Neutral Citation: 1998 ONFSCDRS 32

FSCO A97-001147

BETWEEN:

ANNA JEAN FIELD

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION

Anna Jean Field has been continuously receiving a weekly income benefit under the Schedule¹from State Farm Mutual Automobile Insurance Company ("State Farm") since her August 18, 1990 automobile accident. In August 1993 State Farm reduced Mrs. Field's weekly income benefit by the amount of her Canada Pension Plan ("CPP") disability benefit. Mrs. Field seeks an order that State Farm is not entitled to deduct her CPP disability benefits. The arbitration hearing was held on April 2, 1998 at the Financial Services Commission of Ontario² in North York under authority of the Insurance Act, R.S.O. 1990, c. I.8, as amended.

State Farm is not entitled to deduct CPP disability benefits from Mrs Field's weekly benefits.
State Farm shall pay Mrs. Field her expenses of the arbitration process.

Fred Sampliner

Arbitrator

Date

Mrs. Field and her daughter Karen Field were present at the hearing. She was represented by Stanley B. Pasternak, Barrister and Solicitor. State Farm's claims representatives Richard Roessner and Tracy Goertz were present, and represented by Joseph Sullivan and Edita T. Cimba, Barristers and Solicitors.

The parties filed three exhibits. Mr. Roessner and Mrs. Field testified.

Limitation Argument

As a preliminary matter, State Farm maintains that Mrs. Field filed for arbitration too late. The Schedule³ and the Insurance Act⁴ require the insured person to file for resolution of a disputed benefit within two years of the insurer's denial. State Farm argues that Mrs. Field did not contest the CPP deductions within the two years, and the limitation bars her right to contest these deductions.

Under the Schedule, insurers may deduct post-accident income and collateral benefits, the amounts of which periodically change. For the self-employed person with ever-changing income and expenses or a claimant with multiple policies to coordinate, the correct amounts may not be apparent to both parties far beyond the two-year period. Parties in the dispute resolution process often discover the correct amounts only after formal information exchanges many years after the deductions commenced. If State Farm's interpretation is correct, the Insured is barred from contesting the deductions favorable to them, while the Insurer may seek deductions without regard to any time limitation. This imbalances the parties' rights under the contract, unless there is a rolling limitation period.⁵ I cannot accept the result of State Farm's interpretation.

Testimony from State Farm's representative at the hearing showed that the company's assessment notices to Mrs. Field did not indicate that her weekly benefits were denied.⁶Limitation periods should be construed so as to allow a claimant access to adjudicate the merits of an issue in arbitration.⁷ In the Coates-Boyce⁸ case, the insurer reduced the claimant's weekly benefit on the basis that she had not provided sufficient proof of her income, and the claimant did not file for mediation until three years later. Noting that the legislation referred to the denial of a particular benefit, Arbitrator Allen held that an insurer's reduction of the amount is not a denial and hence does not begin the limitation period. I find her reasons compelling, and rely upon her ruling.

As in the Coates-Boyce case, State Farm did not refuse to pay a particular weekly amount claimed by Mrs. Field. The rate was adjusted. Applying Arbitrator Allen's reasoning to the present situation, I find that State Farm did not deny her weekly benefits. Consequently, State Farm's notice to deduct CPP does not trigger the running of the limitation period, and I find that Mrs. Field's arbitration is timely.

CPP Deduction

State Farm began deducting CPP benefits in August 1993, when jurisprudence supported its position.⁹ In the only previous case I decided on the CPP issue, the applicant presented no substantive or persuasive argument to depart from the leading decision at that time.¹⁰

Recent case law supports Mrs. Field's position that CPP disability benefits are not deductible. In Cugliari¹¹ the Divisional Court decided CPP disability benefits were not deductible from damages in tort actions. Since then, the Court of Appeal has upheld the Divisional Court's ruling.¹²

The Insurance Act¹³ requires that all payments for "loss of income" be deducted from tort damages recovered from automobile accidents, which ostensibly eliminates double recovery for income losses. The Divisional Court determined the character of CPP disability benefits by focusing on the triggering event for eligibility. Since CPP eligibility rests on proof of disability, not of pecuniary loss, the Court held that the benefits do not indemnify the person for loss of income, and are not deductible. I am persuaded by the Divisional Court’s reasoning, and feel bound to follow the Court of Appeal because the pertinent wording of the provisions is virtually identical.¹⁴

Arbitrators Blackman and Evans followed the Divisional Court, finding that CPP disability benefits are not deductible from weekly income benefits under the Schedule.¹⁵ In particular, I agree with Arbitrator Blackman, that exclusions i.e. deductions from contractual benefits should be narrowly construed. His reasoning that deductions for payments available under income continuation benefit plans are limited to those triggered by proof of income loss makes perfect sense in the context of Cugliari and a broad interpretation of the Schedule.

Accordingly, I find that Mrs. Field's CPP disability is not an indemnity for loss of income, and that State Farm is not entitled to deduct these payments from her weekly benefits.

EXPENSES:

As Mrs. Field was successful, I have no hesitation in awarding her expenses of the arbitration process.

September 1, 1998