Neutral Citation: 1994 ONICDRG 81
File No. A-007313
ONTARIO INSURANCE COMMISSION
BETWEEN:
ANTONIO FERRARI
Applicant
and
ROYAL INSURANCE COMPANY OF CANADA
Insurer
DECISION
The Applicant, Antonio Ferrari, was injured in a motor vehicle accident on May 10, 1993. He applied for statutory accident benefits from the Insurer, Royal Insurance Company of Canada ("Royal"), payable under Ontario Regulation 6721. He continues to receive weekly income benefits from Royal at the minimum rate, $185.60 per week. He contends that he is entitled to weekly income benefits at the maximum rate, $600 per week. The parties were unable to resolve their dispute through mediation and the Applicant applied for arbitration under the Insurance Act.
The issues in this hearing are:
What is the proper amount of weekly income benefits to which the Applicant is entitled?
Is the Applicant entitled to a special award?
Is the Applicant entitled to his expenses of the arbitration proceeding?
The Applicant also claims interest on any outstanding amounts owing.
Result:
The appropriate rate of weekly income benefits is $185.60 per week.
The Applicant is not entitled to a special award.
The Applicant is not entitled to his expenses in the arbitration proceeding.
Hearing:
The hearing was held in North York, Ontario, on July 19, 1994, before me, Nancy Makepeace, arbitrator.
Present at the Hearing:
Applicant: Antonio Ferrari
Applicant's Representative: Altor Shields Barrister and Solicitor Selena Chagpar Barrister and Solicitor
Insurer's Representative: A. Wayne Edwards Barrister and Solicitor
Witnesses:
Antonio Ferrari, the Applicant
Vittorio Ferrari, the Applicant's brother
Judy Flanagan, Staff Adjuster, Royal Insurance
Oleh Hrycko, Chartered Accountant
Exhibits:
Exhibit 1 Joint Document Brief
Exhibit 2 Offer to Lease, C. Crescent
Exhibit 3 Disability Questionnaire, December 7, 1992
Exhibit 4 Disability Questionnaire, May 21, 1993
Exhibit 5 Curriculum Vitae - Oleh Hrycko
Other documents before the Arbitrator:
Report of Mediator, January 7, 1994
Application for Appointment of an Arbitrator, January 18, 1994
Response by Insurer, February 8, 1994
Pre-hearing letter, March 1, 1994
The proceedings were recorded by Brad Van Alstyne, of Legal Transcripts Services.
Background and Issues:
The Applicant, Antonio Ferrari, was injured in motor vehicle accidents on December 2, 1992 and May 10, 1993. He received statutory accident benefits from Royal following the first accident. The parties settled that claim on April 27, 1993. There is no issue before me arising out of the first accident.
The only issue in this case is the amount of weekly income benefit owing to Mr. Ferrari following the second accident, on May 10, 1993. The Applicant claims that between April 28 and May 10, he received wages of $795 from Ferrari Cleaners, and real estate commission of $750 for leasing a property on C. Crescent. The Applicant also contends that he earned commission of $2,624.18 in connection with the sale of a property on F. Drive.
Income from Ferrari Cleaners:
The Applicant contends that he received wages of $795 from Ferrari Cleaners between April 28 and May 10, 1993. Ferrari Cleaners is owned by the Applicant's brother, Vittorio Ferrari. The Applicant had starting working for Ferrari Cleaners in May 1992, but he was unable to continue after the first accident on December 2, 1992.
The only documentary evidence of the Applicant's 1993 income from Ferrari Cleaners is a cancelled cheque for $600, dated May 18, 1993 (Exhibit 1, Tab 7). The cheque is made payable to and endorsed by Vittorio Ferrari. In contrast, the documentary evidence of the Applicant's 1992 income from Ferrari Cleaners includes 22 cancelled cheques, all payable to and endorsed by Antonio Ferrari (Exhibit 1, Tab 5B). In addition, cheque stubs covering eight different pay periods in 1992 are all marked "Tony Ferrari" (Exhibit 1, Tab 5C).
I heard no satisfactory explanation for this discrepancy in the method of payment in 1992 and 1993. Vittorio Ferrari could not explain why the cheque was not made payable to Antonio Ferrari. Antonio Ferrari testified that his brother paid him in cash because the accountant had not "put him on the books yet". However, they agreed that the company's paycheques were issued on a weekly basis, with a one-week delay; the 1992 wages ledger supports that testimony. The claim that a cheque could not be made out to Antonio Ferrari on May 18, 1993, eight days after his last day of work, is inconsistent with the company's past practice, and I do not accept it.
There are also discrepancies in the evidence of the amount of the payment. The wages ledger indicates a net of $626.44 for the period ending May 9. Antonio Ferrari testified that Vittorio gave him $630 cash. Vittorio Ferrari testified that he paid his brother the $600 he received when he cashed the May 18 cheque. He was unable to explain how he arrived at the figure of $600. In the absence of documentary evidence of payment, this discrepancy between employee and employer about the amount paid is significant.
In addition, the gross income claimed by the Applicant for 1993 represents a significant increase (55%, by my calculations) over his 1992 wages. Antonio Ferrari and Vittorio Ferrari explained that Antonio was paid a higher salary in 1993 because he was now experienced in using the cleaning machinery. However, in cross-examination, Mr. Ferrari admitted that he was familiar with the machinery in 1992 after a couple of months on the job. Further, the Disability Questionnaire completed by Royal's staff adjuster, Judy Flanagan, and signed by Antonio Ferrari on December 7, 1992, indicates that the job did not involve "technical knowledge or special skills" (Exhibit 3).
Antonio Ferrari and Vittorio Ferrari also testified that in 1993, Antonio took on responsibility for a crew of two cleaners who would handle the jobs in the west end of Toronto, leaving Vittorio free to handle the east end. However, the 1992 Disability Questionnaire indicates that the job involved "supervisory responsibilities" in 1992. In cross-examination, Mr. Ferrari admitted that his job in 1993 was essentially the same as in 1992, except that his brother now had more stores, and needed someone to handle the west end.
I do not accept that Antonio Ferrari's job duties in 1993 justified the claimed increase in his wages.
Antonio Ferrari testified that he returned to work at Ferrari Cleaners on April 28, 1993, the day after he settled his claim arising out of the December 2, 1992 accident. He testified that April 27 was also the day he was "cleared to return to work"; however, I was presented with no medical evidence in support of this testimony. I heard no detailed evidence about Antonio Ferrari's hours, job duties, or income while working for Ferrari Cleaners in 1993. Neither the company's bookkeeper, who prepared the Employer's Confirmation of Income form, nor Ms. M., who is listed as contact person on that form, was called to testify. Nor were there any witnesses from Mr. Ferrari's crew or clients.
I think it is very likely that the documentary evidence of Antonio Ferrari's income from Ferrari Cleaners in the two weeks before the accident was fabricated, and I do not accept it. I am not satisfied that Antonio Ferrari received any income from Ferrari Cleaners in 1993.
Commission for leasing the property on C. Crescent
Mr. Ferrari claims that he began working as a real estate agent with Homelife/Response Realty on April 28, 1993, and earned commission of $750 on May 6, 1993, when the owner of a property on C. Crescent accepted an Offer to Lease the property. The Applicant submits that this amount should be included in his pre-accident income. Royal contends that because the transaction closed and possession passed on June 1, this commission should be included in the Applicant's post-accident income.
The executed leasing agreement was filed (Exhibit 2). The Offer was irrevocable by the tenants until midnight on May 6, 1993, and it was accepted by the owners on that day. The closing date is given as June 1, 1993. Mr. Ferrari testified that the transaction was completed and he received commission of $750 on June 2, 1993. The amount and date of the commission are confirmed by a Trade Record Sheet (Exhibit 1, Tab 12).
The Schedule sets out no explicit rules for recognizing income from real estate commission. The Insurer relies on the arbitration decision, M.P. and Dominion of Canada General Insurance Company, May 21, 1993, OIC File No. A-001478, under appeal. The issue in that case was whether the applicant's income in the four weeks before the accident included two sales that closed within that period, though the Agreements of Purchase and Sale had been executed earlier. Senior Arbitrator Susan Naylor held that these commissions were earned on the date of closing, not on the date when the agreement of purchase and sale was executed. Given Arbitrator Naylor's finding that the applicant's disability in that case did not result from the accident, her comments about real estate commission were not essential to her reasons.
Weekly income benefits are intended to compensate an insured person who is substantially unable to do his or her pre-accident job because of injuries sustained in an accident. In situations where the work is performed before the accident but the money is paid afterwards, it is consistent with the legislative purpose underlying section 12 to recognize income when it is earned. In this case, I accept the Applicant's evidence that he had completed all or substantially all of his work on the lease by May 6, 1993, when the Offer was accepted. Accordingly, the commission will be recognized in the Applicant's pre-accident income.
Commission for selling the property on F. Drive
The Applicant also testified that he earned real estate commission of $2,624.18 in connection with the sale of a property on F. Drive.
Before the first accident, the Applicant had worked for some years as a real estate agent for Canada Trust. That employment was terminated on November 19, 1992. Mr. Ferrari testified that he allowed his real estate licence to lapse at the end of 1992. He testified that he had listed the F. Drive property shortly before leaving Canada Trust. It did not sell. The owner then listed the property with Homelife/Response Realty ("Homelife"), and it sold in February 1993.
Mr. Ferrari began working as an independent agent with Homelife at the end of April 1993 (Independent Contractor Agreement with Homelife, Exhibit 1, Tab 8). According to Mr. Ferrari, the Homelife broker, a Mr. T., had agreed to give him the commission on the property once he returned to real estate.
In support of this claim, the Applicant provided a Trade Record Sheet, dated April 29, 1993, giving May 19, 1993 as the closing date on the sale (Exhibit 1, Tab 9). The document was signed by Mr. Ferrari, and appears also to have been signed by Mr. T. A second version of the Trade Record Sheet, dated February 4, 1993, indicated that closing was to occur on February 19, 1993 (Exhibit 1, Tab 10). The MLS listing confirms that the transaction closed on February 19 (Exhibit 1, Tab 11). The Applicant testified that Mr. T. altered the dates on the original Trade Record sheet because Mr. Ferrari could not receive commission until he reinstated his real estate licence in late April. According to Mr. Hrycko, Mr. T. offered him no explanation for these discrepancies. Mr. T. did not testify.
There are other problems with the documentation. Most significantly, the MLS listing names as listing agent a Ms. M., who is an employee of Ferrari Cleaners (Exhibit 1, Tabs 14, 15 and 17). The Applicant neither denied nor explained this coincidence.
Mr. Ferrari's testimony about this transaction was brief and lacking in detail; in particular, he did not say when and how he received the claimed commission. Given the many problems with the evidence about this transaction, it is difficult to determine what happened. I find that the Trade Record Sheet was likely fabricated or altered in order to increase the Applicant's benefit level. I am not satisfied that the Applicant received this commission. If he received it at all, I do not accept that he received it on April 29 or May 19. I find it more likely that he received it on February 19, 1993 - the actual closing date. In his report, Mr. Hrycko notes that under section 15 of the Schedule, the Insurer is entitled to deduct from the benefit payable, 80% of income received by the Applicant after the first accident. However, I have no jurisdiction to deal with issues pertaining to claims arising out of the first accident.
Method of calculation:
The Schedule provides that the insured person's gross weekly income, for the purpose of determining the rate of weekly benefits, is "his or her average gross weekly income" in either the four weeks or the 52 weeks preceding the accident, whichever is greater.
I have determined that the Applicant's only income in the four weeks before the accident was the $750 commission he received for leasing the C. Crescent property.
In the 52 weeks before the accident, I accept that the Applicant earned $8,250 from Ferrari Cleaners. This income is evidenced by the wages ledger, cancelled cheques, cheque stubs, and income tax returns (Exhibit 1, Tabs 5B and 5C), and is not disputed by the Insurer. In addition, I find that if the Applicant received commission in connection with the F. Drive transaction, it was received on February 19, 1993.
The Schedule says nothing about how to calculate income when the insured person worked for part, but not all, of the four or 52 weeks before the accident. Arbitrators have taken different approaches to this problem. In some cases, income has been averaged over the number of weeks the Applicant actually worked. In other cases, income has been averaged over four weeks or 52 weeks. In Rajbir Singh and Wellington Insurance Company, June 24, 1994, OIC File No. A-004139, I discussed the issue, as follows:
In Scavuzzo, Senior Arbitrator Susan Naylor restated the view she had expressed in Ralph McCormick and Economical Mutual Insurance Company, October 2, 1991, OIC File No. A-000139, that subsection 12(7)1 is ambiguous and admits of both interpretations:
Where a statutory provision is ambiguous and capable of more than one meaning, it is necessary to have regard to the context of the wording used, and the purpose and objectives of the legislation in order to select the interpretation that best reflects the intent of the Legislature.
In McCormick, the purpose of weekly income benefits was expressed in the following terms:
Income benefits are intended to compensate for the financial effects of the automobile accident. The purpose of the legislative scheme therefore is best served by an interpretation that results in the most accurate reflection of the applicant's employment income. ....this is achieved by averaging his employment income over the period of time that the applicant was in fact working, and disregarding the period of time in which he was incapacitated from work.
The No-Fault Benefits Schedule is remedial legislation and therefore must be construed in the manner that best serves the purpose of the legislation -the provision of fair, adequate and speedy compensation for loss of income from employment resulting from an automobile accident. These objectives are best served by calculating benefits based on the Applicant's average earnings over the period of time that he was in fact working, because this calculation better reflects the loss he sustained as a result of the accident.
In Vo, Arbitrator David Draper held that he was not bound to follow the appeal decision in Scavuzzo, and in his opinion the issue was not settled. He found that the facts before him were different from the facts in Scavuzzo and McCormick in that the applicant in Vo was unemployed at the time of the accident, but he was physically able to work and was looking for a job. Arbitrator Draper held that subsection 12(7)1 was intended to provide "relatively clear rules about entitlement". In his opinion, the plain language of the provision requires an applicant's gross weekly income to be averaged over four weeks or 52 weeks, even if the applicant's income was interrupted during those periods. He held (page 22), "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."
I do not agree that the plain meaning of subsection 12(7) mandates the calculation set out in Vo in all cases. I agree with Senior Arbitrator Naylor that subsection 12(7)1 is unclear and ambiguous. It would seem to apply relatively clearly to a long-time employee who has had no interruptions in service in the year before the accident. However, it does not set out rules for determining the gross weekly income of casual workers, seasonal workers, or workers who have been laid off as a result of disability or economic conditions during the year before the accident. Nothing in subsection 12(7)1 mandates any particular way of dealing with the vacation periods of self-employed workers.
In my view, the ambiguous language of subsection 12(7) must be given an interpretation consistent with the underlying legislative intent that weekly income benefits compensate the injured person for roughly 80 per cent of the income lost as a result of the accident. I do not accept that subsection 12(7) was drafted without regard to accuracy. The Schedule is remedial legislation which should be given a broad and liberal interpretation. In my view, subsection 12(7) should be given the interpretation, in each case, which provides for the most accurate assessment of the applicant's pre-accident financial circumstances. It may not be possible to set out a formula for all cases.
Mr. Singh testified that he took a vacation in early 1991 in order to spend time with his parents, who were visiting. I heard no evidence that he took any other vacation during the 52 weeks prior to the accident. A yearly vacation is an expected and regular part of the work cycle. It is accommodated in the case of employees by dividing their yearly income over the entire year, not just the weeks actually worked, in order to provide a continuous income stream over the year, including the vacation period. A self-employed person is responsible for making his or her own plans for continuing the income stream over the vacation period. In my view, Mr. Singh can be assumed to have planned for his vacation by putting aside some of his income to cover that period. In this case, I find that the subsection 12(7) requires Mr. Singh's income in the 52 weeks prior to the accident to be averaged over the entire 52 weeks, not just the 47 weeks he actually worked.
In this case, the Applicant's counsel submitted that I am bound to follow the Scavuzzo decision (Vincenzo Scavuzzo and Canadian Home Assurance Company, March 18, 1992, OIC File No. A-000626), which was upheld on appeal to the Director's Delegate. No authority was offered in support of this submission. I am reluctant to depart from a decision of the Director or her Delegate without good reason. As I stated in Rajbir Singh, I agree with Senior Arbitrator Naylor and Director's Delegate Smith that the Schedule is ambiguous and must be interpreted in a way which provides the more accurate reflection of the applicant's pre-accident income. However, I find that the facts in this case are distinguishable from the facts in Scavuzzo.
The Applicant claims income from employment (Ferrari Cleaners) and self-employment (real estate commissions).
A real estate agent's income may be relatively steady, or it may fluctuate substantially, depending upon market conditions and other factors. In my view, averaging this income over the entire four-week or 52-week period provides a more accurate reflection of the Applicant's nominal real estate earnings than is provided by attributing commission earnings to the day or week when the Agreement was executed.
The Applicant's employment income in the 52 weeks before the accident consisted of $8,250 earned from Ferrari Cleaners between May 11 and December 2, 1992. Mr. Ferrari testified that he stopped working for Ferrari Cleaners after the first accident.
The applicant in Scavuzzo was working at the time of the accident, after a period of unemployment. In contrast, the applicant in Vo (Chuong Vo and Maplex General Insurance Company, October 4, 1993, OIC File No. A-002777, under appeal) was unemployed at the time of the accident, though able to work and looking for work. The facts in this case are closer to the facts in Vo. Mr. Ferrari earned no employment income between December 2, 1992 and May 10, 1993. In this case, I find that averaging the Applicant's income over the entire 52 weeks results in a fairer and more accurate reflection of his income before the accident, than is achieved by averaging the income over the 31 weeks he actually worked at Ferrari Cleaners in 1992.
In conclusion, Mr. Ferrari is entitled to benefits of $185.60 per week, whether his benefits are based on his income in the four weeks or the 52 weeks before the accident.
Special Award:
Subsection 282(10) of the Insurance Act provides as follows:
(10) 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.
Since I am not awarding any benefits to Mr. Ferrari, I need not address his claim for a special award. In any case, I find that the Insurer acted reasonably in questioning the Applicant's income, and in paying weekly benefits at the minimum rate pending receipt of Mr. Hrycko's report.
Expenses:
Under subsection 282(11) of the Insurance Act, an arbitrator has discretion to award the Applicant his expenses, as set out in Schedule 1 of the Dispute Resolution Practice Code and in Ontario Regulation 664, R.R.O. 1990.
Given my finding that the Applicant's documentation was likely fabricated with regard to income from Ferrari Cleaners in 1993 and commission income pertaining to the sale of the property on F. Drive, I find it appropriate in this case to deny the Applicant his expenses.
Order:
The appropriate amount of weekly income benefits is $185.60 per week.
The Applicant is not entitled to a special award.
The Applicant is not entitled to his expenses incurred in respect to the arbitration proceeding.
September 8, 1994
Nancy Makepeace Arbitrator
Date