Voluntary Payments to Victims Cannot Reduce Damages feature image

Voluntary Payments to Victims Cannot Reduce Damages

If someone finds themselves or a family member injured or killed because of a motor vehicle accident or other type of serious personal injury, they may be able to obtain damages from the party responsible for the injury. The other party, who may be represented by their insurer, will likely look to reduce the total amount of damages they are liable to pay. 

A recent decision from the Alberta Court of Queen’s Bench focused on the death of a man after he was struck and killed by a semi-trailer truck. The Court was asked to determine if money provided to the deceased by his employer after his death could be deducted from the total amount of damages owing from the semi-truck driver.

Employee killed in tragic accident

The plaintiff’s husband had been killed in a roadside accident in Calgary in which he was struck and killed by a semi-trailer truck. This led to an action being brought against the driver and owner of the truck that struck him. At the time of his death, the plaintiff’s husband was employed by a company, Westana. He had worked with Westana for a long period of time, and the company was described as being close-knit. 

Following the accident, Westana continued to pay the plaintiff her husband’s salary for several months and made additional payments for a longer period in lieu of workplace insurance. The defendant sought to have these payments deducted from any claims made against them. 

Employer continues to pay widow of deceased employee

The plaintiff received amounts between $6,000 to $8,000 per month from Westana. The company’s representative explained that it considered the payments to be severance pay. The company later found out that the plaintiff would not be able to receive benefits from Alberta’s Workers Compensation Board. One of the directors of the company decided that, in light of this, they should come up with a compensation package for the plaintiff. Following a few months of salary payments, Westana agreed to pay the plaintiff $3,500 per month. In total, the company gave her $346,500.

The plaintiff said her husband had always told her he had Workers Compensation Board coverage and that she was financially dependent on him. Following his death she had no source of income. She said she agreed to the payments in lieu of Workers Compensation Board coverage and signed a document indicating that understanding. Eventually, citing COVID-19 as a cause of hardships, Westana stopped making payments earlier than intended. This left $41,500 outstanding on their commitments. 

Should employer payments be deducted from any damages found owing?

The defendant stated that the agreement between the plaintiff and Westana constituted consideration. The agreements were not gifts or payments made ex gratia, so the defendant company argued that the payments should be subject for deduction from any damages they may be liable to pay. The plaintiff, however, argued that the payments were made ex gratia and should be exempt from deductions. In the alternative, she said that the payments could be considered to have been made to ameliorate the employer’s liabilities stemming from their failure to provide the plaintiff’s husband with insurance. 

The Supreme Court of Canada issued a decision in 2013 that addresses when collateral damages received by the victim of a loss-event should be deducted from damages. The general rule against double-recovery is meant to ensure that people are compensated according to the principle of restitution, which seeks to restore victims to the position they were prior to the event that led to loss. 

In 1994 the Supreme Court of Canada issued a decision that held that not all benefits received by a plaintiff should count against double-recovery. On this, the Supreme Court of Canada stated “before there is any question of deduction, the receipt of the benefit must constitute some form of excess recovery for the plaintiff’s loss and it must be sufficiently connected to the defendant’s breach of legal duty.”

Were the employer’s payments connected to the defendant’s breach of legal duty?

The court in this decision held that the issue of double compensation exists only if the plaintiff received a benefit that would result in compensation beyond their actual loss. It is further required that, if not for the defendant’s breach, the plaintiff would not have received that benefit. Alternatively, the benefit could be intended to be an indemnity for the loss stemming from the breach. 

However, the 1994 Supreme Court of Canada decision allows for exceptions in this. In that case, it was stated that “the common law has treated [the deductibility of compensating advantages] as one depending on justice, reasonableness and public policy.”

Further case law would eventually hold that compassionate payments made in charity by an employer do not have to count against damages owed by defendants. In addition, private insurance payments that people may receive due to contracts they have entered into privately should also not count against damages.

The payments made to the plaintiff were considered charitable gifts

In this case, the court determined that the payments received by the plaintiff fall in between those two exceptions. While the employer was not legally obligated to make the payments it made to the plaintiff, they were made in lieu of insurance being in place, and were subject to a signed agreement between the employer and the plaintiff. In addition, the payments made in lieu of salary could be considered charitable gifts. 

As a result of these findings, the court ruled that the sum of money received by the plaintiff from her husband’s employer will not be deducted from any amounts the defendant may ultimately be on the hook for. 

Contact HMC Lawyers for your insurance law needs

The Insurance Law Team at HMC Lawyers has decades of collective experience around all matters related to insurance law, including those related to Insurance Coverage Disputes as well as matters related to personal injury stemming from automobile or other types of accidents.  We understand the importance of risk management, especially when it comes to questions of insurance coverage and strive to provide our clients with certainty by helping them identify and avoid potential problems wherever possible. To discuss an insurance coverage matter or related dispute, call 1-800-480-3534 or contact us online.

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