Regarding motor vehicle accidents in New Brunswick, the Collateral Benefits Rule has been replaced in 1996 by s. 265.4 of the Insurance Act, RSNB 1973, c. I-12, as far as past loss of income is concerned: Charters v. Hudson, 2002 NBCA 10 para 6; Graham v. Hill, 2003 NBCA 24 paras 10 & 17. (See Related Link  “Collateral Benefits Rule).

The deductibility of benefits against awards of damages is therefore assessed through rules of legislative interpretation applied to the terms contained in the provision. However, that is not very helpful when dealing with contracts of insurance which can contain more or less detailed lists of exclusions, exceptions and offsets. Similar but also different types of rules apply when dealing with the deductibility of benefits under the terms of insurance policies.

Courts have discussed the rules applicable to insurance contracts on many occasions. The general consensus is that they raise considerations of their own. Of course, insurance policies are contracts. “As with all contracts, the terms of the policy must be examined, in light of the surrounding circumstances, in order to determine the intent of the parties and the scope of their understanding. Nevertheless, through its long history, insurance law has given rise to a number of principles specific to the interpretation of insurance policies”: Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21 para 27. When it comes to exclusions, the considerations are explained thusly (paras 28-30):

First, the courts should be aware of the unequal bargaining power at work in the negotiation of an insurance contract and interpret it accordingly. This is done in two ways: (1) through the application of the contra proferentem rule; (2) through the broad interpretation of coverage provisions and the narrow interpretation of exclusions. These rules require that ambiguities be construed against the drafter. In most policies, the drafter is the insurer and the insured is essentially required to adhere to the terms set out by the insurer. […]

Second, the courts should try to give effect to the reasonable expectations of the parties, without reading in windfalls in favour of any of them. In essence, “the courts should be loath to support a construction which would either enable the insurer to pocket the premium without risk or the insured to achieve a recovery which could neither be sensibly sought nor anticipated at the time of the contract” [reference omitted].

Finally, the context of the particular risk must also be taken into account.

See also Stampers v. Finnigan et al. (1986), 75 NBR (2d) 301 paras 16-18 (QB); Reid Crowther & Partners Ltd v. Simcoe & Erie General Insurance Co., [1993] 1 SCR 252 p 269; Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24.

The methodology applicable to the interpretation of insurance policies was explained more recently in Sabean v. Portage La Prairie Mutual Insurance Co., 2017 SCC 7 para 12:

In Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., … this Court confirmed the principles of contract interpretation applicable to standard form insurance contracts. The overriding principle is that where the language of the disputed clause is unambiguous, reading the contract as a whole, effect should be given to that clear language …. Only where the disputed language in the policy is found to be ambiguous, should general rules of contract construction be employed to resolve that ambiguity …. Finally, if these general rules of construction fail to resolve the ambiguity, courts will construe the contract contra proferentem, and interpret coverage provisions broadly and exclusion clauses narrowly ….

Hence, when it comes to the deductibility of benefits from insurance benefits, the golden rule is therefore to look first at the terms of the policy. The legislation may be of assistance in certain cases, but not always.

Section B Weekly Indemnity Benefits

First, the no fault benefits under the Section B part of the Standard Owner’s Policy for New Brunswick (N.B.P.F. No 1) are mandated legislatively. They stem from s. 264 of the Insurance Act, supra, which states:

264   Every contract evidenced by a motor vehicle liability policy provides

(a) insurance described in section 256 against expenses for medical, surgical, dental, ambulance, hospital, professional nursing or funeral services, and

(b) accident insurance benefits described in section 257 in respect of death of or injury to an insured person,

as set forth in Subsections 1 and 2 of Section B, Accident Benefits, of the New Brunswick Standard Automobile Policy approved by the Superintendent under section 226.

Pursuant to the standard policy, the amount payable takes into account “any payments for loss of income from employment received by or available … under … the laws of any jurisdiction” or “wage or salary continuation plans available … by reason of … employment”. Workers’ compensation regimes are expressly excluded from the provision.

Because of its legislative origin, it was held, in Vautour v. LeBlanc (1987), 81 NBR (2d) 158 para 7 (QB), that “the insurer cannot be held responsible for the manner in which the exclusion is expressed and … the ‘contra proferentem’ rule cannot be used to interpret any ambiguities involving the said provisions in favor of the insured”. The New Brunswick Court of Appeal disagreed with that view in Courtney v. Royal and SunAlliance Insurance, 2001 NBCA 53 para 24, although the contra proferentem rule made no difference in the end (paras 37 & 42). The New Brunswick Court of Appeal later held that “whenever the wording of an insuring provision, whether legislative or contractual, is open to more than a single reasonable interpretation, courts should opt for the one that benefits the insured”: Axa Insurance Co. v. Rolfe, 2004 NBCA 14 para 25. In any event, whether the contra proferentem rule applies or not, when dealing with the “restrictive or exclusionary clause” of Section B benefits, it is still interpreted narrowly: Vautour v. LeBlanc, supra para 8; Sweet v. Co-Operative Fire and Casualty Co. (1983), 46 NBR (2d) 189 para 9 (CA). See also Berardinelli v. Ontario Housing Corp., [1979] 1 SCR 275 p 280; Ryan v. Victoria (City), [1999] 1 SCR 201 para 38.

Several cases had to address the exclusion contained in the Section B part of the N.B.P.F. No 1. For example, the matter of Sweet v. Co-Operative, supra, concerned disability benefits paid to an employee through his union. Other than collecting union dues, from which the insurance plan was purchased, the employer played no role in the administration of the plan or the benefits paid. Thus, the benefits resulted from membership in the union, not employment. The unanimous bench of the Court of Appeal held the benefits as non deductible against Section B weekly indemnity benefits.

The case of Courtney, supra, dealt with sick leave benefits paid to an employee injured in a motor vehicle accident. Again, the issue centered on the wording of “payments for loss of income … under … wage or salary continuation plans”. The sick leave benefits were provided for under a collective agreement. Credits accrued with time and a portion of unused credits was payable to the employee upon retirement. Interestingly, the bench looked at s. 265.4(1) of the Insurance Act, supra, and the distinction drawn between paragraph (a) dealing with ‘income continuation plans’ and paragraph (b) speaking of ‘sick leave plans’. The two were held to be distinguishable. Thus, as the N.B.P.F. No 1 only spoke of ‘wage or salary continuation plans’, it was said to exclude sick leave benefits (para 41).

In Vautour v. LeBlanc, supra, an allowance paid to a worker compelled to retire after sustaining an injury in a motor vehicle accident was held not to be ‘a payment for loss of income from employment’. The retirement allowance was paid pursuant to a collective agreement and was payable under various scenarios, including some not related to a withdrawal from the workforce.

One of the questions raised in relation to Section B weekly indemnity benefits and offsets was against which amount should the deduction be applied, i.e. the 80% of the gross weekly earning or the benefits payable. In Landry v. Commercial Union Assurance of Canada (1984), 57 NBR (2d) 181 (QB), the court addressed this issue. It held that the income continuation benefits were deductible from the weekly benefits payable (para 19). However, it also pointed out (para 23) that an amendment to the provision effective January 1, 1984, resolved the issue. A majority of the New Brunswick Court of Appeal upheld the decision: (1985), 63 NBR (2d) 331.

Since Section B weekly indemnity benefits release the tortfeasor of a corresponding amount under both s. 263(2) and 265.4(1) of the Insurance Act, supra, it means that any money received from the wrongdoer by way of settlement for loss of income is not deductible from the no-fault benefits: Basque v. Halifax Insurance Co, 2002 NBQB 8.

Long-Term Disability Insurance Policy

Regarding past loss of income, ss. 265.4(1), (3) and (4) of the Insurance Act, supra, extinguish subrogation rights that LTD insurers may have in relation to awards of damages. Any award for past loss of income is therefore not deductible from the LTD benefits by way of reimbursement: Graham v. Hill, 2003 NBCA 24 para 39. It is worth noting that the apparent contrary view held in Wilson v. Great-West Life Assurance Co., 2008 NBCA 57, at least concerning the past loss of income, is explained by the date of the accident, in 1992, before the coming into force of the 1996 Insurance Act amendments.

The issue is different when it comes to the head of future loss of income; it revolves around whether s. 265.4 of the Insurance Act, supra, is a complete code, which would limit deductions to past loss of income. The jurisprudence appears to support the view that the common law remains applicable in case of future loss of income (see Related Link “Collateral Benefits Rule”). While O’Neill-Jones v. Chabot, 2015 NBQB 143 paras 191 & 204-206, holds that LTD benefits are not deductible from an award for future loss of income, Carter v. New Brunswick, 2013 NBQB 239, holds that an award for future loss of income can be deductible from LTD benefits. Carter, supra, appears consistent with the opinion expressed in Wilson v. Great-West Life, supra, although the accident therein predates the 1996 Insurance Act amendments. The determination of this point will inevitably depend on the terms of the insurance policy.

NBEF No. 44 (Family Endorsement)

The family endorsement for underinsured motorists (SEF 44), provides additional coverage through an insured’s own insurer. It is known as excess insurance: Martineau v. New Brunswick (Minister of Transport) (1988), 94 NBR (2d) 57 (CA). As such, it is the payor of last resort and the policy typically takes into account a variety of benefits paid or available to the insured in the calculation of the amount payable. The interpretation of its terms follows the usual method applicable to insurance policies: Sabean, supra para 12.

Obviously, the end result inevitably depends on the terms of each policy. The offset provision is typically formulated according to two categories: first, benefits ‘actually received’ from any source are deducted, and second, the benefits ‘available’ from listed sources also have to be taken into account. The first part refers to a ‘past’ loss while the second deals with a ‘future’ loss, although the provision is not drafted in those terms: Lapalme v. Economical Mutual Insurance Co., 2010 NBCA 87 paras 18 & 47. Among the sources identified under the second part is any “policy of insurance providing disability benefits”: Sabean, supra para 2; Lapalme, supra para 3. The issue addressed in those two cases was whether CPP disability benefits were deductible from both the ‘past’ and ‘future’ losses of income. The courts held that CPP disability benefits are covered by ‘any source’ but not by ‘policy of insurance providing disability benefits’. Thus, CPP benefits received up to the date of the assessment are deducted from the excess insurance, but not the future benefits. See also Melanson v. Co-Operators General Insurance Co. (1997), 192 NBR (2d) 273 (CA).

The case of Lapalme, supra paras 28-34, is an illustration of how the contra proferentem rule applies in cases of insurance policies. One of the issues was the date from which to calculate the offsets. Arguably, the earlier the date, lower would be the benefits ‘actually received’, and vice versa. Among the three dates suggested (i.e. date of loss, date of settlement or date of assessment), the unanimous bench settled on the date of the judicial decision (i.e. the date at which the assessment of damages is performed) (para 79). The effects on the insured formed an important consideration in the deliberation of the court.

The case of Burke Estate v. Royal and SunAlliance Insurance Co. of Canada, 2020 NBQB 74, presents a situation where the deceased claimant had a complicated pre-existing medical history. He also benefited from payments from various sources following the injuries sustained in the work-related motor vehicle accident. Before his non-accident-related death, some nine years after the collision, he had collected Section D benefits from the corporation’s insurer and workers’ compensation benefits from WorkSafe NB. The issue of coverage had itself been litigated previously: 2010 NBQB 100, overturned at 2011 NBCA 98. Liability was further complicated by driving with a suspended Class 1 licence due to pre-existing medical condition, a failure to wear the seatbelt and to follow medical advices. In other words, the path to compensation was far from being free of obstacles.

In the end, the trial judge assessed the loss of income at $299,316, loss of valuable services at $20,000, and transportation costs of $10,000. The total claim was therefore $333,4333 (counting $329,316, plus 2% simple interest over almost 18 years ($115,261), less 25% for failure to wear the seatbelt ($111,144)). WorkSafe NB had already recovered money from the Section D insurer, through its subrogation right, and the trial judge held (paras 254-257) that the deduction should not include the amount recovered by subrogation, but only the amount actually paid to the deceased for loss of income (para 258). He also excluded money paid by the Section D insurer to WorkSafe NB through its subrogation right (para 259). The total amount deductible still climbed to $369,434. As the value of the claim was inferior to the amount of deduction, the NBEF No. 44 ended up being of no value to the Estate. Nevertheless, the trial judge gave to the exclusion provision an interpretation that favored the plaintiff.

This paper is offered for the purpose of discussion only. It does not constitute legal advice and its distribution does not create a solicitor-client relationship. Please consult a lawyer if you require legal advice.