Neutral Citation: 1993 ONICDRG 35

File No. A-001311

ONTARIO INSURANCE COMMISSION

BETWEEN:

CLAUDE MORIN

Applicant

and

LUMBERMENS MUTUAL CASUALTY COMPANY

Insurer

DECISION

Issues:

The Applicant, Claude Morin, was injured in a motor vehicle accident on December 11, 1990. He applied for accident benefits from Lumbermens according to the No-Fault Benefits Schedule, Ontario Regulation 672, under the Insurance Act, R.S.O. 1990, c. I.8.

Mr. Morin received weekly income benefits in three lump sum payments totalling $18,961.85. He claims that he is entitled to additional benefits. The dispute between Mr. Morin and Lumbermens was not resolved through mediation and, therefore, Mr. Morin applied for arbitration.

The issues to be determined are:

1. Is Lumbermens responsible for providing Mr. Morin with no-fault benefits?

2. Is Mr. Morin entitled to weekly income benefits for any period from the date of the accident until April 16, 1992?

3. If Mr. Morin is entitled to weekly benefits, what is the proper amount of those benefits?

4. If Mr. Morin has been overpaid, should he be required to repay any of the overpayment?

5. Should Lumbermens be ordered to pay Mr. Morin a special award because it unreasonably withheld or delayed benefits?

The Applicant also claims interest on any outstanding amounts owing, and the expenses that he incurred as a result of the arbitration.

Result:

1. Lumbermens agreed to pay any benefits that are found to be owing to Mr. Morin as a result of this arbitration.

2. Mr. Morin is entitled to weekly income benefits of $185.60 for the period from December 18, 1990 to April 16, 1992, a period of 69.43 weeks. His total entitlement, therefore, is $12,886.21.

3. Because Mr. Morin received weekly income benefits totalling $18,961.85, he was overpaid by $6,075.64. Lumbermens is entitled to recover this amount under section 27 of the No-Fault Benefits Schedule.

4. Mr. Morin is entitled to his expenses of this arbitration as set out in Ontario Regulation 664, Dispute Resolution Expenses.

5. I remain seized of the issue of whether Lumbermens should be ordered to pay Mr. Morin a special award under Section 282(10) of the Insurance Act.

Hearing:

The hearing was held in Kitchener, Ontario, on February 16, 17, 18 and 23, 1993, before me, David Draper, arbitrator.

Present at the Hearing:

Applicant:

Claude Morin

Applicant's Representative:

Timothy Jansen Barrister & Solicitor

Insurer's Representative:

Harry P. Brown Barrister & Solicitor

The proceedings were transcribed by Pat Priebe of Marbrae Paralegal Services.

Witnesses:

1. Claude Morin, the Applicant

2. Paul Zebroski, Mr. Morin's accountant

3. Dr. James Israel, orthopaedic surgeon

4. Alena Patrak, Mr. Morin's business associate

5. Brian Thomas, Mr. Morin's business partner

6. Clare Steinmann, Mr. Thomas's bookkeeper

7. Sharon Stone, claims agent, Lumbermens Mutual Casualty Company

8. Bruce Webster, chartered accountant, Coopers & Lybrand

Documents before the Arbitrator:

The documents before the arbitrator are listed in the following appendices to this decision:

Appendix A -

Exhibits

Appendix B -

Documents before the arbitrator, but not marked as exhibits.

Appendix C -

Cases and authorities submitted by the parties.

Reasons for Decision:

Mr. Morin was involved in a motor vehicle accident in December 1990. The evidence is inconsistent as to whether the accident occurred on December 11 or 12, 1990. Based primarily on the records of the Kitchener-Waterloo Hospital, I find that the accident was on December 11, 1990.

Mr. Morin was the driver and his business partner, Mr. Brian Thomas, was riding in the front passenger seat. The automobile was owned by Don Bain and was insured by Lumbermens. As a result of the accident, Mr. Morin claimed no-fault benefits from Lumbermens.

This matter has been contentious from the start. Mr. Morin contacted Lumbermens on February 15, 1991, but no benefits were paid until July 1991, approximately seven months after the accident. In July 1991, Mr. Morin received $5,550. He received further benefits in December 1991 and in the spring of 1992. Based on the evidence of Sharon Stone, a claims agent with Lumbermens, I find that Mr. Morin has received three payments, totalling $18,961.85.

1. Preliminary Issue - Is Lumbermens the proper insurance company?

At the pre-hearing meeting held on November 23, 1992, Lumbermens raised a preliminary issue as to whether it was the insurer responsible for paying no-fault benefits to Mr. Morin.

Section 268(2) of the Insurance Act sets out the rules for determining which insurance company is obligated to pay no-fault benefits. In this case, Mr. Morin was driving an automobile registered to Donald Bain and insured by Lumbermens. Mr. Morin applied to Lumbermens for no-fault benefits under Mr. Bain's policy, according to section 268(2)1.ii. of the Insurance Act.

Lumbermens took the position that another insurance company might have a higher priority under section 268(2). Lumbermens submitted that at the time of the accident Mr. Morin might have been insured or named as a driver in another policy. In order to clarify this matter, the pre-hearing arbitrator ordered Mr. Morin to provide certain information about his insurance brokers, which he did.

At the arbitration hearing, Lumbermens again raised this issue. It maintained that the evidence suggested that Mr. Morin was insured or named as a driver in another policy, or that he had a car made available to him for his regular use (section 3(1) of the No-Fault Benefits Schedule).

However, I have not decided this issue. Lumbermens agreed to participate in the arbitration hearing and to pay any no-fault benefits that are found to be due and owing to Mr. Morin. Mr. Morin agreed to assign to Lumbermens any rights that he might have against any other insurance company as a result of this accident. Mr. Morin also agreed to cooperate with Lumbermens in any resulting claim that it might make against another insurance company. Lumbermens agreed to compensate Mr. Morin for any reasonable expenses that he incurs as a result of his cooperation.

2. The period of Mr. Morin's eligibility for weekly income benefits

Mr. Morin's eligibility is determined under section 12(1) of the No-Fault Benefits Schedule:

12 (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).

[emphasis added]

In order to succeed, Mr. Morin must establish that as a result of the accident he was substantially unable to perform the essential tasks of his work. This means that first, I must define Mr. Morin's "essential tasks". Second, I must determine whether as a result of the accident he was substantially unable to perform those essential tasks for any period.

a) What were Mr. Morin's essential tasks?

Prior to his accident, Mr. Morin and Mr. Brian Thomas were partners in B and C Amusements, which placed video machines in up to twenty locations across southwestern Ontario. Mr. Morin was responsible for the day-to-day operation of the business. His essential tasks included driving to the various locations as often as necessary, emptying the coins from the machines, dividing the coins with the owners of the premises, repairing the machines, and moving the machines to different locations.

I accept Mr. Morin's evidence that he had to move machines that weighed between 100 and 150 pounds. I also accept that his work involved a significant amount of driving, although his evidence does not allow me to determine the mileage involved with any precision.

In 1990, Mr. Morin was also involved in another business, Mr. C's Donuts. He took responsibility for renovating and maintaining the premises, while Ms. Alena Patrak operated the store. I find that even if his work at Mr. C's should be considered, his tasks with the video business were more physically demanding and were more affected by his injuries.

b) Was Mr. Morin substantially unable to perform his essential tasks?

The issue is whether Mr. Morin's injuries prevented him from performing the essential tasks of his work for B and C Amusements. Mr. Morin claims that he was eligible for weekly income benefits from December 11, 1990, the date of the accident, until April 16, 1992. Lumbermens submits that, at most, he is eligible from February 1, 1991 to January 24, 1992.

Mr. Morin's family doctor, Dr. Kugler diagnosed his injury as a "flexion/extension injury to the neck". Dr. Israel later concluded that he had suffered a cervical sprain. Mr. Morin complained of various symptoms, including neck pain, headaches, and pain in the thoracic area of his back. I find that Dr. Kugler and Dr. Israel accepted that these symptoms related to the accident. Dr. Israel also indicated that Mr. Morin's drowsiness could have been caused by his medications.

On March 5, 1991, Dr. Kugler stated that Mr. Morin's return to work was "indeterminate at present" (Exhibit 15) and referred him to the Physiotherapy Centre. He was not able to start at the Centre until April 8, 1991, but began attending a number of times a week. Over a period of ten months, Mr. Morin had 152 physiotherapy sessions, an average of over three visits a week (Exhibit 7).

On June 6, 1991, Dr. Kugler prepared a report for Lumbermens which included the following handwritten addendum (Exhibit 1):

Since the patient's work requires extensive driving, I would say that, while the pain persists it would be difficult, if not impossible, to carry out this job.

In his report, dated September 27, 1991, Dr. Israel, stated (Exhibit 9):

DEGREE OF PHYSICAL DISABILITY: This man is not completely incapacitated, but does have some interference with his normal lifestyle. He has difficulty in driving and also in performing some of his activities of daily living.

With time his degree of disability will improve and he should return to full activity level.

PROGNOSIS: The symptoms he is experiencing in his neck including his headaches will gradually improve with time. It is very difficult to state exactly when the symptomatology will resolve. Gradual improvement has been noted and this should continue. He probably will not have any permanent sequelae develop as a result of the injury to his neck.

I conclude that the evidence is sufficient to establish that by March 1991, Mr. Morin was eligible for weekly income benefits. Although he was not totally incapacitated by the accident, his activities were limited in ways that affected his ability to work. His pre-accident work was relatively demanding. I find that as a result of the accident, he was unable to do the lifting and driving that were essential tasks of his pre-accident occupation.

The evidence is more equivocal, however, with respect to Mr. Morin's eligibility immediately after the accident and toward the end of the period claimed. The difficulty in deciding on Mr. Morin's eligibility is that his evidence about his post-accident activities was confusing and inconsistent.

(i) The initial period

The most troublesome evidence about Mr. Morin's condition immediately following the accident was his testimony about a rental car. On cross-examination, he acknowledged that on December 14, 1990, three days after the accident, he rented a car (Exhibit 16). The customer named on the agreement is Donald Bain, but Mr. Morin signed the form and is listed as the driver. The form indicates that the car was returned on January 11, 1991 and that 4,589 kilometres had been driven.

When asked if he drove this car, Mr. Morin initially said that he "might have". He was asked who put on all of the mileage and he answered that he "might have done it all". He later stated that he thought that Don Bain and Manuel Silva had borrowed the car and that he did not "put it all on". He agreed, however, that he did not notify the rental agency of any additional drivers. Mr. Morin stated that he did not use this vehicle to pick up coins from the video machines, but immediately corrected his answer and said that he thought that he used it to do some collections in December 1990.

Mr. Morin also testified that he used the rental car to drive to Sudbury, Ontario for Christmas. This may explain Dr. Kugler's note that Mr. Morin did not attend his medical appointment on December 20, 1990. In his answers on cross-examination, Mr. Morin did not suggest that anyone else went to Sudbury with him. In his rebuttal evidence, however, he said that Manuel Silva and his girlfriend went with him and did all of the driving.

The manner in which this evidence was presented causes me to have serious doubts about its credibility and casts doubt on the general credibility of Mr. Morin's evidence. In Mr. Morin's favour, however, there is no indication that his trip to Sudbury was planned prior to the accident and, in my view, a holiday trip may be consistent with the medical advice that he received at the hospital that he should rest.

Mr. Morin testified that he was unable to work from the date of the accident because his neck was too sore. He explained that it particularly bothered him to drive with the sun in his eyes. He stated that he attempted to work during the first week of January 1991, but was unable to do the driving.

On cross-examination, his evidence was significantly different. He testified that he did some collections in December 1990. He stated that he was able to drive for the first four weeks after the accident, but could not recall doing any work in January 1991.

Lumbermens pointed to two other areas of evidence in support of its submission that Mr. Morin continued to work steadily after the accident until at least February 1, 1991. First, Ms. Stone, a claims agent at Lumbermens, testified that Mr. Morin did not contact Lumbermens until February 15, 1991. In addition, Ms. Stone testified that Mr. Morin told her that he took the first two weeks after the accident off, but had been unable to work since February 1, 1991. It was submitted by Lumbermens that if he had been disabled from the date of the accident, he would have applied for benefits much earlier.

Second, Dr. Kugler's clinical notes for February 8, 1991 state: "Pain improving but aggravated by heavy work". It was submitted that this is a clear indication that Mr. Morin continued to work.

In my opinion, this evidence strongly suggests that Mr. Morin did some work after the accident. I am convinced, however, that although Mr. Morin was able to do some work, he was not able to return to his full pre-accident duties. In December 1990 and January 1991, he complained to Dr. Kugler about a sore neck and problems with rotational movement. These are essentially the same complaints that the doctors later recognized as preventing him from working.

B and C Amusements was the type of business that could be partially operated. Some of the machines could be maintained, even if it was impossible to keep up with all of them. I find that following the accident, Mr. Morin attempted to keep the business going, but was unable to do all of the driving and lifting. It appears that by February 1991, his financial situation had deteriorated and, therefore, he contacted Lumbermens to inquire about benefits.

In spite of my concerns about Mr. Morin's credibility, I conclude that he was eligible for weekly income benefits from the date of the accident. Section 12(5)(a) of the No Fault Benefits Schedule provides that benefits need not be paid for the first week of eligibility and, therefore, Mr. Morin is entitled to benefits from December 18, 1990.

(ii) The end of his period of eligibility

Mr. Morin continued to attend the Physiotherapy Centre regularly until the end of October 1991. The clinical note from the Physiotherapy Centre for October 16, 1991 indicates that he was "improving gradually" and would attend two times the following week (Exhibit 7). Mr. Morin did not go to physiotherapy again until November 15, 1991. The entry for that date indicates that he was "much better".

Dr. Kugler wrote to Mr. Morin's lawyer on December 16, 1991, as follows (Exhibit 2):

Subsequent to our prior communication of June 6, 1991, things have not really changed much since that time.

Mr. Morin communicated to me on December 12 of this year that he was still experiencing pain in his cervical spine. He does have about 90% range of motion in all planes (flexion, extension, rotation, and lateral flexion) but this motion apparently aggravates the pain. I do note some mild crepitus when putting him throught [sic] this range of motion. There is still some mild muscle spasm in the right and left trapezius muscle.

Mr. Morin's last visit to the Physiotherapy Centre was on January 6, 1992. The final clinical note states: "Has improved over course of treatment but at last visit still had some residual pain which is possibly stress related."

Lumbermens arranged for Dr. Israel to do a follow-up examination of Mr. Morin on April 22, 1992. Dr. Israel diagnosed him as having a "resolving cervical strain" and stated (Exhibit 23):

DISCUSSION: This man's symptoms have significantly improved, he suggests by about 75 to 80%. He no longer has headaches and he no longer has symptoms referrable to his thoracolumbar area. He has improved to the point where he can return to work maintaining machines in an exercise gym.

His symptoms will continue to improve, but the exact duration is not known.

He has recovered to a point where he is able to perform his normal activities. He still does have a general feeling of fatigue which he thinks is due to muscle conditioning. However, this as well will improve with time. Permanent sequelae should not develop as a result of the injury to his neck that occurred in the motor vehicle accident of December 11th, 1990.

On January 7, 1992, Dr. Kugler reported that by April 16, 1992, Mr. Morin had significantly improved and "could probably have resumed his previous work" (Exhibit 3). Mr. Morin conceded that based on this report his eligibility did not extend beyond April 16, 1992. Lumbermens submitted that Mr. Morin was able to return to work by January 24, 1992, at the latest.

Mr. Morin testified that he did not do any work related to the video business between October 1991 and May 1992. I am unable to accept this for the following reasons. First, Mr. Morin acknowledged that he made trips to pick up coins in September and October 1991. According to the medical reports, his condition was improving at this time. I find it implausible that he would decrease his work at a time when his condition was improving.

Second, on October 13, 1991, Mr. Morin applied to another insurance company for coverage for a flat bed truck equipped with loading ramps (Exhibit 17). The application form estimated that the vehicle would be driven 40,000 kilometres a year. The Supplement to the application indicates that Mr. Morin was a "vending machine operator". The broker who took the application also wrote to the insurance company describing Mr. Morin's video business as an active business.

Mr. Morin acknowledged that the truck was designed to transport video machines, but denied working at the time. He testified that he likes to have a truck and that "picking up coins is always my concern". He suggested that the broker described his business based on his knowledge of his past activities. I do not find this evidence plausible and do not accept it. It is possible that Mr. Morin might purchase a truck, even though his business was dormant. It is illogical, however, that he would have insured the vehicle unless he intended to use it.

I find that in October 1991 Mr. Morin's condition had improved to some extent and he was hoping to increase the activity of the video business. Based primarily on Dr. Kugler's report of December 16, 1991, however, I am satisfied that he still was not able to return to his pre-accident duties. The later report of Dr. Kugler states that Mr. Morin was able to return to work by April 16, 1992. Dr. Israel's report does not contradict that opinion. I conclude, therefore, that he was not able to perform the essential tasks of his work until April 16, 1992 and, therefore, was eligible for weekly income benefits until that date.

3. What is the proper amount of Mr. Morin's weekly income benefit?

The following sections of the No-Fault Benefits Schedule are relevant to determining the proper amount of Mr. Morin's benefits:

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

(a) $600 ... ; 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, ...

(5) The insurer is not required to pay a weekly benefit under subsection (1),

(a) for the first week of the disability, ...

(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 weekly income from his or her occupation or employment for the fifty-two weeks preceding the accident,

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.

4. The insurer may deduct from any benefit payable under this Part 80 per cent of any income received or available from any occupation or employment subsequent to the accident.

Mr. Morin's position is that his weekly income from B and C Amusements for the four week and fifty-two week periods preceding the accident was greater than $750 and, therefore, he was entitled to the maximum amount of $600 a week. He acknowledged that he had post-accident income of $1,000, 80 per cent of which must be deducted from his entitlement, according to section 15 of the No-Fault Benefits Schedule.

Lumbermens submitted that Mr. Morin's evidence about both his pre-accident and post-accident income from B and C Amusements was not credible and should not be relied upon in calculating the amount of his weekly income benefits. It was suggested that, at most, he should receive the minimum amount of $185.60 a week, with no reduction for post-accident income.

Lumbermens also submitted that Mr. Morin's losses from Mr. C's must be taken into account in determining his gross weekly income under section 12. Mr. Morin responded that he was simply an investor in Mr. C's and, therefore, any income or losses should not be treated as income.

a) The treatment of Mr. C's Donuts

According to section 12(7)1, only income from an applicant's "occupation or employment" is to be considered in calculating his or her weekly income benefits. I accept, therefore, that investment income is not included. However, I find that Mr. Morin's involvement in Mr. C's went well beyond that of a mere investor.

Mr. C's Donuts opened in February 1990. At that time, Mr. Morin and Ms. Patrak were "common-law spouses". Ms. Patrak testified that she borrowed money from her father to start the business. My understanding is that Mr. C's was a franchise business, although no franchise agreement was submitted.

Ms. Patrak took care of the day-to-day operation of the business, and Mr. Morin assumed responsibility for the repairs and renovations to the premises. He purchased materials as they were needed. He did some work himself, and also hired, supervised and paid tradespeople to do work on the premises. He also provided cash to the business from time to time for various purposes, such as rent. In my view, the extent of Mr. Morin's involvement in the business strongly suggests that he was more than an investor.

If Mr. Morin were simply an investor in Mr. C's, I would have expected some agreement, however informal, about the return he was to receive on his investment. I was not given any evidence of such an agreement. Rather, Mr. Morin stated that he expected the business to make money and I find that he expected to share the profits with Ms. Patrak.

I also find it significant that, when Mr. Morin testified about Mr. C's, he used language that suggested that it was his business, or that he and Ms. Patrak were in business together. He testified that Mr. C's was a store that he bought. He spoke about "splitting his business" from Ms. Patrak in the fall of 1990. When his involvement ceased, he spoke to the franchisor and told them that he "was leaving".

I note that Mr. Morin did not treat his losses from Mr. C's as investment losses on his 1990 income tax return, even though a "Cumulative Net Investment Loss" schedule was completed (Exhibit 11). According to his evidence and that of his accountant, Mr. Zebroski, his business income was calculated by subtracting his losses from Mr. C's from his income from B and C Amusements. For the purposes of income tax, therefore, Mr. Morin and his accountant treated his losses from Mr. C's as business losses, not investment losses.

I find that Mr. Morin and Ms. Patrak pooled their assets to acquire and operate Mr. C's. They both had a financial stake in it. They also shared the duties required to operate the business and expected to share the profits of the business as partners.

If Mr. C's had generated a profit and Mr. Morin had received income from the business, it is my view that he would have been entitled to include it in the calculation of his gross weekly income under section 12 of the No-Fault Benefits Schedule. It follows that, if income from a business would be considered under section 12, losses from that business must also be considered. Weekly income benefits are based on the applicant's income from his or her occupation or employment for the four and fifty-two weeks preceding the accident. An applicant's income situation would certainly be distorted if losses from a business were not taken into account.

I conclude, therefore, that any losses that Mr. Morin had from Mr. C's during the four and fifty-two weeks preceding December 11, 1990, the date of the accident, must be taken into account in calculating Mr. Morin's gross weekly income under section 12 of the No-Fault Benefits Schedule.

b) Mr. Morin's losses from Mr. C's

Mr. Morin testified that when he prepared his 1990 tax return, he conservatively estimated his losses from Mr. C's as $23,000. Ms. Patrak calculated his contributions as follows (Exhibit 14):

Supplies and Equipment

$8,210.70

Labour Costs

4,660.00

Cash Investments

16,420.00

TOTAL

$29,290.70

I found Ms. Patrak to be a credible witness and accept that she reconstructed the records of Mr. C's as accurately as she could. Given the state of the records, her figures cannot be taken as anything more than estimates, but they are the best estimates available.

I also accept Mr. Morin and Ms. Patrak's evidence that they never received any income or recovered any of their financial investment in Mr. C's. I conclude, therefore, that in the fifty-two weeks preceding the accident, Mr. Morin lost approximately $29,000 from Mr. C's.

Mr. Morin testified that he had no involvement in Mr. C's after September 1990. Because Mr. Morin's income from B and C Amusements extended over the full fifty-two weeks preceding the accident, the fairest approach, in my view, is to calculate his losses from Mr. C's based on fifty-two weeks, rather than based on the shorter period for which he actually had losses from Mr. C's.

I conclude, therefore, that Mr. Morin's average weekly loss from Mr. C's for the fifty-two weeks preceding the accident was approximately $558 ($29,000 / 52 = $558).

The next issue is whether Mr. Morin had losses from Mr. C's in the four-week period preceding the accident, that is, from November 13, 1990 to December 10, 1990. Ms. Patrak testified that Mr. C's closed its doors on or about November 22, 1990. She also stated that she thought that Mr. Morin paid some bills for Mr. C's in August and September 1990, but she could not find them. Mr. Morin testified that by August or September 1990, he had no involvement with Mr. C's. Although the precise date is unclear, I find that Mr. Morin did not have any income or loss from Mr. C's in November or December 1990. I conclude, therefore, that the losses from Mr. C's are not relevant in calculating Mr. Morin's gross weekly income for the four-week period preceding the accident.

c) Mr. Morin's income from B and C Amusements

The issue is whether Mr. Morin has provided credible evidence to establish his pre-accident and post-accident income. Lumbermens presented a detailed report prepared by Coopers & Lybrand which questions many aspects of Mr. Morin's records (Exhibit 40). In addition, Mr. Webster of Coopers & Lybrand gave expert evidence at the hearing. After hearing all of the evidence, Mr. Webster provided some additional calculations (Exhibits 41, 42 and 45), but did not change his opinion that Mr. Morin's records were not reliable business records.

Mr. Morin's lawyer acknowledged that the business records are not sophisticated, but submitted that they have sufficient "integrity" or "believability" to support Mr. Morin's claim. He submitted that an applicant for no-fault benefits should not have to meet the civil standard of proof, that is, establishing the claim on a balance of probabilities. Rather, benefits should be paid based on a lesser standard, such as "proof with some integrity".

I agree with the position taken in a number of previous arbitration decisions that the onus is on the applicant to prove his or her claim for benefits under the No-Fault Benefits Schedule, e.g. Jagdishar Singh and Kingsway General Insurance Company, O.I.C. File No. A-000890 (January 29, 1993). I also conclude that the standard of proof must be the civil standard and, therefore, the applicant must establish that his or her version of the facts is more likely than not to be correct.

However, it should be recognized that no-fault benefits are to be paid promptly to applicants, including those who are self-employed. Applicants should not be held to strict requirements of documentary proof which would defeat legitimate claims. Instead, the totality of the evidence must be considered, including the applicant's explanation of his or her financial situation, and a consideration of what documents someone in the applicant's position can reasonably be expected to produce.

I accept Mr. Morin's evidence that the video game business is a "cash business". Ms. Patrak testified that Mr. Morin operates "by cash and a handshake". I note that his use of cash is reflected in the receipts for Mr. C's (Exhibit 30). Ms. Patrak said that Mr. Morin keeps his records in shoe boxes and on matchbook covers, and that this was a source of conflict between the two of them.

It is not surprising that Mr. Morin does not have sophisticated business records. Even taking the nature of his business into account, however, I conclude that he has failed to provide credible evidence to establish either his pre-accident or his post-accident income.

(i) Pre-accident income

I summarize Mr. Morin's evidence about his pre-accident income from B and C Amusements as follows: In July 1989, he and Mr. Thomas started a partnership. Mr. Thomas had been working in the video game business for a number of years and, therefore, had contacts and experience. Mr. Morin contributed $16,000 for machines and parts. It took Mr. Thomas longer than expected to prepare the machines and, therefore, the business did not really get going until November 1989.

Mr. Morin was responsible for running the business. He placed video machines in various locations, moved the machines between locations, and regularly visited the locations to repair the machines and retrieve the coins. Mr. Morin divided the coins from each location equally with the owner of that location. He and Mr. Thomas met each week, usually on Fridays, to divide the proceeds. Mr. Morin was entitled to the first $500 a week and they divided the remainder equally.

Mr. Morin and Mr. Thomas both testified that they kept a record of their weekly income from B and C Amusements in their own book, along with other personal information. Mr. Morin stated that he later transferred the information from his book into a Hilroy account book (Exhibit 10). According to the Hilroy account book, Mr. Morin's income for 1990 was $45,705 and his weekly income for November and December 1990 was:

November 2

$825.00

9

$775.00

16

$810.00

27

$715.00

30

$770.00

December 7

$775.00

14

$300.00

21

$150.00

28

0.00

Mr. Morin testified that the figure of $45,705 was used to prepare his 1990 income tax return. He explained that his tax return shows business income of $22,705 because an estimated $23,000 loss from Mr. C's was deducted from his income from B and C Amusements.

Mr. Morin was unable to provide any primary documents for B and C Amusements, such as receipts from owners of the premises where the machines were placed, bank deposits, or receipts for expenses. In fact, only one document even uses the name, "B and C Amusements". Mr. Thomas's 1990 income tax return includes an Income Statement for B and C Amusements, which was prepared on August 4, 1992, nearly twenty months after the accident (Exhibit 33). All the other documents list Mr. Morin's income from video machines as if the business were a sole proprietorship. Mr. Morin's income tax returns list income from self-employment from a business named, "Claude Morin", with no indication that it is a partnership (Exhibits 11, 34 and 35).

The documents that might have been of assistance are the books in which Mr. Morin and Mr. Thomas claimed to have kept their business records, along with other information. Mr. Morin claims that he discarded his original book after he transferred the figures into the Hilroy account book for his accountant to use to prepare his 1990 income tax return. Based on the evidence of Mr. Zebroski, the accountant, I find that Mr. Morin's 1990 income tax return was prepared in April 1991.

When Mr. Morin applied for no-fault benefits, he estimated his annual income as $57,200. He listed his income for the four weeks preceding the accident as:

Week 1

$ 975

Week 2

1,200

Week 3

1,075

Week 4

1,390

If Mr. Morin had an original book with records that were sufficiently detailed to allow him to prepare the Hilroy account book at a later date, it is difficult to understand why he would have estimated his annual income. It is also difficult to understand the weekly amounts in his application. Given the specificity of these figures, they do not appear to be rough estimates, but they are significantly different from the weekly figures in the Hilroy account book, set out above.

At some point, Mr. Morin also completed an Employer's Confirmation of Income form, stating that his gross income for the fifty-two weeks preceding the accident was $45,705 (Exhibit 12). This is the amount in the Hilroy account book for his total income from B and C Amusements for 1990. It is also the figure he says was used in the completion of his 1990 income tax return.

On the Employer's Confirmation of Income form, Mr. Morin listed his weekly income for the four weeks preceding the accident as $878.94 for each week. He explained that he simply did a weekly average based on his annual income of $45,705. Once again, it is difficult to understand why he would estimate his weekly income if his yearly income had been calculated by totalling the weekly income set out in his book. Mr. Morin acknowledged that he filled out the form over time and did not suggest that he was too rushed to use the proper figures.

Mr. Zebroski testified that he has prepared Mr. Morin's income tax returns since 1985. He explained that Mr. Morin generally compiled his records and sometimes summarized them on "a sheet". It is clear that he relied on the figures that Mr. Morin provided without requiring supporting documentation. Mr. Zebroski could not remember what document Mr. Morin gave him to prepare the 1990 return.

Mr. Morin's 1990 income tax return includes estimates of his travel and office expenses. It does not include any other expenses. Mr. Morin testified that he recorded his expenses in his original book. He did not explain why he did not transfer his expenses into the Hilroy book along with his income.

Mr. Morin testified that Ms. Patrak had all the financial information about Mr. C's Donuts and, therefore, he had to rely on her to compile that information. This seems inconsistent with his evidence that he kept a book in 1990 in which he noted various business and personal information. I would have expected that such a book would also have included records of his expenses for Mr. C's.

By the time Mr. Morin's 1990 income tax return was completed, it was clear to him that his income was an issue for Lumbermens in the determination of his eligibility for weekly income benefits. On March 26, 1991, Lumbermens' claims agent wrote to Mr. Morin, as follows (Exhibit 37):

We wish to acknowledge receipt of your completed form claiming accident benefits under Don Baines, our insured's auto policy.

Under the new Ontario Motor Protection Plan, the priority of payments for accident benefits states that you should go to your own auto policy or any policy that you are a named insured.

As you have representation from Tim Jansen, we ask that you get a signed affidavit swearing to the fact that you are not an insured under any auto policy, such as a personal auto policy. On receipt of this affidavit, along with more proof of wage loss, i.e.; last years income tax and contracts from work that you are unable to do or log books confirming wage loss. We can further consider your claim.

Mr. Morin testified that his original book was probably in the garbage. I find it implausible that Mr. Morin would discard the book when it is precisely the kind of documentation requested in Ms. Stone's letter.

Mr. Morin's claim was not assisted by the evidence of his business partner, Mr. Thomas. Mr. Thomas provided three pages of figures for 1990, which he claimed were his income from B and C Amusements (Exhibit 33). He testified that these pages were in a notebook and that the figures were written in 1990. The suggestion seemed to be that he noted his income in his book as he received it. This clearly was not the case. On cross-examination, Mr. Thomas acknowledged that Exhibit 33 was written in the same pen at one time.

Mr. Thomas insisted that he produced his records independently of Mr. Morin. He testified that, if he had seen Mr. Morin's Hilroy account book at all, it had been a long time ago. I simply do not accept this evidence for the following reasons.

Mr. Thomas' records correlate precisely with Mr. Morin's Hilroy account book. In my view, this degree of accuracy is inconsistent with the informality of the business. There are corrections in Mr. Thomas's records that, in my opinion, can only be explained as corrections to ensure that his records matched Mr. Morin's. In addition, Mr. Morin testified that Mr. Thomas went through his book, but stated that he could not remember if he went through the original book or the Hilroy account book. Finally, it is unclear why Mr. Thomas would have prepared these records in 1990, or even in 1991, when his 1990 income tax return was not prepared until August 4, 1992. Mr. Thomas testified that when he applied for no-fault benefits from another insurance company, he only had to provide his previous tax returns.

Mr. Morin's lawyer submitted that the income claim has a certain credibility because it was not to Mr. Morin's financial advantage to include it in his 1990 income tax return. In my opinion, this submission would be much more persuasive if Mr. Morin had paid a significant amount of income tax for 1990. Because of his losses from Mr. C's and rental losses, however, his taxable income is calculated as $337.64, with a balance due of $46.22. There is no evidence that he paid even this amount. The return is unsigned and no Notice of Assessment has been provided.

A great deal of evidence was presented as to whether the weekly income amounts set out in Exhibits 10 and 32 are statistically plausible. Mr. Webster expressed his opinion that they were not. I found this evidence interesting, but do not feel that I need to rely on it to reach the conclusion that the records are unreliable.

(ii) Post-accident income

In my view, the issue of Mr. Morin's post-accident income is also problematic. Mr. Morin's position is that in 1991, he was only able to pick up coins approximately five times and that his total income from B and C Amusements in 1991 was $1,000. This amount appears on his income tax return for 1991 (Exhibit 35). For the following reasons, I do not accept his evidence.

Mr. Morin's evidence was that the business was fully functioning up to the date of the accident. According to the figures in his Hilroy account book, his share of the receipts in October, November, and the first week of December 1990 averaged approximately $780 a week. Based on the evidence of Mr. Morin and Mr. Thomas about how the receipts were divided, this would mean they were generating over $2,000 a week. The Hilroy account book shows Mr. Morin's post-accident income in December 1990 as $450. It follows that only $900 was recovered from the machines in December 1990.

Mr. Morin acknowledged that he made approximately five trips in 1991. It is clear, therefore, that some of the machines remained in operation. Mr. Morin maintained, however, that he collected only $1,000 in 1991. This would mean that the total amount generated by the machines after the accident was approximately $1,900. Although I am prepared to accept that business would fall off reasonably quickly if no one was running the business, it is reasonable to expect that the machines would have generated considerably more than one week's revenues.

Mr. Morin mentioned at least two locations in his home town where he had placed video games. Although I have concluded that in 1991 he was unable to perform the essential tasks of his work, it is not at all clear why he could not continue to service the machines that he had placed locally.

I am also concerned that, as outlined above, Mr. Morin applied to another insurance company on October 13, 1991 for coverage of a flat bed truck equipped with loading ramps (Exhibit 17). Mr. Morin's evidence did not persuade me that the insurance agent's description was inaccurate (Exhibit 17):

Clients main area of operation is the Golden Triangle, however he does have some clients in Windsor that are services by a commissioned person in that area and Claude usually makes a trip for P.R. reasons about once every three months. Client supplies and services video game machines, so there is no product carried on the truck, however there are times when a machine is delivered or picked up. Lightweight loading ramps are carried for easier loading/unloading and truck has been equipped with steel tie-down rings for use when transporting a machine. Major use of vehicle is for transportation to customers location for periodic service and to pick-up coins from machines.

I conclude, therefore, that I cannot accept Mr. Morin's evidence that he earned only $1,000 from January 1, 1991 until he started his new job on May 4, 1992.

(iii) Conclusion

In a number of previous decisions, arbitrators have decided that if an applicants pre-accident income cannot be determined, his or her income should be deemed to be the minimum amount of $232. Because weekly income benefits are 80% of pre-accident income, this means that the weekly income benefits are $185.60, e.g. Mohamed K. Khan and Pilot Insurance Company, O.I.C. File No. A-000984 (January 27, 1993).

In this case, I am unable to determine either Mr. Morin's pre-accident or post-accident income. In my opinion, it is likely that he had pre-accident income in excess of the minimum amount, but post-accident income of greater than $1,000. In all of the circumstances, I agree with counsel for Lumbermens that the most appropriate conclusion is that Mr. Morin is entitled to weekly income benefits of $185.60, with no deduction for post-accident income.

I conclude, therefore, that Mr. Morin is entitled to benefits under section 12 of the No-Fault Benefits Schedule for the period from December 18, 1990 to April 16, 1992, a period of 69.43 weeks, at the rate of $185.60 a week. This means that Mr. Morin has been overpaid by $6,075.64:

Weekly income benefits

$ 185.60

Weeks of eligibility

x 69.43

Subtotal

$12,886.21

Less benefits paid

-$18,961.85

TOTAL

$ 6075.64

4. Overpayment

Section 27 of the No-Fault Benefits Schedule provides:

27(1) A person must repay to the insurer any benefit received under this Schedule that is paid to the person through error or fraud.

It is clear that, from the start, Lumbermens has not been satisfied with Mr. Morin's evidence about either his disability or his income. Payments were made in response to demands from Mr. Morin or his lawyer.

One of the purposes of the no-fault system is to ensure that benefits are paid in a timely fashion. In my opinion, section 27(1) should not be interpreted in a manner that would discourage the early payment of claims. I do not believe that an insurer's decision to pay benefits pending further evidence or pending mediation and arbitration should preclude its right to recover an overpayment under section 27(1).

I conclude, therefore, that Mr. Morin must repay the overpayment of $6,075.64 to Lumbermens, with interest under section 27(4) of the No-Fault Benefits Schedule, if demanded.

5. Special Award

At the commencement of the arbitration, Mr. Morin's lawyer indicated that Mr. Morin was asking that Lumbermens be ordered to pay a special award under section 282(10) of the Insurance Act because it unreasonably withheld or delayed benefits. The lawyer for Lumbermens objected to including this issue in the arbitration hearing. He submitted that the issue had not been mediated and, therefore, there was no jurisdiction to deal with it.

I concluded that I did have jurisdiction to hear the issue, but that the principles of natural justice and fairness required that Lumbermens be given a reasonable opportunity to prepare its response to this issue. Due to difficulties presented in the evidence on this issue, however, it was agreed that this issue should be adjourned pending the decision of the other issues. I therefore remain seized of this issue if Mr. Morin decides to proceed with it.

6. Expenses

The Applicant seeks an award of the expenses he has incurred in this arbitration. An award for expenses may be made under section 282(11) of the Insurance Act, which provides as follows:

282(11) The arbitrator may award to the insured person such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations to the maximum set out in the regulations.

The prescribed expenses and amounts are set out in Schedule 1 of the Dispute Resolution Practice Code and in Ontario Regulation 664 (R.R.O. 1990) "Schedule".

In Ralph McCormick and Economical Mutual Insurance Company, O.I.C. File No. A-000139 (October 2, 1991), arbitrator Susan Naylor made the following comments about expenses, with which I agree:

The discretion to award expenses should be exercised, having regard to the intent and purpose of the legislative scheme. The arbitration process has been established under the Insurance Act, as amended, in order to facilitate applicants' access to relatively inexpensive, speedy and informal adjudication of disputes regarding no-fault benefits. The discretion to award expenses should be exercised in accordance with this objective, having regard to the individual circumstances of each case.

Accordingly, it is appropriate to award an applicant his or her expenses, unless, in the circumstances of the particular case, it is determined that the application for appointment of an arbitrator was manifestly frivolous or vexatious, or that the applicant's conduct unreasonably prolonged the proceedings.

The Director of Arbitrations approved this statement of the principles guiding an award of expenses in the appeal decision in Vito Luigi Calogero and The Co-Operators General Insurance Company, O.I.C. File No. P-000251 (February 13, 1992).

In the McCormick case, Arbitrator Naylor did not specifically address the question of fraud by an applicant. It is certainly, however, within the spirit of the McCormick decision and the No-Fault Benefits Schedule itself to deny an applicant his expenses in such a case.

Expenses have been denied to applicants in cases where a finding was made that they acted fraudulently, e.g. Marcel Richardson and Royal Insurance Company, O.I.C. File No. A-001141 (November 3, 1992) and Isaiah Alleyne and Royal Insurance Company of Canada, O.I.C. File No. A-001107 (February 18, 1993). In spite of my concerns about Mr. Morin's evidence, I do not believe that this is an appropriate case in which to deny expenses. As stated above, it is clear that this has been a contentious matter from the beginning. In my view, the use of the dispute resolution process to resolve the dispute was appropriate.

Order:

1. Lumbermens agreed to pay any benefits that are found to be owing to Mr. Morin as a result of this arbitration.

2. Mr. Morin is entitled to weekly income of benefits of $185.60 for the period from December 18, 1990 to April 16, 1992, a period of 69.43 weeks. His total entitlement, therefore, is $12,886.21.

3. Because Mr. Morin received weekly income benefits totalling $18,961.85, he was overpaid by $6,075.64. Lumbermens is entitled to recover this amount under section 27 of the No-Fault Benefits Schedule.

4. Mr. Morin is entitled to his expenses of this arbitration as set out in Ontario Regulation 664, Dispute Resolution Expenses.

5. I remain seized of the issue of whether Lumbermens should be ordered to pay Mr. Morin a special award under Section 282(10) of the Insurance Act.

June 16, 1993

David R. Draper Arbitrator

Date

APPENDIX A

Exhibits:

Exhibit 1

Photocopy of the report of Dr. Pierre Kugler, dated June 6, 1991.

Exhibit 2

Photocopy of a letter, dated December 16, 1991, from Dr. Pierre Kugler to Mr. Morin's legal representative.

Exhibit 3

Photocopy of a letter, dated January 7, 1993, from Dr. Pierre Kugler to Mr. Morin's legal representative.

Exhibit 4

Photocopies of the clinical notes of Dr. Pierre Kugler (6 pages).

Exhibit 5

Photocopies of five accounts for the preparation of medical reports and the production of documents.

Exhibit 6

Photocopies of the medical records of the Kitchener-Waterloo Hospital (3 pages).

Exhibit 7

Photocopies of the records of the Physiotherapy Centre under covering letter, dated January 20, 1993.

Exhibit 8

Handwritten letter, dated February 8, 1993, from David Hoffman of Life, Health & Fitness.

Exhibit 9

Photocopy of the report of Dr. James A. Israel, dated September 27, 1991.

Exhibit 10

Hilroy account book, marked "Videos 1990".

Exhibit 11

Client's copy of Mr. Morin's 1990 individual income tax return.

Exhibit 12

Employer's Confirmation of Income.

Exhibit 13

Letter, dated August 1, 1991, from Michael Petrelli.

Exhibit 14

Letter, dated November 23, 1992, from Alena Patrak, with an attached schedule.

Exhibit 15

Medical or Psychological Report, completed by Dr. Kugler on March 5, 1991.

Exhibit 16

Rental Agreement from Tilden Car Rental.

Exhibit 17

Photocopy of an Application for Automobile Insurance, dated October 13, 1991, including a photocopy of a Commercial/Public Automobile Supplement form and a photocopy of a letter from Don Good to Economical Mutual.

Exhibit 18

Photocopy of a Certificate of Automobile Insurance with Economical Mutual Insurance Company with respect to a 1978 Dodge.

Exhibit 19

Photocopy of an Ontario Application for Automobile Insurance, dated May 31, 1991. Attached is a photocopy of an insurance policy with Jevco Insurance.

Exhibit 20

Photocopy of a Summary of Clinical History from the Royal Life Insurance Company of Canada, dated May 9, 1991.

Exhibit 21

Curriculum Vitae of Dr. James A. Israel.

Exhibit 22

Photocopy of a report from Dr. Kugler, dated April 21, 1992.

Exhibit 23

Photocopy of a report from Dr. Israel, dated April 22, 1992.

Exhibit 24

Photocopy of an x-ray report, dated September 27, 1991.

Exhibit 25

Photocopy of fax covering sheet, dated September 3, 1991, from Sharon Stone of Lumbermens Mutual Casualty Company to Dr. Israel. Attached are a photo-copy of a waiver from Mr. Morin, dated August 15, 1991 and a photocopy of a Medical or Psychological Report, completed by Dr. Kugler on March 5, 1991.

Exhibit 26

Photocopy of the clinical notes of Dr. Israel, dated April 22, 1992 (2 pages).

Exhibit 27

Photocopy of the clinical notes of Dr. Israel, dated September 27, 1991 (3 pages).

Exhibit 28

Photocopy of a letter, dated April 14, 1992, from Sharon Stone of Lumbermens Mutual Casualty Company to Dr. Israel.

Exhibit 29

File folder labelled "Claude (Expenses) Mr. C's (Feb 1/90 - Nov 23/90)".

Exhibit 30

File folder, labelled "Claude", containing receipts.

Exhibit 31

Photocopy of an excerpt from the Compendium of Pharmaceuticals and Specialties (C.P.S), including the entry for Tegretol.

Exhibit 32

Handwritten records labelled, "1990 Vides Claud & Brian's"

Exhibit 33

Photocopy of Brian Thomas' 1990 Individual Income Tax Return.

Exhibit 34

Photocopy of Claude Morin's 1989 Individual Income Tax Return.

Exhibit 35

Photocopy of Claude Morin's 1991 Individual Income Tax Return.

Exhibit 36

Fax covering sheet, dated March 25, 1991, from Sharon Stone of Lumbermens Mutual Casualty Company to Timothy Jansen, Mr. Morin's legal representative.

Exhibit 37

File copy of a letter, dated March 26, 1991, from Sharon Stone of Lumbermens Mutual Casualty Company.

Exhibit 38

Telephone message sheet, dated October 28, 1991.

Exhibit 39

Photocopy of a letter, dated December 11, 1991, from Pat Ward of Lumbermens Mutual Casualty Company to Timothy Jansen, Mr. Morin's legal representative.

Exhibit 40

Report, dated February 8, 1993, signed by Daniel M. Edwards of Coopers & Lybrand.

Exhibit 41

Handwritten calculations prepared by Bruce Webster of Coopers & Lybrand.

Exhibit 42

"Summary of Amounts Received by Mr. Morin", prepared by Bruce Webster of Coopers & Lybrand.

Exhibit 43

Appraisal Photograph Record, dated December 17, 1990.

Exhibit 44

Appraiser's report.

Exhibit 45

Calculation of Weekly Income Benefits, prepared by Bruce Webster of Coopers & Lybrand (3 pages).

Exhibit 46

Photocopy of a letter, dated December 9, 1991, from J. Timothy Jansen to Lumbermens Mutual Casualty Company.

Exhibit 47

Letter, dated February 17, 1992, from Dr. Kugler, attaching a typewritten version of some of his clinical notes.

Exhibit 48

Photocopy of a Charge/Mortgage of Land.

Exhibit 49

Photocopy of an Application for Accident Benefits, dated March 14, 1991.

Exhibit 50

Letter, dated August 28, 1991, from J. Timothy Jansen to Lumbermens Mutual Casualty

APPENDIX B

Documents before the arbitrator, but not marked as exhibits:

Report of Mediator, dated May 13, 1992.

Application for Appointment of an Arbitrator, dated August 18, 1992. Response by Insurer, dated September 25, 1992.

Pre-hearing letter, dated November 24, 1992, from K. Julaine Palmer, arbitrator.

APPENDIX C

Cases and authorities submitted by the parties:

By Mr. Morin's representative

Jacqueline Milton-Coates and Kenneth Coates v. Barry Wolfe and EBA Engineering Consultants Ltd., unreported decision of the Queen's Bench of Alberta, dated June 9, 1992.

Driedger, The Construction of Statutes, pp.62-65,

By Lumbermens' representative

Bailey and CAA Insurance Company (Ontario), O.I.C. File No. A-001139 (October 29, 1992).

Calogero and The Co-operators, O.I.C. File No. A-000251 (November 20, 1991).

Khan and Pilot Insurance Company, O.I.C. File No. A-000984 (January 27, 1993).

J. Singh and Kingsway General Insurance Co., O.I.C. File No. A-000890 (January 29, 1993).

Nyamekye and Lloyd's Non Marine Underwriters, O.I.C. File No. 001136 (Dec. 17, 1992).

Stoll and Kingsway General Insurance, O.I.C. File No. A-000386 (October 18, 1991).

Downs and Allstate Insurance Company of Canada, O.I.C. File No. A-000064 (July 18, 1991).

Plows and Jevco Insurance Company, O.I.C. File No. P-000175 and P-000588 (May 22, 1992).

Moxon and State Farm Insurance, O.I.C. File No. A-000090 (July 18, 1991).

Statutory Powers Procedure Act, s.22.

O.I.C. Dispute Resolution Code, s. 18.