Hammond v DeWolfe, 2012 ABQB 684

Court of Queen ’ s Bench of Alberta Citation: Hammond v DeWolfe, 2012 ABQB 684 Date: 20121107 Docket: 1103 14802 Registry: Edmonton Between: Richard Hammond and Syncrude Canada Ltd. Plaintiffs - and - Patricia Dawne DeWolfe Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice R.G. Stevens _______________________________________________________ [ 1 ] On July12, 2012, I gave oral Reasons for Judgment in respect of this matter. Because counsel for both parties advised that one sentence in those Reasons could give rise to a misunderstanding, I was asked to provide clarification, which I do by way of these written Reasons. Background

[2] The Plaintiff Syncrude Canada Ltd. (“Syncrude”) seeks an order in respect of an issue pursuant to Rule 7.1(1)(a). The partiesare agreed in respect of the essential facts. The Plaintiff Richard Hammond (“Hammond”) was at all material times an employee ofSyncrude. On September 22, 2009, Hammond was involved in a motor vehicle accident with the Defendant Patricia DeWolfe(“DeWolfe”) and as a result was injured.

Hammond missed all of his scheduled shifts from September 25, 2009 to January 26, 2010.Syncrude continued to pay him his regular wage during his absence, pursuant to Syncrude’s Temporary Disability Plan (“TDP”). TheTDP provides for short term income benefits in the event of an employee’s disability. The TDP is fully funded by Syncrude and formspart of its employment contract with Hammond.

At paragraph 8.6, the TDP includes a clause entitled “Subrogation”, which provides: To the extent that income benefits are paid to an employee pursuant to this plan as a result of illness sustained by the employee becauseof the actions of a third party the employer is automatically subrogated to all rights of recovery of the employee against such third party. [3] Syncrude’s claim is limited to the wages it paid to Hammond during the period of his disability. The Statement of Defencealleges Syncrude’s right of recovery is barred by

section 626.1 (now s.570) of the Alberta Insurance Act, R.S.A. 2000, c. I-3. [4] The parties agreed that the questions under Rule 7.1(

b) are as follows: 1. Is Syncrude subrogated to any right of recovery enjoyed by Hammond in respect of income benefits paid by Syncrude to Hammondduring his absence due to injuries sustained in the motor vehicle accident of September 22, 2009, notwithstanding s.626.1 of theInsurance Act? 2. Is Syncrude entitled at common law to claim damages for the loss of services of Hammond during his absence due to injuriessustained on September 22, 2009, on the basis of an action per quod servitium amisit, or in other words an action of a master for hisservant’s services? 1.

Subrogation and s. 626.1 (Now s. 570) of the Insurance Act [5] With respect to Question 1, Syncrude submits that it has a right of subrogation under the TDP which forms part of itsemployment contract with Hammond. The TDP is fully funded by Syncrude and Hammond does not pay a premium and therefore inSyncrude’s submission is not an insured. The intent of the Insurance Act is to regulate the traditional insurance industry, to protect thepublic from insolvent or unscrupulous companies and from certain unfair types of policy and claims processes, not to eliminate thirdparty claims against insured tortfeasors.

While the purpose of s.626.1 of the Act is to avoid double-recovery by a claimant, the schemerelates only to insures and contracts of indemnity. Syncrude contends that it is an employer, not an insurer, and the TDP provides for anonindemnity right of subrogation as part of the employment contract. [6] Syncrude points to the decision of the Supreme Court of Canada in Ratych v. Bloomer, (SCC), [1990] 1S.C.R. 940. That case involved a police officer injured on the job. He claimed against the tortfeasor for damages including loss ofearnings, notwithstanding that his earnings had been paid by his employer.

Under the then-prevailing law there was no mechanism toensure a subrogated amount would actually be paid to an employer, and the employer did not advance a subrogated or per quod claim.The Court said double recovery is to be avoided. At para.93, McLachlin J. (as she then was) held: It thus appears that the avoidance of double recovery by transference of benefits to the third party benefactor, while it may function insome cases, does not provide a solution for all situations.

What is required if double recovery is to be avoided is a rule which allowstransfer to third parties wherever appropriate, while preventing double payment where such transfer is impractical or impossible. Then, at para.99, McLachlin J. stated a general rule: As a general rule, wage benefits paid while a plaintiff is unable to work must be brought into account and deducted from the claim forlost earnings. An exception to this rule may lie where the court is satisfied that the employer or fund which paid the wage benefits isentitled to be reimbursed for them on the principle of subrogation.

[7] Syncrude submits that is what is occurring here. It relies upon its right of subrogation and contends that no double recoverywill occur. It should be noted that the Court in Ratych, per McLachlin J., spoke positively about subrogation and per quod servitiumamisit as methods of avoiding double recovery by transfering the benefit to a third party. See particularly paras.86, 87 and 89. [8] Lastly, the TDP establishes an income continuation plan that is a nonindemnity plan where there is no proof of loss and theworker’s income is continued.

This is to be distinguished from an income replacement plan, that is an indemnity plan where premiumsare paid to an insurer for this benefit and the worker is required to provide proof of loss. The terms “income continuation plan” and“income replacement plan” are referenced in

section 626.1(4)(

d) and (e), but are not defined. The word “prescribed” modifies the plansin subsection (d). Counsel submits that “prescribed” requires regulations to give meaning to the subsection. There are no suchregulations, therefore no meaning. [9] DeWolfe submits that the scope of s.626.1 of the Insurance Act is restricted to awards received in respect of an automobileaccident claim, and thus the only claims of beneficiaries under the TDP who are affected by s.626.1 are those injured in an automobileaccident.

DeWolfe contends that s.626.1 was enacted to reverse the effect of the private insurance exception recognized by the SupremeCourt of Canada in Ratych and expanded by that Court in Cunningham v. Wheeler, (SCC), [1994] 1 S.C.R. 359. As aresult, plaintiffs with disability insurance were entitled to dual recovery respecting wage loss, one from the tortfeasor and the other fromthe disability insurer. The collateral benefits provision contained in s.626.1 were devised to prevent such double recovery, as disclosedby the government’s sponsor of the bill: see Alberta Hansard, December 2, 2004, per Mr.

Renner. [10] To achieve its objective, DeWolfe submits, s.626.1 not only provides for deduction of benefits received by insured claimantsbut also removes the right of subrogation that could otherwise be effected through the injured claimant by his benefits provider. Thelegislative objective was to make the injured claimant revenue neutral in this regard. [11] DeWolfe further contends that, but for s.626.1, Syncrude would be entitled to subrogate through its employee. Disability plansfunded and provided by employers constitute contracts of indemnity and are a class of insurance. See Davidson v.

Pun (1984), (BC CA), 57 B.C.L.R. 240 (C.A.) and Chan v. Butcher (1984), (BC CA), 51 B.C.L.R. 337 (C.A.). InChan, the Court of Appeal held that the characterization of the benefits does not depend upon their source but on their intrinsic nature.See para.13.

At para.18, the Court analyzed the short term disability plan in that case and concluded, “There can be no relevantdifference between such a fund and any other form of insurance.” The analysis bears a close resemblance to the case at bar, and DeWolfesubmits that the “intrinsic nature” of the Syncrude plan is a form of insurance. [12] In any event, DeWolfe contends that the statutory provisions do not confine the scope of the collateral benefit provisions,including removal of subrogation rights, to insurers.

Finally, DeWolfe contends that Syncrude’s argument with respect to wagecontinuation and wage replacement amounts to a distinction without a difference. In Graham v. Hill, 2003 NBCA 24, the NewBrunswick Court of Appeal interpreted income continuation as including income replacement. [13] I agree with DeWolfe’s submissions. I find that s.626.1 applies to Syncrude’s TDP plan and therefore the benefits paid toHammond thereunder are deductible and Syncrude’s right of subrogation is removed. 2.

Damages for Loss of Services on the Basis of Per Quod Servitium Amisit [14] With respect to the second question, Syncrude seeks to recover the wages paid to Hammond during his absence pursuant tothe doctrine of per quod servitium amisit. It is not immediately clear whether this doctrine continues to found an action in Alberta. InCanada (A.G.) v. Livingstone, 2004 ABCA 236, the Alberta Court of Appeal did not resolve the issue. That case involved an action bythe Attorney General and the RCMP to recover sick wages paid to an RCMP officer injured when struck by a vehicle driven by thedefendant.

The chambers judge concluded that the doctrine of per quod servitium amisit exists in Alberta as it had not been abolished bystatute. The Court of Appeal set aside the chambers judges’s decision and ordered that the matter be returned to the Court of Queen’sBench for reconsideration de novo. There has been no reported decision regarding a trial de novo in the Livingstone case. [15] Recent decisions in other provinces have confirmed the per quod right even in the face of no-fault insurance schemes. SeeCanada (A.G.) V. Kerr (1997), (ON SC), 36 O.R. (3d) 71 (Div.Ct.) and Schittone v.

George Minkensky Ltd. (1997), (ON SC), 36 O.R. (3d) 75 (Gen.Div.). I would reiterate that in Ratych, McLachlin J. spoke positively about a per

quod action being a potential remedy to the problem she was discussing. [ 16 ] With respect to this matter, I find that Syncrude is entitled at common law to claim damages for loss of services of its employee Hammond during his absence due to the injuries sustained in the motor vehicle accident of September 22, 2009. Costs [ 17 ] On July 12, 2012, when I advised the parties of my decision, counsel very reasonably agreed that as success in this matter was divided, they would each bear their own costs. Heard on the 16th day of May, 2012. Dated at the City of Calgary, Alberta this 2nd day of November, 2012. R.G.

Stevens J.C.Q.B.A. Appearances: J.W. McCully for the Plaintiffs J.L. Huston for the Defendant