A Helpful Guide to Understanding the Law Applicable to Insurer Recovery of Statutory Accident Benefit Overpayments
By: Giancarlo Mazzitelli
Income Replacement Benefit Overpayments
The law is far from silent on insurer overpayments. Overpayments occur when an insurer has paid an injured victim for income replacement benefit and the recipient, or insured, receives or double dips on payments.
52. (1) Subject to subsection (3), a person is liable to repay to the insurer,
(a) any benefit described in this Regulation that is paid to the person as a result of an error on the part of the insurer, the insured person or any other person, or as a result of wilful misrepresentation or fraud;
(b) any income replacement or non-earner benefit under Part II that is paid to the person if he or she, or a person in respect of whom the payment was made, was disqualified from receiving the benefit under Part VII; or
(c) any income replacement, non-earner or caregiver benefit under Part II or any benefit under Part IV, to the extent of any payments received by the person that are deductible under this Regulation from the amount of the benefit.
Notice from an insurer is subject to strict limitation and SABS clearly outlines that any notice is subject to a twelve (12) month limitation (from discovery). If the notice is given after the twelve (12) months the recipient or insured ceases to be liable to repay the amount unless the payment was a result of “wilful misrepresentation or fraud.”
(3) If the notice required under subsection (2) is not given within 12 months after the payment of the amount that is to be repaid, the person to whom the notice would have been given ceases to be liable to repay the amount unless it was originally paid to the person as a result of willful misrepresentation or fraud.
The Statutory Accident Benefits Schedule also clearly outlines that an insurer can charge “bank rate” interest on the repayment:
(5) The insurer may charge interest on the outstanding balance of the amount to be repaid for the period starting on the 15th day after the notice is given under subsection (2) and ending on the day repayment is received in full, calculated at the bank rate in effect on the 15th day after the notice under subsection (2) is given.
(6) In subsection (5),
“bank rate” means the bank rate established by the Bank of Canada as the minimum rate at which the Bank of Canada makes short term advances to the banks listed in Schedule I to the Bank Act (Canada).
In the FSCO appeal of Pries v. Economical Mutual Insurance Company where Economical argued they should be able to recover the full amount of the overpayment (16 months). Director Delegate Evans held the decision from FSCO that an insurer can only recover overpayments made within 12 months, and that the recovery is subject to proper notice. In other words, according to Delegate Evans, an insurer may only request twelve (12) month back payment from the date the notice is sent to the insured, assuming notice is proper and compliant. Proper notice is covered in the decision of Intact Insurance Company v. Marianayam, 2016 ONSC 1479 wherein it was stated:
 A payment request notice pursuant to s. 47 should contain: (a) identification of the type of benefit that was overpaid; (b) the payment period for which repayment is sought; and (c) the amount of repayment sought. See Knechtel and Royal & SunAlliance Company of Canada, (FSCO, Arbitrator Sampliner, June 15, 2009); Cromwell v. Liberty Mutual Insurance Co., supra at para. 46. Given that the proper amount of the deduction is sometimes debatable, in my opinion, the amount claimed need not be perfectly correct, but it should be substantially correct.
Proper notice typically requires accurate calculations of the overpayment. Failure to disclose quantum in a notice will typically result in an invalid notice.
It is crucial that you hire a paralegal or lawyer from the onset of your claim. This will minimize the risk of overpayments occurring in the first place.
It is well articulated both in statute and in common law, that the recovery of overpayments are subject to a 12 month limitation, in addition to strict and accurate notice requirements on behalf of the insurer. Exceptions to notice are defined by “willful misrepresentation and or fraud.“