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Barbara Billingsley

Workers’ compensation schemes cannot recover other benefits paid to claimants, court rules

Tuesday, August 16, 2022 @ 12:22 PM | By Christopher Guly

LexisNexis® Research Solutions
In a straightforward ruling, with two sets of reasons delivered, the Alberta Court of Appeal said that a statutory interpretation of a section of Alberta’s Insurance Act does not preclude — in this case, WorkSafeBC — from bringing a subrogated action against an estate to recover the amounts of workers’ compensation benefits paid to two claimants.

But according to two other sections of the provincial law, compensation paid by WorkSafeBC must be deducted from any damage award payable to the two claimants payable to them by an estate, the court said in Vujicic v. Estate of Leona Donna MacEachern 2022 ABCA 263, released on Aug. 8, which dismissed the appeal by British Columbia’s Workers’ Compensation Board on behalf of claimants Ranko Vujicic and Tomislav Rajlic.

As the court summarized, Vujicic and Rajlic were involved in a head-on collision outside Cochrane, Alta., on Christmas Day, 2013, with Donna MacEachern, who was killed in the collision that left both men seriously injured. At the time of the accident, Vujicic and Rajlic were B.C. residents working in the course of their employment.

As injured workers, they had three options for seeking recovery following the collision. They could have applied for compensation either under B.C.’s Workers Compensation Act or similar legislation in Alberta, or commence a civil tort action against MacEachern’s estate.

Vujicic and Rajlic chose to claim compensation under B.C.’s workers’ compensation scheme and their claims were accepted. WorkSafeBC then commenced subrogated claims in Alberta against MacEachern’s estate. As of March 2019, the board had paid over $379,500 in compensation to the injured workers and that amount continues to grow for Vujicic, according to the appellate court. WorkSafeBC sought to recover from the estate all compensation amounts paid to both men.

In Vujicic v. MacEachern (Estate) 2021 ABQB 9, Alberta Court of Queen’s Bench Justice Robert Neufeld held that the language used in sections 570(3) and 570(4)(g) of Alberta’s Insurance Act regarding reduction of automobile-accident claim awards and compensation under legislation of another jurisdiction equivalent to the province’s Workers’ Compensation Act “and its applicability to the payments made by WorkSafeBC are clear.”

Alberta’s “legislature intended to take measures to lower accident claim awards,” Justice Neufeld wrote. “One method of doing so was to effectively transfer responsibility for certain costs to other benefits regimes, including extra-provincial entities such as workers’ compensation boards, the Canada Pension Program, and other insurance programs such as accident and illness insurance under subpart 6 of the Act, [which states that “a person who makes or assume liability for a payment referred to in subsection (3) is not subrogated to a right of recovery of the insured against another person in respect that payment.”]

“Payments made by WorkSafeBC fall squarely within s 570(4)(g), and must be deducted from a judgment or settlement of this accident claim,” he wrote in his reasons.

As Court of Appeal Justices Dawn Pentelechuk and Bernette Ho wrote in their reasons, “in coming to this conclusion, the chambers judge rejected the ‘more nuanced’ approach to interpretation based on a finding that the primary purpose of s. 570 was to prevent double recovery of collateral benefits by accident victims and that it was not the intention of the legislature that accident victims would be deprived of full recovery.”

They said that according to WorkSafeBC, Vujicic and Rajlic “will not be kept whole” because it has priority under B.C.’s Workers Compensation Act (WCA) to recover the compensation it paid out from any damage award, with Vujicic and Rajlic only receiving any excess.

The Appeal Court judges also noted that Justice Neufeld concluded that WorkSafeBC was not precluded under s. 570(6) from pursuing a subrogated claim on behalf of Vujicic and Rajlic to recover amounts paid to them. “However, one of the common features of subrogation is that the payor is entitled to step into the shoes of the recipient in bringing and prosecuting the action, but the payor does not acquire any rights or entitlements beyond those held by the recipient,” Justices Pentelechuk and Ho wrote.

“Since s 570(4)(g) mandates that Messrs Vujicic and Rajlic must deduct any extra-provincial workers’ compensation benefits received from their tort action against the estate, so must the board.”

On appeal, WorkSafeBC raised the issue as to whether B.C.’s Workers’ Compensation Board Act is “equivalent” to Alberta’s as required by s. 570(4)(g). The B.C. board also referred to the “more nuanced” approach advanced and rejected in the Court of Queen’s Bench regarding the purpose and intent of the provisions and the inter-relationship of the British Columbia and Alberta workers’ compensation schemes, subrogation and tort law, as the appellate court summarized.

WorkSafeBC pointed to the election that workers must make under the B.C. WCB Act that does not exist under the Alberta’s WCB Act and stated that this is “a material difference.”

B.C.’s board said that in its province, workers must elect whether they want compensation from WorkSafeBC or pursue their claim personally as against the tortfeasor. If compensation is elected, then the entire claim is subrogated to the board. By contrast, WorkSafeBC argued that in Alberta, workers are not required to make an election and can obtain compensation through the province’s workers’ compensation scheme as well as pursue a claim against the tortfeasor.

WorkSafeBC’s position was that “you cannot legally separate compensation from the right of subrogation and therefore, the two acts are not ‘equivalent,’” as the Appeal Court described the B.C. board position.

The board also stated that “the interpretation given by the section’s plain and ordinary meaning is absurd because it fails to consider the context, which includes that: (1) Messrs Vujicic and Rajlic will not be made whole because the board will only pay to them any amounts collected in excess of the compensation paid, without regard to heads of damages; (2) British Columbia employers are being harmed because they fund the British Columbia workers’ compensation system, and their experience rating is impacted by recoverable claims; and (3) the interpretation renders the board’s statutory right of subrogation meaningless.”

B.C.’s Court of Appeal rejected WorkSafeBC’s arguments, which it said were “premised on a misunderstanding of the underpinning of workers’ compensation schemes, the law of subrogation and conflicts of law.”

“There can be no doubt that the BC WCB Act is equivalent to the AB WCB Act for the purposes of s 570(4)(g),” wrote Justices Pentelechuk and Ho in their reasons. “Both statutes provide compensation rooted in what is sometimes referred to as the ‘historic tradeoff,’ [which] refers to the policy decision of establishing a no-fault compensation scheme for injured workers, funded by premiums paid by employers, and administrated by a public agency. As noted by our colleague, a key aspect is that workers have prompt access to benefits, irrespective of fault. In exchange, workers give up their right to sue their employers, and any other employer or worker covered by the Act, for work-related injuries.”

“Both the BC WCB Act and the AB WCB Act bear the essential hallmarks of a workers’ compensation scheme … [and that] the general purpose of both acts is identical. The board’s focus on the worker’s election to receive either compensation from [it] or to pursue a civil tort action against the tortfeasor is an overly technical approach to the meaning of ‘equivalent’ and would lead to an absurdity. The ability to pursue both methods of compensation is unique to Alberta. Therefore, if the election is a material distinguishing feature, it would exclude all other provincial workers’ compensation schemes from s 570(4)(g). The legislature cannot have intended to enact a provision that has no application.”

The Court of Appeal said that WorkSafeBC relied on its decision in Hammond v. DeWolfe 2014 ABCA 81 [Hammond] and argued that s.570(6) has no application in this case because Vujicic and Rajlic are not “insureds” of the board.

Although Hammond considered a common law right of subrogation of an employer (Syncrude) for income benefits paid to its employee, the court in that ruling said that the term “insured” suggests “that the persons whose rights of subrogation are removed are persons who make a payment to an insured under a contract of insurance,” said Justices Pentelechuk and Ho, adding that “Syncrude was not such a person.”

They said that as the court noted in Hammond, “the fact s 570(6) may not preclude the board’s right of subrogation is not determinative of whether payments made are deductible from any award arising in the action against the estate.”

“Subrogation allows a third party to step into the place of the recipient of benefits and advance a claim held by the recipient, in the recipient’s name. In this case, the board’s right of subrogation is created by statute (s. 10(6) of the BC WBC Act). Regardless of whether the right of subrogation is based in common law, or created by contract or statute, subrogation is a derivative right; it does not create rights and subrogated rights are subject to the same limiting principle as other claims, including defences and statutory limitations.”

Alberta’s Court of Appeal said that in this case, “the subrogated actions were commenced in Alberta for a tort that occurred in Alberta. As a result, s. 570 of Alberta’s Insurance Act applies, as both the substantive and procedural laws of Alberta govern the proceeding.”

“There is no complaint that Alberta exceeded its jurisdiction in enacting laws regarding the calculation of damages payable for automobile claims,” said Justices Pentelechuk and Ho. “While we disagree with the board’s assertion that there is any unfairness arising from application of Alberta’s law in these circumstances … the Supreme Court [of Canada] in Tolofson [v. Jensen; Lucas (Litigation Guardian of) v. Gagnon [1994] 3 SCR 1022, 120 DLR (4th) 289] was clear that we do not depart from the law of the place of the tort in the face of allegations of unfairness in a specific case because following the principles of private international law creates certainty in the law, responds to the territorial principle under international legal order and the federal regime, and addresses several other sound practical considerations.”

“The court noted that the cases finding an ‘imputed injustice’ of applying the law of the place of the tort arose in circumstances where the courts considered that law ‘contrary to the public policy of the forum i.e. unfair,’ stating [that public-policy arguments] ‘simply mean that the court does not approve of the law that the legislature having power to enact it within its territory has chosen to adopt. These laws are usually enacted on the basis of what are often perceived by those who make them as reasonable, though they may turn out to be unwise. The residents of the jurisdiction must put up with them until they are modified, and one does not ordinarily ignore the law of the land in favour of those who visit. True, it may be unfortunate for a plaintiff that he or she was the victim of a tort in one jurisdiction rather than another and so be unable to claim as much compensation as if it had occurred in another jurisdiction. But such differences are a concomitant of the territoriality principle.’”

As Justices Pentelechuk and Ho said: “the impacts of s. 570 of the Insurance Act on the rights of employers in British Columbia generally or the rights of the board under the BC WCB Act are of no concern to the application of Alberta law. To the extent that the consequences are not as beneficial to the board or British Columbia employers as they would have been had the accident occurred in British Columbia, that is for the board or the British Columbia legislature to address.”

They also held that there was “no unfairness” to Vujicic and Rajlic arising from s. 570. “They elected to pursue compensation under the British Columbia workers’ compensation scheme. In exchange, they received certainty of compensation with immediate benefits regardless of who was at fault for the collision and the outcome of any subsequent litigation,” wrote the two judges. “This is the historic tradeoff in action: the workers’ compensation scheme worked as intended and to this extent, modifies the tort principles regarding damages. Indeed, if any unfairness befalls Messrs Vujicic and Rajlic, it can be traced to the BC WCB Act, which, through its statutorily created right of subrogation, prioritizes payment of the Board’s subrogated claim in any automobile accident claim award received by Messrs Vujicic and Rajlic. This was a policy decision of the British Columbia legislators, modifying the common law principle that a right of subrogation will not arise until the party suffering damages is made whole.”

Barbara Billingsley, University of Alberta

Barbara Billingsley, University of Alberta

Justices Pentelechuk and Ho added that WorkSafeBC acknowledged that Vujicic and Rajlic were permitted to claim under the Alberta workers’ compensation scheme, which by virtue of s. 1.1 of Alberta’s Workers’ Compensation Act, which “is not subject to s. 570 of [Alberta’s] Insurance Act and would have avoided the issues of deduction of damages and limited rights of subrogation, but they chose not to do so. Messrs Vujicic and Rajlic, and the Board as the subrogated party stepping into their shoes, must now navigate the existing action with the consequences of that choice.”

In separate — and far lengthier — reasons, while concurring with the court’s ruling, Justice Thomas Wakeling said that WorkSafeBC “may bring the subrogated actions against the estate in Alberta. Section 570(6) of Alberta’s Insurance Act does not prohibit the board’s action.”

“But the board cannot recover from the estate the payments it has made to Messrs. Vujicic and Rajlic under British Columbia’s Workers Compensation Act,” he wrote. “Section 570(4)(g) is engaged because British Columbia’s Workers Compensation Act is ‘legislation of another jurisdiction that is equivalent to the Workers’ Compensation Act.’ The core features of both enactments are identical.”

Barbara Billingsley, dean of the University of Alberta’s Faculty of Law, who previously worked as a civil litigator in the area of insurance defence, said the ruling “considered the interaction between a workers’ compensation scheme and the tort system.”

“One of the considerations raised is one of statutory interpretation in the sense of, do we look at the fairness implications or its purpose and what it actually says,” explained Billingsley, the author of General Principles of Canadian Insurance Law, third edition of which was published by LexisNexis in 2020.

“In this case, the court is saying ‘we’re staying in our lane and our lane is to determine what the statutory provision means — not to determine whether it’s good policy.’” 

Counsel for both parties did not respond to a request for comment.