Financial Services Commission
Commission des services financiers de l’Ontario
Neutral Citation: 1999 ONFSCDRS 10
Appeal P98-00051
OFFICE OF THE DIRECTOR OF ARBITRATIONS
ALLSTATE INSURANCE COMPANY OF CANADA
Appellant
and
BETTY WRIGHT
Respondent
Before:
David R. Draper, Director’s Delegate
Counsel:
Ian D. Kirby (for Allstate Insurance)
L. Scott Smith (for Betty Wright)
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 decision dated August 31, 1998 is confirmed.
Mrs. Wright is entitled to her reasonable appeal expenses, payable by Allstate Insurance Company of Canada.
January 18, 1999
David R. Draper Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL
This is an appeal by Allstate Insurance Company of Canada (“Allstate”) from an arbitration decision dated August 31, 1998. Allstate claims the arbitrator erred in concluding that Mrs. Wright is entitled to proceed with her claim for income replacement benefits despite the fact that she worked in her pre-accident job for more than 90 days after 104 weeks had passed from the onset of her disability.
II. BACKGROUND
The facts are not in dispute. Mrs. Wright was injured in an automobile accident on January 6, 1994. She received income replacement benefits (“IRBs”) from Allstate on the basis that she was substantially unable to perform the essential tasks of her pre-accident employment. In August 1994, approximately eight months after the accident, she returned to her job on a part-time basis and continued working part-time until August 11, 1995.1 During this period, Allstate continued to pay IRBs, although at a reduced rate due to Mrs. Wright’s employment income.
Mrs. Wright then worked full-time from August 11, 1995 to January 28, 1997, a period of more than 17 months. The parties agree that no IRBs are payable during this period. However, Mrs. Wright resigned from her employment, claiming that her accident-related injuries prevented her from continuing. Her resignation was to take effect on December 23, 1996, but she agreed to stay on until January 28, 1997, to train her replacement.
Allstate refused to reinstate Mrs. Wright’s IRBs, relying on subsection 14(2) of O. Reg. 776/93, as amended, the Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996 (Athe SABS-1994”). Mrs. Wright disputed Allstate’s position, claiming that subsection 14(1), not 14(2), applies to her situation:
14.- (1) A person receiving weekly income replacement benefits under this Part may return to or start an employment at any time during the 104 weeks following the onset of the disability in respect of which the benefits are paid without affecting his or her entitlement to resume receiving benefits under this Part if, as a result of the accident, he or she is unable to continue in the employment.
(2) After the 104-week period referred to in subsection (1), a person receiving weekly income replacement benefits under this Part may return to or start an employment for periods of up to ninety days without affecting his or her entitlement to resume receiving benefits under this Part if, as a result of the accident, he or she is unable to continue in the employment.
The 104-week mark passed in January 1996, while Mrs. Wright was working full-time. Allstate claims that because Mrs. Wright continued to work for another year, she is precluded by subsection 14(2) from receiving IRBs. In response, Mrs. Wright argues that subsection 14(2) does not apply because she did not return to or start employment after the 104-week mark. She claims that because she returned to work within 104 weeks of the onset of her disability, subsection 14(1) applies, allowing her to qualify for IRBs if she is unable to continue due to her accident-related injuries.
The parties were unable to resolve their dispute through mediation and, therefore, Mrs. Wright applied for arbitration. At a pre-hearing held in February 1998, two dates were set. The “return-to-work” issue was scheduled as a preliminary legal issue, with a full hearing on entitlement scheduled to proceed if Mrs. Wright was successful on the preliminary issue.
The preliminary issue was heard on May 20, 1998, based on an agreed statement of facts. The arbitrator released her decision on August 31, 1998, concluding that subsection 14(1), not 14(2), applies and, therefore, Mrs. Wright can proceed to arbitration on her claim for ongoing IRBs from January 28, 1997. Allstate appeals from this order.
Generally, appeals from preliminary orders are not allowed. In this case, however, the parties agreed that the appeal should be decided before they incur the expense of a full hearing on the merits. Further, time was available to deal with the appeal before the date set for the arbitration hearing. Therefore, the appeal was allowed to proceed.
III. ANALYSIS
Allstate submits that the arbitrator erred in her interpretation of the SABS-1994, particularly section 14. Despite the able argument of its counsel, I agree with the arbitrator that when section 14 of the SABS-1994 is given its plain meaning, it distinguishes two situations based on when the insured person returns to work. If he or she returns within 104 weeks of becoming disabled, subsection 14(1) applies. If the return to work is after 104 weeks, subsection 14(2) applies. Further, for reasons that follow, I am not persuaded that the context of section 14 demands a different interpretation.
Although this appeal involves a narrow legal issue, section 14 must be considered in its context as part of a rather complicated scheme for the payment of weekly benefits. The predecessor to the SABS-1994, the Schedule,2 included a provision similar to section 14. However, counsel agreed, correctly in my view, that the cases dealing with section 16 of the Schedule are of little assistance due to changes both in the wording and general structure of the SABS-1994.
The basic rules of entitlement for IRBs are found in subsection 7(1) of the SABS-1994. Where, as here, the insured person was employed at the time of the accident, paragraph 1 applies. It provides that IRBs are payable if he or she suffers a substantial inability to perform the essential tasks of that employment. The injuries need not be immediately disabling, but must arise within two years of the accident. Therefore, someone who continues working after an accident may qualify for IRBs at a later date if he or she is unable to continue within two years.
According to section 8, IRBs are payable “during the period that the insured person suffers a substantial inability to perform the essential tasks of the employment in respect of which he or she qualifies for the benefit.” Unlike the Schedule, the SABS-1994 has no presumption against ongoing entitlement after any specific period. Payments must be made at least once every second week while the insured person remains entitled to receive them [s.62(2)]. If the insurer concludes that the insured person no longer qualifies, it must follow the termination procedures in section 64, as Allstate did here.
The SABS-1994 includes a number of provisions clearly intended to encourage rehabilitation and a return to work. The insurer has a broad obligation to fund reasonable measures to reduce or eliminate the effects of the insured person’s disability, and to facilitate his or her reintegration into the family, the labour market and the rest of society [s.40]. The insured person has a corresponding obligation. According to sections 13 and 73, he or she must make reasonable efforts to return to work, whether through a rehabilitation or vocational program, a return to pre-accident employment or some type of alternative work. If the insured person fails to meet this obligation, his or her IRBs can be reduced [s.13(4) and s.73(3) and (4)].
The insured person can return to work without necessarily losing his or her entitlement to IRBs, although any income is taken into account. Generally, the insurer can reduce IRBs by 90 per cent of the insured person’s net weekly income [s.10(4)(b)]. However, if the insured person does not return to work until more than 26 weeks after the onset of his or her disability, the reduction is limited to 75 per cent for up to 26 weeks of employment [s.10(4)(a)]. This seems designed to offer an extra incentive for those whose situation is becoming long-term.
Finally, the SABS-1994 introduced a new kind of benefit - loss of earning capacity benefits (“LECBs”) - as part of the tradeoff for the complete elimination of the right to sue for economic losses. LECBs are an enhanced long-term benefit, payable for life, intended to provide compensation for the ongoing reduction in the insured person’s earning capacity. They are paid instead of IRBs or other weekly benefits, and are based on a comparison between the insured person’s pre-accident and post-accident earning capacities, as defined by the SABS-1994.
With the agreement of the parties, IRBs can be replaced by LECBs at any point [s.24]. The advantage of such an agreement to the insurer is that amount of the LECBs generally will be lower. The advantage to the insured person is that unlike IRBs, LECBs are payable for life, subject only to the adjustments in the amount of the benefits allowed by the SABS-1994 (although this can lead to LECBs of zero in some cases).
The more typical conversion from IRBs to LECBs is set out in sections 20 to 22 of the SABS-1994. These provisions state that an insurer “shall pay” the insured person LECBs instead of IRBs if they are authorized by Part VI of the SABS-1994. Subsection 21(1) lists seven situations in which the insurer is required to promptly deliver a written offer with respect to LECBs. The first two are relevant here:
The insured person qualified for weekly income replacement benefits under Part II and continues to qualify for those benefits 104 weeks after the onset of the disability in respect of which he or she first qualified for those benefits.
The insured person qualified for weekly income replacement benefits under Part II, did not qualify for those benefits 104 weeks after the onset of the disability in respect of which he or she first qualified for those benefits, but subsequently became entitled to resume receiving weekly income replacement benefits under section 14.
The time period in subsection 21(1) runs from the “onset of the disability,” not the date of the accident. As noted above, a claim for IRBs can arise up to two years following the accident. However, once the claim arises, the subsection 21(1) clock starts running. If the insured person is still disabled 104 weeks later, the SABS-1994 treats the disability as permanent and the insurer must make a written LECB offer.
Generally, someone who receives IRBs but no longer meets the test at the 104-week mark will not qualify for LECBs. However, paragraph 21(1)2 creates an exception. It clearly contemplates an insured person qualifying for LECBs even though he or she did not qualify for IRBs at the 104-week mark because of a return to employment. The question is whether the possibility of further benefits extends indefinitely or for just 90 days.
This takes the analysis back to section 14. Although the section is set out above, I will repeat it here for easy reference:
14.- (1) A person receiving weekly income replacement benefits under this Part may return to or start an employment at any time during the 104 weeks following the onset of the disability in respect of which the benefits are paid without affecting his or her entitlement to resume receiving benefits under this Part if, as a result of the accident, he or she is unable to continue in the employment.
(2) After the 104-week period referred to in subsection (1), a person receiving weekly income replacement benefits under this Part may return to or start an employment for periods of up to ninety days without affecting his or her entitlement to resume receiving benefits under this Part if, as a result of the accident, he or she is unable to continue in the employment.
Allstate contends that subsection 14(2) should be read to include someone who starts working before the 104-week mark, but continues for more than 90 days beyond that date. In its submission, there is no meaningful distinction between that person and someone who starts working after 104 weeks and works for more than 90 days - both have shown an ability to work for more than 90 days during a period more than 104 weeks from the onset of their disability. The problem with Allstate’s argument is that the section reads otherwise. As the arbitrator held, the plain meaning of section 14 is to create two rules based on whether the insured person returns to or starts employment before or after the 104-week mark. Because Mrs. Wright returned to work within 104 weeks of the onset of her disability, subsection 14(1) applies. Also, she does not fit within the plain meaning of subsection 14(2) because she was not receiving IRBs after the 104-week mark. Nothing in subsection 14(1) limits the duration of the employment or creates a different rule if it continues beyond 104 weeks. If that had been the legislative intent, the section could easily have been drafted to achieve it.
In my view, what subsection 14(1) preserves is the insured person’s right to assert a claim for IRBs based on an accident-related disability. If he or she returns to work at an early date, as obliged to do if possible, the insurer cannot assume that entitlement has ended or require a new application if faced with a subsequent claim. The insured person is entitled to go back to the insurer and ask that his or her IRBs be reinstated. The longer the return to work, the more difficult it is likely to be to establish the claim, but section 14 preserves the right to assert it.
The LECB provisions do not come into play until a continuing entitlement to IRBs is established. If the insurer accepts the claim, or if the disability is eventually proven through the dispute resolution process, paragraph 21(1)2 of the SABS-1994, set out above, then applies. At that point, the insurer must make an LECB offer and follow the procedures in Part VI.
Subsection 14(2) serves a limited function. It deals with situations where the insured person qualified for IRBs at the 104-week mark, but for some reason, the transition to LECBs did not take place. This could be by agreement or because there is an ongoing dispute about the LECBs. Even in those cases, the insured person can return to work for a limited period without affecting his or her entitlement to benefits.
As the arbitrator states, this interpretation is consistent with the general approach in the SABS-1994 of encouraging the insured person to return to work. The common theme, in my view, is that the insured person should attempt to return to work before accident benefits are locked in through LECBs and should not be penalized for making the effort.
Section 72 of the SABS-1994 provides some additional support for this approach. It provides that a mediation or arbitration proceeding must be commenced within two years of the insurer’s refusal to pay the amount claimed.3 However, if the insured person has returned to work “as permitted by section 14,” the time period runs for two years from the insurer’s refusal to pay further benefits. In my view, this is consistent with the idea that the insured person’s right to assert a later claim is preserved when he or she attempts to return to work.
As noted previously, Allstate does not rely on the cases decided under the Schedule. However, it submits that the change in wording is significant and should be given effect. First, the time limit in section 16 of the Schedule ran for two years from the date of the accident, not from the onset of disability as in the SABS-1994. Second, section 16 simply says that the insured person can return to work “without affecting his or her benefits,” while section 14 of the SABS-1994 adds some words, stating that the insured person can return to work “without affecting his or her entitlement to resume receiving benefits.” In Allstate’s submission, the reverse must be true - if the insured person works for more than 90 days after the 104-week mark, his or her entitlement to benefits must be affected.
For the reasons set out above, however, I conclude that the plain meaning of section 14 can be applied without conflict with the general approach taken in the SABS-1994. As a result, the appeal is denied.
IV. EXPENSES
Given the outcome and the importance of the issue involved, Mrs. Wright should receive her reasonable appeal expenses. The parties are encouraged to agree on the amount, but if they are unable to do so, an assessment can be arranged through the Registrar.
January 18, 1999
David R. Draper Director’s Delegate
Date
Footnotes
- Mrs. Wright was involved in another automobile accident in October 1994, but counsel agree it has no bearing on the issues raised in this appeal.
- O. Reg. 672/90, as amended, the Statutory Accident Benefits Schedule - Accidents before January 1, 1994 (“the Schedule”).
- Subsection 72(2) extends the time limit for arbitration proceedings for 90 days from the report of mediator.