NS Court of Appeal affirms disability plan's right to subrogation and repayment

The Nova Scotia Court of Appeal has upheld the subrogation and repayment rights of the Nova Scotia Association of Health Organizations (NSAHO) Long Term Disability Plan Trust Fund in a personal injury case.

In Nova Scotia Association of Health Organizations Long Term Disability Plan Trust Fund v. Hollis, 2024 NSCA 33, the court dealt with the issue of how long-term disability benefits are managed and reimbursed in cases of third-party compensation.

The trustees of the plan, responsible for administering long-term disability (LTD) benefits to eligible employees, sought to enforce their right to be repaid for benefits issued following a settlement received by Amanda Marie Hollis. Hollis, a registered nurse, had ceased work due to injuries sustained from a malfunctioning amusement park ride and was later compensated in a personal injury settlement.

Despite receiving LTD benefits managed by Manulife Financial on behalf of the Plan, the allocation of Hollis' settlement did not consult the NSAHO, leading to a dispute over the application of the Plan's subrogation provisions. The central issue revolved around whether the application judge correctly applied the Plan’s stipulations for repayment and offset of benefits from third-party compensations.

The judge had previously calculated the amount owed to NSAHO for past benefits, applying a deduction for legal costs and adding taxes, which was not contested in the appeal. The appeal, however, challenged his application of a "puffery" adjustment in determining the settlement's division among different damages, specifically whether the adjustment was properly limited to earnings-related damages or should encompass all resolved claims.

The appellate court confirmed the application judge’s discretion and methodology in applying the "puffery" adjustment, emphasizing the fact-specific nature of such adjustments. The court dismissed NSAHO's appeal, ruling that the application judge had acted within his discretion to achieve a fair compensation calculation under the Plan, which ultimately served justice between the parties based on their contractual rights and obligations.

Through its ruling, the court reaffirmed the contractual framework governing long-term disability benefits and their subrogation rights, providing clarity on the treatment of future compensations and their impact on LTD benefits. The court highlighted the importance of a balanced consideration of contractual obligations and real-world contingencies in resolving disputes over benefits and compensations. The appeal was dismissed, with costs awarded to the respondent.