SABS Update – A Tale of Two Insurers: The Interplay between Statutory Accident Benefits and Long-Term Disability Benefits
For the week of February 24 to February 28, 2014
Ng v. Cole et al., 2013 ONSC 6588 (CanLII)
On August 8, 2013, the Ontario Superior Court of Justice heard a motion involving the relationship between a statutory accident benefits insurer (“AB Insurer”) and a long-term disability benefits insurer (“LTD Insurer”). The Court was asked to determine whether the AB Insurer should be indemnified by the LTD Insurer for income replacement benefits paid by the AB Insurer when the LTD Insurer had denied the Plaintiff’s claim for benefits.
The action arose out of a slip and fall accident which occurred in March 2008 and a motor vehicle collision which occurred in July 2008. The Plaintiff sustained injuries in both incidents. He sought long-term disability (“LTD”) benefits which were denied on the basis that he was not “totally disabled”. He also sought income replacement benefits (“IRBs”), some, but not all, of which were paid by the AB Insurer.
The Plaintiff sued the AB Insurer and the LTD Insurer for unpaid benefits. The AB Insurer crossclaimed against the LTD Insurer for amounts it paid for IRBs alleging the LTD Insurer was unjustly enriched by the IRB payments that would not have been paid if the LTD insurer paid its benefits. The LTD Insurer moved to strike out the crossclaim.
The AB Insurer had failed to establish a claim for unjust enrichment. Its crossclaim was struck out as it did not disclose a valid cause of action.
Section 7 of the Statutory Accident Benefits Schedule (“SABS”)provides that the amount of the IRBs paid by the AB Insurer are to be reduced by payments received or made available to the insured under an income continuation benefits plan, unless the insured has applied to receive the payments for loss of income. In short, the AB Insurer may only deduct LTD payments from IRBs otherwise payable to the insured if the insured has been paid LTD benefits or failed to apply for them. Murray, J. found that the AB Insurer was not entitled to deduct, from the payments to the Plaintiff, the value of unpaid LTD payments applied for and denied.
Murray, J. rejected the AB Insurer’s assertion that its decision to pay IRBs determined the obligation of the LTD Insurer to pay LTD benefits. He noted that the LTD Insurer is a separate insurer with a separate contract of insurance and separate obligations to the Plaintiff to which the AB Insurer is neither a party nor beneficiary. TheSABS places no obligation on the insured to litigate with the LTD insurer, at their own risk and expense, for the benefit and at the discretion of their AB Insurer.
The tests for IRBs and long-term disability benefits are distinct tests under distinct policies of insurance which require separate consideration. The decision of a statutory accident benefits insurer regarding entitlement to IRBs cannot bind a disability benefits insurer, and vice versa. Moreover, once an insured has applied for and been denied benefits from his or her disability insurer, he or she is under no obligation to pursue those benefits further in order to receive IRBs. For a variety of reasons, an insured may make an educated decision to accept a disability insurer’s denial and pursue only the AB Insurer thus avoiding a duplicity of proceedings and costs. This means that an AB Insurer may be required to pay benefits without offset of unpaid LTD benefits even though the LTD Insurer may have been obligated to pay such benefits. The AB Insurer cannot abrogate its obligation by pointing at the LTD insurer and forcing the insured to finance the dispute.
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