Long-Term Disability & Income Replacement Benefits with Your Insurer

Ontario has rules preventing double recovery after a motor vehicle accident. Double recovery is when a plaintiff is awarded compensation for the same damages twice; once under the Statutory Accident Benefits Schedule and another through a personal injury claim.

When this occurs, a deduction is required for any payments made under the SABS. Importantly, the deduction can only be made when it is clear that the plaintiff received compensation for the same specific benefits for which they are eligible.

In Cooperators General Insurance Company v. Branden, 2022 ONSC 2473, the plaintiff received an income replacement benefit under SABS as well as another payment that was related to income loss. This case tested the double recovery rules described above.

The Case

In 2017, the plaintiff, Patricia Branden, was involved in a motor vehicle accident. She applied for and received an Income Replacement Benefit under the SABS from The Cooperators General Insurance Company.

Branden also applied for a long-term disability benefit through her employer’s insurance, Empire Life Insurance, which was denied. Branden took action against Empire and, in October 2018, they reached a settlement.

Branden received a lump sum of $120,000 in exchange for suspending her long-term disability claim for a two-year period. When The Cooperators received the release regarding the settlement, they recalculated the Income Replacement Benefit that they had been paying to Branden.

The Issue

The Cooperators claimed that the $120,000 lump sum payment that Branden had received in the settlement with Empire was a duplication of the Income Replacement Benefit and represented double recovery. They stated that they had overpaid Branden by $3,369.72 and cut her Income Replacement Benefit payment from $400 per week to $209.80 per week.

In response, Branden filed an application with the License Appeal Tribunal (LAT). The LAT ruled that Branden’s settlement with Empire did not provide any details that would allow The Cooperators to deduct the settlement amount from past Income Replacement Benefits.

Importantly, the settlement did not specify that the lump sum payment represented compensation for loss of income. Indeed, as a settlement, the lump sum represented a compromise and “was not confined to payment for her LTD claims alone”. Therefore, there was no double recovery and The Cooperators were not allowed the deduction or the repayment schedule it had claimed.

The LAT refused to reconsider the decision when asked by The Cooperators. They then appealed the decision to the Ontario Divisional Court.

The Decision

At the Divisional Court, Branden’s legal representation made two arguments. The first was that the LAT’s finding that the $120,000 lump sum payment was not specified as an income replacement was unappealable because it was a factual determination.

To this, the Divisional Court agreed. The Court found that the adjudicator had based his decision on the fact that the settlement did not specify that the lump sum was a weekly income replacement benefit. This factual finding could not be appealed.

In the Divisional Court, The Cooperators also argued that the “silos” approach should be applied. The silos approach refers to the deduction of collateral benefits for tort claims which, they argued, entitled them to the deduction. But Branden’s legal representation argued that the “silos” approach did not apply due to wording. That is, long-term disability settlements and IRB calculations are differently worded and, in order to claim the deduction, both categories must be strictly matched.

To this, the Divisional Court also agreed. The Divisional Court noted that the LAT adjudicator found that the settlement agreement did not provide the details required for the Cooperators to claim that it was an income replacement.

The Divisional Court confirmed the decision that the $120,000 lump sum was not confined to payment for the long-term disability claim alone. They shared the opinion that there was no evidence of double recovery because there was no evidence that the lump sum represented a weekly income replacement.

Have You Had Benefits Reduced?

While there are rules around double recovery in Ontario that prevent a victim from receiving compensation for the same injury twice, these rules are very specific when a reduction is applied. Most importantly, it must be explicit that the victim has received the same specific benefit for the same injury. When this evidence is not present, any reductions may not apply.

If you’ve had benefits deducted as a result of double recovery, the case may not be as clear as your insurance provider would have you believe. Make sure you are getting the compensation you deserve. Contact Sharma Law for a complete review of your case.

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