Financial Services Commission des
Commission services financiers
of Ontario de l’Ontario
Neutral Citation: 2017 ONFSCDRS 253
FSCO A16-000251
BETWEEN:
RAHUL SINGH
Applicant
and
AVIVA CANADA INC.
Insurer
DECISION ON A PRELIMINARY ISSUE
Before:
Arbitrator Paulina Gueller
Heard:
In person at ADR Chambers on July 21, 2017 and by written submisisons completed on July 28 2017
Appearances:
Mr. Jeffrey W. Strype and Ms. Amanda Neves for Mr. Rahul Singh
Mrs. Leanne Zabudsky and Mr. Robert Rogers for Aviva Canada Inc.
Issue:
The Applicant, Mr. Rahul Singh, was injured in a motor vehicle accident on July 30, 2013 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 Mr. Singh, through his representatives, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.
The issue in this Preliminary Issue Hearing is:
- When calculating the Applicant’s weekly IRB quantum pursuant to s. 7 of the Schedule, is the proper deduction for “other income replacement assistance” the gross amount of the Long Term Disability benefits, the net amount of the Long Term Disability benefits, or 70% of the other income replacement assistance?
Results:
When calculating the weekly IRB quantum, the Insurer may deduct 70% of the gross income received for Long Term Disability benefits.
No expenses were requested with respect to this Preliminary Issue Hearing. Therefore, I leave the matter to the Hearing Arbitrator.
EVIDENCE AND ANALYSIS:
Background
The following information is based upon the Agreed Statement of Facts2 provided at the Hearing and submitted by the Applicant’s counsel.
The Applicant was injured in a motor vehicle accident on July 30, 2013. He was employed by the City of Toronto as a Paramedic since 2002; however, at the time of the accident he was on sick leave, and was receiving Long Term Disability (“LTD”) from a plan funded fully by the City of Toronto, which is taxable. The Applicant had been on and off work since August 31, 2012. According to an LTD payment statement from the carrier, Manulife Financial, dated December 10, 2015, the net monthly payment was calculated as $3,976.40, or approximately $917.63 per week net of taxes, CPP and/or EI premiums deducted at the source.
The parties agreed that when determining the income replacement benefit (“IRB”) quantum payable during any period of entitlement, it would be zero if the “gross” monthly LTD is taken into consideration, but the IRB quantum payable may be greater than zero if the “net” monthly LTD is taken into consideration.
The Applicant’s Position
The Applicant submitted that before the legal change on September 1, 2010, under O. Reg. 403/96: Statutory Accident Benefits Schedule – Accidents on or After November 1, 1996 (“Old SABS”), there was complete congruity in the calculations of income under sections 6(1)(a), 6(5) and 7, and comparative amounts were calculated on a net basis.
However, since September 1, 2010, the Schedule defines income replacement benefit assistance under section 4(1)(a) as “the amount of any gross weekly payment for loss of income that is “received by” or available to the person …”
The Applicant submitted that the “amount” received can only be defined as the net amount, per the Court of Appeal’s ruling in Bapoo v. Cooperators General Insurance,3 which defined “received by” as representing a net figure and not a gross figure. Since the legislation at that time did not include the words “net” or “gross”, “received by” must be interpreted the same way in subsequent legislation.
The Applicant also submitted that the meaning of “received by” could have been specified by the legislature to indicate clearly that the deduction must be made on a gross basis, notwithstanding the claimant does not receive all of the benefit.
The Applicant submitted that section 7(3) of the Schedule indicates that any deduction from the IRB for past accident income is only to be made on a 70% of gross basis.
The Applicant submitted that the Schedule is consumer protection legislation and must receive a fair, large and liberal interpretation for the benefit of the claimant.
The Applicant also submitted that the law is silent regarding the LTD. The LTD is received for disability, not employment. Therefore, gross income from employment cannot be equal to the LTD.
The Applicant also submitted that s. 7(2) of the Schedule differentiates “employee” and “insured person”. An employee receives money for work, but an insured person receives money from disability.
The Insurer’s Position
The Insurer submitted that the Schedule dictates that the deduction should be the gross amount of the LTD benefit, and the formula set out in section 7(1) of the Schedule is “the weekly IRB amount payable to an insured is the weekly base amount” minus the total of all “other income replacement assistance”.
The Insurer submitted that the “weekly base amount” is 70% of the insured person’s gross weekly income (section 7(2) of the Schedule). The term LTD (considered “other income replacement assistance”) is any gross weekly payment for loss of income received by or available to the insured person (section 4 of the Schedule). Consequently, the full gross amount of the LTD has to be deducted, before any deductions are taken.
The Insurer also submitted that the Schedule (as opposed to the Old SABS) states, in section 4(1), “other income replacement assistance” means … the amount of any gross weekly payment for loss of income that is received by …”
Conversely, section 7(1)(i) of the Old SABS defined other income replacement assistance as “the amount determined under subsections 6(1) and (5) reduced by … net weekly payments for loss of income that are being received by the person…”.
The Insurer submits that both phrases in the Old SABS and the Schedule are virtually identical, but the “Old SABS” uses “net” and the Schedule uses “gross”, which must signal the legislator’s intent to change the treatment of the LTD under the Schedule. In consequence, the total amount of the benefit, including the amounts for statutory deductions made by the payor of the benefit shall be deducted.
The Insurer submitted that Bapoo v. Co-operators is not applicable to the present case because that case determined whether the insurer was entitled to deduct the gross or net disability income benefit from the IRB quantum, but the Old SABS at that time did not use either the term gross or net.
The Insurer submitted that in Cousins and TD General,4 Arbitrator Parish decided that the deduction when calculating an IRB quantum was of the gross amount.
Law
Section 4(1) of the Schedule states:
“gross employment income” means salary, wages and other remuneration from employment, including fees and other remuneration for holding office, and any benefits received under the Employment Insurance Act (Canada), …
“gross weekly employment income” means, in respect of an insured person, the amount of the person’s gross annual employment income, as determined under subsection (2), divided by 52;
“other income replacement assistance” means, in respect of an insured person who sustains an impairment as a result of an accident,
(a) the amount of any gross weekly payment for loss of income 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,
(i) a benefit under the Employment Insurance Act (Canada),
(ii) a payment under a sick leave plan that is available to the person but is not being received, and
(iii) a payment under a workers’ compensation law or plan that is not being received by the person because the person has elected under the workers’ compensation law or plan to bring an action and is not entitled to the payment
Section 7 of the Schedule states:
(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
“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.
(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
Analysis and Decision
The language used in the Old SABS and the Schedule differ. The legislator must have had a reason for updating the language.
Section 4(1) of the Schedule sets out that “gross employment income” includes “any other benefits received under the Employment Insurance Act (Canada).”
Section 4(1) also sets out that “other income replacement assistance” relates to an insured person who sustains an impairment as a result of an accident”, and subsection (a) sets out that the amount is “any gross weekly payment for loss of income 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 [emphasis mine] a benefit under the Employment Insurance Act (Canada)”.
Section 2(1) of the Employment Insurance Act (Canada) sets out that insurable earnings are the total amount of the earnings that an insured person has from insurable employment. Further, according to s. 4(1) of the Schedule, LTD is to be considered “gross employment income”.
The Supreme Court of Canada has stated that the words in a statute should be read in their ordinary and grammatical sense. In Rizzo & Rizzo Shoes Ltd5 the Court noted:
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, and the intention of Parliament.6
In this case, I find that all the insurable earnings are grouped under one category entitled “any other benefits received under the Employment Insurance Act (Canada)”, which is a different category than “other income replacement assistance”.
Section 7(3) of the Schedule sets out that the “insurer may deduct from the amount of an income replacement benefit payable to an insured person the 70% of any gross income received by the insured person …”
The LTD is governed by the Employment Insurance Act and Income Tax Act, and section 4(1) of the Schedule states “gross employment income”. Hence, the LTD has to receive the same treatment, which is the 70% of the gross income received.
Therefore, I find that when calculating the weekly IRB quantum, an Insurer may deduct 70% of the gross income received for LTD benefits.
EXPENSES:
No expenses were requested with respect to this Preliminary Issue Hearing. Therefore, I leave the matter to the Hearing Arbitrator.
September 26, 2017
Paulina Gueller
Arbitrator
Date
Financial Services Commission des
Commission services financiers
of Ontario de l’Ontario
Neutral Citation: 2017 ONFSCDRS 253
FSCO A16-000251
BETWEEN:
RAHUL SINGH
Applicant
and
AVIVA INSURANCE COMPANY OF CANADA
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c. I.8, as it read immediately before being amended by Schedule 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, and Ontario Regulation 664, as amended, it is ordered that:
When calculating the weekly IRB quantum, the Insurer may deduct 70% of the gross income received for Long Term Disability benefits.
No expenses were requested with respect to this Preliminary Issue Hearing. Therefore, I leave the matter to the Hearing Arbitrator.
September 26, 2017
Paulina Gueller
Arbitrator
Date
Footnotes
- Effective September 1, 2010, the Statutory Accident Benefits Schedule – Effective September 1, 2010 (the “new SABS”) came into force. The transition rules in the new SABS provide that, subject to certain exceptions, benefits that would have been available pursuant to the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996 (the “old SABS”) shall be paid under the new SABS, but in amounts determined under the old SABS.
- Exhibit A – Agreed Statement of Facts.
- Preliminary Issue Brief, Tab 1. Abdul Bapoo v. Co-operators General Insurance Co., Ontario Court of Appeal, 1997.
- Joint Brief, Tab 4, Jim Cousins and TD General, FSCO A16-003358, dated July 10, 2017.
- Rizzo & Rizzo Shoes Ltd., 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27.
- Ibid. at para. 21.