A N.S. First: Extended Earning-Replacement Benefits are Deductible from N.S. Section B Weekly Income Replacement Benefits in McLean v. Portage La Prairie Mutual Insurance Company
May 11, 2018
By Jillian M. Kean, Associate at McInnes Cooper,
Robert Mroz, Associate at McInnes Cooper
On May 8, 2018, for the first time, the Nova Scotia Supreme Court has ruled on the deductibility of Workers’ Compensation Board Extended Earning-Replacement Benefits (EERBs) from weekly income replacement benefits available under Section B of the standard automobile policy for the province of Nova Scotia. In McLean v. Portage La Prairie Mutual Insurance Company, the court decided that EERBs are in the nature of income replacement, and an offset that must be deducted from the amount of weekly indemnity payment. The implications of this decision include the deductibility of analogous income replacement benefits, like Canada Pension Plan disability benefits, from a pre-accident injury regardless of the source of the injury. McInnes Cooper’s Jillian Kean represented the successful insurer.
The Facts. Mr. McLean was involved in a motor vehicle accident on March 13, 2013, and alleged injury as a result. He sought weekly indemnity income replacement benefits from his automobile insurer. Mr. McLean had been injured in a pre-accident workplace incident many years earlier. As a result, he was receiving from the Workers’ Compensation Board an EERB of approximately $387 per week. At the same time, he was also working as a car parts driver and earned a gross weekly income of approximately $410. The insurer paid weekly indemnity benefits of $250 to Mr. McLean until November, 2016, when it discontinued them.
The Claim. Mr. McLean brought a legal action against the insurer for a re-instatement of benefits. The insurer defended the action, claiming Mr. McLean was not disabled within the meaning of the automobile policy. It also argued that if he was disabled, the benefit amount under the calculation formula in the policy nullified his claim. Under Section B – Subsection 2, the amount of weekly indemnity benefits are the lesser of $250 or 80% of the claimant’s gross weekly income from employment net of any payments for loss of income from employment. The benefit amount is calculated pursuant to the following provision:
Amount of weekly payment shall be the lesser of,
(a) $250 per week; or
(b) 80 percent of the insured person’s gross weekly income from employment, less any payments for loss of income from employment received by or available to such person under the law of any jurisdiction…
Mr. McLean brought a motion, pursuant to Civil Procedure Rule 12, for the court to determine whether his EERB payments were an offset under (b) of the benefit calculation provision. If this were the case, his benefit was nullified according to the following calculation: 80% of $410 is $328, less $387 equals -$59; the lesser of $250 and – $59 reduces his benefit amount to zero.
The Decision. Justice Dennise Boudreau determined the EERB is an offset, and must be deducted from the amount of the insured’s weekly indemnity payment. At the root of Justice Boudreau’s reasoning was the character and nature of the EERBs: are EERBs “payments for loss of income from employment”, or something else? She concluded:
- EERBs are “in the nature of income replacement. By its very name, it is an earning replacement benefit”. EERBs are not a disability pension, and are tied directly to a prior employment income. They are therefore “payments for loss of income from employment”, and a proper offset under the formula.
- The offset payment did not have to relate back to the incident that gave rise to the claim for weekly indemnity. In other words, the offset benefit did not have to be made in respect of the accident, but can be any income replacement payment. The court found the policy was not ambiguous in this respect.
- EERBs could not simultaneously be “income from employment” and “payments for loss of income from employment”. If it were both, it would affect the calculation by loading the amount of the EERB into the front end of the calculation, as well as in the offset at the back end. The two are conceptually different, and the court found EERBs are truly in the nature of income replacement.
Please contact your McInnes Cooper lawyer or any member of the Insurance Defence Team @ McInnes Cooper Team to discuss this topic or any other legal issue.
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