Neutral Citation: 1997 ONICDRG 114

OIC A95-000468

ONTARIO INSURANCE COMMISSION

BETWEEN:

DONALD BUCHANAN

Applicant

and

SOUTH EASTHOPE MUTUAL INSURANCE COMPANY

Insurer

DECISION

Issues:

The Applicant, Donald Buchanan was injured in a motor vehicle accident on November 8, 1991. He received statutory accident benefits from South Easthope Mutual Insurance Company ("South Easthope"), payable under the Schedule.¹ South Easthope paid Mr. Buchanan weekly income benefits at a rate of $600.00 per week, for 99 weeks following the accident. South Easthope stopped paying these benefits because of an alleged overpayment; however, it did not dispute Mr. Buchanan's entitlement to weekly income benefits until November 9, 1994, the 156-week mark of the accident. The parties were unable to resolve their dispute about the duration and amount of weekly income benefits through mediation, and Mr. Buchanan applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, (the "Act"), as amended.

The issues in this hearing are:

1. Is Mr. Buchanan entitled to weekly income benefits after November 9, 1994, pursuant to section 12(5)(b) of the Schedule?

2. What is the correct amount of Mr. Buchanan's weekly income benefit?

3. Has there been an overpayment? If so, is South Easthope entitled to a repayment under section 27(1) of the Schedule?

4. If South Easthope is entitled to a repayment, is it entitled to set off amounts against other potential benefits payable under the Schedule?

Mr. Buchanan also claims interest on any amounts owing, and his expenses incurred in the hearing.

Result:

1. Mr. Buchanan is entitled to weekly income benefits from November 9, 1994 onwards, pursuant to section 12(5)(b) of the Schedule.

2. The correct amount of Mr. Buchanan's weekly income benefit is $455.20, subject to deductions of post-accident income. South Easthope shall pay interest at the rate of 2 per cent per month, in accordance with section 24(4) of the Schedule.

3. South Easthope is not entitled to a repayment of any weekly income benefits paid to Mr. Buchanan through error, pursuant to section 27(1) of the Schedule.

4. Mr. Buchanan is entitled to his expenses in respect of this arbitration.

Hearing:

The hearing was held at the offices of the Ontario Insurance Commission in North York, Ontario, on June 18, 19 and 20, 1996, before me, Asfaw Seife, Arbitrator.

Present at the Hearing:

Applicant:

Donald Buchanan

Mr. Buchanan's

Joseph J. Masterson

Representative:

Barrister and Solicitor

South Easthope's

Richard J.T. Shaheen

Representative:

Barrister and Solicitor

Witnesses:

Gary Buchanan, Applicant's son

Dr. Kenneth Rodney, Applicant's family physician

Bruce Webster, Chartered Accountant

Edward Pellow, General Manager, South Easthope

Exhibits:

Listed in Appendix A to this decision.

Evidence and Findings:

Background:

At the time of the accident, Mr. Buchanan was 67 years old, married, with six children ranging in age from 37 to 46 years. He was a self-employed farmer who lived and worked in the Londesboro area of rural Ontario. Mr. Buchanan and his youngest son, Gary Buchanan, share cropped 600 acres of farmland on which they cultivated cash crops and carried on a livestock operation.

The accident occurred on a rural road in Ontario. Mr. Buchanan was driving his pick-up truck, which was loaded with livestock feed, at approximately 50 kilometres per hour. Approaching an intersection, Mr. Buchanan saw a vehicle pulling up in front of him. Mr. Buchanan swerved sharply to avoid a near collision. In the process, his pick-up truck went onto the shoulder of the road, and hit a large maple tree head on. Mr. Buchanan was taken to a local hospital, where he remained for several days.

South Easthope retained the services of Innovative Rehabilitation Inc. to assist in coordinating Mr. Buchanan's medical treatment and his vocational rehabilitation. Since the accident, Mr. Buchanan has been receiving medical treatment from his family doctor, Dr. K. Rodney, on a regular basis. He has been examined by two orthopaedic surgeons: Dr. C. Arciszewski, an orthopaedic surgeon, who performed arthroscopic surgery on Mr. Buchanan's left knee and Dr. Harvey Bailey, an orthopaedic specialist, who examined him at the Insurer's request. Mr. Buchanan has received physiotherapy treatment at various rehabilitation centres and has undergone a Functional Capacities Evaluation.

The medical evidence confirms that as a result of the accident, Mr. Buchanan suffered contusions to his chest and lung and fractures to his nose, his ribs and his right shoulder. In addition, as a result of a severe blow to his left knee during the accident, he suffered a serious aggravation of pre-existing osteoarthritis in the left knee.

Despite the medical and rehabilitation treatments he has received since the accident, Mr. Buchanan claims that his symptoms from the accident have continued without much improvement. He has not been able to return to his pre-accident level of employment activities, nor to any other employment for which he is reasonably suited by education, training or experience.

Mr. Buchanan testified that at the time of the accident he worked 60 to 70 hours per week performing all aspects of his farm duties. For a period of one year after the accident, he was unable to do any of his work. Since then he has been able to perform only light duties, for up to 25 hours per week. He testified that his right shoulder and left knee injuries remain the major limiting factors to his return to work.

Entitlement to Weekly Income Benefits:

South Easthope does not dispute that Mr. Buchanan suffered a substantial inability to perform the essential tasks of his pre-accident occupation, as a result of the injuries he sustained. It has paid him weekly income benefits under section 12(1) of the Schedule. However, it contends that Mr. Buchanan does not meet the stricter test of disability under section 12(5)(b) of the Schedule for any period after November 9, 1994.

In order to succeed in his claim for ongoing weekly income benefits, Mr. Buchanan must adduce evidence sufficient to establish, on a balance of probabilities, that he meets the test under section 12(5)(b) of the Schedule. He must prove that his injuries resulting from the accident continuously prevent him from engaging in any occupation or employment for which he is reasonably suited by education, training or experience.

Education, Training and Experience:

Mr. Buchanan has always done farm work. He started working on his father's farm when he was a teenager, after completing grade nine. He has never returned to school or pursued any other formal education since then. At the time of the accident, Mr. Buchanan owned two farms which he bought in 1946 and 1970. In addition, he sharecropped on a nearby farm owned by his son Gary Buchanan. Gary also worked on his father's farms. Mr. Buchanan and his son cash cropped corn, white beans, and soy beans. They also ran a custom feeding operation of up to 140 veal calves.

Mr. Buchanan and Gary Buchanan testified about their farming activities in detail. Mr. Buchanan's tasks of cash crop farming included cultivating the fields, planting a variety of crops, harvesting and ploughing the land.

The veal calf operation involved feeding the calves, injecting them, and cleaning their pens. The veal calves had to be treated and fed custom food. Then, after six weeks, they would be shipped out to a feed lot. This involved a considerable amount of standing, and struggling with calves to hold them down for injections.

In performing his cash crop tasks, Mr. Buchanan was required to operate various machines, including a tractor and a combine machine. South Easthope does not dispute that Mr. Buchanan's work was heavy and required long hours. The physical demands included prolonged standing and sitting 10 to 12 hours daily on a tractor during the planting and harvesting of crops. The work also involved considerable walking in and around the farm. Mr. Buchanan was frequently required to lift and carry 88 pounds of feed and 50 pound bales of straw. There was a lot of pushing, pulling, and climbing required. The work also required frequent bending, every five to ten minutes from waist to floor level, lots of twisting and upper body rotation.

I find that Mr. Buchanan's work experience and skills relate substantially to cash crop farming and the operation of veal calf custom feeding. I find that this occupation requires hard physical labour, and long hours of work, up to 70 hours per week.

Medical Evidence:

Mr. Buchanan testified that prior to the accident he was able to carry out his full farm duties which included the handling and frequent injecting of 250 to 300 pound calves. He also cultivated, planted and harvested approximately 600 acres of his own and his son's crops. However, after the accident, because of his knee and shoulder problems, he was unable to lift bales of hay, bags of feed or bags of seed. He was unable to inject calves, nor could he clean their pens. He is unable to repair farm machinery, and can only drive a tractor for maximum of five hours a day, with severe pain to his left knee and right shoulder. He experiences pain while getting on and off a tractor, and his sitting tolerance is low. He cannot operate a combine machine because it requires regular getting on and off. He is unable to do any ploughing.

The medical evidence in this case is uncontradicted, and straightforward. A repeat x-ray done in March 1992 confirmed that the injury to Mr. Buchanan's right shoulder was a fracture through the neck of the glenoid, diagnosed by the orthopaedic surgeons as a rotator cuff impingement. The doctors agree that Mr. Buchanan had no injury to his shoulder prior to the accident, and the fracture was caused directly by the accident.

As far as the left knee problem is concerned, the medical evidence indicates that while Mr. Buchanan had mild arthritic changes prior to the accident, the severe trauma to the knee during the accident resulted in a significant aggravation of Mr. Buchanan's pre-existing, asymptomatic osteoarthritis to the left knee.

Dr. Rodney testified that Mr. Buchanan's left knee and right shoulder injuries were caused by the accident and they remain the major contributors to his present disability. Dr. Rodney felt that had the accident not happened, despite his age and other illnesses, Mr. Buchanan could well be farming at this time.

Dr. Rodney supported Mr. Buchanan's claim that he cannot engage in the heavier tasks of his occupation such as driving tractors, handling calves, and carrying bales of hay, because of his knee and shoulder injuries. He testified that Mr. Buchanan is restricted in the weight he can lift and carry because of the impingement in his shoulder.

This opinion is supported by Dr. Bailey, who examined Mr. Buchanan's at South Easthope's request. In his report dated January 17, 1994, Dr. Bailey felt that Mr. Buchanan "will have significant ongoing problems as far as the shoulder and knee are concerned." He concluded that "it is most unlikely that we could predict that he could ever return to his active participation as a farmer. There is no doubt that the situation in his right shoulder is totally related to his accident. I think the situation in his left knee is one of a pre-existing minor problem that has been exacerbated to a major one."

In his submissions, counsel for South Easthope suggested that Mr. Buchanan's pre-accident health problems were responsible for his present disability.

Mr. Buchanan has testified, and the medical evidence indicates, that prior to the accident, he suffered from various illnesses, including hypertension, hyperthyroidism, phlebitis and respiratory problems. Dr. Rodney, who had known and treated Mr. Buchanan for over 25 years, testified that Mr. Buchanan's pre-accident health problems were treated with medication, and that they were not disabling to him.

Dr. Rodney testified that the chest injury Mr. Buchanan received in the accident aggravated his respiratory problems. As a result, Mr. Buchanan now has a chronic case of bronchitis. However, Dr. Rodney testified that this condition is not disabling on its own.

Dr. Rodney testified that prior to the accident, Mr. Buchanan had degenerative osteoarthritis in his left knee; however, at the time of the accident, Mr. Buchanan was asymptomatic. This condition did not adversely affect his pre-accident functional abilities.

Dr. Rodney also confirmed that Mr. Buchanan had never complained to him of a shoulder problem prior to the accident, and that his shoulders were functioning normally at the time of the accident.

I have found Mr. Buchanan a forthright and credible witness. His evidence about his pre-accident activities and his post-accident limitations has been corroborated by Gary Buchanan's testimony.

Mr. Buchanan's testimony that at the time of the accident, he was in relatively good health and working up to 70 hours a week, has not been challenged by South Easthope. The evidence is that despite any pre-existing health problems, at the time of the accident, Mr. Buchanan was performing all of his essential tasks as a farmer without substantial limitations.

I have no difficulty accepting Mr. Buchanan's testimony about his pain and disability. There is an objective, organic basis that lends credibility to his subjective complaints. His claims have been supported by Dr. Rodney and the opinions of the orthopaedic specialists.

Accordingly, I find that despite any pre-existing health problems, Mr. Buchanan was able to perform the essential tasks of his farming occupation without substantial limitations.

I find that as a result of the accident, Mr. Buchanan sustained injuries to his right shoulder from a direct trauma in the accident, and a significant aggravation of his pre-existing osteoarthritis in the left knee. I find that the accident is the cause of Mr. Buchanan's right shoulder and left knee problems.

Disability:

The evidence is clear that Mr. Buchanan suffered a fractured right shoulder and an aggravation of his degenerative osteoarthritis to his left knee, as a result of the accident. All the health care practitioners who have treated or assessed Mr. Buchanan agree, and the Insurer has conceded, that as a result of these injuries, he suffers from a substantial inability to perform the essential tasks of his pre-accident employment, or any other physically demanding work that involves the use of the right shoulder and the left knee. Mr. Buchanan has testified that from one year after the accident, he has been able to perform the lighter aspects of his occupation; however, the issue I must determine is whether he meets the test of disability under section 12(5)(b) of the Schedule after November 9, 1994.

As indicated above, the onus to prove that he meets the test of disability is on Mr. Buchanan. The nature and extent of evidence that an applicant must adduce to discharge this onus depend on the circumstances of each case. In Murray and Wawanesa Mutual,² Arbitrator Lawrence Blackman summarized arbitration cases which commented on the Applicant's onus as follows:

Recent arbitration decisions have grappled with what is the "positive obligation"³on insureds. Arbitrator Evans stated that applicants as part of discharging the onus of proof "must explore career options."⁴ Arbitrator Seife held that "the applicant must identify some sort of 'suitable' employment, describe the physical demands of the work and demonstrate with credible evidence that their injuries continuously prevent them from engaging in such employment."⁵ Arbitrator Manji in the Caruso decision required the Applicant (if unable to adduce strong medical evidence of total disability) to provide some evidence that he or she "has made a bona fide effort to identify, try to find or attempt some sort of 'suitable' employment but failed because his or her injuries continuously prevent him or her from engaging in such employment."

In Murray,⁶ Arbitrator Blackman stated that where an applicant adduces evidence which prima facie meets this onus, an insurer runs the risk of an adverse inference in the absence of evidence to the contrary. I agree.

Arbitrators have acknowledged that subsection 12(5)(b) encompasses a broader range of inquiry than subsection 12(1), and that the issue of disability is considered not merely in terms of the occupation or employment engaged in at the time of the accident, but in terms of any occupation or employment for which the insured person is reasonably suited by education, training or experience.

What is "suitable" employment? Arbitrators have suggested several guidelines for determining what "suitable" employment is. I have summarized them in my decision in Wigle⁷ as follows:

1. The question of suitable employment in every case is a question of fact: the work must be suitable for that applicant, viewed fairly and realistically in the context of his or her educational and employment background.

2. Suitable work is not limited to what the applicant was doing at the time of the accident, provided that it is not unrelated to his or her previous experience. However, work is not necessarily suitable because an applicant has done a stint of it in the past. If the job is substantially different in nature, status, or remuneration it may not be an appropriate alternative.

3. In deciding suitable employment, one must consider such factors as the nature and status of the work compared with what the applicant did before, the hours of work and level of remuneration, the applicant's employment experience and length of time spent in different jobs, his or her age, and his or her qualifications and technical training and know-how.

4. The primary focus is on an applicant's functional limitations; however, job-market considerations are relevant in determining suitable employment.

I adopt these principles for the purposes of this case.

Given that Mr. Buchanan has been a farmer all his life, and has not had any training or experience outside of this occupation, I find that suitable work for Mr. Buchanan is farming in the context of cash crop or livestock operation. This occupation demands hard physical labour and long hours of work. Mr. Buchanan can do light sedentary work; however, he cannot do the great majority of farming activities because of his injuries. In my view, because his experience is limited to farming, involving mostly unskilled physical labour, his options for employment outside of farming doing light work are negligible.

South Easthope has not conducted an assessment of Mr. Buchanan's residual functional abilities; nor did it perform an analysis of transferable skills. Mr. Buchanan has received no vocational training for sedentary, light work from South Easthope and no other assistance in finding alternate employment.

South Easthope presented no evidence of any employment for which Mr. Buchanan might reasonably be suited by education, training, or experience. It appears that South Easthope has not addressed this issue seriously because it believed that Mr. Buchanan's chances of finding employment are limited, not by his knee and shoulder injuries, but by his advancing age and deteriorating health.

Having considered all the evidence in this case, I am satisfied that Mr. Buchanan has proved, on a balance of probabilities, that as a result of the injuries from the accident, he is continuously prevented from engaging in any occupation or employment for which he is reasonably suited by education, training or experience, from November 9, 1994 onwards. Accordingly, I find he is entitled to weekly income benefits from the date they were terminated.

Amount of Weekly Income Benefits:

Section 12 of the Schedule provides that the amount of 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 calculating the gross income of applicants who were self-employed at the time of the accident, section 12(7)(3) provides that business expenses which cease as a result of the accident shall be deducted from the person's income from self-employment before calculating the gross weekly income.

Section 15 of the Schedule allows the insurer to deduct from weekly income benefits 80 per cent of any income received by or available to the insured person from any occupation or employment subsequent to the accident.

Mr. Buchanan has designated the 52 weeks prior to the accident as the time period for calculating his weekly income benefits.

I heard evidence from Mr. Buchanan, his son Gary Buchanan and Mr. Daniel Webster, a Chartered Accountant from the accounting firm of Coopers & Lybrand, who was called by Mr. Buchanan.

Mr. Buchanan also filed into evidence financial documents, including his income tax returns from 1989 to 1995.

The essential dispute between the parties relates to the treatment of the value of Gary Buchanan's labour in share cropping Mr. Buchanan's farm. Mr. Buchanan argues that he should be allowed to assign a monetary value to Gary's labour and treat it as a ceasing business expense. Based on this approach, Mr. Webster calculated that Mr. Buchanan's weekly income benefit is $455.20, subject to deductions of post-accident income.

South Easthope took the position that the value of Gary Buchanan's labour must not be taken into account in calculating Mr. Buchanan's gross income. On behalf of the Insurer Mr. Shaheen argued that Gary Buchanan provided his services gratuitously, out of love of his father and without any expectation of payment. Mr. Shaheen also argued that since Mr. Buchanan's farming operations continued after the accident, Mr. Buchanan had no ceasing expenses. In addition, Mr. Shaheen argued that Mr. Buchanan's gross income should be calculated by subtracting his business expenses from his total revenue. Based on this calculation, he submitted that Mr. Buchanan's weekly income benefits would be the minimum $185.60 under the legislation.

The pertinent facts are not in dispute. During the 52-week period preceding the accident, Mr. Buchanan and his son, Gary Buchanan, share cropped each other's farms and performed an equal amount of general labour duties on the farms. Each worked, on average, approximately 60 to 70 hours per week. The number of hours that Mr. Buchanan worked on Gary's farm was equal to the number of hours that Gary worked on Mr. Buchanan's farms. No money was exchanged between the two for this labour.

Mr. Buchanan and his son each separately recorded their own expenses and revenues from their respective farms. Each separately reported his own income/loss on his own personal income tax returns.

For a period of one year following the accident, Mr. Buchanan was unable to perform any work; however, after the one-year mark of the accident, he has been able to work, on average, approximately 25 hours per week. The operation of Mr. Buchanan's farm has continued without interruption since the accident. The total number of approximately 130 hours per week, required on both Mr. Buchanan's farms and Gary's farm has not changed since the accident. Any work not performed by Mr. Buchanan before the accident has been performed by other individuals (Gary, Mr. Buchanan's grandson and neighbours). Gary has continued to work the same number of hours on Mr. Buchanan's farms from the date of the accident onward.

Gary Buchanan testified that the work arrangement with his father started 12 years prior to the accident. He was the only child helping on the farm and he worked on his father's farm partly for love of his father, but also because his father could not get reliable help at reasonable cost. In addition, his father contributed his share by helping him on his own farm.

Mr. Daniel Webster, a professional accountant experienced in earnings loss analysis under the Statutory Accident Benefit legislation, gave oral evidence. His reports dated June 7, 1996 and June 11, 1996 were also filed into evidence.

Mr. Webster testified that section 12(7)(3) provides that business expenses which cease as a result of the accident are to be deducted from the person's income before calculating the gross weekly income. While the application of this provision is clear in circumstances where the business closed as a result of the accident, the Schedule does not outline the approach to be taken when a business continues after an accident. He testified that gross weekly income for the purposes of the Schedule should be based on sales (total revenue) minus "avoidable expenses." The determination of avoidable expenses is based on the activities of the business following the accident. Specifically:

1. if the business is only temporarily interrupted as a result of the accident, then avoidable expenses are those expenses which cease during the period of temporary interruption;

2. if the business is to be permanently closed as a result of the accident, then all expenses are considered avoidable.

In this case, Mr. Webster testified that Mr. Buchanan's farms continued to operate subsequent to the accident with the help of Gary Buchanan's labour. As a result, the value of Gary's labour must be treated as an expense which would cease during a period of temporary interruption and is an avoidable expense.

Mr. Webster testified that since, prior to the accident, Mr. Buchanan and Gary each performed equal number hours of general farm labour duties on each other's farms and since each worked, on average, approximately 60 to 70 hours per week, this meant that they each worked 32.5 hours on Mr. Buchanan's farms and 32.5 hours on Gary's farm.

As stated above, for approximately one year following the accident, Mr. Buchanan was unable to perform any work; however, following the one year period after the accident, Mr. Buchanan has been able to work 25 hours per week.⁸ Therefore, assuming that the same amount of labour on average per week was required on Mr. Buchanan's farms subsequent to the accident, Mr. Webster determined that for the first year after the accident, Mr. Buchanan required, on average, 65 hours of labour per week; and during the period following the one year period, he required an additional 40 hours of labour per week.

Mr. Webster testified that he assigned a reasonable monetary value to labour performed using an average hourly value for labour of $8.04 per hour for general farm labour as specified in the 1994 London/St. Thomas Wage Book. Based on the number of hours each spent on Mr. Buchanan's farms, Mr. Webster calculated that Mr. Buchanan's farms required additional weekly labour of $522.60 per week (65 x$8.0 per hour) during the one-year period following the accident, and $321.60 per week (40 x $8.04 per hour) thereafter.

Mr. Webster testified that he treated the value of Gary's labour as Mr. Buchanan's business expense, both before and after the accident. He also treated the value of Mr. Buchanan's labour performed on Gary's farm before the accident as Mr. Buchanan's income from self-employment.

Mr. Webster testified that since Mr. Buchanan's farms' wage expense to Gary would be similar to Mr. Buchanan's employment income from working on Gary's farm, for the purposes of calculating Mr. Buchanan's gross weekly income, his pre-accident income would be equal to the income from his farms, with no adjustments for work performed by either party on the other's farm.

Based on the income and expense information contained in Mr. Buchanan's income tax returns, and deducting the value of Gary's labour as a ceasing expense, Mr. Webster calculated Mr. Buchanan's weekly income benefits to be $455.20, before post-accident income deductions are made.

Although post-accident income is not at issue in this arbitration, Mr. Webster proceeded to determine the deductions for income earned subsequent to the accident under section 15 and found as follows:

From November 15, 1991 to November 12, 1992 - nil

From November 13, 1992 to November 11, 1993 - $60.18 per week

From November 12, 1993 to November 10, 1994- $28.57 per week.

Accordingly, he concluded that the weekly income benefits payable during the various periods are as follows:

From November 15, 1991 to November 12, 1992 = $455.20 per week.

From November 13, 1992 to November 11, 1993 = $395.02 per week

From November 12, 1993 to November 10, 1994 = $426.63 per week.

Mr. Webster calculated the weekly income benefit payable to Mr. Buchanan beyond November 10, 1994 to be $351.15 per week, after post-accident income deductions.

South Easthope did not challenge the financial information contained in the income tax returns; nor did it dispute the assumptions or the accuracy of financial information on which Mr. Webster based his calculations.

It did not question the categories of "avoidable" and "unavoidable" expenses in Mr. Webster's calculations, other than the treatment of Gary's labour as a ceasing business expense deductible from Mr. Buchanan's employment income. Though in his submissions, Mr. Shaheen disagreed with Mr. Webster's approach, he has called no accounting or other evidence to challenge it.

Analysis and Conclusion:

The issue before me is whether the value of the services that Mr. Buchanan and his son provide to each other in the course of their share cropping arrangement can be included in calculating Mr. Buchanan's gross weekly income under s. 12(7).

Counsel for Mr. Buchanan submits that a claim based on the value of the services rendered reasonably falls within the concept of income under the legislation. He argued that in the circumstances of this case, the services exchanged between Mr. Buchanan and his son were not intended to be given gratuitously and the fair value of the services must be included, as Mr. Buchanan's employment income where he has provided the services, and as a business expense where he received them.

In Bress and State Farm Insurance⁹ Senior Arbitrator Susan Naylor stated:

The scheme and purpose of the legislation support a broad definition of the term "income" so as to capture the real return from employment or self-employment generated to an applicant ..... Money accrued but not received could be included. Moreover, it might reasonably extend beyond money to money's worth - to remuneration or return capable of being estimated in monetary terms.

....the word income implies that something - money, money's worth, a thing of some value, greater command over goods and services - comes into an applicant's hands or accrues to him or her in return for their employment or occupational endeavours.

Arbitrators have held that the inquiry into the amount of an insured person's pre- and post-accident income should go beyond mere form, to examine the substance of each individual's financial situation. They have looked beyond the form of financial arrangements reached in a family business, in determining whether income is available to a family member.¹⁰

Both Mr. Buchanan and Gary have testified that they spent a total of 65 to 70 hours each working on both farms and that this arrangement had been in place for more than 12 years prior to the accident.

I am not persuaded that Mr. Buchanan was receiving gratuitous help from Gary. The evidence is that Mr. Buchanan also worked on Gary's farm for the same amount of time.

I accept Mr. Buchanan's income tax returns as prima facie evidence of his pre and post-accident income. The value of services provided or received by Mr. Buchanan are not reflected in his financial records as an income or expense; however, given the circumstances of this case, I am prepared to look beyond the form of financial arrangement between father and son. I find that Mr. Buchanan has presented reliable and cogent evidence to overcome the prima facie presumption.

Mr. Buchanan and Mr. Webster's evidence is unrebutted by any evidence. The long-standing exchange of labour between Mr. Buchanan and his son had been mutually beneficial to them. The evidence is that had Gary not worked on Mr. Buchanan's farms, both before and after the accident, Mr. Buchanan's farms would have stopped operation. Therefore, I accept Mr. Webster's approach in assigning monetary value to labour performed by each person and treating it as an employment income or a business expense, as the case may be, both before and after the accident.

I find it reasonable that Mr. Buchanan treat the value of his own contribution of labour in Gary's farm as income from self-employment, and likewise, treat the value of Gary's contribution of labour on his farms as a business expense. I also accept Mr. Webster's approach that this is an expense which would have ceased as a result of the accident, had Mr. Buchanan's farm operations closed down or had been temporarily interrupted.

Mr. Webster's calculation of Mr. Buchanan's weekly income benefit have not been challenged by South Easthope on any other basis. Therefore, having accepted Mr. Webster's approach as reasonable, I also accept his calculation of Mr. Buchanan's weekly income benefits.

I find Mr. Buchanan is entitled to weekly income benefit of $455.20 per week, subject to any post-accident income deductions.

Has there been an overpayment of weekly income benefits and is South Easthope entitled to a repayment?

South Easthope has paid Mr. Buchanan weekly income benefits for 99 weeks at the rate of $600.00 per week. I have found above that the correct amount of Mr. Buchanan's weekly income benefit is $455.20 per week, subject to deductions of post-accident income under section 15 of the Schedule. The Insurer claims repayment of the difference between the two amounts, or an offset against future benefits to be paid to Mr. Buchanan. South Easthope alleges that an error was made in the initial calculation of Mr. Buchanan's weekly income benefits.

On behalf of South Easthope, Mr. Pellow, General Manager of South Easthope with 32 years experience in the insurance industry, testified that he and the adjuster in charge of the file calculated Mr. Buchanan's weekly income benefit on the basis of 80 per cent of his average gross weekly revenue for the four weeks preceding the accident. The gross revenue figures were taken from bank deposit books. No business expenses were deducted. Mr. Buchanan's weekly income benefit was calculated to be the maximum $600.00.

Mr. Pellow testified that he supervised and approved the payment; however, he was not totally satisfied with the information they had received. Mr. Buchanan was paid the maximum amount with a view that any errors could be adjusted in the future when accurate information was obtained. Mr. Buchanan was not asked to provide any additional information until April 1993, one-and-a-half years after the accident, when South Easthope's representatives requested a copy of his 1992 tax returns. In June 1993, they requested his income tax returns for the years 1990 and 1991. The income tax returns for the years 1989, 1990 were requested on August 12, 1993. These documents were provided by Mr. Buchanan or his farm accountants when requested.

After receiving the income tax returns, South Easthope decided the initial calculation of Mr. Buchanan's weekly income benefits was wrong. It recalculated the benefits by taking the gross revenue figures for the year prior to the accident, subtracting all of the business expenses for the year, and calculating 80 per cent of that sum. This resulted in the minimum weekly income benefit under the legislation.

Mr. Pellow testified that neither he nor the adjuster in charge of the file were experienced in calculating weekly benefits of a self-employed person when the business continued after the accident. He said the legislation was relatively new, and no one at South Easthope understood what "ceasing expenses" meant. He testified the error in this case is South Easthope's failure to deduct business expenses before calculating gross weekly income. He testified that he did not consider seeking expert advice on the matter. South Easthope has never hired an accountant to perform the calculations.

Mr. Shaheen conceded that Mr. Buchanan had cooperated and provided documents when requested; however, he argued that repayment is mandated if it was paid through error, irrespective of who was responsible for the commission of the error.

I do not agree with Mr. Shaheen's submissions. Repayment of benefits is governed by section 27 of the Schedule which states:

A person must repay to the insurer any benefit received under this Regulation that is paid to the person through error or fraud.

This section requires that benefits must be repaid when they have been paid to the person through error or fraud. Fraud is not alleged in this case.

In Dana B. Levenson and The General Accident Assurance Company of Canada (February 18, 1992), OIC A-000260, Senior Arbitrator Susan Naylor (as she then was) stated:

It is not sufficient therefore to establish merely that an applicant has received benefits to which he or she is subsequently adjudged not to be entitled. To give meaning to the terminology of the section, the stipulation that benefits be paid "through error" in order to be recoverable must require that responsibility for the payment be attributable in some material way to the actions of the applicant.

I agree with Senior Arbitrator Naylor's interpretation of section 27(1) and adopt it for the purposes of this case.

South Easthope has concedes that the error in the calculation of weekly income benefits is not attributable to Mr. Buchanan.

Mr. Buchanan testified that he has cooperated with every request for financial information, and had supplied them forthwith. He was candid and prompt in his responses to the Insurer's request for financial information.

It has been stated in a number of arbitration decisions that one of the purposes of the Schedule is to ensure that benefits are paid in a timely fashion; and that the provisions of section 27(1) should not be interpreted in a manner that would discourage the early payment of claims. As Arbitrator David Draper stated in Morin,¹¹ that an insurer's decision to pay benefits pending further evidence should not preclude its right to recover an overpayment. However, in the circumstances of this case, the error was not caused by lack of reliable and accurate information; rather, it was South Easthope's interpretation of the legislation that resulted in the overpayment.

I agree with Kennedy, J. in State Farm Mutual Automobile Insurance Company v. Chun Soo Kong¹² who in interpreting section 27(1) of the Schedule stated:

An innocent insured cannot be expected to receive his no fault benefits with a mere hope that the quantum is correct and a fear that he will be asked to repay them at a later date, should the insurer decide to acquire an accounting opinion after the fact. Instead, the insured is entitled to rely on the insurer's expertise in calculating the quantum of no fault benefits and is further entitled to assume the quantum of benefits, as represented by the insurer's payment, is correct. Absent any contributing material act or omission by the insured, the insurer must bear the loss which results from its inadvertence in calculating the quantum of no fault benefits...

It is the obligation of the applicant to provide credible and reliable documentary evidence to support his claim for benefits. It is also his/her responsibility to supply this evidence to the insurer promptly when requested. Mr. Buchanan has done all of this. In the absence of a failure to disclose relevant financial information or any other material act or omission on his part that has caused the overpayment, it would not be reasonable to require Mr. Buchanan to bear the responsibility for an overpayment that resulted, essentially, from the Insurer's interpretation of the legislation.

Accordingly, I find the overpayment was not made through error within the meaning of section 27(1) of the Schedule, and Mr. Buchanan is not obligated to repay any amount to the Insurer.

Expenses:

Mr. Buchanan has succeeded in his arbitration. I exercise my discretion under section 282(11) of the Act to award him his expenses incurred in respect of this arbitration.

Order:

1. Mr. Buchanan is entitled to weekly income benefits from November 9, 1994 onwards, pursuant to section 12(5)(b) of the Schedule.

2. The correct amount of Mr. Buchanan's weekly income benefit is $455.20, subject to deductions of post-accident income. South Easthope shall pay interest at the rate of 2 per cent per month, in accordance with section 24(4) of the Schedule.

3. South Easthope is not entitled to a repayment of any weekly income benefits paid to Mr. Buchanan through error, pursuant to section 27(1) of the Schedule.

4. Mr. Buchanan is entitled to his expenses in respect of this arbitration.

June 24, 1997

Asfaw Seife Arbitrator

Date

APPENDIX A

1. Letter dated April 26, 1993 from D. Stevenson to Applicant

2. Letter dated June 8, 1993 from D. Stevenson to Davies Accounting Services

3. Letter dated August 12, 1993 from D. Stevenston to Applicant

4. Letter dated September 23, 1993 from D. Stevenson to Applicant

5. Medical Brief

6. Rehabilitation Brief

7. Income Statement - Handwritten by Mr. McKenzie

8. Income Tax Brief

9. From Coopers & Lybrand: (9A) Covering letter dated June 7, 1996; Accounting Report dated June 7, 1996 (9B); Follow-up letter dated June 11, 1996 (9C) and Comparison of the Alternative Definitions of Ceasing Expenses (9D)

10. Medical/Psychological Report dated November 24, 1991.

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 On or Between June 22, 1990 and December 31, 1993. In this decision, the term "Schedule" will be used to refer to Regulation 672.
2. 2Murray and Wawanesa Mutual Insurance Company (August 23, 1996), OIC A-003224
3. 3Gagnon and Jevco Insurance Company (May 1, 1996), OIC A-015357
4. 4Gagnon, ibid, at page 5
5. 5Wigle and Royal Insurance Company of Canada (January 12, 1996), OIC A-012312
6. 6Murray (supra) at page 13
7. 7Supra, at footnote #5
8. 8For the purposes of calculating Mr. Buchanan's weekly income benefits, the nature of his activities after the one year period after the accident has not been taken into account. It is assumed that the 25 hours of labour after the accident have the same monetary value as 25 hours of labour before the accident.
9. 9David Bress and Erica Bress and State Farm Insurance Company (March 23, 1992), OIC A-000191 and A-000192
10. 10See for example Bonitatibus and Wellington Insurance Company (April 8, 1993), OIC A-000082(no.2); Piper and Zurich Insurance Company (December 6, 1993), OIC A-002585; James and Allstate Insurance Company (May 17, 1996), OIC A-015580.
11. 11Morin and LumbermensMutual Casualty Company (June 16, 1993), OIC A-001311
12. 12March 4, 1996, Ontario Court (Gen. Div.), No. 18698/94