Mazzucco v. Herer et al., 2015 ONSC 7083

Mazzucco v. Herer Signals a “New Era in the Private Insurance Exception”

Released November 16, 2015 | Full Decision [CanLII]

In Mazzucco v. Herer et al. 2015 ONSC 7083, Skarka J. ruled on the deductibility of LTD benefits from the Plaintiff’s loss of income claim, in a situation where ordinarily the “private insurance exception” would apply.  The Plaintiff sustained a stroke during childbirth and commenced a medical negligence action against the physicians and Women’s College Hospital.  The Plaintiff was unable to return to her job as a teacher, and the evidence was that she would be unable to return to work in the future.  She had been in receipt of long-term disability benefits from Sun Life since her stroke.  Her employer, the Dufferin-Peel Catholic School Board, was the policyholder and paid the premiums for her LTD coverage.  The LTD coverage was provided to Ms. Mazzuco in her collective agreement with the school board.

Justice Skarka’s ruling that the LTD benefits were deductible from her loss of income award marks a surprising shift away from the “private insurance exception” to the deductibility of collateral benefits.

The private insurance exception provides that where plaintiffs have contributed toward payment for their long-term disability coverage, the defendant does not get the benefit of the deduction of those long-term disability or other income indemnity payment in the calculation of the plaintiff’s  loss of income award.  As the Supreme Court of Canada wrote in Cunningham v. Wheeler [1994] 1 S.C.R. 359 and Ratych v. Bloomer [1990] 1 S.C.R. 940, the private insurance exception is triggered where the benefits formed part of the individual’s wage package associated with their employment; evidence confirming that the benefits formed part of their wage package include the provisions of the collective agreement or the direct payroll deductions.

Justice Skarka relied on IBM Canada Limited v. Waterman [2013] S.C.C. 70, where Justice Cromwell wrote that in regards to the private insurance exception “there is room in the analysis of the deduction issue for broader policy considerations.”  Justice Skarka ruled that evidence of Ms. Mazzucco’s collective agreement was no longer determinative of the issue of the deductibility of her LTD benefits from the income loss award.  Instead, policy considerations required an examination of which entity, in fact, was paying for the LTD benefit.  Justice Mazzucco focused on the fact that the employer – the school board – was a provincial entity, funded by the taxpayer.  The Defendant Hospital, as well, was a provincial agency funded by the Ontario taxpayer.  On this analysis, it was the Ontario taxpayer that was indirectly paying for Ms. Mazzucco’s LTD benefits.  Although the Defendant Hospital did not pay anything towards Ms. Mazzucco’s LTD payments, Justice Skarka nevertheless found that she “is in reality getting double recovery from agencies funded by the Ontario taxpayer” in an environment where “the public purse” was already “overburdened.”

Justice Skarka noted that “a new era has begun regarding the private insurance exception”.  The decision is a novel one, and shows a creative and policy-driven shift away from the principle that allows individuals with private insurance to claim the gross amount of their income loss awards.