Neutral Citation: 1997 ONICDRG 99

OIC A96-000393

ONTARIO INSURANCE COMMISSION

BETWEEN:

HENRY A. GOOS

Applicant

and

NON-MARINE UNDERWRITERS, MEMBERS OF LLOYD'S

Insurer

DECISION

Issues:

The Applicant, Henry A. Goos, was injured in a motor vehicle accident on November 19, 1990. In my prior decision of May 9, 1997, I found Non-Marine Underwriters, Members of Lloyd's ("Lloyd's") responsible for payment of any statutory accident benefits to which Mr. Goos may be entitled under Ontario Regulation 672,¹ and I further determined certain disputes concerning the calculation of Mr. Goos' weekly income benefit. I did not however determine, nor was I asked to determine, the exact amount of Mr. Goos' weekly income benefit. Prior to the release of my first decision, but subsequent to the release of new case law, the parties agreed to have me hear the following two additional issues, under the authority of the Insurance Act, R.S.O. 1990, c.I.8, as amended (the "Act"):

1. Did the parties reach a binding settlement on the issue of the deductibility of CPP disability benefits?

2. If the answer to the first question is no, are the CPP benefits being received by Mr. Goos payments for loss of income, and therefore deductible from his gross weekly income, pursuant to subparagraph 12(4)(b)(i) of the Schedule?

Mr. Goos also claims his expenses incurred in respect of this arbitration hearing.

Result:

1. The parties did not reach a binding settlement on the issue of the deductibility of C.P.P. disability benefits.

2. The C.P.P. benefits being received by Mr. Goos are not payments for loss of income, and therefore are not deductible from his gross weekly income.

3. Mr. Goos is entitled to his expenses incurred in respect of this second arbitration hearing.

Hearing:

The hearing was held by telephone conference, on May 22, 1997, before me, Lawrence Blackman, Arbitrator.

Present at the Hearing:

Mr. Goos' Representative:

William C. Goldstein Barrister and Solicitor

Lloyd's Representatives:

Graeme Mew Barrister and Solicitor

Melissa J. Catalano Barrister and Solicitor

Material before the Arbitrator:

1. Written submissions and Agreed Statement of Fact dated April 30, 1997, filed on behalf of the Applicant.

2. Written submissions dated May 5, 1997, and letters dated May 21 and 22, 1997, filed on behalf of Lloyd's.

3. Written submissions dated May 5, 1997, filed on behalf of General Accident Assurance Company of Canada.

Evidence and Findings:

The facts relevant to this hearing are agreed.

Mr. Goos was injured in a motor vehicle accident on November 19, 1990. After this accident, Mr. Goos applied for, and received, weekly income benefits payable under section 12 of the Schedule. Furthermore, solely as a result of injuries which he sustained in this accident, Mr. Goos applied for, and was granted, a Canada Pension Plan ("C.P.P") disability benefit.

At the commencement of the first arbitration hearing on September 16, 1996, the Applicant's counsel delivered to opposing counsel a schedule showing the C.P.P. disability benefits which had been received by Mr. Goos. Counsel agreed at that time that the deductibility of C.P.P. disability benefits was not an issue in the arbitration proceeding, the state of the law then being clear that such benefits were deductible from an insured's gross weekly income.

Law and Analysis:

1. Did the parties reach a binding settlement on the issue of the deductibility of C.P.P. disability benefits?

The Insurer argues that as the parties, both represented by counsel, previously agreed that the question of the deductibility of C.P.P. benefits was not at issue in determining the quantum of weekly income benefits, that issue was irrevocably settled. Accordingly, the Applicant should not be permitted to resile from that agreement, notwithstanding the subsequent release of case law which makes that settlement disadvantageous to the Applicant.

The Insurer relies upon the decision of Canadian Superior Oil Ltd. et al. v. Murdoch,² where the parties had executed an agreement settling their disputes by confirming the validity of a lease. After subsequent litigation determined that the lease was in fact not valid, the plaintiff maintained that she was not bound by the executed agreement. The Alberta Court held that the question of whether there was a binding settlement was one of contract. The Court found that the plaintiff was indeed bound by her agreement, as the parties had agreed that the lease in question should be treated as good no matter what the ultimate result of the litigation might be.

The Alberta Court specifically rejected the Plaintiff's argument that there was lack of "mutuality" in the covenant. Fridman³ describes the concept of mutuality as follows:

. . . to establish a valid contract each party must give or promise something in return for the other's act or promise. A bare, voluntary, gratuitous act or promise, unsupported by any reciprocal undertaking will not be enough. There must be mutuality; a contract must show that both parties are bound in some way.

In Canadian Superior, the court found that there was mutuality, the defendant having paid a monetary sum to the plaintiff, and the plaintiff having discontinued her court action against the defendant and signing a utilization agreement.

In this case, I have no evidence that any consideration was given by the Insurer for what appears to have been a gratuitous acknowledgement by the Applicant of the state of the law at that time, namely that C.P.P. payments were deductible. I also have no evidence that the Applicant agreed to permanently restrict his right to litigate this issue. Accordingly, I find that the issue of the deductibility of C.P.P. benefits was not settled. Therefore, this issue may be arbitrated.

2. Are the C.P.P benefits being received by Mr. Goos payments for loss of income and therefore deductible from his gross weekly income?

Under the Schedule, an insured may be eligible to receive one of two alternative weekly benefits, namely "income benefits" (under section 12) or "benefits if no income" (under section 13). The calculation of either of these benefits requires the deduction of:

. . . any payments for loss of income, except Unemployment Insurance benefits,

(i) received by or available to the insured person under the laws of any jurisdiction or under any income continuation benefit plan, or

(ii) received under any sick leave plan. [emphasis added]

The question before me is whether the C.P.P. benefits being received by Mr. Goos are "payments for loss of income" and hence are deductible in the calculation of Mr. Goos' section 12 benefit.

Counsel for the Insurer referred me to two appellate decisions ⁴ of Director Sachs which deal with the issue of C.P.P. deductibility under section 13. I agree with the comments of Senior Arbitrator Rotter, approved on appeal, that the "deductibility" wording noted above is set out identically in sections 12 and 13 in a similar context, and hence must be interpreted consistently.⁵

The Morin decision is not particularly helpful, as the Applicant in that case conceded both at arbitration and on appeal, that C.P.P. benefits were payments for loss of income.⁶

In the Bruno decision, the Director notes that the Applicant, who was not represented by legal counsel, "appeared" not to argue that C.P.P. disability benefits were to be characterized as "payments for loss of income." The Director however does go on to state that:

In my view, it is well established that C.P.P. disability payments are "payments for loss of income" and thus deductible under section 13(3)(a) of the Schedule.

The Director cites the decision of Justice R.E. Holland in Parks v. Guarantee Company of North America,⁷ who found C.P.P. disability benefits to be deductible under the pre-Schedule no-fault provisions. The latter deducted from the insured's gross income:

any payments for loss of income from employment received by or available to such person under,

(i) the laws of any jurisdiction,

(ii) wage or salary continuation plans available to the person by reason of his employment . . .

Justice Holland concluded that as disability benefits are only payable to persons who have been income earners, and that as these benefits are calculated in part based on prior income, C.P.P. disability benefits were payments "for loss of income from employment." Holland J. concurred with the decision of McMahon D.C.J. in Paese v. United States Fidelity and Guaranty Company,⁸ who held that:

Since in my view the intent of Parliament as set forth in the Canada Pension Plan is to reimburse in part recipients for loss of income, then it must fall within the exclusionary terms used in the Insurance Act.

The Insurer also referred me to the decision of Cusinato J. in Levata v. Simcoe and Erie General Insurance Company, ⁹which considered section 12 under the Schedule. The learned judge construed that the intent of the legislature was to provide payments which are triggered either by contributors' loss of real income in being unable to return to the employment held at the time of the accident, or by the loss of potential income by losing the opportunity to become employed.

However, Justice Carruthers, in the Divisional Court decision of Cugliari v. White et al.¹⁰disagreed with the analysis of Cusinato J. that benefits which compensated for a loss of income potential were deductible. Cugliari considered the wording of subsection 267(1) of the Insurance Act (pertaining to deductibility from tort claims) which is similar to the provision presently under consideration. The pertinent part of the subsection reads as follows:

The damages awarded . . . shall be reduced by,

(c) all payments that the person has received or that were or are available for loss of income under the laws of any jurisdiction or under an income benefit continuation plan and by the present value of any such payments to which the person is entitled;

In its consideration of the words "all payments . . . received . . . or are available for loss of income," the Divisional Court referred to the 1988 Report of Inquiry into Motor Vehicle Accident Compensation In Ontario (the Osbourne Report), which distinguished between indemnity payments which are intended to compensate the insured for a pecuniary loss (and which should be deducted as a collateral payment) and non-indemnity payments which are paid upon proof of a specified event, whether or not there has been a pecuniary loss (and which should not be deducted as collateral payments). Mr. Justice Carruthers concluded:

To my mind, it is clear that the event which triggered the plaintiff's entitlement to those payments was his disability. C.P.P. does not require any proof of pecuniary loss as a condition of entitlement to payments on account of a disability pension due thereunder.

While the C.P.P. payments may have constituted an "advantage counter balancing"¹¹ the disability, they could not be considered indemnity payments, and hence were not to be deducted. The Divisional Court found neither the fact that the amount of the payment was partially calculated based on the insured's past earnings, nor the fact that payments cease when the insured ceases to be disabled as defined, to be relevant to the determination of whether C.P.P. payments were caught by the provisions of section 267.

Although the Cugliari decision dealt with tort deductibility, the pertinent words considered by the Divisional Court in Cugliari are identical to those being considered here. I therefore find the following comments of Director Sachs in Morin concerning sections 12 and 13 to be applicable:

The words are identical in both and cannot have a different meaning.

I agree with Justice Carruthers that C.P.P. benefits are non-indemnity payments which are not intended to compensate for a pecuniary loss, but are rather triggered by disability. In my mind however, the words "payments for loss of income" are themselves ambiguous. They may refer only to those benefits paid when there is a real loss of income from actual employment, or they may also encompass benefits which compensate for loss of opportunity and a potential loss of income.

Therefore, as a guide to interpreting the words "payment for loss of income," I find it helpful to look at the internal context of section 12. Under that provision, the following types of payments for loss of income (excluding Unemployment Insurance benefits) are to be deducted from gross income:

(1) those received or available under the laws of any jurisdiction;

(2) those received or available under any income continuation benefit plan; or,

(3) those received under any sick leave plan.

Driedger in Construction of Statutes¹² states that:

words take their colour from each other; general words not limited by association with a class of things because there is no class, may therefore still be limited by association with other words.

I find that the references to income continuation plans and sick leave plans (which require that employment or income be interrupted, and which are triggered by a loss of employment or actual loss¹³) "colour" the meaning of the words "payments for loss of income . . . received by or available . . . under the laws of any jurisdiction." They suggest that the deductions are limited to indemnity payments which compensate a pecuniary loss.

I further note that Levata, Paese, and Parks all refer to the Supreme Court of Canada decision of Madill v. Chu,¹⁴ wherein Spence J. stated that:

apart altogether from the contra proferentum rule, it is sound construction of a contract to construe the provision thereof broadly and the exclusions thereof narrowly.

The deduction provisions have been found in the cases noted above to be exclusions. The narrower interpretation of that provision is that "payments for loss of income" refers only to indemnity payments, which is consistent with the internal context of the provision, and follows the authoritative decision of the Divisional Court in Cugliari.

I therefore find that C.P.P. benefits as non-indemnity payments, are not "payments for loss of income," and therefore may not be deducted from Mr. Goos' gross weekly income.

Expenses:

In light of the importance of the main issue in dispute in this hearing, the Insurer did not object to the Applicant receiving his expenses in respect of this arbitration hearing.

Considering both the above-noted factor, and the Applicant's success, I find that the Applicant is entitled to his expenses incurred in respect of this second arbitration hearing.

Order:

1. The parties did not reach a binding settlement on the issue of the deductibility of C.P.P. disability benefits.

2. The C.P.P. benefits being received by Mr. Goos are not payments for loss of income, and therefore are not deductible from his gross weekly income.

3. Mr. Goos is entitled to his expenses incurred in respect of this second arbitration hearing.

June 12, 1997

Lawrence Blackman Arbitrator

Date

Footnotes

1. 1Prior to January 1, 1994, Ontario Regulation 672 was called the No-Fault Benefits Schedule. After that date it became the Statutory Accident Benefits Schedule — Accidents On or Between June 22, 1990 and December 31, 1993. In this decision, the term "Schedule" will be used to refer to Regulation 672.
2. 2(1969) 1969 CanLII 767 (AB SCAD), 4 D.L.R. (3d) 629 (Alta. C.A.); aff’d 4 D.L.R. (3d) 464 (S.C.C.), at 86.
3. 3Fridman, The Law of Contract, Third Edition, Thomson Canada Limited (Toronto, 1994).
4. 4Morin and The Personal Insurance Company of Canada (February 26, 1993), OIC P-000468 and Bruno and Liberty Mutual Insurance Company (March 8, 1996), OIC P-002249.
5. 5Morin and The Personal Insurance Company of Canada (June 16, 1992), OIC A-000468 at page 8.
6. 6The point was also conceded in Nand and State Farm Mutual Automobile Insurance Company (May 28, 1993), OIC A-001893.
7. 7[1989] I.L.R. 1-2500 (Ont. H.C.).
8. 8(1985), 1985 CanLII 1984 (ON HCJ), 17 C.C.L.I. 1 (Ont. Dist. Ct.).
9. 9[1992] I.L.R. 1-2868 (Ont. Gen. Div.).
10. 10(1996), 1996 CanLII 11778 (ON CTGD), 31 O.R. (3d) 42 (Ont. Div. Ct.). This decision was noted in Schekene and Co-operators General Insurance Company (March 17, 1997), OIC A-9500314. That decision however is of little assistance, as Arbitrator Manji was considering not whether C.P.P. payments were "payments for loss of income," but rather whether they were "temporary disability benefits" under the subsequent Statutory Accident Benefits Schedule - Accidents after December 31, 1993, and before November 1, 1996, as amended by Ontario Regulations 635/94 and 781/94.
11. 11Using the words of Kelly J.A. in Glynn v. Scottish Union & National Insurance Co., 1963 CanLII 112 (ON CA), [1963] 20 O.R. 705, 40 D.L.R. (2d) 929 (C.A.).
12. 12E.A. Driedger, Construction of Statutes, Second Edition, Butterworths (Toronto, 1983), at page 112.
13. 13As an example in Paese, McMahon D.C.J. found a policy to be a wage or salary continuation plan as the amount of benefit was directly connected to the salary received prior to the accident, and hence the payment was "not merely compensation received for the injury or disability that she suffered." [emphasis added]
14. 141976 CanLII 32 (SCC), [1977] 2 S.C.R. 400.