Disability Benefits Reduce Uninsured Limits

The Court of Appeal today released its decision in Kosanovic v. Wawanesa Insurance, a copy of which we have attached. The decision involved an interpretation of the former s. 2(1)(b) of Ont. Reg. 676. That regulation deals with “Uninsured Automobile Coverage”. The court ruled that payments received by an injured plaintiff from his own disability carrier reduce the liability of the automobile insurer under the uninsured coverage.

Section 2(1)(b) of the regulation was revoked on July 2, 2003. But when it was in force (as it was at the time of the accident in this case), it provided as follows:

The insurer shall not be liable to make any payment

(b) where a person insured under the contract is entitled to recover money under any valid policy of insurance other than money payable on death, except for the difference between such entitlement and the relevant minimum limits determined under clause (a).

The plaintiff in this case was injured by an unidentified driver. He made a claim against his own insurer, Wawanesa, under his policy’s Uninsured Motorist Coverage. By virtue of s. 2(1)(a) of Ont. Reg. 676, that coverage is limited to $200,000.

The plaintiff Kosanovic had received $102,400 in disability benefits from Great West Life, through a disability policy that he had purchased himself. The auto carrier, Wawanesa, argued that former s. 2(1)(b) required that those disability benefits should be deducted, reducing Wawanesa’s liability to $97,600. The Court of Appeal agreed.

The plaintiff had argued that the “private insurance” exception to the rule against double recovery should apply here. According to that rule, a tortfeasor should not benefit from an injured person’s prudence in taking out his or her own private insurance coverage. However, the Court of Appeal, while acknowledging the existence of this rule, held that in this particular situation, the rule had been overridden by the legislative provision (i.e., s. 2(1)(b) of the regulation).

There was one other finding made by the Court of Appeal that is of some interest. The court noted that Wawanesa would not have been entitled to deduct the GWL disability benefits twice. So, if the plaintiff had asserted a claim for income loss and if the GWL benefits had been deductible from those damages, under s. 267.8(1) 2 of the Insurance Act, as payments “under an income continuation benefit plan”, the benefits would not have been deductible from the uninsured motorist limits under s. 2(1)(b) of the regulation. But the court noted that the GWL benefits “do not meet the statutory criteria for a deduction under s. 267.8(1) 2 of the Act. Mr. Kosanovic did not have to be employed at the time of the accident to receive disability benefits under his policy. The payments to him did not depend on his suffering an income loss and he did not have to prove an income loss to receive them. Because the payments Mr. Kosanovic received from Great West Life cannot be deducted from a tort award they are properly deducted under s. 2(1)(b) of O. Reg. 676 from the minimum policy limits of $200,000 for which Wawanesa is liable.”

Hence, Wawanesa could not deduct the GWL benefits from the income loss damages, so deducting them from its uninsured motorist limits did not produce a double recovery.

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