Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2003 ONFSCDRS 76

Appeal P02-00022

OFFICE OF THE DIRECTOR OF ARBITRATIONS

RAYMOND FORTIN

Appellant

and

ECONOMICAL MUTUAL INSURANCE COMPANY

Respondent

Before:

Stewart M. McMahon

Representatives:

William C. Goldstein for Mr. Fortin

James R. Adams for Economical

Hearing Date:

May 2, 2003

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The appeal is dismissed.
Each party shall bear their own expenses.

May 15, 2003

Stewart M. McMahon Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Mr. Fortin is a self-employed carpenter who was injured in a motor vehicle accident in March 1999 ("the first accident"). He received income replacement benefits ("IRBs") pursuant to the SABS-1996,¹ until his return to work in July 2000. Unfortunately, on October 25, 2000 (only three months after returning to work), Mr. Fortin was injured in a second accident. Economical Mutual Insurance Company accepted Mr. Fortin's claim for IRBs following the second accident, but the parties could not agree on the amount of the benefit. Specifically, the parties disagreed about whether the IRBs Mr. Fortin received, as a result of the first accident, should be included in his pre-accident income from employment² for the purposes of calculating his IRBs following the second accident.

In Shearstone and York Fire and Casualty Insurance Company, (FSCO P01-00013, January 8, 2002), Director's Delegate Makepeace considered the more general question of whether temporary disability benefits can be included in the calculation of pre-accident income. She held that short-term workers compensation benefits should not be included as part of an insured's pre-accident income. The parties agreed, that for the purposes of this case, there should be no difference in the treatment of short-term workers compensation benefits and IRBs, and the Arbitrator decided Mr. Fortin's case on the basis that she was bound by the outcome in Shearstone. However, the Arbitrator disagreed with the analysis in Shearstone, and set out the reasons why she would have come to a different result had she not been bound.

I prefer the reasoning in Shearstone, and adopt it. There is little to be gained by repeating the analysis. However, in recognition of counsels' efforts and out of respect for the Arbitrator, I will refer to two of the most compelling arguments that lead me to conclude that IRBs should not be included in the calculation of pre-accident income.

II. ANALYSIS

The first argument involves a consideration of the definition of income from employment. Section 6(1) of the SABS-1996 provides that the insured's IRB will be 80 percent of his "net weekly income from employment." Income from employment is not a defined term per se, but s. 2(5) states that a person is employed if "for salary, wages, other remuneration or profit, the person is engaged in employment, including self-employment, or is the holder of an office and 'employment' has a corresponding meaning." By extension, income from employment is defined as: salary, wages, other remuneration or profit. In addition, because Mr. Fortin is self-employed, s. 62 is particularly relevant. It stipulates that a person's income from self-employment shall be determined in the same manner as the person's profit would be calculated under federal and provincial income tax rules. IRBs do not fit naturally into any of these categories, nor do they equate to income from employment, as that phrase would be understood in common parlance. This plain reading of the SABS suggests that IRBs are not income from employment, and accordingly, will not play a part in determining the level of the insured's benefit following a subsequent accident. The Arbitrator acknowledges that this is a "compelling argument," but does not in any effective way rebut it.

The second argument involves a consideration of the historical treatment of this issue in the jurisprudence and the legislation. If the insured person is out of work for any significant period preceding the accident, calculating the amount of an IRB on income from employment can result in a benefit that is far below historical earnings. This can be addressed in at least two ways. One is to allow for options concerning the period over which to calculate pre-accident income. Another is to stipulate that payments that would not ordinarily be characterized as income from employment are to be included in the calculation. I find it enlightening to track the way the three no-fault regimes have combined these two possible alternatives.

Mr. Fortin argues that a historical analysis is not appropriate because the changes brought about by Bills 164 and 59 did not merely amend existing legislation, but instead revoked the existing regimes, and replaced them with new ones. Care must always be taken to read a particular provision in the context of the legislation as a whole. See R. Sullivan, Dreidger on the Construction of Statutes, 3^rd ed. (Toronto: Butterworths, 1994) at 131. But I do not think this precludes a historical analysis.

The 1990 version of the SABS provided two alternate periods over which to calculate pre-accident income. However, it did not specifically allow for the inclusion of income other than income from employment. Attempts to read the definition of "income from his or her occupation or employment" broadly enough to include payments that would not ordinarily be characterized as income from employment, were unsuccessful. A long list of these decisions is found at footnote 4 to the Shearstone decision. See in particular Jolin and Jevco Insurance Company, (OIC A-002187, October 27, 1993), which held that IRBs from a previous accident should not be treated as income from an occupation or employment.

The 1994 version of the SABS included significant enhancements to the IRB provisions. Amongst other things, the insured person was given more options when selecting the period over which to calculate pre-accident income. In addition, amounts that would not ordinarily be characterized as income from employment were included in the calculation of pre-accident income. Section 9(6) of the SABS-1994 stipulated that a determination of the person's income from employment would include "temporary disability benefits," which were defined to include weekly benefits paid pursuant to the SABS, certain workers compensation benefits, and other temporary periodic benefits paid under an income continuation plan or law, and U.I. benefits.

Bill 59 reduced the type and amount of weekly benefits. Amongst other things it changed the rules concerning the calculation of pre-accident income. First, the options for selecting the period over which to calculate pre-accident income were reduced. Mr. Fortin was limited to selecting the 52 weeks preceding the accident, or his business's last fiscal year. He chose the former.

More importantly for this appeal, the types of payments that can be included in the calculation of pre-accident income have been drastically reduced. Section 8(6) still allows the insured person to include EI benefits, but the reference to temporary disability benefits was removed. The section reads as follows: "A determination of gross income under subsections (3) or (4) shall include any benefit received under the Employment Insurance Act (Canada) or a predecessor of that Act in respect of the relevant period."

In Shearstone, Director's Delegate Makepeace stated that this legislative evolution "strongly supports the Insurer's interpretation." I would put the matter even higher. In my opinion, it leads to the inevitable conclusion that in the SABS-1996 regime, temporary disability benefits – including IRBs – are not to be included in the calculation of the insured person's pre-accident income.

This is a hard case on its facts. Because Mr. Fortin only worked for 12 of the 52 weeks preceding the second accident, calculating his IRB on the basis of the profit from his carpentry business results in a benefit that is far below his historical earnings. It is clear the Arbitrator thought this was unfair. To avoid this harsh result, the Arbitrator cites Bapoo v. The Co-Operators General Insurnace Company (1997), 1997 CanLII 6320 (ON CA), 36 O.R. (3d) 616 (C.A.) for the proposition that one of the purposes of an IRB is to ensure a fair or adequate level of income replacement. She then concedes that the 1996 version of the SABS is less generous than its predecessor, but asks "[d]espite this, it remains a legitimate question, whether the intent to cut back benefits should extend so far as to undermine the very purpose of no-fault legislation, which is to provide fair and adequate compensation."[emphasis in original] She then uses this as a rationale for concluding that IRBs from a previous accident should be characterized as income from employment.

The Arbitrator's intent to read the SABS-1996 in a way that gives Mr. Fortin a benefit that approaches his historical earnings, is understandable. However, I think that she went too far. I do not think that the Bapoo decision can be used to avoid giving effect to an unambiguous provision on the grounds that it is harsh.

Given the historical context, I do not think that the absence of any explicit statement that IRBs are to be excluded, leaves any real doubt about the drafters' intentions. First, the numerous arbitration decisions cited in the Shearstone decision make it clear that temporary disability benefits were not historically included in the calculation of pre-accident income. Second, the inclusion of temporary disability benefits in the SABS-1994 establishes that the drafters of that version turned their mind to the problem posed by this fact, and chose to expand the types of payments that should be included in the calculation. Finally, the fact that the drafters of the 1996 version took out the reference to temporary disability benefits is the clearest evidence possible that they had decided that these type of payments should no longer be included. I do not have the authority to ignore this clear indication of the drafters' intent, notwithstanding the harshness of the result.

The appeal is dismissed.

IV. EXPENSES

Mr. Fortin's decision to appeal was no doubt prompted by the Arbitrator's decision to express her doubts about the correctness of the Shearstone decision. The Arbitrator's comments were prompted by the harshness of the result. In these circumstances, I think an order that each party should bear their own expenses is appropriate.