The Horrible Reality of a Cox & Carter Order
By: Jordan Thompson, Associate Lawyer
If you are injured in a motor vehicle accident and receive weekly indemnity benefits from your own insurance company, the insurance company of the car that hit you has the right to deduct the benefits received from your own insurance company under the Section B provisions of the Standard Automobile Contract.
To better illustrate this, let’s say that Jim is injured in an accident. Jim works full-time making $750.00 gross per week. Jim is disabled from work in the accident. Under the Section B provisions of his own insurance policy, he is entitled to 80% of gross earnings up to a maximum of $250.00 per week (less offsets). Let’s say there are no offsets (e.g.: disability policy, EI sickness, etc.). Jim is entitled to receive the full $250.00 per week.
Jim is 62 years old. At $750.00 gross weekly, this equals $39,000.00 a year. Let’s say Jim is completely disabled from any occupation in this accident and the accident means he will never work again.
Jim is an industrious person. He was not going to retire at 65! No, he was planning on retiring at 70. Therefore, there are 8 years of loss of income.
For illustrative purposes, let’s say Jim’s income is tax free. In reality, past loss income is calculated on a net basis, but for simplicity let’s assume Jim’s gross and net are $39,000.00 a year.
With 8 years left, this means Jim has a loss of income of $312,000.00. Seems simple enough.
But wait, we have the Section B weekly indemnity deduction of $250.00 a week or $13,000.00 per year to take into account.
If Jim is completely disabled and will never work at his own job or any job has experience, education, or training for, then the $250.00 a week is for life.
According to McKeller Structured Settlements, the average 62-year-old male will live another 23 years. Therefore, the Section B deduction is $299,000.00 (23 years x $13,000 per year)
Therefore, the loss of income claim is reduced by $299,000.00. So, Jim’s loss of income is $13,000.00.
This is simplified but the principle is that insurer of the car that hit you is entitled to deduct payments by Section B. I should note that at a Trial, Jim would receive the full $312,000.00 (less the Section B WI he received until the date of the Trial) however the money he receives from Section B WI from the Trial onwards will be given to the insurer of the car that hit him – this is known as a Cox and Carter Order which is the name of the case where this type of Order originated.
Let’s assume that Jim did not earn $39,000 per year but earned $20,000 per year and planned on retiring at 65 (3 years after the accident). Therefore, total loss of income is $60,000.00. How does a Cox and Carter Order work in this scenario?
In New Brunswick, the Court of Appeal in the case of Bent v. McFarlane in 2018 said that the Section B weekly indemnity deduction that the insurer of the car that hit you is not just a deduction against the loss of income portion of a claim but against the whole claim itself.
The other heads of damages are: general damages, loss of valuable services, and cost of care. Let’s say Jim’s claim is as follows:
General Damages $50,000.00
Loss of Income $60,000.00
Loss of Valuable Services $25,000.00
Cost of Care $25,000.00
As Jim is disabled for life and is entitled to WI for the rest of his life, then the Section B Weekly Indemnity lifetime amount is $299,000.00 (as noted above).
So, Jim will be left with $160,000 less $299,000 = $0.00.
This does not seem right, however, the New Brunswick Court of Appeal recently confirmed this as the law in New Brunswick. In that case the Plaintiff was left with $0.00.
Again, this is just for illustrative purposes and is not 100% on how a claim is calculated (there are some more nuances with the calculations and discount rates to take into effect).
But the end result is the same. Jim basically gets nothing from the car that hit him (he does get his Section B benefits).
The reason for this is s.256 and s.257 of the Insurance Act. It basically states that any payment received from your own Section B insurer is a release for payment against the insurer of the car that hit you.
The reality unfortunately is that a Cox and Carter Order can operate to, in some cases, completely wipe out damages owed to an injured person by a person that hit them. Most cases do not see a complete wipe out of damages, however, cases where a person receives Section B weekly indemnity long-term will have to take the effect of a Cox and Carter Order into account.
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