Case Law Chrappa Appeal

The plaintiff was injured in a motor vehicle accident in 1991 which rendered her incapable of performing the requirements of her job. At the time of her successful personal injury action against the defendants, she was receiving long-term disability benefits from her group insurer. As the policy provided, the plaintiff had been required by the insurer to undergo medical assessments to determine her ongoing entitlement. While it was continuing to make payments to her, the insurer made no undertaking with respect to how long it would continue to do so, and there was evidence at trial that in the future the plaintiff would continue to be required by the insurer to be medically examined so that it could determine her ongoing entitlement. The trial judge determined that the damages awarded to the plaintiff should not be reduced by the present value of the future disability benefits which she would receive pursuant to s. 267(1)(c) of the Insurance Act, which required that damages be reduced by “all payments that the person has received or that were or are available for loss of income . . . and by the present value of any such payments to which the person is entitled”. The trial judge found that the defendants had not shown that the plaintiff was entitled to the future payment of disability benefits. To avoid double recovery, she imposed a Cox v. Carter order, requiring the plaintiff to hold in trust for the defendants the future long-term disability payments received from the insurer and, to the extent of the judgment, to pay them over to the defendants. The defendants appealed. The plaintiff cross-appealed from the trial judge’s finding that any future Canada Pension Plan disability benefits should be dealt with by way of the Cox v. Carter order.

Held, the appeal should be dismissed; the cross-appeal should be allowed.

To demonstrate entitlement to future benefits, it must be shown to be beyond dispute that the plaintiff qualifies for those payments in every respect. Section 267(1)(c) requires that the entitlement to future payments exist at the time of the trial. The test required by s. 267(1)(c) is not met where it is merely shown that there is a “substantial possibility” that the plaintiff would receive the future disability payments.

There was ample factual material on the record before the trial judge to justify her conclusion that the defendants had not met the onus upon them.

As Canada Pension Plan disability benefits are not payments made for loss of income, they are not to be deducted from an award of damages under s. 267(1)(c).

Cugliari v. White (1998), 38 O.R. (3d) 641 (C.A.), folld

Other cases referred to

Brown v. Bouwkamp (1976), 12 O.R. (2d) 33, 67 D.L.R. (3d) 620, [1976] I.L.R. 1-807 (C.A.); Coderre v. Lambert (1993), 14 O.R. (3d) 453, 103 D.L.R. (4th) 289, [1993] I.L.R. 1-2977, 18 C.P.C. (3d) 17, 46 M.V.R. (2d) 1 (C.A.); Cox v. Carter (1977), 13 O.R. (2d) 217 (H.C.J.); Madill v. Chu, [1977] 2 S.C.R. 400, 71 D.L.R. (3d) 295, [1976] I.L.R. 1-810, 12 N.R. 187; Schrump v. Koot (1977), 18 O.R. (2d) 337 (C.A.); Stante v. Boudreau (1980), 29 O.R. (2d) 1, 112 D.L.R. (3d) 172 (C.A.)

Statutes referred to

Insurance Act, R.S.O. 1970, c. 224, s. 237(2) Insurance Act, R.S.O. 1990, c. I.8, ss. 266, 267(1)

Authorities referred to

New Shorter Oxford English Dictionary, “entitled”

APPEAL from a judgment of Lax J. (29 O.R. (3d) 222 (Gen. Div.)) determining that the damages in a personal injury action should not be reduced by the present value of future disability benefits which the plaintiff would receive from her own insurer.

S. Wayne Morris, for appellants.
Robert Roth and Kirk F. Stevens, for respondent.

The judgment of the court was delivered by

GOUDGE J.A.: – This is an appeal from the judgment of Lax J. [reported 29 O.R. (3d) 222] in which she determined that the damages awarded to the respondent should not be reduced by the present value of the future disability benefits which the respondent would receive from her own insurer if she received those benefits until age 65.

The legislation interpreted by the trial judge in coming to her conclusion is s. 267(1)(c) of the Insurance Act, R.S.O. 1990, c. I.8. This provision was introduced into the Insurance Act by Bill 68 and applies to actions arising out of motor vehicle accidents that occurred between October 23, 1989 and December 31, 1993. The full subsection reads as follows:

267(1) The damages awarded to a person in a proceeding for loss or damage arising directly or indirectly from the use or operation of an automobile shall be reduced by,

• all payments that the person has received or that were or are available for statutory accident benefits and by the present value of any statutory accident benefits to which the person is entitled;
• all payments that the person has received under any medical, surgical, dental, hospitalization, rehabilitation or long-term care plan or law and by the present value of such payments to which the person is entitled;
• all payments that the person has received or that were or are available for loss of income under the laws of any jurisdiction or under an income continuation benefit plan and by the present value of any such payments to which the person is entitled; and
• all payments that the person has received under a sick leave plan arising by reason of the person’s occupation or employment.

(Emphasis added)

The trial judge found that the appellants had not shown that the respondent “is entitled” to the future payment of disability benefits. Hence, the appellants did not have the right to deduct the present value of such payments from the damages awarded. For the reasons that follow, I agree with this determination.

The facts germane to this appeal are the following. The respondent was injured in a car accident on August 16, 1991. She suffered soft tissue injuries to her chest, neck and lower back. She was 51 years of age at the time of the accident.

Prior to the accident, the respondent was employed as a music librarian. By the time of trial, she had made several genuine although unsuccessful attempts to return to work but was unable to perform the requirements of her job.

While employed, the respondent, together with her fellow employees, had paid for a long-term disability policy with Great-West Life Assurance Company. The definition of “disability” in the policy is as follows:

To receive long-term disability benefits, you must be considered “totally disabled” according to the plan definition. That is, for the first seventeen weeks of short-term disability and for the next two years, starting from your eighteenth week of disability, you must be unable to perform duties that regularly take 60% of your time to complete, or certain tasks that are essential to your own job. Thereafter, you must be unable to perform the duties of any job for which you are or could become reasonably qualified by your education or experience.

The respondent had received long-term disability benefits under this policy on a by-weekly basis commencing 17 weeks after the accident. She was continuing to receive those payments at the time of trial. As the policy provided, she had been required by Great-West Life to undergo medical assessments to determine her ongoing entitlement. Indeed, one such assessment was just prior to trial. The doctor who made this assessment did not give evidence nor did any representative of Great-West Life. While it was continuing to make payments to her, Great-West Life made no undertaking with respect to how long it would continue to do so. Indeed, at trial there was evidence that in the future the respondent would continue to be required by the insurer to be medically examined so that it could determine her continuing entitlement.

The accounting evidence at trial was that the present value of the respondent’s future loss of income on the assumption that she would remain disabled from working to age 65 was $238,900. The present value of her future long-term disability payments, assuming she would continue to receive them to age 65, was $150,159.24.

The jury awarded the respondent damages of $188,000, including $85,000 for future loss of income. Prior to this, the trial judge had determined that the respondent’s injuries met the threshold in s. 266 of the Insurance Act, as constituting “a permanent serious impairment of an important bodily function caused by a continuing injury which is physical in nature”.

Following the jury’s award, the trial judge, in an erudite analysis of the law, determined that the long-term disability benefits already received by the respondent were properly deductible from the award of damages, because under s. 267(1) (c) of the Act, these payments were received for loss of income. Before us, the cross-appeal from this finding was abandoned by the respondent.

Both at trial and on appeal the appellants’ position was that the present value of future disability payments to age 65, namely, $150,159.24, must be deducted from the respondent’s damage award. With other deductions that were agreed upon, this would reduce the respondent’s recovery to zero.

In her reasons, the trial judge determined that in order to succeed in reducing the damage award by the present value of future long-term disability payments, the appellants must demonstrate that it is beyond dispute that the plaintiff (i.e., the respondent) qualifies in every respect for these payments and, therefore, that they will be received. The trial judge found that on the facts before her this had not been established.

However, to avoid double recovery the trial judge imposed a “Cox and Carter” [See Note 1 at end of document.] order, requiring the respondent to hold in trust for the appellants the future long-term disability payments received from Great-West Life and, to the extent of the respondent’s judgment, to pay them over to the appellants. She further ordered that if Great-West Life terminates these payments the respondent must assign to the appellants her rights against the insurer to the extent of the amount then outstanding on the judgment. Then, once the appellants’ monetary claim for reimbursement from Great-West Life is satisfied, the rights against the insurer are to be reassigned to the respondent.

The central issue raised in this appeal is the proper interpretation of s. 267(1)(c). What is required for a finding that the respondent “is entitled”, for the purposes of this subsection, to receive future long-term disability payments to age 65? For convenience, it is helpful to set out the subsection again:

(c) all payments that the person has received or that were or are available for loss of income under the laws of any jurisdiction or under an income continuation benefit plan and by the present value of any such payments to which the person is entitled . . .

(Emphasis added)

The appellants concede that they bear the onus of demonstrating the respondent’s entitlement. In Stante v. Boudreau (1980), 29 O.R. (2d) 1 at p. 4, 112 D.L.R. (3d) 172, this court came to just such a conclusion, deciding that where a defendant claims a release under a similar section of the Insurance Act because of the plaintiff’s entitlement to the benefit of insurance, the defendant bears the burden of establishing the requisite facts to show entitlement.

The respondent argues that for there to be a reduction from the damage award, the entitlement which must be shown is the right of the plaintiff as against the insurer to receive immediate payment of the present value of future payments. I disagree. The subsection, in my view, speaks to two kinds of payments: those that have been received or are presently available on the one hand and those that will be received in the future on the other hand. If entitlement to the latter is demonstrated, the present value of these future payments is to be deducted from the damage award. It is not necessary for the appellants to demonstrate a present right as against the insurer to receive payment of the present value of those future payments.

What then must be shown to demonstrate entitlement to those future payments? As I have said, the test adopted by the trial judge is that it must be shown to be beyond dispute that the plaintiff qualifies for these payments in every respect. I agree with this. The plaintiff’s present right to receive these payments means that so far as the future can be made certain, they will be received. Short of that, there is no entitlement for the purposes of the subsection.

The subsection requires by its terms that the entitlement to future payments exist at the time of trial. It must be shown that there are future payments to which the plaintiff “is entitled” (emphasis added). The New Shorter Oxford English Dictionary provides that to be entitled is to have a rightful claim to something. The plain meaning of the language of the subsection requires the showing of a present right to receive these future payments. Otherwise the present value deduction does not apply.

The relevant case-law also supports the conclusion that a strict construction is to be given to the concept of entitlement to insurance benefits where that entitlement is the basis for a reduction in the plaintiff’s recovery.

In Brown v. Bouwkamp (1976), 12 O.R. (2d) 33, 67 D.L.R. (3d) 620, this court addressed the question of whether, for the purposes of s. 237(2) of the Insurance Act, R.S.O. 1970, c. 224, the plaintiff was “entitled” to no-fault benefits where his entitlement had been disputed by the insurer. That section provided that such an entitlement constituted a release of the defendant to the extent of the payments received or available. At p. 36 this court said the following:

Nor, in our opinion, can a person whose claim has been rejected be stated unequivocally to be a person who is “entitled” to the benefits. To so describe him would be to prejudge the merits of the grounds on which the insurer had rejected his claim.

This was adopted with approval in the subsequent decision of this court in Stante, supra. The passage suggests clearly that “entitlement” requires an unequivocal right to the benefits.

In Coderre v. Lambert (1993), 14 O.R. (3d) 453, 103 D.L.R. (4th) 289 (C.A.), Austin J.A., writing for himself only, addressed the meaning of entitlement in the context of this very subsection.

Because the case was about questions of procedure rather than the meaning of the subsection, he did so in obiter and was the only member of the court to do so in that case. Nonetheless, his comments provide very useful guidance.

Speaking about the meaning of the concept of entitlement in the context of his analysis of Madill v. Chu, [1977] 2 S.C.R. 400, 71 D.L.R. (3d) 295, Austin J.A., using the language borrowed in this case by Lax J., said at p. 459:

The decision of the majority stands for the proposition that where the plaintiff meets all of the qualifications for a benefit, he is then “entitled”, even if he has not applied for such benefits. In my view, that case is not helpful here. It would only be helpful if it was beyond dispute that Coderre qualified for long-term disability benefits in every respect but had not applied for them.

Speaking about the appropriate interpretive approach to be used for the subsection Austin J.A. said this, at p. 459:

What was s. 237(2) is now, with substantial cosmetic changes, s. 267(1)(a). The objective of that subsection, like that of s. 267(1)(c), is to avoid or prevent double recovery. As “entitled” in what is now s. 267(1)(a) has been consistently interpreted in a “narrow” fashion, it is reasonable to assume that when the legislature added s. 267(1)(c) to the Act in 1989 and used the same word, it intended that word to be interpreted the same way.

Finally, in addressing the facts of the case before him, Austin J.A. said this at p. 460:

Any reduction in Coderre’s judgment would be upon the basis that London Life is required to pay Coderre long-term benefits.

Thus, in my view, the jurisprudence supports the view that where the concept of entitlement to future long-term insurance benefits is used as a basis for reducing the plaintiffs damage recovery it must be strictly interpreted to require that it be beyond dispute that the plaintiff qualifies for these future payments in every respect.

There is, I think, a sound policy basis for such an approach. When entitlement to future payments is found, s. 267(1)(c) mandates that the present value of such payments be deducted from the plaintiff’s award of damages. To that extent, the defendant is completely released. If there were uncertainty about the receipt of those future payments the deduction of their present value would expose the plaintiff to the possibility of an ultimate recovery less than that awarded to him. The deduction of the present value of future payments, if those payments are not in fact subsequently received by the plaintiff, would create this result. The concept of entitlement in s. 267(1)(c) should be interpreted to prevent this.

The appellants argue that the standard required by the trial judge for the demonstration of entitlement was too high and that if it were shown that there were a “substantial possibility” that the respondent would receive the future disability payments the test required by s. 267(1)(c) would be met. I disagree. The test of “substantial possibility” applies to the proof of future possibilities either favourable or unfavourable that are to be considered at common law in calculating damages: see Schrump v. Koot (1977), 18 O.R. (2d) 337 (C.A.). What is at stake in this case is not this common law principle, which has a different purpose, but rather s. 267(1)(c). The concept of entitlement in that subsection requires more certainty than “substantial possibility”.

In summary, therefore, I conclude that the trial judge applied the correct legal test to determine if the appellants had demonstrated the respondent’s entitlement to future long-term disability payments for the purposes of s. 267(1)(c).

Moreover, there was ample factual material on the record before her to justify her conclusion that the appellants had not met the onus upon them. The appellants concede that the finding of the trial judge that the respondent’s injuries met the threshold in s. 266 of the Insurance Act does not mean that there is the required entitlement to future disability payments. Nor does the fact that the respondent was receiving such payments at the time of trial yield this conclusion. The insurer neither gave evidence nor had it undertaken that it would continue making payments. It had the right, which it had used previously and would continue to use, to require future medical assessments of the respondent to determine whether the respondent remained disabled as defined in the policy. The respondent’s injuries were not so catastrophic that she would inevitably always meet that definition. In my view, the trial judge was quite justified in concluding that the appellants had not demonstrated the respondent’s entitlement to future disability payments as required by s. 267(1)(c).

I therefore conclude that the appellants fail on the central issue in this appeal. Both parties agreed that, in this event, no quarrel can be had with the modified “Cox and Carter” order imposed by the trial judge. It does full justice to both parties in that it provides a mechanism for ensuring with precision that the respondent obtains no double recovery because of these future payments from the respondent’s insurer to compensate her for loss of income. It does so without passing to the respondent any risk that her ultimate recovery will be less than that awarded by the jury.

Finally, the respondent has cross-appealed from the finding of the trial judge that any future CPP disability benefits will be dealt with by way of the “Cox and Carter” order. The parties agree that if CPP disability benefits are covered by s. 267(1) (c) as payments made for loss of income, then the cross-appeal must be dismissed, and that if they are not so covered, the cross-appeal on this ground must be allowed. This issue has been determined by the judgment in Cugliari v. White which is being released simultaneously with this decision, 38 O.R. (3d) 641, and which determines that CPP disability benefits are not covered by s. 267(1)(c).

I would therefore dismiss the appeal with costs and allow the cross-appeal with costs, to the extent of deleting from the judgment the requirement that any future CPP disability benefits be held in trust for the appellants.