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New Decision Casts Doubt on Deductibility of Collateral Benefits

By Brian C. Atherton

Atherton Barristers

In the recent decision of Gurniak v. Nordquist from the Supreme Court of Canada has cast some doubt on how to interpret the collateral benefit rule dealing with deductibility of benefits of insurance from a tort claim.

The decision originated in British Columbia. A Quebec resident was killed in an automobile accident in British Columbia. The spouse and children received a spousal death benefit, funeral expenses and “dependents benefits” under the Quebec no-fault scheme. A tort action was also commenced in British Columbia under the British Columbia Family Compensation Act . The defendant applied for declaration that the benefits paid in Quebec should be deducted from the damages awarded in the tort action under s. 25 of the British Columbia Insurance (Motor Vehicle) Act .   That section defined “benefits” for the purpose of deductibility as including benefits paid under other contracts or plans of automobile insurance wherever issued or in effect as long as such benefits are “similar” to those described in Part 6 of the British Columbia Insurance (Motor Vehicle) Act.

The Court of first instance and the Court of Appeal in British Columbia held that there was a sufficient distinction between the benefits received under the Quebec scheme from those paid in British Columbia that there should not be a deduction. However, by a majority, the Supreme Court of Canada disagreed, and felt that the supposed distinctions were straying to far from the intent of the word “similar” found in the British Columbia legislation.

Perhaps more importantly, the Court of first instance and the Court of Appeal in British Columbia relied upon two earlier decisions ( Chang v. Chang and Dhanwant v. Buksh ), which interpreted the legislation in a similar fashion.

The Supreme Court of Canada implicitly overturned those decisions.

The minority of the Supreme Court of Canada actually agreed with the disposition of the case but felt that the earlier decisions in British Columbia should not have been overturned. It noted that there was a long line of authority in Ontario, which had adopted the reasoning of those cases in terms of interpreting the Ontario legislation. Specifically, the minority of the Supreme Court of Canada referred to the decisions of Bannon v. McNealy ; Brownell v. Tanahill ; McCartney v. Warrner and Quiroz v. Wallace , all of which have interpreted the language of the Insurance Act in a fashion similar to that found in British Columbia. The minority felt that, by overturning the British Columbia decisions, the majority was also implicitly overturning those decisions and as there is no case from Ontario before them, this result should be avoided.

In reviewing all of the earlier decisions noted by the minority, it is obvious that those cases all dealt with the legislation as it existed under OMPP. The wording found in the Insurance Act at that time regarding the deductibility of collateral benefits simply referred to “no-fault benefits” without much further specifics as to whether only the same type of benefit should be deducted, i.e. benefits for loss of income as oppose to benefits for visitation expenses, etc.

The Ontario Court of Appeal has long held that there should be a “matching” principle and that “apples should be matched with apples” to determine deductions from a tort award.

The legislation under Bill 164 and Bill 59 has been changed, to identify more specifically those items, which are specifically deducted from a tort award. However, the decision in Gurniak does open the door to other interpretations regarding the deductibility of collateral benefits and circumstances were the language may not be as precise. It also indicates that there is a clear “mind set” in the Supreme Court of Canada, which is somewhat different from that found in Ontario, i.e. one should not stray to far from a plain and simple analysis of the legislation as it can lead to results which are not intended by the legislators.

This “mind set” is perhaps the most important feature of this case given it probably has limited application in Ontario, as there are not many cases left from a tort perspective, which deals with the deductibility of collateral benefits. However, for those cases which still exist and which have not yet reached trial, this decision may very well present the defence with an opportunity of achieving a greater deduction then has previously been the case.

Please feel free to contact Brian C. Atherton should you have any further questions.