Section 570 of Alberta's Insurance Act eliminates the right
of insurers providing income continuation or replacement benefits
to subrogate against automobile insurers. In Hammond v
DeWolfe,1 the Court of Appeal determined that the
statutory bar on subrogation only applies to insurers and does not
apply to employers who provide similar income replacement benefits
Richard Hammond was employed by Syncrude Canada Ltd. After being
injured in a car accident, Hammond received $38,668 in income
benefits from Syncrude under a temporary disability plan (the
Plan). The Plan provided that Syncrude had a right of subrogation
with respect to the payment of disability benefits and consequently
Syncrude claimed recovery of the income benefits from the
The Court of Appeal determined that the legislative intent of
Section 570 of the Insurance Act was to reduce motor vehicle
insurance premiums and prevent double recovery. When a plaintiff
has coverage through a disability program, the automobile insurer
is responsible only for topping up income replacement over and
above what has already been received from the disability provider.
The disability provider is unable to recover payments from the
tortfeasor. This method of decreasing damage awards allows
automobile insurers to keep insurance premiums low.2
The legislation also prevents double recovery, a situation in
which the plaintiff receives benefits from his insurer, as well as
The Court of Appeal held that the specific wording of Section
570(6) removes the right of subrogation from an individual who
makes payments to the insured and not to those providing benefits
under a contract of employment.
Consequently, the statutory bar on subrogation only applies
between insurers and does not eliminate an employer's right to
subrogate under a similar income replacement scheme.
This decision has adverse consequences for automobile insurers
insofar as the type of income replacement scheme has a material
effect on the automobile insurer's exposure—especially in
the context of catastrophic accidents. To properly set reserves,
adjusters need to make early inquiries into the nature of an income
replace scheme that a plaintiff is receiving and whether that
scheme is being provided by an insurer.
From an employment standpoint, employers offering these plans
should ensure they take steps to protect their right of subrogation
to recover income replacement benefits.
The author wishes to thank Zoë Abreder, summer student, for
her help in preparing this legal update.
1 2014 ABCA 81.
2 2012 ABQB 684 at para 10.
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