The Superior Court of Justice helpfully clarifies the approach to quantifying loss of competitive advantage in Herrington. After sustaining injuries in a motor vehicle collision, the plaintiff continued to earn business income but in a market with serious labour shortages. Additionally, he was no longer able to perform the physical work of the job. The case also addressed causation and the “crumbling skull” principle. [1]
Fact Summary
The plaintiff was a 60-year-old man who had worked as an auto mechanic all his life. He owned an auto repair shop and performed the work himself with help from an assistant. In a 2015 collision, he sustained serious injuries to his left elbow and was no longer able to perform mechanic duties. He was required to hire additional employees to take over these responsibilities, and was relegated to a supervisory and administrative role.
1. Issue: Was this a “crumbling skull” plaintiff?
The defendant argued that the plaintiff’s elbow injury would have happened regardless of the collision due to the repetitive strain of working as an auto mechanic over his lifetime.
The court reiterated that in order for a damages award to be reduced for a “crumbling skull” plaintiff, there must be evidence from physicians of the likelihood that the plaintiff would have suffered a similar injury had the tortious conduct not occurred. [2]
The court held that this was not a “crumbling skull” case.
Justice Smith did not accept the evidence of the defendant’s medical expert, Dr. Boynton, who opined that the plaintiff’s injury was simply a pre-existing asymptomatic injury, rendered symptomatic by the collision, and could be alleviated with appropriate exercises, treatment, and modifications to the way he performed his work. But the evidence indicated otherwise: he had undergone ample treatment without any appreciable long-term results, and he was no longer able to do the work as a mechanic since shortly after the collision.
With respect to Dr. Boynton’s evidence, the court also noted that medical legal assessments generated a substantial portion of Dr. Boynton’s annual income, 90% of which were done at the request of defendant insurance companies, giving rise to a reasonable perception of bias.
2. Issue: Loss of Competitive Advantage
The court reiterated that awards for loss of competitive advantage are often made without an accompanying award for loss of future earnings in circumstances where the injured party has returned to their pre-accident level of income but has a higher risk of being unemployed in the future due to factors caused by the accident. The amount typically awarded will be the present value difference between the pre-accident probable income and the post-accident probable income.
The plaintiff was 56 years old at the time of the collision and had worked as a mechanic throughout his life, running his own auto-repair shop with the help of an assistant. He had no plans to retire, and business had been steady.
Since the collision he had been limited to the administrative and supervisory work. He was no longer able to perform any of the mechanic work and had to hire additional workers to keep the business viable. Many of those employees were leaving to earn higher wages in other industries, throughout the COVID-19 pandemic. While he continued to enjoy the same, or about the same, level of income as he had before the collision, he managed by paying his employees fairly low wages.
The court considered that given current labour shortages, particularly for skilled mechanics, and generally higher wage expectations, it would be increasingly difficult for the plaintiff to find new employees.
The plaintiff was at a “distinct disadvantage” competing in the mechanic’s trade, calling into question the viability of his business and the level of income it generated. The value of the business asset itself was likely to be negatively impacted.
Based on the actuarial evidence of Ian Wollach of RSM Canada using the Supreme Court of Canada’s methodology in D’Amato [3], the court assessed the plaintiff’s loss of competitive advantage at $571,595. The court accepted the first scenario amount, which used a broader range of the plaintiff’s actual income as opposed to basing it on one year’s income or the statistical earnings of his occupation.
[1] Herrington v. Brewer et al, 2022 ONSC 2852. [2] Athey v. Leonati 1996 1 SCR 333. [3] D’Amato v. Badger,[1996] 2 SCR 1071.
