Financial Services Commission of Ontario

Neutral Citation: 2007 ONFSCDRS 253 FSCO A07-000768

BETWEEN:

MARIA A. LONGO Applicant

and

LOMBARD GENERAL INSURANCE COMPANY OF CANADA Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Joyce Miller Heard: November 27, 2007, at the offices of the Financial Services Commission of Ontario in Toronto. Written submissions were received on November 23, 2007.

Appearances: J.M. Arthur Lefebvre for Ms. Longo Harry Brown for Lombard General Insurance Company of Canada

Issues:

The Applicant, Maria A. Longo, was injured in a motor vehicle accident on May 9, 2003. She applied for and received statutory accident benefits from Lombard General Insurance Company of Canada (“Lombard”), payable under the Schedule.¹ Ms. Longo disputed Lombard’s calculation of her income replacement benefit for the purposes of deducting post accident income from employment. The parties were unable to resolve their disputes through mediation, and Ms. Longo applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

1. Pursuant to subsection 6(2) of the Schedule, should Ms. Longo’s post accident income be deducted: (i) from her income replacement benefit calculated under subsection 6(1) to be $532; or (ii) from her income replacement benefit payable calculated pursuant to subsection 7(1)2 to be $400?

Result:

1. Ms. Longo’s income replacement benefit calculated under section 6(2) is 80 per cent of her post-accident net weekly income, subtracted from her income replacement benefit payable which was determined to be $400 pursuant to subsection 7(1)2 of the Schedule.

BACKGROUND:

At the time of her car accident, Ms. Longo was employed at two jobs. One was a fulltime job as a healthcare worker at Brantford General Hospital as a registering clerk. The other was a part-time job with Brantford Urgent Care clinic in a similar capacity.

Pursuant to subsection 6(1) of the Schedule, Ms. Longo’s income replacements benefit (i.e. 80 per cent of Ms. Longo’s net weekly income form employment) was calculated to be $532. Pursuant to subsection 7(1)2(ii), Ms. Longo’s income replacement benefit payable was limited to $400.

Ms. Longo returned to work at her full time job on permanent modified duties and was paid collateral benefits for time missed from work. She has not returned to the part-time job due to her injuries as a result of the accident.

For a period of time, Lombard paid Ms. Longo an income replacement benefit wherein it calculated her income replacement benefit by deducting her post-accident income from $532. Lombard submits that this was done in error and that her income replacement benefit should be calculated by deducting her post accident income from her income replacement benefit payable of $400 per week.² Ms. Longo disputes Lombard’s interpretation of the legislation.

THE LAW

At the time of the accident, the relevant provisions of the Schedule read as follows:

6(1) The amount of the income replacement benefit shall be, (a) for each of the first 104 weeks of disability, 80 per cent of the insured person’s net weekly income from employment determined in accordance with section 61; and (b) for each week after the first 104 weeks of disability, the greater of the amount specified in clause (a) and $185.

(2) The insurer may deduct from the amount of the income replacement benefit payable to an insured person 80 per cent of the net income received by the insured person in respect of any employment subsequent to the accident.

7(1) Despite subsection 6 (1) but subject to subsections 6 (2) to (6), the weekly amount of an income replacement benefit payable to a person shall be the lesser of the following amounts:

1. The amount determined under subsection 6 (1), reduced by, i. net weekly payments for loss of income that are being received by the person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan, and ii. net weekly payments for loss of income that are not being received by the person but are available to the person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan, unless the person has applied to receive the payments for loss of income.
2. The greater of the following amounts: i. $400. ii. If the optional income replacement benefit referred to in section 27 has been purchased and is applicable to the person, the amount fixed by the optional benefit.

SUBMISSIONS

Ms. Longo’s Submissions

Ms. Longo submits that the legislation is ambiguous. She points out that until the unreported case of Gervais v. Primmum Insurance Company³ in March 2003, it was understood that the practice by the insurers was to deduct post accident income pursuant to subsection 6(2) from the amount of income replacement benefit calculated under subsection 6(1) of the Schedule.

Ms. Longo submits that the Gervais decision relied on cases that were either not relevant and/or distinguishable and did not provide an analysis for its conclusion that post-accident income is not deducted from the income replacement benefit calculated pursuant to subsection 6(1).

Ms. Longo submits that given the two distinct interpretations of how post accident benefits should be deducted, that the legislation is ambiguous as to which amount must be considered before calculating the income replacement benefit when there is post accident income. Accordingly, Ms. Longo submits that in the case of ambiguity, the answer must be decided in the insured’s favour.

Ms. Longo submits that the “purpose of the statutory accident benefits is to ensure that an insured receives a fair or adequate level of income replacement when they are unable to work because of injuries from a car accident.”

Ms. Longo submits that Lombard’s interpretation means that she would be under-compensated because she is unable to return to her second position. Succinctly, Lombard’s interpretation of the legislation would penalize an insured person who makes an effort to return to work.

In support of her position, Ms. Longo relies on the Ontario Court of Appeal decision in Bapoo v. Co-operators General Insurance Co.⁴ wherein it stated:

The interpretation of a statutory provision should not only comply with the legislative text and promote the legislative purpose, it should yield a reasonable and just outcome.

Avoiding unjust or unacceptable results is an essential part of the court’s task in interpreting statutory language.

Ms. Longo submits that Lombard’s position results in an unjust outcome for people in her situation.

Ms. Longo further submits that had the legislators not wanted to have made a difference from previous legislation in deciding from which amount post accident benefits would be deducted, they would have worded the section similarly to subsection 12(4) of Bill 68,⁵ which states that the weekly benefit will be the lesser of $600 and 80 per cent of an insured person’s gross weekly income. Pursuant to section 15 of Bill 68, income received post-accident is deducted from the benefit payable.

Ms. Longo submits that the differences between Bill 68 and Bill 59 are striking in that income replacement benefits were significantly reduced under Bill 59. If the interpretation was to be the same as Bill 68 then the wording could have been the same. The wording in Bill 59 is entirely different. Ms. Longo submits that the change in the wording justifies her interpretation. This is supported by the fact that Lombard paid her benefits in accordance with her interpretation until the two-year mark.

Lombard’s Submissions

Lombard submits that the words under subsection 6(2) are clear and unequivocal and present no ambiguity or absurdity.

Lombard points out that despite the amount calculated pursuant to subsection 6(1), pursuant to section 7, which governs section 6, an income replacement benefit payable is limited to $400, even if the calculated amount is higher.

Lombard submits that pursuant to sections 6 and 7 of the Schedule the case law consistently interprets an insured’s income replacement benefit payable to be the lesser of the $400 limit and the amount of the income replacement benefit calculation, pursuant to subsection 6(1).

Lombard points out that the word “payable” is key in subsection 6(2) and distinguishes it from the calculation in subsection 6(1) which merely provides the base calculation of an insured’s income replacement benefit.

Lombard submits that it would be inconsistent and absurd to interpret the income replacement benefit in one way when there is no deduction for post-accident income and a second and different calculation when the post accident income is to be deducted.

Lombard submits that Bill 59 is a completely different system from Bill 68. Lombard points out that a significant difference between Bill 68 and Bill 59 is the fact that under Bill 59, unlike Bill 68, an insured has a right to sue for all economic losses without any threshold. Lombard points out that Ms. Longo had a tort case that settled and that the issue of economic loss should have been dealt with in the tort case.

Lombard points out that the Gervais case, which has not been appealed, is consistent with its interpretation.

ANALYSIS AND FINDINGS

I agree with Ms. Longo’s submissions that the Judge in the Gervais case did not engage in an analysis for his conclusion, and that the cases cited may be irrelevant and/or distinguished. Nevertheless for the following reasons, I agree with the conclusion in Gervais.

Subsection 6(1) of the Schedule calculates the amount of an insured person’s base income replacement benefit. In the present case, this base income replacement figure was $532. However, the income replacement benefit payable in this case was not $532. Pursuant to subsection 7(1)2, Ms. Longo’s income replacement benefit payable was limited to $400.

Subsection 6(2) states that the Insurer may deduct 80 percent net of an insured person’s post accident income from the amount of the income replacement benefit payable. Subsection 6(2) can be contrasted with subsection 7(1)1(i) which specifically states that collateral benefits received by an insured person reduces the amount determined by subsection 6(1).

Had the legislators intended to allow for the deduction of post accident income from the base income replacement benefit calculated pursuant to subsection 6(1) it could have easily stated that the post accident income is deducted from the income replacement benefit calculated in subsection 6(1). It did not do so. Instead, the legislation specifically states that post accident income is deducted from the amount of the income replacement benefit “payable.”

The amount of the weekly income replacement benefit that Ms. Longo received was not the amount calculated by subsection 6(1) but was determined, pursuant to subsection 7(1). That is, while subsection 6(1) determines an insured’s income replacement benefit, it does not determine what amount the insured will be paid in respect of this calculation. This is provided for in subsection 7(1).

Subsection 7(1) states “Despite subsection 6(1) but subject to subsection 6(2) to (6), the weekly amount of an income replacement benefit payable to a person shall be …” The key word here is “payable.” Subsection 7(1) provides that where the amount calculated under subsection 6(1) is greater than $400, the income replacement benefit payable pursuant to subsection 7(1)2 is limited to $400.

I find that the inclusion of the word “payable” in subsection 6(2) reflects the word “payable” in subsection 7(1). In my view, when these two sections are read together, the clear and logical conclusion is that an insured’s post accident income should be deducted from an insured’s income replacement benefit payable as determined by subsection 7(1)2, as opposed to the base amount (in this case $532) calculated pursuant to subsection 6(1). In short, in my analysis, like the conclusion in Gervais, I do not find that there is any ambiguity in the relevant provisions.

I am reinforced in my conclusion by the analysis in the Appeal case of Welsh and Economical Mutual Insurance Company⁶ with which I agree. One issue in that case was whether sections 6 and 7 of the Schedule are ambiguous. After an in-depth analysis, the Director of Arbitrations concluded that they are not ambiguous. Although the issue in that case dealt with calculating an income replacement benefit where post accident losses from self employment was involved, the Director agreed that the calculation for arriving at the income replacement benefit payable would be the same for deducting post-accident income, pursuant to subsection 6(2) of the Schedule.

The five steps for calculating the income replacement benefit, put forward by the Applicant in that case, and accepted by the Director are as follows:

Step 1 Determine net weekly income [s. 6(1)].

Step 2 Take 80 per cent of the amount from Step 1, subject to a minimum of $185 for any week after 104 weeks of disability [s. 6(1)].

Step 3 Reduce the amount from Step 2 by any collateral benefits received or available [s. 7(1)1].

Step 4 Choose the lesser of the amount from Step 3 and $400 (or a greater amount if optional benefits were purchased) [s. 7(1)2].

Step 5 Increase the amount from Step 4 by 80 per cent of post-accident business losses, or reduce it by 80 per cent of net post-accident income [ss. 6(2) –(6)]. [Emphasis added]

These five steps, accepted by the Director,⁷ arrive at the same conclusion as my analysis above, namely that Ms. Longo’s post-accident income is deducted from her income replacement benefit payable of $400.

With respect to Ms. Longo’s submission that she is being penalized for trying to return to work, although I am sympathetic to her view, I agree with Lombard’s submissions wherein it relies on Arbitrator Blackman’s comments in the case of Champaigne and Co-operators General Insurance Company⁸ at paragraph 222 which states:

The Schedule is a statutory contract of insurance. Unlike tort compensation, it does not purport to put accident victims back to where they would have been, but for the accident. Rather, it provides limited compensation to victims of motor vehicle accidents on a no-fault-fault basis.

Accordingly, for these reasons, I find that subsection 6(2) of the Schedule is clear and unambiguous and that Ms. Longo’s post accident income calculated pursuant to subsection 6(2) is to be deducted from her income replacement benefit payable of $400.

EXPENSES:

If the parties cannot agree on the issue of expenses, I may be spoken to on this issue by written submissions within 30 days of receipt of this decision.

December 19, 2007

Joyce Miller Arbitrator

Date

ARBITRATION ORDER

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

1. Ms. Longo’s income replacement benefit calculated under section 6(2) is 80 per cent of her post-accident net weekly income substracted from her income replacement benefit payable which was determined to be $400 pursuant to section 7(1).

2. If needed, I may be spoken to on the issue of expenses by written submissions within 30 days in receipt of this decision.

December 19, 2007

Joyce Miller Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Lombard is not seeking a repayment as it has not provided notice pursuant to section 47 of the Schedule.
3. 3A motion was heard on December 2, 2002, the decision was reserved and the Motion Record was endorsed by Mr. Justice Hoilett of the Superior Court of Justice on March 7, 2003 (Court File No. C6779/02)
4. 4(1997) 36 O.R. (3rd ) 616.
5. 5The Statutory Accident Benefit Schedule — Accidents before January 1, 1994, R.R.O. 1990, Regulation 672
6. 6(FSCO P02-00024, October 7, 2003) Appeal
7. 7Director Draper noted (at p. 13 of his decision) that even with the amendment made to subsection 7(1) as of October 1, 2003, “post-accident income is still deducted after the maximum is applied.”
8. 8(FSCO A03-001344, March 14, 2007)