December 17, 2015 by Canadian Underwriter
Canada’s highest court announced Thursday it will hear an appeal over the issue of whether future Canada Pension Plan disability payments are deductible from Nova Scotia auto claims paid under family protection endorsements.
Andrew Sabean was injured in a vehicle accident near Bridgewater, N.S. in 2004. The other driver was inadequately insured. Sabean commenced an action under the SEF 44 (family protection endorsement) of his auto policy, written by Portage la Prairie Mutual Insurance Company.
Court records indicate that Sabean had settled with the other motorist. The action Portage la Prairie Mutual was for “actual damages to the extent that they exceeded the amount of the payment by the tortfeasor.”
A jury awarded Sabean $465,408. That included, among other things, $180,000 general damages for pain and suffering, $110,350 for cost of future care and $85,116 for future lost income.
In September, 2013, the Supreme Court of Nova Scotia ruled that the amount for future CPP disability benefits shall not be deducted from the amount payable in damages.
That ruling was overturned on appeal, in a decision released June 4, 2015. Two months later Sabean applied for leave to appeal to the Supreme Court of Canada, which announced Dec. 17 that it will hear Sabean’s appeal.
In Nova Scotia, the amount payable under a family protection endorsement is “excess to any amount” that the claimant is entitled to recovery from several sources, including “any policy of insurance providing disability benefits or loss of income benefits or medical expense or rehabilitation benefits.”
However the Canada Pension Plan act discusses “contributions” rather than “premiums,” Mr. Justice Patrick Murray of the Supreme Court of Nova Scotia noted, in 2013, in his ruling in favour of Sabean.
“Instead of payments, indemnity 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,” Justice Murray wrote.
In overturning that ruling, the appeal court cited case history, including the 1973 Supreme Court of Canada’s ruling in favour of the estate of Pall Singh Gill, who was killed in an auto accident in B.C. in 1968.
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 in 1973, in Canadian Pacific Ltd. vs Gill et al, on behalf of the Supreme Court of Canada.
After the Gill ruling, “Ontario’s Insurance Act was amended making private insurers responsible to provide coverage with respect to underinsured drivers. A standard endorsement form, SEF 42, was drafted by the insurance industry and became available October 1, 1981,” the Nova Scotia Court of Appeal noted in Sabean. But SEF 42 “contained no limitation analogous” to the provision of the SEF 44 endorsement providing for deductions of payments from other insurance policies providing disability benefits.
“SEF 42 was withdrawn by the insurance industry as a direct result of judicial interpretations which expanded coverage in a way it had not anticipated and was unwilling to accept, such as the ‘stacking’ of policy limits,” wrote Mr. Justice Ted Scanlan, of Nova Scotia’s appeal court, on behalf of himself and the other two judges that heard Portage la Prairie Mutual’s appeal. “If left undisturbed, the industry felt the decisions would result in insurers having to pay for losses far in excess of what was originally intended, necessitating an astronomical increase in premiums.”