Canadian Underwriter

Supreme Court of Canada hears appeal over Nova Scotia auto family protection endorsement

October 7, 2016   by Canadian Underwriter

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The Supreme Court of Canada heard Wednesday an appeal from a Nova Scotia auto accident victim whose future Canada Pension Plan disability payments were ordered deducted from the amount payable under his family protection endorsement.

Car CrashAndrew Sebean suffered injuries to his arm and shoulder after a vehicle collision Oct. 23, 2004 in Bridgewater. Court records indicate the vehicle he was driving was struck by another vehicle while going through an intersection.

In 2007, Sabean commenced an action against driver of the other vehicle. That action was settled. The other driver was underinsured. In 2009, Sabean underwent a mid-humeral amputation of his left arm.

Sabean later brought an action against Portage La Prairie Mutual, which wrote his SEF 44 family protection endorsement.

A question before the Supreme Court of Canada – which has yet to render its decision – is whether future CPP disability benefits are deductible from an award of damages under the Nova Scotia auto family protection endorsement.

Section 4 (b (vii)) of the SEF 44 standard form endorsement stipulates that the amount payable is “excess to any amounts the eligible claimant is entitled to recover (whether such entitlement is pursued or not) from,” among other things, “any policy of insurance providing disability benefits or loss of income benefits or medical expense or rehabilitation benefits.”

In a 2013 decision over the action against Portage La Prairie Mutual, a Supreme Court of Nova Scotia jury awarded Sabean more than $464,000. The judge in the case, Mr. Justice Patrick Murray, asked for post-trial submissions on whether future CPP disability payments were deductible. Justice Murray ruled that they were not.

That ruling was overturned on appeal, in a decision released 2015. Sabean appealed to the Supreme Court of Canada.

In ruling that future CPP disability payments are deductible, the Nova Scotia Court of Appeal noted that SEF 44 is an excess coverage provision. The appeal court cited the Supreme Court of Canada ruling, released April 2, 1973, in Canadian Pacific Ltd. v. Gill.

In 1968, Pall Singh Gill was a passenger in a vehicle driven near Vancouver by Sewa Singh Aujla. They drove into a front-end loader operated by Louis Deschamps as part of his duties with Canadian Pacific. Gill was killed. The evidence indicated that the working tail light on the front end loader could only be seen at a distance of 50 to 100 feet, whereas the regulations required it be visible 500 feet to the rear.

Gill’s widow, Rajinder Gill, brought an action under B.C.’s Family Compensation Act. Damages were awarded to the Gill family.

Related: Supreme Court of Canada to hear appeal from Nova Scotia auto claimant over deductibility of Canada Pension disability payments

The trial judge calculated the present value of Pall Singh Gill’s CPP pension payable, to Rajinder Gill and her five children, upon his death. That present value was deductible from the general damages, the trial judge found. But that finding was reversed on appeal. The Supreme Court of Canada agreed with the province’s appeal court, in that the CPP payments to Gill’s surviving spouse and her dependent children were not deductible under the Families Compensation Act.

At the time, the Family 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.”

CPP “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,” Mr. Justice Wishart Flett Spence wrote on behalf of the Supreme Court of Canada, in 1973, in Gill.

In the Gill ruling, the Supreme Court of Canada “concluded that CPP benefits are provided via a contract or policy of insurance,” Portage La Prairie Mutual wrote in its factum to the Supreme Court of Canada, in response to Sabean’s appeal.

The language of Section 4 (b (vii)) of the standard form family protection endorsement “clearly contemplates a deduction of future CPP disability benefits from an award of damages,” Portage La Prairie Mutual argued.

Section 4 (b) stipulates that the amount payable is excess to amounts a claimant is entitled to recover from a total of nine sources, including workers compensation, accident benefits, the insurers of the at-fault motorist and the insurers of any person jointly liable.

Sabean argued that “it would have been very easy to specifically include CPP as a deduction if that had been intended.”

The purpose of tort law “is to give the victim full compensation for tort losses,” Sabean contended, adding if the tortfeasor “had full coverage, there would be no deductions for CPP disability benefits received by the victim.”

For its part, Portage La Prairie Mutual argued that the purpose of the family protection endorsement “is to provide ‘safety net’ coverage according to its own terms, keeping in mind that ‘indemnity’ is the lens through which the SEF must be interpreted,” and that SEF 44″does not purport to ensure full recovery of the award of damages in tort.”

Sabean argued that the Gill ruling “did not establish that for all time and all purposes in the interpretation of any public legislation and private contract,” that CPP ”is so much of the same nature as contracts of insurance that it would always be treated as such.”

Instead, Sabean argued, the Supreme Court of Canada’s reasoning in Gill was “specific to the language, purpose and intent” of the B.C. Family Compensation Act.