Summary: The Insured received collateral benefits which were deemed to be of a non-indemnity nature, and as such, not payments for loss of income under an income continuation benefit plan. On this basis, they are not deductible from an Income Replacement Benefit (IRB).
This decision relates to accidents which occurred from November 1996 to September 2010.=
Roana Codling-Mokoena and CAA Insurance Company, FSCO A04 B000017, October 17, 2006 – Arbitrator Leitch
Date of MVA – September 20, 2000.
The insurer disputed payment of IRBs, arguing the IRBs should be reduced by the insured’s receipt of benefits under a disability insurance policy she purchased prior to the accident from Crown Life.
The issue was whether or not the Crown Life disability benefits constituted payments for loss of income under an income continuation benefit plan which would then be deductible from the amount of IRBs payable pursuant to s.7(1)1i. Arbitrator Leitch found the benefits the insured received under the Crown Life disability insurance policy did not constitute payments for loss of income under an income continuation benefit plan and so her entitlement to IRBs was not reduced.
Arbitrator Leitch provided the following reasons:
- The Crown Life benefits did not fit the definition of income “continuation” benefit plan because they were not payable during the waiting period of the first 60 days after the onset of disability.
- The insured was not required to be employed at the time of disability in order to qualify for the Crown Life benefits. Accordingly, the Crown Life benefits were not intended to indemnify the insured person for loss of income since proof of actual loss of income was not required and so the legislative objective of eliminating double recovery would not be served by deducting benefits payable under the Crown Life policy from the IRBs.
- The Crown Life disability benefits policy at most only coincidentally tied the level of benefits payable to 85 per cent of the insured person’s average monthly earnings in the six months prior to the onset of disability.
What this means for you:
Look carefully at any collateral disability benefits that involve an elimination or waiting period and which are paid out on proof of disability, but not proof of employment or actual loss of income. The collateral benefits may be exempt from the provisions under the SABS, which reduce IRBs by collateral benefits received for loss of income.
For additional information on related topics, see the following posts:
- Long Term Disability Benefits – what is deductible? (Old SABS)
- When are Long-term disability (“LTD”) benefits deductible?
- When is a Collateral Benefit deductible? – Post September 2010
- Collateral Benefits are now Other Income Replacement Assistance – Post September 2010