Neutral Citation: 1997 ONICDRG 63
Appeal P96-00066
OFFICE OF THE DIRECTOR OF ARBITRATIONS
ROYAL INSURANCE COMPANY OF CANADA
Appellant
and
GEORGE DEFOREST
Respondent
Before:
David R. Draper, Director's Delegate
Counsel:
Mark Baker (for Royal Insurance)
David B. Hayward (for Mr. DeForest)
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 dismissed and the arbitration order, dated July 2, 1996, is confirmed.
George DeForest is entitled to his reasonable appeal expenses, payable by Royal Insurance Company of Canada.
April 14, 1997
David R. Draper
Director's Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL
This is an appeal by Royal Insurance Company of Canada ("Royal") from an arbitration decision, dated July 2, 1996, concluding that benefits received by George DeForest pursuant to section 43(1) of the Workers’ Compensation Act are not deductible from his accident benefits under the Statutory Accident Benefits - Accidents On or After January 1, 1994 ("the SABS - 1994").1
II. BACKGROUND
Mr. DeForest worked as a truck driver from 1981 to 1992. In 1992, he was earning approximately $20.00 per hour and working 50-60 hours per week. On September 23, 1992, he broke his left ankle and tailbone in a workplace accident. Due to his injuries, Mr. Deforest received temporary total disability benefits under section 37(1) of the Workers' Compensation Act ("the WCA"). These benefits continued until September 2, 1993, when they were changed to temporary partial disability benefits under section 37(2)(b), although the amount remained the same.
At Mr. DeForest's request, the Worker's Compensation Board conducted a "career probe" to identify appropriate alternative employment for which he could retrain. They suggested marine mechanics, electronics and parts technician as possible options. As part of his retraining, Mr. DeForest returned to high school to complete his diploma.
On March 24, 1994, shortly before he completed his high school upgrading, Mr. DeForest was involved in an automobile accident, fracturing his kneecap. He graduated from high school in June 1994 and began to train as a marine mechanic. Because of his fractured kneecap, however, he was physically unable to continue in that field.
At the request of the Worker's Compensation Board, Mr. DeForest went to Sheridan College to train in electronics. At the time of the arbitration hearing, he was expected to graduate in April 1997. He hoped to find a job in electronics with a starting salary of approximately $12.00 to $14.00 per hour, much less than he earned as a truck driver.
After his automobile accident, Mr. DeForest continued to receive temporary partial disability benefits under section 37(2)(b) from the Workers' Compensation Board until July 1, 1994. At that point, he qualified for future economic loss benefits ("FEL benefits") under section 43(1) of the WCA. In addition, he qualified for a supplement to his FEL benefits ("FEL supplement") under section 43(9) because of his participation in rehabilitation. Mr. DeForest received the combined FEL benefits and FEL supplement until March 1, 1995. As of that date, he no longer qualified for the FEL supplement and received only FEL benefits.
At least for the purposes of this appeal, the parties agree on the following schedule of Mr. DeForest's workers' compensation benefits:2
DATE
Workers’ Compensation Act
AMOUNT
Sept. 24, 1992
s.37(1)
$598.10 per week
Jan. 1, 1993
s.37(1)
$605.70 per week
Sept. 2, 1993
s.37(2)(b)
$605.70 per week
Jan. 1, 1994
s.37(2)(b)
$608.86 per week
March 24, 1994
Automobile accident
July 1, 1994
FEL - s.43(1) FEL supplement - s.43(9)
$1,325.38 per month
$1,313.01 per month
Jan. 1, 1995
FEL - s.43(1) FEL supplement - s.43(9)
$1,325.38 per month
$1,309.23 per month
March 1, 1995
FEL - s.43(1)
$1,325.38 per month
Section 43(13) of the WCA provides for a periodic review of FEL benefits. At the time of the arbitration hearing, Mr. DeForest’s benefits were due to be reviewed in July 1996.
Royal paid income replacement benefits under Part II of the SABS - 1994. My understanding is that Mr. DeForest chose to have his benefits calculated based on his gross annual income in the 156 weeks before his automobile accident. During this period, he had income from his job as a truck driver and temporary disability benefits under sections 37(1) and 37(2)(b) of the WCA. Section 9(6) of the SABS - 1994 makes it clear that temporary disability benefits are included in the calculation of pre-accident income:
- (6) A determination under subsection (1) or (4) of the person's gross income from employment for a period of time shall include temporary disability benefits received in respect of that period and benefits received under the Unemployment Insurance Act (Canada) in respect of that period.
(emphasis added)
"Temporary disability benefits" is defined in section 1 of the SABS - 1994, specifically including benefits paid under sections 37(1) and 37(2)(b) of the WCA:
"temporary disability benefits" means,
(a) benefits paid under Part II, III or IV of this Regulation,
(b) benefits paid under Part V of this Regulation, unless the benefits are paid more than 104 weeks after the onset of the disability,
(c) benefits paid under section 32 of this Regulation,
(d) benefits paid under Part IV of Regulation 672 of the Revised Regulations of Ontario, 1990, unless the benefits have been paid for more than 156 weeks,
(e) benefits paid under Part II of Subsection 2 of Schedule C to the Insurance Act as it existed before June 22, 1990, unless the benefits have been paid for more than 104 weeks,
(f) benefits paid under section 37, subsection 43(9) or subsection 147(2) of the Workers' Compensation Act, or
(g) any other periodic temporary benefit paid under an income continuation plan or law, other than,
(i) Unemployment Insurance benefits,
(ii) benefits paid under Part V of this Regulation more than 104 weeks after the onset of the disability,
(iii) benefits paid under Part IV of Regulation 672 of the Revised Regulations of Ontario, 1990 for more than 156 weeks, or
(iv) benefits paid under Part II of subsection 2 of Schedule C to the Insurance Act as it existed before June 22, 1990 that have been paid for more than 104 weeks.
[emphasis added]
This definition is not only important in determining the insured person's pre-accident income, but also in calculating the amount of his or her income replacement benefits. Section 75 of the SABS - 1994 sets out deductions for collateral benefits. Subsection (4) is the relevant provision:
- (4) The insurer may deduct the following amounts from any weekly income replacement benefits payable to an insured person under Part II, any weekly education disability benefits payable to an insured person under section 15, any weekly caregiver benefits payable to an insured person under Part IV or any weekly disability benefits payable to an insured person under Part V:
Any temporary disability benefits being received by the insured person in respect of a period following the accident and in respect of an impairment that occurred before the accident.
Any other periodic benefit being received by the insured person in respect of a period following the accident and in respect of an impairment that occurred before the accident, if the insured person was receiving the other periodic benefit at the time he or she first qualified for the weekly income replacement benefits under Part II, weekly education disability benefits under section 15, weekly caregiver benefits under Part IV or weekly disability benefits under Part V, and, at that time, the other periodic benefit was a temporary disability benefit.
(emphasis added)
The parties agree that section 75(4)1 allows Royal to deduct Mr. DeForest's workers' compensation benefits paid under sections 37(1), 37(2)(b) and 43(9) of the Worker's Compensation Act. Royal claims, however, that it is also entitled to deduct his FEL benefits paid under section 43(1). Mr. DeForest argues that while the other workers' compensation benefits are specifically included in the definition of "temporary disability benefits," FEL benefits are not.
The arbitrator concluded that FEL benefits are not deductible from income replacement benefits. He held that unlike the earlier Schedule,3 the SABS - 1994 specifically defines which workers' compensation benefits are to be treated as "temporary disability benefits." He rejected the argument that although FEL benefits are not included in paragraph (f) of the definition, they are included in the basket clause in paragraph (g). The crux of the arbitrator's analysis is found at page 6 of his decision:
I find that Mr. DeForest's section 43(1) FEL benefits are not deductible from the benefits to which he might otherwise be entitled under the Schedule. In my view, the Legislature has directly addressed the question of the deductibility of section 43(1) FEL benefits and has indicated that they are not deductible. Both subclauses of section 75(4) use the phrase "temporary disability benefits" and this is clearly defined in section 1 of the Schedule. The definition specifically enumerates those benefits under the Workers Compensation Act that are to be considered "temporary disability benefits" and, therefore, those benefits which are to be deducted under the Schedule. The definition specifically identifies one subsection of section 43 of the WCA as a temporary disability benefit (section 43(9) - the FEL supplement) but does not refer to section 43(1). It is trite to say that had the Legislature intended to include section 43(1) benefits, it could easily have done so.
I do not accept the Insurer's submission that the definition of temporary disability benefits is merely a guide to the issue of deductibility. The definition specifically uses the term "means" (rather than "includes") and this is generally accepted as reflecting an exhaustive description of the defined term. The catch-all portion of the definition is not, in my view, intended to refer to benefits that could easily have been mentioned in the part dealing with workers' compensation benefits, particularly when that part addresses specific sections and subsections of the WCA. In this regard, I find that the definition of "temporary disability benefits" under Bill 164 is intended to replace the general phrase "payments for loss of income" in the previous Schedule, so as to specifically identify those (workers' compensation) benefits that can be deducted by an insurer.
Royal claims that the arbitrator erred in his interpretation and asks for an order allowing it to deduct Mr. DeForest's FEL benefits from his income replacement benefits.
III. THE APPEAL
Royal submits that FEL benefits are "temporary disability benefits" and, therefore, are deductible under section 75(4)1. In the alternative, it claims that FEL benefits are deductible as "any other periodic benefit" under section 75(4)2.
A. The Section 75(4)1 Argument
Section 75(4)1 allows the insurer to deduct:
Any temporary disability benefits being received by the insured person in respect of a period following the accident and in respect of an impairment that occurred before the accident.
Because Mr. DeForest received FEL benefits after his automobile accident for an impairment that occurred before the automobile accident, they are deductible if they are "temporary disability benefits."
In the pre-1994 Schedule, weekly income benefits were reduced by "payments for loss of income... received by or available to the insured person under the laws of any jurisdiction or under any income continuation benefit plan." A number of arbitration decisions dealt with the deductibility of various types of workers' compensation benefits.4 They suggest a distinction between temporary and permanent disability benefits - temporary disability benefits are payments for loss of income and therefore deductible, while permanent disability benefits are payments based on disability, not loss of income, and therefore not deductible.
In Mouawad, one issue was whether Mr. Mouawad’s weekly income benefits under the Schedule should be reduced by his FEL benefits and FEL supplement. The arbitrator held that FEL benefits are temporary in nature and paid in respect of an anticipated loss of income and, therefore, are deductible. However, she found the FEL supplement was not deductible because it is not a "payment for loss of income."
Royal relies on these decisions in support of its argument that FEL benefits are "temporary disability benefits" within the meaning of the SABS - 1994. I agree with the arbitrator, however, that the earlier arbitration decisions are of little assistance. They deal with significantly different legislation. The SABS - 1994 brought in a definition of "temporary disability benefits," presumably to deal with some of the uncertainty of its predecessor.
Significantly, the new regulations do not simply adopt the approach taken in the arbitration decisions. Contrary to the outcome in Mouawad, the definition of "temporary disability benefits" specifically includes the FEL supplement, making it deductible from income replacement benefits. FEL benefits, which were held in Mouawad to be deductible, were not included in the definition, making their deductibility, at best, uncertain.
The question is whether FEL benefits fit under the general language of paragraph (g) of the definition as "any other periodic temporary benefit paid under an income continuation plan." I agree with the arbitrator's analysis. It makes little sense that the drafters would list specific temporary benefits under the WCA, including the FEL supplement paid under section 43(9) of the WCA, but leave section 43(1) FEL benefits to be included under the general wording of paragraph (g).
Royal's position might be stronger if FEL benefits were clearly temporary benefits. In my view, however, they are difficult to categorize. FEL benefits are not obviously either temporary or permanent. They are payable to a worker "who suffers injury resulting in permanent impairment or resulting in temporary disability for twelve continuous months." Therefore, they can be paid without a determination that the worker's injuries are permanent. Further, the amount is not permanently set. It is based on the difference between the worker's pre-injury income and the income that he or she is likely to be able to earn after the injury in suitable and available employment, and is to be reviewed at regular intervals (WCA, s.43(13)). The amount can change for various reasons, including an improvement in the worker's condition, or as a result of vocational rehabilitation.
Finally, it seems consistent with the rest of the definition that FEL benefits are not included. While benefits paid under Parts II (income replacement benefits), III (eduction disability benefits) and IV (caregiver benefits) of the SABS - 1994 are specifically included as "temporary disability benefits," loss of earning capacity benefits paid under Part VI are not. In my view, this is important because loss of earning capacity benefits are similar to FEL benefits in the workers compensation system. I am also influenced by the fact that other long-term, but not necessarily permanent, benefits are specifically excluded from "temporary disability benefits":
weekly payments for loss of income paid after 104 weeks under the old Schedule C to the Insurance Act.
weekly benefits paid for more than 156 weeks under the pre-1994 Schedule.
weekly disability benefits paid under Part V of the SABS - 1994 more than 104 weeks after the onset of the disability.
Royal’s approach would mean that insured persons receiving benefits under the SABS - 1994 would be treated differently depending on whether their previous injuries resulted from an accident covered by workers compensation or automobile insurance. I see no obvious policy basis for such a distinction. As a result, I am not persuaded that the context requires the kind of broad reading of the definition urged by Royal.
B. The Section 75(4)2 Argument
Royal submits that even if Mr. DeForest's FEL benefits are not deductible under section 75(4)1, they are deductible as "any other periodic benefit" under section 75(4)2.
According to the arbitrator, Royal’s counsel "conceded that section 75(4)2 has no application in the present case because Mr. DeForest was not in receipt of the section 43(1) FEL benefits at the time he became entitled to benefits under the Schedule." At the appeal hearing, however, counsel claimed that while he may have made a factual concession, he did not intend to say that section 75(4)2 does not apply to Mr. DeForest. I make no finding on what happened at the arbitration hearing because Mr. DeForest did not object to Royal pursuing this argument on appeal.
When Mr. DeForest first qualified for income replacement benefits under the SABS - 1994, he was receiving temporary partial disability benefits under section 37(2)(b) of the WCA, not FEL benefits under section 43(1). That is agreed. Section 75(4)2 allows the insurer to deduct:
Any other periodic benefit being received by the insured person in respect of a period following the accident and in respect of an impairment that occurred before the accident, if the insured person was receiving the other periodic benefit at the time he or she first qualified for the weekly income replacement benefits under Part II, weekly education disability benefits under section 15, weekly caregiver benefits under Part IV or weekly disability benefits under Part V, and, at that time, the other periodic benefit was a temporary disability benefit.
(emphasis added)
Royal wants to deduct Mr. DeForest's FEL benefits as "any other benefits being received by the insured person in respect of a period following the accident and in respect of an impairment that occurred before the accident." Mr. DeForest submits that this section cannot apply to him because he was not receiving "the other periodic benefit," namely FEL benefits, at the time he first became eligible for income replacement benefits.
Section 75(4)2 is difficult to follow. Paragraphs 1 and 2 both deal with benefits "received by the insured person in respect of a period following the accident and in respect of an impairment that occurred before the accident." Paragraph 1 allows the insurer to deduct such benefits if they are "temporary disability benefits." As discussed above, "temporary disability benefits" is defined in section 1 of the SABS - 1994. Paragraph 2 allows the deduction of "any other periodic benefit." This must refer to benefits that are not temporary disability benefits.
The difficulty is that although section 75(4)2 must apply to benefits that are not "temporary disability benefits," it requires that at the time the insured person first qualified weekly benefits under the SABS - 1994, this "other periodic benefit" must have been a "temporary disability benefit." This suggests that the characterization of the benefit changes. The insured person must be receiving periodic benefits that are not "temporary disability benefits," but were " temporary disability benefits" when he or she first qualified for weekly benefits under the SABS - 1994.
Consider the person who is receiving weekly income benefits under section 12 of the Schedule and is then injured in an automobile accident on or after January 1, 1994. The insurer dealing with the second accident is allowed to reduce the income replacement benefits it pays by the amount of the insured person’s weekly income benefits, as long as they have not been paid for more than 156 weeks. If the weekly income benefits continue beyond 156 weeks, however, paragraph (d) of the definition provides that they are no longer "temporary disability benefits." The question is whether they remain deductible from the income replacement benefits paid under the SABS - 1994. Weekly income benefits paid under the Schedule after 156 weeks clearly are not deductible under section 75(4)1 because they are not "temporary disability benefits." In my view, however, they may be deductible under section 75(4)2.
In this example, the nature of the benefit did not change. The insured person continued to receive weekly income benefits under section 12 of the Schedule, although the eligibility test changed. In Mr. DeForest’s case, he did not continue to receive the same benefits. At the time he first qualified for income replacement benefits under the SABS - 1994, he was receiving temporary partial disability benefits under section 37(2)(b) of the WCA. Royal wants to deduct his FEL benefits paid under section 43(1) of the WCA. I am not persuaded that "the other periodic benefit" in section 75(4)2 is broad enough to refer to these two different types of workers compensation benefits, payable based on separate tests and calculated differently.
Royal submits that Mr. DeForest will receive a windfall if his FEL benefits are not deducted. That is not clear to me. FEL benefits compensate the injured worker for the reduction in his or her earning capacity resulting from the workplace injury. Income replacement benefits under the SABS - 1994 protect the insured person’s income, but not based on his or her actual losses. They are based on the person’s pre-accident income, calculated according to the regulations. If Mr. DeForest is "overcompensated," it seems to me that it is because the SABS - 1994 specifically allows him to calculate his pre-accident income over a period that extends back before he was injured at work.
For all these reasons, I conclude that the arbitrator correctly ordered that Mr. DeForest's FEL benefits are not deductible from his income replacement benefits.
IV. APPEAL EXPENSES
Mr. DeForest was successful in resisting Royal's appeal. This is clearly a case where appeal expenses should be ordered.
April 14, 1997
David R. Draper
Director's Delegate
Date
Footnotes
- Ontario Regulation 776/93, as amended by Ontario Regulation 635/94.
- Arbitration exhibit #1.
- Ontario Regulation 672, Statutory Accident Benefits Schedule - Accidents Before January 1, 1994, s.12(4).
- McCormick and Economical Mutual Insurance Company, (October 2, 1991, OIC A-000139); Pallotta and Alpina Insurance Co. Ltd. (Zurich Insurance Company), (April 22, 1992, OIC A-000808); Mouawad and Alpina Insurance Company, Limited, (June 30, 1994, OIC A-003226, under appeal); Jarvis and Jevco Insurance Company, (April 26, 1996, OIC A-006063); Milevski and State Farm Mutual Automobile Insurance Company, (June 6, 1996, OIC A-010292).