Gratuitous payment by employer to employee's family not deductible in personal injury case

The Alberta Court of Queen’s Bench has ruled that payments made by the employer to a deceased employee’s family out of gratuity is not deductible from the liability incurred by the tortfeasor.

In Stewart v. Collins, 2022 ABQB 258, George Stewart died in a roadside accident in 2011, after being struck by a truck driven by Michael Collins. Westana Equipment Leasing Inc. (Westana), Stewart’s employer, continued paying his salary to his wife for the rest of the year.

In 2012, Alberta’s Worker’s Compensation Board (WCB) denied Stewart’s widow, Lorna Stewart, benefits since Westana operated in an exempted industry and did not purchase voluntary Worker’s Compensation Board (WCB) coverage for its employees. However, out of a moral obligation, Westana and Lorna came to an agreement where the latter would receive monthly payments until she received $388,000. The document embodying the agreement was signed with the understanding of releasing Westana for liability for not having WCB coverage for her husband.

In 2020, the president of Westana advised Lorna that it had to suspend the payment due to the impact of the COVID-19 pandemic. Lorna filed a dependency claim against Collins and his employer, BMC Logistics Inc.

Westana was never a party to the litigation; the parties effectively agreed that Westana was not negligent or liable – a somewhat unique aspect of this case, since “litigants routinely seek to hold employers liable for workplace deaths,” noted Justice Nicholas Devlin, who wrote the decision.

Collins argued that the amounts paid by Westana constituted consideration and should be deducted from his overall liability. Lorna argued that Westana’s payments were made ex gratia and thus exempt from deduction.

The court agreed with Lorna Stewart, finding that the salary payments made in 2011, were “voluntary, without consideration, and ex gratia,” since most of it was paid without Westana’s knowledge on the absence of WCB benefits.

As to the payments made through the agreement, the court found that they were still predominantly charitable in nature, tempered only by Westana’s “contemplation that it may leave some legal exposure for failing to provide WCB coverage.”

The waiver contained in the agreement only slightly changed the nature and character of the payments, and in a direction unhelpful to the defendants, said the court. The release was merely out of an “abundance of cation” rather than a limitation on clear liability, and caselaw further stated that the mere presence of a release does not nullify the gratuitous nature of voluntary giving, said the court.

“A stranger to the tort came voluntarily to the aid of its victim, in part from moral concern and in part as recompense for failing to provide a private indemnity that the victim and his dependents had mistakenly relied upon. Exempting Westana’s payments from deductibility is a principled extension of the evolving law in this area,” said Justice Devlin.