Neutral Citation: 2000 ONFSCDRS 232

FSCO A97-001771

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

WAYNE CLIPPERTON

Applicant

and

ZURICH INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

David J. Evans

Heard:

May 9, 10, 11, and September 5, 6 and 7, 2000, in London, Ontario.

Appearances:

Gordon Good for Mr. Clipperton

Ian M. Boundy for Zurich Insurance Company

Issues:

The Applicant, Wayne Clipperton, was injured in a motor vehicle accident on February 8, 1996. He applied for and received statutory accident benefits from Zurich Insurance Company ("Zurich"), payable under the Schedule.¹ Zurich terminated weekly income replacement benefits on December 31, 1996. The parties were unable to resolve their disputes through mediation, and Mr. Clipperton 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:

1. What is the amount of the weekly income replacement benefit that Mr. Clipperton is entitled to receive pursuant to the Schedule?

2. Is Mr. Clipperton entitled to a special award?

3. Is Zurich liable to pay Mr. Clipperton's expenses in respect of the arbitration under section 282(11) of the Insurance Act, R.S.O. 1990, c. I.8?

4. Is Mr. Clipperton liable to pay Zurich's expenses in respect of the arbitration under section 282(11) of the Insurance Act, R.S.O. 1990, c. I.8?

Mr. Clipperton also claims interest on any amounts owing.

Result:

1. Mr. Clipperton is entitled to weekly income replacement benefits on the basis of a gross annual income from employment of $15,331.17.

2. Mr. Clipperton is not entitled to a special award.

3. The issue of expenses was deferred.

EVIDENCE AND ANALYSIS:

Mr. Clipperton testified that he was born August 4, 1952, has a grade 10 education, and worked in various jobs until the early 1990s when he went on social assistance. He started working as a taxi driver in the early summer of 1995. He did not put all his runs (and hence all his income) on his run sheets, but based his income tax returns on those run sheets. Thus, according to Mr. Clipperton, he received government assistance but then hid income from the same government once he started working.

Mr. Clipperton testified that he initially worked a 12-hour shift, changing to a 24-hour lease in November 1995. The latter provided a higher gross income, as he could choose the peak times of day to be on the road, although the lease cost was also higher.

Mr. Clipperton's cab was sideswiped on February 8, 1996. The impact injured him. In particular, he suffered low back and leg pain, which impeded his driving. He tried to return to work shortly after the accident but was unsuccessful.

Mr. Clipperton indicated on his Application for Accident Benefits dated March 1, 1996 that he had a weekly net income of over $400. Zurich retained Ernst & Young ("E&Y"), who calculated Mr. Clipperton's income replacement benefits ("IRBs") at $185.71 per week based on a gross annualized income of $13,394.47. (It was not until very shortly before the hearing that Mr. Clipperton alleged that his pre-accident income was higher because of unrecorded runs.)

Zurich took steps to return Mr. Clipperton to work after receiving reports from Dr. John Clifford, a physiatrist, in August and September 1996. For various reasons, and sometimes for no apparent reason, Mr. Clipperton failed to attend the return-to-work program. Zurich then arranged a disability DAC, in which Dr. Michel Lacerte determined that Mr. Clipperton was fit to return to work as of January 1, 1997. The IRBs were terminated. Subsequently, on May 5, 1997, Dr. Lacerte felt that the lumbar spine CT scans, showing disc bulges, related to old bulges and did not require him to change his opinion.

Dr. P. Tham, Mr. Clipperton's family physician, referred him to Dr. Hugh Barr, a neurologist. Initially, Dr. Barr did not feel that he (Dr. Barr) should operate on the disc bulges. He changed his mind and on January 16, 1998, performed a lumbar discectomy at the S-1 level. This provided some, but not complete relief.

Zurich then retained Dr. Robert S. Yufe, a neurologist, who concluded that the lumbar disc protrusion was unrelated to the accident.

The hearing in this matter initially proceeded over three days in May 2000 on the grounds of both Mr. Clipperton's disability and the amount of his IRBs. At the hearing, Dr. Hillel Finestone, a physiatrist, who had also seen Mr. Clipperton in 1997, testified that the sequelae of the disc problems constituted about 25 per cent of Mr. Clipperton's problems.

The hearing then adjourned. On August 11, 2000, Mr. Clipperton brought a motion for interim expenses, which I granted,² based on Dr. Finestone's testimony.

At the resumption of the hearing, after several hours of discussions before the hearing proper began, Zurich's counsel announced that entitlement was no longer an issue, leaving only the issue of the amount of the benefit and the question of a special award.

Amount of benefit:

Mr. Clipperton's counsel retained Ms. Karen Dalton, a chartered accountant, to determine Mr. Clipperton's IRBs. The first step in that process was to determine the Applicant's gross annual income from employment.³ On May 2, 2000, Ms. Dalton wrote that she agreed with E&Y's determination of Mr. Clipperton's gross annual income of $13,394.47.

IRBs are determined on the basis of net weekly income, which involves a deduction from the gross annual income of, among other things, premiums under the Unemployment Insurance Act. (Now the Employment Insurance Act, and accordingly Ms. Dalton referred to "EI premiums.") However, in determining Mr. Clipperton's net income, E&Y had used an Ontario tax rate of 58 % when it should have been 56%. Zurich acknowledges that this is the correct rate and that the IRBs should be adjusted. The smaller deduction results in a slightly larger net income and slightly larger IRB.

As for the EI premiums, Ms. Dalton also wrote that both the employee’s and employer’s share of EI premiums were paid on Mr. Clipperton’s behalf by the owners of the vehicle. She did not initially include these in determining Mr. Clipperton’s gross income. However, on May 4, 2000, she wrote that she had just received Arbitrator Renahan's Howden decision⁴ which required the inclusion of those premiums in the Applicant's gross annual income.

I agree with Arbitrator Renahan, who wrote as follows:

The contributions are part of the benefit package which [the Applicant] received in exchange for her labour and the contributions were directly related to [the Applicant s] wages. Accordingly, the premiums paid by the employer should be included in the calculation of [the Applicant s] gross income.

Furthermore, Director Delegate McMahon’s decision in Dhir⁵ appears to support this conclusion, as he wrote that a person’s gross annual income from employment is "obviously meant to be gross of tax." EI premiums were not in issue in that case, but by the same logic, I find that a person's gross annual income from employment should be gross of annual premiums payable for employment insurance as well.

As of May 4, 2000, therefore, Ms. Dalton had concluded that Mr. Clipperton’s gross annual income should be increased by $1,200 for those premiums, raising his gross annual income to $14,594.47, resulting in a weekly IRB of $209.88 (including the correction for the income tax rate).

Ms. Dalton then prepared a further report dated July 20, 2000, in which she wrote:

Subsequent to May 4, 2000, Mr. Clipperton verbally represented to us that he did not record all fares on the daily trip sheets. He estimated 10 to 12 fares per day were not recorded. He also indicated that he did not maintain records with respect to gratuities. Mr. Clipperton indicated the revenue reported on his 1995 income tax return was understated as was the revenue included on the statements of weekly revenue and expenses on which Ernst & Young relied.

Ms. Dalton in this report then calculated Mr. Clipperton's IRBs based on these verbal representations with respect to unrecorded revenue and gratuities, writing: "Given that most transactions were made in cash, these representations cannot be verified by a review of bank statements or other documents." [Bold in the original, Exhibit 13, p.4]

Regarding Mr. Clipperton’s entirely undocumented additional income, I adopt the following words of Senior Arbitrator Rotter in the Stoll case:⁶

I accept the run sheets as prima facie evidence of the Applicant's earnings. I cannot accept the Applicant’s oral evidence about his additional earnings since this evidence has not been verified or documented in any reliable fashion. The Applicant bears the onus, in this case, of proving his earnings.

As in Kahkesh and Lloyd's Non Marine Underwriters,⁷ witnesses testified as to the income of other taxicab drivers. I agree with Arbitrator Palmer's conclusion that such testimony proves nothing about the Applicant’s income.

Mr. Clipperton's counsel made much of the fact that Mr. Clipperton's evidence was "uncontradicted." I do not know how his testimony of what went on in his cab could be contradicted. I agree with Arbitrator Seife who wrote:

In my view, the oral testimony of the Applicant alone, without any corroborative documentary evidence, is not sufficient to discharge the onus in establishing gross income from self-employment.⁸

Mr. Clipperton's counsel attempted to rely on the Sebastian case⁹ to show that it is possible to accept an Applicant's verbal evidence under oath as the basis for a finding on the IRBs. I find that case distinguishable. The Applicant in that case was an independent contractor who went back and reconstructed how much money he was paid by interviewing his customers. The situation here is entirely different.

Mr. Clipperton's counsel submitted that, as suggested in Sebastian, Mr. Clipperton should not be punished for being a poor record creator. In fact, according to Mr. Clipperton, he was a good record creator. He testified that beside his run sheets he kept a "tip sheet" on which he wrote the tips he received as well as his additional undocumented runs. He subsequently destroyed the tip sheets. I could not understand his reasons for creating these sheets, when he did not plan to use them for his income tax returns, nor could I understand why he subsequently destroyed them. In any event, unlike in Sebastian, Mr. Clipperton's record keeping or lack thereof was clearly aimed at reducing reportable income; it was his conscious choice to be a poor record keeper.

I find that Mr. Clipperton is not entitled to IRBs based on additional unrecorded runs.

Counsel for Zurich did acknowledge that Mr. Clipperton perhaps should be allowed some amount for tips based on everyday experience. I allow an additional 5.5 percent for gratuities, in the range of figures suggested by counsel.¹⁰ I find that this amount should be applied to the gross annual income of $13,394.47 (before the addition of the EI premiums, as Mr. Clipperton clearly did not earn tips on these premiums), increasing that income by $736.70 to $14,131.17. Adding in the $1,200 for the EI premiums leads to a total gross annual income from employment of $15,331.17.

I find that Mr. Clipperton is entitled to weekly income replacement benefits on the basis of a gross annual income from employment of $15,331.17. I leave it to the parties to calculate the actual benefit and any interest owing on that benefit. If they require a separate order setting out those amounts, they may contact this office to arrange appropriate procedures.

Special Award:

Mr. Clipperton seeks a special award pursuant to section 282(10) of the Insurance Act, which reads as follows:

(10) If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule. R.S.O. 1990, c. I.8, s. 282(10); S.O. 1993, c. 10, s. 1.

Counsel for Mr. Clipperton admitted that Zurich was probably justified (or at least not liable for a special award) in terminating benefits when it did, as it had the DAC opinion of Dr. Lacerte.

However, he submitted that subsequent events did render Zurich liable for a special award. I disagree. Zurich’s own specialists continued to hold that Mr. Clipperton was not entitled to benefits. Zurich obtained the opinion of Dr. Yufe in response to Dr. Barr's surgery on Mr. Clipperton. Although Dr. Yufe may have made a mistake in his report of May 4, 1998, in referring to a rear-end collision when Mr. Clipperton had been sideswiped, his earlier reports clearly show that he was aware of the mechanics of the collision when outlining his opinion. I do not find that Zurich acted unreasonably in relying on Dr. Yufe’s opinion.

I find that the strongest evidence for Mr. Clipperton's ongoing disability appeared first at the hearing in May 2000, when, as noted above, Dr. Finestone testified about the after-effects of the disc problems causing 25 percent of Mr. Clipperton's current problems. Even at that, I noted in my earlier decision that ". . .it may be that this percentage is sufficient for the criteria set out in Athey v. Leonati et al.¹¹ In any event, that will be a matter for my later evaluation. . ." Thus, even after three days of hearing, I still considered that the matter was open and that Mr. Clipperton was not guaranteed of success. Therefore, I do not consider it unreasonable for Zurich to have maintained its position.

As for the amount of the benefit, Zurich was not made aware of its accountant's two percent error in the income tax calculation until May 2000 and its calculation of gross income was accepted by Mr. Clipperton’s own accountant until May 4, 2000. I find no basis for a special award relating to its initial calculation of the benefit.

I heard a great deal of evidence on the relationship between Mr. Clipperton and Mr. Ron Henry, Zurich's adjuster. I find that none of that was particularly relevant to the issues here.

Accordingly, I find that Mr. Clipperton is not entitled to a special award.

EXPENSES:

The issue of expenses was deferred. If the parties cannot agree on entitlement to expenses, an expenses assessment may be arranged in the usual manner.

December 29, 2000

David J. Evans Arbitrator

Date

Neutral Citation: 2000 ONFSCDRS 232

FSCO A97-001771

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

WAYNE CLIPPERTON

Applicant

and

ZURICH INSURANCE COMPANY

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Mr. Clipperton is entitled to weekly income replacement benefits on the basis of a gross annual income from employment of $15,331.17.

2. Mr. Clipperton is not entitled to a special award.

December 29, 2000

David J. Evans Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 635/94, 781/94, 463/96 and 304/98.
2. 2Decision dated August 22, 2000.
3. 3Section 81 of the Schedule.
4. 4Howden and Pafco Insurance Company Limited (FSCO A99-000951, April 7, 2000)
5. 5Non-Marine Underwriters, Mbrs. of Lloyd's and Dhir, (FSCO P98-00024, October 25, 2000)
6. 6Stoll and Kingsway General Insurance Company (OIC A-000386, October 18, 1991)
7. 7(OIC A-000318, March 31, 1992)
8. 8Main and Canadian General Insurance Company (OIC A-006208, May 6, 1994)
9. 9Sebastian and Canadian Surety Company (OIC A-011358, February 9, 1996) affirmed on appeal (FSCO P96-00032, July 28, 1998)
10. 10This was also the average amount of tips shown in enclosures forwarded to Mr. Ron Henry, Zurich's adjuster, in a letter of August 16, 1996 from Mr. Clipperton's former counsel: Exhibit 14, pp. 48-58.
11. 11[1996] S.C.R. 458: Briefly, it is sufficient if the contribution of the accident was more than minimal and thereby made a material contribution to the development of the condition.