The recent Court of Appeal decision in Kolapully v. Myles, 2024 ONCA 350 is  noteworthy for both plaintiff and defence counsel, making salient remarks about whether non-earner benefits are deductible from a tort award for loss of income pursuant to s. 267.8 of the Insurance Act. Justice Lauwers, writing for Rensburg J.A. and Thornburn J.A., confirmed that the Court’s prior decision in Cadieux v. Cadotte is binding authority to the effect that non-earner benefits received by a plaintiff before trial must indeed be deducted from an income loss award at trial. This decision puts an end to prevailing questions surrounding the applicability of two different approaches to the interpretation of s. 267.8.

The matter before the Court of Appeal arose out of a motor vehicle accident involving Ms. Kolapully, who was struck by a Toronto Transit Commission (“TTC”) bus while crossing the street in Toronto, in 2012. The long-standing dispute between Ms. Kollapully and TTC concluded after a six-week trial in 2022 before Justice Sugunasiri, following which the jury awarded Ms. Kolapully $175,000 in non-pecuniary damages , and $200,000 in damages for past loss of income. The trial judge determined that the amount Ms. Kolapully had received for non-earner benefits under the SABS – about $95,000 – was not to be deducted from the damages award for past income loss under s. 267.8 of the Insurance Act.

The TCC appealed the decision on various grounds. Firstly, the TCC argued that the trial judge erred in three ways, giving rise to the need for a new trial. The TCC submitted that the trial judge erred in:

  1. Allowing into evidence an untried medical test, the Single Photon Emission Computed Tomography (“SPECT”) scan of Ms. Kolapully;
  2. Excluding evidence of attendant care claims forms Ms. Kolapully signed in blank as part of her alleged participation in a fraudulent scheme; and
  3. Her articulation of the test for causation, particularly in her jury instructions and in her instructions on the calculation of damages.

With respect to the admission of SPECT scans into evidence, the Court of Appeal held that their decision should not be liberally interpreted as a proposition that SPECT scans are reliable in detecting brain injuries for the purposes of civil litigation. Instead, the Court reiterated that admissibility should be determined on a case-by-case basis through the application of correct legal principles and careful balancing of the possible prejudicial effect and probative value of novel evidence. The Court held that the judge did not err on the any of the above three grounds of appeal.

Most notably, TTC additionally argued that in her disposition after the jury verdict, the trial judge erred in refusing to deduct non-earner benefits from the tort award under s. 267.8 of the Insurance Act, and she erred in her costs award. The appeal was allowed in part, based solely on this submission. At the appeal, the Court explored the history of insurance legislation, as well as three important cases relating to accident benefits, Walker v. Richie, Cadieux v. Cadotte and Bannon v. McNeely.

Section 267.8 of the Insurance Act mandates that in an action for loss or damage from bodily injury in an automobile accident, the trial judge must reduce a tort award of pecuniary damages by the amount received by the plaintiff in corresponding statutory accident benefits. The TCC moved to have Ms. Kolapully’s non-earner benefits deducted from the $200,000 award for past income loss that she received at trial, but the trial judge dismissed the motion, relying on Walker to find that non-earner benefits are not related to the plaintiff’s loss of income, and are therefore not deductible from a tort award for income loss under s. 267.8(1). The judge further found that since Cadieux was not a case about accounting for non-earner benefits, the court’s inclusion of these benefits in the category of income replacement benefits was obiter and not binding on her.

In its consideration of the spirit of insurance legislation in Ontario, the Court of Appeal noted that ultimately, while the statutory hybrid no-fault-tort insurance scheme aims at full compensation for an injured party, it also aims to prevent double compensation. It analyzed the two lines of caselaw emerging from statutory amendments to the Insurance Act in 1996: the “apples to apples” approach formulated in Bannon applied in cases governed by the new provision, versus the “silo” approach in Cadieux, which amounted to a rejection of the “apples to apples” approach.

In it’s analysis, the Court of Appeal concluded that the result in Walker had subsequently been overruled by the Court in Cadeiux, and therefore Walker was not binding on the trial judge in the present case. Furthermore, the Court held that the inclusion of non-earner benefits in the income loss silo in para. 12 of Cadieux was authoritative and not mere obiter, that it was the correct interpretation of the provision’s current text, and that it was therefore binding on the trial judge.

Lauwers J.A effectively dismantled the proposition that Walker and the “matching principle” continues to be good law in Ontario today as it relates to the deductibility of non-earner benefits from pecuniary damage awards. The Court made it clear that “in Cadieux, this court demolished the underpinnings on which Walker rested”, and that it “replaced the “apples to apples” approach with the silo approach, which groups specific statutory accident benefits and heads of damages together under three general categories.”

Consequently, the Court of Appeal found that the trial judge erred in characterizing as mere obiter the court’s inclusion of non-earner benefits in the silo of income replacement benefits. It held that the trial judge ought to have deducted the $95,000 received in non-earner benefits from the income loss award because non-earner benefits “belong in the income replacement silo.”

The takeaway from this significant decision is simple: the silo approach prevails, overriding Walker and Bannon. Non-earner benefits fall within the “income loss” silo for the purposes of deductibility. This approach aligns with the intended effect of accident benefits legislation, in that it allows full-compensation for victims of bodily injury arising from motor vehicle accidents, while also maintaining the overall integrity of the insurance law scheme by preventing double recovery. This is an especially important consideration to keep in mind for pre-2018 motor vehicle accident tort claims, where the total amount of non-earner benefits received by the plaintiff before trial could be significant, such that their deduction from a tort award may ultimately erase any monetary recovery by the plaintiff in terms of loss of income. It also provides much needed guidance for counsel who are attempting to resolve such cases before they get to trial.

Karina Dziuba is the author of this blog. If you have a question about this decision or a similar file, please contact Karina at 416-777-2811 ext 5293