Your client was injured in a car accident. She commenced a court action against the at-fault driver. Before the settlement of the court action, your client received long-term disability benefits and accident benefits. What do you do with those collateral benefits when comes the time to negotiate the settlement of the court action? What happens at trial? The following is an overview of the deduction of collateral benefits in tort claims against protected defendants in Ontario. The definition of a protected defendant is found in section 267.3 of the Insurance Act.
Section 267.8 of the Insurance Act says that protected defendants in motor vehicle actions are entitled to deduct collateral benefits received by the injured plaintiff from the damages to which the injured plaintiff is entitled to receive. There is one exception: general damages for pain and suffering. According to section 267.8(7) of the Insurance Act, general damages are not reduced by benefits received by the injured plaintiff.
There are 3 broad categories of collateral benefits that are deducted from tort settlement or trial award: income loss, health care expenses and other pecuniary loss.
A claim for income loss or loss of earning capacity in a tort claim will be reduced by the payment of income replacement benefits, benefits paid under a sick leave plan and long-term disability benefits. (section 267.8(1) of the Insurance Act)
Health care expenses claimed in a tort action will be reduced by the payment of medical, rehabilitation and attendant care benefits and of benefits paid under a health care plan. (section 267.8(4) of the Insurance Act)
Finally, a claim for other pecuniary loss will be reduced by the payment of housekeeping benefits or visitors’ expenses. (section 267.8(6) of the Insurance Act)
It is important to note that the Insurance Act refers to “payments that the plaintiff has received” but also to payments that “were available before trial.” Therefore, your injured client has an obligation to mitigate her damages.
Example: If your client is entitled to long-term disability benefits, your client should apply for these benefits. If not, the tort defendant will request a reduction of the income loss by the potential full value of the long-term disability benefits.
Accident benefits received by the injured plaintiff or paid to a treatment provider are considered collateral benefits and they will be deducted from a tort settlement or trial award. The only exception is the payment of non-earner benefits (Kolapully v. Myles, 2022 ONSC 6024), which are not deducted from a claim for income loss.
Accident benefits paid as part of a settlement for past and future accident benefits will also be considered collateral benefits.
Example: If your client settles her accident benefits claim before the tort action is resolved, be mindful of the allocation of the accident benefits in the Settlement Disclosure Notice. The allocation of accident benefits will be used to reduce the tort settlement or tort trial award.
The deduction of accident benefits is made by grouping the damages in 3 silos: income, health care and other pecuniary loss, regardless of whether they are past or future benefits (Cadieux v. Cloutier, 2018 ONCA 903).
Example: If the jury awards your client $50,000 for future physiotherapy but $0 for future attendant care services, the amount of attendant care benefits paid to a provider before trial will be deducted from the future physiotherapy award. Therefore, at trial, you must advance your client’s claim for all past losses even if your client has been fully compensated.
The gross amount of collateral benefits is deducted from a tort settlement or award, not the net amount after the payment of legal fees. However, your client is entitled to seek that the legal fees incurred to obtain accident benefits be paid by the tort defendant (Cadieux v. Cloutier, 2018 ONCA 903). At paragraph 132 in the Cadieux decision, the Court of Appeal lists the factors to be considered when awarding those legal fees.
If your client is found to have been contributory negligent, the deduction of all collateral benefits will be made. (section 267.8(8) of the Insurance Act)
Example: If your client is found to have been 75% negligent and the tort defendant 25% negligent, the trial award will be reduced by 75% to account for your client’s negligence but 100% of the collateral benefits will be deducted. This means that your client is at risk of recovering nil from the trial award.
Collateral benefits can greatly affect your client’s entitlement to damages. Know how the deduction of collateral benefits apply to motor vehicle court actions.
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