Neutral Citation: 1997 ONICDRG 29
OIC A-013360
ONTARIO INSURANCE COMMISSION
BETWEEN:
JOHN CRIPPS
Applicant
and
AXA INSURANCE (CANADA)
Insurer
DECISION
Issues:
Payments made by the Insurer and the Nature of the Dispute:
The Applicant, John Cripps, was injured in a motor vehicle accident on December 7, 1992. He applied for and received statutory accident benefits from Boreal Insurance which has since been taken over by AXA Insurance (Canada) ("AXA"), payable under Ontario Regulation 672.1 The Insurer paid weekly income payments at the rate of $600 per week, starting December 14, 1992, and ending on July 25, 1994. The Applicant applied for mediation, and shortly thereafter payments were reinstated retroactive to July 25, 1994, but at the minimum level of $185.60. The Insurer terminated weekly benefits on December 20, 1995, one week beyond the third anniversary of the accident. An arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended, was scheduled to deal with the questions of entitlement and quantum. In addition, the Applicant sought a special award. In August 1996, the Applicant sought and obtained a order requiring the Insurer to pay interim weekly benefits. Pursuant to that order, weekly benefits were paid at the rate of $185.60 from August 16, 1996 to the hearing date.
On the morning of the first day of the hearing, counsel for the Insurer advised that his client was no longer disputing the Applicant's entitlement to ongoing weekly benefits, but continued to dispute Mr. Cripps' claim that the proper amount was $600 per week. Accordingly, the hearing proceeded on the issues of quantum and special award.
Mr. Cripps also claims interest on any amounts owing, and his expenses incurred in the hearing.
Result:
The Insurer shall pay to the Applicant weekly income benefits at the rate of $501.60.
Mr. Cripps is entitled to a special award pursuant to section 282(10) of the Insurance Act in the amount of $2,000 inclusive of interest.
Mr. Cripps is entitled to interest on outstanding weekly income payments in accordance with section 24(4) of the Schedule.
Mr. Cripps is entitled to his expenses incurred in respect of the arbitration.
Hearing:
The hearing was held in Hamilton, Ontario, on October 28, 29, and 31, 1996.
Present at the Hearing:
Applicant:
John Cripps
Mr. Cripps's Representative:
Michael Winward
Barrister and Solicitor
AXA's Representative:
Mark Wilson
Barrister and Solicitor
AXA's Officer:
Kathleen Urdahl
Reporting Service:
Nimigans-- Ruth Whitton and Margaret Cunningham
Witnesses: John Cripps, Lois Reynolds, Chris Cripps, Gary Ruse, and Max Traversari
Exhibits: 27 exhibits were filed, they are listed in Schedule 1 to these reasons.
Evidence and Findings:
Background
Mr. Cripps is a 58-years-old divorced father of two adult sons and lives in Hamilton. At the time of the accident he was living in a common-law relationship, which has since ended, and he now lives alone.
On December 7, 1992, Mr. Cripps was involved in a high speed, single-vehicle accident on a highway between Toronto and Hamilton. He sustained a number of significant injuries, the most serious of which was a "closed head injury." Mr. Cripps was rendered unconscious by the impact, and he remained in a coma for a number of days. As will be set out in more detail later, the head injury has left Mr. Cripps with a changed personality (principally, diminished emotional control), cognitive deficits, and some loss of motor control.
Mr. Cripps has a grade 12 education. He has spent most of his working life selling plants, in one fashion or another. For a number of years preceding the accident, Mr. Cripps and his son, Chris, sold flowers under the name "Plants Plus." There were three components to the business.
Firstly, they offered what was referred to as "interior landscaping services." The Cripps were hired to decorate restaurants with real and artificial plants and flowers. This part of the business operated year round, but was busiest in the spring, when new establishments were starting up and existing restaurants were reopening their patios. There was also a small increase in this business at Christmas time, when restaurants would hire "Plants Plus" to provide festive plants and trim.
The second component of the business was the sale of poinsettia plants to banks and real estate firms, to decorate their premises. Mr. Cripps had developed a clientele that purchased these plants each year. He would visit the businesses in November and December, obtain the orders and a delivery date, and then on the prescribed date purchase the plants from a wholesaler, dress them up with foil and deliver them to the bank or real estate office. Although this part of the business was restricted to a short season, it was lucrative, and formed an important part of the business.
The third component of the business involved selling live and artificial plants to the public at produce markets. Mr. Cripps senior testified that during the summer and fall they rented a booth six days a week at various outdoor markets. His son, Chris, testified that in addition to the outdoor markets, they rented space at two indoor markets, on weekends throughout the winter months.
This discrepancy becomes important because the quantum of the claim is based upon the four weeks preceding the accident of December 7, 1992. As a result of Mr. Cripps' head injury, his cognitive functions, including his memory, have been impaired. Accordingly, most of the detailed evidence concerning the operations of "Plants Plus" came from Chris Cripps rather than his father. I am prepared to accept that Mr. Cripps may have forgotten about this part of the business when he testified. Because there is virtually no paper work with respect to the market sales, if any amount is to be included, it must be based upon Chris Cripp's testimony.
In assessing the value of Chris Cripps' evidence I start from the proposition that as the son of the claimant, Chris would understandably like to see his father succeed in his dispute with the Insurer, and might be inclined to exaggerate slightly in his father's favor. However, I found him to be a particularly credible witness. He impressed me as having a clear recollection of the events in question, but not afraid to admit facts which were against his father's interest. For example, when confronted with documents that appeared to have been altered, he candidly admitted they had likely been doctored by his father in an attempt to bolster the claim. I note that Chris had not seen these documents before, and the admission was not rehearsed or premeditated. It was a candid admission by a witness doing his best to present his evidence in a truthful fashion.
During cross-examination, Chris Cripps admitted that generally he and his father did the pick-up of the poinsettias together. He was then confronted with the ledger from their principal supplier that demonstrated that pick-ups were made on Saturday, December 5 and Sunday, December 6. Counsel for the Insurer suggested that in light of this evidence, they could not have been manning a booth at the market on these same days. Chris noted that the orders on those days were relatively small, and suggested that one person could have handled such a delivery, or alternatively, that the order was for the market. This latter point is consistent with the evidence that the poinsettias would be picked up on the same day that they were to be sold. I accept Chris' evidence, that on the four weekends preceding the accident, they operated booths at the indoor markets.
Quantum:
(i) General
I am indebted to both counsel for their very helpful submissions on the issue of the correct amount of Mr. Cripps' benefit. Each counsel prepared detailed calculations which are reproduced in Appendices 1 and 2. In preparing the calculations, counsel dealt with each of the three components of the business separately, including in each section, the revenues generated, and the expenses specific to that part of the business. General expenses common to all three components were dealt with at the end of their calculations. I have followed counsels' lead. These reasons should be read in conjunction with the Appendices.
Sections 12(4) and (7) of the Schedule, when read together, provide that a self- employed person's benefit is 80 per cent of his or her gross income, less ceasing expenses. Most of the expenses incurred by Plants Plus related to the purchase of plants, and are properly characterized as ceasing expenses. There were three additional common expenses that I will deal with at the conclusion of this portion of the reasons.
(ii) Poinsettia sales to Banks and Real Estate firms.
There was no dispute concerning the revenue or specific expenses relating to this aspect of the business.
A few days before the hearing, Mr. Cripps was able to obtain the account ledger from Unsworth and Sons, his principle supplier of poinsettias. The ledger records the number of poinsettias purchased by "Plants Plus." In addition, Mr. Cripps was able to locate a few sales invoices from which the retail price of the various sizes of plants could be deduced. The parties agreed that the appropriate way to calculate the profit was to multiply the number of plants recorded in the Unsworth ledger (less an agreed upon number of plants destroyed in the accident) by the prices in the sales receipts, less the wholesale cost of the plants.
Counsel agreed that the income over the four weeks preceeding the accident was $2,923.05.
(iii) Interior Landscaping
The evidence with respect to the revenues generated by this part of the business came primarily from invoices located by Mr. Cripps. In addition, Chris Cripps testified about one further contract to decorate a restaurant with Christmas trim. Mr. Wilson accepted as accurate the revenues set out in the invoices, but submitted that the revenue claimed for the additional restaurant should be rejected as unsubstantiated. Inspite of Mr. Wilson's objections, I include the revenue from the additional restaurant. Firstly, as stated above, I found Chris to be a credible witness who had a good recollection of the details of the business. Secondly, from the invoice numbers on the documents tendered, it was obvious that a number of invoices were missing, and consequently the absence of this invoice is not surprising, and does not suggest to me that the work was not in fact undertaken or billed. Thirdly, the additional job was for one of a chain of restaurants. An invoice for one of the sister restaurants was produced. Chris testified that the same type of decorating was done at both locations and consequently the single invoice is reliable evidence of the revenue generated for both jobs.
I find that the revenue generated from the interior landscaping work was $2,855.
The bigger dispute concerning the interior landscaping work was over the expenses, and hence the profit or income. Again, there was virtually no paper work to assist the parties or myself. Mr. Cripps testified that in general he aimed at a markup of 150 per cent over his material costs, and that he would be unhappy with a mere 100 per cent markup. A 1992 income tax return prepared for Mr. Cripps but never filed, shows a profit of approximately 118 per cent over the cost of materials. Chris Cripps provided an itemized breakdown for one of the first of the receipts tendered. The markup was approximately 100 per cent. For most of the other invoices, Chris was only asked to give a reasonable estimate of the profit. On total sales of $2,855, Chris testified that the profit would have been $1,673.50.
Mr. Winward submitted that I should accept Chris Cripps' evidence of a profit of $1,673.50 without any deduction. Mr. Wilson submitted that I ought to apply a 100 per cent markup on all of the invoices, which would result in a profit of $1,427.55.
In the absence of paperwork setting out the expenses, I am of the view that I must treat the profit from this venture very conservatively. The evidence concerning the markup, or profit was mostly generalized and not entirely consistent. I was not satisfied that any of the figures represented the best evidence. On a consideration of the evidence as a whole, I am satisfied that the Applicant has established that he earned a profit of $1,500.
Chris Cripps testified that some of the poinsettias purchased from Unsworth were used in the decoration of the restaurants. Because the income from the poinsettias used in the interior landscaping part of the business is already accounted for in the calculations under the heading "Poinsettia Sales," both counsel agreed that some amount would have to be discounted from the "Interior Landscape" calculations to avoid duplication. Chris testified that generally they did not sell 4" poinsettias to the banks and real estate companies. Based upon this evidence, Mr Wilson suggested that all sales of the 4" poinsettias be deducted. Mr. Winward suggested that one half of the 4" poinsettia sales, totalling $108, be deducted.
I agree with Mr. Winward's suggestion that deducting all sales of the 4" poinsettias would be excessive. In that regard, I note Mr. Winward's comment that half of the 4" plants were purchased on a day when no interior landscaping was done. Given the evidence that Plants Plus had no capacity to store plants and therefore purchased plants on the days they were to be used, this would suggest that not all of the 4" plants were used for interior landscaping. I also note that Mr. Cripps testified that Unsworth was his principal, but not sole supplier of poinsettia plants. This evidence is consistent with the fact that sales invoices were produced that pre-date the first delivery from Unsworth. Because both counsel calculated the poinsettia sales by reference solely to the Unsworth ledger, it is apparent that there is revenue from the sale of poinsettia plants that is not being accounted for. I am satisfied that if there has been any duplication because of poinsettias that are accounted for under both the Poinsettia Sales heading and the Interior Landscape heading, any such duplication is offset by the unaccounted for poinsettia sales purchased from other wholesalers.
Once the poinsettias sales are "netted out," the income (for the purpose of our calculations) from the interior landscaping operation is $1,392.
(iv) Weekend Market Sales
This was the most hotly disputed source of revenue. As noted above, Mr. Wilson argued that I should not include any income form this source. As set out earlier, I reject Mr. Wilson's submission. I turn to a consideration of how much income was generated by this part of the business.
Four weekends fall within the four weeks preceding the accident. Plants Plus rented a booth at the Kitchener Market on Saturdays, and at the Hamilton Market on Sundays. Chris Cripps testified that they would generally have sold approximately $600 of produce a day at the Kitchener market, netting a profit exclusive of the stall rental of $350. Chris testified that the Hamilton Market was not as busy and that they would have generated a profit of $180 a day on sales of $300. He also testified that during the Christmas season approximately 70 per cent of the sales were poinsettia plants. Because the poinsettia sales after November 23 are already accounted for under the heading "Poinsettia Sales," Mr. Winward reduced the income by 70 per cent for the last two weekends.
After multiplying the resulting figure by four (four weekends) and deducting the booth rental, Mr. Winward's calculation results in an income of $1,250.
Although I found Chris Cripps to be a particularly reliable witness, this source of revenue is completely unsubstantiated by any documentary evidence, and Chris provided estimates only, with respect to both the volume of sales and profit. Because of this, I approach this source of revenue very cautiously. One piece of evidence that I can look to for guidance is the Unsworth ledger. As noted above, Chris testified that at Christmas time 70 per cent of the sales were poinsettias. On the weekend of November 28 and 29, 1992, no poinsettia plants were purchased. On the weekend of December 5 and 6, approximately $465 worth of plants were purchased from Unsworth. If most of these plants were sold at the markets, the sales for the latter weekend would be in keeping with Chris' evidence, but clearly the absence of any purchases on the first weekend is difficult to reconcile with Chris' evidence.
I conclude that Chris Cripps' evidence with respect to the sales at these markets has been unintentionally exaggerated, and most likely includes his memory of sales during the more prosperous spring and summer months. I apply a discount figure of 50 per cent to Chris' estimate of the profits generated at the markets. Accordingly, I find the income for our purposes over the four weeks is $625.
(iv) Common Ceasing Expenses
As previously noted, I have included in each of the above sections those ceasing expenses specific to that particular part of the business. In addition, there are some common ceasing expenses which must be considered.
Both counsel agree that the cost of the delivery van must be accounted for in one fashion or another. Chris Cripps' evidence concerning the daily cost of operating the van is somewhat ambiguous. In response to a question from the Applicant's counsel as to what the van cost "to run," he replied that it was approximately $20 per day, seven days a week. On cross-examination, he agreed with the suggestion that $20 per day was spent on gas. On balance I am uncertain as to whether Chris's evidence is that the cost of the gas for the van was $20 per day or whether the cost of operating the van, including such other expenses as maintenance and insurance, was $20 per day.
Fortunately, on this topic, I also had the benefit of Mr. Cripps' evidence and the aforementioned tax return. Mr. Cripps testified that on the instructions of his bookkeeper he kept invoices for the van's expenses. I did not hear from the bookkeeper who prepared the draft income tax return for 1992, but the return provides sufficient details of the expenses that the only possible conclusion is that she had the records concerning the expenses to operate the van. If the total expenses, including fuel, maintenance, insurance and licence are included, the daily cost of operating the van is $15.93 per day.
In preparing his calculations, Mr. Winward used Chris's estimate of $20 a day as the complete cost of operating the van. Mr. Wilson used Chris' evidence on cross-examination of $20 worth of gas per day and then added the maintenance and insurance costs as set out in the income tax return. In my view, Mr. Wilson cannot have it both ways. He can not accept Chris' estimate of the gas costs which are far higher than in the tax return, and then add on all the other costs set out in the return.
In my view, using Chris' estimate of $20 per day to operate the van is advantageous to the Insurer. However, Mr. Winward has used it in his calculations, and accordingly, I accept it.
Mr. Cripp's van had broken down a few weeks before the accident, and he had rented a replacement van. Mr. Wilson sought to include the expense of $200 to rent the van as a ceasing expense. Mr. Winward objected to the inclusion of the expense, noting that Boreal insured the rental company, and accordingly, had access to the records, but failed to produce them at the hearing. I do not accept that the failure to present the rental documentation should determine whether this expense is included or not. It is clearly a ceasing expense, and the amount is identified in the draft 1992 tax return. I therefore include $200 for the rental of the van as a ceasing expense.
(v) Summary of Income and Ceasing Expenses.
A.
Income less specific expenses.
- Poinsettia Sales
$ 2,923.05
- Interior Landscaping
1,392.00
- Market Sales
625.00
$4,940.05
B.
Common Ceasing Expenses
$ 760.00
C.
Income less all Ceasing Expenses
$ 4,180.05
(vi) Income Split
The last consideration is the attribution of the income between Mr. Cripps and his son. Both individuals testified that Mr. Cripps took a 60 per cent share and his son Chris took a 40 per cent share. This income split is consistent with the fact that Mr. Cripps played a larger role in the business. He had developed the contacts with the banks and real estate companies, and was principally responsible for securing the interior landscaping contracts.
Mr. Wilson pointed to the fact that the draft income tax return split the income evenly between the two. I accept Mr. Cripps' evidence that the accountant did this to minimize his income tax obligations. Both Mr. Cripps and his son were cross-examined thoroughly on this point, and their testimony was not shaken. I accept their evidence and attribute a 60 per cent share of the income to Mr. Cripps. Accordingly, the amount of the income in the four weeks preceeding the accident, attributable to the Applicant is $2,508.03.
(vii) Amount of Benefit
Section 12(4)(b) of the Schedule provides that the weekly benefit is 80 per cent of the weekly income. As noted above, the income over the four weeks is $2,508.03, which when divided by four results in a weekly income of $627. The benefit at 80 per cent of $627 is $501.60.
Special Award:
Section 282(10) of the Insurance Act provides:
If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the No-Fault Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.
Counsel for the Applicant argued that a special award was justified on three distinct grounds. First, that it was unreasonable for the Insurer to have terminated benefits on July 25, 1994, without first seeking updated medical information. Second, Mr. Winward submitted that although the Insurer reinstated benefits shortly after they were terminated in July 1994, it again stopped paying benefits on the third anniversary of the accident, without first obtaining updated medical information. Third, Mr. Winward suggested that it was unreasonable for the Insurer to maintain its denial throughout the summer and fall of 1996, in the face of the new medical evidence that became available at that time. I will deal with each of these claims in turn.
(i) Termination in July 1994
The first step in ascertaining whether the termination was unreasonable is to review the medical information the Insurer had when it made the decision to terminate benefits. From the materials filed and the evidence of Mr. Traversari, a representative of the Insurer, it is apparent that the Insurer had the records from the three hospitals where Mr. Cripps was treated in the months following the accident. Even a cursory review of those records would reveal that Mr. Cripps had been involved in a horrific crash, and was transported by ambulance to the hospital where he remained in a coma for three days.
Mr. Cripp's application for benefits was accompanied by a standard form medical report prepared by Dr. Bayley, the physician who was following Mr. Cripps' progress at the Acquired Brain Injury Program at the Chedoke-McMaster Hospital. Dr. Bayley recorded a diagnosis of traumatic brain injury and spastic right hemiparesis. The duration of disability is noted as "6 months - 1 year (difficult to assess)."
The Insurer also had a six- page narrative report from Dr. Bayley, dated nine months post-injury, that sets out Mr. Cripps' condition and prognosis in considerable detail. Anyone reading the report would be left with the distinct impression that Mr. Cripps had sustained a very serious injury that would leave him with lifelong impairments. The head injury was defined as a "severe traumatic brain injury." Under the heading "Current Level of Disability" is noted:
...there are a number of factors which result in him being unable to return to work. These include his impaired memory and problem-solving and planning.....T e difficulty with control of anger and frustration will result in difficulty in business relationships... "
Under the heading Prognosis is noted:
His major problem, due to right cerebral hemisphere damage, is his lack of awareness of his own difficulties which prevents him from taking appropriate steps to correct his errors. This may result in chronic difficulties in relationships and business but may respond to some remediation. He is expected to have prolonged impairment as a result of his severe injury.
Despite his severe injury, the Insurer had reason to believe that in the summer of 1994, Mr. Cripps had in fact returned to work. The Insurer retained private investigators who placed Mr. Cripps under surveillance. On three of six days between August 8 and August 17, Mr. Cripps was observed manning a stall at an outdoor market from which he sold plants and flowers. On two occasions, the investigators purchased plants from Mr. Cripps. During one of the transactions, Mr. Cripps told the investigator that his business was very profitable, and that in addition to the market sales, he sold to restaurants and banks.
Not surprisingly, based upon the surveillance, the Insurer concluded that despite the rather pessimistic tone of the medical reports, Mr. Cripps had recovered sufficiently to allow him to return to work. Apparently someone advised Mr. Cripps of this conclusion. Mr. Cripps retained Mr. Smye, who wrote to the adjuster on August 15, 1994. In that letter he stated: "He [Mr. Cripps] has advised that someone from you[sic] office had suggested that he is working and thus he is not entitled to benefits. This is not accurate information. If you wish information about his activities, please advise and I will be happy to co-operation[sic]."
Thereafter there were a number of exchanges between Mr. Smye's office and representatives on behalf of the Insurer. I am hampered somewhat by the fact that none of the participants in these exchanges testified. The independent adjuster prepared an Assessment of Claim form dated August 22, 1994 advising that no further weekly benefits would be paid after July 25, 1994, on the grounds that "the claimant has returned to pre-accident self employed activities." I do not know if the adjuster saw Mr. Smye's letter before he prepared the Assessment of Claim form.
Approximately a month later the branch manager wrote to Mr. Smye responding to his earlier correspondence. The letter confirmed that weekly benefits had been terminated. He enclosed a copy of the Assessment of Claim form, referring to some outstanding medical expenses and invited Mr. Smye to contact the writer if he wished to discuss the matter further. I do not know if Mr. Smye took the branch manager up on his invitation. What is apparent, is that no further medical documentation was either requested by the Insurer, or proffered by the Applicant's counsel.
It would appear that shortly thereafter Mr. Cripps applied for mediation. I have no details of the mediation proceedings, but was advised that weekly benefits were reinstated retroactive to the date of termination, albeit at the minimum level. It would appear that the Insurer accepted the suggestion that even though Mr. Cripps was periodically manning a booth at the market, his activities could not be characterized as employment, at least not employment at his old occupation. Both Mr. Cripps and his son were asked if Mr. Cripps earned anything from his efforts at the market. Both denied the suggestion, and it was not pursued by counsel for the Insurer during submissions, and no attempt was made to deduct any post-accident income from Mr. Cripps' weekly benefit.
With the clarity of hindsight it is easy to say that the Insurer ought to have made inquiries to ascertain how someone as severely injured as Mr. Cripps had managed to make such a remarkable recovery, and to satisfy itself that the surveillance material was not being misinterpreted. However, the standard is not one of perfection. The Insurer had information that on its face indicated that Mr. Cripps had indeed returned to work. Mr. Winward attempted to make much of Mr. Smye's letter of August 15, 1994, and suggested that the Insurer simply failed to take Mr. Smye up on the offer to discuss the matter. That does not appear to be the case. Without the benefit of the participants' evidence, it is difficult to know when decisions were made, and on what basis; however, it does appear from the branch manager's letter that even though the Insurer had terminated benefits it was open to further discussions.
Having considered what evidence is available to me, I am not satisfied that the Applicant has satisfied the onus of establishing that the Insurer unreasonably withheld benefits at the time of the termination in the summer of 1994.
In light of the fact that benefits were reinstated after mediation, what does appear evident, is that the mediation process established by the Insurance Act was effective in helping the parties to resolve a dispute in a relatively expeditious manner.
(ii) Termination at the 156-week mark
Section 12(5)(b) of the Schedule provides that only an individual who is incapable of "engaging in any occupation or employment for which he or she is reasonably suited by education, training or experience," will be entitled to ongoing benefits. Establishing entitlement at arbitration is the responsibility of the applicant, but an insurer seeking to terminate benefits at the 156-week mark, can do so, only after making sufficient inquiry to satisfy itself that the insured is no longer entitled to benefits. Almost invariably, this will involve, at a bare minimum, discussing the matter with the insured so as to ascertain what his or her education, training and experience is, and what jobs he or she might be capable of engaging in. Often, it will involve a referral to a physician or for a functional capacity evaluation. It may also involve enrolling the insured in a work- hardening or retraining program. In this case, the Insurer did none of these things.
The one thing the Insurer did do was to continue the surveillance of Mr. Cripps. Surveillance was undertaken on August 18, 19, and 21, 1995 and subsequently on September 22, 1995. On August 18, Mr. Cripps was observed driving around town running various errands throughout the day. On August 19 and 21, he was observed spending the day at an outdoor market. Part of the time he was accompanied by his son, he was alone for the balance. Mr. Cripps was observed taking plants from his van, setting up the stall, completing transactions and packing up. The same activities were observed on September 22, 1995.
As noted above, when the Insurer reinstated benefits, it must have been satisfied that Mr. Cripps' periodic attendances at the market did not amount to a return to his occupation. In light of this, it is difficult to fathom what new insights the Insurer expected to obtain from the continued surveillance. Mr. Traversari testified that the surveillance suggested to him that while Mr. Cripps might not be capable of engaging in full-time employment, he was capable of part-time employment. He went on to state that if he were capable of part-time employment, he would not be entitled to ongoing benefits in the post-156-week period. I do not agree. As has been consistently stated in previous decisions, "other suitable employment" must be comparable in status and remuneration. Part-time work would not be comparable. In fact, Mr. Traversari admitted that the surveillance did not suggest that Mr. Cripps' efforts were viable when examined from a business perspective.
During argument, Mr. Wilson submitted that although Mr. Cripps might not be capable of running his own business, the surveillance evidence demonstrated that he was capable of working for someone else. I do not accept this submission. First, there was no evidence to suggest that the Insurer had reached this conclusion. Second, as stated above, while Mr. Cripps made the odd sale, it was apparent from a review of the tapes that he could not earn a viable living from whatever sales he was making. His attendances at the market were not consistent enough, he completed tasks in a very slow manner, and sales were sporadic. In my view, Mr. Cripps' efforts were not in any fashion equatable to what he had done before the accident.
In addition, I have considered Chris Cripps' evidence on the nature of his father's activities. Chris testified that his father was desperate to work and consequently until he gave up the business, he would take his father around with him, and that ocassionally his father would set up a stall at the Burlington market. Chris testified however, that his father was not fit to carry on business, because he lacked the necessary judgement, and was incapable of maintaining civil relations with people. For example, at the Burlington market, where they had rented a stall for ten years prior to the accident, Mr. Cripps would argue with prospective clients and vendors in the neighbouring stalls about inconsequential affairs. Eventually, the market management barred them from the market.
In my view, the additional surveillance evidence added nothing to the Insurer's knowledge base, and could not form the basis of a reasonable termination of benefits at the 156-week mark. In my estimation, the Insurer did not make the type of inquiry expected of a reasonable Insurer to satisfy itself that Mr. Cripps was no longer entitled to benefits, keeping in mind the provisions of section 12(5)(b) of the Schedule.
During argument, Mr. Wilson suggested that the Insurer was entitled to rely upon the failure of the Applicant to submit any updated medical information to substantiate ongoing entitlement at the 156-week point. I disagree, The Insurer took no steps to warn the Insured that it was contemplating terminating benefits at the 156-week mark. Nor did it request additional medical information, either by way of an updating letter from Mr. Cripps' own physicians or from an IME. Until the insurer approaches its insured looking for updated medical information, the insured is under no obligation to provide it. If the Insurer wanted updated medical information, it should have sought it before summarily terminating benefits.
In conclusion, I am satisfied that it was unreasonable for the Insurer to have terminated benefits at the 156-week mark, and that consequently a special award is merited. The size of the award depends upon all of the conduct, therefore, I leave a discussion of the amount of the award, to the end of this portion of my reasons.
(iii) Conduct after Termination
As noted above, the Applicant argued that even if a special award was not justified at the time of the termination, it was unreasonable for the Insurer to continue withholding payments throughout the summer of 1996, in the face of the emerging medical evidence. In light of the fact that I have already found that a special award is justified, the question goes more to the size of the special award.
The new medical evidence presented by the Applicant's counsel in the spring and summer of 1996 strongly supported Mr. Cripps' claim for ongoing benefits, as is attested to by Senior Arbitrator Rotter's interim award. However, in my view, the Insurer's continued denial of benefits, and defence of the motion for interim benefits was not unreasonable.
First, the Insurer attempted to arrange for an IME to be conducted early in the spring, so that it could verify the information being provided by the Applicant's own doctors. In my view that decision was eminently reasonable. The Insurer had not conducted any IMEs to date and was facing considerable exposure. Unfortunately, the Applicant failed to attend that examination, effectively precluding the Insured from obtaining another view point on his medical condition. Mr. Cripps ultimately attended the IME in late August and a report was prepared in early October, but not received by the Insurer until mid-October. In my opinion, the Insurer cannot be criticised for awaiting the outcome of the IME before conceding entitlement. The delay in the production of the report is attributable to the Applicant, not the Insurer, and accordingly any suggestion that the Insurer ought to have conceded entitlement before that date is unfounded.
The IME report in fact supported Mr. Cripps' claim. Mr. Winward relied heavily upon what he characterized as the Insurer's continued intransigence in the face of its own IME. I do not agree with his characterization. Because of the Applicant's failure to attend the first IME, the Insurer did not receive the IME report until a few weeks before the hearing. At that juncture the parties were in the midst of serious settlement discussions aimed at attempting to resolve the entire matter. I am obviously not privy to those discussions, but given the nature of the talks, it is not surprising that the Insurer as a tactical matter would not concede the entitlement issue until such time as it was clear; either that the entire matter was capable of resolution, or would be proceeding to a hearing. I understand that the parties were continuing to talk until late on the Friday afternoon preceeding the hearing. When the parties assembled on Monday for the hearing, the first thing Mr. Winward did was advise opposing counsel that he was no longer contesting entitlement.
In my view, the Insurer cannot be criticized for the approach it took. I hasten to add that this conclusion is limited to the facts of this case. In another case, where the Insurer obtains the results of an IME earlier, the considerations would be far different.
Considering the matter as a whole, including the conduct of the Insurer, the receipt by the Applicant of interim benefits, and the admission by the Insurer just before the commencement of the hearing, I order a special award in the amount of $2,000 inclusive of interest.
Order:
The Insurer shall pay to the Applicant weekly income benefits at the rate of $501.60.
Mr. Cripps is entitled to interest on the outstanding weekly benefits in accordance with section 24(4) of the Schedule.
Mr. Cripps is entitled to a special award pursuant to section 282(10) of the Insurance Act in the amount of $2,000 inclusive of interest.
Mr. Cripps is entitled to his expenses incurred in respect of the arbitration.
February 7, 1997
Stewart McMahon
Date
Schedule 1
List of Exhibits:
Exhibit 1
Applicant's Medical Brief
Exhibit 2
Report of Dr. Scott H. Garner dated June 10, 1996
Exhibit 3
Report of Dr. David Duncan dated October 8, 1996
Exhibit 4
Plant Plus account ledger with Unsworth & Sons Greenhouse Ltd.
Exhibit 5
Letter from Mr. Reynolds of Unsworth & Son to the Applicant's solicitor dated July 30, 1996
Exhibit 6
Various sales invoices issued by Mr. Cripps to clients (undated)
Exhibit 7
Letter from Garden City Greenhouses dated July 29, 1996
Exhibit 8
Application for Accident Benefits dated June 8, 1993
Exhibit 9
Draft 1992 income tax return of Mr. Crippps
Exhibit 10
Sales invoice No. 40551, Unsworth & Son Greenhouses dated November 23, 1992
Exhibit 11
72 sales receipts prepared by Mr. Cripps
Exhibit 12
Surveillance report on Mr. Cripps by Horvath Investigations Inc. dated August 18, 1994, accompanied by videotape
Exhibit 13
Surveillance report on Mr. Cripps by Horvath Investigations Inc. dated Dec. 16, 1994, accompanied by videotape
Exhibit14
Surveillance report on Mr. Cripps by Horvath Investigations Inc. dated August 8, 1995, accompanied by videotape
Exhibit 15
Surveillance report on Mr. Cripps by Horvath Investigations Inc. dated October 30, 1995, accompanied by videotape
Exhibit 16
Assessment of Claim form by Insurer dated Aug. 22, 1994
Exhibit 17
Ontario Automobile Insurance Medical and Psychological Report dated June 2, 1993
Exhibit 18
Letters of Michael Taylor to Mr. Smye dated Dec. 20, 1994, March 15, 1995 and June 6, 1995
Exhibit 19
Medical Report of Dr. Mark Bayley (Rehab Medicine, Chedoke-McMaster Hospitals) dated September 7, 1993
Exhibit 20
Mr. Smye's letter to Lindsay, Morden, dated August 15, 1994
Exhibit 21
Letter from Brian Blume to Mr. John Cripps dated August 25, 1994
Exhibit 22
Letter from F.N. Scott to Mr. Smye dated September 8, 1994
Exhibit 23
Letter from Mr. Smye to Mr. Taylor dated January 20, 1995
Exhibit 24
Three (3) letters from Mr. Adair to Mr. Mahler dated February 15, February 27 and March 11, 1996
Exhibit 25
Letter from Mr. Hallinan, Coopers & Lybrand, to Mr. Smye dated May 9, 1995
Exhibit 26
Letter from Mr. Smye to Mr. Hallinan, Coopers & Lybrand, dated May 16, 1995
Exhibit 27
Report of Mr. Daniel Edwards of Coopers and Lybrand dated February 1, 1996
Appendix 1
Applicant's Calculations
Calculation of Weekly Income Benefits for John Cripps
Poinsettia Sales
Revenues:
53 x 4" @ $4.00
$ 212.00
869 x 6"@ $5.95
5, 170.00
75 x 10"@ $24.50
$ 1,837.50
$7,220.05
Cost of Goods Sold:
53 x 4" @ $2.00
869 x 6" @ $3.50
75 x 10" @ $12.50
($4,025.00)
Less:
Plants destroyed in motor vehicle accident
30 x 6" @ $5.95
($ 178.50)
3 x 10" @ $24.50
(73.50)
Foil wrap
(20.00)
$2,923.05
$2,923.05
Interior Landscape
Exhibit 6 (Chris Crips)
Profit
Page 42
$ 326.00
Page 46
140.00
Page 47
137.50
Page 48
70.00
Page 49
130.00
Page 50
260.00
Page 58
480.00
Additional Phase 1 Restaurant
130.00
$1,673.50
Less: Half of 4" poinsettias purchased:
27 @ $4.00
(108.00)
$1,565.50
$1,565.50
Weekend Market Sales
Sales/day/Kitchener Profits/day/Kitchener
$600.00 350.00
Sales/day/Hamilton Profits/day/Hamilton
300.00 180.00
After Nov. 23/72, 70% sales poinsettias
Therefore:
Kitchener profits 2 days at $350.00
$ 700.00
2 days at $105.00
210.00
Hamilton profits: 2 days at $180.00
$ 360.00
2 days at $ 54.00
108.00
Less: Booth Rentals
Kitchener: 4 days @ $12.00
(48.00)
Hamilton: 4 days @ $20.00
(80.00)
$1,250.00
$1,250.00
Van Expenses
$20.00/day for 28 days
($ 560.00)
Net Profit John Cripp's 60% share
$5,178.55 3,107.13
Divided by 4
$ 776.78
80%
$ 621.43
Appendix 2
Insurer's Calculations
Poinsetta Sales
Revenues:
53 x 4" @ $4.00
$ 212.00
869 x 6" @ $5.95
5,170.55
75 x 10"@ 24.50
1,837.50
$7,220.05
Cost of Goods Sold:
53 x 4"@ 52.00
869 x 6"@ 3.50
75 x 10" @ 12.50
($4,025.00)
Less:
Plants destroyed in motor vehicle accident
30 x 6" @ $5.95
($ 178.50)
3 x 10" @ $24.50
($ 73.50)
Foil Wrap
($ 20.00)
$ 2,923.05
$2,923.05
Interior Landscape Sales:
Exhibit 6 (Chris Cripps)
Profit
Page 42
$655.00
Page 46
200.00
Page 47
275.00
Page 48
100.00
Page 49
200.00
Page 50
400.00
Page 58
825.00
Additional Phase I Restaurant
---0---
$2,655.00
Less: Half of 4" poinsettias purchased:
$1,327.50
212.00
53 @ $4.00
$ 1,028.00
$1,115.50
Weekend Market Sales
Revenues
0
Annual Expenses:
Maintenance
$1,280.00
Insurance
1,325.00
License
90.00
$2,695.00 – 13
$ 207.30
Gas for van
560.00
Van rental
200.00
Net Profit
$3,071.25
Based upon 60% share
Based upon 50% share
Net Profit
$1,842.75
$1,535.63
divided by 4
460.69
363.90
80 %
$ 368.95
$ 307.13