Tort settlement does not change entitlement to Part 7 disability benefits

Tort settlement’s reduction to long term disability benefits does not affect deductibility from no fault accident benefits.

Insurance law – Accident and sickness insurance – Group insurance – Long term disability benefits – Statutory provisions – Double recovery – Practice – Leave to appeal

Lindblad v. Insurance Corp. of British Columbia, [2020] B.C.J. No. 1738, 2020 BCCA 306, British Columbia Court of Appeal, November 6, 2020, D.C. Harris, G. Dickson and P. Abrioux JJ.A.

The insured was injured in a motor vehicle accident, giving rise to three claims: a tort claim against the other driver, a claim for long term disability (“LTD”) benefits through Great West Life Assurance Company (“GWL”), and a claim for Part 7 no fault benefits through the Insurance Corporation of British Columbia (“ICBC”). This appeal concerned the deductibility of the insured’s LTD benefits from her Part 7 benefits, after her LTD benefits were reduced following settlement of her tort claim.

The insured’s monthly LTD benefits were $2,931.50 until the settlement of her tort claim for the defendant motorist’s available insurance policy limits. GWL then reduced the plaintiff’s monthly LTD benefits to $2,355.08, based on an agreed upon amount of the tort settlement being attributed to compensation for future income loss, and pursuant to the GWL policy providing for a reduction in LTD benefits for other income as a result of the same sickness that caused the plaintiff to be eligible for LTD benefits. ICBC argued that the plaintiff’s entitlement to Part 7 benefits should be calculated based on the plaintiff’s initial LTD benefit amount of $2,931.50, rather than the reduced amount she received after settlement of her tort claim.

Under sections 80 and 81 of the Insurance (Vehicle) Regulation, B.C. Reg. 447/83, ICBC is not required to pay Part 7 disability benefits unless the weekly gross total of other disability compensation payable to the insured is less than 75% of the weekly gross lost earnings of the insured.  In that situation, ICBC is required to pay the lesser of the amount of disability benefits payable under section 80, or the insured’s weekly net lost earnings. ICBC took the position that “gross” total of other disability compensation must refer to the plaintiff’s former entitlement to $2,931.50 in LTD benefits, rather than the post tort settlement amount of $2,355.08.

The Court found in favor of the insured, and held that the lesser amount of $2,355.08 should be used to calculate entitlement to Part 7 disability benefits. Although the insured and GWL reached an agreement on the portion of the tort award allocated to future income loss, there was nothing to indicate that agreement was calculated to prejudice ICBC. The Court rejected ICBC’s argument that using $2,931.50 to calculate Part 7 disability benefits would result in double recovery, as the insured did not receive full compensation for future income loss in her tort claim.

This case was digested by Joe Antifaev, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Joe Antifaev at jantifaev@harpergrey.com.

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