Damages Arising From Future Loss of Income Determined on Gross, Not Net Basis
MacDonald v MacVicar, 2018 NSSC 272 provides judicial guidance on s. 113BA(1) of the Insurance Act, RSNS 1989, c 231 (“Act”), holding that future loss of income damages for plaintiffs injured in motor vehicle accidents should be calculated on a gross, rather than net basis.
In MacDonald v MacVicar, 2018 NSSC 271, the court held that the Plaintiff, Kimberly MacDonald was entitled to future loss of income damages from her motor vehicle accident against the Defendant, Ralph MacVicar. Importantly, the court held that the award should be calculated on a gross basis and not subject to income tax, CPP or other deductions.1 The reasons for a gross basis calculation are set forth in the supplemental decision, MacDonald v MacVicar, 2018 NSSC 272 (“MacDonald”), discussed below.
At common law, an award for future lost earnings is calculated on the basis of gross loss of income without deductions.2 At issue in MacDonald was whether provisions of the Act and its accompanying regulations had displaced the common law.
The Act and its Regulations
The court’s analysis focused on s. 113BA(1) of the Act, and s. 2(1) of the Automobile Insurance Tort Recovery Limitation Regulations, NS Reg 182/2003 (“Regulations”), which defines the terms of s. 113BA(1). The court noted that, at first blush, the language of s. 113BA(1) of the Act does not contradict the common law: while damages in that section are to be calculated on a net basis, the calculus only applies to losses incurred prior to trial. On the other hand, the language of s. 2(1) of the Regulations appears to expand the net calculation to future losses.3
The court investigated whether s. 113BA(1) could be interpreted to apply to future losses. If so, there would be no conflict with s. 2(1) of the Regulations. The court noted that if s. 113BA(1) could not be interpreted to apply to future losses and that there was a conflict between the Act and its Regulations, the presumption against conflict would necessitate that the Act prevail.4
Applicability of Section 113BA(1) of the Act to future losses
The court held that s. 113BA(1) of the Act does not apply to future losses. The court relied on three presumptions of legislative drafting to arrive at its conclusion:
- Presumption against changing the common law: Statutes should not be construed so as to make alterations to the common law. There was no clear and unambiguous language in s. 113BA to suggest that the legislature intended on changing the common law by necessitating a gross basis calculation for future losses.
- Presumed perfection: Legislatures are presumed to always say what they mean and mean what they say. By including the words “before the trial of the action” in both ss. 113BA(1)(a) and (b), the legislature clearly intended to distinguish between past and future losses.
- Presumption against tautology: It is presumed that the legislature avoids superfluous words and that every word is presumed to have a specific role, which suggests that “before the trial of the action” were words that were inserted purposefully into s. 113BA.
The court supported their position by referencing Hornick v Kochinsky,  OTC 292,  OJ No 1629 (ONSC), which held that the proper interpretation of “before the trial of action” in s. 267.5(1) of the Ontario Insurance Act, RSO 1990, c I.8 is that future loss of earning capacity is assessed on the basis of gross loss of income without deduction.
The court also referred to Holland v Sparks, 2018 NSSC 136, where Justice Moir interpreted the words “before the trial of the action” in s. 113A of the Act. Relying on the presumption of tautology, Moir J held that the deduction of payments referred to in s. 113A of the Act does not apply to future payments.5
Based on the foregoing principles of statutory interpretation and case law, the court held that s. 113BA(1) of the Act does not apply to future losses and is therefore in conflict with s. 2(1) of the Regulations. The court held that s. 113BA(1) of the Act is paramount over s. 2(1) of the Regulations, and that damages awarded for future loss of income and earning capacity are to be calculated on a gross basis without deductions.6
Lessons for Insurers
Although the decision does not appear to have an effect on past income loss calculations, Nova Scotia insurers should be mindful that future income loss claims arising from motor vehicle accidents will be calculated on a gross basis.
1 MacDonald v MacVicar, 2018 NSSC 271, at para 380
2 MacDonald v MacVicar, 2018 NSSC 272, at para 5
3 Ibid, at para 10
4 Ibid, at para 11
5 MacDonald v MacVicar, 2018 NSSC 272, at paras 14-20
6 Ibid, at para 25