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FactsEdit

Cunningham was struck by a car on November 14, 1988 and was injured. At the time he had been an employee of BC Rail for around 25 years and as he was off work for 20 weeks he had collected disability benefits pursuant to a collective agreement. No deductions were made from his pay for those benefits, but the hourly wage package was made up of an hourly rate of pay together with collateral benefits. Disability benefits recovered did not have to be paid either to the employer or to the insurance company managing the plan. The trial judge held that the payments should not be deducted in calculating the amount payable by the Wheelers for the wages lost by Cunningham as a result of his injuries, as he had established that the indemnity benefits were paid for by him as part of his wage package. The Court of Appeal reversed the judgment, determining that since there was no subrogation right in the employer, and the direct funding for the disability benefits came from the employer, the plan was not in the nature of a private insurance policy and the funds received should be deducted from the damage award.

IssueEdit

  1. Should disability benefits provided by a collective agreement be exemption from deduction from an amount recovered in damages for loss of wages?

DecisionEdit

Appeal allowed.

ReasonsEdit

Cory, writing for the majority, held that while a plaintiff in a tort action was not generally entitled to a double recovery for any loss arising from the injury, the disability benefits obtained by Cunningham as a result of his collective bargaining agreement were in the nature of a private policy of insurance and should not be deducted from the claim for lost wages. To show that the benefits were in the nature of insurance, there must be evidence adduced of some type of consideration given up by the employee in return for the benefit. Since the benefits at issue here were bargained for and obtained as a result of a reduction in the hourly rate of pay, they were obtained and paid for by Cunningham just as much as if he had bought and privately paid for a disability insurance policy. The application of the insurance exception to benefits received under a contract of employment should not be limited to cases where the plaintiff was a member of a union and bargained collectively. Benefits received under the employment contracts of non-unionized employees would also be non-deductible if proof was provided of payment in some manner by the employee for the benefits. Evidence that the employer took the cost of benefits into account in determining wages would adequately establish that the employee contributed by way of a trade-off against higher wages.

RatioEdit

If payments received as part of an insurance package were paid for in some manner by the injured party (either directly, or in some manner of reduced wages, etc.) then they should not be deducted from the calculation of lost wages when assessing damages.

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