FSCO settlement related to IRBs can be deducted from a court award, not a settlement related to disability benefits: Ontario court

The Ontario Court of Justice has ruled that a FSCO settlement for income replacement benefits (IRBs) counts as a “collateral benefit” and is therefore deductible from a court award, but a settlement from the Ontario Superior Court related to short- and long-term disability benefits (STD/LTD) is not a collateral benefit, since the settlement notice made no mention of an income continuation benefit plan and simply settled a legal obligation.
In Dutton Brock LLP’s quarterly newsletter, Elie Goldberg, a student-at-law at Dutton Brock, explores the case Anand v. Belanger.
Geeta Anand was injured in a motor vehicle accident in April 2003. She commenced a tort action against the driver and owner of the vehicle who hit her. When she discovered the driver was uninsured and the car was taken without the owner’s permission, she added her own insurer, State Farm, to the claim.
At trial, she was awarded $271,679 in damages. The court then assessed the amount of benefits that could be deducted from the damages award against State Farm.
She had received income replacement benefits (IRBs) until they were terminated in July 2005. When her IRBs were terminated, Anand commenced a FSCO arbitration claiming entitlement to unpaid ongoing IRBs. Prior to arbitration, the parties settled for $120,000.
She also received short- and long-term disability (STD and LTD) payments from her workplace insurer, Manulife. When her LTD benefits were terminated, she sued Manulife in Ontario’s Superior Court. The parties settled for $125,000, all-inclusive.
The parties agreed that the IRBs, STD and LTD benefits were collateral benefits that could be credited back to the insurer when paying the damage awards. The parties argued whether the settlements from FSCO and Manulife were also classified as collateral benefits.
The Ontario Court of Justice ruled the FSCO settlement for IRBs was in fact a collateral benefit, but the settlement from Manulife over STD/LTDs was not.
“The court’s reasoning, essentially, was that the IRB Settlement Disclosure Notice form was entitled ‘Offer to Settle Income Replacement Benefits’ and stated that payment was for all past and future IRBs,” Goldberg wrote.
“By contrast, the STD/LTD settlement document nowhere stated that it was a payment under an income continuation benefit plan; it was held to be, simply, a payment to settle a legal obligation.”