Commission des assurances de l’Ontario

Neutral Citation: 1997 ONICDRG 217

Appeal P-007147A

OFFICE OF THE DIRECTOR OF ARBITRATIONS

DAVID SENATER

Appellant

and

SIMCOE & ERIE GENERAL INSURANCE COMPANY

Respondent

Before:

Susan Naylor, Director’s Delegate

Counsel:

Altor Shields (for David Senater)

Ralph D’Angelo (for Simcoe & Erie)

APPEAL ORDER

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

The appeal is allowed and paragraph 1 of the arbitration order dated October 27, 1994 is rescinded. The following order is substituted:

The amount of David Senater’s weekly income benefit after September 4, 1992 is $400.Interest is payable on the balance owing.

Mr. Senater is entitled to his appeal expenses payable by Simcoe & Erie General Insurance Company.

December 24, 1997

Susan Naylor Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

David Senater appeals an arbitrator’s order fixing his weekly income benefits after September 4, 1992, at $185.60. Simcoe & Erie General Insurance Company (“Simcoe & Erie”) is responsible for paying these benefits under the Statutory Accident Benefits Schedule - Accidents before January 1, 1994, R.R.O. 1990, Reg. 672, (“the Schedule”).

II. BACKGROUND

The facts are straightforward. At the time of the accident on March 4, 1992, Mr. Senater was a high school student. He had arranged to start a summer job with a jewellery manufacturing company for whom he had worked during his previous summer vacations. The job was scheduled to start on June 15, 1992, when his classes ended, and to end on August 28, 1992, in time for the beginning of the new school year. He was to be paid an hourly rate of $12.50 for a 40 hour week. Due to his injuries, he was unable to take up the job.

Mr. Senater received $185 a week until June 15, 1992 under section 13 of the Schedule. His benefits were then increased to $400 a week for the summer months that he would have worked. This amount was paid under section 12 of the Schedule and represents 80% of the gross weekly wage his employer would have paid him. However, Simcoe & Erie only paid this higher amount for the duration of his prospective employment. From September 4, 1992, Mr. Senater’s benefits were reduced to $185.60. Mr. Senater claimed he should have continued to receive $400 a week for the duration of his disability.¹ The arbitrator agreed with Simcoe & Erie’s position. Hence, this appeal.

III. THE REGULATIONS

Weekly income benefits are payable to an insured person while he or she is substantially unable to perform the essential tasks of his or her occupation or employment because of an automobile accident. These benefits, which are employment-related, are only available to insureds who have a prescribed connection to the workforce. The requirements are set out in subsections 12(2) and of the Schedule. At the time of the accident, the person must have been either employed, self-employed or on a temporary lay-off, or have worked at least 180 days in the previous twelve months. Mr. Senater did not meet any of these criteria but qualifies under subparagraph 12(2) 1 iii, which covers someone with a definite job offer. The statutory provision refers to a person who at the time of the accident was “entitled to start work within one year under a legitimate offer of employment made before the accident and evidenced in writing.” It is agreed that Mr. Senater meets these requirements.

Subsection 12(4) stipulates that the rate of weekly income benefit payable is the lesser of $600 (plus any additional amount purchased) and 80% of the person’s “gross weekly income from his or her occupation or employment” - $400 in Mr. Senater’s case - less deductible payments for loss of income. However, where there is a definite job offer, weekly income benefits are only payable from the time the job was to have started. Subsection 12(6) states:

(6) The insurer is not required to pay a weekly benefit under subsection (1) to a person described in subparagraph iii of paragraph 1 of subsection (2) until the day the person would have been entitled under the contract to begin employment unless before that day the person is qualified for a benefit under another paragraph of that subsection.

This relieved Simcoe & Erie from paying Mr. Senater weekly income benefits under section 12 until June 15, 1992, when his job would have started. In the meantime, it paid him $185 a week under section 13 of the Schedule. The criteria for entitlement to section 13 benefits is not linked to employment but to the performance of normal tasks, and the benefits are flat-rate rather than earnings-related.

Subsection 12(7) sets out how to calculate a person’s gross weekly income for the purpose of determining the rate of benefit payable under subsection 12(4). The relevant parts state:

(7) The following rules apply to the calculation of gross weekly income:

A person’s gross weekly income shall be deemed to be the greatest of,

i. his or her average gross weekly income from his or her occupation or employment for the four weeks preceding the accident,

ii. his or her average gross weekly income from his or her occupation or employment for the fifty-two weeks preceding the accident,

iii. $232.

Paragraph 2 specifically addresses the “job offer” situation:

When a person becomes qualified to receive an income benefit under subparagraph iii of paragraph 1 of subsection (2) the person’s gross weekly income shall be deemed to be the greatest of,

i. if the person was qualified under either subparagraph i. or ii. of paragraph 1 of subsection (2), his or her gross weekly income as determined under paragraph 1,

ii. the gross weekly income payable under the contract of employment,

iii. $232.

The arbitrator held that subparagraph 12(7) 2 ii allowed Simcoe & Erie to reduce Mr. Senater’s benefits for the period after his employment would have ended. He construed the words “the gross weekly income payable under the contract of employment” to refer to the weekly rate of pay for the period of the contract, not simply to the contractual rate of pay for a weeks’ work. In other words, Mr. Senater’s contractual earnings formed the basis for calculating his benefits only for the term of the contract.

The arbitrator reasoned that because a person’s gross weekly income under subparagraph 12(7) 1 is based on employment earnings averaged over the four or fifty-two weeks, the statutory drafters must have “intended time to be considered in the calculation of benefits for claimants with post-accident job offers, under section 12(2) 1 iii.” He stated at page 5:

Income averaging cannot be used to calculate benefits for insureds who qualify under section 12(2)1 iii. Unlike other section 12 claims, no experience is available since the contract or offer of employment is unfulfilled. Averaging the future work of an employee paid by the hour over some period after the accident would be complete speculation. Therefore the Legislature recognized that the employment offer or contract provides reasonable guidance to the insured person’s potential income.

The arbitrator considered that ignoring the end of the contract could lead to arbitrary results - if a claimant was scheduled to begin a one day job the day after the accident, would weekly income benefits be based upon that day’s rate of pay? He also felt it would lead to practical difficulties - in the case of consecutive contracts, which contract would govern? The arbitrator emphasised that his decision was based on the particular fact situation and that the result might be different where there was evidence that the person would have continued to work.

IV. ANALYSIS AND CONCLUSION

The parties present two different approaches to the legislation. Mr. Senater argues that benefits, based on his contractual weekly rate of pay, should continue for the duration of disability. Simcoe and Erie argue that Mr. Senater cannot rely on his prospective earnings under the contract for any period after his employment would have ended. As between these two positions, I prefer Mr. Senater’s approach.

In construing the regulations, I must read the words of the Schedule in their ordinary and grammatical sense, in context and in harmony with the scheme and intent of the legislation. Cameron J. provided the following description in Youden v. Economical Insurance Company (1996) 1996 CanLII 8010 (ON CTGD), 29 O.R. (3d) 411 (Gen. Div) at page 414:

This is remedial legislation. The “no-fault” legislation deprived the plaintiff of his common law right to sue for damages for loss of income due to another’s negligence. The Regulation provides for prompt payment of an income benefit to replace income lost due to the accident without need to prove fault and in lieu of any amount the plaintiff might have been awarded and recovered at common law. The qualifications for the benefit and the formula used are necessarily arbitrary. In this context, the legislation should be interpreted broadly and liberally.

While income benefits, broadly speaking, are intended to replace loss of earnings as a result of an inability to work, the Schedule does not require that there be an actual loss of income as a condition of receiving such benefits. The wording and structure of the regulations indicate that these benefits are not a precise indemnity for loss of income.

The obligation to pay a weekly benefit is established in subsection 12(1), which sets out the general criteria for entitlement. It states that an insurer “will pay” the benefit to each insured during the period he or she meets the disability test set out, “if the insured person meets the qualifications set out in subsections (2) or (3).” Subsections 12(2) and (3) specify who qualifies for these benefits. Although not expressly addressed,² there is an implicit link between these provisions: the disability requirement in subsection 12(1) relates to the employment which qualifies the person for benefits in subsection 12(2). Therefore, a person with a job offer under subparagraph 12(2) 1 iii is eligible for benefits if he or she is substantially unable to perform the essential tasks of the job offered.

Subsection 12(4) specifies what the benefit “will be”, based on the person’s “gross weekly income”. Subsections 12(5) and 12(6) then set out the circumstances in which an insurer is relieved of responsibility for paying a benefit, even though the person is otherwise eligible for it. Subsection 12(6) expressly relieves an insurer from paying benefits “to a person described in subparagraph iii of paragraph 1 of subsection (2)” until the job would have started unless the person “is qualified” for a benefit under another provision.

Finally, the formula for calculating the benefit is set out in subsection 12(7). This provision does not, on its face, address the duration of benefits at all. It simply sets out the method for calculating a person’s gross weekly income for the purposes for determining the benefit rate under subsection 12(4). The formula deems what a person’s gross weekly income is to be. It does no more than that.

The structure and language of the regulations suggest that once a person becomes qualified for benefits, and provided no relieving provision applies, he or she remains entitled to them at the rate calculated under the Schedule for the duration of disability. This is reinforced by the language of paragraph 12(7) 2, itself. The rules for calculating the benefit rate in the job offer case are only triggered “when a person becomes qualified to receive an income benefit under subparagraph iii of paragraph 1 of subsection (2).”

Prior case-law supports this construction of the Schedule. A number of decisions under Schedule – to the Insurance Act, R.S.O. 1980, c. 218, and its predecessor Schedule E, considered the question whether someone who suffered no actual loss of income was eligible for benefits.³ The issue was directly before the Court of Appeal in Vasquez v. Co-operators General Insurance Company 1985 CanLII 2040 (ON CA), [1985] I.L.R. 1-1897 (p.7302), dealing with an applicant who would have been laid-off due to a work stoppage and would not have sought other work. The court held that the insurance company was nonetheless liable to continue payments during the lay-off. The court agreed with a line of cases holding that despite specific statutory wording requiring payment “for the loss of income from employment” for the period of disability, benefits were payable even though the insured had not actually suffered a loss of income. In reaching this conclusion, the court accepted the provisions that allowed unemployed insureds to qualify as “deemed” employed as determinative: At page 7308, Arnup J.A. said:

There is no requirement that such a “deemed” employee have a reasonable expectation of employment but for the accident. He or she might have remained unemployed for the rest of his or her life. This is irrelevant. They are entitled to benefits just as if they had been employed when disabled by the accident and to the same extent.

There is no requirement in Part II that a person actually employed at the date of the accident must show that he would have continued to be employed but for the accident, through the whole period of his disability.

How then can Schedule – be interpreted so as to require payment only if income has actually been lost because of the accident?

In Kloppenberg v. Pitts Insurance Company [1980] I.L.R. 1-1242, (p. 908) (H.C.J.),⁴ the plaintiff was employed in a summer job when he was rendered a paraplegic in a motorcycle accident. Maloney, J. acknowledged that “in equity and in common sense” there may be merit in the insurer’s position but rejected the argument that the plaintiff’s benefits should be restricted to the period of the contemplated employment. The then statutory language used, but did not define, the term “gross weekly income.” The court took the last wage earned as the basis for calculating benefits.

The Schedule now defines how gross weekly income is to be calculated. It limits the broad discretion previously available in determining a person’s gross weekly income. However, the underlying rationale of the cases remains valid. Indeed, deletion of any reference to payment “for the loss of income from employment” in the opening provisions, and the need for an express proviso in subsection 12(6) restricting payment for the period before employment would have started, reinforce my view that the Schedule contemplates payment even where there is no actual loss of income.

In circumstances other than those contemplated under subparagraph 12(2) 1 iii, the formula for calculating benefits looks back at the person’s previous earnings, subject to a minimum level. Subparagraph 12(7) 1 deems a person’s gross weekly income to be the greatest of his or her average gross weekly income from employment or self-employment for the four weeks or the fifty-two weeks preceding the accident or a minimum figure of $232.

It would seem therefore that a person who is employed at the time of the accident but is injured just prior to retirement or to a lay-off is still entitled to benefits for the duration of disability based on his or her prior earnings in the four or fifty-two weeks before the accident. Likewise, Simcoe & Erie did not argue that a person injured in the course of a fixed-term contract would have their benefits reduced at the end of the contract. If Mr. Senater had been injured a month into his summer job rather than three months before it was scheduled to start, there appears to be nothing in the regulations to stop him receiving ongoing benefits based on his earnings in the prior four weeks.

The phrase “the gross weekly income payable under the contract of employment” should be construed in this context. Subsection 12(7) 2 is no more than a formula for determining the amount of benefits payable once qualification and entitlement is established. It does not restrict the duration of benefits. Given this, I accept Mr. Senater’s argument that his gross weekly income under the contract is simply the rate of pay agreed to for a week’s work - $400 in his case.

The arbitrator ruled that Mr. Senater was entitled to $400 a week to September 4, 1992, and to $185.60 thereafter. In effect, he deemed Mr. Senater’s gross weekly income to be, over different periods, both “the gross weekly income payable under the contract of employment” under subparagraph 12(7) 2 ii” and “$232” under subparagraph 12(7) 2 iii. However, this does not appear consistent with the language of paragraph 12(7) 2, which deems a person’s gross weekly income to be the greatest of:

i. if the person qualifies under the employed, self-employed or temporary lay-off criteria, their income under subparagraph 12(7) 1,

ii. the gross weekly income payable under the contract of employment

iii. 232.

This language suggests that the base for calculating a person’s weekly income benefit remains a constant and does not change over time. In my view, this reinforces my conclusion.

The appeal is therefore allowed.

V. EXPENSES

Mr. Senater has been successful on appeal and is entitled to his appeal expenses.