More on ICBC Injury Claims, Past Wage Loss and Tax Consequences
When advancing a personal injury claim against another as a result of a BC Car Crash claims for past wage loss are limited to wage loss less income tax. This is so because of s. 98 of the Insurance (Vehicle) Act which reads as follows:
Despite any other enactment or rule of law but subject to this Part, a person who suffers a loss of income as a result of an accident or, if deceased, his or her personal representative, is entitled to recover from designated defendants, as damages for the income loss suffered after the accident and before the first day of trial of any action brought in relation to it, not more than the net income loss that the person suffered in that period as a result of the accident.
Over the years there was some uncertainty as to how this section of the Insurance (Vehicle) Act operated with respect to claims for past wage loss that extended for multiple years. For example, if a person suffered 2 years of wage loss of $25,000 per year how would tax be calculated? Would it be the tax payable on $25,000 per year or would it be the tax payable on the whole $50,000 as if it was earned on the date of trial or settlement? In March, the BC Court of Appeal released reasons for judgement clarifying this section stating in essence that if income loss can be attributed to any given year then the taxes payable on that income for that year should be deducted.
There is one scenario, however, that has not been clarified by the BC Court of Appeal and that is what income taxes are payable when the amount of past wage loss for any given year is so small that the figure would be tax exempt but when added up with the other income earned by the Plaintiff the gross figure would be taxable?
Reasons for judgement were released this week by the BC Supreme Court dealing with this issue. In this week’s case (Laxdal v. Robbins) the Plaintiff was involved in a 2006 BC Car Crash. Madam Justice Gerow found that the Plaintiff suffered a past wage loss of $3,306.24 in 2006. ICBC’s lawyers argued that this amount should be further reduced to reflect the income taxes payable when adding this figure to the Plaintiff’s total 2006 earnings. In rejecting this argument the Court held as follows:
“In my view, the authorities support the conclusion that where the gross award is at or below the amount exempt from taxation, there would be no tax payable so that the net past income loss would be the same as the gross past income loss….Accordingly there will be no deduction for income tax as the amount of past wage loss is below the personal exemption.”
This is a great result for BC Plaintiff’s injured in car crashes who suffer a modest past wage loss as it permits the gross amount to be recovered so long as the award fall below the personal income tax exemption for any given calendar year. I imagine ICBC is not as pleased as Plaintiff’s are with this interpretation and perhaps this issue will go up to the Court of Appeal for consideration. If it does I will be sure to write about the result.