An insurer cannot rely on its specialized knowledge of jurisprudence to advance an interpretation of the policy that goes beyond the clear words of the policy as understood by an average person.
Released January 27, 2017 | Full Decision [CanLII]
Nova Scotian plaintiff’s jury award exceeded the defendant’s policy limits. The plaintiff claimed the shortfall from his own insurer under his Nova Scotia SEF 44 Family Protection Endorsement. The Nova Scotia SEF44 allows for the deduction of disability benefits from “any policy of insurance providing disability benefits.” The insurer took the position that the SEF 44’s deduction of future disability benefits from “any policy of insurance” applied to Canada Pension Plan (“CPP”) disability benefits.
The issue was whether the CPP disability benefits fall under a “policy of insurance providing disability benefits”. The trial judge ruled that CPP benefits do not fall within the meaning of “any policy of insurance providing disability benefits” and are therefore not deductible. The Nova Scotia Court of Appeal reversed the trial judge’s decision by ruling that CPP benefits are to be treated as disability benefits recoverable under a “policy of insurance” and therefore deductible. The Supreme Court of Canada allowed the appeal by siding with the trial judge and holding that CPP benefits do not form a policy of insurance and are therefore not deductible.
In Ontario, however, s. 7(g) of the OPCF44R allows for the deduction of benefits from “a law or policy of insurance providing disability benefits….” Accordingly, this decision will not apply to Ontario’s OPCF44R scheme. Nevertheless, this decision can be very helpful to Ontario plaintiffs when interpreting insurance contracts.
Writing for the unanimous decision of the Court, Karakatsanis J. held that an insurer cannot rely on its specialized knowledge of the jurisprudence to advance an interpretation that goes beyond the clear words of the policy. An average person applying for the SEF44 would understand the meaning of “policy of insurance” to mean an optional, private insurance contract and not a mandatory statutory scheme such as the CPP. Accordingly, the CPP disability benefits cannot be treated as benefits under a contract of insurance.
According to Karakatsanis J., the words of an insurance contract must be given their ordinary meaning “as they would be understood by the average person applying for insurance, and not as they might be perceived by persons versed in the niceties of insurance law.” The ordinary meaning of a “policy of insurance” is limited to private contracts of insurance between the insured and a private insurance company. An average person would not consider benefits provided under a mandatory statutory scheme to be a private insurance contract. The insurer cannot rely on its specialized knowledge of the jurisprudence to advance an interpretation that goes beyond the clear words of the policy.
Counsel for the Appellant: Derrick J. Kimball and Sharon L. Cochrane
Counsel for the Respondent: Scott R. Campbell and Scott C. Norton, Q.C.
Read the full decision on CanLII