Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 31

FSCO A00-000163

BETWEEN:

ROBERT LACROIX

Applicant

and

JEVCO INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

Eban Bayefsky

Heard:

June 6, 2005, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

David J. Gillespie for Mr. Lacroix

Jamie Pollack for Jevco Insurance Company

Issues:

The Applicant, Robert Lacroix, was injured in a motor vehicle accident on June 10, 1994. He applied for and received statutory accident benefits from Jevco Insurance Company ("Jevco"), payable under the Schedule.¹ The parties ultimately disagreed as to the quantum of Mr. Lacroix's income replacement benefits ("IRBs") and loss of earning capacity benefits ("LECBs") and proceeded to arbitration on a number of issues in this regard. By decision dated June 27, 2002, I issued the following orders:

The following amounts are to be used in the calculation of Mr. Lacroix's IRBs and LECBs:

i) Mr. Lacroix's base pay for the 4 weeks preceding the accident is $4,459.68.

ii) The value of Mr. Lacroix's 4.5 weeks of annual vacation is not to be included in the calculation of his gross annual income.

iii) Mr. Lacroix's employee benefits (CPP, EI, EHT and WSIB) are not to be included in the calculation of his GAI.

iv) The "normal employer cost" of 2.97% for the employer's pension contribution is to be included in the calculation of Mr. Lacroix's GAI.

v) Jevco is not entitled to use the income tables under section 82 of the Schedule to calculate Mr. Lacroix's net weekly income from employment.

vi) Jevco is required to index Mr. Lacroix's IRBs as of January 1, 1996.

vii) Mr. Lacroix's disability pension benefits are not a deductible collateral benefit.

Mr. Lacroix's LECBs shall be calculated on the basis that his residual earning capacity is zero.
Jevco is not liable to pay Mr. Lacroix a special award.
Mr. Lacroix is entitled to interest on the amounts now owing.

The parties did not appeal these findings. However, they were unable to agree on the precise amounts owing to Mr. Lacroix and eventually returned to arbitration on matters arising out of the initial decision, as well as on new issues. By decision dated June 16, 2004, I issued the following orders:

Jevco shall pay Mr. Lacroix interest on his LECBs as of June 10, 1996.
In determining the amount of LTD benefits deductible by Jevco, the tax Mr. Lacroix pays on his LTD benefits shall be calculated on the basis of his total post-accident income.
The pension contributions General Motors makes on Mr. Lacroix's behalf are not taxable for the purposes of calculating Mr. Lacroix's net weekly income from employment.
Mr. Lacroix's post-accident employee benefits are not a deductible collateral benefit.

Jevco appealed these findings. By decision dated March 23, 2005, Director's Delegate Evans issued the following orders:

The appeal is allowed in part. Paragraph 4 of the Arbitrator's decision of June 16, 2004 is revoked and replaced with the following order:
Mr. Lacroix's post-accident employee benefits are a deductible collateral benefit.
With respect to paragraph 1, the matter is referred back to the Arbitrator to determine at what point the parties agreed to convert income replacement benefits to loss of earning capacity benefits, in order to determine the interest owing on the loss of earning capacity benefits.
Paragraphs 2 and 3 of the Arbitrator's decision of June 16, 2004 are confirmed.

The issue in this further hearing is:

At what point did the parties agree to convert income replacement benefits to loss of earning capacity benefits, in order to determine the interest owing on the loss of earning capacity benefits?

Result:

The parties agreed to convert income replacement benefits to loss of earning capacity benefits on June 12, 1996. Jevco shall pay Mr. Lacroix interest on his loss of earning capacity benefits as of June 10, 1996, to the extent of any deficiency between the LECBs it paid Mr. Lacroix and the LECBs owing to Mr. Lacroix pursuant to the arbitration and appeal decisions in this matter.

EVIDENCE AND ANALYSIS:

Background

Following Mr. Lacroix's June 1994 motorcycle accident and as a result of his inability to return to his job as a utility welder at General Motors, Jevco began paying Mr. Lacroix income replacement benefits at a rate of $316.97 per week. Pursuant to section 21 of the Schedule, given that Mr. Lacroix continued to qualify for IRBs 104 weeks after the onset of his disability (namely, June 10, 1996), Jevco was required to promptly deliver to Mr. Lacroix a written offer with respect to the payment of weekly loss of earning capacity benefits. However, pursuant to section 21(8) of the Schedule, the time for delivering an LECB offer could be extended by agreement between Mr. Lacroix and Jevco.

By letter dated May 28, 1996, Jevco advised Mr. Lacroix that it was having considerable difficulty in obtaining job information from Mr. Lacroix's employer (General Motors) and that it was "impossible to proceed to any sort of Loss of Earning Capacity (LEC) assessment without this information." Jevco, therefore, sought Mr. Lacroix's consent permitting it to "continue to pay [him] weekly benefits..., possibly until the LEC assessment has been completed" and to "have his Income Replacement Benefits (IRB) commuted to Weekly Loss of Earning Capacity Benefits (WLECB), pursuant to section 24 of the SABS." Section 24 of the Schedule states, in part, that a person who has not received an LECB offer under section 21 and who is entitled to receive IRBs may "agree in writing with the insurer that the insurer will pay the person weekly loss of earning capacity benefits instead of the weekly benefits the person would otherwise be entitled to."

On June 12, 1996, Mr. Lacroix granted Jevco his consent for this arrangement by signing the following "Acknowledgement":

I, ROBERT LACROIX in accordance with the request from JEVCO INSURANCE hereby agree to have my Income Replacement Benefits (IRB) commuted to Weekly Loss of Earning Capacity Benefits (WLECB), pursuant to Section 24, of the Statutory Accident Benefits Schedule, and I will be paid at the same rate that I am now receiving from JEVCO INSURANCE in the amount of $1,267.88, every four week period.

In the fall of 1996, the parties continued to discuss the proper quantum of Mr. Lacroix's weekly benefits. On September 30, 1996, Mr. Lacroix provided Jevco with information indicating that his GM Pension and federal income tax were being deducted from his employment disability benefit and asked that his benefits be adjusted accordingly. By letter dated October 16, 1996, Jevco acknowledged the new information and stated that "Mr. Lacroix's income replacement benefits have been set back to their prior level."

On May 26, 1997, Jevco made a formal LECB offer to Mr. Lacroix. Jevco determined Mr. Lacroix's pre-accident earning capacity ("PEC") to be "$28.96 an hour based on a 40-hour work week." Based on a Transferable Skills Assessment indicating that Mr. Lacroix was employable as a Pressure Sealer-and-Tester (Aircraft Manufacture), Jevco determined Mr. Lacroix's residual earning capacity ("REC") to be "a rate of $18.23 per hour." Jevco concluded as follows:

The difference between the hourly PEC and REC is $10.73 per hour. Based on a 40-hour week, this represents a gross amount of $429.20, and a net amount of $329.58, which would be payable at 90% or $296.62 per week. However, as per Section 75 of the SABS, we would deduct GM pension, which is $264.54 per week, and therefore the LEC would equal $32.08 per week.

Accordingly, our offer to Mr. Lacroix is $32.08 per week. This would be affected by any other source of collateral benefits qualifying under Section 75 of the SABS and which may not be listed above.

Jevco deemed Mr. Lacroix to have rejected both the PEC and REC determinations in the LECB offer on the basis that he had not accepted the offer within forty-five days of its receipt. Jevco, therefore, arranged for a REC DAC assessment, which occurred in September and October 1997. By an Explanation of Assessment, dated February 16, 1998, Jevco advised Mr. Lacroix that they would commence paying LECBs of $58.43 per week effective February 17, 1998. By letter dated April 22, 1998, Jevco confirmed this determination, indicating that, based on the REC DAC assessment, Mr. Lacroix's LECB was "now $322.97 per week, less your GM pension of approximately $264.54 per week, which [eaves a net benefit of $58.43 per week."

On April 30, 1998, Mr. Lacroix advised Jevco that he objected to Jevco's LECB offer on the basis that it was "not in accordance with Section 21, of the Statutory Accident Benefits Schedule (post 1994)." Mr. Lacroix specifically objected to Jevco's deduction of his GM pension. On May 13, 1998, Jevco referred Mr. Lacroix to its May 26, 1997 LECB offer, asked for clarification from Mr. Lacroix as to its alleged non-compliance with section 21, and advised that it understood that Mr. Lacroix's GM pension was based on "his inability to return to his pre-accident duties of employment."

On December 16, 1998, Jevco advised Mr. Lacroix of an error in the calculation of his LECBs and adjusted them to $94.69 per week retroactive to January 12, 1998. At a Commission mediation held on December 10, 1999, Jevco agreed to a further revision of Mr. Lacroix's LECBs to $158.17 per week, based on its acknowledgement that Mr. Lacroix's GM pension ought not to have been deducted from his LECBs. However, the parties continued to dispute the proper calculation of Mr. Lacroix's IRBs and LECBs and proceeded to arbitration on this matter (which included the question of what Mr. Lacroix's residual earning capacity was for the purpose of calculating his LECBs).

In the first arbitration decision, I stated that Jevco accepted Mr. Lacroix's initial claim of disability and "paid him income replacement benefits until the parties agreed to commute his IRBs to LECBs, pursuant to section 24 of the Schedule." I made various findings concerning the calculation of Mr. Lacroix's IRBs and LECBs (as set out above) and found that Mr. Lacroix was entitled to interest on the amounts then owing.

The parties returned to arbitration on various issues, including whether, pursuant to section 68 of the Schedule, Mr. Lacroix was entitled to interest on his LECBs as of June 10, 1996 (the 104-week mark) or as of June 27, 2002 (the date of the first arbitration decision). In the second arbitration decision, I found that Mr. Lacroix was entitled to interest on his LECBs as of June 10, 1996. I stated that my initial finding that there was insufficient evidence to conclude that Jevco had unreasonably withheld or delayed payments was not determinative of the issue of whether interest ought to be paid from the time LECBs commenced. I further found that, to the extent that error or fault on the part of an insurer was a consideration in the awarding of interest, Jevco ought to pay interest from the time the benefits owing became due, namely, the two-year mark, on the basis that it had erred in its assessment of Mr. Lacroix's LECB entitlement, both in terms of his physical abilities and in terms of the calculation of his benefits. Finally, I found that, even if Jevco's assessment of Mr. Lacroix's LECB entitlement had to some extent been limited by the information available to it at different times, this was only one aspect of its LECB determination, since it had made certain determinations on its own, in respect of which I later found Jevco to have erred. I, therefore, concluded that Mr. Lacroix's LECBs were overdue as of the two-year mark and that Jevco ought to pay interest from that time.

In the appeal of this decision, the Director's Delegate stated that "the Arbitrator properly refused to exercise his discretion to delay the date from which LECBs were overdue." However, the Director's Delegate continued as follows:

...there is one aspect of the Arbitrator's decision that remains to be determined. The problem is that in decision 1, the Arbitrator wrote that Jevco paid Mr. Lacroix IRBs "until the parties agreed to commute his IRBs to LECBs, pursuant to section 24 of the Schedule. Jevco...has been paying Mr. Lacroix LECBs since February 17, 1998." In decision 2, he found that interest was owing from June 10, 1996, meaning that LECBs were overdue at that point. There is a contradiction between these two decisions. I do not have the evidence to determine at what point the parties agreed to convert the IRBs to LECBs. Accordingly, the matter will be referred back to the Arbitrator to determine this point.

Mr. Lacroix submitted that the parties agreed to convert his IRBs to LECBs on June 12, 1996, being the date he signed the "Acknowledgement." Jevco submitted that the June 12, 1996 Acknowledgement simply extended the time in which it could assess the quantum of Mr. Lacroix's LECBs and make him an LECB offer, and that the agreement to convert did not occur until January 12 or February 17, 1998 when Jevco began paying Mr. Lacroix a new level of weekly benefits.

Findings

I find that the parties agreed to convert income replacement benefits to loss of earning capacity benefits on June 12, 1996. Therefore, given my initial decision that Mr. Lacroix was entitled to interest on his LECBs as of June 10, 1996, given the appeal decision's finding that I had "properly refused to exercise [my] discretion to delay the date from which LECBs were overdue" and given the fact that Jevco continued paying Mr. Lacroix's IRBs as LECBs as of the date they became due (namely, June 10, 1996), I find that Mr. Lacroix continues to be entitled to interest on his LECBs as of June 10, 1996. Since the appeal decision remitted the question of the conversion date "in order to determine the interest owing on the loss of earning capacity benefits," I would add that Jevco would not be obligated to pay interest on Mr. Lacroix's LECBs to the extent that it had already paid Mr. Lacroix the benefits he was owed. In other words, Jevco is only liable to pay Mr. Lacroix interest to the extent of any deficiency between the benefits he was, in fact, paid (pursuant to the parties' agreement of June 12, 1996) and the benefits he was found to be owed (pursuant to the arbitration and appeal decisions in this case).

I find that the June 12, 1996 "acknowledgement" is clear that, at that point, Mr. Lacroix agreed to have his IRBs converted to LECBs. The parties entered into this arrangement "pursuant to section 24, of the... Schedule." In my view, the parties need not have invoked section 24 since that provision contemplates the parties agreeing to bypass the LECB offer process by simply paying the insured LECBs instead of the IRBs to which he or she would otherwise be entitled, whereas in the current situation, the parties agreed to convert Mr. Lacroix's IRBs to LECBs pending the proper calculation of his LECBs and Jevco's compliance with the normal LECB offer process. In any event, based on Jevco's letter of May 28, 1996 and Mr. Lacroix's letter of June 12, 1996, I find that the purpose of the agreement was to allow Jevco more time to assess the proper rate at which it would offer to pay Mr. Lacroix LECBs and, in the interim, to pay him LECBs at the rate at which he was being paid IRBs. While not explicitly stated, Jevco likely sought this arrangement to avoid any suggestion that it had improperly and/or unreasonably failed to comply with its obligation under section 21 of the Schedule to "promptly deliver" an LECB offer to Mr. Lacroix.

I find it significant that the June 12, 1996 agreement simply addressed the commutation of Mr. Lacroix's IRBs to LECBs (specifying that the LECBs would be paid at the same rate as the IRBs). The agreement did not delay the point at which LECBs became payable. On the contrary, by seeking Mr. Lacroix's consent to the commutation of benefits, I find that Jevco acknowledged that Mr. Lacroix was owed LECBs as of the 104-week mark (namely, June 10, 1996). At no point in these proceedings did Jevco question this. The only dispute between the parties has been the quantum of Mr. Lacroix's benefits, in particular, the rate at which his LECBs ought to be paid. Further, the only issue at the second arbitration hearing was whether interest was payable on Mr. Lacroix's LECBs as of June 10, 1996 (the two-year mark) or June 27, 2002 (the date of my initial decision). I found that interest was payable as of June 10, 1996 and this was upheld, subject to the remaining question of when the parties agreed to convert Mr. Lacroix's IRBs to LECBs, which I have found to be on June 12, 1996.

The June 12, 1996 agreement was silent on the issue of interest. In my view, while Mr. Lacroix allowed Jevco more time to gather the information upon which it would assess the proper quantum of benefits, he did not thereby waive or otherwise compromise his right to interest on any amounts found to be owing, particularly where, as set out in the second arbitration decision, there were independent reasons regarding Jevco's assessment of Mr. Lacroix’s LECB entitlement that justified ordering interest as of the two-year mark. I note, in this regard, that Jevco was unable to properly calculate Mr. Lacroix’s LECBs, not through any fault of Mr. Lacroix s, but, as stated in Jevco’s letter of May 28, 1996, because "to date, General Motors cooperation has been minimal." Further, the appeal decision found that there was no basis upon which "to delay the date from which LECBs were overdue." I, therefore, find that the June 12, 1996 agreement did not delay the point at which LECBs and interest became payable, namely, June 10, 1996.

Based on the information it gathered and the determinations it made, Jevco delivered its LECB offer in May 1997 and, in February 1998, adjusted the rate at which it had been paying Mr. Lacroix weekly benefits. In my view, these events do not affect the date at which LECBs and interest became payable. The June 1996 "acknowledgement" marked the point at which the parties not only agreed to convert Mr. Lacroix’s IRBs to LECBs, but in fact converted his IRBs to LECBs. The agreement was simply designed to allow Jevco more time to assess the quantum of Mr. Lacroix’s LECBs, not to convert Mr. Lacroix’s IRBs to LECBs at a later date. Contrary to Jevco’s assertion in the current proceeding, there is no evidence to suggest that the parties agreed to convert Mr. Lacroix’s IRBs to LECBs in February 1998. That is only when Jevco began to pay Mr. Lacroix the newly-calculated quantum of LECBs. The May 1997 and February 1998 dates were when Jevco unilaterally determined Mr. Lacroix’s LECB entitlement, based on information and assessments over which Mr. Lacroix had no particular control. Again, the absence of certain information was only one aspect of Jevco’s consideration of Mr. Lacroix’s LECB entitlement. I found Jevco to have erred in both its substantive and quantitative assessment of Mr. Lacroix’s LECB entitlement. I, therefore, find that June 10, 1996 continues to be the point at which Mr. Lacroix’s LECBs and interest became payable.

The period after June 1996 is relevant to the issue of interest to the extent that Jevco paid Mr. Lacroix the benefits to which he was otherwise entitled. That is, while interest is payable as of June 10, 1996, it is only payable on the benefits that were owing to Mr. Lacroix pursuant to the arbitration and appeal decisions in this matter and which Jevco failed to pay to Mr. Lacroix. I agree with Mr. Lacroix’s submission that, in accordance with the Ontario Court of Appeal decision in Mercier v. Royal & SunAlliance Insurance Co. of Canada (2004), 2004 CanLII 5551 (ON CA), 72 O.R. (3d) 94, interest is payable on the difference between what an insurer pays in the course of adjusting a claim and what is ultimately ordered to be paid by the trial judge.² By virtue of the June 1996 agreement, Jevco paid Mr. Lacroix LECBs at the rate at which it had been paying him IRBs. Jevco later adjusted this amount on a few occasions based on the financial and medical information it gathered, and on its own determinations of the proper calculation of Mr. Lacroix's benefits. Jevco's determinations were the subject of the arbitration and appeal decisions. I do not know the rate at which Jevco ultimately paid Mr. Lacroix LECBs pursuant to these decisions. However, given my finding that interest is payable as of June 10, 1996 and the fact that Jevco has already paid Mr. Lacroix LECBs at varying rates, Jevco is only liable to pay interest effective June 10, 1996 on any deficiency between the benefits it paid and the benefits owing to Mr. Lacroix pursuant to the arbitration and appeal decisions issued in this matter.

Finally, Mr. Lacroix submitted that, pursuant to Rules 65.5 and 65.6 of the Dispute Resolution Practice Code, I should clarify that interest is also owing on his benefits within two years of the accident, namely, from June 10, 1994 to June 10, 1996. Rule 65.5 states that an arbitrator may, at any time, correct a typographical error, error of calculation, technical error or similar error made in his or her decision or order. Rule 65.6 states that an arbitrator may, at any time, clarify a decision or order that contains a misstatement, ambiguity or other similar error. For the following reasons, I am not prepared to correct, clarify or otherwise review the issue of Mr. Lacroix’s entitlement to interest within two years of the accident.

In the first decision, I ordered Jevco to pay Mr. Lacroix "interest on the amounts now owing." In the second decision, I ordered Jevco to pay Mr. Lacroix "interest on his loss of earning capacity benefits as of June 10, 1996." While the noted Rules state that an arbitrator may "at any time" correct or clarify a decision, the only issue since the first arbitration decision has been that of interest on Mr. Lacroix’s LECBs, specifically the date at which interest on the LECBs should commence. The second arbitration decision considered that question in detail. The only issue remitted to me from the appeal hearing was the point at which the parties agreed to convert Mr. Lacroix's IRBs to LECBs in order to determine the interest owing on Mr. Lacroix's LECBs. Neither the first nor the second arbitration decision contains a technical error or misstatement in respect of the issue of interest. To the extent of any ambiguity on this issue, neither Mr. Lacroix nor Jevco advised of a dispute on Mr. Lacroix's entitlement to interest on IRBs within two years of the accident. To my knowledge, at no point prior to the current hearing did Mr. Lacroix provide notice of his request for a correction or a clarification of my previous decisions. In all of the circumstances, I am not prepared to revisit or otherwise review the issue of interest on Mr. Lacroix’s benefits in the two years following the accident.

EXPENSES:

In the earlier proceedings, the parties resolved the issue of expenses. Should they be unable to do so in the present case, they may seek an assessment in accordance with the procedures set out in Rule 79 of the Dispute Resolution Practice Code.

February 22, 2006

Eban Bayefsky Arbitrator

Date