Neutral Citation: 1996 ONICDRG 161

OIC A95-000577

ONTARIO INSURANCE COMMISSION

BETWEEN:

GARY JENSEN

Applicant

and

GAN CANADA INSURANCE COMPANY

Insurer

DECISION

Issues:

The Applicant, Gary Jensen, was injured in a motor vehicle accident on January 18, 1992. He applied for and received statutory accident benefits from the Insurer, payable under Ontario Regulation 672.¹ The Insurer terminated the Applicant's weekly income benefits on March 22, 1995. 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. At the outset of the hearing, counsel advised that the Insurer now accepts the Applicant's entitlement to ongoing weekly income benefits after March 22, 1995 under section 12(5)(b) of the Schedule. Counsel also agreed that they will probably be able to settle the outstanding medical and rehabilitation benefit issues. Accordingly, the hearing of the medical and rehabilitation issues is adjourned with the consent of the parties.

The issues in this hearing are:

1. What is the correct amount of the Applicant's weekly income benefit? To decide this issue, I must decide the following issues:

(a) Should the Applicant's gross income in the 52 weeks prior to the accident be averaged over 52 weeks or over the 13 weeks he actually worked?

(b) Is the Insurer entitled to reduce the Applicant's average gross weekly income on account of Canada Pension Plan disability benefits that may be available to him?

2. Is the Applicant entitled to a special award?

3. Is the Insurer entitled to repayment of benefits overpaid?

4. Is the Applicant entitled to his expenses incurred in the proceeding?

The Applicant also claims interest on any amounts owing.

Result:

1. The Applicant is entitled to benefits at the minimum rate of $185.60 per week.

(a) The Applicant's gross income in the 52 weeks prior to the accident should be averaged over 52 weeks.

(b) The Insurer is not entitled to reduce benefits in respect of Canada Pension Plan benefits available to the Applicant.

2. The Applicant is not entitled to a special award.

3. The Insurer is not entitled to a repayment of benefits overpaid.

4. The Applicant is entitled to his expenses incurred in the proceeding.

Hearing:

The hearing was held in North York, Ontario, on June 3, 1996, before me, Nancy Makepeace, Arbitrator. Following the hearing, I received written submissions from the Applicant dated June 6, 1996 and June 28, 1996, and from the Insurer dated June 28, 1996.

Present at the Hearing:

Applicant:

Gary Jensen

Applicant's Representative:

Ava M. Hillier

Barrister and Solicitor

Jimmy Kandaji

Student-at-Law

Insurer's Representative:

Larry J. Kielbowich

Barrister and Solicitor

Insurer's Officer:

Tricia Doyle

Ms. Charlene Purvis, the Applicant's spouse, observed the hearing.

There were two witnesses: the Applicant, and, Ms. Doyle on behalf of the Insurer.

Twenty-two exhibits were filed.

Background:

The Applicant, Gary Jensen, is a 40-year-old welder/fitter. On May 22, 1991, about eight months before the motor vehicle accident, the Applicant's left great toe was crushed when someone dropped a heavy object (a chainfall) on it at work. The Applicant applied for and received workers' compensation total temporary benefits. He did not work again until August 26, 1991, when he returned to work for one week. The Applicant testified that his toe was still sore at that time and he could not walk. He did not return to work again after that one week, and was still on disability leave at the time of the motor vehicle accident.

On January 18, 1992, the Applicant fell off the back of a moving snowmobile. When he stood up, he was struck in the back by another snowmobile. He sustained a number of injuries, the most serious of which were bilateral knee injuries. Three days after the accident, both knees were scoped, and an internal fixation was performed on the right knee. Long casts were put on both legs. The Applicant was discharged from hospital after about ten days. The casts were removed two months later, but the Applicant continued to suffer discomfort and instability in both knees.

On September 11, 1992, further surgery was performed on the right knee to restore its lateral stability. The right knee was operated on again in August and November 1993, with little success. Dr. D. Evans, an orthopaedic specialist who examined the Applicant in March 1994 at the Insurer's request, found that the Applicant had difficulty walking and getting up from a sitting position, and could not do any heavy lifting, prolonged standing, or repetitive bending. He opined that the Applicant had a significant residual bilateral knee disability and that further degenerative changes were likely.

In addition to his knee injuries, the Applicant also sustained a fracture of his right ankle, which has continued to cause him problems. He also has neck and back pain, and suffers from anxiety, depression, mood changes, irritability, loss of impulse control, and a borderline to mild cognitive impairment.

The Applicant's toe injury has also continued to cause him problems. Reconstructive surgery was scheduled for February 1992, but it was postponed as a result of the motor vehicle accident and had not been rescheduled at the time of the hearing.

There is no dispute that the Applicant was employed at the time of the accident. Nor does the Insurer dispute that the Applicant continues to be disabled and entitled to receive weekly income benefits as a result of the motor vehicle accident.

Calculation of the Applicant's Average Gross Weekly Income:

The Insurer initially paid benefits at $185.60 per week pending receipt of income documentation. Once that information was received, the Insurer recalculated the Applicant's benefits. In a letter dated March 27, 1992, Tricia Doyle, the Insurer's O.M.P.P. Claims Supervisor, explained the Insurer's new calculations and enclosed a lump sum payment bringing the Applicant's benefits up to the correct level to that date. The new benefit rate was based on the Employer's Confirmation of Income Form and the Applicant's 1991 income tax return, which established that the Applicant's gross income for 1991 was $9,648. The Insurer averaged this amount over the twelve weeks the Applicant worked between March 1 and May 31, 1991, for an average of $804 per week, 80% of which is $643.20. ²

For the two weeks of January 25 to February 11, 1992, the Applicant received workers' compensation total temporary benefits of $478.78 per week. Accordingly, the Insurer paid benefits of $260.18 per week, deducting $383.02 (which is 80% of $478.78) from $643.20.

On February 12, 1992, the Applicant's worker's compensation benefits were reduced to $239.39 until the Applicant went ahead with the planned surgery on his toe. The Insurer then increased the Applicant's weekly income benefit to $451.69 per week ($643.20 less $191.51, which is 80% of $239.39).

The Applicant's workers' compensation benefits were terminated on December 27, 1992. Accordingly, the Insurer increased the Applicant's weekly benefit to the maximum amount of $600 per week, and continued to pay this amount until March 22, 1995, when benefits were terminated.

In her written submissions filed after the hearing, the Applicant's counsel advised that the Insurer had made a further benefit payment of $14,112.40 shortly after the hearing, bringing the Applicant's benefits up to date at the rate of $185.60 per week.

The Insurer submitted that it should have averaged the Applicant's gross 1991 income over 52 weeks, according to the formula set out in the Vo decision, rather than averaging it over the number of weeks the Applicant actually worked, as set out in the Scavuzzo decision.³ The effect of adopting the Vo approach would be to reduce the Applicant's average gross weekly income to $185.54. Since this is below the minimum of $232 set out in section 12(7)2iii of the Schedule, the Applicant's gross weekly income would be deemed to be $232. This amount would be reduced further on account of workers' compensation benefits received.

A number of arbitration decisions have considered how to calculate benefits where an insured person worked only part of the 4-week or 52-week period before the accident. In McCormick (released October 10, 1991), ⁴and Scavuzzo (released March 18, 1992), Senior Arbitrator Naylor held that the applicant's income should be averaged over the weeks he actually worked. In early 1992, these were the only decisions on point. Ms. Doyle testified that the Insurer relied on these decisions in recalculating the Applicant's benefit entitlement in late March 1992. The Scavuzzo decision was subsequently confirmed on appeal by Director's Delegate Michele Smith (released June 19, 1992).

In subsequent decisions, some arbitrators have taken a different view, starting with Arbitrator Draper in Vo (released October 4, 1993). Arbitrator Draper held that the Schedule unambiguously requires an insured person's pre-accident income to be averaged over 4 weeks or 52 weeks, whichever is more favourable to the insured person. A number of other decisions have adopted this view. ⁵Ms. Doyle testified that the Insurer changed its method of calculating benefits when arbitration decisions revealed a growing consensus in favour of the view put forward in Vo.

The issue dealt with in Scavuzzo and Vo remains an open question, in my view. The Scavuzzo decision was confirmed on appeal, and has been followed in several arbitration decisions.⁶ There have been no subsequent appeal decisions on point, although a decision on the Vo appeal is pending. In Rajbir Singh, I made the following comments about the issue:

Arbitrator Draper held that subsection 12(7)1 was intended to provide "relatively clear rules about entitlement." In his opinion, the plain language of the provision requires an applicant's gross weekly income to be averaged over four weeks or 52 weeks, even if the applicant's income was interrupted during those periods. He held (page 22), "The section does not suggest that the applicant's gross weekly income is to be the most accurate reflection of his or her pre-accident income or anticipated income.

I do not agree that the plain meaning of subsection 12(7) mandates the calculation set out in Vo in all cases. I agree with Senior Arbitrator Naylor that subsection 12(7)1 is unclear and ambiguous. It would seem to apply relatively clearly to a long-time employee who has had no interruptions in service in the year before the accident. However, it does not set out rules for determining the gross weekly income of casual workers, seasonal workers, or workers who have been laid off as a result of disability or economic conditions during the year before the accident.....

In my view, the ambiguous language of subsection 12(7) must be given an interpretation consistent with the underlying legislative intent that weekly income benefits compensate the injured person for roughly 80 per cent of the income lost as a result of the accident. I do not accept that subsection 12(7) was drafted without regard to accuracy. The Schedule is remedial legislation which should be given a broad and liberal interpretation. In my view, subsection 12(7) should be given the interpretation, in each case, which provides for the most accurate assessment of the applicant's pre-accident financial circumstances. It may not be possible to set out a formula for all cases.

In that case, I decided that the work interruption (a vacation break) was a regular part of the self-employed applicant's income cycle and should be reflected in his benefit calculation by averaging his income over 52 weeks. In a subsequent case adopting the same approach, I held that the applicant's income in the year before the accident should be averaged over 52 weeks, not just the 31 weeks he actually worked, on the basis of my finding that the applicant had not been able to return to that job because of his disability arising out of a previous motor vehicle accident.⁷

In his written submissions, the Insurer's counsel submitted that the "pragmatic approach" I adopted in the Singh and Ferrari decisions is incorrect in law. I do not find it necessary to address these submissions because I find that in this case, the Applicant's gross income in the year before the accident should be averaged over 52 weeks for the following reasons.

At the time of the motor vehicle accident, the Applicant had not worked for almost eight months, except for one week at the end of August, 1991. In all, the Applicant worked 13 weeks - a little more than three months - in the year before the motor vehicle accident.

The Applicant's counsel urged me to adopt the Scavuzzo approach in order to recognize the Applicant's pre-accident earning capacity; the Applicant received employment income of $32,182 in 1990, his last year of full employment. Unfortunately, the Schedule does not compensate insured persons for loss of earning capacity, but only for loss of income. ⁸In any event, the medical evidence in this case suggests that by the time of the motor vehicle accident, the Applicant had sustained a significant loss of earning capacity as a result of his workplace accident. The evidence suggests that the Applicant's work-related disability is likely to be long-term, if not permanent.

The Applicant's pre-accident loss of earning capacity was reflected in his financial situation in the year before the accident. Between January 18, 1991 and January 18, 1992, he received $9,062 in unemployment insurance benefits, and about $15,828.22 in workers' compensation benefits,⁹ as well as the $9,648 he earned in income. In total, he received $34,538.22 in the year before the accident, only about a quarter of which was earned income.

A number of arbitration decisions have held - correctly, in my view - that workers' compensation benefits and unemployment insurance benefits are not "income" for the purpose of weekly benefit entitlement.¹⁰ Workers' compensation total temporary benefits have been held to be deductible under section 12(4)(b)(i) of the Schedule, as "payments for loss of income received by ... the insured person under the laws of any jurisdiction...". The Schedule expressly states that unemployment insurance benefits are not deductible. The effect of these provisions is that the Applicant's weekly benefit rate reflects his pre-accident employment income, but not the workers' compensation or unemployment insurance benefits he received in the year before the accident.

The Applicant's workers' compensation benefits were reduced and subsequently terminated because he had postponed surgery on his toe. The Board's Adjudicator implied in her February 1992 letter that benefits would be restored to the full level once the Applicant recovered sufficiently from his car accident to proceed with the surgery. The Applicant has not appealed the termination of workers' compensation benefits, and may still have that option, since there are no time limits on workers' compensation appeals. Moreover, the seriousness of the toe injury may well warrant a non-economic loss and future economic loss award from the Workers' Compensation Board. Restoration of the Applicant's workers' compensation benefits would go some way towards fairly recognizing the relative contribution of the Applicant's workplace injury and motor vehicle accident to his current disability.

In her written submissions, the Applicant's counsel submitted that "where the insurer, having the full benefit of all current arbitration decisions, as well as its own in-house legal department, embarks upon a course of action upon which an insured thereby place reliance, that insurer should be estopped on the basis of fairness and equity" from changing its position on the method of calculating the Applicant's benefits. Although the Applicant undoubtedly expected to continue receiving benefits at the higher rate once he had begun to do so, I received no evidence that he detrimentally relied on the Insurer's adopting the Scavuzzo approach to benefit calculation. Nor did I receive any evidence that the Insurer represented to the Applicant that it would continue to pay on this basis. I am not satisfied that the Insurer is estopped from changing its position on the method of calculating benefits.

For these reasons, I find that the Applicant's gross income of $9,648 in the 52 weeks prior to the accident should be averaged over 52 weeks, with the result that his gross weekly income, for purpose of section 12(7), is the minimum of $232. Accordingly, between January 25 and February 11, 1992, the Applicant was entitled to no weekly benefit. He was entitled to $40.49 per week between February 12 and March 28, 1992 ($232 less $191.51, which is 80% of $239.39), and $185.60 per week after December 27, 1992.

Repayment:

The Applicant's weekly income benefits between January 25, 1992 and March 22, 1995 have been substantially overpaid. The Insurer seeks repayment of the amount overpaid, with interest, by way of set-off against ongoing benefits.

Section 27(1) of the Schedule, provides that a person must repay benefits overpaid "through error or fraud." There is no suggestion of fraud in this case. In Levenson, Senior Arbitrator Naylor discussed the word "error":

The Concise Oxford Dictionary defines "error" as follows:

1. a mistake.

2. the condition of being wrong in conduct or judgement.

3 a wrong opinion or judgement.

4. the amount by which something is incorrect or inaccurate in a calculation or measurement.

There is therefore a number of meanings in ordinary usage that may be attributed to the word used. However, some assistance is provided by the statutory context in which the words appear. Subsection 27(2) and (3) provide for repayment of benefits in circumstances where there is no error" but where the recipient is disqualified from payment or where deductible payments have been received, in which case repayment is required to the extent of the deduction.

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 these comments, which have been followed in numerous arbitration decisions.

In this case, the Insurer changed its position about the method of calculating benefits in accordance with what it saw as a developing consensus in favour of the Vo approach. The Insurer did not suggest that any conduct on the part of the Applicant contributed to the Insurer's initial decision to calculate benefits on the basis of the method adopted in Scavuzzo. I find nothing in these facts to justify a repayment order.

The Insurer also claimed repayment on the ground that the Applicant had been slow to produce documents through the pre-hearing process. I find that section 27 gives an arbitrator power to order repayment of benefits where benefits were overpaid "through" error or fraud. The Insurer in this case drew no connection between the overpayment of benefits and any subsequent production delays. The Insurer admitted that none of the documents it requested and eventually obtained from the Applicant had any bearing on whether it used the Scavuzzo or the Vo approach in calculating the Applicant's benefits. I am not persuaded that any delays on the Applicant's part in producing documents before the hearing support a repayment order.

The Insurer also submitted that it should be entitled to withhold ongoing benefits in order to recoup Canada Pension Plan ("CPP") disability benefits to which the Applicant may be entitled. The Applicant did not dispute that CPP disability benefits received by or available to an insured person are deductible, under section 12(4)(b) of the Schedule, from the amount that is 80 per cent of the insured person's gross weekly pre-accident income.

By letter of July 12, 1995, the Insurer asked the Applicant's counsel to apply for CPP benefits. In response to a follow-up letter, the Applicant's counsel advised that as of December 14, 1995 the Applicant had not applied for CPP benefits. The Applicant testified that he filed his application about three months before the hearing and had not received a decision yet. Section 14(1) of the Schedule provides as follows:

The insurer will pay full benefits under this Part until the insured person receives payments that would reduce the insurer's obligation through the operation of subsection 12(4) or 13(3) if the insured person has applied to receive the payments.

Giving this section its plain and ordinary meaning, I find that if an insured person has applied to receive CPP benefits - and this insured person has applied - then the insurer is required to pay that person's full benefits. If Health and Welfare Canada awards retroactive CPP benefits, the parties may bring before me any dispute about repayment of benefits paid. Section 27(3) of the Schedule requires an insured person to repay to the insurer any benefit overpaid because of any payments received by the person that are deductible from benefits under subsection 12(4) or 13(3) of the Schedule." In contrast to section 27(1) of the Schedule, there is no requirement in section 27(3) that the benefits were overpaid "through error or fraud."

Special award:

The Applicant claimed a special award under section 282(10) of the Insurance Act on the basis that the Insurer unreasonably terminated benefits on March 22, 1995.

The Insurer's Assessment of Claim form, dated April 12, 1995, indicated that section 12(5)(b) benefits were terminated because medicals and test show you can return to some form of employment you are suited for." The form did not indicate what medical reports the Insurer relied on or what jobs the Insurer thought were suitable for the Applicant and within his capabilities. I could not find this information in any of the documents put before me, and I heard no evidence or submissions as to the Insurer's reasons for terminating benefits. The medical experts who have examined the Applicant agree that he is seriously disabled and cannot return to work as a welder/fitter. Some think he is unlikely to return to any form of competitive employment. Others believe he could do sedentary work. However, the Applicant has never done sedentary work, and I heard no evidence to suggest what kind of sedentary work he would be "reasonably suited" for "by education, training or experience." I was unable to identify any report which would justify the Insurer's decision to terminate benefits in March 1995.

The evidence before me indicates that the Insurer did not dispute the method of calculating the Applicant's benefit until it received the January 29, 1996 report of James Forbes, chartered accountant, who averaged the Applicant's pre-accident income over 52 weeks. It is difficult to resist the conclusion that the Insurer took this position in order to justify its earlier decision to terminate benefits. For the reasons outlined above, I agree that the Applicant's pre-accident income should be averaged over 52 weeks. However, arbitration decisions have consistently stated that repayment will not be ordered where the reason for the overpayment of benefits was a legitimate dispute between the applicant and the insurer. Accordingly, I find that the Insurer's termination of benefits in March 1995 was unreasonable.

However, I find that I have no jurisdiction to order a special award because the Insurer agreed to pay ongoing benefits shortly before the hearing, and brought benefits up to date at the correct rate ($185.60 per week) shortly afterwards. Section 282(10) provides for a special award "... in addition to awarding the benefits and interest to which an insured person is entitled... ." Since I award no benefits and interest to the Applicant, I am unable to order a special award.

Expenses:

The Applicant is entitled to be reimbursed for his arbitration expenses incurred, to the limits set out in the Regulation. I remain seized of the issue of expenses, any may be spoken to about any dispute as to the assessment of expenses.

Order:

1. The Insurer will pay the Applicant's ongoing weekly benefits at the minimum rate of $185.60 per week. The Applicant's application for benefits at a higher rate is dismissed. If the Applicant receives Canada Pension Plan disability benefits or further Workers' Compensation benefits, the Insurer may reduce his benefits pursuant to section 12(4)(b)(i) of the Schedule.

2. The Applicant's request for a special award is dismissed.

3. The Insurer's request for repayment of benefits overpaid is dismissed.

4. The Insurer will reimburse the Applicant for his expenses incurred in the proceeding, subject to the limits set out in Regulation 664 (Schedule F to the Dispute Resolution Practice Code). I may be spoken to about any dispute as to the assessment of expenses.

September 24, 1996

Nancy Makepeace

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. 2The Applicant actually worked 13 weeks in the year before the accident, including the week he worked in August. This would reduce his average gross weekly income to $742.15. In any event, for the reasons that follow, I find that the Applicant's average gross weekly income was $185.54.
3. 3Scavuzzo and Canadian Home Assurance Company (March 18, 1992), OIC A-000626 and (June 19, 1992), OIC P-000626. Vo and Maplex General Insurance Company (October 4, 1993), OIC A-002777, under appeal.
4. 4McCormick and Economical Mutual Insurance Company (October 2, 1991), OIC A-000139.
5. 5Mouawad and Alpina Insurance Company (June 30, 1994), OIC A-003226, Vial and OIC (MVACF) (November 14, 1995), OIC A-010539, Khanna and State Farm Mutual Automobile Insurance Company (January 26, 1994), OIC A-001665, Bush and Pilot Insurance Company (April 25, 1994), OIC A-004687, Milevski and State Farm Insurance Company (June 6, 1996), OIC A-010292, Furtado and York Fire & Casualty Insurance Company (June 22, 1995), OIC A-008927, Wessels and CAA Insurance Co. (Ont.) (June 14, 1995), OIC A-013676, Ahmed and Royal Insurance Company (October 13, 1994), OIC A-004411, Tiwana and Allstate Insurance Co. of Canada (February 13, 1996), OIC A-950155 and, Lunn and State Farm Mutual Automobile Insurance Company (August 18, 1995), OIC A-013860. Decisions of General Division: Michel Descarie V. Personal Ins. Co. (1995) 1995 CanLII 7051 (ON CTGD), 23 O.R. (3d) 457, Jerry Youden v. Economical Mutual Ins. Co., (unreported decision), June 6, 1996.
6. 6Alleyne and Royal Insurance Company (February 18, 1993), OIC A-001107, Kotsiakos and State Farm Mutual Automobile Insurance Company (June 21, 1995), OIC A-002354 and, Richardson and Royal Insurance Company (November 3, 1992), OIC A-001141.
7. 7Ferrari and Royal Insurance Company (September 8, 1994), OIC A-007313.
8. 8Loss of Earning Capacity Benefits are, however, provided in the Schedule of Benefits - Accidents on or after January 1, 1994.
9. 930 weeks x $463.77 = $13,913.10 in 1991, plus 4 weeks x $478.78 = $1,915.12 in 1992.
10. 10Mouawad and Alpina Insurance Company (June 30, 1994), OIC A-003226, McCormick and Economical Mutual Insurance Company (October 2, 1991), OIC A-000139, Bush and Pilot Insurance Company (April 25, 1994), OIC A-004687 and Vo and Maplex General Insurance Company (October 4, 1993), OIC A-002777, under appeal.