Since 1996, regarding motor vehicle accidents, the amendment to the Insurance Act, RSNB 1973, c. I-12, has replaced the collateral benefits rule when dealing with past losses of income (see “Collateral Benefits Rule”). Section 265.4(1) defines the benefits paid to injured individuals that need to be deducted from an award of damages. It is directed mostly at three types of programs: (1) income continuation plans, (2) work-related disability benefits, and (3) sick leave plans:
265.4 (1) In an action for damages arising out of an accident, the amount recoverable by the plaintiff as damages for loss of income between the date of the accident and the date of the judgment shall, subject to subsection (4), be reduced by
(a) all payments that the plaintiff received for loss of income during that period under an enactment of any jurisdiction or under an income continuation benefit plan,
(a.1) all payments that the plaintiff received for loss of earning capacity during that period under a policy of disability insurance, and
(b) all payments that the plaintiff received during that period under a sick leave plan arising by reason of the plaintiff’s occupation or employment, whether or not the plaintiff’s credits under that plan can be characterized as a capital asset.
Are Section B Weekly Indemnity Benefits Deductible from Awards of Damages?
Section B weekly indemnity benefits are peculiar since they are captured by several exclusion provisions, namely ss. 257(2), 263(2) and 265.4(1)(a) of the Insurance Act, supra (see “Deductibility of Section B Weekly Indemnity Benefits”). This has led to overlapping and conflicting jurisprudence. They are deductible from an award of damages, past and future, but a clear statement is still missing as to which provision applies.
Furthermore, Section B insurers will regularly stop or refuse no-fault benefits to injured motorists who are then compelled to sue for reinstatement. If the matter settles before the conclusion of the action against the tortfeasor, the proceeds from the settlement are also deductible. Unless a defendant has evidence of an “improvident settlement” and that “a plaintiff was clearly entitled to a continuation of more available benefits”, courts will only deduct from the award the amount agreed to with the Section B insurer (Morris v. Collette, 2003 NBCA 35 para 21), minus legal fees and disbursements incurred to enforce the entitlement (see “Benefits Non-Deductible from Awards of Damages”).
Are Short-Term and Long-Term Disability Benefits Deductible from Awards of Damages?
Before s. 265.4 of the Insurance Act, supra, courts held that short and long-term disability benefits obtained through the collective bargaining process were not deductible: Hickey v. Daigle (1988), 89 NBR (2d) 77 paras 6-7 (QB); Wilson v. Wilson, 1996 CanLII 12106 (NBQB); Wilson v. Great-West Life Assurance Co., 2008 NBCA 57; see “Collateral Benefits Rule”. Section 265.4(1)(a.1) above was added to the Insurance Act, supra, on April 11, 2003: An Act to Amend the Insurance Act, SNB 2003, c. 22, s. 4(a)(ii). It refers expressly to “policy of disability insurance”. Between 1996 and 2003, courts had to rely on s. 265.4(1)(a) or (b) to apply a deduction. Graham v. Hill, 2003 NBCA 24, rendered on April 10, 2003, was such a case. The New Brunswick Court of Appeal addressed whether benefits paid under a policy of long-term disability insurance had to be deducted from an award of damages for past loss of income. The policy contained a subrogation clause. Continuing on the trend set in the jurisprudence before 1996, the lower court judge had decided, on April 23, 2002 on a preliminary motion, that the benefits were not deductible from the award of damages for past loss of income: (2002), 249 NBR (2d) 262 paras 38-41(QB).
The unanimous bench of the Court of Appeal overturned the motion judge’s decision. It concluded that s. 265.4 “represents a significant departure from the common law. Indeed, it creates an entirely new regime for the assessment of damages for pre-judgment loss of income arising out of any post-1996 motor vehicle accident” (para 10). It also formulated the opinion that “the expression ‘income continuation benefit plan’, … had acquired, prior to the adoption of s. 265.4(1)(a), a settled meaning, one that encompassed any income replacement plan, whether insured or not” (para 13). The amounts paid under such a policy are therefore captured by the provision and are deductible from an award for past loss of income. Furthermore, the subrogation rights were not binding as per s. 265.4(3) with no obligation on the plaintiff to reimburse the LTD insurer out of an award of damages, if any. Thus, the 2003 amendment turned out to be superfluous as far as LTD insurance policies are concerned.
Regarding future loss of income, the decision of O’Neill-Jones v. Chabot, 2015 NBQB 143 paras 191 & 204-206, held that LTD benefits are not deductible therefrom as s. 265.4(1) of the Insurance Act, supra, is limited to loss of income from the date of the accident to the date of the trial. At first glance, a conflicting view appears to emerge from Carter v. New Brunswick, 2013 NBQB 239, leave to appeal dismissed on October 17, 2013 (2013 CanLII 65199 (CA)). Therein, the plaintiff, injured in a motor vehicle accident, collected LTD benefits. Her motor vehicle claim settled and the LTD insurer invoked the amount received to reduce future LTD benefits. It is worth emphasizing that the case did not deal with a deduction of past or future LTD benefits from the award of damages, but the reverse (i.e. a deduction from future LTD benefits of money received as part of the award of damages). As s. 265.4 of the Insurance Act, supra, does not deal with future losses, the terms of the policy dictate the level of integration of benefits (see “Deductibility of Benefits in Insurance Contracts”).
Are Sick Leave Benefits Deductible from Awards of Damages?
The 1996 amendment to the Insurance Act, supra, refers expressly to “sick leave plans”: s. 265.4(1)(b). Before then, sick leave credits used as a result of an injury could potentially be claimed if the evidence showed that they were cashable at the time of retirement or if there was an undertaking to reimburse the employer of the sick time used: Allen v. Farrell (1988), 86 NBR (2d) 50 para 47 (QB). Since 1996, sick leave benefits have to be deducted from awards for past loss of income, even where they may be considered a capital asset (this part was added to the provision in 2003).
That being said, the unanimous Court of Appeal has left open possible claims for the future loss of such benefits in case of depletion of such credits if “there is a real and substantial possibility that his bank of sick leave benefits will not be sufficiently plentiful to cover absences from work unrelated to the accident”: Fraser v. Haines, 2008 NBCA 59 para 46. Therefore, while benefits paid between the date of the accident and the date of the trial are deductible from an award of damage for past loss of income, they may still be claimed as a future loss if the requirements of Vincent v. Abu-Bakare, 2003 NBCA 42 para 76-81, are met.
In Abu-Bakare, supra, the plaintiff, a unionized school teacher, was injured in a motor vehicle accident. Under the collective agreement, he could cumulate up to 15 sickness days per year, carry them over up to a maximum of 195 days; if unused, they could not be cashed at retirement. He used 74 of those days as a result of the accident. During the two school years preceding the trial, the plaintiff had used only a portion of the yearly sick leave benefits available; his total credits had therefore increased during that time. He had lost no past income and formulated no claim in that respect. The trial judge awarded him $18,850 to compensate the “full face value of the sick leave benefits used by Mr. Vincent for accident-related absences from work” (para 1). Although the wording of the provision was different then, not speaking of capital assets, the unanimous bench acknowledged “that s. 265.4(1)(b) of the Insurance Act does ‘not relate to claims for future loss and the loss of the capital asset or benefit of accumulated sick leave benefits’ and that, at common law, the appellants were not entitled to a deduction for future sick leave benefits” (para 77). Because the credits could not be cashed-in, it held however that they were not a capital asset (para 78). Plus, the plaintiff had received an additional award for future loss of income, including time off work because of his injuries, and the award for loss of sickness benefits compensated the plaintiff twice for the same loss.
In light of Fraser v. Haines, supra para 46, the loss of sick leave benefits may still be compensated notwithstanding s. 265.4(1)(b) of the Insurance Act, supra. However, that claim would be formulated as a future loss (general pecuniary damages), not as a past loss (special damages). Given the 2003 amendment, it remains to be seen whether the past depletion of sick leave credits may serve to form the basis of a future claim (even if they are deductible from past losses of income), but it seems clear that future depletion as a result of the accident may be awarded if the credits are redeemable at some point. That inevitably implies that future credits are not deductible from the award of damages.
Finally, the case of Savoie v. Robichaud, 2011 NBQB 337, is also of interest. Part of the plaintiff’s claim consisted of unpaid leave of absence from work due to her injuries. The trial judge allowed a portion of the claim, as a loss, which was shown to be related to the accident (paras 31-34). Of course, being unpaid, this could not fall in the category of ‘sick leave plan’ (or of ‘income continuation plan’) as no money was received during that time off of work. In fact, this was the only pecuniary loss accepted by the presiding judge, as the plaintiff had not proven that her earnings had otherwise suffered as a result of her injuries. However, Justice Léger did deduct the Employment Insurance sickness benefits that she collected during that time (para 33).
Are Employment Insurance Benefits Deductible from Awards of Damages?
The question of the deductibility of Employment Insurance (EI) benefits was answered by the New Brunswick Court of Appeal in Charters v. Hudson, 2002 NBCA 10, a short decision dealing with an advance payment motion. In her judgment, the motion judge had deducted EI benefits in setting the amount payable. On appeal, the plaintiff argued that the benefits were not paid as loss of income but as loss of earning capacity. The unanimous bench disagreed and upheld the motion judge’s decision. See also Harris v. Sterniczuk, 2004 NBQB 26 paras 9 & 11, and Savoie v. Robichaud, supra para 33.
Are Vacation Benefits Deductible from Awards of Damages?
In principle, vacation benefits are different than sick leave benefits. While sick days are akin to an insurance plan (i.e. there when needed), vacation benefits are part of the employee’s basic remuneration package and are expected to be used yearly to maintain productivity, not to treat illnesses. Thus, they are more akin to a pension plan with an effect on the real wage of workers. Under certain employment contracts, the unused balance may be carried over and cashed-in at a later date. However, to the extent that vacations are used by an injured employee to recover, the benefits could arguably be deductible as if the worker had received his or her full salary. But, like sick leave benefits, the depletion of the bank could arguably be claimed as a loss if redeemable at a later date and it is shown that the accident had an impact on the value of the asset when cashed-in.
This paper is offered for the purpose of discussion only. It does not constitute legal advice and its distribution does not create a solicitor-client relationship. Please consult a lawyer if you require legal advice.