Neutral Citation: 1999 ONFSCDRS 203

FSCO A97-001878

BETWEEN:

BARRY M. DESLIPPE

Applicant

and

MOTOR VEHICLE ACCIDENT CLAIMS FUND

Insurer

REASONS FOR DECISION

Before:

Eban Bayefsky

Heard:

June 14 and 15, 1999, in Windsor, Ontario by way of written materials and oral submissions.

Appearances:

Luigi DiPierdomenico for Mr. Deslippe

Thomas H. Clemenhagen for Motor Vehicle Accident Claims Fund

The Applicant, Barry M. Deslippe, was injured in a motorcycle accident on July 10, 1994. He applied for and received statutory accident benefits from the Motor Vehicle Accident Claims Fund ("MVAC"), payable under the Schedule.¹ A dispute arose as to the nature and quantum of Mr. Deslippe's benefits. The parties were unable to resolve their disputes through mediation, and Mr. Deslippe applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. The June arbitration hearing only dealt with the quantum issues.

The issues in this hearing are:

What is the correct calculation of Mr. Deslippe's pre-accident earning capacity, pursuant to section 29(1) of the Schedule?
Are Canada Pension Plan ("CPP") benefits deductible from Mr. Deslippe's loss of earning capacity benefits ("LECBs"), pursuant to section 75 of the Schedule?
Is Mr. Deslippe entitled to interest on the amounts owing to him, pursuant to section 68 of the Schedule, and if so, what is the correct amount?
Is MVAC liable to pay Mr. Deslippe a special award for unreasonably withholding or delaying payment of benefits, pursuant to section 282(10) of the Insurance Act?

Mr. Deslippe also seeks his reasonable expenses of the arbitration.

Mr. Deslippe's pre-accident earning capacity is $391.35 per week, as indexed, pursuant to sections 29(1) and 79 of the Schedule.
CPP benefits are not deductible from Mr. Deslippe's LECBs.
Mr. Deslippe is entitled to interest in the amount of $13,280.01, pursuant to section 68 of the Schedule.
MVAC is liable to pay Mr. Deslippe a special award of 25 per cent of the amount owing, pursuant to section 282(10) of the Insurance Act.
Mr. Deslippe is entitled to his reasonable expenses of the arbitration.

Mr. Deslippe was seriously injured in a motorcycle accident on July 10, 1994. At the time, he was employed at Mohawk Metal in Windsor. MVAC paid Mr. Deslippe income replacement and loss of earning capacity benefits. However, a dispute arose as to the proper quantum of these benefits, specifically, the determination of Mr. Deslippe's pre-accident earning capacity and the deductibility of CPP benefits.

Pre-Accident Earning Capacity:

By letter dated November 27, 1997, MVAC notified Mr. Deslippe that they would calculate his LECB entitlement taking into consideration his "pre-accident disability and his WCB [Workers' Compensation Board] entitlement," as well as "the actual value of the job of 'maintenance worker.'" MVAC's understanding was that Mr. Deslippe was not working in his regular job as a punch-press operator at the time of the accident, but was on modified duties as a maintenance worker due to previous workplace injuries. At the hearing, MVAC indicated that the November 27, 1997 letter formed the basis of its position concerning the proper determination of Mr. Deslippe's pre-accident earning capacity and LECBs. Mr. Deslippe submitted that he had returned to full duties as a punch-press operator at the time of the accident and that, in any event, MVAC had disregarded or misapplied section 29(1) of the Schedule (pertaining to the determination of an insured's pre-accident earning capacity) in calculating his entitlement to LECBs.

In my view, section 29(1) is central to the determination of Mr. Deslippe's pre-accident earning capacity and LECBs. I accept Mr. Deslippe's submission that MVAC either disregarded or misapplied this section in making its calculations. Section 29(1) states, in part, that:

For the purpose of determining the amount of a weekly loss of earning capacity benefit...the pre-accident earning capacity of a person...shall be deemed to be the person's net weekly income from employment used in section 10 in determining the amount of weekly income replacement benefits immediately before payment of the weekly loss of earning capacity benefits begins

As indicated, MVAC calculated Mr. Deslippe's LECBs in light of his "pre-accident disability and WCB entitlement," as well as the "actual value of the job as 'maintenance worker.'" MVAC determined that the appropriate hourly wage for the job of maintenance worker would be $8 per hour. However, I find that, pursuant to section 21(5)(a) of the Schedule, the pre-accident earning capacity determination forming part of MVAC's LECB offer was required to be determined in accordance with section 29 of the Schedule. As set out above, section 29 clearly requires that Mr. Deslippe's pre-accident earning capacity be deemed to be his net weekly income as used in determining his income replacement benefits just prior to his being paid LECBs. Section 29 makes no reference to the extent of any pre-existing disability, receipt of workers' compensation benefits or deemed value of a person's employment.

MVAC had originally determined Mr. Deslippe's net weekly income to be $391.35 and his eligible weekly benefit (that is, 90 per cent of his net weekly income) to be $352.22. MVAC also assessed Mr. Deslippe's income replacement benefits on the basis that CPP benefits were deductible and, therefore, paid him $213.06 per week (being the $352.22 weekly eligible benefit minus $139.16 per week in CPP benefits). However, as indicated below, MVAC conceded at the hearing that CPP benefits were not deductible from income replacement benefits. I, therefore, find that Mr. Deslippe's net weekly income was $391.35 per week and that his income replacement benefits were $352.22 per week.

In determining Mr. Deslippe's entitlement to LECBs, MVAC subsequently took the position that they should calculate the benefits owing on the basis of what Mr. Deslippe ought to have been earning at the time of the accident. MVAC determined this to be $8 per hour and, therefore, based their calculations on a gross weekly amount of $320 per week and a net weekly amount of $254.72 per week. MVAC, therefore, determined Mr. Deslippe's LECBs to be $229.29 per week (less CPP benefits). However, Mr. Deslippe was earning $12.85 per hour at the time of the accident. It is unclear which materials MVAC relied on in determining that the hourly rate for the job of maintenance worker was $8 per hour. On February 19, 1997, MVAC indicated that Mr. Deslippe was capable of doing a number of jobs, all of which paid remuneration which equalled or exceeded Mr. Deslippe's actual pre-accident earnings of $12.90 per hour.² This letter appeared to be based on the information contained in a February 20, 1997 report done by Career Probe Inc. which suggested a number of potential positions for Mr. Deslippe, paying wages from $6.85 per hour to $22 per hour (or, on average, roughly $14 per hour). In either case, the hourly rate is significantly higher than the $8 per hour used by MVAC in determining Mr. Deslippe's LECBs.

I, therefore, find that, pursuant to section 29(1) of the Schedule, Mr. Deslippe's pre-accident earning capacity ought to have been based at least on his actual pre-accident salary of $12.85 per hour (on which MVAC had calculated his net weekly income and income replacement benefits prior to paying him LECBs) and not the estimated wage of $8 per hour MVAC had used for the position of maintenance worker. I note that Mr. Deslippe indicated at the hearing that he would be content with the $352.22 income replacement benefit used by MVAC in their April 26, 1996 Explanation of Assessment, which was based on a net weekly income of $391.35 per week, even though he argued that the figure could be higher on the basis of the average hourly wage of the various positions which MVAC and Career Probe identified as suitable for Mr. Deslippe. I, therefore, accept the figure of $391.35 per week as Mr. Deslippe's pre-accident earning capacity and the figure to be used in calculating his LECBs.

In light of these conclusions, I find it unnecessary to determine whether Mr. Deslippe had, in fact, returned to the full duties of his regular position as a punch-press operator and, therefore, whether MVAC had some basis for using the position of maintenance worker in the calculation of his pre-accident earning capacity and LECBs. As indicated earlier, section 29 of the Schedule clearly sets out a procedure for determining pre-accident earning capacity, which does not include estimating the "actual value" of a person's job in light of his or her work capacity and/or workers' compensation entitlement.

Pursuant to section 79 of the Schedule, net weekly income used in the determination of a person's weekly LECBs is to be adjusted by the indexation percentage published under section 268.1 of the Insurance Act. MVAC paid Mr. Deslippe LECBs from November 27, 1997 onward. The relevant indexation percentages as published in the Ontario Gazette are 1.5 per cent for 1997, 1.6 per cent for 1998 and .7 per cent for 1999. As agreed by the parties, MVAC shall index the net weekly income amount of $391.35 by these percentages, resulting in amounts of $397.22 per week for 1997, $397.61 per week for 1998 and $394.09 per week for 1999.

Deduction of CPP benefits:

Mr. Deslippe submitted that MVAC was not entitled to deduct CPP benefits from his loss of earning capacity benefits.³ MVAC responded that the case law holding that CPP benefits were not deductible as payments for loss of income, most notably, Cugliari v. White et al. (1998), 1998 CanLII 5505 (ON CA), 38 O.R. (3d) 641 (Ont. C.A.), did not apply to this case since the operative statutory provision considered in the case law (section 267(1) of the Insurance Act) was not in effect between January 1, 1994 and November 1, 1996. MVAC, therefore, maintained that CPP benefits were deductible from Mr. Deslippe's LECBs. I find that the case law prohibiting the deduction of CPP benefits continues to be relevant and that, taken together, the legislation and common law preclude MVAC from deducting CPP benefits from Mr. Deslippe's LECBs.

Section 75(1) of the Schedule states, in part, that an insurer may deduct from LECBs "net payments for loss of income...under the laws of any jurisdiction or under any income continuation plan." Section 75 does not specifically allow insurers to deduct CPP benefits. Section 267(1) of the Insurance Act (the provision under which Cugliari found that CPP benefits were not deductible) states, in part, that "damages...in a proceeding...shall be reduced by...all payments...for loss of income under the laws of any jurisdiction or under any income continuation benefit plan...." However, as of November 1, 1996, section 267(6) of the Act stated that section 267 only applies to damages awarded for losses arising before January 1, 1994.

In my view, the inapplicability of section 267(1) between 1994 and 1996 does not render the Cugliari decision irrelevant to the issue in this case. Section 75 of the Schedule applies to this factual situation because it uses the language at issue in Cugliari, namely, "payments for loss of income." While specifically permitting the deduction of a variety of benefits, section 75 does not mention the deduction of CPP benefits. The Court of Appeal held in Cugliari that CPP benefits were not payments for loss of income. In my view, the reasoning in Cugliari is still pertinent to the determination of whether, by using the phrase "payments for loss of income," the legislation excludes CPP benefits from the payments an insurer can deduct from LECBs.

I agree with the comment in the arbitration decision of Goos and Non-Marine Underwriters, Members of Lloyd’s (OIC A96-000393, June 12, 1997), citing the appeal decision in Morin and The Personal Insurance Company of Canada (OIC P-000468, February 26, 1993), to the effect that, while Cugliari dealt with tort deductibility, the statutory and regulatory words are identical and, therefore, cannot be interpreted differently.

Contrary to MVAC's submission, I do not find the arbitration decision of Schekene and Co-Operators General Insurance Company (OIC A95-000314, March 17, 1997) helpful. This case considered whether CPP disability benefits were "temporary disability benefits" and, therefore, deductible pursuant to section 75(4)1 of the Schedule. It did not deal directly with whether CPP benefits were "payments for loss of income" under section 75(1) of the Schedule. In any event, the arbitrator found that CPP benefits were not deductible as temporary disability benefits and only suggested, in obiter, that CPP might be considered "payments for loss of income." Finally, Schekene predated the Court of Appeal decision in Cugliari and the arbitration decision in Goos. Therefore, in light of the identical statutory language and the absence of any judicial modification or qualification of Cugliari, I find that Cugliari remains valid, authoritative and subsisting law for the proposition that "payments for loss of income" do not include CPP benefits.

MVAC submitted that Cugliari suggested that CPP benefits were payments for loss of earning capacity and that they could, therefore, be deducted from LECBs paid pursuant to the Schedule. MVAC argued, on the basis of the companion case to Cugliari, namely, Bannon et al. v. McNeely et al. (1998), 1998 CanLII 4486 (ON CA), 38 O.R. (3d) 659 (Ont. C.A.), that where benefits are to be deducted, they should be deducted from a similar type of benefit; thus, in MVAC's submission, it would be reasonable to deduct CPP benefits from LECBs given that CPP benefits are payments for loss of earning capacity. However, even if CPP benefits could be considered to be payments for loss of earning capacity, section 75(1) only permits the deduction of payments for loss of income. In any event, I see nothing in the legislation to suggest that the potential similarity between LECBs and CPP benefits as payments for loss of earning capacity permits the latter to be deducted from the former.

I, therefore, find the reasoning in Cugliari entirely applicable to this case and that MVAC is not entitled to deduct CPP benefits from Mr. Deslippe's LECBs.

Given this conclusion, I find it unnecessary to address Mr. Deslippe's argument that section 74(1) of the Schedule (which requires the payment of accident benefits despite the receipt of social welfare benefits) also precludes the deduction of CPP benefits.

Special Award:

Mr. Deslippe maintained that MVAC was liable to pay him a special award because they intentionally disregarded section 29 of the Schedule in their assessment of his LECBs. He also seeks a special award on the basis that MVAC unreasonably withheld CPP benefits from its offer and payment of LECBs when they knew, or ought to have known, that they were obligated to include CPP benefits in their calculations. Finally, Mr. Deslippe requests a special award on the basis that neither he nor his counsel received a copy of the REC DAC report until November 27, 1997, some three months after the report had been provided to MVAC.

I find that Mr. Deslippe is entitled to a special award. Section 29(1) is a clear statutory direction as to how pre-accident earning capacity is to be determined. MVAC entirely disregarded section 29(1) in their calculation of Mr. Deslippe's LECBs. While MVAC attempted to explain its position in their November 27, 1997 letter, it made no mention of section 29(1) and gave no explanation at the hearing as to why it neglected to do so. I find that Mr. Deslippe need not establish that MVAC intentionally or wantonly disregarded the relevant statutory provisions. MVAC failed to address and to implement a clear legislative direction and I, therefore, find that it unreasonably withheld the payment of benefits from Mr. Deslippe.

Further, while the law regarding the deductibility of CPP benefits may have been uncertain when MVAC made Mr. Deslippe an LECB offer (namely, November 27, 1997), I find that the situation was clarified by the Court of Appeal decision in Cugliari on April 23, 1998 (or at the latest, when the Supreme Court denied leave to appeal on December 10, 1998). Despite this, MVAC continued to maintain its position that CPP benefits were deductible. In my view, MVAC had a continuing obligation to address this matter and should have done so at the very latest when the Supreme Court denied leave. I, therefore, find that MVAC unreasonably withheld or delayed the payment of benefits to Mr. Deslippe.

Finally, while there may have been a delay in providing Mr. Deslippe or his counsel with a copy of the REC DAC report, I do not find that this resulted from any high-handed conduct on MVAC's part. Section 39(9) of the Schedule requires the REC DAC to provide a copy of its report to the insurer, the insured and the insured's health practitioner. MVAC did not have a statutory obligation to provide a copy to Mr. Deslippe or his counsel. However, even if MVAC had a general obligation to do so, it is unclear that MVAC received the report on July 29, 1997, as claimed by Mr. Deslippe. The date stamps on the report do not clearly indicate when MVAC received the document. Later reports from one of MVAC's case managers suggest that the REC DAC report may only have been received in late August or September 1997. I find no evidence to suggest that MVAC intentionally withheld the REC DAC report from Mr. Deslippe or his counsel. In fact, MVAC's November 27, 1997 letter suggests they believed Mr. Deslippe had already been provided the report.

Therefore, while I find that a special award is warranted in this case, I am not prepared to impose the full 50 per cent amount permitted under section 282(10) of the Insurance Act. I find that a special award of 25 per cent of the amounts owing is appropriate in the circumstances.

Interest:

MVAC submitted that I had a discretion not to award interest on any amounts found to be owing to Mr. Deslippe. Section 68 of the Schedule states that an insurer "shall pay interest" on any overdue payments of benefits "for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly." In my view, this section is clear and unambiguous in requiring interest to be paid on overdue benefits. I have no discretion in this regard and, therefore, order MVAC to pay interest in the prescribed manner on the amounts owing to Mr. Deslippe. However, even if I had the discretion not to award interest, I find nothing in this case suggesting that I should refuse Mr. Deslippe his interest.

The parties agreed that the total amount of benefits owing to Mr. Deslippe, including interest, was $30,118.63 and that the principal sum of benefits payable was $16,838.62. The interest component, therefore, equals $13,280.01, which I order MVAC to pay to Mr. Deslippe.

EXPENSES:

In light of my findings in this matter, I order MVAC to pay Mr. Deslippe his reasonable expenses of the arbitration. The parties may apply for an assessment should they be unable to agree on the amount owing.

October 20, 1999

Eban Bayefsky Arbitrator

Date