Concerns about double recovery have existed for many years in respect of the delivery of auto insurance products, with a view that by reducing double recovery, we can also lower auto insurance premiums. To that end, section 267.8(1) of the Insurance Act provides that certain collateral benefits are to be deducted from plaintiffs’ income loss damages claims. Justice Spencer Nicholson explores this matter in the recent Superior Court of Justice decision, Finnemore v Hyde et al, 2021 ONSC 19 and specifically addresses the questions of when is a particular payment considered a collateral benefit that is subject to deduction, and what some of the qualifying features are that make a payment deductible.
Here, the plaintiff relied on the case Demers v. B.R. Davidson Mining & Development Ltd, 1999 [Demers]. This case held that CPP disability benefits and Hospitals of Ontario Pension Plan (“HOOP”) Disability Benefits were not deductible from an income loss claim under Bill 59 and the common law. The Defendants argue that this case is outdated as it fails to account for the legislative amendments that expressly make CPP benefits deductible as of September 1, 2010, subject to Bill 198 (enacted through s. 5.2(2) of O.Reg 290/10). Secondly, the defendants argue that that when determining whether a benefit is deductible, the focus must be on the words of the statute- “loss of earning capacity”, which extend beyond merely categorizing payments as indemnity or non-indemnity such as in the precedent relied on by the plaintiff. Thirdly, the defendants argue that excluding every disability pension from deduction ignores the carefully crafted wording distinct in every benefit plan and essentially lumps them together.
Justice Nicholson contends that Ontario’s Court of Appeal has analyzed the deductibility of such benefits in Demers and ruled that they are not deductible under Bill 59. And that notably, the amendment later made in Bill 198 did not expressly provide for the deductibility of retirement pension disability benefits, unlike the express inclusion of CPP in the amendment. Furthermore, Nicholson J. states that both the nature of the benefit and the intention of the parties support the contention that non-indemnity payments, such as pension benefits, are not deductible at common law from awards of damages. He references IBM Canada Limited v Waterman– and states “pension benefits are a form of deferred compensation for the employee’s service and constitute a type of retirement savings”. He continues to say that in motor vehicle accident cases, a collateral benefit is only deductible if it is expressly ensnared by s.267.8(1) of the Insurance Act. Finally, in response to the defendant’s third argument, it was held that according to s. 267.8 (1), two criteria need to be satisfied in order for a benefit to be deductible. The benefits must be:
- under the laws of any jurisdiction and;
- an income continuation benefit.
The court held that the fact that a plan is subject to the laws of Ontario, does not make the benefit payable “under the laws of Ontario”. And further, the Union benefits are not “an income continuation plan” as they bear no relation to the plaintiff’s income, but rather are paid out of a repository of funds into which the plaintiff’s employers have paid and now belong to the individual as a member of the Plan.
This decision not only provides a much-needed answer to a key inquiry, but it confirms the importance of statutory interpretation. At paragraph 54, Justice Nicholson, uses Demers to stress that:
If the legislature wanted to require Union pension disability benefits to be deducted from damages for loss of earning capacity, that it would just require it in the legislation as it did with respect to CPP benefits for accidents on or after October 1, 2003. But to deprive the plaintiff of [their] well-recognized common law rights, the legislature must do so by clear and unambiguous language.
Although Canada Pension Plan benefits are specifically provided by legislation to be deductible collateral benefits, the same cannot be said about union disability pension benefits, yet. For now, they are shielded against collateral deductions.