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Insurer cannot recover retroactive CPP disability payments - Pries and economical insurance: Decision on a preliminary issue
In Pries and Economical Insurance, Mr. Pries was injury in a car accident on September 3, 2007. He applied for accident benefits through Economical. He applied for income replacement benefits as he was unable to work. Economical paid them for a time and terminated them when they felt he no longer met the criteria for payment. After receiving updated information, Economical reinstated benefits.
During the time of non-payment, Mr. Pries submitted an application for Canada Pension Plan Disability Benefits. CPP found him eligible. He received a letter on March 3, 2010 informing him that he was approved for benefits and that he would be receiving a lump sum payment from CPP retroactive to the date when CPP entitlement began, namely November 23, 2008. The lump sum payment of $10,954.88 was from November 23, 2008 to February 28, 2010.
As is necessary, Mr. Pries notified his insurer of CPP’s letter and his entitlement to CPP disability benefits.
On March 15, 2010, Economical formally provided notice of its intention to collect a repayment of benefits from Mr. Pries in the amount of $12,333.34 as a result of the overpayment situation brought about by receipt of the lump sum payment from CPP.
Mr. Pries and Economical went to mediation on this matter and were unable to come to a resolution and therefore an application for arbitration was brought.
Economical recognizes that Mr. Pries is entitled to an ongoing income replacement benefit. Both Mr. Pries and Economical acknowledged that CPP benefits are deductible from income replacement benefits. The dispute was over Economical’s insistence that the entire lump sum payment is properly repayable in accordance with the Statutory Accident Benefit Schedule (SABS).
The right to deduct CPP payments from IRB payments is a statutory provision that is incorporated into the insurance contract. The right of the insurer to ask for repayment falls under section 47(1)(c).
In this case, the dispute concerned section 47(3): “The obligation to repay a benefit does not apply unless the notice under subsection (2) is giving within 12 months after the payment was made.”
The insurer took the position that S.47(3) means that notice must be given within 12 months after the collateral payment giving rise to the overpayment received while Mr. Pries took the position that a right to repayment is only generated when notice is given within 12 months of the date that payment of the benefit to be repaid has been paid.
The pre-hearing was heard on August 10, 2012 by Arbitrator John Wilson.
The result of the pre-hearing is as follows:
Economical may not claim repayment [of'] income replacement benefits prior to the notice of repayment given on April 27, 2010 and may only deduct CPP benefits on a going-foward basis from the date of notice.
Arbitrator Wilson, in the decision states:
It should be noted that Economical could at anytime have put Mr. Pries on notice that he had to apply for CPP benefits to continue to receive IRB benefits. Economical was not shy about ceasing to pay IRB benefits for reasons that later turned out to be spurious, and could well have acted promptly to bring the CPP issue forward. It did not and Mr. Pries did not apply until much later, all of which could have been a factor in potentially delaying both the CPP payment and the notice of deductibility.
In the end, Economical benefited from Mr. Pries’ action and continues to do so. If Mr. Pries gets to keep a little more of his past CPP benefit than Economical intended, then it is the result of an anomaly in the legislation, not the fault of Mr. Pries.
…Consequently, while I accept that the drafters of the Schedule may well have had the overall goal of making all collateral payments deductible, and consequently recoverable by way of repayment, that goal did not translate well into the legislation itself.
Mr. Pries’ IRB amount, as a result of the deduction of CPP and the insurer’s claim for repayment is $87.56 per week (from $264.48). Arbitrator Wilson states “One can infer that, even with the CPP payments available to Mr. Pries, he is not getting rich on the back of the Insurer. Indeed, persons living on the economic margins of society such as Mr. Pries must be seen as a highly vulnerable group”.
This decision is currently under appeal. An update will be posted once the results of the appeal have been released.
Aaron Waxman and Associates is a Toronto Personal Injury Law Firm. We handle personal injury claims including car accidents, accident benefits, Canada Pension Plan denials, Critical Illness Claim denials and various other types of claims.
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