Neutral Citation: 2017 ONFSCDRS 278 FSCO A15-009292

BETWEEN:

WAHID AMINI Applicant

and

AIG INSURANCE COMPANY OF CANADA Insurer

REASONS FOR DECISION

Before: Anne Sone Heard: Final written submissions were received on March 20, 2017 Appearances: Corey Sax for Mr. Amini Michael Blinick for AIG Insurance Company of Canada

Issues:

The Applicant, Wahid Amini, was injured in a motor vehicle accident on February 24, 2015. He applied for and received some statutory accident benefits from AIG Insurance Company of Canada (“AIG”), payable under the Schedule.¹ AIG disputed paying weekly income replacement benefits to Mr. Amini. The parties were unable to resolve this dispute through mediation, and Mr. Amini 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 Mr. Amini entitled to receive a weekly income replacement benefit in the amount of $400 per week from March 2, 2015 to date and onwards?
Is AIG liable to pay Mr. Amini’s expenses in respect of the arbitration?
Is Mr. Amini liable to pay AIG’s expenses in respect of the arbitration?
Is Mr. Amini entitled to interest for the overdue payment of benefits?

Result:

Mr. Amini is not entitled to receive a weekly income replacement benefit from AIG.

EVIDENCE:

Facts:

The parties submitted an Agreed Statement of Facts which provided as follows:

Mr. Amini was born on September 21, 1961.
Mr. Amini was involved in a motor vehicle accident (“MVA”) on February 24, 2015.
Mr. Amini is entitled to accident benefits from AIG in accordance with the Schedule.
At the time of the MVA, Mr. Amini was self-employed as a truck driver. Mr. Amini was a 50% owner of an unincorporated partnership, Brothers Trucking Co. He earned gross business income of $288,658 and incurred operating costs of $167,061.41 in 2014.
At the time of the MVA, Mr. Amini had collateral benefits coverage, pursuant to a privately purchased disability policy, bearing policy number FL58563, through NAL Insurance.
The NAL policy provides for potential entitlement to a monthly benefit up to $3,000 per month.
Mr. Amini has been in receipt of benefits from NAL Insurance in the gross amount of $3,000 per month.
As a result of the injuries sustained in the MVA of February 24, 2015, Mr. Amini suffers a substantial inability to perform the essential tasks of his employment.
To date, Mr. Amini has not received any income replacement benefits pursuant to the provisions of the Schedule from AIG.
If the $3,000 per month received by Mr. Amini from NAL is not deductible his income replacement benefit entitlement is $400 per week.
If the $3,000 per month received by Mr. Amini from NAL is deductible his income replacement benefit entitlement is $0 per week.

Positions of Parties:

Mr. Amini submits as follows:

The Applicant was self-employed and the benefits paid to him from the NAL policy were not calculated with reference to his income from employment. Therefore, the disability benefits he received do not constitute an income continuation plan and are not deductible.
The nature of the disability benefits paid to the Applicant does not qualify as a payment for a loss of income. The disability benefits are used to compensate for the Applicant’s disability. The policy provides that the disability benefits shall not be integrated with any payments pursuant to the Schedule. Therefore, the disability benefits form a separate payment that is paid in addition to any monies the Applicant is entitled to under the Schedule’s regime.
Under the common law private insurance exemption, the disability benefits are exempt from the double recovery rule and therefore should not be deductible.

AIG submits the following:

An insurer is entitled to credit for the payments received by Applicant when quantifying the Applicant’s entitlement to income replacement benefits, if it is able to satisfy that the payments are deemed to be made under an income continuation benefit plan.²
In general, the question centres on the nature of the payments made to the Applicant and whether the collateral payment constitutes payments for loss of income.³
In considering whether the collateral payments are payments for loss of income, one must look at the actual policy within the context of the specific wording of the legislation.⁴

The NAL Insurance Policy for Disability Benefits:

The NAL Insurance Contract is dated July 5, 2010, and is divided into two parts. These two parts are:

The Contract
Income Replacement Section

Under the Income Replacement Section, the NAL policy talks about disability benefits in the context of when income replacement benefits will be paid. In other words, income replacement benefits will be paid when the policyholder has the requisite disability.

On page 9, the NAL policy describes when a disability benefit is intended to cover a loss of income due to a qualifying total disability. This portion of the NAL policy applies while Mr. Amini remains totally disabled beyond the elimination period and also provides for potential entitlement to a benefit of up to $3,000 per month. Including “other sources” this amount may not exceed 66 ⅔% of his pre-accident income as defined in the NAL policy.

“Other sources” are defined to include short term and long term disability benefits, employment insurance sick leave benefits, workers’ compensation plan benefits, and Canada Pension Plan disability payments.

The parties agree that Mr. Amini is totally disabled as contemplated by the NAL policy.

Calculation of the NAL Policy Income Replacement Benefit

On page 6 of the NAL Policy, the Relation of Earning and Expenses to Insurance portion of the Statutory Conditions section sets out the calculation of the NAL monthly income replacement benefit. As indicated in the Schedule of Benefits attached to the NAL Policy, the income replacement benefit is subject to fluctuation based on Mr. Amini’s Earned Income (based on his income tax returns) prior to the incident date.

The NAL income replacement benefit is limited to 66 ⅔% of Mr. Amini’s pre-accident income. Earned income for an Employee or a Sole Proprietor and/or Partnership is based upon the gross amounts earned by Mr. Amini for personal services in the performance of an occupation, before taxes and expenses.

As set out in Schedule B to the Agreed Statement of Facts, Mr. Amini’s Gross Business Income as a Sole Proprietor in 2014 (declared on his income tax return) totalled $288,658 (“Gross Income”).

Operating costs associated with the operation of his transport truck (“Total Cost of Revenue”) are subtracted from the Gross Income. These operating costs consisted of fuel costs, truck repairs and meals in connection with the operation of Mr. Amini’s business. For 2014, the Total Cost of Revenue was $167,061.41.

Mr. Amini’s Gross Income for Personal Services in 2014 came to $121,596.59. Sixty-six and two-thirds percent of his Gross Income for Personal Services amounts to $81,469.72. This provides a monthly amount of $6,789.14. Based Mr. Amini’s policy limits, he had an eligible monthly benefit of $3,000. According to paragraph 7 of the Agreed Statement of Facts, this is the amount he has been receiving.

ANALYSIS AND CONCLUSION:

Statutory Framework:

Subsection 7(1) of the Schedule provides that “the weekly amount of an income replacement benefit payable to an insured person … is the weekly base amount … less the total of all other income replacement assistance.”

Under paragraph 4(1)(a) of the Schedule, “other income replacement assistance” means “the amount of any gross weekly payment that is received by … the person as a result of the accident under any income continuation benefit plan” with some exceptions that do not apply here.

Subparagraph 3(1)(7)(d) of the Schedule states that payments for loss of income under an income continuation benefit plan are deemed to include,

(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 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.

Accordingly, an insurer is entitled to deduct periodic payments of insurance received by an applicant when quantifying an applicant’s entitlement to income replacement benefits, if it is able to satisfy that:

the applicant was employed while the contract for insurance was in effect; and
the maximum benefit payable is limited to an amount calculated with reference to income from employment.

Is AIG entitled to Deduct the Payments from the services by Mr. Amini?

Was Mr. Amini Employed at the time of the Accident?

Under subparagraph 3(7)(d)(ii)(A) of the Schedule, payments for loss of income are deductible from statutory income replacement benefits under certain circumstances. One of the requirements is that the Applicant was employed while the contract for insurance was in effect.

Mr. Amini submits that since Mr. Amini was self-employed rather than employed, his private collateral benefits coverage is not a deductible benefit under an “income continuation benefit plan” under subparagraph 3(7)(d)(ii)(A) of the Schedule.

In the Income Replacement Section of the NAL policy, there is a set of definitions on page 8. The NAL policy defines “Employment or Employed” as follows:

For an individual who is not self-employed:

Actively working for salary or wages for one employer (Principal Job) at the time of application;

For a self-employed individual:

Actively running his/her business for at the time of the application.

To be eligible for this coverage, the Life Insured must be an employee or contracted driver of a transportation company working on a full-time basis…(my underlining)

These sections of the NAL policy mean that for the purposes of the policy, “employed” includes a contracted driver of a transportation company working on a full-time basis.

According to the Agreed Statement of Facts, Mr. Amini was a self-employed contracted driver of a transportation company working on a full-time basis at the time of his accident.

In addition, I note that in the Stojanov case, the Arbitrator found that a self-employed drywall contractor was held to be “employed” in the context of subparagraph 3(7)(d)(ii)(A) of the Schedule.

Accordingly, I find that Mr. Amini was “employed” in this case for the purposes of subparagraph 3(7)(d)(ii)(A) of the Schedule.

How was Mr. Amini’s NAL Policy Benefit Determined?

Mr. Amini asserts that the NAL policy did not base his entitlement to disability benefits on his personal income from employment. Rather, his entitlement to these benefits was based on his sole proprietor net business income.

In its Income Replacement Section, the NAL policy specifically defines what income means. Firstly, it provides a formula to determine the amount the policy will pay for income replacement. It then states:

Earned income for an Employee or a Sole Proprietor and/or Partnership includes gross amounts earned by You for personal services in the performance of an occupation, before taxes and expenses. This includes salary, wages, commission, fees or similar earned income.

This section clearly includes Mr. Amini, as according to the Agreed Statement of Facts, he was a 50% owner of an unincorporated partnership.

Within the Income Replacement Section of the NAL policy, there is a heading for Disability Benefits. It provides for three types of Disability Benefits that could be paid. They are the following:

When Your Disability Benefit provided by this Policy is intended to cover a loss of income due to a qualifying Total Disability.

This Disability Benefit pays up to 66 ⅔% of pre-accident income.

When Your Disability Benefit provided by this Policy is intended to cover or replace Your Eligible Pre-Tax Business Overhead Expenses during a qualifying Total Disability.

This Disability Benefit covers up to 100% of Pre-Tax Business Overhead Expenses.

Schedule B to the Agreed Statement of Facts contains a calculation showing the amount of the eligible benefit due to Mr. Amini from the NAL policy. The calculation refers to 67% of his gross income, and pays him $3,000 per month, the maximum applicable monthly amount payable under the NAL policy.

This reference to the 67%⁵ of Mr. Amini’s gross income in Schedule B persuades me that the Disability Benefit he is receiving from the NAL policy is intended to cover his loss of income, as opposed to his Pre-Tax Business Overhead expenses or a combination of both.

I have already found above that under the terms of the NAL policy Mr. Amini was “employed” for the purposes of subparagraph 3(7)(d)(ii)(A) of the Schedule. Therefore, it does not matter if his entitlement to these benefits was based on his sole proprietor net business income. As a result, I find that under subparagraph 3(7)(d)(ii)(B) of the Schedule, the maximum benefit payable to Mr. Amini from the NAL policy was limited to an amount calculated with reference to his income from employment.

What is the Interaction of the NAL Policy and the Schedule?

Under the loss of income section, the NAL policy states as follows:

“Your Disability Benefit will not be integrated with any automobile accident insurance plan, e.g. the Statutory Accident Benefits of the Ontario Automobile Policy (OAP).”

AIG interprets this statement to provide a warning to insureds that they may not be entitled to income replacement benefits from their accident benefit insurer. In other words, the benefits would not integrate based on the “double recovery” principle and an insured was barred from seeking recovery from both the accident benefits insurer and NAL Insurance.

Mr. Amini disagrees with this interpretation and posits that if the drafters of the NAL policy meant to warn insureds that they may not be entitled to income replacement benefits from their accident benefits insurer, they would have explicitly done so.

Although the NAL policy does not specifically mention the potential effects of the non-integration of the NAL policy with Schedule benefits, it clearly sets forth through its wording, bolding and underlining that there will not be any integration of the loss of income portion of the NAL policy with the Schedule. Although further statements/examples in the NAL policy may have made the implications more apparent, they were not necessary to express the clear intention not to integrate the NAL policy with Schedule benefits.

Is the Common Law Private Insurance Exception Applicable?

The private insurance exception, also known as the collateral benefits rule, is a common law principle that provides that payments received under an insurance policy are not deducted from an injured plaintiff's tort award even though this exception may overcompensate the plaintiff.

Mr. Amini submits that consistent with the private insurance exception to the double recovery rule, the Ontario Court of Appeal held in Demers v. Monty and B.R. Davidson Mining & Development Ltd.,⁶ that benefits received pursuant to a private insurance policy accrue to the insured’s benefit, as opposed to that of the insurer, and therefore should not be deductible.

I agree with AIG that this common law principle does not apply to cases involving a dispute for benefits under the Schedule, particularly where the wording of the Schedule clearly denies the applicability of this exception when determining entitlement to benefits under the Schedule.

In the Demers case, the plaintiff received benefits from the Canada Pension Plan and Hospitals of Ontario Pension Plan. These benefits were held not to be deductible; however, in that case these disability benefits were deemed to not compensate the plaintiff for loss of income. In addition, the court in the Demers case was interpreting statutory language found in the Insurance Act relating to entitlement and deductions in a tort action and not an insured’s entitlement to benefits under the Schedule. Accordingly, I find the Demers case distinguishable from Mr. Amini’s case.

Should the NAL Policy Benefit be deducted from Mr. Amini’s Income Replacement Benefits?

According to Stojanov, the law concerning deductibility requires consideration of the entire policy within the specific wording of the Schedule with the overriding question being “what are the payments for?”⁷

This question focuses on the nature of the payments from the NAL policy to Mr. Amini, and especially whether they constitute payment for loss of income.

The NAL policy provides for a disability benefit that is intended to cover a loss of income.

Under subsection 7(1) of the Schedule, the total of all other income replacement assistance is to be deducted from the weekly amount of an income replacement benefit payable to an insured person.

Under paragraph 4(1)(a) of the Schedule, “other income replacement assistance” means “the amount of any gross weekly payment that is received by the person as a result of the accident under any income continuation benefit plan.”

In order for the income replacement assistance from the NAL policy to be deductible from income replacement benefits owed to Mr. Amini by AIG, two conditions must be met. Subparagraph 3(7)(d)(ii)(A) of the Schedule requires that Mr. Amini must be employed while the contract of insurance is in effect, and subparagraph 3(7)(d)(ii)(B) of the Schedule requires that the maximum benefit payable is limited to an amount calculated with reference to Mr. Amini’s income from employment.

As discussed above, I find that both of these requirements have been satisfied.

Accordingly, I find that the $3,000 per month received by Mr. Amini from the NAL policy is deductible from his statutory income replacement benefit. This results in a net income replacement benefit of $0 per week for Mr. Amini.

EXPENSES:

If the parties are unable to resolve the issue of expenses, a hearing in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition –Updated January 2014) may be requested within 30 days.

October 26, 2017

Anne Sone Arbitrator

Date

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 Regulation 664, R.R.O. 1990, as amended, it is ordered that:

Mr. Amini is not entitled to receive a weekly income replacement benefit from AIG.