Neutral Citation: 2002 ONFSCDRS 159

FSCO A01-000942

BETWEEN:

SVETLANA IANKILEVITCH

Applicant

and

CGU INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Eban Bayefsky

Heard:

June 11 and July 24, 2002, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Henry Goldentuler for Ms. Iankilevitch

Kadey B.J. Schultz for CGU Insurance Company of Canada

The Applicant, Svetlana Iankilevitch, was injured in a motor vehicle accident on November 16, 2000. She applied for and received statutory accident benefits from CGU Insurance Company of Canada ("CGU"), payable under the Schedule.¹ CGU denied Ms. Iankilevitch weekly income replacement benefits ("IRBs") on the basis of her failure to provide information reasonably required to assist the Insurer in determining the quantum of her benefits. The parties were unable to resolve their disputes through mediation, and Ms. Iankilevitch applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issue in this hearing is:

Is Ms. Iankilevitch disentitled to income replacement benefits due to her failure to provide information reasonably required to assist the Insurer in determining her entitlement to benefits, pursuant to section 33 of the Schedule?

Ms. Iankilevitch is disentitled to income replacement benefits beyond $185 per week from August 20, 2001 to June 11, 2002.

Background:

The Insurer's Requests for Information and the Applicant's Response

The Applicant was injured in a motor vehicle accident on November 16, 2000. On January 19, 2001, the Insurer wrote Mr. Goldentuler indicating that he had forwarded a "partially completed Application for Accident Benefits" and that it required the Applicant to fill out an Election of Benefits form since it was "not clear from the application...which benefit your client is claiming." The Insurer indicated that, if the Applicant was claiming income replacement benefits ("IRBs"), it intended to engage an accounting firm "as it appears that she is self employed."

On February 19, 2001, Mr. Goldentuler sent the Insurer, among other things, an Application for Accident Benefits (in which the Applicant indicated that she was self-employed as a computer programmer with SIAN Computer Consulting at the time of the accident, and in which she designated the last fiscal year for the calculation of her benefits), an Election of Income Replacement Benefits, a Notice of Assessment for 1999 (the fiscal year immediately prior to the year of the accident), a Statement of Earnings from November 1999 to July 2000, and a Declaration of Post-Accident Income (indicating that the Applicant had not received any post-accident income or benefits).

Roughly a month later, the Insurer sent the Applicant an Explanation of Benefits indicating that she was eligible for IRBs and that it had referred the file to an accountant "to calculate the self-employed benefit."

On March 20, 2001, the accounting firm, Williams & Partners Inc., wrote Mr. Goldentuler, indicating as follows:

To proceed [to calculate the amount of the Applicant's IRBs], we require the following information:

A complete copy of Ms. Iankilevitch's 1999 and 2000 personal income tax returns, including all schedules and attachments thereto, and the corresponding Canada Customs and Revenue Agency Notices of Assessment, when available;
A Statement of Revenues and Expenses of Ms. Iankilevitch's self-employment business, SIAN Computer Consulting, for the periods January 1^st to December 31, 1999, November 19, 1999 to November 16, 2000 (the 52 week period prior to the accident), and November 17, 2000 to as up-to-date as possible;
Copies of the source documentation in support of Ms. Iankilevitch's revenues and expenses from her self-employment business, SIAN Computer Consulting, in the period January 1, 1999 to as up-to-date as possible, including, where applicable, cash receipts and disbursements journal, sales summary, sales invoices/contracts, pay stubs, cheque remittance slips, bank deposits, expense receipts, Goods and Services Tax returns, etc.;
Copies of Ms. Iankilevitch's bank statements, returned cheques and duplicate deposit books with respect to her self-employment business, SIAN Computer Consulting, from January 1, 1999 to as up-to-date as possible;
Details, including name(s), dates and amounts paid to any replacement worker(s) since the date of the accident, including supporting documentation, i.e. copies of returned cheques (front and back), and in the case of cash payments, we require a signed receipt, including the worker(s) name, telephone number, and postal address.

Once we have had an opportunity to examine the foregoing documentation, additional information may be required.

In explaining the need for the requested information, Mr. Rob Pellegrini, an accountant with the firm Williams & Partners Inc., testified that the Applicant's personal income tax return was insufficient since it only set out her total income, not the sources of that income (as requested, for example, in item 3 of the accountants' letter). Mr. Pellegrini stated that item 4 went to the "crux of the financial activity of the Applicant's business." Mr. Pellegrini noted that item 5 was a "standard request " to calculate IRBs "in a self-employment situation" (although he acknowledged that, based on material recently provided by the Applicant, this no longer appeared to be an issue).

Williams & Partners wrote Mr. Goldentuler on April 10, April 24, May 8, May 22 and June 6, 2001 indicating that they had not been provided the information requested in their March 20, 2001 correspondence. They repeatedly stressed that "at present, we are unable to provide a calculation for this claim as, to date, we have not been provided with sufficient documentation to do so."

The Applicant provided a written statement to the Insurer on June 7, 2001, in which she stated that she was unemployed at the time of the accident and was receiving employment insurance benefits. She stated that she had been employed in the year before the accident, doing computer consulting for SIAN Computer Consultants out of her home. She said that she had no employment income other than with SIAN.

The Applicant filed for mediation in March 2001. The mediation was conducted on June 15, 2001, at which time the parties reached a procedural agreement regarding IRBs, namely, that the Insurer would confirm with Mr. Goldentuler "in one week if the income information provided to date is sufficient to calculate an income replacement benefit" and that the Applicant would provide a consent to the Insurer "to obtain tax filing information for 1999 from Revenue Canada." On June 18, 2001, Mr. Goldentuler wrote the Insurer, stating that "further to our mediation, this will confirm that you will speak to your accountant to confirm our client's I.R.B. calculation" and that "if necessary we will execute authorisation for you to obtain 1999 Income Tax Filings from Revenue Canada directly." On June 27, 2001, the Applicant filed for arbitration on the issues of IRBs, medical benefits, housekeeping expenses and the cost of examinations.

On July 12, 2001, Williams & Partners again wrote Mr. Goldentuler stating that they had still not been provided the required information and indicating that "further to mediation you represented you would provide us with consent to obtain personal income tax information with regard to your client." Williams & Partners sent three more letters to this effect on July 27, August 13 and August 30, 2001.

On August 20, 2001, the Insurer filed its Response to the Application for Arbitration, in which it noted that the Applicant had not provided the information repeatedly requested by Williams & Partners. The Insurer also pointed out that, contrary to the information she had provided in her Application for Benefits, the Applicant had made a written statement to the effect that she was not employed at the time of the accident. The Insurer maintained that the Applicant had failed to comply with section 33 of the Schedule. The Insurer also listed the documents it required from the Applicant, which included the following:

the Applicant's tax returns for 1999 and 2000, together with the Notice of Assessment for 2000
CNC records for January 1^st to December 31, 1999, the complete records for November 19, 1999 to November 16, 2000 (since the records provided ended July 31, 2000) and any subsequent records [CNC Global Consulting was a company for which the Applicant had provided computer consulting services]
any information regarding post-accident income, including contracts the insured had sought out following the date of loss
all employment related documents for one year prior to the accident and all employment related documents post-accident, ongoing
the complete employment insurance file

On November 2, 2001, the Insurer sent the Applicant an Explanation of Benefits stating that "our accountant has been working on this issue [IRBs] " and that "to date no calculation has been complete [sic] due to lack of documentation."

On December 6, 2001, Mr. Goldentuler wrote CNC Global Consulting requesting the particulars of the Applicant's employment there. On December 16, 2001, Mr. Goldentuler wrote Human Resources and Development Canada for the Applicant's employment insurance file.

The Commission held a pre-hearing conference in this arbitration on December 5, 2001. At that time, Mr. Goldentuler undertook "to provide all outstanding productions as requested by CGU in its Response within 30 days of today's date and to immediately advise CGU should any difficulties arise in obtaining the documentation requested." The Insurer confirmed its position that the Applicant was in breach of section 33 of the Schedule. The pre-hearing was to resume on February 8, 2002 in light of the fact that the production of the outstanding materials might facilitate settlement.

On December 17, 2001, Mr. Goldentuler sent Ms. Schultz a number of items she had requested in her Response to the Application for Arbitration. In particular, he provided the following:

the Applicant's 1999 and 2000 income tax return
the letter to CNC requesting its entire employment file, a copy of contracts and statements from CNC and a summary of payment regarding the "services provided my client"
a statement that the Applicant had not worked or received any income post-accident
the letter requesting the employment insurance file
regarding the Insurer's request for pre- and post-accident employment documents, a reference to the CNC materials and the statement regarding no work or income post-accident

On January 8, 2002, Ms. Schultz wrote Mr. Goldentuler stating that several productions remained outstanding, including "further CNC records as requested in your letter of December 6, 2001" and the "complete Employment Insurance File, as requested in your letter of December 16, 2001." Ms. Schultz maintained that the Applicant had "yet to provide sufficient documentation in order to calculate her IRB."

On January 14, 2002, Williams & Partners confirmed receipt of the documentation sent by Mr. Goldentuler and stated that they required "the following documentation, some of which may have been previously requested, in order to proceed with our calculation of Ms. Iankilevitch's income replacement benefit...." The requested materials were as follows:

a complete copy of the Applicant's 2000 Canada Customs and Revenue Agency Notice of Assessment
any T4 or T4A slips issued to the Applicant in the 2000 and 2001 taxation years
details, including dates and amounts, with respect to any Employment Insurance benefits received by the Applicant in the 2000 and 2001 taxation years
the financial statements of SIAN Computer Consulting Ltd. for the last fiscal year completed prior to the accident, the source documentation in support of the revenues and expenses of SIAN, and the bank statements, returned cheques and duplicate deposit books of SIAN, for November 19, 1999 to November 16, 2000 (the 52 week period prior to the accident) and for November 17, 2000 to as up-to-date as possible.
a complete copy of the T2 Corporate Income Tax Return of SIAN Computer Consulting Ltd. for its last fiscal year completed before the accident and the corresponding Canada Customs and Revenue Agency Notice of Assessment.
the bank statements, returned cheques and duplicate deposit books for the Applicant's personal bank account(s)
the Articles of Incorporation and Shareholders' Register of SIAN Computer Consulting Ltd.

The pre-hearing conference was resumed on February 15, 2002. Among other things, the parties confirmed the issue for the preliminary hearing, namely, whether the Applicant was disentitled to benefits due to a breach of section 33 of the Schedule. The pre-hearing arbitrator noted that the parties had resolved their production concerns and that the Applicant had indicated that all records from CNC had been obtained and forwarded to the Insurer. The Applicant also undertook to forward further request letters to Employment Insurance. That day, Mr. Goldentuler sent such a letter. He sent a further letter on March 25, 2002. He sent yet another letter on April 9, 2002, this time to a new office of Human Resources Development Canada (based on the advice of Ms. Schultz and the first office of HRDC).

On February 26, 2002, Ms. Schultz wrote Mr. Goldentuler confirming that he had advised at the pre-hearing resumption that all pre-accident employment records, from every source, including original source documentation supporting the Applicant's income tax returns had been provided to the Insurer or its accountant. Ms. Schultz stated that Mr. Goldentuler had also advised that the Applicant had no post-accident employment income from any source and that there were, therefore, no records to provide.

On April 23, 2002, Williams & Partners wrote Mr. Goldentuler to advise that, based on the Insurer's instructions, they would be closing their file since they had "not been provided with sufficient documentation to calculate the income replacement benefit payable to Ms. Iankilevitch."

On May 16, 2002, Mr. Pellegrini prepared a report outlining "the financial documentation received to date and an explanation of why we cannot rely on this documentation to calculate the benefit at this time." Mr. Pellegrini also stated that due to the absence of certain financial documentation, they had been "unable to estimate the weekly income replacement benefit payable to Ms. Iankilevitch at this time." Mr. Pellegrini reported that as of January 9, 2002, he had only received the following documents:

the Application for Benefits
the Canada Customs & Revenue Agency Notice of Assessment regarding the Applicant’s 1999 personal income tax return
statements issued by CNC to SIAN regarding gross income earned by SIAN, dated November 15, 1999 to July 31, 2000
a Pay History report from CNC for June 15, 1999 to July 31, 2000, regarding services provided by SIAN (CNC had advised on July 20, 2001 that SIAN did not provide services to CNC before June 1999 or after July 30, 2000)

Mr. Pellegrini testified that he had not received the information initially requested in Williams & Partners' March 20, 2001 correspondence.

Mr. Pellegrini reported that on January 10, 2002, the Insurer forwarded the following information:

the Applicant's 1999 and 2000 personal income tax returns, with all schedules
a Contract Consultant Master Agreement between SIAN and CNC, dated May 28, 1999
a Contract Consultant Secondary Agreement between SIAN and CNC for June 2 to August 31, 1999
various consultant renewal letters issued by CNC to SIAN for terms in the period October 1, 1999 to June 3, 2000
statements issued by CNC to SIAN regarding amounts paid to SIAN from November 15, 1999 to July 31, 2000
a Pay History report issued by CNC regarding amounts paid to SIAN from June 15, 1999 to July 31, 2000
Mr. Goldentuler's December 6, 2001 letter to CNC regarding the Applicant's employment there
Mr. Goldentuler's December 16, 2001 letter to HRDC regarding the Applicant's employment insurance file

On May 21, 2002, Mr. Goldentuler sent Ms. Schultz the following materials:

a statement of employment insurance benefits for 2001
a Notice of Assessment for 1999
a Notice of Assessment for 2000
Employment Measures and Benefit summaries from December 2000 to April 2001
a November 15, 2000 letter from Seneca College regarding its Skills Development Employment Benefits programme

On May 22, 2002, Ms. Schultz acknowledged receipt of Mr. Goldentuler's May 21^stletter and stated that, "apart from the EI file, it has been your position since the resumed pre-hearing of February 15, 2002...that you have provided absolutely all the financial documentation available concerning Ms. Iankilevitch's self-employment."

On June 5, 2002, just prior to the first day of the preliminary issue hearing, Mr. Goldentuler served three volumes of documents on the Insurer. These materials contained the documents already produced, but also the corporate tax returns of SIAN Computing Consulting Ltd. for the taxation years 1997-98, 1998-99 and 1999-2000. Each return contained a brief list of the company's assets, liabilities, shareholders' equity, gross revenue and expenses. The Applicant had not previously produced SIAN's corporate tax documents.

On the morning of the preliminary hearing, Mr. Goldentuler provided the Insurer with the Applicant’s personal income tax return for 2001 and SIAN's corporate tax returns for the taxation year 2000-2001, including the list of assets, liabilities, equity, revenue and expenses.

Mr. Pellegrini's Testimony on the Information Requested and Provided

Mr. Pellegrini testified that, of the five categories of documents he requested from the Applicant in March 2001, he had yet to receive items 3 and 4, dealing with the source documentation of the Applicant's self-employment business, SIAN Computer Consulting. Mr. Pellegrini stated that the material he received from CNC Global in July 2001 did not address the request for the source documentation for SIAN's revenues and expenses (for example, the need for a "sales summary"). He noted that the material he had just received in the week before the hearing (SIAN's corporate tax returns - which pertained to item 2 of the March 2001 letter) had not been filed with or assessed by Revenue Canada and contained no source documentation.

He stated that this supporting information was needed to calculate the Applicant's IRBs and to determine if the 1999-2000 list of revenues and expenses was complete and accurate. He stated that he was not satisfied that the list was accurate given, for example, the unusual situation of the gross revenue and expenses being identical, leaving a net income of zero. He also stated that the Insurer needed to determine SIAN's fiscal year (since the Applicant had designated this period for the calculation of her benefits), but that the information to make this determination had only come in the week before the hearing. Mr. Pellegrini noted that, since the documentation recently provided established SIAN's fiscal year as November 15, 1999 to November 14, 2000, just two days before the accident, the issue of the difference between the company's fiscal year and the 52 weeks before the accident was now moot.

Mr. Pellegrini testified that, even with the information received from CNC Global in July 2001 (which, it was reasonable to assume, substantiated SIAN's 1999-2000 corporate tax return statement on consulting fees), the Applicant had not provided any information on her business' expenses until the week before the hearing. Mr. Pellegrini stated that, in themselves, the CNC materials were not sufficient to establish SIAN's revenues, since they did not establish whether CNC was the only source of revenue for SIAN (and this only became clearer with the materials the Applicant provided in the week before the hearing). Mr. Pellegrini stated that information on SIAN's revenues and expenses was needed to calculate the Applicant's IRBs. He also said that other than the corporate tax return, there was no information of any income the Applicant had earned from sources other than SIAN (although he did acknowledge the Applicant's June 7, 2001 statement to the effect that she had "no other employment income other than with [SIAN]", but this did not indicate whether the only source of SIAN's revenues was the contract with CNC).

Mr. Pellegrini testified that, in the majority of cases, sufficient information is provided to conduct an assessment of a person's income and to recommend an appropriate rate of benefits. However, he said that since, in this case, the Applicant was self-employed through a closely-held corporation (where the owner generated revenue and incurred expenses on behalf of the company), it was not enough to have her personal income tax assessment. The company's financial information was needed to determine its fiscal year and its net income, which would then be allocated to the Applicant. In this way, the corporate veil would be pierced to determine the Applicant's pre-accident income and IRBs. Mr. Pellegrini stated that, even with the information provided in the week before the hearing (which did not contain source documentation), he could not know the true bottom line of the Applicant's business. He noted that, since the company's expenses appeared to have fluctuated since 1997, it was important to obtain the relevant source documents to determine the company's expenses in the fiscal year before the accident.

In cross-examination, Mr. Pellegrini acknowledged receiving the items in Mr. Goldentuler's February 19, 2001 letter. However, he said that the Applicant's declaration of post-accident income was not relevant to the calculation of her pre-accident income. He also stated that the Notice of Assessment for 1999 was insufficient, since it did not contain any information about the source or time periods of the revenue (although he acknowledged that there was no evidence that the Assessment had been falsified). He stated that he needed SIAN's corporate documents, emphasizing that there was a discrepancy of approximately $12,600 between the corporate tax return statement of revenues and the Applicant's personal income tax return. He stated that the Applicant's personal income tax return did not show her company's expenses, and that these should be attributed to the Applicant's income. He also said that, since the Applicant's income was coming from the business, its profits should be considered her income for the purpose of calculating her IRBs.

Mr. Goldentuler referred Mr. Pellegrini to the 1998-1999 corporate documents that had been provided in the week before the hearing and asked him whether these were sufficient to calculate the Applicant's IRBs. Mr. Pellegrini stated that he would need the supporting documents for these figures, noting, for example, that the documents showed an expense for "subcontractors," whereas the other materials suggested that the Applicant had worked alone. Mr. Pellegrini stated both that he would not be capable of giving a ball park figure for IRBs based on these items, and that he would not be comfortable in doing so. He stated that the 1998-1999 documents were important in establishing consistency in the year-to-year activities of the business.

The Law:

Section 33(1) states, in part, that a person applying for a statutory accident benefit "shall, within 14 days after receiving a request from the insurer, provide the insurer with any information... reasonably required to assist the insurer in determining the person's entitlement to a benefit." Section 33(2) states that "the benefit is not payable for any period before the person complies with subsection (1)." Section 31(1) states that "a person's failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation."

Three arbitration cases suggest that, pursuant to section 33, an insured who fails to provide an insurer with reasonably required information forfeits his or her entitlement to benefits during the period of non-disclosure. An appeal of one of these decisions suggests that an insured's breach of section 33(1) results in a suspension, but not a forfeiture, of benefits.

In Tesfay and Allstate Insurance Company of Canada (FSCO A97-001439, April 7, 1999), the Arbitrator stated as follows:

In my view, section 33 should be interpreted in a purposive, rather than a punitive, manner. The purpose of section 33 is to ensure that insured persons facilitate the insurer's ability to obtain sufficient information to assess a claim for benefits. Having regard to that purpose, I conclude that the provision of an authorization to the Insurer in January 1997 in respect of Dr. Ramroopsingh, coupled with the Applicant's written requests to Dr. Ramroopsingh and the Ministry of Health in June 1997, were sufficient to comply with section 33 during this period. Accordingly, the Applicant has not forfeited any entitlement to benefits during this period, under subsection 33(2) of the Schedule.

I find that since February 5, 1998, Ms. Tesfay has made diligent attempts to obtain Dr. Ramroopsingh's clinical notes and records and the OHIP summary, and has complied with her obligations under section 33 during this period.

I conclude that Ms. Tesfay has not failed to provide information reasonably required to assess her claim so as to disentitle her to any benefits on the basis of section 33(2).

An appeal of this decision was dismissed on the basis that the relevant issues did not need to be decided "in order that an adequate hearing be held" and because it was "an appeal from a preliminary or interim order that does not finally decide the issues in dispute" (Appeal P99-00023, June 21, 1999).

In Kassa and Economical Mutual Insurance Company (FSCO A99-001200, September 11, 2000), the Arbitrator found that, "pursuant to section 33 of the Schedule," the Applicant had "provided insufficient information for Economical to calculate the amount of his IRB and accordingly he is disentitled to a benefit for this reason." In an appeal of this decision (FSCO P00-00053, July 26, 2001; application for judicial review pending), the Director's Delegate stated that "the mere fact that the information supplied by the insured person is insufficient to establish their entitlement, does not necessarily mean that they are subject to the penalty provisions of section 33" and that "the penalty imposed by section 33 should be limited to instances of misconduct, in which the insurer is able to demonstrate that the insured person is intentionally withholding information in an attempt to interfere with a legitimate investigation." Regarding the Arbitrator's conclusion that the Applicant was disentitled to a benefit, the Delegate stated as follows:

[Under section 33(2),... ] the penalty is more in the nature of a suspension of a benefit that is otherwise payable, rather than a disentitlement. Amongst other difficulties, referring to the penalty as a disentitlement has a connotation of permanency, whereas the section is clear that the penalty is lifted once the person supplies the requested information. If the penalty is seen as a suspension rather than a disentitlement, then the need to establish the period over which the penalty operates becomes more obvious. This necessarily involves a consideration of when the suspension starts.

The Delegate found that "the first indication that Mr. Kassa attempted to block access to his medical records is found in a letter from the rehabilitation consultant to Economical dated February 21, 2000" and held that the "arbitrator's ruling is varied such that the suspension of benefits pursuant to section 33(2) is effective as of February 1, 2000." While the Delegate stated that he was "not convinced that the arbitrator's conclusion that Mr. Kassa had failed to prove that he was disabled, should be interfered with," and while he left intact the Arbitrator's Order that the Applicant was not entitled to IRBs under section 4 of the Schedule, he rescinded the Arbitrator's Order that Mr. Kassa was disentitled to income replacement benefits under section 33 of the Schedule and replaced it with the following:

Pursuant to section 33(2) of the Schedule, Economical is authorized to suspend any income replacement benefit that Mr. Kassa is entitled to beyond February 1, 2000, until such time as he complies with the Insurer's requests for medical records.

In Carr and Lombard General Insurance Company of Canada (FSCO A00-000441, September 11, 2001), the Arbitrator found that the Applicant "failed to meet the obligation imposed by section 33 of the Schedule because he failed to provide sufficient objective, reliable information to Lombard on which it could make a determination about his entitlement to an IRB." The Arbitrator further stated that "as Mr. Carr did not present any information to Lombard or to its accountant to refute their conclusions up to and including the arbitration hearing, I find that Mr. Carr did not satisfy the requirements of section 33 and accordingly he is disentitled to an IRB for this reason." This decision did not consider the appeal decision of Kassa.

In my view, the appeal decision in Kassa does not finally determine the issue of whether, pursuant to section 33(2), a breach of section 33(1) disentitles an insured to benefits during the period in which he or she fails to provide the information reasonably required to assist an insurer in determining the person's entitlement to those benefits. In the present case, counsel for the Insurer, Ms. Schultz, properly raised the question of whether section 31(1) of the Schedule confirms that section 33(2) is intended to be a "forfeiture" provision. Section 31(1) also bears on the comments in Kassa to the effect that an insurer must demonstrate misconduct on the part of the applicant. The appeal decision in Kassa did not consider section 31(1) of the Schedule or its interaction with section 33 or the rest of Part X. In my respectful view, in the absence of such an analysis, the issue of whether an insured forfeits his or her entitlement to benefits by breaching section 33(1) of the Schedule, remains an open question. It is also unclear how, in Kassa, the Applicant's entitlement to IRBs could be suspended (until he satisfied the Insurer's request for information) at the same time that his entitlement to IRBs was denied. In my view, this further suggests a need to review the meaning and effect of section 33.

I find that section 33 employs the language of disentitlement, not that of suspension. Section 33(1) establishes the importance of prompt disclosure in the claims process by requiring insureds to provide insurers, within a short time frame, basic information reasonably required to adjust the claim. Section 33(2) emphasizes the importance of this provision by stating that the benefit in question is not payable for any period before the insured complies with section 33(1). Section 33(2) does not state that the benefit is not payable "until the insured complies with section 33(1) " or "pending the insured's compliance with section 33(1)." Further, section 33(2) uses stronger and more direct language than other non-payment provisions. For example, contrast section 33(2), which states that "the benefit is not payable," with section 5(2)(a), which states that an "insurer is not required to pay an income replacement benefit,...for the first week of the disability...." On its face, section 33(2) does not leave the non-payment of benefits to the insurer's discretion. In my view, if the Legislature had intended the provision to simply result in the suspension of an insured's benefits, it would have used significantly less stringent language.

I find that section 31(1) confirms this interpretation of section 33. Section 31(1) states that, an insured's failure to comply with the time limit set out in section 33 "does not disentitle" the insured to benefits if he or she has a reasonable explanation. Section 31(1) does not state that a failure to comply "does not suspend an insured's right to benefits" or "does not stay an insured's benefits." In my view, given the significant obligation imposed on insureds under section 33, and the recognition under section 31(1) that an insured might have a reasonable explanation for not fulfilling that obligation, it would not make sense for benefits simply to be suspended where an insured provided no explanation at all for his or her failure to comply. Thus, while the disentitlement to benefits might seem to be a harsh result, the protection is that an insured can provide a reasonable explanation for the breach. However, in the absence of such an explanation, I see no basis (in either the language or the structure of these provisions) for the conclusion that benefits are simply to be suspended. I find that section 31(1) confirms that section 33(2) is a disentitlement provision.

Section 33 must be read in conjunction with section 35, which deals with an insurer's obligation to promptly pay income replacement benefits. Section 35(1) states, in part, that, upon receiving an application for an income replacement benefit, an insurer shall promptly determine whether a benefit is payable. Section 35(2) states that, if the insurer determines that a benefit is payable, the insurer shall pay the benefit to the insured within 14 days of receiving the application for benefits. Section 35(3) states that where a person fails, without reasonable explanation, to notify the insurer of an accident, the insurer can only delay determining whether the person is entitled to a benefit up to 45 days from the date of receiving the application for benefits. In my view, an insurer's strict obligation to promptly determine a person's entitlement to benefits and to promptly pay the person benefits reinforces the importance of an insured's compliance with their obligation to promptly provide the information enumerated in section 33(1). In light of an insurer's stringent obligations under section 35, and its practical need for adequate disclosure to properly adjust a claim, I find that an insured's failure to comply with section 33(1) is intended to result in more than merely the suspension of a person's benefits, particularly in the absence of a reasonable explanation, as set out in section 31(1).

In my view, section 33 establishes the central importance of disclosure to the claims process. Section 33(1) states that an insured must provide "any" information reasonably required to "assist the insurer in determining" the person's entitlement. It does not say that the person must provide "information" reasonably required to "determine" the person's entitlement. The issue, therefore, is not whether an insured has provided sufficient information to establish his or her claim at a hearing on the merits. As suggested in Tesfay and the appeal decision in Kassa, the focus of the analysis is the adequacy of the insured's efforts in facilitating the insurer's mandated investigation and assessment of the claim. In my view, section 33 requires an insured to diligently aid an insurer's consideration of the question of entitlement. Whether an insured has provided sufficient information to fulfill this obligation is a question of fact to be determined in the particular circumstances of each case.

Under section 31(1), in the absence of a reasonable explanation, a person's failure "to comply with a time limit" can disentitle him or her to benefits. This is a significant consequence for failing to comply with a time limit, further emphasizing the importance of prompt disclosure of relevant information. In my view, disentitlement to benefits is an even more likely result where, without a reasonable explanation, a person not only fails to meet the time limit, but fails to provide the required information at all.

Mr. Goldentuler submitted that failure to comply with section 33(1) only precluded an insured from obtaining interest during the period of non-compliance. I do not accept this. Section 33(2) speaks of the "benefit" not being payable, not "interest on the benefit." Mr. Goldentuler also suggested that an insurer is obligated to pay benefits on the basis of the information the insured provides and that if, at a later date, it is determined that the insured was not entitled to the benefits paid, then the insurer can seek a repayment. However, pursuant to section 47(1) of the Schedule, a person is only required to repay benefits that were paid as a result of the insurer's or the insured's error, or as a result of fraud or wilful misrepresentation. It is not at all clear that a person's failure to provide reasonably required information in a timely manner constitutes an error on the insured's part, let alone fraud or wilful misrepresentation. In my view, the thrust of sections 31, 33 and 35 is the prompt payment of benefits on the basis of prompt disclosure of information, not the prompt payment of benefits on the basis of piecemeal and/or deficient disclosure, inevitably leading to a protracted adjustment process, disputes, accusations and counter-accusations. Given the centrality of disclosure to the claims process, I find that, in the absence of a reasonable explanation, the failure to provide reasonably required information disentitles an insured to the benefit in question.

There is one qualification to this conclusion. In the present case, the Insurer consistently stated that it did not dispute the Applicant's basic medical entitlement to benefits. It maintained that it was merely incapable of calculating the quantum of the IRBs to which the Applicant was entitled, and specifically, whether the Applicant was entitled to the $400 per week she claimed. In these circumstances, I find that it would not make sense to deprive the Applicant of her right to any income replacement benefits. However, if the Applicant is found to have breached section 33(1), then she should be denied the benefits to which she would otherwise be entitled if the Insurer had been able to properly assess the quantum of her IRBs. Thus, in light of the Insurer's acknowledgement of the Applicant's basic entitlement to IRBs, I find that an unwarranted breach of section 33(1) should disentitle the Applicant to IRBs beyond the minimum rate of $185 per week for any period during which she failed to comply.

Findings:

I find that the Applicant failed to provide information reasonably required to assist the Insurer in determining the quantum of her income replacement benefits. I find that the Applicant did not provide a reasonable explanation for failing to provide this information. I find that the Applicant has forfeited her right to benefits beyond the minimum benefits payable ($185 per week) from August 20, 2001 to June 11, 2002.

Whether the Applicant failed to provide Reasonably Required Information

Mr. Goldentuler submitted that the Applicant immediately provided the Insurer her 1999 income tax return and Notice of Assessment, that these provided the Insurer with prima facie evidence of the Applicant's income and that the Insurer could have, and should have, calculated and paid the Applicant IRBs on this basis. I find that the material provided by the Applicant, up to and including the first day of the preliminary issue hearing, was significantly deficient, precluding the Insurer from reasonably assessing the quantum of the Applicant's IRBs. The Applicant identified herself as self-employed through SIAN Computer Consulting Ltd. I accept Mr. Pellegrini’s evidence that, in these circumstances, the Applicant's personal tax information was insufficient to properly assess her entitlement to IRBs. The Applicant had chosen the last fiscal year of her business as the basis for determining her IRBs. In order to assess her claim on this basis, the Insurer required corporate information establishing SIAN's fiscal year. The Applicant only provided this information a week before the hearing. While the business' fiscal year and the 52 weeks before the accident were almost identical (essentially rendering this issue moot), this was not known until a week before the hearing. Mr. Goldentuler appeared to suggest that the Insurer was only entitled to information concerning SIAN if there was a legal basis for piercing the corporate veil, and that the mere fact that the business was a closely-held company was not a sufficient basis for doing this. To the extent I understand this argument, I find that the Insurer properly sought information concerning the nature of SIAN's business given the Applicant's notice to the Insurer that she was self-employed through SIAN, given that she designated SIAN's fiscal year as the basis to calculate her IRBs and given Mr. Pellegrini’s uncontradicted evidence that SIAN's net income would be attributed to the Applicant to determine her IRBs. In my view, assuming there is any issue about piercing the corporate veil, the structure of the relevant statutory provisions (for example, section 8(2), which requires self-employed persons to designate either the 52 weeks or the last fiscal year of their business) and the Applicant's own approach to the calculation of her pre-accident income, entitled the Insurer to look to SIAN for information on the Applicant's IRBs. To deny the Insurer access to this information on the basis that it would pierce the corporate veil would, in my view, unreasonably preclude the Insurer from fulfilling its statutory obligation to promptly assess the quantum of the Applicant's IRBs. In any event, I find that, by ultimately producing some of SIAN's corporate tax information, the Applicant waived any objection she might have had on the basis of piercing the corporate veil.

Mr. Goldentuler suggested that the Insurer's requests for information were only necessary to substantiate what was contained in the Applicant’s 1999 income tax return and Notice of Assessment. I reject this. I find that the noted items gave a very limited and unreliable picture of the Applicant's pre-accident income. As Mr. Pellegrini noted, the 1999 Notice of Assessment was insufficient since it only stated the Applicant’s total income without any information about the source or time periods of the revenue, and since it did not show SIAN's revenues and expenses, which were directly relevant to the Applicant's pre-accident income (as confirmed by the corporate tax returns ultimately produced, which showed a significant discrepancy between the company's revenues and the Applicant's personal tax return). The information provided by the Applicant did not cover the full fiscal year or 52 weeks prior to the accident. The Insurer had requested the Applicant's 2000 personal income tax return and Notice of Assessment in March 2001 (a request which was reiterated on at least two occasions), but the Applicant only provided her 2000 tax return in December 2001 and the related Notice of Assessment in May 2002. As Mr. Pellegrini’s evidence establishes, the Insurer needed the details of the Applicant's self-employment business not to substantiate what she had reported in her income tax returns, but to fully understand and to properly assess the Applicant's pre-accident income. For example, Mr. Pellegrini noted that Williams & Partners' March 2001 request for information on replacement workers was a "standard request" to calculate IRBs "in a self-employment situation." Mr. Pellegrini also said that it was only with the material recently received that this became a non-issue. I, therefore, find that the information the Applicant initially provided to the Insurer was wholly inadequate to assess the quantum of her IRBs.

The Applicant appeared to acknowledge the importance of SIAN's business activities in the assessment of her IRBs, since she attempted to obtain records of the work SIAN had done for CNC Global. However, as Mr. Pellegrini’s uncontradicted evidence establishes, these materials were inadequate for a number of reasons. First, they did not address the need for the source documentation of SIAN's revenues and expenses (for example, the need for a "sales summary"), which, as Mr. Pellegrini stated, went to the "crux of the financial activity of the Applicant's business." They did not answer the basic question of whether, through SIAN, the Applicant had had business revenues and expenses from sources other than CNC Global. And they only shed some light on this issue when read in conjunction with the corporate tax information provided in the week before the hearing.

In March 2001, Williams & Partners had asked for the source documentation of SIAN's business activities. The Applicant has yet to provide this material. In January 2002, Williams & Partners reiterated their request for source documentation and also asked for SIAN's corporate tax return and Notice of Assessment. The Applicant only provided SIAN's corporate tax returns the week before the hearing, and without the related Notices of Assessment or source documentation.

While the Applicant provided some information pertaining to her business, I accept Mr. Pellegrini's evidence that this fell far short of enabling the Insurer to properly assess her pre-accident income and IRBs. I find, as pointed out by Mr. Pellegrini, that the materials provided a week before the hearing confirm the importance of the original request for source documentation, since, for example, they contain the unusual reporting of identical revenues and expenses (resulting in a net income of zero), they contain new information about subcontractors, and they reflect fluctuations in annual expenses (directly affecting an assessment of SIAN's expenses in the fiscal year before the accident, and, therefore, the Applicant's pre-accident income and IRBs).

At one point, Mr. Pellegrini suggested that he would be "uncomfortable" in giving a "ball park figure" for IRBs based on SIAN's 1998-99 corporate tax returns. However, as he correctly pointed out, while these materials were relevant to establishing consistency in SIAN's annual business activities, they did not directly address the period in question, namely, the fiscal year before the accident. Mr. Pellegrini also suggested that he would have to be very careful in relying on these materials in the absence of any supporting documentation. Mr. Pellegrini also stated that he "would not be capable" of giving a ball park figure for IRBs based on this information. I find that Mr. Pellegrini was correct in his reluctance to rely on these materials to calculate the Applicant's IRBs. They were only indirectly relevant to the Insurer's obligation of assessing the quantum of the Applicant’s benefits and could, at most, be used to provide a ball park figure.

While the Applicant provided some information about her financial circumstances, she did so in a piecemeal way, and essentially sidestepped the Insurer's basic requests for documentation. I find that the initial requests in March 2001 for the Applicant's personal and business financial information (as well as the more specific request in January 2002 for SIAN's corporate tax return and Notice of Assessment) were standard inquiries in a self-employment situation. I note, for example, the Commission's Practice Note on the Exchange of Documents (Practice Note 4), which states that where the amount of benefits is in dispute, certified income tax returns and financial statements for self-employed claimants may assist to resolve a dispute. The Practice Note also states that, in certain circumstances, more detailed raw financial documentation may be required such as bank statements and records. While each case must be determined on its particular facts, and while the Applicant may not have needed to provide every single item listed by the accountants, I find that Mr. Pellegrini's evidence establishes the general importance of the materials sought to the assessment of the Applicant's pre-accident income.

As Mr. Pellegrini indicated, insureds normally provide sufficient information to allow their income to be assessed and to recommend an appropriate rate of benefits. In the present case (involving a self-employed individual in a closely-held corporation), certain basic personal and corporate information was required. I find that, to the extent that the Applicant provided this information, she did so in a delayed and deficient manner. In these circumstances, I reject Mr. Goldentuler's submission that the Insurer should have proceeded to calculate and to pay the Applicant's IRBs based on her 1999 personal income tax return and Notice of Assessment. I find that the Insurer was entitled to obtain the requested personal and corporate income documentation before assessing the quantum of the Applicant's IRBs. I find that the Applicant failed to provide information reasonably required to assist the Insurer in determining the quantum of her income replacement benefits.

Whether the Applicant had a Reasonable Explanation for Non-compliance

The question at this point is whether the Applicant had a reasonable explanation for failing to provide this information. I find that she did not. The Applicant had originally indicated that she would testify at the preliminary issue hearing. The hearing began on June 11, 2002 and was resumed on July 24, 2002, with the expectation that the Applicant would testify in response to Mr. Pellegrini's evidence. At the resumption, Mr. Goldentuler indicated that the Applicant would not be testifying. Other than the correspondence between Mr. Goldentuler and the Insurer, the Applicant provided no evidence as to the reasons she failed to provide the requested information. While the noted correspondence reflects the Applicant's efforts to obtain some of the information (for example, the CNC information and the employment insurance information), it sheds no light on whether the Applicant was attempting to obtain the other information sought by Williams & Partners or whether she had any objections to doing so. As noted, the Applicant simply pursued and provided certain limited information about her pre-accident personal and corporate income situation. The only indication of the Applicant's position came in Mr. Goldentuler's submissions at the hearing, to the effect that the Insurer was not entitled to pierce the corporate veil and that the Insurer ought to have calculated and paid the Applicant’s benefits on the basis of her 1999 income tax return and Notice of Assessment. I have rej ected both of these as legitimate reasons for disregarding the Insurer's requests, and in any event, they should have been raised much earlier in the process.

What exacerbates the Applicant's silence on this matter is that Williams & Partners repeatedly told her that they did not have sufficient information to calculate her benefits and the Insurer put her on notice as early as August 2001 that she was in breach of section 33 of the Schedule. Nevertheless, the Applicant proceeded to mediation and then to arbitration on the issue of IRBs (as well as on other matters). Neither the Applicant nor Mr. Goldentuler disputed Ms. Schultz's February and May 2002 correspondence to the effect that the Applicant had claimed to have provided all available financial information concerning her self-employment. Yet, in the week before the hearing, the Applicant produced for the first time her personal 2000 tax assessment and SIAN's corporate tax information. She provided further such information on the day of the hearing. I have found these materials to be directly relevant (although also insufficient) to the calculation of her IRBs. They, in fact, confirmed the reasonableness of the Insurer's previous requests for information. I find that, in light of the noted correspondence, the late production of these materials (as well as the Applicant's failure to provide the source documentation initially requested in March 2001) demanded an explanation, but none was forthcoming.

As noted earlier, the question under sections 31 and 33 of the Schedule is whether the Applicant attempted to facilitate the Insurer's investigation of the quantum of her benefits. In the appeal decision in Kassa, the Director's Delegate suggested that the penalty imposed under section 33 should be limited to instances of misconduct, in which the insurer can demonstrate that the insured person intentionally withheld information in an attempt to interfere with a legitimate investigation. Kassa suggests that the insurer bears the onus of showing misconduct on the part of the insured. However, I find that section 31(1), which Kassa did not consider, places the onus on the insured to provide a reasonable explanation for failing to provide reasonably required information under section 33. Unlike the situation in Kassa, the Applicant in the present case did not testify and provided no evidence as to why she did not seek or provide the requested information. To that extent, I do not find the onus discussed in Kassa applicable to the case at hand. I find that, in light of section 31(1), and particularly where, as here, the insured provides no explanation for failing to comply with the insurer's requests, the insurer need only show that its inquiries were reasonably required and that the insured failed to respond adequately to them.

I, therefore, find that the Insurer discharged its responsibility under section 33 and that the Applicant failed to provide a reasonable explanation under section 31(1). However, to the extent that the onus set out in Kassa applies here, I find that the Insurer has discharged that onus. I find that by delaying the production of reasonably required information, by providing inadequate information and by disregarding some requests altogether, the Applicant sought to thwart, not to facilitate, the Insurer's assessment of her IRBs.

The Period of Disentitlement

Ms. Schultz submitted that the Applicant should be disentitled to IRBs from the date of her Application for Benefits (February 19, 2001) to the first day of the preliminary issue hearing (June 11, 2002). Ms. Schultz recommended this approach, without prejudice to the Insurer maintaining that the Applicant continued to be in breach of its obligations under section 31 and 33 of the Schedule. I find that the Applicant is disentitled to IRBs beyond the minimum benefits payable ($185 per week) from August 20, 2001 to June 11, 2002. I make no determination on the Applicant's right to benefits, on either a procedural or a substantive basis, following this period.

In my view, the earliest date the disentitlement could take effect is the date of Williams & Partners' March 2001 request for information. However, that request was quite detailed and would likely have taken some time to satisfy. Further, while Williams & Partners wrote several follow-up letters, the matter was confused somewhat by the mediation that took place on June 15, 2001. At that time, the parties agreed that the Insurer would confirm "in one week if the income information provided to date [was] sufficient to calculate an income replacement benefit." Williams & Partners subsequently wrote Mr. Goldentuler four more times between July 12 and August 30, 2001 reiterating that they had still not been provided the required information. In its August 20, 2001 Response to the Application for Arbitration, the Insurer formally notified the Applicant of its position that she was in breach of section 33 of the Schedule. In my view, despite the fact that the Applicant failed to respond to the accountants' letters in July and August 2001, I find that the Insurer's Response to the Application for Arbitration is the appropriate point at which to begin the disentitlement to IRBs. At that point, there was no doubt that the Applicant faced the loss of benefits due to her failure to respond to the Insurer's requests. From that point forward, it was clear that the Applicant disregarded the accountants' inquiries at her peril.

I find that the disentitlement should end on the first day of the preliminary issue hearing. As discussed, the Applicant provided relevant, but inadequate, information up to the day the hearing began. The Applicant provided key corporate information on June 6 and 11, 2002, which ought to have been provided in response to the March 2001 request, but at the very latest, shortly after the accountants' January 2002 request. Again, there is no explanation as to why this information was not provided until the eve of the hearing, nor why it was deficient.

I, therefore, find that the Applicant is disentitled to IRBs beyond $185 per week from August 20, 2001 to June 11, 2002.

EXPENSES:

The parties submitted that the matter of expenses should be addressed following my decision on the merits. Therefore, if required, the parties may now make submissions on the issue of expenses.

October 4, 2002

Eban Bayefsky Arbitrator

Date