Neutral Citation: 2016 ONFSCDRS 298

FSCO A16-002496

BETWEEN:

SIERRA MORTEN Applicant

and

AVIVA CANADA INC. Insurer

REASONS FOR DECISION

Before: Arbitrator Charles D. Matheson

Heard: In person at Hanover, Ontario on September 15, 2016

Appearances: Ms. Sierra Morten did not participate Mr. David Donnelly, lawyer for Ms. Morten Mr. Frank Benedetto, lawyer for Aviva Canada Inc.

Issues:

The Applicant, Ms. Sierra Morten, was injured in a motor vehicle accident on December 11, 2014 and sought accident benefits from Aviva Canada Inc. ("Aviva"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and the Applicant, 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:

Is Ms. Morten entitled to attendant care benefits as follows for services provided by:

Mr. Morten (Father):

a) $714.00 for the period of December 12, 2014 to January 7, 2015, less any amounts already paid;

b) $294.00 for the period of January 27, 2015 to February 27, 2015, less any amounts already paid;

c) $336.00 for the period of March 11, 2015 to May 22, 2015, less any amounts already paid; and

Ms. Granger (Stepmother);

d) $447.11 for the period December 12, 2014 to February 5, 2015, less any amounts already paid?

Is Aviva liable to pay a special award because it unreasonably withheld or delayed payments to Ms. Morten?
Is Ms. Morten entitled to interest for the overdue payment of benefits?
Is Aviva liable to pay Ms. Morten's expenses in respect of the Arbitration?
Is Ms. Morten liable to pay Aviva's expenses in respect of the Arbitration?

Result:

Ms. Morten is entitled to receive an overdue amount of $1,791.11 in attendant care benefits.
Aviva is liable for a special award of 35% of the overdue amount and interest calculated thereon.
Ms. Morten is entitled to interest for the overdue payment of benefits.
Aviva is liable for the reasonable expenses of Ms. Morten in regards to this Arbitration.
Ms. Morten is not liable to pay Aviva's expenses in regards to this Arbitration.

EVIDENCE AND ANALYSIS:

Legislation and Case Law Considered

Statutory Accident Benefits Schedule - Accidents on or after September 1, 2010

Insurance Act, O. Reg. 34/10, Sections 3, 7, 19, and 51;

Henry v. Gore Mutual Insurance Company, 2013 ONCA 480

Davis (Litigation guardian of) v. Wawanesa Mutual Insurance Company, 2015 ONSC 6624

Simser v. Aviva Canada Inc., 2015 ONSC 2363 (Div. Ct.)

T. C. and Personal Insurance Company of Canada, 2016 CarswellOnt 3805 (FSCO Arbitration A13-009880)

Rizzo & Rizzo Shoes Ltd., 1998

Smith v. Co-operators General Insurance Company, 2002 (SCC) CanLII 30

Background

At the time of the accident the Applicant was a minor (16 years old) living with her biological father, Mr. Craig Morten, and her stepmother, Ms. Courtnee Granger. Mr. Morten and Ms. Granger from time to time had to miss work in order to provide attendant care to the Applicant.

Both care providers have provided their respective employers' confirmation letters which confirm the hours missed, along with the hourly rate of pay normally received by each person.

Decision

The primary issue at hand is that the Insurer paid attendant care providers for services rendered, however, deducted 30% from the total amount of economical loss the service providers submitted.

The evidence shows that Aviva did pay attendant care benefits to the Applicant during the disputed periods; however, Aviva discounted the claimed economic loss by 30%. Therefore the total amount in dispute is actually $1,791.11.

For further clarity, the Applicant claims that Mr. Morten should have been paid an additional $1,344.00 and Ms. Granger should have been paid an additional $447.11 for a total of $1,791.11.

The parties agree that:

The onus is on the Applicant to prove the "economic loss" sustained by non-professional service providers for attendant care;
There is no definition of "economic loss" within the Schedule;
The term "economic loss" is a comprehensive term which encompasses a wide range of concepts inclusive of but not limited to lost wages;
"Gross" pay is the amount prior to any deductions for income tax, Employment Insurance ("EI"), or Canada Pension Plan ("CPP");
"Net" pay is the amount of wages left after taxable deductions have been removed.

The Insurer argues, in part, that the amounts submitted to Aviva and claimed in this Arbitration do not reflect tax deductions and other deductions. "Gross" pay or lost straight time wages only based on an hourly wage were submitted to Aviva.

The Insurer states that some of what the Applicant alleges to be economic loss is actually not economic loss, because it is of no loss to the family member service provider.

The Insurer submits that the Applicant by submitting her "gross" economic loss seeks to be indemnified for amounts that her service providers did not lose. This is inconsistent with the application of the correct principles of law. This is because it is only the "loss" that must be indemnified by the Insurer. Therefore, a 30% deduction which properly reflects the respective "Net" income loss, or the actual "out of pocket" economic loss of the providers, is required to be paid by the Insurer.

The Applicant argues, in part, that the Insurer accepted that the Applicant required attendant care and that her father and stepmother provided that care, and that economic losses were sustained by the service providers. Therefore the Applicant has met her onus of proving her entitlement to attendant care benefits and the value of the economic loss in accordance of the Schedule.

The Applicant also argues that the Schedule has no definition of economic loss nor does it include a formula for the calculation of attendant care benefits based on the wage loss only, let alone gross wages versus net wages. If the legislature intended for a non-professional service provider to provide an economic loss solely based on lost wages and those losses to be net losses only, it would have done so, and it did not.

The relevant legislation in this matter is Sections 3(7)(e)(iii)(B) and 19(3) and 19(4) of the Schedule, which read as follows:

3 (7)(e) subject to subsection (8), an expense in respect of goods or services referred to in this Regulation is not incurred by an insured person unless,

(i) the insured person has received the goods or services to which the expense relates,

(ii) the insured person has paid the expense, has promised to pay the expense or is otherwise legally obligated to pay the expense, and

(iii) the person who provided the goods or services,

(A) did so in the course of the employment, occupation or profession in which he or she would ordinarily have been engaged, but for the accident, or

(B) sustained an economic loss as a result of providing the goods or services to the insured person;

(Underlined for emphasis)

Attendant Care Benefit:

19 (3) The amount of the attendant care benefit payable in respect of an insured person shall not exceed the amount determined under the following rules:

(4) Despite paragraphs 1, 2 and 3, if a person who provided attendant care services (the "attendant care provider") to or for the insured person did not do so in the course of the employment, occupation or profession in which the attendant care provider would ordinarily have been engaged for remuneration, but for the accident, the amount of the attendant care benefit payable in respect of that attendant care shall not exceed the amount of the economic loss sustained by the attendant care provider during the period while, and as a result of, providing the attendant care.

(Underlined for emphasis)

Reasons

I agree with the Insurer's position that the onus of proof to quantify an economic loss sustained by a non-professional attendant care service provider ("service provider") rests with the Applicant.

I also agree with both of the parties' submissions that the term "economic loss" does not necessarily mean loss of wages, but can also mean a loss of economic opportunity, meaning any lost overtime opportunities, a loss of pension contribution opportunity (for either a defined benefit or defined contribution plan), or the loss of bonuses based on productivity or sales could form an economic loss of a service provider.

I agree with the Insurer's submissions that it is also the burden of the service provider to verify the loss which satisfies the "bona fides" of the economic loss being claimed.

In my view, taking into account that the term "economic loss" is without a definition, an Applicant may claim more than a single silo or category of entitlement; therefore lost wages are not the only silo or category in which to claim an economic loss for service providers.

I agree with the Applicant that the legislature did not insert a formula which would reduce, deduct or claw back any amount in lieu of payroll deductions, and there is no mention of gross wages versus net wages within these sections of the Schedule.

I also view that the deductions made by the Insurer, which the Insurer submitted were in lieu of statutory deductions, negatively impacted the service providers. As the service providers would have to claim the income from the attendant care benefits paid by Aviva, the lack of said contributions would in themselves impact their respective future finances.

I did not hear evidence that the Insurer contemplated deductions for any other silos or categories of economic loss.

I am not persuaded that the intention of the legislature would be to further enrich the Insurer by arbitrarily picking a 30% deduction rate, without any mandatory reconsideration or repayment process for a non-professional attendant care service provider.

I have not heard any evidence that the legislature or the Ministry released any bulletins or addendums that would permit any such deductions by the Insurer.

I also did not hear any evidence of fraud or wrong doing of any kind by the Applicant.

In my view, without said formulas or processes being explicitly read from within the Schedule, the Insurer, in my view, has acted outside its authority and interpreted the legislation incorrectly.

Therefore, for the reasons above, I find that Aviva shall pay the Applicant the overdue amount of $1,791.11.

Interest

Pursuant to section 51(2) of the Schedule, an Insurer is required to pay interest on any amounts found to be overdue for each day the amount is overdue from the date the amount became overdue at the rate of 1 per cent per month, compounded monthly. The Applicant has sought interest on the amounts overdue to be paid. Given that I have found that Aviva must pay the Applicant's claimed benefit, I now find and order the interest to be paid at the applicable rate from the time the Applicant made the appropriate submissions to the Insurer.

Special Award

Pursuant to section 282(10) of the Insurance Act, R.S.O. 1990, c. I.8, as amended, where an Insurer has unreasonably withheld or delayed payments, an Arbitrator can, in addition to awarding the benefits and interest to which an insured person is entitled under the Schedule, award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the Insured (including unpaid interest) at the rate of 1 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

The Insurer argues that the special award is not applicable in this case as there is a fine line between adjusting a file in good faith while considering the meaning of new legislation and the alleged unreasonable actions the Applicant is asserting in this matter.

The Applicant argues that the actions of the Insurer are unreasonable, as the Insurer simply devised a random and arbitrary deduction of 30% so that the service providers would only receive their net wage loss.

I agree with the Insurer that the legislature did make several changes to the attendant care service provider's economic loss provisions, and in determining same. The Applicant did receive attendant care benefits, less deductions, when applied for.

However, the Insurer crossed that thin line by applying a random deduction without considering the ramifications on the service providers. This deduction plan clearly had no reconciliation process for the service providers should the random deductions be beyond the tax bracket of the service providers.

In my view, the Insurer failed to recognize the negative impact or consequences of these deductions on the service providers, as the service providers are required to claim this income, pay taxes on the income and then deduct the subsequent contributions for EI and CPP.

Therefore, for the above reasons, I find the Insurer's interpretation not only incorrect but also unreasonable, and award a further 35% special award on the above overdue amounts and the interest.

EXPENSES:

Given the success of the Applicant in this Arbitration, Aviva is liable for the reasonable expenses of Ms. Morten. Therefore, Ms. Morten is not liable to pay Aviva's expenses in regards to this Arbitration. If the parties are unable to agree to the quantum of the expenses they may apply for an Expense Hearing as per the Dispute Resolution Practice Code.

November 7, 2016

Charles D. Matheson Arbitrator

Date

Financial Services Commission of Ontario