Group disability benefits can be deducted from income replacement benefits: FSCO

An Ontario arbitration decision has once again raised a question about the deductibility of collateral benefits. This time a decision determined that long-term benefits received from a group disability insurance plan underwritten by Sun Life can be deducted from income replacement benefits underwritten by The Co-operators.
In making the decision, Financial Services Commission of Ontario (FSCO) noted this was the first case to look at S. 2(9) and (10) of the Statutory Accident Benefits Schedule (SABS), which amended rules on the deductions of collateral payments.
S. 7 (1) of the SABS notes that income replacement benefits can be deducted by net weekly benefit payments “under any income continuation benefit plan.”
S. 2(9) notes that payments for loss of income under an income continuation benefit plan “shall be deemed to include” periodic payments of insurance.
In Mala Sharma-Singh and Co-operators General Insurance Company, Mala Sharma-Singh, 44, was injured in a motor vehicle accident on May 17, 2006. At the time of the accident, she was employed by the Government of Canada.
On Aug. 17, 2006, she began receiving LTD benefits from a group disability insurance plan underwritten by the Sun Life Assurance Company of Canada, payable monthly in arrears.
As Sharma-Singh continued to receive LTD benefits from Sun Life, The Co-operators continued to deduct them from her income replacement benefits.
The Co-operators suspended its income replacement benefits payments as of Aug. 6, 2009. The company reinstated them as of Dec. 9, 2009, and they continue to be payable.
Counsel for Sharma-Singh argued, among other things, that the Sun Life benefits did not, strictly speaking, count as an “income continuation” benefit, because there was a 13-week interruption — or discontinuation — of payments between the time of the accident and the time of the payments.
Sharma-Singh’s counsel cited FSCO arbitrator David Leitch’s decision in Codling-Mokoena and CAA Insurance Company (Ontario), which found that a lengthy delay in payments meant the benefits did not count as “income continuation.”
But Leitch found in Sharma-Singh that his previous argument in Codling-Mokoena “overlooked the effect of the ss. 2(9) and (10) amendments on the interpretation of section 7(1).”
“While the present case involved a long-term disability plan with a significant delay in first payment, 13 weeks, I am no longer of the view that this fact alone prevents me from finding that section 7(1) applies to authorize the deductions sought by Co-operators,” Leitch wrote in his decision.