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What constitutes 12-months for overpayment recovery in Section 47(3)?

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12-months starts from the day the first payment in error is made, regardless of whether additional payments with the same error were subsequently made. However, subsequent decisions appear to indicate otherwise, and support an overpayment can be recovered for the 12-months prior to notification.

For an updated discussion on related overpayment topics, be sure to also read our subsequent post here.

Merle Slater and Personal Insurance Company of Canada, FSCO A07 000592, March 27, 2008 – Arbitrator Ashby

 Date of MVA: May 14, 2004

Section 47 of the SABS indicates that overpayments by the insurer can be recovered from the insured if proper notice is given within 12 months of the payment. This matter hinged on what was deemed to be the “payment.” It is also important to note, this decision focused on payments made in error, as in an incorrect calculation by the insurer, as opposed to subsequent changes due to retroactive payments such as CPP Disability benefits. For a discussion on CPP Disability benefits, read our new blog.

Where a single lump sum payment is made, there is little dispute about what is meant by the term “payment”. However, in the case of Income Replacement Benefits (“IRBs”) that are paid on a bi-weekly basis, the term “payment” can have at least two interpretations, including:

  • Any payment made in error
  • First payment made in error

In this matter, the insurer argued that a “rolling limitation period” was created as the IRBs were continually paid in error and each payment constitutes a new 12 month period. However, the Arbitrator found this interpretation placed an unfair burden on the insured, and that the legislative intent was to place a limit on the insurer’s ability to recoup overpayments.

Based on this interpretation, the Arbitrator found in this matter that the insured did not have to repay the overpaid benefits as the first payment in error was beyond the 12-month period, and the recouped payments made by the insurer were to be repaid to the insured. No judgment on interest owing was made.

However, in the Pries and Economical Appeal (FSCO Appeal P12-00036), the Director’s Delegate stated in reference to the Slater decision, that “the legislation simply refers to “the payment.” There was no necessity to read into it “the first payment.” Therefore, as the legislation provides, the insurer can recover up to 12 months’ worth of payments made in error.”

We are unaware of any subsequent decisions on this matter.

What this means for you:

Where any question lingers about the accuracy of a payment, ensure the investigation is completed within 12-months of the initial payment in question. In accordance with Section 47(4), this limitation does not exist on matters where the overpayment was obtained through fraudulent means.

New SABS changes:

  • The overpayment recovery is now considered under Section 52.
  • Section 47(4) dealing with recovery where an overpayment exists due to wilful misrepresentation or fraud has been incorporated into a single section dealing with the 12-month period in Section 52(3).
  • The insurer may still charge interest at the bank rate on an overdue amount starting the 15th day after notice is given, pursuant to Section 52(5).

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