Supreme Court of Canada – CPP Payments Non Deductible From Excess Insurance Policy

Reasons for judgement were released today by the Supreme Court of Canada rejecting an insurer’s attempt to restrict the amounts payable under a policy of excess insurance.
In today’s case (Sabean v. Portage La Prarie Mutual Insurance Co.) the Plaintiff was injured in a Nova Scotia motor vehicle accident and was awarded $465,400 by a jury.  The at fault motorist had insufficient insurance to pay and the Plaintiff was only able to collect $382,000.  The Plaintiff had under-insured motorist protection with the Defendant insurance company and applied to recover the shortfall.  The Defendant sought to deduct any Canada Pension Plan disability benefits from their obligation.
The Supreme Court of Canada disagreed with the Defendant and found that CPP benefits could not be deducted from the insurer’s obligation to pay.  In reaching this decision the Court provided the following reasons:
[2]                              The Endorsement stipulates that future benefits from a “policy of insurance providing disability benefits” are deducted from the shortfall in determining the amount payable by the insurer (cl. 4(b)(vii)). The issue in this appeal is whether the Canada Pension Plan  (CPP ) is a “policy of insurance” for that purpose.
[3]                              The trial judge in this case found that CPP  benefits were not benefits from a “policy of insurance” under the Endorsement and thus would not be deducted from the amount payable by the insurer. The Nova Scotia Court of Appeal disagreed, concluding that the CPP  was a “policy of insurance” under the Endorsement.^[1]
[4]                              I agree with the trial judge. The ordinary meaning of the words at issue is clear, reading this Endorsement as a whole. An insurer cannot rely on its specialized knowledge of the jurisprudence to advance an interpretation that goes beyond the clear words of the policy. An average person applying for this additional insurance coverage would understand a “policy of insurance” to mean an optional, private insurance contract and not a mandatory statutory scheme such as the CPP . Thus, future CPP  disability benefits do not reduce the amount payable by the insurer under the Endorsement.
…

[41]                          In sum, with respect to amounts that the eligible claimant is “entitled to recover”, cl. 4 (b) specifies nine sources that give rise to deductions from the amount payable by the insurer, none of which include the CPP . The ordinary meaning of a “policy of insurance” in cl. 4(b)(vii) of the Endorsement is clear. It refers to a private insurance policy purchased by the insured. Portage has asked this Court to read into those clear words the jurisprudence related to the collateral benefits rule in tort so that a “policy of insurance” would also include the CPP  regime. As noted above, I cannot agree. Thus, the ordinary meaning of the words “policy of insurance” in cl. 4(b)(vii) does not include the CPP  regime.

[42]                          The clear language of the provision, reading the contract as a whole, is unambiguous. There are no “two reasonable but differing interpretations of the policy”: B. Billingsley, General Principles of Canadian Insurance Law (2nd ed. 2014), at p. 147; Chilton v. Co-operators General Insurance Co. (1997), 32 O.R. (3d) 161, (C.A., at p. 169). The mere articulation of a differing interpretation does not always establish the reasonableness of that interpretation and does not necessarily create ambiguity.

In British Columbia, it is well understood that CPP benefits are deductible from ICBC’s obligation to provide UMP payments.  This decision likely does  not change this reality as payments “to which the insured is entitled under the Canada Pension Plan” are expressly defined as a “deductible amount” in the legislation defining payable UMP benefits.