Neutral Citation: 2000 ONFSCDRS 71

FSCO A99-000951

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

LORNA HOWDEN

Applicant

and

PAFCO INSURANCE COMPANY LIMITED

Insurer

REASONS FOR DECISION

Before:

William J. Renahan

Heard:

March 14, 2000, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Allen Chapnik for Mrs. Howden

Grant Dow for Pafco Insurance Company Limited

Issues:

The Applicant, Lorna Howden, was injured in a motor vehicle accident on October 5, 1998. She applied for and received statutory accident benefits from Pafco Insurance Company Limited ("Pafco"), payable under the 1996 Schedule.¹ The parties were unable to resolve their dispute concerning the amount of the weekly income replacement benefit through mediation, and Mrs. Howden 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 amounts are included in Mrs. Howden's "gross income from employment for the four weeks before the accident" within the meaning of section 8 of the 1996 Schedule?

2. What amounts did Mrs. Howden receive as "net income from employment subsequent to the accident" within the meaning of subsection 6(3) of the 1996 Schedule?

3. Which days are included in the four weeks before the accident?

Result:

1. The following amounts paid by the employer are included to determine Mrs. Howden's "gross income from employment": life insurance premiums; weekly indemnity insurance premiums; private pension plan contributions; uniform allowance; pay equity adjustment; Canada Pension Plan contribution; and, Employment Insurance Act contribution. The following amounts are not included to determine "gross income from employment": vacation pay and sick day benefits.

2. Life insurance premiums paid by the employer following October 5, 1998 are to be deducted from the income replacement benefit in accordance with subsection 6(3) of the 1996 Schedule.

3. The four weeks before the accident start Monday, September 7, 1998 at 4:00 p.m. and run to Monday, October 5, 1998 at 4:00 p.m.

EVIDENCE AND ANALYSIS:

Section 8 of the 1996 Schedule requires the insured to designate the four or 52-week period before the accident for the calculation of her weekly income replacement benefit. The benefit is based on the insured's "gross income from employment" for the chosen period. "Gross income from employment" is not defined in the 1996 Schedule. Mrs. Howden elected to have her weekly income replacement benefit calculated on her gross income from employment in the four weeks before the accident. Pafco calculated her benefit on the basis of her hourly wage of $14.16 times 37.5 hours per week. Mrs. Howden argued that certain benefits provided by her employer should be included in the calculation of her gross income from employment.

At the time of the accident, Mrs. Howden was employed as a health care aide for Central Park Lodges. Her employment was subject to the terms of a collective agreement between her employer and her union. Mr. Steven Pawelko, the senior Human Resources Advisor at Central Park Lodge testified for Mrs. Howden as to the benefits of her employment.

Life insurance premiums, weekly indemnity insurance premiums, private pension plan contributions and uniform allowance:

Arbitrators have dealt with whether amounts spent by employers for a benefit package should be included as part of an applicant's gross annual income for the purpose of calculating weekly income replacement benefits under previous schedules. In Crevier-Lamarche and Missisquoi²the arbitrator held that the value of a benefit package which included a long-term disability plan, life insurance, extended health care, a dental plan and a pension plan, should be included in "gross annual income" under the 1994 Schedule³ because it was an amount paid by the employer and formed part of the value which the insured received in return for her labour. Although the insured did not receive the value in cash, it was considered income. That the payment was made to a third party, did not disqualify it from being viewed as income.

This decision was followed in Prouse and Non-Marine Underwriters, Mbrs of Lloyd's⁴ where the arbitrator held that premiums paid by the employer for life insurance, dental benefits and medical benefits should be included in "gross income" under the 1994 Schedule. The arbitrator wrote:

In Zehr; [v. The Guarantee Company of North America (OIC A-001963, July 30, 1993)]I relied on an even earlier case, Bress v. State Farm Mutual Automobile Insurance Company, (OIC A-000191 and OIC A-000192, March 23, 1992) in which Arbitrator Naylor held that ". . .the word income implies that something — money, money's worth, a thing of some value, greater command over goods and services — comes into an applicant's hands or accrues to him or her in return for their employment or occupational endeavours." Arbitrator Rotter reaffirmed this broad approach to defining "income" in Crevier-Lamarche. Subsequent decisions have reiterated it, and no arbitration or appeal decision has interpreted "income" in the narrow way the Insurer proposes. [footnote - See, for example, the many decisions in which the Arbitrator examines the exchange of goods and services, as well as money, between spouses or other family members, in order to determine whether one is or was dependant on the other.] The broad approach is consistent with the remedial character of the statutory accident benefit scheme. The Insurer offered no reason why "income" should be construed so narrowly as to exclude employer benefit plans which are an important form of compensation for many employees.

Pafco argued that the 1996 Schedule represents a departure from the 1994 Schdule and that Mrs. Howden's remedy is more appropriately dealt with in a tort action. I disagree. "Gross income from employment" is not defined under the 1996 Schedule. I agree with the reasoning of the earlier decisions and find that it applies to the 1996 Schedule and that the cost of a benefit package, even if paid to third parties, was part of Mrs. Howden's entire compensation package and should be included in the calculation of her "gross income from employment."

Pay equity adjustment:

In 1999, Mrs. Howden's employer and union entered an agreement whereby the employer adjusted Mrs. Howden's pay for the years 1994 to 1998 to comply with pay equity legislation. For the pertinent four-week period in 1998, the employer retroactively increased Mrs. Howden's wages by 47.5 cents per hour. Mr. Pawelko testified that Mrs. Howden may receive further pay equity adjustments for the period under consideration. Mrs. Howden argued that Pafco should include 47.5 cents per hour in calculating her gross income in the four weeks before the accident. Pafco argued that it was entitled to some finality in the determination of the amount of benefit and should not have to revisit the issue on an indeterminate basis.

Mrs. Howden is potentially entitled to the weekly income replacement benefit for the rest of her life. The Schedule contemplates adjustment of the benefit in some circumstances, including when the applicant receives collateral benefits or when the applicant reaches age 65. In view of the ongoing nature of entitlement and the fact that the Schedule contemplates adjustment of the income replacement benefit, I see no reason why income received after the accident for work performed before the accident should not be taken into account in gross income, even if it means that the insurer has to adjust the weekly benefit. Accordingly, Pafco shall include the retroactive pay equity adjustment in the calculation of Mrs. Howden's gross income.

Canada Pension Plan contribution and Employment Insurance Act contribution:

The employer is required by statute to make contributions to the Canada Pension Plan and the Employment Insurance fund. In both cases, the contribution is a percentage of the employee's earnings, subject to a maximum amount, and is paid by the employer over and above the employee’s earnings. The employee also pays an equal amount which is deducted from her earnings. Counsel for Mrs. Howden referred to Court decisions⁵ for the proposition that the employer’s contributions to the Canada Pension Plan and the Employment Insurance fund with respect to an employee who has been wrongfully dismissed, are included in the calculation of damages. Ontario Courts consider employer's contributions to the Canada Pension Plan and the Employment Insurance fund part of an employee's benefit package.

Mrs. Howden received certain rights to pension and unemployment benefits as a result of belonging to both plans. In my view, these public plans are similar to private plans. The fact that the employer's contribution is required by statute rather than contract does not change the nature of the benefit. The contributions are part of the benefit package which Mrs. Howden received in exchange for her labour and the contributions were directly related to Mrs. Howden's wages. Accordingly, the premiums paid by the employer should be included in the calculation of Mrs. Howden's gross income.

Vacation:

Mrs. Howden was entitled to five weeks paid vacation per year and claims that Pafco should increase her gross income 10 per cent to reflect accumulated vacation. Pursuant to the collective agreement, vacation was not cumulative from year to year and the employee could not waive vacation time and draw double pay. Mrs. Howden could only collect cash for accumulated vacation if her employment was terminated.

In these circumstances, where Mrs. Howden could not waive vacation time and draw double pay, vacation time had no cash value to her. Accordingly, vacation time is not included in the calculation of gross income.

Sick day benefits:

Under the collective agreement, Mrs. Howden could accumulate 14 sick days per year. She could use seven consecutive days for illness before the weekly indemnity plan became effective. The sick leave provisions are similar to short-term disabilty in that they are a benefit of employment which the employee receives as consideration for her work. As such, I find that the value of a sick leave plan should be included in the determination of Mrs. Howden's "gross income from employment."

The parties agreed on the value of the benefits, other than the value of the sick day benefits. The premium for the weekly indemnity plan was $52.76 per month. However, I heard no evidence that the employer paid a premium for the sick leave plan. I find that the sick leave benefit was self-funded by the employer. The fact that Mrs. Howden was entitled to 14 sick days per year is not evidence that the sick leave plan cost the employer 14 days per year and had a value to Mrs. Howden of 14 days per year. I heard no other evidence of the cost of the plan to the employer or the benefit of the plan to Mrs. Howden.

In the absence of any reliable evidence of the value of the sick leave plan, Pafco need not add anything to gross income to account for the sick leave plan.

Premiums paid post-accident:

The collective agreement required Central Park Lodges to pay life insurance premiums and weekly indemnity insurance premiums for 31 days after termination of employment. Mrs. Howden's employment was terminated effective the date of the accident. Mr. Pawelko testified that Central Park Lodges continued to pay life insurance premiums and weekly indemnity premiums for seven months by mistake.

Mrs. Howden received no benefit from the payment of the weekly indemnity insurance premiums at the time they were paid because she was already disabled from work. As the premiums for the weekly indemnity coverage had no value to her, these premiums are not post-accident income.

I heard no evidence that Central Park Lodges asked for the return of the premiums for the life insurance paid after 31 days or that Mrs. Howland repaid the premiums. Since the premiums paid before the accident were part of the consideration of employment and included in gross income, the premiums paid after the accident are post-accident income and Pafco is entitled to a deduction pursuant to subsection 6(2) of the Schedule.

Four weeks before the accident:

Mrs. Howden elected to have her weekly income replacement benefit calculated on her gross income in the four weeks before the accident. The accident occurred after she finished her shift at 4:00 p.m. on Monday, October 5, 1998. What days are included in the four week period are relevant to the calculation of some of her benefits because some benefits are calculated on the basis of days worked and Mrs. Howden was away from work on sick leave on September 7 and 8, 1996. In order to include the last shift she worked before the accident in the four week period before the accident, I find that the four week period started on Monday, September 7, 1998 at 4:00 p.m. and ended on Monday, October 5, 1998 at 4:00 p.m.

Interest:

Mrs. Howden withdrew her claim for interest with the consent of Pafco.

EXPENSES:

If the parties cannot agree on the issue of entitlement to expenses of the arbitration proceeding, they may make written submissions to me within 60 days.

April 7, 2000

William J. Renahan

Arbitrator

Date

Neutral Citation: 2000 ONFSCDRS 71

FSCO A99-000951

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

LORNA HOWDEN

Applicant

and

PAFCO INSURANCE COMPANY LIMITED

Insurer

ARBITRATION ORDER

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

1. Pafco shall include the following amounts paid by the employer to determine Mrs. Howden's "gross income from employment": life insurance premiums; weekly indemnity insurance premiums, private pension plan contributions, uniform allowance, pay equity adjustment; Canada Pension Plan contributions; and, Employment Insurance Act contributions. The following amounts are not included to determine "gross income from employment": vacation pay and sick day benefits.

2. Pafco shall deduct life insurance premiums paid by Mrs. Howden’s employer after October 5, 1998 from the income replacement benefit in accordance with subsection 6(2) of the 1996 Schedule. Weekly indemnity insurance premiums paid by the employer after October 5, 1998 are not to be deducted from the income replacement benefit.

April 7, 2000

William J. Renahan

Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96 and 303/98.
2. 2(OIC A96-000865, January 12, 1998)
3. 3Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1996, O. Reg. 776/93 as amended.
4. 4(FSCO A98-000701, March 12, 1999)
5. 5Oranlando v. Essroc Canada Inc., Ontario Court of Justice (General Division), [1995] O.J. No. 4056; Davidison v. Allelix Inc. (1991), 1991 CanLII 7091 (ON CA), 7 O.R. (3d) 581; and, Findlay v. Kershaw Manufacturing (1989), 29 C.C.E.L. 10.