Canada Insurance Lawyer & Attorney : Michael Thomas of Harper Grey Law Firm : British Columbia, Vancouver

Here is a link to an article written by Sarah Harbottle, an articled student at Harper Grey LLP, for the talk that I gave to the Trial Lawyers of British Columbia on this topic in February of 2007:

Section 25 of the Insurance (Motor Vehicle) Act - A bird in hand

I have attached a roughly formated version of the article below.  If you wish to read the formatted version please use the link.  Be warned, the unformated  version included here is a little difficult to read and does not include the footnotes.

Section 25 of the Insurance (Motor Vehicle) Act -

People injured in motor vehicle accidents are entitled to a wide range of insurance and benefits. However, these benefits are deductible from a tort award, even if they have not been claimed pursuant to section 25 of the Insurance (Motor Vehicle) Act R.S.B.C (1996), Chap. 231 (the "Act"). The decision as to what benefits should be claimed following a motor vehicle accident is complicated by potential insurance coverage available in other jurisdictions. This paper will provide an overview of section 25, provide examples of benefits that can be deducted from a tort award, and highlight some issues that can be raised when people have insurance coverage in other jurisdictions.

An Overview of Section 25

In B.C. benefits are payable to an insured pursuant to Part 7 of the Insurance Motor Vehicle Regulations (the "Regulations") in respect of injury or death caused by an accident arising out of the use or operation of a vehicle regardless of who is at fault in the accident. In addition to Part 7 benefits, an insured claimant may also commence a tort action for damages against the motorist at fault.

Part 7 benefits include:

Up to $150,000 of mandatory and permissive medical and rehabilitation benefits;

Unlimited disability benefits for employed persons that are totally disabled as a result of a motor vehicle accident; and

death benefits, including funeral expenses and other survivor benefits.

Section 25 of the Act provides for the integration of Part 7 benefits with tort damage awards. Specifically, section 25 provides that a person who has received benefits respecting a claim for damages is deemed to have released the claim for damages to the extent of those benefits.

Section 25 of the Act reads as follows:

25. (1) In this section and in section 26, "benefits" means a payment that is or may be made in respect of bodily injury or death under a plan established under this Act, other than a payment pursuant to a contract of third party liability insurance or an obligation under a plan of third party liability insurance, and includes accident insurance benefits similar to those described in Part 6 of the Insurance Act that are provided under a contract or plan of automobile insurance wherever issued or in effect.

(2) A person who has a claim for damages and who receives or is entitled to receive benefits respecting the claim, is deemed to have released the claim to the extent of the benefits.

(3) Nothing in this section precludes the corporation from demanding from the claimant, as a condition precedent to payment, a release to the extent of the payment.

(4) In an action in respect of bodily injury or death caused by a motor vehicle or trailer or its use or operation, the amount of benefits paid, or to which the claimant is or would have been entitled, must not be referred to or disclosed to the court or jury until the court has assessed the award of damages.

(5) After assessing the award of damages under subsection (4), the amount of benefits referred to in that subsection must be disclosed to the court, and taken into account, or, if the amount of benefits has not been ascertained, the court must estimate it and take the estimate into account, and the person is entitled to enter judgment for the balance only.

(6) If, for the purpose of this section or section 26, it is necessary to estimate the value of future payments that the corporation or other insurer is authorized or required to make under a plan or contract, the value must be estimated according to the value on the date of the estimate of a deferred benefit, calculated for the period for which the future payments are authorized or required to be made.

The purpose of the s.25 deduction is twofold:

to determine the sum the plaintiff is to receive at the time of judgment; and

to prevent the plaintiff from receiving double compensation.

In Baart v. Kumar (1985), 66 B.C.L.R. 1 (C.A.) at paragraph 12 of the decision, Seaton J.A. described the general purpose of s.25 as shifting responsibility for future care needs from the tortfeasor to a body that provides insurance regardless of fault. In effect, the deduction is for the protection of the defendant, which may be significant where the defendant has personal exposure (Shea v. Shea (1985) 66 B.C.L.R. 92 (C.A.)).

The deduction is mandatory, not discretionary and failure by an insurer to plead s.25 does not preclude the court from making a deduction for Part 7 benefits (Schmitt v. Thomson (1996), 132 D.L.R. (4th) 322 (C.A.)).

If there are multiple defendants who are jointly and severally liable and at least one of them is insured by a policy of automobile insurance, then all of them will have the benefit of the s.25 deduction. This was the case in Brennan v. Singh (1999), 70 B.C.L.R. (3d) 342 (S.C.) in which the British Columbia Supreme Court held that "where a tortfeasor insured with I.C.B.C. under the Plan operative in British Columbia, is held or by admission is to be considered jointly and severally liable with another tortfeasor not so insured, s. 25 should be interpreted so as to prevent the plaintiff obtaining double recovery and I.C.B.C. being deprived of its s. 25 deduction."

Procedure

An application for the deduction of Part 7 benefits is brought after an award of damages is assessed. Pursuant to s.25(4) of the Act, the amount of benefits paid cannot be disclosed to the court until after the damages have been assessed.

The court is not limited to the evidence given at trial in determining the amount to be deducted. The parties may be required to present further evidence on the issue (Schmitt, supra.).

Who Does Section 25 Apply To?

Section 25 is not limited to defendants insured by ICBC, but rather specifically applies to contracts and plans of automobile insurance "wherever issued or in effect." Accordingly, ICBC can seek to deduct from a judgment against any of its insured’s benefits payable under an extra-provincial plan or contract of insurance. Logic dictates, therefore, that an out of province insurer can also invoke the provisions of s.25.

In Hasselbach v. Mudri (1988), 33 C.C.L.I. 312, the defendant was insured by ICBC while the plaintiff was riding a motorcycle registered in Alberta in the name of his father and covered by an Alberta contract of insurance. ICBC discontinued further disability payments and advised the plaintiff that he should claim them under his Alberta contract. He did not do so, nonetheless, the amount he was entitled to received in benefits under the Alberta policy was deducted from his judgment.

In the case of Beifuss v. Reimer (1999), 1 C.C.L.I. (2d) 236 (B.C.S.C.) it was held that an Alberta insurance company could claim a deduction for disability benefits paid or payable by ICBC under what was then s.24(5) of the Act.

In Wong v. Luong 2005 BCSC 617, an Ontario insurer, Belair Insurance Company (Belair), sought to reduce an award of damages for the plaintiff injured in a motor vehicle accident in B.C. pursuant to s.25. The plaintiff, Mr. Wong, was injured in a motor vehicle accident in British Columbia. In respect of that collision, he received a settlement and as part of that settlement, executed a Release in favour of ICBC for his outstanding claim for Part 7 benefits. The defendant, Belair, took the position that a number of items of damage contained in the award should be deducted pursuant to s.25. The plaintiff argued that there should be no deduction because s.25 applied only to ICBC and not to an out-of-province insurer. The British Columbia Supreme Court disagreed with the plaintiff’s argument and found that Belair was, in fact, entitled to rely on s.25. The Court noted that to do otherwise would result in double recovery, which the authorities have held the legislation is enacted to prevent

Scope of Deductible Benefits

A. The Original Matching Requirement

Prior to 2003, the s.25 deduction could only be made where the Part 7 benefits to which the plaintiff was entitled "matched" the types of losses for which damages were awarded. The leading case on the issue at the time was Jang v. Jang (1991), 54 B.C.L.R (2d) 121. In Jang , the British Columbia Court of Appeal examined the issue of whether disability payments paid to a homemaker should be deducted from a general damage award for non-pecuniary losses. The Court noted that the non-pecuniary damage award was for pain and suffering and for loss of some of the amenities of life, including a diminution in the zest for living. There was no allocation of any part of the award of non-pecuniary losses specifically to that part of the suffering that could be said to have been caused by the plaintiff’s inability to carry out her household tasks. Lambert J.A. stated, at para. 13:

The theory underlying s.24 [now s.25] of the Insurance (Motor Vehicle) Act is that there should not be double compensation for the same loss. But that does not mean that all of the benefits paid under Pt. 7 must be deducted on way or another from some item of damages, or from the total award of damages. It is only where the benefit corresponds with the particular heading of claim for damages that the benefit is to be deducted, and then only from the award for that particular head of damages. The requirement that the benefit match the claim is implicit in the legislative scheme as it was described in Baart v. Kumar, supra, and is explicit in s.24(2) which matches "a claim for damages" with "benefits respecting the claim." I do not think that the claim there referred to is the whole claim; rather it is a claim to a particular heading of loss matched by a particular heading of benefits. [emphasis added.]

Thus in Jang, the Court concluded that there was no match between the benefits paid to Ms. Jang for homemaker disability and her claim for general damages to compensate for pain, suffering, and loss of amenities of life.

B. Matching Not Required

In 2003, the Supreme Court of Canada in Gurniak v. Nordquist 2003 SCC 59, expressly overruled the "matching" requirement of earlier jurisprudence. The Court held that there is nothing within the language of s.25 that mandates that there be a "match" between the specific heads of damage in a tort award and the specific heads of damage under the contract or benefits scheme in question before a deduction is appropriately made. Section 25(2) of the Act only requires the benefits under the two regimes to be "similar". The Court held that a trial judge was not required to engage in "a complicated and cumbersome process of ‘matching’ a head of damage in tort to a particular claim for damages under a statutory scheme." Rather, the benefits under the two regimes must only be "broadly similar" in order to deduct from the tort award any benefits already received in respect of the claim for damages arising from the motor vehicle accident.

In Gurniak, Robert Ross, a Quebec insured, was killed in an automobile accident in British Columbia. His common-law wife, Patricia Gurniak, and their two children collected statutory death benefits in respect of that accident under Quebec no-fault insurance scheme, the Quebec Automobile Insurance Act, R.S.B.C. 1996, c. 231. (the "Quebec Act") which is administered by the SAAQ. Such death benefits included a lump sum spousal death benefit and a lump sum payment for her children in her capacity as guardian. A further amount was paid out to Ms. Gurniak by the SAAQ for funeral expenses. Section 83.60 of the Quebec Act provides that SAAQ enjoys a right of subrogation if it compensates a person for an accident that occurred outside Quebec and tort compensation is received in respect of the accident. Ms Gurniak then sued for tort damages in British Columbia under the Family Compensation Act, R.S.B.C. 1979, c. 120 (now R.S.B.C. 1996, c. 126. The appellants applied for a declaration that the benefits paid to the respondents by the SAAQ were "benefits" within the meaning of s.25 of the British Columbia Insurance (Motor Vehicle) Act and ought to be deducted from any damage award under the Family Compensation Act. The Court agreed stating that s.25(2) of the Act only required that the benefits under the two regimes be "similar". Iacobucci J. stated at paragraph 45 of the decision that a trial judge was not required to engage in "a complicated and cumbersome process of ‘matching’ a head of damage in tort to a particular claim for damages under a statutory scheme." Rather, the benefits under the two regimes must only be "broadly similar" in order to deduct from the tort award any benefits already received in respect of the claim for damages arising from the motor vehicle accident.

In light of the interpretation given to the word "similar" the Court found that although the Quebec accident benefits differed in quantum, they were of the same general nature and character as those provided under B.C.’s Act. Additionally, the Court held that although the regimes in B.C. and Quebec were different, that did not mean that the benefits under both schemes were not "similar" within the meaning of s.25 of the Act.

Scope of Deductible Benefits - Mandatory vs. Discretionary Benefits

In B.C. eligible insureds are entitled to medical or rehabilitation benefits outlined in s.88(1) and 88(2) of Part 7 of Insurance (Motor Vehicle) Regulations (the "Regulations).

Medical or rehabilitation benefits -- s. 88(1)

88. (1) Where an insured is injured in an accident for which benefits are provided under this Part, the corporation shall, subject to subsections (5) and (6), pay as benefits all reasonable expenses incurred by the insured as a result of the injury for necessary medical, surgical, dental, hospital, ambulance or professional nursing services, or for necessary physical therapy, chiropractic treatment, occupational therapy or speech therapy or for prosthesis or orthosis.

(2) Where, in the opinion of the corporation's medical adviser, provision of any one or more of the following is likely to promote the rehabilitation of an insured who is injured in an accident for which benefits are provided under this Part, the corporation may provide any one or more of the following…

The benefits in s. 88(1) are "mandatory benefits" meaning that ICBC is required to pay all reasonable expenses incurred by the insured for necessary medical, surgical, dental, hospital, ambulance, professional nursing services, physical therapy, chiropractic treatment, occupational therapy and for prothesis or orthosis.

The benefits in s.88(2) are "discretionary" or "permissive benefits" and are those benefits for which ICBC is given a discretion regarding payment. "Discretionary benefits" are payable when ICBC’s medical advisor(s) is of the opinion that the provision of such benefits would likely promote the rehabilitation of the insured.

A. Mandatory Benefits

The following is a non-exhaustive list of expenses that have been classified as mandatory benefits by the courts in BC and deducted from a damages award in tort:

Travelling expenses for medical treatment (Peterson v. Bannon, (1991), 1 C.C.L.I. (2d) 232 (S.C.));

Massage therapy treatments (MacKinnon v. Ebner, [1998] B.C.J. No. 1395);

Pain clinic expenses (Klonarakis v. Gregg (1999), 42 C.P.C. (4th) 162;

Physiotherapy (Briglio v. Faulkner [1999] B.C.J. No. 2377 (B.C.S.C.);

Magnetic Resonance Imaging (MRI) (Gill v. Probert [2000] B.C.J. No. 1331 (B.C.S.C.));

Psychological counselling (Gill v. Probert [2000] B.C.J. No. 1331 (B.C.S.C.)).

B Discretionary Benefits

Pursuant to s.88(2) of the Regulations, if ICBC’s medical advisor is of the opinion that one or more of the following benefits is likely to promote the rehabilitation of the insured, ICBC may provide:

Funds for a specially equipped car (one time allowance);

Funds for modification of the insured’s residence;

Reimbursement for the costs of attendant care;

Reimbursement for certain listed physical aides (wheelchair, bed, bowel and bladder equipment, aids for communication, dressing, eating, grooming, and hygiene, transfer equipment, and a ventilator);

Funds for vocational or other training.

Although s.88(2) of the Regulations gives ICBC discretion regarding payment, such discretion is not absolute or unfettered (Heare v. ICBC (1989), 34 B.C.L.R. (2d) 324 (C.A.)). The British Columbia Court of Appeal in Heare stated that "if…the Corporation exercises its discretion in a capricious or arbitrary manner, influenced by irrelevant considerations, then the court can interfere…"

Deduction of Future Benefits

As a result of s.25(5) of the Act, future benefits to which the individual is entitled are deducted from an award in tort. In Jang supra, the Court held that in order to deduct future benefits, ICBC must provide an unequivocal undertaking to pay future benefits before a defendant can invoke a deduction. This was specifically overruled in Schmitt supra, in which the Court stated that nothing in the Act or the Regulations could be said to permit a court to require an undertaking before allowing a deduction under what is now s.25(5).

The evidence upon which the estimate of future benefits is to be made is that very evidence which was before the trial judge in the tort action and upon which he or she made their assessment of those damages (Schmitt, supra). The Court in Schmitt commented that any uncertainties as to the payment of future Part 7 benefits which are created by the regulations cannot act as a bar to the court estimating these future benefits as best it can. The defendant bears the onus of proving that the plaintiff is, or will be entitled to the benefits that the defendant seeks to have deducted from the award for cost of future care. However, any uncertainty as to whether Part 7 benefits will be paid must be resolved in the plaintiff’s favour (Lynn v. Pearson (1997), 3 C.C.L.I. (3d) 175 (B.C.S.C.), affirmed (1998), 5 C.C.L.I. (3d) 290 (B.C.C.A.)).

Hypothetical Benefits

Pursuant to s.25(2) of the Act, benefits may be deducted regardless of whether or not the individual has received them. As long as the individual is entitled to receive the benefits, such benefits may be deducted from an award in tort.

In Baart v. Kumar, supra, the plaintiff was injured in an automobile accident and later developed conversion hysteria. The trial judge found that she would have been entitled to no-fault benefits for past wage loss and psychiatric care, but had failed to make a claim and was now statute-barred from applying for them. Nonetheless, the trial judge deducted the hypothetical benefits from the tort award. The plaintiff appealed but was unsuccessful as the Court of Appeal found that the trial judge had not erred in the law concerning the deduction of hypothetical no-fault benefits.

If, however, the plaintiff fails to apply for benefits because of a clear indication from an ICBC adjuster that the claim would be refused, the amount payable to the plaintiff in the tort action will not be reduced (Hlokoff v. Snodgrass (1984), 51 B.C.L.R. 224 (S.C.)). In Hlokoff, the plaintiff did not claim Part 7 benefits because she was told by the insurer that she was not entitled to them. The defendant argued that he was entitled to have the judgment reduced by the amount of benefits she would have received had she claimed them within the applicable limitation period. The British Columbia Supreme Court found that because ICBC had represented to the plaintiff that it would not entertain an application for Part 7 benefits, and because the plaintiff had relied on such representation in not making an application for such benefits, that ICBC was estopped from raising the lack of application as a ground for reducing the personal injury damage award by the amount of no-fault benefits that the plaintiff ought to have recovered.

Jurisdictional Considerations

There are a number of considerations that arise when an individual injured in B.C. has insurance coverage pursuant to a motor vehicle insurance policy in another jurisdiction. Extra jurisdictional coverage can arise in a number of different ways that may not be immediately apparent. For example many Provinces extend insurance coverage to members of an insured household. In Ontario, members of a household are defined as individuals whom are financially dependent on the household. Therefore, someone residing, and insured in B.C., could be entitled to Ontario automobile insurance. The issue can also be complicated for people insured under an automobile insurance policy issued in another jurisdiction who suffer automobile accident related injuries in British Columbia. In this situation, the insured is entitled to first party benefits provided under their own policy. However the insured may also be entitled to first party benefits available to people insured under a British Columbia automobile insurance policy pursuant to the Power of Attorney Undertakings. See Diotte (Gaurdain ad litem of) v. ICBC [2000] B.C.J. No. 2476 (BCSC) and Marchand v. A.M.A. (1994) 89 B.C.L.R. (2d) 253 (BCCA).

The stakes for determining the extent of first party insurance coverage can be high. In Ontario section 57 of the Ontario Statutory Accident Benefits Schedule requires an insured person, who has access to more than one policy of automobile insurance, to make an election as to which benefits they will receive. A person insured by both an Ontario policy and a British Columbia policy may make an inadvertent election of policies by accepting insurance benefits under one policy. If the wrong election is made, the Defendant in the tort action may deduct the larger policy amount pursuant to section 25, leaving the Plaintiff undercompensated [from the Defendant]. Of significance is the recent Supreme Court of Canada’s decision in Gurniak. Since there is no longer a "matching requirement", the scope of potential benefits that might be deducted, regardless of whether or not they were received, is far greater.

When assessing the availability of first party benefits, counsel should ensure that they carefully consider whether benefits may be available under other policies of insurance issued in other jurisdictions, or whether the extra jurisdictional policy is subject to the Power of Attorney Undertakings.

Summary of Benefits in Other Provinces

Accident Benefits coverage is compulsory everywhere in Canada except Newfoundland and Labrador. Accident Benefits coverage varies between provinces, but in general provides compensation for medical and rehabilitation treatments, funeral expenses, loss of income due to disability, and death. The following is a brief summary of what accident benefits are available in other provinces:

Alberta

In Alberta, an individual injured in a motor vehicle accident may be entitled to:

Medical bills up to $50,000 per person for surgery, chiropractic, dental work, hospital stays, psychological, physical, occupational and/or massage therapy, acupuncture, and grief counselling;

Disability benefits up to 80% of the insured’s average before-tax weekly pay to a maximum of $300 per week for 104 weeks; and

Death benefits dependent upon the number of dependants the insured person has, and the insured’s status in the family; up to $400 for grief counselling and $2,000 is available for funeral expenses.

Manitoba

In Manitoba, an individual injured in a motor vehicle accident may be entitled to:

Unlimited money and time for medical care;

Disability benefits up to 90% of the insured’s average after-tax weekly pay for 104 weeks, up to a maximum before-tax income of $69,000; and

Death benefits dependent upon the individual’s age and the amount of money they were earning at the time of death.

Saskatchewan

In Saskatchewan, an individual injured in a motor vehicle accident may be entitled to:

Up to $5,502,680 per person for medical bills, including rehabilitation, physiotherapy, massage therapy/chiropractic treatment, transportation expenses, and prescription medication;

Disability benefits up to 90% of the insured’s after-tax wages, up to a maximum gross income of $63,043 per year; and

Death benefits, including education benefits for dependants and funeral expenses.

Ontario

In Ontario, an individual injured in a motor vehicle accident may be entitled to:

Medical bills, up to $100,000 per person (if the injury is classified as "catastrophic," there is up to $1 million available), including the cost of rehabilitation;

Disability benefits up to 80% of the insured’s after-tax wages up to $400 per week for a maximum of 104 weeks; and

Death benefits of $25,000 if death occurs within 180 days after the accident; $10,000 for each dependent child; and $6,000 for funeral expenses.

New Brunswick

In New Brunswick, an individual injured in a motor vehicle accident may be entitled to:

Medical bills up to $50,000/person, including the cost of rehabilitation, for a maximum of four years, but only after any other health insurance plans have been exhausted;

Disability up to $250 a week for up to 104 weeks; and

Death benefits of $50,000 plus an additional $1,000 for each dependant after the first; and $2,500 for funeral expenses.

Nova Scotia

In Nova Scotia, an individual injured in a motor vehicle accident may be entitled to:

Medical bills, up to $25,000/person including rehabilitation, for a maximum of four years, however only after any other health insurance plans has been exhausted;

Disability benefits up to $140 per week for up to 104 weeks for temporary disability and lifetime payments for permanent disability; and

Death benefits dependent upon age, number of dependants, and status within the household; $1,000 for each dependant after the first; and $1,000 for funeral expenses.