Ontario Insurance Commission

Commission des assurances de l’Ontario

Neutral Citation: 1996 ONICDRG 40

Appeal P-006595

OFFICE OF THE DIRECTOR OF ARBITRATIONS

RONALD L. MORLEY

Appellant (Respondent on Cross-appeal)

and

NATIONAL FRONTIER INSURANCE COMPANY

Respondent (Appellant on Cross-appeal)

Before:

David R. Draper

Counsel:

Shelley Hopkins (for Ronald L. Morley)

André I.G. Michael (for National Frontier)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Mr. Morley is entitled to his reasonable expenses with respect to both appeals, including the expenses of the motion to deal with the timeliness of National Frontier's response and appeal.

March 11, 1996

David R. Draper Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Ronald Morley is the widowed spouse of Marilyn Morley. Mrs. Morley was critically injured in a motor vehicle accident on March 20, 1993, and died as a result on March 25, 1993. At the time of the accident, Mr. and Mrs. Morley were married and living together with their three children, the eldest of whom was 14 years old. Mr. Morley applied to National Frontier for funeral expenses and death benefits on behalf of himself and his children.

Because Optional Benefit 1 had been purchased, the relevant provisions of the Schedule¹ are as follows:

The insurer will pay with respect to each insured person who dies as a result of an accident funeral expenses incurred up to $3,000 if Optional Benefit 1 has not been purchased, and up to $7,500 if it has been purchased.
- (2) If, as a result of an accident, an insured person dies within the benefit period set out in subsection (3), the insurer will pay with respect to the insured person, if Optional Benefit 1 has been purchased,

(a) $50,000 to his or her spouse, if the deceased is survived by a spouse who was his or her spouse at the time of the accident;

(b) $50,000 to his or her dependants, if the deceased is survived by any dependant who was a dependant at the time of the accident and is not survived by a spouse who is entitled to a benefit under this section;

(d) if, at the time of the accident, the deceased was a dependant, $20,000,

(i) to the person upon whom the deceased was dependent or, if that person is dead, to the surviving spouse of that person if the surviving spouse was the deceased's primary caregiver, or

(ii) to the other surviving dependants of the person upon whom the deceased was dependent if that person and his or her spouse are dead.

(4) If at the time of the accident the deceased person had more than one person entitled to claim as his or her spouse, the $25,000 payment under clause (1)(a) or $50,000 under clause (2)(a) will be divided equally between or among such persons who survive the deceased and who at the time of the death were still spouses of the deceased.

(5) Payments under clauses (1)(b) and (d) and clauses (2)(b) and (d) will be paid in equal shares to the surviving dependants.

(6) No amount is payable under subsection (1) or (2) to a spouse or dependant unless the spouse or dependant, as the case may be, survives the deceased by thirty days.

National Frontier paid the following benefits:

Funeral expenses under section 10;
$50,000 for Mr. Morley as the sole surviving spouse, under section 11(2)(a); and,
$20,000 for each of the three children as surviving dependants, under section 11(2)(c).

Mr. Morley claimed an additional death benefit of $20,000 for himself as a dependant, under section 11(2)(c). Section 3(2) of the Schedule provides for the interpretation of "dependant," as follows:

- (2) For the purposes of this Regulation, a person is a dependant of another person if the person is principally dependent for financial support on the other person or the other person's spouse.

National Frontier denied Mr. Morley's claim on the basis that a spouse cannot recover death benefits both as a spouse and as a dependant. In a decision dated May 15, 1995, the arbitrator concluded that payment of a death benefit to a surviving spouse under section 11(2)(a) does not preclude a further payment of death benefits to that spouse under section 11(2)(c) as a dependant. In this case, however, the arbitrator concluded that Mr. Morley was not a dependant within the meaning of section 3(2) of the Schedule at the time of the accident and, therefore, was not entitled to death benefits under section 11(2)(c).

Mr. Morley appealed the arbitrator's order that he was not entitled to any additional death benefits. National Frontier responded to Mr. Morley's appeal, and also appealed the arbitrator's conclusion that it is possible to recover death benefits both as a spouse and a dependant.

Mr. Morley argued that National Frontier's response and appeal were both out of time, and should not be allowed. After reviewing the parties' written submissions, I advised them by letter dated October 3, 1995, that the time periods would be extended. I was not persuaded that National Frontier's two-week delay was sufficient to preclude it from participating in Mr. Morley's appeal. Further, it was reasonable for National Frontier to have waited for Mr. Morley's appeal before starting its own appeal. The arbitrator ordered that no further benefits were payable. As a result, National Frontier's appeal was unnecessary, and perhaps precluded, until Mr. Morley appealed.

II. CAN MR. MORLEY RECEIVE DEATH BENEFITS BOTH AS A SPOUSE AND A DEPENDANT?

A. The Position of the parties

Mr. Morley's position is that nothing in section 11 precludes him from receiving death benefits as a spouse under section 11(2)(a) and as a dependant under section 11(2)(c), provided he can establish that he was principally dependent on his wife for financial support at the time of her accident. He argues that if spouses were meant to be excluded from receiving death benefits as dependants, the legislation could have easily made that clear. For example, section 11(2)(c) could have provided as follows:

(c) $20,000 to each of his or her surviving dependants, other than his or her spouse, who was a dependant at the time of the accident;

Mr. Morley also maintains that his interpretation is more consistent with the rest of the death benefit provisions. Section 11(2)(a) provides a surviving spouse with a death benefit of $50,000, without any inquiry into financial dependence. Section 11(2)(c) provides death benefits to each person who was a dependant of the deceased at the time of the accident. He submits that precluding spouses from recovering death benefits under section 11(2)(c) would fail to recognize the different losses suffered by spouses who were financially dependent and those who were not.

According to National Frontier, "spouse" and "dependant" are consistently used in the legislation as distinct categories. Spouses are given a higher level of death benefits, in part, to avoid the difficult task of determining whether one spouse is financially dependent on the other. It submits that allowing spouses to claim death benefits as dependants would add a level of complexity that is inconsistent with the purpose of no-fault benefits. National Frontier argues that the error of

Mr. Morley's interpretation is clarified when section 3(2) is applied to his situation:

3.--(2) For the purposes of this Schedule, Mr. Morley is a dependant of Mrs. Morley if Mr. Morley is principally dependent for financial support on Mrs. Morley or Mr. Morley.

National Frontier claims that this leads to the absurd possibility of Mr. Morley being a dependant of Mrs. Morley because at the time of the accident, he was financially dependent on himself. It is submitted that if the intention was to allow spouses to qualify for dependant's benefits, section 3(2) could have easily made that clear. The following two options were suggested:

3.--(2) For the purposes of this Regulation, a person is a dependant of another person, including his or her spouse, if the person is principally dependent for financial support on the other person or the other person's spouse.

3.--(2) For the purposes of this Regulation, a person is a dependant of his or her spouse or another person if the person is principally dependent for financial support on the other person or the other person's spouse.

B. Analysis and conclusions

The issue is quite straightforward: Can a surviving spouse who was principally dependent for financial support on his or her spouse at the time of the accident recover death benefits under both sections 11(2)(a) and (c)? As suggested by the parties, the issue could have been clarified by minor additions to section 11. Unfortunately, the Schedule does not provide an obvious answer.

In my view, National Frontier's position has considerable strength. While the Schedule is meant to provide relatively simple, straightforward rules for the prompt payment of accident benefits, unravelling the financial arrangements between spouses is likely to be difficult in some cases. Further, the language of the Schedule, particularly section 3(2), is awkward when applied to spouses claiming death benefits as dependants. For the following reasons, however, I agree with the arbitrator's conclusion that it is possible to recover death benefits under both sections 11(2)(a) and (c).

Section 11(2) provides for three types of death benefits. The first is a lump sum of $50,000. That amount is available to the deceased person's surviving spouse or spouses. If there is more than one spouse, the $50,000 is divided equally between or among them. In order to qualify for this benefit, the applicant must prove spousal status, not dependency. If the deceased person does not have a spouse, the $50,000 goes to his or her dependant or dependants under section 11(2)(b). In order to qualify, the applicant must establish that he or she was a dependant at the time of the accident. Again, if there is more than one eligible person, the amount is divided equally between or among them.

The second type of death benefit is an individualized payment based on the person's financial dependence on the deceased. Each person who survives the deceased and was his or her dependant at the time of the accident is entitled to $20,000 under section 11(2)(c). Unlike payments under sections 11(2)(a) and (b), the total amount paid under this section depends on the number of people who qualify.

Third, a lump sum death benefit of $20,000 is available under section 11(2)(d) where the deceased was a dependant at the time of the accident. The benefit goes to the person who was financially supporting the deceased. If that person does not survive the deceased, the benefit goes to that person's spouse, provided that the spouse was the deceased's primary caregiver (s.11(2)(d)(i)). If neither the person supporting the deceased nor his spouse survives the deceased, the benefit goes to the supporting person's surviving dependants (s.11(2)(d)(ii)).

It is clear that death benefits are not provided based on an individualized inquiry into each applicant's loss. Entitlement depends on his or her relationship to the deceased at the time of the accident, as a "spouse," a "dependant," or the person on whom the deceased was financially dependent. The question is whether "spouse" and "dependant" are entirely separate categories, or overlapping categories.

In my opinion, the plain meaning of "dependant" is quite broad, and can include a spouse who is financially dependent. Earlier legislation specifically adopted this view. Before the Schedule came into force, statutory accident benefits were provided under Schedule C to the Insurance Act. Part I provided for a lump sum to be paid on the death of the head of the household, or the spouse of the head of the household. An additional amount was to be paid for each "dependant," which included "the spouse of the head of household who resides with the head of household." This meant that under Schedule C, a financially dependant spouse could recover death benefits both as a spouse and a dependant.

I am also not persuaded that the use of the two terms, "spouse" and "dependant," in section 11(2) and in other sections of the Schedule² establishes that they are entirely separate categories. The use of two terms indicates that the categories do not overlap completely. Some people may be spouses, but not dependants, or may be dependants, but not spouses. In my view, however, none of the provisions supports the view that a spouse cannot also be a dependant.

The most difficult determination is the effect of section 3(2). The language is certainly awkward when applied to a spouse claiming to be a dependant. As noted by the arbitrator, however, this provision is not part of the definition section, but is under the heading, "Interpretation." In my view, section 3(2) is meant to do two things. First, it clarifies the nature of a dependent relationship. The person must be "principally dependent for financial support" on the other person. Second, it relieves the dependant from establishing which spouse provides his or her financial support. In this case, section s.3(2) made it unnecessary for the Morley children to establish that they were principally dependent for financial support on Mrs. Morley because they were financially dependent on one or both of their parents. Like the arbitrator, I am not persuaded that the section precludes a spouse from qualifying as a dependant, as long as it can be shown that he or she was principally dependent for financial support on the spouse.

Finally, I am persuaded that Mr. Morley's interpretation is more consistent with the structure of section 11, read as a whole. I agree with the arbitrator that the benefits for dependants under section 11(2)(c) are separate and serve a different function than the lump sum benefit under section 11(2)(a). In reaching this conclusion, I was strongly influenced by the following simple scenario. Consider the deceased who is survived by one dependant. If the survivor is a spouse, National Frontier would say that he or she is entitled to $50,000 under section 11(2)(a), but nothing else. If the survivor is not a spouse, the outcome must be that he or she recovers $50,000 under section 11 (2)(b) and $20,000 under section 11(2)(c). In my view, it is more consistent with the purpose of the Schedule for these two situation to lead to same result, with a payment of $50,000 to the survivor as the spouse or dependant, plus $20,000 to him or her as a surviving dependant.

III. WAS MR. MORLEY A DEPENDANT AT THE TIME OF THE ACCIDENT?

The parties agree that the question is whether Mr. Morley was chiefly or for the most part financially dependent on his wife at the time of her accident. They disagree, however, whether the facts, as found by the arbitrator, establish that he was more financially dependent on his wife than on his own sources of income.

The Morleys' financial situation was relatively complicated. They were the co-owners of a family farm that they purchased from Mr. Morley's father. By the time of the accident, they were no longer actively farming, but had entered a sharecropping arrangement with another farmer. Mrs. Morley was working as a full-time nurse and office manager in a doctor's office, earning approximately $54,000 yearly. Mr. Morley was running his own trucking company, with some unpaid secretarial assistance from Mrs. Morley. The trucking business kept Mr. Morley away from home for approximately 250 days a year, and supported him while he was away.

The arbitrator made a number of factual findings in Mr. Morley's favour. For example, she accepted his testimony that although his 1992 T4 form from his trucking company shows income of $32,200, he actually received only $12,077. Further, she reduced the $12,077 by income taxes of $6,171, even though this is the amount shown on the T4 form as having been deducted at source from the full amount of $32,200. Notwithstanding these favourable findings, the arbitrator concluded that Mr. Morley was not principally dependent for financial support on his wife at the time of her accident.

In the course of her reasons, the arbitrator provides the following chart:

MRS. MORLEY

MR. MORLEY

After Tax Income

$ 34,000.00

$ 5,906.00

EXPENSES:

Farm Losses

$ 2,225.21

Shelter

$ 3,650.00

REMAINDER

$ 28,124.795 = $ 5,624.96

$ 30.79

The arbitrator concluded as follows:

I find it likely that Mrs. Morley made a direct financial contribution of approximately $4,000 to Mr. Morley's support in 1992. This contribution is somewhat less than Mr. Morley's own contribution of $5,906 after-tax income.

In the circumstances of this case, I am satisfied that the financial contribution made by Mrs. Morley was not greater than Mr. Morley's own contribution to his living expenses. Accordingly, I conclude that Mr. Morley was not principally dependent for financial support upon his wife, at the time of her accident, within the meaning of section 3(2) of the Schedule.

Mr. Morley submits that the arbitrator erred in comparing the amount his wife had remaining ($5,624.96 adjusted to $4,000.00) with his after-tax income ($5,906.00) instead of with the amount that he had remaining ($30.79). For the following reasons, I am unable to agree.

This case illustrates the difficulty of attempting to determine the relative financial contributions of spouses who are essentially interdependent. Mr. and Mrs. Morley shared responsibilities, including meeting their family's financial needs. The economic well-being of the family was dependent on both of their jobs. The fact that Mr. Morley's personal expenses were met by his company for two-thirds of the year reduced the family's expenses. Mrs. Morley's income relieved Mr. Morley of the need to take a full salary from his company. Instead, he was able to leave most of his earnings in the company in order to develop his business for the future.

In situations where both spouses are employed, I would expect that most families rely on both incomes to support their lifestyle. This makes the spouses financially interdependent, but does not turn one into a dependant of the other. In my opinion, that is the situation here. At the time of his wife's accident, Mr. Morley's personal expenses were largely met through his company. In addition, he was entitled to an annual income of roughly $32,000, although in 1992, he took less than half of this amount. I am simply not persuaded that these facts indicate financial dependence.

The arbitrator analysed the Morleys' financial situation in some detail. If there was any error, it was in Mr. Morley's favour. For example, the expenses he received from his company should have been included in the analysis. I am also unable to agree with Mr. Morley that the arbitrator compared the wrong amounts. She compared the amount that he had to meet his expenses ($5,906) with the amount that Mrs. Morley was in a position to provide to him ($5,624.96 adjusted to $4,000). In my opinion, that is the correct approach. It would have been inappropriate to compare Mrs. Morley's contribution with the amount Mr. Morley had remaining after meeting most of his expenses.

Therefore, I conclude that the arbitrator's decision should be confirmed.

IV. EXPENSES

Mr. Morley claims his expenses related to both appeals, including his expenses arising from the issue of the timeliness of National Frontier's response and appeal. National Frontier accepts that Mr. Morley should recover his expenses in relation to its appeal, but submits that if he is unsuccessful in his appeal, he should not be entitled to those expenses.

I accept National Frontier's submission that the basis for awarding expenses is somewhat different in appeals than for arbitrations. In this case, however, I am satisfied that Mr. Morley should receive his reasonable appeal expenses. He raised substantial issues about the determination of dependency that have not been considered previously at the appeal level.