Corradina DiLorenzo v. Intact Insurance Company, 2016 ONFSCDRS 114

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2016 ONFSCDRS 114

FSCO A13-014232

BETWEEN:

CORRADINA DILORENZO

Applicant

and

INTACT INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

Arbitrator Paulina Gueller

Heard:

In person at ADR Chambers on January 19, 2016

Appearances:

Mr. Ryan Breedon, Mr. Peter Murray and Mr. Joseph Campisi for Ms. Corradina DiLorenzo

Ms. Tracy Brooks and Ms. Antonietta Alfano for Intact Insurance Company

Ms. Vicky Vlahakos on behalf of Intact Insurance Company

Issues:

The Applicant, Ms. Corradina DiLorenzo, was injured in a motor vehicle accident on July 8, 2013 and sought accident benefits from Intact Insurance Company (“Intact”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. DiLorenzo, through her representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

The issues in this Hearing are:

Under the Schedule, what is the correct method for calculating the income replacement benefit (“IRB”) with respect to the deduction of income received as a result of post-accident part-time work with a pre-accident employer up until June 8, 2015?
Who is responsible for the expenses of this Hearing?

Result:

The Insurer’s proposed approach is the correct method of calculating the IRB up until June 8, 2015.
If the parties are unable to agree on entitlement to, or on the amount of, expenses, they may request a determination in accordance with Rule 79.2 of the Dispute Resolution Practice Code.

EVIDENCE AND ANALYSIS:

Background

Before the commencement of the Hearing, I met solely with the lawyers to resolve some preliminary matters so that the Hearing could proceed. I asked the parties to clarify what were the issues in dispute at the Hearing, because the issues submitted in the parties’ brief differed from the issues stated in the Pre-Hearing letter. The parties advised that there was only one issue for me to decide, which is issue number 1 above.

The parties agreed to provide me with the transcripts of the Hearing.

As stated above, the sole issue before me was how to calculate Ms. DiLorenzo’s income given that she returned to work part-time after the motor vehicle accident. Two approaches were proposed and the parties referred to them as follows: the Applicant’s approach was called “the Equitable Approach” and the Insurer’s approach was called “the Insurer’s Approach”.

Applicant’s Submissions

Mr. Breedon submitted that after the motor vehicle accident, Ms. DiLorenzo was able to return to work only on a part-time basis and that the exact amount of part-time hours did not matter particularly. Further, Mr. Breedon submitted that Ms. DiLorenzo did not suffer a substantial inability to complete the essential tasks of her employment during the times when she was actually doing her pre-accident job. However, there were days when Ms. DiLorenzo did suffer an inability to complete the duties of her employment; it is for these missed hours of work that Ms. DiLorenzo should be entitled to a benefit.

In summary, Mr. Breedon submitted that for an overall period during which a person is accepted as entitled to IRBs, a person might alternately be disabled and entitled to benefits and then not disabled and not entitled to benefits depending on the person’s medical progress. Mr. Breedon based this conclusion on the plain wording of the Schedule and on case law where the Arbitrator found that a period of disability could be something less than a week.

Furthermore, Mr. Breedon submitted that the question for me to decide is whether the Insurer could take the deductions under section 7(3) of the Schedule of the part-time income, because, the time that Ms. DiLorenzo returned to work would not constitute part of the period under which she was substantially unable to perform the essential tasks of employment.

Mr. Breedon suggested that to calculate the post-accident income during the disability period, the income ought to be prorated by the number of hours that Ms. DiLorenzo would be able to work during her disability period, relative to the amount of hours that she worked prior to the motor vehicle accident, and that would give the base to calculate her gross income subject to the $400.00 cap per week.

Mr. Breedon submitted that the intention of the law is to restrict the entitlement to the income earned during the period in which the Insured was eligible to receive the benefit, and the only reasonable interpretation is that in fact when the person returns to work to that person’s pre-accident employment on a part-time basis, that does not form part of either the period of eligibility or the period during which the Insurer could claim a deduction. That is only the balance of that person’s working time when they are unable to return to work. Mr. Breedon concluded that this approach will encourage people receiving IRBs to return to work because they will be able to enjoy a greater percentage of their income.

Insurer’s Submissions

The Insurer submitted that Ms. DiLorenzo was paid IRBs without any deduction from one week after the accident until December 2013, under the Insurer’s acceptance that she suffered a substantial inability. In December 2013, Ms. DiLorenzo returned to work as a pharmacy assistant and Intact was notified by correspondence, dated February 2014, advising that Ms. DiLorenzo was working on average six hours a day, three days a week and based on the forensic accounting report, those hours shifted occasionally. Despite Ms. DiLorenzo’s return to part-time work, she continued to meet the substantial inability test, the test for entitlement, and Intact deducted 70% of that post-accident income. In the case law provided by the Applicant,² the Arbitrator found that the Applicant, Ms. Lewis-Lamoureaux, was entitled for various periods claimed, but those amounts were subject to deduction, and that the quantum of Ms. Lewis-Lamoureaux’s benefit was zero.

Further, the Insurer submitted that there is no specific language in the legislation limiting the Insurer’s ability to deduct post-accident income. The law intends to permit deduction of post-accident income pursuant to section 52 of the Schedule, which provides a mechanism for Insurers to retroactively claw back income earned by a person during a period in which an IRB is paid; and the intention of the statutory accident benefits scheme is to ensure that an Applicant who continues to be eligible for IRBs only receives benefits proportionate to their earnings.

The Insurer submitted that the Applicant’s own accounting expert, Mr. Michael Sigsworth, concedes that:

We have outlined the insurer’s apparent methodology in the attached Schedule 2. 1. We note this appears consistent with a strict interpretation of the SABS, and the current industry standard (sic).

Further, the Insurer submits that section 7(1) of the Schedule requires an IRB to be calculated based on seventy percent gross income of either the Insured’s four-week pre-accident income or the latest fifty-two weeks of income and this is a point in time calculation, and it is never adjusted or prorated.

Applicable Law

Eligibility criteria

(1) The insurer shall pay an income replacement benefit to an insured person who sustains an impairment as a result of an accident if the insured person satisfies one or both of the following conditions:
The insured person,

i. was employed at the time of the accident and, as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of that employment, or

C. as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of the employment in which the insured person spent the most time during the 52 weeks before the accident.

Period of benefit

(1) Subject to subsection (2), an income replacement benefit is payable for the period in which the insured person suffers a substantial inability to perform the essential tasks of his or her employment or self-employment. O. Reg. 34/10, s. 6 (1).

(2) The insurer is not required to pay an income replacement benefit,

(a) for the first week of the disability;

Amount of weekly income replacement benefit

(1) The weekly amount of an income replacement benefit payable to an insured person who becomes entitled to the benefit before his or her 65th birthday is the lesser of “A” and “B” where,

“A” is the weekly base amount determined under subsection (2) less the total of all other income replacement assistance, if any, for the particular week the benefit is payable, and

(2) For the purposes of subsection (1), the weekly base amount in respect of an insured person is determined as follows:

(3) The insurer may deduct from the amount of an income replacement benefit payable to an insured person,

(a) 70 per cent of any gross employment income received by the insured person as a result of being employed after the accident and during the period in which he or she is eligible to receive an income replacement benefit; and

Decision

The Schedule does not provide the definition of “period”. The Oxford Dictionary defines “period” as “a length or portion of time”. Both parties agreed that Ms. DiLorenzo was entitled to IRBs from one week after the motor vehicle accident up until June 8, 2015.

What is considered to be the period of disability or substantial inability to perform the essential task of her employment?

Section 6(1) states:

Subject to subsection (2), an income replacement benefit is payable for the period in which the insured person suffers a substantial inability to perform the essential tasks of his or her employment or self-employment. O. Reg. 34/10, s. 6 (1).

According to the case law mentioned above, the use of the phrase “the period” as opposed to “week” or some other term may suggest that IRBs can be claimed for miscellaneous days or hours of work missed as long as the Applicant meets the threshold set out.³ The Applicant submitted that the periods when she suffered a substantial inability to perform the essential tasks of her employment are the periods within a week where she is working part-time, but cannot complete a full week in the same pre-accident manner. For example, if prior to the accident she worked thirty-five hours per week, and post-accident she can only work 18 hours, then the 17-hour difference would be her period of disability.

I cannot accept this argument because the law does not divide a period into smaller periods. For example, the law does not say that a week has to be prorated to calculate how many hours or what percentage of time the Insured worked that week. Conversely, the law clearly states that if a person returns to work after the accident, the Insurer may deduct from the entitlement amount 70% of any gross employment income received by the insured person during the period in which he or she is eligible to receive an IRB.

Both parties provided me with the case of Lewis-Lamoureaux and Zurich Insurance Company, where the Applicant was working full-time and using her sick days to take time off when she could not perform the essential tasks of her employment because of injuries suffered through her accident. Ms. Lewis-Lamoureaux missed work days, on a non-regular basis, and exceeded the sick leave credits that she had accumulated. She claimed specific amounts of hours for all the accumulated time missed from work. Later, Ms. Lewis-Lamoureaux returned to her pre-accident job on a full-time basis. The Arbitrator first found that Ms. Lewis-Lamoureaux was suffering a substantial inability to perform the essential tasks of her employment. The Arbitrator then found that Ms. Lewis-Lamoureaux had entitlement to the miscellaneous sick days that she took off; however the income she earned during that week was greater than the average IRB entitlement, therefore she was entitled to zero dollars.

On the contrary, in this case I find that Ms. DiLorenzo was already within the period of disability recognized by the Insurer, who was paying her the IRB since one week after the accident. She was able to return to work but on a part-time basis, working less hours than the pre-accident hours. Consequently, I find that I cannot apply the same reasoning in Ms. DiLorenzo’s case. Ms. DiLorenzo notified the Insurer that she went back to work on a part-time basis. Ms. DiLorenzo was not taking time off and she was not on sick leave; she merely went back to work less hours than prior to the motor vehicle accident. I am not persuaded by the argument raised by the Applicant’s counsel, that the amount of hours when she was not working during that week represented a different period of disability than the period that she was already in. It is clear that the Insurer already accepted that she met the substantial inability test to perform the essential tasks of her employment and that was the reason why she received IRBs. I do not accept that the meaning of the law is that a person can claim another different “period” of disability within an already established “period” of disability. I am not convinced that in Ms. DiLorenzo’s case the calculation of time relates to a “miscellaneous” period.

Ms. DiLorenzo notified the Insurer by letter, dated February 2014, that she had returned to work on a regular schedule, which was eighteen hours per week split over three days in a defined period of time. The Applicant submitted that under the “Equitable Approach”, after returning to work, Ms. DiLorenzo was working 43.34% of the time that she had been historically working, suggesting that she was entitled to be paid IRBs for the remaining period when she was unable to work which would be 56.66%. I understand the Applicant’s approach and might sympathize with it; however, I am not persuaded that that is the intention of the law. Section 7(3) sets out clearly that the Insurer may deduct 70% percent of the “weekly income”.

The Applicant submitted that the amount of hours for which an Insured has returned to work is irrelevant, that the period does not constitute part of the period under which an Insured is substantially unable to perform the essential tasks of employment. I disagree with this approach. The period where an Insured is considered unable to perform the essential tasks of the employment is all the length of time when the person suffers a disability. She was receiving the difference between her pre-accident income and post-accident income as an IRB because the Insurer agreed that she was substantially unable to perform the essential tasks of her employment. I do not find that the intention of the law is to create a subcategory for disability within another period of disability. Furthermore, if Ms. DiLorenzo would have not been deemed disabled while she was working on a part-time basis, that would have disqualified her under the substantial disability test to perform the essential tasks of the employment she was doing prior to the accident. If I take the approach raised by Applicant’s counsel, who stated that for the 18 hours that she was working part-time she was not disabled, then Ms. DiLorenzo is at risk of not being considered within a disability at all. However, that is not at issue, because both parties agreed that she met the substantial inability test and was entitled to an IRB.

Is Ms. DiLorenzo’s entitlement to the weekly IRB to be calculated by percentage of working hours or by the amount of income earned?

The Applicant’s counsel submitted that when Ms. DiLorenzo returned to work, she did not suffer a substantial inability to complete the essential tasks of her employment. When she was actually doing her pre-accident job, she was obviously capable of doing it and therefore was not entitled to a benefit at that time. But on the hours or days when she was not able to go to work, those are the days in which the Applicant suffered a substantial inability to complete the duties of her employment and those are the days that entitled her to the benefit. The Applicant also submitted that in order to determine the benefit, what has to be done is to prorate her weekly income by the number of hours that she is now unable to work. So if she is unable to work 56 percent of the hours that she worked prior to the accident, then the base or the starting point of the weekly benefit is the 56 percent of whatever the weekly gross employment income is, subject again to the $400.00 cap and if the Insured earned any income, then the Insurer would be able to take credit for that. The Cambridge Online Dictionary defines “income” as “money that is earned from doing work or received from investments”. This definition leads me to the conclusion that the law does not intend that the calculation of IRBs be calculated by using percentages or averages of non-working hours. The calculation for an IRB is prorated or averaged only to calculate the pre-accident income. Ms. DiLorenzo returned to work and had a regular schedule with specified weekly hours. I disagree with the Applicant’s approach. The law uses different terms such as “period” or “week”; however, the law does not use the terms “percentage” or “average of hours” to calculate the income after the Insured returns to work. To be able to calculate the payment for that period, the law states that once the Insured returns to work, the Insurer has to take the weekly income earned by the Insured and deduct the income earned in that week from the amount to which the Insured has entitlement.

The Insurer stated that despite Ms. DiLorenzo’s return to work in December 2013, she continued to meet the substantial inability test and the income earned while performing her job is subject to the deduction allowed under section 7. The Insurer also submitted that the regime that formed part of the discussion in Lewis-Lamoureaux and Zurich Insurance Company is different from the current regime, and the deduction provisions read differently. Section 7(3)(a) sets out that the Insurer may deduct any gross income received by the insured person as a result of being employed. The section does not limit it, or exclude deductions for post-accident income earned at pre-accident employment. I accept the Insurer’s position. I am persuaded that the intention of the law, for a person who returns to work after the accident, is to calculate the amount to be deducted based on the weekly income earned and not based on percentages of “moments in time” when the person is working and not working during a week. Moreover, the amount of hours that Ms. DiLorenzo was working is considered within her substantial inability period to perform the essential tasks of her employment.

For all the above reasons, I conclude that the Insurer’s approach is the correct method for calculating Ms. DiLorenzo’s IRBs up until June 8, 2015.

EXPENSES:

If the parties are unable to agree on entitlement to, or on the amount of, expenses, they may request a determination in accordance with Rule 79.2 of the Dispute Resolution Practice Code.

April 15, 2016

Paulina Gueller Arbitrator

Date