Neutral Citation: 1997 ONICDRG 103
OIC A-950212
ONTARIO INSURANCE COMMISSION
BETWEEN:
ORESTE CAPUTO
Applicant
and
ALLSTATE INSURANCE COMPANY OF CANADA
Insurer
DECISION
Issues:
The Applicant, Oreste Caputo, was injured in a motor vehicle accident on January 9, 1992. He applied for and received statutory accident benefits from Allstate Insurance Company of Canada, payable under Ontario Regulation 672.1 Allstate paid weekly income benefits under section 12 of the Schedule until January 4, 1995, after Allstate learned that Mr. Caputo had been involved in a second accident on December 21, 1994.
Mr. Caputo seeks reinstatement of his benefits at a higher amount than the amounts he received from Allstate. Allstate denies that Mr. Caputo is entitled to further benefits, disputes Mr. Caputo's calculation of benefits, and seeks a repayment of benefits paid or a credit for benefits that may have been available to Mr. Caputo as a result of the second accident.
The parties were unable to resolve their disputes through mediation and Mr. Caputo applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
The issues in this hearing are:
- What is the period of Mr. Caputo's entitlement?
Allstate alleges that Mr. Caputo is not entitled to further benefits and relies in particular on the test set out in section 12(5)(b) of the Schedule: unless it has been established that Mr. Caputo's injury continuously prevents him from engaging in any occupation or employment for which he is reasonably suited by education, training or experience, he is not entitled to a weekly income benefit from Allstate more than 156 weeks after the accident.
- What is the appropriate amount of Mr. Caputo's benefit?
Mr. Caputo was a self-employed ceramic tile setter. He returned to working after the accident for approximately a year, although he hired a worker to do the actual work of laying the tiles. Most of the dispute centred about Mr. Caputo's reallocation of invoices dated January 14, 1992, from his post-accident to his pre-accident income. The amounts of these invoices had originally been included in Mr. Caputo's 1992 post-accident income. Mr. Caputo alleged that the invoices reflected work completed in December 1991 and should be allocated to his 1991 pre-accident income. Such a reallocation increases Mr. Caputo's pre-accident earnings — thus increasing his benefit — and decreases his post-accident earnings — thus decreasing the deduction from his benefit for post-accident earnings.
- Is Allstate entitled to a refund for overpayment of benefits or a deduction for benefits which may be available as a result of the second accident of December 21, 1994?
Mr. Caputo also claims interest on any amounts owing, and his expenses incurred in the hearing.
Result:
Mr. Caputo is entitled to benefits to January 9, 1995, plus an additional eight weeks of benefits for work conditioning totalling $4,800.
Mr. Caputo is entitled to benefits in the amount of $600 per week.
Allstate is not entitled to a refund for overpayment of benefits or a deduction for benefits which may be available as a result of the second accident of December 21, 1994.
Mr. Caputo is entitled to his reasonable expenses of this arbitration hearing.
Mr. Caputo is entitled to interest on the outstanding benefits of $29,170.58 from August 1, 1996.
Hearing:
The hearing was held in London, Ontario, on April 2, 3 and 4, 1996, and August 20, 21, 28, 29 and 30, 1996, before me, David Evans, Arbitrator.
Information on the parties present, the witnesses, and the exhibits is set out in the Appendix.
Evidence and Findings:
Background
Mr. Caputo, born 1946, had been operating his own ceramic tile-laying business since 1981. For several years before the accident he had worked mainly as a subcontractor for Marghella Tile, owned by his brother-in-law Arturo Marghella.
When Mr. Caputo was injured on January 9, 1992, he initially felt pain in the groin, left arm, and left side of his head. He testified that he returned to work in March 1992, generally working one week on and one week off, no more than two hours a day.
Mr. Caputo's family doctor, Dr. Wong, reports that on April 3, 1992, Mr. Caputo developed low back pain on straightening up after laying tiles. Dr. Wong relates that low back pain — which is Mr. Caputo's most significant present complaint — to the accident.
From June 1992 until Mr. Caputo closed his business in early 1993 he hired a worker to lay tiles. Mr. Caputo testified that he has not worked since he closed the business.
On December 21, 1994, Mr. Caputo suffered injuries in a second car accident. Allstate had plans for Mr. Caputo to attend a work conditioning leading to a job immediately prior to the second accident. Mr. Caputo reported this accident to Allstate on January 5, 1995, and advised that he could not attend the conditioning as a result. Allstate paid benefits through January 4, 1995.
Length of Entitlement
Allstate paid Mr. Caputo benefits under subsection 12(1) of the Schedule. Pursuant to this subsection, Mr. Caputo is entitled to receive a weekly benefit during the period in which he suffers a substantial inability to perform the essential tasks of his occupation or employment.
Mr. Caputo alleges that he remains entitled to the benefits. After 156 weeks, Mr. Caputo must meet the stricter test set out in paragraph 12(5)(b): Mr. Caputo is only entitled to further benefits if his injury continuously prevents him from engaging in any occupation or employment for which he is reasonably suited by education, training or experience. The work must be suitable for him, viewed fairly and realistically in the context of his educational and employment background.
Mr. Caputo alleges that he is physically incapable of doing suitable work, and that the work he is physically capable of doing is unsuitable based on such criteria as the nature and status of the work compared with what he did before, the hours of work and pay, his employment experience, age, qualifications, technical training, and know-how.
For Allstate to succeed, I must find that, on a fair and realistic view, there are suitable alternative occupations which Mr. Caputo's injuries do not continuously prevent him from engaging in.
As a first step, Mr. Caputo must prove that he is incapable of returning to his former employment.
Former employment
Allstate raised a causation issue, suggesting that Mr. Caputo's low back injury in April 1992 arose from laying tiles and not from the accident. Dr. Wong, the family doctor, relates the back injury to the accident. Dr. Teasell, an expert called by Mr. Caputo, testified that he estimated an 80-90% probability link between the accident and the pains to the lower back. On the other hand, Dr. Clifford, to whom Dr. Wong had referred Mr. Caputo, testified that symptoms arising more than 36 hours after the event are harder to relate to it.
On balance, I find that the low back pain is related to the accident, as I prefer the conclusion of Mr. Caputo's treating physician. Moreover, Dr. Clifford does not entirely rule out such a link.
Both testimony and medical evidence support Mr. Caputo's allegation that he is not able to return to his former employment.
Testimony
Mr. Caputo testified that between himself and his son John, who had started working with Mr. Caputo in 1989, they did well in 1992.
Michael Livingstone of Livingstone & Co. investigated Mr. Caputo's post-accident work habits. Allstate instructed him to obtain videotape of Mr. Caputo working in excess of two hours a day on consecutive days. Surveillance commenced in May 1992. On a number of occasions neither Mr. Caputo nor his van were observed at his home.
On June 9, 1992, Mr. Livingstone taped Mr. Caputo installing tile on a porch at 533 Emery Street East in London.
Mr. Caputo testified that he was not able to complete that job himself.
The owner of 533 Emery, Nicola Lorusso, testified that he had known Mr. Caputo for a number of years and insisted on having Mr. Caputo do the tiling. Mr. Caputo agreed to do it but said: "I won't be the same." Mr. Lorusso testified that after one day Mr. Caputo left and a younger man came to finish the job.
Mr. Lorusso testified that he was happy with the work at Emery, which had been completed by Mr. John DeVuono.
John DeVuono testified that he finished the tiling at 533 Emery. Mr. Caputo called him, explained that he could not do the job because of his sore back, and asked Mr. DeVuono to complete it, which he did over the next two days. Emery was not a typical job, in that it was a small area requiring a lot of intricate cutting. Mr. Caputo had done the easy part, so Mr. DeVuono had to work quickly to lay the rest of the tiles the second day in order to grout on the third.
After reviewing the surveillance video, Mr. Lorusso testified that Mr. Caputo worked at half of his old pace, and that he could tell Mr. Caputo was suffering. Mr. DeVuono commented that, on the tape, Mr. Caputo worked at a pace that would have added a day to the tiling.
Mr. DeVuono testified that he was good at his work and did it at a competitive speed.
Mr. Livingstone continued his surveillance of Mr. Caputo. After a number of fruitless attempts to observe him on weekdays at home, Mr. Livingstone discovered that Mr. Caputo was working in Woodstock. On July 21, 1992, Mr. Livingstone observed Mr. Caputo working at an apartment complex there. Mr. Livingstone saw Mr. Caputo installing ceramic tiles in the main lobby for a few minutes, which was not taped. That day and the following Mr. Livingstone taped Mr. Caputo washing out some pails, getting in and out of his van, loading items in the van, moving a saw table, and carrying food.
Mr. DeVuono testified that he worked with Mr. Caputo at apartment buildings in Woodstock and Sarnia until Mr. Caputo shut his business down the following year. Mr. DeVuono did the main installation. On a typical day he would bring his tools to the area, get set up, and wait for Mr. Caputo or his son to bring the materials. Installation was quicker when the materials were provided by a helper. The job at Woodstock was more amenable to having a helper, as it had larger areas than the job on Emery. Mr. DeVuono was able to do 6-8 bathtubs per day with the materials there; without a helper, Mr. DeVuono could only have done 4 tubs a day. It took Mr. DeVuono 45-60 minutes to do a tub, so Mr. Caputo or his son would work about 20 minutes for every hour he worked laying tiles. As Mr. DeVuono received $18 an hour it was not economical for him to load tile.
Mr. DeVuono testified that Mr. Caputo would do some small things, then stop, relax or eat or get coffee or lunch. Occasionally Mr. Caputo would try to lay tile out of boredom, but DeVuono knew he was in pain down the sides and back: his motions were not proper or natural, and Mr. Caputo looked like a beginner. Mr. Caputo would complain constantly and lay tile for only 15 to 30 minutes. Mr. Caputo did normally open the van and bend over to load items like tiles and boxes.
Mr. DeVuono testified that Mr. Caputo could do certain aspects of the job, such as setting tiles out in piles, drawing chalk lines, taking measurements, stringing up string, cleaning up, and doing the paperwork. However, he testified that you could not hire someone to do those parts and be efficient, as you have to price by the square foot: the marketplace does not have enough money nor enough work.
Mr. Caputo testified that the only part of the job he could not do was the tile installing itself.
Mr. Caputo testified that he closed his business because clients were not happy with his company's work and he could not do it, despite the fact that in 1992 he had been busy. Dr. Wong in his report of May 14, 1993, reports that Mr. Caputo told him he had disbanded his company as of December 1992 because his pain made it difficult for him to go and supervise the workers. Mr. Livingstone testified that in June 1994 a source at Marghella Tile informed him that because of a dispute between the brothers-in-law Mr. Caputo no longer worked as a subcontractor for Marghella Tile. Mr. Caputo denied that a dispute with his brother-in-law prevented him from working for Marghella Tile. However, Mr. Blaak — Mr. Caputo's accountant — testified that Mr. Caputo forbade him from contacting Marghella Tile because the brothers-in-law were not speaking. Mr. Caputo did not call a witness from Marghella Tile.
Medical Evidence
Dr. David Taylor, an orthopaedic surgeon, saw Mr. Caputo on August 25, 1993. He found that Mr. Caputo was not a surgery candidate. He diagnosed Mr. Caputo at maximal medical recovery and identified these permanent physical restrictions:
no repetitive bending or twisting
no prolonged periods of standing or sitting for more than half an hour without being able to alternate position
no lifting in excess of 10 kilograms.
Allstate subsequently sent Mr. Caputo for a functional capacities assessment at MEDEX Clinical Rehabilitation Group. The assessment was completed on March 3 and 4, 1994, by Barbara Mills. She found that Mr. Caputo did not meet the following physical demands of a tile setter:
Lifting/carrying greater than 20 pounds.
Kneeling/squatting with forward back flexion.
Sustained bending/twisting at the waist in sitting, standing or low level posture.
I find that Mr. Caputo meets the test under subsection 12(1), as Mr. Caputo is substantially unable to perform an essential task of his former employment: laying tile. I base this conclusion on the medical evidence and the testimony of Mr. DeVuono.
The test is stricter after 156 weeks. Is Mr. Caputo continuously prevented from performing his former job? Mr. Caputo's former employment included a number of tasks such as estimating jobs when he installed tiles in private residences, preparing for laying tile by measuring and setting up the materials, and cleaning up afterwards. Laying tile was, however, the major component of the job. Mr. DeVuono testified that setting out the tiles in preparation took 15-20 minutes, whereas actually laying them took 45-60 minutes for a typical job. On that basis, laying tile consisted of 66-75% of most of the work hours. Mr. DeVuono testified that Mr. Caputo could work at most 15-30 minutes laying tile on a given day. Given this evidence, I find that Mr. Caputo's limited ability to lay tiles effectively prevents him from continuously performing his former job.
The issue now becomes whether Mr. Caputo is physically capable of some work, and whether that work is suitable.
Is Mr. Caputo physically capable of work?
Mr. Caputo's actions after the accident suggest he is. He was busy in 1992, and the only work he could not perform was laying tiles. I infer from Mr. Caputo's many absences from his residence on weekdays — when neither he nor his work van were to be seen — that he was at work sites, some of which were in Woodstock and Sarnia.
Other surveillance evidence also shows Mr. Caputo's activity level post-accident. On various occasions he was seen: driving around town (including on one occasion driving from London to beyond Brantford); shopping; lifting his granddaughter from a van to her stroller, pushing her in the stroller, and lifting her back into the van; and nailing some boards on a shed for a few minutes.
In a letter to Mr. Caputo's counsel dated April 10, 1995, Dr. Wong summarizes his views to that date. He notes that there are no objective problems preventing Mr. Caputo from returning to some sort of light work. Based on the reports of Dr. Taylor and Dr. Clifford, he had earlier concluded that Mr. Caputo's injuries did not meet the paragraph 12(5)(b) test. He notes that Mr. Caputo's chronic pain was limiting his ability to work, and writes: "The pain can only be felt by Mr. Caputo and if there is no malingering, then this in itself can be incapacitating."
As is usual in these cases, Allstate prepared a list of various occupations it alleges are suitable for Mr. Caputo and which he could perform. Mr. Caputo denied he could perform these jobs, either for physical reasons or because they were unsuitable.
Dr. Clifford testified that these jobs were "safe" for Mr. Caputo to perform.
Dr. Teasell testified that he and Dr. Clifford are often on opposite sides, as in this case, and that it was not unusual for a patient to have chronic pain without neurological or spinal evidence. He and Dr. Clifford disagree about the degree to which a patient should be disabled by pain. However, Dr. Teasell was unaware of Mr. Caputo's post-accident activity, he did not know about the second accident, and he did not know that as a result of that accident Mr. Caputo had not attended work conditioning.
Dr. Teasell testified that Mr. Caputo could do a few, infrequent heavy lifts two or three times a day. He could also do an occasional bend and twist at the waist. The optimum would be a job with a varied posture, such as at a parking lot, where an employee can sit and stand as required. Dr. Teasell testified that he would be content to certify Mr. Caputo capable of performing a job that meets his physical limitations.
I find that Mr. Caputo is physically capable of some form of work, as most of his doctors suggest he can work, and even Dr. Teasell would release Mr. Caputo to a physically suitable job.
There remains the issue of whether any job Mr. Caputo can perform is a suitable job in light of Mr. Caputo's education, training or experience.
Education, training or experience
Mr. Caputo received a grade 5 education in Italy before leaving school to work on his family farm. Later, he worked in welding, construction, and road paving, before taking up ceramic tile installation. For three years starting in 1978 he also operated a pizza business with his brother.
Mr. Caputo testified that when he installed tiles in residences he would estimate the labour and materials required based on his measurements at the site. From 1989 onwards he mostly installed tiles in apartment buildings on a subcontract basis for Marghella Tiles. He let his son John prepare the invoices for Marghella, as John could read and write English better than he.
In the summer of 1994 the Centre for Lifelong Learning assessed Mr. Caputo at below grade 3 in spelling and arithmetic and at grade 4 in reading.
On August 29 and 30, 1994, Andrew Wilson of Career Probe conducted a vocational evaluation. Mr. Caputo's low to low average rankings for academic achievement were the approximate equivalent of less than grade 8 level in Ontario. The report indicates that Mr. Caputo had low average math abilities, including the ability to solve simple math problems involving addition, subtraction, multiplication, and some fractions. He experienced difficulty when required to solve problems involving division, percentages, finding an average of a group of numbers, and algebra.
Mr. Wilson found that, given Mr. Caputo's demonstrated abilities in running a business, in completing the intake three-page questionnaire on his employment and vocational history, and in effectively communicating orally throughout the program, these academic rankings were somewhat lower than what would be expected. Based on this academic potential, Mr. Wilson did not consider Mr. Caputo to be a suitable candidate for formal retraining at the post-secondary level. He found nine employment alternatives for Mr. Caputo, including parking lot attendant and attendant at a recreational facility.
Ms. Mills, in her MEDEX assessment, found that Mr. Caputo had competitive tolerances for repetitive manual handling in both fine and gross activities, with or without tool use.
Given this background, are there suitable alternative occupations for Mr. Caputo?
Suitable alternative occupations
Scott Patriquin, employment consultant with Crawford Disability Management, testified that Allstate retained Crawford in October 1993, and that he started overseeing Mr. Caputo's rehabilitation after Dr. Taylor set out Mr. Caputo's permanent restrictions. After the testing in the summer of 1994, he recognized that Mr. Caputo's limited reading skills suggested an employment requiring reading and writing was inappropriate. In October 1994 he discussed the Career Probe report with Mr. Caputo, who was adamant that the jobs listed by Career Probe were inappropriate.
On December 19, 1994, he wrote to Dr. Clifford and asked him if the Career Probe alternatives would be appropriate.
On December 20, 1994, Mr. Patriquin discussed a work conditioning program at Goodwill Industries with Mr. Caputo. Mr. Patriquin testified that he told Mr. Caputo that Goodwill Industries were planning to open a new store and would be hiring customer service representatives. Mr. Patriquin told Mr. Caputo that participation in work conditioning might assist in getting interviews for those positions. Mr. Caputo agreed to contact him early in the new year to discuss work conditioning.
By way of background, Mr. Patriquin testified that over a period of 6-8 weeks Mr. Caputo would have worked as a sales assistant or cashier to obtain transferrable skills and increase his work tolerance. The Insurer pays Goodwill to employ people to increase their tolerance. The physical requirements were sedentary with no lifting, so they would have met Mr. Caputo's physical restrictions, and on the job training would have enabled him to work.
On January 3, 1995, a representative at Goodwill told Mr. Patriquin that they would be interviewing for the positions in early February for full- and part-time cashiers. Those already in Goodwill's work conditioning program would likely possess the necessary skills and would be given interview priority. On February 7 she confirmed the interviews were to begin and there was the possibility of further openings at Goodwill Recycling Centre in March or April 1995.
Mr. Caputo denied knowing anything about a job at Goodwill.
On December 21, 1994, Mr. Caputo was involved in a second motor vehicle accident in which he sustained injury to the right side of his head, arm and right shoulder. Mr. Caputo called to advise Mr. Patriquin of the second accident on January 6, 1995, and that as a result he did not feel he was presently capable of participating in an active employment search or a work conditioning program.
Mr. Patriquin testified that he continued identifying jobs which met Mr. Caputo's limitations.
Mr. Patriquin's notes reveal that he was instructed to send the summary closure report once the anticipated report of Dr. Clifford arrived. Dr. Clifford wrote on January 31, 1995, that all the jobs listed could be done safely by Mr. Caputo. He writes that the purpose of any rehabilitation strategy is to provide the patient with an opportunity to re-enter the workplace in a safe environment. It is not a goal of the strategy that the patient reports less pain or necessarily chooses to return to work.
After receiving Dr. Clifford's report, Mr. Patriquin closed his file. He testified that Mr. Caputo never contacted him again, nor did he try to contact Mr. Caputo.
Mr. Patriquin testified that most of the jobs he researched were at minimum wage or slightly above. He encouraged Mr. Caputo to pursue them because he might get a supervisory position soon with his age and experience. Regarding pre-accident earnings, he had been told that the weekly income benefits were $402, and working 40 hours a week at $8 an hour earns you $320.
In fact, Allstate eventually paid benefits of approximately $466, and as will be seen below I find that Mr. Caputo was entitled to benefits of $600.
Mr. Caputo retained Michelle Williams of Associative Rehabilitation Inc., who conducted an employability assessment on December 8, 1995. She reviewed the positions identified by Career Probe and Mr. Patriquin, as well as positions she identified herself, and concluded that none were suitable for Mr. Caputo. Her search for positions was limited to those earning $30,000 or more per year.
In her testimony and her reports, Ms. Williams rejected a number of positions on the basis that they were "questionable." For instance, Ms. Miller testified that although Mr. Caputo might be able to obtain a light assembly job that fits within his physical restrictions and required no special education, she finds "questionable" the likelihood that he would be successful at meeting the essential tasks on a consistent basis. I find that with these comments she is discussing the test under section 12(1), and not whether Mr. Caputo would be continuously prevented from performing a suitable job.
One of the occupations Ms. Williams identified was also one identified by Career Probe: Attendant (Recreational Facility). Ms. Williams' information was that such a position did not physically exist in London, and for the closest position she identified (cashier at an arena or aquatic facility) her contact advised that only students or past employees would be considered. Although the job has few physical demands, Ms. Williams also doubted whether Mr. Caputo had the necessary math skills: the ability to operate a cash register and make change.
On the other hand, Ms. Williams confirmed that she did not investigate the Goodwill job, which included on-the-job training as a cashier. She agreed that work conditioning is an excellent way to return to work. Ms. Williams testified that the Goodwill job seemed excellent. She testified that since her computer search produced the Attendant position, the computer interprets that some attendants at recreational activities are paid $30,000.
Regarding Mr. Caputo's post-accident attempts to return to work, Ms. Williams testified that it was in its totality a greater work effort than what she understood when she wrote her report.
Conclusion
Based on Mr. Caputo's previous income and background, Ms. Williams identified the position of Attendant (Recreational Facility). She rejected this occupation on two grounds: that the job did not exist in the London market, and that Mr. Caputo did not have the required math skills.
On the first point, Mr. Patriquin made efforts to put Mr. Caputo into a work conditioning program for a position at Goodwill Industries that I find to be similar to the position identified by Ms. Williams. Ms. Williams herself testified that the position sounded "excellent." I find that positions such as this do exist in the London market.
As for the math skills, I find that Ms. Williams tended to underrate Mr. Caputo's background and experience, especially in light of the minimal requirements of running a cash register and making change. Mr. Caputo testified that, even before his son John started working with him, he went to clients' houses, made measurements, and was able to calculate the materials and labour required in a job. Mr. Caputo testified that he had owned a pizza business for three years, and I find it likely that he learned to run a cash register to operate the business. The Career Probe report indicates that Mr. Caputo had basic math skills. At Goodwill, the work conditioning included on the job training, including learning how to be a cashier, so Mr. Caputo would have been given an opportunity to learn how to run a cash register. Following the training, he would have been favoured for a position in the interviews.
I find that this position is a suitable position for Mr. Caputo in light of his previous education and experience. As for wages, the uncontradicted evidence from Career Probe was that the salaries of such positions range from about $14,000 to $33,000 per year. The original calculation for Mr. Caputo's 1991 income was $28,765, and after refiling it was calculated at $40,786. I find that the wages for the proposed position are not so substantially different as to make the position unsuitable.
However, Mr. Patriquin testified that Mr. Caputo required the work conditioning program and the training it included in order to be eligible for the Goodwill jobs.
I find that, but for the second accident, Mr. Caputo would have been qualified for a suitable position with Goodwill following the work conditioning program. The work conditioning program was to last six to eight weeks. Accordingly, I order that Mr. Caputo receive an additional eight weeks of benefits to cover this period of training, for a total of $4,800. Since Mr. Caputo himself refused the training as a result of his injuries in the second accident, and since he never requested the training afterwards, I do not order any interest on that amount.
Amount of Benefit
Mr. Caputo alleges that his weekly income benefit should be the maximum available to him, $600. He bases this proposition on a recalculation of his income for the years 1991, 1992, and 1993.
The most important issue raised by this recalculation is the reapportionment of several invoices to Marghella Tile dated January 14, 1992, totalling $11,490. The amounts of these invoices had originally been included in Mr. Caputo's 1992 income (which for all intents and purposes had been treated as his post-accident income). In the recalculation, this amount was attributed to his 1991 (or pre-accident) income, thereby increasing the amount on which his benefit was calculated and decreasing the deduction for post-accident income.
Mr. Wilt Blaak has been Mr. Caputo's accountant since the early to mid-1980s. He testified that until 1995 he had prepared Mr. Caputo's income tax returns without regard for accounts receivable straddling a year-end: if an account was invoiced in January of a given year, the amounts invoiced were treated as income of that year, even if the work had been completed in the previous year. For the years 1991 and 1992, Mr. Blaak's employee, Patrick McGuinness, had prepared Mr. Caputo's income tax returns and had followed that practice. Thus, he had attributed the amounts of the January 14, 1992, invoices to 1992. He calculated Mr. Caputo's gross income as $62,824 in the original 1991 tax return and as $83,239 in the original 1992 tax return.
Mr. McGuinness provided the information on which Allstate based its calculation of benefits. Mr. George A. John, chartered accountant, wrote a report dated September 21, 1993, for Allstate, in which he calculated the weekly income benefit based on this information. He took the 1991 income as reported, calculated the total of expenses that ceased as a result of the accident, and obtained a ceasing expenses ratio to determine both the amount of the benefit and the amount of the deduction for post-accident income. He determined that the weekly benefit should be $466.52, and that for 1992 the amount of $401.91 should be deducted from that benefit for post-accident income.
Mr. John testified that, although strictly speaking the benefits should have been calculated from one year prior to the accident, he used the 1991 income tax returns as the best information available. As Mr. Caputo testified that the work for the January 14 invoices was completed the previous December, I find that there is no essential difference whether the calculation is based on the 1991 tax year or based on the period January 10, 1991, to January 9, 1992.
After Mr. Caputo's benefits were terminated, Mr. Caputo's counsel sought a recalculation of the benefits from Mr. Blaak. Mr. Blaak testified that, according to Mr. Caputo, the work invoiced on January 14, 1992, had been completed in December 1991. The routine was for Mr. Caputo to give the contractor (Marghella Tile) several weeks to inspect the work. After Marghella had inspected the work and approved it, Mr. Caputo would submit his invoice.
Mr. Blaak then recalculated Mr. Caputo's income, taking into account these straddling invoices. These recalculations had a ripple effect on the years around 1991 as well. In 1996 Mr. Blaak submitted revised income tax forms for the years 1991 through 1993, increasing Mr. Caputo's income and tax owing for 1991 and decreasing those amounts for 1992 and 1993. The net effect of these changes was an increase in Mr. Caputo's income tax. Most of these changes arose from the attribution of the January 14 invoices to tax year 1991.
The net tax increase to Mr. Caputo would be more than offset by the increase in benefits and decrease in the deduction for post-accident income. Mr. Blaak calculated that the maximum benefit of $600 would be payable, and the deduction for post-accident income would be only $179.18 for 1992 and $99.95 for 1993. There was no deductible post-accident income from 1994 on. If these calculations are correct, Allstate owes Mr. Caputo approximately $29,000 extra for the period in which he received benefits.
Mr. John had objected to the way Mr. Blaak first calculated the effect of the January 14 invoices. He also thought the implication of the changes was that Mr. Caputo alleged that he had completed the contracts that formed the basis of the invoices in the few days preceding the accident. Mr. Blaak then changed his approach, based on Mr. Caputo's advice that the contracts had in fact been completed in December 1991. I understand that this second approach is called the "completion method." Mr. John in his report of August 22, 1996, writes of that method as follows:
The completion method takes the whole revenue (including holdbacks) from each contract into income of the year in which the work thereon is physically completed. A contractor who chooses to adopt the completion method is required to do so in respect of all short-term contracts and is required to use the same method consistently from year to year.
Mr. John testified that work done before January 9, 1992, would be "captured" (which I took to mean "included in pre-accident income") if it was completed but not billed before that date.
Mr. John also testified that it is usual for subcontractors to give the contractor time to inspect their work before invoicing the work.
Thus, although Allstate strenuously objected to the change in accounting method, Mr. John had no philosophical objections to the accounting method proposed by Mr. Blaak. In fact, his other calculations show that he himself used a similar method: he agreed with Mr. Blaak's inclusion of outstanding cheques (cheques that had been written to suppliers in 1991 but not cashed by them until 1992) in the calculation of 1991 business expenses, and he agreed that it was fair to take out of the 1991 income some invoices for work that had been completed in 1990 but only invoiced in 1991.
The essential question, then, is whether the work invoiced on January 14, 1992, was completed prior to January 9, 1992. I do not have the best evidence before me. The invoices contain a date stamp, but no breakdown of when the jobs were completed or how long they took. Mr. Caputo did not allow Mr. Blaak to contact Marghella Tile, so the only source for the information is Mr. Caputo himself.
On the other hand, Mr. Blaak testified that his usual practice when preparing tax returns was to have Mr. Caputo come into the office with his bank statements, cancelled cheques, and sales invoices. I understand this evidence to mean that these invoices were in Mr. Blaak's possession before he was asked to recalculate the 1991 income. Mr. Blaak also testified that these invoices fit the pattern for Mr. Caputo's invoicing methods over the years, and Mr. John agreed that this pattern was a standard practice in the industry for this kind of work.
I find that the January 14, 1992, invoices reflect work completed prior to the accident.
Can Mr. Caputo change his accounting method mid-stream, so to speak? Either accounting method — the method used by Mr. Caputo over the years and the completion method which he seeks to use for the years 1991 forward — is acceptable, as long as the method is consistent. Mr. Blaak has now made the accounting consistent for the years 1991 forward. No provision in the Schedule was put to me that forbids Mr. Caputo from choosing the accounting method most favourable to him. Therefore, I find that Mr. Caputo may change the accounting method because it is a reasonable way of attributing the income reflected in the invoices and, in these circumstances, is a more accurate way of reflecting the situation.
Interest on outstanding benefits is another matter. Mr. John, acting for Allstate, calculated the benefits on the information provided to him. Mr. Caputo accepted the amount of these benefits for years. Allstate was not notified of the request for higher benefits until after Mr. Blaak recalculated the income tax for the years in question, and Mr. Blaak had errors in his calculations that were not corrected until shortly before the second part of the hearing in August 1996. I find that interest on the additional benefits should only run from August 1, 1996.
Assuming that the disputed invoices were captured in the 1991 income (and aside from other issues which do not affect the size of the benefit), Mr. John otherwise agreed with Mr. Blaak's calculations.
I have adopted Mr. John's calculation of weekly benefit entitlement in light of my findings, using Mr. Blaak's net figures of $179.18 for post accident income in 1992 (80% of $223.97) and $99.95 in 1993 (80% of $124.94):
From
To
Benefit
Net post-mva
Ne
of
Total owed
Income
Benefit
Weeks
16-Jan-92
31-Dec-92
600
179.18
420.82
50
$21,041.00
01-Jan-93
31-Dec-93
600
99.95
500.05
52
$26,002.60
01-Jan-94
31-Dec-94
600
0.00
600
52
$31,200.00
01-Jan-95
09-Jan-95
600
0.00
600
1.29
$774.00
$79,017.60
Amount paid
($49,847.02)
Amount owing
$29,170.58
Refund
I have found that Allstate owes money to Mr. Caputo. Allstate is therefore not entitled to a refund.
Allstate also suggests it is possibly entitled to a deduction for benefits that may have been available as a result of the second accident. Subsection 12(4) of the Schedule, which determines the amount of the benefit, allows a deduction for "any payments for loss of income." As Mr. Caputo had not been working at the time of the accident, I infer that he would have only been entitled to the section 13 benefit, entitled "Benefit if no income." This suggests that the benefits would not be payments for loss of income and therefore not deductible. In any event, to make a ruling I would have to have evidence of Mr. Caputo's substantial inability to perform the essential tasks in which he normally engaged before the second accident. In the absence of such evidence, I find that no deduction is available to Allstate as a result of the second accident.
Expenses
Mr. Caputo is entitled to his reasonable expenses incurred in respect of the arbitration.
Order:
Mr. Caputo is entitled to benefits to January 9, 1995, plus an additional eight weeks of benefits for work conditioning totalling $4,800.
Mr. Caputo is entitled to weekly income benefits in the amount of $600 per week.
Allstate is not entitled to a refund for overpayment of benefits or a deduction for benefits which may be available as a result of the second accident of December 21, 1994.
Mr. Caputo is entitled to his reasonable expenses of this arbitration hearing.
Mr. Caputo is entitled to interest on the outstanding benefits of $29,170.58 from August 1, 1996.
June 18, 1997
David Evans
Arbitrator
Date
APPENDIX
Present at the Hearing:
Applicant:
Oreste Caputo
Mr. Caputo's
Paul Ledroit
Barrister and Solicitor
Representatives:
Susan Murdoch
Barrister and Solicitor
Allstate's
Grant Dow
Representative:
Barrister and Solicitor
Allstate's
Betty Menard
Officers:
Dan Grey
Court
Dorothy Marchant
Triune Reporting
Reporters:
Sarah Baumann Priscilla
Rogers Reporting
Witnesses:
Oreste Caputo
Wilt Blaak
Dr. David Taylor
John DeVuono
Michelle Williams
Rosa Caputo
Nicola Lorusso
Dr. John C. Clifford
Tim Colley
Michael Livingstone
George John
Scott Patriquin
Dr. Robert Teasell
Exhibits:
Medical Brief
Rehabilitation Brief
Income Brief
Determination of Gross Weekly Income
2 spreadsheet sheets dated April 1, 1996
Application for Accident Benefits signed March 2, 1995
Accident Benefits Application Package signed February 13, 1996
Original Tax Return for 1990
Tax Return for 1994
Notice of Reassessment 1991 for John Caputo dated January 29, 1996
1995 Income Tax Return for Oreste Caputo and Notice of Assessment dated March 21, 1996
Determination of Gross Weekly Income and Accident Benefits as of August 12, 1996 [b]
Work Sheet prepared by Wilt Blaak dated May 31, 1996
"Some Facts About Wilt E. Blaak"
Invoices from Savuto to Marghella Tile for period January-March 1992
Invoices from Savuto to Marghella Tile for January 1993
Statement of Account and Notice of Reassessment from Revenue Canada
Cheques from Savuto Ceramic Tile
Expert Witness Brief
Letter from Crawford & Company to Dr. D. Taylor dated December 1, 1993
Letter from W. Blaak dated May 31, 1993
Video of balance of Mr. Blaak's evidence
Associative Rehabilitation Inc. Report dated May 15, 1996
Curriculum Vitae of Dr. John Clifford
Letter of Dr. John Clifford dated March 19, 1996
Letter of Dr. John Clifford dated April 12, 1996
Videotape of Mr. Caputo by Investigative Concepts
Report of Investigative Concepts dated August 25, 1995
4 sheets of photographs marked A, B, C and D, taken July 21 and 22, 1992
6 surveillance reports and 2 photographs for the August 25, 1993 report, by Livingstone & Company
Set of 3 videotapes from Livingstone & Company
Curriculum Vitae of George G. John, Chartered Accountant
Letter from George G. John dated March 27, 1996
Letter from George G. John dated August 22, 1996
Resume of Scott M. Patriquin, Employment Consultant, Crawford & Company
Letter from Scott M. Patriquin dated March 29, 1996
Original 1992 Tax Return for Mr. Caputo
Curriculum Vitae of Dr. Robert Teasell