Luana Parrotta v. RBC General Insurance Company, 2015 ONFSCDRS 67

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2015 ONFSCDRS 67

FSCO A13-005371

BETWEEN:

LUANA PARROTTA

Applicant

and

RBC GENERAL INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Anne Sone

Heard: August 12, 2014, at the offices of the Financial Services Commission of Ontario in Toronto

Appearances: Adam Moras for Mrs. Parrotta

Robert Bowman for RBC General Insurance Company

Preliminary Issue:

The preliminary issue is:

Is RBC entitled to deduct the Canada Pension Plan disability benefits being received by Mrs. Parrotta from the income replacement benefits it pays her when there has been a lump sum payment from her long term disability benefits that contemplates the payment of Canada Pension Plan disability benefits?

Result:

RBC is entitled to deduct the Canada Pension Plan disability benefits being received by Mrs. Parrotta from the income replacement benefits it pays her when there has been a lump sum payment from her long term disability benefits that contemplates the payment of Canada Pension Plan disability benefits.

Overview:

The Applicant, Luana Parrotta, was injured in a motor vehicle accident on January 18, 2011. She applied for statutory accident benefits from RBC General Insurance Company (RBC), payable under the Schedule.¹ Income replacement benefits (IRBs) were paid until May 3, 2012. Housekeeping benefits were paid until April 15, 2011. Mrs. Parrotta sought continued IRBs, housekeeping, attendant care benefits, the cost of examinations and a determination that she sustained a catastrophic impairment. The parties were unable to resolve their disputes through mediation, and Mrs. Parrotta applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Facts:

The facts of this case are not in dispute. Both parties agree that Mrs. Parrotta:

Is claiming an IRB, along with other statutory accident benefits;
Is receiving a Canada Pension Plan (CPP) disability benefit;
Has settled her claim for a long term disability (LTD) benefit from Manulife Insurance (Manulife) for an undisclosed lump sum payment, which she claims included a deduction for her CPP benefit;²
Has not provided any details regarding the amount she received for the LTD benefit.

Law:

Subsection 7(1) of the Schedule states that the weekly amount of an income replacement benefit payable to a person shall be reduced by net weekly payments for loss of income that are being received by the person as a result of the accident under the laws of any jurisdiction.

Subsection 2(9) of the Schedule expressly states that for the purposes of this Regulation, payments for loss of income under an income continuation plan shall be deemed to include the following payments:

Payments of disability pension benefits under the Canada Pension Plan.³

This is not always the case. Subsection 2(10) of this Schedule sets out:

Subsection (9) only applies in respect of accidents that occur on or after January 1, 2002.

I also note that the legislature made these provisions mandatory. This wording indicates to me that I do not have discretion to override these provisions.

Mrs. Parrotta’s Submissions:

Mrs. Parrotta submits that:

According to the Group Benefits Policy which governed Mrs. Parrott’s claim for LTD benefits, Manulife was entitled to deduct CPP disability benefits from LTD benefits.⁴
As part of the LTD benefits settlement, Manulife was given a credit for past and future CPP disability benefits. In other words, the settlement of her LTD claim reflected a deduction for CPP disability benefits.⁵
CPP disability benefits should only be deducted once and that has now happened.

RBC’s Submissions:

RBC submits that:

Subsequent to January 1, 2002, by operation of subsections 2(9) and (10) of the Schedule, CPP benefits are deductible from IRBs paid under the Schedule.

Analysis:

Mrs. Parrotta concedes that the Schedule envisions insurers being credited with a deduction for CPP disability benefits from IRBs in certain situations. For example, she proposes that when an insured has no access to any other income continuation benefit plan, that would entitle an insurer to deduct CPP disability benefits.

Mrs. Parrotta cited a number of cases to support her position that this is the only fair and equitable way of interpreting the Schedule, (since to do otherwise in this case would result in CPP benefits being deducted twice from her other benefits). For example, Mrs. Parrotta referred to Cugliari v. White.⁶ In this case, before the amendment to the Schedule allowing the deduction of CPP disability benefits, the Ontario Court of Appeal held that CPP disability benefits do not constitute payments for loss of income (and are not deducted from an award of damages pursuant to paragraph 267(1)(c) of the Insurance Act).

Mrs. Parrotta submits now that these benefits are deductible under the Schedule, it can only be presumed they are deductible once.

Mrs. Parrotta also referred to Bapoo v. Co-Operators General Insurance Company.⁷ The issue in Bapoo was whether the insurer was allowed to deduct gross or net disability income payments from IRBs. The Ontario Court of Appeal held that the insurer was limited to deducting net (after tax) disability benefits. Mrs. Parrotta submits that in Bapoo, the Court was dealing with an accident that occurred in 1992 but the principle is the same.

In Bapoo, Laskin J.A. stated that:

Section 12(4)(b) [allowing for IRBs] has several purposes. One purpose is to ensure that injured insureds receive a fair or adequate level of income replacement when they are unable to work because of injuries suffered in a car accident.

Laskin J.A. also stated that if the insurer in Bapoo were correct in its interpretation of the Schedule, Mr. Bapoo would have been better off financially if he had not obtained any disability income protection. Laskin J.A. stated that insureds should receive IRBs equivalent to 80 percent of their gross weekly wages before their accident [the formula at the time].

Mrs. Parrotta further referred to Scott v. State Farm Mutual Automobile Insurance Company.⁸ In that case, Ms. Scott applied for IRBs. She also applied for and received LTD benefits. It was conceded that LTD benefits were deductible from IRBs. Ms. Scott, however, was also enrolled in the Hospitals of Ontario Pension Plan (“HOOPP”). She applied for and received a disability retirement pension. The HOOPP payment was deductible from LTD benefits. The issue was whether or not State Farm could also deduct the HOOPP payments. Arbitrator Muir found that HOOPP benefits were not deductible from IRBs. State Farm appealed, and Director’s Delegate Evans denied the appeal on the basis that the HOOPP payment was not deductible because it was not an income replacement plan. The Divisional Court upheld the Director’s Delegate’s decision.

Finally, Mrs. Parrotta relies on two cases which she states are directly on point. The first, which she admits dealt with a previous version of the Schedule, is Trottier and Royal & SunAlliance Insurance Company of Canada.⁹ Mr. Trottier applied for IRBs. He also applied for LTD benefits and CPP disability benefits. He received LTD benefits retroactively in the amount of $40,627.52 and CPP disability benefits retroactively in the amount of $13,078.91. In the meantime, IRBs were paid, denied and reinstated. On appeal, Director’s Delegate Draper found that the overpayment was $27,548.61. The Insurer was entitled to deduct the amount of the LTD benefit minus the CPP disability benefit.

The other case which Mrs. Parrotta submits deals directly with this issue (albeit once again under a previous version of the Schedule) is Chun v. Primmum Insurance Co.¹⁰ Ms. Chun was receiving IRBs, LTDs and CPP disability benefits. The LTD insurer was deducting CPP disability benefits. Primmum sought to deduct LTD benefits before adjusting for CPP disability benefits. As noted by Karakatsanis J., this would allow Primmum to do indirectly what it cannot do directly. Karakatsanis J. also stated:

In my view the “net payment that has been received by the plaintiff for income replacement” is the amount that Ms. Chun actually receives from Equitable Life, that is, “net” both of taxes but also of other deductions, such as CPP. The appropriate amount that should be deducted pursuant to s. 75(1) is the amount of the LTD benefit that Ms. Chun actually receives from Equitable Life (after deduction for CPP).¹¹

This decision was upheld by the Ontario Court of Appeal.¹²

However, all these cases deal with accidents that precede the amendments regarding CPP to the Schedule. For example, the decision in Scott concerns a 1999 accident. The Trottier decision also concerns a 1999 accident and the earlier version of the Schedule; the distinction is noted at paragraph 22:

The CPP payments also affected the calculation of Mr. Trottier’s IRBs. Because his accident was before January 1, 2002, the CPP benefits were not deductible from his IRBs. …¹³

Director’s Delegate Blackman in Intact and Marianayagam,¹⁴ (which involved a May 26, 2004 accident) specifically follows Salmers J. in State Farm v. Ramalingam,¹⁵ and found “that the disability pension benefits under CPP received by the Respondent … are deductible under paragraph 2(9)(1) and hence, subsection 7(1) of the Schedule.”

Conclusion:

Based on the Marianayagam and Intact and State Farm v. Ramalingam cases, I find that under the version of the Schedule that applies to this 2011 accident, CPP disability pension benefits are deductible from IRBs.

I find the cases that Mrs. Parrotta cited are distinguishable from this one. They were all decided before the amendment to the Schedule, when it was not clear what to do with CPP disability pension benefits. At that time, there was no specific provision in the Schedule to deal with CPP disability pension benefits. However, now subsection 2(9) has specifically made CPP disability pension benefits deductible from IRBs.

Mrs. Parrotta asks me to find that the legislature intended that CPP disability benefits be deducted once and not twice. However, as noted above, the legislature has used mandatory language in these provisions. This wording indicates to me that I do not have discretion to override these provisions, as Mrs. Parrotta has urged me to do.

Accordingly, I find that RBC is entitled to deduct the CPP disability benefits being received by

Mrs. Parrotta from the IRBs it pays her, even though Mrs. Parrotta alleges that there has been a lump sum payment from her long term disability benefits that contemplates the CPP disability benefit payments.

March 27, 2015

Anne Sone

Arbitrator

Date