A recent ruling by the Ontario Superior Court of Justice in
Mazzucco et al v Herer et al confirms that long-term
disability ("LTD") benefits may be deductible from awards
for income loss.
The ruling was made during a trial of a medical malpractice
action. In 2005, the plaintiff, Ms. Rita Mazzucco, suffered a
stroke two days after discharge from a hospital admission to treat
hypertension and a severe headache. Since then, the plaintiff had
not returned to work. She received Canada Pension Plan
("CPP") disability benefits as well as long-term
disability ("LTD") payments from her LTD provider, Sun
Life Financial. Her employer, a school board in Ontario, paid all
of the premium costs for her LTD coverage in accordance with the
terms of a collective agreement. The issue before the Court was
whether the plaintiff's LTD payments should be deducted from
any award for loss of income.
The Court recognized the long-standing principle that negligence
damages are to be measured by actual loss and double recovery is
prohibited. Yet, this principle has been subject to the
"private insurance exception". Courts have applied this
exception in the context of LTD benefits. In particular, if these
benefits were obtained under the terms of a collective agreement,
they were held not to be deductible from a claim for lost
However, in Mazzucco, the Court recognized that the law
on the deductibility of LTD benefits payments has evolved. The 2013
Supreme Court of Canada decision of IBM Canada Limited v
Waterman introduced "a new era" regarding the
private insurance exception. Waterman established that the
more closely a benefit resembles, "in nature and
purpose", an indemnity against the type of loss caused by a
defendant's breach, the more likely it will be deductible.
Applying Waterman, the Court considered the nature and
purpose of the plaintiff's LTD benefit. It determined that the
benefit constituted an indemnity for the type of loss caused by the
defendants' breach and should therefore be deducted from an
award for wage loss. Further, in accordance with Waterman,
the Court considered broader policy implications with respect to
the deduction. The plaintiff's LTD benefit was paid pursuant to
a policy of insurance paid by the plaintiff's employer, a
public entity, which meant that the benefit was funded by Ontario
taxpayers. Similarly, the defendants were paid through the Ministry
of Health and thus, an award for lost wages would be indirectly
funded by Ontario taxpayers. Without a deduction, the plaintiff
would be paid twice from the public purse.
For these reasons, the Court instructed the jury to deduct LTD
payments from any past or future income award. This case marks the
first time that Waterman has been applied in this context
in Ontario, and may be influential in clarifying the law on the
deductibility of LTD payments.
In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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