CPP Disability Benefit Deductibility: The Sparks v. Holland Decision
In January of 2019, the Nova Scotia Court of Appeal released a decision outlining why the amount received in Canada Pension Plan (CPP) disability benefits will continue to be deducted from Motor Vehicle Accident (MVA) damages for loss of future income. The decision focused on the intent of the Nova Scotia legislature when they brought into effect s. 113A of the Insurance Act in 2003.
Below is s. 113A of the Nova Scotia Insurance Act:
Effect of income-continuation benefit plan 113A 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 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 if, under the law or the plan, the provider of the benefit retains no right of subrogation. 2003 (2nd Sess.), c. 1, s. 12.
This section essentially sates that any payments to supplement income loss, which the plaintiff is receiving because of the accident, should be deducted from the damages designated for loss of income and loss of earning capacity in their civil action.
In May of 2018, prior to the Court of Appeal decision, the Nova Scotia Supreme Court released the decision of Holland v Sparks. The court decided MVA claimants should not be deprived of the benefit of receiving CPP disability benefits, in addition to the full amount of future loss of income in their claims.
Why is This Being Debated?
All MVA claims fall under the classification of a civil claim. The objective of civil claims is to compensate the plaintiff for their exact loss. The Supreme Court of Canada has stated, for policy reasons, a plaintiff should not be overcompensated for a wrong done to them. Issues arise with trying to predict future income streams, which is why they are so hotly debated.
It is not unusual for a person’s injuries from an MVA to leave them unable to return to work for weeks, months, or even indefinitely. Shortly after their motor vehicle accident, a plaintiff may apply for CPP disability benefit to assist in replacing income lost from being unable to return to work. Their civil claim may settle or be decided by the court prior to them returning to work.
The recent debate in Nova Scotia has surrounded whether the amount of CPP disability payments a person will receive in the future, which are intended to supplement lost income, should be deducted from the amount they are awarded by the court for future loss of income. If the amount for CPP is not deducted, and you continue to receive CPP payments in addition to the future loss of income awarded, then you will theoretically be over-compensated.
Future payments are typically awarded based on their likelihood of occurring. Traditionally, CPP disability benefits were subject to the collateral benefits rule. The collateral benefits rule is that insurance benefits should not be deducted from remedies in a civil claim; the rationale for this is the wrongdoer should not get to pay less because the plaintiff had forethought to pay for insurance. It makes sense for this rule to be applied to CPP disability benefits because the plaintiff would have been paying the premiums all along and should benefit as such.
Intent of the Legislature
When looking to interpret legislation, the Supreme Court of Canada has identified principles of interpretation. The main principle highlighted in this case is that when looking at the legislation, it should be read with the surrounding context in mind.
The intent of the Nova Scotia legislature when implementing s. 113A of the Insurance Act in 2003 was to modify the common law. The modification was implemented at a time when insurance premiums were escalating at an alarming rate. This section of the Insurance Act was intended to limit costs for insurers, in the interest of limiting the premiums they charged their customers.
The trial judge failed to consider the context of the implementation of the legislation. They looked at the words in a narrow perspective, not considering the overall intent of the legislature when implementing this section of the Insurance Act.
It is not up to the court to defy the intent of the legislature. Throughout Canada, the provincial governments have made attempts to limit increasing insurance premiums by legislating benefit limits. The deduction for CPP disability benefits is an example of one of these attempts.
At MacGillivray Injury and Insurance Law, we help victims across Atlantic Canada pursue justice and fair compensation for their injuries sustained in a motor vehicle accident. If you’ve been injured in an accident and are unable to return to work, contact us today at 1-888-434-0398 for a free consultation.
Nova Scotia Insurance Act: https://nslegislature.ca/sites/default/files/legc/statutes/insurance.pdf