Ten years ago the Alberta government significantly amended the Insurance Act to limit the upward pressure on motor vehicle liability insurance premiums. Surprisingly, some of those amendments still cause confusion; specifically, what benefits are deducted from loss of income claims.To reduce post-accident payments, the government addressed “double recoveries”, in which claimants recovered money in their lawsuit for which they had already been reimbursed by another source. So, section 626.1 of the Act (now section 570) mandated deducting from income loss awards:Income tax, if the amount is not subject to income tax;Canada Pension Plan contributions and Employment Insurance premiums;No fault automobile insurance benefits paid to non-Alberta residents;Private medical, sickness and accident benefits;Private disability benefits;Canada Pension Plan disability benefits;The list of deductions also includes “benefits under a prescribed income continuation or replacement plan” and “benefits under an income replacement plan or scheme referred to in section 15.1”: the former of which is neither defined nor established in the regulations, and the latter of which is even more confusing than it sounds.The Act also, and critically, extinguishes a payor’s right to subrogate for benefit payments meaning (for example) that if a disability insurer pays income replacement benefits after a motor vehicle accident, the insured cannot sue for those same amounts and the insurer cannot seek to be reimbursed by the at fault driver’s insurer for its payments.These provisions were examined by the Court of Appeal in Hammond v DeWolfe, a case involving injuries in a motor vehicle accident. The Plaintiff missed work at Syncrude due to his injuries, and Syncrude paid $38,668 in “income benefits” while he recovered. Many large employers pay short-term disability benefits on this basis, and the Syncrude program (like many others) provided that Syncrude was subrogated to the Plaintiff’s rights of recovery. The issue before the Court was whether Syncrude could subrogate for those benefits, despite the wording of the Insurance Act.While there had been a general assumption that the legislation was intended to allow for the deduction of all such short-term benefits, the Court of Appeal noted that the wording of section 15.1, which is supposed to clarify what are deductible benefits, does nothing of the sort and is (to say the least) “vague and confusing”.To add to the confusion, in barring subrogation section 626.1(6) of the Act (now s. 570(6)) states that the payor of benefits “is not subrogated to a right of recovery of the insured against another person”. On the facts of Hammond, it would be odd to describe Syncrude’s employee as “the insured”, suggesting that such benefits were not meant to be included. The Court concluded:The context of the legislation suggests the legislation was not intended to apply to income benefits paid by an employer who retains a right of subrogation. The comments of the legislation’s sponsor suggest that the legislation is aimed at collateral benefits which result in a claimant being paid twice. Where an employer pays an income benefit to an employee and then recovers the amount of the benefit from a tortfeasor, the employee is not paid twice. The employee is paid once by the employer and the employer recovers its payment from the tortfeasor.Accordingly, and unless the government wishes to revisit the issue, if a claimant (1) is injured in a motor vehicle accident, (2) receives income replacement benefits from their employer, and (3) if the employer’s program contains a right of subrogation, then the benefits are not deductible from an award and the right of subrogation is not statutorily extinguished.What this means for you?When calculating loss of income after a motor vehicle accident, although taxes and benefits can be deducted from the gross amount, if a plaintiff’s employer pays income replacement benefits (that are subject to a right of subrogation), then such payments are not deductible.