Ontario Insurance Commission

Commission des assurances de l’Ontario

Neutral Citation: 1996 ONICDRG 83

Appeal P-007314

Appellant

and

Respondent

Before:

Susan Naylor, Director’s Delegate

Counsel:

Altor Shields (for the Appellant)

William G. Scott (for the Respondent)

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

The appeal is dismissed and the arbitration order dated April 13, 1995 is confirmed.
Mr. Palumbo is entitled to his reasonable appeal expenses.

May 24, 1996

Susan Naylor Director’s Delegate

Date

Mr. Palumbo suffered injuries in an automobile accident on February 13, 1991. For a number of years, he had worked out of the family home as a free-lance editor in partnership with his wife, Sharon. Sharon was diagnosed with cancer in 1987. As the disease progressed, Mr. Palumbo cut down on his work in order to care for her. He stopped working in the business altogether by April 1990. Sadly, Sharon died in July of that year. Mr. Palumbo suffered a period of acute bereavement. He was starting to gradually resume his life again, only to be involved in the accident.

Mr. Palumbo received weekly benefits under s. 13 of the Statutory Accident Benefits Schedule - Accidents Before January 1, 1994, Ontario Regulation 672, R.R.O. 1990 (the Schedule). These benefits were paid under an automobile policy issued by Dominion of Canada General Insurance Company (Dominion). Dominion terminated benefits as of October 22, 1993, on the basis that Mr. Palumbo had recovered sufficiently to be able to perform his usual tasks. Mr. Palumbo disputed the stoppage of benefits and took the matter to arbitration. He argued that he should be paid ongoing benefits as a self-employed person under section 12, not section 13, of the Schedule.

Disability benefits under the Schedule take two forms: “income benefits” under section 12 and “benefits if no income” under section 13. Income benefits are available to anyone who is employed or self-employed at the time of the accident, has a prescribed record of employment in the past year, or has a definite offer of employment. Applicants who do not qualify under section 12, whether they are unemployed or out of the work force altogether, fall under section 13. The criteria for entitlement to these benefits is not linked to employment but to the performance of normal tasks and activities, and the benefits are flat-rate rather than earnings-related.

Under section 12, the focus is on disability from work. Entitlement would be linked to Mr. Palumbo’s inability to perform the essential tasks of his employment or occupation, or after 156 weeks, other suitable work. The test under section 13 is different, based on an applicant’s inability to perform the essential tasks in which he or she would normally engage, or after 156 weeks, substantially all his or her normal activities.

At the arbitration hearing, Mr. Palumbo claimed benefits from October 22, 1993 under section 12 of the Schedule. His claim included benefits beyond the 156 week mark, when the statutory test for benefits becomes stricter. Dominion argued that the arbitration should be limited to Mr. Palumbo’s entitlement up to 156 weeks, but not beyond it. The arbitrator agreed with Dominion and refused to deal with Mr. Palumbo’s claim for benefits after February 21, 1994. Mr. Palumbo appealed this ruling.

The hearing proceeded on the question of Mr. Palumbo’s entitlement to weekly income benefits up to 156 weeks. Mr. Palumbo claimed that he was self-employed at the time of the accident. He argued that his business continued, although its operation was temporarily suspended, during the period leading up to, and after, his wife’s death. Alternatively, if his business ceased at some point, Mr. Palumbo argued that he had resumed his occupation by the time of the accident. The arbitrator found against Mr. Palumbo on both points, and held that his claim should be considered under section 13 of the Schedule, not section 12. Mr. Palumbo appealed this finding. On the appeal, he conceded that his business had ceased after he stopped work in April 1990, but claimed that he had started business afresh by the time of the accident.

In the alternative, Mr. Palumbo argued that, if he fell within section 13, the arbitrator should consider his occupational tasks as a free-lance editor as part of his normal tasks. The arbitrator disagreed because, in her view, that would be to do away with the distinction between section 12 and section 13. She held that Mr. Palumbo was able to do his day-to-day tasks of daily living, excluding his work activities, by the time his benefits were terminated. She was influenced in this finding by the fact that Mr. Palumbo had recovered to the point that he was considering returning to work well before then. She held that Mr. Palumbo was not entitled to benefits from October 22, 1993 to February 21, 1994. On appeal, Mr Palumbo asked for a new hearing in which his occupational tasks would be considered as part of his normal, essential tasks.

The appeal proceeded on the basis of the arbitration record and the written and oral submissions of the parties. There was no transcript of the testimony given at the arbitration hearing.

1. Post 156 Week Benefits

Under both section 12 and section 13 of the Schedule, the requirements for entitlement to disability benefits become stricter after 156 weeks. Because the change in the disability test may require different evidence, the parties need reasonable notice that it is in issue.

In this case, as in many others, the question of what was included in the arbitration arises largely as a matter of timing.

Mr. Palumbo’s weekly benefits were terminated on October 22, 1993, about four months short of the 156 week mark. He sought ongoing benefits. Mediation took place, with a report of mediator issued on January 11, 1994. Mr. Palumbo’s application for arbitration was filed on February 2, 1994. The 156 week period had not yet expired. He listed as his grounds for arbitration that the “insurer refuses to pay benefits ($185.00 per week) after October 22, 1993.” In its response, Dominion took the position that Mr. Palumbo was able to perform the essential tasks of his occupation, and therefore did not qualify for further benefits.

A pre-hearing discussion was held on April 14, 1994 and resumed on May 13, 1994. Although the 156 week mark had expired by then, it appears from the pre-hearing letter that no-one addressed the question of benefits after 156 weeks. The pre-hearing arbitrator defined the issue to be arbitrated as whether the applicant was “substantially unable to perform his essential tasks from and after October 23, 1993". Although she described the claim as open-ended, the issue for arbitration was defined solely in terms of the pre-156 week test.

The hearing, originally scheduled for October 1994, eventually took place in March 1995. At the hearing, apparently for the first time, it became clear that benefits in excess of 156 weeks were being claimed. Dominion objected because it did not have the relevant vocational or medical evidence required to deal with this claim.

The arbitrator ruled that Mr. Palumbo could not include his entitlement to weekly income benefits after 156 weeks in the arbitration at that stage. She relied on previous decisions in DeCicco and State Farm Mutual Automobile Insurance Company, (February 21, 1992, OIC File P-000277) and Kotsiakos and State Farm Mutual Automobile Insurance Company, (July 26, 1994, OIC File A-002354, under appeal), in concluding that post 156-week entitlement was a separate and distinct issue from entitlement up to 156 weeks and did not flow “reasonably or Consequentially” from the latter. The arbitrator held that the discrete issue of post-156 week entitlement could not be arbitrated because firstly, it had not been mediated and, secondly, both parties did not consent to its inclusion.¹ The arbitrator restricted the arbitration to Mr. Palumbo’s entitlement up to February 21,1994.

I agree with the arbitrator’s conclusion, but for somewhat different reasons. While Mr. Palumbo claimed ongoing benefits, his claim for benefits after 156 weeks was not clearly articulated until the hearing. Fairness requires that both parties have reasonable notice of what the arbitration will deal with, and an opportunity to prepare their cases accordingly. It is incumbent on both parties to ensure that their positions are articulated with reasonable particularity as early as possible and, save in unusual circumstances, by the conclusion of the pre-hearing conference. One of the purposes of the pre-hearing conference is to give parties an opportunity to fully canvass the scope of their dispute in order to avoid the confusion that occurred in this case.

If parties do not clearly set out their positions in advance, they run the risk of having the arbitrator refuse to deal with aspects of their dispute because it would involve unfair surprise to the other party. In the circumstances of this case, the arbitrator properly declined to deal with Mr. Palumbo’s post-156 week entitlement because it was unreasonable to expect the insurer to be able to respond to the claim at that late stage. The appeal from the arbitrator’s order restricting the scope of the arbitration is therefore dismissed.

2. Mr. Palumbo’s Employment Status

Mr. Palumbo claims that he was self-employed at the time of the accident and therefore qualified for weekly income benefits under section 12 of the Schedule.

Section 12(2) and (3) of the Schedule set out the criteria that insured persons must meet to qualify for weekly income benefits: he or she must have been at the time of the accident,

(a) employed or self-employed,

(b) on a temporary lay-off,

(c) entitled to start work within one year under a legitimate offer of employment made before the accident and evidenced in writing, or

(d) have worked for any 180 days in the twelve-month period before the accident.

On the facts found by the arbitrator, Mr. Palumbo and his wife ran an editing and book publishing business out of their home for a number of years. Mr. Palumbo was primarily responsible for the editing, while his wife focused on book production and making work contacts. They got their work mainly through networking and socialising. After his wife was diagnosed with cancer in 1987, Mr. Palumbo gradually took on less work, and stopped working altogether in April, 1990 to care for her full-time. He let the person who was working for him go, and sent any work coming his way to others. Mr. Palumbo’s wife died in July, 1990, leaving him grief-stricken. Following her death, Mr. Palumbo avoided social activities and, save for a small job in September 1990, did not return to work.

The arbitrator found that in December 1990, Mr. Palumbo discussed with his family doctor the possibility of starting to socialise again and resuming work. He took a sculpting course in January 1991, testifying that he wanted an activity as far away from editing and thinking as possible.

On February 13, 1991, the evening of the accident, Mr. Palumbo went out socially for the first time since his wife died. He attended a play written and directed by a friend of his, and afterwards socialised with people he knew.

Mr. Palumbo acknowledged that, as of February 1991, he was not working and had not lined up any work. The arbitrator noted Mr. Palumbo’s testimony that he was “almost in the same position in starting up his business as he and his wife were when they first started the business in 1985.”

Mr. Palumbo submitted that because he worked from home, he did not have the usual indicia of carrying on a business, such as a business telephone line or listing, or business cards. Clients were attracted through socialising and networking. This was what he had started to do on his evening out, the day of the accident.

The arbitrator concluded on these facts that Mr. Palumbo was not carrying on his editing business or any other business at the time of the accident. Although she did not consider that Mr. Palumbo had to be actually working in order to be self-employed, in her view, “something more is needed than a subjective intention, or declaration of a person that he is self-employed”.

Several previous arbitration decisions were provided to me. These decisions are of limited use in this case. The question of whether a person is employed or self-employed is one of fact and dependent upon the circumstances of the case. Moreover, the decisions deal, for the most part, with whether a business or employment continued, rather than with its commencement or re-commencement.

Mr. Palumbo disagreed only with the arbitrator’s findings of fact; he did not take issue with the arbitrator’s description of the nature of the evidence required to establish self-employment or with the application of the Schedule to the facts. Appeal decisions, starting with that of the Director of Arbitrations in Calogero and The Co-operators General Insurance Company, (February 13, 1992, OIC File P-000251) have established that it is not my role on appeal to re-evaluate the evidence before the arbitrator and substitute my own view of the weight to be attributed to it. In this case, the arbitrator heard evidence from a number of witnesses, including Mr. Palumbo and his family doctor, over the course of a three-day hearing. Because of this advantage, the arbitrator’s findings of fact should not be interfered with unless she ignored material evidence or arrived at unsupported conclusions.

In considering the arbitrator’s findings, I am also hampered by the absence of a transcript of the testimony given at the hearing. The difficulty that the lack of a transcript presents was the subject of comment by the Director of Arbitrations in Singh and Simcoe Erie Group, (February 2, 1994, OIC File P-000532), who held that factual findings

.... are difficult for the parties to refute unless the exhibits show that a fact found and relied on by the arbitrator could not have been so found in all of the circumstances, or documentary evidence was ignored or fundamentally misconstrued.

The arbitrator had the benefit of hearing Mr. Palumbo’s testimony. While she did not question his credibility, she concluded, on balance, that his efforts to resume his life as of the date of the accident did not amount to self-employment, although they were leading him in that direction. Having reviewed the record, I do not find any error in the arbitrator’s conclusion. In many ways, the most succinct statement of Mr. Palumbo’s position was made by his family doctor, who described him as, by the New Year, “mobilising himself to reach out” (Exhibit 3). By the time of the accident, he was starting to take steps in that direction but I agree with the conclusion that his efforts had not reached the point of resuming an occupation.

The appeal on this ground is therefore denied.

3. Essential Tasks Under s. 13 of the Schedule

It is Mr. Palumbo’s position that, even if his claim falls under section 13, the arbitrator should have taken his editing tasks into account in considering whether he was disabled within the meaning of the section.

Section 13(1) states:

The insurer will pay with respect to each insured person who sustains physical, psychological or mental injury as a result of an accident, a weekly benefit during the period in which the insured person suffers substantial inability to perform the essential tasks in which he or she would normally engage.... (Emphasis added).

In contrast, benefits are payable under s. 12(1) where the insured person suffers substantial inability to perform the essential tasks of his or her occupation or employment... .

The time frame for fixing essential tasks is perhaps more explicit in section 12 than section 13. Section 13(1) does not expressly define a period of time within which to evaluate a person’s normal tasks. I note that the section uses the auxiliary verb “would”, commonly denoting continual past activity of a habitual nature. In my view, the adverb “normally” reinforces this sense.

Mr. Palumbo submitted that the arbitrator erred in failing to completely canvass the tasks in which he “would normally engage”. He submitted that his usual and ordinary tasks included editing books. This was what he did normally. His normal tasks were interrupted by an extraordinary event: the illness and subsequent death of his wife. It was argued that this period was unrepresentative of how Mr. Palumbo usually spent his time and should be excluded from consideration in determining the tasks in which he would normally engage.

Dominion submitted that a person’s normal activities must be measured in terms of the person’s daily activities of living at the time of the accident. Dominion argued that to include the occupational tasks that Mr. Palumbo performed nine months earlier would be to do away with the distinctions in section 12 and section 13. The arbitrator agreed with this analysis.

The context of section 13(1) suggests that it must relate broadly to the tasks that the person was doing at the time of the accident. However, I agree with the analysis in Donohue and State Farm Mutual Automobile Insurance Company, (August 3, 1994, OIC File A-006756) that this does not require determination of the person’s circumstances at a single moment in time, but a realistic and reasonable perspective of their entire situation:

the person's essential tasks cannot be based solely on a "snapshot" of what he or she happened to be doing on the date of the accident. For example, it would make little sense to treat a vacationer's essential tasks as limited to his or her duties while on vacation. In my view, the phrase, "in which he or she would normally engage" [emphasis added], means that although the person's essential tasks must be determined at the time of the accident, they must be considered over some reasonable time period.

In this case, we are dealing with a period in excess of nine months. Save for one brief occasion, Mr. Palumbo did not engage in any occupational tasks during this time. He performed a single, small editing job in September, 1990, but I would characterise this as an isolated activity. Given the length of time involved and the very preliminary steps he had taken towards resuming work, I do not think it can be said that Mr. Palumbo’s work formed part of the tasks in which he would normally engage.

This should not be taken to indicate that occupational tasks might never be an appropriate consideration under section 13. The words “essential tasks in which [a person] would normally engage” should be given their ordinary meaning. In any case, a person’s normal, essential tasks are a question of fact, that depends on his or her particular circumstances. In this case, however, I agree that Mr. Palumbo’s editing tasks were properly excluded from consideration. The appeal is therefore denied.

4. Expenses

In prior appeal decisions, expenses have been refused where the appeal is based solely on an applicant’s disagreement with factual findings. This appeal however involved more than factual findings and raised important questions relating to the application of the Insurance Act and Schedule. Moreover, both counsels’ submissions were helpful and Mr. Palumbo made a constructive effort to narrow the issues on appeal. In the circumstances, Mr. Palumbo is entitled to recover his reasonable appeal expenses. Either party may apply to have the expenses assessed in the event there is a disagreement about them.