The cheque at the end of a Prince Edward Island injury claim is smaller than the damages the court or the insurer calculated. The difference is PEI car accident settlement deductions. They exist because the law will not pay you twice for the same loss. If your own insurer already paid $10,000 of wage replacement, the at-fault driver’s insurer does not pay that $10,000 again. The rule is fair in principle. In practice, the defence deducts more than it should, and the plaintiff’s lawyer’s job is to audit every line.
This post explains which payments are deducted, which are not, and where the defence reaches too far.
The Indemnity Principle Is Why PEI Car Accident Settlement Deductions Exist
Insurance law puts the injured person back where they were before the loss, and no better. A benefit received from another source for the same loss comes off the award. That is the whole of the indemnity principle.
The deductions apply to special damages: lost wages, medical bills, out-of-pocket costs. They do not touch general damages for pain and suffering. Keeping those two columns separate is the first place a file goes wrong, because the defence will try to apply an income deduction against the whole settlement.
Not every benefit is deductible. The Insurance Act and the case law decide which ones are, and the answer turns on what the benefit was for and who paid for it.
The deductions appear on the release you sign at settlement. The release lists the Section B weekly indemnity received, the disability benefits received and the CPP paid, and subtracts them from the special damages. Once signed, the numbers are final. The audit has to happen before the signature, not after.
Section B Benefits Received or Available Are Credited to the at-Fault Insurer
Section B is the no-fault part of your own auto policy. In PEI it pays up to $50,000 in medical and rehabilitation costs and a weekly indemnity for lost wages. The at-fault insurer gets a credit for Section B benefits you received, and for benefits that were available to you.
The weekly indemnity is capped at $250 a week. Over the two or three years it takes to resolve a car accident claim, that adds up, and the total appears as a deduction on the release. The number has to be checked against the insurer’s own payment ledger, because inflated Section B totals are common.
The available benefits rule costs unrepresented claimants the most. If you never applied for Section B, the defence still deducts what you could have received. That is why the firm tells every client in Charlottetown to file the Section B claim in the first month. Skipping it costs the money twice: once because you never got it, and once as a deduction.
The credit covers medical costs as well. Every physiotherapy session and prescription Section B paid for comes out of the medical expense claim against the driver, because your own insurer already paid it. The defence should not also deduct treatment Section B refused to cover. That error is common, and the Section B payment file has to be read line by line against the deduction schedule.
Private Disability Payments Are Deducted Unless the Private Insurance Exception Applies
Long-term and short-term disability payments from an employer plan replace lost income. The defence deducts them from the lost income claim. Whether it can depends on the policy wording and on who paid the premiums.
The private insurance exception is the old rule that a benefit you bought with your own money is yours, and the negligent driver gets no credit for it. PEI legislation has narrowed that exception for motor vehicle claims, but it has not erased it. Where the employee paid the premiums, the deduction is arguable and the firm argues it.
The wording matters in two places. First, whether the plan pays for the same loss the lawsuit claims. A benefit that replaces income is deducted from income loss. A benefit that pays for something else is not. Second, whether the employee paid the premiums. Where the employer paid, the deduction usually stands. Where the employee paid through payroll, the exception is live and has to be pleaded.
Subrogation is a separate problem. Some LTD insurers have a contractual right to be repaid out of the settlement. That is not a deduction. Money is taken from your share and sent to the disability carrier instead. A client dealing with long-term disability denials and a subrogation clause needs both handled in one strategy, or the same dollar gets claimed twice.
CPP Disability Is Deducted From Past and Future Income Loss
CPP Disability is deducted from past and future loss of income. Atlantic courts argued about it for years. The current precedents treat CPP as an indemnity for the same loss, so it comes off.
Future CPP is where the defence over-reaches. Nobody knows whether you will stay on CPP for life. The deduction has to be discounted for the chance that you recover, return to work, or that the benefit rules change. The firm has an actuary price those contingencies instead of accepting the defence’s lump sum.
The defence’s usual method is to take the current monthly CPP payment, run it to retirement age and deduct the total. That ignores every contingency. The actuary applies discount rates and probabilities to the same payment stream, and on a long-term claim the difference between the two figures is large.
CPP never touches general damages. It applies to the income replacement and loss of income capacity heads and nowhere else.
The 2026 Minor Injury Cap Limits General Damages To $9,659
PEI caps general damages for minor soft-tissue injuries. On 1 January 2026 the cap was indexed to $9,659.
The cap is not a deduction. A ceiling applies to one head of damages instead. But when it applies, it makes every income deduction matter more, because the pain and suffering award is already small.
Insurers classify as many injuries as they can as minor. Whether an injury is minor is a medical question, and a report that documents a lasting impairment takes the claim outside the cap. The firm gets that report early.
The insurer makes its cap decision early, often before the injury has settled. An injury that still limits work or daily activity months after the crash is not minor, and a physician’s report saying so is what moves the claim outside the cap. Without that report the insurer’s classification stands by default.
Wage Loss Is Valued at Net Income Under the Insurance Act
The Insurance Act values a PEI wage loss claim at net income, not gross. If you had worked, you would have paid tax on the wages, so the award is calculated after tax. That reduces the claim before any collateral benefit is deducted.
The deductions then have to match. A non-taxable disability benefit is deducted at its gross value. A taxable one is adjusted. The defence sometimes deducts gross benefits from a net wage claim and calls it even. It is not, and the firm re-runs the arithmetic on every file.
The gross salary becomes a lower net figure before the claim starts. Then the Section B indemnity, which was calculated on gross earnings, is deducted from the net claim. That step overstates the deduction unless the indemnity is adjusted the same way, and the defence rarely adjusts it unprompted.
The net income rule also makes fringe benefits matter. Lost pension contributions, health benefits and a car allowance are losses in their own right, and they are not reduced by the net income rule in the same way. They belong in the claim.
Section B Pays Medical Costs First and the at-Fault Insurer Deducts Them
Section B is the primary payor for medical and rehabilitation costs. A private health plan through your job usually pays first for prescriptions and physiotherapy, and Section B pays what is left up to the $50,000 limit.
At settlement, the at-fault insurer deducts the value of the treatment Section B paid for or would have paid for. Keep every receipt. If you paid out of pocket for a treatment Section B should have covered, the defence will deduct it as available and you will not get it back. The firm gives clients a medical expense log for this reason.
Section B and the private plan both keep records of what they paid. The deduction schedule should match those records to the dollar. Where it does not, the difference comes out of the client’s share, and nobody but the client’s lawyer will check.
Health PEI has a subrogated right to recover the cost of your hospital care from the at-fault insurer. That comes out of the total settlement, not your share, but it has to be settled with the province before the file closes.
The Lawsuit Deadline Is Two Years and the Section B Deadlines Are Shorter
The lawsuit must be filed within two years of the collision. The Section B deadlines are shorter. Miss them and the available benefits rule produces a deduction for money you never saw.
The Section B notice and proof of claim deadlines are counted in days. The Insurance Act sets them, the policy repeats them, and an insurer that receives a late notice raises it in the first letter.
The firm files the Section B notice and forms inside the Insurance Act timelines so that the later deduction is for money you actually had. The provincial rules are published by the Prince Edward Island Department of Justice and Public Safety.
Why Choose Mike Murphy Law Group for Your PEI Claim?
Michael B. Murphy, KC, has practised for over 40 years and the firm has over 100 reported decisions. The file work on deductions is arithmetic and policy reading, and it is done on every file before the release is signed.
Personal injury claims are taken on contingency. There are no upfront costs and no fee unless the firm recovers money for you.
FAQ
Are Disability Benefits Always Deducted From My Settlement?
Usually. Benefits that replace lost income are deducted from the lost income claim. The exception depends on the policy wording and who paid the premiums, so the disability contract has to be read before anyone agrees to the deduction.
What is the “Minor Injury Cap” for 2026?
As of 1 January 2026 the cap is $9,659. It limits general damages for sprains, strains and some whiplash injuries. It is not a deduction, but it lowers the total for injuries it catches. A documented permanent impairment takes the claim outside the cap.
Can the Insurance Company Deduct Section B Benefits I Didn’t Receive?
Yes. Under the available benefits rule the at-fault insurer deducts Section B benefits you could have claimed, whether or not you applied. Apply for Section B at the start.
Does CPP Disability Affect My Settlement?
Yes. Past and future CPP Disability payments are deducted from the lost income part of the award. The future deduction has to be discounted for the chance you stop receiving the benefit, which is an actuarial calculation and not a guess.
What does “Net Income” mean for my claim?
Your wages after tax and mandatory government deductions. PEI values lost wages at net income before any collateral benefit is deducted. Non-taxable benefits and lost fringe benefits are added on top, which is why the financial records matter.
If you have questions about PEI car accident settlement deductions on your claim, call the Mike Murphy Law Group at 902-334-4228 or contact the firm through the secure online intake form. There are no fees unless the firm wins your case.