Ruling: Deduct Canada Pension Plan (CPP) Disability Benefits Available, but not Received - Income Replacement Benefits

February 23, 2018

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Insurers can deduct CPP disability benefits that may have been available to the applicant, but which were not pursued, when calculating income replacement benefits (IRBs), the Financial Services Commission of Ontario has ruled.

The decision, in the matter of Hua Li Pan and Allstate Insurance Company of Canada (Allstate) (FSCO A16-003705), appears to be the first decision in which an insurer successfully applied the use of the paragraph (b) provision of the definition of “other income replacement assistance” contained in subsection 4(1) of the Statutory Accident Benefits Schedule – Effective September 1, 2010, Ontario Regulation 34/10 (SABS).

Ms. Pan was injured in a motor vehicle accident on August 28, 2014. At the time of the accident, she was self-employed operating her own cleaning business. While FSCO grappled with the basis for the quantification of Ms. Pan’s IRB, at the hearing Allstate also proffered the argument that as Ms. Pan was catastrophically impaired and as it was over two years post-accident, any calculation of her IRB should also include a deduction for CPP disability benefits, even though she had yet to apply for the benefits. The paragraph (a) portion of the subsection 4(1) definition of "other income replacement assistance" and paragraph 7(1)(“A”) of the SABS provide for the deduction of "the amount of any gross weekly payment for loss of income that is received by or available to the person as a result of the accident ...", while the paragraph (b) portion of the subsection 4(1) definition provides for the deduction of “the amount of any gross weekly payment for loss of income, … that may be available to the person as a result of the accident…but is not being received by the person and for which the person has not made an application”.

Counsel for Ms. Pan argued that Allstate has no legislative authority to force her to apply for CPP disability benefits and, even if they did, there is no way of knowing if she would have been approved to receive these benefits and, if so, for how much and starting from when?

Allstate argued that Ms. Pan has a duty to mitigate and although Allstate cannot force Ms. Pan to apply for CPP disability benefits, as it was apparent that she met the threshold for the contribution requirement aspect of such an application, to not interpret paragraph (b) to permit their deduction when no application has been made would render it meaningless.

The Arbitrator Alan Smith agreed. Further, he stated that “The fact that the Applicant may not qualify for CPP disability benefits pursuant to the applicable “severe and prolonged” test for those benefits is … irrelevant” and “Given the CPP disability criteria of a “severe and prolonged” disability, … eighteen months post-accident is reasonable and sufficient time for the Applicant to have applied for CPP disability benefits” such that “the Insurer is to offset the applicable quantum of CPP disability benefits … starting February 29, 2016”.

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