Neutral Citation: 1995 ONICDRG 2

File No. A-006150

ONTARIO INSURANCE COMMISSION

BETWEEN:

DOUGLAS P. GIBSON

Applicant

and

YORK FIRE & CASUALTY INSURANCE COMPANY

Insurer

DECISION

Issues:

The Applicant, Douglas P. Gibson, was injured in two separate motor vehicle accidents on July 14, 1990 and July 14, 1991. He applied for statutory accident benefits from York Fire & Casualty Insurance Company ("York") in respect of the second accident. York paid weekly income benefits in the amount of $492.31 under section 12 of Ontario Regulation 672¹ until August 3, 1993. York stopped paying weekly income benefits because of an alleged overpayment of $27,043.28. The parties were unable to resolve their disputes through mediation and the Applicant applied for arbitration under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

The issues in this hearing are:

1. Does Mr. Gibson's entitlement to weekly income benefits arise under the provisions of section 12 (Income Benefit) or section 13 (Benefit if No Income) of the Schedule?

2. What rate of weekly income benefit is payable to Mr. Gibson by York?

3. Is York entitled to a repayment of $27,043.28 in respect of weekly income benefits paid to Mr. Gibson under section 12 of the Schedule during the period November 26, 1991 to August 3, 1993, pursuant to section 27(1) of the Schedule?

4. Is Mr. Gibson entitled to interest and expenses?

The issue of whether Mr. Gibson suffers a substantial inability to perform his essential tasks is not before me in this hearing.

Result:

1. Mr. Gibson's entitlement to weekly income benefits arises under the provisions of section 12 of the Schedule.

2. Mr. Gibson is entitled to $185.60 per week under the provisions of section 12(7) 1 .iii and section 12(4) of the Schedule.

3. York is not entitled to a repayment of weekly income benefits paid to Mr. Gibson under section 12 of the Schedule during the period November 26, 1991 to August 3, 1993, pursuant to section 27(1) of the Schedule.

4. Mr. Gibson is entitled to his expenses of the arbitration. No interest is payable to Mr. Gibson.

Hearing:

The hearing was held in North York, Ontario, on May 9, 1994, before me, Janice Mackintosh, arbitrator.

Present at the Hearing:

Applicant:

Douglas P. Gibson

Applicant's Representative:

Frederick Leitch

Barrister and Solicitor

Insurer's Representative:

Stanley C. Tessis

Barrister and Solicitor

Insurer's

Officer:

Ray Shostak

Manager

Witnesses:

Douglas P. Gibson, applicant

Exhibits:

The parties filed an Agreed Statement of Facts and a joint book of relevant documents, containing 22 tabbed items. The exhibits and other documents before the Arbitrator are listed in Schedule A. Authorities referred to by Counsel for the Insurer are listed in Schedule B.

Evidence and Findings:

The following facts are not in dispute:

Mr. Douglas Gibson injured his neck and lower back in a motor vehicle accident on Saturday, July 14, 1990 ("the first accident") (Exhibit 2, Tab 1, medical report dated March 25, 1991). Lloyd's of London ("Lloyd's") was Mr. Gibson's automobile insurer at that time.

At the time of the first accident Mr. Gibson was a self-employed cleaner, carrying on business under the name Clean-Rite. Clean-Rite was a subcontractor of ServiceMaster. ServiceMaster is a franchise operation which provides cleaning services to industries and businesses. Mr. Gibson (Clean-Rite) and ServiceMaster entered into an agreement which required Mr. Gibson to abide by certain terms and conditions to receive industrial and commercial cleaning contracts through ServiceMaster. Mr. Gibson received all of his commercial cleaning work through ServiceMaster. Mr. Gibson has not returned to work since the motor vehicle accident on July 14, 1990.

Lloyd's paid weekly income benefits to Mr. Gibson in the amount of $573.05 under section 12(1) of the Schedule, in connection with his July 1990 accident. This was the only income received by Mr. Gibson in the period July 12, 1990 to July 14, 1991.

Mr. Gibson sustained injuries to his neck and back in a second motor vehicle accident on Sunday, July 14, 1991 ("the second accident") (Exhibit 2, Tab 1, medical reports dated July 23, 1991 and December 10, 1991, and Tab 5, medical report from Dr. Julia Alleyne, dated August 1991). York was Mr. Gibson's automobile insurer at the time of the second accident. The second accident is the subject of this arbitration.

Shortly after the second accident, Mr. Gibson provided a standard form 4 Medical Report completed by Dr. Julia Alleyne on July 23, 1991, to King Adjusters, the independent adjuster acting for York. This medical report described Mr. Gibson's injuries following the second accident and made reference to the first accident (Exhibit 2, Tab 1, Part 3). The independent adjuster provided this form to York on August 14, 1991 (Exhibit 1, Tab 21).

Lloyd's terminated payment of weekly income benefits to Mr. Gibson, in respect of the first accident, on November 25, 1991.

Mr. Gibson submitted an application for statutory accident benefits, in respect of injuries sustained in the second accident, to York. A standard form Application for Accident Benefits dated December 11, 1991, was completed for Mr. Gibson by his wife (Exhibit 2, Tab 1). Mr. Gibson's ability to read and write is limited.

Part 5 of the standard form Application for Accident Benefits is titled "Claimant's Medical Condition as a Result of Accident". Under this section appears the following question:

If you were EMPLOYED at Time of Accident - Do injuries sustained prevent you from performing the essential tasks of your employment? Explain." (emphasis in standard form).

Mrs. Gibson left this question blank.

The very next question under part 5 of the standard form Application asks:

If you were NOT EMPLOYED at Time of Accident - Do you suffer a substantial inability to perform the essential tasks in which you would normally engage? Explain." (emphasis in standard form).

The following answer was provided on behalf of Mr. Gibson: "I was on disability due to a previous accident which happened in July 1990".

Immediately following that answer, Mrs. Gibson checked off "Yes" to the phrase "Were you unable to continue your work/studies/normal activities as a result of the accident?" In answer to the question "If yes, from what date?" she inserted "July 15, 1990" being the date of Mr. Gibson's first accident. No question under part 5 refers to a person who is SELF-EMPLOYED.

Part 6 of the standard form Application is titled "Claimant's Employment". Directly under this title appears the following phrase: "At the time of the accident you were:". This phrase is then followed by several check off boxes, including boxes for "Employed", "Self-employed", and "Unemployed". Mrs. Gibson checked off the box marked "Employed" and wrote the words "sub-contractor" beside the box. Under the heading "Most Recent Employer" Mrs. Gibson inserted the name "ServiceMaster of Mississauga" and provided the name of a contact person, address and telephone number for ServiceMaster of Mississauga. The next question asked is: "Type of employment" followed by several check off boxes, including boxes for "full-time", "part-time", and "self-employed". Mrs. Gibson checked off "full-time". Under the heading "Income from Employment" Mrs. Gibson recorded the Applicant's income as follows:

From Jan 90 - July 12/90 gross income $19,173.30 (28 weeks) Pay varies from month to month. Average $685.00 weekly approximately $35,000 yearly (52 weeks).

Part 6 contains no specific reference to income from self-employment.

In support of his Application for Accident Benefits, Mr. Gibson also provided King Adjusters with a standard form 4 Medical Report completed by Dr. Southey, dated December 10, 1991. This form was forwarded to York by the independent adjuster in January 1992 (Exhibit 2, Tabs 1 and 21). Part 3 of the standard form 4 medical report is titled "Examination/Objective Findings". The following question appears under this part: "When did symptoms first appear?" Dr. Southey notes the following answer: "MVC July 14 1990 not fully recovered when a second accident occurred July 14, 1991" (emphasis contained in original). Dr. Southey reported the duration of the applicant's disability as "unknown".

York paid no weekly income benefits to the Applicant in respect of injuries sustained in the second motor vehicle accident during the period December 1991 to April 1992. In April 1992, York responded to an inquiry from the Market Conduct Branch of the Ontario Insurance Commission concerning Mr. Gibson. By letter dated April 1, 1992, Mr. Ray Shostak, Manager at York, reported to the Commission that while York did not obtain an Employer Confirmation of Wage Loss form, their adjuster "did verbally determine that the insured was earning approximately $32,000.00 per year at the time of the initial loss" (Exhibit 2, Tab 21). There is no indication that a copy of this correspondence was provided to Mr. Gibson.

As a result of their adjuster's verbal inquiries, York issued a cheque to Mr. Gibson, in the amount of $9,846.20 which represented 20 weeks of weekly income benefits calculated under the provisions of section 12 of the Schedule, at the rate of $492.31 per week (ie. $32,000 52 weeks = $615.38 x 80% = $492.31) for the period November 25, 1991 through to April 13, 1992. No interest was included in this lump sum payment (Exhibit 2, Tab 21, letter from Mr. Shostack).

On April 2, 1992, Mr. Shostak, Manager, issued a handwritten memo to file (Exhibit 2, Tab 21) addressed to "Richard" which states in part:

(3) Make sure that King [King Adjusters] gets the file so they can contact Ins'd & get file moving.

(4) We need salary confirmation from employer in writing - disability may have to be adjusted We may owe a 2% a month penalty from 10 days past 11 Dec. to present.

York paid Mr. Gibson weekly income benefits at the rate of $492.31 for 88 weeks until August 3, 1993. York's assessment of claim form dated July 16, 1993, provides the following explanation for the termination of Mr. Gibson's benefits as of August 3, 1993 (Exhibit 3):

Overpayment past 3 year period at $185.00. Payment should have been made at $185.00 per week based on non-qualification under employment section.

Does Section 12 or 13 of the Schedule Apply?

The relevant portions of Section 12 provide:

12-- (1) The insurer will pay with respect to each insured person who sustains physical, psychological or mental injury as a result of an accident a weekly income benefit during the period in which the insured person suffers substantial inability to perform the essential tasks of his or her occupation or employment if the insured person meets the qualifications set out in subsection (2) or (3).

(2) The following qualifications apply to an insured person who claims a weekly benefit under subsection (1):

1. He or she must have been at the time of the accident,

i. employed or self-employed,

ii. on a temporary lay-off, or

iii. entitled to start work within one year under a legitimate offer of employment made before the accident and evidenced in writing.

2. He or she as a result of and within two years of the accident must have suffered a substantial inability to perform the essential tasks of his or her occupation or employment.

(3) A person who was unemployed and was not self-employed at the time of the accident is qualified to receive a weekly benefit under subsection (1) if he or she was employed or self-employed for any 180 days in the twelve-month period before the accident, and if he or she as a result of and within two years of the accident has suffered a substantial inability to perform the essential tasks of the occupation or employment in which he or she spent the most time during the twelve-month period before the accident.

If an applicant qualifies under section 12, their essential tasks are normally determined in relation to their employment or occupation, and their weekly income benefit is calculated on the basis of their gross weekly income under section 12(7) (infra at page 15). If an applicant fails to qualify for benefits under section 12, they may qualify for a basic payment of $185 under section 13.

Mr. Gibson's Application for Accident Benefits clearly states that he was "Not Employed at the time of the accident...because [he] was on disability due to a previous accident which happened in July 1990", that he had been unable to perform his essential tasks since July 1990, and that his last income from employment was earned in the period January 1990 to July 1990, a full year before the second accident. However, Mr. Gibson's application to York also noted that at the time of the second accident, despite his lengthy period of disability, he considered himself employed as a subcontractor, last employed in July 1990, by ServiceMaster of Mississauga West.

In April 1992, York considered the information contained on Mr. Gibson's Application for benefits, made its own inquiries, and decided that Mr. Gibson qualified for benefits under section 12 of the Schedule. York appears to have concluded that, Mr. Gibson retained his status as a subcontractor at the date of the second accident, despite having performed no work and having earned no income from that work in the 52 weeks preceding the accident.

In August 1993, York changed its approach to Mr. Gibson's claim. York now takes the position that Mr. Gibson was neither employed nor self-employed at the date of the second accident or at any time during the 52 weeks preceding the second accident. York maintains that Mr. Gibson does not qualify for benefits under section 12 of the Schedule and should not have been paid weekly income benefits at the rate of $492.31 under section 12. Rather, he should have received $185 weekly under section 13.

York's original approach to Mr. Gibson's claim is supported by decisions of R. Sharma and Co-operators General Insurance Company, February 7, 1994, OIC File No. A-003840 (under appeal) and P. Jolin and Jevco Insurance Company, October 27, 1993, OIC File No. A-002187 (supplementary decision March 31, 1994). These decisions examine the status of an employed person at the time of an accident and conclude that a person may retain the status of an employee under section 12, despite having performed no work and having received no wages for long periods preceding the accident.

In the Sharma decision, Arbitrator Palmer considered whether Mr. Sharma was on a temporary layoff from his employment at the time of the accident under section 12(2)1. ii, or was no longer employed, thereby falling under section 13. At page six of the decision she stated:

I agree that the intention in the minds of the parties at the time of the "temporary lay-off" and their good faith is important. A lay-off by an employer who has no intention of recalling the employee is tantamount to dismissal. Similarly, a laid-off employee who immediately seeks other permanent employment may have no intention of treating the separation as "temporary". The actions of the parties with respect to their employer/employee relationship up to the date of the accident are important. However, I do not believe that the intention of the parties should govern the question of temporality of the lay-off; an objective, reasoned interpretation of the individual circumstances is called for.

After reviewing the particular circumstances of Mr. Sharma's case, Arbitrator Palmer concluded that at the time of the accident he was on "temporary layoff^” and was entitled to receive benefits under section 12 although he had performed no work and had received no income from his employment in the 10 months preceding his accident (ie. in excess of 180 days in the 12 month period preceding the accident).

I considered and accepted Arbitrator Palmer's approach in the decision R.J. Madore and Co-operators General Insurance Company, August 24, 1994, OIC File No. A-004305 (under appeal). After reviewing the objective circumstances of Mr. Madore's situation, I concluded at page six:

I am not persuaded by the Insurer's argument that the state of being employed is limited to those periods when work is done and wages are received.

In my view, individuals may retain their status as employees during periods when they are neither performing work nor earning income due to such reasons as illness or an unpaid leave of absence. I consider that the state of being employed depends as much upon the intentions of the employer and the employee and the expectations between them, as upon the payment of salary in return for specified work.

Counsel for the Insurer submitted that decisions relating to the status of an employed person under section 12 are not applicable to the situation of a self-employed person such as Mr. Gibson. Counsel argued that self-employment ceases as soon as work activity and the income generated by that activity ends. York submitted that Mr. Gibson performed no work and received no revenue from his cleaning activities in the 52 weeks preceding the second accident and was therefore no longer self-employed within the meaning of sections 12(2) or 12(3) of the Schedule at the time of his second accident.

Counsel for the Insurer relied on the case of R. Raickovic and Gore Mutual Insurance Company, May 26, 1993, OIC File No. A-002533, in support of this proposition. In that case, Arbitrator Palmer considered whether Mr. Raickovic continued his status as a self-employed carpenter-renovator at the time of the motor vehicle accident, despite the fact that he had been unable to work and had earned no income from work activity in over 52 weeks preceding the accident. Arbitrator Palmer concluded that Mr. Raickovic was neither employed nor self-employed in the 12 month period before the motor vehicle accident and was therefore ineligible for weekly income benefits under section 12 of the Schedule. Arbitrator Palmer noted that Mr. Raickovic provided little evidence concerning his activities in the 52 weeks preceding the accident. In the absence of other evidence, Arbitrator Palmer relied on the fact that Mr. Raickovic did no work on his own behalf in respect of his business, trade, or profession, and provided no evidence of receipts or income other than Workers' Compensation benefits.

I do not accept Counsel for the Insurer's position that self-employed persons are necessarily subject to a different rule than employees. In my view, the status of being self-employed is not limited to only those periods when work is done and payment in respect of work is received. Individuals may retain their self-employed status during periods when they are neither performing work nor earning income due to such factors as illness or a downturn in the economy. I find that "an objective, reasoned interpretation of the individual circumstances" at the time of the accident is called for not only to determine whether an employee is on permanent or temporary layoff at the time of an accident (Sharma, supra pages 10 and 11), but equally to determine whether a self-employed person has permanently stopped working at the time of the accident (whether it be due to illness, disability, or a downturn in the economy).

Mr. Gibson testified that Clean-Rite had been a sub-contractor of ServiceMaster since 1985. He readily admitted that his personal labour was the whole business, and explained that he could not simply hire someone to replace him due to his personal relationship with ServiceMaster and the requirement that he be bonded. However, he also testified that, after his first accident, he was working hard towards resuming the activities of Clean-Rite as soon as his injuries would permit.

Medical reports of the Personal Injury Clinic confirm this view. The report dated May 31, 1991 (Exhibit 2, Tab 3), records that Mr. Gibson was pursuing an aggressive rehabilitation program, had managed to lose 20 pounds, and was working hard to overcome his disability. The report concludes as follows:

I still feel that there is a high chance that he will eventually return to a pain free state and be capable of resuming his job as a carpet cleaner and I think therefore any decision about retraining should be deferred for at least 6 months.

This opinion is reiterated in a report from the Personal Injury Clinic dated June 4, 1991, approximately one month prior to the second accident (Exhibit 2, Tab 4).

However, by October 15, 1991, approximately three months following the second accident, a report of the Argus Sports Clinic dated October 15, 1991 (Exhibit 2, Tab 6), states:

At this point, I feel that based on his testing and ongoing exercise program, that he would be most suitable for small appliance repair, small engine repair or motorcycle maintenance jobs. I feel that he does need retraining for this and that this should include literary [sic] training in reading and writing skills. I do not feel that he is suitable for going back to a heavy lifting job.

Mr. Gibson stated that he lost all hope of resuming his cleaning business after his medical advisors expressed doubt about his recovery and recommended that he enter vocational retraining to prepare for lighter work. In accordance with their recommendations, he enrolled in courses to upgrade his reading and writing skills. He ultimately sold off approximately $5,000 worth of cleaning equipment he had purchased through ServiceMaster, when it seemed to him that he would not be able to use it again.

The specific terms of the agreement between Mr. Gibson and ServiceMaster were not provided to me. I do not know what, if any, obligation ServiceMaster may have had to Mr. Gibson in the event of extended disability. However, Counsel for the Insurer informed me that following the second accident, ServiceMaster informed York that it no longer considered Clean-Rite one of its sub-contractors due to Mr. Gibson's extended disability.

Although Mr. Gibson stopped cleaning immediately following his injuries from the first accident, an objective review of the facts at the time of the second accident demonstrates that Mr. Gibson was expected to recover from his injuries, was expected to resume the activities of Clean-Rite, and was taking the necessary steps to achieve that realistic goal. Mr. Gibson's uncontroverted evidence was that he could not hire a replacement worker to carry on the activities of Clean-Rite during his disability. In these circumstances, Mr. Gibson did the only thing that he could do to keep Clean-Rite alive -- he pursued rehabilitation to enable him to return to cleaning as soon as possible.

Following the second accident, the medical opinion filed suggests that Mr. Gibson's chances of returning to the activities of Clean-Rite were substantially reduced. Mr. Gibson sold off his cleaning equipment, ServiceMaster stated that it was no longer interested in working with him, and Mr. Gibson began retraining for a different career.

For these reasons I conclude that Mr. Gibson's status as a self-employed cleaning sub-contractor did not end until shortly after the second accident. Therefore, I find that York's original assessment that Mr. Gibson's entitlement to benefits in respect of the second accident arose under section 12 of the Schedule was correct.

Calculation of Weekly Income Benefits under Section 12:

York originally paid weekly income benefits at the rate of $492.31, calculated on the basis of gross weekly income earned by Mr. Gibson up to July 12, 1990, a period in excess of 52 weeks preceding his second accident. Counsel for the Applicant seeks the continuation of weekly income benefits at this rate, although he cited no authority which would justify payment at this rate.

The relevant provisions of Section 12(7) of the Schedule state:

(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.

This section has been considered in several previous decisions of the Commission including R. McCormick and Economical Mutual Insurance Company, October 2, 1991, OIC File No. A-000139, V. Scavuzzo and Canadian Home Assurance Company, March 18, 1992, OIC File No. A-000626 (upheld on appeal, June 19, 1992, OIC File No. P-000626), C. Vo and Maplex General Insurance Company, October 4, 1993, OIC File No. A-002777 (appeal decision on the issue of intervenor status, March 11, 1994, OIC File No. P-002777), J.N. Bush and Pilot Insurance Company, April 25, 1994, OIC File No. A-004687, B. Mouawad and Alpina Insurance Company, Limited, June 30, 1994, OIC File No. A-003226 (under appeal), J. Singh and Kingsway General Insurance Company, January 29, 1993, OIC File No. A-000890 and A. Ferrari and Royal Insurance Company of Canada, September 8, 1994, OIC File No. A-007313 (under appeal). None of these decisions suggest an interpretation of section 12(7) which would include income earned in a period earlier than 52 weeks preceding the accident which gave rise to the claim. The structure and wording of the applicable section, 12(7), persuade me that only income from occupation earned within the stated time periods can be included in the calculation of gross weekly income.

I find that York originally misinterpreted the provisions of section 12(7) and mistakenly relied on income earned by Mr. Gibson in the period January 1990 to July 12, 1990, in respect of the accident which occurred over a year later on July 14, 1991.

As an alternative argument, Counsel for Mr. Gibson submitted that the $573.05 weekly income benefit received from Lloyd's (in respect of the first accident), should be considered income received from employment in the calculation of Mr. Gibson's gross weekly income under section 12(7) of the Schedule, in respect of the second accident (ie. 80% of $573.05 = $458.44). Counsel cited no authority for this proposition but suggested that the principles of justice and fairness demand such an outcome.

York submits that Mr. Gibson received no "income from his occupation or employment" in either the four or 52 weeks preceding the second accident, within the meaning of section 12(7)1 of the Schedule. Counsel for the Insurer argues that the $573.05 weekly income benefit received from Lloyd's in respect of Mr. Gibson's first accident is a "payment for loss of income" and not "income from occupation or employment". Counsel for the Insurer submitted that, at best, Mr. Gibson is entitled to a weekly income benefit of $185.60 payable as a result of the deemed minimum income set out in 12(7) 1 .iii of the Schedule.

Counsel for the Insurer relied upon several previous decisions of the Commission in support of York's position. In F. Nand and State Farm Mutual Automobile Insurance Company, May 28, 1993, OIC File No. A-001893, weekly payments received by Mr. Nand under the provisions of Schedule C of the Insurance Act, R.S.O. 1980, in respect of an earlier car accident, were found by Senior Arbitrator Rotter to be "payments for loss of income". In that case it was accepted that Mr. Nand had not worked and had earned no other income from work activity in the two years between the first and second accidents.

In the case of W. Ntana and Zurich Insurance Company and Allstate Insurance Company of Canada, November 15, 1993, OIC File Nos. A-003279 and A-003280 (under appeal), Mr. Ntana was receiving statutory accident benefits from Allstate in respect of a first car accident when, a little over a year later, he was injured in a second car accident. Mr. Ntana sought weekly income benefits under section 12 from Zurich Insurance Company in respect of his second accident. Senior Arbitrator Rotter concluded that Mr. Ntana maintained his status as an employee at the time of the second accident but had not worked or earned income from employment in the 52 weeks preceding the second accident. She found that his weekly income benefits must be based on the deemed minimum earnings of $232.00, as stipulated under section 12(7) 1 .iii of the Schedule. The statutory accident benefits received from Allstate in respect of the first accident were not considered income from employment in calculating Mr. Ntana's gross weekly income in respect of the second accident.

A similar outcome was reached in the case of Jolin (supra page 10). Mr. Jolin was injured in three accidents over two years. Counsel for Mr. Jolin sought to have Workers' Compensation benefits and statutory automobile insurance accident benefits, from the first two accidents, characterized as "income from employment" in respect of the third accident, for the purpose of calculating Mr. Jolin's gross weekly income under section 12(7) of the Schedule. Counsel for Mr. Jolin argued that these benefits should be characterized as "income from occupation or employment". Senior Arbitrator Rotter rejected this argument and concluded that the legislative scheme clearly distinguishes revenue which is "income from employment" from revenue which is "payment for loss of income" and treats them quite differently. Mr. Jolin's weekly income benefits were calculated on the basis of the deemed minimum income provisions of section 12(7) 1 .iii.

Senior Arbitrator Rotter's approach has been followed by other arbitrators at the Commission. Arbitrator Draper in Vo (supra page 16, under appeal) concluded at page 24:

In my opinion, Unemployment Insurance is not "income from his or her occupation". In addition, section 12(4)(b) makes a distinction between "income from his or her occupation or employment" and "payments for loss of income". Although Unemployment Insurance benefits are treated differently than other payments for loss of income, the section suggests that they are payments for loss of income rather than income from employment.

Arbitrator Draper did not include Unemployment Insurance benefits in the calculation of Mr. Vo's gross weekly income.

I adopted a similar approach in my decision Mouawad (supra page 16, under appeal). I concluded that Unemployment Insurance benefits and Workers' Compensation benefits received by Mr. Mouawad in the 52 weeks preceding his motor vehicle accident were "payments for loss of income" rather than "income from occupation or employment" and I did not include these amounts in the calculation of Mr. Mouawad's gross weekly income under section 12(7) of the Schedule.

Senior Arbitrator Rotter acknowledged that the outcome in the Jolin case (supra at page 10) may appear harsh or inequitable. Other decisions of the Commission have also recognized that the specific provisions and formulas of the Schedule superimposed onto particular fact situations may sometimes lead to anomalous, incongruous or harsh results². The drafters of the Statutory Accident Benefits Schedule - Accidents on or after January 1, 1994, Ontario Regulation 776/93, as amended, enacted under the Insurance Act, R.S.O. 1990, c. I.8, have specifically addressed some of these difficulties and have provided the following provision with respect to disability payments and Unemployment Insurance benefits:

Part II Income Replacement Benefits:

Gross Annual Income

9.--(6) A determination under subsection (1) or (4) of the person's gross weekly income from employment for a period of time shall include temporary disability benefits received in respect of that period and benefits received under the Unemployment Insurance Act (Canada) in respect of the period.

Unfortunately this provision is not available to assist Mr. Gibson in the Schedule which applies to his accident.

I conclude that Mr. Gibson received no "income from his or her occupation or employment" in the 52 weeks preceding the second accident. The maximum weekly income benefit Mr. Gibson is entitled to receive is $185.60 under the provisions of section 12(4) and 12(7) 1 .iii of the Schedule.

Is the Insurer entitled to a repayment under section 27 of the Schedule?

The Insurer paid weekly income benefits under section 12 at the rate of $492.31, for 88 weeks to August 3, 1993, for a total payment of $43,323.28 (88 weeks x $492.31). I have concluded that Mr. Gibson is entitled to weekly income benefits under section 12 at the minimum rate of $185.60 for a total payment of $16,332.80 during that same period (88 weeks x $185.60). The Insurer seeks repayment of the difference (ie. $26,990.48) under section 27(1) of the Schedule, as a result of this error.

The relevant portions of section 27 state:

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.

(2) A person must repay to the insurer any benefit received under sections 12 and 13 that is paid to him or her if the person or the person in respect of whom the payment was made was disqualified from payment under section 17.

(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).

York does not allege fraud under section 27(1). However, Counsel for the Insurer maintains that the wording of section 27(1) is broad enough to trigger a repayment in respect of any error, either of fact or law, regardless of whether the Applicant contributed to the error in any way.

Counsel for the Applicant maintained that it would be unfair in the extreme to order a repayment of benefits in the circumstances of this case and that I should decline to do so.

Many of the decisions of the Commission which order an applicant to repay benefits under section 27(1), include a finding that the applicant contributed in some way to the insurer's error by withholding information, or providing false, misleading, or incomplete information, upon which the insurer relied to its detriment³. However, Counsel for the Insurer relied on decisions of the Commission in which applicants were ordered to repay benefits under section 27(1) as the result of factual or calculation errors as well as new interpretations of the operation of sections of the Schedule⁴.

I prefer the approach taken by Senior Arbitrator Naylor in the decision D.B. Levenson and The General Accident Assurance Company of Canada, February 18, 1992, OIC File No. A-000260 (upheld on appeal on another issue, September 29, 1992, OIC File No. P-000260). Senior Arbitrator Naylor considered the meaning of the phrase "paid through error or fraud" contained in subsection 27(1) and compared it to the somewhat different wording of subsections 27(2) and (3) which contain no requirement for the Insurer to establish error or fraud. Senior Arbitrator Naylor stated at page 28 of her decision:

These provisions suggest that the requirement of "error" in section 27(1) requires more than an error of judgement or "being wrong" on the part of the insurer in paying benefits. Otherwise, the broader wording of Section 27(2) and (3) would be redundant. It is not sufficient therefore to establish merely that an applicant has received benefits to which he or she is subsequently adjudged not to be entitled. To give meaning to the terminology of the section, the stipulation that benefits be paid "through error" in order to be recoverable must require that responsibility for the payment be attributable in some material way to the actions of the applicant.

I agree with the view expressed by Senior Arbitrator Naylor. I conclude that if York is to recover benefits paid to Mr. Gibson "through error", responsibility for the overpayment must be attributable in some material way to the actions of Mr. Gibson.

York alleges that Mr. Gibson contributed to its original error in calculating benefits in several material ways. Firstly, on the Application for Accident Benefits (Exhibit 2, Tab 1), Mr. Gibson referred to himself as a subcontractor, who was employed by ServiceMaster rather than self-employed, which allegedly created some confusion on the part of the Insurer as to how to treat his claim. York originally treated Mr. Gibson as an employed person under section 12, but subsequently decided that he should have been treated as an unemployed person under section 13 at the time of the accident.

I ultimately found that Mr. Gibson was a self-employed person under section 12 at the time of the accident. York states that had it been aware of Mr. Gibson's self-employed status from the beginning, it may have been in the position to deduct "ceasing expenses" under section 12(7)3 of the Schedule.

Mr. Gibson's uncontroverted evidence was that he had no idea how York arrived at his weekly income benefit. He did not know why York paid him a significantly lower weekly amount than his previous insurer Lloyds. He was unaware that York had based the calculation of his income on a yearly figure of $32,000 obtained through its own inquiries, rather than the approximate figure of $35,000, provided in Mr. Gibson's Application for Benefits. He was not aware of the significance of the two small boxes marked "Self-employed" contained under Part 6 of the Application, which are the only references to self-employment on the Application form. He provided no information concerning "ceasing expenses" to York because he was not aware of the concept of "ceasing expenses" and there was no question concerning expenses on the Application form. Mr. Gibson testified that his wife answered the questions on the application form, on his behalf, as best she could and there was no attempt to withhold information from York. Mr. Gibson's evidence was not significantly shaken under cross-examination and I accept it on these points.

In my view, the Application for Accident Benefits form is intended to provide an insurer with a starting point for its assessment of an applicant's claim. The information contained in the Application should reflect an honest attempt by an applicant to respond to the questions asked and should provide an insurer with sufficient information to make additional inquiries where indicated. In this case, Mr. Gibson stated on the Application that, at the time of the second accident, he was not employed, was last employed as a sub-contractor for ServiceMaster and had not worked for over a year prior to the accident in question. On the face of it, these answers invite further inquiry and clarification, by York, of Mr. Gibson's situation at the time of the second accident. York received notice of Mr. Gibson's accident in August 1991 (Exhibit 1, Tab 21). Mr. Gibson's Application for Accident Benefits was received in December 1991. York made its first payment of benefits approximately four months later, in April 1992. York had plenty of time to make sufficient inquiries prior to paying benefits.

The Insurer alleges that the Applicant's failure to check-off the boxes marked "self-employed" is fatal. I do not accept this view. In Part 5 of the Application form the terms "employed" and "employment" appear to be used in the general sense of any occupation or activity giving rise to income. No distinction is made between employment and self-employment under part 5. Part 6 of the Application generally refers to income from employment with no separate heading for income from self-employment. However, there are two small boxes within part 6 which specifically refer to "self-employed". Mr. Gibson interpreted the term "employment" in the general sense and checked off the box marked "employed" but added the words "sub-contractor" which implies self-employment.

In my opinion, the Application Form is intended to aid the Insurer but is not meant to create a trap for unwary or unsophisticated applicants. I find that Mr. Gibson's failure to check-off the boxes marked "self-employed" did not materially contribute to York's overpayment of benefits. As I previously concluded, York's miscalculation was due to its decision to include income from cleaning activity earned by Mr. Gibson in the period January 1990 to July 12, 1990, in its calculation of gross weekly income under section 12(7). This income was earned more than 52 weeks prior to the second accident and was outside the provisions of section 12(7).

York also alleges that Mr. Gibson overstated his actual income from cleaning activity earned in the six month period January 1990 to July 12, 1990, thereby contributing to York's overpayment. The Insurer compared the gross income of $35,000 (estimated over 12 months) contained on Mr. Gibson's Application for Benefits to the gross business income of $17,573.30 declared on his 1990 income tax return (earned in the six months preceding his injury in the first accident) (Exhibit 2, Tab 2). Counsel for the Insurer noted that Mr. Gibson claimed deductible business expenses totalling $7,764.39 on his income tax return, leaving a net taxable income in 1990 of $8,733.05. Counsel suggested that York might have been able to reduce the amount of weekly income benefits payable to Mr. Gibson by the amount of his "business expenses which ceased" under section 12(7)3.

I find that York did not rely on the income information provided in Mr. Gibson's application. York made its own inquiries and instructed its employee, Richard, to obtain written confirmation from ServiceMaster (Exhibit 2, Tab 21). York recognized the need for follow-up with ServiceMaster and with Mr. Gibson, and instructed its employee to contact the adjustor to carry this out. I received no evidence from York to establish whether the recommended follow-up ever took place.

Mr. Gibson struck me as a sincere, unsophisticated, and honest person. I am confident that if York had properly conducted the obvious follow-up invited by Mr. Gibson's responses in the application form, York would have obtained whatever further information it requested. I am reluctant to visit the consequences of York's failure to make reasonable inquiries upon Mr. Gibson.

Whatever Mr. Gibson's gross weekly income, less ceasing expenses, might have been in the period ending July 1990, York made the mistake of including that income in the calculation of gross weekly income under section 12(7) of the Schedule. But for York's mistake, the question of Mr. Gibson's ceasing expenses with Clean-Rite would never have arisen. In these circumstances, I am not prepared to order repayment by Mr. Gibson to York.

Expenses:

In view of the difficulty of some of the issues presented and the partially successful outcome achieved by Mr. Gibson, I am prepared to exercise my jurisdiction to award Mr. Gibson his expenses of the arbitration pursuant to the provisions of section 282(11) of the Insurance Act as prescribed in Ontario Regulation 664, and Schedule 1 of the Dispute Resolution Practice Code.

I remain seized of this matter in the event there is a dispute in regards to the amount of expenses claimed.

Order:

1. Mr. Gibson's entitlement to weekly income benefits arises under the provisions of section 12 of the Schedule.

2. Mr. Gibson is entitled to $185.60 per week under the provisions of section 12(7) 1 .iii and section 12(4) of the Schedule.

3. York is not entitled to a repayment of weekly income benefits paid to Mr. Gibson under section 12 of the Schedule during the period November 26, 1991 to August 3, 1993, pursuant to section 27(1) of the Schedule.

4. Mr. Gibson is entitled to his expenses of the arbitration. No interest is payable to Mr. Gibson.

January 4, 1995

Janice Mackintosh

Arbitrator

Date

SCHEDULE A

Exhibits:

Exhibit 1

Agreed Statement of Facts

Exhibit 2

Arbitration Brief of Documents, prepared by counsel for the Insurer

Tab 1

No-Fault Forms

Application for Accident Benefits dated December 11, 1991

Medical Report dated March 25, 1991

Medical Report (received August 24, 1992)

Medical Report dated July 23, 1991

Medical Report dated December 10, 1991

Tab 2

1990 Tax Return and copies of monthly statements

Tab 3

Report of Dr. Wylde, dated May 31, 1991

Tab 4

Report of Dr. Urovitz, dated June 4, 1991

Tab 5

Report of Dr. Alleyne, dated August 9, 1991

Tab 6

Report of Dr. Alleyne, dated October 15, 1991

Tab 7

Report of Crawford & Company Health and Rehabilitation, dated June 15, 1992

Tab 8

Report of Dr. Goldenberg, dated June 27, 1992

Tab 9

Report of Dr. Alleyne, dated August 4, 1992

Tab 10

Report of Crawford & Company Health and Rehabilitation, dated August 17, 1992

Tab 11

Report of Crawford & Company Health and Rehabilitation, dated October 20, 1992

Tab 12

Report of Crawford & Company Health and Rehabilitation, dated November 6, 1992

Tab 13

Report of Crawford & Company Health and Rehabilitation, dated January 5, 1993

Tab 14

Report of Crawford & Company Health and Rehabilitation, dated February 17, 1993

Tab 15

Report of Crawford & Company Health and Rehabilitation, dated February 18, 1993

Tab 16

Report of Dr. Mascarenhas, dated April 13, 1993

Tab 17

Report of Crawford & Company Health and Rehabilitation, dated June 16, 1993

Tab 18

Report of Crawford & Company Health and Rehabilitation, dated June 19, 1993

Tab 19

Report of Crawford & Company Health and Rehabilitation, dated August 10, 1993

Tab 20

Report of Crawford & Company Health and Rehabilitation, dated September 2, 1993

Tab 21

Letter dated April 1 1992, from York Fire & Casualty Insurance Company to the Ontario Insurance Commission and a handwritten memorandum to file dated April 2, 1992

Tab 22

Report from Aston Associates Limited, dated December 17, 1992

Exhibit 3

Assessment of Claim by Insurer form dated July 16, 1993

Other Documents Before the Arbitrator:

Report of Mediator dated October 15, 1993

Application for Appointment of Arbitrator dated October 20, 1993

Response by Insurer dated January 13, 1994, with attached Schedule A

Letter from pre-hearing arbitrator dated February 17, 1994

Case brief provided by counsel for the Insurer

SCHEDULE B

Cases Referred to by Counsel for Insurer:

Ahmed and Royal Insurance Company of Canada, October 13, 1994, OIC File No. A-004411

Bonitatibus and Wellington Insurance Company, March 16, 1992 and April 8, 1993, OIC File No. A-000082

Bress and State Farm Mutual Automobile Insurance Company, March 23, 1992, OIC File Nos. A-000191 and A-000192

Bush and Pilot Insurance Company, April 25, 1994, OIC File No. A-004687

Calogero and The Co-operators, November 20, 1991, OIC File No. A-000251 (appeal decision, February 13, 1992, OIC File No. P-000251)

Crimmisi and AXA Insurance, November 10, 1993, OIC File No. A-002393

Fanuzzi and Zurich Indemnity Company of Canada, October 7, 1992, OIC File No. A-001436

Ferrari and Royal Insurance Company of Canada, September 8, 1994, OIC File No. A-007313 (under appeal)

Hassan and Kingsway General Insurance Company, November 10, 1993, OIC File No. A-002188 (under appeal)

Jolin and Jevco Insurance Company, October 27, 1993, OIC File No. A-002187 (supplemental decision, March 31, 1994)

Kahkesh and Lloyd's Non Marine Underwriters, March 31, 1992, OIC File No. A-000378 (appeal decision, August 19, 1992, OIC File No. P-000378)

Kahlon and Royal Insurance Company of Canada, June 23, 1993, OIC A-001687

Levenson and The General Accident Assurance Company of Canada, February 18, 1992, OIC File No. A-000260 (upheld on appeal on another issue, September 29, 1992, OIC File No. P-000260)

Madore and Co-operators General Insurance Company, August 24, 1994, OIC File No. A-004305 (under appeal)

McCormick and Economical Mutual Insurance Company, October 2, 1991, OIC File No. A-000139

McNamara and Zurich Insurance Company, April 26, 1994, OIC File No. A-000881 (under appeal)

Mouawad and Alpina Insurance Company, Ltd., June 30, 1994, OIC File No. A-003226 (under appeal)

Nand and State Farm Mutual Automobile Insurance Company, May 28, 1993, OIC File No. A-001893

Ntana and Zurich Insurance Company and Allstate Insurance Company, November 15, 1993, OIC File Nos. A-003279 and A-003280 (under appeal)

Raickovic and Gore Mutual Insurance Company, May 26, 1993, OIC File No. A-002533

Scavuzzo and Canadian Home Assurance Company, May 18, 1992, OIC File No. A-000626 (upheld on appeal, June 19, 1992, OIC File No. P-000626)

Sharma and Co-operators General Insurance Company, February 7, 1994, OIC File No. A-003840 (under appeal)

Singh and Kingsway General Insurance Company, January 29, 1993, OIC File No. A-000890

Singh and Allstate Insurance Company, October 4, 1994, OIC File No. A-000999

Upper and Canadian General Insurance Company, June 3, 1994, OIC File No. A-002855

Vo and Maplex General Insurance Company, October 4, 1993, OIC File No. A-002777, (appeal decision, March 11, 1994, OIC File No. P-002777)

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. 2P. Bonitatibus and Wellington Insurance Company, March 16, 1992 and April 8, 1993 (quantum decision), OIC File No. A-000082; P. Fanuzzi and Zurich Indemnity Company of Canada, October 7, 1992, OIC File No. A-001436; D. and E. Bress and State Farm Mutual Automobile Insurance Company, March 23, 1992, OIC File Nos. A-000191 and A-000192
3. 3S.S. Kahlon and Royal Insurance Company of Canada, June 23, 1993, OIC File No. A-001687; A. Criminisi and AXA Insurance, November 10, 1993, OIC File No. A-002393; S.M. Hassan and Kingsway General Insurance Company, November 10, 1993, OIC File No. A-002188 (under appeal); M.J. Upper and Canadian General Insurance Company, June 3, 1994, OIC File No. A-002855; P. Singh and Allstate Insurance Company, October 4, 1994, OIC File No. A-000999; U.A. Ahmed and Royal Insurance Company of Canada, October 13, 1994, OIC File No. A-004411
4. 4Bonitatibus (supra page 19); V.L. Calogero and The Co-operators, November 21, 1991, OIC File No. A-000251 (appeal decision February 13, 1992, OIC File No. P-000251)