Deductions from Damages: Collateral Benefits

• Author: Jamie Cassels
• Profession: Professor of Law University of Victoria
• Pages: 376-405

CHAPTER

DEDUCTIONS

FROM

DAMAGES:

COLLATERAL

BENEFITS

A.

INTRODUCTION

1)

The

Issue Explained

Closely

related

to the

issues

of

mitigation

and

"avoided loss"

is the

sub-

ject

of

collateral benefits. This subject arises whenever

a

plaintiffs

loss

(as a

result

of

breach

of

contract

or

tort)

is

apparently ameliorated

by a

payment

from

a

third party

(or

"collateral source").

The

question

is

whether that payment should

be

taken into account

in

calculating

the

plaintiffs

loss, thus reducing

the

damages payable

by the

defendant.

Collateral benefits problems arise

in

many contexts

in

civil litiga-

tion.

For

example,

in

wrongful

dismissal

and

personal injury cases,

the

plaintiff

may

receive employment insurance,

welfare,

or

other

assis-

tance that cushions

the

wage loss.

In

personal injury cases,

the

plain-

tiffs

actual expenses

for the

cost

of

care

and

income losses

may

frequently

be

paid

for by

insurance

or

offset

by

income

or

benefits

in

kind

from

a

variety

of

sources. Public health-care benefits will fre-

quently cover many

of the

plaintiffs

medical expenses. Family mem-

bers

and

charitable institutions

may

provide care

to the

plaintiff

free

of

charge.

The

plaintiffs

wage loss

may be

defrayed,

partly

or in

whole,

by

disability insurance,

an

employer's wage continuation plan,

or a

benev-

olent

fund.

In

every case,

the

question

is

whether

the

benefits received

by

the

plaintiff

cancel

the

loss

suffered.

376

13

Deductions

from Damages:

Collateral

Benefits

377

2)

Framework

for

Analysis

The

tension over collateral benefits

is

acute.

On the one

hand,

to

per-

mit the

plaintiff

to

claim

a

loss

or

expense that

is not

actually incurred

(or

which

is

offset

from

another source) appears

to

overcompensate

the

plaintiff.

For

example,

a

person

who is

injured

but

continues

to

receive

his

salary

from

a

disability

fund

will receive

a

"windfall"

or

"double compensation"

if he is

also permitted

to

claim lost income

from

the

defendant.

On the

other hand,

to

exclude such losses

from

the

plaintiffs

claim gives

to the

defendant

the

benefit

of the

program,

essentially "subsidizing"

the

defendant's negligence.

For

those

who

believe that tort

law

should

play

a

deterrent role

by

charging wrong-

doers with

the

full

costs

of

their activities, such

a

subsidy undermines

the

social purpose

of the

law.

The law

regarding collateral

benefits

is

always evolving

and the

questions raised largely involve policy considerations.

The

"fundamen-

tal"

policy

of

tort

is

compensation

of the

plaintiff,

not

punishment

of

the

defendant,

and

from

this

perspective,

a

failure

to

deduct collateral

benefits

amounts

to

double compensation

or a

windfall

to the

plaintiff.

In

Ratych

v.

Bloomer,1

McLachlin

J.

stated:

The functional rational [sic] for the award of damages adopted in the

trilogy

of

Andrews,

Thornton

and

Teno

underlines

the

necessity

of

using

the

plaintiffs

actual loss

as the

basis

of his or her

damages.

The

award

is

justified,

not

because

it is

appropriate

to

punish

the

defen-

dant

or

enrich

the

plaintiff,

but

because

it

will serve

the

purpose

or

function

of

restoring

the

plaintiff

as

nearly

as

possible

to his

pre-acci-

dent state

or

alternatively, where

this

cannot

be

done, providing

sub-

stitutes

for

what

he

lost.

The

trilogy follows

the

modern trend

in the law of

damages away

from

a

punitive approach

which

emphasizes

the

wrong

the

tortfeasor

has

committed.

The

link between

the

moral culpability

of the

tortfea-

sor and his

obligation

to pay

damages

to the

person

he

injures

is

fre-

quently

tenuous

in our

technological

and

mechanical

era.

A

moment's inattention

is all

that

is

required

to

trigger astronomical

damages.

The

risks inherent

in

such activities

as the use of our

high-

ways

by

motorists

are

increasingly recognized

as a

general social

bur-

den.

In

this context,

the

maxim that compensation must

be

fair

to

both

the

plaintiff

and the

defendant seems eminently reasonable

. . .

1

[1990]

1S.C.R.

940

[Ratych].