Who pays for my lost income after a car accident injury?
After you are injured, you will start hearing phrases and terms being described with acronyms that make little sense to you (AB IE, SABS, LTD/STD, Tort, CPP, etc.). You will also hear many of them appearing to “pass the buck”, saying that you have to contact someone else first or give them some other information before anyone can pay you.
The frustration that my clients feel when they encounter this is completely justified. They have paid into these car accident and disability insurance policies for years, and then when they need them the companies seem to just be delaying things and passing the buck. Further, why should the car insurer get to deduct your disability benefits? – you paid for them after all. And why does your car insurance company have to pay if the other driver is the one that caused the accident? And why should they get to deduct CPP – you paid the taxes towards that for so many years. The financial stress, confusion, pain and other problems only add to the frustration.
I am going to try to provide a “tip of the ice-berg” introduction to how all of this works and who pays what. Let me start by saying: YES, the system is completely unfair, does not provide perfect compensation and makes very little sense . You are absolutely right. However, it is the only system that we have and the best compensation that we have available. Barring a drastic change by the policy-makers in government, this is what we have to work with. What is important is making sure that you apply to the right companies at the right times to avoid prejudicing yourself and losing even more.
Most people’s first thought after an accident is to sue the other driver’s insurance company. They cannot understand why they are not entitled to just go after that other driver’s insurer. After nearly 11 years practicing in this area (since 2002), I can say that I completely agree – it makes very little sense and probably hasn’t even served the insurers well over the last few years either. You should be able to go after them logically, and leave your insurer completely out of it. However, that is not the reality.
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The reality is that you are required to first apply to your own insurance company for limited benefits. Unless you opted for extra insurance when you purchased your car insurance, you are probably limited (for current accidents) to recovering 70% of your income from your car insurer, to a maximum of $400 per week (these are called income replacement benefits). You can also get some limited medical/rehabilitation benefits and perhaps some other benefits as well, depending on your circumstances. The benefits available to you are much less than they were before the last round of changes to the car accident insurance system in 2010.
Your own motor vehicle insurer will likely require you to apply for short term (STD) and long term (LTD) disability benefits if you had coverage available to you. Your auto insurer will then almost certainly deduct the LTD/STD benefits that you receive from the income replacement benefits that they pay you (depending on a series of calculations about the percentage of your income left after the deduction). Oddly enough, if the LTD/STD insurer denies you benefits and then settles with you, then there is case-law that say that your insurer and the other insurer may not get to deduct most of the settlement in many circumstances.
Your auto insurer may also require you to apply for CPP or other benefits depending on the nature of your disability. They will also likely be entitled to a deduction for amounts received.
If you do not apply for long term or short term coverage or CPP etc. even though you had the opportunity, your car insurer will say that you failed to do what you should have and may argue that they can reduce your payments or even sue you for repayment. Aside from the fact that you should try to avoid this, it is good practice to apply in any event since it can maximize your pay-outs and there are time-limits to apply for these coverages – you don’t want to miss the time-limits because it may bar your recovery or make it more challenging to access the benefits, or, at least, delay the recovery.
You can also sue the other driver’s insurance company, but the other driver’s insurance company gets to, in almost all cases, deduct the benefits that you have received from CPP, your auto insurer and the disability benefits company (ie: Manulife, Desjardins, Great West Life, etc.). The other driver’s insurance company also has a series of protections against your claims, including that they do not have to pay unless your injury is deemed to be permanent, serious and important (the threshold) based on a number of factors and details, they get to apply a $30,000 deductible off of your pain and suffering claim if your damages are $100,000 or less (and to top it off, if it goes to Court, many of these things have to be kept secret from the jury – even the fact that the defendant has insurance is kept secret from the jury). There are different limits on how much you can sue the other driver’s insurance for.
You need to obtain legal advice for settling with any of the insurers, as one of the others may say that you failed to get full compensation from the one that you settled with and claim a deduction for how much you “should have” received.
All of this makes it clear that the system is about as clear as mud to everyone except the injury lawyers and the insurance companies. The system is full of pit-falls and you need effective and knowledgeable legal representation to ensure that your case is managed properly. Call us for a free consultation. We can’t turn water into wine, but we like to think that we can turn mud into something a bit clearer.