This article, the forth 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.
As a young lawyer 26 years ago I liked to collect and read what I could on long term disability benefits. My obsession landed me at the Supreme Court of Canada’s law library with my young family. My children were looking for dinosaurs and I was looking through the stacks for disability insurance articles. We both had limited success.
In 1996, Marvin Baer prepared a Study Paper on The Legal Aspects Of Long Term Disability Insurance for the Ontario Law Reform Commission. In 1996 long term disability policies were not paying less than 50% of pre-disability earnings, so the current reality is somewhat different. There are now good public policy reasons to rethink clawback provisions in a long term disability policy.
On the issue of priority of Public Compensation Schemes the author, Marvin Baer writes:
"The integration with the most common types of government disability payments (workers' compensation and Canada pension) is well established and accepted by both private insurers and the government. There is no compelling reason to change this system of priority. However, the integration with other forms of government disability payments may be less successful, particularly if the government scheme provides for discretionary payments. In the application of other government schemes, there may be no consistent or settled policy about whether private LTD benefits should be considered a 'collateral source' and if they are taken into account, there may be an obvious inconsistency in the priorities contemplated in the two schemes. Where such inconsistency occurs in the provisions adopted by private insurers, it may be reasonable to ignore both provisions, or by more subtle method of interpretation, allow one insurer's provision to prevail over the other's. However, where a government scheme is involved, the only reasonable solution is to read down the clause in the private LTD policy so that its benefits are not reduced by disability income payable under a government plan which is treated as excess insurance. This approach assumes that not all government schemes will be first-loss insurance. Whether they should be involves issues of public policy that are beyond the scope of this study..."
Sounds familiar—the Canada Disability Benefit is a government plan which should be treated as excess insurance. Isn't that what Minister Qualtrough said in the House of Commons on June 14, 2023?
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