Neutral Citation: 1995 ONICDRG 116

File No. A-007555

ONTARIO INSURANCE COMMISSION

BETWEEN:

MATTHEW RAY

Applicant

and

WELLINGTON INSURANCE COMPANY

Insurer

File No. A-013442

AND BETWEEN:

MATTHEW RAY

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION

Issues:

The Applicant, Matthew Ray, was injured in a motor vehicle accident on May 7, 1993, when he was a passenger in a vehicle that struck a trailer. His father, John Robert Ray, was the named insured in a motor vehicle policy issued by Wellington Insurance Company ("Wellington"). State Farm Mutual Automobile Insurance Company ("State Farm") insured the vehicle in which Mr. Ray was a passenger. Mr. Ray applied for and received statutory accident benefits from Wellington, payable under Ontario Regulation 672,¹ as a dependant of his father. Wellington denies that Mr. Ray was a dependant of his father, and alleges that State Farm should be paying his benefits. The parties were unable to resolve their disputes through mediation, and Mr. Ray applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issue in this hearing is:

1. Was Matthew Ray a dependant of John Robert Ray on May 7, 1993, within the meaning of subsection 3(2) of the Schedule?

The Applicant also claims his expenses incurred in the hearing. As Wellington has paid his benefits throughout, no amounts are owing.

Result:

1. Matthew Ray was not a dependant of John Robert Ray on May 7, 1993, and accordingly State Farm is responsible for paying his benefits.

Hearing:

The hearing was held in Kingston, Ontario, on June 19 and 20, 1995, before me, David Evans, arbitrator.

Present at the Hearing:

Applicant:

Matthew Ray

Applicant's Representative:

John Scheulderman

Barrister and Solicitor

Wellington's Representative:

Colin S. Jackson

Barrister and Solicitor

Wellington's Officer:

Hanna McQuaid

State Farm's Representative:

Joseph J. Sullivan

Barrister and Solicitor

Witnesses:

Jane Keeler

Mrs. Katherine Ray

Beth Van Dusen

Bradley Ray

Matthew Ray

James Forbes

John Seigel

Other persons present:

John Robert Ray

Exhibits:

Exhibit 1

County of Northumberland Social Services welfare file for Matthew Ray

Exhibit 2

Financial statement prepared by Mrs. Katherine Ray

Exhibit 3

Copy of letter from Mrs. Ray to Mr. Scheulderman dated May 31, 1993

Exhibit 4

Printout of transactions at the Bank of Montreal branch in Campbellford for account#5093-999

Exhibit 5

Copy of Matthew Ray's 1992 Income Tax Return

Exhibit 6

Report dated June 9, 1995, by James A. Forbes of Coopers & Lybrand

Exhibit 7

Curriculum Vitae of James A. Forbes

Exhibit 8

Draft copy of Exhibit 6

Exhibit 9

Report dated June 14, 1995, of John Seigel of Price Waterhouse

Exhibit 10

Curriculum Vitae of John Seigel

Exhibit 11

Sports section of the June 15, 1995, edition of the Peterborough Examiner

Evidence and Findings:

Matthew Ray was injured in a motor vehicle accident on May 7, 1993, when he was a passenger in a vehicle that struck a trailer. His father, John Robert Ray, was the named insured in a motor vehicle policy issued by Wellington under policy number PPA 252 5419-A26. State Farm, under policy number 60-1333-357, insured the vehicle in which Matthew Ray was a passenger. Matthew Ray applied for and received weekly benefits from Wellington under section 13 of the Schedule, on the basis that he was a dependant of his father within the meaning of the Schedule. Wellington denies that Matthew Ray was a dependant of his father, and alleges that State Farm should be paying his benefits. Both Insurers participated in the hearing.

At the time of the accident, and in fact for most of his life, Matthew had been living with his parents. Approximately two months before the accident, he applied for and started to receive welfare. He paid almost two-thirds of his welfare benefit to his parents, for room and board.

Matthew did not own an automobile and was not a named insured in any policy. Therefore, as he was an occupant of an automobile in a motor vehicle accident in Ontario, it is possible that he is an "insured person" under two separate policies, pursuant to the following definitions of "insured person" in the Schedule:

"insured person," in respect of a particular motor vehicle liability policy, means,

(a) in respect of accidents in Ontario, an occupant of the insured automobile,

(c) the named insured, his or her spouse and any dependant of either of them while the occupant of any other automobile...

[Emphasis added.]

Matthew is an "insured person" under the State Farm policy, as he was an occupant of a State Farm-insured vehicle. If he was a dependant of his father (or his mother), then he would also be an "insured person" under his father's policy with Wellington. Assuming Matthew met both definitions, the "priority rules" set out in subsection 268(2) of the Insurance Act would require Wellington to continue paying the benefits. If Matthew was not a dependant, then State Farm is responsible for paying Matthew's benefits.

The term "dependant" is separately defined in subsection 3(2) of the Schedule:

(2) For the purpose of this Regulation, a person is a dependant of another person if the person is principally dependent for financial support on the other person or the other person's spouse.

Arbitrator Draper wrote the following in McDonald ² about the definition of "dependant," in the context of death benefits:

The term, "principally dependent for financial support" requires more than some dependence. It means that the person claiming benefits must establish that he or she is more financially dependent on the deceased person than on any other source.

One need only substitute "other person or other person's spouse" for "deceased person" in the quotation. Thus, if Matthew was more financially dependent on his mother or his father than on any other source, such as welfare, he would be a dependant of his father. In the present situation, it appears that if Matthew was financially dependent on anyone, it was on his mother, as she was the only parent working at the time of the accident.

Since, as noted above, Matthew was receiving welfare, a large part of the evidence and submissions turned on whether the benefit in money he received from welfare was greater than the benefit in kind he received by living with his parents: however, as has been noted in several cases,³ a person's position cannot be determined solely by a single "snapshot" of his or her circumstances at the time of the accident. Also, as Arbitrator Naylor stated in Raffoul,⁴ section 3(2) requires a realistic assessment of an applicant's actual financial circumstances to determine whether that person is in fact relying on another for support.

Accordingly, I heard and considered evidence about Matthew's life over several years prior to the accident, which I will now set out.

As a result of his injuries, Matthew does not remember very much about the weeks and months immediately before the accident. Neither his sister, Beth Van Dusen, nor his brother, Bradley Ray, were able to add very much information about the household arrangements, as neither of them had lived at home for a number of years prior to the accident. They mainly confirmed that Mrs. Ray was a workaholic, who put a lot of hours into keeping her house clean. Most of the evidence I heard came from Mrs. Ray.

Matthew was born April 29, 1969. Mrs. Ray testified that he was living with her in Campbellford in May of 1993, and that he had always lived there except for the months of October through December 1992, when he lived in Peterborough.

Mrs. Ray testified that, after his graduation from high school in 1988, Matthew worked at a company called Carter Concrete until the summer of 1991. From June to September 1991 Matthew helped his sister (Beth Van Dusen) and brother-in-law build their house.

Mrs. Ray testified that once Matthew started working, he started paying her room and board. I understood from her testimony that she usually charged him $50 a week.

In the fall of 1991, Matthew started studying architectural technology at Loyalist College in Belleville. Mrs. Ray testified that Matthew received grants from OSAP and loans from the Canada Student Loan Program. She gave him no money to go to school, but he lived at home rent-free. Mrs. Ray testified that the only time Matthew did not pay room and board was when he was studying at Loyalist.

Because Matthew was not happy with his marks after his first year at Loyalist, he decided to repeat the year. Although he started at Loyalist again in the fall of 1992, Matthew did not stay in school. Mrs. Ray testified that Matt was suffering stress because of school, a recent breakup with his girlfriend, and drinking, so he went for counselling in Peterborough, where he initially lived with his aunt. Matthew testified he could not remember exactly how much he paid his aunt for room and board, but he thought it was around $300 a month. After the counselling ended, he stayed in Peterborough in an unsuccessful search for a job. Matthew testified he went into a one-room shared accommodation at $350 a month for the months of November and December 1992. Before Christmas, he was running out of money, so he went home. As he put it, the job situation was hopeless in Peterborough, and it was a waste of money and time to be staying there.

Matthew testified he had received another OSAP grant and Canada Student loan for the fall of 1992. He testified that he would have received more money in January 1993 if he had stayed in school, although he did not know how much. After he left school, he used his grant and loan to pay his expenses in Peterborough.

Matthew's 1992 income tax return was entered as Exhibit #5. It shows that Matthew received a total of $1,295.00 in grants from OSAP for the year. The Tuition and Education Credit Certificate from Loyalist shows that Matthew paid $400.00 for the periods January-April and September 1992. The return also shows a Child Benefit from Canada Pension of $3,336.52 ascribed to Matthew's income. (According to the accountant's report of John Seigel, discussed below, the Child Benefit is available to a disabled contributor's child up to age 25, if the child is in full-time attendance at school.)

Since September 1993 Matthew has been repaying his student loan at $85 a month.

Matthew had more or less run out of money by the time he returned home. His bank statement was put into evidence as Exhibit #4. It shows that in early October 1992 he had a balance of $941.80, and that over the months of October and November $900 were withdrawn. The balance by the end of January 1993 was $3.15.

After Matthew returned home to Campbellford, the household consisted of four people — Mr. and Mrs. Ray, Matthew, and Matthew's younger sister, Tara.

Mrs. Ray testified that she did not immediately ask Matthew for room and board after his return. However, she soon found that the household needed extra money. She told Matthew that he needed to help with the groceries because she could not afford to support him, and she testified that it was on her insistence that Matthew applied for welfare. She thought of the welfare as a stopgap measure, as she assumed he would be going back to school in the fall of 1993. Jane Keeler of the Northumberland County Social Services testified that Matthew's original application for welfare was made on March 8, 1993, and that she interviewed Matthew on March 17. Ms. Keeler noted that Matthew resided with his parents, and that he was going to pay $50 per week for room and board. The monthly figure of $216.50 for room and board (derived from $50 a week) was less than the statutory minimum of $264 allowed for board and lodging. Matthew's welfare benefit came to $314, as a $50 allowance for miscellaneous expenses was added to the budget of those who paid room and board. Ms. Keeler testified that Matthew started receiving welfare benefits, which were terminated after her office received notice of his accident. He received a total of $868.77 for the period March 8-May 31, 1993.

Ms. Keeler testified that the $264 is the minimum statutory amount, and that benefits can be higher (up to a statutory maximum) to allow for higher living expenses.

Ms. Keeler testified that she understood that Matthew's parents had been supporting him. As part of his application, Matthew had signed a form stating that he had depended on his parents since December 1992.

Mrs. Ray testified that, once Matthew started receiving welfare, she simply took $200 as room and board from the $314 cheque the moment he cashed it. She said the money went towards Matthew's food and laundry. Matthew testified that he spent most of the remaining $114 on cigarettes and beer.

After the accident, Mrs. Ray helped with Matthew's application for accident benefits. As part of that effort, she provided Matthew's counsel, Mr. Scheulderman, with a letter dated May 31, 1993, describing the family situation at the time of the accident (Exhibit 3). I reproduce what she wrote to Mr. Scheulderman:

Matthew finished school in October 92, and resided at home — 203 Center Street, Campbellford. Awaiting full time employment, Matthew was receiving Social Service Benefits. He paid room and board while at home and was not dependant on anyone.

Mrs. Ray testified that, within the household, Matthew would help by looking after his own bedroom, stripping and making the bed. He would also help with the supper dishes, and sometimes helped with the gardening. The gardening and lawn cleaning took about 2 hours a week. Mrs. Ray estimated that three out of five working days Matthew prepared supper. She thought the preparation and cleanup took about one and a half hours. Matthew prepared his own breakfast and lunch during the week. He also sometimes did the vacuuming, which took about an hour, although he did not necessarily do it every week. Matthew testified that occasionally he would do "a big Friday cleaning." Aside from that, he estimated he did six or seven hours of work around the house per week.

Mrs. Ray testified that on the weekends, she cooked the supper. She also looked after the laundry, which she estimated took about 16 hours a week. She spent another eight hours weekly on cleaning.

Beth Van Dusen testified that her mother was a "workaholic," and tends to run the household her own way. She testified that, if anything, her mother had underestimated the number of hours a week she spent doing housework.

Mrs. Ray testified that the only monetary support she gave Matthew was to buy the odd package of cigarettes. This did not occur very often, as she could not afford it. Matthew confirmed in his testimony that he received no money from his parents after he returned, other than an "odd pack of smokes."

Mrs. Ray had also prepared a financial statement, which set out her expenses for the period January to December 1992 (Exhibit 2).

Counsel took Mrs. Ray through the statement in some detail. The figure for clothing did not apply to Matthew, as he had bought his own clothing since 1988 (except for Christmas or birthday presents). Mrs. Ray never sent any of Matthew's clothing to the laundry. Other items that did not apply to Matthew: credit card debts; recreation; personal care (Mrs. Ray never bought Matthew's razors or shaving cream, although he shared the shampoo and soap); car operation and auto insurance; life insurance. Such items as the sewage/water/hydro, phone, and cable bills applied to Matthew. At Christmas, Matthew usually received a year's supply of deodorants. Mrs. Ray cut Matthew's hair. As for the drugs and dental care coverage, Matthew was covered only while he was at college.

Mrs. Ray testified that she bought the family groceries, including pop, laundry products, and soap, and that if Matthew wanted something special, he would pick it up himself. Matthew bought his own alcohol, and did not drink his father's alcohol.

Matthew had unrestricted access to all the rooms of the house, and use of the television and the stereo. He could bring a friend in to watch a movie, but it was expected that he would not hold any parties. The only furniture Matthew had ever bought was his double bed in 1990, which he had taken to Peterborough and brought back when he returned. Otherwise, Mr. and Mrs. Ray provided the furniture in the house.

Mrs. Ray testified that she thought the $50 per week for room and board was cheap. She arrived at the figure because it was "nice and round": she did not calculate it out based on expenses. She testified that rents are expensive in Campbellford. As for room and board, she testified that she had heard prices in the range of $60-$75 per week.

Matthew testified that, since he spent most of his money on cigarettes, he lived as cheaply as possible. He estimated he spent about $12 a week on beer; he could spend $1.00 on an evening at the pool hall, by winning "beers" from other pool players. He testified that while he was living on his own in Peterborough he had lived on a few dollars a day as well, spending approximately $60 a week on food and nothing on clothing. He estimated that $20 would have covered his expenses for personal supplies for the period November-December 1992.

The Accountants' Reports

Both Insurers put reports by accountants into evidence. The reports tended to be highly theoretical.

State Farm presented a report by James Forbes of Coopers & Lybrand (Exhibits 6 and 8), and Mr. Forbes testified at the hearing. In his report, Mr. Forbes found that Matthew was principally financially dependent on his parents at the time of the accident.

Some of the assumptions on which Mr. Forbes based his conclusion were incorrect. For instance, Mr. Forbes did not know of the Child Benefit from Canada Pension Plan in the amount of $3,336.52 that Matthew received in 1992.

Mr. Forbes also assumed that the loans Matthew received were "revenue-neutral." That is, he did not consider the loans in assessing whether or not Matthew was principally financially dependent on his parents. This assumption is contrary to the findings of Arbitrator Mackintosh in Najem,⁵where she stated:

The specific purpose of the student loans was to provide the Applicant with the financial resource to pursue his education, when other forms of financial support, including financial support from his parents, were not available. While the student loan carries with it an obligation to repay, this obligation is deferred to a date in the future when the Applicant will no longer be occupied by full-time studies. I find that the student loans should be included in the calculation of the Applicant's financial resources.

I find the reasoning of Arbitrator Mackintosh persuasive. When Matthew was living in Peterborough on his own, he was supporting himself from his Canada Student Loan, not from any monies received from his parents. He would not be considered a dependant of his parents at that point. I find the loans should equally be considered during periods when Matthew was living with his parents.

Mr. Forbes tried to determine whether Matthew was actually dependent on his parents for any cash amount. He concluded that, based on his expenses and the annualized welfare income, Matthew would have suffered an annual deficit of $156. Therefore, he concluded that Matthew was dependent on his parents for at least that annual shortfall of $156. However, the report assumed that Matthew paid annual room and board of $2,600, when in fact Matthew was paying $2,400 per year ($200 per month). This reduction in expenses changes the supposed annual deficit into a slight surplus, rendering the conclusion on this point incorrect.

In the remainder of the report, Mr. Forbes tried to arrive at a value for the room, board and other non-cash items Matthew received from his parents. He created a figure for rent and food and deducted Matthew's monthly payments to arrive at a net value for room and board received from the parents. He then added a number of non-cash items, such as use of the telephone, to the net value to obtain a total value received from the parents. By his calculations, this total exceeded the total amount Matthew received from social assistance, leading to his conclusion that Matthew was principally dependent on his parents and not on the social assistance benefit.

Some of the actual figures used by Mr. Forbes were adjusted during the course of the hearing. Mr. Forbes admitted that his figure for food costs may have been too high, if Matthew did not eat in restaurants, which was the uncontradicted evidence. Counsel for State Farm also admitted in submissions that under non-cash items there should be no amount for clothing and the amount assigned for the telephone was too high.

I find the report to be highly artificial and inconsistent. Mr. Forbes relied on the Statistics Canada publication Family Expenditure in Canada, 1992, for various non-cash items such as costs for personal care, toiletries, and so on, and in particular Table 4 of that publication.⁶ Mr. Forbes did not rely on the figures set out in the financial statement prepared by Mrs. Ray. He disagreed that the actual costs paid by Mrs. Ray would be more appropriate. He testified that he was trying to obtain a "fair market value" that would not depend upon amounts actually paid. Yet when it came to determining the rent value, Mr. Forbes ignored the Statistics Canada figure ($2,742 annually) and tried to rely on rent prices in Campbellford in 1992.

I do not accept the figure Mr. Forbes proposed for the rent value. He submitted that Matthew's room in the Ray house was equivalent to a bachelor apartment. However, Matthew was living in shared accommodations, sharing the kitchen and bathroom and the other common rooms with his family members. I do not find this accommodation equivalent to living in a bachelor apartment. Arbitrator Mackintosh rejected a similar suggestion to the effect that a one-bedroom apartment was equivalent to a room in a parent's house in Najem, and I agree with her reasoning.

Mr. Forbes' reasoning also completely ignores the fact that, had Matthew been living on his own, he would have received more money from social assistance. This highlights the problem with Mr. Forbes' approach: his report attempts to assign values based on a hypothetical situation that does not exist in reality. Mr. Forbes agreed in cross-examination that he was assessing Matthew's costs as if he was living on his own, but only deducting what Matthew actually paid to his parents.

The contrasting report for Wellington, prepared by John Seigel of Price Waterhouse (Exhibit 9), consists mostly of an attack on Mr. Forbes' report. I find the approach taken as artificial as that taken by Mr. Forbes. For example, Mr. Seigel did not allow anything for such items as the telephone expense.

Mr. Seigel also used a different approach from that of Mr. Forbes for determining whether or not the social assistance benefit provided the principal financial resource for Matthew. Once Mr. Seigel determined Matthew's monthly costs — in this case $397 — he simply divided the welfare amount by the figure for the costs to obtain a proportion: $314/$397 equals 79.1%, leading Mr. Seigel to conclude that Matthew's welfare cheque covered about 80% of his costs. However, Mr. Seigel testified that he assumed the entire welfare cheque went to the costs as set out in his calculation. Under cross-examination, he admitted that this calculation is incorrect where, as here, Matthew spent the extra $114 on cigarettes and beer.

Conclusion

I do not agree with the approach suggested by either accountant in this case.

I find it more appropriate to examine the actual expenses paid by the Rays and from which Matthew benefitted, and then to attribute a one-fourth pro-rata share to Matthew. I exclude items Matthew provided for himself, such as alcohol and tobacco, and items he did not share in, such as the use of the car. I have used the figures the accountants did agree on, where possible, such as amounts for personal care supplies and toiletries. Similarly, I have used Mr. Seigel's figures for the food, and as Mr. Jackson agreed that some amount should be put in for household supplies, I have put in half of Mr. Forbes' figure, as well as Mr. Forbes' figure for the laundry and dry cleaning. The result is as follows:

Family (annual)

Family (monthly)

Pro-rata share

Food (per Seigel)

$150.00

Household costs:

Mortgage

$4,680.00

$390.00

$97.50

Taxes

$1,008.64

$84.05

$21.01

Home Insurance

$324.00

$27.00

$6.75

Fuel

$650.00

$54.17

$13.54

Water/sewage/hydro

$2,200.00

$183.33

$45.83

Repairs and maintenance

$300.00

$25.00

$6.25

Subtotal household costs:

$9,162.64

$763.55

$190.89

Miscellaneous

Phone

$780.00

$65.00

$16.25

Cable tv

$234.00

$19.50

$4.88

Drugs, dental care

$490.36

$40.86

$10.22

Personal care (from accountants' reports)

$18.50

Laundry and dry cleaning (from Forbes)

$6.83

Household supplies/cleaning supplies (half of Forbes'figure)

$7.63

Subtotal miscellaneous

$64.30

Total

$405.19

Less: Room and Board reimbursed

($200.00)

Net value received from parents

$205.19

Extras:

Cigarettes

$10.00

Mrs. Ray: 2 hours/week @ $6.85

$59.31

Total including extras

$274.50

Total Value Received from Social Assistance

$314.00

I do not find that any amounts for the automobile should be attributed to Matthew, as he had very little use of it. I have included an amount for the cigarettes and I attributed two extra hours a week to Mrs. Ray for her housekeeping services to Matthew at a minimum-wage level. Even including these extra amounts, the total is less than the total value received from social assistance. Based on the welfare benefit alone, I find that Matthew was not principally financially dependent on his parents at the time of the accident.

In addition, I find that the question of dependance should be examined over an extended period in this context. Matthew may well have been dependent on his parents on his return to the home. However, the fact that the parents could not continue to support him speaks for itself. He was not dependent on his parents in the fall of 1992, when he was living in Peterborough. As for 1992 in total, I find that the loans should be included in Matthew's financial resources. His outside financial resources, which totalled over $580 per month, were greater than the benefit he received from living at home (as he was not paying room and board, the total including extras would be $467.15). Accordingly, I find that Matthew was not principally financially dependent on his parents in 1992. Looking at the family and personal situation over the longer term, I find that Matthew was not a dependant of his parents at the time of the accident.

Expenses

Both counsel for the Insurers agreed that Matthew's expenses should be paid. As State Farm was unsuccessful in this hearing, I find that it is responsible for paying Matthew's expenses of the hearing.

Order

1. Matthew Ray was not a dependant of John Robert Ray on May 7, 1993, and accordingly State Farm is responsible for paying his benefits.

2. State Farm is responsible for paying Matthew Ray's expenses of this hearing.

August 23, 1995

David J. Evans Arbitrator

Date

Footnotes

1. 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.
2. 2Bruce and Eleanor McDonald and State Farm Insurance Companies, March 11, 1993, OIC File No. A-001347.
3. 3Frank Donohue and State Farm Mutual Automobile Insurance Company, August 31, 1994, OIC File No. A-006756; Dianne Raffoul and State Farm Mutual Automobile Insurance Company, September 21, 1994, OIC File A-004476; John R. Palmer and Pilot Insurance Company, January 13, 1995, OIC File No. A-009068.
4. 4Loc. cit.
5. 5Peter Najem and AXA Insurance Company, and Economical Mutual Insurance Company, July 27, 1993, OIC File Nos. A-003115 and A-003116.
6. 6The Table is set out in Schedule D of Mr. Forbes' draft report, Exhibit 8.