Canada: N.S. Court Decides Future Wage Loss Calculated On Gross – Not Net – Basis In MacDonald v. MacVicar

On October 24, 2018, the N.S. Supreme Court issued Supplemental Reasons explaining why it decided that future income loss under section 113BA(1) of the N.S. Insurance Act, RSNS 1989, c. 231 must be calculated on a gross, and not a net, basis.

The decision in MacDonald v. MacVicar highlights, and perhaps heightens, the confusion that has surrounded the Act's separate treatment of past and future financial losses, and of loss of income and diminished earning capacity, for people injured in motor vehicle accidents. Until now, insurance defence counsel has relied in part on the reference in section 2(1) the Insurance Tort Recovery Limitation Regulations, NS Reg. 182/2003 to future income loss as support for the position these awards must be calculated on a net basis. And the court supported this interpretation of the Regulations in its 2009 decision in McKeough v. Miller. The interpretation in MacDonald v. MacVicar is at odds with McKeough v. Miller. It is, however, consistent with the court's June 2018 decision in Holland v. Sparks – currently under appeal.

It remains to be seen whether the insurer will appeal the decision in MacDonald v. MacVicar to resolve the confusion around the interpretation of section 113BA(1) of the Act, whether the appeal decision in Holland v. Sparks will do so, or whether the confusion will continue. In the meantime, given two consistent 2018 decisions, N.S. casualty insurers are wise to project future income loss claims arising from motor vehicle accidents on the higher gross basis. Past income loss remains calculated on a net basis. The decision doesn't, however, appear to affect insurers in other Atlantic provinces. It appears the current N.L. approach to calculating future income loss on a net basis can continue. This is based on the different language of section 26.5 of the N.L. Automobile Insurance Act, of which the courts in both this decision and in Holland v. Sparks took note (at para. 22-23) – at least until the N.L. courts say otherwise. In N.B. and P.E.I., the approach is to calculate future income loss on a gross basis in any event. 

The Trial Decision. Ms. MacDonald was a registered nurse. On September 4, 2012, she was a passenger in a vehicle in Glace Bay, N.S. when it was hit from behind. Ms. MacDonald claimed she suffered injuries and a total disability as a result of the accident. At trial, Ms. MacDonald successfully argued she was unable to return to her employment as a nurse. The N.S. Supreme Court awarded her damages for future loss of income without any residual earning capacity. In the court's September 7, 2018 trial decision, it stated Section 113BA(1) "should not be construed as interfering with a Plaintiff's common law right to damages for future income loss based on a gross before-tax earnings without clear and unambiguous language" (at para. 385). The court set provisional loss of future income at $335,514 (before a reduction for negative contingencies), with Supplementary Reasons to follow.

The Supplementary Reasons. In the court's October 24, 2018 Supplementary Reasons, it expanded on why it decided an award for future income loss should be calculated on gross basis instead of a net basis (that is, net of statutory deductions like income taxes, Canada Pension Plan premiums, Employment Insurance premiums, and union dues):

• Common law. The default common law position is that future income loss is calculated on a gross basis, per the Supreme Court of Canada's 1994 decision in Cunningham v. Wheeler.  
• Act interpretation. The wording of section 113BA(1) does not specifically address income loss into the future, and looks to the court's June 2018 decision in Holland v. Sparks – currently under appeal – as authority for distinctive treatment of income loss awards from "before the trial" and after.  
• Regulations subordinate. The wording of Section 2(1) the Insurance Tort Recovery Limitation Regulations, NS Reg. 182/2003, does speak to future income loss, and state it should be calculated net of statutory deductions. The court found the principles of statutory interpretation dictate that the wording of a statute (the Act) is paramount to subordinate legislation (the Regulations) so the Regulations' reference to future loss was not authoritative.

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