Federal Court


Offset represented substantial limitation to Canadian Forces member’s long-term disability coverage

Plaintiff brought class proceeding on behalf of former members of Canadian Forces. Issue concerned legality of Federal Government’s policy of reducing long-term disability (“LTD”) benefits payable to disabled Canadian Forces (“CF”) members under CF Service Income Security Insurance Plan (“SISIP”) Policy by monthly amounts payable to those members under Pension Act (Can.). Preliminary question of law posed was whether Act pension payments were “total monthly income benefits” as described in s. 24(a)(iv) of part III(B) of SISIP Policy. Article 24 of SISIP Policy provides that “The monthly benefit payable at Section 23 shall be reduced by the sum of . . . the total monthly income benefits payable to the member under the Pension Act”. Class argued that Act payments not caught by benefit offset provision since not income replacement. Canada argued that contracting parties intended to offset benefits and, in context of entire scheme, intention manifest in specialized language used. Preliminary question of law determined in favour of plaintiff. SISIP is income replacement scheme intended to replace percentage of CF member’s lost income due to inability to work. Act provides pensions and other benefits to CF members in recognition of Canada’s obligation to compensate CF members disabled or killed in service of Canadians. Act disability benefit payable regardless of whether disabled CF member continues in active service. Monthly benefit payable not income replacement but rather compensation for loss of amenities of life and personal limitations and sacrifices that arise from disabling injuries. Class members not strangers to SISIP Policy. They were beneficiaries to insurance policy and, as such, had legal interest sufficient to have policy enforced and to argue for any interpretation open to contracting parties. CF members have always contributed to cost of SISIP Policy which expressly recognizes their status as insureds. In interpreting insurance contracts, court should look for meaning on basis of reasonable expectations of parties although doctrine of contra proferentem applies. “Income” unnecessary if intention to provide for deduction of Act disability benefits and could not be ignored. Viewed contextually, parties did not intend SISIP offset provision to apply to Act disability benefits. This would wholly deprive disabled veterans of important financial award intended to compensate for disabling injuries suffered in service of Canadians. Issue must also be resolved against Canada on basis of contra proferentem. Offset represented substantial limitation to CF member’s LTD coverage and, in absence of clear language that member’s Act disability pension could be deducted, ambiguity must be resolved in favour of plaintiff.

Manuge v. Canada

(May 1, 2012, F.C., Barnes J., File No. T-463-07) 214 A.C.W.S. (3d) 952 (31 pp.).

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