Neutral Citation: 1997 ONICDRG 186

OIC A96-001429

ONTARIO INSURANCE COMMISSION

BETWEEN:

MARY JEAN OLIVITO

Applicant

and

DOMINION OF CANADA GENERAL INSURANCE COMPANY

Insurer

DECISION on a PRELIMINARY ISSUE

Issue:

This case is about the right to re-elect from one category of accident benefits (education benefits) to another (income replacement benefits). The Applicant, Mary Jean Olivito, was injured in a motor vehicle accident on August 27, 1994. She elected and received education benefits from Dominion of Canada General Insurance Company ("Dominion"), payable under the Schedule,¹until August 1995, when she returned to school. She now wishes to change her election to income replacement benefits. The parties were unable to resolve their dispute through mediation, and Ms. Olivito applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Result:

Ms. Olivito may not elect to receive income replacement benefits instead of education benefits.

Evidence and Findings:

Background

Mary Jean Olivito was injured in a car accident on August 27, 1994. She was driving her car on the expressway when a vehicle travelling in the opposite direction crossed the median and smashed into her car at high speed. Her car spun out of control and hit the median. She was hospitalized for a week and suffered numerous injuries, including a badly broken ankle, a broken wrist, neck and back injuries and several cuts and bruises on her face and legs. She complains of ongoing problems since the accident, including arthritis in her left ankle.

At the time of the accident, Ms. Olivito was twenty years old and working at two part-time waitressing positions. She was also enrolled in the Early Childhood Education Program at St. Clair College of Applied Arts and Technology, which was scheduled to begin on August 29, 1994, two days after this accident. As a result of this accident, Ms. Olivito postponed her studies for one year until September, 1995. She completed the course successfully in June, 1997 and worked part-time in children's education during the summer of 1997. She has not returned to waitressing work and claims that she is unlikely to do so in the forseeable future.

Ms. Olivito was eligible for two alternative weekly disability benefits under the Schedule. She could claim either education benefits based upon her inability to pursue her studies or income replacement benefits for her inability to work as a waitress. The legislation requires Ms. Olivito to choose one weekly benefit by filing an election form with the Insurer. It also requires the insurer to provide an applicant with a written explanation of the accident benefits available. Section 59(2) states:

(2) The insurer shall promptly provide the person with,

(a) the appropriate application forms;

(b) a written explanation of the benefits available under this Regulation; and

(c) written information to assist the person in applying for benefits, including information to assist the person in making any possible elections.

(Emphasis added)

The Election:

Both the Applicant and her father, Sam Olivito, testified about the circumstances surrounding Ms. Olivito's election. In the weeks following the accident Ms. Olivito was confined to a wheelchair, reliant on medication, and in a lot of pain. She depended on her father to review and complete any documents because, in her words, she "couldn't care less at that time." Where necessary, Ms. Olivito supplied information verbally to her father and signed the forms.

Mr. Olivito is self-employed as a distributor of soft drinks. Both his testimony and his written responses on the insurance forms indicate a good command of English.

Dominion sent Ms. Olivito an "Application for Accident Benefits" (Application) along with several brochures² which explain the available accident benefits. In the Application,³ Ms. Olivito stated that at the time of the accident she was employed at two part-time positions: as a waitress at Belamy's, where she earned $180 per week, plus tips, and as a waitress/bartender at the Greek Community Centre, where she earned $70 per week, plus tips. Although Ms. Olivito testified that her gratuities formed a "significant" portion of her income, she did not provide any information regarding their amounts to Dominion or at the hearing.

On her Application, Ms. Olivito also disclosed that she was scheduled to begin the Early Childhood Education program at St. Clair College on August 29, 1994.

Upon receipt of the Application, Cindy MacMinn, the adjustor who was handling the claim for Dominion, sent an "Explanation of Assessment" (Explanation) to Ms. Olivito. The Explanation advised that Ms. Olivito was eligible for either an income replacement benefit of $90.35 per week or an education benefit of $224.76 per week.⁴ In the section relating to income replacement benefits, the Explanation contains a box entitled "Notes on calculating your income replacement benefit, including income or payments from other sources:" There Ms. MacMinn wrote: "... Based on information from your application but not including 'TIPS.' We would require your '93 income tax assessment..." (emphasis added) Both Ms. Olivito and her father inferred from this statement that unless she had included gratuity income in her '93 income tax return - which she had not - Dominion would not include tips in its calculation of income replacement benefits.

I agree that the wording on the Explanation implies that unless Ms. Olivito included tips in her income tax return, Dominion would not include those amounts in its calculation of income replacement benefits. Leanne Lagana, a claims specialist for Dominion who testified at the hearing, admitted that if Dominion was prepared to consider other forms of proof, it could and should have added the words "or further information" immediately following the statement "we would require your '93 income tax statement." Dominion argued that Ms. Olivito could nonetheless have produced other proof of her gratuity income, and that the Explanation merely "suggests" her income tax return as one method of proof. I disagree; the word "require," which implies a demand, coupled with the reference to only one document - Ms. Olivito's income tax assessment - strongly indicates that no other proof will do.

I also find that Dominion's advice was incorrect, both in terms of its own practice and in law. Ms. Lagana acknowledged that "it is Dominion's policy to pay income replacement benefits based on tips if they can be proven [by some reliable method]," and that an income tax return was only one such method. Others may include proof of bank deposits, evidence of co-workers, etc. This is consistent with the case law that has developed at the Commission. In Wiseman and. Coachman Insurance Company⁵ the applicant, a waitress, had reported only a portion of her tips on her income tax form. Arbitrator Draper, as he then was, found nonetheless that "the estimates provided by Ms. Wiseman and the other servers are sufficiently reliable that they can be used as the basis of a reasonable estimate of her tip income."⁶

Along with the Explanation, Ms. MacMinn sent a form entitled "Election of Weekly Benefit" (the Election). The Election form contains a notice in bold near the top of the page, stating:

IMPORTANT: Before you choose which benefit you want to receive, read the information that is included with this form. Once you have made your choice, it cannot be changed.

This notice is consistent with section 61(7) of the Schedule, which provides that an election "may not be changed."⁷ Immediately below this notice, the form advises: "If you need help, please contact us immediately." And further down, where the applicant must designate the benefit chosen, the form states: "I am eligible for more than one weekly benefit. I realize my choice cannot be changed after this form is submitted to the insurance company. I choose to receive the following weekly benefit:" Mr. Olivito, who filled out the form, designated the education benefit of $224.76, and Ms. Olivito signed the Election.

Regrettably, neither the Applicant nor Mr. Olivito read the brochures that accompanied the Election form. Mr. Olivito recalled receiving the brochures but "because of my negligence I didn't bother reading [them]." The brochures explain, in fairly simple, straightforward language, the types of benefits available. One of the brochures, entitled "What you need to know about Election of Benefits," describes the election process, and advises that in order to choose which benefit is most suitable, an applicant should consider the eligibility requirements, how long she may qualify under each benefit, and the amount of the weekly benefit. The brochure also advises that if an applicant remains disabled more than two years after the accident, she may receive a loss of earning capacity benefit, the amount of which will depend on the type of benefit she selected. Finally, the brochure sets out phone numbers which an applicant can call if she has questions concerning the election of benefits. Neither Ms. Olivito nor her father contacted anyone with questions regarding the election.

Events Following the Election:

Because of her injuries, Ms. Olivito postponed her college studies for a full year, the equivalent of two school semesters. Dominion paid her two lump sums of $4,000⁸ plus education benefits of $224.76 per week until August 1995, when Ms. Olivito returned to school. Dominion then terminated her education benefits.

Ms. Olivito then brought an application for mediation, complaining that her election was invalid because Dominion misinformed her about the amount of income replacement benefits to which she was entitled. Ms. Olivito argues that Ms. MacMinn misled her by suggesting, in the Explanation, that tips could not be included in the calculation of benefits unless Ms. Olivito had declared them in her 1993 income tax return. This, she submits, is contrary to the law and resulted in an unfairly low calculation of income benefits. Ms. Olivito claims that if her gratuity income had been included in the determination of her income replacement benefits, they would have been substantially higher, and she would therefore have elected them instead of the education benefits.

The evidence, however, does not support Ms. Olivito's contention that she would have elected income replacement benefits, had the calculation included her tips. She admitted that she relied on her father to determine which election was appropriate, and Mr. Olivito's testimony on this issue was inconsistent. He initially testified that he designated the education benefit simply because it was the higher one. He also stated that he expected that Dominion would continue to pay benefits as long as his daughter was disabled from either school or work, and was upset that Dominion terminated education benefits when his daughter returned to school. This evidence suggests that he considered only the amount of the respective benefits, and gave no thought to the eligibility requirements or how long Ms. Olivito may qualify under each benefit.

Mr. Olivito later stated that if he had known that a proper calculation of income replacement benefits would include tips, thus raising the amount of that benefit, he would have chosen the income replacement benefit. He insisted that would be the case even if the income benefit, inclusive of tips, was still lower than the education benefit. Mr. Olivito explained that at the time he filled in the Election, it was already apparent to him that although his daughter may eventually return to school, it was unlikely she would return to work in the forseeable future.

Therefore, in his view, she would have been better off electing income replacement benefits, even if they were lower than education benefits.

I find Mr. Olivito's explanation implausible. If at the time he made the election he truly believed that his daughter would soon return to school but was unlikely to return to work in the forseeable future, she arguably stood to gain more in the long run by electing the income benefit offered by Dominion, even if it didn't include tips. Ms. Olivito's counsel suggested that Mr. Olivito could not have appreciated the long term benefit of electing income benefits unless the differential between the two figures was reduced by including tips in the calclulation of income replacement benefits. I find, however, that Mr. Olivito's initial explanation was the most likely: he chose the education benefit because it was the highest. He admitted that he didn't seriously consider the long term implications of his decision, because he expected that benefits would continue as long as his daughter was disabled from either school or work. It was only with the benefit of legal advice and some hindsight, after his daughter returned to school and her benefits were terminated, that Mr. Olivito maintained otherwise.⁹

Analysis:

Compared to its predecessor,¹⁰ the Schedule significantly expanded both the range and amount of benefits available to an applicant. At the same time, it removed the right to sue in tort for economic loss, no matter how serious the injury. This means that an applicant must recover any economic losses solely from the Schedule - a complex regulation that requires her to elect, at a fairly early stage in her recovery, under which category she will claim benefits. The consequences of a wrong decision at this early stage can be profound. For this reason, I believe insurers are obliged to comply strictly with the disclosure requirements set out in section 59.

As Arbitrator Sampliner stated in Prosser:¹¹

The legislation requires insurers to explain the available weekly benefits to accident victims in a written form approved by the Ontario Insurance Commission. Without basic information about potential accident benefits, the insured person is unable to make the reasonably informed decision contemplated by the legislators. Insurers who fail to comply with the statutory standard do so at their peril.

In this case, unlike Prosser, the Insurer made some effort to comply with the requirements under the Schedule; it delivered the information brochures produced by the Insurance Bureau of Canada along with the required forms. However, I have also found that Dominion misinformed Ms. Olivito by advising her that it could not include tips in its calculation of income replacement benefits unless she included them in her 1993 income tax assessment. This advice was clearly wrong. The question is, what is the consequence of this mistake?

Ms. Olivito argues that it must follow that she is entitled to re-elect. I disagree. Although Ms. Olivito may have been misinformed, I am not persuaded that she was misled - that is that Dominion's error caused her to elect as she did. As I noted above, it was Mr. Olivito who took responsibility for guiding the Applicant's decision. For the reasons already stated, he did not persuade me that he would have advised Ms. Olivito any differently, even if he had been correctly informed. I am therefore not convinced that Dominion's error contributed in any material way to Ms. Olivito's election of education benefits.

Ms. Olivito's counsel, Mr. Katzman, argues that Ms. Olivito does not have to prove that she relied on the Insurer's error when making her election. In fact, Mr. Katzman advised me that in his view he needn't even address this issue. He asserts that Dominion's error, on its own, nullifies Ms. Olivito's election and entitles her to start over, as it were. I disagree. The Schedule and the Election form clearly state that elections are final. Where, as here, the Applicant wishes to reverse that process, I find the onus is on her to establish why the strict language of the Schedule should not apply. I also find it would be unfair to undo the election process simply because the Insurer gave wrong advice, without some persuasive evidence that its misrepresentation led the Applicant to apply for a particular benefit.

This case contrasts with the facts in Prosser, where the insurer's negligent misrepresentation caused the applicant to elect in a certain manner. In that case, the applicant had to choose between caregiver benefits and income replacement benefits. The insurer's adjuster recommended to the applicant that she elect the caregiver benefit because it paid a larger weekly amount than the income replacement benefit. However, the adjuster incorrectly established the applicant's income replacement benefit without reference to her earnings from her second job that she had left shortly before the accident. Arbitrator Sampliner found that the insurer's misinformation "directly led Mrs. Prosser to apply for the caregiver benefit...Mrs. Prosser relied to her detriment on [the insurer's] representations, and on these facts [the insurer] cannot limit her claim to the caregiver benefit..."

I note that in Prosser the arbitrator found not only that the applicant relied on the insurer's misrepresentation when making her election, but that she also did so "to her detriment." In view of my finding in this case that the Applicant did not rely on the Insurer's mistake, I do not consider it necessary to decide whether she must also establish detrimental reliance, and if so, whether she has met that burden. In any case, I received no evidence as to whether a correct calculation of the income replacement benefit would have benefitted Ms. Olivito, or even what that calculation might have been.

I conclude that Ms. Olivito has not established that the Insurer's misrepresentation resulted in her election of the education benefit, and therefore she may not elect to receive income replacement benefits.

Order:

1. Ms. Olivito may not elect income replacement benefits instead of education benefits.

October 6, 1997

Deena Baltman

Arbitrator

Date

APPENDIX

Hearing:

The hearing was held in Windsor, Ontario, on September 9, 1997, before me, Deena Baltman, Arbitrator.

Present at the Hearing:

Applicant:

Mary Jean Olivito

Ms. Olivito's

Marc Katzman

Representative:

Barrister and Solicitor

Dominion's

Kevin Bunt

Representative:

Barrister and Solicitor

Dominion's

Leanne Lagana

Officer:

Witnesses:

Mary Jean Olivito

Sam Olivito

Leanne Lagana

Exhibits:

Exhibit 1

Brief of Documents and Authorities

Exhibit 2

Document Brief

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents after December 31, 1993, and before November 1, 1996, called "the Schedule" in this decision. The Schedule is Ontario Regulation 776/93, as amended by Ontario Regulation 635/94.
2. 2Prepared by the Insurance Bureau of Canada.
3. 3Exhibit 1, Tab 3. The Application is dated September 7, 1994
4. 4The entire text of the Explanation is attached as Exhibit "A." The amount of the education benefit, as prescribed under the Schedule, is based on 50% of the average annual income in Ontario.
5. 5Wiseman and Coachman Insurance Company (June 10, 1994), OIC A-005706
6. 6Supra, p. 16. See also Kahkesh and Lloyd's Non Marine Underwriters (August 19, 1992), OIC P-000378 where the Director of Arbitrations determined that "...evidence may be supplemented...by oral testimony relating to tips which had not been declared for tax purposes."
7. 7Subject to the exception in subsection 61(6), which does not apply to this case.
8. 8Section 16(1)(c) of the Schedule requires the insurer to pay a lump sum of $4,000 for each semester that the applicant is unable to attend a post-secondary educational institute.
9. 9My difficulty with Mr. Olivito's evidence is compounded by the fact that I received virtually no evidence as to what the income replacement benefit should have been, had tips been included.
10. 10Ontario Regulation R.R.O. 672 (the "No-Fault Benefits Schedule")
11. 11Prosser and Progressive Casualty Insurance Company (May 28, 1997), OIC A96-000358