Neutral Citation: 2000 ONFSCDRS 228

FSCO A97-002106

BETWEEN:

PIUS BONIFACE

Applicant

and

LIBERTY MUTUAL INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

Nancy Makepeace

Heard:

December 11, 2000, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

David S. Wilson for Mr. Boniface

Pamela Brownlee for Liberty Mutual Insurance Company

The Applicant, Pius Boniface, was injured in motor vehicle accidents on June 30, 1995, April 12, 1996 and September 15, 1996. He applied for and received statutory accident benefits from Liberty Mutual Insurance Company ("Liberty Mutual"), payable under the Schedule.¹ Liberty Mutual terminated weekly income replacement benefits on March 16, 1997. The parties were unable to resolve their disputes through mediation, and Mr. Boniface 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:

Indexation: The parties agree that effective January 1, 1997, the Applicant is entitled to a 1.5 percent increase in his net weekly income, for the purpose of determining the amount of his income replacement benefits, pursuant to paragraph 79(1)1. of the Schedule. The Applicant submits that on January 1, 1997, he is also entitled to a revision that takes into account the indexation percentage (2.3 percent) that took effect on January 1, 1996. The Insurer submits he is precluded from doing so pursuant to subsection 79(2).
Expenses: The Applicant claims entitlement to his arbitration expenses between June 16, 2000 and December 11, 2000, pursuant to section 279(11) of the Act and the criteria set out in Ontario Regulation 664, R.R.O. 1990, as amended by Ontario Regulation 464/96.

The Applicant is not entitled to an adjustment of his net weekly income that takes into account the indexation percentage that took effect on January 1, 1996. The adjustment that takes effect on January 1, 1997 shall be in the amount of 1.5 percent, being the Commission's published indexation percentage for 1997.
The Applicant is entitled to his arbitration expenses between June 16, 2000 and December 11, 2000. I may be contacted if the parties are unable to agree on the amount.

Background:

A pre-hearing was held in this matter on June 1, 1998 before Arbitrator Bayefsky. At that time, the issues in dispute were identified as whether the Applicant was entitled to income replacement benefits after March 17, 1997, and whether the Applicant was entitled to his arbitration expenses. The matter was scheduled to be heard in August 1999. The hearing was adjourned and rescheduled to January 2000 because the Insurer had not received required productions. A further adjournment was granted when Mr. Wilson replaced the Applicant's former counsel, and the hearing was rescheduled for June 19-22, 2000. Mr. Wilson moved for an interim benefits award, and his motion was heard by Arbitrator Killoran on April 6, 2000. A further pre-hearing discussion was held on February 11, 2000 before Arbitrator Blackman. It dealt with certain production issues arising in the interim benefits motion.

By order dated June 15, 2000, Arbitrator Killoran ordered the Insurer to pay income replacement benefits ("IRBs") of $313.77 on an interim basis, with interest. She indicated that her reasons would follow. The next day, the Insurer advised it would no longer dispute the Applicant'e entitlement to IRBs arising out of the accident of June 30, 1995. Benefits were reinstated. The Insurer also agreed to pay the Applicant's arbitration expenses to June 16, 2000.

The matter came before me for hearing on June 19th. I adjourned the hearing at the Applicant's request, with the Insurer's consent, because Arbitrator Killoran's reasons were still pending. The Applicant raised new issues relating to the benefit rate. I scheduled a preliminary issue hearing by telephone conference on July 28th to hear the parties' submissions with respect to these issues and to resolve outstanding production issues. The hearing was rescheduled for December 11-14, 2000.

Arbitrator Killoran issued reasons for her order on July 6th, deferring the issues of special award and arbitration expenses to the hearing. As the Insurer had already agreed to pay expenses to June 16, 2000, the only remaining issue was the claim for a special award. However, in my letter of July 28th, I ruled that the new benefit rate issues raised by the Applicant would be added to the issues to be decided in the December hearing. A dispute also developed as to the amount of the Applicant's expenses relating to the interim benefits proceeding, and a date for an expenses assessment was fixed for December 22, 2000.

A further telephone conference was held on December 1, 2000. This was initially scheduled to hear the Insurer's motion with respect to the Applicant's failure to attend a requested Insurer Examination. The Insurer subsequently withdrew that IE request. During the telephone conference, the parties agreed that the hearing on December 11-14, 2000 would address the outstanding issues about the benefit rate, special award and assessment of expenses, and that the time would also be used to hold a pre-hearing with respect to new issues relating to the Applicant's entitlement to Loss of Earning Capacity Benefits ("LECB").

At the outset of the hearing on December 11, 2000, the parties advised that they had settled the special award issue and all issues relating to arbitration expenses to June 16, 2000. They reached a partial settlement of the issues in dispute pertaining to the rate of income replacement benefits arising out of the accident of June 30, 1995. I heard the parties' submissions on two outstanding issues that are the subject of this decision.

The Insurer delivered a Loss of Earning Capacity Benefits offer with respect to the Applicant's accident of June 30, 1995 on December 4, 2000. The Applicant has raised a number of issues with respect to that offer, and claims IRBs and LECB benefits arising out of the April 12, 1996 and September 15, 1996 accidents. The Applicant is about to apply for mediation with respect to these matters. They will be heard in an arbitration scheduled for July 16-19, 2001.

Indexation of Income Replacement Benefits:

Section 79 provides for the indexation of weekly benefits:

Weekly Benefits

79.—(1) Each of the following amounts shall be revised, effective the 1st day of January in every year after 1994, by adjusting the amount by the indexation percentage published under section 268.1 of the Insurance Act:

The net weekly income from employment used to determine the amount of a person's weekly income replacement benefit under Part II.
The amount of a person's weekly education disability benefit under section 15.
The amount of a person's weekly caregiver benefit under Part IV.
The net weekly incomes used to determine the amount of a person's weekly loss of earning capacity benefit under Part VI, if the benefit is payable to a person who is less than sixty-five years of age.
The amount of a person's weekly loss of earning capacity benefit under Part VI, if the person is sixty-five years of age or more and is not receiving a weekly benefit of $185 under subsection 35(2).

(2) Subsection (1) does not apply to the amount referred to in paragraph 1 of subsection (1) if the person has been receiving the weekly income replacement benefits for less than one year after the onset of the disability in respect of which the benefits are payable.

(3) No amount shall be reduced by the operation of subsection (1).

(4) The amount of a weekly loss of earning capacity benefit under Part VI that is payable to a person who is receiving a weekly benefit of $185 under subsection 28(3) or 35(2) shall be revised to the amount to which it would have been revised under subsection (1) if subsection 28(3) or 35(2) had never applied to the person, effective the 1st day of January in the year in which, if subsection 28(3) or 35(2) had never applied, the person's weekly benefit would have been revised to an amount greater than $185.

Pursuant to section 268.1 of the Act, the Superintendent has published an indexation percentage of 2.3 percent for 1996 and 1.5 percent for 1997.²

The Applicant was injured on June 30, 1995. The parties agree that the effect of subsection 79(2) was to preclude the Applicant from receiving an increase in his IRBs on January 1, 1996, because at that time he had been receiving benefits "for less than one year after the onset of the disability in respect of which the benefits are payable." They also agree that he was entitled to an adjustment on January 1, 1997. They disagree about the amount of that increase. The Insurer submits that the Applicant's net weekly income should be increased by 1.5 percent, in accordance with the 1997 indexation percentage. The Applicant submits the 1996 indexation percentage of 2.3 percent should also have been applied at that time.

In effect, the Applicant submits that subsection 79(2) defers the adjustment. The Applicant submits that this interpretation is in accord with the remedial purpose of the accident benefit scheme. Mr. Wilson is right in saying that the Insurer's interpretation of the provision means the Applicant loses the benefit of the 1996 adjustment for all time, and thus "remains behind" inflationary increases, despite subsequent adjustments.

The Insurer relied on K.M.(Minor) and General Accident Assurance Company Of Canada³ for the appropriate approach to statutory interpretation. The issue in that case was whether the applicant, a four-year-old girl whose mother had died in a motor vehicle accident, was entitled to additional benefits beyond the $10,250.46 death benefit she received under paragraph 51(4)(a) of the Schedule. Her father, who was separated and living apart from her mother, received a benefit of $96,703 pursuant to paragraphs 51(1)(a) and (b). Although the minor applicant sustained a fractured skull in the accident, this was not the basis for her claim. Her submission was that she was entitled to benefits to replace her mother's caregiving services. The Arbitrator concluded that there was no entitlement to benefits, other than death and funeral benefits, in the absence of an "impairment" as defined in section 1 of the Schedule. In response to the applicant's argument that the Schedule should be given a broad remedial interpretation, the Arbitrator made the following remarks, which the Insurer urged on me:

There is no question that the Statutory Accident Benefits Schedule under dispute in this case is remedial legislation deserving of a broad and liberal interpretation. This has consistently been the view of arbitrators at the Financial Services Commission. As confirmed by Director's Delegate David Draper in Tustin and Canadian General Insurance Group (FSCO P99-00004, August 13, 1999), where he quoted from the Court of Appeal:

The legislation should be interpreted sensibly, assuming that its intention is to provide fair and reasonable compensation to accident victims. As stated by the Court of Appeal in Bapoo v. Cooperators General Insurance Company (1997), 1997 CanLII 6320 (ON CA), 36 O.R. (3d) 616: "The interpretation of a statutory provision should not only comply with the legislative text and promote the legislative purpose, it should produce a reasonable and just outcome."

However, in any exercise of statutory interpretation, one must first look to the wording of the legislative provisions in question, in this case the sections of the Schedule dealing with entitlement, in order to determine whether there is language capable of supporting the broad interpretation suggested.

I agree with this approach, which has consistently been applied in numerous FSCO decisions.

The legislative purpose of indexation is to protect the value of accident benefits against inflation. This is an important objective, in accord with the remedial nature of the legislation. The purpose of subsection 79(2) is less obvious. The parties agree that, like the first-week deductible mandated in subsection 8(3), the limitation in subsection 79(2) appears to be a cost-containment measure. I accept this submission. The legislature's balancing of the goals of providing comprehensive and accessible benefits, on the one hand, and maintaining reasonable premiums for compulsory automobile insurance, on the other, is evident throughout the Schedule. Mr. Wilson recognized that this sometimes creates "rough justice."

Another consideration is the use of January 1 as a fixed adjustment date. This is consistent with general practice in the Canadian labour market: inflation increases are generally recognized on the first day of January each year, based on Statistics Canada's annual reports. This inevitably creates anomalies. If everyone who has begun receiving benefits in the previous year receives an inflation increase on January 1st, this will overcompensate most accident victims relative to the general standard of a single annual increase, especially those injured in the latter part of the year. On the other hand, if no one receives an adjustment until they have received benefits for a year or more, some people will have to wait almost two years before receiving an inflation adjustment, resulting in undercompensation. This problem could be cured by making the annual adjustment on the anniversary of the accident. That was not the method chosen by the legislature, presumably because of the administrative convenience of using a single fixed date.

The Applicant's interpretation of subsection 79(2) does not adequately address either of these objectives, in my view. Although deferring the adjustment would allow insurers to invest the funds during the waiting period - between January 1, 1996 and January 1, 1997, in this case - the money would ultimately have to be paid out. I received no evidence to suggest that the legislature intended only the more limited cost containment this would afford. Nor does the Applicant's interpretation make the scheme any less arbitrary, since it would have the effect, in this case, of giving the Applicant the benefit of an inflation adjustment for benefits received after only about six months.

Policy considerations aside, the main problem with the Applicant's submission is the language of the Schedule. Subsection 79(2) states that the indexation rule set out in subsection (1) "does not apply" where the person has been receiving benefits for less than one year. I find the phrase "does not apply" clear and unambiguous. For persons who have been receiving benefits for less than one year, there is no entitlement to indexation pursuant to subsection 79(1)(a). If there is any remaining doubt about this, it is resolved by the fact that subsection 79(2) says the indexation rule does not apply to "the amount referred to in paragraph 1 of subsection (1)." The amount referred to in that section is the net weekly income from employment used to calculate IRBs. Thus, the focus on the section is on the net weekly income amount, not the person receiving benefits. As the indexation adjustment does not apply to the net weekly income amount on January 1, 1996, the amount that is adjusted on January 1, 1997 is the net weekly income amount as it stood on December 31, 1995.

No doubt the Applicant would prefer to have the benefit of the 2.3 percent adjustment that took effect on January 1, 1996. Without it, his 1997 and subsequent benefit rates will invariably lag 2.3 percent behind the inflation-indexed cost of living in subsequent years. Unfortunately, this outcome seems to have been intended by the legislature. I find the words of subsection 79(2) clear and unambiguous, and I am not persuaded I have power to remedy any injustice in this outcome.

Expenses between June 16, 2000 and December 11, 2000:

The Applicant seeks reimbursement of his expenses between June 16, 2000 (when the Insurer agreed to pay expenses to date) and December 11, 2000 (the date of this hearing). Ms. Brownlee submitted that the Applicant could have brought forward his claim for an increased level of income replacement benefits based on additional income from his part-time job as a newspaper carrier earlier in the proceedings.

Section 282(11) of the Insurance Act gives arbitrators discretion to grant arbitration expenses to the insured person or the insurer:

282.- (11) The arbitrator may award, according to the criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.

The criteria for awarding expenses are found in section 12(2) of O.Reg. 464/96, which states as follows:⁴

12.- (2) An arbitrator may award expenses to an insurer or insured person under subsection 282(11) of the Act if the arbitrator is satisfied that the award is justified, having regard to the following criteria:

Each party's degree of success in the outcome of the proceeding.
Conduct of the insurer or insured person that tended to shorten or facilitate the proceeding or that tended to prolong, obstruct, or hinder the proceeding, including failure to comply with undertakings or orders.
Whether the proceeding or any position taken by the insurer or the insured person during the proceeding was manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process.
The degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding.
If the insurer or the insured person requests, any written offers to settle made after the conclusion of mediation and before the conclusion of the arbitration in accordance with the rules of practice and procedure applicable to the proceeding, including the terms of the offers, the timing of the offers and the responses to the offers, having regard to the result of the proceeding.
Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.

Mr. Wilson first raised the issue of the Applicant's carrier income shortly before the hearing scheduled to begin on June 19, 2000. Ms. Brownlee opposed the issue being added to the arbitration. I scheduled a telephone conference for July 28, 2000 to determine whether the issue should be added, and advised the Applicant to produce supporting documentation or demonstrate his efforts to do so by that time. Mr. Wilson provided particulars of the Applicant's additional claims in his letter of July 18, 2000. Enclosed was a letter from the Toronto Star, dated June 26, 2000, indicating that the Applicant was on contract with the Star as a carrier, and giving the amounts the Star paid him during the period of his employment between 1992 and 1994. However, some subscribers paid the Applicant directly, and the Applicant was unable to produce any records of that income. On November 16, 2000, the Toronto Star gave information about the current earnings of another carrier, to provide a basis for estimating the Applicant's likely income paid directly from subscribers. The Insurer agreed to adjust the Applicant's benefit rate in recognition of this income.

Expeditious resolution of accident benefit claims is an important goal of the system. This depends on the parties putting forward their entire case at the outset, and promptly providing full disclosure of relevant information. However, Mr. Wilson says the Applicant did not know he could use his part-time income to increase his IRB rate. Mr. Wilson replaced the Applicant's former solicitor in November 1999; presumably it was in the course of their discussions that the matter arose. The Application for Accident Benefit form does not clearly invite information about secondary part-time employment, and some insured persons may not think to mention that they have a part-time job unless asked directly by an adjuster.⁵ I heard no evidence in this case about the communications between the parties. It would have been to the Applicant's advantage to disclose this information earlier, and I heard no evidence to suggest it was withheld for sinister reasons. Moreover, the Star's letter of June 26, 2000 did not resolve the issue. Only when they received the Star's subsequent letter of November 16, 2000 were the parties able to settle on the appropriate amount. These enquiries would have to have been made no matter when this issue was raised, though the information might have been easier to obtain if requested earlier.

In any event, the carrier income issue was not the only issue outstanding between the parties after the interim benefits decision was issued. The Applicant claimed that his IRB should take into account his pre-accident employer's benefit contributions on his behalf. The Insurer ultimately conceded this point. The Applicant also raised two issues around indexation. In addition to the issue disposed of in this decision, he submitted that the Insurer had failed to apply the 1997 indexation percentage. The Insurer conceded this point and made the appropriate adjustment. The special award issue and the amount of expenses payable to June 16, 2000 were not resolved until the morning of December 11, 2000. The parties' minutes of settlement indicate the Insurer agreed to pay an amount under both heads. The Insurer also agreed to adjust its LECB offer to recognize a higher PEC based on the new IRB rate. The parties also had discussions about the timing and amount of the LECB offer, and the relative contribution of the three accidents in the Applicant's residual disability. These issues will be determined in a subsequent proceeding. There was also a dispute about the Insurer's request for an Insurer Examination in relation to its imminent LECB offer. The Insurer subsequently withdrew its request, and decided instead to commission a vocational assessment of the Applicant based on a file review. Thus, the Applicant achieved substantial success with respect to the new issues he raised after June 16, 2000. I am not satisfied that any position taken by either party was "manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process." Further, given Mr. Wilson's rather late arrival on the record, I do not think any delay or conduct on his part unduly prolonged the proceedings.

The Insurer also submits that expenses should be denied because the settlement reached on the morning of December 11, 2000 is on the terms offered by the Insurer on December 7, 2000. Ms. Brownlee's letter setting out the terms of the offer concludes with a postscript: "You have now advised that you are rejecting the above noted offer and we urge you to reconsider your position." The offer was transmitted again, by fax, at 4:15 on the afternoon of December 7th.

The Expenses Regulation requires an Arbitrator to consider a written offer to settle "made after the conclusion of mediation and before the conclusion of the arbitration." Rule 74.1(b) of the Code adds that the Arbitrator will give "particular consideration . . . to any offer served after the conclusion of the pre-hearing discussion or preliminary conference as the case may be, up to five days before the commencement of the hearing." This reflects the reality that both parties' costs are concentrated in the period just prior to commencement of the hearing. In this case, where the Insurer's offer essentially gave the Applicant what he was asking for, except with respect to the two issues that are the subject of this decision, the issue is whether the Applicant's arbitration expenses incurred after he received the offer should be denied. I find that the Applicant is entitled to a reasonable period of time to discuss the offer with his solicitor, and to make any counter-offers with respect to the remaining issues. The offer to settle was made on Thursday, December 7th, only two business days before the commencement of the hearing on Monday, December 11th. I am not satisfied that the Applicant's delay in accepting the offer warrants denying his expenses.

EXPENSES:

I may be contacted if the parties are unable to agree on entitlement to expenses relating to this hearing.

December 22, 2000

Nancy Makepeace Arbitrator

Date