Neutral Citation: 1994 ONICDRG 58

File No. A-003226

ONTARIO INSURANCE COMMISSION

BETWEEN:

BARAKET (BEN) MOUAWAD

Applicant

and

ALPINA INSURANCE COMPANY, LIMITED

Insurer

DECISION

Issues:

The Applicant, Baraket (Ben) Mouawad, injured his neck and back in a motor vehicle accident on September 17, 1991. He sought weekly income benefits payable under section 12 (enhanced by Optional Benefit No. 2), of Ontario Regulation 672.[1]

The Applicant and the Insurer, Alpina Insurance Company, Limited, could not agree on the amount of Mr. Mouawad's gross weekly income from occupation or employment, or the deductions, if any, to be made from his gross weekly income under section 12(4) of the Schedule.

The parties entered into lengthy negotiations and attended mediation at the Ontario Insurance Commission on three separate occasions. The parties resolved some aspects of their dispute but the Insurer refused to pay the amount of weekly income benefit sought by the Applicant. The Applicant subsequently applied for the appointment of an arbitrator under the Insurance Act, R.S.O. 1990, c.I.8.

The issues in this hearing are:

A. How should the Applicant's gross weekly income be calculated under section 12(7) of the Schedule?

B. What, if any, collateral benefit payments should be deducted from the Applicant's gross weekly income under section 12(4)(b) of the Schedule?

C. Are amounts contributed by the Applicant's employer to the Applicant's union in respect of health and pension benefit plans deductible by the Insurer, under section 15 of the Schedule?

D. Is the Insurer entitled to a repayment of benefits from the Applicant under section 27 of the Schedule?

E. The Applicant claims interest compounded at two per cent per month on any outstanding amounts owing by the Insurer, under section 24(4) of the Schedule, and his expenses incurred in the arbitration.

F. The Insurer claims interest on any outstanding amounts owing by the Applicant, under section 27 of the Schedule.

Result:

A. The Applicant's gross weekly income under section 12(7) of the Schedule is calculated on the following basis:

1. The Applicant's gross weekly income should be calculated based on his total income earned in the year immediately preceding the motor vehicle accident, divided by 52 weeks, rather than on his average income for the 23 weeks he actually worked, or on the income he earned in his last four weeks of work ending July 25, 1991.

2. The Applicant's gross weekly income includes the total hourly rate paid by D.S. Construction, in respect of the Applicant's labour, inclusive of the $3.58 portion allocated for health and welfare, SUB, and pension plans for the members of the carpenters' union.

3. The amount of $455.00 paid to the Applicant for work performed on a freelance basis is included in the calculation of the Applicant's gross weekly income.

4. Unemployment insurance premiums and workers' compensation benefits paid to the Applicant from his last day of work (July 25, 1991) to his car accident (September 17, 1991) are not income from employment and are not included in the calculation of gross weekly income.

5. Amounts paid by D.S. Construction to the union from the Applicant's last day of work (July 25, 1991) to the date of the car accident (September 17, 1991) are not income from employment and are not included in the calculation of gross weekly income.

Calculated on this basis, the amount of the Applicant's gross weekly income under section 12(7) is $526.00.

B. Collateral benefit payments are deducted from the Applicant's gross weekly income under section 12(4)(b) of the Schedule, on the following basis:

1. Payments for loss of income which are received by or available to the Applicant are deductible from his gross weekly income, despite sections 20 and 21 of the Schedule dealing with workers' compensation benefits, and notwithstanding that the benefits relate to a previous condition unconnected to the car accident.

2. Payments for temporary total disability (TTD), and future loss of earnings (FLE), received by the Applicant under the Worker's Compensation Act, R.S.O. 1990, are payments for loss of income and are deductible. Vocational rehabilitation supplements (VR) are not payments for loss of income and are not deductible.

3. The Insurer is not entitled to continue to deduct an amount equal to vocational rehabilitation (VR) supplements after termination by WCB, on the basis that the Applicant failed to mitigate his damages.

4. Payments made directly to the Applicant under the provisions of the Canada Pension Plan are payments for loss of income and are deductible. Payments made directly to the Applicant's children are not deductible.

5. Payments made by D.S. Construction to the union from the date of the car accident (September 17, 1991) to July 10, 1992, are deductible.

The weekly income benefit payable to the Applicant under the provisions of section 12 of the Schedule is calculated on the basis of 80 per cent of a gross weekly income of $526.00, less the deductions allowed above.

C. Amounts remitted by D.S. Construction to the union in respect of health and pension plans are not deductible under section 15 of the Schedule.

D. The Insurer is entitled to a repayment of benefits from the Applicant under section 27 of the Schedule, as specifically set out in this decision.

E. The Applicant is entitled to his expenses incurred in the arbitration. In the event any weekly income benefit is owed to the Applicant, he is entitled to simple interest, under section 24(4) of the Schedule.

F. In the event any repayment is owed by the Applicant, the Insurer is entitled to interest, under section 27(4) of the Schedule, calculated from the date of this decision, as long as any repayment remains owing.

Hearing:

The hearing was held in Windsor, Ontario, on September 21 and 22, 1993, before me, Janice Mackintosh, arbitrator.

In response to a summons issued by the Insurer, the Applicant's Canada Pension Plan file was forwarded to the Commission from Health and Welfare Canada on October 15, 1993, and was marked as Exhibit 28 to these proceedings. Written submissions from the Applicant and the Insurer were filed with the Commission on November 5, 1993. The Insurer's reply to the Applicant's written submissions was filed on November 16, 1993. Corrections to the Insurer's submissions were filed on February 2 and March 11, 1994. Additional materials were filed on behalf of the Applicant on March 11, 1994. Further oral submissions were made by counsel via telephone conference call on April 28 and 29, 1994.

Present at the Hearing:

Applicant:

Baraket (Ben) Mouawad

Applicant's Representative:

Anthony Soda Barrister and Solicitor

Insurer's Representative:

Frank Csathy Barrister and Solicitor

Seven witnesses testified and twenty-eight exhibits were filed. These, and other documents before the arbitrator, are listed in Appendix A. The parties referred to a number of decisions which are listed in Appendix B. Weekly income benefits paid to the Applicant are listed in Schedule C.

Factual Background:

The Applicant, Baraket Mouawad, is 48 years of age, married, with four children. He has been employed in the construction industry in Canada since 1965. He became a member of the United Brotherhood of Carpenters and Joiners ("carpenters' union") in 1966 and obtained his general carpenter's licence in 1973.

The Applicant was receiving unemployment insurance benefits in late 1990 and early 1991. He started working with D.S. Construction, as a carpenter steward, on Tuesday, February 12, 1991, and continued to work there until Thursday, July 25, 1991. The Applicant was paid an hourly wage under the provisions of a collective agreement negotiated by his union.

The Applicant testified that throughout his career as a carpenter, he often did small one or two day carpentry jobs which did not come through his union. He testified that in the first week of July 1991, he installed a window for which he was paid $455.00, over and above expenses. He did not report this income to his union or to Revenue Canada.

On July 10, 1991, the Applicant fell and hurt his right knee while working for D.S. Construction. The condition of his knee deteriorated and he stopped working on July 25, 1991. He was examined by his family physician on July 26, 1991, and was found unfit to continue work.

Following his knee injury and departure from work, his employer, D.S. Construction, paid amounts directly to the union, in the name of the Applicant. The union credited these amounts to the Applicant's name in connection with health and welfare and pension plans provided through the union (Exhibits 18 and 19). No portion of these payments was remitted directly to the Applicant by the union.

As a result of his injury at work, the Applicant began to receive workers' compensation benefits, effective July 26, 1991 (Exhibit 20). Between September 17, 1991, and December 10, 1991, the Applicant also received short term disability benefits from Mutual of Omaha because he was unable to work.

On September 17, 1991, the Applicant injured his neck and back in a motor vehicle accident. After his car accident, the Applicant continued to receive workers' compensation for his work related knee injury (Exhibit 20), along with short term disability benefits issued by Mutual of Omaha. D.S. Construction continued to pay amounts directly to the union, in the Applicant's name, in respect of health and pension benefits (Exhibits 18 and 19). In June 1992, the Applicant also began to receive disability benefits from the Canada Pension Plan, retroactive to November 1, 1991. Over time, some of these payments ended, some were increased, and some were reduced.

The facts in this case raise several fundamental issues about the calculation of weekly income benefits under sections 12(7) and 12(4) of the Schedule. In addition, at several points in their negotiations, the parties reached certain understandings and agreements, the effect of which must be considered.

A CALCULATION OF GROSS WEEKLY INCOME UNDER SECTION 12(7):

1. Upon what time period should the calculation of the Applicant's gross weekly income be based?

Should the gross weekly income be divided by 4 weeks, 52 weeks, or by the 23 weeks actually worked by the Applicant?

The Applicant's former employer, D.S. Construction, provided the Insurer with a completed Employer's Confirmation of Income form, dated October 10, 1991 (Exhibit 25), in connection with the Applicant's claim for benefits. The form set out the Applicant's base salary, and indicated the specific amounts allocated for union benefit programs for the last four weeks worked. The form states that the Applicant worked a total of 24 calendar weeks (23 seven day periods) prior to his departure from work on July 25, 1991, due to his knee injury.

The time period reflected on the Employer's Confirmation of Income form does not correspond to either of the time periods referred to under section 12(7) of the Schedule. The relevant portion of section 12(7)1 states:

12(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.

The four weeks immediately preceding the date of the motor vehicle accident run from Monday August 19, 1991 to Monday, September 16, 1991. The 52 weeks preceding the motor vehicle accident run from September 17, 1990 to September 16, 1991.

The Insurer considered the information contained in the Employer's Confirmation of Income form for several months prior to making any payment of benefits. The Insurer decided to calculate gross weekly income on the basis of the Applicant's last four weeks of employment with D.S. Construction, ending Thursday July 25, 1991 (approximately eight weeks prior to the motor vehicle accident), rather than the four weeks immediately preceding the car accident on September 17, 1991. Both parties accepted the four week time period ending July 25, 1991, and conducted their negotiations and entered into agreements at mediation in May 1992, August 1992, and January 1993, on this basis.

The issue of whether the Applicant's gross weekly income should have been calculated based on the time periods set out under section 12(7) of the Schedule, rather than the four weeks ending July 25, 1991 as previously agreed, was raised for the first time by the Insurer during the course of the second pre-hearing discussion held May 20, 1993. This issue was not mediated, however both parties sought to include this issue in the arbitration hearing.

The Applicant presented evidence about his income for both the 52 weeks prior to the car accident and the four weeks preceding his last day of work with D.S. Construction (ie. approximately eight weeks prior to the car accident). Counsel for the Applicant submitted that gross weekly income from employment, calculated under section 12(7) of the Schedule, was the greater of the Applicant's weekly income from employment for the four full weeks immediately preceding the Applicant's departure from work on July 25, 1991, or the 52 weeks immediately preceding the Applicant's motor vehicle accident on September 17, 1991. Counsel for the Applicant submitted that the Applicant was entitled to disregard the time when he was not working, due to unemployment, holidays, or a workers' compensation injury, when determining the appropriate time period under section 12(7)1 and when calculating the average gross weekly income within the time period chosen.

Counsel for the Applicant relied on the decisions of Senior Arbitrator Susan Naylor in Ralph McCormick and Economical Mutual Insurance Company, October 2, 1991, OIC File No. A-000139, and Vincenzo Scavuzzo and Canadian Home Assurance Company, March 18, 1992, OIC File No. A-000626. Scavuzzo was affirmed on appeal to the Director's Delegate, dated June 19, 1992.

Counsel for the Applicant suggested that in both these cases it was held that the purpose of the accident benefit scheme is best served by an interpretation of section 12(7) that results in the most accurate reflection of a claimant's employment income. Counsel noted that in both the McCormick and Scavuzzo decisions, the arbitrator found that the most accurate reflection of a claimant's employment income could best be achieved by averaging income from employment over the period of time that the claimant was in fact working, disregarding those periods of time when the claimant was not working. Specifically, in dealing with the effect of worker's compensation benefits, Senior Arbitrator Naylor found in the McCormick decision at page 23,:

...[T]he Applicant is entitled to disregard the period of time during which he was unable to work and was in receipt of workers' compensation benefits in calculating the average of the gross weekly income from his employment under s. 12(7)1.

Counsel for the Applicant concluded that if the periods of time in which the Applicant was unable to work were disregarded, the most advantageous time period for the calculation of the Applicant's gross weekly income was the 52 week period preceding the car accident, under section 12(7)1(ii) of the Schedule divided by the 23 weeks actually worked. However, if the periods off work were not excluded, the Applicant sought to rely on income earned within the four week period ending July 25, 1991, previously relied upon by the parties.

Counsel for the Insurer submitted that section 12(7) did not offer as much flexibility as proposed by Applicant's counsel. He disagreed with the Applicant's view that periods off work could simply be ignored under section 12(7) of the Schedule when determining the appropriate time period under section 12(7)1 and when calculating the average gross weekly income within the time period chosen.

The Insurer noted that the Applicant was not working during the four weeks immediately preceding the car accident and had little or nothing in the way of income to calculate under section 12(7)1(i). Counsel for the Insurer noted that under the Schedule, the only logical time framework available to calculate the Applicant's gross weekly income was the 52 weeks immediately preceding the car accident, under section 12(7)1(ii). Counsel for the Insurer submitted that periods off work should be included when calculating the average weekly income within the 52 week period. However, if it were found that periods off work were not included under section 12(7), counsel for the Insurer proposed that the Applicant ought to be bound to the calculation based on income earned during the four week time period ending July 25, 1991, divided by four weeks, relied upon by the parties during their negotiations.

I have considered the decisions in McCormick and Scavuzzo referred to by Applicant's counsel in his submissions. I have also had the benefit of reviewing the reasoning of Arbitrator Draper in his more recent decision, Chuong Vo and Maplex General Insurance Company, October 4, 1993, OIC File No. A-002777, and of hearing further oral submissions by both counsel in this case, concerning Arbitrator Draper's decision. Arbitrator Draper's analysis of section 12(7) of the Schedule was approved and adopted by Arbitrator Palmer in her decision Joseph N. Bush and Pilot Insurance Company, April 25, 1994, OIC File No. A-004687. Both Arbitrator Draper and Arbitrator Palmer took a different approach than was taken in the McCormick and Scavuzzo decisions. They concluded that the claimant was not entitled to disregard the period of time during which he was unable to work in calculating the average of the gross weekly income from his employment under section 12(7)(1). Arbitrator Draper stated at pages 19, 22 and 23 of the Vo decision:

Senior Arbitrator Naylor concluded that Mr. McCormick's income should be averaged over the period that he actually worked because this approach provided a more accurate reflection of his employment income.

Section 12(7)1 sets out the rules for calculating the applicant's gross weekly income. The section does not suggest that the applicant's gross weekly income is to be the most accurate reflection of his or her pre-accident income or anticipated income.

In my opinion, the ordinary meaning of section 12(7)1 is that the applicant's average gross weekly income is to be calculated for two periods: four weeks and fifty-two weeks. A weekly average is to be calculated for those two periods, even if the applicant had no gross weekly income from his or her occupation or employment during some of the weeks. Although it might be possible to read the section to mean that the four and fifty-two week periods can be further divided into weeks that the person worked, I am not convinced that this is the plain or ordinary meaning.

I accept counsel for the Insurer's submission that section 12(7) is not as flexible as counsel for the Applicant suggests. Like Arbitrator Draper in his decision in Vo, I am not convinced that the wording of section 12(7) permits the Applicant to rely upon a four week period that occurred approximately eight weeks prior to the motor vehicle accident, or 23 weeks out of the 52 weeks preceding the accident, on the basis that it is the most accurate or favourable reflection of the Applicant's gross weekly income from employment.

In my opinion, section 12(7) provides a formula for calculating the Applicant's gross weekly income in one of two time periods, either four weeks or 52 weeks immediately preceding the motor vehicle accident. The section states that the person's gross weekly income is deemed to be the greatest of the average gross weekly income for either the four or 52 week period preceding the accident. Or, the Applicant may rely on subsection iii of section 12(7)1, which provides for a minimum gross weekly income of $232.

In the decisions McCormick and Scavuzzo, Senior Arbitrator Naylor totalled the income earned during the time period chosen by the Applicant and divided the total by only that number of weeks in which employment income was actually earned, ignoring those weeks in which no income was earned. In my view, the Applicant is not entitled to disregard those weeks during which he did not work, or earned no income. Every week of the four and 52 week periods immediately preceding the accident, ought to be considered and included when calculating the average. All income from occupation or employment within the four and 52 week periods should be totalled. This total income is then divided by either four weeks or 52 weeks, to determine the greatest average weekly income under the section. This calculation includes days not worked in each seven day consecutive period, and weeks not worked within the two time periods.

I conclude that Mr. Mouawad is not entitled to disregard the period of time during which he was unable to work when determining the most advantageous time period under section 12(7)1, or in calculating the average gross weekly income from his employment in accordance with its provisions.

Both parties acknowledged that they accepted and used the four week time period ending July 25, 1991, as the basis for their negotiations and agreements prior to the arbitration hearing. Therefore I find that both parties are bound to the time framework and variables previously adopted by them, up to the date of this decision. Thereafter, the parties are bound to the strict provisions of section 12(7), as I have interpreted them in this decision. To decide otherwise would undermine the considerable efforts of the parties to settle their own disputes, and override their settlements reached at mediation.

2. What amounts are considered income from occupation or employment under section 12(7)?

In the 52 weeks preceding the Applicant's motor vehicle accident (Monday September 17, 1990 to Monday September 16, 1991), I find that the following amounts were paid in respect of the Applicant:

i. September 17, 1990 to February 11, 1991 - Unemployment Insurance Benefits (Exhibits 1, 2, and 3);

ii. February 12, 1991 to April 30, 1991 - D.S. Construction 465 hours worked:

• Total hourly rate: $27.17 (Exhibits 4 and 5);

• Portion of hourly rate remitted to Applicant = $23.59 per hour

• Portion of hourly rate allocated to union benefit programs = $3.58 per hour

iii. May 1, 1991 to July 25, 1991 - D.S. Construction 497.50 hours worked:

• Total hourly rate: $28.67 (Exhibits 4 and 5);

• Portion of hourly rate remitted to Applicant = $25.09 per hour

• Portion of hourly rate allocated to union benefit programs = $3.58 per hour

iv. July 1 to 5, 1991 - Income from freelance carpentry work = $455.00; July 25, 1991, last day of employment (approximately 8 weeks prior to car accident).

v. July 26, 1991 to September 16, 1991 - Temporary Total Disability payments in the amount of $549.78 per week from Worker's Compensation (Exhibit 20);

vi. July 26, 1991 to September 16, 1991 - post work benefit payments made by D.S. Construction to the Union, in the name of the Applicant (Exhibit 19).

I must now determine whether each of these amounts is income from the Applicant's occupation or employment within the meaning of section 12(7) of the Schedule.

3. What hourly rate should be used to calculate the Applicant's gross weekly income under section 12(7) of the Schedule?

Under the collective agreement negotiated by the carpenters' union on behalf of its members, D.S. Construction was required to pay the Applicant $27.17 per hour up to May 1, 1991, when the rate was increased to $28.67 per hour. This amount was not paid directly to the Applicant but was paid to Local 494 of the carpenters' union, to which the Applicant belonged.

The members of Local 494 voted to use $3.58 of the hourly rate paid to each member to provide health and welfare plans, pension plans, and supplementary unemployment insurance benefits (SUB), on behalf of the members. Amounts paid to the union by D.S. Construction in respect of hours worked by the Applicant, were specifically credited to the Applicant. The union retained $3.58 of the hourly rate paid by D.S. Construction in respect of work performed by the Applicant and remitted the remaining portion of the hourly wage to the Applicant.

The Insurer claimed that the Applicant's gross weekly income under section 12(7) ought to be calculated on the basis of the portion of the hourly rate actually remitted to the Applicant by the union, exclusive of the $3.58 credited to the Applicant for health and welfare, SUB and pension plans. (Exhibit 4)

The Applicant claimed that his gross weekly income ought to be calculated on the basis of the total hourly rate paid by his employer, D.S. Construction, in respect of his labour, inclusive of the $3.58 allocated to the union to purchase health and welfare, SUB, and pension plans for its members.

Counsel for the Applicant quoted the definition of income contained in Webster's New World Dictionary, Second College Edition, 1979, as follows:

The money or other gain received, especially in a given period, by an individual, corporation, etc., for labour or services or for property, investments, operations, etc. (emphasis added)

The Applicant relied upon the evidence of Mr. James Caron, a long-time member and current business representative for the Ontario Provincial Council, United Brotherhood of Carpenters and Joiners of America. Mr. Caron testified that under the collective agreement between the carpenters' union and the employer, as of May 1, 1991, the employer's total obligation was to pay an amount of $28.67 to each member for each hour worked (Exhibit 4). Mr. Caron stated that the membership of Local 494 could have voted to allocate the total hourly rate payable under the collective agreement to base pay. Had this occurred, the union would not have provided their membership with health and welfare, pension, and SUB plans.

Counsel for the Insurer accepted that benefit plans, such as those provided by the union to its membership, are part of the total compensation package to the Applicant in respect of his services. Counsel for the Insurer also accepted that the wage component of the package would be higher if the union membership voted to drop the benefit plans. However, counsel suggested that the $3.58 paid toward benefit plans should not be considered gross weekly income within the meaning of section 12(7) of the Schedule for the following reasons:

i) the $3.58 portion of the hourly rate is not reported as income on the Applicant's tax return or shown as such on the T-4 slip issued by D.S. Construction (Exhibit 3);

ii) benefits received through the union plans are non-taxable;

iii) it would be incongruous to include both taxable income and non-taxable benefits received through the union, under the generic heading of "gross weekly income" in the Schedule;

iv) the Applicant cannot pay into the union benefit plans on a personal basis or "cash out" of the plans, at will.

I was not provided with the income tax policy rationale for the exclusion of the benefit portion of the Applicant's hourly rate from the T-4 slip issued by D.S. Construction. I am not persuaded that the taxable or non-taxable status of income or benefits under the Income Tax Act, R.S.O. 1990, c.I.2, is determinative of the issue of whether the $3.58 portion of the Applicant's hourly rate, is "income" for the purposes of section 12(7) of the Schedule.

The term "income" has been examined in several arbitration decisions of the Commission. In the decision Kevin Zehr and The Guarantee Company of North America, July 30, 1993, OIC File No. A-001963, Arbitrator Nancy Makepeace stated at page 6:

The term "income" is not defined in the No-fault Benefits Schedule or the Insurance Act. As has often been said in arbitration decisions, the Schedule must be given a broad, liberal, and remedial interpretation in keeping with the purpose of the legislative scheme. I find that "income" may include cash payments that are not specifically identified as "salary", and payments in kind, including food.

As Arbitrator Naylor stated in Bress, the word "income" implies that something of value is received "in return for" the insured person's labour.

I conclude that the $3.58 portion of the hourly rate allocated to union benefit programs is paid by D.S. Construction in return for the Applicant's labour and is of value to the Applicant. In effect, the Applicant contributes $3.58 of each hour of pay earned by him, toward the cost of benefit plans provided through his union.

I agree with counsel for the Insurer that the amount of the deduction ($3.58), the nature of the benefits purchased, and the specific provisions of the plans are all determined by decisions of the collective and are outside the Applicant's direct personal control. However, this can also be said of the remainder of the hourly rate, which is the result of the collective bargaining process and is ratified by the collective decision of the union membership. I am satisfied that the $3.58 portion of the Applicant's hourly rate which is allocated to union benefit programs forms part of the Applicant's gross income.

A distinction must be drawn between the value of $3.58 contributed by the Applicant on the one hand, and the specific value of any benefits received under such plans, the cost to an individual to replace such plans, or the value of the whole benefit plan purchased with the combined buying power of all the contributors, on the other. The Applicant is entitled to include the specific amount of his own contribution as part of his gross weekly income. He is not entitled to include the value of the whole plan, his cost to replace the benefits under the plan, or the present dollar value of any benefits that might someday flow to him under such plans, as part of his gross weekly income.

As observed in previous cases before the Commission, an applicant bears the burden of proving the amount of gross weekly income claimed. If, as in this case, an applicant claims that monies earmarked for benefit plans are part of his gross weekly income, the applicant must establish the specific amount claimed. He must also establish that the monies are his own contribution from what would otherwise be his employment income, distinct from the value of the contribution of the whole group, or the contribution required from an employer pursuant to a provincial hospitalization or medical care insurance program. The Applicant in this case has met that burden of proof.

4. Should amounts paid to the Applicant for work performed on a casual basis be included in calculating the Applicant's gross weekly income under section 12(7) of the Schedule?

The parties agree that the Applicant received $455.00 for freelance carpentry work he did in the first week of July 1991. The Applicant did not obtain this job through the union nor did he report the income on his income tax return.

Counsel for the Insurer urged me to calculate the Applicant's gross weekly income under section 12(7) solely on the basis of the Applicant's 1991 income tax return (Exhibit 3). Counsel objected to the inclusion of unreported income from a one-time activity on the basis that such income did not arise out of the Applicant's regular full-time employment with D.S. Construction or "his occupation" as a carpenter steward.

Counsel for the Applicant urged me to give the widest possible interpretation to the words "income from his or her occupation or employment" under section 12(7) of the Schedule, and submitted that the Applicant's freelance income should be included in the calculation of his gross weekly income under section 12(7), despite its omission from the Applicant's 1991 income tax return.

I conclude that the phrase "income from his or her occupation or employment" in section 12(7) is broad enough to encompass income earned from the freelance work performed by the Applicant. In this case, there is no dispute that the Applicant received payment for his services and I am satisfied that this payment was income earned from "his occupation" as a carpenter.

Several cases before the Commission have considered the inclusion of income not reported on tax forms or elsewhere, in the calculation of gross weekly income under section 12(7). In particular, Senior Arbitrator Susan Naylor concluded at page 21 of her decision Kwabena Nyamekye and Lloyd's Non Marine Underwriters, December 17, 1992, OIC File No. A-001136:

I find that the legislation does not authorize the establishment of a rigid rule regarding proof of income, that has the effect of denying an applicant the benefit of section 12(7)... I must conclude that a rigid rule that restricts proof of income to the prior year's tax return, without consideration of the reliability of other sources of proof in individual cases, is contrary to the legislative scheme. I consider that, in determining an applicant's weekly income for the statutory periods, an insurer must evaluate the totality of evidence available to it.

I accept and adopt Senior Arbitrator Naylor's conclusions regarding the inclusion of income not reported on income tax returns. In my view income tax returns are an important form of evidence of pre-accident income but not the exclusive one. An applicant may prove pre-accident income from employment or occupation by other evidence, without reference to tax returns.

I conclude that the $455.00 paid to the Applicant in July 1991, for freelance carpentry work is included in the calculation of the Applicant's gross weekly income under section 12(7).

5. Should amounts paid by D.S. Construction to the Union from the Applicant's last day of work (July 25, 1991) to the date of the car accident (September 17, 1991), be included as income from employment under section 12(7)?

The Applicant left work on July 25, 1991, due to his knee injury. In compliance with the terms of the collective agreement, D.S. Construction continued to make payments directly to the union in the name of the Applicant, in connection with health and welfare and pension plans offered through the union. The variable amounts of these payments are set out in Exhibit 19.

I previously concluded that the total hourly wage paid by D.S. Construction, inclusive of the $3.58 portion allocated for union benefit programs, was income from employment under section 12(7). That being the case, counsel for the Insurer submitted that amounts paid by D.S. Construction in the name of the Applicant, in respect of pension and health and welfare coverage after the Applicant left work, should also be treated as income from employment when calculating the number of weeks in which income was earned and when averaging the gross weekly income under section 12(7)1, prior to the date of the car accident. Counsel for the Applicant made no submissions on this issue.

The $3.58 portion of the hourly rate paid by D.S. Construction prior to the Applicant's work accident, was paid in return for the Applicant's labour and was deducted from the hourly rate payable to the Applicant. This is not the case for amounts paid after the Applicant left work. I was not provided with the specific provisions of the collective agreement which created these post-work payments. Mr. James Caron testified that the post-work payments made by the employer are intended to maintain health and welfare and pension coverages under the union benefit programs during periods of unemployment due to injury. Under the provisions of the collective agreement, the employer is required to make these payments for up to a year following injury. D.S. Construction continued to contribute to Mr. Mouawad's benefit coverage until July 1992 (Exhibit 18).

After that time, the employee must rely on his own hours, banked by him during previous periods of employment. Mr. Mouawad continued his benefit coverage from his own banked hours from July 1992 until October 1992, when his banked hours ran out (Exhibit 17). Mr. Caron stated that once an employee's banked hours are exhausted, he may continue to maintain health and welfare coverage by paying the equivalent of $1.13 x 120 hours per month to the union. An employee may not make direct payments into the pension plan. Mr. Mouawad did not continue his coverage beyond October 1992, when his banked hours ran out. On the facts before me, I am not satisfied that monies paid by D.S. Construction after the Applicant left work on July 25, 1991, are "income from his occupation or employment" which should be included in the calculation of gross weekly income under section 12(7). Rather, these payments are more in the nature of a benefit continuation program specifically designed to maintain benefit coverage during periods when the Applicant was not employed and was not receiving income from his labours.

6. Should unemployment insurance premiums and workers' compensation benefits paid to the Applicant from the Applicant's last day of work (July 25, 1991) to the Applicant's car accident (September 17, 1991), be included in the calculation of gross weekly income from employment under section 12(7)?

Neither counsel submitted that benefits received from Unemployment Insurance and Worker's Compensation, were income from the Applicant's occupation or employment within the meaning of section 12(7).

Furthermore, in the decision Peter Jolin and Jevco Insurance company, March 31, 1994, OIC File No.A-002187, Senior Arbitrator Rotter specifically rejected the argument that worker's compensation benefits and weekly auto insurance benefits, triggered by an earlier accident, should be treated as income from employment for the purpose of calculating gross weekly income under section 12(7). Arbitrator Rotter concluded that the very purpose of such benefit payments is to compensate a person for their loss of income from occupation or employment and they could therefore not be viewed as income from occupation or employment in themselves. Similarly, Arbitrator Draper excluded unemployment insurance benefits from the calculation of gross weekly income in the decision in Vo.

I therefore conclude that the Applicant had no income from his occupation or employment, within the meaning of section 12(7), in the four weeks immediately preceding his motor vehicle accident.

In the 52 weeks immediately preceding the motor vehicle accident, the Applicant had the following income from his employment and occupation under section 12(7):

i. February 12, 1991 to April 30, 1991 - D.S. Construction

• 465 hours x $27.17 per hour = $12,634.05(Exhibits 4 and 5);

ii. May 1, 1991 to July 25, 1991 - D.S. Construction

• 497.50 hours x $28.67 per hour = $14,263.33 (Exhibits 4 and 5);

iii. July 1 to 5, 1991 - Income from freelance carpentry work = $455.00;

TOTAL INCOME: $27,352.38.

The average weekly income over the 52 week period is $27,352.38 - 52 = $526. Under section 12(7) of the Schedule, the Applicant's gross weekly income in the 52 weeks immediately preceding the motor vehicle accident is deemed to be $526.00.

B DEDUCTIONS UNDER SECTION 12(4) AND SECTION 15:

After the motor vehicle accident on September 17, 1991, I find that the following amounts were paid in connection with the Applicant:

i. September 17, 1991 to July 1992: variable payments made by D.S. Construction to the Union, in the name of the Applicant, after the Applicant stopped working (Exhibit 18).

ii. Benefits from Workers' Compensation (WCB) in respect of the Applicant's workplace injury: (Exhibits 6, 7 and 20)

• September 17, 1991 to December 31, 1991: Temporary Total Disability payments (TTD) in the amount of $549.78 per week (Exhibits 6 and 20);

• January 1, 1992 to October 31, 1992: TTD payments in the amount of $568.01 per week (Exhibits 6 and 20);

• November 1, 1992 to December 31, 1992: Future Economic Loss payments (FEL) in the amount of $905.19/month - 4.33 = $209.05 per week (Exhibit 7);

• November 1, 1992 to December 31, 1992: Vocational Rehabilitation (VR) Supplement in the amount of $1,556.18/month - 4.33 = $359.39 per week (Exhibits 7 and 20);

• January 1, 1993 to November 1994: FEL payments in the amount of $919.67/month - 4.33 = $212.39 per week (Exhibit 20);

• January 1, 1993 to March 1, 1993: VR supplements in the amount of $1572.31/month - 4.33 = $363.12 per week (Exhibit 20). These supplements were terminated as of March 1, 1993 (Exhibit 16);

iii. Canada Pension Plan Benefits (CPP) (Exhibit 28):

The first payment of CPP benefits was made in June 1992 for the following periods:

• November 1, 1991 to December 31, 1991:

• monthly benefit: $504.25 - 4.33 weeks = $116.45 per week

• monthly child payment: $113.14 per child x 4 children = $452.56 - 4.33 weeks = $104.51 per week;

• 1992:

• monthly benefit: $533.50 - 4.33 weeks = $123.21 per week

• monthly child payment: $154.70 per child x 4 children = $618.80 - 4.33 weeks = $142.91 per week;

• 1993:

• monthly benefit: $543.10 - 4.33 weeks = $125.43 per week;

• monthly child payment: $157.48 per child x 4 children = $629.92 - 4.33 weeks = $145.48 per week;

iv. Mutual of Omaha, short term disability benefits (STD):

• September 17, 1991 to December 9, 1991: $250.00 per week;

• November 7, 1991 to December 9, 1991 $525.60/month - 4.33 = $121.39 per week;

• Payments were terminated December 9, 1991.

During the course of the hearing, I was informed by counsel that the parties resolved their dispute with respect to the collateral insurance benefits received by the Applicant from Mutual of Omaha until December 9, 1991. Consequently, I make no further reference to these benefits.

The parties disputed the deductibility of certain payments received by the Applicant after his motor vehicle accident, under section 12(4) and section 15 of the Schedule.

1. Are payments received by the Applicant from benefit plans and collateral insurers, in connection with an earlier unrelated accident, deductible under section 12(4)(b) of the Schedule from weekly income benefits payable by the Insurer?

Counsel for the Applicant relied on the decision in Pineda v. Co-Operators Group Ltd (1985), 1985 CanLII 2094 (ON HCJ), 51 O.R. (2nd) 787, (H.C.J.) for the proposition that benefits received on account of an earlier work accident, should not be deducted from weekly income benefits payable by the Insurer as the result of an unrelated car accident. Counsel submitted that this proposition was particularly applicable in the case of Workers' Compensation Benefits because of Part VII of the Schedule, which consists of sections 20 and 21, and deals specifically with the effect of WCB benefits. Counsel for the Applicant submitted that the expressed inclusion of Part VII of the Schedule, entitled "The Effect Of Worker's Compensation" is intended to cover, exclusively, the effect of these benefits to the exclusion of the application of other provisions, specifically section 12(4)(b).

This issue has been considered in several earlier cases before the Commission, including Ralph McCormick and Economical Mutual Insurance Company, October 2, 1991, OIC File No. A-000139; Michael Morin and The Personal Insurance Company, June 16, 1992, OIC File No.A-000468, overturned on appeal to the Director of Arbitrations, OIC File No P-000468. The decision of the Director of Arbitrations in Morin was confirmed by a decision of the Supreme Court of Ontario (Divisional Court). The issue was also considered in Lily Steele and Zurich Insurance Company, December 3, 1992, OIC File No. A-001024; Francis Nand and State Farm Mutual Automobile Insurance company, May 28, 1993, OIC File No. A-001893, and again in the supplementary decision in Peter Jolin and Jevco Insurance Company, March 31, 1994, OIC File No. A-002187.

In the McCormick case, Mr. McCormick received WCB benefits from an earlier workplace accident unrelated to his motor vehicle accident. Senior Arbitrator Naylor considered the effect of Part VII and sections 20 and 21 of the Schedule upon the deductibility of WCB benefits under section 12(4)(b). She decided that WCB benefits paid for temporary total disability were "payments for loss of income". She concluded that they were deductible under section 12(4)(b) of the Schedule, despite sections 20 and 21 and notwithstanding that the benefits were triggered by a previous unrelated injury. Senior Arbitrator Naylor was not referred to the Pineda decision relied upon by counsel in this case.

In the Morin decision, Mr. Morin received CPP disability benefits for an earlier condition unrelated to his motor vehicle accident. Mr. Morin conceded that the CPP benefits were "payments for loss of income". Senior Arbitrator Rotter considered whether the CPP payment was deductible under the reasoning in McCormick. The Pineda decision was cited by Senior Arbitrator Rotter and she relied upon it to conclude that only payments for loss of income arising from the same accident are deductible under sections 12 and 13.

The decision in Morin was appealed by the Insurer to the Director of Arbitrations. The Director also considered the reasoning in the Pineda decision, but preferred the reasoning in McCormick and upheld the Insurer's appeal. The Director's decision was confirmed on an application for judicial review to the Divisional Court.

This issue and the reasoning of Mr. Justice Cromarty in the Pineda decision were also considered by Arbitrator Palmer in her decision in Steele. Arbitrator Palmer noted that in Pineda, Justice Cromarty was considering the precursor of what is now section 20 of the Schedule, regarding worker's compensation payments. Arbitrator Palmer concluded that the amount of Mrs. Steele's CPP disability pension and her Bell Canada disability pension must be deducted from weekly benefits payable to her by her auto insurer, notwithstanding that these pensions related to an earlier disability.

I agree with and adopt the reasoning of the Director of Arbitrations, Senior Arbitrator Naylor and Arbitrator Palmer in connection with this issue. I conclude that "payments for loss of income" are deductible under section 12(4)(b) of the Schedule, despite sections 20 and 21 of the Schedule, dealing with worker's compensation benefits and notwithstanding that the benefits relate to a previous condition unconnected to the car accident.

Senior Arbitrator Rotter reconsidered this issue in the decision of Nand and the supplementary decision in Jolin. Senior Arbitrator Rotter followed the reasoning of the Director of Arbitrations in the appeal of the Morin decision. In Jolin, Senior Arbitrator Rotter concluded at page 5 of the supplementary decision:

Accordingly, I find that it is now settled law that ail payments for loss of income, regardless of their source or origin, be deducted from weekly income benefits payable under the Insurance Act.

This issue has now been considered by the Director of Arbitrations, four different arbitrators, and the Divisional Court. A consensus of opinion has emerged that "payments for loss of income...received by or available to" an Applicant, are deductible under section 12(4)(b) of the Schedule, despite sections 20 and 21 of the Schedule dealing with worker's compensation benefits and notwithstanding that the benefits relate to a previous condition unconnected to the car accident. I accept and adopt Senior Arbitrator Rotter's conclusion in Jolin that this is now settled law before the Commission.

2. Are benefits for temporary total disability (TTD), future loss of earnings (FLE), and supplements for vocational rehabilitation programs (VR), received by the Applicant under the Worker's Compensation Act, R.S.O. 1990, "payments for loss of income", within the meaning of section 12(4)(b) and therefore deductible by the Insurer?

i. Payments for Temporary Total Disability (TTD):

Several cases before the Commission have considered payments made under the Worker's Compensation Act to determine if they are "payments for loss of income". In the case of McCormick, Senior Arbitrator Naylor stated:

Whether a benefit is a "payment for loss of income" within the meaning of subsection 12(4) depends upon the nature and source of the particular payment, viewed in the context of the program in which it operates. (page 15)

Senior Arbitrator Naylor concluded that TTD benefits payable under section 40(1) of the Workers' Compensation Act, R.S.O. 1980, c. 539 were "payments for loss of income" because the amount of the compensation was directly related to the employment income of the individual and was calculated to be equal to 90 per cent of the individual's net average earnings before the compensable accident. She concluded that TTD benefits were intended to compensate Mr. McCormick for his loss of income arising from his inability to work because of an employment injury, and as such were prima facie "payments for loss of income", within the meaning of section 12(4)(b) of the Schedule, and therefore deductible.

In the present case, Mr. Mouawad received TTD benefits payable under section 37(1) of the Worker's Compensation Act, R.S.O. 1990, c. w. 11. Similarly the section provides that where injury to a worker results in temporary total disability, the worker is entitled to compensation in an amount equal to 90 per cent of the worker's net average earnings before the compensable injury. Like Senior Arbitrator Naylor in McCormick, I conclude that such benefits are based upon employment income and are intended to compensate Mr. Mouawad for his loss of income arising from his inability to work because of an employment injury. Accordingly, TTD benefits paid to the Applicant are "payments for loss of income" and are deductible under section 12(4)(b) of the Schedule.

ii. Payments for Future Loss of Earnings (FLE):

The Applicant's TTD benefits were terminated on November 1, 1992. WCB concluded that the Applicant suffered temporary disability for 12 continuous months with the likelihood of permanent impairment (Exhibit 7). WCB awarded a benefit based on the Applicant's future loss of earnings (FLE) projected over a two year period, pursuant to section 43 of the Worker's Compensation Act, R.S.O. 1990.

Section 43 requires that the future loss of earnings (FLE) benefit be 90 per cent of the difference between the Applicant's pre-accident net average earnings and the net average earnings the Applicant will likely earn in suitable and available alternate employment. The quantum of FLE benefit is fixed for a two year term. At the end of the term, it is reviewed and fixed for a further term.

WCB determined that the Applicant would benefit from vocational rehabilitation and retraining to re-enter the workforce as an electronic repairman (Exhibit 27). The Applicant enrolled in a vocational rehabilitation program designed with the assistance of a WCB vocational rehabilitation caseworker. Section 43(9) of the Worker's Compensation Act provides that if a worker receiving FLE benefits is cooperating in a board-authorized vocational rehabilitation program, the worker shall receive an additional vocational rehabilitation (VR) supplement. The amount of the FLE benefit under section 43(1) is topped up by the VR supplement, for as long as the worker is cooperating in the rehabilitation program. The calculation of the VR supplement is the difference between the worker's FLE payment and 90 per cent of his pre-injury net average earnings.

Counsel for the Applicant urged me to find the FLE benefit and the VR supplement awarded to the Applicant under section 43 of the current Worker's Compensation Act, R.S.O. 1990, equivalent to the permanent disability pension considered in the decision Carlo Caringi and The Wawanesa Mutual Insurance Company, February 18, 1993, OIC File No.A-000860, and therefore not deductible by the Insurer.

In the Caringi decision, Mr. Caringi was in receipt of a 70 per cent permanent disability pension, plus a partial supplement under section 45(1) of the Ontario Workers' Compensation Act, R.S.O. 1985, at the time of his motor vehicle accident. Mr. Caringi's auto insurer sought to deduct these ongoing payments from his weekly income benefit on the basis that they were "payments for loss of income" within the meaning of section 13(3). Senior Arbitrator Naylor reviewed her reasoning in an earlier case on the same issue, Antonio Pallotta and Alpina Insurance Co. Ltd. (Zurich Insurance Company), April 22, 1992, OIC File No. A-000808. Mr. Pallotta was in receipt of a 10 per cent permanent disability pension under section 43(1) of the Worker's Compensation Act, R.S.O. 1980, c. 518, as amended.

In both the Caringi and Pallotta decisions, Senior Arbitrator Naylor found that the rules governing payment of benefits for permanent disability were quite different from those governing payment of benefits for temporary disability. Senior Arbitrator Naylor reviewed the nature and character of the specific payment, and the wording of the relevant sections of the Workers' Compensation Act and concluded that permanent disability pensions from WCB were not payments for loss of income within the meaning of either section 12(4) or 13(3) of the Schedule. In reaching this decision Senior Arbitrator Naylor took into account the following factors:

a) Compensation for permanent disability is estimated from the "nature and degree of the injury";

b) The degree of physical impairment is used to determine the impairment of earning capacity as set out in a standardized "rating schedule";

c) It is expressed as a percentage of "total disability" of the "whole person", applied to the injured worker's pre-accident wage rate;

d) The pension is payable for life regardless of whether the worker actually returns to work and regardless of the actual impact of the disablement on earnings;

e) When the physical impairment method of calculation is used, compensation is commonly awarded when there is no actual loss of earnings.

Considering these factors, Senior Arbitrator Naylor concluded that the permanent pensions from WCB paid to Mr. Caringi and Mr. Pallotta were not paid to reimburse them for their loss of income, but for disability.

For the following reasons, I do not accept counsel for the Applicant's submission that the FLE payment and VR supplement paid to Mr. Mouawad under section 43 of the Workers' Compensation Act, are equivalent to a permanent disability pension.

The wording of section 43 of the Worker's Compensation Act, R.S.O. 1990, governing FLE payments and VR supplements, is very different from the wording considered by Senior Arbitrator Naylor in the Caringi and the Pallotta decisions, and the wording considered in the decision Norma Shehadeh and the General Accident Assurance Company of Canada, May 21, 1993, OIC File No. A-001177. Unlike the permanent disability pension, FLE payments are not based upon the "nature and degree of the injury" suffered. Rather, they are intended to compensate for "future loss of earnings arising from the injury." The calculation of the FLE benefit is not based on a percentage of "total disability" of the "whole person", but rather on the difference between the worker's net average earnings before the injury and the net average earnings the worker is expected to earn in his post-accident condition. FLE payments are also not permanent. The amount of the compensation is reviewable at regular intervals. For example, when an injured worker concludes rehabilitation and returns to the workforce, the amount of the FLE payment is adjusted in accordance with the amount of income earned.

I am satisfied that the FLE payment under section 43(1) of the Workers' Compensation Act, R.S.O. 1990, is paid to reimburse Mr. Mouawad for anticipated loss of income due to a reduced earning capacity, and is therefore deductible under section 12(4)(b) of the Schedule.

iii. Vocational Rehabilitation Supplements (VR):

However, I am not satisfied that the VR supplement is a deductible payment for loss of income for the following reasons.

The VR supplement is paid only during the period the injured worker is "co-operating in rehabilitation" and is cancelled when the worker drops out of a vocational/rehabilitation program, or is unable to continue due to factors unrelated to the workplace injury. For example, if an injured worker is incapable of proceeding with rehabilitation due to intervening factors, the VR supplement is terminated even where the worker's original injury still prevents him from returning to his former employment and the original loss of income continues. As such, payment of the VR supplement is not primarily designed to compensate for a worker's loss of income but rather as an incentive to encourage an injured worker to participate and co-operate in WCB authorized rehabilitation programs. As stated by Senior Arbitrator Naylor at page 16 of the Pallotta decision:

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

I conclude that the VR supplement under section 43(9) of the Workers' Compensation Act is not a payment for loss of income but a payment for cooperation in rehabilitation programs. I find that it is not deductible under section 12(4)(b) of the Schedule.

3. Is the Insurer entitled to continue to deduct an amount equal to vocational rehabilitation (VR) supplements, after termination by WCB, on the basis that the Applicant failed to mitigate his damages?

The Applicant's VR supplements were terminated by Worker's Compensation as of March 1, 1993. The reason for the termination is set out in a letter dated April 6, 1993, from Worker's Compensation to the Applicant (Exhibit 16). The letter notes that the Applicant felt unable to continue his WCB approved vocational rehabilitation program due to problems connected to his neck and back injuries suffered in the car accident.

The Insurer seeks to continue to deduct the Applicant's VR supplement from weekly income benefits beyond the date of their cancellation by WCB, on the basis that the Applicant was physically capable of continuing his rehabilitation program and should have continued. The Insurer claims that but for the Applicant's voluntary withdrawal from rehabilitation, the VR supplements were "available to" him and therefore deductible under section 12(4)(b)(i) of the Schedule.

It is not necessary for me to decide this issue, in view of my decision that VR supplements paid by WCB are not payments for loss of income and therefore not deductible by the Insurer under section 12(4)(b), in any event.

4. Are various payments made under the provisions of the Canada Pension Plan in respect of the Applicant and the Applicant's children, "payments for loss of income...received by or available to" the Applicant under any "income continuation benefit plan", within the meaning of section 12(4)(b)(i) and therefore deductible?

For the purposes of this decision, counsel for the Applicant agreed that CPP disability payments made directly to the Applicant on his own behalf (as opposed to payments made to the Applicant's children) are "payments for loss of income" within the meaning of section 12(4) of the Schedule. However, counsel for the Applicant submitted that it is inequitable to permit the Insurer to deduct the entire monthly benefit payable to the Applicant in respect of a disability arising from the combined effects of both the pre-existing knee injury and the motor vehicle accident.

I cannot agree with this submission by counsel for the Applicant. As stated earlier, it is now settled law before the Commission that payments for loss of income, received by or available to the Applicant, are deductible by the Insurer under section 12(4) of the Schedule, notwithstanding that all or a portion of the payments may relate to a previous condition unconnected to the motor vehicle accident.

Counsel for the Insurer seeks to deduct CPP payments made to the Applicant's children, under section 59 of the Canada Pension Plan Act, from the Applicant's weekly income benefit, on the basis that these are "payments for loss of income".

Counsel for the Applicant submits that these are not payments to compensate the Applicant for his loss of income which were "received by or available to" the Applicant, and are therefore not deductible by the Insurer under section 12(4)(b) of the Schedule.

Section 59 of the Canada Pension Plan Act provides that a basic monthly amount is payable to the child of a disabled contributor or the orphan of a deceased contributor. The monthly amount is not based upon the pensionable earnings of the disabled contributor but rather on the Pension Index in any given year.

Counsel for the Insurer relied upon the decision of Steele J. in the case of Jose Ormonde v. London Life Insurance Company (1991) 35 C.C.E.L. 175. In that case the judge concluded that CPP benefits payable to the children of a disabled contributor were deductible from benefits otherwise payable by a disability insurer to the insured parent, under the terms of a disability policy. Steele J. concluded that the CPP amounts were for:

...the maintenance and support of children of a disabled contributor. They are not windfall payments. They are receivable from the government for no other reason than that they are children of a disabled contributor. The payments therefor fall under the term of the policy,"...other benefits payable on account of the disability of the employee," as set out in para. 5 of the policy. The child benefits under the Canada Pension Plan are therefore deductible...

The wording of section 12(4)(b)i of the Schedule differs from the wording considered by Steele J. in the Ormonde decision. I agree with Steele J. that CPP payments to the children are triggered by the Applicant's disability. However, the payments are not calculated on the basis of the Applicant's lost income. In my opinion they do not compensate the Applicant for his loss. Rather, a basic amount is paid directly to the children to offset their anticipated loss of financial support from their disabled father.

I heard no evidence to establish whether benefits payable to the children are included in their income, for tax purposes, or whether these amounts are paid directly to the children or their mother, and possibly are not "available" to the Applicant. In the circumstances of this case, I am not satisfied that CPP payments to the children are payments for the Applicant's loss of income or that they are received by or available to the Applicant. I find that they are not deductible.

5. Are payments made by D.S. Construction to the Union from the date of the car accident (September 17, 1991) to July 1992, deductible under section 12(4)(b) as "payments for loss of income...received by or available to the insured person"?

Are they deductible under section 15 as "any income received or available from any occupation or employment subsequent to the accident"?

I previously concluded that the hourly wage paid by D.S. Construction in return for the Applicant's labour was income from employment under section 12(7), inclusive of the $3.58 portion allocated to union benefit programs. However, on the evidence before me, I was not persuaded that contributions made by D.S. Construction to the union after the Applicant left work on July 25, 1991, were "income from his occupation or employment" which should be included in the calculation of gross weekly income under section 12(7) up to the date of the car accident. It therefore follows that these contributions are not deductible as "income received or available from any occupation", subsequent to the date of the car accident under section 15 of the Schedule.

I previously concluded that the post-work payments made by D.S. Construction to the Applicant were more in the nature of a benefit continuation program specifically designed to maintain benefit coverage to union members during periods of injury when there was no income from employment. I conclude that D.S. Construction's contributions towards maintaining this coverage amounted to "payments for loss of income...received by or available to" the insured person "under any income continuation benefit plan" or "sick leave plan" and are therefore deductible under section 12(4)(b).

6. Is the Insurer entitled to any repayment from the Applicant under section 27 of the Schedule?

i. Repayment under section 27(1):

The Insurer made no payment of weekly income benefits to the Applicant for approximately seven months following the motor vehicle accident in September 1991. The first payment of benefits occurred on May 1, 1992, as a direct result of mediation at the Commission, which ended April 30, 1992. Thereafter, the Insurer paid weekly income benefits in various amounts, over various periods of time, as set out in Appendix C to this decision.

I previously concluded that the Applicant's gross weekly income under section 12(7) is $526.00, based upon income earned in the year prior to the car accident of September 17, 1991, divided by 52 weeks. The Insurer had previously calculated the Applicant's gross weekly income to be either $998.09 or $934.63, based on income earned in the last four weeks worked by the Applicant (ending July 25, 1991), divided by four weeks.

The Insurer is claiming a repayment from the Applicant of excess benefits paid through error, under section 27(1) of the Schedule, which states:

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.

Fraud is not alleged in this case. The Insurer claims that it acted in error when it originally paid weekly income benefits calculated on the basis of the average gross weekly income earned in the Applicant's last four weeks of work (ending July 25, 1991). The Insurer states that it should have calculated gross weekly income strictly in accordance with section 12(7)1 on the basis of either the four weeks immediately preceding the September 17, 1991 car accident in which there was no income from employment, or the 52 weeks immediately preceding the car accident in which there was $27,352.38 income, divided by 52 weeks. The Insurer seeks repayment of excess benefits paid on the basis of this alleged error, retroactive to the beginning of the Applicant's claim in September 1991.

I do not find that the Insurer acted through error at the time it calculated the gross weekly income and paid the benefits which are the basis for the repayment claim. Furthermore, in the particular circumstances of this case, the Insurer is estopped from denying the four week time period it deliberately chose, which formed the underlying basis for negotiations and agreements reached with the Applicant at mediation in May 1992, August 1992, and January 1993.

The Insurer based its original calculations on the Employer's Confirmation of Income form (Exhibit 25) completed by the Applicant's former employer, D.S. Construction. The form sets out the Applicant's employment income for the last four weeks worked (week ending July 27, 1991). The form states that the Applicant worked only 24 calendar weeks (23 seven day periods) prior to his departure on July 25, 1991, due to his knee injury. Neither party suggested that the information contained on this form was erroneous. The Insurer took several months to consider the information contained in this form.

It was obvious that the time period reflected in the form did not correspond to either the four weeks immediately preceding the date of the motor vehicle accident (ie. Monday August 19, 1991 to Monday, September 16, 1991), or the 52 weeks immediately preceding the accident, as stipulated by section 12(7) of the Schedule. Nonetheless, the Insurer adopted this time framework, although it disputed the inclusion of the $3.58 portion of the hourly rate allocated to union benefit programs and the $455 received from freelance work, in the Applicant's income for this period.

The parties submitted their dispute concerning the inclusion of certain amounts as income to mediation at the Commission in May 1992, August 1992, and January 1993. Immediately following mediation in May 1992, the Insurer began to pay weekly income benefits based on the Applicant's gross weekly income earned in the last four weeks of work ending July 25, 1991 (Exhibit 26).

By letter dated December 15, 1992 (Exhibit 23), the Insurer announced to the Applicant that it had arrived at a new calculation of his weekly income benefit. The new calculation continued to be based on the Applicant's gross weekly income in the last four weeks of work ending July 25, 1991.

However, the Insurer deducted the disputed portion of the hourly rate allocated for union benefit programs from this calculation.

In its December 15, 1992, letter to the Applicant (Exhibit 23), it is clear that the Insurer had considered the option of averaging the Applicant's gross weekly income over a full 52 week period. However, the Insurer rejected this calculation and confirmed its reliance upon the four weeks ending July 25, 1991, in the following words:

This method of calculation is of benefit to you as opposed to taking the average of your salary over the last 52 weeks prior to your Workers' Compensation accident as you had only worked 24 out of the previous 52 weeks. (Exhibit 23)

The issue of whether the Applicant should rely upon a 52 week period rather than the four week period preceding the Applicant's worker's compensation accident, or the four week period immediately preceding the car accident, was not raised in the four Reports of Mediator prepared in this case. The issue was first raised by the Insurer in a follow-up pre-hearing letter dated May 25, 1993.

In the particular circumstances of this case, I conclude that there was no error, within the meaning of section 27(1), when the Insurer paid benefits based on the Applicant's gross weekly income earned for the four weeks ending July 25, 1991. The Insurer was aware of the different time periods and different methods of calculation available to it and deliberately chose the four weeks preceding the Applicant's work injury when calculating the Applicant's gross weekly income. Furthermore, the Insurer cannot now repudiate its understanding with the Applicant and demand a recalculation of the gross weekly income, in accordance with a strict reading of section 12(7), retroactive to the beginning of the Applicant's claim.

As stated by Lord Denning in his seminal decision Central London Property Trust Ltd. v. High Trees House Ltd. [1947] K.B. 130 at 134:

There has been a series of decisions,...in which a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on. In such cases the courts have said that the promise must be honoured....The courts have not gone so far as to give a cause of action in damages for the breach of such a promise, but they have refused to allow the party making it to act inconsistently with it. It is in that sense, and that sense only, that such a promise gives rise to an estoppel.

By its own act, the Insurer entered upon a course of negotiation which had the effect of leading the Applicant to believe that the strict provisions of section 12(7)1 of the Schedule would not be enforced. It would be inequitable to allow the Insurer to retroactively enforce these provisions having regard to the dealings which have taken place between the parties.

For the purpose of determining whether an overpayment has been made by the Insurer and repayment is due from the Applicant, from the commencement of the Applicant's claim to the date of this decision, I conclude that the Applicant's gross weekly income under section 12(7) of the Schedule should be calculated using the time framework and variables previously adopted and relied upon by both parties.

I find that the parties accepted:

• the time period for calculation was the last four full weeks ie. the last 20 days worked by the Applicant at D.S. Construction (ending July 25, 1991);

• 148 hours worked in that 20 day period;

I previously concluded that the hourly rate to be applied during this four week period is $28.67.

The Applicant's gross weekly income during this period is:

• 148 hrs. x $28.67 per hour =

$4,243.16

• July 1991 income from freelance work =

$ 455.00

TOTAL

$4,698.16

• divided by 4 weeks =

$1,174.54

• 80% of $1,174.54 =

$ 939.63

ii. Repayment under section 27(3):

From the outset of the Applicant's claim, the Insurer asserted its right to deduct collateral benefit payments, under section 12(4), when calculating the Applicant's weekly income benefit. However, the amount and nature of several of the collateral payments for loss of income received by the Applicant changed over time. The Insurer was not always up to date concerning these changes and, in some cases, did not deduct the full amount. Also, CPP disability benefits were paid to the Applicant in June 1992, but were retroactive to November 1991. The Insurer now seeks to deduct the correct amount of payments for loss of income received by the Applicant and obtain repayment of any overpayment that arises under the provisions of section 27(3) of the Schedule, which states:

(3) A person must repay to the insurer any benefit received under sections 12 and 13 to the extent of any payments received by the person that are deductible from benefits under subsection 12(4) or 13(3).

I conclude that section 27(3) entitles the Insurer to deduct the correct amount of payments for loss of income, once they have been received by the Applicant, provided that they are deductible within the meaning of section 12(4)(b). Under this section the Insurer does not need to establish error or fraud.

The section contemplates a situation where an insurer continues to pay weekly income benefits in full knowledge that an application for collateral benefits, such as CPP disability benefits, has been made by an applicant. An insurer may make these payments with the expectation that collateral benefits will be granted to a claimant, possibly retroactively, and may cover a time period during which weekly income benefits are being paid. No error is made, but recovery of such benefits is ensured by the provisions of section 27(3).

The Insurer is entitled to a repayment of benefits from the Applicant during the period September 17, 1991 to the date of this decision, only to the extent that there is an overpayment using a calculation based on 80 per cent of the gross weekly income of $1,174.54, less allowable deductions under section 12(4)(b) of the Schedule, as they have been determined by this decision.

Both the Applicant and the Insurer placed the four week period previously relied upon by them into contention in this arbitration. I previously found that the Applicant's gross weekly income, calculated in accordance with section 12(7), is $526.00. Eighty percent of this amount is $420.00.

From the date of this decision forward, the Insurer is entitled to deduct payments which fall within the meaning of section 12(4)(b) from the weekly sum of $420.00.

7. Is the Applicant entitled to interest and expenses in respect of this arbitration?

The issues raised in this claim are numerous and complex. The Insurer was uncertain how to proceed with the Applicant's claim and made no determination for approximately seven months. Even after mediation, the Insurer remained uncertain and altered its position on the amount of weekly income benefits payable. It is not surprising that the Applicant would seek the assistance of mediation and ultimately arbitration at the Commission to determine the matters in dispute between the parties. I conclude that this is an appropriate case in which to award the Applicant his expenses of arbitration. If the parties are unable to agree on the amount of the expenses, I remain seized of this matter and either party may apply for an assessment of the expenses.

The Applicant is seeking interest on any amounts payable by the Insurer in accordance with section 24(4) of the Schedule. Counsel for the Applicant submits that the wording of the section implies that the two per cent interest be calculated and compounded monthly.

Counsel for the Insurer submits that section 24(4) of the Schedule makes no reference to compounding, whereas, in the same package of legislation which created the Schedule, provisions were passed under the Insurance Act, R.S.O. 1990, c.I.8, which explicitly provide for compound interest. Section 282(10) of the Insurance Act, R.S.O. 1990, c.I.8, provides for a lump sum special award "together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of two per cent per month, compounded monthly, from the time the benefits first became payable" under the Schedule.

Counsel for the Insurer submits that had the Legislature intended interest payments pursuant to section 24(4) to be made on a compound basis, it would have explicitly provided for it as in section 282(10) of the Insurance Act.

I accept counsel for the Insurer's submissions. There is no ambiguity or lack of clarity in the statute which would require one to interpret the clear meaning of section 24(4) of the Schedule or to read in similar wording to that found under section 282(10) of the Insurance Act.

In the event that any weekly income benefit is owed to the Applicant, he is entitled to simple interest on overdue payments from the date they become overdue at the rate of two per cent per month under section 24(4).

Order:

A. The Applicant's gross weekly income under section 12(7) of the Schedule is calculated on the following basis:

1. The Applicant's gross weekly income should be calculated based on his total income earned in the year immediately preceding the motor vehicle accident, divided by 52 weeks, rather than on his average income for the 23 weeks he actually worked or on the income he earned in his last four weeks of work ending July 25, 1991.

2. The Applicant's gross weekly income includes the total hourly rate paid by D.S. Construction, in respect of the Applicant's labour, inclusive of the $3.58 portion allocated for health and welfare, SUB, and pension plans for the members of the carpenters' union.

3. The amount of $455.00 paid to the Applicant for work performed on a freelance basis is included in the calculation of the Applicant's gross weekly income.

4. Unemployment insurance premiums and workers' compensation benefits paid to the Applicant from his last day of work (July 25, 1991) to his car accident (September 17, 1991) are not income from employment and are not included in the calculation of gross weekly income.

5. Amounts paid by D.S. Construction to the union from the Applicant's last day of work (July 25, 1991) to the date of the car accident (September 17, 1991) are not income from employment and are not included in the calculation of gross weekly income.

Calculated on this basis, the amount of the Applicant's gross weekly income under section 12(7) is $526.00.

B. Collateral benefit payments are deducted from the Applicant's gross weekly income under section 12(4)(b) of the Schedule, on the following basis:

1. Payments for loss of income which are received by or available to the Applicant are deductible from his gross weekly income, despite sections 20 and 21 of the Schedule dealing with workers' compensation benefits, and notwithstanding that the benefits relate to a previous condition unconnected to the car accident.

2. Payments for temporary total disability (TTD), and future loss of earnings (FLE), received by the Applicant under the Worker's Compensation Act, R.S.O. 1990, are payments for loss of income and are deductible. Vocational rehabilitation supplements (VR) are not payments for loss of income and are not deductible.

3. The Insurer is not entitled to continue to deduct an amount equal to vocational rehabilitation (VR) supplements, after termination by WCB, on the basis that the Applicant failed to mitigate his damages.

4. Payments made directly to the Applicant under the provisions of the Canada Pension Plan are payments for loss of income and are deductible. Payments made directly to the Applicant's children are not deductible.

5. Payments made by D.S. Construction to the union from the date of the car accident (September 17, 1991) to July 10, 1992, are deductible.

The weekly income benefit payable to the Applicant under the provisions of section 12 of the Schedule is calculated on the basis of 80 per cent of a gross weekly income of $526.00, less the deductions allowed above.

C. Amounts remitted by D.S. Construction to the union in respect of health and pension plans are not deductible under section 15 of the Schedule.

D. The Insurer is entitled to a repayment from the Applicant under section 27 of the Schedule as specifically set out in this decision.

E. The Applicant is entitled to his expenses of the arbitration. In the event any weekly income benefit is owed to the Applicant, he is entitled to simple interest under section 24(4) of the Schedule.

F. In the event any repayment is owed by the Applicant, the Insurer is entitled to interest under section 27(4) calculated from the date of this decision, as long as any repayment remains owing.

June 30, 1994

Janice Mackintosh Arbitrator

Date

APPENDIX A

LIST OF WITNESSES

1. Baraket C. Mouawad, applicant

2. William Rae Martin

3. James A. Caron, representative from Carpenters' Union

4. Michael John Springstead

5. Susan Beasley-Tapak

6. Dr. Paul Ziter, applicant's physician

7. Brian D. Tandy

LIST OF EXHIBITS

1. 1990 Income Tax Return, plus 10 pages of attachment

2. Begg & Daigle Stores - Pay period stub, dated Aug. 17/90

3. 1991 Income Tax Return, plus attached T-4 slip

4. Copy of pages 120 and 121 of the Carpenters Collective Agreement L.U. 494 Windsor Ontario

5. Pay stubs from D.S. Construction from Feb. 12/91 - July 27/91

6. Letter from WCB with benefit printout, dated April 3/92

7. Letter from WCB, dated Sept. 24/92

8. Letter from WCB, dated April 6/93

9. WCB file memo, dated Sept. 22/92

10. WCB file memo, dated March 23/93

11. Note from Dr. Titer, dated July 19/93

12. 1992 Income Tax Returns

13. 1992 Statement of Benefits from WCB

14. WCB file memo, dated Dec. 8/92

15. WCB file memo, dated Feb. 16/93

16. Letter from WCB to Applicant, dated April 26/93

17. Transmittal form from Carpenters & Joiners Local 494, dated Feb. 16/93

18. D.S. Construction benefits paid to Carpenters Union following car accident

19. D.S. Construction pre-accident benefits, from Feb. 16/91 to Sept. 16/91

20. Letter from WCB, dated Sept. 20/93

21. Letter prepared by Ms. Susan Beasley Tapak and signed by Dr. Titer, dated March 30/93

22. Schedule of Income Benefits prepared by Hughes Amys

23. Letter from Insurer to Applicant, dated Dec. 15/92

24. Letter from Insurer to Applicant's counsel, dated July 28/92

25. Accident benefit claims form package

26. Letter from Insurer to Applicant, dated May 1/92

27. WCB memo to file, dated Sept. 18/92

28. Record of Mr. Mouawad's Application for CPP disability, dated Oct. 8/93, received by Commission on Nov. 5/94

OTHER DOCUMENTS BEFORE THE ARBITRATOR

1. Report of Mediator, dated May 1, 1992

2. Revised Report of Mediator, dated August 20, 1992

3. Report of Mediator, dated January 28, 1993

4. Report of Mediator, dated June 9, 1993

5. Application for Appointment of an Arbitrator, dated February 17, 1993

6. Response by Insurer, dated April 1, 1993

7. Pre-hearing discussion letter, dated April 29, 1993

8. Further pre-hearing discussion letter, dated May 25, 1993

9. Further Application for Appointment of an Arbitrator, dated July 9, 1993

APPENDIX B

1. Carlo Caringi and the Wawanesa Mutual Insurance Company, February 18/93, OIC File No. A-000860

2. Central London Property Trust Ltd. v. High Trees House Ltd. [1947] K.B. 130

3. Peter Jolin and Jevco Insurance Company, March 31/94, OIC File No. A-002187

4. Dana B. Levenson and the General Accident Assurance Company of Canada, February 18/92, OIC File No. A-000260

5. Ralph McCormick and Economical Mutual Insurance Company, October 2/91, OIC File No. A-000139

6. Michael Morin and the Personal Insurance Company, June 16/92, OIC File No. A-000468

7. Francis Nand and State Farm Mutual Automobile Insurance Company, May 28/93, OIC File No. A-001893

8. Kwabena Nyamekye and Lloyd's Non-Marine Underwriters, December 17/92, OIC File No. A-001136

9. Ormonde v. London Life Insurance Co. (1991), 35 C.C.E.L. 175

10. Antonio Pallotta and Alpina Insurance Company Ltd. (Zurich), April 22/92, OIC File No. A-000808

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

12. Vincenzo Scavuzzo and Canadian Home Assurance Company, March 18/92, OIC File No. A-000626

13. Norma Shehadeh and the General Accident Assurance Company of Canada, May 21/93, OIC File No. A-001177

14. Lily Steele and Zurich Insurance Company, December 3/92, OIC File No. A-001024

15. Chuong Vo and Maplex General Insurance Company, October 4/93, OIC File No. A-002777

16. Kevin Zehr and the Guarantee Company of North America, July 30/93, OIC File No. A-001963

APPENDIX C

DATE OF CHEQUE

PAYMENT PERIOD

GROSS WEEKLY INCOME

DEDUCTIONS TAKEN

WEEKLY BENEFIT PAID

Apr 30/92

Jan 1/92 to May

$998.09 x .80 =

TTD from WCB

18 wks @

Exhibit 26

5/92

$798.47 Exhibit 26

$549.78

$248.69 = $4,476.42

May 13/92 Exhibit 22

May 6/92 to May 19/92

Same as above

Same as above

2 wks @ $248.69 = $497.38

Every two weeks from May 28/92 to Aug 7/92 Exhibit 22

May 20/92 to Aug 11/92

Same as above

Same as above

12 wks @ $248.69 = $2,984.28

Letter dated July 28/92 suspending payment Exhibit 24

Aug 12/92 to Nov 3/92

No payments made

No payments made

[12 wks @ $248.69 = $2,984.28] NOT PAID

Nov 16/92

Nov 4/92 to Nov 17/92

$998.09 x .80 = $798.47

TTD from WCB $549.78

2 wks @ $248.69 = $497.38

Dec 2/92

Nov 18/92 to Nov 30/92

Same as above

Same as above

2 wks @ $248.69 = $497.38

Dec 15/92 Letter from Insurer re calculating benefits from date of accident Sept 17/91 Exhibit 23

Reconciliation of amounts from Sept 24/91 to Dec 21/92

$934.63 x .80 = $747.70

Sept 24/91 to Dec 9/91 11 weeks: $549.78 TTD from WCB $188.10 from Mutual of Omaha Dec 10/91 to Dec 21/92 54 weeks: $549.78 TTD from WCB

11 weeks @ $9.82 = $108.02 54 weeks @ $197.92 = $10,687.68 Less amounts previously paid= $1,842.86

Jan 7/93 and every two weeks thereafter

Dec 22/92 and every two weeks thereafter

$934.63 x .80 = $747.76

$549.84 TTD from WCB

$197.92

1Prior to January 1, 1994, Ontario Regulation 672 was called the No-Fault Benefits Schedule. After that date it became the Statutory Accident Benefits Schedule - Accidents Before January 1, 1994. In this decision, the term "Schedule" will be used to refer to Regulation 672.