Canadian Underwriter

Auto accident victim contends Canada Pension Plan disability benefits should not be deducted from Nova Scotia Family Protection Endorsement claims

September 15, 2015   by Canadian Underwriter

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An auto insurance claimant is asking the Supreme Court of Canada to rule on the question of whether future disability benefits, under the Canada Pension Plan, should be deducted from a Nova Scotia auto insurer’s payments under the family protection endorsement.

In a decision released last June, the Nova Scotia Court of Appeal ruled against Andrew Sabean, who was injured in a vehicle accident near Bridgewater in 2004. The other driver was inadequately insured, and Sabean had commenced an action under the family protection endorsement in his policy with Portage LaPrairie Mutual Insurance Company.

The insurer contended that future CPP disability benefits should be deducted. In a decision released Sept. 30, 2013, Mr. Justice Patrick Murray, of the Supreme Court of Nova Scotia, disagreed with Portage LaPrairie Mutual. Justice Murray found that the amount for future CPP disability benefits shall not be deducted from the amount payable in damages.

An auto insurance claimant argues Canada Pension Plan payments should not be deducted from claims under the Nova Scotial SEF 44 family protection endorsementThat decision was reversed earlier this year on appeal.

The Supreme Court of Canada announced Sept. 11, 2015 that Sabean applied for leave to appeal to Canada’s highest court. A decision on his leave application has yet to be released.

Article 4 of Nova Scotia’s SEF 44 family protection endorsement stipulates that the amount payable on a claim “is excess to any amount” payable under several sources, including “any policy of insurance providing disability benefits or loss of income benefits or medical expense or rehabilitation benefits.”

In 2013, Justice Murray noted that the CPP Act does not define, insurance, policy, premium or instrument.

“Instead of premiums the Act discusses ‘contributions,'” he wrote. “Instead of payments, indemnify or proceeds of insurance the Act discusses pensionable earnings, and pension as the form of payment, constituting the payout or indemnity which the contributor receives.”

In overturning Justice Murray’s decision, the Nova Scotia Court of Appeal ruled that future disability benefits under CPP do qualify as a policy of insurance.

“I am satisfied there is no ambiguity once the general principles of contract interpretation are applied, including the plain, ordinary and proper meaning of the words in clause 4, the law in Canada at the time the SEF 44 became available, and its history,” wrote Mr. Justice Ted Scanlan, of the Nova Scotia Court of Appeal, on behalf of himself and the other two judges hearing Portage LaPrairie Mutual’s appeal.

The Nova Scotia Court of Appeal cited a Supreme Court of Canada decision, released in April, 1973, against Canadian Pacific Ltd. and Louis Edward Deschamps, who were sued by the family and administrator of the estate of Pall Singh Gill.

Gill had been killed in a vehicle collision in British Columbia in 1968. His widow brought an action under B.C.’s Families Compensation Act.

At the time, the Families’ Compensation Act stipulated that “in assessing damages there shall not be taken into account any sum paid or payable on the death of the deceased under any contract of assurance or insurance.”

The trial judge ruled that CPP benefits, which Gill’s widow and children were entitled to under Gill’s death, should be deducted from the damages awarded in the lawsuit. The Court of Appeal for British Columbia overruled that decision and the Supreme Court of Canada dismissed CP’s appeal.

In upholding the B.C. appeal court’s decision not to deduct CPP benefits from payments to the Gill family, the Supreme Court of Canada cited a case from Britain, noting that “persons in the class of pensionable persons are required by statute to make a contribution to the pension plan; the employer makes a contribution, and then a pension is payable on retirement or upon becoming disabled, or a pension is payable to the widow and dependent children upon the death of the contributor.”

CPP, therefore, “is an exact substitute for a privately arranged insurance policy made between the deceased person and an insurance company with the benefits payable upon the death or disablement of the insured,” wrote Mr. Justice Wishart Flett Spence, on behalf of the Supreme Court of Canada, in Gill.

“There are, of course, many forms of insurance and surely one of them may be considered to be the social insurance now exemplified by the Canada Pension Plan,” Justice Spence added. “In so far as the word ‘contract’ is concerned, there is, in result, a contract between the contributor to the Canada Pension Plan and the Government which, by virtue of the statute, exacts from such contributor weekly deductions from his wages.”