August 2017

4.6: Settlement Agreements and Other Awards

Legislative Authority

Section 7(3) of the Act.
Sections 14(1), 17(2), 39(1), (3) and (4), 53, 54 and 62(3) of Regulation 134/98.

Audit Requirements

All awards and settlement payments are noted as assets, and exceptions to these assets and transfer of such assets are documented and on file.

Asset levels for such awards and settlement payments are adhered to and transfer of asset rules are applied consistently and fairly in accordance with provincial standards.

Random file reviews are completed to ensure that the above information is documented and filed accordingly.

Application of Policy

Amounts received as compensation for pain and suffering and expenses actually and reasonably incurred or to be incurred as a result of an injury to or death of a member of the benefit unit, including any prejudgment interest, are exempt as assets up to a maximum amount of $50,000 per award.

Amounts received under settlement agreements and other awards, other than amounts paid for loss of income, may be partially or fully exempt as assets as outlined in regulation.

An award received by an applicant or recipient must be verified by the caseworker in order to make a determination of eligibility for an exemption.

Interest (other than prejudgment interest), dividends, or investment income from awards for compensation are considered income. Any income gained on a conversion of assets in excess of the exempted amount is charged as income unless the funds are used to purchase an exempt asset.

Awards for Pain and Suffering

Awards for pain and suffering are exempt as income and assets to a maximum of $50,000 per award.

In some cases, more than one member of a family may be granted an award. The maximum $50,000 exemption applies to each member of a benefit unit separately.

Some examples of these awards include:

  • pain and suffering awards made by the Criminal Injuries Compensation Board (CICB);
  • tort awards made by a court for pain and suffering;
  • compensatory payments to victims of abuse in provincial institutions not otherwise explicitly exempted in regulation (e.g., the Nova Scotia Compensation for Institutional Abuse Agreement; see Settlement Agreements and Other Awards below for exempted agreements);
  • payments made under the Japanese Canadian Redress Agreement;
  • compensatory payments to persons infected with HIV or Hepatitis C not otherwise explicitly exempted in regulation (e.g., the Canadian Red Cross Society (CRCS) Hepatitis C Settlement Agreement; see Settlement Agreements and Other Awards below for exempted agreements);
  • payments made under clause 61 (2) (e) of the Family Law Act to compensate for loss of care, guidance and companionship, and
  • payments for non-economic loss received under section 46 of the Workplace Safety and Insurance Act, 1997 or section 42 of the Workers’ Compensation Act.

Awards in excess of $50,000 will be considered income and assets in making a determination about eligibility.

When determining an income charge as a result of assets in excess of the allowable maximum, the Administrator should look at the net amount payable to the beneficiary after legal fees and disbursements have been deducted from the total settlement/court judgment.

Non-Exempt Forms of Compensation

Portions of awards to compensate a person for lost income are not exempt and are considered income and/or assets. The following forms of compensation are treated as income and/or assets:

  • Income replacement benefits
  • Non-earner benefits
  • Past or future loss of income
  • Punitive damages awards
Workplace Safety and Insurance Act, 1997, or Workers’ Compensation Act awards for past or future economic loss.

Criminal Injuries Compensation Board Awards

The CICB provides compensation to victims of violent crime and may make an award for pain and suffering and expenses in a lump sum, through periodic (i.e., monthly) payments, or a combination of lump sum and periodic payments.

In the case of monthly payments, the recipient may choose to have either the total monthly payment exempted until the total exemption reaches $25,000; or, a partial exemption applied each month over the total time period of the award. If the recipient chooses to have a partial exemption applied each month, the cumulative total exemption must not exceed $25,000.

Structured Settlements

Recipients of a structured settlement do not receive the full award at once. Payments are provided over a period of time. Cases where structured settlements are planned or in place require careful review.

Awards may be broken down and paid out for different reasons under several headings known as "heads of damage”.

Some heads of damage are exempt (e.g., cost of future care), while other heads of damage are not exempt and are treated as income and assets (e.g., loss of income). Structured settlements may include various heads of damage paid at varying time periods, or may not define heads of damage at all (see Verification Procedure below).

Settlement Agreements and Other Awards

The following payments and awards are exempt as outlined:

Indian Residential Schools Settlement Agreement

Any payments, other than payments for loss of income, received in the settlement of a claim of abuse sustained at an Indian residential school are exempt as income and assets.

The exemption also includes compensation payments made under the Alternative Dispute Resolution process established by the federal government prior to the formal Settlement Agreement.

Compensation under the Indian Residential Schools Settlement Agreement may include some or all of the following:

  • Common Experience Payment (CEP) of $10,000 for the first school year plus $3,000 for each school year after that (exempt).
  • Personal Credits, not cash, will be provided if there is sufficient funding remaining in the federal CEP fund after all claims are paid and can be used for personal, family or education services (exempt).
  • Payments resulting from the Independent Assessment Process (IAP), which replaced the federal government’s Alternative Dispute Resolution process. The IAP provides payments of $5,000 to $275,000 for those who suffered serious abuses (exempt).
  • Income loss payments of up to $250,000 in addition to the above payments may be paid to individuals who can prove actual loss of income (not exempt).

Personal credits within the meaning of section 5.07 of the Indian Residential Schools Settlement Agreement are also exempt.

Note that where a former student of an Indian residential school is deceased, any payments under the Indian Residential Schools Settlement Agreement are made to the deceased former student’s estate. Any payments from the estate to its beneficiaries are not exempt as assets.

Aboriginal Land Claim Settlement Agreements

Payments made by Ontario or Canada pursuant to an Aboriginal Land Claim Settlement are exempt as income and assets. The exemption applies to the capital amount of a settlement payment, and not to any additional amounts that may result due to interest earned. The terms of each land claim settlement should be reviewed in order to determine the capital amount to which the exemptions would apply.

Helpline Reconciliation Model Agreement

The Helpline Reconciliation Model Agreement provides payments to victims of abuse in provincial institutions. Under this agreement, beneficiaries are eligible to receive:

  • a lump sum government payment up to $25,000;
  • an additional payment from the Christian Brothers of Ottawa for every dollar paid by the government;
  • a $3,000 contribution to an "Opportunity Fund" for each validated claimant;
  • free counselling services in Ontario; and
  • payment of legal fees.

Some beneficiaries of this award are also eligible to receive a sum for unpaid wages that were earned while they attended the provincial institution.

All payments received under the Helpline Reconciliation Model Agreement are exempt as income and assets.

Grandview Agreement

The Grandview Agreement provides payments to victims of abuse in provincial institutions. Under the Grandview Agreement, beneficiaries are eligible to receive:

  • financial support;
  • counselling;
  • removal of self inflicted tattoos through laser therapy;
  • educational and vocational opportunities; and
  • a contingency fund to cover expenses incurred in accessing benefits (e.g., transportation, child care, etc.).

All payments received under the Grandview Agreement are exempt as income and assets.

Extraordinary Assistance Plan and Multi-Provincial/Territorial Assistance Program

The Extraordinary Assistance Plan (EAP) was established in May 1990 to provide financial assistance to individuals infected by HIV through blood or blood products received in Canada. This assistance plan is funded by the federal government and consists of one lump sum payment of $120,000, tax free. EAP payments are exempt as income and assets.

Once approved for financial assistance under the EAP, individuals become eligible for additional one-time assistance from the Multi-Provincial/Territorial Assistance Program (MPTAP).

The main components of the MPTAP package are:

  • $30,000 per year for life to people directly infected;
  • a one-time $22,000 lump sum payment to people directly infected or their surviving spouses when the package is accepted;
  • $20,000 per year for five years to surviving spouses; and
  • $4,000 per year for five years to surviving dependent children.

Payments received under the MPTAP Agreement are also exempt as income and assets.

Ontario Hepatitis C Assistance Plan

A person who contracted the Hepatitis C virus through the blood system in Ontario before January 1, 1986 or from July 1, 1990 to September 28, 1998 is eligible for a total payment of $25,000 (an initial payment of $10,000 plus additional compensation of $15,000) from the Ontario government. All payments under the Ontario Hepatitis C Assistance Plan are exempt as income and assets.

1986-1990 Hepatitis C Settlement Agreement

Payments under the federal, provincial and territorial 1986-1990 Hepatitis C Settlement Agreement made with respect to individuals infected with the Hepatitis C virus through the blood system between January 1, 1986 and July 1, 1990, other than payments for loss of income or loss of support, are exempt as income and assets.

Payments under the Agreement may include:

  • Payments for pain and suffering to individuals infected with the Hepatitis C virus, based on the severity of their illness. The settlement calls for an initial payment of $10,000, followed by additional payments as the disease progresses. A total of $225,000 may be received for pain and suffering (exempt).
  • Lump-sum awards up to $50,000 for loss of care, companionship and guidance to family members and dependents where an individual dies as a result of the Hepatitis C virus (exempt).
  • Payments for loss of income or loss of support. Loss of income payments are available to individuals with the Hepatitis C virus who progress to the later stages of the disease. Loss of support payments are paid to family members and dependents where an individual has died from the Hepatitis C virus (not exempt).

Extended benefits are available for social assistance recipients who are ineligible for income assistance due to assets received from payments for loss of income or loss of support (see Directive 7.3: Extended Health Benefits for more information).

Pre-1986/Post-1990 Hepatitis C Settlement Agreement

Payments under the Pre-1986/Post-1990 Hepatitis C Settlement Agreement, other than payments for loss of income, loss of services, or compensation to dependents, are exempt as income and assets.

The Agreement provides compensation to persons infected with the Hepatitis C virus through the blood system before January 1, 1986 and after July 1, 1990. These persons were not covered under the 1986-1990 Hepatitis C Settlement Agreement noted above.

Eligibility criteria are the same as for the 1986-1990 Agreement. The Agreement consists of one-time lump sum compensation payments to eligible individuals ranging from approximately $10,000 to over $300,000.

Lump sum compensations payments may include the following elements:

  • Compensation to approved Hepatitis C Infected Class Members (exempt).
  • Compensation for loss of income (not exempt).
  • Compensation for loss of services in the home (not exempt).
  • Compensation for family members and dependents (not exempt).

Walkerton Compensation Plan

The Walkerton Compensation Plan is the settlement of court proceedings for the Walkerton class action approved by the Ontario Superior Court of Justice on March 19, 2001. Walkerton residents, as well as non-residents who became ill or died as a result of drinking the water, or who were exposed to someone who was ill as a result of the drinking water, may be eligible for:

  • a minimum payment of $2,000 per person; and
  • additional payments above the $2,000 minimum where individuals are able to prove that their losses are compensable under the Plan and exceed $2,000.

Payments may be provided for pain and suffering, loss of past and future income, health care costs not covered by OHIP, out-of-pocket expenses and other monetary losses.

All payments received under the Walkerton Compensation Plan, except for payments for future loss of income, are exempt as income and assets.

Huronia, Rideau and Southwestern Regional Centres Settlement Agreements

The Huronia, Rideau and Southwestern Regional Centres Settlement Agreements are the settlements of court proceedings for the class action litigations by former residents of these institutions. The Huronia Regional Centre agreement was approved by the Ontario Superior Court of Justice on December 3, 2013, while the Rideau Regional Centre and Southwestern Regional Centre agreements were approved on February 24, 2014.

Payments may be provided to class members who were victims of abuse. Individual class members may be eligible for a maximum payment of $35,000, with a potential top-up of 20% per claim if there are any funds remaining after all the claims have been paid out.

All payments received from the Huronia, Rideau and Southwestern Regional Centres Settlement Funds are exempt as income and assets.

Clegg Settlement Agreement

Payments received by a class member under the Settlement Agreement in the class action Clegg v. Her Majesty the Queen in Right of the Province of Ontario (also called Schedule 1 Facilities Class Action) that was approved by the Superior Court of Justice on April 25, 2016, are exempt as income and assets.

Nova Scotia Home for Colored Children Class Action Settlement Agreement

The Nova Scotia Home for Colored Children (NSHCC) Class Action Settlement Agreement is a settlement of court proceedings for the class action litigations by former residents of the NSHCC. The NSHCC agreement was approved by the Nova Scotia Supreme Court on July 7, 2014.

Under the terms of the settlement, former residents of NSHCC may be eligible for compensation packages ranging from $1,000 to $200,000, depending on period of residence and the severity of harm suffered.

All payments received under the NSHCC settlement agreement are exempt as income and assets.

Thalidomide Survivors Contribution Program

On March 6, 2015, the federal government announced a support package for Thalidomide survivors. Payments made under the Government of Canada’s Thalidomide Survivors Contribution Program are exempt as income and assets.

Verification Procedure

A reward is verified in order to make a determination of eligibility for an exemption. Damages or compensation for pain and suffering or expenses may be awarded by a court, but are frequently settled out of court. If a case proceeds to trial, the judge may break down the damage award under various headings (i.e., heads of damage).

Out of court settlements are less likely to use heads of damage. Generally in this case, a total figure is calculated in the settlement and the various heads of damage may not be broken down to their monetary components. If an award is made without specific reference to the heads of damage, it is necessary for the applicant/recipient, spouse and/or dependent to provide written verification from the lawyer or insurance company of the amounts sought for each head of damage in their original claim.

The proportion of the original claim that was made for pain and suffering can then be applied to the total amount of the award actually made. Where no other heads of damage were sought for loss of earnings, other income or employment, the whole amount of the award can be attributed to pain and suffering and expenses.

The following particulars relating to the awards(s) are determined:

  • the purpose(s) of the award(s);
  • the amount(s); and
  • the named participant(s).

In some cases an amount may represent several awards. The amount and purpose of each award must be specified together with the name of the beneficiary.

The applicant or recipient must provide verification of the award by way of:

  • a copy of the order(s) for the award(s) made by the court or Tribunal; or
  • a statement or statements from the payor(s) such as an insurance company.

Upon receipt of verification, staff can make a determination of eligibility.

Determination of Eligibility

The following examples are designed to show the theoretical application of the
guidelines in respect of income and/or assets derived from an award or awards (other than payments received under the agreements or plans outlined above).

Example 1:

A single person, with no other income, and no assets receives an award from the
Criminal Injuries Compensation Board in the amount of:

  • $15,000 for pain and suffering (P&S); plus
  • $250 per month as ongoing compensation for loss of earnings.
Award Exempt Non-Exempt
$15,000 (P&S) $15,000 $0
$250/month
(loss of earnings)
$0 $250/month

Assistance is reduced by $250 per month plus any income generated by the exempted asset (e.g., interest payments).

Example 2:

A head of a family with a spouse and 3 children has no other income and no assets. The family is involved in an accident. The head of the family is killed and the spouse and 2 children are injured.

An auto insurance claim is settled as follows:

  • $10,000 to estate of deceased person for expenses (EXP); plus
  • $20,000 to spouse for P&S and $7,000 for EXP; plus
  • $10,000 to first child for P&S and $10,000 for EXP; plus
  • $11,000 to second child for P&S and $15,000 for EXP.
Award Beneficiary Exempt Non-Exempt
$10,000 EXP Estate of deceased* N/A N/A
$20,000 P&S
$7,000 EXP
Spouse $27,000 $0
$10,000 P&S
$10,000 EXP
First Child $20,000 $0
$11,000 P&S
$15,000 EXP
Second Child $26,000 $0
Total

 

$73,000 $0

The awards received are within the allowable compensation award limits.

The amount awarded to the estate of the deceased person does not affect the eligibility of the survivor until the estate is finalized.

*Note: Upon receipt of funds from the estate, the money inherited by the spouse and/or the children is non-exempt ($10,000 in the example above) and would be treated as income in the month received and assets thereafter in accordance with the usual policy and procedures.

Example 3:

A single recipient lives with her mother who is in receipt of Old Age
Security. The recipient has no non-assistance income, but has assets of $1500. Both the recipient and her mother are injured in an automobile accident.

The awards are as follows:

  • $20,000 to the recipient for P&S and $6,000 for EXP; plus
  • an additional $4,000 to the recipient for expenses relating to her mother's care; plus
  • $25,000 to the mother for P&S and $25,000 for EXP.
Award Beneficiary Exempt Non-Exempt
$20,000 P&S
$6,000 EXP
Recipient $26,000 $0
$4,000 EXP Recipient (in respect of the mother who is not a member of the benefit unit) N/A N/A
$25,000 P&S
$25,000 EXP
Mother (not a member of the benefit unit) N/A N/A
Total

 

$26,000 $0

The total award for the recipient is exempt as it is within the exemption limit and the recipient continues to be eligible for Ontario Works.

Payments to or in respect of the mother are not considered, as the mother is not a member of the benefit unit.

Example 4:

A recipient and spouse are involved in an accident that occurred prior to eligibility for assistance.

An auto insurance claim was settled as follows:

  • $5,000 to participant for EXP; plus
  • $7,000 to spouse for EXP and $20,000 for loss of earnings.
Award Beneficiary Exempt Non-Exempt
$5,000 EXP Recipient $5,000 $0
$7,000 EXP
20,000 (Loss of earnings)
Spouse

 

$7,000 $20,000
Total

 

$12,000 $20,000

The total non-exempt assets are in excess of the allowable asset limit for the couple benefit unit, therefore the benefit unit is ineligible.

Treatment of Exempted Assets

Once it is determined that an amount is exempt from income and assets and total assets are not in excess of the asset limit, the changes in the value of the exempt asset (e.g., investments made, income earned, items purchased and sold) are monitored. The applicant, recipient or member of the benefit unit is advised that they are responsible for providing adequate information and verification of money gained and lost in respect of the exempt asset.

The recipient can retain the exempt award indefinitely. However, the exempted amount may be reduced over time depending on the circumstances. As an exemption from assets, the use of those funds by the beneficiary is not an issue, but the conversion of those assets (e.g., the conversion of those assets into capital gains), and income resulting from conversion (e.g., interest earned) must be considered in relation to ongoing eligibility for assistance. Exempt assets cannot be replenished from another income source or other assets and continue to be considered exempt at the higher level.

Interest and Dividends Earned

Any interest, dividends or investment income generated from an exempt award is included as income in the month earned and as an asset thereafter. Applicants and recipients should be advised to obtain financial advice.

In cases where substantial assets are received as a result of large or multiple awards, beneficiaries may take advantage of complex investment options. Some investment options, such as stocks and securities, may produce income in the form of additional shares as opposed to cash dividends. Such transactions should be considered income in the months intended. Transaction receipts, T4s, T5s or income tax returns may be required for verification.

Where a portfolio is actively traded, capital gains and losses are charged as income at the point of the transaction. Any withdrawals from the portfolio made by the member of the benefit unit are considered income in the month received.

Certain annuities provide a blended payment of capital and interest. Only the interest earned is charged as income. The capital is averaged over the number of months from the start date of the annuity to age 65. The additional amount each month is interest income, which is to be deducted as income.

Deferred annuities provide no income for a specified period of time, after which blended interest and capital is paid. During the deferred period when interest income is not received, income is not charged. Interest income becomes chargeable at the point when it is paid to the member of the benefit unit.

Conversion by a Transaction to Property for Personal Use

Example:

A person with a dependent adult receives an exempt award of $20,000.
 
The participant subsequently buys a second car for $16,000 to help a dependent adult to find and maintain employment. The exemption level remains at $20,000.  The vehicle, although above the asset limit for a second motor vehicle ($15,000), is exempt as it was purchased with exempt funds.

Three years later, the participant sells the car for $14,000.  The exemption level for the award is adjusted to $18,000.

The exemption level can never exceed the original award.  For example, if the recipient in this case purchased a coin collection for $12,000, the exemption level remains at $20,000.  The participant later sold the coin collection for $23,000, earning a capital gain of $11,000. As a capital gain is a non-exempt asset,  the $11,000 takes the participant over the asset limit; the participant would now be ineligible for assistance (total assets are now $31,000, composed of the coin collection now valued at $23,000, plus the exempt $8,000 for the award that was not used to purchase the coin collection).

Conversion by Purchase of an Investment Portfolio

Example:

A single person receives an exempt award of $20,000 and purchases an investment portfolio.

At a later date, the value of the portfolio increases to $22,000.  The participant is still eligible for assistance as the extra $2,000 in assets are still within the  maximum asset limit for a single person.