Aurelia Brasil v. State Farm Mutual Automobile Insurance Company, 1997 ONICDRG 125

Ontario Insurance Commission

Commission des assurances de l’Ontario

Neutral Citation: 1997 ONICDRG 125

Appeal P96-00041

OFFICE OF THE DIRECTOR OF ARBITRATIONS

AURELIA BRASIL

Appellant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Respondent

Before:

David R. Draper, Director's Delegate

Counsel:

Jack F. Fitch (for Aurelia Brasil)

Joseph J. Sullivan (for State Farm)

APPEAL ORDER

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

1. The appeal is dismissed and the arbitration order, dated March 12, 1996, is confirmed.

2. Ms. Brasil is entitled to her reasonable appeal expenses.

3. State Farm may use the appeal expenses to reduce Aurelia Brasil's repayment obligation.

July 4, 1997

David R. Draper

Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This appeal involves the interaction between survivor's benefits under the Workers' Compensation Act, R.S.O. 1990, Chap. W.11 and death benefits under the Statutory Accident Benefits Schedule - Accidents Before January 1, 1994, R.R.O 1990, Reg. 672 ("the Schedule").

Aurelia Brasil appeals an arbitration order, dated March 12, 1996, requiring repayment of the death benefits she and her children received from State Farm Mutual Automobile Insurance Company ("State Farm") because they also received workers' compensation benefits in respect of her husband's death.

II. BACKGROUND

On June 11, 1993, Manuel Brasil was struck by an automobile and died the following day. His spouse and two children claimed funeral expenses and death benefits under his standard automobile insurance policy. State Farm paid Mrs. Brasil $3,000 for funeral expenses and death benefits of $25,000 as his surviving spouse. It also paid death benefits of $10,000 for each of his two dependent children.

At some point, Mr. Brasil's death came to the attention of the Ontario Workers' Compensation Board ("the W.C.B."). In November 1993, the W.C.B. wrote to Mrs. Brasil, advising her that because her husband's accident occurred while he was in the course of his employment, benefits were available under the Workers' Compensation Act.

Mrs. Brasil received burial expenses of $4,997.90 from the W.C.B.. As the surviving spouse, she also received a lump sum of $78,191.54 under section 35(1)(a) of the Workers' Compensation Act based on her age at the time of her husband's death. Finally, she was awarded monthly survivor's benefits under sections 35(1)(b) and 35(4). She receives a significantly higher rate because she has dependent children.

State Farm demanded repayment of the benefits it paid, relying on section 20 of the Schedule:

20. The insurer will not pay benefits under this Schedule in respect of any insured person who, as a result of an accident, is entitled to receive benefits under any workers' compensation law or plan.

Mrs. Brasil repaid the funeral expenses, but took the position that State Farm was not entitled to repayment of the death benefits. She claims that section 20 does not relieve State Farm from paying death benefits because the "insured person," namely Mr. Brasil, was never entitled to receive workers' compensation benefits.

The arbitration hearing proceeded on an agreed statement of facts. The parties also agreed that State Farm would be entitled to repayment if the arbitrator accepted its position.

In reaching his decision, the arbitrator considered, but rejected, an earlier arbitration decision in Lupien and General Accident Assurance Company of Canada, (December 28, 1995, OIC A-014182). In that case, Michele Brouillette was killed in an automobile accident while in the course of her employment. The issue before the arbitrator was whether Ms. Brouillette's dependent children were entitled to death benefits under the Schedule.

At the time of her accident, Ms. Brouillette and her three children lived with David Rhyner, her common law spouse. After Ms. Brouillette's death, her children did not stay with Mr. Rhyner, but went to live with her parents. Like Mrs. Brasil, Mr. Rhyner received a lump sum and monthly survivor's benefits under sections 35(1)(a), 35(1)(b) and 35(4) of the Workers' Compensation Act. The difference between the two cases is that Ms. Brouillette's children did not receive any of the workers' compensation benefits. The benefits were paid to Mr. Rhyner, who kept them.

The children's litigation guardian applied to Mr. Rhyner's automobile insurer for death benefits. The insurer refused payment, relying on section 20 of the Schedule. The arbitrator in Lupien adopted the analysis now argued by Mrs. Brasil. He concluded that section 20 did not apply because Ms. Brouillette was not personally entitled to receive workers' compensation benefits. As a result, the insurer was ordered to pay death benefits to her children.

The arbitrator in this case rejected the Lupien analysis, stating that the clear purpose of section 20 is to preclude double recovery, with the automobile insurer as the "payer of last resort." Since benefits were paid under the Workers' Compensation Act in respect of Mr. Brasil's death, he concluded that death benefits are not also payable under the Schedule.

III. THE APPEAL

Mrs. Brasil's argument is straightforward. First, she claims that "insured person" in section 20 of the Schedule means Mr. Brasil. That much seems clear. He fits under the definition of "insured person," while she and the children do not. As Mrs. Brasil points out, section 22 of the Schedule distinguishes between the "insured person" and "the person otherwise entitled to make a claim." Mr. Brasil is "the insured person." She is "the person otherwise entitled to make a claim" for death benefits.

It is also clear that Mrs. Brasil is asking State Farm to pay benefits "in respect of her husband. Death benefits under section 11 of the Schedule are paid "with respect to each insured person who dies." The dispute centers on the remaining words of section 20. Is State Farm being asked to pay benefits in respect of an insured person, Mr. Brasil, "who, as a result of an accident, is entitled to receive benefits under any workers' compensation law or plan?"

Mrs. Brasil submits that section 20 does not apply because her husband was never entitled to receive workers' compensation benefits as a result of his accident. This is because the Workers' Compensation Act makes it clear that entitlement to survivor's benefits is hers, not his:

35. -(1) Where death results from an injury to a worker, a spouse who survives the worker shall be entitled to,

(a) compensation payable by way of a lump sum of $40,000 increased by the addition of $1,000 for each year of age of the spouse under forty years at the time of the workers' death or reduced by the subtraction of $1,000 for each year of age of the spouse over forty years at the time of the worker's death, but in no case shall a spouse receive a lump sum payment of more than $60,000 or less than $20,000;

(b) compensation by way of periodic payments in the manner and to the extent provided in this section . . .

(4) Where the deceased worker is survived by a spouse and one or more children, compensation in an amount equal to 90 per cent of the deceased worker's net average earnings at the time of injury shall be payable to the spouse until the youngest child reaches the age of nineteen.

[emphasis added]

Mrs. Brasil claims that section 20 is unambiguous and, therefore, its plain meaning should be respected. In her submission, the arbitrator failed to give meaning to the clear requirement in section 20 that it is the insured person who must be entitled to workers' compensation benefits. She argues that Mr. Brasil is an "insured person," but is not entitled to workers' compensation benefits. In contrast, she is entitled to workers' compensation benefits, but is not an "insured person" under the Schedule.

Section 20 of the Schedule should be given its plain meaning, but it must be read in context. In my view, its link to the Workers' Compensation Act is through section 4(1), which states:

4. -(1) Where in any employment, to which this Part applies, personal injury by accident arising out of and in the course of employment is caused to a worker, the worker and the workers' dependants are entitled to benefits in the manner and to the extent provided under this Act.

According to this section, entitlement to workers' compensation benefits is triggered when a worker is injured in the course of his or her employment. The entitlement is to the benefits provided in the Workers' Compensation Act. The fact that certain benefits are not provided, or are to be paid to the worker's survivors, does not negate the workers' general entitlement to workers' compensation. In my opinion, it is this general entitlement that brings section 20 of the Schedule into play.

I agree with the arbitrator that the legislation makes compensation available under one system or the other, with very limited overlap. The general rule, reflected in section 20, is that where someone is injured in an accident covered by the Workers' Compensation Act, that is where compensation is provided. This is subject to two exceptions set out in section 21 of the Schedule, both creating an interim role for automobile insurers. The exceptions deal with situations where the person is awaiting a determination on other compensation, either workers' compensation or damages from the at-fault party:

21. -(1) Despite section 20, the insurer will pay full benefits under this Schedule to a person described in that section until the resolution of any action brought by the person in any court to recover for personal injuries resulting from the accident under which the workers' compensation claim arose or until the person receives payments under a workers' compensation law or plan . . .

To qualify for accident benefits under section 21, the person must give the automobile insurer an approved assignment of his or her workers' compensation benefits. This allows the insurer to recover the benefits it paid according to the formula set out in section 21(2). In my view, this underscores the interim nature of the insurer's role.

Mrs. Brasil relies on section 21 in support of her position. She points out that it applies to "the person described in" section 20, which she submits can only be Mr. Brasil, not his survivors. Further, she claims it is drafted this way because the survivors are entitled to compensation under both the Schedule and the Workers' Compensation Act and, therefore, do not need the protection of section 21.

While this is an interesting argument, I am unable to accept it. In my view, the person described in section 20 is not obvious. If the section were meant to apply only to the insured person, it could easily have read: "The insurer will not pay benefits under this Schedule to any insured person who, as a result of an accident, is entitled to receive benefits under any compensation law or plan." Instead, it deals with "benefits under this Schedule in respect of any insured person." This suggests that insurers are not just relieved from paying accident benefits to insured persons, but also to others entitled to make a claim in respect of an insured person.

Looking at the legislation in context, I believe the better interpretation is that section 21 applies to those who are deprived of entitlement to accident benefits under section 20, including dependants. Dependants face the same interim issues as injured workers. They may want to sue instead of receiving workers' compensation benefits. Section 10 of the Workers' Compensation Act specifically gives them that option. Also, dependants may face questions about their entitlement to workers' compensation benefits. For example, their status as spouses or dependants may be uncertain. In those cases, dependants need the protection of the interim benefits provided in section 21 of the Schedule.

Mrs. Brasil also claims that the arbitrator misinterpreted the Lupien decision. She objects to his statement that the arbitrator in Lupien interpreted the words, "entitled to receive," as if the section read, "entitled to and in receipt of." I accept Mrs. Brasil's submission that her argument does not turn on the receipt of workers' compensation benefits. Her position is that section 20 does not apply because the insured person, Mr. Brasil, was not entitled to workers' compensation benefits.

It seems to me, however, that the arbitrator correctly identified a problem with the Lupien approach. It would lead to dramatically different results depending on whether the insured dies in the accident or survives for a short time. If death is immediate, the Lupien analysis would allow the surviving spouse and dependants to claim death benefits under the Schedule and survivor's benefits under the Workers' Compensation Act. However, if the insured person survives long enough to claim workers' compensation benefits, his or her survivors would be denied death benefits under the Schedule. In my view, it is hard to find a public policy rationale for this distinction, particularly when the Schedule covers deaths occurring up to three years after the accident.

Finally, Mrs. Brasil argues that death benefits do not raise the same double-recovery concerns as other benefits under the Schedule because they are non-indemnity payments. She points out that unlike other accident benefits, death benefits are not reduced by other payments, such as Canada Pension Plan survivor's benefits or payments made under a life insurance policy. Although this argument has some force, it does not affect the approach to the interpretation of section 20 set out above. I am also not persuaded there is a clear distinction between indemnity and non-indemnity payments under the Schedule. Weekly income benefits are based on the insured person's pre-accident income whether or not it accurately reflects his or her lost income. The relationship to economic loss is even more tenuous for weekly benefits under section 13 of the Schedule.

For these reasons, I agree with the arbitrator's conclusion. Section 20 of the Schedule applies in this case. State Farm is not required to pay benefits in respect of Mr. Brasil because as a result of his accident, he was entitled to receive the benefits provided under the Workers' Compensation Act. The fact that the benefits were not payable to him due to his death does not negate his entitlement.

IV. ALTERNATIVE ARGUMENT

Mrs. Brasil argued in the alternative that even if she is precluded from receiving death benefits under the Schedule, her children are not. I find no basis for this distinction. Death benefits under section 11 of the Schedule are paid "in respect of" Mr. Brasil. Because I have found that Mr. Brasil was "entitled to receive" workers' compensation benefits, within the meaning of section 20 of the Schedule, State Farm is not required to pay death benefits to Mrs. Brasil or her children.

V. INTEREST

The children's death benefits were paid into court. The arbitrator ordered to them to repay the benefits plus interest, but limited the interest to the amount actually earned. There is no dispute about this order.

For Mrs. Brasil, however, the arbitrator ordered interest at the bank rate, as specified in section 27 of the Schedule, from the date State Farm demanded repayment. Mrs. Brasil submits that because she did not mislead State Farm, she should not be penalized through interest at a rate higher than she earned.

Section 27 provides as follows:

27. -(4) The insurer may charge interest from the day the amount owing under this section is determined at the bank rate on that day.

Although the wording of the section is awkward, I agree with the arbitrator that it allows the insurer to demand repayment and charge interest on the amount owing at the bank rate on the day that the demand is made. The insured person is entitled to challenge the insurer's determination that there is an overpayment, but if unsuccessful, I see no reason that the interest should not be payable. Unlike the interest insurers must pay on overdue benefits, interest under section 27 is not designed as a penalty. The bank rate is used to reflect the fact that the insured person had use of the money.

Therefore, the arbitrator's order with respect to interest is confirmed.

VI. APPEAL EXPENSES

This appeal raised a significant issue on which arbitrators had reached different conclusions. It was pursed in a timely and helpful manner. Therefore, I exercise my discretion to award Mrs. Brasil her appeal expenses. However, because she has been ordered to repay a substantial amount, State Farm should be allowed to offset her expenses against the amount she owes.

July 4, 1997

David R. Draper

Director's Delegate

Date