2010 NBCA 87, 2010 NBCA 87

COURT OF APPEAL OF NEW BRUNSWICK 157-09-CA ECONOMICAL MUTUAL INSURANCE COMPANY APPELLANT ECONOMICAL, COMPAGNIE MUTUELLE D’ASSURANCE APPELANTE - and - - et - GINETTE LAPALME RESPONDENT GINETTE LAPALME INTIMÉE Economical Mutual Insurance Company v. Lapalme, 2010 NBCA 87 Economical, Compagnie Mutuelle d’Assurance c.

Lapalme, 2010 NBCA 87 CORAM: The Honourable Chief Justice Drapeau The Honourable Justice Larlee The Honourable Justice Quigg CORAM : L’honorable juge en chef Drapeau L’honorable juge Larlee L’honorable juge Quigg Appeal from a decision of the Court of Queen’s Bench: November 27, 2009 Appel d’une décision de la Cour du Banc de la Reine : Le 27 novembre 2009 History of Case: Historique de la cause : Decision under appeal: 2009 NBQB 312 Décision frappée d’appel : 2009 NBBR 312 Preliminary or incidental proceedings: Court of Appeal: [2009] N.B.J.

No. 407 Procédures préliminaires ou accessoires : Cour d’appel : [2009] A.N.-B. n o 407 Appeal heard: March 31, 2010 Appel entendu : Le 31 mars 2010 Judgment rendered: December 2, 2010 Jugement rendu : Le 2 décembre 2010

Reasons for judgment by: The Honourable Chief Justice Drapeau Motifs de jugement : L’honorable juge en chef Drapeau Concurred in by: The Honourable Justice Larlee The Honourable Justice Quigg Souscrivent aux motifs : L’honorable juge Larlee L’honorable juge Quigg Counsel at hearing: For the appellant: André G. Richard, Q.C. For the respondent: Stéphane Viola Avocats à l’audience : Pour l’appelante : André G. Richard, c.r. Pour l’intimée : Stéphane Viola THE COURT Through the N.B.E.F.

No. 44 endorsement, automobile insurers carrying on business in this Province provide coverage against losses sustained by an eligible claimant by reason of the fault of an underinsured motorist. While the coverage is excess to all “amounts” actually recovered by an eligible claimant from all sources, when it comes to “amounts” the eligible claimant has not actually recovered but is entitled to recover, the coverage is only excess to those “amounts” provided by a finite number of specified sources.

Under Clause 2 (“Insuring agreement”) of the NBEF 44, the insurer undertakes, subject to the endorsement’s other terms and conditions, to indemnify each eligible claimant for the compensatory damages he or she “is” legally entitled to recover from an inadequately insured motorist. In Somersall v.

Friedman , the Supreme Court of Canada, by a majority, held the date of the motor vehicle accident giving rise to the underlying losses was the relevant date for the determination of legal entitlement to recover against the underinsured motorist for the purposes of Clause 2 under an SEF 44 endorsement.While there is no material difference between the pertinent provisions of the NBEF 44 and the SEF 44, that insured-favouring ruling is specific to Clause 2, and does not inform the

interpretation of Clause 4 (“Amount Payable Per Eligible Claimant”), which provides the formula to quantify the amount payable by the NBEF 44 insurer. By that formula, the aggregate of the amounts actually recovered by the eligible claimant from all sources and LA COUR Par l’intermédiaire de l’avenant F.A.N.-B. n o 44, l’assureur automobile qui fait affaire dans notre province fournit une garantie contre les pertes que subit un demandeur admissible par la faute d’un automobiliste sous-assuré.

Bien que la garantie soit complémentaire aux « sommes » que le demandeur admissible recouvre effectivement de toutes les sources, lorsqu’il s’agit des « sommes » que le demandeur admissible n’a pas effectivement recouvrées mais est en droit de recouvrer, la garantie est complémentaire aux seules « sommes » provenant d’un nombre fini de sources expressément mentionnées.

Aux termes de la clause 2 (« Nature et étendue de l’assurance ») de l’avenant F.A.N.-B. n o 44, l’assureur s’engage, sous réserve des autres conditions de l’avenant, à indemniser tout demandeur admissible des dommages-intérêts compensatoires qu’il « est » en droit de recouvrer d’un automobiliste sous-assuré. Dans l’arrêt Somersall c.

Friedman , la Cour suprême du Canada a, à la majorité, statué que la date de l’accident de véhicule à moteur qui donne lieu aux pertes sous-​jacentes était la date à laquelle il fallait se reporter pour évaluer, pour les fins de la clause 2 d’un avenant SEF 44, le droit de recouvrement auprès de l’automobiliste sous-assuré.

Quoiqu’il n’y ait pas de différences importantes entre les dispositions pertinentes de l’avenant F.A.N.-B. n o 44 et celles de l’avenant SEF 44, cette décision favorable à l’assuré concerne exclusivement la clause 2 et n’éclaire pas l’interprétation de la clause 4 (« Somme payable par demandeur admissible »), laquelle énonce la formule qu’il faut utiliser pour calculer la somme que doit payer l’assureur visé à l’avenant F.A.N.-B. n o 44.

Suivant cette formule, il faut soustraire des dommages-intérêts auxquels est condamné l’automobiliste sous-assuré le total des sommes que le demandeur admissible recouvre effectivement de toutes les sources et des sommes qu’il est en droit de recouvrer de certaines sources précises.

the amounts he or she is entitled to recover from specified sources must be deducted from the amount of damages assessed against the inadequately insured motorist. The wording of Clauses 4 and 5(

b) of the NBEF 44 confirms the relevant date for the assessment of those damages and the quantification of the deductions identified in Clause 4 is the date of adjudication of the amount payable by the insurer. Clause 4(b)(vii), which provides for the deduction of amounts that an eligible claimant has not actually recovered but is nonetheless entitled to recover under “any policy of insurance providing disability benefits”, does not capture disability benefits under the Canada Pension Plan . Only actually recovered CPP disability benefits are deductible pursuant to Clause 4. The appeal is allowed, in part. The determination made in first instance is replaced by the following:

(1) Clause 4 of the NBEF 44 requires the deduction of all CPP disability benefits actually recovered by the eligible claimant, Ginette Lapalme, during the period between the accident and adjudication by a judge of the Court of Queen’s Bench of the amount payable to her under the NBEF 44; and

(2) Clause 4 does not, however, provide for any other deduction of CPP disability benefits, including unrecovered pre-adjudication CPP disability benefits Ms. Lapalme is entitled to recover or CPP disability benefits she might be entitled to recover in the future. Le libellé des clauses 4 et 5b) de l’avenant F.A.N.-B. n o 44 confirme que la date pertinente pour l’évaluation de ces dommages-intérêts et le calcul des déductions mentionnées à la clause 4 est la date de la décision qui détermine la somme payable par l’assureur.

La clause 4b)(vii), qui prévoit la déduction de sommes que le demandeur admissible ne recouvre pas effectivement mais qu’il est en droit de recouvrer en vertu d’« un contrat d’assurance prévoyant des prestations pour incapacité », ne s’applique pas aux prestations d’invalidité versées en vertu de la loi intitulée Régime de pensions du Canada . Seules les prestations d’invalidité du RPC que le demandeur a effectivement recouvrées sont déductibles conformément à la clause 4. L’appel est accueilli en partie.

La décision prise en première instance est remplacée par ce qui suit : (1) aux termes de la clause 4 de l’avenant F.A.N.-B. n o 44, toutes les prestations d’invalidité du RPC que la demanderesse admissible, Ginette Lapalme, aura effectivement recouvrées entre le moment de l’accident et celui où un juge de la Cour du Banc de la Reine déterminera la somme qui lui est payable en vertu de l’avenant F.A.N.-B. n o 44 doivent être déduites; et (2) la clause 4 ne prévoit pas, toutefois, la déduction d’autres prestations d’invalidité du RPC, notamment les prestations d’invalidité du RPC qui n’ont pas été recouvrées avant que la somme payable ne soit déterminée mais que M me Lapalme est en droit de recouvrer ou encore les prestations d’invalidité du RPC qu’elle pourrait être en droit de recouvrer à l’avenir.

The judgment of the Court was delivered by DRAPEAU, C.J.N.B. I. Introduction [ 1 ] For several decades now, auto insurers carrying on business in this Province have provided, through an endorsement currently entitled N.B.E.F. No. 44, but previously, and still routinely, called SEF 44, “excess” insurance against losses sustained by their insured (and eligible family members) by reason of the fault of an underinsured motorist.

That optional coverage is neither free nor open-ended, its availability being conditional upon payment of an extra premium and its protective umbrella extending only as far as the terms and conditions of the NBEF 44 permit. Of those terms and conditions, Clauses 2 and 4 are the most significant, at least for our present purposes. [ 2 ] Subject to the NBEF 44’s other provisions, Clause 2 (“Insuring Agreement”) obligates the insurer to indemnify each eligible claimant for the compensatory damages he or she “is” legally entitled to recover from an inadequately insured motorist.

Clause 2 of the NBEF 44 is identical to the clause (Clause 2 of the SEF 44 endorsement) that was at issue in Somersall v. Friedman , 2002 SCC 59 , [2002] 3 S.C.R. 109. In that case, the majority held the date of the motor vehicle accident giving rise to the

underlying losses was the relevant date for the determination, for Clause 2 purposes, of legal entitlement against the underinsured motorist. [ 3 ] Clause 4 (“Amount Payable Per Eligible Claimant”) enunciates the formula to quantify the amount payable by the NBEF 44 insurer: the aggregate of the amounts actually recovered by the eligible claimant from all sources and the amounts that he or she is entitled to recover from specific sources must be deducted from the amount of damages assessed against the inadequately insured motorist.

Clause 4(b)(vii) is at the heart of the present appeal: it provides for the deduction of amounts that an eligible claimant has not actually recovered but is nonetheless entitled to recover under “any policy of insurance providing disability benefits”. While the appellant NBEF 44 insurer, Economical Mutual Insurance Co., and the respondent insured/eligible claimant, Ginette Lapalme, agree Melanson v. Co-operators General Insurance Co. (1997), 1997 CanLII 9540 (NB CA) , 192 N.B.R. (2d) 273, [1997] N.B.J.

No. 364 (C.A.) (QL) correctly holds that actually recovered Canada Pension Plan disability benefits are deductible, they clash over two affiliated questions. [ 4 ] The first is whether the motion judge committed reversible error in determining, on the authority of Melanson v. Co-operators , that Economical’s right to deduct CPP disability benefits did not survive Ms. Lapalme’s amicable settlement of her action in tort against the underinsured motorist. [ 5 ] In first instance and in its written submission on appeal, Economical contended Somersall v.

Friedman ordains the conclusion that both legal entitlement to recover against the inadequately insured motorist (Clause 2) and the amount payable to an eligible claimant (Clause 4) stand to be determined as of the date of the accident. It would follow by extrapolation, so goes the argument, that the present day value, as of the date of the accident, of all amounts recoverable from any source is deductible under Clause 4(b). Two cases are cited in support of that most insurer-favouring

interpretation: MacNeill v. Co-operators Insurance , 2003 PESCAD 9 , [2003] P.E.I.J. No. 30 (QL), and Campbell-MacIsaac v. Deveaux , 2004 NSCA 87 , [2004] N.S.J. No. 250 (QL). [ 6 ] However, at the hearing of the appeal, Economical pressed a far less ambitious case for reversal: (1) the ruling in Melanson v. Co-operators (identifying the date of judgment in the tort action as the crystallization date for Clause 4 purposes) has no application because Ms. Lapalme’s damages have yet to be judicially assessed; and

(2) Clause 4(

b) dictates, if not expressly then by necessary implication, a deduction of all recovered and recoverable CPP disability benefits during the timeframe between the accident and adjudication of the amount payable under the NBEF 44. Benefits that have not actually been recovered, but are recoverable would be deductible pursuant to Clause 4(b)(vii). [ 7 ] In the reasons that follow, I express and seek to substantiate the view that the majority in Somersall v.

Friedman left undetermined the relevant date for the determination of the amount payable to the eligible claimant pursuant to Clause 4, including perforce the date for the application of the deductions-related provisions of Clause 4(b). I also explain why MacNeill v. Co- operators , Campbell-MacIsaac v. Deveaux and Melanson v. Co-operators are distinguishable and, on that basis alone, not determinative of the crystallization date for Clause 4 purposes in the case at bar. As I hope to demonstrate, Economical’s broad understanding of the effect of Somersall v. Friedman is irreconcilable with Clause 5(

b) and several key features of the deductions-related provisions of Clause 4(b). Indeed, if accepted, that understanding would, in my view, entail a major rewrite of those provisions, an outcome the majority in Somersall v. Friedman could not have intended. Finally, I anchor to the wording of Clauses 4 and 5(

b) the conclusion that the timeframe for the application of the deductions-related provisions of Clause 4(

b) is post-accident and that Economical’s right to deduct actually recovered CPP disability benefits continues unabated, despite the settlement of Ms. Lapalme’s action in tort, until adjudication by a judge of the Court of Queen’s Bench of the amount payable under the NBEF 44. [ 8 ] The other controversial interpretative question is whether the motion judge committed reversible error in determining that unrecovered CPP disability benefits are not deductible under Clause 4(b)(vii). Economical relies upon Gignac v. Neufeld , 1999 CanLII 2182 (ON CA) , [1999] O.J. No. 1295 (C.A.) (QL) in support of reversal.

While there may be a more general basis upon which to sustain the motion judge’s determination on point, suffice it say that settled principles of

interpretation lead me to conclude the expression “policy of insurance” in Clause 4(b)(vii) does not encompass the provisions of the Canada Pension Plan , R.S.C. 1985, c. C-8, under which Ms. Lapalme accesses and might be entitled to access disability benefits. As will be seen, I find Gignac v. Neufeld is distinguishable and, therefore, inapplicable to the case at bar. [ 9 ] For the reasons summarized hereinabove and fleshed out in the text that follows, I would allow the appeal, in part, and replace the determination made in first instance with the following:

(1) Clause 4 of the NBEF 44 requires the deduction of all CPP disability benefits actually recovered by Ms. Lapalme during the period between the accident and adjudication by a judge of the Court of Queen’s Bench of the amount payable to her under the NBEF 44; and

(2) Clause 4 does not, however, provide for any other deduction of CPP disability benefits, including unrecovered pre-adjudication CPP disability benefits that Ms. Lapalme is entitled to recover or CPP disability benefits she might be entitled to recover in the future. II. Background

[ 10 ] On September 25, 1997, Ms. Lapalme was injured in a two-vehicle roadway accident. On June 3, 1999, she commenced an action for damages against the driver and the registered owner of the other vehicle. [ 11 ] On September 14, 2001, Ms. Lapalme settled her action in tort with Royal & Sun Alliance Insurance Company of Canada (the insurer of the other vehicle) and the defendants. While Economical was not a party to that action, it nonetheless joined in the minutes of settlement. However, and most importantly, those minutes expressly preserve Economical’s right to litigate the quantum of Ms. Lapalme’s damages.

While the minutes also contain an acknowledgement of Economical’s entitlement to contest Ms.

Lapalme’s allegation that her damages exceed the limit of Third Party Liability coverage under the policy issued for the other vehicle involved in the accident, it is admitted in Economical’s Statement of Defence that this vehicle was an “underinsured motor vehicle”. [ 12 ] That said, the minutes of settlement begin with preambular statements, all worthy of reproduction if only for contextual purposes: WHEREAS a motor vehicle accident occurred in the city of Moncton, New Brunswick, between Ginette Lapalme, operating a motor vehicle registered in the name of Jean Lapalme, and Sandra Young, operating a motor vehicle registered in the name of Richard Young, on September 25, 1997.

AND WHEREAS the vehicles involved in the accident referred to in the preceding paragraph were respectively insured by Economical Mutual Insurance Company for Ginette Lapalme and Royal & Sun Alliance Insurance Company of Canada for Sandra Young. AND WHEREAS the policy of insurance issued by Royal & Sun Alliance Insurance Company of Canada on the vehicle driven by Sandra Young was issued on the basis of a misrepresentation as to the true ownership of the vehicle which was never owned by Richard Young.

AND WHEREAS the policy of insurance issued by Economical Mutual Insurance Company on the vehicle driven by Ginette Lapalme, the spouse of Jean Lapalme owner of the vehicle, also included an [NBEF] 44 – Family Protection Endorsement. AND UPON IT APPEARING THAT Sandra Young was solely at fault for the collision which occurred on September 25, 1997 and the subsequent injuries and damages resulting therefrom. AND UPON IT APPEARING THAT Richard Young is not an owner of the motor vehicle operated by Sandra Young, within the meaning of the word as used in the Motor Vehicle Act of New Brunswick, R.S.N.B. 1973, c.

M-17, and in particular, section 267(1) thereof; AND UPON IT FURTHER APPEARING THAT the total value of Ginette Lapalme’s claim exceeds the

Section A policy limit of the vehicle driven by Sandra Young in the amount of Two Hundred Thousand Dollars ($200,000.00). AND UPON IT FURTHER APPEARING THAT Sandra Young is without personal assets as confirmed by the Statement of Property and Debts (Form 74A) annexed as a

schedule to these Minutes of Settlement. AND UPON IT FURTHER APPEARING THAT Richard Young was never aware that a policy of insurance had been issued under his name as owner of the vehicle driven by his mother Sandra Young who committed the misrepresentation as to the ownership of the vehicle. [ 13 ] As for the body of the minutes of settlement, it features a number of agreements that, like the foregoing acknowledgements and the admissions in the Statement of Defence, will ripple through the process of determination, at trial in the Court of Queen’s Bench, of the amount payable to Ms. Lapalme under Clause 4 of the NBEF 44:

1. Royal & Sun Alliance Insurance Company of Canada, on its own behalf, in contemplation of the provisions of

section 250 of the Insurance Act, R.S.N.B. 1973, c. I-12, and in particular subsection (1) thereof, and on behalf of the defendants, Sandra Young and Richard Young, shall pay to the plaintiff Ginette Lapalme the sum of Two Hundred Thousand Dollars ($200,000.00), plus taxable costs and disbursements in an amount to be agreed upon between the parties within Thirty (30) days of execution of this agreement, and if no agreement is reached, upon taxation before the Clerk of the Court, Judicial District of Moncton, Trial Division; 2. The plaintiff Ginette Lapalme agrees to provide to Economical Mutual Insurance Company, within 6 months of the signing of these Minutes of Settlement, a

summary of Mrs. Lapalme’s total claim, including an actuarial report detailing all past and future losses of pecuniary and non-pecuniary heads of damages, if Economical Mutual Insurance Company deems the later necessary for our negotiations. 3.

The plaintiff Ginette Lapalme agrees that any accrual of interest on Special Damages suffered by herself from the date of the accident to the date of trial will have to be offset (reduced) by the interest that could accrue on the policy limit of Two Hundred Thousand Dollars ($200,000.00) from the date of payment of Royal & Sun Alliance Insurance Company of Canada to the date of trial. 4.

Economical Mutual Insurance Company waives any and all rights of subrogation, pursuant to the [NBEF] 44 – Family Protection Endorsement against the defendants, Sandra Young and Richard Young, or their respective heirs, administrators and assigns, and Royal & Sun Alliance Insurance Company of Canada, for any payments or payments made by it, pursuant to the [NBEF] 44 Endorsement or to the plaintiff Ginette Lapalme. 5.

Despite the payment of Royal & Sun Alliance Insurance Company of Canada, on behalf of Sandra Young, of the policy limit of Two Hundred Thousand Dollars ($200,000.00) to the plaintiff Ginette Lapalme, Economical Mutual Insurance Company will still be entitled to contest the quantum of damages claimed by Ginette Lapalme and/or that it exceeds the policy limit of the insurance policy issued to the defendant Sandra Young. 6.

Economical Mutual Insurance Company consents to the execution and delivery of a Release by the plaintiff Ginette Lapalme in favour of and to the defendants, Sandra Young and Richard Young and Royal & Sun Alliance Insurance Company of Canada, which Release will be in a form suitable to all parties and prepared by the solicitor for the Defendants in conformity with the provisions contained in these Minutes of Settlement. 7.

Economical Mutual Insurance Company consents that the action commenced by the plaintiff Ginette Lapalme under court file number M/C/547/99 be discontinued and that a new action solely against Economical Mutual Insurance Company under the [NBEF] 44 – Family Protection Endorsement be commenced within 15 days of the signing of these Minutes of Settlement. 8.

Furthermore, the plaintiff Ginette Lapalme agrees to proceed to an Examination for Discovery within 45 days of the filing of the Statement of Defence in the new action to be commenced against Economical Mutual Insurance Company under the [NBEF] 44 – Family Protection Endorsement. [ 14 ] In furtherance of paragraph 7 of the minutes, Ms. Lapalme launched the underlying action against Economical on September 25, 2001. In its Statement of Defence, which is dated November 7, 2001, Economical makes the following admissions:

(1) Ms. Lapalme is an “insured person” and an “eligible claimant” within the meaning of the NBEF 44; (2) the NBEF 44 limits are $1,000,000, exclusive of interest and costs, less the aggregate of the Clause 4(b) “amounts”;

(3) Ms. Lapalme was involved in a two- vehicle accident on September 25, 1997; (4) the other vehicle was operated by Sandra Young and owned by Richard Young; (5) the Young vehicle was an “underinsured motor vehicle”;

(6) Economical was invited to participate in the proceedings and negotiations relating to Ms. Lapalme’s action against the Youngs; and (7) on September 14, 2001, Ms. Lapalme, the Youngs, Royal & Sun Alliance and Economical entered into the minutes of settlement, which resolve the action in tort and touch upon issues pertinent to the NBEF 44 action against Economical. [ 15 ] The record is mute on whether Ms. Lapalme provided Economical with a “summary of [her] total claim” within the timeframe set by paragraph 2 of the minutes of settlement.

It is likewise silent on whether she proceeded to an examination for discovery within the deadline set by paragraph 8. [ 16 ] Moreover, no explanation has been provided for the fact that nearly a decade after it was initiated, Ms.

Lapalme’s NBEF 44 action remains un-adjudicated. That said, as the pleadings currently read, neither party is charging the other with blame for that admittedly intolerably long delay . Nor is it alleged in the Statement of Claim that the minutes of settlement crystallize the amounts that go into the computation of the payout pursuant to Clause 4. [ 17 ] Following the accident of September 25, 1997, Ms. Lapalme applied for CPP disability benefits. In April of 1999, her claim was approved, retroactive to January 1998.

More than a decade later, more precisely on September 17, 2009, Economical filed a Notice of Motion seeking the determination of the following questions: 1. Are CPP Benefits, past and future, properly included in the calculation of the “aggregate amount” as set out in paragraph 4(

b) of the [NBEF] 44 Family Protection Endorsement under the SPF #1, Standard Automobile Policy; and 2. Are CPP Benefits, past and future, to be deducted from the amount payable by the Defendant under the terms of the [NBEF] 44 Family Protection Endorsement. [ 18 ] I hasten to point out that Clause 4 does not refer to “past” and “future” benefits or “past” and “future” amounts: what it does is differentiate between amounts actually recovered by the eligible claimant and amounts he or she is entitled to recover.

I also underscore the fact that the deductibility of CPP benefits pursuant to Clause 4 is the sole question at issue in these proceedings : subrogation and/or assignment of rights of action issues – one or both of which may have played a role in shaping the outcome in MacNeill v. Co-operators and Campbell-MacIsaac v. Deveaux – are not in the mix.

Recall that neither issue is raised by the questions articulated in the Notice of Motion giving rise to the present appeal, a state of affairs that may be tied to, inter alia , the apparent inexistence of any right of action for CPP disability benefits under the Canada Pension Plan . As will be shown, MacNeill v. Co- operators and Campbell-MacIsaac v. Deveaux are distinguishable on another basis. [ 19 ] The salient parts of Clause 4(

a) provide that the amount payable under the NBEF 44 to any eligible claimant is to be ascertained by determining the amount of damages the eligible claimant is legally entitled to recover from the inadequately insured motorist and deducting from that amount the aggregate of the amounts referred to in Clause 4(b). Clause 4(

b) stipulates the amount payable under the NBEF 44 is excess to any amount actually recovered by the eligible claimant from any source, while Clause 4(b)(vii) goes on to provide the amount payable under the NBEF 44 is also excess to any amounts the eligible claimant is entitled to recover (whether such entitlement is pursued or not) from any “policy of insurance” providing disability benefits. [ 20 ] On November 27, 2009, a judge of the Court of Queen’s Bench determined that only CPP disability benefits for the period between the accident and the September 14, 2001 minutes of settlement were deductible under Clause 4.

He settled upon that cut-off date by seemingly assimilating the legal effect of the minutes of settlement to that of the judgment of the Court of Queen’s Bench upon which hinged Melanson v. Co-operators ’ ruling respecting crystallization for Clause 4 purposes: The Melanson decision was based on a finding by our Court of Appeal that the amount for which an insured is entitled to recover is determined as arising at the time the judgment is entered against the tortfeasor. […] The decision of our Court of Appeal was followed by the Nova Scotia [Supreme Court] in Doran v.

Commercial Union Assurance of Canada , [2000] N.S.J. No. 24 (QL) . Subsequent to the Melanson decision the Supreme Court of Canada in Somersall v. Friedman , 2002 SCC 59 , [2002] 3 S.C.R. 109 was faced with the issue of the meaning of the phrase “entitled to recover” in the context of

section 2 of the SEF 44 Endorsement. In the course of the decision in that case Mr. Justice Iacobucci found that liability under the Endorsement arises when the tort occurs, regardless of the fact that the amount of damages cannot be determined at that time. From that finding, which obviously suggests deduction of future benefits to be determined, Courts of Appeal in both Prince Edward Island and Nova Scotia have taken Somersall as overruling our Court of Appeal in Melanson by necessary implication: MacNeill v. Co- operators Insurance , 2003 PESCAD 9 and Campbell-MacIsaac v.

Deveaux and Lombard , 2004 NSCA (CanLii). The Court in MacNeill stated as follows: In the face of this analysis from the Supreme Court of Canada, I do not think the decisions in Melanson and Doran can be followed.

Their analyses were founded upon a determination that legal entitlement crystallized only at the time damages were assessed. Given the statements of Iacobucci J. in Somersall v. Friedman et al. , I am unable to accept this view of when legal entitlement crystallizes. Applying the analytical approach approved of in Somersall v. Friedman et al. , MacNeill’s legal entitlement to benefits from the Board crystallized at the time of his accident.

Therefore, there is no basis upon which to distinguish between benefits paid up to the date of any particular judgment of the court and benefits to be paid after the date of that judgment. The legal entitlement to those benefits existed at the date of the accident and encompasses all benefits flowing from the accident. The Court in Campbell-MacIsaac dealing directly with an issue concerning future long term disability payments states as follows: Remembering the objective of the endorsement, the words “entitled to recover” must mean and are intended to include benefits payable to the insured in the future.

The inclusion of the words, in brackets “(whether such entitlement is pursued or not)” immediately after “is entitled to recover” suggests that even if the insured had not pursued the other listed sources of payment by time of trial, the insurer was nonetheless entitled to have such sum ensure to the insurer’s future benefit.

The fact that by their very nature, accident benefits identified as a source under (vi) and long term disability benefits mentioned as a source under (vii) are payable in future, confirm the view that they are caught by the prospective meaning I attach to the words “is entitled to recover” in 4(b). In my view the current position taken by the Courts of Appeal in Nova Scotia and P.E.I., is sound given the result implied by the Supreme Court of Canada in Somersall . It must be recognized however that neither decision was dealing directly with CPP disability payments.

It must also be noted that CPP disability payments are not specifically included in the enumerated heads to which the eligible claimant is entitled to recover under s. 4(

b) of the [NBEF 44] Endorsement. That being said, I am faced with two considerations. First, I am bound by the judgment of our Court of Appeal in Melanson regardless of the persuasive authority of the Courts of Appeal in our sister Maritime Provinces. Second, I can only follow those authorities if I am firstly satisfied that Melanson should be considered as overruled by the observations of the Supreme Court of Canada in Somersall . Somersall does not specifically relate to

section 4 of the SEF 44 [or the NBEF 44] Endorsement. It does not state that Melanson should be considered to be overruled or modified. To the extent that the decision may be taken to change the “crystallization” of entitlement from the date of the tort judgment to the date of the tort, it gives rise to the arguments that all CPP disability payments should be deducted or indeed that no CPP disability payments should be. In any event to this point in our jurisdiction the law in New Brunswick is as is stated in Melanson .

The decision to restate this law as may follow the effect of the judgment of the Supreme Court of Canada in Somersall should rest with our Court of Appeal.

Accordingly, I am bound by the law as stated in Melanson and that the Plaintiff’s CPP disability benefits paid to the date of the minutes of settlement should be deducted from the amount payable to the Plaintiff under the [NBEF 44] Endorsement issued by her insurer, but any payments made subsequent to that date should not. [paras. 6-20] [ 21 ] Economical appeals, with leave, contending the motion judge committed reversible error: (1) in failing to appreciate that Somersall v. Friedman effectively overruled the finding in Melanson v.

Co-operators that the indemnity payable to an eligible claimant under Clause 4 crystallizes at the time judgment is rendered in the tort action; (2) in failing to determine the deductions required by Clause 4(

b) in accordance with the majority’s reasoning in Somersall v. Friedman , which, Economical argues, mandates a

projection into the future, as of the date of the accident, of all amounts recoverable from all sources; (3) in determining that CPP disability benefits are not deductible under Clause 4(b)(vii); and (4) in failing to distinguish Melanson v. Co-operators on the basis that, unlike Ms. Lapalme, the eligible claimant in that case had obtained a judgment in the Court of Queen’s Bench determining the damages he was entitled to recover against the inadequately insured motorist. III. Key Provisions of the NBEF 44 [ 22 ] Clause 2: 2.

INSURING AGREEMENT In consideration of the premium charged and subject to the provisions hereof, it is understood and agreed that the Insurer shall indemnify each eligible claimant for the amount that such eligible claimant is legally entitled to recover from an inadequately insured motorist as compensatory damages in respect of bodily injury or death sustained by an insured person by accident arising out of the use or operation of an automobile. [ 23 ] Clause 4: 4. AMOUNT PAYABLE PER ELIGIBLE CLAIMANT (

a) the amount payable under this endorsement to any eligible claimant shall be ascertained by determining the amount of damages the eligible claimant is legally entitled to recover from the inadequately insured motorist and deducting from that amount the aggregate of the amounts referred to in paragraph 4(

b) but in no event shall the insurer be obligated to pay any amount in excess of the limit of coverage as determined under paragraph 3 of this endorsement. (

b) the amount payable under this endorsement to any eligible claimant is excess to any amount actually recovered by the eligible claimant from any source (other than money payable on death under a policy of insurance) and is excess to any amounts the eligible claimant is entitled to recover (whether such entitlement is pursued or not) from: (

i) the insurers of the inadequately insured motorist, and from bonds, cash deposits or other financial guarantees given on behalf of the inadequately insured motorist; (ii) the insurers of any person jointly liable with the inadequately insured motorist for the damages sustained by an insured person; (iii) the Régie de l’assurance automobile du Québec; (iv) an unsatisfied judgment fund or similar plan or which would have been payable by such fund or plan had this endorsement not been in effect ; (

v) the uninsured automobile coverage of a motor vehicle liability policy; (vi) any automobile accident benefits plan applicable in the jurisdiction in which the accident occurred;

(vii) any policy of insurance providing disability benefits or loss of income benefits or medical expense or rehabilitation benefits; (viii) any Worker’s Compensation Act or similar law of the jurisdiction applicable to the injury or death sustained; (ix) any Family Protection Coverage of a motor vehicle liability policy. IV. Other NBEF 44 provisions [ 24 ] Clause 5: 5. DETERMINATION OF THE AMOUNT AN ELIGIBLE CLAIMANT IS LEGALLY ENTITLED TO RECOVER

a) The amount that an eligible claimant is legally entitled to recover shall be determined in accordance with the procedures set forth for determination of the issues of quantum and liability by the uninsured motorist coverage provisions of the policy.

b) In determining the amount an eligible claimant is legally entitled to recover from the inadequately insured motorist, issues of quantum shall be decided in accordance with the law of the province governing the policy and issues of liability shall be decided in accordance with the law of the place where the accident occurred.

c) In determining any amounts an eligible claimant is legally entitled to recover, no amount shall be included with respect to pre-judgment interest accumulating prior to notice as required by this endorsement.

d) In determining any amounts an eligible claimant is legally entitled to recover, no amount shall be included with respect to punitive, exemplary, aggravated or other damages the award of which is based in whole or in part on the conduct of the inadequately insured motorist or person jointly liable therewith, to the extent that the said damages are not for the purpose of compensating the eligible claimant for actually incurred losses.

e) In determining any amounts an eligible claimant is legally entitled to recover from an inadequately insured motorist as defined in paragraph 1(e)(i), no amount shall be included with respect to costs.

f) No findings of a Court with respect to issues of quantum or liability are binding on the insurer unless the insurer was provided with a reasonable opportunity to participate in those proceedings as a party. [ 25 ] Clause 6: 6. PROCEDURES

a) The following requirements are conditions precedent to the liability of the insurer to the eligible claimant under this endorsement (

i) The eligible claimant shall promptly give written notice, with all available particulars, of any accident involving injury or death to an insured person and of any claim made on account of the accident; (ii) The eligible claimant shall, if so required, provide details of any policies of insurance, other than life insurance, to which the

eligible claimant may have recourse; (iii) The eligible claimant and the insured person shall submit to examination under oath, and shall produce for examination at such reasonable place and time as is designated by the insurer or its representative, all documents in their possession or control that relate to the matters in question, and they shall permit extracts and copies thereof to be made.

b) Where an eligible claimant commences a legal action for damages for bodily injury or death against any other person owning or operating an automobile involved in the accident, a copy of the Writ of Summons or other initiating process shall be delivered or sent by registered mail immediately to the chief agency or head office of the insurer in the province together with particulars of the insurance and loss

c) Every action or proceeding against the insurer for recovery under this endorsement shall be commenced within 12 months from the date upon which the eligible claimant or his legal representatives knew or ought to have known that the quantum of the claims with respect to an insured person exceeded the minimum limits for motor vehicle liability insurance in the jurisdiction in which the accident occurred. No action which is commenced within 2 years of the date of the accident shall be barred by this provision. [ 26 ] Clause 9: 9.

SUBROGATION Where a claim is made under this endorsement, the insurer is subrogated to the rights of the eligible claimant by whom a claim is made, and may maintain an action in the name of that person against the inadequately insured motorist and the persons referred to in paragraph 4(b). [ 27 ] Clause 10: 10.

ASSIGNMENT OF RIGHTS OF ACTION Where a payment is made under this endorsement, the insurer is entitled to receive from the eligible claimant, in consideration thereof, an assignment of all rights of action whether judgment is obtained or not, and the eligible claimant undertakes to cooperate with the insurer, except in a pecuniary way, in the pursuit of any subrogated action or any right of action so assigned. V.

Analysis and Decision [ 28 ] As is well known, the Supreme Court of Canada has repeatedly emphasized that, although effect must be given to unequivocal contractual wording, adhesionary contracts of insurance, such as the NBEF 44, stand to be interpreted “ contra proferentum , or in favour of the insured” where general rules of contract

interpretation fail to resolve the ambiguity at the root of the dispute between the parties: Somersall v. Friedman , at para. 47 and Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada , 2010 SCC 33 , [2010] S.C.J. No. 33 (QL) , at paras. 21-24 . True ambiguities stand to be resolved against the insurer: Canadian National Railway Co. v. Royal and Sun Alliance Insurance Co. of Canada , 2008 SCC 66 , [2008] 3 S.C.R. 453 , at paras. 33 and 73-75 . Correlatively, coverage provisions attract a broad construction, while exclusion clauses are to be read narrowly: Non-Marine Underwriters, Lloyd’s of London v. Scalera , 2000 SCC 24 , [2000] 1 S.C.R. 551 , at para. 70 .

[ 29 ] The NBEF 44 is a carefully drawn document. As such, it needs to be interpreted having regard to what it actually states; courts have no business rewriting the endorsement in favour of either the insurer or the insured unless, of course, a claim of rectification has been pleaded and established, which is not the case here. [ 30 ] Clause 2 (“Insuring Agreement”) is a coverage provision: it sets out the parameters of the insurer’s basic indemnification obligation under the NBEF 44.

Subject to the endorsement’s other provisions, the clause obligates the insurer to indemnify each eligible claimant for the compensatory damages he or she “is” legally entitled to recover from an inadequately insured motorist. In Somersall v. Friedman , the majority applied the insured-favouring principles adumbrated in the preceding paragraph and held the date of the motor vehicle accident giving rise to the underlying losses was the relevant date to determine whether the eligible claimant “is” legally entitled to recover from the inadequately insured motorist.

If there is entitlement at that time, the threshold condition set by Clause 2 is met and any subsequent extinguishment of entitlement is inconsequential. Happily for the eligible claimants in Somersall v. Friedman (and perhaps their lawyers’ insurer), the majority’s

interpretation allowed the continued prosecution of the contested SEF 44 claims. An overarching issue in the present appeal is whether that indisputably insured-favouring

interpretation of Clause 2 brings about the insurer-favouring understanding and application of Clause 4 advocated by Economical . [ 31 ] Clause 4 (“Amount Payable Per Eligible Claimant”) speaks to a matter not explicitly and specifically addressed in Clause 2: the quantification of the indemnity provided under the NBEF 44, a process that requires an assessment of damages followed by a deduction of the aggregate of amounts from collateral sources in accordance with Clause 4’s specifications . This process was not in issue in Somersall v. Friedman . [ 32 ] Clause 4(

a) establishes a two-step formula for the ascertainment of the amount payable under the NBEF 44. [ 33 ] The first step is the determination of the amount of damages the eligible claimant is legally entitled to recover from the inadequately insured motorist. Over the course of the last two decades, the Legislature of this Province has enacted a number of provisions designed to reduce the recovery that an injured party would have otherwise achieved at common law. I have in mind the following sections of the Insurance Act, R.S.N.B. 1973, c.

I-12: s. 265.2(1) (25% presumptive reduction for failure to wear seatbelt assembly); s. 265.3(1) (past loss of income limited to after-tax income); s. 265.4(1) (past loss of income reduced by payments received for loss of income under an enactment, under an income continuation benefit plan or under a sick leave plan); s. 265.5(1) (denial of pre- trial interest on non-pecuniary loss); and s. 265.21 (the conduit for capping at $2,500 non-pecuniary general damages for some fairly serious injuries: Fraser v. Haines , 2008 NBCA 59 , 334 N.B.R. (2d) 182, Larlee J.A. for the Court).

Needless to say, those legislative alterations of the common law have increased the odds that an eligible claimant’s damages will not exceed the limits of insurance available under the at-fault motorist’s insurance policy. The resulting enhanced infrequency of payouts under the NBEF 44 likely goes a long way toward providing an explanation for the relatively modest premiums the endorsement has commanded to date.

My point is simply this: the cost of NBEF 44 coverage ought not to produce insurer-friendly resolutions of ambiguities in the deductions-related provisions of Clause 4. [ 34 ] The second step under Clause 4 involves the deduction of the aggregate of “amounts” from the quantum of damages the eligible claimant is entitled to recover against the inadequately insured motorist. Like standard exclusionary clauses, the deductions-related provisions of Clause 4 are designed to reduce coverage and, as such, ought, as well, to attract a narrow construction.

At any rate, any true ambiguity in their wording must be resolved in favour of the insured, not the insurer: Somersall v. Friedman , at para. 47 , and Non-Marine Underwriters, Lloyd’s of London v. Scalera , at para. 70. [ 35 ] Clause 4(

b) divides the deductible “amounts” into two categories. [ 36 ] The first consists of amounts “actually recovered” by the eligible claimant from “any source”. Only one “actually recovered” amount escapes that all-encompassing deduction requirement: a death-related payout under a policy of insurance. That exception is not in play in the present case. More pertinently, the parties are of the common view that Melanson v.

Co-operators correctly holds that CPP disability benefits actually recovered by an eligible claimant fall within this category and are therefore deductible. [ 37 ] The second category extends to amounts that have not been actually recovered but which the eligible claimant is entitled to recover, whether entitlement is pursued or not. Importantly for the discussion that follows, this category shows the “excess” nature of the NBEF 44 coverage is far from absolute: indeed, rather than targeting any and all sources, this category implicates only the nine sources identified in Clauses 4(b)(

i) to (ix). A reminder of elementary propositions may be timely: rather than resolving genuine ambiguities in the deductions-related provisions of Clause 4(

b) in favour of the insurer on the basis of the NBEF 44’s “excess” objective, it behoves courts to select among the available reasonable

interpretations the one that favours the insured. After all, “it is [the business of the insurers] to see that precision and clarity are attained” (see Halsbury’s Laws of England , 4 th ed., 2003 reissue, Vol. 25, para. 87) and the insurers settled upon wording that makes plain the NBEF 44 is not excess to all benefits from any and all other collateral sources:

when it comes to amounts the eligible claimant is entitled to recover the NBEF 44 is only excess to the amounts from the sources enumerated in Clause 4(b). [ 38 ] By virtue of Clause 4(b)(vii), one of the enumerated sources is “any policy of insurance” providing disability benefits. The present appeal raises two interpretative issues in relation to that clause. [ 39 ] The first interpretative debate pits against one another divergent views that entail markedly different outcomes in terms of potential payout under the NBEF 44. Ms. Lapalme argues Clause 4(

b) does not require the deduction of CPP disability benefits after the settlement of her tort action, while Economical puts forward alternative submissions: first, it draws from Somersall v. Friedman the implicit instruction to deduct an amount equivalent to the present day value, as of the date of the accident, of all recoverable CPP disability benefits; second, it claims, at a minimum, an entitlement to deduct all CPP disability benefits Ms. Lapalme has recovered and is entitled to recover as of adjudication of the amount payable under the NBEF 44. [ 40 ] However, as the panel underscored at the hearing, Somersall v. Friedman does not even attempt an

interpretation of Clause 4, let alone its deductions-related provisions, the focus of the debate in the Supreme Court of Canada being exclusively on Clause 2. Moreover, as mentioned in my introductory remarks, Economical’s broad understanding of the effect of Somersall v. Friedman is disharmonious with several key features of the deductions-related provisions of Clause 4(b).

Indeed, if accepted, that understanding would rewrite those provisions in favour of the insurer. [ 41 ] First, it would render nugatory the “actually recovered” category of deductions: if all deductions stand to be quantified as of the date of the accident there could never be a deduction for an amount actually recovered by the eligible claimant. Yet, Clause 4(

b) explicitly provides for such a deduction. [ 42 ] Second, the underlined words in the phrase “the amount payable under this endorsement to any eligible claimant […] is excess to any amounts the eligible claimant is entitled to recover ( whether such entitlement is pursued or not )” would also become meaningless. I acknowledge that drafters do occasionally resort to superfluous words. I cite by way of example the use of the word “legally” in the phrase “is legally entitled to recover”: being entitled to recover in that context can only mean being legally entitled to recover.

In that regard, it bears recording that the French version of Clause 4 equates “any amounts the eligible claimant is entitled to recover” with “aux sommes qu’il est en droit de recouvrer”. Nevertheless, a s a general rule, contractual

interpretation requires the attribution of meaning to each word employed by the parties (see Art Hauser Centre Board Inc. v. Canadian Union of Public Employees Local No. 882, 2008 SKCA 121 , [2008] S.J. No. 574 (QL) ). Correlatively, every word in a contract is “presumed to have meaning” (see Hanna Collision Repair

(1984) Ltd. v. Insurance Corp. of British Columbia , 2009 BCSC 1200 , [2009] B.C.J. No. 1758 (QL) , Pass Creek Enterprises Ltd. v. Kootenay Custom Log Sort Ltd. , 2003 BCCA 580 , [2003] B.C.J. No. 2508 (QL) , Scanlon v. Castlepoint Development Corp. , 1992 CanLII 7745 (ON CA) , [1992] O.J. No. 2692 (C.A.) (QL) at para. 89 , National Trust Co. v. Mead , 1990 CanLII 73 (SCC) , [1990] 2 S.C.R. 410 , [1990] S.C.J. No. 76 (QL) at para. 26 , and Robichaud et al. v. Pharmacie Acadienne de Beresford Ltée et al., 2008 NBCA 12 , 328 N.B.R. (2d) 205 , at para. 32 ). The drafters of Clause 4(

b) would not have addressed the issue of pursuing entitlement to unrecovered amounts if they intended deductions to be quantified as of the occurrence of the loss-causing accident: needless to say, at that moment, the pursuit of entitlement is hardly a realistic possibility. [ 43 ] Third, any deduction, whether under the first or second category, would not be for “amounts” actually recovered or “amounts” the eligible claimant is entitled to recover, but for the present day value (as of the date of the accident) of those amounts. Clause 4(

b) provides for the deduction of the aggregate of “amounts” actually recovered and “amounts” the eligible claimant is entitled to recover, not the value of those amounts as of a moment previous to their due date. [ 44 ] The second interpretative issue is whether CPP disability benefits that have not been actually recovered may nonetheless qualify for deduction under Clause 4(b)(vii) as “amounts the eligible claimant is entitled to recover [under ...] any policy of insurance providing disability benefits”. In support of an affirmative answer, Economical relies upon Gignac v.

Neufeld , which is reviewed in greater depth at paragraphs 82-88. I do not doubt for a moment that the Ontario Court of Appeal rightly decided the Ontario Legislature intended to cover CPP disability benefits by its resort to the expression “policy of insurance” in the statutory provision at issue in Gignac v. Neufeld . Obviously, that decision, while not binding, would be a formidable ally to Economical should its context and the present one be materially similar. However, the debate in this case is materially dissimilar to the one settled by Gignac v.

Neufeld : the issue here is whether CPP disability benefits are provided under a “policy of insurance” for Clause 4(b)(vii) purposes . If they are not, it will be unnecessary to determine the broader question of whether Clause 4 catches any future disability benefit. The discussion on point will need to take account of the jurisprudence opposed to the recognition of a present enforceable right to future disability benefits. Entitlement to those benefits is invariably conditional upon the insured meeting qualifying conditions which only arise during the future period to which the benefit relates.

On that score, I do wish to draw attention to the following observation in Norwood & Weir, Norwood on Life Insurance Law in Canada , 3 rd ed. (Toronto: Carswell, 2002):

[…] there can be no finding of liability for future disability against the insurer which provides disability insurance coverage, since disability is a matter of proof which remains with the insured to demonstrate from time to time on an ongoing basis. [p. 479] [Emphasis in original.] The ruling in Melanson v. Co-operators confirming the non-deductibility of future disability benefits under Clause 4(

b) is consonant with that statement of the law. A. The minutes of settlement as the cut-off event for the deduction of CPP benefits “actually recovered” [ 45 ] It is common ground that Ms. Lapalme received CPP disability benefits both before and after the execution of the minutes of settlement. As I understand the record, it is also conceded she has received all of the CPP disability benefits to which she is currently entitled. That said, there is no guarantee she will continue to receive those benefits between now and the trial, and thereafter. [ 46 ] As mentioned, Ms.

Lapalme contends this Court’s decision in Melanson v. Co-operators forecloses Economical’s claimed entitlement to a deduction of the CPP disability benefits received post-settlement, a view that prevailed in first instance. For its part, Economical argues in its written submission that Somersall v. Friedman “extinguishes the rationale for any distinction between past and future CPP benefits”. This would be so because the majority in Somersall v. Friedman found “the conditions for an insured’s entitlement under an SEF 44 Endorsement are satisfied at the time the tort occurs”.

Economical goes on to rely upon MacNeill v. Co-operators and Campbell-MacIsaac v. Deveaux for the contention it is entitled to deduct both “past and future” CPP disability benefits. I respectfully disagree with both Ms. Lapalme’s and Economical’s submission. [ 47 ] As underscored at paragraph 18, Clause 4 does not refer to “past” and “future” benefits or “past” and “future” amounts. It differentiates amounts actually recovered by the eligible claimant and amounts he or she is entitled to recover.

C lause 5 of the NBEF 44 (“Determination of the amount an eligible claimant is legally entitled to recover”) provides the general procedural framework for the determination of the amount an eligible claimant is legally entitled to recover from an inadequately insured motorist. [ 48 ] Under Clause 5(a), the amount an eligible claimant is legally entitled to recover stands to be determined in accordance with the procedures for the determination of the issues of quantum and liability set forth in

Section D (uninsured motorist coverage). Those procedures are found in Clause 5 of

Section D (“Determination of Legal Liability and Amount of Damages”) and contemplate two vehicles for the resolution of any disagreement. The first is arbitration, in which case the Arbitration Act , S.N.B. 1992, c. A-10.1 applies. The second is through an action by the eligible claimant against the insurer in the Court of Queen’s Bench of New Brunswick. I note parenthetically that Clause 5(3) of

Section D states an insurer may, in its defence to that action, contest the issue of the legal entitlement of the claimant to recover damages or the amount of damages payable, “only if such issue has not already been determined in a contested action in The Court of Queen’s Bench of New Brunswick”. This provision may need to be read in conjunction with Clause 5(

f) of the NBEF 44 so that the insurer would only be bound by the determinations of the Court of Queen’s Bench with respect to liability and quantum if it was provided a reasonable opportunity to participate in the action as a party. In the case at bar, there has been no determination of the Court of Queen’s Bench with respect to quantum. [ 49 ] In my view, the finding in Melanson v. Co-operators regarding the date of crystallization is tethered to the prior judicial determination of Ms. Melanson’s accident-related damages. Ms.

Lapalme’s damages were not determined by the minutes of settlement and they have yet to be quantified by a judge of the Court of Queen’s Bench. That being so, the crystallization finding in Melanson v. Co-operators is not determinative of the present controversy and a discussion of that finding’s correctness will await a case on all fours. It should go without saying that any debate on point will require close scrutiny of all pertinent NBEF 44 provisions, including, in particular, Clause 5(f), which went unmentioned in Melanson v. Co-operators .

Be that as it may, by the underlying action she launched in the Court of Queen’s Bench, Ms. Lapalme chose the process provided by Clause 5(1)(

c) of

Section D: it will be up to the Court of Queen’s Bench to determine liability and quantum in accordance with the NBEF 44’s terms and conditions. [ 50 ] Clause 5(

b) of the NBEF 44 provides that “[i]n determining the amount an eligible claimant is legally entitled to recover from the inadequately insured motorist, [the issue] of quantum shall be decided in accordance with the law of the province governing the policy”. That law is the law of the Province of New Brunswick. Thus, Clause 4 contemplates the unfolding of a longstanding process applied in metronome-like fashion by the litigation bar and judges of this Province, one that involves the determination of “the amount of damages payable” (see Clause 5(3)(

b) of

Section

D) as of the date of adjudication . In this Province, pecuniary losses incurred prior to adjudication are to be awarded as special damages, while the present day value (as of the date of adjudication) of subsequent pecuniary losses is allowed for pecuniary general damages (see Vincent v. Abu-Bakare , 2003 NBCA 42 , 259 N.B.R. (2d) 66). Special damages must be quantified “down to the time of assessment” (Rule 54.10(1) of the Rules of Court ) while general damages, both pecuniary and non-pecuniary, are quantified as of the time of assessment/adjudication.

With respect to special damages, the foregoing requirement applies in all cases, including those where damages are to be assessed in respect of any continuing

cause of action, repeated breaches of recurring obligations and intermittent breaches of a continuing obligation (see Rule 54.10(1)). [ 51 ] Of course, in this jurisdiction, quantification itself is incomplete without certain deductions for payments from a variety of collateral sources. Thus, for example, no-fault benefits received or available under

Section B are quantified and deducted as of the date of adjudication, as is the case for payments received for “past” loss of income under an enactment or under an income continuation benefit plan, payments received for loss of earning capacity under a policy of disability insurance and payments received under a sick leave plan (see ss. 263(2) and 265.4(1) of the Insurance Act ).

I am unable to find anything in the wording of the NBEF 44 to support the theory that its drafters intended to derogate from the commonly applied approach and to require the decision-maker under Clause 5 to quantify, as of a moment other than adjudication, damages (including the deductions from collateral sources required by statute and at common law) and deductions pursuant to Clause 4.

In fact, the wording of Clause 5(b), read contextually, contradicts that theory. [ 52 ] The right or entitlement to compensatory damages may well have arisen upon the accident’s occurrence, but their quantum stands to be fixed as of the date of adjudication. And, as I have indicated, the minutes of settlement do not purport to amend the NBEF 44 in any related way. [ 53 ] Indeed, the minutes do not record any definitive agreement on the quantum of Ms. Lapalme’s damages, let alone a consensus on the amount payable to her under Clause 4 of the NBEF 44.

Paragraph 5 of the minutes is on point and reads as follows: Despite the payment by Royal & Sun Alliance Insurance Company of Canada, on behalf of Sandra Young, of the policy limit of Two Hundred Thousand Dollars ($200,000.00) to the plaintiff Ginette Lapalme, Economical Mutual Insurance Company will still be entitled to contest the quantum of damages claimed by Ginette Lapalme and/or that it exceeds the policy limit of the insurance policy issued to the defendant Sandra Young. [ 54 ] That being so, I see no basis for the conclusion that CPP disability benefits received after the minutes of settlement are not deductible pursuant of Clause 4.

On that question, I am in substantial agreement with the views expressed by Economical in the following excerpt from its written submission on appeal: [33] The use of the past tense in the wording “amounts actually recovered” must refer to one of three dates: the date of the accident, the date of [settlement], or the date of the [NBEF] 44 judgment. The first of these possibilities is illogical. The purpose of an [NBEF] 44 Endorsement is to indemnify claimants for damages sustained in motor vehicle accidents when the wrongdoer is underinsured ( Somersall at para 17 .).

As such, when the phrase “any amount actually recovered” is read in the context of the entire Endorsement, it can only refer to amounts recovered in relation to the motor vehicle accident. These amounts must therefore be recovered after the accident; it would be nonsensical for the Endorsement to refer to compensation that was recovered with respect to an accident prior to its occurrence. [34] The second possibility, that “amounts actually recovered” refers to the date of [settlement], appears incorrect once it is accepted that the [critical date for entitlement purposes] is the date of the accident.

If the insured’s entitlement under the [NBEF] 44 Endorsement is activated at the time of the accident and is definitely quantified at the date of the [NBEF] 44 judgment, there is no reason to interpret subsection 4(

b) with reference to the date of [settlement]. Rather, a more intuitive reading of subsection 4(

b) would be to assess “amounts actually recovered” at the time of the [NBEF] 44 judgment when the extent of the insurer’s liability under the Endorsement is finally determined. [ 55 ] That brings me to a consideration of the two cases Economical relied upon in its written submission to argue the aggregate of all “past and future” amounts stands to be quantified as of the date of the accident. [ 56 ] In MacNeill v.

Co-operators , the parties applied by stated case for the determination of questions of law regarding the operation of Prince Edward Island’s workers’ compensation legislation with respect to the plaintiff’s SEF 44 claim. Stephen MacNeill was injured when the vehicle he was operating collided with a vehicle operated by Raymond Wright. The vehicle driven by Mr. MacNeill was owned by his employer and insured by Co-operators Insurance through a policy with an SEF 44. Mr. MacNeill sued Mr. Wright in tort and Co-operators for indemnification pursuant to the SEF 44. Upon Mr.

Wright’s death, his estate was added as a party. The Third Party Liability limit under the policy covering the Wright vehicle was $200,000, while Co-operators’

maximum exposure under the SEF 44 stood at $1,000,000. [ 57 ] As the collision occurred in the course of his employment, Mr. MacNeill received workers’ compensation benefits while he recovered from his injuries. Sometime after the accident, the P.E.I. Legislature repealed the workers’ compensation statute then in effect and replaced it with the Workers Compensation Act , R.S.P.E.I. 1988, c. W-7.1.

That Act featured a new provision by which a worker injured in a motor vehicle accident was deemed not to be entitled to benefits under the Act for the purposes of the Insurance Act of Prince Edward Island or for the purposes of any contract of insurance in place on the date of the accident.

Prior to this amendment, SEF 44 insurers were allowed to deduct, pursuant to Clause 4, workers’ compensation benefits. [ 58 ] Co-operators took the position the amendment did not apply retroactively and that it was entitled to deduct not only actually recovered benefits but, as well, the present value of the stream of benefits that might be paid to Mr. MacNeill into the future. For their part, Mr. MacNeill and the Workers Compensation Board contended the new provision applied to the case and, in any event, there could be no deduction under the SEF 44 because Mr.

MacNeill’s damages had yet to be determined and, as a result, he was not “legally entitled to recover” (within the meaning of Clauses 2 and 4) against Mr. Wright’s estate. The Board also asserted a right of subrogation against amounts payable to Mr. MacNeill under the SEF 44. [ 59 ] In first instance, the Court ruled rights under the SEF 44 accrued upon the happening of the accident and, therefore, before the adoption of the new Act , which was not to be applied retroactively.

In the Court’s view, Co-operators could deduct the workers’ compensation payments, including future payments, and neither the SEF 44 nor the Act gave the Board subrogation rights with respect to amounts payable under the SEF 44. [ 60 ] On the Board’s appeal and Mr. MacNeill’s cross-appeal, the judgment in first instance was affirmed.

In the view of the Appeal Division of the Prince Edward Island Supreme Court, the SEF 44 insurer’s right to deduct the worker’s compensation benefits was contained in Clause 4(b)(viii) and included all benefits arising as a result of the accident, which included the future stream of benefits proven to be payable to Mr. MacNeill. The Court’s take on the effect of Somersall v. Friedman lies at the heart of the rationale for that view: […] the analysis of Iacobucci J. in Somersall v.

Friedman regarding the crystallization of the legal entitlement to recover damages is also relevant to, and I think decisive of, the particular issue of whether or not future benefits are included within the amount MacNeil is entitled to recover from the Workers Compensation Board. As noted earlier, the S.E.F. 44 endorsement provides: 4. AMOUNT PAYABLE PER ELIGIBLE CLAIMANT . . . . . (

b) The amount payable under this endorsement to any eligible claimant is excess to any amount actually recovered by the eligible claimant from any source (other than money payable on death under a policy of insurance) and is excess to any amounts the eligible claimant is entitled to recover (whether such entitlement is pursued or not) from: .... (viii) any Worker’s Compensation Act or similar law of the jurisdiction applicable to the injury or death sustained; ... (Emphasis added) The amount payable by the insurer is therefore excess to any amounts MacNeill is “entitled to recover” from the Workers Compensation Board whether or not MacNeill pursues that entitlement.

The references made to the case of Somersall v. Friedman in connection with the first question put to this court are relevant to the second question because the analysis in connection with question 1(

i) was with respect to the meaning of the phrase “legally entitled to recover” in the context of an S.E.F. 44 endorsement. As stated earlier, Iacobucci J. clearly found legal entitlement to recover relates to the time of the actual event giving rise to the claim. The legal entitlement crystallizes as of the date of that event. Such entitlement does not await any determination of quantum of damages or even a determination of whether or not there was an uninsured or underinsured motorist. The legal entitlement comes into being at the time of the accident.

As counsel for the insured pointed out, after all the evidence is in, the quantum of the entitlement may be zero but that does not alter the fact that the legal entitlement crystallizes at the time the event giving

rise to the injury occurs. In the face of this analysis from the Supreme Court of Canada, I do not think the decisions in Melanson and Doran can be followed. Their analyses were founded upon a determination that legal entitlement crystallized only at the time damages were assessed. Given the statements of Iacobucci J. in Somersall v. Friedman , I am unable to accept this view of when legal entitlement crystallizes. Applying the analytical approach approved of in Somersall v. Friedman , MacNeill’s legal entitlement to benefits from the Board crystallized at the time of his accident.

Therefore, there is no basis upon which to distinguish between benefits paid up to the date of any particular judgment of the court and benefits to be paid after the date of that judgment. The legal entitlement to those benefits existed at the date of the accident and encompasses all benefits flowing from the accident.

As a result, the insurer’s right to deduct workers’ compensation benefits payable to injured workers includes the right to deduct the present value of the future stream of workers’ compensation benefits payable to the worker, because the worker is entitled to recover those benefits as of the date of the accident. However, the question put to this court asks about future benefits which “might” be paid as opposed to future benefits that “will” be paid.

There is no question that the onus of proof is on the insurer to prove that there is a future stream of workers’ compensation benefits payable to the injured worker before any deduction can be made for the present value of these benefits. With respect to the issue of the degree of probability required to meet that onus of proof, I agree with the comments of McQuaid J.A. that this matter was not argued before us and so should not be decided at this time.

The answer to the question put to the court is: the insurer may deduct the present value of the future stream of benefits to which the worker has been proven to be entitled. [paras. 56-65] [Emphasis added.] [ 61 ] The Court went on to hold the Board was not entitled to subrogation with respect to amounts payable under the SEF 44, its right of subrogation extending only to Mr. MacNeill’s action against the tortfeasor, Mr. Wright. [ 62 ] In the result, “the present value of the future stream of benefits to which [Mr. MacNeill] has been proven to be entitled” (para. 65) was left undetermined.

The Court also declined to identify the standard of proof applicable to that entitlement. [ 63 ] In Campbell-MacIsaac v. Deveaux , the plaintiff, Dr. Katherine Campbell-MacIsaac, suffered debilitating injuries in a two-vehicle accident in 1995. She had previously procured ample insurance coverage in the event she became disabled and was prevented from practicing her chosen profession, dentistry:

(1) SEF 44 coverage of $2,000,000 with her own automobile insurer, Lombard Insurance Company, which was increased to $6,000,000 pursuant to a Personal Umbrella Liability policy; and (2) a long term disability policy with Canada Life providing monthly benefits of $5,400 (indexed) for as long as she was unable to work as a dentist, whether or not she was able to earn income from another occupation. Dr. Campbell-MacIsaac brought an action for compensation against her SEF 44 insurer, Lombard Insurance Company, and the other driver, Lisa Deveaux. At trial, Ms. Deveaux admitted liability and Dr.

Campbell-MacIsaac’s damages were assessed at $2,714,564.90 (see Campbell-MacIsaac v. Deveaux , 2003 NSSC 111 , [2003] N.S.J. No. 170 (QL), para. 253 ). [ 64 ] Ms. Deveaux’ insurer paid $972,826, the balance of its third party liability limit of $1,000,000. The evidence at trial showed Dr. Campbell-MacIsaac had received $55,720 in

Section B weekly indemnity benefits and $567,514 in LTD benefits; it also established a present value of $79,741 and $1,216,643 for future

Section B weekly indemnity benefits and LTD benefits, respectively. [ 65 ] At trial, Lombard Insurance argued Clause 4 of the SEF 44 provided for the deduction of any amount Dr. Campbell-MacIsaac received for LTD benefits up to the date of trial, and the present value of future LTD benefits. Those arguments were rejected by the trial judge on the basis of the collateral benefits rule (a tortfeasor is not credited with the value of private insurance benefits obtained by the insured/plaintiff through his or her own insurer). Lombard Insurance appealed that rejection, among other decisions rendered at trial.

[ 66 ] The Nova Scotia Court of Appeal found the collateral benefits rule has no application in a case involving a first party contractual dispute between an insured and an insurer and concluded, after reviewing Somersall v. Friedman and MacNeill v. Co- operators, there is no basis upon which to distinguish between benefits paid up to the date of trial and benefits payable post-trial: As 4(

b) makes clear, Lombard’s promise to cover the “amount payable” under the endorsement is considered to be “excess” to whatever amounts are “actually recovered” or might spring from sources from which she is “entitled to recover.” Remembering the objective of the endorsement, the words “entitled to recover” must mean and are intended to include benefits payable to the insured in the future.

The inclusion of the words, in brackets “(whether such entitlement is pursued or not)” immediately after “is entitled to recover” suggests that even if the insured had not pursued the other listed sources of payment by time of trial, the insurer was nonetheless entitled to have such sum enure to the insurer’s future benefit.

The fact that by their very nature, accident benefits identified as a source under (vi) and long term disability benefits mentioned as a source under (vii) are payable in future, confirm the view that they are caught by the prospective meaning I attach to the words “is entitled to recover” in 4(b).

To conclude on this point, leaving aside sums to be set off as falling into the category of “actually recovered” and about which, accordingly, there may be no dispute, I am of the opinion that upon proof of present entitlement, the words “entitled to recover” encompass both benefits payable to the insured in future, and equally to past benefits to which the insured was entitled, but which have not yet been received. Such an

interpretation reflects the excess coverage protection intended by the SEF 44 endorsement for damages not recoverable from the inadequately insured motorist, but not in a way that would enable the plaintiff to obtain a profit or windfall at the insurer’s expense. Any other

interpretation would in my view render meaningless and would not reflect the true intent of the parties when they entered into this contract of insurance. Accordingly, I would direct that the earlier decision of Wright, J., for the Nova Scotia Supreme Court in Doran v. Commercial Union Assurance Co. of Canada (2000), 2000 CanLII 4415 (NS SC) , 182 N.S.R. (2d) 329, decided without benefit of the Supreme Court of Canada’s subsequent decision in Somersall , supra , is wrongly decided and is therefore overruled. Before leaving the question let me say that I share the point made by Webber, J.A., in MacNeill v.

Co-Operators General Insurance Co. , (2003), 2003 PESCAD 9 (CanLII) , 224 D.L.R. (4th) 385 (P.E.I.C.A.) when, in considering the application of the SEF 44 endorsement in that case, she said at para 61: Therefore, there is no basis upon which to distinguish between benefits paid up to the date of any particular judgment of the court and benefits to be paid after the date of that judgment. The legal entitlement to those benefits existed at the date of the accident and encompasses all benefits flowing from the accident. In

summary then, I find that the stream of LTD benefits to which Dr. Campbell-MacIsaac is entitled at the time of judgment, staggered as it is over time, must upon receipt by Dr. Campbell-MacIsaac, be factored to the credit of Lombard in calculating its liability to Dr. Campbell-MacIsaac under the SEF 44 endorsement. [paras. 76-80] [ 67 ] The Court then grappled with the thorny question of giving practical effect to its finding. It discerned significant problems with Lombard Insurance’s suggestion that it be allowed to deduct the present value of future LTD benefits from the award of damages against Ms.

Deveaux: The next question is the mechanism by which that accounting in favour of the SEF 44 insurer ought to be conducted. One method would be to attempt to calculate the present value of future benefits and permit the insurer Lombard to deduct that sum from Dr. Campbell-MacIsaac's total damage award at trial. In my opinion there are problems with such an approach. Under the terms of her contract with Canada Life, Dr. Campbell-MacIsaac is entitled to a future stream of long term disability benefits to age 65 for loss of income due to disability for as long as she continues to meet the policy

definitions and requirements. In her case, by virtue of the “own occupation rider,” Dr. Campbell-MacIsaac's “disability” and therefore entitlement to future benefits is defined as: You are unable to perform the important duties of your regular occupation whether or not this results in a Loss of Earned Income. Thus, Dr. Campbell-MacIsaac's LTD benefits will continue as long as Canada Life is satisfied or, in the event of a dispute between Canada Life and Dr. Campbell-MacIsaac, a court determines, that her condition and on-going disability satisfy the policy requirement.

We were advised at the hearing that this entails an on-going assessment apparently subject to at least semi-annual reviews undertaken by Canada Life officials and its medical advisors.

Thus, while under those circumstances just described, Dr. Campbell-MacIsaac is entitled to a future stream of long term disability benefits, she is by no means entitled to "the present value" of such a stream. Put simply, she would have no right to insist that Canada Life provide her with a cheque representing the present value of her LTD benefits payable to age 65. If Dr. Campbell-MacIsaac has no such immediat

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