Understanding Subrogation Rights in Canadian Personal Injury Law

Here’s what injured claimants, insurers, and lawyers need to know about subrogation rights under Canadian law When someone else caused the accident and a settlement is within reach, several letters may start arriving. For one, the long-term disability insurer wants repayment, but so does OHIP. That is subrogation in action, and in personal injury cases across Canada, missing it can cost an injured person dearly. Subrogation is the right of reimbursement. Black’s Law Dictionary defines it as “the substitution of one party for another whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the debtor.” In personal injury practice, it means an insurer that has paid benefits to an injured person can step into that person’s shoes and pursue the responsible party, up to the amount paid out. The doctrine has been part of Canadian law for well over a century. In National Fire Insurance Co. v. McLaren (1886), 12 O.R. 682, it was held that subrogation is “a creature of equity not founded on contract, but arising out of the relations of the parties.” Most modern policies include an express clause granting this right before full indemnification is reached. Provincial statutes can also be a basis for the doctrine of subrogation. In Ontario, for example, s. 152(1) of its Insurance Act provides that upon making a payment under a covered contract, the insurer is subrogated to all rights of recovery of the insured and may bring action in the insured’s name. The basics of subrogation is explained in this video: If you’re a litigant looking for lawyers to help you in your claims, check out Canadian Lawyer’s Special Report on Canada’s Best Personal Injury Law Firms . The doctrine was refined in Douglas v. Stan Fergusson Fuels Ltd., 2018 ONCA 192 , setting out five principles governing how subrogation rights operate at common law: However, subrogation is not the same as deductibility. The Supreme Court of Canada drew this distinction in Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee , [1994] 1 SCR 359 . While deductibility asks whether a benefit reduces what the tortfeasor owes, a subrogated claim asks whether the insurer has a direct right to reimbursement from the injured person’s recovery. When a serious injury forces someone out of work, long-term disability (LTD) benefits help replace lost income. If that person later recovers compensation through a tort settlement, the LTD insurer may want that money back. Whether it can get it depends almost entirely on how the injury happened. LTD insurers cannot pursue subrogation in motor vehicle accident cases, as established by provincial insurance laws. An example is s. 83(7) of British Columbia’s Insurance (Vehicle) Act. It states that despite any right of subrogation a person may have under an agreement, the common law, or any enactment, a person who pays or provides benefits — or assumes liability to do so — is not subrogated to the injured person’s right of recovery. Outside the motor vehicle context (e.g., slip and falls , occupier’s liability, medical malpractice), LTD insurers may have a contractual right to reimbursement through a clause in the policy. However, the private insurance exception is a significant limit. As confirmed in Cunningham , the exception holds that an insured person should not lose a benefit they personally paid for simply to reduce the tortfeasor’s liability. Where it applies, LTD benefits are not deductible from the tort award and the reimbursement clause may be unenforceable. The Ontario Court of Appeal added a further limit in Rochon v. Rochon, 2015 ONCA 746 . It says that an insurer cannot subrogate against its own insured, as doing so “does not fulfil the aims of subrogation, which is to avoid overpayment of the insured.” In any non-motor vehicle case involving LTD benefits ,