Category: Income Loss (Past)

Banked Sick Time Recoverable On Tax Exempt Basis

In Chalmers v Russell, the Court held that payments for banked sick time are tax exempt in a damages award for loss of income.

 

 [85]           I accept Ms. Chalmers’ evidence that following the first accident, she was so sore and painful that she felt it necessary to take time off work prior to the birth of her child in order to expedite her recovery.  I am mindful that she did not obtain any medical evidence in support of her decision to take time from work.  Regardless, given her advanced state of pregnancy, the trauma of the accident and the pain she was in after the first accident, I consider her decision not to return to work to be reasonable and due to her injuries.  The cost to reimburse the sick bank during this time period is $342.45 per day, totalling $3,766.95.

 

[86]         As noted in Bjarnason v. Parks, 2009 BCSC 48, depletion of a sick bank is a compensable loss: at para. 56.  However, it is not an income loss so there should be no deduction for income tax in accordance with ss. 95 and 98 of the Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231: Bjarnason at para. 66.

 

Plaintiff Entitled To Award For Banked Sick Time

In Burton v Bouwman, the Plaintiff was forced to use up a good portion of “banked sick time” due to injuries sustained in a motor vehicle accident. The lawyer for ICBC argued that the Plaintiff was not entitled to such damages, however the Court ruled differently.

 

 [157]      Mr. Burton is not entitled to receive cash from CSC for unused banked sick leave.  The banked sick leave will only be of value to him if he becomes sick and has insufficient banked sick leave, with the result that he takes an unpaid leave.

 

[158]       There is a real and substantial possibility that Mr. Burton will become sick while still employed by CSC and have insufficient banked sick leave.  Mr. Burton is entitled to compensation to reflect that…

 

[190]      As discussed above, Mr. Burton is entitled to be compensated for the loss of his banked sick time.  CSC paid Mr. Burton about $12,000 for his banked sick leave after the First Accident, about $250 after the Second Accident, and about $18,700 after the Third Accident.  That is a total of about $30,950.

 

[191]       The method of compensating a continuing employee for loss of sick bank credits was discussed in Bjarnson v. Parks, 2009 BCSC 48, and the cases cited in it.  In that case, and in Roberts v. Earthy, [1995] B.C.J. No. 1034 and Choromanski v. Malaspina University College, 2002 BCSC 771, the court awarded the full amount of salary corresponding to the banked sick leave, without making any deduction for contingencies.  Other cases cited in Bjarnson made such a deduction.

 

[192]       I would assess the likelihood that Mr. Burton will become sick while working at CSC and have insufficient banked sick leave at 75 percent.  As a result, Mr. Burton is entitled to damages of $22,500 in respect of his lost banked sick leave.

Court Discusses “Private Insurance” Exception To Rule Against Double Recovery

If you have been injured in a motor vehicle accident, and you have received wage loss replacement benefits through, for example, your employer, ICBC cannot then deduct any such amounts from your overall damages award, provided there is evidence that you paid for such insurance benefits in the first place. A main reason for no deduction being allowed is that your employer or insurance carrier will almost invariably ask you to sign a subrogation agreement, requiring you to repay the amount of the wage loss benefits.

 

In Napoleone v Sharma, the Court discussed the “private insurance” exception to the rule against double recovery.

 

[5]               Ms. Napoleone argues that the insurance exception to the general rule against doubt recovery is applicable to this case. In support of this proposition, Ms. Napoleone relies upon Cunningham v. Wheeler,1994 CanLII 120 (SCC), [1994] 1 S.C.R. 359, Brennan v. Singh (1999), 86 A.C.W.S. (3d) 537 (S.C.), and Kean v. Porter2008 BCSC 1594 (CanLII), 2008 BCSC 1594.

 

[6]               The defendant argues the insurance exception is not available to Ms. Napoleone because there is no evidence that she or her husband paid for the insurance benefits by any means. In support of this proposition, the defendant relies upon Cunningham and Ratych v. Bloomer1990 CanLII 97 (SCC), [1990] 1 S.C.R. 940.

 

[7]                The general rule in an action for damages arising out of negligence is that the plaintiff is only entitled to be restored to the position she would have been in had the accident not occurred. The plaintiff is awarded damages for her actual loss and no more: Cunningham at para. 5 per McLachlin J. (dissenting in part)

 

[8]                The law has recognized a limited exception to the rule against double recovery which is referred to as the “private insurance” exception. In Cunningham at para. 75 Mr. Justice Cory, speaking for the majority, adopts the following passage from Bradburn v. Great Western Rail Co., [1874-80] All E.R. 195 as accurately describing the underlying rationale for the exception:

 

… I think that there would be no justice or principle in setting off an amount which the plaintiff has entitled himself to under a contract of insurance, such as any prudent man would make on the principle of, as the expression is, “laying away for a rainy day”. He pays the premiums upon a contract which, if he meets with an accident, entitles him to receive a sum of money. It is not because he meets with the accident, but because he made a contract with, and paid premiums to, the insurance company, for that express purpose, that he gets the money from them. …and I think that it ought not, upon any principle of justice, to be deducted from the amount of damages proved to have been sustained by him through the negligence of the defendant.

 

[9]                Whether the plaintiff has paid for private insurance or has obtained these benefits through an employment contract, the exception will apply. It is also irrelevant that it is the plaintiff’s husband who secured these benefits. See, Brennaat para. 182-3. However, the onus rests with the plaintiff to prove he or she has paid for the provision of insurance benefits in some fashion. As Cory J. says in Cunningham at para. 94:

 

In my view, Ratych v. Bloomer, supra, simply placed an evidentiary burden upon plaintiffs to establish that they had paid for the provision of disability benefits. I think the manner of payment may be found, for example, in evidence pertaining to the provisions of a collective bargaining agreement just as clearly as in a direct payroll deduction.

 

[10]            There is no evidence before the court as to what, if any, consideration passed between Mr. Napoleone and his employer in respect of the extended health benefits. There is no evidence of whether Mr. Napoleone pays all or a portion of the insurance cost or whether it was negotiated as a part of a collective bargaining scheme. The only evidence before the court is that the plan was secured through Mr. Napoleone’s employer and it covers 80% of Mrs. Napoleone’s health related expenses.

 

[11]            Without an evidentiary foundation to support the claim, I am unable to apply the private insurance exception to the case at hand. As Cory J. says at para. 93 of Cunningham, it is only when this evidentiary requirement is met that the court may be satisfied the plaintiff has shown the prudence and corresponding deprivation that underlies the exception and permits double recovery.

Past CPP Benefits Not Deductible From Income Loss Award

When an award for past wage loss has been made, the lawyer for ICBC will often argue that any CPP benefits already made to the claimant should be deducted from the amount awarded.

 

In Kean v Porter, Seniuk, and ICBC, the Court dismissed the argument of ICBC’S lawyer in this regard.

 

[102]        Counsel for the defendant and the third party argued that CPP disability benefits received by Mr. Kean should be deducted from his award for past wage loss, and the present value of future CPP disability benefits should be deducted from his future income award.  The thrust of their argument is that this is necessary to prevent double recovery.  The defendant argues that CPP disability benefits are a form of mandatory social insurance that workers cannot negotiate out of, and the scheme is a form of income replacement.

 

[103]        The defendant’s argument is essentially the same argument that these same counsel made unsuccessfully in the case of Maillet v. Rosenau 2006 BCSC 10.  In Maillet, the plaintiff had received social assistance payments which were deducted from the past wage loss, but Powers J. did not accede to the defendant’s argument that future CPP disability benefits should be deducted from the award for losses of future earnings.

 

[104]          In Maillet, Powers J. followed a line of authority which had held that the CPP disability pension scheme was essentially an insurance scheme and covered by the insurance exception to the rule against double recovery.

 

[105]      Like Powers J, I do not see the reasoning in M.B. as effecting a change in the law as it applies to CPP disability payments.  The analysis undertaken in that case was outlined in ¶24 of the decision:

 

The first question is whether social assistance is a form of income replacement.  If it is not, no duplication arises.  If it is, the further question arises of whether social assistance can be excluded from the non-duplication rule under an existing or new exception.

 

[106]      The court determined that social assistance was a form of income replacement and then stated in ¶28:

It follows that the only way in which they can be non-deductible at common law is if they fit within the charitable benefits exception, or if this court carves out a new exception. Otherwise, retention of them would amount to double recovery.

 

[107]      After holding that social assistance payments did not fit the charitable benefits exception (because the rationale for that exception did not concern the purpose of charitable donations, but its effect on the owners and the difficulties of valuation), the court discussed whether it should carve out a new policy- based exception.  The court decided that it should not do so.  Clearly there was no viable argument that the insurance exception might be applicable to social assistance and that was not considered.

 

[108]        The defendant wishes to characterize the CPP disability payments as a form of social security because it is a legislative creature and contributions are mandatory. But, unlike social assistance, it is funded by contributions and only those who have contributed can benefit.  There is an overlap of recovery, but that is inherent in the insurance exception to the rule against double recovery.  The other side of the coin is that to deduct the CPP benefits from a tort award is to force the injured contributor to share the benefits of his contributions, (which represent deductions from his former earnings), with the tortfeasor.

 

[111]        I conclude, as did the court in Maillet, that the law in this jurisdiction is settled to the effect that CPP disability benefits fall within the insurance exception to the rule against double recovery and should not be deducted from tort awards for past or future wage loss.