Darshan Saini v. Wellington Insurance Company, 1997 ONICDRG 60

Ontario Insurance Commission

Commission des assurances de l’Ontario

Neutral Citation: 1997 ONICDRG 60

Appeal P-001515

OFFICE OF THE DIRECTOR OF ARBITRATIONS

DARSHAN SAINI Appellant

and

WELLINGTON INSURANCE COMPANY Respondent

Before: Elisabeth Sachs

Counsel: Peter S. Carlisi (for Darshan Saini) Grant Dow (for Wellington Insurance)

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 18, 1994 is confirmed.

2. Mr. Saini is entitled to his reasonable appeal expenses.

April 3, 1997

Elisabeth Sachs Director of Arbitrations

Date

REASONS FOR DECISION

I. BACKGROUND

Darshan Saini was injured in a motor vehicle accident on November 26, 1990. He received weekly income benefits from Wellington Insurance Company (“Wellington”) under section 12 of O.Reg. 672, Statutory Accident Benefits Schedule - Accidents Before January 1, 1994 (the Schedule) until January 3, 1991, when they were terminated.

Mr. Saini claimed continued entitlement to benefits in an amount greater than the minimum and beyond the six weeks he had been paid. In addition, Mr. Saini claimed reimbursement for the costs of hiring others to run his business during the time he was unable to work after the accident. The issues were not resolved at mediation. At the ensuing arbitration hearing, Mr. Saini and his wife testified and nine exhibits were filed.

The arbitrator found Mr. Saini entitled to a weekly income benefit of $211.98 until February 1, 1991. She refused, however, to order Wellington to pay any expenses for replacement labour in Mr. Saini’s gas station business. Mr. Saini submits the denial of this claim is an error of law. He argued that section 12 of the Schedule provides for protection of a source of income during a period of disability (the reimbursement claim), or alternatively, “economic rehabilitation” of injured self-employed individuals is compensable under paragraph 6(1)(f).

II. ISSUES AND ANALYSIS

No appeal is taken from the arbitrator’s findings of fact. She accepted that Mr. Saini had a substantial inability to perform the essential tasks of a self-employed service and gas station owner/attendant from the time of the accident to February 1, 1991. Mr. Saini operated the station as a sole proprietorship. The arbitrator also accepted that in order to keep the business operating during that approximate two month period, Mr. Saini needed to have someone other than immediate family members, who regularly assisted him without remuneration, run the gas station.

1. Source of Income

The first part of Mr. Saini’s submissions is based on the interpretation of section 12 of the Schedule, the relevant portions of which are as follows:

12 (4) Subject to subsection (5), the weekly benefit under subsection (1) will be the lesser of,

(a) $600...; and

(b) 80 per cent of the insured person’s gross weekly income from his or her occupation or employment...

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

1. …

2. …

3. Business expenses which cease as a result of the accident shall be deducted from a person’s income from self-employment before calculating his or her gross weekly income.

(Emphasis added)

Mr. Saini submits that the section provides an income stream for a disabled self-employed claimant based on his gross income from his occupation which is, in effect, the gross revenue of the business he is engaged in. The business and the claimant are to be considered one and the same where, as in this case, the claimant operates a sole proprietorship. Mr. Saini argues the reason the section is to be interpreted in this manner is that only by relating personal gross weekly income to the gross revenues of a business, can a claimant protect the continued operation of that business. The protection is afforded by, among other things, hiring replacement labour to do the work formerly done by the proprietor. To hold otherwise, Mr. Saini suggests, goes against the concept of mitigating losses - surely it is better if the business continues and provides him with an income when he is able to return to work, rather than his relying on weekly benefits in the future.

Mr. Saini argues the scheme of the Insurance Act and the Schedule is prospective, geared toward getting people back to their pre-accident status. Consequently, he submits, the cost of replacing the work he would normally do in the business must be included.¹

Mr. Saini relied on the ‘Statement of Income and Expenses From A Business’ form included with his personal income tax returns. In the 1990 return, Mr Saini declared a “gross profit” (sales revenue less cost of goods sold) from the gas station of $129,183 with an income after expenses (“Net Expenses” line) of $12,453. In 1991, Mr. Saini declared a loss of $14,810.48. The figures are illustrative - Mr. Saini submits that the words “gross weekly income from his or her occupation” in section 12 of the Schedule mean his personal gross income from his occupation should be at least the gross profit of the business. His position, as I understand it, is that he earned that same amount - $129,183. On this analysis, he would be entitled to the maximum of $600 weekly.

The arbitrator did not, and I do not, accept this position. The Schedule established a statutory scheme of limited income loss compensation, taking an historical perspective in calculating the amount based on a person’s earnings before the accident. Mr. Saini’s earnings were not his gross profit as defined for tax purposes. The amount of Mr. Saini’s pre-tax earnings constitute his income under section 12. Business revenue generated by a self- employed individual or sole proprietorship is not personal gross income. Section 12 does not replace business profits, reimburse any other expenses or provide other income replacement benefits. In the absence of a specific provision for the replacement labour costs claimed, none can be awarded under this section.²

2. The “Economic Rehabilitation” Concept

Mr. Saini submits as an alternative on appeal, as he did in the arbitration, that replacement labour costs should be characterized as rehabilitation expenses under section 6 of the Schedule. He argues the language of paragraph 6(1)(f) does not exclude non-medical expenses incurred in mitigation of an insured person’s losses. The paragraph reads:

6 (1) The insurer will pay...all reasonable expenses...for,

(f) other goods and services, whether medical or non medical in nature, which the insured person requires because of the accident.

(Emphasis added)

Mr. Saini says he required the replacement labour to mitigate his loss and he should be compensated accordingly. The $211.98 weekly income benefit was not sufficient to meet that goal. It made sense to him to hire replacement workers to keep his business running after the accident, rather than close it temporarily or reduce its hours to what he and his normally unpaid spouse could manage alone.

Mr. Saini incurred a business expense which cannot reasonably be linked to his medical treatment or personal rehabilitation, similar to the situation of the applicant in Zehr and The Guarantee Company of North America (July 30, 1993, OIC A-001963). The idea that the Schedule encompasses “economic rehabilitation” of the insured person is interesting. However, in my view, the parameters of the “basket clause”, paragraph 6(1)(f), cannot be stretched to include such costs.³ I agree with the arbitrator’s reasoning that the nature of expenses claimed under this paragraph must relate to the rehabilitation of the person, not his or her finances.

III. EXPENSES

This appeal raised a novel legal issue and theory on the interaction of the income replacement and rehabilitation provisions of the Schedule and “economic rehabilitation”. Although unsuccessful, Mr. Saini is entitled to his reasonable expenses of this appeal. If the parties cannot agree, expenses may be assessed by filing written submissions with the Registrar.

April 3, 1997

Elisabeth Sachs Director of Arbitrations

Date

Footnotes

1. 1In his personal income tax returns, Mr. Saini claims expenses of almost $6,400 in salary, wages and benefits for the 1990 calendar year, and $6,640 for 1991 (Ex. 8), but testified he only hired and paid for his wife, a brother and a former employee to run the gas station during December 1990 and January 1991. He testified he did not pay for help from other family members or hire employees during this or any other time since June, 1989. These amounts are substantially higher than what was documented as paid to these three persons and detailed in Ex. 4, 5, and 6. The 1990 tax return was attached to the written appeal submissions, but apparently not filed as an exhibit in the arbitration.
2. 2See Bress and State Farm Insurance Companies, (March 23, 1992, OIC A-000191 & OIC A-000192).
3. 3As I stated in Chamale and Wellington Insurance Company, (July 9, 1996, OIC P-000849) at p. 5: “...services...available under section 6 and 7 are for those goods and services required by the insured person for their own treatment and rehabilitation and are not intended to provide replacement services for the family of the insured.” In my view, replacement services in this context also are not intended to provide for the continued health of the insured person’s business, or the maintenance of a source of income.