On May 2, 2017, the N.S. Court of Appeal decided another case involving the deductibility of CPP disability benefits – but this time, in the context of a tort claim. In Tibbetts v. Murphy, the Court held future CPP disability benefits are deductible from an award for diminished earning capacity arising from a motor vehicle accident. This decision resolves uncertainty resulting from two opposing lines of authority in the N.S. Supreme Court and is now the leading authority in N.S. on deductibility of CPP from awards of future income loss and diminished earning capacity. Here is what the Court of Appeal's decision means for insurers.
In N.S., it is now settled that future CPP disability benefits are deductible from tort damages for income loss that arises out of a motor vehicle accident. This is in contrast to contract damages: in January 2017, the Supreme Court of Canada held in Sabean v. Portage LaPrairie Mutual Insurance Co. that CPP disability benefits were not deductible from SEF44 insurance. As the Court of Appeal noted in Tibbetts (at para. 23), in tort law, "a plaintiff is to be fully compensated, but not overcompensated"; however, this principle might not be the case when contractual language plays a role, as it did in Sabean. Each case should be evaluated on its facts to determine whether CPP benefits are awarded in respect of injuries sustained in a motor vehicle accident; how a plaintiff words their CPP application will be telling on this point of fact. Automobile insurers must be clear which decision applies to their situation: deduct CPP disability benefits from income loss when dealing with a tort claim; do not deduct CPP when calculating what is owed under excess insurance pursuant to SEF44.
In Tibbetts, the claimant was injured in a motor vehicle accident and brought a claim in tort against the at fault driver. At trial, the N.S. Supreme Court awarded her $40,000 for loss of future earning capacity. Although the claimant could return to the kind of work she had done before the accident, the trial judge found she had been deprived of the ability to do heavier work. The claimant received CPP disability benefits after the accident. At trial, the judge found that future CPP disability benefits were deductible from the award for diminished earning capacity pursuant to Section 113A of the N.S. Insurance Act. The claimant had to remit the amount of any future CPP disability benefits until the defendant had been fully reimbursed. The claimant appealed, but the N.S. Court of Appeal dismissed her appeal.
Legislative Intent. In coming to its decision, the Court of Appeal addressed the legislature's intention in drafting Section 113A. The Court focussed on the legislature's mandate to reduce "sky-rocketing" insurance premiums at the time the legislation was introduced, including provisions aiming to reduce overall damages awards by avoiding double recovery.
"Payment in respect of the incident". To find CPP was deductible from an award for future earnings, the Court had to evaluate whether CPP benefits are "payments in respect of the incident" causing the loss (in this case, the motor vehicle accident). For the purposes of Section 113A, the Court of Appeal held the claimant's injuries were inseparable from "the incident" (the accident) as contemplated by the provision. Whether payment of CPP benefits is "in respect of the incident" is a question of fact; in the claimant's case, were it not for the collision she would not have applied for and received CPP disability benefits.
No double recovery. Since CPP disability benefits tend to duplicate damages for loss of earnings, the Court held one should be deductible from the other. This accords with the legislative intent to reduce insurance premiums by avoiding double recovery.
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.
