Before and After: NS Supreme Court Decision on CPP Benefit Deductability

The Nova Scotia Supreme Court has decided that Canada Pension Plan disability benefits are not deductible from damages of future income loss or lost earning capacity arising from a motor vehicle accident.

The recent decision of the Supreme Court of Nova Scotia in Holland v Sparks¹ decides a question of law on whether s.113A of the Insurance Act applies to future Canadian Pension Plan (CPP) payments. This is a significant decision due to the impact on deductible amounts for injury claims resulting from motor vehicle accidents.

Background

In Holland v. Sparks, the plaintiff, Holland, was involved in a motor vehicle accident on May 15, 2013. She had been receiving CPP disability benefits as a result of injuries sustained by the accident. The question for the court was whether the CPP disability benefits Holland was to receive after trial were deductible from an award of damages for loss of earnings or loss of earning capacity. It was agreed by the parties that the benefits already received were deductible.

Nova Scotia Legislature enacted the Automobile Insurance Reform Act (also known as “Bill 1”) in 2003. A purpose of Bill 1 was to lower motor vehicle insurance premiums and fund lowered premiums through limitations on the amounts claimable by individuals injured in motor vehicle accidents. One of these limitations included introducing deductions for certain categories of collateral benefits.

The plaintiff made a motion relating to this limitation under Nova Scotia Civil Procedure Rule 12. The question of law before the court was: Do the deductions from income loss and loss of earning capacity permitted by Section 113A of the Insurance Act, as amended, include CPP disability benefits received by or available to a Plaintiff after the trial of the action?

Section 113A of the Insurance Act states:

In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the damages to which a plaintiff is entitled for income loss and loss of earning capacity shall be reduced by all payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for income loss or loss of earning capacity under the laws of any jurisdiction or under an income-continuation benefit plan if, under the law or the plan, the provider of the benefit retains no right of subrogation.

The 2017 decision of the Nova Scotia Court of Appeal in Tibbetts v. Murphy ruled that CPP disability benefits were deductible from injury claims through Section 113A even though CPP disability benefits are not deductible at common law.² The court noted that Tibbetts did not deal with the issue of whether CPP disability benefits received or available after trial were deductible from an award for lost future earnings or diminished future earning capacity.

The court recognized the legislative intent of s. 113A to “change the collateral benefits rule as part of a wide-reaching statutory scheme to reduce insurance premiums.” The court acknowledged that if Section 113A were to apply to future CPP disability payments, the collateral benefits rule would be further changed such that the amount of claims for losses in motor vehicle collisions would be reduced and subsequently, insurance companies would be permitted to reduce premiums as they desired.

The defendant argued that the reference to “loss of earning capacity” contemplated a loss that will occur in the future. After reviewing the case law interpreting the phrase, the court found that previous case law has not distinguished the phrase between past losses and future losses.

The court then turned itself to the phrase “payments…the plaintiff has received or that were available before the trial of the action.” The court underwent an extensive statutory interpretation exercise and determined that Section 113A refers to payments available before trial and does not extend to benefits only available after trial.

The Decision

The court decided that the deductions from damages for income loss and loss of earning capacity required by Section 113A do not include future CPP disability benefits to be received or available to the plaintiff after trial.

The court specifically mentioned that the decision in Tibbetts did not settle the issue of this decision. The court did not believe that loss of earning capacity was necessarily about future losses for the purpose of Section 113A and that the correct interpretation of Section 113A would exclude future payments from its application.

We do not know at this point whether Holland v. Sparks will be appealed. Given the amount at issue in future cases, it would not surprise us if an appeal was filed.

Lessons for Insurers

Insurers should be aware that Section 113A of the Insurance Act does not apply to future payments to be received by, or available to, a plaintiff after the trial of an action. CPP disability benefits are excluded from the application of Section 113A of the Insurance Act and are not deductible from damages.

¹ Holland v Sparks, 2018 NSSC 136.
_² Tibbetts v Murphy, 2017 NSCA 35.