Ng v. Cole et al., 2013 ONSC 6588

Ng v. Cole et al.

[Indexed as: Ng v. Cole]

Ontario Reports

Ontario Superior Court of Justice,

Murray J.

October 24, 2013

117 O.R. (3d) 391 | 2013 ONSC 6588

Case Summary

Insurance — Automobile insurance — Statutory accident benefits — Long-term disability insurer denying insured's application for long-term disability ("LTD") benefits — Automobile insurer paying income replacement benefits and claiming reimbursement from LTD insurer on basis of unjust enrichment — Claim dismissed — Automobile insurer not entitled under s. 7 of Statutory Accident Benefits Schedule to deduct value of unpaid LTD benefits from statutory accident benefits — LTD insurer not enriched by automobile insurer's payment of income replacement benefits and automobile insurer suffering no corresponding deprivation or loss — Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, O. Reg. 403/96, s. 7.

The insured suffered injuries in a slip and fall and a motor vehicle accident. His application for long-term disability ("LTD") benefits pursuant to a disability insurance policy with Manulife was denied on the basis that he was not totally disabled. Dominion paid the insured statutory accident benefits, including income replacement benefits, before taking the position that the income replacement benefits were paid mistakenly. The insured sued both insurers and others. Dominion cross-claimed against Manulife, seeking reimbursement of the income replacement benefits paid to the insured on the basis of unjust enrichment. Manulife brought a motion to strike the cross-claim on the basis that it did not set out a valid cause of action.

Held, the motion should be granted.

Pursuant to s. 7 of the Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996 ("SABS"), Dominion was entitled to deduct Manulife LTD payments from income replacement benefits otherwise payable by it only if the insured had been paid LTD or had failed to apply for LTD. The insured had, in fact, applied for LTD and had not received LTD from Manulife. Dominion was not entitled to deduct from payments to the insured the value of unpaid LTD payments applied for and denied. The claim for unjust enrichment failed because Dominion could not establish that Manulife was enriched by Dominion's payment of income replacement benefits. Manulife might or might not be liable to pay the insured pursuant to its LTD policy. Its liability would not be affected by the payment by Dominion of statutory accident benefits to the insured. Dominion suffered no corresponding deprivation or loss. Its liability to pay statutory accident benefits was pursuant to its contract with the insured, the Insurance Act, R.S.O. 1990, c. I.8 and the Regulations thereunder. Finally, there was no unjust retention because there was nothing for Manulife to retain.

Vanderkop v. Personal Insurance Co. of Canada, [2009] O.J. No. 2616, 2009 ONCA 511, 74 C.C.L.I. (4th) 191, 251 O.A.C. 77, 178 A.C.W.S. (3d) 433, consd

Other cases referred to

Aetna Insurance Co. v. Canadian Surety Co., 1994 ABCA 145, [1994] A.J. No. 399, 114 D.L.R. (4th) 577, [1994] 8 W.W.R. 63, 19 Alta. L.R. (3d) 317, 149 A.R. 321, 24 C.C.L.I. (2d) 257, [1994] I.L.R. 1-3119, 48 A.C.W.S. (3d) 413 (C.A.); Aviva Insurance Co. of Canada v. Lombard General Insurance Co. of Canada (2013), 116 O.R. (3d) 161, [2013] O.J. No. 2851, 2013 ONCA 416, 309 O.A.C. 276; Chrappa v. Ohm (1998), 1998 893 (ON CA), 38 O.R. (3d) 651, [1998] O.J. No. 1678, 159 D.L.R. (4th) 215, 109 O.A.C. 102, 33 M.V.R. (3d) 284, 79 A.C.W.S. (3d) 293 (C.A.); Pettkus v. Becker, 1980 22 (SCC), [1980] 2 S.C.R. 834, [1980] S.C.J. No. 103, 117 D.L.R. (3d) 257, 34 N.R. 384, 8 E.T.R. 143, 19 R.F.L. (2d) 165, 6 A.C.W.S. (2d) 263; Rathwell v. Rathwell, 1978 3 (SCC), [1978] 2 S.C.R. 436, [1978] S.C.J. No. 14, 83 D.L.R. (3d) 289, 19 N.R. 91, [1978] 2 W.W.R. 101, 1 E.T.R. 307, 1 R.F.L. (2d) 1, [1978] 1 A.C.W.S. 225; RBC Travel Insurance Co. v. Aviva Canada Ltd., [2006] I.L.R. I-4545 (Ont. C.A.); Sharwood & Co. v. Municipal Financial Corp. (2001), 2001 24066 (ON CA), 53 O.R. (3d) 470, [2001] O.J. No. 927, 197 D.L.R. (4th) 477, 142 O.A.C. 350, 12 B.L.R. (3d) 219, 104 A.C.W.S. (3d) 6 (C.A.); Sorochan v. Sorochan, 1986 23 (SCC), [1986] 2 S.C.R. 38, [1986] S.C.J. No. 46, 29 D.L.R. (4th) 1, 69 N.R. 81, [1986] 5 W.W.R. 289, 46 Alta. L.R. (2d) 97, 74 A.R. 67, [1986] R.D.F. 501, 23 E.T.R. 143, 2 R.F.L. (3d) 225, 39 A.C.W.S. (2d) 347

Statutes referred to

Insurance Act, R.S.O. 1990, c. I.8 [as am.], s. 268(1), (6)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 21.01(b)

Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, O. Reg. 403/96, ss. 7 [as am.], (1) paras. 1(i), (ii), 47(1) [as am.]

Authorities referred to

Maddaugh, Peter D., and John D. McCamus, The Law of Restitution (Aurora, Ont.: Canada Law Book, 1990)

MOTION to strike a cross-claim.

G. Jermane, for defendant Manufacturers Life Insurance Company.

A. Ottaway, for defendant Dominion of Canada General Insurance Company.

Endorsement of MURRAY J.: —

The Motions

1There are two motions before the court.

2The Dominion of Canada General Insurance Company (hereinafter "Dominion") brings a motion for leave to deliver an amended statement of defence. Leave to deliver and file the amended statement of defence was granted on the return of the motion.

3Manufacturers Life Insurance Company, carrying on business as Manulife Financial (hereinafter "Manulife"), brings a motion pursuant to rule 21.01(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to strike out the cross-claim brought against it by the defendant Dominion on the basis that the cross-claim contained in the amended statement of defence does not establish a valid cause of action against Manulife. I reserved my decision on Manulife's motion to strike out the amended cross-claim. The cross-claim is based on unjust enrichment.

4Manulife's motion to strike the amended cross-claim is granted for the reasons set out herein.

The Action

5Le Che Ng, the plaintiff, commenced an action against multiple defendants arising out of a slip and fall accident which occurred in March of 2008 and a motor vehicle accident which occurred in July 2008. The plaintiff asserts that he has been unable to return to his occupation and has and will suffer earnings losses which will continue into the future.

6The plaintiff applied for long-term disability benefits ("LTD") pursuant to a disability insurance policy with Manulife. Manulife denied the plaintiff's claim to long-term disability benefits on the basis that he was not totally disabled and did not qualify for such benefits. As a result, Mr. Ng claims LTD benefits against Manulife, one of the defendants in this action.

7In addition, the plaintiff is suing his insurer Dominion for no-fault statutory accident benefits ("SABs"), in particular for income replacement benefits ("IRBs") and medical/rehabilitation benefits.

8Dominion takes the position in its statement of defence and counterclaim that it has paid all income replacement benefits and medical rehabilitation expenses to which the plaintiff is entitled and denies any obligation to pay additional benefits to the plaintiff. Dominion asserts that it paid a total amount of $44,428 to the plaintiff. In its counterclaim, Dominion asserts that income replacement benefits were paid for a time during which the plaintiff was paid severance pay by his employer and that income replacement benefits (which are to indemnify against lost income) were paid in error under a misapprehension of the facts. Dominion seeks repayment of income replacement benefits against the plaintiff.

The Cross-claim

9Dominion cross-claims against the defendant Manulife for an amount equal to the disability benefits paid to the plaintiff by Dominion for the time during which it asserts that Manulife was obligated to pay disability benefits to the plaintiff pursuant to the plaintiff's LTD coverage. Dominion claims that Manulife has been unjustly enriched by Dominion's payment of income replacement benefits to the plaintiff and that income replacement benefits of $44,028.85 paid to the plaintiff would not have been paid if the plaintiff had received disability benefits which Manulife was under an obligation to pay. In short, Dominion claims

(1) that Manulife had primary responsibility to pay LTD benefits to the plaintiff;

(2) that the obligation of Dominion to pay income replacement benefits should have been reduced by LTD payments made to the plaintiff by Manulife;

(3) that Manulife has been unjustly enriched by its refusal to pay disability benefits to the plaintiff; and

(4) that Manulife is obligated to pay to Dominion the LTD benefits it ought to have paid to the plaintiff.

Analysis

10No-fault benefits are determined under the Insurance Act, R.S.O. 1990, c. I.8 and Regulations. Dominion is the plaintiff's insurer and pursuant to the Insurance Act is obligated to provide to the plaintiff no-fault benefits pursuant to Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96 ("SABS"). Section 7 of Regulation 403/96 provides for income replacement benefits. According to s. 7(1) para. 1(i) of the Regulation, the amount of income replacement benefits paid by the insurer is to be reduced by payments received by the insured under any income continuation benefit plan.

11Section 7(1) paras. 1(i) and (ii) of the SABS reads as follows:

7(1) Despite subsection 6(1) and (5), but subject to subsection 6(2), the weekly amount of an income replacement benefit payable to a person shall be the lesser of the following amounts:

1. The amount determined under subsections 6(1) and (5), reduced by,

i. 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 or under any income continuation benefit plan, and

ii. net weekly payments for loss of income that are not being received by the person but are available to the person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan, unless the person has applied to receive the payments for loss of income.

12Pursuant to s. 7 of SABS, Dominion is entitled to deduct Manulife LTD payments from IRBs otherwise payable by it only if

(a) Mr. Ng has been paid LTD; or

(b) he failed to apply for LTD.

13It is not disputed that Manulife has not paid LTD benefits to the insured and that Mr. Ng has applied for such benefits. Manulife denies that the insured is entitled to receive any disability benefits pursuant to the LTD policy of insurance made available to the insured through his employment. Unpaid LTD benefits cannot be characterized as payments for loss of income received by the insured under an income continuation plan. Pursuant to the plain reading of the Regulation, Dominion is not entitled to deduct from payments to Mr. Ng the value of unpaid LTD payments applied for and denied.

14In Vanderkop v. Personal Insurance Co. of Canada, [2009] O.J. No. 2616, 2009 ONCA 511, the Court of Appeal dealt with the situation where LTD benefits were claimed by an injured employee and denied by the LTD insurer (also Manulife in Vanderkop). Manulife persisted in that denial of benefits by resisting and defending an action by the insured Vanderkop. Eventually, the claim against Manulife was settled. The plaintiff's insurer then sought to reduce the SABS income replacement benefits it was otherwise obligated to pay based on the settlement. The Court of Appeal held that entering into a settlement with Manulife was not the equivalent of abandonment or withdrawal of an application for LTD benefits but merely a compromise of her claim against Manulife. The plaintiff's insurer further argued that the LTD benefits were available to the plaintiff within the meaning of s. 7(1) para. 1(ii) of SABS. The Court of Appeal disagreed with this submission, stating as follows, at paras. 26-27:

IRBs are to be reduced by LTD being received as a result of the accident. The legislation does not entitle Personal to set off hypothetical benefits applied for but refused. Ms Vanderkop was not in receipt of LTD. As Manulife had denied her claim, she cannot be described as entitled to the payment of LTD. That is, LTD was not "available" to her. To treat LTD as being available would effectively oblige an insured to litigate with their collateral benefits insurer, at their own risk and expense, for the benefit and at the discretion of, their accident benefits insurer. In our view, SABS places no such obligation on an insured.

15Based on Vanderkop, Dominion cannot set off against income replacement benefits payable to Mr. Ng any hypothetical LTD benefits applied for but refused by Manulife and Dominion has not done so in this case. Rather, Dominion has paid the income replacement benefits to Mr. Ng and has elected to claim reimbursement of such hypothetical benefits directly from Manulife on the basis of unjust enrichment. There are several problems with this approach.

16The unjust enrichment claim made by Dominion is inconsistent with the decision of the Court of Appeal in Vanderkop. It is also inconsistent with the statutory and regulatory scheme providing no-fault benefits.

17Dominion's cross-claim is against the collateral benefits insurer and thus avoids the problem identified by the Court of Appeal in Vanderkop of obliging an insured to litigate with their collateral benefits insurer, at their own risk and expense, for the benefit and at the discretion of, their accident benefits insurer. However, Dominion's claim for relief is premised on Manulife being liable to pay LTD payments to Mr. Ng by Manulife. Dominion asserts that the collateral benefits insurer Manulife is liable to pay LTD benefits to the insured because it has paid income replacement benefits to the insured. In effect, Dominion asserts that its decision to pay income replacement benefits determines the obligation of Manulife to pay LTD benefits to Mr. Ng. This claim ignores the fact that Manulife is a separate insurer with a separate contract of insurance with separate obligations to the insured to which Dominion is neither a party nor a beneficiary.

18The result sought by Dominion is also inconsistent with s. 7(1) paras. 1(i) and (ii) of SABS, which makes it clear that Dominion is entitled to deduct Manulife LTD payments from IRBs otherwise payable by it only if (a) Mr. Ng has been paid LTD; or (b) he failed to apply for LTD.

19Mr. Ng is covered by the Manulife policy. Manulife has the right to make its own decisions with respect to eligibility of Mr. Ng to receive LTD benefits in accordance with the terms of the policy.

20Section 268(1) and (6) of the Insurance Act are also relied on by Dominion in support of its cross-claim.

21Do these provisions provide a basis for an action by Dominion against Manulife? In RBC Travel Insurance Co. v. Aviva Canada Ltd., [2006] I.L.R. I-4545 (Ont. C.A.), the Court of Appeal affirmed that s. 268(6) of the Insurance Act must be read as making the SAB excess to any other insurance which is, by its own terms, bound to provide first dollar coverage.

22I will now turn to Dominion's claim against Manulife based on unjust enrichment.

23Fairness underlies an unjust enrichment claim.

24Has there been an enrichment?

25The cross-claim of Dominion fails on the first branch of the test.

26Neither has there been a corresponding deprivation or loss.

27Finally, there is no unjust retention because there is nothing for Manulife to retain.

28Manulife's decision not to pay LTD benefits is a decision under a different insurance policy.

29If Mr. Ng is successful in his claim against Manulife for failure to pay LTD benefits and the Manulife contract of insurance provides that it is the first payor, nothing in this decision is intended to stand for the proposition that he is entitled to double recovery for wage loss.

30Furthermore, nothing in this decision is intended to stand for the proposition that Dominion is not entitled to recover from Manulife all or a portion of money paid to him for income replacement benefits.

Conclusion

31The amended cross-claim by Dominion against Manulife does not disclose a cause of action. Manulife's motion brought pursuant to rule 21.01(b) to strike out the cross-claim is granted.

Costs

32Manulife is entitled to its costs. If the parties cannot agree on costs, then I will entertain brief written submissions by Manulife within two weeks of the release of this decision and by Dominion within two weeks after receipt of submissions by Manulife.