Richer v. Manulife Financial et al. [Indexed as: Richer v. Manulife Financial]
85 O.R. (3d) 598
Court of Appeal for Ontario,
Borins, MacPherson and Juriansz JJ.A.
March 27, 2007
Insurance -- Disability insurance -- Insured injured in course of employment -- Insured applying for workers' compensation benefits but then electing under s. 30 of Workplace Safety and Insurance Act to proceed with civil action against party responsible for his injuries -- Insured's long- term disability plan requiring that application for workers' compensation benefits be made in order to receive benefits under plan -- Insured having made application for workers' compensation benefits and therefore entitled to receive long- term disability benefits under policy -- Insurer entitled to reduce monthly benefit paid to insured by amount of workers' compensation benefits to which he would have been entitled had he not elected to proceed with civil action -- Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16, Sch. A, s. 30.
The insured was covered by a disability insurance policy through his employer. He was injured in a motor vehicle accident in the course of his employment. Article 4 of the disability insurance plan provided that a disabled employee, in order to receive benefits under the plan, had to apply for any workers' compensation disability benefits for which he might be eligible, and that the amount of monthly long-term disability benefits payable to the employee was to be reduced by any payment to which he was entitled for that month under workers' compensation legislation. The insured applied for benefits under the Workplace Safety and Insurance Act, 1997, and then elected under s. 30 of that Act to proceed with a civil action against the party responsible for his injuries. The insured's claim for long-term disability ("LTD") benefits was denied by the insurer. The insured brought an action claiming entitlement to LTD benefits under the policy. On a motion by the insurer to determine questions of law before trial, the motion judge held that the insured was not entitled to receive any LTD benefits under the policy after electing to proceed with a civil action. The insured appealed.
Held, the appeal should be allowed in part.
Article 4 of the LTD plan stipulated, as a condition precedent for the receipt of benefits under the plan, that an application for workers' compensation disability benefits be made. The insured did make an application for workers' compensation benefits. Under s. 30 of the Act, his application had not yet been finally determined. Depending on the amount of damages he obtained in his civil action, the application he had made might still result in the payment of workers' compensation benefits to him. The condition precedent in Article 4 having been satisfied, the insured was entitled to receive LTD benefits under the policy.
The insured's LTD benefits were subject, under Article 4 of the LTD plan, to an offset of the amount of the workers' compensation benefits which the insured was entitled to receive, i.e., the amount that he could have received had he exercised his entitlement to them, not the amount of benefits that he actually received. The insurer was entitled to reduce the monthly benefit payable to the insured under the policy by the amount of workers' compensation benefits to which he would have been entitled had he not elected to proceed with the action.
APPEAL from the order of Wein J. (2006), 2006 16356 (ON SC), 80 O.R. (3d) 699, [2006] O.J. No. 1934 (S.C.J.), on a motion for the determination of questions of law.
Cases referred to Madill v. Chu, 1976 32 (SCC), [1977] 2 S.C.R. 400, [1976] S.C.J. No. 77, apld [page599] Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, s. 267(2) [as am.] Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16, Sched. A, s. 30
Jonathan S.D. Wakelin, for appellant. Denise L. Tynan and Craig Anderson, for respondents.
The judgment of the court was delivered by
JURIANSZ J.A.: --
Introduction
[1] This appeal concerns the interpretation of a disability insurance contract. The appellant is an employee of the City of Toronto (the "City"). The City has a contract with Manulife Financial ("Manulife") to provide health and disability benefits to its employees including those who, in the course of their employment, are entitled to workers' compensation for qualifying injuries.
[2] The appellant brought an action against the respondents after his claim for long-term disability ("LTD") benefits was denied by Manulife. That refusal was confirmed by the motions judge on Manulife's motion to determine two questions of law before trial. The appellant appeals to this court. I would allow the appeal in part.
[3] The motion proceeded on the basis of an agreed statement of facts. The appellant is employed as a truck driver and loader by the City. He is insured for LTD benefits under the group policy of insurance between the respondents. On January 7, 1999, he was injured in a motor vehicle accident in the course of his employment, sustained serious injuries to his left leg, and suffered post-operative complications.
[4] The group policy was a self-insured plan funded by the City and administered by Manulife. The policy provided that if an employee of the City became totally disabled, as defined in the benefit plan, and met all of the criteria set out in the benefit plan, then Manulife would pay monthly benefits on behalf of the City to the disabled employee. The City retained ultimate authority to accept or decline the adjudication recommendations of Manulife.
[5] The basic LTD benefits applicable to the appellant's claim are $2,432 per month. [page600]
[6] As the motor vehicle accident occurred in the course of his employment, the appellant was eligible to apply for and receive benefits under the Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16, Sched. A ("WSIA").
[7] The appellant made an application to the Workplace Safety and Insurance Board ["WSIB"] for benefits. The WSIB advised him that he could elect to proceed with a civil action against the third party responsible for his injuries pursuant to ss. 30(2), (4) and (5) of the WSIA. The appellant elected to proceed with a civil action.
Questions
[8] Following the commencement of the appellant's action, Manulife brought a motion for the determination before trial of two questions of law, the essence of which were:
(1) Is the appellant entitled to receive LTD benefits under the policy after electing to proceed with a civil action?
(2) If question 1 is answered in the affirmative, are the appellant's LTD benefits subject to an offset of the amount of the Workplace Safety and Insurance Board benefits that he would have received had he not elected to proceed with a civil action?
[9] The motions judge decided that the appellant was not entitled to receive any LTD benefits and that the second question did not need to be answered. The appellant appeals the judge's disposition of the questions.
[10] I would answer both questions in the affirmative.
Article 4 of the LTD plan
[11] Before discussing and resolving the questions, it is important to first examine the relevant portions of Article 4 of the LTD plan. The case turns on the interpretation of this Article which provides in part:
The amount of Monthly Benefit payable to the Employee shall be reduced by any payment to which the disabled Employee is entitled for that month:
(a) for loss of time under any Workers' Compensation Act other than amounts received for medical expenses and prosthetic appliances, or under a comparable legislative or insurance provision;
(b) under the disability benefit provisions of the Canada or Quebec Pension Plan, excluding any benefit that the Employee is entitled to receive for dependent children; [page601]
A disabled Employee, in order to receive benefits under this Plan must make application for any disability payments for which he may be eligible under any Workers' Compensation Act or comparable legislative or insurance provision or under the Canada or Quebec Pension Plan, and any other benefits for which he may be eligible under (c) or (d) above, and until the amount of those payments has been established the Administrator reserves the right to make the reductions described above on the basis of the estimated amount of those payments. Such estimated amounts must be mutually satisfactory to the City Treasurer of the Employer and the Administrator. When the amount of such disability benefits has been established, the Administrator will adjust the reductions previously made to correct the amount.
(Underlining added)
[12] The parties are agreed that in interpreting Article 4, ambiguities must be resolved in favour of the insured and not the insurer (the contra proferentem rule), coverage provisions should be construed broadly and exclusion clauses should be interpreted narrowly, and effect should be given to the reasonable expectations of the parties. I do not find it necessary to resort to any of these principles as I find the ordinary meaning of the policy's language to be clear and logical.
Question One: Is the Appellant Entitled to Receive LTD Benefits Under the Policy After Electing to Proceed With a Civil Action?
[13] Article 4 of the LTD plan stipulates a condition precedent for the receipt of any benefits under the plan. It provides, "A disabled Employee, in order to receive benefits under this Plan must make application for any disability payments for which he may be eligible under any Workers' Compensation Act" (underlining added). The first question is whether this condition precedent is satisfied here.
[14] The appellant did make an application to the WSIB for benefits. That application remains before the WSIB and is being processed according to the Act. Section 30 of the Act contemplates an application for WSIB benefits made by a worker who is also entitled to commence an action in respect of an injury or disease against a third party who is not the worker's employer. Although the appellant's application is being processed by the WSIB in accordance with that section, he was deemed to have elected to commence an action rather than receive WSIB benefits.
[15] Section 30(14) provides for the following rules to apply when a worker elects to commence an action instead of claiming benefits under the insurance plan: [page602]
The worker or survivor is entitled to receive benefits under the insurance plan to the extent that, in a judgment in the action, the worker or survivor is awarded less than the amount described in paragraph 3.
If the worker or survivor settles the action and the Board approves the settlement before it is made, the worker or survivor is entitled to receive benefits under the insurance plan to the extent that the amount of the settlement is less than the amount described in paragraph 3.
For the purposes of paragraphs 1 and 2, the amount is the cost to the Board of the benefits that would have been provided under the plan to the worker or survivor, if the worker or survivor had elected to claim benefits under the plan instead of commencing the action.
[16] As can be seen, the appellant's application to the WSIB for benefits has not been finally determined. Depending on the amount of damages he obtains in his action, the application he has made may still result in the payment of WSIB benefits to him.
[17] As the appellant made an application to the WSIB and that application remains before it, the condition precedent has been satisfied. I would answer the first question in the affirmative -- the plaintiff is eligible to receive LTD benefits under the policy.
Question Two: Are the Appellant's LTD Benefits Subject to an Offset of the Amount of the WSIB Benefits that He Would Have Received Had He Not Elected to Proceed With a Civil Action?
[18] Article 4 of the LTD plan also provides that the amount of the monthly benefit payable to the appellant "shall be reduced by any payment to which the disabled Employee is entitled for that month" (underlining added).
[19] As the motions judge noted, in Madill v. Chu, 1976 32 (SCC), [1977] 2 S.C.R. 400, [1976] S.C.J. No. 77, the Supreme Court of Canada determined that the phrase "entitled to receive benefits" means that an insurer is entitled to reduce benefits on satisfactory proof that the insured could have successfully claimed the benefit whether or not such claim was actually made. Ritchie J. held, at p. 409 S.C.R., that a worker's "entitlement 'to receive' payments is not dependent upon a formal application for workmen's compensation having been made and approved" (emphasis in original).
[20] Madill v. Chu, supra, as I understand it, stands for the proposition that the amount of reduction of payments under the plan for WSIB benefits which the appellant is "entitled to receive" is not the amount of WSIB benefits that the appellant receives but the amount of such benefits that the appellant could have received had he exercised his entitlement for them. In this case, the amount by which the monthly benefit payable to the [page603] employee is reduced "by any payment to which the disabled Employee is entitled for that month" refers to the amount of WSIB benefits to which the appellant would have been entitled had he not elected to proceed with his civil action. This interpretation gives effect to the observation of Ritchie J. in Madill v. Chu, at p. 410 S.C.R., that an insurer's obligation under the policy should not be "varied adversely to its interest after the happening of the event insured against by the independent act of the insured".
[21] On this interpretation, the subsequent language in the Article that allows the Administrator to estimate the amount of reductions, subject to adjustment when the amount of the WSIB benefits has been finally established, refers only to the administrative quantification of the appellant's entitlement to WSIB benefits. It does not refer to the application of ss. 30(14) and (15) of the Act which allow the WSIB to deduct from WSIB payments whatever amount of damages the appellant ultimately receives pursuant to a judgment or settlement of his tort action. Thus, the result of the appellant's tort action would not have the effect of reducing or eliminating the amount of the offset available to Manulife under the Article.
[22] I would answer the second question in the affirmative by concluding that Manulife is entitled to reduce the monthly benefit payable to the appellant under the policy by the amount of WSIB benefits to which he would have been entitled had he not elected to proceed with an action.
Conclusion
[23] I find it unnecessary to consider whether the respondents have any rights of subrogation. Further, whether and to what extent my conclusions in this case would result in double recovery for the appellant would depend on the application of s. 267(2) of the Insurance Act, R.S.O. 1990, c. I.8. That issue is not before us in this appeal.
[24] I would allow the appeal, set aside the order of the motions judge, and replace it with an order that the appellant is eligible to receive LTD benefits under the policy in an amount reduced by the amount of WSIB benefits which he would have received had he not elected to commence an action.
[25] I would fix costs on a partial indemnity scale in the amount of $15,000, inclusive of disbursements and GST.
Appeal allowed in part. [page604]