Deductibility of government benefits

Nicholas Sampson of Neinstein LLP discusses this common theme in personal injury litigation, including what the courts have said, what tests to consider in determining deductibility, and overall practice considerations

A common theme in personal injury litigation, in particular medical negligence matters, is the debate between the parties on whether government-funded social benefits ought to be deducted from a plaintiff’s damages. The debate is based upon two competing principles. From the plaintiff’s perspective, the tortfeasor has an obligation of restitutio in integrum – to restore the plaintiff to the pre-incident condition, which involves paying full compensation for the plaintiff’s losses. From the defendant’s perspective, not deducting available government benefits from the plaintiff’s assessed damages offends the principle against “double recovery” – the plaintiff should not be paid twice for the same loss and thereby be overcompensated.

The broader public policy question is who should pay for the plaintiff’s losses, the tortfeasor or the taxpayers through government resources?

The courts have recognized the inherent risk to plaintiffs in reducing a damages award based upon the assumed availability and adequacy of government benefits into the future.

In Paxton v Ramji,[1] the Court stated:

“Where benefits are deducted from a damages award it is premised on the plaintiff continuing to receive them over the relevant future period. If it is possible that assistance may be discontinued or reduced, then the less certain a Court will be that the collateral benefit sought to be deducted will in fact flow to the plaintiff and the less inclined the Court will be to make the deduction. A number of Courts have recently refused to make such deductions where there is doubt whether the benefits will persist. The test seems to be that, as between the tortfeasor and the victim, the latter should receive the benefit of the doubt . . . If, however, the Court is satisfied that the benefits will continue to flow to the plaintiff into the future, then their value should be deducted pursuant to the compensatory principle”.

In Butler (Litigation Guardian of) v. Royal Victoria Hospital,[2] the Court stated that:

“[The trial judge] must make awards for future care and services on the theory that the tortfeasors, and not any level of government, should be responsible for paying the cost of such items . . . [The plaintiff] should not be forced to bear the risk of future reduced or eliminated government-funded assistance programs. If such programs were reduced or eliminated, or if the applicable access criteria were to change, [the plaintiff] might be left in the position where her damages award would be insufficient to fund those things that she requires to manage her disability.”

Ultimately, the trial judge was not prepared to expose the plaintiff “to shortages of funding for her future care when those needs have been identified and quantified today and when she will have no right to come back to seek further compensation from the tortfeasor in the event that the identified programs are unavailable to offer future funding or assistance”.

The risk of a plaintiff being unable to access government benefits is not just theoretical. An example is the representative plaintiff’s experience in Leroux v. Ontario.[3]  This case is a certified class action against the Government of Ontario – Ministry of Community and Social Services (MCSS) – for mismanagement of priorities and waitlists administered through Disability Services Ontario for Passport Funding, Residential Services, and Caregiver and Respite supports. The decision was reported in 2023 and the representative plaintiff was still waiting for services, despite having been approved to receive same since 2016.

The Test/Approach to Determine Deductibility

The courts, through a series of cases, answer the question of the deductibility of government benefits depending on the specific characteristics of the benefit in question. They have determined that a particular government benefit should not be deducted where:

  1. The benefit is affected by income or requires a means-test;[4]
  2. The benefit is affected by tort compensation;[5]
  3. The benefit is unstable and/or discretionary;[6] or
  4. The benefit is subrogated.[7]

The remainder of this article will discuss categories 3 and 4.

Entitlement vs. Eligibility – Is the Benefit Discretionary?

When assessing a particular government benefit, whether the plaintiff is “entitled” to the benefit versus “eligible” for the benefit can make a material difference in the deductibility analysis. If a plaintiff must meet eligibility criteria, then it is likely that the benefit is discretionary and therefore not deductible.

In K.S. v. Willox,[8] the Court of Queen’s Bench of Alberta explored the distinction between entitlement-based benefits and discretionary benefits. The particular benefit in question was Alberta’s “The Persons with Developmental Disabilities program” (PDD). The Court analyzed the wording of the PDD’s enabling legislation, the Persons with Developmental Disabilities Act, RSA 2000, c P-9.5, s. 1.2, which provided:

1.2 If an assessment, in a format satisfactory to the director, of an adult’s condition or impairment indicates that the adult has a developmental disability, the director may[9]

(a) develop a plan with respect to the provision of services to the adult to meet the needs of the adult; and

(b) enter into an agreement with a service to provide with respect to the provision of services to the adult in accordance with the plan

The Court determined that while PDD funding is statutory, the funding decision remains, by the wording of section 1.2 of its governing legislation, within the Minister’s discretion, and therefore, the PDD funding was not deductible from the plaintiff’s damages.

An example of an entitlement-based program is the Ontario Health Insurance Plan (OHIP) for Ontario residents. The Health Insurance Act, R.S.O. 1990, c. H.6, s. 11 and 12 provide that “Every person who is a resident of Ontario is entitled to become an insured person . . .” and that “Every insured person is entitled to payment to himself or herself or on his or her behalf for, or to be otherwise provided with, insured services in the amounts and subject to such conditions and co-payments, if any, as are prescribed.”[10]

Therefore, if the enabling legislation for the benefit in question uses discretionary language such as “may” when outlining its parameters, there is a very good argument that it is a discretionary benefit and not deductible.

“Stable” Benefits/Programs – May Not Result in Complete Deduction

Even if the assessment of a particular benefit reveals that it is “stable” and the benefit does not fall within any of the other categories of non-deduction, it still may not result in the deduction of the full value of the benefit scheme.

In Krangle (Guardian ad Litem of) v. Brisco,[11] despite the finding that there was a 95% likelihood of the disabled plaintiff accessing the benefit in question in the future, the plaintiffs were awarded 5% contingency for the possibility that the program would become unavailable.

Krangle confirms that the plaintiff is the party to be protected against future risks that threaten the expected care model.

A Right of Subrogation

The underlying objective of the doctrine of subrogation is to ensure that the insured receives no more and no less than a full indemnity and that the loss falls on the person who is legally responsible for causing it.[12] Subrogation only applies after the insured has received restitutio in integrum.[13]

With respect to the deductibility of a benefit, the Supreme Court of Canada has confirmed, if the third party who paid the benefits has a right of subrogation then there should not be any deduction from the plaintiff’s damages. It does not matter whether the right of subrogation is exercised or not. The exercise of the right is a matter between the plaintiff and the third party and the failure of a third party to exercise the right cannot in any way affect the defendant’s liability for damages. The Court did clarify that different considerations may apply if a third party has formally released its subrogation right.[14]

An application of these principles can be found in Stein v. Sandwich West (Township).[15] In this case, OHIP had explicitly waived its statutory right of subrogation. Nonetheless, the Ontario Court of Appeal declined to make any deduction for the plaintiff’s past and future costs of care, stating that “to allow the deduction claimed by the appellants would have the effect of transferring to the appellants the benefit conferred by statute on the respondent . . . and similarly transfer to the appellants the benefit of OHIP’s waiver of its subrogation rights.”

The enabling legislation of many government benefits contain subrogation provisions. Examples include the Health Insurance Act, R.S.O. 1990, c. H.6, section 30, the Ministry of Health and Long-Term Care Act, R.S.O. 1990, c. M. 26, section 11.2, the Ontario Disability Support Program Act, 1997, S.O. 1997, c. 25, Sched. B, section 52, and the Ministry of Children, Community and Social Services Act, R.S.O. 1990, c. M. 20, section 8.

Practice Considerations

It is important to consider the unique characteristics of each potential benefit. Every benefit is different.

As a general approach, start with the benefit’s enabling legislation (if there is any) or the agreement from which the benefit arises. The goal is to understand the criteria for the benefit as outlined in any regulations or directions from the Minister/administrator.

Additionally, it may become important to understand in detail how the benefit is administered in practice, asking and answering the following questions:

  1. Are there lengthy waitlists which mean that the plaintiff may not be able to actually receive the benefit?
  2. Is the service provided adequate for the current and future needs of the plaintiff?
  3. What burdens are placed on the plaintiff in continually applying for the benefit?
  4. What is the historical context of the benefit over the years it has existed (to assess stability/instability)?


Nicholas is an Associate at Neinstein Personal Injury Lawyers LLP. His practice focuses on medical malpractice litigation. Nicholas is known for his confident advocacy and solutions-oriented approach to legal issues.

Nicholas has extensive trial experience and has appeared before the Ontario Superior Court of Justice, the Divisional Court, and the Ontario Court of Appeal. His most recent courtroom accomplishment includes victory in Hasan v Trillium Health (2022 ONSC 3175) involving a severely brain injured plaintiff.

He is frequently asked to speak on medical-legal issues, most recently presenting on the important decision in Florence v Benzaquen alongside Dr. Erin Neilson.

[1] [2006] OJ No. 1179, 2006 CarswellOnt 1844 (Ont. Sup. Ct.), at para. 53-57, appealed to the Ontario Court of Appeal on other grounds, 2008 ONCA 697.

[2] 2017 ONSC 2792, at paras 361-363.

[3] 2023 ONCA 314, leave to appeal to S.C.C. denied, 2024 CarswellOnt 644 (SCC).

[4] Lurtz v Duchesne, [2005] OJ No 354, at para 25 (ONCA).

[5] Fullerton (Guardian ad Litem of) v Delair, 2006 BCCA 339, at paras 6-7 [Fullerton]; Forde v Inland Health Authority, 2010 BCSC 91, at para. 230.

[6] See Fullerton, at para 28; Paxton v Ramji, [2006] OJ No 1179 at pars 51-57 (Ont Sup Ct J); MacLean v Wallace, [1999] OJ No 3220 at paras 186-188 (Ont Sup Ct J); K.S. (Litigation Representative of) v Willox, 2016 ABQB 483 at paras 762-768; A.T.-B v Mah, 2012 ABQB 777 at para 629; Forde, at paras 242-244; Cottrelle v Gerrard, [2001] OJ No 5472 at para 109-115; Butler (Litigation Guardian of) v Royal Victoria Hospital, 2017 ONSC 2792 at paras 361-363.

[7] See Ken Cooper-Stephenson and Elizabeth Adjin-Tettey, Personal Injury Damages in Canada, 3rd ed (Toronto: Carswell, 2018), p. 814; Cunningham v Wheeler, [1994] SCJ No 19 at para 122; Stein (Litigation Guardian of) v Sandwich West (Township), [1995] OJ No 423 at paras 36-41 (Ont CA); IBM Canada Limited v Waterman, [2013] 3 SCR 985 at para 24.

[8] 2016 ABQB 483, at paras 762-768.

[9] Emphasis added.

[10] Emphasis added.

[11] [2002] 1 SCR 205, at paras. 5, 42-43.

[12] Somersall v Friedman, [2002] 3 SCR 109, at para 50.

[13] Melanson v. Co-operators General Insurance Co., 1996 CarswellNB 364, at para 13 (NBQB).

[14] Cooper v. Miller, [1994] 1 SCR 359; CarswellBC 121, at para 62.

[15] 1995 CarswellOnt 160, at paras 39-41 (ONCA).