Effectively Navigating Injuries and Disabilities: What Benefits are Available to Employees who have been victims of a Motor Vehicle Accident?
What happens when an injured employee approaches you for advice on how to proceed with benefits? How does the person decide whether to proceed by way of tort claim and accident benefits and/or long-term disability and short term disability and/or WSIB? In order to help the injured employee decide, you must understand how the benefits offset and work against, and potentially with, one another, such that the potential benefits of proceeding one way or another can be understood.
The following analysis will consider an employee who is involved in a car accident. The reality is that due to the particular legislative and jurisprudential nuances of the area of insurance motor vehicle litigation, any meaningful analysis is almost forced to consider it in isolation. This paper should be read in conjunction with the companion paper presented by my co-panellist who will focus on the issues arising in the non-motor vehicle claim. In situations where an employee is injured in a car crash, is that employee best off accepting disability benefits from his employer and perhaps pursuing a tort claim against the party who caused his accident? What then about WSIB benefits? The interactivity of all of these benefits is a tricky, complex and much-misunderstood area of the law. This paper will attempt to dispel some of the myths surrounding how to deal with such a claim.
It is well known that the fundamental goal of the tort law system is to ensure that a plaintiff be restored to the position s/he would have been absent the tortfeasor’s negligence. However, the system is also designed to prevent a windfall accruing to the injured plaintiff; while s/he should be put into the position s/he would have been had no accident occurred, s/he is also not supposed to enjoy any greater benefit for having been involved in the accident. This is complicated by the situation of a protected defendant who enjoys not only the deductibility of collateral benefits but other statutory protections that its non-protected counterpart does not, which inevitably leads to the question – where’s the fairness in that?
The collateral source rule
In common law, the collateral source rule serves as an exception to the rule against double recovery. The rule has 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 or loss of earning capacity. The Ontario Court of Appeal in Boarelli v Flannigan  expressed that:
Moneys received by an injured party as a result of a private or public benevolence have never been taken into consideration in assessing damages for loss of income or earning capacity 
The second exception to the rule against double recovery is the private insurance exception established in Bradburn v Great Western Railway Co . , in which case the receipt of benefits from a private insurer was held not to be deductible from damages for personal injury. The private insurance exception is rooted in the principle that a negligent defendant should not benefit from a plaintiff’s forethought and wisdom in securing private insurance in the event of disability. The Supreme Court of Canada twice maintained this exception, in Ratych v Bloomer  and Cunningham v Wheeler .
In Ratych, Justice McLachlin, writing for the majority, stated the fundamental principle of recovery in a tort action is that an injured plaintiff is to be compensated for the full amount of his loss but no more, as confirmed by the Supreme Court in the trilogy of Andrews v Grand Toy Alberta Ltd. , Thornton v Prince George School Board  and Arnold v Teno . Upholding the principle of fair compensation, McLachlin, J. felt it best served by focusing not on the tortfeasor but on restoring the plaintiff to his pre-accident state, that is to award him not a penny less nor more.
Ratych was drastically narrowed by Cunningham v Wheeler, which involved three appeals pertaining to the question of deductibility of disability benefits from a plaintiff’s claim for lost wages. Writing for the majority, Cory, J. firmly upheld the private insurance exception, stating at paras 16-18:
I think 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 of some income in case of disabling injury or illness. The acquisition of the policy has social benefits for those insured, their dependants and indeed their community. It represents forbearance and self-denial on the part of the purchaser of the policy to provide for contingencies. The individual may never make a claim on the policy and the premiums paid may be a total loss. Yet the policy provides security.
Recovery in tort is dependent on the 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 a tortfeasor 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 for a wrongdoer to benefit from the private act of forethought and sacrifice of the plaintiff.
There is a good reason why the courts should be slow to change a carefully considered long-standing policy that no deductions should be made for insurance money paid for lost wages. If any action is to be taken it should be by legislatures It is significant that in general no such action has been taken.
Cory, J. found that, in effect, Ratych required plaintiffs to prove 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.
Ratych, therefore, posits that collateral benefits are not deductible where a plaintiff can establish he has given something up in return for benefits (such as paying a policy premium), while Cunningham narrows the scope of deductibility by finding that, in certain circumstances, a trade-off may be implied (for example through collective bargaining). Moreover, where a benefit provider retains a right of subrogation, no deduction is made for those benefits.
Statutory modifications to the collateral source rule
The introduction of no-fault automobile insurance legislation in the Insurance Act  has considerably modified the collateral source rule for motor vehicle-related injuries.
The OMPP Regime 
The first no-fault regime in Ontario, the OMPP regime introduced a dual system of tort and accident benefits, meaning that accident victims lost their right to sue in certain circumstances, in exchange for no-fault accident benefits12. It also introduced a threshold that restricted recovery of non-pecuniary general damages where injuries failed to satisfy a certain threshold. Section 267.1 of the Insurance Act was contemporaneously created to credit tort defendants for certain payments the plaintiff had either received or was entitled to receive from other sources.
One of the more important decisions under the OMPP regime, in terms of deductibility of collateral benefits, is Cugliari v Whiten , in which it was ultimately found that CPP disability benefits were non-deductible because they were non-indemnity in nature since they did not require the recipient to be employed at the time of the disability. Finding that the legislative purpose of section 267 was to eliminate double recovery, the Court of Appeal was satisfied that, had the legislature intended CPP disability benefits to be deductible, it would have expressly done so.
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”, defined to include (i) the owner of an automobile; (ii) the occupants of an automobile; and (iii) any person present at the incident. Non-pecuniary losses were only recoverable if the plaintiff met a verbal threshold. Section 267.1 amendments removed the defendant’s right to deduct benefits previously allowed under the OMPP regime. The collateral source rule once again became relevant but only in the context of a claim against an unprotected defendant for pecuniary losses.
The Bill 59 regime took effect on November 1, 1996, and once again dictated that a plaintiff could not sue a protected defendant unless his/her damages surpassed the threshold, subject of course to a 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 in section 267.8(1), which provides a list of all collateral benefits by which any amount awarded for income loss and loss of earning capacity must be reduced, including payments received by the plaintiff before the trial of the action under a sick leave plan arising by reason of the plaintiff’s 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 McKenzie , decided in 2005, it appeared the issue of deductibility of CPP disability benefits had been settled. Meloche, however, resurrected the issue of deductibility of various benefits, including CPP, from a tort award against a protected defendant. The court found that the amendments under Bill 59 altered the private insurance exemption under common law 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 favour of defendants for receipt of such collateral benefits. Favouring a broad approach to deductibility the court stated in para 19:
Since the original intent was 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 an award for past loss and the subject of a trust for future receipt.
Having found that CPP disability benefits were tied to a recipient’s inability to engage in the act of gainful employment or as a result of a loss of earning capacity, the court held the benefits were deductible. It further noted that Bill 198, which explicitly makes CPP disability benefits deductible, was simply a clarification of the original legislation.
The Ontario Superior Court of Justice in Strickland v Mistry , another Bill 59 case, followed Meloche and found that long-term disability payments received by the plaintiff were deductible and subject to the trust and assignment provisions of the Insurance Act. In that case, the plaintiff was in receipt of a CPP disability pension and long-term disability benefits from her employer's group insurer. The court agreed that CPP disability benefits were intended to be among the class of benefits deductible from a tort award against a protected defendant.
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 source rule from income loss, health care costs and other pecuniary losses in motor vehicle accident claims. In essence, the tortfeasor receives credit for all income replacement benefits received or available from the statutory accident benefits insurer prior to the trial of the action and also for payments received under a sick leave plan or any payments received or available to the plaintiff for income loss or loss of earning capacity under the laws of any jurisdiction before trial.
Section 267.8(2) provides that collateral 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 to the deduction of such benefits. The regulations under Bill 198 now explicitly make CPP disability benefits deductible in tort.
As a result of the evolving no-fault legislation, it can be confusing when attempting to determine which benefits are properly deductible from a tort award for damages and which are not. See the chart appended to this paper for guidance in this respect.
Interplay of long term disability benefits with motor vehicle accidents
In Ontario, LTD benefits are the primary source of recovery and must be exhausted before auto insurance benefits are payable. Whether tort damages can be offset against LTD payments ties into whether the LTD insurer has a right of subrogation.
In Gibson v Sun Life Assurance Co of Canada  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 . In Budnark v Sun Life Assurance Co of Canada , the court held Sun Life was entitled to repayment of a portion of disability benefits where the net past loss of income recovered plus the disability benefits received exceeded 100% of the claimant’s past loss. Though subrogation rights for past loss of income were calculable, they were not so easily determined with respect to the award for future loss of income; thus the plaintiff was not required to account to Sun Life for her future loss of income.
An insurer will therefore be subrogated to a right of recovery where the claimant is fully compensated for his or her past losses. With regard to future losses, courts have held the determination of a number of damages to compensate for future loss of earning capacity is subject to uncertainty this is relevant when considering whether the plaintiff has in fact been fully compensated .
Future collateral benefits
Section 267.8(9) provides for the treatment of future collateral benefits and dictates which collateral benefits must be deducted from any tort award, including but not limited to any payments received after the trial of the action under any medical, surgical, dental, hospitalization, rehabilitation or long term care plan or law.
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 trial (section 267.8(12)).
Workplace Safety and Insurance Benefits (WSIB)
As a general rule, a person elects to receive either WSIB benefits or long-term disability benefits, but cannot opt to receive both. Where LTD benefits have been elected but the person has already received some WSIB benefits, the person is obligated to repay the WSIB benefits or vice versa. Even where entitlement to LTD benefits has survived the election for WSIB payments, the WSIB quantum would likely wipe out any obligation of the LTD insurer to pay.
An important case that deals with the interaction between WSIB money and LTD payments is Abdulrahim v. Manufacturers Life Insurance Company , where the plaintiff had sustained serious injuries while at work and opted to receive WSIB benefits in regard thereto. However, the plaintiff also simultaneously applied for LTD benefits through his group policy. Manulife asserted that it was entitled to a set-off for any WSIB monies paid, which prompted the plaintiff’s solicitors to advise all of the parties that they had decided to “de-elect” WSIB benefits, and had chosen instead to proceed with a tort action against the manufacturer of the machinery that had caused the injury. WSIB demanded full repayment by certified cheque and discontinued payments in the interim.
The central issue to be decided was the proper interpretation of the phrase “receives, or is entitled to receive”, as used in the policy. Justice Himel applied the principles of interpretation relating to insurance contracts as set out by Mr. Justice Sopinka in Brissette v. Westbury Life Insurance Company . These principles include the idea that ambiguities should be construed against the insurer. After a lengthy analysis, he concluded that the contract was not clear and should be interpreted in favour of the insured. He found that since the plaintiff elected to proceed in tort, the WSIB benefit was not available to him.
Counsel should be mindful, however, that this decision was based on the wording of the particular policy before the Court. Counsel should carefully compare and consider the wording in your own client’s policy before embarking upon the high-risk strategy employed in Abdulrahim.
This is especially so when one considers the 2007 decision of Richer v Manulife Financial , involving an insured employee who suffered injury as a result of a workplace accident. Although the employee was insured under the employer’s group policy, which deemed him eligible for long-term disability benefits, the plan also dictated that such benefits would be reduced by any amount of payment to which the employee was entitled under workers’ compensation legislation. The plaintiff commenced a claim for WSIB benefits, as required by his insurance policy, and was advised by WSIB that he was entitled to pursue a civil action for damages against the party responsible for his injuries. The plaintiff did so, giving rise to the insurer’s bringing of a motion for determination of whether the plaintiff would be entitled to receive LTD benefits under the policy after having commenced a civil claim and, if so, whether such benefits would be subject to offset of any WSIB benefits that the plaintiff would have been entitled to, had he not decided to proceed with a tort claim. Eventually, the Court of Appeal reversed the trial judge’s initial finding and concluded that the plaintiff was entitled to receive the long-term disability benefits under the employment policy of which he was a part, however, this was subject to the offsets of the WSIB claim. The court was satisfied that, despite the fact that the WSIB deemed the plaintiff as having elected to pursue a civil claim rather than receive WSIB benefits, his application for benefits had not been finally determined. Thus, “[d]epending on the number of damages he obtains in his action, the application has made may still result in the payment of WSIB benefits to him” :
17 As the appellant made an application to the WSIB and that application remains before it, the condition precedent has been satisfied. I would answer the first question in the affirmative — the plaintiff is eligible to receive LTD benefits under the policy.
The Court of Appeal continued to find that it was satisfied that the plaintiff had made his WSIB claim as required by the policy and, though the claim had not yet been determined, entitlement to receive payments was not dependent upon an application for compensation being approved, since the terms of the policy in question allowed for the deduction of WSIB benefits.
The issue was recently revisited in RBC Life Insurance Co v Janson , but in the context of whether it is the net or gross amount which a plaintiff must repay to WSIB. The case involved a plaintiff who had suffered injuries in the workplace, resulting in a claim to both the insurer, the WSIB and CPP. After having received benefits from his insurer, the plaintiff’s appeal to the WSIB was successful and he was retroactively paid a large sum of money ($64,459.29), of which his counsel claimed fees of $31,405, based on a percentage of the total recovery (which was $314,059). The insurer sought payment of the entire amount paid by WSIB, without deduction of the legal costs incurred by the plaintiff, and the application was allowed. The court was satisfied that, based on the language of the insurance policy in play, the insurer was indeed entitled to the gross amount paid by WSIB on account of lost earnings, without any deduction for counsel fees:
26 As noted, RBC Life was entitled to “[s]ubtract 100% of direct deductible sources of income” in calculating the amount payable to Mr. Janson. Specifically identified were amounts that Mr. Janson received or was “entitled to receive under any Workers’ Compensation Act or similar legislation”. Ontario’s Workplace Safety and Insurance Act is the successor to the Workers’ Compensation Act.
27 As noted, RBC Life paid Mr. Janson without deducting anything on account of the WSIB claim.
28 Once the WSIB implemented the Tribunal’s decision, the extent of Mr. Janson’s entitlement to a payment from the WSIB on account of a loss of earnings was known. RBC Life was then in a position to do that which the policy contemplated occurring at the outset: subtract “100%” of the amount the WSIB should have awarded Mr. Janson at first instance. However, practicality had intervened. Nothing had been estimated or subtracted.
29 That fact engaged the language concerning “overpayment”. RBC Life had, indeed, paid more than the formula required. Pursuant to the policy, RBC Life was entitled to recover “any overpayments” and to require that Mr. Janson “reimburse us in full” .
This emphasizes the need for counsel to carefully review and consider the specific language used in the policy-relevant to their client before making any determination as to which way a client should proceed. Counsels should also be mindful of the investment they make in a client who may end up with a legal bill s/he is unable to pay, due to deductions from the amount awarded to the client.
Canada Pension Plan Income Disability Payments (CPP)
Where a person receives Canada Pension Plan Disability benefits (CPP), then, pursuant to the wording found in every policy, the LTD carrier gets credit for the CPP payments. The manner of the deduction is generally dealt with under either the “offset” or the “coordination of benefits” section contained in all group LTD policies. The offset can arise in one of two ways: either a direct deduction of benefit, as specifically listed in the policy; or, through an all-source maximum clause that dictates that the policy benefit, when added to the income from all other sources, cannot exceed a certain percentage of pre-disability earnings.
When undertaking the deduction of CPP benefits from LTD benefits, the question will undoubtedly arise as to whether it is the gross amount of the CPP or the amount net of taxes that is to be deducted. The answer is not the same in all cases, as it depends strictly upon the wording used in the relevant insurance policy. If the policy itself is silent on this issue, then it would be wise to assert that it is the net amount that is deductible (as this position is the most beneficial to your client). An interesting debate is whether “net payable” should be calculated by deducting legal fees paid to counsel to secure CPP benefits. My understanding is that some Counsel has had success in claiming that only the net, after legal fees, CPP amount is subject to deduction.
Hospitals of Ontario Pension Plan (HOOPP)
Deductibility of Hospitals of Ontario Pension Plan (HOOPP) benefits from a tort award was most recently considered in the Ontario Court of Appeal decision Demers v B.R. Davidson Mining & Development Ltd. , which involved the determination of whether such benefits were deductible from damages awarded on account of loss of income or loss of earning capacity. The motions judge found that the benefits were not deductible because they had not been recovered for loss of income or loss of earning capacity, and the Court of Appeal upheld that decision on the basis that the addition of the term “loss of earning capacity” in section 267.8(1) of the Insurance Act did not change the non-deductibility of benefits at common law. Since the benefits had been paid not in respect of the accident, but in respect of the plaintiff’s disability, so no deduction was necessary.
Ontario Disability Support Program (ODSP)
Moss v. Hutchinson  is a case involving a plaintiff who, after suffering an injury in a car accident and subsequently being forced to abandon his employment due to the injuries arising therefrom, commenced a claim for loss of income, amongst other damages. The plaintiff, who had been receiving monthly benefits under the ODSP, had agreed, in writing, to reimburse the Ministry of Community and Social Services (which administered the ODSP benefits) for any amount of ODSP benefits he received as a result of his tort action. The defendants argued that, pursuant to s. 267.8 of the Insurance Act, any ODSP benefits received by the plaintiff should be deducted from any amount he obtained under the heads of damage for loss of income and/or loss of competitive advantage. The court dismissed the defendants’ motion on the basis that the ODSP Act created an exception to s. 267.8 of the Insurance Act and that recovery of the benefit payments was achieved by the plaintiff’s voluntary assignment to the Ministry. Thus, where ODSP benefits are subject to repayment, they are distinguishable from other social assistance benefits and are thus not deductible. Howden, J. was satisfied that this interpretation satisfied the dominant purpose of s. 267.8 and stated that “[t]o do otherwise is to allow the defendants a windfall”.
Income Replacement Benefits (IRB) and Caregiver Benefits (CGB)
The 2011 decision of the Court of Appeal in Sutherland v. Singh  addressed whether income replacement benefits (IRBs) could be deducted from a tort award when the plaintiff had never received such benefits. When faced with a choice, the plaintiff had elected to receive caregiver benefits instead of IRBs, which should have answered the question, but the defendant creatively argued that the value of both IRBs and CGBs should properly be deducted from any tort award for damages addressing income since the plaintiff could have chosen IRBs, thus making such payments “available” to him within the meaning of section 267.8(1). The Court of Appeal found, without hesitation, that to allow such a deduction would effectively permit the defendant to benefit from double recovery (the CGBs, which the plaintiff had received, and the IRBs, which the plaintiff had never received), resulting in an impermissible windfall.
Where a plaintiff has actually received IRBs, however, they must be deducted from any award in the tort action, in accordance with s.267.8(1), subject to one caveat. Consider the recent case of Mikolic v Tanguay , where the plaintiff had settled with his accidents benefit insurer before pursuing a tort claim, where he was awarded certain sums of money under various heads of damage. The parties disagreed on whether the payment of the AB insurer was deductible from the tort award since it had been made in a lump sum, resulting in the following statement by the court:
15 Lump sum awards to settle law suits regarding future I.R.B.’s or other wage continuation plans have been held not to be deductible because such payments are a compromise made to settle a legal obligation one party sought to enforce by litigation against another and therefore fall outside the scope of s. 267.8(1)2. They cannot be considered weekly payments for loss of income in the future but rather a lump sum negotiated as a compromise to resolve the risks to both parties of the law suit. (Tsiaprailis v. R.,  1 S.C.R. 113 (S.C.C.); Cromwell v. Liberty Mutual Insurance Co. (2008), 89 O.R. (3d) 352 (Ont. S.C.J.); Vanderkop v. Personal Insurance Co. of Canada,  O.J. No. 1937 (Ont. S.C.J.))
16 There is no evidence before me as to what amount of the total I.R.B. settlement constitutes future payments. As such, there is no evidence led by the defence, which has the onus, to tell me whether the plaintiff received $1.00 or $77,500.00 for future I.R.B.’s. The amount offered and accepted was a lump sum compromise by both parties to resolve the risks and costs of continuing with a law suit. It is therefore not possible for this court to be able to determine what amount, if any, should be deducted from the damages for future income loss awarded by the jury. I would therefore make no deduction under that head of damage .
Thus, lump-sum payments made to settle lawsuits regarding future income continuation plans are not deductible from tort damage awards because they fall outside the scope of s. 267.8(1)2.
In discerning whether severance payments will be deductible from LTD benefits, the wording of the policy will be paramount. Generally speaking, most LTD contracts stipulate that they are entitled to deduct money paid by the employer to the employee by way of severance. Employers, on the other hand, have tried to claim a set-off for LTD payments when paying out severance packages. It is very common for employers to terminate workers that have been off for an extended period of time, with or without a severance. Plaintiffs’ lawyers running LTD actions will almost certainly be asked to provide advice on the interaction between LTD payments and severance packages.
Employers have been trying to deduct LTD payments from severance packages for a considerable period of time. The Supreme Court of Canada seemed to support their position in Sylvester v. British Columbia  when the employer was allowed to take credit for disability payments and deduct those payments from damages for wrongful dismissal. Justice Major found that since the disability policy was entirely funded by the employer, there was no expectation that the employee could receive both benefits.
Many criticized Sylvester on grounds that the Courts were making it too easy for employers to terminate ill employees at a reduced cost, but the potential harm caused by Sylvester was greatly limited by the Ontario Court of Appeal in Sills v. Children’s Aid Society of Belleville , where Simmons, J.A., relying on an earlier decision of the Supreme Court  concluded that
“[a]bsent an express provision precluding double recovery … the principles in Cunningham assist in determining whether an intention that there would be a double recovery in the event of a wrongful dismissal can be inferred” .
The key is that benefits can be paid for directly or indirectly. Since most employees can argue that they accept lower payments in order to have their group benefits paid for by the employer, it can be said to be an indirect benefit.
Thus, it appears that, where the recipient of the benefit has actually paid premiums for the LTD policy, and where there is nothing in the policy that indicates that an employee cannot receive both employee benefits and LTD benefits, so the employee will be entitled to receive both. Deduction of severance payment will hence turn on the language of the policy – does it include a deduction for monies “earned”, or is there an “all-source limitation” clause, which deducts from any benefits received the amount of any “income” (ie: monies received in any capacity whatsoever)?
With respect to the question of employer cooperation, plaintiffs should not be surprised that most employers are reluctant to cooperate with litigants attempting to collect long-term disability benefits from insurance companies. In the first place, the employer and long-term disability company likely have a long-standing relationship.
More importantly, premiums paid by the employer are directly impacted by the number of active claimants and the money being paid out to those claimants. There are significant financial costs associated with having an employee collect disability benefits for years or even decades. However, notwithstanding these concerns, in our experience, many employers are in fact supportive of their employees. Plaintiffs that are able to bring employers with them to trial to give evidence about positive work habits, long work history, positive relations with coworkers, and legitimate bona fide attempts to return to work or perhaps the best evidence supporting a claim for long-term disability benefits.
A recent development that has arisen in some cases is the requirement being raised by at least one insurance company that the employer consent to any settlement regarding long-term disability claims. We have encountered one case where the employer specifically declined to contribute any money towards a severance package and, in fact, required that the employee in question resign from her job in order to finalize a settlement with her long-term disability company. It is our view that placing a plaintiff in such a position is clearly inappropriate and tying employment relationships and long-term disability claim settlements together may constitute bad faith conduct warranting punitive and aggravated damages. Counsel should attempt to protect our clients, where possible, from such inappropriate behaviour.
Protected and unprotected defendants
Who is protected?
Defendants have, since the introduction of the no-fault regime, been placed into two categories: protected and unprotected. A protected defendant is defined in section 267.3 of the Insurance Act as a person who is protected from liability by subsections 267.5(1), (3) and (5): the owner of an automobile, the occupants of an automobile and any person present at the incident.
Section 267.3 defines an “owner” as, “an operator as defined in subsection 16(1) of the Highway Traffic Act  and a person who is a lessee for the purposes of section 192 of that Act”. Effective March 1, 2006, a lessee became a protected defendant. Where previously a lessee could only be sued for his own negligence, a lessee can now be held vicariously liable for the negligent operation of a leased vehicle.
Section 224 defines an occupant of an automobile as a driver, passenger (carried in or on the automobile) and a person getting into, out of, or off an automobile
Advantages of having protected defendant 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 a motor vehicle accident. They are also shielded from payments in excess of 80% of the plaintiff’s net income loss or loss of earning capacity after the first seven days and before trial  and are immune from liability for health care expenses, non-pecuniary general damages and damages under the Family Law Act  unless the plaintiff surpasses the threshold requirement. Thus, unless the injured person has died or has sustained a permanent serious disfigurement or permanent, serious impairment of an important physical, mental or psychological function, the protected defendant will not be 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 $15,000 for FLA loss of care, guidance and companionship claims). With the accident benefits amendments of September 1, 2010 (0 Reg 34/10), amendments to the Insurance Act were made to reflect changes to the tort deductibles: if the insured purchases optional enhanced coverage, the deductibles can be reduced to $20,000 and $10,000 for general damage claims and FLA claims respectively. Note also the vanishing deductible under Bill 198, under which, if the plaintiff’s general damages exceed $100,000, or if an FLA claimant’s damages exceed $50,000, then no deductible is applied.
Finally, an uninsured person may not recover against a protected plaintiff .
Where there is a mixture of protected and unprotected defendants, protected defendants are given a partial priority in that collateral benefits are deducted first from the damages for which protected and unprotected defendants are jointly and severally liable, and any excess is applied to the damages for which the unprotected defendants are solely liable. This priority applies only to past losses and not to future losses.
Note that a protected defendant loses his status if he is defended by an insurer that is not licensed to undertake automobile insurance in Ontario and has not filed an undertaking under section 226.1 of the Insurance Act .
Treatment of collateral benefits among protected and unprotected defendants
The Ontario Superior Court of Justice has held that both protected and unprotected defendants are entitled to s. 267.8 deductions for long-term disability benefits, because s. 267.8 does not distinguish between protected and unprotected defendants. In Burhoe v Mohammed , the plaintiff was rear-ended by the defendant parking valet in front of a hotel in December 2001 (Bill 59). The plaintiff received LTD benefits through his employer. The defendant’s vehicle was insured by Coachman Insurance Company, which had excess coverage through Gerling Canada Insurance Company. These insurers were determined to be the first loss insurers and the hotel's policy was to act as an excess insurer only.
The only mention of protected defendants is in s. 267.8(3). Given the non-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 entitled to the trust assignment and deduction provisions of s. 267.8.
OHIP and subrogated claims
Section 267.8(17) limits the right of subrogation for anyone who has paid collateral benefits and s. 267.8(18) provides an exception for OHIP, but only against a person not insured under a motor vehicle liability policy issued in Ontario. To complicate matters, if a tavern owns a vehicle then, even if the automobile policy is not called upon to respond to a claim, the tavern is nonetheless immune from OHIP’s subrogated claim .
It is not a novel concept to treat the same person differently in the same case. Counsel will undoubtedly encounter situations involving a mixture of protected and unprotected defendants, or where a defendant wears many hats, as in cases of vicarious liability. A vicariously liable employer does not benefit from the negligent employee’s protected status under the Insurance Act.
In Harrison, 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 driver’s negligence during the course of his employment, the plaintiff was injured. Despite his immunity from liability under the HTA as the owner of the vehicle, Krug, as the employer, was found to be vicariously liable for the driver’s negligence.
The Supreme Court of Canada considered a similar issue of vicarious liability in Kearney, where 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 could not escape liability for the negligence of its employee.
Vollick v Sheard involved a bicycle motor vehicle collision under the Bill 59 regime. The defendant tow truck driver was in the course of his employment at the time of the collision. The plaintiff sued both the driver and the employer. The protection provisions under Bill 59 shielded only owners or occupants of a vehicle, or people present at the scene. The plaintiff was not precluded from recovering against the employer towing company, as it was not protected. The Ontario Court of Appeal confirmed the lower court decision, holding that although the tow truck company was protected as an owner it was not protected as the employer of the defendant driver.
The impact of Vollick was extensive. Municipalities could no 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 definition of the protected defendant was left unchanged but s.267.5(10.1) was introduced to end the damaging impact of Vollick on 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 any amount greater than the amount of damages for which the protected defendant is liable. If the employee is a protected defendant, then the employer to becomes pseudo-protected by virtue of the amended section with respect to its vicarious liability .
Going forward, a vicariously liable defendant is no more liable for damages than a protected defendant, but only where they are found jointly liable. The provision does not extend to the employer’s independent negligence.
Apportionment of liability damages between protected and unprotected defendants
Before the no-fault regimes, joint and several liabilities were 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 non-motorists, who became severally liable for damages. Bill 164 shielded motorists from paying pecuniary losses and gaining the benefit of a deductible for non-pecuniary damages. It also introduced a provision for apportionment of damages (now s. 267.1) which was carried forward to Bill 198. Several liabilities no longer exists. Where there is a mixture of protected and unprotected defendants, section 267.7(1) prescribes the approach to apportionment and s. 267.7(3) ensures that liability is to be determined as though all parties responsible for the damages were parties to the action even where a person is not actually a party. This proviso thwarts a plaintiff’s attempts to avoid the effects of s. 267.7 by failing to sue a protected defendant.
Sullivan Estate v Bond  outlines the proper approach to apportioning damages between protected and unprotected defendants. Sullivan was involved in a single motor vehicle accident under the Bill 59 regime. Sullivan, one of the passengers, was killed, while two others were injured. The injured passengers and the estate of the deceased passenger claimed damages against the driver, the owner and lessee of the vehicle and two taverns in which the parties had been drinking prior to the accident. One of the taverns brought a motion seeking the proper interpretation and application of s. 267.7. On appeal, it was held that the protected defendants were not liable for any portion of the statutory deductible and the unprotected defendants were not liable for the full amount of the deductible, only the amount based on their percentage of liability. The Court of appeal found that s 267.7 should be properly interpreted to mean:
(a) the unprotected defendants are jointly and severally liable with the protected defendants for the damages for non pecuniary loss for which the protected defendants are liable under the Act and;
(b) using the gross figure for non pecuniary loss the unprotected defendants are solely liable to the 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
As a result of Sullivan, cases involving protected and unprotected defendants will vary payments owing to the plaintiff based on differing degrees of fault. 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 plaintiff’s recovery in a motor vehicle accident claim. Section 267.8(8) provides that reductions for collateral benefits shall be made after any apportionment of damages is required for contributory negligence. The combination of the deduction of collateral benefits and contributory negligence can effectually result in zero recoveries to the plaintiff.
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 of two 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 tavern owner for over-serving him alcohol. The tavern does not gain the benefits provided under the Insurance Act. The motorist is then able to claim his full losses. In the case of a two-car collision involving a defendant motorist who is protected and the tavern that is unprotected, damages are apportioned according to the joint and several liability provisions under the Insurance Act. Ultimately, the protected motorist enjoys certain statutory protections while the unprotected tavern owner does not. This disproportionate apportioning of damages in turn affects the plaintiff's recovery.
 I would like to thank and acknowledge the outstanding work of research lawyer Catherine Mahoney in the planning, research and drafting of this paper. Her contribution was invaluable. Catherine is responsible for most of the scholarly content and insight found in the paper. Any errors or omissions are, of course, my own.
 (1973), 3 OR 69 CA.
 Ibid at para 12. But see MB v British Columbia (2003), 2 SCR 477 (SCC), where the Supreme Court held that social assistance benefits are a form of wage replacement and do not fall under the exception of the charitable benefits, thus making them deductible
 (1974), 80 All ER Rep 195 (Ex Div).
 (1990),1 SCR 940 (SCC).
 (1994), 1 SCR 359 (SCC).
 (1978), 2 SCR 229 (SCC).
 (1978), 2 SCR 267 (SCC).
 (1978), 2 SCR 287 (SCC).
 RSO 1990, c I 18.
 For accidents occurring on or after June 22 1990.
 see Lento v Castaldo (1993) 15 OR 3d 129 (CA).
  OJ No. 1628 (CA).
 (2005) 27 CCLI 4th 134 (OSCJ).
 , OJ No. 1169 (OSCJ).
 (1984), 45 OR 2d 326 (HCJ).
 see Confederation Life Insurance Co v Causton,  BCJ No. 1172 (CA), where the disabled claimant recovered full wage loss at trial but received only 75% of the award after deduction of legal fees; Court held the claimant did not receive full indemnification for her loss thus no money was owed to the disability insurer
  BCJ No. 1960 (BCSC).
 see Stitzinger v Imperial Life Assurance Co of Canada (1998), 39 OR 3d 566 (Gen Div), at para 21.
 (2003), 65 OR (3d) 543 (SCJ).
  3 SCR 87 at 92-93.
 (2007), 85 OR (3d) 598 (ONCA).
 Ibid at para 16.
 2013 ONSC 3154.
 Ibid at paras 26-29.
 2012 ONCA 384.
 (2007), 85 OR (3d) 604 (OSCJ).
 2011 ONCA 470.
 2013 ONSC 7177.
 Ibid, at paras 15, 16.
  2 SCR 315.
 (2001), 53 OR (3d) 577 (CA).
 Cunningham v. Wheeler,  1 SCR 359.
 At para. 45.
 RSO 1990, c H 8.
 S .267.5(1).
 Damages for loss of care, guidance and companionship under section 61(2)(e) of the Family Law Act, RSO 1990 c F 3.
 S. 267.6(1).
 267.5(6). Note this does not apply to vicariously liable defendants discussed later
 (2008), 97 OR 3d 391 (OSCJ).
 See Georgiouv Scarborough City (2002), 61 OR 3d 285 (ONCA).
 see for example Harrison v Toronto Motor Car Ltd and Krug (1945), OR 1 (ONCA); Co-operators Insurance Association v Kearney (1964), 48 DLR 2d 1 (SCC).
 (2005), 75 OR 3d 621 (ONCA).
 2003. See Carter Litigation Guardian of v Sanders,  OJ No. 3558 (OSCJ).  (2001), 55 OR 3d 97, 148 OAC 86 (ONCA).