CITATION: Waterloo Insurance v Switzer, 2023 ONSC 604

DIVISIONAL COURT FILE NO.: 453/21

DATE: 20230131

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BACKHOUSE, MATHESON & KURZ JJ.

BETWEEN:

WATERLOO INSURANCE

Appellant

– and –

MICHAEL SWITZER

Respondent

Kathleen O’Hara, for the Appellant

Gordon Marsden, for the Respondent

HEARD at Toronto: January 23, 2023 (by videoconference)

REASONS FOR DECISION

By the Court:

1This is a statutory appeal from the decision of the Licence Appeal Tribunal dated May 12, 2021,¹ and related reconsideration decision dated April 5, 2022,² both decisions of Adjudicator Lake. The issue relates to the interpretation of the Statutory Accident Benefits Schedule – Effective September 1, 2010³ (the “SABS”) provisions regarding income replacement benefits or “IRBs” for self-employed persons.

2For the reasons set out below, this appeal is granted.

Brief Background

3The respondent Michael Switzer was in a motor vehicle accident on February 3, 2018. He was a self-employed lawyer.

4Among other benefits, the respondent claimed entitlement to IRBs, giving rise to this dispute about the proper approach to calculate IRBs in his case.⁴

5The respondent had started his own firm (Switzer PC) as of May 17, 2017, less than a year before the accident. His new firm had not yet made a profit. He had previously been self-employed with the law firm Flaherty, McCarthy LLP for several years. At his prior firm, he had earned a substantial annual income (over $500,000).

6There is no dispute that the respondent is entitled to IRBs commencing from February 10, 2018. The issue is the quantum. The respondent argued before the Adjudicator that he was entitled to $1000/week, and the appellant argued the weekly entitlement came to $nil.

7The Adjudicator found that the respondent was entitled to $711.15 per week from February 10, 2018 to December 31, 2018 (reduced from $1,000 due to some income that he earned post-accident) and $1,000 per week from that time forward. The Adjudicator accepted that the respondent could have the IRBs calculated under s. 4(2)3 of the SABS and based on the designation of the December 31, 2016 year end of his prior law firm even though it had been more than eight months since he had been with that firm. The appellant submits that s. 4(2)3 is not available to the respondent, and he cannot rely on his prior law firm’s financial year-end information.

8At the hearing before this court, counsel to the appellant frankly acknowledged that the appellant’s interpretative argument had just changed based upon a further examination of the SABS. More specifically, the appellant now relies on s. 5 of the SABS in the interpretation of s. 4. Respondent’s counsel was given the option of an adjournment to respond to the new legal argument but preferred to proceed and addressed the interpretive issues as they had developed.

Issues and Standard of Review

9This appeal, pursuant to s. 11 of the Licence Appeal Tribunal Act, 1999⁵ is limited to questions of law.

10The issue before us is whether the LAT erred in its interpretation of s. 4 of the SABS for a self-employed person in the respondent’s situation, including whether s. 4(2)3, properly interpreted, applies to the respondent.

11As a statutory appeal, the standard of review is set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. On questions of law, the standard is correctness.

12There is no issue about the proper approach to statutory interpretation, which is as set out in Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, at para. 26.

Analysis

13IRBs are addressed in Part II of the SABS, in ss. 4 – 11. The eligibility criteria are in s. 5. There is no issue that the respondent sustained an impairment as a result of the accident, a requirement for eligibility. Subsection 5(1) then distinguishes between eligibility for employees and for self-employed persons:

5. (1) The insurer shall pay an income replacement benefit to an insured person who sustains an impairment as a result of an accident if the insured person satisfies one or both of the following conditions:

6. The insured person,

i. was employed at the time of the accident and, as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of that employment, or

ii. was not employed at the time of the accident but,

A. was employed for at least 26 weeks during the 52 weeks before the accident or was receiving benefits under the Employment Insurance Act (Canada) at the time of the accident,

B. was at least 16 years old or was excused from attending school under the Education Act at the time of the accident, and

C. as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of the employment in which the insured person spent the most time during the 52 weeks before the accident.

2. The insured person,

i. was a self-employed person at the time of the accident, and

ii. suffers, as a result of and within 104 weeks after the accident, a substantial inability to perform the essential tasks of his or her self-employment. [Emphasis added.]

14There is no issue that the respondent was a self-employed person at the time of his accident and for the relevant period prior to the accident.

15Subsection 5(1) distinguishes between employed persons (addressed in s. 5(1)1) and self-employed persons (addressed in s. 5(1)2). Subsection 5(1) allows for the possibility that an employed person may also be self-employed. However, the respondent was self-employed only.

16The respondent is eligible under s. 5(1)2 as a self-employed person, not under s. 5(1)1.

17The above eligibility provisions have a role in determining the quantum of IRBs. Section 4 addresses income using the eligibility categories from s. 5 and incorporates the possibility (which does not arise here) that a person may have been both employed and self-employed in the relevant time periods:

4. (1) In this Part,

(2) The gross annual employment income of an insured person is determined as follows:

1. In the case of a person referred to in subparagraph 1 i of subsection 5 (1) who was not a self-employed person at any time during the four weeks before the accident, the person’s gross annual employment income is whichever of the following amounts the person designates:

i. The person’s gross employment income for the four weeks before the accident, multiplied by 13.

ii. The person’s gross employment income for the 52 weeks before the accident.

2. Subject to paragraph 3, the person’s gross annual employment income is his or her gross employment income for the 52 weeks before the accident if,

i. the person qualifies for a benefit under subparagraph 1 i of subsection 5 (1) and was a self-employed person at any time during the four weeks before the accident, or

ii. the person qualifies for a benefit under subparagraph 1 ii of subsection 5 (1).

3. If the person described in subparagraph 2 i was self-employed for at least one year before the accident, the person may designate as his or her gross annual employment income the amount of his or her gross employment income during the last fiscal year of the business that ended on or before the day of the accident.

(3) A self-employed person’s weekly income or loss from self-employment at the time of the accident is ...

(4) A self-employed person’s loss from self-employment after an accident is … [Emphasis added.]

18The Adjudicator applied s. 4(2)3. The Adjudicator erred in overlooking the s. 5(1)1 i requirements of s. 4(2)3, which are not met by the respondent. Subsection 4(2)3 applies to people described in s. 4(2) i – people who qualify under s. 5(1) 1 i – not the respondent.

19The Adjudicator therefore erred in law in proceeding under s. 4(2)3. Subsection 4(2)3 is available only if the person qualifies for a benefit under s. 5(1)1 i and was a self-employed person at any time during the four weeks before the accident.

20In this case, the Adjudicator ought to have proceeded under s. 4(3), which provides as follows:

A self-employed person’s weekly income or loss from self-employment at the time of the accident is the amount that would be 1/52 of the amount of the person’s income or loss from the business for the last completed taxation year as determined in accordance with Part I of the Income Tax Act (Canada).

21Subsection 4(4) may also be applicable.

22Unfortunately, due to the above error, there is no adequate analysis of the correct subsections or the evidentiary record (including expert evidence) from which to proceed. While there may be overlap between arguments and evidence for the different subsections, this court is not in a position to fully address the matter. The other issues raised on this appeal will therefore not be addressed. This matter must be sent back for a fresh hearing, allowing for additional evidence, based on these legal principles.

23On the subject of evidence, we note the following. The Adjudicator’s order stated that the IRB payment of $1,000 was from January 1, 2019 “and ongoing”. The appellant has made submissions before us about potential evidence that the respondent had income from Switzer PC commencing in the year ended September 2018 and forward based upon a family law decision about the respondent. That evidence, if available, is not before us. The appellant further submits that the Adjudicator erred in finding that there was “no evidence” that the appellant had requested information about the respondent’s post-accident income. It is apparent that there was evidence that the appellant had made requests, evidence that the Adjudicator overlooked. The appellant further submits that the respondent failed in his duty to disclose, and that the Adjudicator erred in effectively shifting the onus of proof on to the appellant. On the onus, the Adjudicator agreed in the reconsideration that the burden of proof was on the respondent, but this was tied into the non-disclosure issues.

24In argument before this court, there was no issue that the appellant was entitled to updated financial information on request if not also an obligation to volunteer the information. The parties disagreed on whether the appellant could unilaterally stop paying benefits based on updated financial information. The respondent submitted that the appellant could unilaterally stop payments. The appellant was of the view that it would have to go back and get the LAT order changed.

25The discussion of these issues shows that the fresh LAT hearing should include the opportunity to request and receive updated financial disclosure from the respondent, and permit additional evidence at the hearing, so that there does not need to be yet another LAT hearing based on post-accident financial information.

Order

26This appeal is therefore granted with costs to the appellant fixed in the agreed-upon amount of $5,000, all inclusive. The LAT decisions regarding income replacement benefits are set aside and this matter is remitted back to the LAT for a fresh hearing on income replacement benefits, before a different adjudicator, with a fresh opportunity to put forward evidence before the adjudication.

Footnotes

1. 12021 111146
2. 22022 27505
3. 3O.Reg. 34/10
4. 4Although not material to the statutory interpretation issues here, the respondent had purchased optional coverage increasing his potential IRB amount from $400 to $1,000.
5. 5S.O. 1999, c. 12, Sch. G