The recent decision from the Licence Appeal Tribunal (“LAT”) in the matter of Applicant and Certas Home and Auto Insurance Company (“Certas”) (Tribunal File Number: 18-003331/AABS) confirms our understanding of what constitutes “payments for loss of income under an income continuation benefit plan,” which are deductible in the calculation of an income replacement benefit (“IRB”).
Facts of the case
At the time of the motor vehicle accident, which occurred on February 7, 2016, the applicant was self-employed as an AZ long-haul transport truck driver. As a result of the accident, the applicant sustained catastrophic injuries and was unable to return to his pre-accident self-employment. In addition, on February 25, 2016, the applicant commenced to receive weekly indemnity benefits of $700 by virtue of a policy he had acquired from Industrial Alliance (“Alliance”) in 2002.
Calculating the IRB
The issues in dispute in this matter are the quantum of the applicant's IRB in terms of the deductibility of the benefits from Alliance of $700 per week and, as a result, the period in respect of which Certas may recover an overpayment of IRBs. Initially, Certas did not deduct the benefits from Alliance in the calculation of the applicant's IRB, but rather in June of 2016 commenced to pay the policy maximum of $400 per week from the first day after the one-week deductible period, pending receipt of the additional information they had requested with respect to the Alliance policy.
In December 2017, Certas sent the applicant an Explanation of Benefits (OCF-9) (“OCF-9”), which indicated a revised IRB, net of the deduction of the $700 per week from Alliance, of $36.30 per week since February 28, 2016, and advised the applicant of a sizeable overpayment of IRBs as of July 18, 2017. The applicant retained an accountant, who authored a report, which indicated there should be no deduction for the $700 per week from Alliance and, therefore, that the IRB should remain $400 per week.
Did the $700 per week from Alliance constitute a payment for loss of income under an income continuation benefit plan, as defined in s.3(7)(d) of the SABS, deductible in the calculation of the IRB as “other income replacement assistance,” pursuant to its s.4(1) definition and s.7(1)(“A”) of the SABS? S.3(7)(d) deems “payments for loss of income under an income continuation benefit plan” to include “periodic payments of insurance, …, if the insurance is offered by the insurer, (A) to persons who are employed while the contract for the insurance is in effect, and (B) only on the basis that the maximum benefit payable is limited to an amount calculated with reference to the insured person's income from employment.”
In this case, the applicant argued that the definition only contemplates policies that are paid for by employers, not those acquired by self-employed persons, and that the amount of the disability benefit being paid by Alliance does not reflect a calculation of the applicant's income, as he made substantially more than $700 per week.
In the first instance, the adjudicator found “that s.3(7)(d) applies to self-employed individuals,” that in her “view, this section does not differentiate between employed and self-employed individuals” and that “if the legislature did not intend for s.3(7)(d) to apply to self-employed individuals it would have specifically stated that they are excluded.”
With respect to the balance of part “(B)” of the s.3(7)(d) definition, the adjudicator found a number of reasons by which to conclude that it had indeed been met with reference to the applicant's policy with Alliance, as follows:
- The confirmation of insurance coverage provided in respect of the policy defines the benefit as “income replacement(24-hour coverage)”;
- In order for the applicant to qualify for the benefit, he had to be gainfully employed on a full-time basis immediately before the accident;
- The disability benefit is calculated based on 75% of the applicant's gross weekly earnings up to a maximum of $700 per week for total disability, regardless of the fact that there is a maximum amount payable;
- The Alliance policy contained an integration provision whereby if the weekly indemnity for total disability (either alone or in concert with “any other benefits”) exceeded 75% of the insured person's pre-disability gross earnings, it would be reduced by any amount exceeding said percentage;
- The “any other benefits” referred to above included Canada Pension Plan disability benefits and benefits from the Workplace Safety & Insurance Board, designed to compensate for income loss; and
- The disability test under the Alliance policy was similar to that in order to qualify for IRBs under the SABS.
Accordingly, the adjudicator found the $700 per week that the applicant received from Alliance to be deductible in the calculation of his IRB. But the question then became, starting from when?
Period of overpayment
As you know, if an insurer does not give notice within 12 months after the payment of the amount that is to be repaid, the claimant ceases to be liable to pay the money back, pursuant to s.52(3) of the SABS. In this case, the adjudicator took exception to the vague manner in which Certas attempted to put the applicant on notice. Not only did Certas not include with the OCF-9 to the applicant the period for which it was seeking overpayment, but also there was no accounting for the stated amount of the overpayment, which was, in fact, incorrect.
Ultimately, Certas did provide proper notice in February 2018, which became the date for the end of the 12 months for which it was seeking repayment of the overpaid IRBs.
Synopsis
The findings in this case create a good roadmap for applying the s.3(7)(d) definition of a payment for loss of income to policies for disability benefits, particularly those acquired by self-employed persons, and serves as a reminder to be clear and complete when seeking a repayment of overpaid IRBs.