Neutral Citation: 1994 ONICDRG 4

File No. A-001736

ONTARIO INSURANCE COMMISSION

BETWEEN:

FRANCOIS PHILIPPE

Applicant

and

ROYAL INSURANCE COMPANY OF CANADA

Insurer

DECISION

Issues:

The Applicant, Francois Philippe, was injured in a motor vehicle accident on December 14, 1990. He is receiving accident benefits under his automobile insurance policy, set out in the No-Fault Benefits Schedule ("the Schedule"), Ontario Regulation 672, R.R.O. 1990, enacted under the Insurance Act R.S.O. 1990, c. I.8. The No-Fault Benefits Schedule is now referred to as the Statutory Accident Benefits Schedule - Accidents before January 1, 1994, further to Ontario Regulation 779/93.

Mr. Philippe continues to receive disability benefits under section 12 of the Schedule because he has been unable to perform his pre-accident job duties since the accident. His entitlement to these benefits is not in dispute. However, Mr. Philippe disputes the amount of those benefits. He also disagrees with the Insurer about his rehabilitation benefits and claims a special award.

The particular issues to be determined at the arbitration hearing are:

1. What is the amount of Mr. Philippe's weekly income benefits? Specifically,

(a) In calculating Mr. Philippe's income from self-employment under section 12(7), should certain expenses incurred by Mr. Philippe be deducted as "business expenses which cease as a result of the accident" under section 12(7)3. of the Schedule?

(b) In deducting post-accident income from Mr. Philippe's weekly income benefits under section 15 of the Schedule, how is this income to be calculated?

2. Is Royal Insurance liable to pay a further award under section 282(10) of the Insurance Act on the basis that it unreasonably withheld or delayed rehabilitation benefits or disability payments?

Mr. Philippe also claimed interest on any outstanding amounts and his expenses connected with the hearing.

Result:

1. Mr. Philippe is entitled to a weekly income benefit of $502.34.

2. Mr. Philippe's post-accident income should be deducted net of his business expenses. He is therefore entitled to a further amount of $998.77.

3. Mr. Philippe is entitled to interest under section 24(4) of the Schedule.

4. Royal Insurance is liable to pay a special award of $350, and compound interest as required under section 282(10) of the Insurance Act.

5. Mr. Philippe is entitled to his expenses incurred in respect to this arbitration, as set out in Ontario Regulation 664, R.R.O. 1990.

Hearing:

A hearing was held in Sudbury, Ontario, on July 5 and 6, 1993, and continued on July 29, 1993, before me, Susan Naylor, Senior Arbitrator.

Mrs. Nicola Philippe represented her husband, Francois Philippe, at the hearing. Royal Insurance Company was represented by Mr. Kevin J. Kovalchuk, Barrister and Solicitor. Mr. Richard Guillemette, Assistant Claims Manager of Royal Insurance, also attended.

The following witnesses gave oral testimony at the hearing:

Francois Philippe

Nicola Philippe

Richard Schaak, chartered accountant

Steven Warner, Adjuster, Underwriters Adjustment Bureau

Richard Guillemette, Claims Manager, Royal Insurance

Twenty-seven documents were filed as exhibits to the hearing. They are listed at Appendix 1.

(1) The amount of benefits

A. "Ceasing" expenses under section 12(7) 3.

(a) Summary of the dispute:

Weekly income benefits are based on 80 per cent of an applicant's gross weekly income from employment or self-employment, up to the limits of the policy. The gross weekly income is determined under a formula set out in section 12(7). An applicant's income is deemed to be his or her average gross weekly income from employment or self-employment for either the four or the fifty-two weeks before the accident, whichever is more favourable to the applicant. In any event, an applicant's income is deemed to be at least $232, regardless of the actual income.

In calculating gross weekly income from self-employment under section 12(7), certain expenses are deducted. Section 12(7)3. of the Schedule states:

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.

For ease of reference, these expenses are called "ceasing expenses". Sections 12(4) and 12(7) are reproduced in their entirety in Appendix 2.

Essentially, benefits under the Schedule for the self-employed are based on 80 per cent of a "modified net" income concept. The Schedule recognizes that many applicants will have ongoing expenses for which they remain liable after the accident. These continuing expenses are not deducted from their income, under section 12(7)3.

The scheme is meant to ensure that an applicant is not stuck with continued business expenses, without allowance being made for them in his or her benefits. However, expenses that stop after the accident because the applicant is no longer at work are deducted from his or her income.

The parties disagree about the ceasing expenses that should be deducted in calculating Mr. Philippe's income from self-employment before the accident. The core of the dispute is whether a reduction in an expense after the accident represents a ceasing expense under section 12(7)3.

The parties agree that Mr. Philippe's business continued to be liable for certain costs after the accident, such as ongoing insurance payments, interest on a bank loan, utilities, etc. These have not been deducted in calculating his benefits. However, they disagree about certain expenses, which continued to some extent after the accident, but at a reduced level.

Mr. Philippe argued that Royal Insurance was not entitled to deduct the amount by which his expenses had decreased after the accident. He felt that reduced expenses were not "ceasing" expenses. His position was summarized in a letter (marked Exhibit 11) from Mr. Schaak, a chartered accountant whom he retained for the purposes of giving an opinion on the question. The letter states:

...The business continued to incur expenses after Mr. Philippe's accident. The expenses arose for two reasons: Mr. Philippe attempted to return to work for a period of three months and Mr. Philippe has continued to maintain his equipment in anticipation of returning to work in the future.

Revenue Canada's Interpretation Bulletin IT-487, paragraph 2(c) states that "An expense would not be disallowed simply because the income earning process produced a loss as long as the intention in making the expenditure was to produce income". The expenses in question appear to be legitimate business expenses since Mr. Philippe anticipates returning to work.

It would therefore seem that section 2.28.3 of the insurance policy would not apply since business expenses have not ceased.

Mr. Schaak reiterated his opinion in the course of testimony at the hearing.

Mr. Philippe submitted that the regulation would have been worded differently, if it was intended to capture expenses that had decreased but had not stopped altogether. He pointed to contrasting definitions of "decrease", "reduce" or "lessen". He also submitted that his ongoing expenses fluctuated from month to month, and could not fairly be estimated at a fixed amount. He stated that the Insurer's estimate of the amount by which expenses had diminished after the accident was simply a "guess".

Counsel for Royal Insurance submitted that the weekly income benefits that Mr. Philippe was receiving were intended broadly to compensate Mr. Philippe for his loss of income, or anticipated income, resulting from the accident. He submitted that Mr. Philippe's business expenses were significantly less during the period when he was not working, than when he was working. This reduction in expenses should be taken into account in calculating Mr. Philippe's benefit level.

Mr. Philippe is currently receiving a weekly payment of $502.34. This figure is based on his income from employment and self-employment in the four weeks before the accident. Of this amount, $345.70 represents income from employment, which is not in dispute, and $156.64 represents his income from self-employment, less "ceasing" expenses. If these expenses were not deducted, Mr. Philippe's benefit from self-employment would be $227, for a total weekly benefit of $572.70.

(b) The background facts

At the time of the accident, Mr. and Mrs. Philippe had recently started their own business under the operating name, F & N Contractors. The business involved snow ploughing and installing insulation and drywall. It was contemplated that Mr. Philippe would do the manual work of the business, while Mrs. Philippe would be in charge of financial matters. The business was a small family operation run out of their home; they had no other employees. Mr. and Mrs. Philippe invested in a new truck and a snow plough for use in the business. During this time, Mr. Philippe was working for another contractor, as well as working on his own account. However, only his income from self-employment is in dispute.

In early December 1990, Mr. Philippe secured four snow-ploughing contracts for the winter of 1990, for which he was paid a total of $1,135. Unfortunately, he was injured in an automobile accident shortly afterwards, on December 14, 1990. Due to his injuries, Mr. Philippe has not been able to do his usual work since the accident (save for a brief but unsuccessful trial period at the end of 1991). He arranged for the existing snow-ploughing contracts to be completed by his brother, and was paid for the jobs. However, with Mr. Philippe unable to work, the activities of F & N Contractors were temporarily suspended after that time.

Although the revenues of the business stopped after the accident, the expenses did not. Mr. Philippe testified that it was necessary to incur these expenses in order to maintain the business as a viable concern, when he was ready to resume work.

In support of his claim, Mr. Philippe filed financial documentation, including income tax returns for 1990, 1991 and 1992, financial statements for F & N Contractors for the same years, and a special statement of income and expenses for the four weeks before the accident, prepared by Mr. Schaak. Mr. and Mrs. Philippe explained the expenses in the course of their testimony at the hearing.

Based on documentation provided by Mr. Philippe and Mr. Schaak, Royal Insurance calculated that some of the business expenses had significantly decreased after the accident. In a letter dated March 25, 1993 to Mr. Philippe, marked Exhibit 4, the Insurer summarized its calculation of the percentage by which Mr. Philippe's expenses had decreased:

Expenses Deducted

Percentage Ceased

Meals and entertainment

100%

Vehicle operation

80%

Bank Charges

95%

Pager Charges

100%

The Insurer concluded that $360.66 of the expenses claimed in the four weeks before the accident had ceased after the accident. It expressed this figure as a ratio of ceasing expenses to earnings of 31.8%, and applied this ratio to Mr. Philippe's gross average weekly income, to determine his benefit level. Mr. Philippe objected to the deduction of any proportion of these expenses, because he felt they were not ceasing expenses under section 12(7)3.

It is unnecessary for me to set out in detail the financial evidence filed. In fact, the Insurer's calculations were not set out in detail at the hearing. In submissions on behalf of Mr. Philippe, it was conceded that, if I ruled that a ceasing expense could include a reduction in expenses, Mr. Philippe generally did not take issue with the Insurer's estimate in this case, except for two items - the deduction of 100% entertainment expenses and the cost of Mr. Philippe's pager.

Although counsel for the Insurer challenged the amount of some of the expenses claimed, there was no genuine issue as to Mr. and Mrs. Philippe's credibility or the reliability of their documentation. Mrs. Philippe maintained the financial end of the business, with appropriate professional help. She testified that their first business venture was a learning experience for the couple. I found Mrs. Philippe to be a straightforward, candid and very credible witness. She impressed me as a careful record keeper, and I accept the explanations she advanced in those instances when receipts were not retained. In every instance, I accept that the Philippes incurred the expenses that were claimed, and that such expenses were reasonable expenses arising out of the business.

Mr. Philippe testified that he continued to maintain his truck and snow-ploughing equipment. He testified that the cost of maintenance, in fact, increased because of the damage done to the equipment in the accident, although no further evidence of this was introduced, and I make no specific findings in respect to it. The Insurer's calculations did not assume a reduction in maintenance costs, but assumed a significant reduction in gas expenses (see Exhibit 4).

Mr. Philippe testified that he continued to use the truck for business purposes, during the period he was not working. He testified that he used the truck intermittently to visit contractors and maintain ongoing contact with them in the interests of future business relations. He bought the contractors coffee occasionally, and bought himself lunch when he was on the road visiting them. He claimed the cost of gas, oil and these refreshment expenses as a business expense on his income tax return. Mr. Philippe testified that the expenses varied from month to month.

The evidence showed that Mr Philippe spent considerably less on these items when he was not working, than during the period when he attempted to return to work in late 1991.

Receipts filed showed that Mr. Philippe spent a total of $114 up to November 1991 for gas and oil. Mrs. Philippe testified that this figure understated the gas expenses. She explained that she did not know that she had to keep all gas bar receipts while her husband was off work, and only started to do so later, on advice from her bookkeeper. The 1991 tax return showed a figure of $1,754.23 for vehicle operations. Deducting gas expenses for the last two months of 1991 when Mr. Philippe returned to work, this leaves an average monthly expense of $106 for the remaining months, a figure comparable to the expense claimed for the same months in 1992.

Mr. Philippe attempted to return to work from November 1, 1991 to January 23, 1992. The receipts show gas expenses of $303.50 and $388.00 for November and December 1991, respectively, and $314 in January up to January 23, 1992. His total gas expenses for the remainder of 1992, for which receipts were provided, were $1,110.25, or an average of approximately $100 per month.

Mr. Philippe did not claim any expenses for business entertainment for most of 1991, when he was not working. Receipts for meal expenses showed he spent $185 in November 1991 and $146.60 in December 1991. The receipts showed that Mr. Philippe spent $98.68 on meal expenses from January 1 to January 23, 1992, and a total of $117.64 for the remainder of the year.

The financial documentation filed indicated bank charges of $522 in 1990, including $40.00 in the four weeks before the accident, $56.85 in 1991 and $21.00 in 1992.

(c) "Ceasing" expenses

Mr. Philippe acknowledges that many of the expenses of the business were reduced when he was not working. However, he submits that a reduction in expenses is not a cessation of those expenses within the meaning of section 12(7)3.

In my view, section 12(7)3. cannot be interpreted to provide a clear formulation which applies in all cases. Ultimately, the issue of whether an expense is a ceasing expense is a question of fact, based on an individualized inquiry into the specific circumstances of each case.

I accept that a decrease in expenses following an accident may be a ceasing expense within section 12(7)3. Mr. Philippe cited several dictionary definitions of the word "cease" - for example, to stop, bring or come to an end (The Concise Oxford Dictionary) - and compared them to definitions of "decrease", "reduce" or "lessen". However, I do not accept Mr. Philippe's proposition that a category of expense in its entirety must "cease, stop or come to an end", for the language of the regulation to apply. The language used can apply equally to a proportion or part of an expense - i.e. that proportion of the expense "ceases, stops or comes to an end".

In this case, Mr. Philippe stopped working after the accident. No replacement was hired to continue with the work. The activities of the business were temporarily suspended during Mr. Philippe's incapacity. Mr. Philippe continued to incur expenses, which were necessary to maintain the viability of the business for when he was able to resume work. However, he incurred fewer expenses when he was not working than when he was working. Although he continued to incur business expenses after the accident, these expenses were limited. In such circumstances, it is not unreasonable to take account of the reduced expenses in the calculation of Mr. Philippe's benefits. The income replacement benefits are broadly intended to compensate him, within the limits of the policy, for the income that has been interrupted by the accident (measured by his pre-accident income). To pay him an additional amount in respect of expenses which are not being incurred would, in effect, provide Mr. Philippe with additional compensation for his loss.

I find, therefore, that it is not necessary for a particular expense to stop in its entirety after the accident in order for the expense to be treated as a ceasing expense. If a significant proportion of the expense stops as a result of the accident, that proportion may be regarded as an expense that has ceased under section 12(7)3.

Mr. Philippe argued that it would be unfair to deduct a fixed proportion of variable expenses, which may fluctuate from month to month. To the extent that the expenses are variable, the proportion to be deducted will be more difficult to assess accurately. The appropriate deduction must be calculated based on the best evidence available.

Mr. Philippe took issue with the deduction of 100% of entertainment expenses, as a ceasing expense. He submitted that the business continued to incur the cost of some business promotion, in order to maintain it as a viable concern. The financial documentation filed showed that Mr. Philippe claimed no expenses for entertainment and business promotion for the year after the accident. In these circumstances, I find that the Insurer was not unreasonable in regarding all entertainment expenses as having ceased after the accident, in calculating Mr. Philippe's average income under section 12(7).

Mr. Philippe also disputed the deduction of a monthly charge for a pager, as an expense that ceased as a result of the accident, under section 12(7)3. He testified that he gave up the pager because it was not appropriate to his needs, and that he would have preferred a cellular phone. Mr. Philippe testified that he did not re-lease the pager when he returned to work in November 1991, and spent the money he saved on the pager on other office equipment.

Details of the pager lease are contained in documentation at Exhibit 3. These show that Mr. Philippe rented a pager from Northern Communications Services Ltd. on September 25, 1990, at $37.50 a month, plus $18 insurance. The documentation did not indicate that the period of lease was other than a month-to-month arrangement. The pager lease was apparently cancelled on January 9, 1991, approximately three weeks after the accident. No explanation was advanced as to why the pager lease was terminated at this time, and Mr. Philippe did not substitute alternative technology, such as a cellular phone.

Based on the evidence before me, I am persuaded that there was some relationship between the accident and the termination of the pager lease. I conclude that Mr. Philippe likely cancelled his lease arrangement because he did not need to use the pager once he stopped working. I therefore find that the Insurer legitimately treated the cost of the pager as an expense that ceased as a result of the accident.

I therefore find no reason to disturb the ratio of 31.8% ceasing expenses to income applied by the Insurer in calculating Mr. Philippe's average income under section 12(7)3. Accordingly, I find that he is entitled to the total weekly benefit amount of $502.34 that he is currently receiving.

B. Expenses incurred in post-accident employment or self-employment under section 15

Mr. Philippe attempted to return to work on November 1, 1991. He worked for approximately three months until January 23, 1992, when his condition forced him to stop work again. During this period, he earned approximately $4,000. He testified that he incurred additional expenses during this period.

Mr. Philippe claimed that, because the business incurred expenses during this period, the expenses of the business did not cease after the accident within the meaning of section 12(7)3. His position in this regard is set out in Exhibit 11.

However, the regulations treat income earned in employment or self-employment after an accident differently than income earned before the accident. Post-accident employment income is deducted from benefits under section 15. It is not included in section 12(7). As a matter of logic, one would expect that expenses incurred in earning that income after an accident would be deducted from that income.

The Insurer deducted 80 per cent of the gross amount of the income, without making any allowance for expenses.

Section 15 states:

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.

Section 15 does not state whether income is to be deducted on a gross basis or net of expenses. The word "income" by itself can have either meaning. Some other provisions in the regulation, such as section 12(7), refer specifically to "gross" income. However, this reference does not indicate what the Legislature intended by omitting the words elsewhere.

Where, as here, statutory language is ambiguous, the interpretation that best meets the objectives of the legislation should be adopted.

Rehabilitation is an essential feature of the accident benefits scheme. Rehabilitation includes the goal of safely returning the injured person to the work force.

It is the Insurer's position that 80 per cent of any revenue from self-employment earned after the accident is deducted without regard to the expenses incurred in generating the income. I cannot accept this result. It represents a serious financial disincentive to an injured person to try to return to some form of work. It therefore clearly offends against the policy of the regulation. It also makes no sense in a context where benefits based on income are calculated using a "modified net" (i.e. net of ceasing expenses) concept.

I find that the Legislature must have intended "income" in section 15 to mean, in the case of the self-employed, income net of expenses incurred to generate it. Therefore, a self-employed applicant is entitled to deduct the expenses he or she incurred, in calculating post-accident income under section 15, except to the extent that those expenses have already been taken into account.

Where a business continues uninterrupted after an accident, but without the active participation of the injured person, the relationship between section 12(7)3. and section 15 and the application of these sections to the case may be unclear. However, in this case, there is a clear delineation between the period when Mr. Philippe was not working and the three-month period when he attempted to return to work. Expenses associated with the latter period should be taken into account under section 15.

According to the evidence, Mr. Philippe did not incur expenses for entertainment and business promotion during the months in 1991 that he was off work due to his injuries. During the period he worked, he claimed total expenses of $430.28. He continued to incur refreshment expenses of approximately $10 per month thereafter promoting his business, although he was not working.

The additional expenses that Mr. Philippe incurred during the short period he resumed work are properly to be included in the calculation of his deductible post-accident income under section 15. The entertainment expenses claimed after January 23, 1992 are more difficult to characterize. I do not question that these expenses were reasonably and legitimately incurred for business purposes. However, in the circumstances, it seems appropriate to view these expenses as analogous to expenses incurred to generate income after the accident. They therefore should be considered under section 15.

The parties disagreed about the amount of post-accident income that Mr. Philippe had earned. Mr. Philippe stated that he earned $3,926, of which 80 per cent or $3,140 was deducted by the Insurer. The Insurer stated that it had been informed of earnings of $3,776, of which $3,020 had been deducted.

I had little evidence in regards to the income that was deducted. The Insurer filed a letter, dated July 15, 1993 and marked Exhibit 26, which sets out a summary schedule of payments. However, it did not provide a computer printout of payments made, or introduce further evidence at the hearing, to confirm the information contained in the letter. In the absence of further evidence, I am prepared to give the benefit of any doubt on the matter to Mr. and Mrs. Philippe, who gave sworn testimony as to the amount of income declared and deducted.

With the exception of gas and meal expenses, I was not provided with detailed evidence of Mr. Philippe's expenses during the three-month period when he tried to return to work. Furthermore, the Insurer did not take any position on the amount of deductible expenses. In view of this, I accept Mr. Philippe's position that the 31.8% ratio of expenses to income should be applied to his post-accident income as a reasonable estimate in the circumstances of this case.

I find that Mr. Philippe's post-accident income, net of expenses, to be as follows:

Total post accident income from November 1, 1991 to January 23, 1991

$3,926.00

Deemed expense/income ratio at 31.8%

1,248.46

Income net of deemed expenses

2,677.54

80 per cent of net income

2,142.03

Amount deducted by Insurer

3,140.80

Amount recoverable by the Applicant

998.77

I find that the Insurer was entitled to deduct $2,142.03 from Mr. Philippe's benefits under section 15 of the Schedule. It is therefore required to repay Mr. Philippe a total of $998.77, together with interest at 2% per month on the outstanding amount.

(2) Special Award

Section 282(10) of the Insurance Act states:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the No-Fault Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

This award is referred to in the notes to the Schedule as a "special award", and I refer to it as such in the following paragraphs. Mr. Philippe alleged three grounds for a special award. These were:

a. Delay in including Mr. Philippe's income from self-employment in the calculation of his benefits,

b. Delays in rehabilitation treatment,

c. A delay in reinstating disability benefits after Mr. Philippe's attempted return to work.

a. Delay in including Mr. Philippe's income from self-employment in the calculation of his benefits.

Mr. Philippe complained that Royal Insurance did not include his income from snow ploughing in his benefits until mediation occurred in June 1992. He felt that Royal Insurance had thereby unreasonably delayed the benefits to which he was entitled. I heard evidence from Mr. and Mrs. Philippe on this point, and also from Mr. Steve Warner of the Sudbury Underwriter's Association, an adjuster initially assigned to the case.

I am satisfied, based on all the evidence, that Royal Insurance did not act unreasonably in regards to the calculation of Mr. Philippe's benefits. Benefits of $282.41 were initially paid based on Mr. Philippe's employment income, and were reassessed in Mr. Philippe's favour, on an ongoing basis, as further information and financial documentation was exchanged. Royal Insurance's requests for documentation to verify Mr. Philippe's income from his own business were reasonable, and account for the preponderance of any delay in the inclusion of this income in the calculation of benefits.

b. Delays in rehabilitation treatment

(i) The issue stated

Mr. Philippe claimed that he had not been afforded timely rehabilitation by the Insurer. In his application, he stated:

Since the accident, I have had to fight tooth and nail in order to receive treatment to try to get well enough to be able to return to full-time work...I also request that some provision be made to protect myself from being denied any treatment that is deemed necessary to help my physical condition.

Mr. Philippe alleged that the Insurer had terminated physiotherapy in early 1991, delaying his recovery, and that he was denied access to an intense physiotherapy program until late 1992. He conceded that he had not been denied any rehabilitation treatment.

The parties agreed that the Royal Insurance had paid for the treatment in issue. Mr. Philippe's principal concern was in regards to his future right to rehabilitation. He was concerned that Royal Insurance would let him "sit at home" once the membership of his gym club had expired. He was also concerned about his right to future disability benefits after 156 weeks had expired under section 12(5)(b) of the Schedule.

At the hearing, I explained to Mr. Philippe that I had no jurisdiction to rule on these future claims, and therefore I make no findings in regards to these matters. However, I have treated Mr. Philippe's complaints about his treatment as a request for a special award.

(ii) Facts and evidence

Before the accident, Mr. Philippe, who is 26 years old, had an extremely energetic lifestyle, and was very fit. He was a long distance runner, and raced competitively. He specialized in ultra marathon competitive running - running 100 mile races within 24 hours. Newspaper articles about his many impressive accomplishments in the field of running were filed as Exhibit 12. Mr. Philippe started running long distance at age 13. At age 20, he was the youngest person to run an ultra marathon in Canada and was one of the top ten runners in Canada. It was clear from the newspaper clippings that Mr. Philippe was a talented and committed athlete - he testified that he was working his way up to becoming an elite runner; one of the very best in North America.

Running was an integral and vital part of Mr. Philippe's life. His life, and that of his family, was very much structured around his athletic activities.

According to the medical reports filed, Mr. Philippe suffered a soft tissue flexion extension injury in the accident. He subsequently experienced neck and right shoulder problems, headaches and low back pain. He continues to experience stiffness and chronic pain in the right shoulder and arm, occasional back ache and headaches. Due to his condition, Mr. Philippe is unable to perform the heavy physical tasks involved in drywalling or snow removal, particularly tasks involved in working overhead. He testified that the accident also deprived him of the ability and pleasure of running competitively or for long distances, and that the loss of this recreational activity has significantly affected his enjoyment of life and his relationship with his family.

Mr. Philippe has seen a number of doctors and health professionals and has undergone various treatments. A number of medical reports were filed. They show that Mr. Philippe suffered soft tissue injuries in the car accident, but disagree on the nature of, and need for, further treatment and on the degree to which the injuries continue to be disabling.

The evidence that I have relied upon in coming to my conclusions in regards to a special award is pieced from Mr. and Mrs. Philippe's oral testimony and the medical reports before me. Because disability was not an issue before me, the medical evidence was incomplete. I did not have reports from a number of the rehabilitative facilities that Mr. Philippe attended, nor did I have a reliable record of the duration of the rehabilitation treatment. Correspondingly, I had little evidence as to the reason why a course of rehabilitation treatment commenced when it did, and ended when it did. I heard no evidence at all in respect to the rehabilitation consulting service (Northern Rehabilitation Consulting Services) retained by Royal Insurance in this case.

The evidence before me indicates the following: After the accident, Mr. Philippe started physiotherapy on January 15, 1991, and continued for approximately two and a half months. The treatment was paid for by Royal Insurance, and involved manual mobilization, and flexibility and stretching exercises, for up to an hour each day, five days each week. Mr. Philippe stated that he felt some improvement, but thought a more intensive course would have been more beneficial.

Mr. Philippe complained that Royal Insurance cut off payment for the physiotherapy, although he wanted the treatment to continue. However, there was no evidence before me that this was the case. There was no evidence that Mr. Philippe's family doctor, Dr. Johnston, had recommended further physiotherapy, or that Royal Insurance had refused to pay for any treatment. Mr. Philippe testified that he was told that he was discharged because the course of treatment had ended, and the physiotherapist felt that there was no further benefit to be gained by continuing. I am therefore unable to conclude that Royal Insurance was responsible for the termination of the physiotherapy treatment at that time, or that it had refused to reinstate treatment.

In late April 1991, Mr. Philippe was referred to the Merali Stress & Pain Clinic for management of chronic pain, apparently at the suggestion of his insurance agent and his family doctor. The treatment was paid for by Royal Insurance. Two reports from Dr. Merali are marked Exhibit 20. They indicate that treatment involved participation in a biofeedback program for stress management and relaxation therapy for pain relief and management, followed by a course of massage treatment. The biofeedback program was intended to last for eight or ten weekly sessions.

Mr. Philippe testified that he left the program, without completing it, in June 1991, because he felt that it was a "waste of time". Given Mr. Philippe's former energetic and physical lifestyle, it is not surprising that the form of therapy offered did not meet his expectations. However, it is clear that it was Mr. Philippe's choice not to continue with the program.

Mr. Philippe was referred for chiropractic treatment by his family doctor. The treatment continued for approximately six months, and was paid for by Royal Insurance. Mr. Philippe testified that the treatment provided little relief other than a slight reduction in his headaches.

In November 1991, Mr. Philippe attempted to return to work, but ongoing pain forced him to stop at the end of January 1992. He continued with chiropractic treatments during this time, apparently until spring 1992.

On March 26, 1992, Mr. Philippe was examined by Dr. Fred Langer, an orthopaedic surgeon at Mount Sinai Hospital in Toronto. Dr. Langer thought that Mr. Philippe should return to work, and did not require further treatment. These findings were echoed, with some modifications, by Dr. Anthony D. Graham, Medical Director of the Rehabilitation Unit at Laurentian Hospital, who assessed Mr. Philippe several months later on June 2, 1992. Dr. Graham concluded that Mr. Philippe should be encouraged to gradually resume activity, and to return to modified work. He felt that there was no need for further investigation or treatment.

As a result of discussions in mediation, Mr. Philippe was referred for an assessment to Dr. P. Rothbart, a specialist at the Whiplash & Headache Clinic Inc. on July 13, 1992. Dr. Rothbart concluded that Mr. Philippe sustained soft tissue injuries in the automobile accident, and thought that Mr. Philippe possibly had some facet joint damage which required further radiological review.

Dr. Rothbart recommended, among other things, an extensive physiotherapy program through a rehabilitation centre, including daily exercises and psychological therapy as necessary. If Mr. Philippe's headaches did not improve after a few months' therapy, a course of occipital steroid block injections was recommended. Dr. Rothbart recommended that Mr. Philippe be re-assessed in six to nine months after the physiotherapy.

Further radiological review was carried out by Dr. Ming Chiu on February 9, 1993. He found that Mr. Philippe's cervical spine was within normal limits, but did not rule out the possibility that Mr. Philippe's shoulder pain resulted from degenerative changes to neck facet joints.

In late November 1992, Mr. Philippe commenced an intensive course of physiotherapy in a chronic pain program, as recommended by Dr. Rothbart. Mr. Philippe was assessed for the program on November 16 and 17, 1992. A copy of the report of the assessment is included in Exhibit 14. Except for this initial report, no further records from the physiotherapy centre were filed. Mr. Philippe testified that he attended the program for two and a half to three hours each day for about six months, although the centre had initially projected a time-frame of six to eight weeks. Mr. Philippe received intensive physiotherapy, together with pain management and psychological counselling.

During this time, Mr. Philippe was referred for a further orthopaedic assessment by Dr. Dennis C. Evans. Dr. Evans' report, dated February 27, 1993, is also part of Exhibit 14. He recommended that Mr. Philippe continue on an intensive physiotherapy program for a further two months, progressing to a two-month work simulation program. Dr. Evans suggested that Mr. Philippe try to return to some form of work after that, but that, if no modified work was available in his occupation, a change of work, even temporarily, should be considered.

Mr. Philippe was discharged from the physiotherapy treatment program and testified that his physiotherapist told him that not much else could be done for him. He testified that he did not attend the work simulation program recommended by Dr. Evans, because he could not do any overhead work.

Mr. Philippe's physiotherapist recommended that he continue exercises on his own. Mr. Philippe wanted to take up swimming, as he had learnt that this form of activity was used to help athletes heal faster. Accordingly, Royal Insurance paid for some gym equipment for use at home, and also paid temporary dues for membership of a gym club with a swimming pool. Although, at the time of the hearing, Mr. Philippe continued to be a member of the club, he was concerned that his membership would expire shortly, and that Royal Insurance might not pay for it to be renewed.

Based on the evidence before me, I cannot find that Royal Insurance has acted unreasonably or irresponsibly in respect to Mr. Philippe's rehabilitation. It has paid for all treatment recommended by Mr. Philippe's health professionals, including his family physician, the specialists whom he consulted, and his physiotherapist. He has not been denied any recommended treatment.

Royal Insurance reasonably sought the opinion of Dr. Langer, an orthopaedic specialist, and Dr. Graham, a physiatrist, as to Mr. Philippe's ongoing problems. Although Mr. Philippe complained of having to submit to medical examinations by doctors chosen by Royal Insurance, and did not accept their findings, Royal Insurance was, and remains, entitled to require, on reasonable notice, that Mr. Philippe attend at such an examination, "as often as it reasonably requires" under section 23(2) of the Schedule. There was no evidence that Royal Insurance's requirements were unreasonable in this case.

Although Dr. Langer or Dr. Graham considered that Mr. Philippe did not require any further treatment, Royal Insurance agreed to seek a further opinion from Dr. Rothbart, a specialist in pain management, at the Whiplash and Headache Clinic in Toronto, and subsequently paid for further intensive therapy, as recommended by Dr. Rothbart. Although several months elapsed between Dr. Rothbart's report and the treatment, I heard no evidence about the reasons for this from either party, and am not in any position to speculate. In the absence of evidence, I am not prepared to draw an inference that Royal Insurance unreasonably delayed Mr. Philippe's rehabilitation during this time.

I also note that Royal Insurance was willing to pay for the work simulation program recommended by Dr. Evans, but that Mr. Philippe did not take advantage of the program.

The evidence does not support a finding that Royal Insurance unreasonably withheld or delayed rehabilitation treatment in Mr. Philippe's case. Therefore, Mr. Philippe's claim for a special award on this ground is denied.

However, I have some additional comments on the evidence before me. I have no doubt from the evidence that Mr. Philippe is a self-reliant and highly motivated individual, who is attempting to rehabilitate himself to the level of functioning he enjoyed before the accident. He excelled at athletic activities and took pride in the physical nature of his work and in his physical condition. Coming to terms with a less active level of functioning has been difficult and frustrating for Mr. Philippe.

While I find that Royal Insurance has not acted unreasonably in regards to Mr. Philippe's rehabilitation, it is regrettable that intensive rehabilitative intervention did not take place until almost two years post-accident. There was no evidence of coherent or co-ordinated rehabilitation planning in this case, although I have previously noted the deficiencies in the evidence before me.

As has been stated in other arbitration decisions, effective rehabilitation planning and management requires a co-ordinated and collaborative approach. It requires the involvement of all concerned parties in the process, acting in partnership - the applicant and his or her family, the insurer, treating health professionals and the rehabilitation case-manager. Responsibility for achieving this partnership rests with all the participants.

Under section 6 of the Schedule, Mr. Philippe is entitled to all reasonable measures required to reduce the effects of residual disability resulting from the accident, and to restore him, to the extent possible, to his pre-accident level of functioning. Entitlement to rehabilitation benefits is not limited to restoration of employment functioning, but embraces the full range of social, family and athletic activities he enjoyed before the accident. Furthermore, it does not depend on continued entitlement to weekly income benefits.

I strongly urge the parties in this case to work together in resolving Mr. Philippe's future rehabilitation needs.

c. A delay in reinstating disability benefits after Mr. Philippe's attempted return to work.

Mr. Philippe returned to work in his own business, installing drywall, on November 1, 1991. He testified that he was still in considerable discomfort at this time, but wanted to try to work.

On being advised of Mr. Philippe's return to work, Royal Insurance discontinued disability benefits, on the basis that Mr. Philippe was no longer substantially unable to perform his essential tasks.

Mr. Philippe testified that he experienced persistent and increasing pain as a result of working, and that the deterioration in his condition forced him to stop work altogether on January 24, 1992.

Mr. Philippe testified that he contacted Royal Insurance and advised them that he was not able to work. Exhibit 24 shows that he saw his family doctor, Dr. Johnston, on February 10 and again on February 22, 1992. Dr. Johnston wrote a note, dated February 27, 1992, as follows:

To whom it may concern:

Francois returned to work on Nov 1/91 but remained on light duty due to his ongoing neck pain. The neck pain which is the result of the original car accident was still present and was made worse by the work, but he kept working any way. He then began doing his usual drywalling specialty and this caused much more severe pain to the point that he had to stop work again on 24 Jan/92.

This note was faxed to Royal Insurance by Mr. Philippe's then-solicitor in a letter dated February 27, 1992. Royal Insurance's response came in a letter, dated March 4, 1992 and marked Exhibit 25, which stated as follows:

Further to your correspondence dated February 27th, 1992, before any further weekly indemnity payments can be considered, we require your client attend an independent medical examination.

The letter stated that an appointment had been made for Mr. Philippe to see Dr. Langer in Toronto on March 26, 1992, three weeks later. Mr. and Mrs. Philippe testified that they were in desperate financial straits at this point, with Mr. Philippe having been unable to work since January 24, some six weeks earlier, with no alternative source of income. Mr. Philippe stated that he contacted someone at the Ontario Insurance Commission for help, and, with their intervention, benefits were reinstated in mid-March (the Insurer was unable to advise me of the precise date).

In the arbitration decision, Larry Erickson and The Guarantee Company of North America, A-000560, dated June 2, 1992 and July 16, 1992 (appeal pending), Senior Arbitrator Frederika Rotter rejected the view that a special award was comparable to an award of exemplary or punitive damages. She stated:

..the criteria for punitive damages, that is wilful and deliberate misconduct or bad faith, goes considerably beyond the Insurance Act standard of simple unreasonableness. It is clear that conduct may be unreasonable, but still not deliberately or wilfully injurious, or motivated by bad faith... wilful or deliberate misconduct and bad faith are additional factors in the conduct of the Insurer, beyond unreasonableness, which should be taken into consideration when assessing the quantum of a special award.

I agree with these comments.

In Wayne Allan Plowright and Wellington Insurance Company, A-003985, dated October 29, 1993, Arbitrator Palmer described "unreasonable" behaviour by an Insurer as behaviour that was "excessive, imprudent, stubborn, inflexible, unyielding or immoderate". She went on to comment:

The standard expected of an insurer's examiner and her supervisors is one of sound and moderate judgment.

In this case, Mr. Philippe made his best efforts to return to work. When those efforts failed, he asked Royal Insurance to reinstate his benefits. He sent them a medical report, dated February 27, 1992, from his family practitioner, which supported his claim. Royal Insurance took the position that it would not consider reinstating Mr. Philippe's benefits until he had been examined by the Insurer's choice of doctor, some three weeks later.

In my view, Royal Insurance's actions in this regard were unreasonable.

Periodic benefit payments are paid under Part IV of the Schedule. They are intended generally to replace the earnings of employed or self-employed applicants, who cannot do their usual work because of their injuries. Like Mr. Philippe, most applicants have no source of income other than these benefits, once they stop working. They depend upon them for the necessities of life. The scheme is designed to pay benefits promptly, regularly, and with a minimum of formality. Insurers who fail to comply with these key precepts face the risk of a special award.

Dr. Johnston's medical report was prima facie evidence that Mr. Philippe was disabled. Royal Insurance had no medical, or other reliable evidence, to contradict or cast doubt on that report. Benefits should have been paid to Mr. Philippe, at the latest, on the strength of that report.

Section 23(2) provides the insurer with an opportunity to fairly assess the insured's medical condition, on an independent basis, through a medical examination by a practitioner of its own choice. The Schedule provides some recourse in the event that an applicant unreasonably refuses to attend an examination. However, nothing in the wording or spirit of the Schedule entitles an insurer to refuse to pay benefits to an applicant, pending the examination.

The fact that Mr. Philippe had returned to work for a period of time was obviously a factor in Royal Insurance's decision to deny benefits until it had received independent verification of his condition. However, the fact that Mr. Philippe had tried to return to work should not have been used against him. Applicants should be encouraged to return to some form of work as speedily as is safely possible. They should not be penalized for so doing. This policy is underlined by section 16(2) of the Schedule, which states explicitly that a person may return to work at any time within two years after the accident, without affecting his or her benefits, if they are subsequently forced to stop work again.

I find that Royal Insurance acted arbitrarily and unreasonably in refusing to reinstate benefits until Mr. Philippe had been examined by Dr. Langer. Although this is not a case of wilful misconduct or bad faith on the part of the Insurer, the conduct of Royal Insurance warrants the imposition of a special award. However, in determining the amount of the special award, I have taken into account the fact that Royal Insurance promptly reinstated benefits after the intervention of the Ontario Insurance Commission, and therefore mitigated the effect of its prior unreasonable conduct.

Section 282(10) of the Insurance Act authorizes me to award a lump sum of up to 50 per cent of the amount to which Mr. Philippe was entitled at the time of the award. I have found that Mr. Philippe is entitled to just under $1,000 owing since December 1991/January 1992, plus interest. In this case, there is no relationship between the amount awarded to Mr. Philippe and the delay in benefits for which a special award has been made. I heard no submissions on the significance, if any, of this point.

In the circumstances, I prefer to adopt the approach of Arbitrator Palmer in Plowright, and award an inclusive dollar figure under section 282(10) of the Insurance Act, rather than a fixed percentage of the award. Bearing in mind all the factors in this case, including the 50 per cent maximum award allowable, I award a round figure of $350, together with compound interest as required under section 282(10) of the Insurance Act.

Expenses:

Under section 282(10) of the Insurance Act, I may award Mr. Philippe certain expenses he incurred in participating in the hearing. The nature of the expenses and the maximum amount that can be awarded are set out in Ontario Regulation 664, R.R.O. 1990. I am satisfied that Mr. Philippe should be awarded his expenses in this case.

Order:

1. Mr. Philippe is entitled to a weekly income benefit of $502.34.

2. Mr. Philippe's post-accident income should be deducted net of his business expenses. He is therefore entitled to a further amount of $998.77.

3. Mr. Philippe is entitled to interest under section 24(4) of the Schedule.

4. Royal Insurance is liable to pay a special award of $350, and compound interest as required under section 282(10) of the Insurance Act.

5. Mr. Philippe is entitled to his expenses incurred in respect to this arbitration, as set out in Ontario Regulation 664, R.R.O. 1990.

January 24, 1994

Susan Naylor Senior Arbitrator

Date

APPENDIX 1

Exhibit 1

Business license for F & N Contractors, registered on September 27, 1990

Exhibit 2

Statement of Income and Expenses for F & N Contractors, prepared by Richard A. Schaak, C.A., for the period November 17, 1990 to December 14, 1990

Exhibit 3

Receipt for pager charges, dated January 9, 1991

Exhibit 4

Letter, dated March 25, 1993, from Martin Koretsky, staff adjuster, Royal Insurance Canada to Francois Philippe

Exhibit 5

1990 Income Tax return for Francois Philippe

Exhibit 6

1991 Income Tax return for Francois Philippe

Exhibit 7

1992 Income Tax return for Francois Philippe

Exhibit 8

1990 Financial statement for F & N Contractors

Exhibit 9

1991 Financial statement for F & N Contractors

Exhibit 10

1991 Financial statement for F & N Contractors

Exhibit 11

Letter, dated December 11, 1992, from Richard A. Schaak, C.A to Charlotte Pragnell, Royal Insurance Canada

Exhibit 12

Newspaper clippings regarding Mr. Philippe's achievements in running

Exhibit 13

(1) Report, dated June 2, 1992, of Dr. Anthony D. Graham, M.D. F.R.C.P., Medical Director, Rehabilitation, Laurentian Hospital, Sudbury (2) Report, dated March 26, 1992, of Dr. Fred Langer, M.D., F.R.C.S.(C)

Exhibit 14

Reports attached to Mr. Philippe's application for arbitration, filed on April 23, 1993: (1) Report, dated July 18, 1992, of Dr. P. Rothbart, M.D., F.R.C.P.(C), (2) Report, dated February 11, 1993, of Dr. Ming C. Chiu, M.D., F.R.C.P.(C) (3) Report of assessment on November 16 and 17, of Gilles Chabot, B.Sc., P.T., Physiotherapist, and Keith Klassen, M.A., Sudbury Orthopedic and Sports Physiotherapy Centre (4) Report, dated February 27, 1993, of Dr. Dennis C. Evans, F.R.C.S.(C), Bay Medical Assessments Corporation (5) Report, dated March 18, 1993, of Dr. Dennis C. Evans, F.R.C.S.(C), Bay Medical Assessments Corporation (6) Report, dated October 4, 1991, of Dr. L.A. Johnston, M.D. (7) Report, dated February 27, 1992, of Dr. L.A. Johnston, M.D.

Exhibit 15

Report, dated May 31, 1992, of Dr. L.A. Johnston, M.D.

Exhibit 16

Application for Accident Benefits, dated December 21, 1990

Exhibit 17

Summary of findings, Centre Chiropractic

Exhibit 18

Application for Accident Benefits (Second copy)

Exhibit 19

Letter, dated August 23, 1991, from Marcel Leger, Zito Associates, to Steven Warner, Underwriters Adjustment Bureau Ltd.

Exhibit 20

(1) Report, dated February 20, 1991, of Dr. L.A. Johnston, M.D. (2) Report, dated April 22, 1991, of Dr. S.Y. Merali, Merali Stress & Pain Clinic (3) Report, dated June 4, 1991, of Dr. S.Y. Merali, Merali Stress & Pain Clinic (4) Report, dated July 10, 1991 of Dr. J.D. Maki, M.D. (5) Report, dated September 30, 1991, of Dr. A.K. Mitra, F.R.C.S.

Exhibit 21

Letter, dated December 31, 1991, from Elizabeth Grant, Claims Representative, Royal Insurance

Exhibit 22

Assessment of Claim form, dated December 31, 1991

Exhibit 23

Report, dated October 4, 1991, of Dr. L.A. Johnston, M.D.

Exhibit 24

Note, dated June 17, 1993, on behalf Dr. L.A. Johnston, M.D.

Exhibit 25

Letter, dated March 4, 1992, from Elizabeth Grant, Claims Representative, Royal Insurance

Exhibit 26

Letter, dated July 15, 1993, from Martin Koretsky, Staff Adjuster, Royal Insurance

Exhibit 27

Copy of a cheque, with attached typewritten note, dated October 14, 1992

Also before the arbitrator but not marked as an exhibit:

Copy of Revenue Canada Interpretation Bulletin No. IT-487, dealing with General limitation on deductions of outlays or expenses.

Application for appointment of an arbitrator, filed on April 23, 1993

Response of Insurer, filed on May 10, 1993

Reply by Insured person, filed on May 26, 1993

Letter, dated June 14, 1993, of Frederika Rotter, Senior Arbitrator, confirming pre-hearing discussions held on June 9, 1993

Letter dated July 9, 1993, from Mrs. Nicola Philippe

APPENDIX 2

Section 12

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

(a) $600 plus, if Optional Benefit 2 has bee 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.