In the case of Kolapully v. TTC, the question arose whether non-earner benefits should be deducted from an award for loss of income under s. 267.8 of the Insurance Act. Ms. Kolapully had received over $95,000 in non-earner benefits before trial. Non-earner benefits are payable by accident benefits insurer to motor vehicle accident victims if they suffer a complete inability to carry on a normal life and do not qualify for an income replacement benefit.

In the Kolapully case, the defendant moved to have the non-earning benefits deducted from the $200,000 awarded for her past income loss she received at trial. The trial judge dismissed the defendant’s motion, relying on the precedent set in the decision Walker v. Ritchie, which concluded that non-earner benefits are not related to loss of income and thus not deductible from tort awards for loss of income.

However, the defendant argued that this conclusion conflicts with the Court of Appeal’s decision in Cadieux v. Cloutier, where non-earner benefits were included in the category of “income replacement benefits.” The trial judge found the inclusion of non-earner benefits in Cadieux as obiter and not binding, thus not deducting the non-earner benefits from the damages award for income loss. This blog explores the key principles, trial judge’s ruling, and the implications of the appellate decision on this matter.

Governing Principles

The compensation system for motor vehicle accident injuries in Ontario combines no-fault insurance and traditional tort law. Insured parties have access to no-fault benefits, but there are limits on the ability to sue for injuries. The statutory scheme aims to prevent double compensation, ensuring fair but not over-compensated recovery for accident victims. This principle is reflected in s. 267.8 of the Insurance Act, which mandates the reduction of tort awards by the amount received in statutory accident benefits (SABS).

Evolution of the Legislation

The history of s. 267.8  of the Insurance Act reveals an evolution aimed at preventing double recovery. Initially, the Insurance Act required a reduction of damages awarded by the amount received in no-fault benefits. This approach was based on a strict matching of benefits to identical heads of damages, known as the “apples to apples” approach.

The legislature amended the statutory scheme to introduce three categories of SABS. Each category is to be deducted from corresponding categories of tort damages: income loss and loss of earning capacity, health care expenses, and other pecuniary loss. This shift seems to have marked the transition from the “apples to apples” approach to the broader “silo” approach, grouping benefits into general categories rather than precise matches.

Judicial Interpretations

Two lines of case law emerged the statutory scheme amendments. The first line continued using the “apples to apples” approach, as seen in Walker, where non-earner benefits were not deductible from income loss damages. The second line adopted the “silo” approach, grouping benefits into broad categories, as seen in Basandra v. Sforza and El-Khodr v. Lackie. The Ontario Court of Appeal in Cadieux resolved the conflict by endorsing the “silo” approach.

In Cadieux, the court held that the current statutory provisions support matching benefits only at the level of the three broad silos: income loss, health care expenses, and other pecuniary loss. Non-earner benefits were included in the income loss silo, making them deductible from tort awards for loss of income.

The Trial Judge’s Ruling and Appellate Review

In Kolapully’s case, the trial judge considered herself bound by Walker and found Cadieux’s inclusion of non-earner benefits in the income loss silo as obiter. She concluded that the statutory provisions were ambiguous regarding non-earner benefits as income replacement benefits. However, the appellate court found this reasoning flawed.

The appellate court noted that Walker was overruled by Cadieux, which replaced the “apples to apples” methodology with the “silo” approach. The court’s intention in Cadieux was to provide a clear and predictable framework for the interaction between no-fault benefits and tort damages. The inclusion of non-earner benefits in the income loss silo was not obiter but a considered interpretation of the statute’s current text. The Court of Appeal held that non-earner benefits, as an alternative to other benefits in the income replacement silo, should be deductible from the tort award for loss of income.

Conclusion

The Court of Appeal’s decision in Kolapully v. TTC underscores the importance of the “silo” approach in interpreting s. 267.8 of the Insurance Act. The decision seems unfair to accident victims. As the name of the benefit says, the non-earner benefit is for accident victims who do not qualify for an income replacement benefits. That being said, the decision does clarify that non-earner benefits are part of the income replacement benefits silo and are deductible from tort awards for loss of income.

Legal practitioners should note this interpretive approach when dealing with cases involving statutory accident benefits and tort damages. Understanding the evolution and judicial interpretations of s. 267.8 of the Insurance Act is crucial in ensuring accurate and equitable application of the law.

If you have any questions about the interplay between non-earner benefits paid by your accident benefits insurer and your tort damages, contact one of the lawyers at Burn Tucker Lachaîne PC. You text us at 613-777-0992 or contact us through our website. We have offices in Ottawa, Hawkesbury, Waterloo and Toronto. We provide free initial consultation, in French and English.

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