Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2004 ONFSCDRS 151

Appeal P03-00008

OFFICE OF THE DIRECTOR OF ARBITRATIONS

LIBERTY MUTUAL INSURANCE COMPANY

Appellant

and

SHARON A. MORABITO

Respondent

Before:

Nancy Makepeace

Representatives:

Dwain Burns for Liberty Insurance

Brian A. Banfield for Ms. Morabito

Hearing Date:

March 29, 2004 in St. Catharines, Ontario

Written submissions completed on May 20, 2004

APPEAL ORDER

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

1. The appeal is allowed with respect to pre-accident earning capacity, and dismissed with respect to residual earning capacity. Paragraph 1 of the arbitration order, dated January 28, 2003, is revoked and replaced with the following:

Liberty shall pay to Mrs. Morabito a loss of earning capacity benefit based on a residual earning capacity of zero.

2. The matter is remitted to the Arbitrator with respect to pre-accident earning capacity.

3. If the parties are unable to agree on appeal expenses, the matter may be resolved in accordance with Rule 79 of the Dispute Resolution Practice Code.

October 8, 2004

Nancy Makepeace

Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Liberty Mutual Insurance Company ("Liberty") appeals from the Arbitrator's order that it pay Sharon Morabito a loss of earning capacity benefit ("LECB") based on a gross pre-accident earning capacity ("PEC") of $31,000 and a residual earning capacity ("REC") of zero. Liberty asks me to replace the Arbitrator's order with an order that Mrs. Morabito's pre-accident earning capacity was $23,600, her income in her best 52 weeks of the 156 weeks before the accident, and her residual earning capacity was $14,840, based on performing administrative/clerical work for 20 hours per week.

I am not persuaded the Arbitrator erred in concluding Mrs. Morabito had no residual earning capacity, a finding which was available to him on the evidence. However, the Arbitator's determination of Mrs. Morabito's pre-accident earning capacity seems to have depended on a misunderstanding of the evidence, and I am unable to determine whether he would have reached the same conclusion if not for that error. In addition, I find that the Arbitrator erred in law by failing to consider the credibility of Mrs. Morabito's evidence about her pre-accident earning capacity. Rather than substituting my assessment of the evidence for that of the finder of fact, I conclude the appropriate disposition is to remit the matter to the Arbitrator with respect to pre-accident earning capacity.

II. BACKGROUND

Mrs. Morabito was injured in an automobile accident on June 13, 1995. She was 34 years old at the time. She and her husband operated two gas stations - a full-service station with a car wash and a smaller gas bar - through their company, M & K. She claims she cannot work as a result of impairments she suffered in the accident, mainly headaches, neck pain, temporomandibular joint ("TMJ") pain, low back pain and cognitive impairments.

Liberty paid income replacement benefits ("IRBs") under s. 7 of the of the SABS-1994¹ from one week after the accident to July 16, 1997, when IRBs were terminated pursuant to s. 64. Because her IRBs were not terminated until after the 104-week point described in s. 21(1)1, Mrs.Morabito claimed that Liberty was required to continue them until it made an LECB offer. Liberty claimed it was still obtaining medical evidence.

The parties' dispute went to an arbitration hearing in late 1999. In a decision dated January 31, 2000, the Arbitrator found that by continuing to pay IRBs after 104 weeks, Liberty conceded that Mrs. Morabito continued to qualify for them. This meant she was entitled to an LECB offer and, in case of a dispute about her REC, Liberty was required to continue paying IRBs pending the receipt of the REC DAC report.² The Arbitrator also ordered Liberty to pay a special award of $15,000, including interest, because its termination of Mrs. Morabito's IRBs was not supported by any evidence that she could return to work full-time, and its failure to pay IRBs pending an LECB offer contravened the SABS.

Although this was enough to dispose of the case, the Arbitrator went on to consider whether Mrs. Morabito was entitled to ongoing IRBs after July 16, 1997 in any event. He determined that she was. The main factual issues pertained to Mrs. Morabito's pre-accident job duties and pre-existing conditions.

Mrs. Morabito had suffered several injuries before the disputed accident, including a cervical strain from an automobile accident in May 1981 that disabled her for 15 months; a workplace injury in July 1987, when a sign fell on her shoulder, disabling her for a few months; another workplace injury in January 1990, when she fell off a chair at the gas station, and was off work for five months with a sore elbow; a broken ankle at a marina in July 1994, after which she returned to work part-time in the winter of that year; and another workplace injury in January 1995, when she slipped on ice at work and sprained the same ankle again. She had returned to work only six days before her June 13, 1995 automobile accident. She claimed she was working full-time and performing her full duties at the time of the accident.

The Arbitrator found that Mr. and Mrs. Morabito did not always distinguish between her hours and duties before the ankle injury and immediately before the automobile accident. He concluded that Mrs. Morabito was working full-time before the accident, but her duties were sedentary - processing cash and credit card sales, and doing the paperwork for the business. On reviewing the expert evidence, and the testimony of the Morabitos, the Arbitrator accepted that Mrs. Morabito "tried to work from time to time after the motor vehicle accident but was unable to work full-time hours." Though causation was also disputed, given Mrs. Morabito's pre-accident history, the Arbitrator accepted that the ankle injury did not prevent her from working as a cashier before the accident.

As required by the Arbitrator's order, Liberty made an LECB offer in mid-March 2000. The Insurer assessed Mrs. Morabito's loss of earning capacity at $23.76 per week based on an insurer examination in April 1997 that concluded she could work full-time as a credit collector. Mrs. Morabito rejected the offer with respect to both PEC and REC. In accordance with s. 23(2), a REC DAC assessment was performed between July and September 2000. The assessors concluded that Mrs. Morabito could work part-time as a general office clerk, and that her REC was $14,840, based on 20 hours per week. In November 2000, Liberty made a second LECB offer of $70.59 per week, based on the REC DAC assessment. Mrs. Morabito disagreed.

The matter came before a second Arbitrator in late 2002. Both PEC and REC were in issue. The Arbitrator heard testimony from Mrs. Morabito, her husband (Chris), her daughter (Melissa), Dr. Michael Sumner, a psychiatrist and neurologist who saw her on referral from her treating doctors in September 2001, and two of the REC DAC assessors - Dr. Denton Buchanan, a neuropsychologist, and Dr. Kenneth Craven, an occupational medicine specialist. The Arbitrator concluded that Mrs. Morabito could not work 20 hours a week on a sustained basis, though home-based administrative/clerical work was otherwise suitable for her. Nor could she work a shorter week; he found that her "lack of reliability and inability to meet deadlines would make it unlikely that she would be competitively employable at all in that capacity," and no alternative occupation had been suggested. Therefore, her REC was zero.

To determine Mrs. Morabito's PEC, the Arbitrator had to consider what contribution she and her husband made to the work of the business. He rejected Liberty's argument that Mrs. Morabito should be treated as an employee of the business, rather than self-employed. The main issue was whether Mrs. Morabito's benefit should be based on her documented income of about $23,600 in the best 52 of the 156 weeks before the accident, or a higher amount that included unreported income. The Arbitrator accepted the Morabitos' testimony that they charged personal expenses to their business and under-reported their business revenues, but he refused to increase Mrs. Morabito's benefit accordingly because he had no reliable basis for quantifying the additional income. However, he accepted the Morabito's evidence that they "had just begun, or were about to begin opening a third" gas station at the time of the accident, and estimated they could have earned $14,800 a year ($7,400 each) from that station, in addition to the income they were earning from their two existing locations. On that basis, and considering her best 52 weeks in the 156 weeks before the accident, the Arbitrator found that Mrs. Morabito's PEC was $31,000 ($23,600 plus $7,400), to be indexed under s. 79(1)4 of the SABS-1994.

The Arbitrator ordered a special award of $500 in relation to the first LECB offer, which, he found, was inconsistent with the overwhelming weight of the evidence, and was based on a nearly three-year-old assessment. He did not agree that the Insurer's second offer, which relied on the REC DAC assessment, was unreasonable. He calculated the award based on the difference between the two offers, the principal of which was found to be less than $1,500. There is no appeal with respect to the special award.

Liberty appealed, disputing both the PEC and REC findings of the Arbitrator.

III. ANALYSIS

A. Pre-Accident Earning Capacity

(i) Law

Liberty submits that there was insufficient evidence to support the Arbitrator's finding that Mrs. Morabito could reasonably have earned income of $7,400 from a third gas station. Even if I agree the Arbitrator's finding was generous, that does not answer the question before me, which is whether the Arbitrator erred in law. A factual inference or conclusion is an error of law only if it is not supported by evidence or it is based on a misapplication of legal principles to the facts.³

In the IRB context,⁴ Commission adjudicators have long accepted that a precise determination of pre-accident income may not be possible, especially where the claimant was self-employed or marginally employed. For one thing, "people do not keep records designed to calculate average gross weekly income in the four and 52 weeks preceding an unexpected event."⁵ In addition, many self-employed people lack the time or skills to produce income documentation that would satisfy a professional accountant. Given these realities, "[t]he goal should be finding a reasonable basis for making the calculation, not punishing poor record keepers."⁶ Finally, Commission adjudicators have recognized unreported income for which there is reliable evidence, although a claimant's non-compliance with tax and other legal reporting obligations will tend to undermine her credibility.

However, "there is a limit to the arbitrator's ability to 'fill in the gaps.'"⁷ I discussed the issue in Clipperton and Zurich Insurance Company:

FSCO adjudicators have allowed flexibility in proof of income, but they have insisted that the insured person bears the burden of establishing, on a balance of probabilities, a reliable basis for calculating the benefits claimed. This is difficult without documentary evidence.⁸

In the absence of reliable income documents, the oral evidence must be of sufficient reliability that it enables the arbitrator to estimate the insured person's gross annual income on a balance of probabilities. The evidence of income need not be precise, but it must be of sufficient quality to enable the arbitrator to make a reasonable estimate of the benefit to which the insured person is entitled.⁹

In that case, the Arbitrator allowed the claimant, a cab driver, an additional 5.5 per cent for unreported tips, "based on everyday experience," but rejected his claim of substantially higher unreported income. The claimant argued that his testimony was "uncontradicted," but the Arbitrator remarked: "I do not know how his testimony of what went on in his cab could be contradicted." In dismissing the appeal, I noted that this comment reflects "the common sense principle that the evidentiary burden of proof generally rests with the party that is in the best position to lead evidence on [sic] the disputed fact."¹⁰ There were other considerations supporting the Arbitrator's conclusion:

The sticking point for the arbitrator was that Mr. Clipperton's non-compliance with his tax obligations so undermined his credibility that the arbitrator could find no reasonable basis for determining any particular gross annual income figure. This is a risk a person takes when operating a "cash" business.¹¹

I concluded the decision was consistent with FSCO authorities in requiring the claimant to present, "at the very least . . . a coherent account of his financial affairs that provides a reasonable basis for an estimate of his pre-accident income.¹²

Additional considerations affect the determination of pre-accident earning capacity under s. 29 of the SABS-1994.

Pursuant to s. 29(1), the PEC of a person who was employed before the accident is deemed to be "the net weekly income from employment used in section 10 in determining the amount of weekly income replacement benefits immediately before payment of the weekly loss of earning capacity benefits begins." For self-employed persons who were working at the time of the accident, s. 29(2) requires PEC to be based on the income "the person could reasonably have earned at the time of the accident, having regard to the person's personal and vocational characteristics at that time." "Personal and vocational characteristics" are defined in s. 1 to include employment history, education and training, vocational interests and aptitudes, vocational skills, physical abilities, cognitive abilities, and language abilities.

Clearly, s. 29(2) contemplates a broader and more flexible enquiry than s. 29(1). How much broader has been at issue in a number of PEC decisions. In summary, while perfect measures are not required, pre-accident earning capacity must reflect a reasonable estimate of the insured person's realistic income expectations at the time of the accident. The evidence required depends on the nature of the claim, but may include, for example, a post-accident recall notice,¹³evidence about the cost of replacement labour required as a result of the accident, or evidence about the value of the claimant's transferable skills on the job market.¹⁴ Pre-accident earning capacity cannot be based only on hope or conjecture, and does not capture lost opportunity. An insured person's bare assertion of undocumented income is not enough to support a claim for an enhanced PEC.¹⁵

The Arbitrator stated the principles correctly.¹⁶ The issue is whether he applied them in reaching his factual conclusions based on the evidence before him.

(ii) The Evidence

As Delegate McMahon stated in Lombardi and State Farm, "[t]he line between a conclusion that there was 'no evidence' to support a finding, and a mere 'insufficiency of evidence' will often be difficult to discern".¹⁷

Both parties referred to the arbitration transcript in their submissions, and there seems little dispute about the evidence the Arbitrator received. I agree with Liberty there was no evidence for the Arbitrator's finding that the Morabitos expected to earn about $14,800 from the third station, Lakeport.¹⁸ The likely source for it was evidence about the Bunting Street location, which replaced Page Street as the Morabitos' second, smaller, station in the year before the accident.¹⁹The Arbitrator seems to have confused the Lakeport location with the Bunting Street location.²⁰His error was understandable because he lacked a transcript, and the Morabitos' testimony about the various gas stations they operated over the years was vague and confusing.²¹

That error is not fatal, if the Arbitrator's conclusion was supportable on other grounds. However, his reasons leave me unable to decide whether he had any other basis for his conclusion.

Liberty challenged Mrs. Morabito's claim on numerous grounds. For example, no documentary evidence was led in support of the Morabitos' testimony that they intended to open a third station; Liberty argues that such evidence should have been available based on the Morabitos' own testimony.²² Moreover, the Morabitos gave few details about the third station in their oral evidence, and said nothing about what they expected to earn from Lakeport. Indeed, the Arbitrator's reasons reflect his uncertainty whether they "had just begun, or were about to begin opening a third" gas station at the time of the accident.²³ This was arguably a crucial point, yet the Arbitrator failed to address its significance.²⁴

Mrs. Morabito did not introduce any expert evidence about the retail gas sector, which might have filled in the evidentiary gap in her claim. Liberty submits that the Arbitrator erred in refusing to allow its accountant, Daniel Edwards, to give such evidence. The Arbitrator refused to hear it on the basis that the accountant had not been qualified as an expert in the area and had not addressed the issue in his reports.²⁵ I am not persuaded the Arbitrator erred in refusing to qualify Mr. Edwards as an expert in the retail gas industry, but Mr. Edwards could not have dealt with the issue in his reports because the claim about a third station did not come up until the hearing. An alternative response to the Insurer's attempt to lead expert evidence about the industry might have been to adjourn the hearing to allow the parties to introduce evidence about the new claim, though Liberty did not request an adjournment. On appeal, Liberty suggests the third station claim did not appear to be of central importance at the arbitration hearing.

In my view, the Arbitrator's error was in failing to consider the credibility of the Morabitos' evidence about the third station, and in particular, how that belated and undocumented claim could be proved or disproved.²⁶

There was no mention of a third station in the first arbitration decision, dated January 31, 2000, in Mrs. Morabito's second Application for Arbitration, dated September 24, 2001, or in reports prepared by Mrs. Morabito's accountant in May 2001 and October 2002 (just before the hearing).²⁷Liberty argues that the third station claim, mentioned for the first time at the arbitration hearing, was a results-oriented response to its accountant's criticisms of Mrs. Morabito's previous arguments for an enhanced PEC based on under-reported revenue and over-reported expenses. Liberty argues that Mrs. Morabito was simply searching for any way to justify a higher PEC than she would receive based on her actual income in her best 52 of the 156 weeks pre-accident.²⁸

In addition, Liberty argued that the Morabitos' evidence about their income reporting practices suggested they were prepared to misrepresent the facts for financial gain,²⁹ which raised the question whether they were now overstating their income to obtain higher LECBs. I agree the Arbitrator erred in law by failing to address this credibility issue in his reasons. He did, however, consider the vagueness of the Morabitos' evidence. He accepted that Mrs. Morabito's reported income underestimated her actual income "to some unquantifiable degree," but refused to increase her PEC on the basis of under-reported revenue and over-reported expenses because he had no reliable evidentiary basis for quantifying the amount, and any finding would be "entirely speculative."³⁰ For the same reason, he accepted that the Morabitos attempted to maintain a stable income from year to year, but placed "little weight" on their lifestyle evidence, because "it is impossible to make any precise quantitative findings about the nexus between income and what it would buy the Morabitos."³¹

Liberty argues that the same reasoning should have doomed the third station claim. It did not because the Arbitrator found that "the most straightforward approach" to determining Mrs. Morabito's PEC was to add to her reported income of $23,600 her share of the income they could have earned from the third station:

This is more than mere speculation as the Morabitos were committed to a third location and I find that they would have operated the location, but for the motor vehicle accident. The income from this location was expected to be roughly the same as received from the Page Street location or approximately $14,800 (an average of Page street for 1991, 1992 and 1993 — separate figures for 1994 are not available). Adding 50 per cent of that amount to Mrs. Morabito’s reported income in her best 52 weeks results in a PEC of approximately $31,000 ($23,600 plus $7,400).

Accordingly, I find that Mrs. Morabito's PEC (in gross figures) at the time of the motor vehicle accident is $31,000.³²

This suggests the Arbitrator relied on what he understood to be quantitative evidence about the Lakeport station. Mrs. Morabito submits that the Arbitrator's order should stand because the decision may not have turned on this finding; the Arbitrator may have simply found these to be convenient figures on which to base a conservative estimate of the income the Morabitos could reasonably expect to receive, beyond what they reported. This is a legitimate possibility. Having accepted that the Morabitos were about to open a third station, the Arbitrator may have thought the Page station provided the best available evidence about what income the new station would generate. Alternatively, having accepted that the Morabitos did not report their incomes accurately, and acted so as to maintain a certain income and lifestyle, he may have found, balancing all the evidence he heard, that adding an additional $7,400 to Mrs. Morabito's actual income reflected a reasonable estimate of her pre-accident earning capacity. The problem is that the Arbitrator's reasons leave me with no way to determine if there was any evidentiary basis for such a conclusion.

Liberty asks me to revoke the Arbitrator's order and substitute an order that Mrs. Morabito's LECB should be based on a PEC of $23,600. I am not persuaded that is the appropriate disposition. As the Arbitrator stated, s. 29(2) allows "a certain degree of flexibility" in determining a self-employed claimant's PEC.³³ The determination may not allow for perfect measures, and a certain amount of judgement and discretion is involved in coming up with a reasonable estimate of pre-accident earning capacity. The Arbitrator is in a better position than I am to determine what, if any, additional evidence is required. As an appellate adjudicator, I am, of course, well-advised to avoid interfering with an Arbitrator's factual assessment. For the same reason, I conclude that the issue to be remitted to the Arbitrator is not limited to the third station claim, but extends to all aspects of Mrs. Morabito's pre-accident earning capacity.

B. Residual Earning Capacity

Liberty submits that the Arbitrator erred in law by concluding that Mrs. Morabito had a zero residual earning capacity. Its submissions essentially restate its position at arbitration, relying mainly on the REC DAC conducted by the Injury Management Centre in the summer of 2000. The REC DAC assessors deemed Mrs. Morabito capable of doing administrative/clerical work (for example, computer work or bookkeeping) at home, in her ergonomically modified home office, for 20 hours a week, earning $14,840.³⁴

The summary report focused on Mrs. Morabito's limited attendance at the psychological assessment and work simulation week, which she attributed to recurrent migraine headaches. Dr. Denton Buchanan, the psychologist who conducted the psycho-vocational assessment, reported that on two tests designed to detect attempts to deceive or mislead, Mrs. Morabito "fell well beyond the acceptable limits." He had no confidence in the validity of the results, and concluded, "Intentional deceit or malingering must be seriously considered in this case." Dr. Buchanan elaborated on these concerns in his testimony.³⁵

The Arbitrator considered Dr. Buchanan's evidence, but discounted it. Unlike the Arbitrator, I did not have the opportunity to observe Dr. Buchanan giving his testimony. However, the Arbitrator's inference that the psychologist's frustration with Mrs. Morabito's limited participation had "a substantial impact on his conclusions" was supported by the attention given the issue in the REC DAC report and Dr. Buchanan's oral evidence.

In any event, Liberty argues, on appeal, that any frustration felt by Dr. Buchanan could have no impact on the objective tests, which "clearly show[ed] malingering and deception." However, Dr. Buchanan did not go that far, as the Arbitrator noted.³⁶ Moreover, it was for the Arbitrator to assess the credibility of Mrs. Morabito's complaints and the ultimate question of her residual earning capacity. To make the decision, he had to consider, not only Mrs. Morabito's performance on various earning capacity tests, but also her own evidence³⁷ and that of her family members, and the evidence of the experts who testified for both parties, not just the REC DAC assessors. He was not required to base his decision on Dr. Buchanan's tests alone, or on any one piece of evidence, and it would have been inappropriate for him to do so. He was required to consider all the evidence, to weigh each piece of evidence, and give reasons for preferring one piece of evidence over another. This he did.

Amongst the expert reports considered was that of Dr. Kenneth Craven, who conducted a medical and physical assessment as part of the REC DAC. The Arbitrator's brief comments about Dr. Craven's evidence suggest he found it inconclusive.³⁸ On appeal, Liberty relies on Dr. Craven's report, which stated that Mrs. Morabito demonstrated a functional range of motion in her spine and limbs, attended for only 12 hours on one of the five scheduled days of work simulation, and reported she was working part-time from home doing some administrative work for M & K. However, Dr. Craven also predicted, based mainly on Mrs. Morabito's medical history since the accident, rather than the pre-existing degenerative changes in her spine, that she would likely continue to have neck pain and headaches. He recommended that she avoid activities requiring "considerable neck extension, highly repetitive neck flexion and extension, or whole body vibration," but stated she could otherwise "safely be active within her symptom tolerances." (p. 12) The assessors also noted certain "activities that may aggravate her symptoms, related both to the accident or to pre-existing conditions" - sustained and repetitive overhead work, continuous standing, prolonged walking and frequent squatting. They recommended she avoid driving or operating machinery because of her medications.

The Arbitrator accepted, as undisputed, that "Mrs. Morabito did attempt to contribute to the family business for a considerable length of time after the accident."³⁹ He also found she had the intellectual capacity and skills to do administrative/clerical work from her home office.⁴⁰ But he did not accept that she could do so for 20 hours a week on a sustained basis. He did not accept that such a conclusion was justified based only on an extrapolation from Mrs. Morabito's post-accident work history. He found there was no other evidence she could work on a sustained basis. He preferred the evidence of Mrs. Morabito and her family, supported by Dr. Sumner and Dr. G.A. Fulton, a physiatrist who assessed her in May 1999 at Liberty's request, both of whom accepted that Mrs. Morabito was competitively unemployable because she could work only for two hours at a time, and not reliably or consistently.⁴¹ For the same reason, the Arbitrator dismissed Liberty's suggestion she could work for 10 hours a week, finding that "her lack of reliability and inability to meet deadlines would make it unlikely that she would be competitively employable at all in that capacity."⁴²

In my view, the Arbitrator's finding that Mrs. Morabito had zero residual earning capacity was consistent with the principle that the test for employability must take account of the economic realities of a competitive workplace that demands reliable and consistent productivity. Further, while a return to work creates a presumption in favour of work-readiness, the presumption may be rebutted by evidence of a failed or unsustainable return to work.⁴³

Finally, the Arbitrator noted, "At this point there is no alternative employment suggested by Liberty Mutual or any that finds any support in the evidence." Liberty submits that this was in error because it implied that it was the Insurer's responsibility to suggest alternative employment. Liberty took the position, based on the REC DAC, that Mrs. Morabito was capable of doing the work she was doing before the accident. However, there was no suggestion that Mrs. Morabito ever returned to any of the non-administrative duties she had carried out before the accident, and the Arbitrator accepted she was unable even to perform her administrative duties on a sustainable basis. This meant her REC must be based on alternative employment. As there was simply no evidence of any other suitable employment, I am not persuaded the Arbitrator erroneously put the onus on the Insurer. If Mrs. Morabito was unable to sustain work from her home office in her family business, she was unlikely to be employable in the competitive marketplace. In any event, the real barriers for Mrs. Morabito were sustainability and productivity.

Liberty would undoubtedly have preferred the Arbitrator to accept its evidence, but the Arbitrator was well within his authority in preferring the evidence put forward by Mrs. Morabito, and I am not satisfied the Arbitrator erred in doing so.

IV. EXPENSES

If the parties are unable to agree on appeal expenses, the matter may be resolved in accordance with Rule 79 of the Dispute Resolution Practice Code.

October 8, 2004

Nancy Makepeace

Director's Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended.
2. 2A report of a designated assessment centre ("DAC") appointed under s. 26 to assess residual earning capacity ("REC") under s. 30 of the SABS-1996. Section 23(2) of the SABS-1994 requires a REC DAC assessment if the insured person rejects the insurer's offer in respect of residual earning capacity.
3. 3Housen v. Nikolaisen, 2002 SCC 33, [2002] S.C.J. No. 31 (S.C.C.), Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01-00022, February 26, 2003).
4. 4Pursuant to s. 10 of the SABS-1994, the amount of the IRB is based on the insured person's net income from employment, calculated in accordance with the rules set out in that section.
5. 5Mills and Canadian General Insurance Company, (OIC P-005599, October 8, 1996), at p. 4.
6. 6Ibid.
7. 7Ibid.
8. 8(FSCO P01-00008, August 24, 2001), p. 9
9. 9Ibid., pp. 10-11.
10. 10At p. 10.
11. 11Ibid., p. 11.
12. 12Ibid., p. 10. See also, for example, Ferenczi and State Farm Mutual Automobile Insurance Company, (FSCO P98-00021, September 27, 1999), and Price and Liberty Mutual Insurance Company, (FSCO P00-00018, February 19, 2001). On the quality of income evidence required, see for example, Agha and General Accident Assurance Company of Canada, (OlC P-009703, February 27, 1997), and Carr and Lombard General Insurance Co. of Canada, (FSCO A00-000441, September 11, 2001).
13. 13Lehman and GAN Canada Insurance Company, (FSCO P97-00064, August 10, 1998), p. 17.
14. 14See, for example, Ironside and Royal Insurance Company of Canada, (FSCO P99-00011, November 30, 1999) and Shadd and Liberty Mutual Fire Insurance Company, (FSCO P02-00001, December 24, 2002).
15. 15By "enhanced PEC," I mean a PEC that exceeds the amount guaranteed by s. 29(4) of the SABS-1994 — in this case, the reported income Mrs. Morabito earned in the best 52 weeks of the 156 weeks before the accident.
16. 16Arbitration decision, pp. 11-12.
17. 17(FSCO P01-00022, February 26, 2003), p. 10.
18. 18Arbitration decision, p. 14: "The income from this [third] location was expected to be roughly the same as received from the Page Street location or approximately $14,800 (an average of Page Street for 1991, 1992 and 1993 - separate figures for 1994 are not available)."
19. 19Examination and Cross-Examination of Daniel Edwards, Arbitration Transcript, November 5, 2002, Questions 141-148 and 250-260.
20. 20See also p. 9 of the arbitration decision: "At the time of the accident they were operating two (Ontario Street and Page Street) and had just begun, or were about to begin operating a third location."
21. 21There appears to have been no dispute that the Morabitos operated the full service Ontario Street station (at which they had previously been employed) between 1990 and 1996 or 1997, and operated Page Street, a much smaller station that did not have a car wash, between 1990 to 1993, both for Pioneer. Mr. Morabito ran Ontario Street, and Mrs. Morabito ran Page Street. By the time of the accident in June 1995, the Morabitos had given up Page Street, but had opened a second location at Bunting & Welland Streets, initially as an independent, then for Cango. This was about the same size as Page Street, or smaller (it had a kiosk, not a building), and Mrs. Morabito ran it. The Morabitos also testified about several other stations they operated at various times during the period at issue. The important station, for purposes of this dispute, was the Lakeport location, about which there was no income evidence.
22. 22For example, see questions 140-162 of the Examination of Chris Morabito, Arbitration Transcript, November 5, 2002, with respect to the Morabitos' agreement to open the Lakeport station.
23. 23Arbitration Decision, p. 9.
24. 24It is not clear whether this remark reflects the Morabitos' confusing testimony about the Lakeport station, or the confusion of Lakeport with Bunting and Wellington. Either way, the point is significant.
25. 25Arbitration Transcript, November 5, 2002, Cross-Examination of Daniel Edwards, p. 44.
26. 26See, for example, Clipperton and Zurich, discussed at p. 7, above.
27. 27In his first report, R. Andrew James, of Durwood Jones Barkwell and Company LLP, added back $17,000 in estimated personal expenses (insurance, vehicle and telephone charges) that the Morabitos claimed had been written off their business income: Appellant's Exhibit Brief, Tab 4. In his second report, he provided a revised calculation of her income that included unreported car wash revenue of $10,869 for the best 52 of the 156 pre-accident weeks: Appellant's Exhibit Brief, Tabs 6 and 7.
28. 28Liberty relies, for example, on Mr. James' testimony on November 4, 2002, Arbitration Transcript, p. 50.
29. 29Arbitration Transcript, Cross-Examination of Chris Morabito, November 6, 2002, Questions 57-71 and 87 -101.
30. 30Arbitration decision, p. 13.
31. 31Ibid.
32. 32Ibid., p. 14.
33. 33Ibid., p. 11.
34. 34Classified in the FSCO 2000 REC Wage Table as General Office Clerks, N.O.C. Code 1411. The full-time wage, based on 36 months but less than 120 months experience, is $29,680.
35. 35See, for example, his answers to Questions 66-70, 76, 82 (arbitration transcript, October 30, 2002). The raw test results were admitted as Arbitration Exhibits 11A, 11B and 12.
36. 36Arbitration decision, p. 7: "...he was careful to state that he made no positive finding in this regard." Arbitration transcript, October 30, 2002, Question 480.
37. 37Including her demeanour on the stand, which the Arbitrator described on p. 5 of the decision. I have no basis for second-guessing his observations.
38. 38Arbitration decision, p. 7.
39. 39Discussed at p. 8 of the arbitration decision. Liberty excerpted Mrs. Morabito's testimony about her post-accident work at para. 76 of its appeal submissions. This evidence indicated that Mrs. Morabito could work, at most, for two or three hours over the course of a day in 1995 and 1996.
40. 40Arbitration decision, p. 9.
41. 41Dr. Sumner's report is found at arbitration exhibit 3, Tab 17. See also his answer to questions 75-77, arbitration transcript, November 5, 2002. Dr. Fulton's report is found at Arbitration Exhibit 5, Tab 13.
42. 42Ibid.
43. 43The leading decisions are Chudy and West Wawanosh Mutual Insurance Company, (FSCO A96-000924, January 23, 1997) and Lanctot and Zurich Insurance Company, (FSCO P99-00012, November 9, 1999).