Chisholm v. Lindsay, 2012 ABQB 349

Court of Queen ’ s Bench of Alberta Citation: Chisholm v. Lindsay, 2012 ABQB 349 Date: 20120525 Docket: 0701 04015 Registry: Calgary Between: Catherine Chisholm Plaintiff - and - Noreen Lindsay Defendant _______________________________________________________ Supplemental Reasons for Judgment of the Honourable Madam Justice C.L. Kenny _______________________________________________________ Introduction [ 1 ] This decision is a follow-up to my Reasons for Judgment issued on February 12, 2012 and reported as Chisholm v. Lindsay , 2012 ABQB 81 . [ 2 ] There are two issues that have arisen.

a) In my Judgment, I awarded $125,000 for loss of earning capacity. The Plaintiff believes this is a net award, and seeks to have this award increased for tax. The Defendant argues that the award should be reduced for tax pursuant to

section 626.1(2) of the Insurance Act , RSA 2000, c I-3.

b) The Defendant argues that any medical benefits that the Plaintiff is entitled to, as they relate to an award of a future care cost, must be deducted from the cost of future care pursuant to

Section 626.1(4)(

b) of the Insurance Act . [ 3 ] I am advised by counsel that there is really no substantive law on these sections of the Insurance Act which came into force on January 26, 2004 because there have been very few personal injury trials to date where the accident occurred after January of 2004.

Tax Gross-up on Loss of Earning Capacity [ 4 ] The Plaintiff argues that the intention of my award was to compensate the Plaintiff for the loss of a future income stream and since the economists at trial calculated various scenarios for the loss of a future income stream based on net numbers, I must now gross up my award for tax in order to make the Plaintiff whole. [ 5 ] I declined to make an award based on the loss of a specific future income stream. The facts of this case do not lend themselves to that calculation.

I awarded a loss of earning capacity which is an acknowledgement that there will be times in the future when the Plaintiff’s capacity to maximize her earning potential will be impaired by the injuries suffered from the accident. [ 6 ] There is case law and academic writing which suggest that whether you call it loss of earnings, loss of earning capacity or loss of working capacity, it is all the same - a loss of the ability to earn income to your maximum potential at some time in the future. [ 7 ] The experts at trial provided their information in net numbers as s.626.1(2) of The Insurance Act requires that gross income be reduced by income tax, contributions and premiums to prevent double recovery.

It would be inappropriate to now gross up my award, as suggested by the Plaintiff, only to have it reduced again to comply with the legislation. [ 8 ] While the Defendant argued before me that tax must be taken off the award for loss of earning capacity pursuant to the Insurance Act , I understand that they take that position only if the Court were to gross up the award.

Section 626.1(2) says that income tax that would have been payable on lost earnings had the accident not occurred must be deducted. Since the evidence before me was in net numbers, so is my award for loss of earning capacity. There is no tax that must be deducted. [ 9 ] There will be no tax gross-up or deduction from my award of $125,000 for loss of earning capacity. Deductions to Cost of Future Care Award [ 10 ]

Section 626.1(4) (

b) of the Insurance Act provides that awards for medical care and sickness and accident benefits comprising medical care or goods or services that are not provided under the Alberta Health Care Insurance Act must be reduced by the aggregate of all payments and net of tax, contributions and premiums paid or payable that are received by the claimant as a result of the accident. [ 11 ] This amendment again is to deal with the issue of double recovery. If the claimant has a policy which covers a portion of the expenses, then they cannot be compensated again for that payment. This is akin to

Section B benefits which are deducted from any award for the same benefit already covered by

Section B. The Court may also consider deducting premiums to maintain the policy in place as set out in subsection (7). [ 12 ] In this case, the Plaintiff argues that this issue was never raised in argument at trial or in evidence at trial. No questions were asked by the Defendant of the Plaintiff or her husband while on the stand about any benefits they had or that they had used to pay any medical expenses nor was any evidence elicited with respect to the premiums for such medical insurance. The only reference to benefits in the evidence is a hearsay statement in a report by a cost of care expert indicating that he was told by the Plaintiff that her husband had

extended medical benefits. [13] I agree that there is no evidence before the Court on this issue. The question then becomes, does that matter? The Defendantsays it does not. A plain reading of the section, they say, makes it clear that once an award is granted, the appropriate reductions andcontributions must be considered to come up with a net number so that the claimant is not compensated twice. They refer specifically tothe following items awarded for future care in this case: dental treatment, psychotherapy, and medication.

It is argued that theDefendant/Court should review the policies held by the Plaintiff or her husband to see if they cover these expenses and then the Courtshould estimate an appropriate deduction from the award for future benefits that may be paid under that policy. [14] The Plaintiff argues that "medical care" referenced in

section 626.1(4)(

b) applies only to medical care referenced in theAlberta Health Care Insurance Act, RSA 2000, c A-20 and "accident and sickness benefits" are defined in s. 662 of the Insurance Actand neither cover the items of future care referred to above. In addition, the Plaintiff argues s. 626.1(5). That subsection says thatpayments received by the claimant are deemed to include circumstances where a legal obligation to pay or provide a benefit has beenestablished or acknowledged before the award (emphasis mine).

Since there is no evidence before the court about any such benefits,the Defendant cannot now, in effect, reopen their case to elicit this information after the award has been granted. [15] I see several difficulties with the Defendants position and the legislation itself. First of all, I agree with the Plaintiff thatsubsection (5) appears to require evidence of the obligation to provide benefits before the award. There is no evidence before the Courtin this regard. It was never argued and never asked about during the trial.

A hearsay statement in an expert report is not anacknowledgment or evidence that establishes the obligation to provide the benefit. [16] I do not agree with the Plaintiff that "medical care" and "accident and sickness benefits" is to be read so narrowly. Clearly theintention of the legislation is to prevent double recovery.

If one has extended health and dental benefits through any number of plans,and are compensated for costs of care related to the accident under such a plan, then those costs already covered by the plan must bededucted from the award for those costs of care. [17] The Defendant refers to the decision of Sovani v. Jin 2005, BCSC 1285 as analogous to the provisions in Alberta. Ifind that decision distinguishable given the different motor vehicle insurance schemes in the two provinces and the differences in what isthe equivalent of

section B benefits particularly the amount and for how long they can be paid. They are not comparable. [18] Counsel were unable to find any cases dealing with these provisions of the Insurance Act especially as they relate to medicalexpenses. Some of the provisions appear problematic to me especially in dealing with the cost of future care. These costs are often paidlong into the future. Most plans require that the person be a member of the plan or an employee, for example, at the time the benefits areclaimed.

If one has such benefits through employment, what is to say the provider does not change the plan in the future or the personlose their employment and no longer have any benefits. Under the current provisions of the Insurance Act, the Court would have made adeduction for those benefits which may not exist tomorrow or when the expenses are incurred.

The Plaintiff would then not becompensated for those costs of future care awarded by the Court. [19] There may, of course, be benefits which are triggered by an accident which carry on regardless of whether the person is amember of the plan at the time the costs of care are incurred.

That would be rare, I suspect, in normal extended benefit packages that oneeither subscribes to or go along with employment, but could easily be established at trial as those benefits would have kicked in at thetime of the accident regardless of whether the individual had coverage at the time of trial or thereafter. [20] The other difficulty is subsection (7) which allows the court to consider the premiums paid for those benefits or policies. Theonly reason an individual receives compensation under an extended plan is because they have paid premiums for that plan.

It is arguabletherefore, that when a Defendant claims a deduction for benefits already paid or to be paid in the future, all of the premiums paid by thepolicy holder from the time the policy started (since one could not know when an accident would occur) to some indefinite time in thefuture, must be added back in. For example, if a Plaintiff was age 25 at the time of the accident, and it was expected that they wouldrequire certain items of future care until they were 65, then an argument could be made that it is reasonable to add in anticipatedpremiums for the next 40 years.

Those are issues to be argued and decided at another time as they are unnecessary for my decision here. [21] I am satisfied that subsection (5) applies to this case, such that the legal obligation to make the payments or provide thebenefits was not established or acknowledged before the award. As such, there will be no reduction in the cost of future care award. Evenif this had been established, in my view, the Defendant would have to establish that there was a legal obligation to provide the benefits in

the future regardless of whether a benefit plan was in existence at the time the costs of care were incurred. The cost of premiums would also have to be addressed. Decision [ 22 ] There will be no tax gross up or tax deduction to the loss of earning capacity award. There will be no reduction to the cost of future care award for benefits paid or payable under any extended health or dental plan. Heard on the 16 th day of May, 2012. Dated at the City of Calgary, Alberta this 25 th day of May, 2012. C.L. Kenny J.C.Q.B.A. Appearances: Norma C. Mayer for the Plaintiff Taryn Burnett/ Katherine Stys for the Defendant