Deductions from income replacement benefits – Where does it end?
Income replacement benefits are payable by the accident benefits carrier to an insured person who sustains an impairment as a result of an accident, subject to certain conditions. One such condition is that the insured person must suffer a substantial inability to perform the essential tasks of their pre-accident employment (or self-employment, as the case may be) as a result of and within two years of the accident. At the two-year mark, the disability test changes to require the insured person to suffer a complete inability to engage in any employment or self-employment for which she or he is reasonable suited by education, training, or experience.
The Statutory Accident Benefits Schedule outlines how the weekly income replacement benefit is to be calculated. The limit for this weekly benefit is typically $400 per week, but an optional income replacement benefit can be purchased by the policyholder to increase the maximum weekly amount to $600, $800, or $1,000. Importantly, the regulation also sets out what an insurer may deduct from the amount payable as an income replacement benefit, broadly stated as:
Any temporary disability benefits being received by the insured person in respect of a period following the accident and in respect of an impairment that occurred before the accident.
Any other periodic benefit being received by the insured person in respect of a period following the accident and in respect of an impairment that occurred before the accident, if the insured person was receiving that other periodic benefit at the time he or she first qualified for the income replacement or non-earner benefit and, at that time, the other periodic benefit was a temporary disability benefit.
A common situation that arises is when an insured person becomes approved for Canada Pension Plan disability benefits (“CPPD benefits”). Usually, an insured person’s ability to meet the income replacement benefit test also means that they are able to meet the CPPD disability test of “severe and prolonged” disability. By the time the insured person is approved for CPPD benefits, however, that person is likely to have already been in receipt of income replacement benefits for some time. Does that mean that the insured person now has to repay these weekly benefits to the insurer?
Fortunately, the answer is no. The Statutory Accident Benefits Schedule provides that if a person is liable to repay an amount to an insurer, the insurer shall give the person notice of the amount that is required to be repaid. Importantly, subsection 52(3) states:
If the notice required under subsection (2) is not given within 12 months after the payment of the amount that is to be repaid, the person to whom the notice would have been given ceases to be liable to repay the amount unless it was originally paid to the person as a result of wilful misrepresentation or fraud.
In other words, subject to any evidence of wilful misrepresentation or fraud, only 12 months of repayment are recoverable from the date of a repayment notice. The purpose of this provision is not to encourage an insurer to claw back income replacement benefits, but rather to limit the amount they may claw back. See State Farm Mutual Automobile Insurance Company v. Kumuthakumary Kulaveerasingam, 2018 ONFSCDRS 110 (CanLII), and Aviva Insurance Company of Canada v 17-001880, 2017 CanLII 146180 (ON LAT).
Despite the law being clear on this issue of repayment, insurance companies will sometimes issue a notice asking for years’ worth of repayment. When this happens, we encourage you to contact us for legal recourse
