Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2018 ONFSCDRS 46

FSCO A15-008668

BETWEEN:

TERRY DACOSTA

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

Before:

Arbitrator Jeff Musson

Heard:

In person at Woodstock, Ontario on October 10, November 9, (via teleconference) December 18, 19, and 20, 2017

Appearances:

Mr. Terry Dacosta participated

Mr. Talaal Bond participated for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Mr. Terry Dacosta, was injured in an automobile accident on May 25, 2013 and sought accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Dacosta 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 Arbitration Hearing are:

Is Mr. Dacosta entitled to income replacement benefits at a rate of $400 per week from May 25, 2013 and ongoing?
Is Mr. Dacosta entitled to interest for the overdue payment of benefits?
Is either party liable to pay expenses in respect of the Arbitration Hearing?

Result:

Mr. Dacosta is not entitled to income replacement benefits and this claim is dismissed.
Mr. Dacosta is not entitled to interest for the overdue payment of benefits.
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 for determination of same in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

Motions at the Hearing

There were three motions that were put forward as part of this Hearing. Two motions were requested prior to the commencement of the Hearing and one motion was requested during the proceedings. Two motions were put forward by the Applicant and one motion was put forward by the Insurer.

Motion October 10, 2017

The Applicant on the first day of the Hearing requested an adjournment of the proceedings due to personal medical reasons. The Applicant produced a note from his family doctor confirming that from a medical perspective the Applicant was not in a position to participate in a hearing.

The Insurer objected to this request based on a lack of details with regards to the medical condition from which the Applicant was suffering. Further, the Applicant produced his doctor’s note at the Hearing and the Insurer was not given proper advance notice.

After hearing submissions from both parties, I granted an adjournment of the Hearing based on medical reasons until December 18, 19, and 20, 2017 in Woodstock, Ontario.

Further, I also ordered the following as part of the adjournment request:

The Applicant must produce by 5pm, October 10, 2017 to the Arbitrator, documentation confirming the name of counsel (if any) who has been retained to represent him.
The Applicant must produce all documents, reports and evidence that he intends to rely on at the Hearing by 5pm, October 11, 2017 to the Insurer and to the Commission.
The Insurer may file updated reports less than 30 days prior to the Hearing but not less than 7 days prior to the reconvening of the Hearing.
The Applicant will produce by 5pm, October 13, 2017 updated clinical notes and records of Dr. Lau.
The parties will be permitted to make cost submissions with regards to this motion at the conclusion of the Hearing.
It is peremptory for the Applicant to attend the Hearing on December 18, 19, 20, 2017 and no further adjournment request will be heard. Failure to attend will result in dismissal of the Application on a with costs basis.

Motion November 9, 2017

The Applicant had summoned Mr. Talaal Bond, Insurer’s counsel, and the Applicant’s former counsel, Mr. Doug Bryce, to appear as witnesses at the resumption of the Applicant’s Hearing on December 18-20. 2017. The Applicant requested that both witnesses appear in order to testify as to the settlement discussions which were conducted on a without prejudice basis prior to the commencement of the Hearing.

The Insurer objected to this request on the basis that the discussions that took place were on a without prejudice basis. In addition, the discussions were not relevant in order for the Applicant to prove his entitlement to accident benefits.

After hearing submissions from both parties, I ruled that Mr. Bond and Mr. Bryce were released from testifying at this Hearing. Their testimony was not relevant to the issues in dispute. Further, I also ruled that the issue of costs related to this motion will be addressed at the conclusion of the Arbitration Hearing.

Motion December 19, 2017

The Applicant put forward a motion to have Mr. Greg Phelps testify on his behalf at the Hearing. Mr. Phelps was summoned as per the Dispute Resolution Practice Code (“DRPC”), however, the summary report authored by Mr. Phelps was only served on the Insurer on December 18, 2017. The Applicant put forward the position that the report is a summary of the financial information contained in the Applicant’s financial brief and that there is no new evidence being produced. Further, the Insurer had the Applicant’s financial information 30 days prior to the recommencement of the Hearing.

The Insurer objected to the calling of Mr. Phelps as a witness because it had not been given the opportunity to respond to the information contained in the summary report served on it on December 18, 2017. Mr. Phelps was being called to testify as an expert witness based on this report and the Insurer was of the opinion that it put them in a severely prejudicial position.

After hearing submissions from the parties, I allowed Mr. Phelps to testify. Based on the evidence before me, I determined that the Insurer would not be severely prejudiced if the Applicant’s expert witness testified. The summary report authored by Mr. Phelps is only 7 pages in length and as such only contains a summary of information that the Insurer already had in its possession 30 days prior to the start of the Hearing.

EVIDENCE AND ANALYSIS:

BACKGROUND

Mr. Dacosta decided to proceed at the Arbitration Hearing as a self-represented applicant. To his credit, he did a very commendable job presenting his case, especially considering his lack of formal legal education.

The Applicant is a self-employed businessman who owns an electrical, mechanical and general contracting business. On May 25, 2013, in Woodstock, Ontario, the Applicant was involved in a motor vehicle accident (“MVA”) while driving to get supplies for a customer of his business. The Applicant’s vehicle was hit by another vehicle and, from a property damage perspective, the Applicant’s vehicle was written off.

The Applicant did not require an ambulance at the scene nor did he attend a hospital the day of the accident. The following day, after the accident, the Applicant began feeling soreness in his upper and lower back, his neck, shoulders, arms and legs as a result of the collision. Eventually, the Applicant attended Woodstock Hospital on June 5, 2013 because he was still experiencing pain from the May 25, 2013 accident.

THE APPLICANT

The Applicant testified that he has owned and operated an electrical, mechanical and general contracting business for a number of years. His client base includes residential, commercial and industrial projects. Prior to the accident, he completed these jobs on his own with only occasional assistance being provided by supplemental contracted help that he would hire. He testified that, for the most part, he was a “one man” shop.

Prior to the accident, the Applicant stated that business was going well. In his opinion, he felt that the size of his business at that time was manageable and he had no plans on growing the business beyond his current monthly workload. The Applicant testified that if he increased the number of signed jobs, it would increase his workload. That would then cause a domino effect which would increase his mental and physical demands as well as increase his stress level. He stated that he tried this once and did not want to experience it again.

As it related to work outside of his business, the Applicant testified that he owned some rental property which he personally managed and on which he completed the maintenance. Around his personal residence, he was also active and would complete the gardening and landscaping tasks around his house.

Prior to the accident, he testified that his health was unremarkable. There was an incident in 2000/2001 where he hurt his back at work.² As a result, he attended massage therapy and was prescribed medication, however, he stated that he fully recovered a short time later from his injuries. In June of 2009, an x-ray of his lumbar spine was taken. It concluded that there was minimal scoliosis, degenerative disc disease in his upper lumbar spine.³ This finding was noted but there was no treatment plan initiated. In February of 2010, the Applicant visited his family doctor, Dr. Liao. It was noted that he had complaints of bilateral knee pain. Based on the family doctor’s clinical notes and records, the Applicant was suffering more pain in his right knee than his left knee.⁴ He was prescribed medication for the pain.

Ultimately, the Applicant testified that any pain that he suffered from prior to the MVA had all resolved. When compared to the pain he has suffered since the MVA, he stated that there is no comparison to any pain suffered pre-accident. He testified that the pain which he suffers from post-MVA has not resolved to date.

The Applicant stated that he has had to reduce his workload since the MVA, hire additional staff, as well as make accommodations on the job site in order to complete his company’s work. He testified that none of these additional adaptations were necessary prior to the MVA. The Applicant stated that due to the injuries he has suffered, the amount of physical labour that he can perform varies from very minimal to none at all. Even with his modified and mostly supervisory role at his company, he testified that he still cannot work at a productive, meaningful level. Since his ability to complete work tasks has decreased because of the pain, he stated that the less physical work he is able to do himself, the more labourers he must hire to complete this work.

In terms of his rental properties, the Applicant testified that he now only rents to full-time, long-term tenants for his seasonal rental properties because he is unable to manage the properties himself. He has negotiated an arrangement with the tenants, whereby the tenants are now responsible for their own lawn maintenance, gardening and landscaping at the properties. As for the Applicant’s own place of residence, he testified that for any property/building maintenance that is required, he is forced to hire people to do this work or he is forced to ask for help.

The Applicant testified that when he does work, he will experience major pain either immediately afterwards or later that day and sometimes it will linger for a number of days. He testified that all of these conditions are a direct result from the injuries sustained from his MVA.

The Applicant stated he has suffered continual pain since the MVA and that this pain has varied in intensity in the 4 years since the accident. He testified that he has experienced numbness in his legs, feet and toes only since the accident. As a result, he is unable to sit or stand for a prolonged period. The pain that he suffers from also causes him difficulty sleeping.

The Applicant testified that any physical tasks that he did try to perform post-accident were done merely on a trial basis in order to test his pain limitation. Unfortunately, once the task was completed, he stated that he was unable to cope with the aftermath of pain and suffering. He would experience sharp pain on the side of his body, leg and lower back which would continue to be present of a period of time afterwards.

Since the accident, the Applicant testified that he has tried both massage therapy as well as prescribed medication in order to deal with the pain. To date, none of the treatments have been successful. He has visited doctors both in Canada and in the US and no one has been able to provide the Applicant relief from his pain symptoms. He has continued to work as well as continued to participate in the activities of daily living, albeit, by adapting to his pain levels.

MR. GREG PHELPS

Mr. Phelps is an accountant whom the Applicant hired in order to calculate the quantum of the Applicant’s income replacement benefit (“IRB”) claim. The Applicant had Mr. Phelps testify as his accounting expert. I found Mr. Phelps to be a credible witness who has testified at a number of FSCO arbitration hearings as well as in court proceedings.

Mr. Phelps testified that he agreed for the most part with the calculations of the Jarvie report (Insurer’s IRB report). He testified that the Insurer did not provide him any updated calculations on the Applicant’s IRB claim since the last report was authored. In addition, since the Applicant’s corporate year-end does not align with the calendar year end, it makes it a little more difficult in calculating IRB quantum entitlement.

The Applicant had a couple of numbered companies operating under his control at the time of the accident up to and including today. There was the numbered company which controlled the operations of the Applicant’s electrical, mechanical and general contracting business. There was another company which controlled the Applicant’s rental income from his property. He testified that the Applicant gave him financial information on what was paid by one of the Applicant’s companies to the other and the Applicant told him that this amount should be considered in the calculation of his IRB claim. This was a non-cash transaction that appeared on both companies’ income statements and balance sheets.

Further to calculating the Applicant’s income, Mr. Phelps testified that the Applicant’s wages would appear in the category of “wages” on the Applicant’s income statement if the rules governing accounting methods were followed when the Applicant’s corporate year-end taxes were completed. Mr. Phelps testified that he was not retained to complete the Applicant’s corporate tax return. He stated that he was just using the numbers given to him in order to calculate the Applicant’s IRB claim.

INCOME REPLACEMENT BENEFITS – ANALYSIS

The onus is on the Applicant to prove entitlement to benefits. The Applicant is claiming entitlement to both pre- and post-104 IRBs as a result of the accident. In order for an applicant to successfully claim IRBs, there are two separate issues that must be addressed: disability and quantum. First, from a medical perspective, as regards the pre-104 test, do the Applicant’s injuries provide him with either a substantial or a complete inability to work? As regards the post-104 test, can the Applicant, despite his injuries, engage in any employment for which he is reasonably suited by education, training or experience? Second, if from a medical perspective the Applicant qualifies for IRBs, does the Applicant then from a quantum perspective qualify for IRBs? In the Schedule, the pre-104 entitlement to IRBs is defined in section 5(1)(1)(i)⁵ and the post-104 entitlement to IRBs is defined in section 6(2)(b).⁶

From a medical perspective, the Applicant must prove that on the balance of probabilities, the injuries that he suffered as a result of his MVA provide a substantial (for the first 104 weeks) and a complete (after the first 104 weeks) inability to engage in any employment for which he is reasonably suited by education, training or experience. The evidence that the Applicant submits as part of his case must be clear, convincing, and cogent in order to satisfy the balance of probabilities test.⁷

Even though the Applicant did sustain injuries from the accident, based on the evidence presented, his injuries do not meet the threshold related to either the pre- or post-104 IRBs. The Applicant with his own testimony stated that he was able to return to work after the accident, albeit there were modifications which were required in order for him to work. With these modifications in place, the Applicant actually generated more revenue in his company post-accident than he did pre-accident. In fact, the amount of additional income was substantially higher post-accident than pre-accident. It was noted that the Applicant’s expenses also increased, however, in the end, the net amount of income increased.

From a medical perspective, the Applicant relied on the assessment of Dr. Keith Sequeira⁸ to prove his entitlement to IRBs. Dr. Sequeira stated in his report:

It is my opinion that the primary diagnoses noted previously has directly and materially contributed to the May 25, 2013 motor vehicle accident. There has been consistent documentation of Mr. Dacosta’s symptoms, impairments and limitations from the time of the 2013 accident to the present to substantiate a direct and material contribution of this accident on Mr. Dacosta. There were no pre-existing impairments of consequence that have afflicted him. His problems appear to be mostly within the physical realm and affect his back, neck and shoulders…

Unfortunately, with this report and all other reports tendered as evidence at the Hearing by the Applicant, it did not specifically address the Applicant’s ability post-accident to “perform the essential tasks” of his pre-accident employment. In order to claim IRBs, this is the test with which the Applicant’s injuries must be compared.

This pre-104 IRB test can be segmented into the following steps: 1) there must be an impairment; 2) the impairment must be as a result of an accident; 3) there must be an analysis of what the essential tasks are of the employment; and 4) there must be a substantial inability to perform those essential tasks.⁹

The Applicant also submitted an assessment completed by Ms. Mindy Gulas, a Registered Kinesiologist Certified and FCE Evaluator, in support of his case.¹⁰ Mr. Gulas conducted a physical evaluation of the Applicant which included 36 tests. She noted that the Applicant’s “Grip strength was below average for the right (60%) and left hand (59%) when compared to age and gender norms (using the standard deviation)”. Ms. Gulas also noted that:

Mr. Dacosta demonstrates the ability to function at the LIGHT physical demands level safely. The work of an electrician requires work in the Medium to Heavy physical demand levels. Specific limitations are present for functional movements of kneeling, bending and crouching for repetitive or sustained periods, strength beyond the LIGHT physical demands level (-20lbs) and tolerance for standing more than an occasional basis (up to 1/3 of workday).

Again, just like Dr. Sequeira’s report, Ms. Gulas’ report fails to state any conclusions related to the Applicant’s entitlement to pre- and post-104 IRB benefits. That is, in essence, does the Applicant meet the inability test post-accident to “perform the essential tasks” of his pre-accident employment?

Finally, the Applicant submitted the clinical notes of his family doctor, Dr. Liao.¹¹ On May 10, 2017, Dr. Liao noted that the Applicant, “is under my care for his lower back pain. He continues to be symptomatic and is unable to repetitively bend or lift objects >20 pounds”. Again, there is not a note saying that the Applicant from a medical perspective meets the inability test post-accident, that he cannot “perform the essential tasks” of his pre-accident employment.

Based on the medical evidence submitted by the Applicant, he does not meet the substantial inability test post-accident to perform the essential tasks of his pre-accident employment. By definition, if the Applicant cannot meet the pre-104 substantial inability test, he will not be able to meet the post-104 complete inability test for IRB entitlement.

Income Replacement Benefit Quantum

Since the evidence proves that based on the balance of probabilities, from a medical perspective, the Applicant does not meet the test of IRB entitlement, then it would be moot to render a decision as it relates to the Applicant’s quantum of IRBs. However, evidence was tendered by the Applicant based on the quantum of his IRB calculation so I will comment on it.

Putting aside the above medical evidence, in the alternative, if one considers the financial evidence on its own merit, the Applicant still does not quality for pre- or post-104 IRBs. The Schedule states the method by which IRBs are to be calculated. Gross annual employment income for a person who was self-employed at any time during the four weeks before the accident is their gross employment income for the 52 weeks before the accident. If the person was self-employed for at least one year before the accident, he may designate it as his gross employment income during the last fiscal year of the business ending pre-accident instead.¹²

A self-employed person’s weekly loss from self-employment after an accident is determined in the same manner as under subsection 9(2) of the Income Tax Act, but without deductions for: expenses not reasonable or necessary to prevent loss of revenue; salary expenses paid to replace the applicant’s participation in the business, unless reasonable; and non-salary expenses that are different or greater than before, unless reasonable and necessary to prevent losses resulting from the accident.¹³

It is important to note, especially in respect of the Arbitration Hearing before me, that the Applicant’s passive income, including rental income, should not be included in calculating the Applicant’s IRBs, either before or after the accident. Rental income is better characterized as investment income rather than income from employment.¹⁴

In reviewing the financial information put into evidence, and as noted above, the Applicant did not suffer a financial loss after the accident.

INTEREST FOR OVERDUE PAYMENT OF BENEFITS

As no benefits are payable to the Applicant, then no interest is payable.

CONCLUSION

The Applicant failed to meet the onus of proof to show that he was entitled to the benefits in dispute. The evidence submitted by the Applicant did not withstand the defense presented by the Insurer. The Applicant did not produce medical evidence or experts to answer the fundamental question which was germane to this Hearing, mainly from a medical perspective: does the Applicant suffer a substantial inability to perform his pre-accident work initially and, after 104 weeks, a complete inability to perform work for which he is qualified to do by way of education, training or experience. Therefore, all issues in dispute are denied.

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 for determination of same in accordance with Rules 75 to 79 of the DRPC.

February 28, 2018

Jeff Musson

Arbitrator

Date