Who Should Bear the Cost of Accident Benefits Disputes?

Injured victims depend on Accident Benefits under the Statutory Accident Benefits Schedule¹ (“SABS”) for income replacement and a variety of healthcare benefits to assist them with their recovery after a motor vehicle accident. Unfortunately, injured victims’ SABS benefits are often denied by insurers, and injured people are faced with the expense of disputing those denied benefits.

There are many reasons someone injured in a motor vehicle accident may need to dispute a denied SABS benefit at the Licence Appeal Tribunal (“LAT”). One legal reason is that section 267.8 of the Insurance Act² permits the at fault party (i.e. tort defendant) to deduct any health expenses and income replacement benefits that the injured person received from the Accident Benefits insurer. Even if a SABS benefit was denied, the tort defendant may also deduct benefits that were available before trial. Therefore, injured victims and their counsel are often left with no choice but to litigate denied benefits to avoid the argument from the tort defendant that these benefits were available to the injured person (and should have been disputed at the LAT).

Not surprisingly, the cost of Accident Benefits disputes at the LAT can become significant, depending on the issues in dispute, the complexity of the proceeding and how many experts are required to testify. Prior to April 1, 2016, injured victims could initiate an Accident Benefits dispute at the Financial Services of Commission (“FSCO”) with the solace that, if successful at the hearing, costs of the proceeding could be claimed and would routinely be awarded by FSCO arbitrators.

With the transition to the Licence Appeal Tribunal (“LAT”) in 2016, injured people are now basically responsible for their own costs of litigating denied benefits at the LAT, regardless of the outcome of the proceeding. Section 19 of the LAT Rules of Practice stipulates the very narrow circumstances where costs are now available:

Where a party believes that another party in a proceeding has acted unreasonably, frivolously, vexatiously, or in bad faith, that party may make a request to the Tribunal for costs. [emphasis added]

The language of the costs provisions in the LAT rules makes seeking costs at the LAT entirely dependent on the bad conduct of the other party during the actual proceeding. The new rules effectively ignore the insurer’s conduct outside of the proceeding, including the very actions that led to the denial of benefits. This stringent test for awarding costs makes it extremely difficult for injured victims to recover any costs at the LAT.

Despite that costs are available only in exceptional circumstances at the LAT, Ontario courts have recognized that injured victims can, in some circumstances, recover their costs of an Accident Benefits dispute from the tort defendant. As noted above, tort defendants benefit financially when injured victims dispute denied Accident Benefits because of section 267.8 of the Insurance Act. Recent Ontario court decisions have effectively concluded that the tort defendant should pay the injured party’s costs of pursuing denied Accident Benefits because of the discount that the tort insurer receives when benefits are litigated and won.

In Carr v Modi³ , the Ontario Superior Court of Justice held the tort defendant responsible for paying the injured party’s FSCO arbitration expenses in the amount of $24,218.25 in fees and $6,296.27 in disbursements. On appeal, the Ontario Divisional Court upheld the lower court ruling that SABS arbitration costs can be recovered in tort:

As a question of law, we agree with the conclusion of the motion judge that the recovery of SABs may be a benefit to a defendant and therefore the costs of obtaining same may be recoverable by the plaintiff against the defendant. We find this to be a correct statement of the law.⁴

The approach in Carr v Modi was recently adopted by the Ontario Court of Appeal in Cadieux v Cloutier⁵. The Court of Appeal held that:

[…] it may, in some cases, be appropriate to award the plaintiff, as part of the costs of the tort action, some or all of the costs actually incurred by the plaintiff in recovering SABs which have reduced the amount of the tort award under s. 267.8.⁶ [emphasis added]

[…] It respects the statutory direction in s. 267.8, while enabling the court to make a fair allocation of the costs of pursuing SABs in appropriate cases.⁷

There is no doubt that the LAT’s new rules relating to costs have put a huge financial burden on injured people – who are often already in financial distress – to dispute their denied Accident Benefits claims. However, given the Court of Appeal’s Cadieux decision, it is crucial for injured victims and their lawyers to consider claiming any unpaid arbitration costs from the tort defendant, who ultimately receives financial benefit from a successful SABS dispute.

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1. O. Reg. 34/10
2. R.S.O. 1990, c. I.8
3. Carr v Modi 2016 ONSC 1300. See also Ananthamoorthy (Litigation guardian of) v Ellison 2013 ONSC 4510; Hoang (Litigation guardian of) v Vicentini 2014 ONSC 5894; Ryan v Rayner 2015 ONSC 3110
4. Carr v Modi 2016 ONSC 7255 at paragraph 15
5. 2018 ONCA 903
6. Ibid at para 123
7. Ibid at para 128