Attavar v. Allstate Insurance Company of Canada [Indexed as: Attavar v. Allstate Insurance Co. of Canada]

63 O.R. (3d) 199

[2003] O.J. No. 213

Docket No. C34787

Court of Appeal for Ontario

Laskin, Simmons and Gillese JJ.A.

January 29, 2003

Insurance -- Automobile insurance -- Statutory accident benefits -- Interest -- Insurer paying insured loss of earning capacity benefits on [page200] basis of REC/DAC assessment -- Insured challenging assessment and quantum of benefits -- Trial judge agreeing with insured and ordering insurer to pay substantially higher loss of earning capacity benefits -- Trial judge not erring in ordering interest under s. 68 of Statutory Accident Benefits Schedule from time of insured's application for benefits instead of from date of his decision -- Statutory Accident Benefits Schedule -- Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93, s. 68.

Insurance -- Automobile insurance -- Statutory accident benefits -- Loss of earning capacity -- Intelligent and ambitious insured was attending university and planning career as financial analyst at time of serious motor vehicle accident which left her with cognitive deficits -- Independent assessor recommending that insured could work as retail sales clerk or self-serve gas bar attendant -- Evidence indicating that insured would suffer serious depression if she tried to work at either recommended job -- Trial judge not erring in finding that insured's residual earning capacity was zero because her psychological makeup precluded her from doing those jobs -- Psychological makeup constituting "personal characteristic" under s. 30(2)3 of Statutory Accident Benefits Schedule -- Statutory Accident Benefits Schedule -- Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93, s. 30.

The plaintiff was an ambitious and intelligent young woman who was enrolled in an Honours Bachelor of Business Administration and planning a career as a financial analyst when she was injured in a motor vehicle accident. As a result of her injuries, she suffered from cognitive deficiencies and had difficulty concentrating. Her performance and marks deteriorated, but she did not abandon the ambition of eventually graduating from university. The defendant insurer paid the plaintiff a weekly education disability benefit under the Statutory Accident Benefits Schedule -- Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93. After 104 weeks, the education disability ends and is replaced by a weekly loss of earning capacity benefit ("LECB") which is payable for the lifetime of the insured person. The plaintiff's LECB was her pre-accident earning capacity ("PEC") less 90 per cent of her residual earning capacity ("REC"). The defendant initially claimed that the plaintiff's REC was greater than her PEC and that she was not entitled to an LECB. It made an "offer" to pay her a zero LECB. The plaintiff rejected that offer, which triggered the requirement that she be assessed at a Designated Assessment Centre. The assessor recommended two jobs as being appropriate for the plaintiff: either a retail sales clerk at an annual salary of $16,412 or a self-serve gas- bar attendant at an annual salary of $12,451. Based on these recommendations, the defendant began paying the plaintiff an LECB of $132.44 bi-weekly. The plaintiff claimed that her REC was zero and brought an action to vindicate her claim. There was evidence before the trial judge that the plaintiff was already depressed to some extent and that she would suffer a serious depression, which would worsen over time, if she tried to work at either recommended job. An expert in rehabilitation psychology testified that the suggested jobs were "discordant" with the plaintiff's continuing ambitions in the field of finance and business and, as permanent jobs, would amount to a "sentence of psychological death for her". The trial judge held that the plaintiff's psychological makeup precluded her from doing the recommended jobs and that her REC was zero. He awarded her a substantial LECB and awarded interest on the benefit from the time it was first due at the rate of 2 per cent per month, the rate provided for overdue payments under s. 68 of the Schedule. The defendant appealed. The plaintiff cross-appealed, arguing that the trial [page201] judge erred by locking-in her pre-accident earning capacity instead of permitting it to increase as she got older.

Held, the appeal should be dismissed; the cross-appeal should be allowed.

In concluding that the plaintiff's REC was zero, the trial judge did not fail to apply the criteria in s. 30 of the Schedule. While he did not explicitly refer to the criteria in s. 30(2), he clearly relied on s. 30(2)3: "It would be reasonable to expect the person to engage in the employment having regard to the possibility of deterioration in the person's impairment and to the person's personal and vocational characteristics." The trial judge could reasonably conclude that the plaintiff's psychological makeup was a personal characteristic under s. 30(2)3 and that it was not reasonable for her to engage in either recommended job because if she did, one of her personal characteristics, her psychological makeup, made it likely that one of her impairments, her depression, would worsen to the point where she could not cope with either job.

The trial judge did not err by failing to give any weight to s. 34(1) of the Schedule. Section 34(1) did not apply in this case. It deals with a future permanent deterioration in a person's impairment, which would then require a review of the LECB already being paid. Section 30(2)3 of the Schedule requires an assessment of "the possibility of deterioration in the person's impairment" in order to determine a person's REC and, thus, LECB. Section 34(1) deals with future unforeseen deterioration, while s. 30(2)3 deals with cases where the possibility of deterioration is foreseeable.

Section 68 of the Schedule requires the insurer to pay interest on overdue payments of benefits from the date the amount became overdue. The trial judge did not err in ordering interest under s. 68 from the time of the plaintiff's application for benefits instead of from the date of his decision. Under s. 62(2) of the Schedule, an insurer is required to mail or deliver an LECB at least once every second week while the insured person remains entitled to the benefit. Under s. 62(4), an amount payable under Part VI (Loss of Earning Capacity Benefits) of the Schedule is overdue if the insurer fails to comply with s. 62(2). Thus, under those provisions, the plaintiff was entitled to the amount of the LECB found owing by the trial judge by the second week after her weekly education benefit ended. Any amounts not paid by the insurer from that date were overdue and thus attracted interest under s. 68.

The trial judge erred in locking in the plaintiff's pre- accident earning capacity between February 1997 and February 2000.

APPEAL and CROSS-APPEAL from a judgment of McGarry J., 2000 50970 (ON SC), [2000] O.J. No. 2712 (Quicklaw), 20 C.C.L.I. (3d) 290 (S.C.J.) in an action for the loss of earning capacity benefits. [page202]

Cases referred to Liberty Mutual v. Joe Angolano, [2000] O.F.S.C.I.D. No. 47; M.D. v. Halifax Insurance Co., [2001] O.F.S.C.I.D. No. 71 (O.F.S.C.); Sebastian v. Canadian Surety Co., [1998] O.F.S.C.I.D. No. 130 (O.F.S.C.); Urquhart v. Zurich Insurance Co., [1998] O.I.C.D. No. 34 Rules and regulations referred to Statutory Accident Benefits Schedule -- Accidents After December 31, 1993 and Before November 1, 1996, O. Reg. 776/93, ss. 1 "impairment""personal and vocational characteristics", 15(1), 20, 21, 23(2), (5), 28, 29, 30, 33(1), 34(1), 62, 68, 81, 82

Stephen R. Scheneke, for respondent. Ian D. Kirby, for appellant.

LASKIN J.A.: --

A. Introduction

[1] The respondent Suman Attavar was badly injured in a car accident during her first year of university. Her injuries were so serious that she had to withdraw from the Honours business program she had set her sights on completing.

[2] Under the applicable Statutory Accident Benefits Schedule, she qualified for and received from the appellant, Allstate Insurance Company of Canada, a weekly education benefit. A dispute then arose about whether she was entitled to a loss of earning capacity benefit. Allstate initially contended that she was not entitled to this benefit because her residual or post-accident earning capacity was greater than her pre-accident earning capacity. Later, relying on the report of an independent assessor, which recommended that she could work at certain jobs, Allstate paid Ms. Attavar a small loss of earning capacity benefit.

[3] The trial judge, however, concluded that Ms. Attavar's residual earning capacity was zero, and he therefore awarded her a substantial loss of earning capacity benefit. He held that her psychological make-up precluded her from doing the jobs recommended by the independent assessor. The trial judge also awarded interest on the benefit from the time it was first due, at the rate of 2 per cent per month, the rate provided for overdue payments under s. 68 of the Schedule.

[4] Allstate appeals. It submits that the trial judge erred in holding that Ms. Attavar's residual earning capacity was zero and that he erred in awarding interest under s. 68 from the time the loss of earning capacity benefit was first payable, instead of from the date of his decision.

[5] Ms. Attavar cross-appeals. She contends that the trial judge erred by locking-in her pre-accident earning capacity instead of permitting it to increase as she became older. Therefore, these are the three issues on the appeal and the cross-appeal:

1. Did the trial judge err in holding that Ms. Attavar's residual earning capacity was zero?

2. Did the trial judge err in ordering interest under s. 68 of the Schedule from the time of Ms. Attavar's application for benefits instead of from the date of his decision? [page203]

3. Did the trial judge err in "locking in" Ms. Attavar's pre- accident earning capacity between February 1997 and February 2000?

B. Background Facts

[6] Ms. Attavar was born in 1976. She was a gifted student; the "bright light" of her family. She graduated early from high school, at age 17, with honours. She intended to pursue a "fast track" program: first an accounting degree and then an MBA. Eventually, she wanted to become a financial analyst. No one doubted that the goals she set for herself were realistic. The trial judge found her to be "a most intelligent, charming and candid witness".

[7] In the fall of 1994, Ms. Attavar was accepted into the Honours Bachelor of Business Administration program at York University. She was awarded a scholarship to pursue her studies. Before the accident, she maintained a B average and planned to graduate in April 1998.

[8] The accident occurred on February 16, 1995, in the winter of her first year of university. The driver of the sports car in which she was a rear-seat passenger lost control. Ms. Attavar suffered a closed head injury and a fractured pelvis. She was in a coma for 15 days. Even after she came out of the coma, for a period of time she was unable to walk or talk. She spent two months in a wheelchair. Ms. Attavar then underwent intensive rehabilitation, including speech therapy, physiotherapy and occupational therapy. Her speech improved substantially, and she can now walk unaided.

[9] However, many profound effects of the accident persist. At the time of the hearing before McGarry J., she suffered from cognitive deficiencies, difficulty concentrating, reduced hearing in her left ear, and numbness in her right thigh, calf and foot. She also had a loss of fine motor co-ordination and occasional tremors in her right hand, soreness and, at times, tightness in her upper shoulders, and difficulty maintaining her balance on uneven ground and in elevators.

[10] Despite these difficulties, Ms. Attavar tried to continue her university studies. In September 1995, she enrolled part-time in the Honours Bachelor of Business Administration program at York. The University's office for persons with disabilities gave her both accommodation and assistance. She was also assisted by an occupational therapist, a note-taker, a tutor and a case management worker. But her marks and her overall performance deteriorated. She began to realize that she could no longer succeed in the program that she had been so proud to be in.

[11] Although"emotionally speaking it was hard", in the early fall of 1997, she dropped out of the Honours program and switched [page204] into a less-demanding course: part-time study in a business administration program. She also worked on campus as a waitress. In the fall of 1998, she switched into a part-time liberal arts degree program because her marks were not good enough for the business administration program. She also tried working as a bank teller, but she could not cope and quit after two months. In April 1999, she failed an exam. At the time of trial in November 1999, Ms. Attavar's prospects of graduating from university seemed poor.

C. Ms. Attavar's Entitlement to Statutory Accident Benefits

[12] Ms. Attavar is an insured person under the governing Statutory Accident Benefits Schedule -- Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93 (the "Schedule"). For the first two years or 104 weeks after the accident -- that is between February 1995 and February 1997 -- Allstate paid Ms. Attavar a weekly education disability benefit in accordance with s. 15(1) of the Schedule, which provides, in part:

15(1) An insured person who sustains an impairment as a result of an accident is entitled to a weekly education disability benefit if the insured person meets the following qualifications:

1. . . .

ii. was enrolled on a full-time basis in . . . post- secondary education at the time of the accident . . .

2. The insured person, as a result of and within two years of the accident,

i. suffers a substantial inability to continue his or her education, in the case of an insured person who qualifies under subparagraph . . . ii of paragraph 1, [. . . or]

iii. suffers a partial or complete inability to carry on a normal life, in the case of an insured person who qualifies under subparagraph . . . ii . . . of paragraph 1.

[13] In making these payments, Allstate thus accepted that, as a result of the accident, Ms. Attavar suffered "a substantial inability to continue . . . her education" or "a partial or complete inability to carry on a normal life".

[14] Under ss. 20 and 21 of the Schedule, after 104 weeks, the education disability benefit ends and is replaced by a weekly loss of earning capacity benefit ("LECB"), which is payable for the lifetime of the insured person. The amount of an insured person's [page205] LECB is calculated by a formula set out in s. 28 of the Schedule. Ms. Attavar's LECB -- calculated under s. 28(2) -- is her pre-accident earning capacity ("PEC") less 90 per cent of her residual earning capacity ("REC"). The formula for calculating her LECB is therefore:

LECB = PEC - (0.90 x REC)

[15] Apart from the narrow issue raised on the cross-appeal, the parties agree on Ms. Attavar's PEC, which is calculated under s. 29 of the Schedule. The main dispute centres on her REC. Section 30 of the Schedule sets out the criteria for determining a person's REC. Subsections 30(1) and (2) provide:

30(1) For the purpose of this Part, the residual earning capacity of a person shall be deemed to be the net weekly income determined in accordance with section 81 or 82 using the gross annual income that the person could earn from the type of employment that best satisfies the criteria set out in subsection (2).

(2) The criteria referred to in subsection (1) are:

1. The person,

i. is able and qualified to perform the essential tasks of the employment, or

ii. would be able and qualified to perform the essential tasks of the employment if the person had not refused to obtain treatment or participate in rehabilitation that was reasonable, available and necessary to permit the person to engage in the employment.

2. The employment exists in the area in which the person lives and is accessible to the person.

3. It would be reasonable to expect the person to engage in the employment having regard to the possibility of deterioration in the person's impairment and to the person's personal and vocational characteristics.

[16] As I will discuss, at the heart of the dispute between Ms. Attavar and Allstate is the application of s. 30(2)3: whether it was reasonable for Ms. Attavar to engage in certain proposed jobs, having regard to the possibility of deterioration in her impairment and to her personal and vocational characteristics.

[17] Allstate initially took the position that Ms. Attavar's REC was greater than her PEC, and it therefore maintained that she was not entitled to an LECB. It made an "offer" under s. 21 of the Schedule to pay her a zero LECB. Ms. Attavar rejected the offer. Under s. 23(2) of the Schedule"[a]n insured person who rejects the insurer's offer in respect of residual earning capacity" must [page206] be assessed at a Designated Assessment Centre ("DAC"). The assessment report is commonly called a REC/ DAC.

[18] Allstate arranged for Ms. Attavar to be assessed by Link with Work. The assessment took place over eight days in September 1997. The Link with Work REC/DAC recommended two jobs it considered appropriate for Ms. Attavar: either a retail sales clerk (in a music, kitchen or card store) at an annual salary of $16,412 or a self-serve gas-bar attendant at an annual salary of $12,451. Based on these recommendations, Allstate began paying Ms. Attavar an LECB of $132.44 bi-weekly, retroactive to February 1997, when her education disability benefit terminated.

[19] A REC/DAC is not binding on an insured, [See Note 1 at end of document] and Ms. Attavar disagreed with Link with Work's assessment. She acknowledged that she was qualified to perform the essential tasks of the two jobs under s. 30(2)1 of the Schedule and that the jobs were available and accessible under s. 30(2)2. But, she maintained that under s. 30(2)1 she was unable to perform the two jobs and that under s. 30(2)3 it was not reasonable to expect her to engage in these jobs, having regard to the possibility of deterioration in her impairment and to her personal and vocational characteristics. She claimed that her REC was zero and brought this litigation to vindicate her claim.

[20] The trial judge accepted Ms. Attavar's position. He concluded that her REC was zero and he therefore ordered Allstate to pay her an LECB of $291.03 per week.

D. Discussion

1. First Issue: Did the trial judge err in holding that Ms. Attavar's residual earning capacity was zero?

[21] Allstate submits that the trial judge erred in two ways: first, he failed to apply the criteria in s. 30 of the Schedule, and second, he failed to give effect to s. 34(1) of the Schedule. I do not accept either submission.

[22] Admittedly, the trial judge did not explicitly refer to the criteria in s. 30(2) of the Schedule that, in his view, were not met. It seems to me, however, that he relied on s. 30(2)3:

30(2)3. It would be reasonable to expect the person to engage in the employment having regard to the possibility of deterioration in the person's impairment and to the person's personal and vocational characteristics. [page207]

[23] I say that because, in holding that Ms. Attavar's REC was zero, the trial judge made this key finding at para. 31 of his reasons:

Having considered the facts of this case and the decisions of the arbitrators, it is my view that I must take into consideration not only the physical and mental ability for an individual to work at the jobs recommended by the REC/DAC, but to also [sic] the psychological make-up of the claimant. I accept the evidence of the two psychologists called by the plaintiff and find that requiring Suman to work at the jobs suggested by the REC/DAC would be very destructive and she would in due course be unable to work full time at either occupation as she would find them both demeaning and not worthy of her abilities which, as opined by the psychologists, would result in a deepening depression and termination of her employment.

[24] Thus the trial judge concluded that it was not reasonable for Ms. Attavar to engage in either of the jobs recommended by Link with Work, because if she did, one of her personal characteristics -- her psychological make-up -- made it likely that one of her impairments -- her depression -- would worsen to the point where she could not cope with either job. In my view the trial judge's conclusion is supported by the wording of s. 30(2)3 and by the evidentiary record.

[25] The criteria in s. 30(2) contemplate the existence of a job in the area where the insured person lives, which the insured person is able and qualified to perform, and which it is reasonable for the insured person to take. An insured cannot contend it would be unreasonable to take a job simply because that job is not the insured's first choice. Some flexibility is required. Section 30(2)3 focuses on whether the employment is reasonable. See Liberty Mutual v. Joe Angolano, [2000] O.F.S.C.I.D. No. 47 at para. 26.

[26] In assessing whether it is reasonable to expect a person to engage in a job, a trier of fact must consider both the insured's personal and vocational characteristics and the possibility of deterioration in the insured's impairment. For the trial judge in this case, Ms. Attavar's most important personal characteristic was her psychological make-up.

[27] In my opinion, the trial judge could reasonably conclude that Ms. Attavar's psychological make-up is a personal characteristic under s. 30(2)3 of the Schedule. "Personal and vocational characteristics" are defined in s. 1 of the Schedule to "include":

(a) employment history,

(b) education and training,

(c) vocational interests and aptitudes,

(d) vocational skills,

(e) physical abilities, [page208]

(f) cognitive abilities, and

(g) language abilities.

[28] Although "psychological make-up" is not expressly listed, the definition is not exhaustive. A person's psychological make-up, however, is a personal characteristic that may well be relevant to a person's ability to engage in a particular job, especially where -- as in Ms. Attavar's case -- it is directly linked to a listed factor, here "vocational interests and aptitudes". The trial judge therefore did not err in taking Ms. Attavar's psychological make-up into account in determining her REC.

[29] Nor did the trial judge err in taking into account the likely deterioration in Ms. Attavar's depression if she attempted to do either job suggested by Link with Work. Depression can be an impairment because s. 1 of the schedule defines "impairment" to mean "a loss or abnormality of psychological, physiological or anatomical structure or function" (emphasis added). Here, Ms. Attavar's depression was one of the impairments she suffered because of the accident.

[30] I expect most, if not all, of us would at least be disappointed if injuries from an accident forced us to work at a job less meaningful than the job we aspired to before the accident. Some grief or sadness is inevitable. Nonetheless, it may still be reasonable for a person to engage in that employment, depending on the likely effect of doing so. In this case, however, it was not reasonable for Ms. Attavar to engage in either of the two suggested jobs because, had she done so, she would likely have suffered a major clinical depression.

[31] Indeed the evidence shows that after the accident Ms. Attavar suffered a mild depression, which worsened over time, and that had she tried to work at either recommended job, this depression would deepen to the point where it would be even more difficult for her to function. In the light of this evidence, the trial judge concluded that it was not reasonable for Ms. Attavar to engage in these jobs.

[32] His conclusion is amply supported by the evidence of the two psychologists called by Ms. Attavar, whose testimony the trial judge accepted. Dr. Trevor Smith, an expert in rehabilitation psychology, testified that the jobs suggested by Link with Work were "discordant" with Ms. Attavar's continuing ambitions in the field of finance and business and, as permanent jobs, would amount to a "sentence of psychological death for her".

[33] Dr. Tony Iezzi, a psychologist with expertise in assessing and managing patients coping with the emotional and physical consequences of trauma, undertook a comprehensive psychological [page209] assessment of Ms. Attavar in which he evaluated her vocational stability for the jobs suggested by Link with Work. Dr. Iezzi found that when Ms. Attavar was assessed by Link with Work she was suffering from a mild depression because of the accident. By the time he saw her, however"she was suffering from significant levels of emotional distress, largely in the form of major depression."

[34] In Dr. Iezzi's opinion, doing either job recommended by Link with Work would constantly remind her that she had been unable to achieve her goals. He was then asked what would happen to her psychologically if she tried to do these jobs, and he gave this telling answer:

A. You would expect her to become more depressed, more frustrated, more angry, more discouraged, and you would expect her to eventually give up trying.

Q. With what result then?

A. Umm, a higher level of depression, which would make it even more difficult for her to function, would in fact also, you would predict that it would magnify her cognitive difficulties to an even greater extent, which of course, would make her more distressed and then you're in this vicious cycle.

Dr. Iezzi therefore concluded that it was not reasonable for Ms. Attavar to attempt either job.

[35] Indeed, the two jobs recommended by Link with Work were incompatible with the paramount goal underlying Ms. Attavar's rehabilitation: ensuring the continued pursuit of her university studies. Link with Work looked at Ms. Attavar's rehabilitation from a narrow vocational perspective and, thus, did not adequately take into account the psychological impact on her of doing these jobs. Even Allstate's expert acknowledged that it would be unreasonable for Ms. Attavar to abandon her studies and do the jobs recommended by Link with Work.

[36] In considering all the evidence before him, in my view the trial judge was justified in holding at para. 9:

[A]t some point in the future she would find this form of employment unacceptable due to her emotional state brought on by her depression which relates to her cultural background and expectations of her parents who looked upon her as the bright light in their family. In due course, she would be overwhelmed with a sense of guilt based upon the conclusion that she has not achieved her goals in life and eventually will give up trying.

[37] I am therefore satisfied that in finding Ms. Attavar's REC to be zero, the trial judge properly applied the criteria in s. 30 of the Schedule.

[38] Allstate acknowledges the possibility that Ms. Attavar's impairment will deteriorate in the future if she works at either of the jobs proposed by Link with Work, but submits that any future deterioration should be addressed under s. 34(1) of the Schedule: [page210]

34(1) A person receiving weekly loss of earning capacity benefits may require the insurer to review the amount of the benefit if the person provides the insurer with a certificate from a health practitioner stating that the person has suffered a permanent deterioration in his or her impairment as a result of the accident that makes the person unable to engage in employment in which the person could earn the gross annual income that was used to determine the person's residual earning capacity for the purpose of determining the amount of the person's weekly loss of earning capacity benefit.

[39] Allstate contends that the trial judge erred by failing to give any weight to s. 34(1). In my view, s. 34(1) does not apply in this case. Section 34(1) deals with a future permanent deterioration in a person's impairment, which would then require a review of the LECB already being paid. Section 30(2)3 of the Schedule requires an assessment of "the possibility of deterioration in the person's impairment" in order to determine a person's REC and, thus, LECB. In other words, s. 34(1) deals with future unforeseen deterioration, while s. 30(2)3 deals with cases where the possibility of deterioration is foreseeable. In fixing Ms. Attavar's REC at zero, the trial judge considered the possibility that Ms. Attavar's depression would deteriorate. Had he not done so, he would not have properly applied the section.

[40] Accordingly, I would not give effect to the first ground of appeal advanced by Allstate.

2. Second Issue: Did the trial judge err in ordering interest under [s. 68](https://www.canlii.org/en/on/laws/regu/o-reg-776-93/latest/o-reg-776-93.html#sec68_smooth) of the [Schedule](https://www.canlii.org/en/on/laws/regu/o-reg-776-93/latest/o-reg-776-93.html) from the time of Ms. Attavar's application for benefits instead of from the date of his decision?

[41] Section 68 of the Schedule requires the insurer to pay interest on overdue payments of benefits from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.

68. If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.

[42] The trial judge ordered Allstate to pay interest under this section, 14 days after it had received Ms. Attavar's application for an LECB. He concluded at para. 4 of his supplementary endorsement dated March 8, 2001, that the insurer must bear the consequences of its decision not to pay benefits later found to be owing:

In reviewing the case law which is that of various arbitration awards, it is clear that the precedents establish that failing unusual circumstances brought on by the complexity of the action and/or the applicant's own behaviour "it is the insurer not the insured who must bear the consequences of a decision not to pay benefits that are found later to be owing", Canadian Surety Company v. Sebastian [infra] decision of Susan Naylor, Director's Delegate. In this case [page211] there are no unusual circumstances and consequently, I agree with the policy established by the Director's Delegate requiring that interest be paid in accordance with the calculations contained in Attachment A.

[43] Allstate submits that the trial judge erred because the payment he ordered was not due until he made his decision. Therefore, at the time of Ms. Attavar's application for benefits, and up until the trial decision, no payment was "overdue".

[44] Allstate points out that it paid Ms. Attavar the benefit recommended by the REC/DAC assessment. It likens that assessment to an interim order, binding on the parties until the court determines otherwise. It contends that s. 68 should be interpreted in a way that encourages insurers to comply with REC/DAC recommendations.

[45] I am inclined to agree with the trial judge for two reasons: the wording of s. 62 of the Schedule and the policy underlying s. 68.

[46] Under s. 62(2), an insurer is required to mail or deliver an LECB at least once every second week while the insured person remains entitled to the benefit. Under s. 62(4), an amount payable under Part VI (Loss of Earning Capacity Benefits) of the Schedule is overdue if the insurer fails to comply with s. 62(2). Thus, under these provisions, Ms. Attavar was entitled to the amount of the LECB found owing by the trial judge by the second week after her weekly education benefit ended. Any amounts not paid by the insurer from that date were overdue and thus attracted interest under s. 68.

[47] Had the drafters of the Schedule intended that insurers avoid s. 68 by paying the amount recommended by the REC/DAC assessment, they could have said so. For example, by contrast, s. 62(5) of the Schedule expressly states that a payment is not overdue where an insured person fails to furnish a health practitioner's certificate in response to a request for one from an insurer. Section 62 does not contain a similar provision saying a payment is not overdue if the insurer pays the amount recommended in a REC/DAC.

[48] Moreover, I do not consider as sound the analogy drawn by Allstate between an interim order and a REC/DAC recommendation. Certainly, as the Director's Delegate said in M.D. v. Halifax Insurance Co., supra (at para. 17): "The DAC Report is not just another opinion." And, under s. 23(5) of the Schedule, the insurer may begin paying an LECB based on a REC/ DAC determination. But the Schedule does not treat a payment in accordance with a REC/DAC recommendation as a binding interim order that stops the running of interest. Still, an insurer has an incentive to pay the LECB recommended by a REC/ DAC assessment, for in doing [page212] so it will either reduce or eliminate the amount of the benefit that will attract interest under s. 68.

[49] Although the amount of interest provided for in s. 68 is above the bank rate, I, like several arbitrators, regard s. 68 as compensatory, not punitive. The provision is designed to compensate insureds for the time value of money and to encourage insurers to pay accident benefits promptly. Without a provision like s. 68, insurers would have an incentive to delay paying benefits properly owing, thus forcing insureds to litigate their claims. I agree with the comments of Arbitrator McMahon in Urquhart v. Zurich Insurance Co., [1998] O.I.C.D. No. 34 at para. 14:

In addition to the specific intent of compensating the insured for the delay in obtaining the benefit, it cannot be ignored that the interest provisions are part of a larger scheme designed to encourage Insurers to pay benefits in a prompt fashion. In many cases insured persons are not in a position to pay for supplementary treatments or services out of their own resources.

And, with the similar comments of the Director's Delegate Naylor in Sebastian v. Canadian Surety Co., [1998] O.F.S.C.I.D. No. 130 (O.F.S.C.) at para. 31:

Canadian Surety characterised the interest rate as punitive, designed to punish insurers for reprehensible behaviour. In my view, the interest component in the benefits scheme should be seen as remedial. It is designed not only to compensate applicants for the value of money withheld but to further the system's fundamental goal of ensuring prompt payment of benefits for an injured person's medical and vocational rehabilitation, their care or their day-to-day financial support.

[50] I would therefore not give effect to this ground of appeal.

3. Third Issue: Did the trial judge err in "locking in" Ms. Attavar's pre-accident earning capacity between February 1997 and February 2000?

[51] Under s. 29(5) of the Schedule, an insured person's PEC -- on which the person's LECB depends -- is determined by multiplying net weekly income (calculated under ss. 81 and 82 of the Schedule) by a specified factor. That factor -- and thus a person's PEC -- is higher the older the person is. This correlation between the factor and age makes good sense because assuming no accident, a person's earning capacity typically increases as the person gets older. Section 29(5) provides:

29(5) For the purpose of determining the amount of a weekly loss of earning capacity benefit under this Part, the pre- accident earning capacity of a person who is entitled to weekly education disability benefits under section 15 shall be determined in accordance with the following formula:

B = D x E [page213]

where,

B = the pre-accident earning capacity,

D = the factor in the Table to this subsection set out opposite the range that includes the age the person has attained at the time the weekly loss of earning capacity benefit is to be paid.

E = the net weekly income determined in accordance with section 81 or 82 using a gross annual income from employment equal to 52 multiplied by the Average Weekly Earnings for Ontario, Industrial Aggregate, for the month of June in the year immediately preceding the year in which the determination of pre-accident earning capacity is first made under this section, as published by Statistics Canada under the authority of the Statistics Act (Canada).

TABLE

Age Range (Years) Factor

16 or over but under 18 0.55

18 or over but under 20 0.60

20 or over but under 22 0.65

22 or over but under 24 0.70

24 or over but under 26 0.75

26 or over but under 28 0.80

28 or over but under 30 0.85

30 or over 0.90

[52] When Ms. Attavar first qualified for an LECB in February 1997, she was 20 years old. Thus, the applicable factor for determining her PEC was 0.65. In November 1998, Ms. Attavar turned 22. She contended at trial, as she does on her cross- appeal, that on her 22nd birthday, the applicable factor became 0.70 and that her PEC should be increased accordingly.

[53] The trial judge, however, rejected this contention. He held that her PEC remained "locked in" with the factor 0.65 until February 2000, when under s. 33(1) she was entitled to a review of the amount of her LECB. Section 33(1) provides for a mandatory review of an LECB three years and eight years after it is first paid.

[54] In my view, the trial judge erred in locking in Ms. Attavar's PEC because he failed to give effect to the definition of D in the formula in s. 29(5):

D = the factor in the Table to this subsection set out opposite the range that includes the age the person has attained at the time the weekly loss of earning capacity benefit is to be paid.

(Emphasis added)

[55] As counsel for Ms. Attavar pointed out in his factum, for benefits paid before her 22nd birthday, the age Ms. Attavar had attained "at the time the weekly loss of earning capacity benefit [was] to be paid" brought her within the 20 to 22 category. Thus, [page214] the appropriate factor was 0.65. But for the benefits to be paid after her 22nd birthday, the age Ms. Attavar had attained "at the time the weekly loss of earning capacity benefit [was] to be paid" brought her within the 22 to 24 category. Thus, the appropriate factor under s. 29(5) was 0.70.

[56] This interpretation gives effect to the formula in s. 29(5) and to s. 20(2) of the Schedule, which provides:

20(2) A weekly loss of earning capacity benefit under this Part is payable during the lifetime of the insured person and is subject to such adjustments in the amount of the benefit as are provided in this Regulation.

[57] I interpret the higher factor that accompanies an increase in age to be an "adjustment" under s. 20(2). This interpretation furthers the remedial purpose of the Schedule. I would therefore allow Ms. Attavar's cross-appeal.

E. Conclusion

[58] I would dismiss the appeal. I would allow Ms. Attavar's cross-appeal and amend the trial judgment in accordance with these reasons. Ms. Attavar is entitled to her costs of the appeal, which I would fix at $10,000, plus disbursements and GST, the amount substantially agreed to by both sides.

Appeal dismissed; cross-appeal allowed.

Notes

Note 1: Nor is it binding on an insurer. The party disagreeing with REC/DAC may apply for mediation and, if the dispute is not resolved, go to court or arbitration. See M.D. v. Halifax Insurance Co., [2001] O.F.S.C.I.D. No. 71 (O.F.S.C.) at para. 17.