Neutral Citation: 1998 ONFSCDRS 26

FSCO A96–001785

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

MANJINDER KAUR CHAHAL

Applicant

and

ZURICH INSURANCE COMPANY

Insurer

DECISION

Issues:

The Applicant, Manjinder Kaur Chahal, was injured in a motor vehicle accident on November 5, 1994. She applied for and received statutory accident benefits from Zurich Insurance Company (“Zurich”), payable under the Schedule.¹ Zurich terminated the weekly income replacement benefits she had been receiving pursuant to section 7 of the Schedule on February 5, 1997, after a DAC assessment concluded that the Applicant was able to resume her pre-accident employment as well as the “essential tasks of activities of daily living, child care and housekeeping.”

The parties were unable to resolve their dispute through mediation, and Mrs. Chahal applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

1. Is Mrs. Chahal entitled to receive weekly income replacement benefits under section 7 of the Schedule after February 5, 1997 on the basis that she suffers a substantial inability to perform the essential tasks of her pre-accident employment?

2. What is the appropriate quantum of weekly income replacement benefits to be paid to Mrs. Chahal?

3. Is Zurich deemed to have accepted Mrs. Chahal’s disability at the two-year point and therefore required to make a written offer with respect to the payment of weekly loss of earning capacity benefits in accordance with section 21 of the Schedule?

4. Is Zurich liable to pay a special award pursuant to subsection 282(10) of the Insurance Act?

Mrs. Chahal also claims interest on any amounts owing and the expenses she incurred as a result of the hearing.

Result:

1. Mrs. Chahal is entitled to receive weekly income replacement benefits after February 5, 1997 as long as she satisfies the requirements of Part II of the Schedule.

2. Mrs. Chahal is entitled to an income replacement benefit based on a weekly salary of $275 per week. Zurich is therefore required to pay her the difference between that amount and the $185 per week it paid her from November 12, 1994 to February 5, 1997, and the new full amount from February 6, 1997 to date, less the amount owed for the period from December 15, 1997, the date this matter was adjourned, to June 29, 1998, the first day of this hearing.

3. I need not determine whether Zurich should be deemed to have accepted Mrs. Chahal’s disability at the two-year point, in light of my findings that the Applicant is entitled to income replacement benefits after February 5, 1997.

4. Zurich is not liable to pay a special award under section 282(10) of the Insurance Act.

Hearing:

The hearing was held at the offices of the Ontario Insurance Commission in North York, Ontario, on June 29 and 30 and July 2, 1998, before me, Shari L. Novick, Arbitrator.

Present at the Hearing:

Applicant: Manjinder Kaur Chahal

Mrs. Chahal’s Michael J. Henry

Representative: Barrister and Solicitor

Zurich’s Aldo Picchetti

Representative: Barrister and Solicitor

Zurich’s Leanne Tucker

Officer:

Witnesses: Manjinder Chahal

Kamaljit Singh

Dr. Donna Ouchterlony

Mrs. Chahal was assisted in her testimony by Ken Mann, a Punjabi interpreter.

Exhibits: The parties filed13 exhibits at the hearing.

Evidence and Findings:

The Applicant was a passenger in a car being driven by her sister when the vehicle was hit from the rear, swerved out of control and hit a pole. She was sitting in the back seat directly behind the driver, on the side of the car that made contact with the pole. The vehicle suffered extensive damage, and the Applicant was taken to hospital by ambulance, where she remained overnight. She suffered injuries to her right leg and hand, and experienced headaches and pain in her neck, lower back and chest in the aftermath of the accident. The Applicant’s most serious injury was a fracture of the second metacarpal bone of the index finger on her right hand.

Mrs. Chahal is right handed. Despite undergoing three surgical procedures and extensive physiotherapy treatment for her hand, she has not regained full range of movement of the metacarpal joint of her right index finger.

The Applicant arrived in Canada from India in 1988. She has a Grade 9 education and speaks limited English. She has three young children and is married to Kamaljit Singh, who until recently worked as a taxi driver.

The Applicant has worked in various factories since coming to Canada, mainly as a sewing machine operator. After working for one company for three or four years, with various breaks to have and look after her children, she quit in early 1994 when her mother-in-law, who had been looking after her children, left to return to India. Mrs. Chahal then began sewing on a piecework basis at home in June of 1994 for a company called Chavetta International (“Chavetta”), which she indicated manufactured sportswear under the Roc’s Wear name. She continued to do so until sustaining her injuries in the accident some five months later, in November of the same year.

Does the Applicant remain substantially disabled from performing the essential tasks of her pre-accident employment?

Mrs. Chahal testified that while working at home for Chavetta prior to the accident she sewed both T-shirts and sweatshirts, and was paid on a piecework basis. She estimated that on average, she could complete 100 pieces over the course of an eight or nine-hour workday, interspersed with short periods of time during which she looked after her three children.

Mrs. Chahal described the various steps involved in the sewing process. She stated that she received whole pieces, such as the fronts, backs and sleeves of the garments in large bundles, and that she would first sort them into separate piles. She explained that she would then use both hands to feed these pieces through the machine and sew them together, while operating the controls with her feet. She stated that it was not a continuous process, as she often had to stop as a result of the thread tearing or the cloth not being properly aligned, and explained that she would then either use tweezers to rethread the machine or pull the cloth to straighten it out. Mrs. Chahal testified that she required the use of both hands and legs to sew, and that it was important for her to be able to grip the cloth with both hands in order to feed it properly through the machine.

The Applicant stated that she could not put pressure on her right index finger without feeling pain, and that it was accordingly difficult for her to hold the tweezers and to grip the cloth so that it could be guided effectively through the machine. She added that she was also required to cut out the neck and shoulders of the garments that she sewed together, and that it was very painful for her to use scissors to cut the cloth. She stated that she was required to perform all of these tasks quickly and efficiently as she was being paid by the piece, explaining that the company only gave work to people at home who could work quickly.

Mrs. Chahal explained that she has not done any sewing since the accident, as she cannot grip anything properly with her right hand and because she finds the movements required to be painful.

Several medical reports and records were submitted by the parties for my review. As mentioned, Mrs. Chahal underwent three surgical procedures on her right hand as a result of a spiral fracture to the metacarpal bone of her right index finger. Some 10 days after the accident Dr. Baum operated on her finger and inserted two pins to keep the reconstructed bone in place. The surgical pins were removed in January 1995 and in March of 1996 she was assessed by Dr. Vaughan Bowen, Director of the Toronto Hospital Hand Program. Dr. Bowen determined that the general shape and alignment of the metacarpal was satisfactory but noted that the range of motion was limited by adhesions that had developed between the extensor tendon and the healing metacarpal bone and in late May 1996 he performed a “tenolysis of the right index finger with an MP joint release.”

One week after surgery Dr. Bowen reported to Dr. Baum that the Applicant had not regained movement as fast as he would have liked to see. However, he did not put any restrictions on her activities and stated that he was encouraging her to do as much as possible functionally. On July 19, 1996, after a follow-up visit with Mrs. Chahal, Dr. Bowen reported that although her hand “does not work normally with some extension deformity in the index finger, there should not be a great deal of limitation for any of her activities of daily living.”

Dr. Geoffrey French conducted an IME on the Applicant in early October of 1996, and noted a 50 percent loss of the range of flexion through the MP joint of her right index finger compared to the left. He also concluded that she “continues to demonstrate tenderness about the right index finger metacarpal and its MP joint.” Dr. French indicated, however, that Mrs. Chahal should be able to return to her pre-accident work and that the limitation in the range of flexion in her finger on her right hand would not prevent her from operating a sewing machine. Based on this opinion, the Insurer advised the Applicant that her benefits would be terminated.

Dr. Sanghamitra Mehmi is the Applicant’s family doctor. A review of his clinical notes and records reveal that he met with Mrs. Chahal every week or two throughout the summer and fall of 1996. His notes indicate continuing complaints of pain in her right hand and arm which limited her level of functioning around the house. Dr. Mehmi released the Applicant to perform activities of daily living on August 21, 1996, but advised the rehabilitation consultant later that month that her hand had not yet recovered and that she continued to be disabled from returning to work as a sewing machine operator. The records provided indicate that Dr. Mehmi continued to hold that view in late November of 1996, when he opined that Mrs. Chahal had developed a permanent disability as she was unable to perform fine movements and other heavy tasks related to her job with the affected finger. Dr. Mehmi did not agree with Dr. French’s opinion that the limitation in the range of motion of her finger would not prevent her from operating a sewing machine.

A disability DAC was subsequently performed in February of 1997. On physical examination reduced flexion at the MCP joint of the right index finger was noted, estimated at 45 degrees instead of the customary 90, and the Applicant “demonstrated some reduced movement at the neck and lumbosacral spine, particularly at the right shoulder.” Some reduced flexion and muscular power of the right wrist and elbow was also noted. It was determined that these limitations did not constitute a significant functional impairment, however, and the conclusion reached was that none of these symptoms presented a barrier to either a resumption of the Applicant’s activities of daily living or her returning to work as a sewing machine operator.

The DAC assessor described Mrs. Chahal as being very pain-focused and as trying to “project inability.” He stated that while there was some measurable impairment at the right MCP joint, she was able to demonstrate ample ability to feed and guide pre-cut material through an automated sewing needle. He also noted that she was able to use small tools such as tweezers which may be required in the sewing process.

To counter the findings of Dr. French and the DAC assessors, the Applicant filed three medical reports and called Dr. Donna Ouchterlony, a specialist in rehabilitative medicine, to testify. Mrs. Chahal was examined by Dr. Kim, a specialist in Physical Medicine and Rehabilitation at the AIM Clinic in Scarborough, in late November 1997. Dr. Kim determined that the Applicant was not able to resume working at her pre-accident job without a work-hardening and/or graduated work programme, and listed various factors that restricted her return to work including limited mobility of the MP joint and limited endurance in the use of her right hand. Mrs. Chahal was also assessed for her functional capacity to perform the essential tasks of her pre-accident occupation by an occupational therapist at the same clinic. The assessor found that while Mrs. Chahal was capable of performing certain essential tasks of her pre-accident employment, she was not capable of performing others. The report states that “her dexterity in forward reaching tasks are slow, which may be a limiting factor in her pre-accident occupation as the claimant was working by piece work.”

The Applicant also relied on a report by Dr. Anastakis, a plastic surgeon specialising in hand surgery, who examined Mrs. Chahal in December of 1997. He diagnosed a fixed flexion deformity of the right index MCP joint at 60 degrees and stated that “range of motion across this digit will not improve with time.” Dr. Anastakis described her prognosis as poor with regard to the restoration of normal right hand function, and stated that given the significant weakness in grip and key pinch in her right hand, the Applicant had a permanent impairment/disability of that hand. He also stated that her ability to perform the essential tasks of her pre-accident employment is impaired, due to her inability to “carry out rapid fine motor movements, maintain sustained grip, maintain sustained key pinch, generate forceful grip or generate forceful key pinch.” He added that it would also be difficult for Mrs. Chahal to perform the fast, repetitive movements that are required when working on a piecework basis.

The Applicant called Dr. Donna Ouchterlony as a witness. Dr. Ouchterlony described herself as a family physician who has practised rehabilitative medicine for many years. Aside from being an Assistant Professor at the University of Toronto Faculty of Medicine, she has been the Director of the Neurorehabilitation Unit at the Riverdale Hospital for the past 20 years, and a consultant in rehabilitation medicine at Sunnybrook Hospital for over 15 years. She examined Mrs. Chahal in December of 1997 and found that she had a stiff metacarpal joint and reduced range of motion in her index finger as a result of the spiral fracture of her metacarpal bone, and that this caused pain and affected her hand movement. She explained that 75 percent of hand function is dependent on the ability to grip, and determined that while the Applicant retained basic function in her finger, she could not apply any force to it or sustain a grip for any period of time without her hand becoming weak. She tested the Applicant’s grip strength and reported significantly lower results in her right hand over her left.

Dr. Ouchterlony concluded that Mrs. Chahal could not return to work and that she suffered a substantial inability to perform the essential tasks of her pre-accident employment. She disagreed with Dr. French’s conclusion that the Applicant could operate a sewing machine, stating that her pain and the loss of fine, coordinated movement would be barriers to her return. She allowed that Mrs. Chahal could probably sew a few T-shirts, but stated that she did not believe that she would be able to complete a large volume of shirts at a rate that would make her competitive, as to do so would require repeated and constant use of her right hand. She also disagreed with the DAC assessment and the reports generated by the rehabilitation caseworker, noting that none of the assessments performed required the Applicant to operate a sewing machine.

The Insurer retained an investigative firm to carry out surveillance on the Applicant in late November of 1997. The videotape of that surveillance shows Mrs. Chahal driving a car, walking around and at one point, unlocking the driver’s side door with a key held in her right hand. I did not find this videotape to be particularly useful, as the Applicant had agreed in cross-examination that she was able to perform all of the movements it depicted.

Findings

In order to qualify for income replacement benefits after February 5, 1997 the Applicant must demonstrate that she sustained an impairment as a result of an accident, from which she continues to suffer a substantial inability to perform the essential tasks of her pre-accident employment. An “impairment” is defined in section 1 of the Schedule as “a loss or abnormality of psychological, physiological or anatomical structure or function.” Given the conclusive medical evidence that Mrs. Chahal has significantly reduced flexion and range of motion in her right index finger that appears to be permanent, I have no trouble concluding that she has suffered an “impairment” as it is defined in the Schedule.

The question then becomes whether she remained substantially unable to perform the essential tasks of a sewing machine operator working on a piecework basis after February 5, 1997, when Zurich terminated her benefits. Many arbitrators have commented on the level of disability that an Applicant must demonstrate to meet the requisite standard. I note that many have cited and adopted the following comments made by then Senior Arbitrator Naylor in Flemming and Wawanesa Mutual Insurance (OIC A-000406, April 28, 1992):

...the fact that the Applicant is able to perform some functions of her occupation on a part-time basis does not address the standard of disability set out in the regulations...In determining an applicant’s ability to perform his or her essential occupational or employment tasks, the demands of such tasks cannot be evaluated in isolation from the broader employment context.

I find the above comments to be particularly applicable to the facts of this case. In order to operate a sewing machine, Mrs. Chahal was required to perform several different hand movements including gripping the fabric as she guided it through the machine, squeezing her fingers together as she used tweezers to rethread the machine, and cutting the cloth with scissors to complete the shapes of the shirts she was sewing. It was clear from the Applicant’s evidence that while she may be able to perform many of the tasks required in the sewing process in isolation, she cannot work quickly or for any sustained period without experiencing debilitating pain. I accept that she required a high level of manual dexterity to complete the various tasks described above and that being right-handed, she relied to a large extent on her right hand.

In his report, Dr. Anastakis stated that the decreased range of motion of the Applicant’s right index finger will not improve over time. He concluded that she suffered from a significantly weak grip and key pinch in her right hand, and that this would render her unable to carry out “rapid fine motor movements” or to generate or maintain a sustained grip or key pinch. Dr. Ouchterlony agreed with these findings and stated that 75 percent of hand function is dependent on the ability to grip. While the evidence indicated that the Applicant was physically able to grip the fabric and exert a limited amount of pressure with and on her index finger, I am persuaded that she is not capable of sustaining the grip necessary to effectively perform most of the required movements with her dominant right hand, and that the reduced flexibility in her right index finger prevents her from being able to work effectively with scissors and tweezers and to perform the fine motor movements that sewing requires.

My conclusions are based, in part, on the manner in which Mrs. Chahal was remunerated. In order to make a gainful living doing piecework, she was required to work for eight or nine hours each day, operating the machine both quickly and efficiently. I think it is safe to assume that despite taking occasional breaks to care for her children, her hands were in constant use over long periods, performing the required repetitive movements. The uncontradicted evidence was that Chavetta would only give work to people at home who could work quickly, and in order to make it worth her while to rent a sewing machine, the Applicant would have to be able to work efficiently and produce at a high volume. Given the nature of the injury that she suffered, I am satisfied that she simply would not be able to sustain the necessary movements over a long period of time, and that she therefore remains substantially unable to perform the essential tasks of her employment.

I acknowledge Dr. French’s comment that the limitation in the range of flexion in the Applicant’s finger would not prevent her from operating a sewing machine, and the DAC assessor’s finding that Mrs. Chahal could feed material through a sewing needle. Again, while this may indicate that the Applicant could physically perform many of the required movements in isolation, it does not take into account the requirement that she operate the machine quickly and repetitively over the course of several hours.

I note that Dr. Bowen did not place any restrictions on the use of her hand shortly after the third surgery. While this may suggest that there were no barriers to the Applicant returning to work, I do not find these instructions to be determinative of the question I must decide. I also note that Dr. Bowen was subsequently asked by the rehabilitation consultant to complete a release to work form for Mrs. Chahal and he refused to do so, responding that she needed to first consider what kind of work she was able to do. He stated that once the vocational issues were resolved, it would then be necessary to see if any restrictions needed to be imposed and to decide how many hours she could work at one time. These comments suggest that Dr. Bowen was aware that the Applicant was not able to return to her pre-accident employment, and that by not placing any restrictions on the use of her hand he was simply encouraging Mrs. Chahal to do as much with her hand as she felt she was able to.

What is the appropriate quantum of weekly income replacement benefits to be paid?

In order to determine the correct amount of benefits to be paid to the Applicant, it must first be decided whether she was an employee or whether she was self-employed at the relevant time. The application of subsections 7(2) and (3) of the Schedule to these facts leads to the conclusion that if the Applicant was an employee, her weekly earnings during the four- week period prior to the accident can be used as the benchmark by which her income replacement benefits are to be paid, but that if she was self-employed, her earnings for one year prior to the accident must be used as the basis for the calculation of her entitlement to these benefits. In order to decide whether she was employed or self-employed, a close consideration of the circumstances of her work is required.

As mentioned above, the Applicant worked as a sewing machine operator out of her home from June of 1994 until the accident in early November of that same year. She would receive various pieces of cloth from Chavetta which she sewed into either T-shirts or sweatshirts. Mrs. Chahal testified that she was paid by the piece, and that she received 50 cents for each T-shirt she completed and 85 cents for each completed sweatshirt. She recalled that in the four weeks preceding the accident she primarily sewed T-shirts.

The Applicant explained that she would typically receive a call from someone at Chavetta’s factory advising her of work that needed to be done and the time frame within which it needed to be completed, and that her husband would then pick up bundles of pieces and bring them home for her to sew. She recalled that the amount of work she was given varied over the five months in question, with the first few weeks in June being fairly busy, the summer months being quite slow, and the pace of work subsequently picking up in late September as Christmas orders came in from the stores.

Mrs. Chahal stated that she had rented a sewing machine from an appliance rental company and that Chavetta did not contribute either to the cost of the rental or for the electricity it consumed. She testified that she supplied her own scissors and needles and sometimes the thread she used as well. She explained that during the busy periods she typically worked between eight and nine hours each day, interspersed with breaks to look after her children at various points throughout the day. She stated that she was paid in cash, and that no taxes or statutory remittances were deducted from her salary.

Counsel for the Applicant submitted that Mrs. Chahal was employed by Chavetta, as opposed to being self-employed. He noted that the company told her both what had to be done as well as the time within which the work had to be completed, and suggested that even though she worked out of her home and was not directly supervised, it was clear that she was under the company’s control. Counsel also noted that Mrs. Chahal was paid a set rate per piece which had not been negotiated, and that no real notion of profit was inherent in the arrangement, unlike typical cases of self-employment. He allowed that Chavetta had not deducted any tax or statutory remittances from her pay, but contended that that was likely because they did not want to be bothered to do the required paperwork.

The insurer submitted that the circumstances of Mrs. Chahal’s relationship with Chavetta was more suggestive of self-employment than that of employer/employee. Counsel relied on the fact that the Applicant was only given work when there was an overflow at the factory and that she rented the sewing machine and purchased most supplies she used on her own. He also noted that the Applicant essentially determined her own schedule and fit her work around her child care responsibilities. He acknowledged that her tax returns did not indicate any deductions for business expenses, but suggested that that was not a significant factor, due to the negligible amount of tax she was required to pay. Finally, he noted that the Applicant did not receive a Record of Employment when she stopped working for the company, and that she was issued a T4A, as opposed to a T4 slip, for tax purposes which usually indicates self-employment.

Based on the evidence before me, I have concluded that Mrs. Chahal was an employee of Chavetta during the relevant period. While certain aspects of her situation may be suggestive of self-employment or a contract of service arrangement, such as her paying for the rental of the sewing machine she used and most of her supplies, as well as the fact that she worked according to her own schedule, I am persuaded that the fundamental aspects of her relationship with Chavetta bore more resemblance to that of employee/employer than to one of self-employment.

I note that the Schedule does not contain any definitions that usefully distinguish between an employee and someone who is self-employed. Section 5 states that a person is employed if “for salary, wages, other remuneration or profit, the person is engaged in employment, including self-employment, or is the holder of an office.” The Commissioner has issued a Guideline for Identifying Self-employed Individuals (4/96, effective October 19, 1996) under the authority of subsection 268.3(1) of the Insurance Act. Subsection 268.3(2) provides that a guideline shall be considered in any determination involving the interpretation of the Schedule. I interpret that to mean that while the guideline should be considered in my analysis, it is not binding upon me if the facts of the case dictate a different approach.

The guideline states that an individual that derives his or her remuneration from an incorporated business is considered to be an employee of the corporation. It also defines an “employee” as “an individual who is hired to perform pre-determined tasks/work in a business in exchange for remuneration.” I do not find the guideline to be assistive in this case, as I did not hear any evidence on whether Chavetta was an incorporated business, and I find the definition of “employee” to be quite broad: while it would certainly encompass Mrs. Chahal’s situation, it would likely also apply to many employees who would consider themselves to be self-employed. The guideline also describes two situations which typify self-employment, namely “Traditional Self-Employment Situation” which clearly does not apply to Mrs. Chahal’s circumstances, and “Contract of Service Situation” which while closer to her situation, is still, in my view, not really applicable to the instant case.

As neither the Schedule nor the guideline is of much assistance on this issue, I turn to the common law and cases decided under other statutory regimes where the question of whether or not an individual is an employee has been addressed. While I do not propose to review the various tests that have been applied by the courts and other tribunals in any detail, I will briefly set out the general manner in which the law in this area has evolved. The traditional fourfold test enunciated in Montreal v. Montreal Locomotive Works Ltd. 1946 CanLII 353 (UK JCPC), [1947] 1 D.L.R. 161, in which the Privy Council identified the factors of control, ownership of tools, and the chance of profit and risk of loss as determinative of whether an employment relationship exists has given way or been enlarged by the “organizational test,” which was approved and applied by the Supreme Court of Canada in Co-operators Insurance Association v. Kearney (1964), 1964 CanLII 21 (SCC), 48 D.L.R. (2d) 1. That approach focuses on the degree to which an individual is part of the organization he or she is involved with, and whether the work being performed is subject to coordinational control.

The application of the above tests to the instant case fails to point conclusively in one direction or the other. Leaving aside the issue of control for a moment, the evidence indicated that Mrs. Chahal owned or rented the tools necessary for her work, yet did not have much of a chance of profit in the true sense, nor did she bear any risk of loss. It is equally ambiguous to apply the organizational test, as there are factors mitigating both for and against her being considered part of Chavetta’s organization. When the important factor of control is considered, once again there are indicators on both sides: while the Applicant essentially set her own hours of work and was not under direct supervision, she was often given a time frame within which the work needed to be completed.

In light of the above ambiguities, I find it assisstive to apply the “statutory purpose” test used by several adjudicators under the Employment Standards Act as well as the United States Supreme Court in interpreting the National Labour Relations Act. This approach requires that the evidence be weighed in relation to the purpose of the governing statute or regulation, and with that purpose in mind, the individual’s integration into the organization and the degree of economic dependence of that individual on the alleged employer be considered.

The purpose of the Schedule is to provide fair and adequate benefits to persons who are injured in automobile accidents, without regard to fault. It is necessary to delve deeper in this instance, however, and determine more specifically what the purpose of the distinction is between those who are employed and those who are self-employed. A review of the relevant provisions of the Schedule reveals that the only distinction is the different manner in which employment income and income derived from self-employment is treated. One of the differences is that the Schedule permits individuals who earn employment income to designate the last four weeks prior to the accident as the relevant period from which their entitlement to income benefits are calculated, while those who are self-employed may only designate the prior year or three years prior. The rationale behind this distinction is due to the manner in which income from self-employment is usually calculated, that is, the individual’s business expenses are deducted from his or her earnings, and the nature of some of those expenses makes it impractical to consider a period as short as four weeks.

Given the rationale for treating these two types of income differently, the fact that Mrs. Chahal reported the income she earned from Chavetta as “other income,” as opposed to business income, on her tax return and did not deduct any business expenses from her income becomes important. The evidence was clear that she did not conduct a business, in any real sense, and in my view, any factors that might generally suggest self-employment, such as her paying for the rental of the sewing machine and supplying the needles and scissors she used, as well as Chavetta’s failure to deduct the usual statutory remittances or taxes, were likely the result in this case of the unequal bargaining power that was a feature of her relationship with Chavetta.

Given my finding that the Applicant was an employee, her income for the four weeks prior to the accident can be used as the basis upon which her entitlement to weekly benefits is calculated. Mrs. Chahal received $185 per week from the Insurer from one week post-accident until February 5, 1997. She claims that this amount is incorrect and that the figure of $550, which approximated her weekly earnings during the four weeks prior to the accident, should be used as the basis for determining her entitlement.

The actual amount that the Applicant was paid by Chavetta during the relevant period was hard to establish. She did not have any pay stubs or cancelled cheques to confirm her assertion that she earned $550 weekly, as she was paid in cash. Her husband testified that she earned approximately $500 per week in the weeks prior to the accident, but when questioned more closely on this point, he stated that he did not recall the exact amount because each day was different, but thought that she averaged over $400 per week.

Various other documents were filed relating to the Applicant’s earnings over the relevant period, most of which were not consistent with her testimony. The only document that was possibly consistent with her evidence on this point was the Employer’s Confirmation of Income form, which contained the handwritten notation “554 weeks” in the box indicating earnings for the four weeks prior to the accident. It was not clear, however, what this notation meant and the author of the form could not be found to clarify its meaning.

In her Application for Accident Benefits, Mrs. Chahal’s gross income for the period of June to November of 1994 was stated as $11,911, which averages out to approximately $518 per week. Mrs. Chahal testified, however, that she had not completed this form and did not know who had. The T4A slip she received from Chavetta for 1994 indicated earnings of only $4,715. 97, significantly less than half of that amount, for the period in question. In a statement given to the adjuster in early December 1994, one month after the accident, Mrs. Chahal stated that prior to the accident she had been earning “$450 - $500 weekly and sometimes more.” However, when responding to the suggestion put to her at the hearing that she was able to return to work but was choosing not to do so for financial reasons, the Applicant asked hypothetically why she would not have gone back to work if she had been able to, as she only received $185 per week from the Insurer while she could have earned $300 per week if she was working.

In another instance, when asked about the cost of the sewing machine rental, Mrs. Chahal stated that she paid between $475 and $500 for three months, and explained that it paid her to rent the machine because she could earn $300 per week. This estimate seems consistent with her evidence that she could complete approximately 100 shirts each day, at 50 cents for each T-shirt she sewed together. Multiplying this $50 daily figure by five days of work each week, a weekly salary of $250 is arrived at. Even allowing for six days of work per week, or for the Applicant sewing some sweatshirts, which attracted a higher payment, it would likely be difficult for Mrs. Chahal to exceed a weekly salary of $300.

I note as well that according to the T4A she received from Chavetta for 1994, Mrs. Chahal earned approximately $4,700 over the 23 weeks that she worked out of her home. I find it hard to believe that approximately half of that amount, or $2,200, would have been earned in the last four weeks that she worked. I find it much more likely that her weekly earnings over the relevant four-week period were between $250 and $300. I note that in order for the Applicant to have earned $550 per week, she would have had to complete over 200 pieces per day, which does not sound feasible in light of the other evidence.

Accordingly, based on the evidence before me, I find that Mrs. Chahal’s weekly income for the four weeks prior to the accident averaged out to $275. According to the Schedule, she is entitled to receive 90 percent of the net amount of this figure, a calculation I will leave to the parties to complete. She will consequently be entitled to a top-up for the period that she was paid benefits, and to the full amount from February 6, 1997 until the date of this decision, less whatever would be owed during the six-month “adjournment period,” as agreed by the parties.

Given my findings on this point, I need not consider the Applicant’s ability to perform household duties, nor whether the provisions of the Schedule contemplate a weekly payment of less than $185 for persons who are employed.

Can Zurich be deemed to have accepted the Applicant’s disability up to two years post-accident and is therefore required to make an LEC offer?

The Insurer’s letter advising the Applicant that her weekly benefits would be terminated is dated October 29, 1996 and encloses Dr. French’s report from the IME conducted on October 1, 1996. The letter contains the usual references to various parts of section 64 of the Schedule and advises the Applicant that her benefits will cease as of November 16, 1996. Mr. Singh, the Applicant’s husband, testified that he recalled faxing the letter to his wife’s lawyer the morning after it arrived in the mail. The subsequent letter from Applicant’s counsel requesting a DAC assessment on behalf of Mrs. Chahal was sent on November 12, 1996. I was advised that this letter was sent out immediately after counsel received the faxed copy of the letter of termination, leading to the conclusion that the Applicant did not receive it until November 11.

Counsel for the Applicant contended that the Insurer did not comply with the requirements of subsection 64(4) in terminating Mrs. Chahal’s benefits, as it did not provide the requisite 14 days notice of the termination of her benefits. He also submitted that as the notice of termination was not received until more than two years after the accident (which occurred on November 5, 1994) and almost exactly two years after the date of the first payment, the Insurer should be deemed to have accepted that Mrs. Chahal remained disabled at the two-year point. He noted that section 236 of the Insurance Act makes clear that an insured’s benefits cannot be terminated until proper notice is provided, and that subsection 64(4) stipulates that benefits are to run for 14 days after that.

Counsel for the Applicant distinguished the situation in Fox and Economical Mutual Insurance Company, (OIC A96-002040, February 17, 1998) from the instant case. In the Fox case, Arbitrator Palmer addressed the period between the time the applicant was notified that his benefits would be terminated and the point at which the DAC report was received by the insurer, and ruled that the fact that Mr. Fox continued to receive benefits beyond the two-year point as a result of the application of subsection 64(3) did not oblige the insurer to deliver an LEC offer. Applicant’s counsel stated that in this case, however, the two-year point fell within the period between the date the Insurer decided that the Applicant’s benefits should be cut off and the point at which the Insured became aware of its intention to terminate her benefits, and submitted that as benefits continued to be paid beyond the two-year point, the Insurer should be deemed to have accepted that Mrs. Chahal remained disabled at the two-year point.

Counsel for the Insurer argued that the Applicant was estopped from making this argument, as she had not asked for a Loss of Earning Capacity Benefits offer upon being advised that her benefits were being terminated, and instead chose to request a DAC assessment. Counsel noted that subsection 21(1)1 of the Schedule provides that a LEC offer shall be delivered if an insured qualifies, as opposed to simply receives, income replacement benefits 104 weeks after the onset of disability, and contended that the receipt of benefits as a result of the application of any procedural provision cannot trigger the obligation to deliver an LEC offer.

It is evident to me that the question raised here differs from the issue addressed by Arbitrator Palmer in the Fox case. I find the Applicant’s argument in this respect to be rather technical, however, given my findings on the disability issue and the alternative nature of this argument, I need not determine this question. In any event, I have set out the relevant facts and the parties’ arguments on this issue as they pertain to the Applicant’s request for a special award.

Is Zurich liable to pay a special award pursuant to subsection 282(10) of the Insurance Act?

The Applicant argued that she is entitled to a special award because the Insured’s conduct in terminating her benefits within either one day or one week (depending on whether the date of the accident or date of first payment is the starting point) past the two-year anniversary date of the accident essentially forced the parties to participate in an unnecessary arbitration hearing. Subsection 282(10) provides an arbitrator with the authority to award a “special award” if he or she finds that an insurer has unreasonably withheld or delayed payments to the Applicant.

I do not find a special award to be merited on the facts of this case. While I ultimately preferred the medical evidence marshalled by the Applicant over that of Dr. French, whose report the Insurer relied on to terminate Mrs. Chahal’s benefits, I cannot say that Zurich acted unreasonably in terminating benefits when it did. By February 5, 1997 both Dr. French and the DAC assessors had determined that the Applicant could operate a sewing machine, and Dr. Bowen had stated that she was under no restrictions in terms of the use of her hand. While I found Dr. Ouchterlony’s evidence and Dr. Anastakis’ report to be more useful because they addressed the difficulties inherent in the repetitive motions the Applicant was required to do while sewing, their reports were not generated until December of 1997, well after the Insurer had made its decision to terminate benefits on the medical evidence they had.

Expenses:

The Applicant seeks payment of the expenses she has incurred in pursuing this arbitration. Given her success on the disability issue, and her mixed success on the issue of quantum, I find that an award for expenses is justified. I note that this hearing was initially scheduled to commence on December 15, 1997 and was adjourned due to the late filing of the Applicant’s medical reports. As a term of that adjournment, the parties agreed that if the Applicant was ultimately successful, no benefits or interest would be paid during the six months between the initial start date in December and the actual day the hearing started, and that the issue of expenses would be left to the hearing arbitrator.

The Applicant conceded that the Insurer should be entitled to any costs thrown away as a result of the adjournment. I will leave it to the parties to sort out the appropriate amount of expenses that the Applicant is entitled to, and set that off against the amount of costs thrown away by the Insurer as a result of the adjournment. In the event that the parties cannot agree on the total amount of expenses payable, either party may apply to the Registrar for an assessment of expenses under Rule 77 of the Practice Code.

Order:

1. Zurich shall pay Mrs. Chahal weekly income replacement benefits from February 5, 1997 to December 15, 1997, and from June 29, 1998 to the date of this decision on the basis of a weekly salary of $275. Zurich shall also pay the difference between that amount and the $185 it paid Mrs. Chahal weekly from November 12, 1997 to February 5, 1997.

2. Zurich is not liable to pay a special award under subsection 282(10) of the Insurance Act.

3. Zurich shall pay to Mrs. Chahal interest on all amounts set out above pursuant to section 68 of the Schedule, excluding the period of December 15, 1997 to June 29, 1998, as well as expenses she incurred in this arbitration, subject to a set off of the amount of costs thrown away by the insurer as a result of the adjournment.

August 27, 1998

Shari L. Novick

Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents after December 31, 1993, and before November 1, 1996, called “the Schedule” in this decision. The Schedule is Ontario Regulation 776/93, as amended by Ontario Regulation 635/94.