Canada: Back To The Future: The Court Of Appeal And Part VI Of The Insurance Act

In its recently released decisions Cobb v. Long Estate and El-Khodr v. Lackie, the Ontario Court of Appeal ("ONCA") provided timely guidance with regards to the Part VI regime in the Insurance Act.  The appeals were heard and released concurrently having both raised common issues concerning the application of the Part VI regime. The ONCA made declarations concerning the treatment of statutory accident benefits ("SABs") in the calculation of damages arising from motor vehicle accidents, the applicability of the statutory deductible in force, the applicable rate of prejudgment interest under the Courts of Justice Act , and the assignment of future SABs payments.

The Cobb Appeal

In July 2008, the plaintiff's vehicle was hit by the defendant, who was charged with operating a motor vehicle while impaired. After a 19-day trial, a jury awarded the plaintiff with $220,000 in compensatory damages. After deducting the requisite amounts for collateral benefits received by the Plaintiff pursuant to the Act, the Court ordered a final judgment of $34,000 and costs on a partial indemnity scale for $409,098.48.

  • Did the trial judge err by deducting, pursuant to s. 267.8(1) of the Act, the SABs amounts allocated to income replacement benefits from the awards for past and future income loss? Did the trial judge err by failing to deduct the full amount of the housekeeping and home maintenance benefits ("HKHM") received by the plaintiff before trial from the damages awarded for loss of the same?

The Court determined that the Act does not distinguish between amounts that relate to past and future income loss; the Act only speaks to amounts received prior to trial for income loss as a single head of damage.  Since the purpose of s. 267.8(1) is to prevent double recovery for a single loss, the Court held that there is no reason to distinguish between pre- and post-trial income loss and "loss of income capacity" when deducting SABs from awarded damages.

The Court followed the Supreme Court of Canada in Gurniak and found it doubtful that any qualitative or temporal matching requirement not mandated by legislation (ie. apples to apples) should be applied in SABs cases. The Court concluded the sum the Plaintiff received before trial for SABs in respect of income loss should be deducted from the trial award for past and future income loss.

While the trial judge distinguished between past and future awards for HKHM benefits in applying the relevant SABs deductions, the Court of Appeal once again held that there was no reason to differentiate between past and future awards. The Act requires a reduction from awarded damages of all SABs payments received before trial and the total HKHM award is not to be temporally separated. Whether for future or past loss, all HKHM benefits constitute a single head of damage for the purposes of the Act.

  • Did the trial judge err in his determination of prejudgment interest? Did the trial judge err in his assessment of costs by using the previous iteration of s. 267.5(9) of the Act?

The Court went on to examine whether s. 258.3(8.1) of the Act, which came into force on January 1, 2015 applied retrospectively. It was determined that prejudgment interest does not fit into the definition of a "vested right"; the rate of prejudgment interest on damages is always subject to judicial discretion, which can only be exercised at the time damages are awarded. Any "right" is not crystallized or certain until a judge makes a determination as to the applicable interest rate. The Court also found that the legislature intended for the prejudgment interest regime to have retrospective effect so as to apply to pre-existing causes of action. Any perceived unfairness to litigants who commenced their actions before January 1, 2015 could be ameliorated through a judge's discretion under s. 130 of the CJA.

While the previous version of s. 267.5(9) of the Act held that the determination of a party's entitlement to costs would be made without regard to the damages awarded for non-pecuniary loss, the amended version effective August 1, 2015 provides that the determination should be made with regard to the net damages award. The Court of Appeal held that the amendment should have been applied in Cobb because: a) there is no vested right to costs; and b) costs legislation is "procedural." The statutory scheme relating to costs, like that of prejudgment interest, is discretionary in nature and accordingly cannot vest until a judge's decision. Procedural legislation applies immediately to both pending and future cases because it does not affect the substance of the relevant rights. Costs legislation has long been considered "procedural."

  • Did the trial judge err in applying the statutory deductible in force prior to August 1, 2015 ($30,000) rather than the statutory deductible in force at the time of judgment ($36,540)?

This was in relation to 267.5(7)3(i) of the Act which requires the deduction of a prescribed statutory deductible prescribed by regulations. The amendment to this regulation came into force on August 1, 2015 while the accident occurred in 2008. The Court concluded that the legislature would have understood that the "rolling incorporation rule" mandated by s. 59 of the Legislation Act, 2006, which ensures application of the current version of a regulation to which a statutory provision refers, would apply. As the regulation was intended to "keep pace with economic realities", the Court decided that the statutory deductible in force at the time of judgment was to be used accordingly.

  • Did the trial judge err in refusing to put the question of punitive damages to the jury?

The ONCA found that a factor in assessing the eligibility of a punitive damages award is whether punishment had already been imposed in a separate proceeding for the same misconduct. As the defendant in Cobb had already been given a criminal sentence, the Court held that there was no evidence to suggest that the previous sentence was insufficient to meet the objectives of retribution, deterrence and denunciation.

El-Khodr v. Lackie

In the companion decision El-Khodr, the Ontario Court of Appeal also determined whether future SABs payments in relation to medication, assistive devices, and professional services should have been assigned to the appellant (defendant) in the matter under s. 267.8(9) of the Act. At trial, the Superior Court of Justice had not assigned the same because the jury failed to differentiate the apportionment between the categories.

The ONCA held that qualitative and temporal matching requirements should not be applied as the assignment and trust provisions of the Act require the court to match benefits that will be received after trial to the broad, enumerated statutory categories only in a general way. As the aim of the trust and assignment provisions is to ensure that no risk of under-compensation passes to the Plaintiff while also minimizing double recovery, the Court concluded that the trial judge erred in not ordering an assignment in relation to the awards for the cost of future medication and assistive devices and future professional services.


Future plaintiffs in motor vehicle accident cases should minimize trial courts' difficulty in matching damages and statutory benefits by presenting their claims according to the categories in s. 267.8 of the Act. They should make claims for:

  • past and future health care expenses;
  • past and future income losses;
  • past and future for other past and future pecuniary losses that have SABs coverage; and
  • any past and future pecuniary losses that lack SABs coverage.

It would also be prudent for plaintiffs to keep in mind that the provision amendments in the Act with regards to costs, statutory deductibles, and pre-judgment interest are in force and will be considered in any applicable decision, regardless of whether an accident occurred before January or August 1, 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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