Neutral Citation: 1992 ONICDRG 13

File No. A-000808

ONTARIO INSURANCE COMMISSION

BETWEEN:

ANTONIO PALLOTTA

Applicant

and

ALPINA INSURANCE CO. LTD. (ZURICH INSURANCE COMPANY)

Insurer

DECISION

Issue:

The Applicant was injured in an automobile accident on November 6, 1990. He was insured under a standard automobile owner's policy issued by the Insurer. Every motor vehicle liability policy provides for the no-fault benefits specified in Ontario Regulation 273/90 ("the No-Fault Benefits Schedule"), and enacted under the Insurance Act, R.S.O. 1990, c. I.8 ("the Act").

The Insurer paid weekly benefits under the policy on the basis that the Applicant was disabled to the extent required under the regulations. In calculating the amount of the benefits, however, the Insurer made several deductions. It deducted the amount of a monthly workers' compensation disability pension that the Applicant received for a prior back injury. It also deducted the amount of a disability insurance benefit that the Applicant receives because of the accident under a private accident and sickness insurance policy issued by North American Life and Casualty Company. The Applicant disputed this deduction. Mediation on the issue was unsuccessful, and the Applicant applied for the appointment of an arbitrator under the Act.

The issues to be determined in this arbitration are:

1. Is the monthly workers' compensation pension a "payment for loss of income" that is received by the Applicant under Ontario laws, within s. 13(3)(a) of the No-Fault Benefits Schedule, and so deductible in calculating his no-fault weekly benefit?

2. Is the disability insurance benefit received by the Applicant from North American Life and Casualty Company a "payment for the loss of income...received...under any income continuation benefit plan", within s. 13(3)(a) of the No-Fault Benefits Schedule, and so also deductible in calculating his weekly benefit?

Result:

The decision is:

1. The monthly workers' compensation pension is not a "payment for loss of income" that is received by the Applicant under Ontario laws, within s. 13(3)(a) of the No-Fault Benefits Schedule. Therefore, it is not deductible from the amount of his no-fault weekly benefit.

2. The disability insurance benefit received by the Applicant from North American Life and Casualty Company is a "payment for loss of income...received...under any income continuation benefit plan", within s. 13(3)(a) of the No-Fault Benefits Schedule. Therefore, it is deductible from the amount of his no-fault weekly benefit.

At the hearing, the Applicant raised the issue of his entitlement to continuing benefits. His no-fault weekly benefits had apparently been terminated shortly before the hearing. The duration of the

Applicant's disability had not previously been identified as an issue in the arbitration. As the parties were not in a position to address this issue at the hearing, only the issue of the amount of benefits to which the Applicant is entitled was dealt with. It was determined that a further hearing would be convened in the event that the Applicant requested a ruling on his entitlement to benefits from the date of termination onwards.

Hearing:

An arbitration hearing was conducted at North York on December 18, 1991, before me, Susan Naylor, Arbitrator. Present at the hearing were:

The Applicant:

Antonio Pallotta

The Insurer:

Represented by Jim Herbrand

Branch Claims Manager

Zurich Insurance Company

The Applicant was the sole witness to testify at the hearing. The evidence was translated by an Italian interpreter, Mr. Joseph Dionigi.

Documents before the Arbitrator:

Exhibit 1:

Report entitled Service Entitlement Report, Workers' Compensation Board, dated July 8, 1985

Exhibit 2:

Statement of Explanation of Benefits, from North American Life and Casualty Company, dated November 25, 1991, and Cheque Stub #17839, indicating an amount of $300.00.

Exhibit 3:

Cheque Stub #028099, indicating payment for disability from November 6, 1990 to August 26, 1991, at $65.00 per week.

In addition, the following documents were provided to the arbitrator, but not marked as exhibits:

• Application for Appointment of an Arbitrator, filed on November 13, 1991

• Response of Insurer, filed on November 26, 1991

• Report of Mediator, dated October 28, 1991

At the request of the arbitrator, subsequent to the hearing, the Applicant provided a copy of the policy issued by North American Life and Casualty Company. This was a nine-page document.

The Evidence:

The Applicant testified that he was injured in an automobile accident on November 6, 1990.

He testified that he had previously suffered a low back injury at work on August 31, 1981. He was awarded a pension of $220.00 a month by the Workers' Compensation Board. The Applicant continues to receive this amount each month.

Exhibit 1 is a memorandum from the Workers' Compensation Board, dated July 8, 1985. It is entitled "Vocational Rehabilitation History, Service Entitlement Report". It reviews the Applicant's history. It indicates that he was rated for a 10% permanent disability award on May 13, 1985.

The Applicant testified that his pension is paid for life. It does not depend upon whether he is unable to return to work or can only return to a lower-paying job.

The Applicant did, in fact, return to work at some time after his initial back injury. He last worked for a company called Penton Construction Company, from mid-1988 to October 18, 1989. At that time, he had a recurrence of his back injury, which forced him to stop work. He has not worked since.

The Applicant testified that he would have been ready to return to work by November 1990, when the automobile accident happened. However, he was prevented from working by the injuries he sustained in the automobile accident.

The Applicant also receives $300.00 a month under an accident and sickness policy from North American Life and Casualty Company. The Applicant first purchased the insurance policy in 1969. He pays the contributions himself. He testified that, when he purchased the policy, he was earning around $600.00 a month. This was considerably less than he was earning when he was first injured. He thought that the premiums he paid and the benefits he received were flat-rate amounts. They were not related to his earnings.

A copy of the policy was provided subsequent to the hearing. Attached to it is a copy of the application of the Applicant, entitled "Application for Family or Individual Health Insurance", No. 4003913. It is dated February 23, 1971, and signed by the Applicant. It states that the Applicant is a driver of a light panel truck, delivering aluminium windows, at a monthly earned income of $600.00.

The insurance policy provides for a monthly benefit in the event of total disability arising from an accident or sickness. It also provides for the payment of fixed sums in the event of death or dismemberment.

The relevant provisions of the policy are as follows:

PART 1. MONTHLY BENEFIT - INJURY

If, within 90 days after the accident, injury requiring the regular care of a licensed physician or osteopath results in continuous total disability which continues beyond the Elimination Period for Injury specified in the Schedule, the Company will pay benefit during such continuous total disability at the rate of the Monthly Benefit specified in the Schedule, commencing with the first day of such continuous total disability following the Elimination Period and for not longer than the Maximum Benefit Period for Injury specified in the Schedule. However, (a) if total disability of the Insured continues beyond the anniversary of the Policy Date next following the Insured's 65th birthday and benefit for less than 12 months has been paid, or, (b) if injury, within 90 days after the accident which occurs on or after such policy anniversary, results in continuous total disability, benefit payment shall be continued, or made, at the above rate during such total disability which continues beyond the Elimination Period for injury until a total of not more than 12 Monthly Payments have been made.

Any benefit payable under this Part 1, which is payable for a period during which the Insured is entitled to receive periodic benefit payment under the provisions of a Workmen's Compensation Act or similar law, shall be paid at the rate of one-half the Monthly Benefit specified in the Schedule.

Any period of total disability which results from injury and commences while this policy is in force but more than 90 days after the accident causing the injury shall be deemed to have resulted from sickness.

Under the "Definitions" section, the policy states:

"Total Disability" means the complete inability of the Insured to engage in any and every gainful occupation for which the insured is reasonably fit by education, training or experience. However, until the Insured has been disabled during any period of disability for a period equal to that shown in the Schedule as the Maximum Benefit Period for Sickness but not for more than twenty-four months, he shall be deemed totally disabled while he is unable to perform any and every duty of his occupation and is not engaged in any gainful occupation.

The Schedule to the policy provides that the maximum benefit period for injury is 24 months. It is also 24 months for sickness (but not beyond the anniversary of the policy date following the Insured's 65th birthday, except as provided in the policy). It provides for a 7-day waiting or elimination period. The principal sum is stated to be $300.00. The annual premium is listed at $159.00

The policy provides that benefits are reduced to one-half the regular monthly amount if the claimant is also entitled to workers' compensation or to payments under "a similar law". Before the automobile accident, the Applicant had received a monthly disability benefit of $150.00 while he was disabled from work after the recurrence of his back injury. This was half the usual amount because the Applicant was entitled to receive workers' compensation benefits while he was off work due to his back condition.

Exhibit 2 is a letter dated November 25, 1991 from North American Life and Casualty Company. It is entitled "Explanation of Benefits". It confirms that disability payment of $300.00 was made to the Applicant under the policy for the period from November 11, 1991 to November 30, 1991.

Exhibit 3 is a cheque stub No. 028099, annotated "Elizabeth Modica, Claims Dept." and "Agent, Derrin Insurance Broker." It states: "Disability from Nov. 6/90 to Aug. 26/91 at $65.00 per week. The first week is not paid."

The Legislation:

The relevant parts of Section 13 of the No-Fault Benefits Schedule are as follow:

Section 13

(1) The insurer will pay with respect to each insured person who sustains physical, psychological or mental injury as a result of an accident, a weekly benefit during the period in which the insured person suffers substantial inability to perform the essential tasks in which he or she would normally engage if he or she meets the qualifications set out in subsection (2).

(2) The following qualifications apply to an insured person who claims weekly benefits under subsection (1):

1. He or she as a result of an within two years of the accident must have suffered a substantial inability to perform the essential tasks in which he or she would normally engage.

2. He or she must not be entitled to receive a benefit under section 12 at the time of the payment of a benefit under this section or, if entitled to a benefit under that section, he or she must be a primary caregiver as described in subsection (4) and have only income from self-employment from work in his or her home.

3. He or she must attain the age of sixteen years before being eligible to receive the weekly benefit.

(3) The weekly benefit under subsection (1) will be $185 less any payments for loss of income, except Unemployment Insurance benefits.

(a) received by or available to the insured person under the laws of any jurisdiction or under any income continuation benefit plan; or

(b) received under any sick leave plan.

(7) A person cannot receive benefits under this section and section 12 at the same time.

Submissions of the Applicant:

The Applicant argued that his workers' compensation pension should not be deducted because it was payable for life, regardless of whether he was employed. He further argued that it is not possible to survive on the $700.00 a month that he receives. He submitted that he had always paid the premium for his automobile insurance policy, and he should be entitled to receive something in return.

With respect to the North American Life and Casualty insurance payments, the Applicant submitted that he had been paying them out of his own pocket, and should be entitled to receive something for them.

The Insurer:

The Insurer submitted that both payments represented payments for loss of income within the meaning of s. 13(3) of the No-Fault Benefits Schedule. The section, it was submitted, was clear and all-encompassing. The representative of the Insurer submitted that, while the pension was payable for life, both benefit payments stemmed from a reduced ability to earn income. He submitted that Section 13 was not intended as a replacement for wage loss from earnings, but represented a set amount in order to provide income and off-set expenses incurred as a result of disability. For example, some temporary domestic help could be hired for an applicant's additional needs resulting from his or her disability. If the Applicant received two sets of benefits, there would be double recovery to defray these costs.

Findings:

The Applicant was injured in an automobile accident on November 6, 1990. At the time of the accident, he was not employed or self-employed.

There is no issue that the Applicant was disabled from his usual tasks because of the injuries he sustained in the automobile accident, and that he is therefore entitled to a weekly benefit under Section 13 of the No-Fault Benefits Schedule. The issue in this arbitration is the amount of no-fault weekly benefits to which he is entitled, specifically, whether the workers' compensation pension and the private disability insurance payments he receives must be deducted.

The Applicant is entitled to no-fault weekly benefits under Section 13 of the No-Fault Benefits Schedule. Section 13 is contained in Part IV of the No-Fault Benefits Schedule. Part IV contains two types of weekly benefits.

"Weekly income benefits" are paid under Section 12. These are paid to persons who were employed or self-employed at the time of the accident, or had a record of recent such employment, as set out in s. 12(2) and (3). The Applicant does not qualify for benefits under these provisions.

Section 13 is subtitled "benefit if no income". It provides a weekly benefit to persons, such as the Applicant, who do not qualify for income benefits as employed or recently employed persons under s. 12. S. 13(1) provides for a weekly benefit where an applicant "suffers substantial inability to perform the essential tasks in which he or she would normally engage", as a result of an automobile accident. There is no issue that the Applicant meets this condition.

The amount of weekly benefits is not linked to employment earnings, but is a flat-rate sum. However, certain payments are deducted from this amount. In deducting these payments, s. 12(4) and 13(3) use the same wording.

Section 13(3) states:

The weekly benefit under subsection (1) will be $185 less any payments for loss of income, except Unemployment Insurance benefits,

(a) received by or available to the insured person under the laws of any jurisdiction or under any income continuation benefit plan; or

(b) received under any sick leave plan.

In this case, I am called upon to determine whether the payments made to the Applicant are "payments for loss of income" that are received by or available to him "under the laws of any jurisdiction" or "under any income continuation benefit plan". If so, they must be deducted from his weekly benefit. If both payments are deducted, instead of a weekly benefit of $185.00, the Applicant would only get $65.00 a week.

The No-Fault Benefits Schedule is remedial legislation, and, in accordance with the usual principles of statutory construction, must be accorded a broad and liberal interpretation, that best achieves the object and intent of the legislation.

The Workers' Compensation Pension

The Applicant receives $220.00 per month in the form of a workers' compensation pension. This is paid for a work-related injury that happened many years before the automobile accident. The payment is made under the Ontario Workers' Compensation Act. It is therefore received by the Applicant "under the laws of any jurisdiction" within the meaning of s. 13(3). The issue is whether the monthly pension is a "payment for loss of income" under this subsection.

These words have not been interpreted in the context of a claim for weekly benefits under Section 13. However, several arbitration cases have dealt with the meaning of the same words in the context of weekly income benefits under s. 12(4). According to these decisions, whether a payment represents a "payment for loss of income" within the meaning of s. 12(4) depends upon the nature and character of the specific payment, viewed in the context of the program in which it operates.

A previous arbitration decision, McCormick v. Economical Mutual Insurance Company, (Ontario Commission File No. A-000139, S. Naylor, Arbitrator, October 2, 1991) dealt with the deductibility of workers' compensation benefits paid for temporary total disability arising from a previous work-related accident. That decision concerned the interpretation of the words "payment for loss of income" under Section 12. The benefits were held to be payments for loss of income and so deductible.

On the basis of this decision, the Insurer argued that the workers' compensation pension likewise is a "payment for loss of income" under s. 13(3) and therefore deductible.

In my view, however, the workers' compensation pension received by the Applicant is not a "payment for loss of income" under s. 13(3) of the No-Fault Benefits Schedule. The rules governing payment of benefits for permanent disability are quite different than those governing payment of benefits for temporary disability, and the ruling in McCormick has no application in this case. (This distinction was expressly referred to on page 15 of the McCormick decision.)

Workers' compensation benefits are paid under a statutory scheme to protect employees against the consequences of injuries in the work-place. The Ontario Workers' Compensation Act provides for a range of benefits in the event of a work-related injury or disease. These include monetary periodic compensation for temporary and permanent disability, and health care and rehabilitation benefits.

In this case, the Applicant is entitled to receive a permanent workers' compensation pension, as a result of a work-related accident in 1981. Exhibit 1 confirms that the Applicant was awarded a 10 per cent permanent disability award. This pension was payable under Section 43 of the Workers' Compensation Act, R.S.O. 1980 c. 518, as amended.

The relevant parts of Section 43 state as follows:

43(1) Where permanent disability results from the injury, the impairment of earning capacity of the employee shall be estimated from the nature and degree of the injury, and the compensation shall be a weekly or other periodical payment during the lifetime of the employee, or such other period as the Board may fix, of a sum proportionate to such impairment not exceeding in any case the like proportion of 75 per cent of his average weekly earnings during the twelve months immediately preceding the accident, or such lesser period as he has been employed.

(2) Compensation for permanent disability is payable whether or not an award is made for temporary disability.

(3) The Board may compile a rating schedule of percentages of impairment of earning capacity for specified injuries or mutilations that may be used as a guide in determining the compensation payable in permanent cases.

Compensation for permanent disability therefore is based on the impairment of earning capacity resulting from the injury. This is estimated from the "the nature and degree of the injury". The Workers' Compensation Board uses a standardised "rating schedule" - known as the "meat-chart" - to estimate the degree of physical impairment, and so determine the impairment of earning capacity. It is expressed as a percentage (in this case, 10 per cent) of "total disability" of the "whole person", applied to the claimant's pre-accident wage rate. The pension is payable for life regardless of the actual effect of the injury upon a claimant's occupational situation. The Applicant's pension continues regardless of whether he was able to return to work and regardless of whether he in fact suffered any loss of income in the long run.

Professor Ison, in his text-book, Workers' Compensation in Canada, (2nd. ed.), 1989, Butterworths) states (at page 96):

The physical impairment method as traditionally used in Canada does not include an occupational variable, and it is not part of this method to consider the actual impact of the disablement on earnings. Thus in the calculation of compensation by this method, it is irrelevant that no adverse effect of the disability upon earning capacity may be apparent...or that the pension awarded may be inadequate in comparison with the actual loss of earnings.

Moreover, the amount of the pension may be seen to incorporate an aspect for other intangible losses, not just loss of earning capacity. Professor Ison states at page 99:

It is sometimes said that workers' compensation is payable only for loss of earnings or earning capacity and not for non-disabling pain and suffering, loss of enjoyment of life, loss of amenities or a shortening of expectation of life. However, this is not really correct...when the physical impairment method is used,...compensation is commonly awarded when there is no actual loss of earnings and no measurable impact on earning capacity. A pension in those cases might well be seen as compensation for the intangible losses mentioned.

In the arbitration decision of Branden K. Hui and Security National Insurance Company (Ontario Insurance Commission File No. A-000055, S. Naylor, Arbitrator, November 15, 1991), it was stated (page 17):

In order for payments to represent payments for loss of income, the payments must be predicated upon the occurrence of loss, and made for that loss. The loss for which the payment is made is not loss of employment per se, but loss of income. Generally, one would expect payments of this kind to terminate when the loss to which they pertain is made good.

That arbitration decision concerned the deductibility of termination pay and severance pay under the Employment Standards Act. It was held that these payments were not deductible under the No-Fault Benefits Schedule because the payment did not depend in any way upon the applicant incurring a loss of income as a result of the loss of his employment.

The Applicant's pension under the Workers' Compensation Act likewise is not paid to reimburse him for any actual loss of income, but for disability. A claimant may suffer no such loss of income but may still be entitled to a pension, based on the clinical impairment rating. The pension is payable for life. It should be added that the provisions of the legislation govern the character of the payment, not the Applicant's own individual occupational experience.

Payments do not constitute "payments for loss of income" merely because entitlement is initially triggered by a requirement of disability. Nor is the fact that the pension is based on a proportion of the Applicant's pre-injury earnings sufficient. In order to constitute "payments for loss of income", they must be predicated upon there being a loss of income and paid for that loss. This is not the case here.

I find that the workers' compensation pension, therefore, is not a payment for loss of income within the meaning of s. 13(3) of the No-Fault Benefits Schedule, and is not deductible.

The Private Disability Insurance Benefits

The Applicant is also receiving $300.00 a month under a private disability policy issued by North American Life and Casualty Company. The Applicant had been paying premiums since 1969. It is not disputed that these benefits were awarded to the Applicant because of the disabling effects of the automobile accident.

Following the recurrence of his work injury the previous year, the Applicant had been receiving $150.00 a month in disability payments under this policy while he was disabled from work because of his back injury. The amount of these payments were half the usual amount because the Applicant was getting workers' compensation benefits. Presumably, the Applicant received additional workers' compensation benefits for this period of total disability. The Applicant's own evidence was that he was ready to go back to work when the automobile accident occurred. I assume therefore that the insurance payments would have ceased but for his further disabling injuries.

The issue is whether the insurance payments of $300.00 a month that the Applicant receives as a result of the automobile accident are "payments for loss of income...received by the insured person...under any income continuation benefit plan" and so deductible in calculating his weekly benefits under s. 13(3).

In order to determine whether the payments that the Applicant receives are "payments for loss of income...received...under any income continuation benefit plan", it is necessary to read the insurance policy as a whole in order to determine firstly, whether the payments are intended to compensate the Applicant for loss of income arising from his inability to earn and secondly whether they are paid under a benefit plan that is designed to continue the Applicant's income following his inability to earn.

In this case, entitlement to the insurance payments is triggered by the Applicant becoming and remaining totally disabled, as defined by the policy. The definition of "total disability" precludes a claimant from engaging in any gainful employment during the period of disability. Payment starts when disability is established, and ceases when the claimant is able to return to work. The payments are made to compensate a claimant, at least in part, for a loss of income from employment.

The Applicant's evidence is that the amount he receives is not related to the amount of his loss. The benefit is a fixed, flat-rate sum, which bears no relationship to his earnings at the time of the disabling accident. However, I am not satisfied that the way the benefit is calculated is determinative. Although the payment is not earnings-related and does not compensate an applicant to the extent of his or her earnings loss, nonetheless, it is intended to provide some compensation for such loss. I find therefore that the payments are "payments for loss of income" within the meaning of the subsection.

The second question is whether these payments are received by the Applicant under an "income continuation benefit plan". The payments are made under a private insurance policy paid for in its entirety by the Applicant. They are not part of a work-related plan, such as an employee group plan. On its face, the wording of the section extends to the proceeds of a purely private insurance plan. It is not limited to an employment-related plan. This is in contrast to the wording of Schedule C of the former Insurance Act, which governed prior to the enactment of the Insurance Statute Law Amendment Act, S.O. 1990 and the No-Fault Benefits Schedule. Under these former provisions, payments were deductible if they were received under "wages or salary continuation plans available to the person by reason of his employment."

In this case, the disability insurance plan provides for the continuation, in part, of the Applicant's stream of income when his ability to earn income is interrupted. As stated above, benefits are not earnings-related, and the plan does not provide for the continuation of those earnings. However, it provides for the continuation during disability of income, in an amount established under the policy. It therefore falls within the plain wording of subsection 13(3)(a).

The Applicant argues that he should not be deprived of the value of the contributions that he has made since 1969, to a purely private plan. He also argued that it was not reasonable to expect him to live on the amount of money he receives from the total of these sources, if they are off-set against each other. However, as has been stated in other arbitration decisions, an arbitrator has no power to ignore or override the requirements of the No-Fault Benefits Schedule, properly construed, because its provisions may work unfairly in the case of a particular applicant. An arbitrator's jurisdiction is limited to the powers expressly or impliedly conferred by statute.

I find therefore that the monthly workers' compensation disability pension is not a "payment for loss of income" under s. 13(3) of the No-Fault Benefits Schedule. Therefore, the Applicant is entitled to a weekly no-fault benefit, without deduction of this amount. I find however that the monthly disability insurance payment is a "payment for loss of income...received...under any income continuation benefit plan", under s. 13(3)(a) of the No-Fault Benefits Schedule. Therefore, it is deductible from his no-fault weekly benefit.

I remain seized of this matter in the event there is a further dispute regarding the Applicant's entitlement to continuing benefits.

The Applicant is entitled to interest upon the sums found to be owing, and to his expenses in participating in this arbitration.

Order:

1. The Applicant's weekly benefit is to be recalculated, without deduction of his monthly workers' compensation pension. The Applicant, therefore, is entitled to a weekly benefit of $116.00.

2. The Applicant is entitled to payment of outstanding amounts and interest on such amounts found to be owing.

3. The Applicant is entitled to his expenses incurred in respect of the arbitration proceeding, as set out in Ontario Regulation 275/90.

April 22, 1992

Susan Naylor Arbitrator

Date