

problem

with the

growth

of

legislation providing

benefits for

injured

workers Commentatorshave

complained

that the

development

of the law in this areahas beencharacterized

by

instability

recurrent shifts in

judicial thinking

and the absence of

underlying

principle

Yet

despite

any confusion that may have beset this issue nocourt in Canadaor

England

has

questioned

the

principle

enunciated in Bradburn supra

that benefits awarded under a

private

insurance contract should notbe deducted from

damages

awarded

against

atortfeasor internal citations omitted

The Court of

Appeal

in Bradburn held that the

plaintif

was entitled to receive both the amount

payable by

the insurer and the

damages

for loss of income

recoverable from the defendant

Pigott

B heldat p 197

Ithink that there would be no

justice

or

principle

in

setting

offanamount

which the

plaintiff

has entitled himself to under a contract of insurance suchasany

prudent

manwould makeonthe

principle

of asthe

expression

is

laying

by

for a

rainy

day

He pays the

premiums

upon a contract

which if he meets with an accident entitled him to receive a sum of

money Itisnotbecause hemeets with the accident butbecausehe made

a contract with and

paid premiums

to the insurance company for that express purpose that he

gets

the money from them

As discussed in

Ratych

English

courts have never

questioned

nor

applied

the

deductibility

rule

to

private

insurance

Ratych

was no different In

spite

of McLachlin J s

approval

of the Bradburn rule and the non

deductibility

of

private

insurance benefits the

majority

of the

Supreme

Court didnotfind

receipt

of sick leave benefits

analogous

to

private

insurance benefits and thus held them deductible from anaward for

damages

Ratych

was

drastically

narrowed

by Cunningham

v

Wheeler12

which involved three

appeals

pertaining

to the

question

of

deductibility

of

disability

benefits from a

plaintiffs

claim for lost

wages McLachlin J now

writing

for the

minority

reiterated her

position

onfair

compensation

12

Cunningham

supranote5

M Steven Rastin

to both

parties focusing again

on restorative not

punitive damages

On the

private

insurance

exception

issue in Bradburn the

minority

felt it should not be extendedto benefits

paid

under

employment

contracts

stating

that where a loss is made

good

by

employment

benefits the

plaintiff

suffers no

parallel

loss recoverable intort

Now

writing

for the

majority

in

Cunningham

Cory

J

firmly

upheld

the

private

insurance

exception stating

atparas 16 18

Ithink 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 ofsome income incase

of

disabling injury

orillness The

acquisition

of the

policy

has social benefits for those insured their

dependants

and indeed their

community

It

represents

forbearance and self denial onthe

part

of the

purchaser

of the

policy

to

provide

for

contingencies

The individual maynevermake a claim onthe

policy

and the

premiums paid

may beatotal loss Yet the

policy provides security

Recovery

intortis

dependent

onthe

plaintiff establishing injury

and loss

resulting

from an act of misfeasance or nonfeasance on the

part

of the defendant the tortfeasor I can see no reason

why

atortfeasor should benefit from the sacrifices

made

by

a

plaintiff

in

obtaining

an insurance

policy

to

provide

for lost wages Tort recovery is based on some

wrongdoing

It makes little sense fora

wrongdoer

tobenefit from the

private

actof

forethought

and sacrifice of the

plaintiff

There is

good

reason

why

the courts should be slow to

change

a

carefully

considered

long

standing policy

that nodeductions should be made for insurance

moneys

paid

for lost wages If any action is to be taken it should be

by

legislatures

It is

significant

that in

general

nosuch action has been taken

Cory

J found that in effect

Ratych

required plaintiffs

toprove

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

M Steven Rastin

RASTIN ASSOCIATES

In

maintaining

the

private

insurance

exception

to commonlaw

principles

of double recovery

Ratych

posits

that collateral benefits are not deductible where a

plaintiff

can establish he has

given something

up in return for benefits

Cunningham

narrows the scope of

deductibility by

finding

that in certain circumstances a _{trade off may be}

implied

eg

through

collective

bargaining

Further where a benefit

provider

retains a

right

of

subrogation

no deduction is

made for those benefits

Statutory

Modificationstothe Collateral Source Rule

The introduction of no fault automobile insurance

legislation

in the Insurance Act has

considerably

modified the collateral source rule formotorvehicle related

injuries

The OMPP

Regime

The OMPP

regime

wasthe firstno fault

regime

in Ontario 14

created inanefforttostabilizeauto

insurance rates It introduced a dual

system

oftort and accident benefits In short accident

victims lost their

right

to suein certaincases in returnfor no fault accidentbenefits I5 A verbal threshold was introduced that restricted the recovery ofnon

pecuniary

general damages

where

injuries

fell below the threshold 16In addition section 267 1 of the Insurance Actwascreatedto

give

creditto tortdefendants forcertain

payments

the

plaintiff

receivedor wasentitledtoreceive from othersources Section267 1

provided

The

damages

awarded to a person in a

proceeding

for loss or

damage arising

directly

or

indirectly

from theuse or

operation

ofanautomobile shall be reduced

by

13

R S O 1990 cI 8

14

Foraccidents

occurring

on orafter June 22 1990

15

See Lentov Castaldo 1993 15 O R 3d 129 C A

16

The issue of threshold is

beyond

the scope of this paper

M StevenRastin

a all

payments

that the person has receivedorthatwere or areavailable forno

fault benefits and

by

the

present

value of anyno fault benefits to which the person is entitled

b all

payments

that the person has received under any medical

surgical

dental

hospitalization

rehabilitationor

long

term care

plan

orlaw and

by

the

present

value of such

payments

to_{which the person is entitled}

c all

payments

that the person has receivedorthatwere or are available for loss

of income under the laws of any

jurisdiction

orunderanincome continuation

benefit

plan

and

by

the

present

value ofanysuch

payment

towhich theperson

is entitled and

d all

payments

that the person has received under a sick leave

plan

arising

by

reasonof the persons

occupation

or

employment

An

important

decision under the OMPP

regime

pertaining

to

deductibility

of collateral benefits is

Cugliari

v

Whiten

There the

plaintiff

was

injured

inamotor vehiclecollisionin 1990 At trial the

judge

held that CPP

disability

benefits received

by

the

plaintiff

before trial should be deducted from the

global

award of

damages

The Divisional Court reversed and the Court of

Appeal

upheld

the Divisional Courts

ruling stating

that CPP

disability

benefits were non

indemnity

innature as

they

didnot

require

the

recipient

tobe

employed

atthe time of

disability

The Court of

Appeal

found the

legislative

purpose ofs 267was to eliminate double recovery

had the

legislature

intended CPP

disability

benefits to be deductible it would have

expressly

doneso

Bill 164

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 A

protected

person was i the owner of an automobile ii the

occupants

of an automobile and ii anyperson

present

at the incident Non

pecuniary

losses

were

only

recoverable if the

plaintiff

met a verbal threshold Section 267 1 amendments

removed the defendants

right

to deduct benefits

previously

allowed under the OMPP

regime

17

1998 O J No 1628 C A

M Steven Rastin

RASTIN ASSOCIATES

The collateral source rule once

again

became relevant but

only

in the contextofa claim

against

an

unprotected

defendant for

pecuniary

losses

Bill 59

The Bill 59

regime

took effect onNovember 1 1996 Once

again

a

plaintiff

could not sue a

protected

defendant unless her

damages

surpassed

the threshold

subject

ofcourse toa

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 Section 267 8 1

provides

the

following

Inan action for loss or

damage

from

bodily injury

or death

arising directly

or

indirectly

from the use or

operation

ofan automobile the

damages

to which a

plaintiff

is entitledfor income loss and loss or

earning capacity

shall be reduced

by

the

following

amounts

1 All

payments

in

respect

of the incident that the

plaintiff

has received or that were available before the trial of the action for

statutory

accident benefits in

respect

of the income loss and loss of

earning capacity

2 All

payments

in

respect

of the incident that the

plaintiff

has received or that

were available before the trial of the action for income loss orloss of

earning

capacity

under the laws of any

jurisdiction

orunder an income continuation benefit

plan

3 All

payments

in

respect

of the incident that the

plaintiff

has received before the trial of the action under a sick leave

plan

arising

by

reason of the

plaintiffs occupation

or

employment

Nearly

identical to the

provision

under the OMPP

regime

Bill 59 amendments added the deduction of benefits for loss of

earning

capacity

Until Meloche v

McKenzie18

decided in

2005 it

appeared

the issue of

deductibility

of CPP

disability

benefits had been settled Meloche

reraised the issue of

deductibility

of various benefits

including

CPP from atortaward

against

a

protected

defendant The court found that the amendments under Bill 59 altered the

private

insurance

exemption

under commonlaw

by

establishing

the

deductibility

of collateral benefits

from a tort award for loss of income and

earning

capacity

It also created a

statutory

trust in

18

2005 27 C C L I 4th 134 S C J

M Steven Rastin

favour of defendants for

receipt

of such collateral benefits

Favouring

a broad

approach

to

deductibility

thecourtstatedatpara 19

Sincethe

original

intentwas 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 anaward for

past

loss and the

subject

ofatrustfor future

receipt

Having

found thatCPP

disability

benefitswere tiedtoa

recipients inability

toengage in theact

of

gainful employment

or as aresult ofaloss of

earning capacity

19

thecourtheld the benefits

were deductible It further noted that Bill 198 which

explicitly

makes CPP

disability

benefits deductible was

simply

aclarification of the

original

legislation

Recently

the Ontario

Superior

Court ofJustice in Strickland v

Mistry20

another Bill 59 case

followed Meloche and found that

long

term

disability

payments

received

by

the

plaintiff

were deductibleand

subject

to the trust and

assignment provisions

of the Insurance Act In thatcase

the

plaintiff

wasin

receipt

of CPP

disability pension

and

long

term

disability

benefits from her

employers

group insurer The court

agreed

that CPP

disability

benefits were intended to be among the class of benefits deductible fromatortaward

against

a

protected

defendant

Bill 198

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 sourcerule from income loss health care costs and other

pecuniary

losses in motor vehicle accident claims Inessence

the tortfeasor receivesacredit for all income

replacement

benefits receivedoravailable from the

statutory

accidentbenefitsinsurer

prior

to the trial of the action and also for

payments

received under asick leave

plan

or any

payments

receivedor availableto the

plaintiff

for income loss or

loss of

earning capacity

under the laws of any

jurisdiction

before trial

19 Ibid atpara 27 20 2009 O J No 1169 S C J M Steven Rastin RASTIN ASSOCIATES 9

Section267 8 2

provides

thatcollateral benefit

payments

made in

respect

of any loss of income in the first seven

days

after the accident are not deductible Section 267 8 3

gives

protected

defendants

priority

with

respect

todeduction of such benefits

Cugliari

involved a similar

provision

in the OMPP which allowed for the

deductibility

of

collateral benefits that were considered

indemnity

payments

CPP

disability

benefits were found

to benon

indemnity

payments

and thus nondeductibleunder the OMPP The

regulations

under

Bill 198now

explicitly

make CPP

disability

benefits deductible intort

Asaresult of the

evolving

nofault

legislation

itcanbe

confusing

when

attempting

todetermine which benefits are

properly

deductible from atort award for

damages

and which are not The

following

chart should be of assistance

Type

of Benefit Deductible Comments

Long

Term

Disability

LTD

Yes Section5 2 of0

Reg

461

9621 provides

that

long

term

disability

benefits aredeductible fromatortaward for income loss after October 1 2003

Canada Pension Plan

CPP

Yes CPP

disability

benefitsare

explicitly

made deductible from income loss awards inmotorvehicle accident cases

arising

after October 1 2003 Bill 198 22Also deductible under Bill 59

Severance

Packages

Yes See Skinnerv

Goulet23

To be deductible the defendantmust

prove which

part

of theseverance

package

is consideredtobe

payment

of income as

opposed

toother heads of

damages

Ontario

Works Yes Socialassistance benefitsare aform of wage

replacement

and

aredeductiblefrom

damages

for lost

opportunity

toearn

income

Refusing

deduction would amount todouble

recovery

24

Health Yes Section267 8 4 of the Insurance Act

provides

that

damages

21

Court

_{Proceedings for}

Automobile Accident that Occuron or

_After

November 1 1996 0 Reg 461 96 s 5 2 LTDpaymentsarealso deductible from income

replacement

benefits

22

Ibid See Meloche supranote 17 Strickland supranote 19

23 1999 0 J No 3209 S C J 24 MB vBritish Columbia 2003 2 S CR 477 S C C M StevenRastin RASTIN ASSOCIATES

insurance for healthcarewill be reduced

by

all

payments

received

by

the accident benefits carrier for healthcare and all

payments

received before trial under any medical

surgical

dental

hospitalization

rehabilitationor

long

termcare

plan

Medical rehabilitation benefits

Yes The defendant receives acredit for

past

health careexpenses and anyamounts for future medical and rehabilitation costs

already

paid

by

the accident benefits carrier The defendant receivesatrustor

assignment

offuture medical rehabilitation

benefits seebelow

Housekeeping

home maintenance benefits

Yes Benefits received from the accident benefits carrier before trial

aredeductible 25

WSIB No Section267 8 15 of the Insurance Act

provides

that any

payments

orbenefits receivedorthatwere ormay become availabletoaperson under the

Workplace Safety

and

InsuranceAct 1997 donotreduce

damage

awards forincome

loss healthcare orother

pecuniary

losses The WSIB hasa

right

of

subrogation

thus benefits

paid

toaworkerarenot

deductible26 Sick leave

benefits

No Under

Cunningham

employment

benefits willnotbe deductible if

paid

for

by

the

employee

directly

or

directly

Employment

Insurance E I

No See

Jorgensen

v Jack Cewe Ltd22E I benefits are

subject

to

repayment

upon the settlement ofatortclaim 28

ODSP No Section 8 of the Ontario

Disability

Support

Program

Act

199729 provides

for

repayment

tothe

Ministry

of any

damage

award allocatedtoincome loss orloss of

earning capacity

By

virtue of the

repayment

provision

ODSP

payments

arenot

creditedtothetortdefendantasthere isnodouble

recovery30

General

damages

No Collateral benefitsarenotdeductible from anaward fornon

pecuniary

damages

31

25

Sees 267 8 6

26

Workplace Safety

and Insurance Act S O 1997 c 16 Sched A s 30 10 13

27

1980 111 D L R 3d 577at581 SC C

28

Employment

Insurance Act S C 1996 c 23 S 45

29 S O 1997 c 25 Sched B 3 MOSSvHutchinson 2007 85 O R 3d 604 S C J 31 Sees267 8 7 M Steven Rastin RASTIN ASSOCIATES 11

Non earner

benefits

No See Walker v Ritchie 32

Gifts No Section 267 8 of the Insurance Act doesnotmake referenceto

gifts

Atcommonlaw

private

orcharitable

gifts

arenot

deductible33

Interplay

of

Long

Term

Disability

LTD Benefits with Motor Vehicle Accidents

InOntario LTD benefits are the

primary

sourceof recovery and must be exhausted before auto

insurance benefits are

payable

Whether tort

damages

canbe offset

against

LTD

payments

ties into whether theLTDinsurer hasa

right

of

subrogation

InGibson v Sun

_Life

Assurance Co

_{of Canada34}

the court held that in a

disability

contract of

indemnity

the disabled claimant must account to the insurer for

damages

recovered from the tortfeasor where the amount received exceeds the amount

required

for full

indemnity

35 In Budnark v Sun

_Life

Assurance Co

_{of Canada36}

the court held Sun Life was entitled to

repayment

ofa

portion

of

disability

benefits where thenet

past

loss of income recovered

plus

the

disability

benefits received exceeded 100 of the claimants

past

loss

Subrogation rights

for

past

loss of incomewerecalculable

they

werenotso

easily

determined with

respect

tothe award for future loss of income therefore the

plaintiff

wasnot

required

to account to Sun Life for her future loss of income37

An insurer will thus be

subrogated

toa

right

of recovery where the claimant is

fully compensated

for his her

past

losses With

regard

to future losses courts have held the determination ofan

32

2004 O J No 787 revdonother

grounds

2006 2 S C R 428

33

See

Cunningham

supra note5

accepting

the

exception

todouble recovery withrespecttocharitable

gifts

34

1984 45 O R 2d 326 H C J

35

Seeeg _{ConfederationLife}Insurance Co v Causton 1989 B C J 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 didnotreceivefull indemnification for her loss thus nomoneywasowedtothedisabilityinsurer

36 1994 B C J No 1960 B C S C 37 Ibid atparas 51 52 M StevenRastin RASTIN ASSOCIATES

amount of

damages

to

compensate

for future loss of

earning capacity

is

subject

to

uncertainty

this isrelevant when

considering

whetherthe

plaintiff

has in fact been

fully compensated

38

Future Collateral Benefits

Section267 8 9

provides

for thetreatmentof future collateral benefits

A

plaintiff

who recovers

damages

for income loss loss of

earning capacity

expenses that have beenorwill be incurred for healthcare orother

pecuniary

loss in an action for loss or

damage

from

bodily injury

or death

arising directly

or

indirectly

from the use or

operation

ofan automobile shall hold the

following

amounts intrust

1 All

payments

in

respect

of the incident that the

plaintiff

receives after the trial of the action for

statutory

accident benefits in

respect

of income lossorlossof

earning capacity

2 All

payments

in

respect

of the incident that the

plaintiff

receives after the trial of the action for income loss orloss of

earning capacity

under the laws of any

jurisdiction

orunderanincome continuation benefit

plan

3 All

payments

in

respect

of the incident that the

plaintiff

receives after the trial of the action under a sick leave

plan

arising by

reason of the

plaintiffs

occupation

or

employment

4 All

payments

in

respect

of the incident that the

plaintiff

receives after the trial of the action for

statutory

accident benefits in

respect

of expenses for health

care

5 All

payments

in

_respect

of the incident that the

plaintiff

receivesafter the trial of theactionunder any medical

surgical

dental

hospitalization

rehabilitation

or

long

term care

plan

orlaw

6 All

payments

in

respect

of the incident that the

plaintiff

receives after the trial of the action for

statutory

accident benefits in

respect

of

pecuniary

loss other than income loss loss of

earning capacity

and expenses for healthcare

In addition to

holding

future collateral benefits in trust for the defendant the court may on

motion order the

assignment

of future collateral benefits in

respect

of the

damages

recovered

by

the

plaintiff

after tria1 39

38

Stitzingerv

Imperial Life

Assurance Co

_of

Canada 1998 39 O R 3d 566 Gen Div atpara 21

M StevenRastin

RASTIN ASSOCIATES

Protected and

Unprotected

Defendants

Whois

protected

As alludedto earlier since the introduction of theno fault

regime

defendants have been

placed

into two

categories

protected

and

unprotected

A

protected

defendant is defined in section 267 3 of the Insurance Act as aperson who is

protected

from

liability by

subsections 267 5 1

3 and 5 These sections list the

following

aspersons

protected

from

liability

They

are

i theownerofanautomobile

ii

occupants

ofanautomobile and

iii any person

present

atthe incident

Section 267 3 defines an owner as an

operator

asdefined in subsection 16 1 of the

Highway

Traffic

Act and aperson who is a _{lessee for the purposes of section 192 of that Act} Effective March 1 2006 alessee became a

protected

defendant Where

previously

alessee could

only

be

sued for his own

negligence

a lessee can now be held

vicariously

liable for the

negligent

operation

ofaleased vehicle

Section224 defines an

occupant

ofanautomobile as a _{driver passenger carried in}or onthe

automobile andaperson

getting

into outoforoffanautomobile

Advantages

of

Having

ProtectedDefendant 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 amotorvehicle accident

They

are also shielded from

payments

in excess of 80 of the

plaintiffs

net income loss orloss of

earning capacity

after the firstseven

days

and before tria140 In addition

protected

defendants are immune from

liability

for health care expenses non

pecuniary general damages

s 267 8 12

40

s 267 5 1

M StevenRastin

and

damages

under the

Family

Law

Act41

unless the

plaintiff

surpasses the threshold

requirement42

Thus unless the

injured

person has died orhas sustained a a

permanent

serious

disfigurement

or b a

permanent

serious

impairment

of an

important

physical

mental or

psychological

function the

protected

defendant will notbe liable for the above noted

damages

Only

protected

defendants are entitled to the

statutory

deductible which is 30 000 for non

pecuniary

general damage

claims and 15 000for FLA loss ofcare

guidance

and

companionship

claims With the accident benefits amendments effective

September

1 2010 0

Reg

34 10 amendments tothe Insurance Act will also be made to reflect

changes

tothe tortdeductibles if the insured

purchases optional

enhanced coverage the deductibles canbe reduced to 20 000 and 10 000 for

general damage

claims and FLA claims

respectively

Note also the

vanishing

deductible under Bill 198 If the

plaintiffs general damages

exceed 100 000 or if an FLA

claimants

damages

exceed 50 000 thennodeductible is

applied

Sees 267 5 8 and 8 1

Finally

anuninsured person maynotrecover

against

a

protected

plaintiff

43

Where there isamixture of

protected

and

unprotected

defendants

protected

defendantsare

given

a

partial priority

collateral benefits are deducted first from the

damages

that

protected

and

unprotected

defendants are

jointly

and

severally

liable for and any excess is

applied

to the

damages

the

unprotected

defendants are

solely

liable for This

priority applies only

to

past

losses andnot tofuture losses 45

41

Damages

for loss ofcare

guidance

and

companionship

under section 61 2 e of the

Family

Law Act RS O 1990 cF 3

42

SS 267 5 3 and 5

43

S 267 6 1 See Hernandez

_infra

5 267 8 3 45 s 267 8 3 M Steven Rastin RASTIN ASSOCIATES 15

Note thata

protected

defendantloses hisstatus if he is defended

by

aninsurerthatisnotlicensed

to undertake automobile insurance in Ontario and has not filed an

undertaking

under section

226 1 of theInsuranceAct46

Treatment ofCollateral Benefits

Among

Protectedand

Unprotected

Defendants

Recently

the Ontario

Superior

Court of Justice held that both

protected

and

unprotected

defendantsareentitledtos 267 8 deductions for

long

term

disability

benefits This is so because

s 267 8 does not

distinguish

between

protected

and

unprotected

defendants47 In Burhoe the

plaintiff

was rear ended

by

the Defendant a

parking

valet in front of the Park

Hyatt

Hotel on

December 21 2001 Bill 59 The

plaintiff

received

long

term

disability

benefits

through

his

employer

The Defendants vehicle was insured

by

Coachman Insurance

Company

which had

excesscoverage

through

Gerling

CanadaInsurance

Company

Theseinsurersweredeterminedto

be thefirstloss insurers and the hotels

policy

wasto actas anexcess insurer

only

The

only

mentionof

protected

defendants is in s 267 8 3 Given thenon

exclusionary language

in the other subsections of s 267 8 Justice Wein held there was no differentiation between

protected

and

unprotected

defendants

Accordingly

the

unprotected

defendant the hotel was

entitledtothetrust

assignment

and deduction

provisions

ofs 267 8

OHIP and

Subrogated

Claims

Section 267 8 17 limits the

right

of

subrogation

for anyone who has

paid

collateral benefits Section 267 8 18

provides

an

exception

for OHIP but

only

against

apersonnotinsured undera

motor vehicle

liability policy

issued in Ontario To

complicate

matters if a tavern owns a

vehicle evenif the automobile

policy

is not called upon to

respond

to a claim the tavern is nonetheless immune from OHIPs

subrogated

claim 48

46

s 267 5 6 Notethis doesnot

apply

to

vicariously

liable defendants discussed later

47

BurhoevMohammed 2008 97 O R 3d 391 S C J

48

Georgiouv

Scarborough

City 2002 61 O R 3d 285 CA M StevenRastin

The Uninsured Plaintiff

Each no fault insurance

regime

has been confronted with the

impact

of the Insurance Act on

plaintiffs

and the proper treatment of

protected

and

unprotected

defendants Hernandez v

1206625 Ontario Inc49 dealt with the issue ofanuninsured

plaintiff

who loses his

right

to sue

for

damages

in tort There the

plaintiff

had been

drinking

at a bar

prior

to a motor vehicle

collision Section 267 6 1 of the Insurance Act serves as a bar to uninsured persons from

claiming damages arising

from a motor vehicle accident Nonetheless the defendant taverns

motion to dismiss the action was dismissed

by

both the lowercourt and Court of

Appeal

The Court of

Appeal

found the

plaintiffs

claim

against

the tavern owner was in Taverners

negligence

and

despite

the use of an automobile as the instrument of his

injuries

the

automobilewasincidentaltohis causeof action The Court of

Appeal

statedatpara 46

The

specific

purpose ofs267 6 1 is to address the

problem

of uninsureddrivers

An

interpretation

ofs267 6 1 that

precludes

recovery of

damages

for vehicular

negligence

but

permits

a causeof action in Taverners

negligence

promotes

both

the

general

and

specific

purposes of the statute and

provision

A

contrary

interpretation

leads to the absurd result that Taverners have a reduced

responsibility

toward

patrons

who

happen

not tohave automobile insurance

Applying

a narrow

interpretation

ofs 267 6 1 the Court of

Appeal

found that the subsection

did not absolve the defendant tavern from

responsibility

to its

patrons

who did not

happen

to

have automobile insurance

Following

Supreme

Court of Canada

authority

as

opposed

to

decisions under the OMPP and Bill 164 the Court of

Appeal

preferred

to examine the

precise

cause of action

against

the defendant

holding

that if the cause of action is not relatedto motor

vehicles theInsuranceAct will not

apply

5

Off road vehicles

present

an

interesting

conundrum Where a dirt bike orother off road vehicle

is

operated

onthe vehicle owners land it neednot beinsured

Any

off road vehicle drivenon

49

2002 61 O R 3d 584 C A

50

SeeHerediv Fensom 2002 2 S C R 741 Derksenv 539938 Ontario Ltd 2001 3 S C R 398

M StevenRastin

RASTIN ASSOCIATES

land not

belonging

to the ownermust therefore be insured51 In case of

injury arising

from an

uninsured off road vehicle s 267 6 1 of the Insurance Act

operates

to

preclude

the uninsured

injured

party

from

bringing

an action for

damages

arising

from the use or

operation

of the vehicle This was the case in New v

Liberatore52

The

plaintiff

was

driving

anuninsured dirt bike at a

city

intersectionwhen he collided with the defendantsmotor vehicle The defendant

brought

a motion for summary

judgment

on the basis that the

plaintiff

was

precluded

from

bringing

anaction

pursuant

tos 267 6 1 of the Insurance Act

Thecourt determined the dirt bikewas anautomobile under sections 1 and 224 of the Insurance

Act

Having

also found the dirt bikewas a

motorcycle

pursuant

tothe

Highway

_Traffic

Act the

court held the dirt bike was

required

to be insured under s 2 of the

Compulsory

Automobile Insurance

Act53 Additionally

regulation54

requires

off road vehiclestobeinsuredin accordance with the CAIA as well as section 15 of the

_Off

Road Vehicles Act

Accordingly

the

plaintiffs

action was dismissed Had the off road vehicle been insured under a motor vehicle

liability

policy

the Insurance Act

provisions

would have been

applicable

Vicarious

Liability

It is not a novel

concept

to treat the same person

differently

in the same case Counsel will no

doubtencountersituations

involving

amixture of

protected

and

unprotected

defendantsorwhere

adefendantwearsmanyhatsasincases of vicarious

liability

A

vicariously

liable

employer

does

not benefit from the

negligent

employees

protected

status under the Insurance Act 55 In

Smyth

the

plaintiff

was apassenger in avehicle owned

by

the defendant her husband whowas

driving

as an

agent

for his motheratthe time of the accident While atthat time awife could notsueher

51

Off

Road Vehicles Act R S O 1990 c0 4 s 15 4

52

2005 33 C C L I 4th 26 Ont S C J

53

R S O 1990 c C 25 CAIA

54

Section 17 of 0 Reg 316 03 entitled

Operation

of OffRoad Vehicles on

Highways

55

Seeeg Harrisonv Toronto Motor Car Ltd andKrug 1945 O R 1 C A

Smyth

v Moss 1949 1 K B 424 Co operatorsInsurance Associationv Kearney 1964 48 D L R 2d 1 S C C

M Steven Rastin

husband she could nonethelesssue her mother in law for her husbands

negligence

That the

husband heldtwo

capacities

husband and

agent

was

recognized by

thecourt

InHarrison the

plaintiff

was a nurse

employed

by

the defendant

Krug

who also owned the

vehicle

carrying

the

plaintiff

The driver was an

employee

of

Krug

As a result of the drivers

negligence during

the courseof his

employment

the

plaintiff

was

injured

Despite

his

immunity

from

liability

under the

Highway

_Traffic

Actas ownerof the vehicle

Krug

asthe

employer

was

foundtobe

vicariously

liable for the drivers

negligence

The

Supreme

Court of Canadaconsidereda similar issue of vicarious

liability

in

Kearney

There

the

plaintiff

was a passenger

injured

in a vehicle

operated by

a co worker and owned

by

their

employer

the Co

operators

In its

capacity

as owner the Co

operators

had

statutory

immunity

but it couldnot escape

liability

for the

negligence

of its

employee

Vollick v

Sheard56

involved a

bicycle

motor vehicle collision under the Bill 59

regime

The defendanttow truck driverwas in the courseof his

employment

atthe time of the collision The

plaintiff

sued both the driver and the

employer

The

protection provisions

under Bill 59 shielded

only

owners or

occupants

ofa vehicle or

people

present

at the scene The

plaintiff

was not

precluded

from

recovering against

the

employer towing

companyas it was not

protected

The

Ontario Court of

Appeal

confirmed the lower courts decision

holding

that

although

the tow

truck companywas

protected

as owner itwasnot

protected

as

employer

of the defendant driver

The courtin Linharesv

Seals57

followedVollick

finding

the

employer

was

vicariously

liable for

its

employees

Even

though

itwasalso theownerof thevehicle itwas an

unprotected

defendant

The

impact

of Vo ickwas extensive

Municipalities

couldno

longer rely

on

statutory

protections

in claims

involving

motor vehicles driven

by municipal employees

Vollick has since been overruled for accidents

occurring

after October 1 2003 Bill 198 Under the Bill 198

regime

the

56 2005 75 O R 3d 621 CA 57 2006 49 C C L I 4th 296 Ont S C J M Steven Rastin RASTIN ASSOCIATES 19

definition of

protected

defendant was left

unchanged

but s 267 5 10 1 was introducedto end

the

damaging

impact

of Vollickon

employers

It

provides

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 anyamount

greater

than theamount 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

liability

58

Going

forward a

vicariously

liable defendant is no more liable for

damages

than a

protected

defendant but

only

where

they

arefound

jointly

liable The

provision

doesnot extendtothe

employers

independent

negligence

Apportionment

of

Liability

Damages

BetweenProtected 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 nonmotorists who became

severally

liable for

damages

Bill 164 shielded motorists from

paying pecuniary

losses and

gaining

the benefit ofa

deductible for non

pecuniary damages

It also introduced a

provision

for

apportionment

of

damages

now s 267 1 whichwas carried forwardtoBill 198 Several

liability

no

longer

exists

Where there is amixture of

protected

and

unprotected

defendants section 267 7 1

prescribes

the

following approach

to

apportionment

1 If inanaction for loss or

damage

from

bodily injury

ordeath

arising directly

or

indirectly

from the use or

operation

of an automobile one or more

protected

defendants andone or moreother persons arefoundtobe liable for

damages

a the other persons

58

This amendment is notretroactive and doesnot

apply

to accidents that occurred between 1996 and October 1

2003 SeeCarter LitigationGuardian

_of

v Sanders 2004 O J No 3558 S C J

M Steven Rastin

i are

jointly

and

severally

liable with the

protected

defendants for the

damages

for which the

protected

defendants are liable

having

regard

tosection 267 5 and

ii are

solely

liable for any amount

by

which the amount mentioned in

subclause i IS less than theamountthat the other persons would have been liable to make contribution and

indemnify

the

protected

defendants in

respect

of

damages

in the absence of section 267 5

b the other persons are liable to make contribution and

indemnify

the

protected

defendants in

respect

of

damages

tothe sameextentasif section

267 5 didnot

apply

up to the amount for which the

protected

defendants

areliable

having regard

to section 267 5 and

c the

protected

defendantsareliable tomake contribution and

indemnify

the other persons for the amount that the

protected

defendants are liable

having

regard

to section 267 5 reduced

by

the amount that the other persons are liable to make contribution and

indemnify

the

protected

defendants under clause b

Subsection

267 7 3 ensuresthat

liability

is tobe determined as

though

all

parties responsible

for the

damages

were

parties

tothe action evenwhere aperson is not

actually

a

party

This

proviso

thwarts a

plaintiffs

attempts

to avoid the effects of s 267 7

by

failing

to sue a

protected

defendant

Sullivan Estate v

Bond59

outlines the proper

approach

to

apportioning

damages

as between

protected

and

unprotected

defendants Sullivan involved a

single

motor vehicle accident under the Bill 59

regime

Sullivan one of the passengers was killed two others were

injured

The

injured

passengers andestate of the deceased passenger claimed

damages against

the driver the

ownerand lessee of the vehicle andtwo tavernsin which the

parties

had been

drinking prior

to

the accident One of the taverns

brought

a motion

seeking

the proper

interpretation

and

application

ofs 267 7 The motions

judge

held that in the eventthe defendanttavernwas found

negligent

as an

unprotected

joint

and several tortfeasor it would be

responsible

for 100 of the

deductibles 59 2001 55 O R 3d 97 148 O A C 86 C A M StevenRastin RASTIN ASSOCIATES 21

On

appeal

the Court of

Appeal

held that the

protected

defendantswerenotliable for any

portion

of the

statutory

deductible and the

unprotected

defendants werenotliable for the full amount of the deductible

only

the amountbasedontheir

percentage

of

liability

The Court of

Appeal

stated

at

paragraphs

31 32

The

legislature

enacted

provisions

toensurethat

unprotected

defendants and

their insurers wouldnotbe saddled with the entire burden of the benefits afforded

to

protected

defendants and their insurers it is

apparent

that the purpose of the

legislation

wasnot tobenefit

protected

defendants ortheir insurers atthe expense

of

unprotected

defendants and their insurers

The

legislative

intent is still that persons

injured

in motor vehicle accidents

give

up certain

rights

in tort in

exchange

for enhanced first

party

benefits from their insurer internal citations omitted

The Court of

Appeal

founds 267 7 should be

properly

interpreted

tomean

a the

unprotected

defendants are

jointly

and

severally

liable with the

protected

defendants for the

damages

for non

pecuniary

loss for which the

protected

defendantsareliable under the Act and

b

using

the gross

figure

for non

pecuniary

loss the

unprotected

defendants are

solely

liabletothe

plaintiff

for the amount if any

by

which the amount that

they

would have been liable to make contribution and

indemnify

the

protected

defendants under the

Negligence

Act exceeds the

figure

calculated in a above 60

As aresult of Sullivan cases

involving protected

and

unprotected

defendants will vary

payments

owing

to the

plaintiff

based on

differing

degrees

of fault 61

The

unprotected

defendant will be

solely

liable for the

portion

of the

statutory

deductible if its

liability substantially

exceeds that of the

protected

defendant

Contributory negligence

is also a factor which can

negatively impact

a

plaintiffs

recovery in a

motor vehicle accident claim Section 267 8 8

provides

that reductions for collateral benefits

6

Ibid atpara 33

61

Liability

unders267 7 1 is determined

separately

forthe

following damages

i loss of income and

eaming

capacity

ii healthcareexpenses past and future iii other

pecuniary

loss iv non

pecuniary general damages

as

wellasloss ofcare

guidance

and

companionship

FLA

damages

Sees 267 7 2

M Steven Rastin

shall be made afterany

apportionment

of

damages

are

required

for

contributory negligence

The

combination of the deductionof collateral benefits and

contributory negligence

can

effectually

result inzerorecoverytothe

plaintiff

Conclusion

The no fault auto insurance

regimes

have created a distinction between motorists and non

motorists that can be likened to a class

system

of sorts While

seemingly straightforward

in

placing

defendants in one oftwo

categories

that of

protected

and

unprotected

in

practice

the distinction is

significant

For

example

consider an

injured

motorist in a

single

motor vehicle collision The motorist claims

damages

against

the tavernowner for over

serving

him alcohol

Thetaverndoesnot

gain

the benefits

provided

under the Insurance Act The motorist is then able

to claim his full losses Inthe caseofatwo carcollision

involving

adefendant motorist who is

protected

and thetavernthat is

unprotected62

damages

are

apportioned

according

tothe

joint

and several

liability provisions

under the Insurance Act

Ultimately

the

protected

motorist

enjoys

certain

statutory

protections

while the

unprotected

tavernownerdoes not This

disproportionate

apportioning

of

damages

inturn affects the

plaintiffs

recovery

62

Seeeg Sullivan supranote58

M Steven Rastin

RASTIN ASSOCIATES