Don’t confuse LTD with SABS – no deductibility of CPP child benefit from IRB
Blakely v. State Farm Mutual Automobile Insurance Company; FSCO A09-003232; January 19, 2012; Arbitratror J. Killoran
August 18, 2005 collision. Insured applied for income replacement benefits (“IRB”). As a preliminary issue, arbitrator considered deductibility of CPP childcare benefits when calculating the insured’s IRB. Subsection 2(9) of the SABS provides:
2(9) For the purpose of this regulation, payments for loss of income under an income continuation benefit plan shall be deemed to include the following payments:
1. Payments of disability pension benefits under the Canada Pension Plan.
Insurer relied upon the decision of Ruffolo v. Sun Life Assurance Co. of Canada (“Ruffolo”), a 2007 decision in which the Court, and subsequently the Ontario Court of Appeal, considered deduction of CPP childcare benefits in the context of 2 long-term disability (“LTD”) policies. The Court held that, although the benefits belonged to the children and not the insured, they were nonetheless deductible from the monthly LTD benefits given the wording of the LTD policies and other options that could have been purchased excluding the offset of those benefits.
Arbitrator distinguished Ruffolo. When setting rates, private insurers take into account whether there will be offsets for public insurance provided by CPP. In this case,
the SABSlanguage was different than the LTD policies in Ruffolo in that the reference was to "payments of disability pension benefits" not to "disability benefits" or "disability income" as in the LTD policies. Arbitrator held that the word "pension" was included in the SABS for a reason, one of which was to distinguish the CPP disability pension benefit from the CPP child's benefit. The policies in the Ruffolo case provided clear contractual language for the interpretation of "disability benefits" or "disability income" under the CPP as including the CPP child's benefit.
the SABSlanguage was different than the LTD policies in Ruffolo in that the reference was to "payments of disability pension benefits" not to "disability benefits" or "disability income" as in the LTD policies. Arbitrator held that the word "pension" was included in the SABS for a reason, one of which was to distinguish the CPP disability pension benefit from the CPP child's benefit. The policies in the Ruffolo case provided clear contractual language for the interpretation of "disability benefits" or "disability income" under the CPP as including the CPP child's benefit.
Implications:
When calculating an IRB for a person in receipt of CPP benefits which include a portion for a child’s benefit, the portion attributable to the child’s benefit should be determined and not included in the deduction. Insured’s should check the IRB calculation to determine if the whole CPP benefit has been deducted and request re-calculation in the event that it has been.
Accessing Arbitration Decisions
If you would like to read the arbitration decisions for yourself, they can be found at http://www.fsco.ca/english/insurance/auto/drs/decisions/default.asp.
Please contact FSCO at 1-800-517-2332 ext. 7202 to obtain a password to gain access to the site.
If you have questions or comments about this edition of the newsletter, contact Joni Dobson at Legate & Associates: jdobson@legate.ca.
