The Nova Scotia Court of Appeal has dismissed an appeal by disability plan trustees who challenged how settlement funds were divided between an injured employee and their long-term disability insurer.
S.F. was injured in a workplace slip and fall in February 2015 while working as a consultant. He had been on leave from his full-time position with Nova Scotia Community College since 2012 but remained covered under the Nova Scotia Public Service Long Term Disability Plan. A week after the workplace incident, S.F. suffered another fall at his home.
S.F. went off work in March 2015 and began receiving disability benefits that November. He later sued his employer for negligence and settled the claim for $365,000 through mediation in April 2023.
Subrogation dispute emerges
The disability plan includes subrogation provisions that give the trustees rights to recover benefits they paid from any third-party settlement. The plan also requires trustee consent for any settlement to be effective.
The trustees consented to the overall $365,000 settlement amount but refused to approve how the settlement was broken down among different types of damages. This created a dispute over how much the trustees could recover from the settlement proceeds.
The trustees sought a court declaration determining how much of the settlement should be allocated to past and future income loss — the portions they had subrogation rights to recover.
Court applies proportional approach
The application judge allocated $32,442.91 to past wages and pre-judgment interest and $65,703 to future wage loss. The judge used a proportional approach, comparing the total amount claimed in the mediation brief (approximately $2.3 million) to the actual settlement amount.
The judge also applied a 50% reduction for “puffery” — accounting for the possibility that income loss claims were overstated or might have failed due to various legal risks.
Trustees challenge multiple aspects
The trustees appealed on seven grounds, arguing the judge misunderstood evidence and made legal errors. They claimed the income loss claims were not riskier than other damage categories and that the judge incorrectly calculated the proportional allocation.
The trustees also argued that S.F.’s mediation brief double-counted $345,266 in disability benefits already paid and significantly undervalued pre-judgment interest at only $8,070.
Appeal court upholds decision
The Court of Appeal rejected all grounds of appeal. On the risk assessment, the court found the application judge properly considered liability and causation issues that made income loss claims more vulnerable than other damages.
The judge had noted that “there were issues of liability and causation that present a real risk for Mr. Feener to account for the weakness of income loss claims relative to the other components of the claim.” He found it was “easier to quantify the injuries, he sustained from the first fall than it is to determine the impact of the two falls relative to his ability to earn an income now and into the future.”
The court emphasized that S.F. had suffered two falls within a week, creating complications about which incident caused his ongoing disability. Medical evidence showed his treating neurologists did not believe he sustained a head injury, and there were questions about whether his issues were psychological rather than physical.
Calculation methodology defended
Regarding the trustees’ mathematical objections, the appeal court said the application judge was entitled to base his calculations on what was actually claimed in the mediation brief rather than what should have been claimed.
The court noted that “it was not so much the accuracy of the individual amounts claimed, but the settlement amount compared to the overall claim which he considered important.” This approach fell within the judge’s discretion and was not “so clearly wrong as to amount to an injustice.”
Puffery adjustment timing upheld
The trustees argued the 50% puffery reduction should have been applied before calculating proportional allocations rather than after. However, the appeal court found this approach was consistent with previous similar cases and represented a fair exercise of judicial discretion.
The court noted there is “no formula or approach that is universal in these cases” and that judges must try to reach allocations that are fair to all parties.
No waiver found
The trustees also claimed the judge wrongly found they had waived their rights by not participating in the mediation. The appeal court clarified that the judge did not find an irrevocable waiver but simply noted the trustees “did not have a say in the real-time allocation of the damages” by choosing not to attend.
This finding had no effect on the judge’s analysis or outcome, the court said.
The Court of Appeal dismissed the entire appeal and ordered the trustees to pay $5,000 in costs to S.F.
For more information, see Nova Scotia Public Service Long Term Disability Plan Trust Fund v. Feener, 2025 NSCA 49 (CanLII).
