The Supreme Court of Canada released its decision in Sabean v Portage La Prairie Mutual Insurance Co, 2017 SCC 7 at the end of January, finally answering an insurance policy question that had divided the lower courts. The question was: Are future CPP disability benefits deductible by the insurer under the SEF 44 Endorsement as a “policy of insurance providing disability benefits”? The SCC’s answer: No.
Nova Scotia’s SEF 44 Endorsement is similar to “Special” or “Family Protection” endorsements that exist elsewhere in Canada. These are excess insurance policies. Coverage under these policies generally makes up for the shortfall (up to limits) that arises when an insured person is injured in a motor vehicle accident and cannot recover the full amount of her damages from the tortfeasor’s insurer.
Nevertheless, the SEF 44 policy sets out certain amounts that will be deducted from what the SEF 44 insurer has to pay. Clause 4(b)(vii) of the SEF 44 was the deduction at issue in Sabean. Under this provision, “future benefits from a ‘policy of insurance providing disability benefits’ are deducted from the shortfall in determining the amount payable by the insurer.”
Justice Karakatsanis, writing for the Court, focused on the ordinary meaning of the words “policy of insurance.” In her view, an “average person” would understand “policy of insurance” to refer to a private policy that a consumer can purchase, not a statutory scheme like the Canada Pension Plan to which all working Canadians have to contribute. This “average person” would not have the same in-depth knowledge of insurance case law as the insurer.
Only if the language at issue is ambiguous does the analysis move on to other rules of insurance contract interpretation, in accordance with the three-stage approach from the Supreme Court’s decision in Ledcor Construction Ltd v Northbridge Indemnity Insurance Co, 2016 SCC 37.
The Supreme Court left it open for the insurance industry to amend the language of excess policies like the SEF 44. If the clause had explicitly referred to CPP disability benefits, “an average person would have known exactly what they applied for as insurance, and what was and was not covered by the premiums paid under the Endorsement.” But where the language is not that specific, the ordinary meaning of the words, as understood by an “average person”, will govern.