Interpretation of the disability plan must include surrounding circumstances like offset agreements
The Nova Scotia Court of Appeal has ruled that an offset agreement providing for a deduction for part-time income against long-term disability benefits must be included in the interpretation of the long-term disability plan.
In Nova Scotia Public Service Long Term Disability Trust Fund v. Baxendale, 2022 NSCA 6, Baxendale was injured in a motor vehicle accident. Three years after the accident, she worked part time while receiving benefits from the Long-Term Disability (LTD) Plan administered by the Nova Scotia Public Service Long Term Disability Trust Fund (Trustees). These benefits were reduced by 50 per cent of Baxendale’s part-time income. Years later, Baxendale received a settlement of $800,000 for her losses — $360,000 of which was characterized as “loss of future income.”
Due to the subrogation provisions of the plan, Baxendale and the Trustees entered into an offset agreement where she could retain the $360,000 and her LTD benefits would be “reduced until such time as the $360,000, including an amortized rate of return on this sum, had been exhausted. Thereafter, Ms. Baxendale would once again be entitled to long-term disability benefits.” Eventually, Baxendale was paid LTD benefits less the offset as well as a reduction for her part-time income.
Baxendale sued, claiming that the Trustees breached the offset agreement and asserted that she should receive the LTD benefits without deduction for part-time income. The judge agreed and awarded Baxendale “retroactive benefits.”
The Trustees appealed, alleging that both the offset agreement and the plan provided for offset of part-time income against LTD payments.
The appellate court agreed.
In failing to interpret the offset agreement, the judge failed to consider the surrounding circumstances which disclosed that the offset included a deduction for part-time income when calculating the LTD amounts payable, said the court. Thus, the appeal was allowed.