IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20151215

Docket: S126223

Registry:
Vancouver

Between:

George Brugger

Plaintiff

And

The Trustees of the
IWA – Forest Industry Long Term Disability Plan

Defendant

Before:
The Honourable Mr. Justice Ball

Reasons for Judgment

[1]            
The issue in this case is whether, and to what extent, Mr. Brugger is
obliged to repay the benefits he received as a member of the IWA – Forest
Industry Long Term Disability Plan (the “Plan”).

[2]            
Mr. Brugger was injured in a motor vehicle accident on October 18, 2001.
Because of the injuries he sustained, he was totally disabled and began
receiving benefits from the Plan. Mr. Brugger subsequently obtained settlements
in respect of the motor vehicle accident. Based on those settlements, the
Trustees of the Plan now seek repayment of a portion of the benefits that were
paid to Mr. Brugger. The amount sought is $40,383.25, plus interest.

Plan History

[3]            
By way of an Agreement and Declaration of Trust dated June 15, 1982 (the
“Trust Agreement”), and subsequently amended, a trust fund known as the IWA –
Forest Industry Long Term Disability Trust Fund was established (the “Fund”).
The purpose of the Fund is to fund and maintain a plan to provide long term
disability benefits (“LTD Benefits”) for employees employed by participating employers.

[4]            
The Trust Agreement authorized, empowered and directed the Trustees to
establish the IWA – Forest Industry Long Term Disability Plan. The Plan was to
be consistent with the Trust Agreement and was to define the LTD Benefits,
provide the conditions of eligibility for such benefits and contain such other
terms as the Trustees deemed necessary. The Trustees were also provided with discretion
to change, modify or amend the amount of LTD Benefits or the eligibility rules,
retroactively or otherwise.

[5]            
The Trustees, in accordance with the Trust Agreement, established the
Plan.

[6]            
The Plan is a benefit trust. Pursuant to the terms of the Plan, every
employee who becomes “disabled" within the meaning of the Plan and satisfies
certain eligibility conditions is entitled to be paid prescribed LTD benefits.

[7]            
The Plan further provides that, if a disabled employee receives
compensation from a third party or receives a settlement, that person will be
required to repay to the Trustees some or all of the LTD Benefits they were paid
in accordance with the terms of the Plan. “Third Party” is defined as “any
person or persons whose acts or omissions have caused, or are alleged to have
caused, the Disability of the Employee.”

Factual Background

[8]            
Mr. Brugger worked as a millwright for approximately 25 years and at all
material times, he was a member of the Plan. On October 18, 2011, he was
involved in a motor vehicle accident and became totally disabled.

[9]            
From October 19, 2001, to October 18, 2002, Mr. Brugger was paid
approximately $60,320 in short term disability benefits by the Plan.

[10]        
On or about September 23, 2002, Mr. Brugger applied for LTD benefits
payable under the Plan for his disability.

[11]        
As part of Mr. Brugger’s application for benefits, he provided an
executed copy of the Plan’s “Reimbursement Agreement”. By doing so, he agreed
to reimburse the Plan should he recover a settlement from a Third Party in
connection with the same disability for which he was receiving benefits. Mr.
Brugger also completed an “Assignment of Proceeds”, wherein he agreed to assign
all the proceeds of the claims against the Third Party to the Trustees.

[12]        
On October 19, 2002, Mr. Brugger began to receive monthly benefits from
the Plan of $1,800 per month.

[13]        
Mr. Brugger subsequently commenced an action against the driver and the
owner of the vehicle involved in the motor vehicle accident that disabled him
on September 23, 2003. Pursuant to a policy of insurance required by law in
British Columbia, those persons were represented by the Insurance Corporation
of British Columbia (“ICBC”).

[14]        
On September 5, 2008, Mr. Brugger entered into an agreement to settle the
tort claim for the sum of $197,773.36, less the amount paid out for damage to Mr. Brugger’s
vehicle, plus costs on Scale “B” (later settled in the amount of $34,999.27). The
amount represented the policy limits of the motor vehicle defendants’ insurance
policy. The settlement was made on the express understanding that Mr. Brugger
was entitled to bring an underinsured motorist protection program (“UMP”) claim
pursuant to the Insurance (Vehicle) Regulation, B.C. Reg. 447/83, against
ICBC for the balance of his damages beyond the policy limits.

[15]        
Counsel for Mr. Brugger advised the Plan that the tort claim had been
settled and that Mr. Brugger was continuing to advance the UMP claim. Further,
counsel advised the Plan that, as LTD payments were deductible from the UMP
claim, it was Mr. Brugger’s position that there was no sum to be repaid to the Plan.
In addition, counsel advised the Plan that the settlement amount for the tort
claim referred to above contained no payment for wage loss and, as a result, no
sum was repayable to the Plan. Counsel for the Trustees advised Mr. Brugger
that the Plan took the position that a portion of the settlement proceeds were
reimbursable to the Plan in accordance with the terms thereof.

[16]        
On or about March 24, 2009, counsel for Mr. Brugger undertook in writing
that if Mr. Brugger received a settlement after his UMP claim with ICBC, and if
there was any amount owing to the Plan, she would reimburse the plan on Mr.
Brugger’s behalf.

[17]        
On August 1, 2009, as a result of changes in the Plan, the plaintiff’s
monthly LTD benefits were reduced to $647.62 per month.

[18]        
On November 10, 2010, Mr. Brugger’s counsel wrote to counsel for the
Plan, seeking confirmation of the amount of LTD benefits paid to date as well
as any authorities suggesting that these amounts were not fully deductible from
any UMP claim.

[19]        
On December 1, 2010, the Trustees responded enclosing a copy of Dycke
v. ICBC, an arbitration decision confirming that IWA payments are fully
deductible from UMP.

[20]        
On December 8, 2010, the UMP claim was settled for an all-inclusive
amount of $240,000. This settlement included $26,928.43 for costs and
disbursements. The settlement also included a release of any further claims
under Part 7 of the Insurance (Vehicle) Regulation.

[21]        
Effective September 30, 2011, the Trustees stopped providing LTD
payments or health care benefits to Mr. Brugger. On several occasions between
October 2008 and October 2012 Mr. Brugger has advised the Trustees that it is
his position that no LTD benefits are repayable as none of the payments made by
the Trustees were recovered by Mr. Brugger. The Trustees responded on several
occasions that a portion of the LTD benefits were repayable to the Plan.

[22]        
The current proceeding was commenced September 10, 2012, by Mr. Brugger.
Mr. Brugger claimed that the Trustees had, on or about October 2011, wrongfully
terminated Mr. Brugger’s benefits under the Plan. The Trustees counterclaimed
for $40,383.25 plus interest from September 2, 2011, calculated at the rate
required by the Plan, alleging that Mr. Brugger breached the Plan and the reimbursement
agreement.

[23]        
In other parallel proceedings, Mr. Brugger applied for Canada Pension
Plan (“CPP”) total disability benefits, but initially his application was
denied by CPP. He appealed. On May 27, 2014, Mr. Brugger’s appeal of the denial
of his application for CPP disability benefits was allowed. He was awarded CPP
total disability benefits starting April 2009.

[24]        
As the monthly amount payable under the CPP disability pension exceeded the
amount payable under the Plan, Mr. Brugger was no longer entitled to any LTD
benefits from the Trustees. Mr. Brugger has returned to the Trustees the
amounts received from CPP from April 2009 to September 2011, as it is not
disputed that the Trustees were entitled to a return of these amounts. Mr.
Brugger also withdrew his claim in this action.

[25]        
There has never been an adjudicated assessment of the total value of Mr. Brugger’s
claims arising from the motor vehicle accident, as he was able to enter into an
unallocated settlement for both the tort claim and the UMP claim with ICBC.

[26]        
Mr. Brugger’s claim arising from the motor vehicle accident included the
following:

Non-pecuniary damages                              $225,000.00

Past wage loss (net
of 25%)                        $476,841.90

Collateral
benefits paid by IWA                       $16,977.48

Loss of capacity                                          $500,000.00

Rehab expenses
paid by ICBC                       $91,419.68

Special damages                                             $3,452.53

Cost of future care                                      $100,580.00

Sub total                                                  $1,414,271.59

Taxable costs
& disbursements                      $61,927.70

TOTAL CLAIM                                          $1,476,199.20

[27]        
The amounts deductible from the $1,000,000 available in UMP coverage
included the following:

Tort claim paid
by third party insurers           $197,773.36

Short term disability
paid by IWA                    $23,347.96

Long term disability
paid by IWA                   $150,619.00

LTD estimated
payable                                $102,381.00

LTD collateral benefits
paid by IWA                $16,977.48

TTD paid by ICBC                                       $130,865.58

Rehabilitation
expenses paid by ICBC             $91,419.68

CPP estimated
payable                                 $59,400.00

Total deductions
from UMP                          $772,784.06

Remaining UMP                                          $227,215.94

[28]        
After deducting Mr. Brugger’s legal costs from both the tort claim and
the UMP claim, which were $169,978.62, he was left with a net recovery of
$302,794.01.

Analysis

[29]        
The Trustees claim that Mr. Brugger has failed to repay his
reimbursement obligation and the total of $40,383.25 is due and owing by Mr.
Brugger pursuant to the terms of the Plan, the reimbursement agreement and the
assignment of proceeds.

[30]        
Mr. Brugger submits that the clear intention of s. 9 of the Plan and the
reimbursement agreement is to prevent double recovery for wage loss. In this
case, he submits that there can be no double recovery since he was not able to
recover the full amount of his claim because of the limits of the motor vehicle
accident defendants’ insurance and the deductions required under UMP coverage.

[31]        
In particular, Mr. Brugger contends that a significant portion of his
past and future wage loss claims were deducted from the settlement amount. He
says that over $466,000 of what was deducted from the UMP claim was related to
wage loss and thus was not recovered. Since the benefits Mr. Brugger was paid
under the Plan were deducted from the UMP claim, he argues there could be no double
recovery of this amount.

[32]        
However, Mr. Brugger was not required to be fully indemnified for his
wage loss claims in order to trigger his reimbursement obligation. I accept the
Trustees’ submission that this is a subrogation analysis that is not applicable
here, given that the Plan is a benefit trust and not a contract of insurance.

[33]        
A similar argument was rejected in B.C. Marine Industry Standard
Welfare Plan (Trustees of) v. Dizdarevich, 2004 BCSC 696. Mr. Dizdarevich
had been injured in two motor vehicle accidents and subsequently received
benefits under his employment health benefit plan. After Mr. Dizdarevich
commenced actions against the tortfeasors in both accidents, and received
damages, the trustees of the employment health benefit plan sought repayment of
the benefits. In holding that the trustees were entitled to repayment, Ralph J.
stated:

20        I find the decisions
in Audia and in Meek, supra, to be applicable to the
circumstances of the present case. For the reasons set out in those cases, I
conclude that the Plan administered by the trust is not a type of insurance. As
a result, the common law right of subrogation which provides that an insurer is
not subrogated to the insured’s portion of his tort recovery until the insured
is fully indemnified for his loss is not applicable in this case (see Confederation
Life Insurance Co. v. Causton, [1989] B.C.J. No. 1172 (B.C.C.A.)).

[34]        
The same, in my view, applies here. The Trustees were entitled to seek
recovery under the Plan and the reimbursement agreement, even if Mr. Brugger
had not been fully indemnified for his total wage loss: see also British
Columbia Life & Casualty Co. v. Meek, [1999] B.C.J. No. 980 at para. 26
(S.C.), aff’d 2000 BCCA 215.

[35]        
All that was required to trigger the reimbursement obligation was that
Mr. Brugger received a “Settlement” (as defined in the Plan) in relation
to the same disability for which he was receiving LTD benefits under the Plan.
This becomes clear upon examination of the reimbursement agreement and s. 9 of
the Plan.

[36]        
The reimbursement agreement states:

For and in consideration of the payment by the Trustees of
the IWA – Forest Industry LTD Plan (the “Plan”) to me of disability benefits
pursuant to the terms of the plan, I hereby covenant and agree:

(1)        To reimburse the said Trustees to the extent that I
receive duplicate payments for the same injury, disease, or disability through
or under any of the income sources taken into account by the Plan in computing
the amount of disability benefits to which I am entitled; and

(2)        that if I recover a Settlement (as defined in
the “Plan”) from a Third Party in connection with the same disability, to
promptly provide details of such Settlement to the Trustees, and to pay to the
Trustees the amount of Repayable LTD Benefits as determined in Section 9 of the
Plan.

[Emphasis added.]

[37]        
The first part of the reimbursement agreement does refer to “duplicate
payments”, but it is only meant to cover certain types of payments from
specified sources under s. 3.13 of the Plan, such as benefits paid out under
the CPP or the Workers’ Compensation Act. Therefore, only the second
part of the agreement applies to the present case; it only requires the
recovery of a Settlement, from a Third Party, in connection with the same
disability.

[38]        
Settlement is defined in s. 9.2(h) of the Plan, as follows:

“Settlement” means the conclusion of a Disabled
Employee’s claim for monetary compensation against a Third Party and includes:

(iii)       a negotiated settlement (including a structured
settlement) concluded between the Disabled Employee and the Third Party or
between their respective representatives or insurers (including the Insurance
Corporation of British Columbia) on their behalf whether the Third Party admits
or denies liability,

(vi)       any money paid to the Disabled Employee by the
Insurance Corporation of British Columbia pursuant to Section 148.1(2) of the
Revised Regulation (1984) under the Insurance (Motor Vehicle) Act, as amended.

[39]        
Subsection (vi) refers to monetary compensation obtained through UMP
coverage. By including this subsection, the Trustees demonstrated an intention
to include UMP claims, like Mr. Brugger’s, in the reimbursement obligation,
regardless of whether the LTD benefits have been deducted from such claims. In
this context, it is important to note that the Trustees provided counsel for
Mr. Brugger with the Dycke arbitration decision, which says that the
Plan’s LTD benefits are deducted from UMP claims. The Trustees were therefore
aware of the deductions, but still chose to capture those Settlements in the
Plan. It was within their discretion to do so.

[40]        
Mr. Brugger’s tort and UMP settlements therefore clearly fell within the
terms of s. 9.2(h). Further, the settlements related to the same disability
that was the subject of Mr. Brugger’s LTD benefits under the Plan, which were
the injuries sustained in the motor vehicle accident on October 18, 2001.

[41]        
The other portion of s. 9 that is relevant for Mr. Brugger’s reimbursement
obligation is set out in s. 9.4:

9.4       Where pursuant to a Settlement a Disabled Employee
recovers monetary compensation including, but not limited to, compensation
for pain and suffering sustained and loss or damage suffered (including past
and/or future loss of earnings) he or she will:

(a)        as soon as he or she becomes aware that his or
her Settlement has occurred, provide to the Trustees full particulars of the
Settlement (including without limitation, copies of any court reasons for
judgment, court order, settlement agreement, annuity, correspondence or other
documentation which contains details of the Settlement) and shall cooperate
with and assist the Trustees to obtain any and all information and documents
with respect to the Settlement which they may require;

(b)        as soon as he or she is reasonably able to do so,
provide the Trustees with full information as to the legal fees, costs,
disbursements and taxes paid or payable by him or her in order to obtain his or
her Settlement;

(c)        promptly provide the Trustees with such other
information relating to his or her Settlement as the Trustees may require of
him or her, in particular without limiting the generality of the foregoing:

(i) the amount of compensation allocated to each
category of damages, if available;

(iii)       any information in the possession of him or her
or his or her lawyer relating to the value of his or her claim for past wage
loss and future wage loss; and

(iv)       any information which he or she can obtain from
the Third Party or the insurer for the Third Party relating to the value of his
or her claim for past wage loss and future wage loss.

(d)        promptly pay to the Trustees his or her Repayable
LTD Benefits.

(e)        if he or she does not promptly pay the Trustees
his or her Repayable LTD Benefits, the Trustees may charge interest on any such
outstanding Repayable LTD Benefits beginning three (3) months after the date of
the settlement.

[Emphasis added.]

[42]        
The terms of s. 9 are clear. Once Mr. Brugger received a Settlement (or
Settlements) for monetary compensation, whether or not it included an amount
for wage loss, he was required to comply with s. 9.4. The amounts recovered
under each head of damage are immaterial for this purpose. Indeed, s. 9.4(c)(i),
through the use of the phrase “if available”, even explicitly envisions
situations where, as here, the settlement was not allocated among heads of
damages.

[43]        
Mr. Brugger also clearly obtained monetary compensation pursuant to the
Settlements. He received $197,773.36 from the tort claim, plus costs; and he
received $240,000 from the UMP claim.

[44]        
I therefore find that Mr. Brugger had a reimbursement obligation to the
Trustees.

[45]        
Turning to the amount of the reimbursement obligation, Mr. Brugger takes
issue with the fact that the Trustees’ calculation includes Part 7 TTD benefits.

[46]        
Part 7 benefits are no-fault benefits available to an insured who is
injured in a motor vehicle accident, regardless of who caused the accident.
TTD, or total disability benefits are a sub-set of Part 7 benefits that provide
wage loss benefits if the accident prevents the insured from working.

[47]        
The Trustees calculated Mr. Brugger’s Part 7 benefits as $226,195.67. Mr. Brugger
received Part 7 benefits of $128,015.26 on account of TTD benefits for the
period from December 2001 to November 2009. He received TTD benefits at the
rate of $1,303.57 for the next three months up to February 2010. The total
amount received as Part 7 benefits on account of wage loss was $131,926.29. The
TTD benefits amount was then used in the calculation of Mr. Brugger’s reimbursement
obligation.

[48]        
The Trustees submit that TTD benefits properly form part of the
calculation because Mr. Brugger’s UMP settlement deducted, and included a
release of, all future Part 7 benefits. Therefore, the Trustees say that Part 7
benefits form part of Mr. Brugger’s compensation under the settlement.

[49]        
I accept the Trustees’ submissions on this point. Part 7 benefits were
payable by ICBC due to Mr. Brugger’s injuries that were a direct result of the
fault of a third party. The portion of Mr. Brugger’s Part 7 benefits that
reflects compensation for past wage loss (claimed in both the tort settlement
and the UMP settlement) falls under the definition of “Gross Compensation” in
the Plan, which is where the Trustees included them in their calculation.
Consequently, the TTD benefits Mr. Brugger received were appropriately
used to determine the amount of Mr. Brugger’s reimbursement obligation.

[50]        
Mr. Brugger also submits that different formulas have been used, some of
which took into account an UMP policy and some of which did not, resulting in
different calculations of the amount that is repayable. Mr. Brugger submits
that the proper approach is to apply the UMP policy in calculating the “Wage
Loss Recovery” amount. Mr. Brugger argues that the different calculations
demonstrate that the Trustees are exercising their discretion in an unfair and
arbitrary manner in order to maximize their recovery.

[51]        
The Trustees explain the different calculations that were used as an
error. They say that the various calculations they have used cannot override
the clear terms of the UMP policy, which specifies that it is to apply to the “Repayable
LTD Benefits” amount, at the end of the calculation.

[52]        
Under the original terms of the Plan, there is no specific policy for
calculating a member’s reimbursement obligations when their settlement has
arisen through an UMP claim. The UMP policy was passed by the Trustees in order
to reduce a member’s reimbursement obligation in these circumstances in
recognition of the possibility that the member would have received greater
compensation if the third party had a higher insurance limit.

[53]        
The UMP policy states:

The amount the Plan member is
required to repay to the Plan at the conclusion of a third party Settlement be
his Repayable LTD Benefits multiplied by A/B where A is the past wage loss
compensation actually received by the Plan Member and B is the unreduced value
of the Plan Member’s past wage loss claim.

[54]        
The express terms of the policy accord with the Trustees’ submission.
The amount of the member’s Repayable LTD Benefits is first determined (which takes
into account the Wage Loss Recovery amount). That is the end of the calculation
if the member has not had to resort to making an UMP claim, and the member’s
Repayable LTD Benefits amount constitutes the entirety of their reimbursement
obligation. But if the member had to make an UMP claim, then the UMP policy
will apply to their Repayable LTD Benefits amount to reduce their reimbursement
obligation according to the formula provided. Therefore, the UMP policy is clearly
meant to be applied at the end of the calculation.

[55]        
It is also apparent from the operation of the UMP policy and the terms
of the Plan as a whole that the Trustees have not exercised their discretion so
as to maximize their recovery. The purpose of the UMP policy was to reduce the reimbursement
obligations of Plan members who settle with underinsured motorists. Without it,
Mr. Brugger would undoubtedly owe the Plan a much larger sum.

[56]        
Mr. Brugger cannot now say that the UMP policy as it stands operates in
an unfair manner and that it should be applied at a different stage of the
calculation than the one prescribed by the policy itself. These are the terms
that Mr. Brugger agreed to when he began receiving the LTD benefits. He
accepted the benefits of the Plan and must also take its burden: Hwang v.
AXA Pacific Insurance Co., 2001 BCCA 410.

Conclusion

[57]        
Mr. Brugger has a reimbursement obligation, and the Trustees are
entitled to recover a portion of the LTD benefits they paid him as a result of
his injuries. With the TTD benefits included and the UMP policy properly
applied to the end of the calculation, the amount Mr. Brugger owes to the
Trustees is $40,383.25. The Trustees are entitled to judgment in that amount.

[58]        
The Trustees are also entitled to interest on this amount as per s. 9.4
of the Plan from September 2, 2011, in accordance with Court Order Interest
Act, R.S.B.C. 1996, c. 79.

[59]        
Costs will follow the event, with liberty to apply.

“Ball J.”