Andrew Sabean was awarded damages of $465,400 by a jury in Nova Scotia at the trial of his motor vehicle accident tort claim. The tortfeasor was underinsured and only paid approximately $382,000 of the award. Mr. Sabean pursued Portage La Prairie Mutual Insurance Co. for the shortfall of $83,000 under the provisions of his SEF 44 Endorsement.
The Nova Scotia SEF 44 Endorsement is an excess insurance policy. It is an optional coverage, sometimes called Special or Family Protection Endorsements in other provinces, which indemnify insureds for any shortfall in the payment of a judgment for damages against an underinsured tortfeasor. The Endorsement allows certain deductions to be made from the amount payable by the insurer to the claimant including future benefits from “any policy of insurance providing disability benefits or loss of income benefits”.
Mr. Sabean is entitled to receive future CPP disability benefits. Portage took the position that it could deduct future CPP disability benefits from the indemnification amount pursuant to Clause 4(b)(vii) of the Endorsement. The Clause stipulates that amounts recoverable under “any policy of insurance providing disability benefits or loss of income benefits or medical expense or rehabilitation benefits” are to be deducted from the shortfall of the damages award in determining the amount payable by the insurer to the eligible claimant. Portage submitted that CPP disability benefits is a “policy of insurance” and thus deductible.
Mr. Sabean disagreed with Portage as did the trial judge. Justice Murray found that CPP benefits were not benefits from a “policy of insurance” under the Endorsement and thus would not be deducted from the amount payable. The Nova Scotia Court of Appeal disagreed however, overturning the trial judge, and concluding that the CPP was a “policy of insurance” under the Endorsement.
The Supreme Court has restored the trial judge’s decision, overruling the Court of Appeal of Nova Scotia. It has rejected the notion that CPP is a “policy of insurance” and allowed the appeal. It took the view that the ordinary meaning of a “policy of insurance” is limited to private contracts of insurance between an insured and a private insurance agency. It canvassed various dictionary references and noted the words “policy of insurance” to be generally defined as a private contract purchased as a policy of insurance. CPP benefits, meantime, are benefits provided under federal legislation: Canada Pension Plan, R.S.C. 1985, c. C-8 . Contributions are mandatory for all employed Canadians over the age of 18. CPP benefits are payable as retirement pension, disability benefit or death benefit.
In arriving at its decisions, the Court reinforced the overriding principle in the interpretation of standard form insurance contracts: where the language of the disputed clause is unambiguous, reading the contract as a whole, effect should be given to that clear language. It put to task insurers by stating that the words used must be given their ordinary meaning, as they would be understood by the average person applying for insurance, and not as they might be perceived by persons versed in the niceties of insurance law. An average person applying for additional insurance coverage would understand a “policy of insurance” to mean an optional, private insurance contract and not a mandatory, statutory scheme such as the CPP.
While this case confirms that CPP disability benefits are not deductible from the amounts payable by the insurer under an the Nova Scotia Endorsement, it reminds insurers to properly canvass benefits being received by the claimant that may be included in the enumerated deductions set out in the Endorsement.
Clause 7 of the OPCF 44R Family Protection Coverage, the Ontario equivalent of the SEF 44 Endorsement, stipulates the same nine exclusions set out in the SEF 44 Endorsement
7. The amount payable under this change form to an eligible claimant is excess to an amount received by the eligible claimant from any source, other than money payable on death under a policy of insurance, and is excess to amounts that were available to the eligible claimant from:
a) the insurers of the inadequately insured motorist, and from bonds, cash deposits or other financial guarantees given on behalf of the inadequately insured motorist;
b) the insurers of a person jointly liable with the inadequately insured motorist for the damages sustained by an insured person;
c) the Société de l’assurance automobile du Québec;
d) an unsatisfied judgment fund or similar plan in a jurisdiction other than Ontario, or which would have been payable by such fund or plan had this change form not been in effect;
e) the uninsured automobile coverage of a motor vehicle liability policy;
f) an automobile accident benefits plan applicable in the jurisdiction in which the accident occurred;
g) a law or policy of insurance providing disability benefits or loss of income benefits or medical expense or rehabilitation benefits;
h) any applicable Workers’ Compensation Act or similar law of the jurisdiction in which the accident occurred;
i) the family protection coverage of another motor vehicle liability policy.
At first glance, one might think that clause 7(g) above is identical to Clause 4(b)(vii) of the SEF 44 Endorsement. However, there is a subtle yet critical difference in the language of clause 7 (g). In the Ontario wording, it says “a law or policy of insurance providing disability benefits or loss of income benefits”. The Nova Scotia endorsement does not reference the words “a law”. Indeed, the Supreme Court of Canada, in deciding that the CPP disability benefits were not deductible, found that CPP benefits are not paid under a policy of insurance. The Court would have had to find that CPP benefits were payable under “a law”. As such, it would appear that this Supreme Court of Canada decision will not impact the deductibility of CPP benefits in Ontario, even though plaintiff’s counsel may be emboldened to try it on for size.