The appeal by an insurer from a decision holding that it was entitled to deduct from amounts payable to the insured under her underinsured motorist coverage only those Canada Pension Plan disability benefits actually paid to the date that she settled her claim with the other motorist and owner. The appeal was allowed. Although the insured’s right to damages arose at the time of the accident, the quantum of damages stood to be fixed as of the date of adjudication. The insurer was entitled to deduct all amounts recovered by the insured from the date of the accident to the determination of her damages entitlement by the Court.
Economical Mutual Insurance Co. v. Lapalme,  N.B.J. No. 421, December 2, 2010, New Brunswick Court of Appeal, J.E. Drapeau C.J.N.B., M.E.L. Larlee and K.A. Quigg JJ.A.
The insured, Ms. Ginette Lapalme (“Lapalme”), was injured in a two-vehicle accident. She commenced an action for damages against the driver of the other vehicle. Ms. Lapalme settled her action in tort with the insurer of the other vehicle. While Ms. Lapalme’s insurer, Economical Mutual Insurance Company (“Economical”), was not a party to that accident, it was joined in the Minutes of Settlement. Those Minutes of Settlement expressly preserved Economical’s right to litigate the quantum of Lapalme’s damages.
Following the automobile accident, Lapalme applied for CPP disability benefits. Her claim was approved. More than a decade later, Economical filed a Notice of Motion seeking a determination of whether the CPP benefits, past and future, were properly included in the calculation of “aggregate amount” as set out in paragraph 4(b) of the NBEF 44 Family Protection Endorsement and whether the CPP benefits, past and future, were to be deducted from the amount payable by Economical under the terms of the NBEF 44 Family Protection Endorsement.
Through the NBEF No. 44 endorsement, automobile insurers carrying on business in New Brunswick provide coverage against losses sustained by an eligible claimant by reason of the fault of an underinsured motorist. While the coverage is excess to all “amounts” actually recovered by an eligible claimant from all sources, when it comes to “amounts” the eligible claimant has not actually recovered but is entitled to recover, the coverage is only excess to those “amounts” provided by a finite number of specified sources.
The parties agreed that CPP benefits received to date were deductible but questioned whether benefits to be received in the future would also be deductible.
The salient parts of Clause 4(a) provide that the amount payable under the NBEF 44 to any eligible claimant is to be ascertained by determining the amount of damages the eligible claimant is legally entitled to recover from the inadequately insured motorist and deducting from that amount the aggregate of the amounts referred to in Clauses 4(a). Clause 4(b) stipulates that the amount payable under the NBEF 44 is excess to any amount actually recovered by the eligible claimant from any source, while Clause 4(b)(vii) goes on to provide that the amount payable under the NBEF 44 is also excess to any amounts the eligible claimant is entitled to recover from any “policy of insurance” providing disability benefits.
In Somersall v. Friedman, 2002 SCC 59,  3 S.C.R. 109, the Supreme Court of Canada, by a majority, held the date of a motor vehicle accident giving rise to the underlying losses was the relevant date for the determination of legal entitlement to recover under the underinsured motorist for the purposes of Clause 2 under an SEF 44 (the predecessor NBEF No. 44). The New Brunswick Court of Appeal (the “Court”) in this case held that this decision does not inform the interpretation of Clause 4, which provides the formula to quantify the amount payable by the NBEF 44 insurer. By that formula, the aggregate of the amounts actually recovered by the eligible claimant from all sources and the amount he or she is entitled to recover from specified sources must be deducted from the amount of damages assessed against the inadequately insured motorist. Clause 4(b)(vii) provides for the deduction of amounts that an eligible claimant has not actually recovered but is nonetheless entitled to recover under “any “policy of insurance” providing disability benefits” does not capture disability benefits under the Canada Pension Plan. Only actually recovered CPP disability benefits are deductible pursuant to Clause 4.
The Court cites with approval the Ontario Court of Appeal’s decision in Gignac v. Neufeld,  O.J. No. 1295 (C.A.) when it was held that the Ontario Legislature intended to cover CPP disability benefits by its resort to the expression “policy of insurance” in the statutory provision at issue. Further, the Court held that the ruling in Melanson v. Co-operators General Insurance Co.  N.B.J. No. 364 (CA) confirmed the non-deductibility of future disability benefits under Clause 4(b) is consistent with the principle that entitlement to those benefits is invariably conditional upon the insured meeting qualifying conditions which only arise during the future period to which the benefit relates. As such, there can be no finding of liability for future disability against the insurer which provides disability insurance coverage, since disability is a matter of proof which remains with the insured to demonstrate from time to time on an ongoing basis.
The Court held that the wording of Clauses 4 and 5(b) confirms that the relevant date for Clause 4 purposes is the date of adjudication of the amount payable by the insurer. Clause 4(b)(vii), which provides for the deduction of amounts that an eligible claimant has not actually recovered but is nonetheless entitled to recover under “any policy of insurance providing disability benefits”, does not capture disability benefits under the Canada Pension Plan. Only actually recovered CPP disability benefits are deductible pursuant to Clause 4. As such, Clause 4 of the NBEF 44 requires the deduction of all CPP disability benefits actually recovered by the insured during the period between the accident and the adjudication by a judge of the amount payable to Lapalme under the NBEF 44; and, Clause 4 does not, however, provide for any other deduction of CPP disability benefits, including unrecovered preadjudication CPP disability benefits that the insured is entitled to recover or CPP disability benefits that Lapalme might be entitled to recover in the future.
The appeal was allowed in part.
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