Lombard General Insurance Company of Canada v. Ejaz Butt, 2009 ONFSCDRS 48

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2009 ONFSCDRS 48

Appeal P09-00010

Appellant

and

Respondent

BEFORE: David Evans

REPRESENTATIVES: Dave A. Messam for Lombard General Allen Wynperle for Mr. Butt

HEARING DATE: By written submissions filed by April 21, 2009

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

The appeal of the arbitrator’s decision dated March 3, 2009 may proceed.
The arbitrator’s March 3, 2009 orders regarding the treatment of Capital Cost Allowance and a special award hearing are stayed pursuant to subsection 282(6) of the Insurance Act, R.S.O. 1990, c. I.8 (as amended).

April 22, 2009

David Evans Director’s Delegate

Date

I. NATURE OF THE APPEAL

Lombard General Insurance Company of Canada (Lombard) appeals the arbitrator’s interim order regarding the calculation of Capital Cost Allowance (CCA) for Mr. Butt’s taxi vehicle purchased during the time he was receiving income replacement benefits (IRBs) pursuant to the SABS–1996.¹

II. BACKGROUND

Mr. Butt was injured in a motor vehicle accident on October 3, 2003. As a result of his injuries, he was only able to return to work part-time. Lombard agreed that Mr. Butt was substantially unable to work at his pre-accident employment and was entitled to IRBs up to 104 weeks after his accident under the SABS s.4 “own occupation” test. In this arbitration Mr. Butt claimed entitlement to post 104-week income replacement benefits under the SABS s. 5(2)(b) “any occupation” test.

The arbitrator found that, despite credibility concerns raised by Mr. Butt’s unreported income, he provided significant objective evidence of his disability. She concluded that the combination of low back pain, problems with cognitive function, irritability and anger management issues rendered him completely unable to work on a full-time basis at any occupation for which he is reasonably suited.

As to the basis for the IRB, the arbitrator found that Lombard used the only documentation it could, namely Mr. Butt’s income tax return in the fiscal year before the accident, which at least set a floor for his pre-accident earnings. She was not persuaded that she had a reliable basis to determine the amount by which he under-reported his income on his income tax return.

However, the arbitrator also found that Matson, Driscoll & Damico Ltd. (“MD&D”), the accountants Lombard retained, did not follow the provisions of the SABS in calculating Mr. Butt’s IRBs. She found that his IRBs would have to be recalculated in several areas – including treatment of the CCA, as discussed in the next section – and remained seized of aspects of that recalculation. She also found that Mr. Butt was entitled to a special award. In the section dealing with a special award, she noted that an adjuster “critically reviewing and analyzing MD&D’s accounting reports would note that capital cost allowance was deducted from Mr. Butt’s earnings in the year before the accident, contrary to the requirements of the Schedule.” She also remained seized of the amount of the special award, pending the recalculation of Mr. Butt’s IRBs.

III. ANALYSIS

Rule 50.2 of the Code provides that a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute in the arbitration have been finally decided, unless ordered otherwise. Since neither the ultimate calculation of the IRB nor the amount of the special award have been finally decided, the criteria for admitting an appeal of a preliminary or interim order set out in Allstate Insurance Company of Canada and Tesfay, (FSCO P99-00023, June 21, 1999) are applicable. These include the apparent strength of the appeal, the importance or novelty of the issue raised, and whether rejecting the appeal or hearing it will provide the quickest, most just, and most expeditious way of disposing of the issues between the parties.

With respect to the CCA, the arbitrator found that s. 62(1)(a) of the SABS provides that for purposes of calculating an IRB, “the income of a self-employed person is calculated as the person’s profit, under the federal and provincial income tax acts, but without taking into account expenses such as capital cost allowance.” She concluded that CCA was incorrectly deducted as an expense from Mr. Butt’s 2002 Statement of Business Activities in calculating his IRB.

However, the arbitrator did not consider the appeal decision in Royal Insurance Company of Canada and Aramakis, (OIC P96-00081, January 7, 1998), which considered the same provision set out in s. 83 of the SABS-1994.² The delegate held that the SABS requires that the expenses that are eligible for capital cost allowance (such as capital expenditures for the purchase of a taxi) and not the CCA itself, (the amount allowed for depreciation on the taxi) are what should be excluded from the calculation of pre- and post-accident income or loss. Accordingly, she held that the CCA must be taken into account pursuant to normal income tax practices and not be excluded from the calculation of income or loss for self-employment.

Wahidpur and Unifund Assurance Company, (FSCO P08–00006, May 28, 2008) also dealt with a preliminary order where a significant appeal case was not mentioned. To paraphrase what was said in Wahidpur, the arbitrator did not mention Aramakis in her reasons. She would seemingly be obliged to directly address Aramakis and whether it was distinguishable on a factual basis, there was a new interpretive argument being advanced or whether there had been a change in the environment in which the legislation operated, or whether the decision was incorrect and should not be followed.

The calculation of the IRB also affects the possible amount of the special award. In Abrams and Aviva Insurance Company of Canada, (FSCO P08-00027 and P08-00028, September 18, 2008), the appeal of a preliminary issue was allowed to proceed where the calculation of interest would have affected the possible amount of the special award. As was stated there, granting leave to appeal is the most efficient manner of proceeding, as otherwise the parties would incur unnecessary legal expenses on the special award issue, should the CCA calculation order be rescinded.

Accordingly, the appeal may proceed. Lombard also requests a stay. The appeal is clearly bona fides and substantive, and I am prepared to proceed as quickly as possible to resolve this matter. A stay of the arbitrator’s March 3, 2009 order is granted.

April 22, 2009

David Evans Director’s Delegate

Date

Footnotes

The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
The Statutory Accident Benefits Schedule – Accidents after December 31, 1993 and Before November 1, 1996, O. Reg. 776/93, as amended.