Canada: Insurers Seeking Recovery Of Overpayment? Beware Of Notice Requirements

Case Comment: Intact Insurance v. Marianayagam 2016

A decision released on March 1, 2016 by Justice Perell of the Superior Court serves as a useful reminder to insurers of the demanding notice requirements that apply to requests for repayment under Section 47 of the SABS.

The Plaintiff was involved in an accident on May 26, 2004. His accident benefit insurer was Intact Insurance Company. The parties disputed entitlement to an Income Replacement Benefit. Nearly two years passed, and on May 3, 2006 the parties agreed to the terms of a consent Order that required Intact to pay an Income Replacement Benefit from September 27, 2005 on an ongoing basis.

At the time of the agreement Intact understood that it was the only insurer paying benefits.

This proved to be incorrect in the light of subsequent developments.

The Plaintiff had an ongoing lawsuit against Equitable Life for collateral benefits. In April 2007 he was paid benefits by Equitable Life for the period commencing September 2004.

The Plaintiff applied for CPP in September 2007. In September 2008 his CPP disability benefits were approved with retroactive effect to November 2006.

Intact came to learn about the receipt of these benefits. It was then in a position to reduce the Income Replacement Benefit based on the deduction for collateral payments foreseen by Section 7(1) of the SABS.

But Intact was in an awkward position at this point. Although the consent Order foresaw a reduction of benefits based on collaterals, Intact was also bound by Section 287 of the Insurance Act that prevented an insurer from altering an order "unless the person agreed or unless the Director or an arbitrator so orders in a variation..."

Intact sought consent to vary the Order. For whatever reason, the Plaintiff refused that consent.

Intact also applied for arbitration concerning revision of the Order. Since Intact had commenced litigation on the issue, the arbitrator decided to defer the issue to the Court.

In his reasons Justice Perell explained that in support of its claim for repayment, Intact was required to comply with the notice requirements of Section 47(2) of the SABS. This notice must contain:

(a) identification of the type of benefit that was overpaid;
(b) the payment period for which repayment is sought; and
(c) the amount of repayment sought."

In Justice Perell's view "the amount claimed need not be perfectly correct, but it should be substantially correct."

This might sound simple enough, but Justice Perell determined that Intact's two attempts to provide such notice failed to comply with the notice requirements.

In its first request, Intact sought repayment of $69,000 or 170 weeks of Income Replacement Benefits, although the applicable regulation foresaw repayment for only 12 months (i.e. 52 week period). For this reason "the amount requested was not substantially correct; it was grossly incorrect."

In its second repayment request, Intact repeated its legal position and advised that an accountant had been retained to calculate the quantum of the repayment. Justice Perell concluded that this too did not satisfy the notice requirement as the amount of the repayment was left undetermined.

In the peculiar circumstances of this case, Intact's delivery of an accountant's report on March 14, 2008 was deemed to satisfy the notice requirements of Section 47(2), as the report came closest to calculating the correct amount of the overpayment for the 12 month period (calculated by Justice Perell at $11,150 with respect of the Plaintiff's receipt of benefits from Equitable Life, with deductions made for the Plaintiff's legal expenses).

As for the CPP benefits received by the Plaintiff, Justice Perell concluded that although an accountant's report had been served concerning that calculation, no formal notice was issued for repayment of that benefit, and accordingly no order for repayment would be made for those benefits.

Although containing a set of what the Judge called "a freakishly complicated set of facts," the decision provides useful guidance to insurers about what to do in the face of a Plaintiff who resists a request for repayment. Justice Perell explained that:

  • Intact could have pushed promptly for a formal variation of the May 3, 2006 consent Order rather than bring an action before the Court.
  • Intact could have sought repayment on a graduated basis rather than on a lump sum pursuant to section 47(5) of the SABS.

The decision also serves as a useful reminder that in serving a notice for repayment under Section 47 of the SABS, the amount of the repayment should never be "grossly incorrect" but instead "substantially correct." This will ensure that the request for repayment is deemed valid should an order ever be necessary to enforce the request for repayment.

Read the full case decision Intact Insurance v. Marianayagam 2016 from the CanlII site.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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