Neutral Citation: 1995 ONICDRG 86
File No. A-008869
ONTARIO INSURANCE COMMISSION
BETWEEN:
WILLIAM ARENDS
Applicant
and
ZURICH INSURANCE COMPANY
Insurer
DECISION
Issues:
The Applicant, William Arends, was injured in a motor vehicle accident on December 18, 1992. He subsequently applied for weekly income benefits from the Insurer, Zurich Insurance Company, payable under Ontario Regulation 6721. The Insurer paid weekly income benefits for the period from September 1, 1993 to February 1, 1994, but refused to pay further benefits, on the basis that Mr. Arends' post-accident income was so high as to disentitle him from further benefits. 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:
Is Mr. Arends entitled to any weekly income benefits, in light of his post-accident income, and if so, in what amount?
Was Mr. Arends overpaid, and if so, what is the amount of the overpayment?
Mr. Arends also claims interest on any amounts owing, and his expenses incurred in the hearing.
Result:
Mr. Arends' post-accident income was in excess of the benefits that he would have otherwise been entitled to, except for the period from September 1, 1993 to February 1, 1994, when he was paid the appropriate amount by the Insurer.
In light of my findings above, there was no overpayment.
The Applicant is entitled to his expenses in the proceeding.
Hearing:
The hearing was held in Chatham, Ontario, on June 12, 1995, before me, M. Guy Jones, arbitrator.
Present at the Hearing:
Applicant: William Arends
Applicant's Representative: James E. S. Allin Barrister and Solicitor
Insurer's Representative: Ian M. Boundy Barrister and Solicitor
Proceedings recorded by: Donna Peachey Reporter
Witnesses: William Arends, the Applicant Shirley Arends David Wheeler Jim Hoare
Exhibits:
Seven exhibits were filed with the arbitrator.
Entitlement to Weekly Income Benefits:
Background:
The Applicant, Mr. William Arends, was involved in a motor vehicle accident on December 18, 1992. As a result of the accident, he suffered a tear to his right rotator cuff. Unfortunately the injury did not respond to conservative treatment, and surgery was performed in the fall of 1993. This resulted in the Applicant being, in essence, totally off work from September 1, 1993 through February 1, 1994, during which time the Insurer paid weekly income benefits.
Prior to the accident, Mr. Arends and his wife, Shirley, ran Arends Enterprises and had done so for many years. While this business engaged in a number of different activities, it was primarily involved in the following:
- auto wrecking and metal recycling
- purchase, repair and resale/leasing of used motor vehicles
- snow removal
- moving sand, et cetera, at a foundry
During the hearing, counsel for the Insurer conceded that the Applicant would be entitled to $600 per week in weekly income benefits, subject to a credit for post-accident income.
The evidence of Mr. Arends, Mrs. Arends, and one of their employees, Mr. David Wheeler, was all essentially consistent. I found them all to be honest, forthright and credible witnesses.
All of the witnesses who testified on the point indicated that prior to the accident, Mr. Arends was involved in all aspects of the business. This varied from heavy physical labour, including carrying transmissions, hooking-up and towing cars, and the like, to the light administrative work involved in the business. This included such things as preparing receipts, dealing with personnel issues, and soliciting business.
Prior to the accident, Mrs. Arends' role was limited to bookkeeping and banking, a chore which took her approximately nine to ten hours per week spread over three days a week.
The medical evidence submitted at the hearing clearly demonstrated that Mr. Arends is no longer able to do the heavy lifting, such as lifting transmissions and hooking up vehicles for towing. On the other hand, the medical evidence was also clear that he is capable of doing lighter administrative duties such as dealing with personnel matters, developing business and speaking with clients.
It was the uncontradicted evidence of the witnesses, however, that Mrs. Arends now runs the business, and she has largely taken over that role from Mr. Arends. She now deals with personnel issues, ensures that the employees are doing their work, responds to inquiries from the clients, sends out bills and so on. In addition to this, she continues to do the bookkeeping and banking that she did prior to the accident.
Mr. Arends freely admitted on cross-examination that there was no physical reason why he could not do the parts of the job that his wife is now doing, other than the bookkeeping and banking which she did before the accident. The heavier aspects of the job, which he is not presently doing are now performed by other employees. Apparently Mr. Arends now spends his time at work largely inspecting the stock and so on.
Post-Accident Income - Analysis and Conclusions
Prior to the accident, Mr. Arends was essentially self-employed, working in a partnership with his wife.
Accordingly, he would be entitled to weekly income benefits pursuant to section 12(1) of the Schedule. The actual amount of the benefit is, of course, determined by the operation of section 12(4) after taking into account business expenses which cease pursuant to section 12(7)3.
The evidence submitted at the hearing indicated that the Applicant's income would be based on the 52 weeks prior to the accident. In light of my eventual findings in this matter, it will not be necessary to analyze in detail the actual numbers involved.
Ceasing Expenses:
Because the business continued on after the accident, and indeed the profit actually increased, there were no actual ceasing expenses. Mr. Hoare, a chartered accountant who testified on behalf of the Insurer, took the position that certain expenses should be deemed to have ceased. The Insurer's counsel referred to these as "variable" expenses and suggested that in order to arrive at an appropriate income figure, it was necessary to treat these variable expenses as though they had to some extent ceased.
Arbitrator Sampliner, in Adozinda Oliveira and Zurich Insurance Company and The Personal Insurance Company, April 21, 1995, OIC File No. A-002691, dealt with a somewhat similar situation. In that case, Mrs. Oliveira was injured in a motor vehicle accident. Her husband worked hard to make up for her absence from the farm and also hired some extra labourers to operate the farm. The insurer in that case attempted to deem certain variable expenses as ceasing expenses for the purposes of the Schedule. Arbitrator Sampliner rejected this approach, and indicated that if the expenses continued after the accident, they are not to be considered ceasing expenses. I am in total agreement with his view on this point.
Post-Accident Income:
Section 15 of the Schedule states:
The insurer may deduct from any benefit payable under this part 80 per cent of any income received or available from any occupation or employment subsequent to the accident.
Counsel for Mr. Arends argued that the only income that should be deducted from any weekly income benefit payable was that which was properly attributable to Mr. Arends' work after the accident. In effect, he urged that an approach be adopted similar to that proposed by the Insurer's accountant, Mr. Hoare, in his report of September 27, 1994 (exhibit 6). In that report, Mr. Hoare questioned the 50/50 split of income that Mr. and Mrs. Arends adopted for income tax purposes, both prior to and after the accident. Mr. Hoare submitted that since Mrs. Arends was not a key person in the operation of the business before the accident, it was improper to allocate 50 per cent of income, for OMPP purposes, to her. Rather, he suggested that a notional salary payment be attributed to the work which she did. Mr. Hoare suggested seven dollars per hour for 40 hours per week which would amount to $14,560 per year. This was based on the assumption that Mrs. Arends worked a 40 hour week. When the evidence showed that she worked only approximately ten hours per week before the accident, Mr. Hoare proposed that the same "attribution" approach be used, allocating the remaining income to Mr. Arends.
It is clear that Mrs. Arends largely took over the operation of the business after the accident. As indicated above, she essentially did everything Mr. Arends was doing before the accident, except for the heavy labour, which was done by other male employees.
In light of this evidence, counsel for Mr. Arends now submits that a similar approach to that proposed by Mr. Hoare be applied when considering how much of the business earnings are "available" to Mr. Arends as post-accident income.
Arbitrator Sampliner, in Oliveira, noted that both the applicant and her husband shared equal portions of the family farm's post-accident income on their income tax returns. Mrs. Oliveira claimed that because she was no longer able to perform her former labour, the income was not "earned" by her. Accordingly, she argued that the income was not "available" to her within the meaning of section 15. Arbitrator Sampliner stated:
The word "available" is a broad term. In my opinion, if the insured person has access to the funds, even as an investor/owner, the net income is "available" within the meaning of section 15 of the Schedule"
Arbitrator Sampliner went on to hold that half the net post-accident income was "available" to Mrs. Oliveira.
On the facts of the case before me, it is unnecessary for me to decide if I agree with Arbitrator Sampliner's position. In the present matter, it is clear that the respective roles and duties of Mr. and Mrs. Arends have changed. However these changes have not been caused by the injuries Mr. Arends suffered in the motor vehicle accident. As indicated above, the evidence is that Mr. Arends is quite capable of performing all of the duties which Mrs. Arends has assumed since the accident. The decision that Mrs. Arends take over the operation of the business was essentially a lifestyle decision, and not based on the physical injuries suffered by Mr. Arends in the accident. Accordingly, I am not prepared to change the allocation of income from what it was before the accident. In light of this, and in light of the fact that the business made a larger profit subsequent to the accident than it had before, the post-accident income is greater than the weekly income benefit otherwise payable.
The only exception occurred during the period from September 1, 1993 to February 1, 1994, when Mr. Arends was undergoing and recovering from surgery. The Insurer paid benefits during that time period and accordingly no further benefits are owing.
Expenses:
Mr. Arends seeks an award of expenses incurred in the arbitration proceeding. An award for expenses may be made under section 282(11) of the Act which provides as follows:
The arbitrator may award to the insured person such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations to the maximum set out in the regulations.
In accordance with the principles set out by Senior Arbitrator Naylor in Ralph McCormick and Economical Mutual Insurance Company, October 2, 1991, OIC File No. A-000139, I find it appropriate to exercise my discretion to award Mr. Arends his expenses incurred in the proceeding. I remained seized of the issue of expenses in the event that the parties are unable to agree on the amount owing.
Order:
The Applicant is not entitled to any additional weekly income benefits in light of his post-accident income.
The Insurer is not entitled to an overpayment.
The Applicant is entitled to his expenses incurred in respect to the arbitration.
June 30, 1995
M. Guy Jones Arbitrator
Date