Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2017 ONFSCDRS 195

FSCO A16-003358

BETWEEN:

JIM COUSINS

Applicant

and

TD GENERAL INSURANCE COMPANY

Insurer

Before:

Arbitrator Kimberly Parish

Heard:

In person at ADR Chambers on May 26, 2017

Appearances:

Mr. Paul Cahill for Mr. Jim Cousins

Mr. Peter Soltysiak and Mr. Kevin Temple for TD General Insurance Company

Issues:

The Applicant, Mr. Jim Cousins, was injured in a motor vehicle accident on October 29, 2013 and sought accident benefits from TD General Insurance Company (“TD General”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Cousins, through his representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act (“the Act”), R.S.O. 1990, c. I.8, as amended.

The issues in this Hearing are:

Is the calculation for quantum of the Income Replacement Benefit (“IRB”) payable to Mr. Cousins based upon the deduction of gross or net amounts of Short-Term Disability (“STD”), Long-Term Disability (“LTD”), and Canada Pension Plan (“CPP”) disability benefits?
Is either party entitled to its expenses of this Hearing?

Result:

TD General can deduct the gross amounts of STD benefits, LTD benefits and CPP disability benefits from the IRB payable to Mr. Cousins.
The parties made no submissions on expenses. If the parties are unable to agree on the entitlement to, or quantum of, the expenses of this matter, the parties may request an appointment with me within 30 days of the date of this order for determination of same in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

EVIDENCE AND ANALYSIS:

Background

The following information was based upon an Agreed Statement of Facts² provided at the Hearing, submitted by the Applicant’s counsel, Mr. Cahill.

Mr. Cousins was injured in a motor vehicle accident which occurred on October 29, 2013. Following this motor vehicle accident, Mr. Cousins returned to work and continued working until October 28, 2014. Mr. Cousins has not worked since that date, and is claiming IRBs from TD General. Mr. Cousins was approved for STD benefits from October 29, 2014 to February 25, 2015, funded by his employer. The amounts received were taxable. LTD benefits have since been paid from Manulife to Mr. Cousins from February 26, 2015 to present. The amount of LTD benefits which Mr. Cousins is entitled to is based upon 75% of his pre-accident income, including cost of living adjustments after 12 months of payments, calculated every January 1. Mr. Cousins was approved for CPP disability benefits on April 23, 2016, retroactive to February 1, 2015. Mr. Cousins currently receives monthly payments from Manulife less any CPP disability benefits received. Any CPP disability benefits received are taxable.

TD General takes the position that Mr. Cousins is entitled to receive IRBs, but the quantum of the IRBs is $0.00 after credit for the collateral benefits has been applied. Mr. Cousins has not received any IRBs from TD General to date.

Prior to the Hearing, it was agreed by the parties that if I determine that TD General can deduct the gross amount of the STD, LTD, and CPP disability benefits from the IRB payable, then TD General owes no past or ongoing IRBs to Mr. Cousins.

The parties also agreed that if I determine that TD General can deduct the net amount of the STD, LTD, and CPP disability benefits payable from the IRB, then TD General shall pay IRB arrears to Mr. Cousins in the amount of $25,000.00, inclusive of interest to May 31, 2017. The parties agreed the weekly amount of IRBs payable from June 1, 2017 to December 1, 2017 would be $154.12. It was further agreed by the parties that this weekly amount would continue to be paid to Mr. Cousins until issuance of a proper termination or recalculation notice from TD General, or a request for recalculation from Mr. Cousins.

Lastly, the parties agreed that if I determine that TD General can deduct the net amount of collateral benefits payable from the IRB payable, then both parties will have the right as of January 1, 2018 to assess and calculate the weekly amount of ongoing IRBs payable based on the indexing of collateral benefits, review of tax credits, and amount of income taxes paid. At that time, TD General would have the right to recalculate the quantum or terminate entitlement thereafter by issuing a proper termination or recalculation notice. Mr. Cousins would retain the right to request the recalculation of the IRB entitlement/quantum and dispute any issues which may arise.

The Applicant’s Position

The Applicant asserts TD General is only entitled to deduct the net amount of the STD, LTD, and CPP disability benefits payable from the IRB, and as a result, there is an unpaid IRB amount owing to Mr. Cousins.

Mr. Cahill submits that the Schedule is remedial and constitutes protection for consumers under consumer protection law. There are rules in place to prevent double-recovery, and the rules provide an understanding with respect to the priority of payers.

It is Mr. Cahill’s position that what is central to this dispute stems from s. 4(1)(a) of the Schedule, which states:

the amount of any gross weekly payment for loss of income that is received by [emphasis Applicant’s] or available to the person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan, other than…

Mr. Cahill further submitted that the words “received by” in s. 4(1)(a) above are intended to mean it is the net amount of collateral benefits payable that are to be deducted from the IRB amount payable to Mr. Cousins. This is because Mr. Cousins does not receive any amounts which have been allocated to taxes. It is the parsing off of taxes which significantly impacts Mr. Cousins, and the collateral benefits deduction is aimed to prevent double-recovery. Mr. Cahill relies on an accounting report from Collins Barrow, dated May 8, 2015.³ It was noted under paragraph 8.3 of this report that Collins Barrow deducted the amounts of Mr. Cousins’ STD and LTD benefits, net of applicable income taxes. It is noted within this report: “This approach as to the term “received” is consistent with the decision of Stinson J in Anand v. Belanger [2010 ONSC 5356.]”

Anand v. Belanger⁴ was a tort action which stemmed from a motor vehicle accident on April 26, 2003. Therefore, Ontario Regulation 403/96: Statutory Accidents Benefits Schedule-Accidents on or After November 1996 (“Old SABS”) applied. However, the Anand decision post-dated September 1, 2010. Stinson J. found that the net proceeds after the deduction of the plaintiff’s legal expenses qualified as payments received by a plaintiff and the Insurer was entitled to receive that amount as a credit for the IRB payment. Stinson J. concluded that ‘received by’ does not mean gross receipts. Mr. Cahill therefore submits that the net (after-tax) amounts should be deducted from the IRB payment.

Mr. Cahill referred to TD General’s Factum,⁵ wherein it stated Mr. Cousins is receiving more than $900.00 per week in combined LTD and CPP disability benefits, which is more than double the IRB entitlement limit for Mr. Cousins. A further report by Collins Barrow, dated July 29, 2016,⁶ notes that Mr. Cousins should be entitled to past and future IRBs in the amount of $146,174.00. Mr. Cahill submitted that Mr. Cousins has not received that amount as an IRB payment from TD General, as it has been “carved off” as an amount paid to Revenue Canada.

Lastly, Mr. Cahill submits that the problem with TD General’s argument that it can deduct the gross amounts of STD, LTD, and CPP disability benefits from the IRB payable to Mr. Cousins, is that an inequality exists between recipients who receive taxable benefits and recipients who receive non-taxable benefits. An individual who has a taxable benefit incurs a shortfall as the credit goes to the insurance company. The words “received by” should be interpreted as the amount which is received in the claimant’s pocket. The result of Mr. Cousins receiving a taxable benefit equates to a shortage in the IRB amount of $154.00 per week. For recipients of non-taxable benefits, the calculation works and double recovery is prevented. The use of the word “gross” within the Schedule creates inconsistency when calculating an IRB, as the calculation is affected by the taxability of the collateral benefits. In this case, the contradiction between the wording “gross amounts” and “received by” has created an unavoidable contradiction which has worked against Mr. Cousins and resulted in a loss in the IRB amount payable.

The Insurer’s Position

TD General asserts it can deduct the gross amount of the STD, LTD, and CPP disability benefits from the IRB payable to Mr. Cousins. Therefore, the quantum of the IRBs is $0.00 after credit for the collateral benefits has been applied.

The Insurer’s counsel, Mr. Soltysiak, stated that the proper calculation of an IRB as it relates to this accident comes from within Ontario Regulation 34/10: Statutory Accident Benefits Schedule- Effective September 1, 2010 (“the Schedule”).

Mr. Soltysiak stated that it is the wording “received by” in the Anand case that the Applicant relies upon. Mr. Soltysiak submitted that by doing this, the Applicant is trying to import a definition which is from a different regime and context. Anand was a tort case and the Schedule is contractual. The legislators of the Schedule intended to make the wording different.

Mr. Soltysiak noted a distinctive change in the wording from the Old SABS to the wording in the Schedule. Within s. 61 of the Old SABS,⁷ there was a formula provided for calculation of net weekly income. In s. 63(1) of the Old SABS,⁸ deductions and tax credits were listed. These could then be applied to the calculation of after-tax amounts received. The current Schedule contains no sections corresponding to s. 61 and s. 63(1) of the Old SABS. It is Mr. Soltysiak’s position that the deliberate removal of these two sections from the current Schedule means it was the intent of its drafters that the gross income and gross collateral benefits be considered when deducting these benefits from the IRB. There is no mechanism within the Schedule to identify which tax credits are applicable, and there are no guidelines to calculate after-tax collateral benefit amounts.

The applicable sections of the Schedule which Mr. Soltysiak referenced for calculation of the IRB include ss. 7(1) and (2).⁹ The Schedule further states under s. 4(1)(a):

the amount of any gross weekly payment for loss of income [emphasis Insurer’s] that is received by or available to the person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan, other than…

Mr. Soltysiak asserts that the wording “gross weekly payment for loss of income” is clearly stated within the Schedule, and it was clear that the legislation did not intend there to be an after-tax calculation.

TD General relies on Stepien and Security National Insurance Co./Monnex Insurance Mgmt. Inc.,¹⁰ in which Arbitrator Anschell determined Security National was entitled to deduct a lump sum amount for past LTD benefits received by Ms. Stepien from past IRB amounts it owed. It was further noted by Arbitrator Anschell that the purpose of s. 7(1) of the Old SABS was to prevent an insured person from being able to benefit from double-recovery.

TD General also relies on RBC Life Ins. v. Janson,¹¹ in which RBC was entitled to gross amounts paid or payable by the Workplace Safety and Insurance Board on account of Mr. Janson’s loss of earnings, and no credit was granted by the court for Mr. Janson’s legal fees.

TD General referred to the Supreme Court of Canada case Rizzo & Rizzo Shoes Ltd.,¹² in which Iacobucci J. described the interpretation of legislation per Elmer Driedger in Construction of Statutes (2nd ed. 1983), at pg. 87:

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

TD General submitted that there are differentiating factors within Anand which the Applicant has not recognized. In Anand, the governing statutory provision was s. 267.8(1)1 of the Act.¹³ That section specified the damages a plaintiff was entitled to for income loss and loss of earning capacity shall be reduced by:

All payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for statutory accident benefits in respect of the income loss and loss of earning capacity.

TD General states that this provision of the Act did not utilize the word “gross”, but the word “gross” is specifically referenced within s. 4(1)(a) of the Schedule.

TD General lastly submits that entitlement to accident benefits is based on elements of statutory and contractual entitlement. If it had been the legislative intent that Insurers were to only deduct net collateral benefits received, then the “net” language would have been maintained in the transition from the Old SABS to the Schedule. The change in language was a purposeful decision by the legislators. TD General asserted that to interpret “gross weekly payment” as “net weekly payment” would involve interpreting the plain and unambiguous language of a statute directly opposite to its ordinary grammatical meaning, and to interpret statutes in that way would pose a risk of ignoring legislative intent while enabling courts and tribunals to second-guess and overrule it.¹⁴

Analysis and Decision

I conclude that TD General can deduct the gross amount of the STD, LTD, and CPP disability benefits from the IRB payable.

Anand was a tort case relating to a 2003 motor vehicle accident. I agree with TD General that the context of Anand was different from the current case. Mr. Cousins’ claim for IRBs is a claim for statutory accident benefits defined within the Schedule. Anand involved IRBs, but also involved regulations under the Old SABS. More specifically, Stinson J. in Anand addressed the deduction of legal costs incurred by the plaintiff to recover IRBs from his accident benefits Insurer.¹⁵ Mr. Cousins’ claim for IRBs involves collateral benefits deductions. I do not find the words “received by” in Anand can be transposed to hold the same implications in the context of Mr. Cousins’ claim.

The statutory language relating to the calculation of an IRB within the Old SABS has significantly changed to how it now appears within the Schedule. There was a clear change in the legislative intent.

I find the intent of s. 267.8(1)1 of the Act is to prevent double-recovery. However, the Act has been in effect since 1990; the current Schedule has been in effect since 2010. The change in wording regarding the calculation of an IRB must be read in conjunction with the Act.

TD General identified that s. 61 and s. 63(1) in the Old SABS do not appear within the Schedule. Those sections listed deductions and tax credits applicable to the calculation of after-tax amounts received. The current Schedule contains no corresponding sections. The language in section 4(1)(a) of the Schedule specifically refers to gross amounts.

Sections 7(1) and (2) of the Schedule outline the following calculation of a weekly IRB:

(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, [emphasis mine] if any, for the particular week the benefit is payable, and

“B” is $400 or, if an optional income replacement benefit referred to in section 28 has been purchased and applies to the person, the amount fixed by the optional benefit.

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

Determine whichever of the following amounts is applicable:

i. 70 per cent of the amount, if any, by which the sum of the insured person’s gross weekly employment income and weekly income from self-employment exceeds the amount of the insured person’s weekly loss from self-employment, if the weekly income replacement benefit is for one of the first 104 weeks of disability, or

ii. the greater of the amount determined for the purposes of subparagraph i and $185, if the weekly income replacement benefit is for a week for which the person is entitled to receive an income replacement benefit after the first 104 weeks of disability.

To the amount determined under paragraph 1, add 70 per cent of the amount of the insured person’s weekly loss from self-employment that he or she incurs as a result of the accident.

Per s. 7(1) of the Schedule, “A” notes that the weekly base amount determined under subsection (2), less the total of all other income replacement assistance, is used to determine the amount of an IRB, and no further wording differentiates between net and gross amounts. I conclude the legislation intended the “total of all other income replacement assistance” to mean the gross amount. I agree with TD General in that the Schedule provides no further provisions to identify applicable tax credits, or guidelines to calculate net collateral benefit amounts. I therefore do not find that the words “received by” were intended to mean that an Insurer can deduct net amounts of STD, LTD, and CPP disability benefits payable from IRBs.

EXPENSES:

The parties made no submissions on expenses. If the parties are unable to agree on the entitlement to, or quantum of, the expenses of this matter, the parties may request an appointment with me within 30 days of the date of this order for determination of same in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

July 10, 2017

Kimberly Parish

Arbitrator

Date