Hammond and Syncrude Canada Ltd. v. DeWolfe,
2012 ABQB 684

Richard Hammond was employed by Syncrude Canada when he was injured in a motor vehicle accident with the Defendant, Patricia DeWolfe. As part of his employment contact with Syncrude, Hammond was covered by a Temporary Disability Plan (TDP), which provided for short term income benefits in the event of disability. The TDP was fully funded by Syncrude and Hammond did not pay any premiums for such coverage.

As a result of the accident, Hammond was off work for 6 months, during which time Syncrude continued to pay his regular wage. Syncrude became a Plaintiff in the action and sought to recover the wages paid to Hammond pursuant to paragraph 8.6 of the TDP which provided an automatic right of subrogation. The Defendant alleged that Syncrude’s right of recovery was barred by section 626.1 (now s. 570) of the Insurance Act, RSA 2000, c I-3. This section requires disability benefits to be deducted from any claims for income loss.

Two issues arose regarding Syncrude’s claim:

(1)     is Syncrude subrogated to any right of recovery in respect of the income benefits they paid Hammond; and
(2)     is Syncrude entitled to claim damages for the loss of services of Hammond during his absence from work.

With respect to the first issue, Syncrude argued that the Insurance Act was intended to regulate the traditional insurance industry, to protect the public from insolvent or unscrupulous companies and from unfair policy and claims processes, not to eliminate third party claims against insured tortfeasors. Further, the purpose of s. 626.1 was to avoid double-recovery by a claimant, and therefore related only to insurers and contracts of indemnity.

Syncrude referred to the Supreme Court of Canada’s decision in Ratych v. Bloomer, [1990] 1 S.C.R. 940. This case involved a police officer who was injured on the job and claimed against the tortfeasor for damages including loss of earnings, notwithstanding that his earnings had been paid by his employer. The Supreme Court acknowledged that double recovery was to be avoided, stating:

As a general rule, wage benefits paid while a plaintiff is unable to work must be brought into account and deducted from the claim for lost earnings. An exception to this rule may lie where the court is satisfied that the employer or fund which paid the wage benefits is entitled to be reimbursed for them on the principle of subrogation.

Syncrude argued that its right of subrogation under the TDP meant that double recovery would not occur here as any monies awarded would be paid directly to them and not to Hammond.

The Defendant disagreed with this position and argued that the objective of s. 626.1 was to reverse the effect of the private insurance exception recognized in Ratych. To achieve this objective, s. 626.1 not only provides for deduction of benefits received by claimants who have disability coverage, but also removes the right of subrogation by the benefits provider. The legislative objective was to make the injured claimant revenue neutral.

The Court disagreed with Syncrude’s position and held that the characterization of benefits does not depend upon the source of such benefits, but on their intrinsic nature. The TDP was inherently a contract of indemnity and therefore was subject to s. 626.1 of the Insurance Act. Benefits paid to Hammond under the TDP were deductible from any award for loss of income, and Syncrude’s right of subrogation was eliminated.

With respect to the second issue, Syncrude sought to recover the wages paid to Hammond during his absence from work pursuant to the doctrine of per quod servitium amisit (“per quod”). At common law, when a person commits a tort against a servant and injuries result, the per quod action allows the master to sue the tortfeasor for damages arising from the loss of services of his servant. The doctrine of per quod has been expressly abolished by statute in British Columbia, New Brunswick and England; however its status in Alberta remains unclear and was specifically addressed in Canada (A.G.) v. Livingstone. In that case, an RCMP officer was involved in an accident and sustained personal injuries rendering him unfit to return to active duty. During his absence, the RCMP continued to pay the officer his full wage, plus medical expenses. The Attorney General, as employer of the officer, brought a per quod action to recover the wages and medical expenses it had paid. A trial of an issue was held to determine whether the doctrine of per quod continued to exist in Alberta.

The Chambers Judge in that case concluded that the doctrine of per quod had not been expressly abolished by statute and therefore continued to exist in Alberta. Further, per quod actions related to economic losses and therefore fell outside the general rule for recoverability; however, the Chambers Judge held that the facts of the case meet the Anns test of foreseeability. Accordingly, the Crown could pursue its claim for wages paid to the RCMP officer.

The Defendants appealed, arguing that per quod actions are fundamentally based on the premise that a master has a propriety interest in another human being and, as this premise no longer exists, per quod actions have been judicially rejected. Further, any new exceptions to the general rule against recovery for economic loss should be created with extreme caution and only where justified by policy considerations and required by justice; neither of which were present in this case. The Defendant also noted that neither the Supreme Court nor any other Canadian Court had created new exceptions to the general rule in subsequent cases that applied the Anns test.

The Court of Appeal held that the most recent and definitive pronouncement of the test for recovery of pure economic loss was outlined in Cooper v. Hobart, 2001 SCC 79 and that this case had been incorrectly applied by the Chambers Judge. Further, even if the proper test had been applied, the Court of Appeal found that the Chambers Judge did not have a proper evidentiary foundation to apply the Anns test and ordered the matter be returned to the Court of Queen’s Bench for reconsideration de novo. To date, there has been no reported decision arising from any such trial.

Returning to Hammond, the Court did not engage in a detailed analysis of the status of per quod claims, therefore the question as to their ultimate status in Alberta remains unanswered. Despite this uncertainty, the Court referred to recent decisions in other provinces which confirmed the continued existence of the per quod claims even in the face of no-fault insurance schemes. As such, the Court held that Syncrude was entitled at common law to claim damages for the loss of services of Hammond during his absence due to the injuries he sustained in the accident.

As outlined in Hammond, an employer’s right of subrogation has been removed under s. 570 of the Insurance Act; therefore, per quod claims appear to be the only remaining avenue available for an employer to recover wages paid an injured employee during his absence from work. Without such a method of recovery, employers may be unwilling to provide wage continuation plans, leaving private insurers to fill the void. That being said, we note that this case is currently under appeal.