Tough News Decision from the Nova Scotia Court of Appeal Affecting Car Crash Injury Victims
Seriously injured car crash victims will now receive less money in their pockets after trial for loss of future income damages claims given the December 10, 2018 Nova Scotia Court of Appeal decision in Sparks v Holland.
In the past, certain types of income replacement benefits received by an injured Plaintiff were not deducted from a Plaintiff’s award for loss of future income. These were referred to as collateral benefits.
In the past, Canada Pension Plan Disability [CPPd] benefits were not deducted from future income loss awards. Unfortunately, the highest Court in Nova Scotia has ruled that future CPPd are not a collateral benefit and are indeed deductible from loss of future earning capacity and loss of future income damages awards made at Trial.
At issue was the interpretation of s. 113A of Insurance Act which states:
113A In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the damages to which a plaintiff is entitled for income loss and loss of earning capacity shall be reduced by all payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for income loss or loss of earning capacity under the laws of any jurisdiction or under an income–continuation benefit plan if, under the law or the plan, the provider of the benefit retains no right of subrogation.
A prior decision out of the Nova Scotia Court of Appeal in Tibbetts v Murphy had interpreted this section of the Insurance Act and found that the deduction for future CPPd would apply to an award for future loss of earning capacity.
In Sparks plaintiff counsel argued that the Court in Tibbetts had not specifically ruled on whether the section also applied to an award for future loss of earnings. There is a difference in these two types of future income losses. Future loss of earning capacity involves compensating for non-specific future loss of ability to earn income vs loss of future earnings being a defined and calculable loss. An illustrative example of loss of earning capacity would be the carpenter who injures his dominant hand and can do some carpentry work but not all he used to be able to do while the carpenter who becomes a quadriplegic can do no longer do carpentry work at all so has a future loss of earnings claim.
The CPPd deduction or not issue remained debatable and unresolved until Sparks v Holland was heard last year.
Catherine Holland was injured by Josh Sparks in a May 15, 2013 car collision. As a result of her injuries from the collision, Ms. Holland applied for and was granted CPPd. The formal Action was filed on January 26, 2016. The parties’ lawyers disagreed on whether future CPPd should be deducted and also disagreed on whether the deduction issue was already previously decided in Tibbetts.
Ms. Holland’s lawyer made a Motion under Rule 12 of the Nova Scotia Civil Procedure Rules for a question of law to be determined. The question of law was whether the benefit deductions for income loss and loss of earning capacity stated in s. 113A of the Insurance Act also included CPPd received by a plaintiff after the trial or only applied to benefits received before the trial.
The Motion was heard by Justice Gerald Moir who answered the question “NO” holding that deductions from damages for income loss and loss of earning capacity required by s. 113A did NOT include CPPd received by or available to the plaintiff AFTER the Trial of an action only BEFORE the Trial.
In his decision on the motion at the supreme court level, Justice Moir held Tibbetts did not previously cover the issue, the references in s. 113A to loss of earning capacity were not necessarily about future income losses and that the correct interpretation of the section used in context was that the section did not apply to future CPPd payments.
The Nova Scotia Court of Appeal disagreed with Justice Moir and ruled future CPPd is deductible from all future income loss and future earning capacity damage awards. The key findings were:
- 113A was part of an insurance reform which occurred in 2003 in response to the auto insurance industry claiming personal injury damages claims were rising in volume and in total award made causing insurance premiums to also therefore increase rapidly to pay for the awards with s. 113A being designed to help reduce the rising premiums. The NS Court of Appeal stated this topic had been earlier discussed by the NS Court of Appeal in the Tibbetts case;
- S113A was intended to change the collateral benefits rule to avoid double recovery occurring for income loss;
- If the Court only deducted CPPd to the date of Trial as opposed to before and after Trial it would frustrate the legislative intent of limiting double recovery;
- The Court held that loss of earning capacity is a future focused head of damages and Justice Moir did not interpret it properly in its context;
- The Court said Justice Moir applied an overly technical approach in interpreting the phrase “available before the Trial of an action” and should have included future payments in his analysis as the claimant was “entitled” to them so they were also “available” in the future.
The Nova Scotia Court of Appeal gave great deference to the legislature and its stated intent to eliminate double recovery for income loss with the goal of effecting reduced premiums for auto insurance.
The Nova Scotia Court of Appeal decision is written clearly and does have an internal logic in its presentation. However, there are significant questions which remain in its interpretation and also in the practical application of the decision to the real world and in the procedural managing of a tort claim including:
- The plaintiff would have paid premiums for CPPd protection out of his or her own pocket for years through the employee/employer CPP premium deductions so why would the plaintiff not be rewarded for this foresight with no deduction being mandated as opposed to the tortfeasor being rewarded for his poor conduct injuring the Plaintiff but now not having to pay fully for the future income loss he has created?
- Has the intent of the legislature to reduce auto insurance premiums actually occurred? Has there actually been a measurable reduction in auto insurance premiums given all the plaintiff has given up through the imposition of minor injury damages caps as well as by future income loss compensation being taken away from the Plaintiff? Should there be an actuarial study commissioned to measure the prior losses the insurers say have taken place and also to confirm the reduction of premiums are at a proper level?
- Should the legislature re-involve itself in this matter and specifically remove CPPd payments from being deducted from future loss of income/earning capacity claims after Trial?
- How will the future deduction of CPPd actually be administered? Will the Plaintiff have to sign over each monthly CPPd cheque on an ongoing basis to the insurer? Who will administer this payment and provide oversight? The NS Court of Appeal decision is silent on this process.
- What if the parties agree the Plaintiff is entitled to CPPd for life and the Defendant insurer demands the full lifetime CPPd deduction from the award for future income/earning capacity take place but later CPPd cuts the Plaintiff off from benefits?
These are fundamental fairness as well as practical issues which need to be sorted out.
In the end, the Court is tasked with interpreting law and making decisions and many will say the Nova Scotia Court of Appeal did its level best to arrive at its decision. The legislature is tasked with drafting and passing law. It seems to me this issue is one that is best to be revisited at the political policy level and s. 113A revisited.
We shall see if Ms. Holland’s counsel decides to seek leave to appeal the Nova Scotia Court of Appeal decision to the Supreme Court of Canada. Given the Nova Scotia Court of Appeal decision was a 5-0 ruling, Ms. Holland’s counsel will need to seek leave [obtain permission] to appeal to the Supreme Court of Canada as no Justice on the Court of Appeal dissented from the written decision.
Bottom line, this decision is not a friendly one for significantly injured victims of car crash negligence in Nova Scotia who will need to be cared for into the future.