The Importance of Certainty When Pursuing the Deduction of Collateral Benefits

The jury in Gilbert v. South et al., 2014 ONSC 3485 (CanLII), awarded the plaintiff general damages, future care costs and damages for past and future income loss and loss of housekeeping.

The plaintiff had been injured in a motor vehicle accident in 2010. The plaintiff’s injuries were non-catastrophic. He was entitled to certain statutory accident benefits including up to $100,000 for medical and rehabilitation, subject to a 10-year time period.

The plaintiff had received some medical benefits totalling $14,822.50 and housekeeping benefits totaling $14,822.50. The plaintiff had neither applied for nor received income replacement benefits or attendant care benefits and the time period to receive same had expired. The time period had also expired for the plaintiff to receive future housekeeping benefits. The defendant did not seek relief in relation to the benefits that may have been available to the plaintiff but were not pursued.

Prior to judgment being formally entered, the defendant brought a motion seeking various forms of relief relating to “certain futurestatutory accident benefits and other collateral benefits” received or to be received by the plaintiff.

The defendant relied on s.267.8 of the Insurance Actwhich in certain prescribed circumstances imposes trust, payment and assignment obligations on plaintiffs who in motor vehicle accident cases obtain certain types of litigated recovery for losses which also may be addressed by certain collateral benefits (para 8).

Justice Leach set out the general principals relating to the application of this section, including the following (pars 9):

·         the object of these provisions is to prevent “double recovery” by the plaintiff. The provisions assume that the plaintiff has obtained, through litigation, damages covering the same loss otherwise covered by the collateral benefits;

 

·         concern of double-recovery is balanced by concern that a plaintiff should receive full compensation and not recover less than that to which he is entitled. Statutory provisions of this nature are strictly interpreted and applied;

 

·         deductions from a plaintiff’s damage award to prevent double-recovery will be made only if it is absolutely clear that the plaintiff’s entitlement to such collateral benefits is certain, and the plaintiff received compensation for the same benefits in the tort judgment. Evidence of “likelihood” and “probability” is not enough to warrant a deduction. A “very strict onus of proof” applies in relation to such matters, and it must be “patently clear” that the preconditions for an appropriate deduction have been established.

Justice Leach held that there were too many uncertainties as to entitlement and overlap to grant the relief requested and the defendant’s motion was denied. There was no evidence as to the total amount or the nature of statutory accident benefits the plaintiff would definitely receive.

A further obstacle to the relief requested by the defendant was that the jury awarded the plaintiff $57,250.00 for “future care costs” but the jury did not indicate, and was not asked to indicate, the extent to which any of this amount was allocated to the time period during which the plaintiff may be entitled to medical and rehabilitation benefits. Of importance, Justice Leach notes that this uncertainty may have been avoided by the posing of more specific questions to the jury.

This decision stresses the importance of quantifying future entitlement to collateral benefits in advance of trial and the importance of taking care to ask the necessary questions of the jury in order to identify any overlap between the tort award and collateral benefits.

It's a whole new ballgame in PIP litigation, thanks to an SJC decision

I have written before, here, about why it is difficult to sue PIP carriers who fail to pay claims.  PIP claims are by their nature small: generally not more than $2000 and never more than $8000.  The PIP statute provides that the insurer must pay the claimant's attorney's fees if a judgment against the carrier enters.  Up until now, an insurer could avoid paying those fees if it forced a claimant to file suit, conduct discovery and go to trial and then, minutes before judgment enters, paid the claim.  Of course if the claimant proved bad faith in the insurer's actions then attorney's fees were available under Mass. Gen. Laws ch. 93A, but bad faith is harder to prove than mere failure to pay a claim when due.  Although some wiggle room was found by various decisions of the Massachusetts Appellate Division (a court that does not set precedent), see here and here, PIP cases in general were simply a bad risk. 

The Supreme Judicial Court of Massachusetts has changed all that.

In Barron Chiropractic & Rehabilitation, P.C. v. Norfolk & Dedham Group, 469 Mass. 800 (2014), the SJC has held that an unpaid party who has brought suit may refuse the insurer's tender of PIP amounts due, proceed with suit, and obtain a judgment for those amounts as well as its costs and attorney's fees. 

The plaintiff, Barron Chiropractic & Rehabilitation, provided chiropractic services to Nicole Jean-Pierre after an auto accident.  Jean-Pierre's PIP carrier was Norfolk & Dedham. 

Jean Pierre's chiropractor at Barron and Norfolk & Dedham disagreed about the length of treatment made necessary by the accident and about the proper price for her treatment.  The disputed amount was $1,544.05. 

Barron sued Norfolk & Dedham in District Court.  Norfolk & Dedham determined that its anticipated litigation costs would substantially exceed the amount of the disputed medical fees.  Six days prior to trial it sent Barron a check for the disputed amount with an attached check stub that stated "full and final settlement."  Barron's counsel returned the check to Norfolk's counsel with a letter stating that its offer of settlement was rejected.

The SJC held that under contract law Barron was not required to accept the tender of settlement for the amount due after the time for payment under the PIP statute had passed.  It also held that it would be unfair and against the purpose of the PIP statute to allow the insurer to escape costs and attorney's fees by paying the PIP amount that was due after forcing the claimant to file suit. 

Insurance and global warming

The New York Times has an article about the reaction (and non-reaction) of insurers to higher risk of property damage as a result of global warming.

My guess is that the government will find itself more and more in the property insurance business. Just as it entered the flood insurance market through the National Flood Insurance Program, the government will have to make a choice about whether to abandon owners of property now at high risk for hurricanes and other disasters or to subsidize them. 

My vote would be a gradually phased-out subsidy, perhaps with an income-based component.  Just as I don't think that taxpayers should have to pay to protect the houses of people who choose to build on unstable lands prone to falling into oceans or canyons, I don't think that over the long-term taxpayers should have to pay to protect property that is highly likely to be destroyed by relatively predictable weather disasters.  But I also don't want to see those property owners suffer a unilateral loss as a result of global warming, an event we have all caused and should all bear responsibility for.  And I want to see poorer people with more protections for their limited assets.   

The Test to Determine Whether an Insured "Permitted" the Unauthorized use of a Motor Vehicle

A recent decision looked at the test to determine whether an insured permitted someone else to drive his vehicle when she was not authorized to do so.

In O’Connell v.Personal Insurance Co., (2014 ONSC 1469 (S.C.J.), the insured let his girlfriend borrow his motor vehicle. The insured’s girlfriend was involved in an accident. It turned out that the insured’s girlfriend only had a G1 license and therefore she was not authorized to drive alone or on a 400 series highway, where the accident occurred. The insured stated that he had assumed his girlfriend had a full license. At trial, the insured’s girlfriend testified that she had not told the plaintiff that she did not had have a full license because she was embarrassed. The insurer denied a defence and indemnity on the bases that the insured had breached statutory condition 4(1) of the Ontario Regulation 777/93 and section 1.4.5 of the OAP, by allowing someone else to drive his vehicle when they are not authorized to do so.

The court held that the insured had not “permitted” his girlfriend to drive when she was not authorized to do so. In reaching this conclusion, the court held that the test to determine whether an insured permitted the use of their vehicle by an unauthorized driver is whether the insured took all reasonable and prudent precautions to see that the statutory condition was not contravened. The court held that the insured knew his girlfriend had a driver`s license and it looked the same has his full G license, he had heard her anecdotes involving driving in the past and she had never told him that she only had a G1 license. Given this, the court held that the insured acted as reasonably and prudently as an average individual in similar circumstances, the statutory condition was not breached and the insurer was bound to defend and indemnify the insured.

Appeals Court reminds us that when it comes to insurance, it's usually Buyer Beware

In Kleycamp v. USAA Casualty Ins. Co., 86 Mass. App. Ct. 1113, 2014 WL 4799608 (unpublished), the Massachusetts Appeals Court affirmed summary judgment to a defendant insurer that had not recommended that the plaintiffs purchase underinsured coverage with their auto policy.

The plaintiffs had never specifically inquired of the insurer about underinsured coverage, and the insurer never made any specific assertions or representations about the adequacy of the plaintiffs' coverage. 

The court noted that the general rule in Massachusetts is that insurers and their agents do not have a general duty to recommend insurance coverage, or to guarantee that insurance policies are adequate for a particular insured's needs.  There is an exception only for special circumstances, such as reliance on specific assertions or representations concerning the adequacy of coverage. 

In a footnote the court noted that the same analysis might not apply to homeowner's policies.

In my view, underinsured and uninsured coverages are among the most important insurance you can buy.  They can't protect you against the risk that another driver's carelessness will injure you; but they do protect you against the risk that that careless driver doesn't have enough insurance to cover your injuries. 

"Buyer's Remorse" Does Not Entitle Plaintiff to Rescind Settlement

In almost every settlement, there is an element of compromise.  In some cases, there is "settlor's remorse" and one of the parties tries to rescind the agreement.  Fortunately, the courts generally hold litigants to their bargains.

An example is Morant v. Sun Life Assurance Company of Canada, 2014 ONSC 2876 (S.C.J.).  The parties attended a mediation where they reached a settlement.  Approximately two weeks letter, the plaintiff's counsel wrote advising his client wished to resile from the settlement and would bring a motion to set it aside.  Plaintiff's counsel filed an affidavit deposing that at the time of the settlement, the plaintiff was in emotional and physical pain, extremely fatigued and felt unduly stressed and pressured.  The plaintiff herself did not file an affidavit.

Justice Daly dismissed the motion to set aside the settlement.  Justice Daley held that as a general rule parties are held to their agreements, although there are certain situations where courts may exercise discretion not to enforce a settlement: 

[34]           As a general rule parties are to be held to their bargains and to settlements which they negotiate and conclude. The court may exercise its discretion not to enforce the terms of a settlement where there is evidence that:

(a)               the resulting agreement and settlement was unconscionable, fraudulent or based on a party’s misapprehension of a material fact which was known to the opposite party;

(b)               the solicitor representing the party was not retained or did not have authority to settle the action and this limitation was known to the opposite party; and

(c)               the party lacked the legal or mental capacity to enter into the settlement agreement at the material time.

In the circumstances, there was no evidence that counsel did not have authority, that the plaintiff lacked capacity or that the settlement was unconscionable.  At most, the plaintiff's evidence was that she had a change of heart or "buyer's remorse", which does not constitute proper grounds for setting aside a settlement.

Automatic Renewal Section of Policy Does Not Obligate Insurer to Renew

Does an "automatic renewal" section in a home owner's policy require the insurer to renew?  A recent decision says "no".

In Merei v. State Farm Fire and Casualty Company, 2014 ONSC 1960 (S.C.J.), the plaintiffs' home was destroyed by fire eight days after their home insurance policy was cancelled.  The insurer's underwriting department made the decision not to renew the policy after the plaintiffs made three claims and had a history of non-payment.  The policy contained the following clause:

Automatic Renewal – if the policy period is shown as 12 months, this policy will be renewed automatically subject to the premiums, rules and forms in effect for each succeeding policy period. If this policy is terminated, we will give you and the Mortgagee/Lienholder written notice in compliance with the policy provisions or as required by law.

The plaintiffs alleged that the "automatic renewal" section of their policy obligated the insurer to renew the policy as they were not in arrears, not in breach of any of the rules in the policy and had submitted all forms.

The Court disagreed, relying on the plain reading of the contract (and common sense).  Justice Carey held that the policy was intended to allow for a renewal of the policy when the policy has not been cancelled.  He stated, "It is contrary to all rules of interpretation and normal insurance practice to conclude the insurer intended that they could only cancel the policy if the policy was not in good standing".