Significant Alberta Court of Appeal Decision for Automobile Insurers
On February 26 the Alberta Court of Appeal released its decision in Hammond v DeWolfe, 2014 ABCA 81, a decision of some significance for automobile insurance underwriters in Alberta. In brief the Court of Appeal concluded the Insurance Act restrictions on the recovery of income related damages where a claimant has an alternate source of recovery have no application when that alternate source of recovery is an employer`s income benefits program rather than an insurance policy.
The Plaintiffs were Mr. Hammond and his employer Syncrude Canada Ltd. Mr. Hammond was injured in a motor vehicle accident and sued Ms. DeWolfe as the at fault party. Under a private income benefits plan associated with its employment contract with Mr. Hammond, Syncrude paid Mr. Hammond over $38,000 while he was temporarily disabled. Pursuant to subrogation rights provided for in the contract Syncrude joined Mr. Hammond as a plaintiff to recover what it had paid. Syncrude also claimed recovery of what it had paid based on an independent action for the loss of Hammond's services, a per quod servitium amisit or 'per quod' claim.
The Court of Queen's Bench Chambers Justice that heard the initial Application (2012 ABQB 684) was asked two questions: (1) Does section 570 (previously section 626.1) of the Alberta Insurance Act bar Syncrude's subrogated claim and (2) can Syncrude recover the payment based on the 'per quod' claim. The Chambers Justice found that the Insurance Act provision bars Syncrude's subrogated claim and that the 'per quod' claim was available.
The Court of Appeal overturned the decision on section 570. The Court recognized that, but for the statute section, the right of Syncrude to recover by way of subrogation would exist at common law, and that legislation is not presumed to abolish or limit common law rights in the absence of express language.
The Court recognized that section 570 was passed as part of the package of reforms intended to control damages payouts by automobile insurers and control insurance premiums. Section 570 did so by putting an end to double recovery where a claimant has a benefits source that overlaps with that part of his or her damages recovery that is calculated based on loss of earnings.
In the case of a private income replacement scheme such as that offered to Syncrude employees the Court found that Syncrude was not an insurer and its scheme was not intended to be caught by section 570. Specifically, it was not clear that the legislature intended benefits paid under such a scheme to be deducted from the damages awarded on the basis that they were `benefits under an income replacement plan or scheme referred to in section 15.1' for the purposes of section 570(4)(e). Furthermore, the Court interpreted the provision in section 570(6) which removes a benefits payor's right of subrogation as applying only to insurers who make payments to 'insureds'. Syncrude, not being an insurer, was therefore not caught by that provision.
The Court of Appeal, having upheld Syncrude's right of recovery by way of subrogation declined to address the second issue. Accordingly, the Chambers Justice's approval of the 'per quod' claim is the last word on that issue, neither affirmed nor reversed by the Appeal panel. The law in this area is in need of clarification in Alberta but the Court's decision not to touch the issue is perhaps not surprising in the circumstances. In 2004 the Court of Appeal declined to consider the merits of this type of claim because the evidentiary basis was insufficient. The same could be said about the Hammond case which proceeded as a purely legal argument on agreed facts.
It remains to be seen whether Ms. DeWolfe and her insurer will seek leave to appeal to the Supreme Court of Canada. In the meantime it appears that payments that claimants receive under income benefit plans offered by employers rather than by insurers are not to be deducted from lost earning damages awards and the employers who make payments under such plans can continue to recover from the at fault party's automobile insurer what they have paid based on subrogation.