June 8, 2015
On June 4, 2015, the NS Court of Appeal decided the value of future CPP disability benefits is deductible under the SEF 44 family protection endorsement because they fall into the definition of “any policy of insurance providing disability benefits or loss of income benefits”. The decision changes the law in NS, diverging from the NB law on the issue. The NS decision to go its own way creates two conflicting lines of authority on the issue of the deductibility of CPP disability benefits under the SEF 44 endorsement in Atlantic Canada – and uncertainty over which road PEI and NL will follow.
The claimants were in a motor vehicle accident. Their claims were settled based on the Section A policy’s $500,000 limit of coverage. They subsequently sued for the balance of their actual damages under the SEF44 endorsements in their respective policies. One issue: is the value of the claimants’ future CPP disability benefits deductible under the SEF 44. The NS Supreme Court said yes; the NS Court of Appeal agreed:
Read the NS Court of Appeal’s decision in Portage Le Prairie Mutual Insurance Company v. Sabean and Hallett, 2015 NSCA 53.
Atlantic Canada Impact. Before the Sabean decision, there was but one line of Court of Appeal authority on the issue of the deductibility of CPP disability benefits under SEF44: that from NB, which NS and PEI had adopted. The Sabean decision changes the law in NS, diverging from NB and creating two conflicting lines of authority in Atlantic Canada and uncertainty in PEI and NL:
Insurance Act section 113A implications. There might be a question whether the Sabean decision has any implications for the interpretation of section 113A of the NS Insurance Act. Section 113A provides for “all payments in respect of the incident” for income loss or loss of earning capacity under the laws of any jurisdiction to be deducted from awards for income loss and loss of earning capacity. Its object is to narrow the scope of the common-law collateral benefits rule to reduce potential double recovery for loss of income. We do not believe the Sabean decision has any implications for the interpretation of this section. Section 113A is limited to “payments in respect of the incident” giving rise to the loss of income claim. Several decisions (most recently Hollett v. Yeager, 2014 NSSC 207) have concluded that CPP disability benefits are a non-indemnity benefit triggered by the claimant’s disability – not by the incident giving rise to that disability. The phrase “any insurance policy” in the SEF44 endorsement is broad enough to include both indemnity and non-indemnity insurance policies. But “all payments in respect of the incident” can only include indemnity policies so CPP disability benefits are not deductible under section 113A of the Insurance Act.
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Insurance Defence Team to discuss this topic or any other legal issue.
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