January 27, 2017 by Canadian Underwriter
Future disability benefits under the Canada Pension Plan are not deductible from auto insurers’ payments under the Nova Scotia family protection endorsement, the Supreme Court of Canada found in a ruling released Friday.
Canada’s highest court restored a 2013 ruling, by the Supreme Court of Nova Scotia, in favour of Andrew Sabean, who was injured in 2004 in a collision in Bridgewater.
Sabean sued the other driver, who was underinsured. Sabean also brought an action against Portage La Prairie Mutual Insurance Company, which wrote Sabean’s Nova Scotia SEF 44 Endorsement. That optional endorsement is similar to family protection endorsements in other provinces and indemnifies insureds “for any shortfall in the payment of a judgment for damages against an underinsured tortfeasor,” subject to deductions, wrote Madam Justice Andromache Karakatsanis of the Supreme Court of Canada.
Section 4 (b (vii)) of the SEF 44 standard form endorsement, in Nova Scotia, 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.”
Portage La Prairie Mutual had argued that clause means disability payments under CPP would be deductible. The Nova Scotia Court of Appeal agreed, in a ruling released in 2015.
However the finding was overturned in the Supreme Court of Canada’s unanimous decision released Jan. 27, 2017.
Section 4 (b (vii)) of the SEF 44 “specifies nine sources that give rise to deductions from the amount payable by the insurer, none of which include the CPP,” Justice Andromache Karakatsanis of the Supreme Court of Canada wrote. “The ordinary meaning of a ‘policy of insurance’ in cl. 4(b)(vii) of the Endorsement is clear. It refers to a private insurance policy purchased by the insured. Portage has asked this Court to read into those clear words the jurisprudence related to the collateral benefits rule in tort so that a ‘policy of insurance’ would also include the CPP regime.”
Portage La Prairie Mutual had 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.”
The insurer added in its factum to the Supreme Court of Canada that SEF 44 “does not purport to ensure full recovery of the award of damages in tort.”
In 2013, Sabean had been awarded more than $464,000 by a jury but the amount he actually received from the defendant’s insurer was only about $382,000.
In a ruling on post-trial submissions Mr. Justice Patrick Murray of the Supreme Court of Nova Scotia ruled that future CPP disability payments were not deductible from that award.
When the Nova Scotia Court of Appeal overturned that ruling, it cited the 1973 Supreme Court of Canada ruling in Canadian Pacific Ltd. v. Gill.
In 1968, Pall Singh Gill was killed in a collision near Vancouver involving a front-end loader operated by a Canadian Pacific employee. Gill’s family was awarded damages under B.C.’s Families Compensation Act.
The trial judge found that CPP payments to Gill’s family were deductible from the general damages. That finding was reversed on appeal, in a ruling upheld by the Supreme Court of Canada.
At the time, B.C.’s 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.”
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 of the Supreme Court of Canada wrote in Gill.
However the Gill ruling “is confined to a distinct interpretive context far removed” from the Nova Scotia family protection endorsement, Justice Karakatsanis wrote in Sabean v. Portage La Prairie Mutual Insurance Co.
“The ordinary meaning of a ‘policy of insurance’ is limited to private contracts of insurance between an insured and a private insurance agency,” she added. “An average person would not consider benefits provided under a mandatory statutory scheme to be a private insurance contract.”
The family protection endorsement could have specified that future CPP disability payments are deductible, Justice Karakatsanis wrote.
“Had the contract done so, an average person would have known exactly what they applied for as insurance, and what was and was not covered by the premiums paid under the Endorsement.”
Among the cases cited were three Supreme Court of Canada rulings: Non-Marine Underwriters, Lloyd’s of London v. Scaler, released in 2000; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, released in 2010; and Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., released in 2016.
“In interpreting a standard form policy of insurance, the court is concerned with the ordinary meaning of the contract as it would be understood by the average insured,” Justice Karakatsanis wrote in Sabean.