DATE: 20020816 DOCKET: C36727
COURT OF APPEAL FOR ONTARIO
McMURTRY C.J.O., CATZMAN and MacPHERSON JJ.A.
BETWEEN:
JANET MATT, a mental incompetent not so found, by her Litigation Guardian, James L. Matt, JAMES L. MATT,VALERIE MATT, RICHARD MATT and JONATHAN MATT
Stewart G. Baker, for the appellant Her Majesty the Queen in Right of Alberta
Plaintiffs (Appellants)
- and -
ROBERT A. BARBER, ALICE L. GRAVELINE, DISCOUNT CAR AND TRUCK RENTALS LTD., AND SERENDIPITY CAR AND TRUCK RENTALS LTD.
Daniel J. Dochylo, for the respondents Robert A. Barber and Serendipity Car and Truck Rentals Ltd.
W. Colin Empke, for the respondent Alice L. Graveline
Defendants (Respondents)
- and -
LIBERTY INSURANCE COMPANY OF CANADA, formerly Prudential of America General Insurance Company, and ECONOMICAL MUTUAL INSURANCE COMPANY
Third parties
Heard: July 3, 2002
On appeal from the order of Justice James M. Spence dated June 26, 2001 dismissing the motion by Her Majesty the Queen in Right of Alberta for the determination of questions of law.
CATZMAN J.A.:
The appeal
[1] A young Ontario woman was seriously injured in a motor vehicle accident outside of Ottawa. As a result of her injuries, she spent two and a half years in an Ontario hospital. When her parents took up residence in Alberta, she moved with them, and was hospitalized there for a further year and a half. In an action in the young woman’s name in Ontario, the Alberta government health provider (“Alberta Health”) asserted a subrogated claim for the cost of her hospital expenses in that province. Spence J. rejected that claim. His reasons are reported at (2001), 2001 62763 (ON SC), 30 C.C.L.I. (3d) 33.
[2] Alberta Health now appeals from that decision. For the reasons that follow, I would dismiss the appeal.
The facts
[3] On November 30, 1993, Janet Matt was a passenger in a car driven by Robert Barber. She was then 24, and a resident of Meaford, Ontario. Near Ottawa, the car in which she was riding collided with a car driven by Alice Graveline. Both the Barber vehicle and the Graveline vehicle were registered in Ontario, and both drivers were residents of Ontario.
[4] In 1994, Ms. Matt was adjudged incapable of managing her affairs due to mental infirmity, and her parents were appointed committees of her estate. On her behalf and their own, her parents and other family members commenced proceedings in Ontario against the drivers and owners of the Barber and Graveline vehicles. The statement of claim pleaded that Ms. Matt’s injuries constituted a permanent, serious impairment of an important bodily function caused by continuing injury which was physical in nature within the meaning of s. 266 of the Insurance Act, R.S.O. 1990, c.I.8, as amended. It further pleaded that she had incurred and would continue to incur expenses, including expenses for hospitalization, medication, therapy, rehabilitation, medical treatment and other forms of care.
[5] The Ontario action was settled by minutes of settlement, subject to a claim to be advanced by Alberta Health. By judgment implementing the minutes of settlement, the insurer of the Barber vehicle was ordered to pay $767,891.25 to Ms. Matt’s parents as committees and guardians of her estate; the further sum of $5,500 monthly, indexed to the Consumer Price Index, for as long as she remained alive; $50,000 for the Family Law Act claims asserted in the action; and $100,000 for costs.
[6] The premium necessary to fund the annuity which provided the $5,500 monthly payment was $1,282,108.75. A separate lump sum of $400,000 was paid in respect of available statutory accidents benefits. The limits of coverage for accident benefits under the policy of the insurer of the Barber vehicle have been exhausted, and Ms. Matt’s guardians released all claims past, present and future with respect to them.
[7] For the purpose of this proceeding, the parties agreed to cap Alberta Health’s claim at $150,000, inclusive of interest and costs, so that the limits of third party liability coverage under the responding insurance policy would not be exceeded.
[8] Ms. Matt suffered very serious injuries in the collision, including a diffuse traumatic brain injury. She required lengthy hospitalization. She was hospitalized continuously in Ontario from the date of the accident until May 1996, when her parents moved to Alberta. She was then transferred to Alberta Hospital Ponoka, where she was an inpatient until November 1997. Following her release from that hospital, she has resided with her parents in Edmonton. She remains an Alberta resident.
[9] The agreed costs of insured health services provided by Alberta Health to Ms. Matt in respect of her inpatient hospitalization in that province were $145,866 for the period of September 1996 through November 1997. As noted, Alberta Health capped its claim at $150,000, including interest and costs. It agreed to advance no claim for the costs of health care services Ms. Matt might require in the future.
[10] Alberta Health claimed to be subrogated to Ms. Matt’s rights with respect to the costs of insured services she received.
The motion before Spence J.
[11] In order to establish its entitlement to assert its claim, Alberta Health made a motion for determination of two questions of law:
i. is Her Majesty the Queen in Right of Alberta [Alberta Health] subrogated, either by statute or common law, to the right of recovery of the plaintiffs in respect of the cost of insured services provided to the plaintiff Janet Matt while she resided in Alberta?
ii. does section 267 of the Insurance Act bar any recovery in favour of Her Majesty the Queen in Right of Alberta [Alberta Health] as against the defendants?
[12] Spence J. held that s. 267(1)(b) of the Insurance Act barred Alberta Health’s claim. The relevant paragraphs of his decision, reported at (2001), 30 C.C.L.I. (3d) pp. 34-35, read:
Section 267(1)(b) provides that the damages awarded to a plaintiff for loss or damage in a motor vehicle accident shall be reduced by all payments the person has received under any hospitalization plan or law and the present value of such payments to which the person is entitled.
[Alberta Health] submits that this provision is not to be regarded as a bar to recovery but only as a limitation as to quantum. The provision by its terms imposes a limitation on quantum. However, the effect of the provision is clearly to bar any award of damages in respect of amounts of the type referred to. Since no damages can be awarded in respect of such amounts, it must be concluded that a claim for such amounts is therefore barred.
In the present case the monetary payments were made by [Alberta Health] to the Alberta Hospital Ponoka on account of the services it provided to the plaintiff. The same type of service and payment arrangements existed in the Osborne case and the Regie v. Soloway, Wright case and the court in those cases treated the payments made in those cases as payments covered by s. 267(1), although the decisions do not specifically address whether it can be said that “payments” have been “received” by the plaintiff, as s. 267(1)(b) requires. However, the plaintiff received services under the arrangements and the services were provided on a basis that involved payment being made for those services. Accordingly, the services the plaintiff received had a monetary cost and a monetary value. On that basis it is proper to consider that the plaintiff received payments for purposes of s. 267(1)(b).
Section 267(1)(b) is therefore a bar to recovery by the plaintiff. Based on the Tolofson decision, Ontario law applies to determine the plaintiff’s right of recovery, and not s. 58(1)(a) of the Hospitals Act of Alberta.
Because the plaintiff, by reason of s. 267(1)(b), has no claim to recover for the hospitalization payments, there is no claim or right to which [Alberta Health] could be subrogated. It is not necessary to consider whether s. 267(4) is applicable.
The formal order of Spence J. does not answer the two questions that were asked. Instead, it simply dismisses Alberta Health’s motion.
[13] Alberta Health’s appeal from the decision of Spence J. repeats the two questions, and seeks an affirmative answer to the first question and a negative answer to the second question.
Relevant statutory provisions
[14] The following statutory provisions, as they appeared at the relevant time, are material to the disposition of this appeal:
- Alberta
(i) Hospitals Act, R.S.A. 1980, c. H-11
PART 3
HOSPITALIZATION BENEFITS PLAN
- In this Part,
(d) “beneficiary” means a person who receives insured services under this Part;
(i) “insured services” means the hospital services the operating costs of which will be provided for under this Part;
58(1) When as a result of a wrongful act or omission of another, a person suffers personal injuries and becomes a beneficiary,
(a) the beneficiary has the same right to recover the cost of insured services against the person guilty of the wrongful act or omission as he would have had if he had been required to pay for the whole cost of the hospital services which he received, and
(b) the Minister is subrogated to the right of recovery of the beneficiary in respect of the cost of insured services furnished and the Minister may maintain an action either in his own name or in the name of the beneficiary to recover the cost of the insured services to which he is hereby subrogated.
(5) A beneficiary may at any time settle his claim for damages sustained by reason of personal injuries, other than the cost of insured services to which the Minister is subrogated, but the claim of the Minister shall not be settled without the prior written consent of the Minister and any settlement made without his prior written consent is void.
(6) The obligation of an insurer to an insured person against whom a claim by a beneficiary for personal injuries and the cost of insured services could be made, shall not be discharged until the subrogated claim of the Minister is paid or settlement of it as aforesaid is made and the amount of the settlement is paid.
(7) In this section, “cost of insured services” means the difference between the amount that the person, as a beneficiary, is liable to pay to the hospital and the amount for which he would have been liable to the hospital if he were not a beneficiary.
- Ontario
(i) Health Insurance Act, R.S.O. 1990, c. H.6
Subrogation 30.(1) Where, as the result of the negligence or other wrongful act or omission of another, an insured person suffers personal injuries for which he or she receives insured services under this Act, the Plan is subrogated to any right of the insured person to recover the cost incurred for past insured services and the cost that will probably be incurred for future insured services, and the General Manager may bring action in the name of the Plan or in the name of that person for the recovery of such costs.
Payment by Plan recoverable by insured
(2) For the purposes of subsection (1), the payment by the Plan for insured services shall not be construed to affect the right of the insured person to recover the amounts so paid in the same manner as if such amounts are paid or to be paid by the insured person.
Cost of hospital services
(3) For the purposes of this section, the cost of insured services rendered to an insured person in or by a hospital or health facility shall be at the rate charged by the hospital or health facility to a person who is not an insured person.
Exception
(4) Despite subsection (1), the Plan is not subrogated to the rights of an insured person in respect of personal injuries arising directly or indirectly from the use or operation of an automobile after this section comes into force in Canada, the United States of America or any other jurisdiction designated in the No-Fault Benefits Schedule under the Insurance Act.
(ii) Insurance Act, R.S.O. 1990, c. I.8
Collateral source rule not to apply
267.– (1) The damages awarded to a person in a proceeding for loss or damage arising directly or indirectly from the use or operation of an automobile shall be reduced by,
(a) all payments that the person has received or that were or are available for statutory accident benefits and by the present value of any statutory accident benefits to which the person is entitled;
(b) all payments that the person has received under any medical, surgical, dental, hospitalization, rehabilitation or long-term care plan or law and by the present value of such payments to which the person is entitled;
(c) all payments that the person has received or that were or are available for loss of income under the laws of any jurisdiction or under an income continuation benefit plan and by the present value of any such payments to which the person is entitled; and
(d) all payments that the person has received under a sick leave plan arising by reason of the person’s occupation or employment.
Exception
(2) Payments or benefits received or that were, are or may become available to a person under the insurance plan established under the Workers’ Compensation Act shall not be applied under subsection (1) to reduce the damages awarded.
Idem
(3) A reduction made under subsection (1) does not apply for the purpose of determining a person’s entitlement to benefits under subsection 10(2) of the Workers’ Compensation Act.
Limitation on subrogation
(4) A person who has made a payment or who has a liability to pay a benefit described in clause (1) (a), (b), (c) or (d) is not subrogated to a right of recovery of the insured against another person in respect of that payment or benefit.
Idem
(5) The Workers’ Compensation Board is not subrogated to a right of recovery of the insured against another person in respect of a payment or benefit paid by the Workers’ Compensation Board to the insured or in respect of a liability to make such payment or benefit.
Application
(6) This section applies to damages awarded for loss or damage arising directly or indirectly from the use or operation, after the 23rd day of October, 1989, of an automobile.
The first question: subrogation
[15] I turn first to the question of subrogation.
[16] Mr. Baker submitted that Alberta Health is entitled to be subrogated to Ms. Matt’s right to recover the costs of the insured services provided to her while a resident of Alberta. The statutory right is expressed in s. 58(1) of Alberta’s Hospitals Act and applies even where, as in the present case, the tort occurred in another jurisdiction.
[17] On the authority of the recent decision of this court in Kingsway General Insurance Co. v. Canada Life Assurance Co., (2001) 2001 14695 (ON CA), 149 O.A.C. 303, [2002] I.L.R. I‑4063, I accept this submission. Kingsway General held that, in ascertaining whether an Ontario insurer was subrogated to the right of an Ontario insured for medical expenses incurred by her following an accident in Florida in which she was a passenger on a motorcycle driven by her husband, the law of Ontario, rather than Florida, applied. Goudge J.A. said, at paras. 11-13:
In arguing for the applicability of Florida law to determine whether Canada Life has a right of subrogation the appellant relied on the jurisprudence exemplified by Tolofson v. Jensen, 1994 44 (SCC), [1994] 3 S.C.R. 1022. In that case LaForest J. for the majority of the Supreme Court of Canada held that the rule of private international law that should generally be applied in torts is the law of the place where the accident occurred.
It may be that the determination of whether the driver of the motorcycle was at fault for the accident is to be determined according to Florida law. However, the right of Canada Life to subrogate to the position of its insured depends not on tort law but on its contract with its insured. The question is whether Canada Life has contracted away its right of subrogation in the circumstances of this case. That question is one of contract law not tort law.
I do not think there is any doubt that the policy issued by Canada Life must be interpreted according to Ontario law, not Florida law. …
[18] The right of subrogation in Kingsway General was expressed in a contract of insurance. The right of subrogation in the present case is expressed in a statute. On this branch of the argument, I see no distinction in principle between Kingsway General and the present case. Alberta Health’s entitlement to assert its subrogated position under the Hospitals Act is clear. By virtue of that statute, a resident of Alberta is entitled, subject to exceptions that do not apply to Ms. Matt, to receive insured services. The term “insured services” includes the hospital services she received. The statute describes a person who receives insured services as a “beneficiary”. The result – subject to consideration of the effect of s. 267(1) of the [Ontario] Insurance Act – is that Alberta Health is subrogated to Ms. Matt’s right of recovery in respect of the costs of insured services furnished to her. I see no principled basis on which an Ontario court can refuse to recognize the existence of that subrogated right.
[19] Having accepted Mr. Baker’s submission that Alberta Health has a subrogated claim by virtue of s. 58 of the Alberta Hospitals Act, it is not necessary for me to consider whether Alberta Health enjoys, as well, a subrogated position at common law. Mr. Baker devoted no oral argument to that proposition, nor did he suggest that subrogation at common law conferred any position on Alberta Health superior to that to which it was entitled by statute. I therefore propose to turn now to the second issue, namely, whether Alberta Health’s recovery is barred by the provisions of s. 267 of the Insurance Act.
The second question: the effect of section 267 of the Insurance Act
[20] In my view, the disposition of this appeal turns on the effect of s. 267(1)(b) of the Insurance Act. It is therefore not necessary for me to address the parties’ competing submissions respecting s. 267(4), and I do not propose to do so.
(a) “payments that the person has received”
[21] Section 267(1)(b), like the three other clauses found in s. 267(1), begins with the words “all payments that the person has received”. There is no suggestion that Ms. Matt directly received any payments for the hospital services with which she was provided in Alberta. As Spence J. noted, the monetary payments were made by Alberta Health to the Alberta Hospital Ponoka on account of the services that hospital provided to Ms. Matt. As he further noted, the same type of service and payment arrangements existed in Osborne (Litigation Guardian of) v. Bruce (County), (1999), 39 M.V.R. (3d) 159 (Ont. Gen. Div) and in Québec (Régie de l’assurance-maladie) v. Soloway, Wright (1996), 1996 8236 (ON SC), 31 O.R. (3d) 254 (Gen. Div.), and the courts treated the payments made in those cases as payments covered by s. 267(1). With respect to the present case, Spence J. continued:
However, the plaintiff received services under the arrangements and the services were provided on a basis that involved payment being made for those services. Accordingly, the services the plaintiff received had a monetary cost and a monetary value. On that basis it is proper to consider that the plaintiff received payments for purposes of s.267(1)(b).
[22] The payments in issue in Kingsway General were health care payments made by an insurer on behalf of an injured party. This court found that those payments were engaged by the expression “all payments in respect of the incident that the plaintiff has received” in s. 267.8(4) of the Insurance Act. Speaking for the court, Goudge J.A. said, at para. 15:
It is not disputed that the payment by Canada Life of Shirley Stoesser’s Florida medical bill comes within the scope of health care expenses described in s.267.8(4) of the Insurance Act.
[23] In their submissions before us, all counsel proceeded on the premise that the substance of Alberta Health’s claim fell within the expression “all payments that the person has received” within the meaning of s. 267(1), and I propose to address the effect of that subsection on Alberta Health’s claim without qualification by the fact that Ms. Matt received no payments directly for the hospital services that were rendered to her at Alberta Hospital Ponoka.
(b) the effect of section 267(1)(b) on Alberta Health’s subrogated claim
[24] Part VI of the [Ontario] Insurance Act is entitled “Automobile Insurance”. Section 267 is one of a number of sections found in that portion of Part VI headed “Limited Accident Insurances”. It was enacted as part of the Ontario Motorists Protection Plan, the new automobile accident compensation regime that was adopted in this province in 1990. In essence, the new regime represented an exchange of rights, by which an accident victim’s entitlement to no-fault first party benefits was significantly enhanced and, correspondingly, his or her right to sue third parties in tort was significantly restricted. The legislative scheme of which s. 267 and related sections form a part has been chronicled in a number of decisions of this court: Meyer v. Bright (1993), 1993 3389 (ON CA), 15 O.R. (3d) 129; Cugliari v. White (1998), 1998 5505 (ON CA), 38 O.R. (3d) 641; Chrappa v. Ohm (1998), 1998 893 (ON CA), 38 O.R. (3d) 651; Bannon v. McNeely (1998), 1998 4486 (ON CA), 38 O.R. (3d) 659; Sullivan Estate v. Bond (2001), 2001 8584 (ON CA), 55 O.R. (3d) 97.
[25] Subrogation is most frequently encountered in insurance cases where, upon paying the insured’s loss, an indemnity insurer is entitled to the benefit of all of the insured’s remedies against the person liable for the loss. The right of subrogation is derivative, and the subrogated party can be in no better position as against a third party than the injured party would be: Brown & Menezes, Insurance Law in Canada (Scarborough: Carswell, 1999, loose-leaf ed.), para. 13-2. Any restriction or limit on the injured party’s right of recovery against the third party applies equally to the subrogated party which, since it is acting by derivative subrogation, is subject to the same law and the same restrictions: Régie de l’assurance automobile du Québec v. Brown (1990), 1990 2609 (NB CA), 71 D.L.R. (4th) 457 (N.B.C.A.), at p. 461. It was for this reason that this court affirmed the dismissal of an action brought by a subrogated insurer against the allegedly at-fault driver more than two years after the automobile accident in which the insured person was injured: Royal Insurance Co. of Canada v. Aguiar (1984), 1984 2099 (ON CA), 48 O.R. (2d) 705. The insurer’s right was held to be no greater than the right of its insured and, as a result, “any claim based on subrogation was defeated by s.180(1) of the Highway Traffic Act” (p.707), for the insurer had “no basis to claim reimbursement except subrogation and its subrogation rights have been defeated by the limitation period.” (p.708).
[26] The derivative character of subrogation is reflected in the very section of the Hospitals Act on which Alberta Health relies. By s. 58(1)(b), Alberta Health is subrogated to the right of recovery of the person to whom the hospital services were furnished. The right of recovery of that person, the “beneficiary”, is set out in s. 58(1)(a). But if the beneficiary – in the present case, Ms. Matt – has no right of recovery, then Alberta Health – which stands in no higher position than Ms. Matt – can have no right of recovery either.
[27] Has Ms. Matt a right of recovery? The answer, found in s. 267(1)(b), is in the negative. By that provision, the damages which she is entitled to be awarded must be reduced by “all payments that [she] has received under any medical, surgical, dental, hospitalization, rehabilitation or long-term care plan or law”. Having regard to the broad interpretation of the phrase “all payments that [she] has received” (see paras. 21-23, above), the insured services fall squarely within the list that follows. Section 267(1)(b) bars any claim by Ms. Matt for damages in respect of the insured services and, by extension, any derivative claim to which Alberta Health is subrogated.
[28] Mr. Baker noted that s. 267(1) does not, in terms, purport to bar all claims for the payments to which it refers but, instead, limits the damages that the injured party may recover. So, he argued, the injured party’s right to sue remains unaffected and may be asserted by the subrogated insurer which, conveniently, is not subject to the limitation on damages that the section imposes. In my view, this submission cannot survive the principle that a subrogee cannot be in a better position than the injured party. The principle is not limited to the technical question whether a right of action exists. Rather, as this court has stated, the principle is that “the rights of the insurer [are] no greater than those of the insured persons”: Royal Insurance Co. of Canada v. Aguair, at p. 707. If Ms. Matt could not recover damages in respect of the insured services, neither can Alberta Health.
[29] This conclusion is reinforced when one has regard to the trade-off that marked the new accident compensation regime, described in para. 24, above. Referring to that trade-off, this court said in John v. Flynn (2001), 2001 2985 (ON CA), 54 O.R. (3d) 774, at para. 54:
Mandatory deduction of no-fault benefits prevented double recovery in specified circumstances. The legislative intent … was to limit significantly the right of a victim of a motor vehicle accident to maintain a tort action against the tortfeasor. The compensation scheme provides for an exchange of rights – the victim loses the right to sue unless coming within the statutory exemptions, but receives more generous first party benefits, regardless of fault, from his or her own insurer.
The interpretation of s. 267(1)(b) as precluding any subrogated claim for the payments there catalogued is more consistent with this legislative objective than the converse interpretation, which would enable a subrogee to pursue the tortfeasor for damages that the statute bars the injured person herself from recovering[^1].
[30] I therefore agree with the conclusion reached by Spence J. that, because of s. 267(1)(b), Ms. Matt could assert no claim to recover damages in respect of the hospital services in Alberta and that, correspondingly, Alberta Health can assert no such claim in its subrogated position to Ms. Matt’s right of recovery.
Disposition
[31] For the foregoing reasons, I would dismiss the appeal, answer in the affirmative both questions appearing in para. 11, above, and substitute those answers for the provision in the order of Spence J. that simply dismissed Alberta Health’s motion.
[32] The respondents are entitled to their costs of the appeal on a partial indemnity scale. At the conclusion of the argument, counsel for the parties made submissions regarding those costs. Having considered those submissions, I would fix the fees portion of the costs of the respondents represented by Mr. Dochylo, who carried the burden of the argument, at $9,000 and the fees portion of the costs of the respondent represented by Mr. Empke at $1,000. I would also allow the respondents their reasonable disbursements and goods and services tax actually paid or payable on their fees and disbursements.
Released: AUG 16 2002 RRM
Signed: “M.A. Catzman J.A.”
_____ “I agree R.R. McMurtry C.J.O.”
_____ “I agree J.C. MacPherson J.A.”
[^1]: The treatment of the subrogated claim for the hospital services Ms. Matt received in Ontario is consistent with my conclusion. Section 30(1) of the Health Insurance Act, R.S.O. 1990, c. H-6, provides that where, as a result of negligence or other wrongful act or omission, a person suffers injuries for which he or she receives insured services, the Ontario Health Insurance Plan (“OHIP”) is subrogated to any right of the insured person to recover the past and probable future cost of such services. But s. 30(4) of the Act expressly provides that, despite subsection (1), OHIP is not subrogated to the rights of the injured party in respect of personal injuries arising from the use or operation of an automobile in Canada, the United States and other designated jurisdictions during the relevant time period.