Neutral Citation: 1998 ONFSCDRS 104

FSCO A97-000147

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

PASQUALE ROCCA

Applicant

and

GAN CANADA INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

David Evans

Heard:

October 5, 1998, at the Financial Services Commission of Ontario, Toronto

Appearances:

Michael J. Gillen for Mr. Rocca

Ralph D'Angelo for GAN Canada Insurance Company

Issues:

The Applicant, Pasquale Rocca, was injured in a motor vehicle accident on February 15, 1995. He applied for and received statutory accident benefits from GAN Canada Insurance Company ("GAN"), payable under the Schedule¹ GAN terminated weekly income replacement benefits on June 11, 1997, 121 weeks after the accident. The parties were unable to resolve their disputes through mediation, and Mr. Rocca applied for arbitration at the Financial Services Commission of Ontario² under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

At the first hearing regarding Mr. Rocca's claim against GAN,³ I held that he was self-employed. As Director's Delegate Naylor noted in the appeal confirming my decision,⁴ this finding resulted in a substantially lower benefit than that claimed by Mr. Rocca. The precise amount remains in dispute: to date Mr. Rocca has been receiving benefits at the minimum rate of $185 a week. There will be a further hearing on the amount of Mr. Rocca's income replacement benefit.

In the interim, 104 weeks after the onset of his disability Mr. Rocca became entitled to an offer of a loss of earning capacity ("LEC") benefit, pursuant to section 21. The provisions regarding LEC benefits are set out in Part VI of the Schedule. GAN submits that Mr. Rocca could earn at least as much after the accident as he had been earning before, and on April 15, 1997, it offered a zero benefit. Pursuant to section 23, Mr. Rocca was deemed to have rejected GAN's offer 45 days after having received it and to have triggered an assessment of his residual earning capacity. GAN considered that section 23 allowed it to terminate his weekly income replacement benefits and did so, effective June 11, 1997.

The only issue before me in this hearing is:

1. Is Mr. Rocca entitled to ongoing weekly income replacement benefits from June 12, 1997, pending the resolution of the dispute regarding his loss of earning capacity benefit?

Mr. Rocca also seeks interest on outstanding benefits and his expenses of the hearing.

Result:

1. GAN Canada shall pay ongoing weekly income replacement benefits from June 12, 1997, subject to its right to substitute a loss of earning capacity benefit in accordance with subsections 23(5) and 23(5.1).

2. GAN Canada shall pay interest on overdue amounts, in accordance with section 68 of the Schedule.

3. I leave the question of expenses to the further hearing.

EVIDENCE AND ANALYSIS:

Section 23 of the Schedule is entitled "Procedure if No Agreement." I quote the relevant portions:

(5) Subject to subsection (8), if an insured person rejects the insurer's offer in respect of residual earning capacity or both residual earning capacity and pre-accident earning capacity, the insurer may commence paying weekly loss of earning capacity benefits to the insured person 14 days after receiving the report from the designated assessment centre under subsection 27 (5).

(5.1) The benefits paid under subsection (5) shall be based on,

(a) the insurer's offer made under section 21, in respect of the insured person's pre-accident earning capacity; and

(b) the determination made by the designated assessment centre of the insured person's gross annual income, in respect of the person's residual earning capacity.

(8) Subject to subsection (6) and to subsection 281 (4) of the Insurance Act, the insurer shall continue to pay benefits under Part IV or V pending the resolution of a dispute under subsection (3) or (4), if the person continues to qualify for those benefits.

As originally drafted, subsection 23(8) required an insurer to continue paying weekly income replacement benefits (IRBs) pending resolution of the dispute (the "pay-pending-resolution" requirement). This subsection was amended as of January 1, 1995, removing IRBs from those benefits listed in subsection 23(8).

Section 23 also required that Mr. Rocca's residual earning capacity be assessed by a disability assessment centre (a "REC-DAC"), which only took place in late April 1998. GAN does not agree with the REC-DAC report; its findings, if accepted, would entitle Mr. Rocca to an LEC benefit.

Regarding the effect of the REC-DAC report in the context of this dispute, subsection 23(5) of the Schedule provides that the insurer may commence paying weekly loss of earning capacity benefits to the insured person 14 days after receiving the report. GAN submits that the use of the word "may" allows an insurer to continue not to pay benefits (either IRBs or LEC benefits) until arbitration or litigation determines whether an LEC benefit is payable. Furthermore, GAN argues that no weekly benefits are payable to an insured for the period from the date an LEC offer is made until 14 days after the REC-DAC report was received, even if an insured is ultimately found to be entitled to an LEC benefit.

Mr. Rocca submits that the amendments to section 23 simply allow GAN to substitute an LEC benefit for the IRB if it chooses. This point was discussed by Director's Delegate Draper in the appeal decision in GAN Canada and Lehman⁵ With respect to section 23, and in particular the amended subsection 23(8), he states:

This new section does not include IRBs in the pay-pending-resolution requirement. Instead, the insurer is allowed to pay benefits based on the offer it made with respect to pre-accident earning capacity and the REC-DAC's assessment of residual earning capacity.

This statement supports Mr. Rocca's position. Director's Delegate Draper simply stated what is set out in subsection 23(5.1) — that the insurer could substitute an LEC benefit based on its offer for the pre-accident earning capacity and based on the REC-DAC assessment. He did not state that no category of benefit was payable in this interim period.

Subsection 23(5) sets out both express and implicit preconditions as to when the substitution can take place. The express precondition is that the insured person has rejected the insurer's offer, either in respect of the residual earning capacity or in respect of both the pre-accident and the residual earning capacity. Implicitly, the REC-DAC's assessment of residual earning capacity has to be completed and its report received by the insurer.

Counsel for GAN submitted that Mihichuk v. Allstate Insurance Company of Canada (1998), 1998 CanLII 14674 (ON CTGD), 38 O.R. (3d) 762 supports its position. I do not interpret the decision that way. In any event, I do not consider that I am bound by a decision of a court of first instance.

Accordingly, I find that GAN Canada is required to pay income replacement benefits unless and until it elects to pay a loss of earning capacity benefit pursuant to subsections 23(5) and 23(5.1).

EXPENSES:

The parties may addres the question of expenses for the hearing of this issue at the end of the forthcoming hearing which will deal with the correct amount of income replacement benefits to which Mr. Rocca is entitled.

December 31, 1998

David Evans

Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 635/94, 781/94 and 463/96.
2. 2Effective July 1, 1998, the Ontario Insurance Commission was changed to the Financial Services Commission of Ontario, pursuant to the Financial Services Commission of Ontario Act, S.O. 1997, c.28.
3. 3(OIC A95-000106, May 29, 1996)
4. 4(OIC P96-00055, July 25, 1997)
5. 5(FSCO P97-00064, August 10, 1998)