Neutral Citation: 1992 ONICDRG 9

File No. A-000626

ONTARIO INSURANCE COMMISSION

BETWEEN:

VINCENZO SCAVUZZO

Applicant

and

CANADIAN HOME ASSURANCE COMPANY

Insurer

DECISION

Issue:

The Applicant was injured in an automobile accident on June 27, 1991. He was insured under a standard automobile insurance 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"), enacted under the Insurance Act, R.S.O. 1990, c. I.8 ("the Act").

The Applicant received weekly income benefits under the policy because he was unable to return to work as a result of the accident. He had started a new job several days beforehand. His claim for benefits was based upon his regular hourly rate for a regular working week at his new job. However, the Insurer calculated his benefits on the basis of his employment earnings averaged over the full 52 weeks before the accident. Instead of the maximum amount of $600.00 a week in benefits, this meant that the Applicant received only $304.53.

The Applicant applied for mediation on the issue of the amount of his no-fault benefits. Mediation was unsuccessful, and he therefore applied for the appointment of an arbitrator under the Act.

The issue to be determined at this arbitration hearing is:

What is the amount of the Applicant's gross weekly income from his employment as determined under Section 12(7) of the No-Fault Benefits Schedule. Is it:

(a) the amount of his regular weekly rate at the time of the accident?

(b) the amount of his employment income, averaged over the weeks during which he was in fact employed (disregarding the weeks he was unemployed) in the fifty-two weeks before the accident?

(c) the amount of his employment income averaged over the full fifty-two weeks before the accident?

At the hearing, the arbitrator asked the parties to address a further issue in the event that (c) was found to be correct. This is:

(d) are unemployment insurance benefits received by the Applicant before the accident to be included as part of his income from employment under Section 12(7)?

The Applicant also claimed interest on any amounts found to be owing, and the expenses he incurred in participating in the arbitration.

Decision:

1. The amount of the Applicant's gross weekly income should be calculated by averaging his gross weekly income over the weeks he was in fact employed in the fifty-two weeks before the accident, disregarding the weeks he was unemployed. Therefore, the Applicant is entitled to weekly benefits of $600.00.

2. The Applicant is entitled to interest on amounts outstanding.

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

Hearing

An arbitration hearing was held in North York on November 19, 1991, before me, Susan Naylor, arbitrator.

Present at the hearing were:

Applicant:

Vincenzo Scavuzzo

Insurer:

David Heard

Technical Advisor, Canadian Home Assurance Company

Insurer's

Harry Brown

Representative:

Barrister & Solicitor

The proceedings were interpreted by Lydia Basta, an interpreter in the Italian language.

Documents before the arbitrator:

Documents

• Application for Appointment of an Arbitrator, filed on October 1, 1991

• Response by Insurer, filed on October 11, 1991

• Report of Mediator, dated September 18, 1991

• File Summary on behalf of Canadian Home Assurance Company, filed on November 21, 1991

The following documents were provided after the hearing:

• Written submissions dated November 21, 1991 from counsel for the Insurer

• Letters dated November 21 and November 26, 1991 and January 29, 1992 from the Applicant

Case Authorities and Texts:

The following case authorities and arbitration decisions were cited in the course of the hearing:

• Sue et al. v. Royal Insurance Company of Canada, (1984) 1984 CanLII 2059 (ON HCJ), 45 O.R.(2d) 696

• Van Hoorn v. Pilot Insurance Co., (1985) 1985 CanLII 2160 (ON HCJ), 50 O.R. (2d) 682

• McCormick and Economical Mutual Insurance Company, O.I.C. File No. A-000139, October 10, 1991

The following cases were cited in the course of post-hearing submissions:

• Parks v. Guarantee Co. of North America, (1989) O.J. No. 1511

• Paese v. United States Fidelity & Guaranty Co., (1985) 1985 CanLII 1984 (ON HCJ), 54 O.R. (2d) 43

• Pineda v. Co-operators Group Ltd., (1985) 1985 CanLII 2094 (ON HCJ), 51 O.R. (2d) 787

• Vautour v. Gore Mutual Insurance Co., (1985) I.L.R. 11 - 1962

• Bragagnola v. MacIvor et al., (1982) 1981 CanLII 1812 (ON HCJ), 35 O.R. (2d) 364

• Madill v. Chu, (1977) 1976 CanLII 32 (SCC), 2 S.C.R. 400

The Facts:

The facts in this case are not in dispute.

The Applicant was injured in a motor vehicle accident on June 27, 1991. As a result of his injuries, the Applicant has been unable to return to his pre-accident job. This is not in dispute. The sole issue before me is the amount of his no-fault benefits and how this amount should be calculated.

The evidence is that the Applicant was employed periodically in the year before the accident. On June 25, 1991 - two days before the accident - he had started at a new job with Nicola's Choice Meats Ltd. This was a full-time job, paid at an hourly rate of $19.00 based on a 44-hour week. During the two days the Applicant worked for this employer, he earned $380.00. No further details about his employment were provided at the hearing.

The Applicant had had two other periods of employment in the year before the accident, both with different employers.

From June 27, 1990 to September 12, 1990 (a total of 11 weeks), he worked for Ontario Paving Company Limited and earned a total of $9,260.85.

From September 12, 1990 to December 18, 1990, he was employed by Hard-Co Excavating Ltd. At the end of this period, he was laid off due to shortage of work. During these 14 weeks, he earned a total of $10,153.37.

From December 13, 1990 to June 23, 1991, the Applicant was unemployed and in receipt of unemployment insurance benefits. The exact amount of these benefits was not available at the hearing.

The Insurer calculated the Applicant's benefits by averaging the total income he earned from his jobs over the four and the fifty-two weeks before the accident. These calculations are as follows:

1.a) Average gross weekly income for the 4 weeks preceding the accident (2 days income): $380.00 divided by 4 = $95.00

b) Average gross weekly income for the preceding 52 weeks: $19,794.22 divided by 52 = $380.66

Weekly income benefits: 80 per cent of greater of (a) and (b) = $304.53

The Applicant's position is that his benefits should be based upon his regular wage at the time of the accident:

Regular hourly rate of $19 an hour for a 44-hour week = $836.00

Weekly income benefits: lesser of 80 percent or $600 = $600.00

In his application, the Applicant also claimed that his employment benefits and vacation pay should be included in his weekly income. However, this was not pursued before me, and no evidence or submissions were made in respect to the matter. In light of my findings, it is not necessary to determine this issue.

The Legislation

The relevant provisions of Section 12 of the No-Fault Benefits Schedule are as follows:

(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 income benefit during the period in which the insured person suffers substantial inability to perform the essential tasks of his or her occupation or employment if the insured person meets the qualifications set out in subsection (2) or (3).

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

1. He or she must have been at the time of the accident,

i. employed or self-employed,

ii. on a temporary lay-off, or

iii. entitled to start work within one year under a legitimate offer of employment made before the accident and evidenced in writing.

2. He or she as a result of and within two years of the accident must have suffered a substantial inability to perform the essential tasks of his or her occupation or employment.

(3) A person who was unemployed and who was not self-employed at the time of the accident is qualified to receive a weekly benefit under subsection (1) if he or she was employed or self-employed for any 180 days in the twelve-month period before the accident, and if he or she as a result of and within two years of the accident has suffered a substantial inability to perform the essential tasks of the occupation or employment in which he or she spent the most time during the twelve-month period before the accident.

(4) Subject to subsection (5), the weekly benefit under subsection (1) will be the lesser of,

(a) $600 plus, if Optional Benefit 2 has been purchased, the amount of the benefit chosen; and

(b) 80 per cent of the insured person's gross weekly income from his or her occupation or employment, less any payments for loss of income, except Unemployment Insurance benefits,

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

(ii) received under any sick leave plan.

(7) The following rules apply to the calculation of gross weekly income:

1. A person's gross weekly income shall be deemed to be the greatest of,

i. his or her average gross weekly income from his or her occupation or employment for the four weeks preceding the accident,

ii. his or her average gross weekly income from his or her occupation or employment for the fifty-two weeks preceding the accident,

iii. $232.

2. When a person becomes qualified to receive an income benefit under subparagraph iii of paragraph 1 of subsection (2), the person's gross weekly income shall be deemed to be the greatest of,

i. if the person was qualified under either subparagraph i or ii of paragraph 1 of subsection (2), his or her gross weekly income as determined under paragraph 1,

ii. the gross weekly income payable under the contract of employment,

iii. $232.

3. Business expenses which cease as a result of the accident shall be deducted from a person's income from self-employment before calculating his or her gross weekly income. O.Reg. 273/90, s. 12.

Submissions

The Applicant submitted that his benefits should be calculated on the basis of his weekly income at the time of the accident. He felt that he should not be penalized because the accident happened on the second day of work. If he had not been injured, he would have earned $18,988.00 for the period between June and December 1991. Instead, he received only $6,690.00 in benefits. It was not right that he should lose his weekly income on the basis of somebody else's negligence.

Counsel for the Insurer submitted that the words of Section 12(7) were clear and unambiguous. This section required an applicant's gross weekly income from employment to be averaged over the four or the fifty-two weeks before the accident, or to be the flat sum of $232.00, whichever was best. He submitted that the arbitration decision of McCormick and Economical Mutual Insurance Company, O.I.C. File No. A-000139, October 10, 1991, was incorrect in finding that the words in Section 12(7) were ambiguous. While he conceded that the interpretation he endorsed would likely cause some hardship, nonetheless, it was mandated by legislation. He also submitted that the interpretation of Section 12(7) adopted in the McCormick decision would discriminate between self-employed and employed persons.

In post-hearing submissions, the Insurer submitted that unemployment insurance benefits should be considered to be income for the purposes of Section 12(7) of the No-Fault Benefits Schedule.

Findings

This application concerns the amount of weekly income benefits to which the Applicant is entitled under Section 12 of the No-Fault Benefits Schedule. In particular, it concerns the correct interpretation of Section 12(7)1, that governs the calculation of an applicant's gross weekly income upon which benefits are based.

In Madill v. Chu, (1977) 1976 CanLII 32 (SCC), 2 S.C.R. 400, the Supreme Court of Canada ruled that terms of automobile insurance policies incorporating statutory benefits should be governed by the general principles of statutory construction.

These general principles were articulated by Judge McMahon in Paese v. United States Fidelity & Guaranty Co., (1985) 1985 CanLII 1984 (ON HCJ), 54 O.R. (2d) 43, in the following terms:

... the grammatical and ordinary sense of the words is adhered to, unless that would lead to some absurdity or some repugnance or inconsistency with the rest of the statute; in which case the grammatical and ordinary sense of the words may be modified so as to avoid that absurdity and inconsistency but no further: 31 C.E.D. (Ont 3rd).

... If the words of a statute are clear they must be followed even though they may lead to a manifest absurdity. The court has nothing to do with the question of whether or not the Legislature created an absurdity. If however the words admit of two interpretations, one leading to an absurdity and the other which does not, the court will conclude that the Legislature did not intend to lead to an absurdity and will adopt the other interpretation. A construction that makes nonsense of a section must be avoided if the language will permit.

Accordingly, the provisions of the No-Fault Benefits Schedule must be read in their ordinary and grammatical sense, in context and in the light of the scheme and intent of the legislation.

Weekly income benefits under Section 12 are intended to compensate an applicant for loss of income arising from his or her inability to work as a result of an automobile accident, regardless of fault.

An applicant is entitled to weekly income benefits if the applicant is disabled to the extent specified in Subsection 12(1). He or she must also meet the qualifications of Section 12(2) or (3).

To be entitled to weekly income benefits, an applicant must suffer substantial inability to perform the essential tasks of his or her occupation or employment during the period claimed under Section 12(1).

In addition, an applicant must be attached to the labour force at the time of the accident within the meaning of Section 12(2) or (3).

Broadly speaking, Subsection 12(2) encompasses those applicants who have an existing employment relationship or occupation, or an offer of future employment, at the time of the accident. Applicants qualify for benefits under this subsection if they are: (i) employed or self-employed at the time of the accident, (ii) on a temporary lay-off, or (iii) entitled to start work within one year under a legitimate offer of employment made before the accident and evidenced in writing.

Alternatively, an individual can qualify for benefits although he or she is unemployed at the time of the accident, if the conditions of Section 12(3) are satisfied. These require a record of employment or self-employment of 180 (non consecutive) days in the twelve months before the accident.

For persons who qualify for benefits under Section 12(2) 1., the compensable disability relates to the employment or occupation extant at the time of the accident. This logically is the employment or occupation in which the applicant was engaged at the time of the accident, the employment or occupation from which the applicant was temporarily laid-off, or the offer of employment under which the applicant was entitled to start work.

In the latter case, however, Section 12(6) provides that an insurer is not required to pay benefits until the contract would have started.

Subsection 12(3) addresses the disability required of unemployed persons. It provides that unemployed persons must suffer substantial inability to perform the essential tasks of the employment or occupation "in which he or she spent the most time during the twelve month period before the accident" as a result of and within two years of the accident.

In all cases, after 156 weeks, the conditions of entitlement are more restrictive, and applicants must show that they are unable to engage in any employment or occupation for which they are suited.

These provisions make it clear that the Legislature has carefully tailored the requirements of disability to an applicant's pre-accident employment circumstances.

In this case, the Applicant was employed at the time of the accident, and falls squarely within the provisions of Section 12(2)1.i. For entitlement to benefits, he must be disabled from the essential tasks of this employment. There is no dispute that he meets this requirement.

Once an applicant has established that he or she is entitled to benefits and meets the qualifications for receipt, it is necessary to determine the amount of benefits claimed.

Interpretation of the provisions of Section 12 that deal with the amount of benefits to which an applicant is entitled must be construed in the overall context of the section, as outlined above.

The amount of benefits is governed by the terms of Section 12(4). This subsection provides that the amount of benefits is the lesser of (a) $600.00, and 80 per cent of the insured person's "gross weekly income from his occupation or employment" less deductible payments.

The calculation of an applicant's gross weekly income is governed by Section 12(7). Subsection 12(7) 1. deems a person's gross weekly income to be the greatest of:

i. his or her average gross weekly income from his or her occupation or employment for the four weeks preceding the accident,

ii. his or her average gross weekly income from his or her occupation or employment for the fifty-two weeks preceding the accident,

iii. $232

In the case of an applicant who was entitled to start work under an offer of future employment, Section 12(7) 2. provides that his or her gross weekly income can also be the gross weekly income payable under the contract of employment, if this is more favourable.

The wording of Section 12(7) provides a formula for calculating an applicant's gross weekly income. It deems an applicant's gross weekly income to be an amount calculated in accordance with Section 12(7). This is an average gross weekly amount under subsection i or ii or a minimum amount under subsection iii - whichever is most favourable to the applicant.

When a statute deems an amount to be a certain amount, it indicates that there is no room for an alternative approach. Therefore, the Applicant's gross weekly income for the purpose of Section 12 is his income calculated in accordance with the formula established in Section 12(7).

The wording of Section 12(7) does not equate an applicant's gross weekly income with the daily or hourly wage rate payable under the employment contract. Instead, the formula calculates an applicant's income on the basis of his or her average actual income during the two periods of time - four weeks and fifty-two weeks - specified in the legislation.

If the Legislature intended to encompass the contractual rate, it would be a simple matter to represent this intent in the statutory wording - as the legislation does in Section 12(7)2.ii, which refers to "the gross weekly income payable under the contract of employment".

Therefore I cannot accept the Applicant's argument that his gross weekly income should be based upon his hourly rate multiplied by his standard working week under the contract.

Had the Applicant been injured the day before he started his new job, he would have been entitled to benefits based upon the rate payable under his contract of employment under Section 12(7) 2. ii (assuming he met the other conditions of Section 12(2) 1 .iii, i.e. an offer of employment made before the accident and evidenced in writing). However, because the Applicant was injured two days after starting work, instead of the day before, the legislation requires that his benefits must be based on his prior employment history, subject to a deemed minimum income of $232.00. While it is questionable whether this is a fair result in this case, the legislation appears to leave no room for discretion in the matter. The formula contained in Section 12(7) must be followed.

This leaves the issue of how the formula contained in section 12(7) is to be construed.

Counsel for the Insurer submits that the formula established for the calculation of gross weekly income in Section 12(7) requires that the Applicant's income be averaged over the full period of the four or the fifty-two weeks before the accident, regardless of the period or periods of time for which he was employed. In his view, the wording of the subsection is clear and unambiguous.

However, in the arbitration decision of McCormick and Economical Mutual Insurance Company, (supra), this arbitrator concluded that the wording of Section 12(7) was ambiguous, and could be read in either of two ways.

1. Gross weekly income from an applicant's occupation or employment averaged over the 4 weeks or the 52 weeks preceding the automobile accident, or

2. The average of the gross weekly income from an applicant's occupation or employment within the 4 weeks or the 52 weeks preceding the automobile accident.

The decision states:

The first interpretation requires the applicant's gross weekly income from employment to be averaged over the full period specified in the legislation, notwithstanding that he was incapacitated from earning for part of the period. The second interpretation allows his gross weekly income to be averaged over the period he was in fact in employment, within the period specified in the legislation.

I heard nothing in argument from counsel for the Insurer in this case that would cause me to change my view of the interpretation of these provisions.

Counsel submitted that the interpretation adopted in McCormick requires that the words "during the period in which the insured person engaged in his or her employment or occupation" be read into Section 12(7) 1.i and ii. He submitted that the principles of statutory interpretation do not allow words to be read into a provision, that is otherwise unambiguous and readily understood.

However, I do not accept that the interpretation adopted in McCormick requires such words to be read in, or that the interpretation counsel suggests represents the only ordinary and grammatical sense of the words used. The words of subsection 12(7) or (ii) must be read in their entirety, as a whole. They refer to average gross weekly income from employment or occupation for the four or fifty-two weeks preceding the accident. These words, in my view, are clearly open to both interpretations advanced.

Where a statutory provision is ambiguous and capable of more than one meaning, it is necessary to have regard to the context of the wording used, and the purpose and objectives of the legislation in order to select the interpretation that best reflects the intent of the Legislature.

In McCormick, the purpose of weekly income benefits was expressed in the following terms:

Income benefits are intended to compensate for the financial effects of the automobile accident. The purpose of the legislative scheme therefore is best served by an interpretation that results in the most accurate reflection of the applicant's employment income..... this is achieved by averaging his employment income over the period of time that the applicant was in fact working, and disregarding the period of time in which he was incapacitated from work.

The No-Fault Benefits Schedule is remedial legislation and therefore must be construed in the manner that best serves the purposes of the legislation - the provision of fair, adequate and speedy compensation for loss of income from employment resulting from an automobile accident. These objectives are best served by calculating benefits based on the Applicant's average earnings over the period of time that he was in fact working, because this calculation better reflects the loss he sustained as a result of the accident.

Before the enactment of the Insurance Statute Law Amendment Act, 1990 and the No-Fault Benefits Schedule, no-fault weekly benefits under Schedule C of the former Insurance Act were stated to be the lesser of $140.00 per week or 80% of the insured person's gross weekly income from employment, (less deductible payments). The term "gross weekly income" was not defined elsewhere in the legislation, and there was no minimum amount provided for. In interpreting these provisions, the courts adopted a flexible approach that best reflected the circumstances of the individual case, and the particular employment situation.

In Sue et al. v. Royal Insurance Company of Canada, (1984) 1984 CanLII 2059 (ON HCJ), 45 O.R.(2d) 696, Mr. Justice Montgomery rejected the Insurer's argument that the applicant's income had to be based on his wages in the week before the accident, because they were unrepresentative of his real employment situation. Instead, he allowed benefits to be based on 1/52 of the applicant's gross income for the year prior to the accident. In doing this, Mr. Justice Montgomery said:

Would it be reasonable to suggest that a commission salesman is restricted to a gross weekly rate based on one week before the accident? Perhaps he had minimal sales that week. Would it be reasonable to assess the gross weekly income of the fisherman on his income the week before the accident if he has been shore-bound most of the week due to weather? Should the farmer who is injured in February have only his egg money to look to as he has no crops to sell in February?

In my opinion, the legislation should be given a broad interpretation. If the Legislature had meant the rate of pay the week before the accident to apply it could have said so.

In a later decision, Van Hoorn v. Pilot Insurance Co., (1985) 1985 CanLII 2160 (ON HCJ), 50 O.R. (2d) 682, Judge Mullen rejected the view that there was a general rule that income had to be averaged over the year before the accident. In this case, the court held that the applicant's gross weekly income was his gross weekly income at the time of the accident.

...would it be fair if a person who is employed during the first six months of the year prior to the accident at a gross salary of $100 per week, and during the last six months of the year prior to the accident earned a gross salary of $300 per week, that one should average his salary in order to determine his gross weekly salary at the time of the accident. My answer to that is, of course, no.

Another instance would be where the claimant had only worked for two months prior the accident but could have continued on in his employment for an indefinite period in the future if it had not been for the accident. Surely a person who had not worked previously and obtained a job two months before the accident would not have a gross weekly income of one-twelfth his two months' salary.

The provision of a statutory formula for calculating gross weekly income under Section 12(7) of the No-Fault Benefits Schedule has narrowed the scope for judicial discretion and flexibility in individual cases. However, these cases are instructive in their emphasis on fairness and reasonableness. The words of the current legislation should also be interpreted broadly and liberally in the interests of the objectives of fairness and adequacy of compensation.

Counsel for the Insurer also argued that the adoption of the interpretation suggested in McCormick would discriminate against self-employed persons.

In the first place, I do not accept this premise. A self-employed applicant who commences his or her occupation within the periods specified in the legislation - e.g. a taxi-driver starting his occupation two weeks before the date of the accident - will have his or her income averaged over that period.

In any event, however, many statutes - for example, tax and employment laws - differentiate between the employed and the self-employed. The provisions of the No-Fault Benefits Schedule also distinguish between employed and self-employed insureds - e.g. in requiring self-employed persons to deduct ceasing expenses in calculating their income under Section 12(7). No case-law was provided to me to support the proposition that the No-Fault Benefits Schedule must be interpreted in a manner that has an identical impact upon employed persons and self-employed persons, alike.

I find therefore that the Applicant's gross weekly income should be determined under Section 12(7) 1.(i) and (ii) by averaging his gross weekly income from employment over those weeks that he was working in the 4 and the 52 weeks before the accident, (and disregarding the periods when he was unemployed). This interpretation, in my view, best reflects the intent, scheme and purpose of the legislation.

Therefore, the Applicant's gross weekly income from his employment should be recalculated as follows:

1.(a) Average gross weekly income from employment, for the four weeks preceding the accident (s.12(7) 1. i)

June 25 & 26, 1991

1 week = $380

Total = $380.

Average gross weekly income 1 week) = $380.

(b) Average gross weekly income from employment for the fifty-two weeks preceding the accident (s.12(7) 1.ii)

i) June 27 to September 12, 1990

11 weeks = $9,260.85

ii) September 12, 1990 to December 14, 1990

• 14 weeks = $10,153.37

iii) June 25 to June 26, 1991

• 1 week = $380.

Total = $19,794.22

Average gross weekly income 26 weeks) = $761.32

(c) Gross weekly income = greater of (a) and (b) and $232.

Weekly Income Benefits

Lesser of $600.

or

80% of $761.32 (609.05)

= $600. per week

In view of this finding, it is unnecessary to determine the issue of whether unemployment insurance benefits are income from employment for the purpose of Section 12(7).

The Applicant is entitled to interest on all amounts outstanding and his reasonable expenses incurred in respect of the arbitration hearing.

Order:

1. The Applicant is entitled to weekly benefits of $600.00.

2. The Applicant is entitled to interest on amounts outstanding.

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

March 18, 1992

Susan Naylor

Senior Arbitrator

Date