Written By: Savannah Snyder, Associate, and Avery Kavanaugh, Student-at-Law
7 Minute Read
After a motor vehicle collision, an injured person may pursue two types of claims: a tort claim, also known as the lawsuit, and an accident benefits claim. In this article, we break down the relationship between accident benefits and tort claims in clear, practical terms.
Before diving into how these two claims interact, it is useful to first understand the nature of a tort and accident benefits claim.
Accident benefits are no-fault benefits available to provide immediate financial support for certain benefits, such as income replacement benefits, attendant care benefits, and medical and rehabilitation benefits.
Accident benefits entitlement is divided into categories based on injury severity, which determines the amount of coverage available. There are three categories: minor injury guideline, non-catastrophic, and catastrophic injuries. Typically, determination of catastrophic impairment increases the amount of money available from $65,000.00 to $1,000,000.00. To learn more about accident benefits, visit our blog titled Accident Benefits 101: What Insurers Cover Immediately After a Crash.
On the other hand, tort claims are against the at-fault parties for general and special damages. General damages include monetary losses, such as loss of income and cost of future care, and non-monetary losses, such as pain and suffering and loss of enjoyment of life.
Accident benefits claims allow injured parties to receive financial support early on to support their recovery. A tort claim, on the other hand, results in a settlement or trial award where you are given a total sum of money.
Why can Accident Benefits Can Be Deducted From a Tort Claim?
The law in Ontario stands to prevent “double recovery” to an injured party. This means that the law prevents someone from being compensated twice for the same loss. This principle is set out in section 267.8 of the Insurance Act,[1] which specifically requires certain deductions to be made from a tort award. Under section 267.8(1), damages awarded for income loss or loss of earning capacity must be reduced by amounts the injured person has already received, or was entitled to receive, before trial. Section 267.8(4) applies a similar rule to health care expenses.
This ensures that compensation is fair and proportionate, rather than duplicative. While this may sound concerning at first, it’s important to remember that accident benefits provide early support, often long before a tort claim is resolved.
How Deductions Are Applied in Practice
While section 267.8 of the Insurance Act sets out what must be deducted, the courts have clarified how those deductions are applied in practice. Historically, courts followed what was known as the “apples-to-apples” approach. Under this method, accident benefits had to be matched to the same type of loss in the tort claim. While this approach sounds logical, it often became overly technical and difficult to apply in complex cases.
Recent case law has confirmed a more relaxed approach. The Ontario Court of Appeal in Cadieux v Cloutier[2], confirmed that the correct approach to deducting accident benefits is the “silo approach”, not the apples-to-apples method. Under the silo approach, damages are grouped into broad categories, or “silos”, based on section 267.8 of the Insurance Act. Accident benefits are then deducted from the appropriate category without needing an exact match. This can include benefits such as income replacement, attendant care, medical and rehabilitation benefits.
Ultimately, whether and how deductions apply depends on how damages are assessed and categorized in your case. This is why understanding the heads of damages in your tort claim is so important.
Understanding the Settlement Disclosure Notice
A Settlement Disclosure Notice (“SDN”) is a key document used when accident benefits are resolved by way of a full and final settlement. It sets out the total settlement amount and specifies how the funds are allocated among various benefit categories such as income replacement, medical, rehabilitation, and attendant care benefits, among others.
An overlooked aspect of the interaction between the accident benefits and tort claims is how the settlement amount is allocated on the Settlement Disclosure Notice. The way an accident benefits settlement is documented can directly affect what amounts are deductible from the heads of damages in the tort claim.
Accordingly, careful allocation of settlement funds is critical to preserving and maximizing the value of the tort claim. Strategic allocation can play a significant role in the overall outcome of your case and because of its significance, the Settlement Disclosure Notice should always be reviewed carefully before finalizing any settlement.
Why Legal Guidance Matters in Accident Benefit and Tort Interactions
The interaction between accident benefits and tort claims can be complex, especially when it comes to allocation, documentation, and timing.
An experienced personal injury lawyer can help:
- Structure settlements in a way that minimizes unnecessary deductions
- Ensure proper allocation of accident benefit funds
- Interpret how benefits will impact your tort claim
- Advocate for fair compensation across all categories of loss
Decisions made early in your claim, particularly around accident benefits, can have lasting consequences. Understanding those implications is key to protecting your interests.
You can also learn more from trusted external resources such as: Financial Services Regulatory Authority of Ontario (FSRA) – After an Accident: Understanding the Claims Process.
Conclusion
Understanding how accident benefits interact with a tort claim is essential for anyone navigating a personal injury claim arising from a motor vehicle collision. Given the significant impact these interactions can have on overall compensation, It is critical to work with an experienced personal injury lawyer to ensure you or your loved one receives the maximum recovery available to support both present needs and future care. Contact our experienced team at McLeish Orlando for guidance.
[1] Insurance Act, R.S.O. 1990, c. I. 8.
