How do disability benefits effect my ICBC claim?

If a person injured in a motor vehicle accident has access to a short-term or long-term disability plan because of the injuries suffered in the motor vehicle accident this is, generally speaking, a significant advantage.

The advantage is that in most situations ICBC cannot deduct the disability benefits paid when considering settlement on the injury claim. In other words, if the net wage loss is $10,000 and the insured is paid $5,000 in disability benefits, ICBC does not pay $5,000, they pay $10,000.

ICBC is not allowed to deduct disability benefits in situations where the insured pays all or part of the premiums of the disability insurance plan. Also, if there is a right of subrogation (i.e. repayment), on the part of the insurance company, then ICBC cannot deduct the amount of the disability benefit received from the ICBC claim. Further, if the disability plan received through the employer is part of an employment package negotiated on behalf of a union or by the employee, ICBC cannot deduct the disability benefits paid to the insured.

As you can see, in almost every situation, ICBC will not be able to deduct the disability payments because it’s quite easy to fall into one of the three exceptions noted above.

The only downside to having a short-term or long-term disability plan is that ICBC considers the amount of the disability benefits in reducing the amount of Part VII disability benefits they pay. This is because ICBC Part VII benefits are considered secondary insurance. Put another way, the Part VII disability benefits are generally only paid if one does not have other coverage. Thus, an insured should not expect ICBC to be paying wage loss until the end of the claim if there is a short-term or long-term disability plan.

One of the issues that usually arises when an employer or insurance company pays disability benefits is whether or not the employer or insurance company has a right to be repaid the disability benefits. This is called a subrogation claim. Often, the employer or insurance company will want a “reimbursement agreement” so that they can get paid back.

The first question is whether or not the employer or insurance company has a right to ask for reimbursement. The answer lies in the insurance plan that gives rise to the payment of disability benefits.

The second question is how much should one pay the employer or insurance company back? Often they want a reimbursement agreement which says that they get pay back 100% of the disability benefits if the insured recovers any money from ICBC. This type of agreement is usually unfair because if the insured has to go the litigation route and spend money on legal fees, the insured will have to pay back 100% of the disability benefits without receiving 100% recovery in the settlement.

In addition, if there is an issue in the ICBC claim that prevents recovery of 100% of the damages (e.g. liability fight, intervening event, pre-accident health issue, etc..), the employer or insurance company should not get 100% recovery. If they did receive 100% recovery the insured would end up paying money to them out of a settlement which is not part of the money received from ICBC  to compensate for wage loss during the period disability benefits were paid.

In summary, disability benefits are generally not considered in reducing the amount of a settlement with ICBC, but they are considered in any payments by ICBC under Part VII benefits. If the insurance company or employer is looking to get paid back any disability benefits, the insured should be very cautious and only agree to pay them the net amount received from ICBC for the subrogation claim, rather than paying them out of the total settlement.