In a recent case before the Ontario Superior Court of Justice,
the Court was once again faced with a question surrounding the
deductibility of collateral benefits in the motor vehicle accident
context.
In Finnemore v. Hyde et
al1, which arose from a 2016 motor vehicle accident,
the defendants brought a motion pursuant to Rule 21.01(1)(a) of the
Rules of Civil Procedure for a determination of an issue
prior to trial, namely whether the plaintiff’s disability
pension benefits were deductible from damages for income loss.
Benefits at Issue
The benefits at issue on the motion were disability pension
benefits received by the plaintiff pursuant to the terms of his
union pension plan.
Although the motion judge noted that characterization of the
disability pension benefits was a contentious point, after
reviewing the evidence on the motion (which did not include the
actual pension plan), His Honour imputed the following
characteristics to the benefits:
- entitlement to the benefits was subject to the union member
becoming totally and permanent disabled, as determined by whether
the member was entitled to receive Canada Pension Plan
(“CPP”) or Quebec Pension Plan (“QPP”)
disability benefits; - the member had to be at least 55 years of age to start
receiving the benefits; - the quantum of the benefits was determined by the amount of
pension accrued under the plan, not by the member’s actual
income; - the member, once totally and permanent disabled, would be
entitled to retire and receive a disability pension, with no
reduction for early retirement; - the member would be entitled to the benefits until death,
unless the member returned to a regular occupation; - the member would not be disabled if the member engaged in a
regular occupation for remuneration or profit.
When the plaintiff opted to retire post-accident, he was
entitled to CPP disability benefits and was thus eligible for his
union disability pension benefits.
Importantly, the motion judge noted that since the amount for
those benefits was not calculated pursuant to the plaintiff’s
income, the benefits would be classified as “non-indemnity
benefits”.
Applicable Legal Framework
The motion judge outlined the legal framework applicable to the
deduction of collateral benefits.
While, at common law, payments received under an insurance
policy are generally not deductible from tort awards despite
potential double recovery to the plaintiff, the Insurance
Act statutorily overrides that common law private insurance
exemption for certain collateral benefits in the motor vehicle
accident context.
The relevant Insurance Act provisions in this regard
are sections 267.8(1), (9) and (12). Where section 267.8(1)
addresses the deduction of specific collateral benefits received or
available prior to trial, sections 267.8(9) and (12) address the
handling of specific collateral benefits received by or to which
the plaintiff is entitled post-trial.
For the purposes of the motion before the Court, the issue to
address was whether the plaintiff’s disability pension benefits
constituted “payment in respect of the incident….for income
loss or loss of earning capacity under the laws of any jurisdiction
or under an income continuation plan” pursuant to the
applicable provisions of section 267.8.
Positions of the Parties
On the motion, the plaintiff contended that the disability
pension benefits were not deductible, relying on the decision of
Demers v. B.R. Davidson Mining and
Development2.
In Demers, the Court of Appeal reviewed the
deductibility of CPP disability benefits and Hospital of Ontario
Pension Plan (“HOOP”) disability benefits for an accident
occurring in 1999, under a previous Insurance Act regime
(governed by Bill 59).
In that case, Laskin J.A. held that neither the CPP disability
benefits, nor the HOOP disability benefits, were deductible, noting
that entitlement to neither benefit depended on the plaintiff being
employed at the time of application or on the plaintiff proving or
suffering an income loss, thus being non-indemnity payments.
Rather, the benefits were paid on account of the plaintiff’s
disability.3
In Finnemore, the plaintiff argued that Demers
was determinative of the issue, because the plaintiff’s
disability pension benefits in question were analogous to the HOOP
disability benefits – and thus not deductible.
Further, the plaintiff contended that the disability pension
benefits stemmed from the plaintiff’s pension plan, to which he
had been contributing over the course of his career – making
the benefits his property, and not benefits payable as a
continuation of the plaintiff’s wages or sick leave, nor
benefits from insurance.
The defendants argued that Demers was distinguishable.
Among other things, the defendants contended that Demers
was determined under the outdated Bill 59 regime, with the present
action governed by Bill 198.
The defendants also contended that the focus in Demers
was inappropriately on the questions of whether the disputed
collateral benefits could be classified as indemnity or
non-indemnity payments, when the focus should have been on whether
they were payments for “loss of earning capacity”, and
that Laskin J.A. only undertook a cursory statutory interpretation
of section 267.8 in relation to the HOOP benefits.
The defendant sought that the motion judge rely on
pre-Demers decisions wherein disability benefits had been
deemed deductible.
Disposition of the Court
Justice Nicholson agreed with the plaintiff that the disability
pension payments in question were payment made from the
plaintiff’s vested pension plan – his own property.
His Honour did not agree with the defendants critique of
Demers, finding that Laskin J.A. did engage in a thorough
analysis of the deductibility of the HOOP benefits.
With respect to the defence argument that Demers
inappropriately considered the distinction between indemnity and
non-indemnity payment in its analysis, His Honour noted that such a
distinction continues to be made – as demonstrated in the
Supreme Court of Canada’s decision in IBM Canada Limited v.
Waterman4.
Moreover, Justice Nicholson concluded that he was bound by
stare decisis. While acknowledging that Demers
was decided under a previous regime (Bill 59), His Honour noted
that the subsequent changes made in Bill 198 did not expressly
provide for the deductibility of retirement pension disability
benefits, save for the express inclusion of wording to effect the
deduction of CPP disability pension benefits. Thus, the highest
provincial court had analyzed the deductibility of such benefits as
those at issue before the Court and ruled they were not
deductible.
His Honour noted further that in the years since
Demers, the legislature has not seen to amending the
section 267.8 scheme to effect the deductibility of retirement
disability pension benefits. Thus, the law remains that such
benefits, including the HOOP benefits in Demers, are not
presently deductible from damages for income loss or loss of income
earning capacity.
His Honour held that non-indemnity payments, such as pension
benefits, are not deductible at common law. In the motor vehicle
accident context, collateral benefits are only deductible if
expressly provided for by the applicable provisions of section
267.8 of the Insurance Act. The disability pension
benefits at issue did not fall within the collateral benefits
categories provided for by section 267.8.
Accordingly, it was ordered that the plaintiff’s disability
pension benefits were not deductible pursuant to section 267.8(1),
nor subject to the trust or assignment provisions of section
267.8(9) or (12) of the Insurance Act.
Take-Aways
Assuming that the plaintiff’s disability warranting
entitlement to both CPP disability benefits and the disability
pension benefits arose as a result of the accident, the decision in
Finnemore is perhaps not the most intuitive to digest.
That said, the reasoning appears sound in the face of the
characterization of the disability pension benefits, the
legislative wording, and the binding authority in
Demers.
Notably, Justice Nicholson agreed with the defence that the
approach to be taken was not one where simply every disability
pension benefit was to be found not deductible. His Honour outlined
that the approach must be to review the specific collateral
benefits in question and assess whether they “match” the
criteria of section 267.8.
He noted: “The use of the word ‘pension’ does not
make what would otherwise be deductible, not deductible.”
However, the analysis in the case before him was made difficult by
the lack of the precise pension plan wording underlying the
impugned benefits.
As such, in cases where the deduction, trust and/or assignment
of such benefits may be at issue, defence counsel should ensure
that requests are made for all underlying plan documentation.
Indeed, this is likely good practice with respect to all collateral
benefits that may be subject to section 267.8.
Footnotes
1 2021 ONSC 19.
2 2012 ONCA 384.
3 Importantly, subsequent to the accident subject of the
litigation in Demers, the legislation amended the
applicable Insurance Act regulations to expressly provide
for the deductibility of CPP disability pension benefits, which
Laskin J.A. acknowledged in the decision.
4 2013 SCC 70.
Rogers Partners LLP is an experienced civil litigation firm in
Toronto, Ontario. The firm represents insurers and self-insured
companies in numerous areas, including motor vehicle negligence,
occupiers’ liability, product liability, professional
negligence, construction claims, statutory accident benefits,
disability benefits, municipal liability, medical negligence,
sexual abuse, and insurance coverage disputes.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
— to www.mondaq.com
