On February 26, 2014, the Court of Appeal unanimously allowed
the appeal of an employer seeking to recover the income benefits
paid to an employee, from a third party tortfeasor (Hammond v
DeWolfe, 2014 ABCA 81).
The employer, Syncrude, issued $38,668 in income benefits to its
employee who missed time from work as a result of injuries
sustained in a motor vehicle accident with the respondent
tortfeasor. The payments were made pursuant to a temporary
disability plan which formed part of the employment contract. The
plan explicitly provided Syncrude with a right of subrogation
against third parties responsible for causing the employee's
illness. To this end, Syncrude and the employee brought an action
against the respondent.
A preliminary issue arose as to the effect of the former section
626.1 (now section 570), of the Insurance Act, RSA 2000, c
I-3, on Syncrude's subrogation rights. This provision governs
reductions of automobile accident claim awards. Subsection 3
requires such an award to be reduced by certain payments received
by the claimant, including those from specific sources or plans
enunciated in subsection 4. Subsection 6 removes a person's
right to subrogate to an insured's right of recovery.
The Chambers judge found section 626.1 applicable to the
benefits paid under Syncrude's temporary disability plan. As a
result, the benefits would be deductible from any damage award
received by the employee and Syncrude would not have the ability to
pursue recovery of the benefit payments from the tortfeasor.
The appeal attracted the attention of the Board of Trustees of
Edmonton School District No. 7, who intervened in support of
Syncrude's position. Syncrude took the position that its
temporary disability plan was an "income continuation
plan," not an "income replacement plan," with the
result that section 626.1 did not properly apply to the payments in
question. Not surprisingly, the respondent tortfeasor advanced the
In addition, both Syncrude and the Board of Trustees pointed to
the use of the word "insured" in section 626.1(6); they
maintained that such language revealed the legislature's intent
to limit the anti-subrogation provision to payments made under a
contract of insurance. For her part, the respondent argued that
subsection 3 referred to payments received by a
"claimant," not an "insured" and furthermore,
that the removal of the right of a "person" to subrogate
captured a corporate entity like Syncrude.
The Court of Appeal began its discussion with reference to the
common law. As a general rule, collateral benefits are deductible
from a damages award so as to prevent double recovery on the part
of a plaintiff. However, a common exception exists where the entity
paying the benefit is entitled to reimbursement from the
tortfeasor. In this way, the right of subrogation operates to
prevent over-compensation of the plaintiff.
The Court then turned to the relevant provisions of the
Insurance Act. With reference to their "vague and
confusing nature," the Court could find no legislative or
common law indication that a temporary disability plan like that of
Syncrude was an income replacement plan within the meaning of
section 626.1(4). Citing Hansard commentary on the passage
of the provision, the Court held that the legislation was intended
to prevent injured claimants from "double dipping"
through the receipt of both disability benefits and an award of
damages. This end would not be served by barring an employer's
right to subrogate in these circumstances: the employee would only
be paid once by the employer who could then recover those sums from
the responsible party.
Ultimately, the Court of Appeal held that section 626.1 lacked
the "clear and express language" required to support the
result reached by the Chambers Judge. The provision, as it
continues to read, was deemed ambiguous "at best." In the
absence of an explicit indication from the legislature, the Court
was not prepared to remove employers' common law right to
pursue a subrogated claim for employee income benefits from
In the result, insurers are not in a position to deduct benefits
received by an employee in circumstances where the employer has a
right of subrogation. The tortfeasor, not the employer, bears the
financial burden of fully compensating the injured Plaintiff in
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