Neutral Citation: 1995 ONICDRG 76
File No. A-002354
ONTARIO INSURANCE COMMISSION
BETWEEN:
PETER KOTSIAKOS
Applicant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Insurer
DECISION
Issues:
The Applicant, Peter Kotsiakos, was injured in a motor vehicle accident on October 1, 1991. He applied for and received statutory accident benefits from the Insurer, payable under Ontario Regulation 6721. Mr. Kotsiakos received weekly income benefits under section 12 of the Schedule until December 19, 1993, when benefits were terminated. The parties were unable to agree on the correct amount of weekly income benefits. Mediation was not successful in resolving the dispute and Mr. Kotsiakos applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
The sole issue in this hearing is:
What is the correct amount of weekly income benefits to which Mr. Kotsiakos is entitled? Specifically, what is the correct method of calculating his weekly income benefits under section 12(7)(i) of the Schedule?
The Applicant also claims his expenses incurred in the hearing.
Result:
The Applicant is entitled to weekly income benefits at the rate of $429.31.
The Applicant is entitled to his expenses incurred in respect of this arbitration.
Hearing:
The hearing was held in North York, Ontario, on October 24, 1994, before me, Asfaw Seife, arbitrator. Written submissions were filed and exchanged by January 18, 1995.
Present at the Hearing:
Applicant:
Peter Kotsiakos
Applicant's
Tony Lafazanis
Representative:
Barrister and Solicitor
Insurer's
Philippa G. Samworth
Representative:
Barrister and Solicitor
Background:
The following is a summary of an Agreed Statement of Facts filed by the parties:
Mr. Kotsiakos was paid weekly income benefits under section 12 of the Schedule in the amount of $185.60 per week from October 8, 1991 until May 23, 1992.
After having proceeded through mediation, the amount of weekly income benefits was adjusted so that Mr. Kotsiakos was paid weekly income benefits in the amount of $308.52 from October 8, 1991 to December 19, 1993. This figure was based on Mr. Kotsiakos' average income from employment for the 52 weeks preceding the accident, excluding the weeks that were not worked.
Mr. Kotsiakos' earning history for the year prior to the motor vehicle accident is as follows:
a. Canada Post - October 14, 1990 to December 29, 1990 - 11 weeks earning a total of $4,060.65;
b. Part-time employment at Statistics Canada - July 25, 1991 to August 9, 1991 - 2.143 weeks, earning a total of $822.51;
c. Mr. Submarine - full-time employment commencing on September 24, 1991- one week, earning a total of $536.64.
- Based on the above earnings, the following are the relevant calculations with respect to the quantum of Mr. Kotsiakos' weekly income benefits under section 12.
Calculation Excluding Weeks Not Worked
a.80 per cent of his average gross income for the 52 weeks preceding the accident is $308.52;
b.80 per cent of his average gross income for the four weeks preceding the accident is $429.31.
In the above situation Mr. Kotsiakos would be entitled to $429.31 per week.
Calculation Including Weeks Not Worked.
a. 80 per cent of his average gross income for the 52 weeks preceding the accident is $83.06;
b. 80 per cent of his average gross income for the four weeks preceding the accident is $107.33 [sic].
In the above situation, Mr. Kotsiakos would be entitled to the minimum of $185.60 per week, as originally paid by State Farm.
HOW SHOULD MR. KOTSIAKOS' INCOME BE AVERAGED?
Section 12(7) of the Schedule sets out the rules for calculating a person's gross weekly income as follows:
12(7) The following rules apply to the calculation of gross weekly income:
- 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.
Mr. Kotsiakos has designated the four weeks preceding the accident for the purpose of calculating the amount of his weekly income benefits.
The parties disagree on the method of calculation of gross weekly income under section 12(7) 1 (ii).
On behalf of Mr. Kotsiakos, Mr. Lafazanis submits that the appropriate method to calculate Mr. Kotsiakos' weekly income benefits under section 12(7) is to include only those weeks during the four weeks preceding the accident that Mr. Kotsiakos was actually employed. Ms. Samworth submits that, Mr. Kotsiakos' income must be averaged over the full four weeks.
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 preceding the accident. Arbitrators have taken different approaches to this issue. In some cases, income has been averaged over the number of weeks the applicant actually worked. In other cases, income has been averaged over the entire four or 52 week period.
In Ralph McCormick and Economical Mutual Insurance Company, October 2, 1991, OIC File No. A-000139, Senior Arbitrator Naylor found that section 12(7)1 was capable of being read in two different ways:
gross weekly income from an applicant's occupation or employment averaged over the four weeks or the fifty-two weeks preceding the automobile accident, or
the average of the gross weekly income from an applicant's occupation or employment within the four weeks or the fifty-two weeks preceding the automobile accident.
Mr. McCormick had stopped working approximately three months before his automobile accident due to a work-related injury. During the period that he was not working, he collected unemployment insurance benefits, which were later replaced by workers' compensation benefits.
Senior Arbitrator Naylor concluded that Mr. McCormick's income should be averaged over the period that he actually worked because this approach provided a more accurate reflection of his employment income.
In Vincenzo Scavuzzo and Canadian Home Assurance Company, March 18, 1992, OIC File No. A-000626, the applicant was working at the time of the accident, after a period of unemployment. In this decision, Senior Arbitrator Susan Naylor restated the view she had expressed in Ralph McCormick. This decision was appealed to the Director of Arbitration.
On appeal in Scavuzzo, the Director's delegate found that the wording of section 12(7) 1.i and 12(7) 1.ii is ambiguous and capable of the two interpretations described above. She concluded that it was appropriate to include in the average weekly income from employment only those weeks during the four or 52 weeks that the applicant was employed.
In Chuong Vo and Maplex General Insurance Company, October 4, 1993, OIC File No. A-002777, Arbitrator David Draper did not follow the interpretation in McCormick and Scavuzzo. In the 52 weeks preceding the accident, Mr. Vo worked for the first 33 weeks. He then received unemployment insurance benefits for about seven months. He was still unemployed at the time of the accident, looking for a job.
Arbitrator Draper stated that 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 stated that section 12(7)1 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. This decision is under appeal.
In Baraket Mouawad and Alpina Insurance Company, June 30, 1994, OIC File No. A-003226, Arbitrator Janice Mackintosh followed the Vo approach. In Joseph N. Bush and Pilot Insurance Company, April 25, 1994, OIC File No. A-004687, Arbitrator K.J. Palmer agreed with Arbitrator Draper's reasoning in Vo.
In Rajbir Singh and Wellington Insurance Company, June 24, 1994, OIC File No. A-004139, Arbitrator Nancy Makepeace stated that the plain meaning of subsection 12(7) does not mandate the calculation set out in Vo in all cases. She agreed with Senior Arbitrator Naylor that subsection 12(7)1 is unclear and ambiguous. However, she was of the view that it may not be possible to set out an appropriate formula for all cases and that section 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.
Mr. Singh was a self-employed taxi driver. Arbitrator Makepeace found that 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 because Mr. Singh had taken a vacation during the 52 week period preceding the accident in order to spend time with his parents, who were visiting. She found that a yearly vacation is an expected and regular part of the work cycle. This 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 entire year. She stated that a self-employed person is responsible for making his or her own plans for continuing the income stream over the vacation period.
In Antonio Ferrari and Royal Insurance Company of Canada, September 8, 1994, OIC File No. A-007313, Arbitrator Makepeace restated her views first expressed in Singh that section 12(7) is ambiguous and must be interpreted in a way which provides the more accurate reflection of the applicant's pre-accident income.
Submissions:
On behalf of State Farm, Ms. Samworth relies on the Vo line of decisions (Bush and Mouawad). She disagrees with the interpretation accorded to section 12(7) in McCormick and Scavuzzo, as well as the approach in Ferrari and Singh. She submits that the words of section 12(7) are clear and create a procedure for calculating benefits that is consistent with the legislative intent behind a universal no-fault benefit system designed to provide quick and regular payment of loss of income benefits.
With regard to the individualized approach suggested in Ferrari and Singh, Ms. Samworth submitted that when legislation is created that is to apply universally, the concept of absolute fairness to each individual, in other words, individualized treatment, must to some extent give way to universality of approach. She submitted that the legislation requires that each insured be treated equally and that the same rules apply in each and every case.
Ms. Samworth argued that section 12(7)(1) 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. Rather, gross weekly income is simply deemed to be the greatest of either paragraphs 12(7)1.i, ii, or $232.00. The ordinary meaning of section 12(7)1 is that the applicant's average gross weekly income is to be calculated for two periods, four weeks or 52 weeks depending on which results in a more favourable result to the insured. She submitted this is the only allowance for an individualized approach in this universal rule.
On behalf of Mr. Kotsiakos, Mr. Lafazanis submitted that section 12(7) 1.ii is not ambiguous and that "gross weekly income from his or her occupation or employment" means gross income from the weeks employed. He argued that had the words "from his or her occupation or employment" not been included in section 12(7) 1.ii, a different interpretation might be possible.
Mr. Lafazanis submitted that if I find that the section in question is ambiguous, the ambiguity should be decided in favour of the insured, and the interpretation in McCormick and Scavuzzo should be followed.
Mr. Lafazanis argued that the Vo decision distinguishes McCormick and Scavuzzo on the basis that the insured was not working at the time of the accident, and as a minimum, that is a reason to distinguish the Vo line of decisions from the facts of this case.
Mr. Lafazanis agreed with the insurer that to the extent possible, the same results should apply in each and every case; however, he submits it is impossible to avoid some individuality in decision-making as the legislation does not deal with every possible scenario. Alluding to the provisions of section 12(2) 1.iii and 12(7)2, he submitted that Mr. Kotsiakos should not be in a worse position because he started his employment just prior to the accident than if he was to start one day after the accident.
Mr. Lafazanis referred to the state of the law before June 22, 1990 (the date when Bill 68 came into effect) and submitted that if Mr. Kotsiakos had been injured before June 22, 1990, his gross weekly income from employment would have been $536.64, the weekly amount he was earning at the time of the accident, whether he started one week, one day, or one month before the accident. He submitted that the language of section 12(7) is very similar to the pre-Bill 68 language and that without extremely clear direction from the legislation to interpret the language differently, interpretation from pre-Bill 68 should be followed.
He argued that under the old legislation average earnings over a longer period of time are relevant only if they are higher than the earnings just prior to the accident.
Findings:
I agree with the view of Senior Arbitrator Naylor, Arbitrator Makepeace and the Director's Delegate that section 12(7) 1.ii is ambiguous and capable of the two interpretations outlined above. The fact that different arbitrators have ascribed different meanings to the wording of the section is, in my view, a good indication that its "natural or ordinary" meaning is sufficiently ambiguous to require interpretation.
As the Director's Delegate stated in the Scavuzzo appeal, the legislation has restricted an insured's right to sue for damages. The Schedule in turn provides a more generous scheme of weekly income benefits than was provided under prior legislation.
In McCormick, Senior Arbitrator Naylor stated the purpose of weekly income benefits under the Schedule as follows:
Income benefits are intended to compensate for the financial effects of an 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.
I agree with this conclusion.
While I have not followed Arbitrator Draper's interpretation of the meaning of section 12(7)(1) in Vo, I agree with his general statement that:
Ontario's no-fault system uses the No-Fault Benefits Schedule in place of the individualized determination of damages that is required in a tort-based system. Benefits are to be paid according to the Schedule, whether or not the injured person was at fault. It appears that the intention was to encourage the prompt payment of benefits by providing relatively clear rules about entitlement. The cost of this approach is that it necessarily includes an element of arbitrariness, which may work to the applicant's advantage or disadvantage.
It has been stated in a number of arbitration decisions that the Schedule is remedial legislation and therefore must be construed in the manner that best serves the purpose of the legislation. One of the purposes of the Schedule is to provide fair, adequate and speedy compensation for loss of income from employment resulting from an automobile accident. Weekly income benefits are intended to compensate insured persons who, as a result of a motor vehicle accident, suffer from a substantial inability to perform the essential tasks of their pre-accident employment or occupation. Therefore, the ambiguous language of subsection 12(7) must be construed in a manner consistent with this underlying legislative intent.
In my view, the objectives of the legislation are best served by calculating benefits based on the Applicant's average earnings over the period of time that he/she was in fact working, because this calculation better reflects the loss he/she sustained as a result of the accident.
It was agreed by both parties that had Mr. Kotsiakos been unemployed at the time of the accident but under a contract of employment to start at a later date, the Schedule would allow him weekly income benefits based on the amount payable under the contract, subject to the qualifications and limits provided in section 12(2) 1.iii and 12(7)2. Given the legislative intent discussed above, I am unable to discern any rationale for according different treatments to what are virtually identical situations, save for the extraneous intervention of the accident.
Therefore, I find that Mr. Kotsiakos' average gross weekly income from employment is $536.64, his earnings for one week of employment during the four weeks preceding the accident. Based on this, he is entitled to weekly benefits in the amount of $429.31.
Order:
The Applicant is entitled to weekly income benefits at the rate of $429.31.
The Applicant is entitled to his expenses incurred in respect of this arbitration.
June 21, 1995
Asfaw Seife Arbitrator
Date