Neutral Citation: 2000 ONFSCDRS 184

FSCO A99-000608

BETWEEN:

DAVID C. KILBY

Applicant

and

DOMINION OF CANADA GENERAL INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

Anne Sone

Heard:

May 15, 16 and 17, 2000, in Lindsay, Ontario.

Appearances:

John R. McCarthy for Mr. Kilby

William A. McClelland for Dominion of Canada General Insurance Company

The Applicant, David C. Kilby, was injured in a motor vehicle accident on December 2, 1994. He applied for and received statutory accident benefits from Dominion of Canada General Insurance Company ("Dominion"), payable under the Schedule.¹ Dominion terminated weekly income replacement benefits on April 11, 1997. The parties were unable to resolve their disputes through mediation, and Mr. Kilby applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Is Mr. Kilby entitled to receive a loss of earning capacity benefit offer, pursuant to section 21 of the Schedule?
Is Mr. Kilby entitled to receive a weekly income replacement benefit from April 11, 1997 and ongoing, pursuant to section 7 of the Schedule on the basis that he suffers a substantial inability to perform the essential tasks of his employment, pending receipt of a loss of earning capacity benefit offer?
Is Dominion entitled to a repayment of $2,146.10, pursuant to section 70 of the Schedule?
Is Dominion liable to pay Mr. Kilby's expenses in respect of the arbitration pursuant to subsection 282(11) of the Insurance Act, R.S.O. 1990, c.I.8?

Mr. Kilby is entitled to receive a loss of earning capacity benefit offer, pursuant to section 21 of the Schedule.
Mr. Kilby is not entitled to receive a weekly income replacement benefit from April 11, 1997 and ongoing, pending receipt of a loss of earning capacity benefit offer, pursuant to section 7 of the Schedule.
Dominion is not entitled to a repayment of $2,146.10, pursuant to section 70 of the Schedule.

Background:

On December 2, 1994, Mr. Kilby was a front seat passenger in a vehicle travelling at 80 kilometres per hour, when it was involved in a head-on collision. Mr. Kilby was not wearing a seatbelt and was thrown head first into the windshield. He instantly sustained severe head, neck and back injuries from the accident. He was x-rayed at Kingston General Hospital and discharged to the care of his family doctor.

At the time of the accident, Mr. Kilby was 36 years old. He operated a company called Bob's Home Improvements. The company built and renovated homes, cottages and small industrial buildings. Mr. Kilby acted as construction carpenter and project manager, among other duties.

As a result of the accident, Mr. Kilby stopped working from December 2, 1994 to April 18, 1995. He received chiropractic care, massage and exercise therapy at The Accident Injury Management ("AIM") Clinic. Dominion paid Mr. Kilby a weekly income replacement benefit during this time period.

After he returned to work, Mr. Kilby found that he required substantial assistance, as he was unable to sustain the physical demands of prolonged lifting, carrying, climbing, hammering and walking. Because of this, Dominion reinstated income replacement benefits retroactive to April 18, 1995. It retained Coopers & Lybrand to examine Mr. Kilby's books and records to determine the amount of the benefit, after deducting Mr. Kilby's post-accident income. Dominion terminated these benefits on April 11, 1997, pursuant to section 65 of the Schedule after an insurer's medical examination on November 25, 1996, and a disability assessment report dated February 25, 1997 prepared by a designated assessment centre ( DAC"). Mr. Kilby has never received a loss of earning capacity offer from Dominion.

Law:

Sections 20 and 21 of the Schedule set out the relevant law regarding loss of earning capacity benefits. Pursuant to subsection 20(1), an insurer shall pay an insured person weekly loss of earning capacity benefits instead of weekly income replacement benefits under Part II of the Schedule, if the payment of loss of earning capacity benefits is authorized by this Part of the Schedule.

Pursuant to subsection 21(1), an insurer shall promptly deliver a written offer to an insured person with respect to the payment of weekly loss of earning capacity benefits, if the insured person qualified for weekly income replacement benefits, and continues to qualify for those benefits 104 weeks after the onset of the disability. As initial entitlement is conceded, if Mr. Kilby continues to qualify for income replacement benefits 104 weeks after the accident, Dominion must promptly deliver an offer.

Section 8 of the Schedule sets out the period of time an insured person is entitled to a weekly income replacement benefit. Pursuant to section 8, Mr. Kilby is entitled to a weekly income replacement benefit during the period he suffers a substantial inability to perform essential tasks of his employment.

Mediation:

Mr. Kilby submitted that Dominion had not mediated the issue of qualifying for a weekly income replacement benefit as it pertains to the right to a prompt loss of earning capacity offer. He argued that it cannot now raise this issue at the hearing. I disagree. As set out above, the section of the Schedule dealing with a loss of earning capacity benefit offer refers directly back to the provision dealing with income replacement benefits. Accordingly, section 7 flows naturally from referring to section 21, and Dominion is entitled to refer to this section in its defence.

Estoppel:

Mr. Kilby submits that since Dominion paid him for longer than 104 weeks, it is estopped from arguing that he is not entitled to a loss of earning capacity offer. Mr. Kilby argues that he relied on Dominion's implied representation that he was entitled to a loss of earning capacity benefit to his detriment. For example, he lost the opportunity to obtain medical evidence at that time to support his position.

Dominion argues that section 21 of the Schedule r elating to loss of earning capacity offers refers to an insured person who "qualified for weekly income replacement benefits... and continues to qualify for those benefits 104 weeks after the onset of the disability..." Accordingly, it submits that Mr. Kilby must qualify for income replacement benefits at 104 weeks. Based on its medical evidence and its assessment of Mr. Kilby's credibility, its position is that Mr. Kilby is not entitled to a loss of earning capacity offer.

Dominion relied upon Fox and Economical Mutual Insurance Company² to support its position. In my view, this case is distinguishable from the present case. In Fox and Economical, the insurer delivered a notice of termination under section 64 of the Schedule, approximately one month before the expiration of the 104-week period. The insured person requested a disability DAC assessment, which triggered the insurer's obligation to continue paying income replacement benefits. The insurer had to continue paying these benefits under section 64 because the assessment process was not completed within the remaining month. The DAC assessors ultimately concluded that Mr. Fox was no longer disabled, which authorized the insurer to terminate the benefit.

Mr. Fox argued that because the insurer was not authorized to stop paying the benefit, and in fact continued to pay beyond the 104-week mark, it ought to have delivered a loss of earning capacity offer on the second anniversary of the accident.

Arbitrator Palmer concluded that because the insurer put the applicant's qualification for ongoing income replacement benefits in issue prior to the expiration of the 104-week mark, it would be inappropriate to require the insurer to make a loss of earning capacity offer prior to the release of the DAC report and, if necessary, an arbitrator's ruling on the income replacement issue.

The key point that distinguishes Fox and Economical is that the insurer had questioned the insured person's entitlement to ongoing income replacement benefits prior to the 104-week mark, rather than after it. Under these circumstances, I agree with Arbitrator Palmer's conclusion that the loss of earning capacity benefits stage should be delayed until after the weekly benefits issue is resolved.

In this case, Dominion continued to pay Mr. Kilby an income replacement benefit past the 104-week mark. That action implies that Dominion accepted that Mr. Kilby was qualified to receive these benefits. I agree with Arbitrator McMahon's conclusion in Gauthier and Allstate Insurance Company of Canada,³ that in ordinary circumstances, if the insurer pays income replacement benefits to the end of the 104-week period, without invoking the stoppage provisions of section 64, it is too late to subsequently challenge the insured person's qualification for income replacement benefits, and it must make a loss of earning capacity benefit offer. Accordingly, I find that Dominion is estopped from arguing that Mr. Kilby is not entitled to a loss of earning capacity benefit. Should I be wrong in law on the issue of estoppel, I have heard evidence and submissions, and made findings with respect to whether Mr. Kilby was "qualified" to receive income replacement benefits at 104 weeks after the onset of his disability.

Essential Tasks:

Prior to the accident, Mr. Kilby engaged in on-site labour for his construction company. His former partner, Mr. Bryce Hughes verified that Mr. Kilby had no pre-accident physical disabilities. Physical demands of Mr. Kilby's employment ranged from light duty carpentry work to heavy work such as block work, pouring concrete footings, framing, roofing, drywalling and facets of interior and exterior finishing. Mr. Kilby also performed administrative duties such as providing estimates to customers and arranging for sub trades. By doing as much of the work himself as possible, he increased his profits.

After returning to work after the accident, I accept Mr. Kilby's evidence that he could not do as much physical labour as he had done before. I further accept that he could no longer lift beams, wood, concrete blocks, windows and doors. He also could not do overhead work with drywall and shingles; nor could he push wheelbarrows containing concrete. He was forced to hire additional employees such as Mr. Neil Alston who worked for him as a lead hand carpenter. Mr. Kilby also could not put in a full day's work as he had done before. Recognizing that Mr. Kilby's income had dropped because of the additional help he now required, Dominion paid income replacement benefits to Mr. Kilby after he returned to work.

Medical Evidence:

Prior to the accident, from January 1993 to September 1993, Mr. Kilby's chiropractor treated him for low back pain and tightness between the shoulders. He did not miss any work as a result of these complaints, and I do not find that these complaints contributed significantly to his post-accident condition.

After the accident, Mr. Kilby received treatment at the AIM Clinic. Upon discharge in April 1995, Mr. Kilby reported that he had improved 75-80% overall.

Dr. Jaikaran is a specialist in both orthopaedic surgery, and physical medicine and rehabilitation. He examined Mr. Kilby on behalf of Dominion on March 27, 1996. In his report at page four, he states that, "the impairment does prevent a full time return to work." He also states at page five that, he is in my opinion well motivated."

Dr. Jaikaran again examined Mr. Kilby on behalf of Dominion on November 25, 1996. He states at page three that, impairment does prevent full time return to work as of November 25, 1996...This patient should be able to return to full time work by January 1, 1997."

The 104-week period expired on December 2, 1996. Therefore, Mr. Kilby continued to be unable to return to full time work as of 104 weeks after the accident, according to Dominion's own medical evidence.

Dr. Ingram and Ms. Joanne McKee, a physiotherapist, both of G.S.D. Limited, examined Mr. Kilby on February 25, 1997, and provided a disability DAC report. The report states at page five that, "David Kilby is not substantially disabled from returning to his former employment."

Credibility:

I found Mr. Kilby to be a credible and trustworthy witness despite Dominion's attempts to impugn his credibility in various ways. For example, Dominion suggested that a significant reason for Dr. Jaikaran's opinions was that the subjective information and complaints provided by Mr. Kilby were incorrect. However, if Dr. Jaikaran did not find Mr. Kilby believable, he could have taken this into consideration in his analysis of his condition. On the contrary, in his report dated March 27, 1996, he found him "well motivated". Dominion did not provide any evidence which I found to undermine the truthfulness of Mr. Kilby's presentation.

Dominion also suggested that Mr. Kilby deliberately tried to delay the termination of benefits process. I accept Mr. Kilby's explanation that he was unaware of the significance of the 104-week period, as he did not have a lawyer at the time. He was merely rescheduling appointments to times more convenient for a person carrying on a business.

In addition, Dominion suggested that Mr. Kilby's financial records did not support his case. For example, Dominion took the position that Mr. Kilby's company hired employees and subcontractors both before and after the accident. In other words, it would have had to do so even if the accident had not occurred. The evidence of Mr. Kilby, Mr. Hughes and Mr. Alston supports Mr. Kilby's position that he had to hire more highly skilled labour to replace the work he would normally do himself. For example, instead of using a carpenter's assistant, he had to hire Mr. Alston who was a carpenter. I accept Mr. Kilby's verbal evidence on this point because it is substantiated by Dominion's own medical evidence. In addition, Dominion continued to pay Mr. Kilby after he returned to work based upon the calculations of its experts who reviewed Mr. Kilby's books and records.

Dominion also tried to impugn Mr. Kilby's credibility by stating that Mr. Kilby only provided the names of two subcontractors when asked for a list of people who worked for him. I accept Mr. Kilby's explanation that he thought Dominion was asking for the names of two people who worked for him because he entitled his list, "Two Sub/Contractors/Post Accident".⁴

Loss of Earning Capacity Offer:

I find that Mr. Kilby is entitled to a loss of earning capacity offer. Dominion stated that Mr. Kilby had to prove that he was qualified" for weekly income replacement benefits at the 104- week mark. I find that the 104-week mark was reached on December 2, 1996. I find that Mr. Kilby was qualified for weekly income replacement benefits as of that date. As stated above, Dominion's own medical evidence supports this finding. Dominion argued that the disability DAC dated February 25, 1997 should be used as a basis to conclude that Mr. Kilby was not substantially disabled as of the 104-week mark. I disagree. I am not prepared to give retroactive effect to the disability DAC, especially when Dr. Jaikaran opined on November 25, 1996, a week before the 104-week mark, that Mr. Kilby's impairment prevents a full time return to work.

In addition, a claims specialist employed with Dominion testified that no loss of earning capacity offer was made to Mr. Kilby because he did not suffer "a complete inability to return to his pre-accident employment." This is not the test referred to in the Schedule. Accordingly, I find that Dominion used an inappropriate test to determine whether Mr. Kilby was entitled to a loss of earning capacity offer.

Dominion did not deliver a notice of termination until January 7, 1997, which was after the 104- week period expired. Accordingly, as set out above, the Fox and Economical case is not applicable. As a result, Dominion must make a loss of earning capacity offer.

Ongoing Income Replacement Benefits:

Mr. Kilby claims that he is entitled to income replacement benefits from April 11, 1997, and ongoing, pending receipt of a loss of earning capacity offer. I disagree. He is claiming these benefits pursuant to section 8 of the Schedule which states that a weekly income replacement benefit under section 7 is payable only during the period that the insured person suffers a substantial inability to perform the essential tasks of his employment.

The relevant question then becomes: did Mr. Kilby suffer a substantial inability to perform the essential tasks of his employment ongoing from April 11, 1997?

I am of the view that he did not and does not suffer a substantial inability to perform the essential tasks of his employment. The disability DAC assessment conducted on February 25, 1997 stated that, "It would be our conclusion that David Kilby is not substantially disabled from returning to his pre-accident employment due to the accident alone." Mr. Kilby suggested that I should not rely upon the DAC report, as it did not fully list all the essential tasks of his employment. The assessors considered this area in the following ways:

...by his own admission David is achieving 60 to 75% of his pre-accident work load...

The incorporation of pacing techniques and the need to hire an extra person to assist him does not seem to be a major detriment to his ongoing productivity. In fact, many of the jobs that he describes would have an additional person involved irrespective and pacing himself such as in carrying two 2 x 4's instead of four or five 2 x 4's will not have a major impact in his employment. In addition, it would appear that his physical findings are relatively minor at this point in time.

Although there is no detailed listing of all Mr. Kilby's essential tasks, I find that, as set out above, the DAC assessors sufficiently considered whether Mr. Kilby was substantially unable to perform the essential tasks of his pre-accident employment.

In addition, in his report of November 25, 1996, Dr. Jaikaran opined that this patient should be able to return to full time work by January 1, 1997."

After reviewing the disability DAC report and Dr. Jaikaran's report, I am satisfied that Mr. Kilby did not suffer a substantial inability to perform the essential tasks of his pre-accident employment as of February 25, 1997.

Mr. Kilby did not provide any medical evidence to the contrary.

Mr. Kilby referred to a number of cases to establish that weekly income replacement benefits should be paid until the date of the loss of earning capacity offer.

In my respectful view, all of these cases are distinguishable. In Commisso and Canadian General Insurance Group,⁵ the insurer agreed to pay weekly income replacement benefits until it had delivered a written offer with respect to the payment of loss of earning capacity benefits. However, the insurer was not ordered to do so. In the other cases of Rocca and Gan Canada Insurance Company,⁶ Martins and Commercial Union Assurance Company⁷, and Blake and Jevco Insurance Co.,⁸ the arbitrators made an express or implied ruling that an insurer was only obliged to pay income replacement benefits, pending final resolution of a dispute about a person's loss of earning capacity benefits, if the person continued to qualify for those benefits. [emphasis added]. As set out above, I have found that Mr. Kilby did not continue to qualify for income replacement benefits after the disability DAC assessment of February 25, 1997. Therefore, Dominion was not obliged to continue paying weekly income replacement benefits after that assessment was communicated to Mr. Kilby.

Set off of Overpayment:

The parties have agreed that if no amounts are found to be owing to Mr. Kilby, Dominion will not be seeking repayment of $2,146.10 of the benefits it claims that it overpaid. In view of the way I have decided this case, it is not necessary for me to deal with this issue at this time.

However, should benefits be found to be owing in the future, I find that Dominion is not entitled to a repayment of $2,146.10 of the benefits it has already paid. Dominion states that in April of 2000, it realized that it had made an overpayment in this amount. It gave Mr. Kilby notice of termination of weekly income replacement benefits on January 7, 1997. Subsection 70(1) of the Schedule requires a person to repay to the insurer any benefit received under this Regulation that is paid to the person through error, wilful misrepresentation or fraud. In the case of an error (which is the case here), subsection 70(2) applies. It states that the obligation to repay does not apply unless notice is given under subsection (5) within 12 months after the payment was made to the person. Dominion's last payment to Mr. Kilby was for the period ending April 11, 1997. Accordingly, it did not comply with the limitation period of one year set out in subsection 70(2).

Dominion referred to subsection 70(4), which permits repayment of amounts received that are deductible, such as post-accident income. However, since Mr. Kilby had previously provided his books and records indicating his post-accident income much earlier, I am of the view that this overpayment was due to an error on the part of Dominion, and as such, the limitation period set out in subsection 70(2) applies.

EXPENSES:

I thank both counsel for their able assistance, and for conducting the hearing in an efficient and effective manner. I may be spoken to regarding expenses, if necessary.

September 29, 2000

Anne Sone Arbitrator

Date