Intact Insurance Company v. Joseph Anton Marianayagam, 2011 ONFSCDRS 16

Financial Services Commission of Ontario

Commission des services financiers de l'Ontario

Neutral Citation: 2011 ONFSCDRS 16

Application P09-00028V

OFFICE OF THE DIRECTOR OF ARBITRATIONS

INTACT INSURANCE COMPANY (Formerly known as ING Insurance Company of Canada) Applicant

and

JOSEPH ANTON MARIANAYAGAM Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. William M. Sproull for the Applicant, Intact Insurance Company Mr. David S. Wilson for the Respondent, Mr. Joseph Anton Marianayagam

HEARING DATES: May 7 and October 14, 2010, final transcript received November 22, 2010

VARIATION ORDER

Under section 284 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The Equitable Life Policy is an income continuation plan under subsection 7(1) of the Schedule. The Respondent's weekly income replacement benefit is reduced by the calculated net weekly payment for loss of income received by the Respondent under that policy.

2. The disability pension benefits under the Canada Pension Plan received by the Respondent are deductible under paragraph 2(9)(1) of the Schedule, calculated as a weekly benefit, from the Respondent's weekly income replacement benefit.

3. A legal expense hearing shall be requested within thirty days of the date of this decision, accompanied by a Bill of Costs and written submissions, as set out below.

4. This variation application is otherwise stayed pending resolution of Ontario Superior Court of Justice File No. CV-09-389904, subject to any further or other order of a FSCO adjudicator.

February 10, 2011

Lawrence Blackman Director's Delegate

Date

REASONS FOR DECISION

I. BACKGROUND AND NATURE OF THE VARIATION APPLICATION

The Respondent, Joseph Anton Marianayagam, applied to his first-party automobile insurer, the Applicant, Intact Insurance Company (formerly known as ING Insurance Company of Canada), for statutory accident benefits payable under the Schedule¹ as a result of injuries sustained in a May 26, 2004 motor vehicle accident.

On February 2, 2005, the Respondent filed for arbitration disputing, in part, the Applicant's termination of his weekly income replacement benefits ("IRBs").

Prior to the arbitration hearing, the parties agreed to a May 3, 2006 Order of Arbitrator Murray (the "Arbitrator") that reflected the parties' November 16, 2005 Minutes of Settlement. The consent Order provided, in part, that the Applicant would pay the Respondent weekly IRBs of $400 ongoing from September 27, 2005, subject to the appropriate deduction for collateral benefits and post-accident income pursuant to the Schedule.

The Order further provided that the agreed IRBs might be varied upon application in the event the Respondent received new information respecting the net amount of his long term disability policy. Prior to this settlement, the Respondent had been advised by his collateral insurer, Equitable Life Insurance Company of Canada ("Equitable Life"), that his disability benefit had been terminated effective September 26, 2005.

The Applicant continues to pay the Respondent a weekly $400 IRB. However, by letter dated November 22, 2007, the Respondent advised the Applicant that Equitable Life had, as of April 2007, reinstated his long term monthly disability benefit of $1,602 from "September 23, 2004." By letter dated January 21, 2009, the Applicant was advised that the Respondent's application for Canada Pension Plan ("CPP") disability benefits had been approved effective June 2006.

On October 14, 2008, the Applicant applied for mediation. In issue was IRB repayment pursuant to section 47 of the Schedule. The March 3, 2009 mediation failed to resolve this issue.

On July 24, 2009, the Applicant applied under section 284 of the Insurance Act, R.S.O. 1990, c. I.8, to vary the Arbitrator's May 3, 2006 $400 weekly IRB Order to $169.66. The Applicant submits that Equitable Life's April 2007 reinstatement of disability benefits and CPP's subsequent approval of benefit payments represent material changes under subsection 284(3) of the Insurance Act in the Respondent's circumstances allowing the requested variation.

The Applicant submits that subparagraph 7(1)(1)(i) of the Schedule entitles it to deduct "net weekly payments for loss of income that are being received by the person as a result of the accident … under any income replacement benefit plan" and subsection 2(9) of the Schedule deems an income continuation benefit plan to include CPP disability pension benefit payments. The Applicant restricts its claimed relief in this application to reducing the May 3, 2006 Order of the weekly IRBs from $400.00 to $169.66 only ongoing from the date of my order.

My December 17, 2009 preliminary conference letter confirmed the jurisdictional issue of whether the Applicant was required to amend its Application for Variation to encompass the relief sought in its Ontario Superior Court of Justice Action No. CV-09-389904. The court action seeks repayment of IRBs paid in error from January 4, 2007, the alleged error being the receipt of collateral benefits. The alternative jurisdictional question was whether the Respondent should be allowed sufficient time to commence a variation application encompassing, in this forum, any necessary repayment order. The Respondent has subsequently withdrawn this request.

II. ANALYSIS

(a) Jurisdictional Issue

As noted above, the jurisdictional issue is whether the Applicant should be required to broaden the relief sought in its Application for Variation. However, as set out below, I find that this variation proceeding should be stayed, as requested in the alternative by the Respondent in oral submissions, pending the determinations by the court of the correct IRB weekly quantum.

The Respondent submits that the related court action in which he is the named defendant is virtually the same as this variation application, involves the same parties, has virtually identical facts and requires the same evidence. However, the court action seeks an immediate, lump sum repayment of the entire IRB overpayment. This, in the Respondent's submission, is contrary to the limit under subsection 47(5) of the Schedule of repayment to 20 per cent of further IRB payments.

The Respondent argues that if the Applicant is allowed to continue with both proceedings there is prejudice in increased legal expenses and the risk of inconsistent results. The Respondent, however, agrees that a FSCO determination on the deductibility of CPP and Equitable Life benefits, subject to any application for judicial review, would probably apply to the court proceeding.

The Respondent agrees that a FSCO adjudicator cannot stay or strike a court action, but submits that it is within my jurisdiction to require, as a term of any relief granted the Applicant, that the latter amend this variation application to include the same relief sought in its court action. The Respondent submits, without any supporting case law, that the powers on variation under section 284 of the Insurance Act, the authority under section 23 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22 to control a proceeding and the consumer protection nature of automobile insurance legislation allow his requested relief.

The Respondent submits, in the alternative, that I dismiss or stay this variation and allow the court action to address all of the issues, so as to avoid a multiplicity of actions.

The Applicant submits that it is obligated under the May 3, 2006 Order and section 287 of the Insurance Act "to go to the Commission to alter the terms of an order" and that it was only for that reason it brought a FSCO proceeding.² The Applicant further submits that for "the sake of simplicity [it] has pursued the remedy of repayment directly via the court proceeding rather than indirectly through the Financial Services Commission."

While the Applicant limits its requested relief in this application to the correct ongoing IRB, it indicates, at page 38 of the May 7, 2010 transcript, that it does not know whether section 287 of the Insurance Act applies only to prospective IRB payments or equally to past IRB payments.

There are three main questions in this proceeding. First, are the Equitable Life and CPP payments deductible from IRBs? If so, what is the present deduction? Further, what is the amendment to the May 3, 2006 Order regarding continuing weekly IRBs from the date of my decision?

In the court action there are the further questions of what are the correct past deductions, what are the past weekly IRB payments that should be amended in the May 3, 2006 Order, what amounts, if any, should be repaid, and if there are repayments, how should they be repaid.

The parties agree that my decision as to the deductibility of CPP and Equitable Life payments would be res judicata, subject to judicial review, on any further or other court or FSCO proceeding. However, in both this application and in the court action, the correct IRB quantum is in issue, the Applicant dividing this question between these two forums on the artificial dividing line of the date of my decision rather than the date of any change in collateral benefits payments.

However, the same facts may apply, with possibly different findings in this forum versus the court, for the day after and the day before my decision. The Applicant implicitly argues that while FSCO has exclusive jurisdiction regarding any amendment to the May 3, 2006 Order regarding prospective IRBs, the Court has jurisdiction to amend the May 3, 2006 Order regarding past IRBs. Whether the latter is correct is for the court to decide.

As agreed by the Applicant at page 54 of its May 7, 2010 transcript submissions, my specific concern is my obligation to control the process before me. Non-Marine Underwriters, Mbrs. of Lloyd's and Mangat, (FSCO P00-00020, August 1, 2000), endorsed a "pragmatic balancing of interests" in addressing a multiplicity of proceedings. The decision cited King and Royal Insurance Company of Canada, (FSCO A98-000234, March 24, 1999), that:

Arbitration decisions have established a number of principles governing the question of whether a person is precluded from proceeding before both a court and the Commission, the most basic of which being that an insured may not pursue a dispute in more than one forum, but is not required to pursue all of his or her disputes in only one forum. The remaining principles may be summarized as follows:

1. Does the arbitration involve issues substantially similar to those in the civil action?

2. How far along has the civil action proceeded (for example, have discoveries taken place on the issues before the court)?

3. Is the civil action broader in scope than the arbitration, both in terms of the issues involved and the relief sought?

4. Is there any serious impediment to having the issues in the arbitration dealt with in the court proceeding?

5. Would permitting the Applicant to proceed with the arbitration unduly duplicate proceedings, leading to greater costs and delays and raising the spectre of inconsistent results? [emphasis in the original]

These principles apply equally to variation proceedings and equally to multiple proceedings commenced by an insurer. This is not a case, as in State Farm Mutual Insurance Co. v. Ramalingam, [2009] O.J. No. 351, where, as the Applicant submits at paragraph 14 of its Reply submissions, the Court found that the other pending proceeding "related to a distinct and unrelated issue." Rather, this variation application involves an overlapping issue with the civil action, namely the correct weekly IRB.

The Applicant relies on reports from PricewaterhouseCooper, specifically the most recent dated February 25, 2009, that sets out different IRB amounts as of January of 2007, 2008 and 2009. The report opines that the Respondent's continuing weekly IRB beyond March 2, 2009 is $166.66. The Applicant submits there is no need to return every year to revise the weekly IRB. If I identify the correct IRB as $169.66, further changes ought to be on consent.

The Applicant submits that the Respondent has not challenged the calculations in its report, nor has he provided any subsequent information or led any evidence to controvert ongoing receipt of CPP or Equitable Life payments. The Applicant concludes, at page 104 of its May 7, 2010 transcript submissions, that:

… as of today, 2010, does the insurer have a calculation of what the 2010 amount is? No. We don't have the evidence … this is the best evidence and if my friend provides us with additional information, we could have a calculation of what the benefit would be currently.

I agree with the Respondent that the onus in this variation application is on the Applicant to establish, on a balance of probabilities, that the Respondent continues to receive payments under an income continuation plan and the amount of the net weekly payments that are being received.

This could have been obtained simply and expeditiously through the pre-hearing process by obtaining any necessary production orders. My December 12, 2009 letter, however, confirmed the parties' advice there were no further documents to be exchanged. No witnesses were called at the variation hearing. The Applicant acknowledges that CPP is indexed and the current correct IRB would, in fact, be less than the $169.66 per week advanced, but only slightly so.

I am, nonetheless, concerned about making findings of fact based on speculation and non-current data, especially when the court will be asked to make factual numerical determinations including the same approximate time period. At page 92 of its October 14, 2010 transcript submissions, reiterating remarks at page 48 of its earlier submissions, the Applicant states that if I find the requested IRB variation appropriate, in the court action it "is going to have to prove that amounts are properly – amounts were received by Mr. Marianayagam … from both Intact and from Equitable Life and from CPP, there has been an overpayment and the insurer is entitled to it."

The Respondent argues in this proceeding, relying on City of London v. Gibbons et al., 69 O.R. (2d), that the Equitable Life payments he received should be net of the alleged considerable legal expense incurred in obtaining these payments. The Respondent seeks an accounting with respect to what he actually received as net payment.

Subsection 7(1) of the Schedule provides that one deducts the "net weekly payments for loss of income that are being received." Whether or not Gibbons, that addressed reimbursement of welfare payments from a personal injury award, is relevant to this case, the question of whether "net weekly payments" means after deducting legal expenses incurred in obtaining the payment is another area of potential inconsistent findings between this forum and the court.

The civil action is far broader in scope than this variation application, both in terms of the issues raised and the relief sought. The parties, however, do not see any impediment to my determining whether the CPP and Equitable Life payments are deductible.

I find the most fair and pragmatic means of moving this matter forward while avoiding inconsistent results and unnecessary duplication of effort is that all determinations regarding the correct weekly IRB quantum occur in one forum. I am not persuaded I have the power to require the Applicant to bring all of its claims for relief regarding the May 3, 2006 Order in this forum. I certainly do not have jurisdiction to stay or strike the court action. Thus, the only present possible forum to address all of the requested amendments to the weekly IRBs is the court.

I thus stay this variation proceeding pending such determinations, subject to any further or other order of a FSCO adjudicator. If the Court determines that it has jurisdiction to amend any portion of the May 3, 2006 Order, it will proceed to do so. If the Court determines it does not have such jurisdiction in any respect, the Applicant may return to this forum to proceed with this variation application regarding any requisite and proper amendment to the May 3, 2006 Order.

(b) Equitable Life Policy

The Applicant argues that the Equitable Life Policy meets the deductibility requirements of subparagraph 7(1)(1)(i) of the Schedule by providing indemnity for lost income rather than simply providing payment on the happening of an adverse event. The Applicant submits that the Respondent is estopped from arguing that the benefits are not deductible, having previously accepted their deductibility.

Section 287 of the Insurance Act provides, in part, that an insurer shall not, after the order of an arbitrator, reduce benefits to an insured on the basis of an alleged change of circumstances, alleged new evidence or an alleged error, unless either the insured person agrees, or an adjudicator so orders in a section 283 appeal or a section 284 variation proceeding.

Section 284 of the Insurance Act provides that to vary an order, the adjudicator must be satisfied that there has been a material change in the circumstances of the insured or that evidence not available on the arbitration or appeal has become available, or that there is an error in the order.

The Respondent acknowledges that the payment of benefits subsequent to the May 3, 2006 Order constitutes a material change in circumstances. I agree.

The provisions relevant to this appeal are subsections 7(1) and 2(9) of the Schedule.

Subsection 2(10) of the Schedule provides that subsection 2(9) only applies in respect of accidents that occur on or after January 1, 2002. This accident took place in 2004.

Subsection 7(1) provides that IRBs are reduced by net weekly payments for loss of income being received under any income continuation plan. The Respondent submits that the Equitable Life Policy is not an income continuation benefit plan as it only pays benefits on the 120th consecutive day of disability. The Respondent also argues that the Equitable Life and CPP benefits are not deductible as neither are payable on a weekly basis. Subsection 7(1) states that:

7. (1) Despite subsections 6 (1) and (5), but subject to subsection 6 (2), the weekly amount of an income replacement benefit payable to a person shall be the lesser of the following amounts:

8. The amount determined under subsections 6 (1) and (5), 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. [emphasis added]

Subsection 2(9) of the Schedule states that payments for loss of income under an income continuation plan shall be deemed to include certain payments. The parties disagree on whether subsection 2(9) expands or restricts subsection 7(1). The Respondent argues that the Equitable Life benefits are not payments for loss of income under an income continuation benefit plan as its eligibility provisions extend, in contradiction to subparagraph 2(9)(2)(i), to persons who become employed subsequent to the effective date of the policy. Subsection 2(9) provides that:

(9) For the purpose of this Regulation, payments for loss of income under an income continuation benefit plan shall be deemed to include the following payments:

1. Payments of disability pension benefits under the Canada Pension Plan.

2. Periodic payments of insurance, if the insurance,

i. is offered by the insurer only to persons who are employed at the time the contract for the insurance is entered into, and

ii. is offered by the insurer only on the basis that the maximum benefit payable is limited to an amount calculated with reference to the insured person's income from employment. [emphasis added]

I will now address these issues.

(1) Is subparagraph 7(1)(1)(i) restricted to or expanded by subsection 2(9)?

Arbitrator Leitch, in Sharma-Singh and Co-operators General Insurance Company, (FSCO A07-000588, February 26, 2010), held that:

In Cugliari [Cugliari v. White (1998), 1998 CanLII 5505 (ON CA), 38 O.R. (3d) 641, leave to appeal to the Supreme Court of Canada denied, December 10, 1998], the Court of Appeal stated that the language now found in section 7(1) was "enacted for the purpose of eliminating certain instances of double recovery." [emphasis in the original] It follows that it is neither helpful nor correct to claim that the current method of resolving deductibility issues is designed to eliminate or prevent double recovery. It is, instead, designed to distinguish between those forms of double recovery that are allowed and those that are not. In deciding that CPP disability payments were not deductible, the Court specifically recognized that this could lead to double recovery in cases where recipients were employed at the time of the disability and able to demonstrate pecuniary loss. It nevertheless decided that such payments were not deductible because the conditions of eligibility for CPP disability payments required neither that the recipient be employed at the time of the disability nor that he/she be able to demonstrate a pecuniary loss. The Court concluded that CPP disability payments "cannot reasonably be construed as intending to indemnify a disabled person for loss of income", even though they might coincidentally do precisely that with resulting double recovery. [emphasis in the original]

Arbitrator Leitch concluded that he did not accept the broad assertion that the legislation and case law spoke to the total "elimination of double recovery – injured persons should not be compensated twice for the same loss." Rather, Arbitrator Leitch found "the amendments adopted in 2002 did not contain language capable of displacing the common law rule that non-indemnity payments are not deductible."

I agree with Arbitrator Leitch. Indeed, it was not argued otherwise. Rather, the Applicant cites Arbitrator Leitch in Sharma-Singh that one must distinguish between those forms of double recovery that are allowed and those that are not. Hence, one must look at the particulars of the actual policy in the context of the specific wording of the legislation.

The Equitable Life policy, at page 407-7, paragraph 3(b), provides that eligibility includes all permanent full-time employees placed on the payroll after the effective date of the Policy, three months after being so placed. The Applicant acknowledges that the Respondent "likely does not come within the definition of subsection 2(9)2 of the Schedule in terms of long term disability benefits received or available from Equitable."

The Applicant submits the Equitable Life benefits are nonetheless deductible under subparagraph 7(1)(1)(i). The Applicant argues that subsection 2(9) is a deeming provision intended to capture two specific instances of deductibility that might not otherwise be included in subparagraph 7(1)(1)(i). The Respondent disagrees, submitting that subsection 2(9) does not expand subparagraph 7(1)(1)(i) but rather limits income continuation benefit plans solely to the two specific examples provided in subsection 2(9).

The Respondent argues that subparagraph 2(9)(2)(ii) sets out a scenario already encompassed in subparagraph 7(1)(1)(i). Therefore, he argues that the provision is a manifest absurdity unless the words "shall be deemed to include the following payments" are interpreted to mean "limited to the following payments."

I am persuaded by the Applicant's argument.

Sullivan on the Construction of Statutes, Fifth Edition (Markham: LexisNexis Canada Inc. 2008) states, at page 62, that:

Non-exhaustive definitions presuppose rather than displace the meaning a defined term would have in ordinary (or technical) usage. Non-exhaustive definitions may be inclusive or exclusive. Inclusive non-exhaustive definitions are normally introduced by the verb "includes".

Further, at page 85, the author notes that the verb "to deem" is used in legislation for a variety of purposes including creating "a legal fiction by declaring that something exists, or has occurred regardless of the truth of the matter," or to declare the law. The parties agree that subparagraph 2(9)(2)(i) represents a legislative change in the prior law enunciated by the Ontario Court of Appeal in Cugliari v. White (1998), 1998 CanLII 5505 (ON CA), 38 O.R. (3d) 641.

I find that subsection 2(9) of the Schedule, specifically by using the words "deemed to include," is a non-exhaustive inclusive definition intended, regarding CPP benefits, to create a legal fiction in light of the determination of the Ontario Court of Appeal in Cugliari regarding the technical meaning of income continuation benefit plan. I am not persuaded that both instances set out in the non-exhaustive inclusive definition in subsection 2(9) must be there for the precise same reason. Hence, whether subparagraph 2(9)(2)(ii) is also intended to create a legal fiction or is simply there to declare the law is not determinative.

In this regard, I heed Justice Laskin's statement in Bapoo v. Co-operators General Insurance Company, (1997) 1997 CanLII 6320 (ON CA), 36 O.R. (3d) 616 (C.A.), leave to appeal denied [1998] S.C.C.A. No. 62, that "legislative evolution should be used cautiously. The court may not be able to distinguish amendments that are meant to clarify or confirm the law from amendments that are meant to change the law."

This caution is enhanced by the Respondent's argument as to the implications of subsequent legislative changes amending subsection 2(9) to the present clause 3(7)(d). The latter states:

(d) payments for loss of income under an income continuation benefit plan are deemed to include,

(i) payments of disability pension benefits under the Canada Pension Plan,

(ii) periodic payments of insurance, irrespective of whether the contract for the insurance provides for a waiting period, deductible amount or similar limitation or restriction and irrespective of whether the contract is paid for in whole or in part by the employer, if the insurance is offered by the insurer,

(A) to persons who are employed while the contract for the insurance is in effect, and

(B) only on the basis that the maximum benefit payable is limited to an amount calculated with reference to the insured person's income from employment; [emphasis added]

The Respondent argues that the words "deemed to include" under the present Schedule actually mean "include," whereas in the subsection 2(9) of the Schedule before me, the same words, "deemed to include," mean "limited to." In Morin and The Personal Insurance Company of Canada, (OIC P-000468, February 26, 1993), Director Sachs, in comparing two provisions, stated, that "[t]he words are identical in both and cannot have a different meaning." I find, likewise, that the words "deemed to include" do not have the diametrically opposed meanings in the two provisions in question, as argued by the Respondent.

Nor do I see any ambiguity in the words "deemed to include" in subsection 2(9), or am I persuaded that there is any gap in the legislation necessitating the interpretation urged by the Respondent. Rather, I agree with Arbitrator Leitch in Sharma-Singh that:

In my view, these words [deemed to include] confirm that the purpose of the amendments [in subsection 2(9)] is not to exclude payments that might otherwise be covered by section 7(1). It is rather to include payments that might not otherwise be covered by section 7(1) and to ensure that other specified payments are covered by section 7(1).

Accordingly, I find that subparagraph 7(1)(1)(i) of the Schedule is not limited to the two examples set out in subsection 2(9). Hence, one must determine whether the Equitable Life Policy is an income continuation benefit plan under subparagraph 7(1)(1)(i).

(2) Is the Equitable Life Policy an income continuation benefit plan under subparagraph 7(1)(1)(i)?

Following the analysis in Sharma-Singh, the Applicant submits that the Equitable Life Policy is an income continuation benefit plan as it is not directed toward the happening of an adverse event, as evidenced by:

• Page 407-5 of the Policy that defines employee long term disability coverage as 66.7% of monthly earnings to the next higher dollar, to a maximum benefit of $5,000 per month;

• Page 407-9 whereby the insurance automatically terminates upon the date the employee ceases to be employed by the Employer;

• Page 407-27 that links entitlement to the inability to perform any duty of one's regular occupation;

• Page 407-28 that provides for deductibility of post-accident income;

• Page 407-15(b) that addresses the Company's subrogation rights against third parties;

• Page 407-26 that provides for benefits ceasing on the employee's 65th birthday; and that,

• The cover page of the Policy states that the "Policy is issued in consideration of the Employer's application."

The Respondent does not dispute that the Equitable Life Policy is consistent with an income continuation benefit plan regarding these specific hallmarks. However, the Respondent submits that the Policy is excluded from being an income continuation benefit plan because its long term disability coverage begins on the 120th consecutive day of disability, as set out at page 407-5 of the Policy. The Respondent relies on Lee and Certas Direct Insurance Company, (FSCO A03-000041, June 15, 2006), wherein Arbitrator Alves found that the policy before her commenced:

… four months after the onset of disability. I find the gap suggests that the policy was a financial cushion which Ms. Lee arranged for herself in the event of disability which lasted for longer than four months, rather than a policy tied to her earnings.

On these criteria, the IOF policy does not qualify as an indemnity policy and the payments do not qualify as income continuation payments. Ms. Lee purchased the IOF policy herself in 1989 and paid all the premiums herself. Her policy was not arranged through an employer or union. There has been no involvement or contribution of premiums by a union or an employer. The IOF policy provides payment for periods of total disability which commence while the certificate is in force. Coverage does not end with unemployment.

The Respondent also relies on Codling-Mokena and CAA Insurance Company (Ontario), (FSCO A04-000017, October 17, 2006), where Arbitrator Leitch stated that "the legislator's choice of the word 'continuation' in the phrase 'income continuation benefit plan' must be respected."

Arbitrator Leitch found that the dictionary definition of "continuation" incorporates the concepts of carrying on or keeping up.

Arbitrator Leitch found that a collateral benefits policy could only qualify as an income continuation benefit plan if it called for the payment of benefits almost immediately after the onset of disability. While short waiting periods might be compatible with the word "continuation," as IRBs themselves are not payable for the first week of disability, a claimant who receives no benefits under the policy for 60 days after the onset of disability plainly has not had his or her income continued during that period and might, as a result, suffer serious financial consequences.

The Applicant relies on Arbitrator Leitch's decision in Sharma-Singh wherein he reversed his position in Codling-Mokena, stating he was no longer of the view that "a long-term disability plan with a significant delay in first payment" alone prevented him finding that subsection 7(1) applied in allowing deductions.

The Respondent submits that Arbitrator Leitch was incorrect in this retraction. The Respondent notes that subsection 2(9) of the Schedule is now clause 3(7)(d) and specifically provides that payments for loss of income under an income continuation benefit plan are deemed to include periodic payments of insurance "irrespective of whether the contract for the insurance provides for a waiting period."

The Respondent submits that this is a legislative response to a potential area of ambiguity created by the case law, specifically Codling-Mokena and Sharma-Singh. He states, at page 15 of his October 14, 2010 transcript submissions, that "the fact that there's a waiting period now is very clear that will not impact upon whether – that will not detract from the proposition that a benefit is to be deducted." However, the Respondent, at page 49, states that arguments could be made either way whether this is a clarification of or a change in the law.

I find Lee to be distinguishable. In that decision, Arbitrator Alves states that "[t]he two main hallmarks of an indemnity policy are a stated intent to pay income security for loss of wages, and provisions designed to continue paying an amount of income that closely follows the claimant's pay at the time of her disability." Arbitrator Alves found the policy before her was not an income continuation plan for a number of reasons, including that it had been purchased by the insured, the policy was not arranged by or contributed to by an employer or by a union, there was no provision for subrogation rights and there was no clause integrating the amount of the benefit with any other payments. I do not see the waiting period as the defining criterion.

The Ontario Court of Appeal, in Cugliari, stated that in the 1988 Report of Inquiry into Motor Vehicle Accident Compensation in Ontario, Osborne J. distinguished between indemnity and non-indemnity payments as follows:

An indemnity payment is one which is intended to compensate the insured in whole or in part for a pecuniary loss. Unemployment insurance benefits and employment disability benefits are examples of indemnity payments. A non-indemnity payment is a payment of a previously determined amount upon proof of a specified event, whether or not there has been pecuniary loss. Life insurance, employee retirement benefits and fixed-sum accident benefits are examples of non-indemnity payments. In principle, non-indemnity payments should not be considered in the discussion of the collateral source rule since they do not result in true overcompensation. Indemnity payments, on the other hand, can be clearly identified as duplicating an item of damage claimed from the tortfeasor and accordingly do constitute overcompensation.

[emphasis added]

An indemnity payment may thus encompass less than full payment of a pecuniary loss. It follows that partial payment may encompass some delay in payment, as long as the payment is intended to compensate for a pecuniary loss and is not simply dependent on proof of a specified event.

Nor does the income continuation benefit plan have to follow the entire period of disability and resultant loss of income. Bhola and Personal Insurance Company of Canada, (FSCO A06-001473, September 17, 2007) and Sharma-Singh both hold that income continuation benefit plans do not have to provide for the entire period of disability. Rather, one feature of a deductible policy is that may terminate on the employee's 65th birthday, notwithstanding the absence of any such mandatory age retirement in Ontario.

In this case, the waiting period would seem to be more indicative of a differentiation between a long term indemnity plan from a short term indemnity plan, rather than a distinction between an indemnity and non-indemnity policy. At page 407-5, the Equitable Life Policy is clearly identified as "Employee Long Term Disability."

Given the hallmarks of the Equitable Life Policy as an income continuation benefit plan enumerated above, I am of the view that a 120 day waiting period in this case does not, by itself, take that Policy out of subparagraph 7(1)(1)(i). To the extent that there is a waiting period, no deduction is made for that period.

(3) Must Payments be paid weekly and not monthly?

The Applicant relies, in part,³ on Bhola that "weekly payments" in subparagraph 7(1)(1)(i) signify the period of calculation of the deduction rather than the period of receipt of the benefit.

The Applicant further relies on the comments of Lofchik J. in Cromwell v. Liberty Mutual Insurance Company, 2008 CanLII 3409 (ON S.C.) that:

In my view the term "net weekly payments" used in s. 7(1) of the SABS is a method of calculating the amount of the deduction so that it coincides with the income replacement benefits being paid, which are also weekly benefits. The fact that a policy provides for benefit payments to be monthly rather than weekly does not disqualify the benefits from being deducted from the income replacement benefits if the benefits otherwise qualify for a deduction. [emphasis in the original]

Salmers J. adopted this reasoning in State Farm and Ramalingam, [2009] O.J. No. 5971, stating that "I reject the defendant's submission that CPP disability benefit payments are not to be deducted from income replacement benefits simply because the CPP payments are paid monthly."

The Respondent submits that while the Schedule provides a methodology to calculate a weekly IRB, there is no methodology for calculating a weekly collateral benefit. Thus, the word "weekly" must be given its normal meaning, that subparagraph 7(1)(1)(i) only deducts net payments for loss of income if that collateral benefit is paid on a weekly basis. Otherwise, the word "weekly," in the Respondent's submission, serves no purpose.

The Respondent argues that Arbitrator Rogers' methodology in Bhola (multiplying the monthly collateral benefit by 12 and dividing by 52) results in different weekly deductions depending on the number of days in the month. While these differences may be modest, the Respondent questions why there should be any differences at all. The Respondent submits that these mathematical problems can be avoided by its interpretation of the word "weekly."

The Respondent further argues that prior to the version of the Schedule applicable here, the word "weekly" was not used. As, in the Respondent's submission, this presented no difficulty under the prior versions of the Schedule, there was no need for clarification. Thus, the addition of the word "weekly" must represent a change in the law.

The Respondent further notes that subsection 6(2) of the Schedule deducts post-accident income by simply referring to "80 per cent of the net income received by the insured person" without use of the word "weekly." The Respondent argues that there is no reason for a distinction in wording between deducting post-accident income and deducting collateral benefits. The use of different words means there is a difference, namely that collateral benefits must be paid weekly to be deductible.

Sullivan on the Construction of Statutes, states at page 1, that:

Today there is only one principle or approach [to the interpretation of statutes], namely, the words of an Act are to be read in their entire context, in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

As noted in Sharma-Singh above, subsection 7(1) was "enacted for the purpose of eliminating certain instances of double recovery." One must, hence, distinguish between those forms of double recovery that are allowed and those that are not. Again, the common law distinction is whether the payment is indemnity for a pecuniary loss or simply payment on the happening of an adverse event.

As noted in Bapoo above, "legislative evolution should be used cautiously." If it was clear that the Legislature intended, in subparagraph 7(1)(1)(i), that only the specified collateral payment paid weekly was to be deducted, that would be the end of the matter. However, that is not clear, Thus, one endeavours to interpret the purpose of the word "weekly,"

I am at a loss, in considering the entire context and object of the Schedule, to follow why the Legislature would deduct only a collateral benefit paid weekly, but not bi-weekly or monthly payments. I am further at a loss to discern why the Legislature would specifically amend the Schedule to deduct CPP benefits under paragraph 2(9)(1) of the Schedule if, as monthly payments, they would nonetheless not be deducted under subparagraph 7(1)(1)(i).

I am not persuaded that the absence of a specific methodology in the Schedule of converting bi-weekly or monthly benefits to a weekly amount means that only payments made weekly are to be deducted. Nor am I persuaded that Arbitrator Rogers' methodology is the only, or necessarily the most accurate means of converting monthly payments to weekly amounts.

Had the Legislature wished to restrict deductibility to income continuation benefit plans paid weekly, it would be a simple matter to simply add the word "weekly" as a modifier to that specific phrase. Rather, I am persuaded that by using "weekly" as a modifying adjective to the words "payments for loss of income," the Legislature was providing instruction regarding the precise amount to be deducted, similar to its use of the word "net" that precedes "weekly."

Accordingly, I finding that the Equitable Life Policy is an income continuation benefit plan under subsection 7(1) of the Schedule and that the Respondent's weekly IRB is reduced by the net weekly payments for loss of income received by the Respondent under that policy. As set out above, I leave to the Court the determination of the correct amounts to be deducted over the entire period in question and the further question of the amount and method of any repayment.

(c) CPP

The Applicant relies, in part, on State Farm v. Ramalingam, [2009] O.J. No. 5971, wherein Salmers J. held that CPP disability payments are deductible from IRBs. The Applicant maintains that CPP disability benefits received or available to the Respondent are deductible from weekly IRBs under subparagraph 7(1)(1)(i) by virtue of paragraph 2(9)(1). The Applicant submits that this is a legislative change in response to the Court of Appeal decision in Cugliari.

The Respondent submits that "it's clear that subject to the argument pertaining to the word 'weekly' that CPP benefits are caught. That's undoubtedly an expansion of what would ordinarily be covered under section 7." Again, the Respondent submits that what is deductible as a payment under an income continuation benefit plan is limited to subsection 2(9) of the Schedule, as further limited by the word "weekly" in subparagraph 7(1)(1)(i).

The Respondent argues that if the legislative response to Cugliari was ineffective, an adjudicator is entitled to ignore that change. Thus, if it is trite, as argued, that CPP is paid monthly, as "the CPP benefit is not paid as a weekly payment, then the benefit is still not deductible."

I find for the reasons noted above, that the word "weekly" relates to calculating the amount of the deduction under an "income continuation benefit plan" rather than defining what is encompassed under that term. Accordingly, I find that the disability pension benefits under CPP received by the Respondent, as calculated as net weekly payments, are deductible under paragraph 2(9)(1) and hence, subsection 7(1) of the Schedule.

(d) Estoppel

In oral submissions, the Applicant stated that it did not know whether estoppel applied in this case. The Respondent submits that one cannot speculate on what he agreed or did not agree was deductible when he consented to the May 3, 2006 Order. The Respondent notes that his letter of November 22, 2007 states that he was not conceding the benefits were deductible, only that the Applicant was entitled to the information that its insured was receiving the benefits so that it could take any steps it deemed appropriate.

Given my findings regarding deductibility, it is not necessary to address the question of estoppel.

III. EXPENSES

If the parties are unable to agree on the legal expenses of this variation application, pursuant to

Rule 79.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated – September 2010) a legal expense hearing shall be requested within thirty days of the date of this decision.

The request shall be accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, as well as submissions regarding entitlement to and/or the quantum of such expenses.

February 10, 2011

Lawrence Blackman Director's Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Pages 38 to 39 of the May 7, 2010 transcript and paragraph 13 of the Applicant's November 27, 2009 Reply Submissions.
3. 3The Appellant further relies, in this respect, on Codling-Mokena and CAA Insurance Co., (FSCO A04-000017, October 17, 2006).