Disability Insurance Information

Clawbacks Series Part 5 - The Most Disappointing Insurance Clawback

This article, the fifth in a series about insurance clawbacks, was written by Steven Muller, Vice President Litigation at Share Lawyers. Click here to read the rest of the series.

It is strange that we accept the concept in Canada that a child can sue if their parent has been wronged in a tort action (MVA or slip and fall) but we don’t accept a claim by a child where their parent’s long term disability contract claim has been wrongly terminated. I have met many children over the years whose schooling has been sabotaged because of their parent’s disability claim not being paid or even worse—these children just go hungry.

It is far more expensive to be a disabled person in Canada and the cost for a parent being disabled must have an impact on their child. As early as 1966, we as Canadians accepted this truism and adopted the Canada Disability Pension Plan benefit paid to dependent children but unlike the U.S. not for the disabled spouse. This public benefit scheme has been routinely on disability insurers' list of insurance clawbacks.

In June 2003, the Subcommittee on the Status of Persons with Disabilities prepared a report on the CPP(D) Program. The Subcommittee recommended that Parliament enact the necessary amendments to render illegal the offsetting of CPP(D) benefits paid to dependent children of a CPP(D) recipient.

It stated: "We find it very difficult to accept and believe that the setting of premiums for private LTD plans actually consider potential CPP(D) payments to children of CPP(D) beneficiaries. Aside from the fact that these payments represent less than 10% of total CPP(D) payments, the number of dependents among plan members is constantly changing. Hence, we think that it would be very difficult for private insurers to capture the effect of children's benefits in a meaningful way when they are setting premiums for their own plans."

Sadly, nothing happened with this recommendation and just four years later insurers successfully defended a class action on the clawback of CPP(D) dependent benefits. Justice Perell on the public policy issue wrote: "The federal government has not acted on the Subcommittee’s recommendation that an offset of a child’s CPP benefit is illegal, and I do not think it can be said that the Canada Pension Act expressly or implicitly prohibits offsetting the child’s benefit. Declaring offsets illegal is a social policy decision yet to be made by Parliament, assuming it has the constitutional authority to regulate this aspect of insurance law."

So is this all about money, power in balance or does Parliament not care about child poverty if it means less profits for disability insurers? I wish to think if necessary that Canadians would pay just a little bit more in premiums to stop the clawback of monies direct to children of the disabled. It is time for us in Canada to rethink our archaic approach to clawbacks by insurers.

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