Having your cake but not eating it – how entitlement to future insurance benefits can lead to a big deduction from a trial award

A plaintiff who established at trial that car accidents caused permanent disability and ongoing need for future care has a significant deduction made to her trial award for a portion of the future wage loss and medical benefits that she was entitled to receive from the insurer

Insurance law – Automobile insurance – Statutory Accident Benefits – Disability benefits, deductibility – Future benefits – Evidence – Admissibility

Aarts-Chinyanta v. Harmony Premium Motors Ltd. (c.o.b. Harmony Acura), [2020] B.C.J. No. 1030, 2020 BCSC 953, British Columbia Supreme Court, June 25, 2020, D.C. MacDonald J.

Following a trial where the plaintiff was awarded damages against several defendants for injuries suffered in three motor vehicle accidents, the defendants made applications pursuant to s. 83 of the Insurance (Vehicle) Act (the “Act”) and Part 7 of the Insurance (Vehicle) Regulation (the “Regulation”) allowing them to:

1. deduct $57,975.95 in Temporary Total Disability (“TTD”) benefits under s. 80 and s. 86 of the Regulation;
2. deduct $139,417.09 from the plaintiff’s award for future loss of earning capacity, representing the net present value of $164,717.52 at a discount rate of 1.5%; and
3. deduct $106,800 from the plaintiff’s award for costs of future care.

The Act provides that if a person who has a claim for damages receives or is entitled to receive benefits respecting the loss on which the claim is based, the person is deemed to have released the claim to the extent of the benefits. The Regulation sets out how benefits are to be paid, which includes disability benefits and medical and rehabilitative benefits.

The deductions sought by the defendants, along with agreed to deductions for income tax and employment insurance, would reduce the plaintiff’s award from $764,211 to $441,297.96. The insurer provided an affidavit in support of the applications that outlined the amount of available benefits, accepted the findings of fact made by the court, and deposed that among other things, the insurer would irrevocably continue to pay the plaintiff her Part 7 entitlements to TTD payments and health care payments as required and as incurred, and that she had authority to bind the insurer and make representations on the insurer’s behalf.

The plaintiff opposed the applications and argued that the plaintiff’s inability to work and requirement for future care was contributed to by two pre-existing conditions, dis-entitling her to benefits under s. 96(f) of the Regulation, and second, that the insurer’s financial peril made future payments uncertain. The plaintiff argued that courts are not permitted to rely on an adjuster’s affidavit to remove uncertainty regarding plaintiff entitlement to benefits, only to remove uncertainty as to the continuing access to discretionary benefits. The former was precisely what they said the adjuster attempted with her affidavit. Secondly, the plaintiff filed an affidavit that included a notice of civil claim from a class action and several newspaper articles that said that the insurer was in dire financial straits, arguing that this created uncertainty as to payment of the benefits. This evidence was opposed by counsel appointed by the insurer, who argued that it was inadmissible hearsay evidence. The notice of civil claim was admitted for the fact it exists, not the truth. The newspaper articles were held inadmissible.

In analyzing the plaintiff’s primary argument regarding entitlement, the trial judge considered and applied the principles flowing from Schmitt v. Thomson (1996), 18 B.C.L.R. (3d) 153 (C.A.) and subsequent jurisprudence. Primarily, if there is no statutory entitlement to benefits, there can be no deduction because the insurer cannot authorize deductions beyond what the statute permits. If statutory entitlement is established, based on the award and the legislation, the question is whether the Part 7 benefits are mandatory or discretionary. If the benefits are mandatory, the court must deduct them, and no further evidence is required. If the benefits are discretionary, they are too uncertain, and the court should decline to deduct them from the award. However, the exception to the general rule regarding discretionary benefits is that where the insurer, through affidavit evidence, undertakes or promises to pay discretionary benefits going forward, they may be deducted. Post-trial affidavit evidence is admissible for this purpose.

The trial judge relied on the evidence at trial and confirmed that it was the accidents, not her pre-existing conditions, which resulted in the plaintiff requiring the treatments outlined in the judgment. Although the plaintiff’s pre-existing conditions were aggravated (and the award had been reduced by a percentage due to the active pre-existing conditions), the accidents were responsible for the majority of the plaintiff’s symptoms. Therefore, the plaintiff failed to establish that but for the pre-existing conditions, she would not need the TTD payments, the treatments, and the medications which she was awarded in the judgment. It was the evidence at trial which established the plaintiff’s entitlement to the benefits, not the affidavit of the insurer’s adjuster.

The trial judge relied on the affidavit of the insurer’s adjuster to deal with the issue of uncertainty of payment of benefits, holding that there was little risk the insurer would not honour its commitments. Additionally, the judge held there was not a proper evidentiary foundation to allow the court to conclude the insurer’s financial forecast resulted in the plaintiff’s benefits being uncertain. The trial judge granted the applications, with a reduction of the future care deduction amount by 25% to account for contingencies that part 7 benefits are partially going to MSP fees and other expenses and therefore not being entirely used for future care items.

This case was digested by Mark A. McPhee, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Mark A. McPhee at mmcphee@harpergrey.com.

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