Members of the Canadian military and Royal Canadian Mounted Police injured in the line of duty may also be entitled to benefits from the Department of Veteran Affairs, pursuant to Part III (ss. 42-56.8) of the Veterans Well-Being Act, SC 2005, c. 21. That statute partly replaced the Pension Act, RSC 1985, c. P-6.
Like the CPP disability benefits, such benefits are neither deductible from an award of damages for past loss of income pursuant to s. 265.4(1) of the Insurance Act, supra. Again, the result is due to the nature of the benefits paid and not the subrogation exception. As explained in Doucet v. New Brunswick, 2004 NBQB 398 para 8:
The funds payable to the plaintiff in the present case are in compensation for disabling war injuries. In the plaintiff’s case he was rendered completely deaf from the left ear, and his hearing is only partial from the right ear with the assistance of a hearing aid. The funds payable to him are disability pension funds intended to be paid to him over his lifetime and are designed to provide for his infirmity and disability. The government of Canada must further have intended that the Veteran’s Disability Pension was not to be considered income as it is exempted as such for the purpose of the Income Tax Act Canada.
The reasoning follows closely the one formulated in the case of CPP disability benefits discussed above.
The characterization of the benefits in New Brunswick is similar to what has been held in other jurisdictions. Namely, in Burry v. Burry, 2005 NLTD 184 para 32, although dealing with a division of property issue, the court held that the “payment of a disability pension under the Veterans Act is compensation for a disability incurred by a war veteran in the service of their country”. It is non-taxable (para 36). In Frigon v. Blanchard, 2014 MBQB 212 para 44, the presiding justice held that “VAC benefits are not intended to be a form of income replacement”. In Manuge v. Canada, 2012 FC 499 para 63, Justice Barnes explained the purpose of the veterans’ disability benefits as “an important financial award intended to compensate for disabling injuries suffered in the service of Canadians”, and “to provide modest financial solace to disabled CF members for their non-financial losses”. Furthermore, it emphasized “that disabled CF members who continue with their active service are entitled to be paid and to keep their Pension Act disability benefits”. In Manuge, supra, those benefits were not considered income replacement or deductible from LTD benefits.
That being said, there is a longstanding debate in family law whether the veteran’s disability benefits are considered ‘income’ for calculation of spousal and child support payments. While some courts take the benefits into consideration (Irving v. Irving (1988), 17 RFL (3d) 318 paras 33-34 (BCSC); Burry v. Burry, supra para 34; Darlington v. Moore, 2013 NSSC 103 paras 69-73; Vaughan v. Vaughan, 2014 NBCA 6 para 26; Starling v. Starling, 2016 SKQB 112 paras 24-37), others have not (Storey v. Simmons, 2013 ABQB 168; Frigon v. Blanchard, supra para 47). However, such cases have little relevance in the context of insurance law as they speak to ‘means’ as opposed to ‘income replacement’ or ‘income continuation plan’.