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Carrigan Decision Rocks Ontario Pension Administration
November 27, 2012

The recentOntario Court of Appeal decision in Carrigan v. Carrigan Estate  has sent shivers through the pension industryacross Canada. While the facts in Carrigan were not atypical, the appeal court’s decision was totally unexpected. If yourorganization administers a pension plan for employees whose entitlements areregulated by the Ontario PensionBenefits Act (PBA), you need to pay attention to this decision.

Mr. Carrigan,an active pension plan member, died with two spouses. He had a married spousefrom whom he had been “living separate and apart” for over eight years. He also had a common law spouse with whom hehad been living with for at least eight years. The PBA definition of “spouse”is such that both married and common-law spouses can file a claim following aplan member’s death. So, naturally, bothspouses claimed the death benefit.

At trial the judgeinterpreted the PBA in a manner consistent with the industry view; namely, thatthe spouse (married or common-law) who is living with a plan member at the dateof death has priority, and is entitled to the death benefit payable to “thespouse”, subject to the operation of a spousal waiver if one exists. As therewas no spousal waiver, the common-law spouse was awarded the pre-retirementdeath benefit.

The Court ofAppeal undertook a painful exercise in statutory interpretation. In so doing,the majority of the Court interpreted the PBA pre-retirement death benefitprovisions such that if the married spouse was “living separate and apart” fromthe plan member at the time of death, the death benefit had to be paid to theplan member’s designated beneficiary (or estate in lieu). In Carriganthe designated beneficiary happened to be the married spouse and their twodaughters, and, hence, the common-law spouse, who had been living with the planmember at the time of death, was denied the death benefit.

Implications for PBA Administrators

Carrigan has implications beyond pre-retirement death benefits. Pension planadministrators subject to the PBA must carefully review their plan membercommunications and develop policies addressing issues arising from Carrigan, for example, policiesaddressing:

  • the proper “spouse” forpurposes of pre-retirement death benefits, spousal waivers and Joint &Survivor annuities; and
  • claims and potential claimsarising from previous decisions relating to death benefits, spousal waivers orJoint & Survivor annuity purchases.

Implications for Non-PBA Administrators

Carrigan offers valuablelessons for non-PBA pension plan administrators, who should be askingthemselves: 

  • do our policies mandatesufficient investigation and documentation prior to paying death benefits?
  • have our decision-makers beensufficiently trained to address the complexities arising from competing claimsfor benefits?
  • do our communicationsaccurately reflect the complex issues that may arise following the death of aplan member?

Common-lawspouses living with an Ontario pension plan member who is legally married butseparated from the married spouse, cannot assume they will be entitled to thepension survivor benefits after their partner dies.

Pension planadministrators are frequently called upon to adjudicate cases involving spousesand former spouses (married and common-law) and have learned to deal withmultiple claims for the same benefit. However, those adjudications have generally taken place with a firmunderstanding of applicable fundamental principles. Carrigan has created uncertainty where there was previously generalconsensus on expectations and established practice in the pension industry.Given that death and marriage breakdown are constants in today’s society, thisis unfortunate.

Leave toappeal to the Supreme Court of Canada is being sought.

If you haveany questions regarding this article, please contact Claude N. Marchessault,Associate Counsel.

Carrigan v. Carrigan Estate