After a collision in St. John’s or anywhere else in Newfoundland and Labrador, money tends to arrive from several places at once. Your own insurer pays Section B. The Canada Pension Plan may pay a disability pension. Your employer’s group plan may pay long-term disability. Then the at-fault driver’s insurer offers a settlement. The question clients ask most is whether those disability benefits get subtracted from the settlement.
Usually, yes. The rest of this post explains which ones, by how much, and where insurers get the math wrong.
The rule behind all of it is the bar on “double recovery.” A personal injury award is meant to put you back where you would have been had the crash not happened. If a disability plan has already replaced your wages for a year, and the at-fault driver’s insurer also pays you that year of wages, you have been paid twice for one loss. Courts will not allow that. So the benefit comes off the award.
Which benefits come off, and how much, depends on the Newfoundland and Labrador statute and on the case law. Those two sources do not always say the same thing, and the details are where settlements are won or lost.
Most Income-Replacement Disability Benefits Are Deducted From a Newfoundland Car Accident Settlement
The starting point is the Insurance Act of Newfoundland and Labrador. Under that Act, most payments you receive for loss of income are deductible from the damages a court would award for the same loss. The defendant pays your net loss, not your gross loss. Some other provinces apply a broader “private insurance” exception. Newfoundland does not.
Section B accident benefits are the clearest example. If your own insurer pays you a weekly indemnity because you cannot work, that amount comes off any wage-loss claim against the at-fault driver. The statute says so. Nobody can contract around it.
Not every benefit is treated the same way, though. The Act distinguishes “indemnity” benefits, which replace a specific loss, from “non-indemnity” benefits, which pay a fixed sum on the happening of an event regardless of what you lost. A fixed lump sum paid because you suffered a particular injury may not be deductible at all. Sorting one from the other is technical, and it is the reason a personal injury lawyer in St. John’s who knows the local decisions changes the outcome. Every dollar wrongly classed as deductible is a dollar off your settlement.
CPP Disability Is Deducted From Future Earnings Loss Only, and Its Future Value Must Be Discounted
CPP Disability benefits were argued over for years. Were they a collateral benefit the defendant could take credit for, or something the plaintiff had earned through contributions and could keep?
The current position is that CPP Disability is deductible from the part of your award that compensates loss of future income capacity. The reasoning is that CPP replaces income, and the tort claim for lost income replaces the same income, so a court allows only one recovery for that loss.
The dispute is over the amount of the deduction. CPP Disability can end if your health improves or if you return to work. Deducting a lifetime of payments up front, as if the pension were guaranteed, overstates the credit. The future value has to be discounted for that contingency, which takes actuarial evidence tied to your actual prognosis. Insurers’ first estimate is rarely discounted enough. We retain our own actuary and put the two calculations side by side.
CPP is not deducted from general damages for pain and suffering, and it is not deducted from the cost of future care. Both heads of damage are unaffected by this rule. Keeping the deduction confined to the wage-loss head, and out of the others, is a large part of the job.
LTD Payments Are Deducted or Repaid, Depending on the Subrogation Clause
Many Newfoundland workers have LTD through their employer. If that plan is paying you after a crash, the payments are usually deductible under the Insurance Act. But the policy wording controls, and many LTD policies carry a subrogation clause.
Subrogation changes who pays whom. Instead of the at-fault insurer taking a credit for what LTD paid, you recover the full wage loss from the at-fault insurer and then repay the LTD carrier out of the settlement. Same arithmetic for the defendant, very different arithmetic for you if nobody has read the clause. Plaintiffs who settle without accounting for a subrogated claim can find themselves owing the LTD carrier money they no longer have.
We handle Newfoundland long-term disability denials and the subrogation claims that follow them. We get the policy, read the clause, and work out whether the LTD payments are a deduction, a repayment, or, in rare cases, neither. Running that analysis before the settlement number is fixed, not after, is what protects the amount you actually keep.
Section B Weekly Indemnity Is Deducted If You Had the Coverage
Newfoundland and Labrador is the only Atlantic province where Section B no-fault coverage is optional. If you bought it, it pays certain medical costs and a weekly indemnity of up to $140 regardless of fault. Because it replaces wages, it is deductible from the wage-loss part of your tort claim. You cannot collect the same $140 a week from your own insurer and from the defendant.
If you did not buy Section B, there is nothing to deduct. That makes the settlement arithmetic simpler, at the cost of having no income support while the lawsuit runs.
When Section B is in play, the at-fault insurer will want proof of what was paid before it closes the file. The process is called “release and assignment.” Errors in that reporting delay closing and can lead to over-deduction, so we reconcile the Section B file against the tort claim ourselves rather than accepting the defence figure.
Lost Wages and the Deductions Are Both Calculated on Net Income
Newfoundland courts calculate lost wages on net income, not gross salary. The question is what you would have taken home after tax and statutory deductions. The same logic applies to the benefit being deducted: the comparison is between net loss and net benefit.
Insurers inflate net deductions in three ways. A defence proposal will sometimes apply the wrong tax bracket, ignore credits you would have claimed, or deduct a gross benefit figure against a net loss figure. Each of those inflates the deduction. We redo the calculation independently and put our own numbers to the defence. If the disability benefit you receive is taxable, that tax liability has to enter the equation too.
The 2026 Statutory Deductible Takes About $5,000 Off Pain and Suffering Awards
Do not confuse benefit deductions with the statutory deductible. Newfoundland and Labrador applies a deductible to every award for non-pecuniary loss, meaning pain and suffering. It is indexed annually and in 2026 sits at approximately $5,000.
If a judge assesses your pain and suffering at $50,000, you receive $45,000. That happens whether or not you are on disability. It is a separate, mandatory reduction that applies to a different head of damage.
Combine the two and the settlement total can look nothing like the take-home amount. Part of our job is to tell you the take-home amount early, so there is no surprise at the end.
The Case Law on Deductions Changes, So the Claim Has to Be Structured Around It
The case law on deductions changes. The Supreme Court of Canada’s decision in Sabean v. Portage La Prairie changed how courts read insurance wording, and the treatment of particular benefits has shifted since. Advice that was right two years ago may be wrong today.
The lawyer decides how to structure the claim across every benefit. We look at CPP, LTD, Section B and your employment contract together and decide how to structure the claim. Sometimes the right move is to hold off settling until a benefit period has ended, so the total deduction is known rather than estimated. Michael B. Murphy, KC, and the team make those calls on every file.
The firm has over 100 reported decisions. That matters here because insurers know which firms will take a deduction dispute to court and which will fold. Work is done on a no win, no fee basis.
Insurers Over-Deduct, So Every Line of the Deduction Schedule Is Checked
The most common mistake unrepresented plaintiffs make is accepting the insurer’s deduction schedule as written. Adjusters are paid to save their employer money, and over-deducting benefits is a quiet way to do it. Deducting a gross benefit where the law allows only net, or deducting a non-indemnity payment as if it were income replacement, can cost thousands.
We audit every line of the defence proposal: which benefit, what period, gross or net, deductible under the Act or not.
We also identify collateral sources that are never deductible. Gifts from family and charitable donations stay with you. Depending on the wording of the Insurance Act, benefits from a policy you paid for entirely yourself may fall under the “private insurance exception.” Those funds are yours.
Section B Is Pleaded in Full, Credited at the End, and Deducted Only If You Applied for It
If you are receiving the standard $140 a week from Section B, here is how it fits. Your Statement of Claim pleads your full gross wage loss. At the end of the case, the Section B payments are subtracted from that figure. The $140 keeps you going in the short term; the at-fault insurer takes the credit later.
Because Section B is optional in Newfoundland, the deduction applies only if you had the coverage and were eligible. One defence tactic: if you had the coverage but never applied, the insurer argues it should still deduct what you could have received. Applying for everything you are entitled to under Section B, on time, closes that argument off.
The St. John’s office deals with Aviva, Intact and RSA on these cross-claims regularly. Whether the case is a motorcycle accident or a car crash, the benefit coordination is the same work.
Deductions Reduce the Settlement but Do Not Remove the Reason to Claim
Whether disability benefits reduce a settlement is rarely a yes or no. It is a calculation built from the Insurance Act, the policy wording, the case law and the tax rules, and the calculation has to be checked before it is accepted.
Deductions should not stop you from claiming. Even after CPP, LTD, Section B and the statutory deductible come off, the tort claim is usually the only route to the difference between what benefits pay and what you actually lost.
The firm has five offices across the Atlantic provinces and over 40 years of practice. Contact the St. John’s office for a free consultation.
FAQ
Are Private Disability Benefits Always Deductible in NL?
Most income replacement benefits are deductible from a Newfoundland car accident settlement, to prevent double recovery. The wording of the Insurance Act and of your policy can create exceptions. If your policy has a right of subrogation, you repay the insurer from the settlement instead of having the defendant deduct the amount. The policy has to be read to know which rule applies.
Do CPP Disability Benefits Reduce My Settlement Amount?
Yes, from the part of the settlement that covers loss of the future ability to work for income. CPP Disability replaces income. The law treats it as a collateral benefit against that specific head of damage. The future value has to be discounted for the chance the benefit ends, which takes actuarial evidence. It does not reduce general damages or future care costs.
What is the “private insurance exception” in Newfoundland?
At common law, benefits you paid for yourself are not deducted from your damages. For car accidents in Newfoundland the Insurance Act overrides much of that principle, and most income replacement benefits are deductible regardless of who paid the premium. Whether any part of your coverage remains exempt from that override depends on the policy wording.
How Does the Statutory Deductible Affect My Overall Payout?
Newfoundland applies a statutory deductible, approximately $5,000 in 2026, to every award for pain and suffering. It is separate from any disability benefit deduction and applies to almost every car accident claimant in the province. One way to reduce its effect is to prove the underlying award properly.
Can I Sue for the Difference Between My Disability and My Full Salary?
Yes. Most LTD plans pay 60 to 70 percent of gross salary, and Section B pays at most $140 a week. The unreplaced remainder is recoverable from the at-fault driver, and in many files it is the largest single component of the claim.
If you are struggling to understand your insurance payout, contact the Mike Murphy Law Group today at 709-383-2757 or through the the contact form. There are no fees unless the firm wins your case.