Curt Barker v. Economical Mutual Insurance Company, 2017 ONFSCDRS 290

Financial Services Commission des Commission services financiers of Ontario de l’Ontario

Neutral Citation: 2017 ONFSCDRS 290

FSCO A16-000643

BETWEEN:

CURT BARKER

Applicant

and

ECONOMICAL MUTUAL INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before: David Snider

Heard: June 9, 2017, by written submissions

Appearances: Siona Sullivan for Mr. Barker Christopher Schnarr for Economical Mutual Insurance Company

Issues:

The Applicant, Curt Barker, was injured in a motor vehicle accident (MVA) on October 21, 2014. He applied for and received statutory accident benefits from Economical Mutual Insurance Company (“Economical”), payable under the Schedule.¹ Economical has provided weekly income replacement benefits, in varying amounts, since 7 days after the date of loss. The Applicant disputes the quantum of income replacement benefits he is receiving. The parties were unable to resolve their dispute through mediation, and Mr. Barker 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:

What weekly rate of Income Replacement Benefits is Mr. Barker entitled to?

Result:

Mr. Barker is entitled to receive Income Replacement Benefits at the rate of $308.74 per week to present and ongoing with a right for review of this weekly quantum if and when his declared pre-accident income is adjusted by the Canada Revenue Agency.

EVIDENCE AND ANALYSIS:

This file was transferred to me on June 9, 2017 for purposes of preparing this Order. Since the matter proceeded by written submissions only, I have accordingly designated June 9, 2017 as the date the matter was “heard” by me. As a result of the phasing-out of the Financial Services Commission of Ontario (FSCO) Dispute Resolution Services and the need to transfer the matter among arbitrators, this file has taken an inordinate amount of time to have a decision issued. However, the end result is such that no additional negative economic effect will be experienced by the Applicant as a consequence of this decision, other than a modest costs award against him. The parties should mutually recognise that this quantum will remain unchangeable (unless affected by any possible appeal) unless and until Mr. Barker, or the Canada Revenue Agency (CRA), brings about a review or audit of his income tax filings for the year(s) prior to the date of this MVA. I am dealing only with quantum, not eligibility, in this decision.

The issue is a simple one. What is the correct weekly amount of Income Replacement Benefits (IRBs) that Mr. Barker is entitled to?

The insurer states that Mr. Barker is entitled to a weekly income replacement benefit amount of $308.74. The applicant states that he is entitled to a weekly income replacement benefits amount of $400.00. The question has been greatly simplified for me by the fact that both sides have agreed that Mr. Barker was, in fact, as a matter of law, employed as an employee by Amber Same Day Delivery (Amber). Both sides also acknowledge and concede that Mr. Barker, and Amber, both characterized his working status as that of “self-employed” for income tax purposes during the years he worked for Amber prior to the MVA. This characterization relieved Amber from making remittances on behalf of Mr. Barker for E.I and C.P.P., etc., and was therefore of benefit to Amber Carr, the proprietor of Amber. It also allowed Mr. Barker to deduct various expenses from his income for income tax purposes, thereby reducing his annual tax payable to the CRA and hence benefitting him. So, the arrangement was mutually beneficial, although less than accurate.

I have not been asked to review the Insurer’s calculations of income which result in the figure of $308.74 per week as Mr. Barker’s income replacement benefit entitlement and have accepted them as being accurate and appropriate based upon the income declarations made by Mr. Barker to the CRA in 2013 and 2014.

I recognise the fact that the $308.74 weekly amount is being calculated based upon the “self-employed” income Mr. Barker declared to, and had accepted by, the CRA in 2013 and 2014. I also recognise that these lowered (by virtue of self-employed income deductions for allowable expenses) income figures reduced his potential weekly IRBs from $400.00 to $308.74. I must conclude, however, that section 4(5) of the Schedule requires that this lower quantum be ordered by me in this matter.

As previously found by various Arbitrators and confirmed by Director’s Delegate Evans in the Uribe and Wawanesa Mutual Insurance Co. (FSCO P09-00021, February 5, 2010) appeal decision concerning the interpretation of the predecessor to section 4(5) of the Schedule “where a person has a legal obligation to declare his entire income, it is not unfair, on its face, that the person be bound by that declaration”. This amendment to the Schedule specifically prohibited an individual from including extra, undeclared (for income tax purposes) income amounts in his total annual income for purposes of determining an IRB quantum. It was made deliberately and explicitly to solve a long-standing income calculation problem being faced by FSCO arbitrators when dealing with self-employed individuals who wanted to include such things as undeclared tips, for example, in their income for IRB purposes while not declaring it as taxable income.

It should also be noted, though, that section 4(6) of the Schedule does allow a recipient of IRBs to have the quantum of his IRBs adjusted (presumably upward) if and when the CRA (and/or other taxing bodies, if applicable) determines that his declared income from previous year(s) should be changed. There does not seem to be a time limitation on when such an adjustment may be made under the Schedule. Accordingly, Mr. Barker has an opportunity remaining open to him to seek the $400.00 per week maximum IRB quantum if he chooses to refile his pre-MVA income tax returns, or if the CRA decides to conduct an audit or review which results in an upward taxable income adjustment. Whether those financial results would work out to an overall net benefit to Mr. Barker when the tax consequences are offset in the amount of $91.26 by an increase in weekly IRB entitlement remains to be seen and is beyond my jurisdiction to consider.

Accordingly, I hereby order that Mr. Barker’s weekly income replacement benefit entitlement is $308.74 per week.

EXPENSES:

I hereby order costs in a fixed total amount of $1000.00 to be payable by Mr. Barker to the Economical Mutual Insurance Company.

November 2, 2017

David Snider Arbitrator

Date