Neutral Citation: 1996 ONICDRG 22

File No.: A-011358

ONTARIO INSURANCE COMMISSION

BETWEEN:

JOSEF DOUGLAS SEBASTIAN

Applicant

and

CANADIAN SURETY COMPANY

Insurer

DECISION

Issues:

The Applicant, Josef Douglas Sebastian, was injured in a motor vehicle accident on July 22, 1993. He applied for statutory accident benefits from Canadian Surety Company payable under Ontario Regulation 672¹.

Mr. Sebastian alleges that he is entitled to receive weekly income benefits in the amount of $600.00 per week from July 29, 1993 onwards. He has been receiving $185.60 per week from July 29, 1993. Mr. Sebastian also seeks payment of interest on any amounts owing from July 29, 1993 and his expenses of the proceeding.

Canadian Surety Company ("Canadian") submits that Mr. Sebastian is entitled to receive weekly income benefits at the minimum amount of $185.60. In addition, if a benefit is found owing, Canadian denies that interest is due and payable from July 29, 1993.

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. What is the amount of weekly income benefit to which Mr. Sebastian is entitled under section 12 of the Schedule?

2. If there is a further weekly income benefit owing to Mr. Sebastian, when does the interest start to run?

Result:

1. Mr. Sebastian is entitled to receive weekly income benefits in the amount of $550.52 per week from July 29, 1993 onwards.

2. Mr. Sebastian is entitled to receive interest on the amounts outstanding from June 8, 1994 according to the provisions of section 24 of the Schedule.

3. Mr. Sebastian is entitled to receive his expenses of this proceeding.

Hearing:

The hearing was held in Waterloo, Ontario, on November 15 and 16, 1995, before me, Fern Kirsch, Arbitrator.

Present at the Hearing:

Applicant:

Josef Douglas Sebastian

Applicant's

Darrell N. Hawreliak

Representative:

Barrister and Solicitor

Insurer's

Edmund Kent

Representative:

Barrister and Solicitor

Witnesses:

Josef Douglas Sebastian

Linda Sebastian

Exhibits:

17 Exhibits were filed in this proceeding, and are listed in Schedule A. In addition, one exhibit was entered by Mr. Hawreliak during submissions.

Other material before the Arbitrator:

Application for Arbitration dated May 10, 1995

Response of Insurer dated July 10, 1995

Report of the Mediator dated September 9, 1994

Pre-hearing Letter dated October 30, 1995

Background:

Mr. Sebastian is 56 years of age and resides with his wife, Linda Sebastian. He was involved in a motor vehicle accident on July 22, 1993. He received weekly income benefits under section 12 of the Schedule from July 29, 1993 onwards in the sum of $185.60 per week.

At the time of the accident Mr. Sebastian was self-employed as a ceramic tile setter. He did not keep accurate records of his income during the year prior to the accident. After the accident he reconstructed invoices showing the income he allegedly received from July 22, 1992 until July 22, 1993 being the year prior to the accident.

Mr. Sebastian submits that he is entitled to receive weekly income benefits of $600.00 per week under section 12(4) of the Schedule.

Canadian submits that the reconstructed invoices are not reliable or legitimate. They question Mr. Sebastian, and claim he is entitled to receive the minimum amount of $185.60 per week as weekly income benefit.

The Law:

Weekly income benefits are based on 80 per cent of an applicant's gross weekly income from employment or occupation, up to the limits set out under section 12(4) of the Schedule. The gross weekly income is determined in accordance with the rules set out in section 12(7).

Section 12(7) provides that an applicant's gross weekly income from his or her occupation or employment is deemed to be the greatest of:

1. his or her average gross weekly income for the four weeks preceding the accident; or

2. his or her average gross weekly income for the 52 weeks preceding the accident; or

3. $232.00.

In Singh², with which I agree, Senior Arbitrator Frederika M. Rotter stated:

The Applicant bears the onus of proving his gross weekly income. That onus can only be discharged through reliable and credible documentation of the Applicant's earnings and expenses.

Evidence and Findings:

Mr. Sebastian has chosen to base the calculation of his gross weekly income on the average for the 52 weeks preceding the accident.

Mr. Sebastian testified that at the time of the accident he was self-employed as a ceramic tile setter. I found him to be unsophisticated in financial matters. He stated on several occasions, that he left money matters to his wife and accountants, initially Mr. Preddie and then Mr. Count. Nevertheless, I found his testimony believable despite his lack of sophistication for the following reasons.

Mr. Sebastian testified that he generally worked on a "cash basis." He stated that he rarely provided his customers with an invoice of work performed by him unless he was asked for one. This was confirmed by Mrs. Sebastian who testified that her husband was "sloppy" in this regard. Mr. Sebastian clearly did not have an understanding of records that he should have maintained as a self-employed person. In fact, the only business records that Mr. Sebastian retained were invoices of his expenses.

After the accident, Mr. Sebastian applied for weekly income benefits from Canadian. Canadian advised him that they required evidence of his earnings for the period prior to the accident. Due to Mr. Sebastian's poor record keeping, this request posed a problem for him. He contacted Russell Preddie, and later Mr. Count, accountants, for assistance.

Mrs. Sebastian created two ledger books at the direction of Mr. Preddie, which Mr. Preddie, and later Mr. Count referred to in order to prepare Mr. Sebastian's income tax returns. The figures contained in these ledgers did not reflect Mr. Sebastian's actual income for work he had performed. The income figures were extrapolated by the accountants on the basis of actual expense receipts provided by Mr. Sebastian. The assumption was then made by each accountant that Mr. Sebastian was working on a "break-even" basis. Each of the accountants surmised that Mr. Sebastian's income was enough to cover his actual expenses.

On this basis, Mr. Preddie and Mr. Count each created a 1992 income tax return for Mr. Sebastian which was eventually presented to Canadian.³ Canadian continued to remain unconvinced of Mr. Sebastian's income for the 52 weeks prior to the accident based on these returns.

Coopers and Lybrand was retained by Canadian to generate its version of Mr. Sebastian's gross weekly income.

Mr. Sebastian testified that he realized that he had the option of reconstructing his earnings for the 52 weeks prior to the accident only after the pre-hearing of this matter. He immediately started to reconstruct invoices which were submitted in evidence in this proceeding.⁴ The invoices purported to show Mr. Sebastian's actual income earned during the 52 weeks prior to the accident.

Canadian submitted that Mr. Sebastian provided them with several different income amounts.⁵It stated that the gross earnings in the reconstructed invoices were just one more attempt by Mr. Sebastian to show what his gross income was and therefore I should ignore them in determining Mr. Sebastian's gross weekly income.

Canadian also submitted that the invoices⁶ themselves were suspect, stating that they were fabricated solely to increase Mr. Sebastian's gross weekly income under the Schedule. I do not accept these submissions.

I find that Mr. Sebastian's actual gross income for the 52 weeks prior to the accident was unknown until the reconstruction of the invoices showing the work he actually performed.

Mr. and Mrs. Sebastian testified about how the invoices were reconstructed. Mr. Sebastian contacted all but one customer by telephone. He advised that he needed an invoice confirming the work performed for the customer, and asked to see the customer. Mr. Sebastian attended at most of these customers' homes. Mrs. Sebastian accompanied him about half of the time. Mr. Sebastian often did an estimate in order to determine the square footage of the work which he had performed. The invoice was then prepared showing the cost of the work performed. Each customer acknowledged his or her agreement that the invoice reflected the work performed and the money actually paid⁷ to Mr. Sebastian by signing the bottom of the invoice.

Mr. Sebastian also submitted a few original invoices, which were provided to the customer at the time the work was performed.⁸

I find that Mr. Sebastian had an excellent memory of the work he had performed for his customers. He was able to recall specific details of the work he had performed for them, at the hearing, confirming in my mind that the work had actually been done.

In addition, the work noted on the invoices, and the costs claimed by Mr. Sebastian were verifiable. Canadian could have verified the invoices if it wished to by contacting the customers noted on the invoices. The case of MacDonald, with which I agree, suggests that "[a]n insurer should not reject independent evidence which verifies an otherwise unreliable claim based upon the claimant's credibility alone."⁹ If Canadian truly believed that the work performed on the invoices was suspect it could have subpoenaed the various customers to cross-examine them if necessary. None of these customers were called upon to give evidence.

The reconstructed invoices showed Mr. Sebastian's additional income to be in excess of $60,000.00 during the 52 weeks prior to the accident. Mr. Count noted that the tax authorities had been informed of the additional tax liability.¹⁰

Mrs. Sebastian confirmed that as a result of the disclosure of this additional income, Mr. Sebastian incurred a substantial tax liability, of approximately $38,000.

I accept the reconstructed invoices¹¹ as believable and cogent evidence of Mr. Sebastian's actual earnings for the work he performed in the 52 weeks prior to the accident.

I rely on this documentary evidence and the testimony of Mr. and Mrs. Sebastian, to determine the amount of weekly income benefit to which Mr. Sebastian is entitled.

Amount of Benefit:

Mr. Hawreliak stated that the invoices¹² show Mr. Sebastian's gross revenue from July 1992 to July 1993 to be $64,214.71. He states that two invoices¹³, totaling $2,825.00 should be deducted leaving Mr. Sebastian's gross revenue received as $61,389.71.

He states that business expenses of $17,791.52¹⁴ should be subtracted from the gross revenue of $61,389.71 for a total gross annual income of $43,598.19. He submits Mr. Sebastian's average gross weekly income would be $838.43, eighty percent of which is $670.74. Mr. Hawreliak submits Mr. Sebastian is therefore entitled to receive a weekly income benefit of $600.00 per week, the maximum amount available under the Schedule.

Mr. Kent submits that Mr. Sebastian's benefit should be $185.60 per week or at most $267.00 per week as set out in the Cooper's & Lybrand report dated July 7, 1994.¹⁵ I do not accept the contents of this report or the calculations contained in it. The report was prepared without considering the contents of Mr. Count's letter of November 1, 1995, and without considering the actual income information contained in the reconstructed invoices. Canadian provided me with no further submissions as to calculation of Mr. Sebastian's weekly income benefits.

I do not accept the submission of either counsel in determining the amount of benefit to which Mr. Sebastian is entitled.

To ascertain the amount of Mr. Sebastian's benefit, I must determine the amount of Mr. Sebastian's gross earnings. I find that the invoices reflect Mr. Sebastian's gross revenues to be $62,414.71¹⁶, not $64,214.71 as suggested by Mr. Hawreliuk.

Further, there is no evidence on three of the invoices, which total $6,500.00, as to when in July 1992 the work was completed.¹⁷ This work may have been performed outside the 52 week period before the accident. I therefore find that the further amount of $6,500.00 should be deducted from the gross revenues.

Two invoices showed income invoiced but not paid, in the sum of $2,825.00. This sum should be deducted as well¹⁸ from Mr. Sebastian's gross earnings.

Mr. Sebastian stated that the invoices were pretty accurate to within $40.00 to $50.00 as a result of wastage. In order to take this into account, I deduct from his gross earnings the additional sum of $50.00 per invoice for a total of $900.00. This should be deducted only from the eighteen reconstructed invoices.¹⁹

Mr. Sebastian kept actual invoices of all business expenses incurred prior to the accident. These expenses were noted in the disbursement journal²⁰ and are to be deducted from the gross income shown by the invoices. Mrs. Sebastian testified that all of Mr. Sebastian's disbursements, including disbursements included on the reconstructed invoices, were duplicated in the disbursement journal.²¹ All disbursements shown in the journal should be deducted from the total of the income shown on the invoices so as to avoid duplication of the expense deductions.

Mr. Sebastian's business expenses in the amount of $16,405.80 for the period from July 22, 1992 until the date of the accident are deducted from his gross earnings.

I find Mr. Sebastian's gross weekly income for the 52 weeks prior to the accident is calculated as follows:

Gross earnings as per invoices²²

• $62,414.71

Less July 1992 invoices²³

• $6,500.00

Less amounts invoiced but not paid²⁴

• $2,825.00

Less $50.00 per reconstructed invoice²⁵

• $900.00

Total gross earnings for 52 weeks prior to the accident

$52,189.71

Less business expenses (Exhibit 15) from July 22, 1992 until July 22, 1993

• $16,405.80

Gross Annual Income

$35,783.91

Average Gross Weekly Income ($35,783.91 divided by 52)

$688.15

Weekly Income Benefit (80% of $688.15)

$550.52

Mr. Sebastian is entitled to receive weekly income benefits in the sum of $550.52 per week from July 29, 1993 ongoing, and not the amount of $185.60 per week actually paid to him.

Interest:

Mr. Sebastian seeks interest on the outstanding weekly income benefit from July 29, 1993. Canadian submits that it should only pay interest on any amount outstanding from the dates that it was provided with the reconstructed invoices: October 18, 1995 for exhibit 3 and November 15, 1995 for exhibit 5.

The criteria for the payment of interest is set out in section 24 of the Schedule which states as follows:

(1) Amounts payable under Parts II, III and V are overdue if not mailed or otherwise delivered by the insurer within thirty days after it has received a completed application for statutory accident benefits.

(4) The insurer will pay interest on overdue payments from the date they become overdue at the rate of 2 per cent per month. [emphasis added]

The section of the Schedule that deals with the application for accident benefit form is section 29 which reads as follows:

29.-(1) An initial application for benefits under Part II, IV or V shall be in Form 1 and an application for additional benefits shall be in a Form 2.

Section 24(1) states that amounts payable under Part II (weekly income benefits) are overdue if not mailed or otherwise delivered within thirty days after it has received a "completed" application for statutory accident benefits. In considering when the benefits owed to Mr. Sebastian became overdue, it is necessary for me to determine when Mr. Sebastian's application for accident benefits was "completed."

Cases at the Commission have held that the words of the Schedule are to be given their ordinary meaning which must be interpreted in a manner consistent with the context and purpose of the statutory scheme.²⁶

In drafting the legislation, the words "completed application for accident benefits" were not specifically defined. The legislators did however choose to include the application for accident benefits as a standard form appended to the Schedule²⁷ The use of this form would ensure that all applications for accident benefits are standardized. Each applicant would make his or her application for accident benefits on the same form. Consequently, I find that the term "Application for Accident Benefits" noted in section 24(1) refers to the document appended to the Schedule.

The term "complete" is undefined in the legislation.

The Concise Oxford Dictionary defines the word as:

"Having all its parts; entire; finished."

Generally, no question arises as to when the Application for Accident Benefits has been "completed" by an applicant. As a result, in most cases before the Commission, interest runs as matter of course, within 30 days after the completed Application for Accident benefits form has been provided to the insurance company in question.

Canadian submits that if benefits are owing then interest is owed to Mr. Sebastian from October 18, 1995 forward,²⁸ stating that this is when they first received the first set of reconstructed invoices upon which Mr. Sebastian relied.

If I accept Canadian's submission then Mr. Sebastian's application for accident benefits would have been "completed" under the meaning of section 24(1) and interest would have started to run some two years and three months after the application was first made by Mr. Sebastian.

Black's Law Dictionary Revised fourth edition defines "interest" as:

[Interest] is the compensation allowed by law or fixed by the parties for the use or forbearance or detention of money.

I have found benefits are owing to Mr. Sebastion from July 29, 1993 onwards. If I accept Canadian's submission²⁹, then Canadian would have had the benefit of the money which should have been paid to Mr. Sebastian, without the necessity of paying interest to him, for a period of over two years. I do not believe that this was the intent of the legislature when drafting this section of the Schedule.

When I consider the term "completed" application I must look at what makes the most sense given the remedial nature of the statute.³⁰

I find that the term "completed" in section 24(1) should be given its plain and ordinary meaning. Taken literally and on its face, the section means that the application for accident benefits is finished and interest is owed within 30 days after the application is received by the insurance company.

Accordingly, I find that an application for accident benefits is completed and interest thereby owed when the application has been filled in, signed, dated and provided to the insurer.

I did not hear any evidence that the Application for Accident Benefits was not "completed" or finished by Mr. Sebastian. Upon review of the Application for Accident Benefits,³¹ I note that Mr. Sebastian has filled out the relevant sections of the document, signed it, dated it August 2, 1993, and sent it to Canadian.

The document was completed August 3, 1993. Interest starts to run 30 days later on September 2, 1993.

Mr. Sebastian shall be paid interest at the rate of 2% per month from September 2, 1993 on any weekly income benefits owing to him from July 29, 1993 onwards.

Expenses:

Mr. Sebastian seeks an award of the expenses he has incurred in this arbitration. In accordance with section 282(11) of the Insurance Act and the case law that has evolved, I find that Mr. Sebastian is entitled to his expenses as set out in schedule F of the Dispute Resolution Practice Code - 1995. In the event that the parties cannot agree as to the total amount of expenses, a party may apply to the Registrar of the Ontario Insurance Commission for an assessment of the expenses.

Order:

1. Canadian Surety Company shall pay to Josef Douglas Sebastian weekly income benefits in the sum of $550.52 per week from July 29, 1993.

2. Canadian Surety Company shall pay interest on the weekly income benefits owing to Mr. Sebastian in the sum of 2% per month from September 2, 1993.

3. Mr. Sebastian is entitled to his expenses incurred in this arbitration.

February 9, 1996

Fern Kirsch Arbitrator

Date

Schedule "A"

Exhibit 1

Letter from Coopers & Lybrand, dated April 22, 1994.

Exhibit 2

Letter from Brickhouse, dated March 10, 1994.

Exhibit 3

Invoices prepared by Mr. Sebastian: #110860, July 1, 1992; #45695, July 1992; #110868, August 1992; #110867, August 1992; #110862, September 1992; #45677, September 1992; #110864, September 1992; #110866, September 1992; #110866, September 8, 1992; #110861, October 1992; #108466, November 17, 1992; #110863, December 1992; #45675, January 1993; #45679, January 1993; #45674, February 1993; #45676, March 1993; #45680, April 1993; #110869, May 1993; #45678, June 1993; #108463, July 14, 1993.

Exhibit 4

Letter from Cora Construction Ltd., dated October 16, 1995.

Exhibit 5

Four invoices: #110874, January 1993; #110873, July 1992; #110871, August 1992; #110870, October 1992.

Exhibit 6

Letter from David J. Count, accountant, dated November 1, 1995, with two Statement of Business/Professional Income and Expenses: September 1, 1991 to August 31, 1992 and September 1, 1992 to August 31, 1993.

Exhibit 7

1992 Tax Return.

Exhibit 8

1993 Tax Return.

Exhibit 9

Application for Accident Benefits.

Exhibit 10

Letter from Coopers & Lybrand, dated January 12, 1994.

Exhibit 11

1992 Tax Return, prepared by Mr. Preddie.

Exhibit 12

Letter to Coopers & Lybrand from Mr. Sebastian, dated April 26, 1994.

Exhibit 13

Seven page report of Coopers & Lybrand, dated July 7, 1994.

Exhibit 14

Two page, contents of black smaller ledger #1 - Sales Summary.

Exhibit 15

19 page journal, contents of black larger ledger #2 - January 1992 - July 1993.

Exhibit 16

Document showing living expenses in 1992.

Exhibit 17

Material relied upon by Coopers & Lybrand, 1992 income tax return, and purchase order.

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. 2Jagdishar Singh and Kingsway General Insurance Company, January 29, 1993, OIC File No. A-000890.
3. 3Exhibit 7 and Exhibit 11.
4. 4Exhibits 3 and 5.
5. 5The different income amounts were contained in Mr. Sebastian's Application for Accident Benefits, two different 1992 income tax returns, the letter from Brickhouse dated March 10, 1994 in the amendment to Mr. Count's 1992 income tax return, and finally by way of the invoices prepared by Mr. Sebastian after the pre-hearing of this matter.
6. 6Exhibits 3 and 5.
7. 7Within $50.00 of each job.
8. 8Invoices 110860 July 1992 to Grey Cliff; Invoice 110864 September 1992 to Dr. Bedesse; Invoice 110866 September 1992 to Albert Rumph; Invoice 108466 November 17, 1992 to Norrish; Invoice 108463 July 14, 1993 to Albert Rumph.
9. 9Michael S. MacDonald and Pilot Insurance Company, March 3, 1995, OIC File No. A-008372, Arbitrator Sampliner: at page 11.
10. 10Exhibit 7.
11. 11Exhibit 3 and 5.
12. 12Exhibit 3 and 5.
13. 13numbered 108466, dated November 17, 1992, and invoice number 108463, dated July 14, 1993.
14. 14Total Exhibit 15.
15. 15Exhibit 13.
16. 16Exhibit 3 and Exhibit 5.
17. 17These invoices were for Grey Cliff (invoice 110860 -$500.00), for Cherry (invoice 45695-$400), or Albert Rumph (invoice 110873- $5,600.00).
18. 18Invoice 108466-November 17, 1992 ($2,000); Invoice 108463-July 14, 1993 ($825.00 of the total).
19. 19No deductions for wastage was made for the remaining two invoices (I110866 and I108463) which were not reconstructed.
20. 20Exhibits 14 and 15.
21. 21Exhibit 15.
22. 22Exhibit 3 and 5.
23. 23I 110860-$500; I 45695-$400; I 110873- $5,600.00.
24. 24I 108466-$2,000.00; I 108463-$825.00.
25. 25There are 18 reconstructed invoices.
26. 26Stephen Salmon and TTC, December 20, 1991, OIC File No. A-000235.
27. 27Form 1.
28. 28The date when they first received the reconstructed invoices.
29. 29That the interest starts to run only when they received the reconstucted invoices.
30. 30Branden K. Hui and Security National Insurance, November 15, 1991, OIC File No. A-000055; David and Erica Bress and State Farm Mutual Automobile Insurance Company, March 23, 1992, OIC File Nos. A-00191/2; Amnon Ajzensztadt and CAA, February 6, 1992, OIC File No. A-000185.
31. 31Exhibit 9.