Insurance Law News & Updates

Deductibility of CPP Benefits in Nova Scotia Car Accident Cases

What happens when a person, who has been injured as a result of the actions of another person, sues that other person but, in the meantime, receives financial benefits from some other source, such as the income derived from Canada Pension Plan (CPP) disability benefits?  Is the person who has been sued able to deduct the amount of those other benefits from the amount otherwise payable to compensate the injured person?  This is a potentially tricky question otherwise known as the collateral benefits problem.

The recent decision of the Nova Scotia Court of Appeal in Tibbetts v Murphy, 2017 NSCA 35, affirms that CPP disability benefits are deductible in the context of a bodily injury tort claim arising from a motor vehicle accident.

There are two basic competing interests at play here.  On one hand, the underlying principle of compensation supports the view that the harmed person should only receive compensation for his or her actual loss – collateral benefits should be deducted from a damage award in order to avoid double recovery or overcompensation.  On the other hand, why should someone who has harmed another be entitled to enjoy the benefit of those collateral benefits, particularly where the person harmed previously had to pay for or give something up in order to secure those collateral benefits?
In the specific context of CPP disability benefits, several decisions of the Supreme Court of Canada in the 1970s make it clear that, in the absence of legislation to the contrary, CPP disability benefits are not deductible from damage awards for bodily injury or death.  These decisions have been repeatedly followed by Nova Scotia courts.

The general understanding for this exception to the rule against double recovery is that CPP disability benefits are akin to private insurance.  For over a hundred years, courts have held that, a person who harms another should not receive any credit against the damages otherwise payable as a result of the private insurance benefits purchased by the person harmed. 

When the Nova Scotia government instituted automobile insurance reforms in 2003, a number of provisions were added to the automobile insurance part of the Insurance Act.  Some of those provisions served to reduce the damages payable to claimants suing for bodily injury damages as a result of motor vehicle accidents.  In relation to income loss or loss of earning capacity from a motor vehicle accident, the legislation states that if the claimant received or is entitled to receive payments related to income loss “under the laws of any jurisdiction or under an income-continuation plan” then his damages should be reduced accordingly, so long as the provider of the benefit cannot sue to recover the amount of those payments from the wrongdoer.

As a result of these reforms, the question became whether or not CPP disability benefits fell within the description of payments that were deductible.  Nova Scotian courts were divided on this matter. The decision of the Supreme Court in McKeough v. Miller, 2009 NSSC 394 held that they were, while the opposite view was taken in Hollett v. Yeager, 2014 NSSC 207.  In Hollett, the Court overturned McKeough in light of a more recent decision from the Ontario Court of Appeal (Demers v. B.R. Davidson Mining and Development Ltd., 2012 ONCA 384). 

The decision in Tibbetts v Murphy, 2015 NSSC 280 provides clarity as to the current approach in Nova Scotian. The ruling in Tibbetts, which was subsequently affirmed by the Court of Appeal (2017 NSCA 35), follows McKeough and states that CPP disability payments are deductible from damages for loss of income or earning capacity. This decision clarifies the court’s position on the collateral benefits problem, affirming their commitment to avoiding double recovery and overcompensation.

It is important to point out that these decisions do not address contractual claims like those under the family protection endorsement (i.e. the S.E.F. No. 44) that can be purchased as part of the insurance coverage under the standard Nova Scotia automobile insurance policy – different considerations apply in that case.  These decisions also say nothing about bodily injury claims outside of the context of motor vehicle accidents (e.g. occupiers’ liability) where the judge-made rule of non-deductibility of CPP benefits continues to apply.

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