When the Private Insurance Exception Does Not Apply
The Ontario Superior Court of Justice recently interpreted and applied the provisions of the Insurance Act intended to address double recovery and the private insurance exception in McCurdy, et al. v Maille, et. al., 2023 ONSC 6857.
In the reasons on this post-trial motion regarding collateral benefits, Justice Nicholson ruled that the plaintiff’s income continuance benefits, received pursuant to a Manulife policy, were deductible from the jury’s past loss of income damages award at trial, and to be assigned with respect to the award for future loss of income.
Background
This action arose out of a motor vehicle accident that occurred on February 24, 2016. A jury trial proceeded in March and April 2023. Liability was admitted and the only issue for trial was damages, including the Family Law Act claims of the plaintiff’s spouse and children.
The jury awarded significant amounts for past and future loss of income. The jury did not make any deductions for collateral benefits in its verdict since this issue is required to be determined by the trial judge.
With regard to collateral benefits, the parties agreed on the deduction of income replacement benefits and the deduction and assignment of CPP Disability benefits.
The parties did not agree with respect to the deduction and assignment of the plaintiff’s Manulife income continuance benefits, which were the subject of this motion.
Relevant Legislative Provisions
The relevant sections of the Insurance Act are 267.8(1),(9),(10),(12) and (13). Section 267.8(1)2 provides:
267.8 (1) In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the damages to which a plaintiff is entitled for income loss and loss of earning capacity shall be reduced by the following amounts:
…
2. All payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for income loss or loss of earning capacity under the laws of any jurisdiction or under an income continuation benefit plan.
Further guidance is provided in section 5.2 of Regulation 461/96 to the Insurance Act, and Clause 3 (7)(d) of Ontario Regulation 34/10, which read as follows:
Section 5.2 of Regulation 461/96 to the Insurance Act
5.2 (2) For the purposes of paragraph 2 of subsection 267.8 (1), paragraph 2 of subsection 267.8 (9) and subclause 267.8 (12)(a)(ii) of the Act, payments in respect of an incident for income loss or loss of earning capacity under an income continuation benefit plan are deemed to include if the incident occurs on or after September 1, 2010, the payments for loss of income under an income continuation benefit plan described in clause 3(7)(d) of Ontario Regulation 34/10 (Statutory Accident Benefits Schedule—Effective September 1, 2010), made under the Act.
Clause 3 (7)(d) of Ontario Regulation 34/10
3 (7) For the purposes of this Regulation,
(d) payments for loss of income under an income continuation benefit plan are deemed to include,
(i) payments of disability pension benefits under the Canada Pension Plan,
(ii) periodic payments of insurance, irrespective of whether the contract for the insurance provides for a waiting period, deductible amount or similar limitation or restriction and irrespective of whether the contract is paid for in whole or in part by the employer, if the insurance is offered by the insurer,
(A) to persons who are employed while the contract for the insurance is in effect, and
(B) only on the basis that the maximum benefit payable is limited to an amount calculated with reference to the insured person’s income from employment.
Analysis of the Court
The court interpreted and applied the conditions set out in (A) and (B), above.
The court considered the plaintiff’s argument that (A) was not satisfied because benefits under the subject Manulife policy were also available to unemployed persons. The implication by the plaintiff was that the policy is not an “income continuation benefit plan” because payments under the policy can be made even if the policy holder is not employed at the onset of disability.
The court rejected the plaintiff’s argument. The relevant considerations for the court included the fact that benefits under the policy were available to employed persons, and, in this case, the plaintiff was actually employed when the accident occurred. The available benefits for employed persons are also greater than for unemployed persons.
With respect to the condition set out in (B) above, the court reviewed the relevant sections of the Manulife policy, which indicate that the quantum of the maximum monthly benefit is determined by considering the policy holder’s income at the time of disability.
Also taken into consideration was the Manulife policy provision that the amount of the monthly income continuance benefit could be adjusted based on the plaintiff’s income on the date of disability versus the date of application. Under the policy, Manulife was able to adjust the amount of the monthly benefit in response to the plaintiff’s actual income on the date of disability.
Given the above, Justice Nicholson found that the monthly payments did satisfy the condition in (B), because the quantum of the benefit was limited to an amount calculated with reference to the plaintiff’s income.
Ultimately, Justice Nicholson concluded that, “[a]s the Manulife benefits fall within s. 267.8 of the Insurance Act, the private insurance exception does not apply.”
Takeaways
This case is representative of a circumstance where section 267.8 of the Insurance Act is applicable with respect to the deduction of income continuance benefits under a private policy of insurance.
The relevant considerations will include whether the private insurance policy was available to employed persons (irrespective of whether it is also available to unemployed persons), and whether the amount to be received under the policy is responsive to the plaintiff’s pre-accident earnings.
When the plaintiff is an insured under such a policy, parties should be alive to the consequence of similar provisions, as they could have a significant effect on the deductions to the awards for past loss of income, and the assignment of future benefits to be received under the policy, should the income continuance benefits fall within s. 267.8 of the Insurance Act.