Simon Logan v. His Majesty the King class action

Background

A retired CAF member, Simon Logan initiated legal action against the Department of National Defence and the Canadian Armed Forces (DND/CAF) in 2018, alleging that the formula used to calculate his Canadian Armed Forces Long-Term Disability (CAF-LTD) benefits only took into account his base pay and did not include allowances he had also received. This omission, he argued, created a financial gap in his monthly CAF-LTD payments.

This class action was about the miscalculation of CAF-LTD benefits to former CAF members under the Service Income Security Insurance Plan (SISIP) Policy; specifically, the interpretation of provisions under the group insurance policy in regard to the definition of “monthly pay”.

The CAF-LTD insurance benefit is calculated based on 75% of a former CAF member’s monthly pay in effect on the date of release (for Regular Force members), or at the time of injury or illness (for Class “C” Reserve Force members). Manulife is the insurer and the CAF-LTD is the responsibility of the Canadian Armed Forces.

In March 2020, the Court agreed with the Class and ruled that Class Members’ monthly allowances should have been included in the definition of “monthly pay” for the purposes of calculating CAF-LTD. The Court left it to the Parties to negotiate the damages to be paid to Class Members. The Parties entered settlement negotiations in September 2022 and on 11 January 2023 a proposed agreement was announced. On 24 April 2023 the Court issued its decision to approve the settlement of this class action.

In accordance with VAC legislation, CAF-LTD benefits were deducted as part of the calculation of VAC’s Earnings Loss Benefit (ELB) which was in place from 2006 until 31 March 2019. CAF-LTD benefits are also deducted as part of the calculation of VAC’s Income Replacement Benefit (IRB), which was introduced on 1 April 2019.

Any changes in the amount of CAF-LTD benefits payable (including retroactive adjustments) leads to VAC recalculating the amount of ELB and/or IRB payable; either to determine if there were past overpayments, or to determine a new amount payable going forward. As part of the settlement agreement, any overpayments in VAC Financial Benefits (ELB or IRB) resulting from the payment of retroactive CAF-LTD adjustments as part of this class action will not be recovered from Class Members.

Following distribution of the settlement payments in this case, VAC will recalculate the amount of IRB payable to each Class Member who still receives both IRB and CAF-LTD. Each Class Member will be advised in writing of their new IRB payment amount.

As VAC legislation requires that CAF-LTD benefits be deducted from the IRB, higher CAF-LTD payments amounts could result in lower IRB payment amounts for Class Members on a go forward basis.

Additional details of the case and settlement

NOTE: For Logan Class Action inquiries, please contact Manulife at 1-800-565-0701. 

Q1. What is this class action about?

A1. This class action concerned the miscalculation of Canadian Armed Forces Long Term Disability (CAF-LTD) benefits to former CAF members under the Service Income Security Insurance Plan (SISIP) Policy.

On 24 March 2020, the Federal Court ruled that monthly allowances paid to CAF members should have been included in “monthly pay” for the purposes of calculating CAF long-term disability (CAF-LTD) benefits. The Federal Court ruled that monthly allowances in effect on the date of release from CAF (Regular Force members) or at the time of when injury was incurred or illness was contracted (Reserve Force – Class “C” members) should have been included in the calculation of their CAF-LTD insurance benefits.

Q2. Who are the Class members?

A2. The Class includes former CAF members who were released on or before 31 December 2021, and who, on or after 17 July 2012, received long term disability and/or dismemberment benefits under Division 2, Part III(B) of the Service Income Security Insurance Plan (SISIP) Policy #901102, and who had a monthly allowance from the CAF in effect on the date of their release from the CAF (in the case of Regular Force Members) or when injury was incurred or illness was contracted (in the case of Reserve Force Members on Class “C” service).

Q3. How many retired CAF members are involved in this class action?

A3. The class action was filed on behalf of approximately former 8,630 CAF members who had received CAF-LTD benefits under the SISIP Policy.

Q4. Why did it take so long to finalize a settlement?

A4. This was a complex file involving many stakeholders who worked together in good faith to reach this agreement.

Q5. When was the final settlement approved?

A5. The final settlement was approved on 24 April 24 2023, by the Federal Court.

Q6. What does the final settlement agreement include?

A6. The final settlement agreement includes the following:

1. An additional lump sum amount equal to the difference between the amount of CAF-LTD benefits received by each Class Member and the amount that would have been received had their CAF-LTD benefits under the SISIP Policy have been calculated in accordance with the Federal Court’s March 2020 decision (Additional Amount);
2. For Class Members who continued to receive CAF-LTD benefits on or after 1 January 2022, their monthly CAF-LTD benefit payments will continue to be paid in accordance with the Federal Court’s decision from the time their Additional Amount is paid up to the end date of their CAF-LTD benefits claim;
3. Remission (forgiveness) of any overpayments of VAC Financial Benefits (Earnings Loss Benefit and/or Income Replacement Benefit) caused by this retroactive adjustment of CAF-LTD; and
4. Recalculation of VAC’s Income Replacement Benefit to account for higher CAF-LTD benefits received by Class Members on a go-forward basis.

Q7. When will the retroactive CAF-LTD adjustment payments be made?

A7. The CAF-LTD retroactive adjustment payments will be made by Manulife Financial. Manulife Financial is optimistic that they can achieve the deadline of 24 June 2025, set out in the settlement agreement, to pay 100% payments (excluding estate claims, claims subject to appeals, and claims where further information has been requested from a Class Member but not received).

Q8. How much of a retroactive CAF-LTD adjustment payment will each Class Member receive?

A8. The amount of retroactive CAF-LTD payments that each Class Member will receive will differ depending upon the amount of monthly allowances they were receiving and for how long they were receiving CAF-LTD benefits.

Q9. Will the retroactive CAF-LTD adjustments from this settlement affect benefits provided by Veterans Affairs Canada?

A9. Retroactive CAF-LTD adjustments will not affect benefits provided by VAC.

CAF-LTD benefits were deducted as part of the calculation of VAC’s Earnings Loss Benefit (ELB) from 2006 until 31 March 2019. CAF-LTD benefits were also deducted as part of the calculation of VAC’s Income Replacement Benefit (IRB). Retroactive CAF-LTD adjustment payments will require VAC to recalculate ELB and IRB benefits paid to Class Members in the past to determine if there were overpayments made.

Any overpayments made as a result of the retroactive CAF-LTD will not be recovered from Class Members as set out in accordance with the March 2020 Court decision.

Q10. Will the higher go-forward CAF-LTD payments which will be paid to Class Members who remain on claim with CAF-LTD affect benefits provided by Veterans Affairs Canada?

A10. CAF-LTD benefits are deducted from the Income Replacement Benefit delivered by VAC. As a result, going forward higher CAF-LTD payments could change the amount received through the Income Replacement Benefit.

Q11. What will happen when VAC recalculates the Income Replacement Benefit?

A11. Each Class Member’s IRB will be recalculated to account for their newly adjusted CAF-LTD benefit amount.  As CAF-LTD is deducted from the IRB, a higher CAF-LTD amount could result in a lower IRB amount going forward.  

Each Class Member will be advised by VAC in writing of their new IRB payment amount.

Q12. When will VAC recalculate Income Replacement Benefit benefits for Class Members?

A12. VAC will begin the recalculations of the Income Replacement Benefit following the distribution of settlement payments to those Class Members who continue to receive both CAF-LTD insurance benefits and the Income Replacement Benefit.

It is estimated that the VAC’s recalculations will begin by Spring/Summer 2025, which will be communicated to each Class Member. Any overpayments of VAC Financial Benefits accrued from this settlement up to the point the IRB is recalculated will be forgiven.

Q13. Is VAC going to include monthly allowances in the calculation of the IRB?

A13. VAC legislation and policy sets out how the IRB is calculated;  allowances are not included in the calculation.

The SISIP Policy was amended as of 1 January 1 2022.  Consistent with those amendments, the calculation of CAF-LTD will not include monthly allowances for CAF members who release on or after that date.

Q14. Why did this situation happen to these retired CAF members?

A14. CAF-LTD is governed by the Service Income Security Insurance Plan (SISIP) Policy. The Federal Court determined that there was an ambiguity in the definition of “monthly pay” in the SISIP Policy, and that monthly allowances should have been used to calculate CAF-LTD benefits.

Specifically, the Federal Court ruled that monthly allowances in pay at the time of release (for Regular Force members) or at time of illness or injury (for Reserve Force – Class “C” members) should have been included in the calculation of their CAF-LTD benefits.

The SISIP Policy was amended as of 1 January 2022. Consistent with those amendments, the calculation of CAF-LTD will not include monthly allowances for CAF members who release on or after that date.