Insurance & Reinsurance
The Ontario Court of Appeal has affirmed the silo approach to deducting and assigning statutory accident benefits.
That is the main takeaway from two recent rulings, in Carroll v. McEwen and Cadieux v. Cloutier, which ought to promote greater efficiency in motor vehicle accident litigation and prevent double recovery to the injured party.
Both appeals address the treatment and matching of SABs to tort damages under section 267.8 of the Insurance Act. The rulings are also notable in that two earlier rulings, Bannon v. McNeely and Gilbert v. South, which both supported a "strict matching" approach, are no longer regarded as binding authority.
In Ontario, parties injured in an automobile accident can receive "no fault" first-party benefits through SABs and simultaneously sue the "at fault" driver in tort. There is usually overlap between the compensation provided to an accident victim from SABs and the award of damages in a civil proceeding.
Section 267.8 requires a tort award to be reduced by corresponding categories of designated SABs that have been received by the injured party. Specific categories of tort damages include income loss, loss of earning capacity, expenses that have been or will be incurred for health care, or other pecuniary loss. Any SABs subsequently received by the accident victim that correspond to those categories are subject to a statutory trust and repaid to the party who paid the damages.
The common law had developed two matching approaches. The "strict matching" approach required temporal and qualitative matching of SABs to specific heads of tort damages. More recently, the courts have applied a "silo" approach, which only includes three broad categories of SABs under the Insurance Act: income replacement benefits, health care benefits, and other pecuniary losses. Under the “silo” approach, tort damages are only required to match generally with a corresponding SABs category.
Cadieux concerned the deduction of SABs from tort damages awarded at trial. The Supreme Court of Canada's decision in Gurniak v. Nordquist distinguished Gilbert and Bannon and applied a broad silo approach to the deduction of SABs received before trial.
As a matter of statutory interpretation, section 267.8 requires SABs received before and after trial to be deducted from the corresponding tort award on a silo basis. This means that SABs received for income replacement benefits are to be deducted from the tort award for income replacement benefits, etc.
The Ontario Court of Appeal determined that the strict matching approach unnecessarily complicated tort actions by focusing on labels for heads of damages. Instead, deducting the SABs within each silo increases efficiency by no longer requiring each head of damages awarded at trial to be strictly matched to a particular benefit under a statutory scheme.
The Carroll appeal considered whether a court can attach a conditional assignment to a tort award. At trial, Justice McLean awarded a conditional order to the defendant insurers, providing them with the option to receive the plaintiffs' future SABs if the $2,610,774.32 judgment was paid in full. The insured's policy provided coverage for a maximum of $2 million. The conditional assignment had the potential to reduce the insurers' liability if the plaintiffs' outstanding SABs exceeded $610,774.32.
The plaintiffs appealed on the grounds the trial judge did not strictly match the SABs with a particular head of damages awarded by the jury. The court dismissed the appeal and found that section 267.8 allows for SABs to be assigned or held in trust in three broad silos until the defendant, or its insurer, has been reimbursed for payments made under the judgment in respect of the particular silo. In this case, the damages awarded by the SABs and the damages award fell exclusively within the health care silo, and the trial judge was entitled to award the conditional order to the insurers for the medical and rehabilitation benefits available to the plaintiff from her insurer.
The court also recognized that section 267.8 can impose conditions on a plaintiff to disclose the value of future SABs payments to an insurer or defendant to promote greater transparency in motor vehicle accident litigation.