Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 1999 ONFSCDRS 139

Appeal P98-00037

Appellant

and

Respondent

Before:

Nancy Makepeace

Counsel:

Gregory Brimblecombe (for the Appellant)

Mark Grossman (for the Respondent)

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 15, 1998 is confirmed.
Halifax shall pay Mr. Reith’s arbitration expenses in the amount of $1,159.28.
Halifax shall pay Mr. Reith a special award in the amount of $1,500.00.
Halifax shall pay Mr. Reith’s reasonable appeal expenses.

July 16, 1999

Nancy Makepeace Director’s Delegate

Date

Halifax Insurance Company (“Halifax”) appeals from the arbitration order dated July 15, 1998. The arbitrator found that Mr. Reith is entitled to an income replacement benefit based on an annual income of $18,000.00 from March 27, 1997 and ongoing, subject to any deductions for post-accident income. The arbitrator also ordered Halifax to pay interest on overdue benefits and Mr. Reith’s arbitration expenses.

Halifax requested a stay of the arbitrator’s order pending the appeal decision. By letter dated September 18, 1998, Director’s Delegate Naylor stayed only the interest component of the arbitrator’s order and refused the stay request with respect to benefits and arbitration expenses. She directed the parties to contact the Registrar in case of disagreement about the amount of expenses owing.

On May 11, 1999, the Commission received a letter from Mr. Grossman indicating that Halifax had not paid the outstanding benefits or arbitration expenses. Mr. Grossman moved for an interim order dealing with this matter. Given the proximity of the appeal hearing, it seemed more expeditious to deal with the issue at that time. I heard submissions about the outstanding order at the outset of the hearing on May 27, 1999, and invited the parties to make further written submissions by June 25, 1999.

A. Outstanding Benefits

Following the order of Director’s Delegate Naylor, Mr. Brimblecombe requested information about Mr. Reith’s post-accident income by letter dated October 20, 1998. Mr. Grossman provided Mr. Reith’s pay stubs and Employment Insurance cheque stubs by letter dated November 16, 1998. He sent several follow-up letters, but had not received a response from Halifax at the time of the appeal hearing. Mr. Brimblecombe concedes that he received the letter on November 20, 1998, but did not pass it on to Halifax until March 12, 1999, a period of four months. On May 13, 1999, two months later, Halifax’s adjuster sent Mr. Brimblecombe a cheque for $6,196.96, which he forwarded to Mr. Grossman.

The amount paid consists of weekly benefits of $220.10 per week for the period from March 27, 1997 (one week after the accident) to January 21, 1998, when Mr. Reith returned to work, less benefits already paid. The parties agree that there are no outstanding benefits for this period. The cheque also included benefits of $522.68 covering seven weeks between February and May of 1998 during which Mr. Reith worked part-time and for which the appropriate post-accident income deductions were made. Halifax submits that any remaining outstanding benefits are minimal and await further income documentation. Mr. Reith submits that he is entitled to benefits of $220.10 per week for the remaining weeks to March 20, 1999 (104 weeks after he first qualified for benefits).

As the arbitrator’s order for ongoing benefits was “subject to any deductions for post-accident income,” Halifax was entitled to enquire about Mr. Reith’s post-accident income before paying the outstanding benefits. However, I am troubled that at the time of the appeal hearing, Mr. Reith had not yet received any of the outstanding benefits ordered by the arbitrator in July 1998. Halifax was entitled to request a stay, and to withhold payments ordered by the arbitrator pending the disposition of a timely stay request. However, having received the order largely dismissing the motion, Halifax was obliged to take all necessary and reasonable steps to comply with the effective portion of the arbitrator’s order forthwith. Any difficulties in complying with the order of the Director’s Delegate should have been brought to her attention.

There can be little justification for the delay of six months in paying Mr. Reith’s outstanding benefits for the period before his return to work on January 21, 1998. Though Mr. Brimblecombe takes responsibility for not relaying the income documents to Halifax until mid-March of 1999, Halifax is ultimately responsible for delays caused by its counsel, even if inadvertent. I am not satisfied that the task of calculating the amounts owing was so difficult as to explain the remaining delay of 60 days.

The situation is less clear with respect to benefits owing after January 21, 1998. The parties do not agree on the amount outstanding. Halifax paid the benefits owing for the seven weeks in 1998 for which Mr. Grossman provided documentation, and did not pay benefits for any other week after January 21, 1998. Mr. Reith submits that these are the only weeks he worked under his contract of employment between January and June 1998 and that he has provided all the documentation he has.

In her letter of May 13, 1999, Halifax’s adjuster requested that Mr. Reith complete and return a Declaration of Post-Accident Income and Benefits (OCF 13) form. I expect that much of the delay in this matter could have been avoided if Halifax had forwarded this form immediately after the stay ruling of September 18, 1998. In the event, I find that Mr. Reith responded to Halifax’s request by providing all the documentation available on November 16, 1998. Accordingly, interest under subsection 46(2) of the SABS-1996 is payable on the outstanding benefits from December 4, 1998 — 14 days after November 20, 1998, when the letter was received in Mr. Brimblecombe’s office.¹

Mr. Reith seeks a special award pursuant to subsection 282(10) of the Insurance Act. Halifax submits that the interest rate provided under s. 46(2) — 2 percent per month compounded monthly — is a sufficient penalty. I find that the high interest rate set out in s. 46(2) is not punitive, but is intended to compensate the insured person for lost use of the money withheld and promote prompt benefit payment.² Unlike interest, a special award is not paid just because an adjudicator finds that the insurer erred in denying benefits; the insured person must establish that the insurer acted “unreasonably.”³ In any event, the language of subsection 282(10) of the Act makes a special award mandatory if the arbitrator finds that the insurer unreasonably delayed or withheld benefits.

I find that Halifax’s delay in paying benefits of $6,196.96 for some five months between December 4, 1998 and May 13, 1999 was unreasonable. I am particularly concerned that the delay followed an arbitrator’s final order, which was confirmed by a stay ruling by a Director’s Delegate. The absence of any bad faith or malice is a mitigating factor. Halifax was entitled to withhold the payment of interest between September 18, 1996 and the date of this decision. Accordingly, the special award will be limited to a percentage of the outstanding principle of $6,196.96. I find an award of $1,500.00 to be appropriate.

I am not satisfied that Halifax acted unreasonably in delaying payment of benefits for the period after January 21, 1998 because it had reason to expect that Mr. Reith had been employed for part of that period. While interest is payable on the outstanding benefits, I dismiss the request for a special award in this connection.

B. Arbitration Expenses

Mr. Grossman sent Halifax his bill of costs on March 22, 1999. Halifax was entitled to dispute Mr. Reith’s claim for arbitration expenses, but should have invoked the process set out in Rule 77 of the Dispute Resolution Practice Code (April 15, 1997), as the Director’s Delegate indicated in her order refusing a stay of arbitration expenses. It was not entitled to do nothing.

The parties agreed that in the interests of an expeditious resolution of this matter, I should determine the amount of expenses payable based on their oral submissions. Mr. Reith claims a total of $2,180.86:

legal fees of $83.75 per hour for 19.4 hours of hearing preparation and attendance = $1,624.75
20 letters at 6 minutes per letter = $167.50
GST = $125.46
disbursements of $236.40 for non-GST items
GST-taxable disbursements of $25 plus GST of $1.75

Halifax submits that a claim for 19.4 hours is excessive considering that the hearing lasted less than 3 hours, and that the letters should be included in the hearing preparation.

At the arbitration hearing, there was little factual dispute between the parties except about whether Mr. Reith would have worked as a courier if not for the accident. The legal issues were not particularly difficult. Nonetheless, Mr. Grossman had to interview Mr. Reith and Stuart Morrish, Employee Services Manager with UPS, who also testified, as well as preparing submissions and the short exhibit brief. I find it appropriate to award 10 hours for hearing preparation, including correspondence, and hearing attendance. When advised that the Expense Schedule gives an adjudicator discretion to award legal fees at up to $150 per hour,⁴ Mr. Grossman requested the higher rate, but provided no basis for the request. I award his legal fees at the rate of $83.75 per hour. GST of $58.63 is payable on the legal fees. Accordingly, Mr. Reith is entitled to reimbursement of his arbitration expenses in the amount of $1,159.28

III. APPEAL ISSUE AND SUBMISSIONS

There is no dispute about the main facts. In February 1997, Mr. Reith applied for a job with United Parcel Service (“UPS”) in Kitchener. After two interviews, a road test (driving test) and a medical examination, he was offered a job as a “Package Car Driver.” He began a one-week orientation course on March 17, 1997. Unfortunately, he was involved in an accident on the morning of Thursday, March 20, 1997. If Mr. Reith had successfully completed the course, he would have begun work as a casual driver the following Monday.

This case is about the application of paragraph 3 of section 4 of the SABS-1996, which says:

The Insurer shall pay an insured person who sustains an impairment as a result of an accident an income replacement benefit if the insured person meets any of the following qualifications:
The insured person,

i. was entitled at the time of the accident to start work within one year under a legitimate contract of employment that was made before the accident and that is evidenced in writing, and

ii. as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of the employment he or she was entitled to start under the contract.

Halifax submits that Mr. Reith was not “entitled at the time of the accident to start work within one year” [emphasis added] because he had already started the UPS contract at the time of the accident. Accordingly, Halifax paid income replacement benefits on the basis of Mr. Reith’s hourly wage of $6.85 earned during the orientation course, rather than the $11.30 per hour he would have received if he had completed the course and worked as a casual driver. Alternatively, Halifax submits that there is no basis in the evidence for the arbitrator’s finding that Mr. Reith would have earned $18,000 as a casual driver, which Halifax characterizes as speculative.

Mr. Reith submits that section 4.3 applies whether the insured person was employed or unemployed at the time of the accident and whether or not the contract for a new job is with the insured person’s current employer or another employer. Mr. Reith submits that the best evidence before the arbitrator supported the $18,000.00 figure and that Halifax brought no evidence to dispute it. In any event, Mr. Reith submits that the latter submission does not raise a question of law and therefore is not open to appeal.

IV. ANALYSIS AND FINDINGS

To succeed on appeal, Halifax must show that the arbitrator erred in law. I find no error.

A. Section 4.3

The arbitrator began her analysis of the section by setting out the applicable principles of statutory interpretation:

In a recent decision interpreting the provisions of the Schedule,⁵ Laskin J.A. of the Ontario Court of Appeal noted that “the modern approach to statutory interpretation calls on courts to interpret a legislative provision in its total context.” Justice Laskin stated that the court’s interpretation should satisfy three criteria, namely to “comply with the legislative text, promote the legislative purpose and produce a reasonable and just meaning.”

Halifax did not take issue with this test, which I accept.

Applying the three criteria, the arbitrator held that a person entitled “to start work”

includes a person who entered an employment contract before the accident, but has yet to start the actual work for which he was contracted to perform. In this case, Mr. Reith was contracted to perform work as a casual driver. At the time of the accident, however, he was merely a trainee, and had not yet started the work for which he had been hired. . . .

Moreover, in this case the distinction between these positions is not superficial, as both the essential tasks and the pay differ vastly. As a trainee, Mr. Reith earned the minimum wage of $6.85 per hour, attended classes at an orientation centre, and was responsible primarily for learning the policies and procedures of UPS; a driver, by contrast, earns $11.30 per hour and is on the road each day delivering parcels.

I find no error in this analysis. As the arbitrator noted, s. 4.3.ii of the Schedule “contemplates the insurer paying benefits on the basis of ‘the essential tasks’ of the job the applicant ‘was entitled to start’ under the contract.” The key point, as stated by the arbitrator, is that

By making the payment of benefits contingent on an inability to perform the prospective job tasks, the legislators made the job, rather than the employer, the focus of [benefit] compensation. Thus benefits do not increase simply because of anticipated or even promised pay raises, but because before the accident, the employee was promised a job distinct from what he was then doing.

As a trainee, Mr. Reith spent his time sitting at a desk learning about UPS policies and practices. His future tasks as a package car driver would include lifting weights of up to 70 pounds. It was presumably because of this difference in tasks that UPS paid its trainees half the hourly rate they would receive as couriers following completion of the course. Halifax submitted that Mr. Reith’s status was similar to that of a probationary employee. Completing a probationary period does not usually involve a substantial change in essential tasks. Where it does, I am inclined to think s. 4.3.ii would apply.

Mr. Grossman relied on subsection 8(7) of the Schedule, which is as follows:

(7) If a person qualifies for an income replacement benefit under paragraph 1 or 2 of section 4 and also qualifies under paragraph 3 of section 4, the person’s gross annual income from employment shall be determined under subsection (3) or (4), as the case may be, until the day he or she would have been entitled to begin employment under the contract described in paragraph 3 of section 4, and thereafter the person’s gross annual income from employment shall be determined in accordance with subsection (5).

The effect of this provision is that if an insured person qualifies for an income replacement benefit on the basis of the job he held at the time of the accident or a former job he held during the year before the accident, and also qualifies for a benefit based on a job offer, the benefit shall be calculated on the basis of the pre-accident job until the day he would have begun the new job, from which time the benefit shall be calculated on the basis of “the gross income payable under the contract of employment, extrapolated to reflect an annual income.” In my view, subsection 8(7) establishes conclusively that the legislature contemplated a person already employed taking advantage of the “contract of employment” provision. There is no basis in the Schedule for making the application of s. 4.3 dependent on whether the new job is with the same employer or a different employer. Nor is there any policy reason for drawing such a distinction. The “contract of employment” provisions are clearly intended as a departure from the generally “backward looking” approach of the SABS in calculating the income replacement benefit rate and establishing the “essential tasks of . . . employment” in respect of which entitlement is determined.⁶ Given this legislative intent, I can think of no policy reasons for putting Mr. Reith in a worse position than he would have been in if the accident had occurred the week before the course began. If there is any ambiguity in the SABS-1996, I find that policy considerations support the interpretation adopted by the arbitrator.

B. Finding as to prospective income

Halifax submits that the arbitrator’s finding that Mr. Reith would have earned $18,000 as a casual driver was unsupported on the evidence. Mr. Reith submits that this ground of appeal does not raise a “question of law.”⁷ I do not find it necessary to decide the latter point because I find there was sufficient evidence before the arbitrator to support her finding.

Having found that Mr. Reith was entitled to start work after the accident under a contract of employment, the arbitrator faced three evidentiary problems in determining Mr. Reith’s “gross annual income from employment” for purposes of subsections 8(5) and 8(7). First, Mr. Reith was hired as a casual driver. He would work “on call”, and UPS did not guarantee any minimum number of hours per week. However, the arbitrator received credible evidence that he was likely to work at least substantial part-time hours:

Mr. Reith testified that he was told during the interview that although there was no guarantee of hours, he would likely get between 10 to 50 hours a week. He was also told that he could increase his chances of getting work if he was “eager” and showed up at the depot every morning.

I found Mr. Reith to be a forthright witness and accept his evidence that he was motivated to get as many hours as possible, with the hope of eventually becoming a full-time driver. His evidence was confirmed by Mr. Stuart Morrish, Employee Services Manager of UPS, who testified that although it is impossible to predict how many hours a casual employee may work in a given week, they usually work every day and can enhance their chances for work by showing up at the depot each morning.

Halifax did not challenge this evidence at the arbitration hearing or on appeal.

Halifax submits that the arbitrator took insufficient notice of the high attrition rate amongst UPS casual drivers. Mr. Morrish testified that “normally three or four months is a normal period of time for somebody to stay around,” and that Mr. Sinkins, who started the training course with Mr. Reith, lasted only about two weeks. Three more casual drivers hired after the accident, but were no longer with the company by the time of the arbitration hearing. Mr. Brimblecombe concedes the principle set out in Senater and Simcoe and Erie — that an insurer is not entitled to reduce or terminate benefits on the date the contract would have terminated⁸ — but submits that a high attrition rate is evidence that there was little work available. In the absence of evidence that drivers left because of insufficient work rather than, for example, better opportunities for lighter, better paid or steadier work, I find this speculation of no evidential value.

The arbitrator received no evidence about earnings of casual drivers in Kitchener after the accident. Mr. Morrish testified that at the time of the arbitration hearing, UPS did not employ any casual drivers in Kitchener. The arbitrator’s factual findings are as follows:

UPS therefore did a projection on the basis of a casual driver employed in London, which has comparable demographics. That employee worked 1,392 hours in 1997, earning an annual income of $18,040.26. Mr. Reith seeks a weekly benefit based on the same annual salary.

Halifax raised some valid concerns over this approach. I heard about only one driver, and in a different jurisdiction. Mr. Morrish conceded that it is impossible to say whether the hours worked by the London driver are average or unusual. At the same time, however, Mr. Morrish testified that casual drivers usually work each day, and Mr. Reith was told that he would likely work between 10 to 50 hours per week. I also accept that because he was motivated, he would maximize whatever opportunities were made available to him. Finally, I find it significant that the London driver used as a comparison worked approximately 30 hours⁹ per week in 1997, which is the midpoint of the 10 to 50 hour range quoted to Mr. Reith in his interview with UPS. In other words, the salary earned by the London driver, on which Mr. Reith wishes to rely, is consistent with what UPS advised during the interview and Mr. Morrish stated at the hearing. For these reasons, although the evidence is not ideal, I accept that, on the balance of probabilities, Mr. Reith would have earned an annual income of approximately $18,000, and Halifax should pay him benefits on that basis.

Halifax makes the same arguments on appeal, and relies on the principle that there is no contract without certainty. I accept Mr. Reith’s submission that nothing in the SABS requires that the contract of employment include a certain or fixed income. Indeed, it is in the nature of casual employment that the employee may have no fixed weekly, monthly or annual income. In this case, the terms of the contract between Mr. Reith and UPS included the provision that no minimum number of hours were guaranteed, and employment of casual drivers was limited under a collective agreement. Halifax did not challenge the evidence of Mr. Reith and Mr. Morrish about their expectations as to how many hours Mr. Reith would work. I do not accept that this contract was void for uncertainty.

Nevertheless, Mr. Reith bears the onus of establishing his anticipated gross annual income.

Difficulties in ascertaining gross annual income are not unique to future contract of employment situations. The issue also comes up when an insured person claims benefits on the basis of the job he held at the time of the accident, but cannot document his income claim because of poor record-keeping. In these cases, adjudicators have rejected the argument that the claim is restricted to what can be documented with precision on the basis that this would not be a reasonable or practical expectation for many self-employed and casually employed insureds. Instead, adjudicators have examined the totality of the evidence to determine whether the insured person has established, on a balance of probabilities, that he earned the income claimed. Where a precise amount cannot be determined, a sensible estimate for which the insured person has shown a reasonable basis is acceptable.¹⁰

Section 4.3 of the SABS-1996 does not exclude part-time casual workers. Nor does it preclude entitlement where the contract would have been frustrated in any event because of factors unrelated to the accident (for example, an unexpected economic lay-off after the accident.) Halifax raises a legitimate question about how “gross annual income” is to be proven in such cases, but offers no persuasive reason to second-guess the arbitrator’s conclusion in this case. Mr. Reith and UPS expected that Mr. Reith would work between 10 and 50 hours per week and that he could increase the number of hours he worked by making himself available on a daily basis. UPS clearly expected work to be available, because they hired three other couriers around the same time as Mr. Reith. The arbitrator based her income finding on uncontroverted evidence that a courier in a comparable market worked about 30 hours a week the same year, which, as the arbitrator noted, was the midpoint of the range quoted to Mr. Reith in his interview. I find that the arbitrator’s conclusion was amply supported by the evidence and correct in law.

V. EXPENSES

Mr. Reith is entitled to his appeal expenses. I may be spoken to if the parties are unable to agree on the amount owing.