No Income Tax Deductions for Depleted Sick Bank Damages


As previously discussed, when a person becomes disabled from work due to injuries and uses up banked sick time they can claim damages to be reimbursed for this loss in a tort claim.
If the tort claim arises from a BC motor vehicle accident the Insurance (Vehicle) Act requires awards for past wage loss to be reduced to take income tax consequences into account resulting in damages only for “net income loss”.  So, when damages are paid for use of banked sick time does the award need to be reduced to take income tax into account?   The answer is no and reasons for judgement were released last week by the BC Supreme Court, Vancouver Registry, addressing this issue.
In last week’s case (Chalmers v. Russell) the Plaintiff was a school teacher who was involved in two motor vehicle collisions.  The Plaintiff was not at fault for either of these crashes.  As a consequence of injuries sustained the Plaintiff had to use up several thousand dollars of banked sick time available to her through her employment.  Madam Justice Griffin awarded the Plaintiff damages for this loss and in doing so provided the following useful reasons explaining that these awards are not to be reduced to take income tax consequences into account:

[85]         I accept Ms. Chalmers’ evidence that following the first accident, she was so sore and painful that she felt it necessary to take time off work prior to the birth of her child in order to expedite her recovery.  I am mindful that she did not obtain any medical evidence in support of her decision to take time from work.  Regardless, given her advanced state of pregnancy, the trauma of the accident and the pain she was in after the first accident, I consider her decision not to return to work to be reasonable and due to her injuries.  The cost to reimburse the sick bank during this time period is $342.45 per day, totalling $3,766.95.

[86]         As noted in Bjarnason v. Parks, 2009 BCSC 48, depletion of a sick bank is a compensable loss: at para. 56.  However, it is not an income loss so there should be no deduction for income tax in accordance with ss. 95 and 98 of the Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231: Bjarnason at para. 66.

In addition to the above, today’s case is worth reviewing for the Court’s discussion of non-pecuniary damages for mothers whose injuries affect their ability to look after their young children.  In today’s case the Plaintiff sustained various soft tissue injuries which, while not disabling, continued to affect the Plaintiff and interfered with her ability to look after her infant children.  Madam Justice Griffin assessed non-pecuniary damages at $50,000 and in doing so provided the following reasons:

[123] Importantly, Ms. Chalmers has lost the experience of being a relatively pain-free, physically active mother of her infant children during an important period in their young lives.  This is clearly a huge loss for Ms. Chalmers.

[124] I conclude that a reasonable award of non pecuniary damages, that is fair to all parties, is $50,000.

This is not the first time that pain interfering with parenting has been considered a relevant matter by the BC Supreme Court in addressing non-pecuniary damages and you can click here to read a previous post further discussing this topic.

bc injury law, Madam Justice Griffin, Non-Pecuniary Damages Young Parent, Sick Bank, Tax Deductions, wage loss

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ERIK
MAGRAKEN

Personal Injury Lawyer

When not writing the BC Injury Law Blog, Erik is the managing partner at MacIsaac & Company, based in Victoria, B.C. He is also involved with combative sports regulatory issues and authors the Combat Sports Law Blog.

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