In the matter of an Application pursuant to subsection 280(2) of the Insurance Act, RSO 1990, c I.8., in relation to statutory accident benefits.
Between:
[The Applicant]
Appellant
And
Certas Home and Auto Insurance Company
Respondent
DECISION
PANEL:
Rebecca Hines, Adjudicator
APPEARANCES:
For the Applicant:
[The Applicant]
Sandra Train, Counsel
For the Respondent:
Bruce Chambers, Counsel
HEARD:
In Writing on: November 12, 2018
OVERVIEW
1[The applicant], (the applicant) was involved in an automobile accident on February 7, 2016 and applied for accident benefits through Certas Home and Auto Insurance Company (the respondent). He applied for an income replacement benefit (IRB) pursuant to the Statutory Accident Benefits Schedule - Effective September 1, 2010 (the ''Schedule'') .
2The parties agree that the applicant is entitled to an IRB, however, they disagree on the amount. The quantum of the benefit is at issue. The applicant claims he is entitled to $400.00 per week. The respondent submits he is entitled to $36.30 per week. The crux of the dispute is whether a disability benefit the applicant has been receiving through a privately purchased policy fits within the definition of an “income continuation benefit plan” pursuant to the section 3(7)(d) of the Schedule and is deductible from his weekly IRB.
3The parties were unable to resolve the issue at the case conference and the matter proceeded to this written hearing.
ISSUES
4I have been asked to decide the following issues:
(i) Is a disability benefit paid by Industrial Alliance in the amount of $700.00 per week, considered a payment under an “income continuation benefit plan” and deductible from the applicant’s weekly IRB under section 3(7)(d) of the Schedule?
(ii) If the answer to the first question is yes, is the respondent entitled to a repayment of the benefit pursuant to section 52 (1) of the Schedule?
(iii) Is the applicant entitled to costs pursuant to Rule 19 of the LAT’s Rules of Practice and Procedure?
RESULT
5For the reasons that follow I find:
(i) The disability benefit paid to the applicant by Industrial Alliance in the amount of $700.00 per week is a payment under an “income continuation benefit plan.” Therefore, the respondent is entitled to deduct the amount from the applicant’s weekly IRB.
(ii) The respondent is entitled to repayment from February 3, 2017 to February 3, 2018.
(iii) The applicant is not entitled to costs.
FACTS
6The applicant was injured on February 6, 2016 when his motorcycle collided with a van resulting in catastrophic injuries. At the time of the accident, the applicant was a self-employed as an AZ long-haul transport truck driver. Since the accident, he has been unable to return to his pre-accident employment.
7In 2002, the applicant purchased an accident disability policy offered by Industrial Alliance while employed with Atlantis Transportation. The policy provides a weekly indemnity benefit as a result of disability (“disability benefit”). On February 25, 2016, Industrial Alliance started paying the applicant a disability benefit in the amount of $700.00 per week as a result of the accident.
8An IRB Calculation Report dated June 2, 2016, prepared by Jarvie and Company on behalf of the respondent calculated the applicant’s IRB’s at $400.00 per week. This initial report did not deduct the applicant’s disability payment of $700 per week from Industrial Alliance but requested the applicant to provide further documentation on the policy. The respondent started paying the applicant an IRB in the amount of $400.00 per week from February 15, 2016 to date.
9On December 8, 2017, a year and a half later, the respondent sent the applicant an Explanation of Benefits (OCF-9) enclosing an updated IRB Calculation Report of Jarvie and Company which re-calculated the applicant’s weekly IRB in the amount of $53.19 per week from February 15, 2016 to February 28, 2016 and $36.30 per week, payable from February 29, 2016 to date and ongoing. This accounting report deducted the $700 per week from the Industrial Alliance policy from the applicant’s weekly IRB. The respondent informed the applicant that as of July 18, 2017, it had made an overpayment in the amount of $33,997.23 and that it would be making a 20% deduction to the applicant’s $36.20 weekly IRB payment.
10The applicant relied on the IRB Calculation Report of RSM Canada Consulting LP dated February 27, 2018, which calculated the applicant’s IRB at $400.00 per week. This report did not agree with Jarvie and Company that the disability benefit paid by Industrial Alliance should be deducted from the applicant’s weekly IRB.
ANALYSIS
11I find that the disability benefit paid by Industrial Alliance in the amount of $700.00 per week is part of an “income continuation benefit plan” and is deductible from the applicant’s weekly IRB.
12Section 7(1) of the Schedule sets out how an IRB is to be calculated and prevents double recovery as it states that all other “income replacement assistance” is deductible from an IRB. Section 7(2) and (3) of the Schedule sets out the special formula to apply when calculating IRBs for a self-employed insured to factor in losses from self-employment that do not apply to people regularly employed.1
13Section 4(1) defines “other income replacement assistance” as a) the amount of any gross weekly payment for the loss of income that is received or available to the person as a result of the accident under the laws of any jurisdiction or under any income continuation plan.
14Section 3(7)(d) of the Schedule provides the following definition for an “income continuation benefit plan”:
(i) 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 in 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.
15The applicant argues that s.3 (7)(d) only applies to insurance policies that are paid for by “employers”. Therefore, it does not apply to him because he was self-employed and paid for the policy himself. He argues that if the legislature intended for the above section to apply to self-employed individuals it would be specifically outlined in the Schedule. The fact that it is not means that his private policy for a disability benefit is exempt from being deducted. Second, the amount of the disability benefit does not reflect a calculation of his income as he made substantially more than $700.00 per week pre-accident.
16The respondent argues that the disability benefit paid to the applicant falls within the definition of an income replacement benefit plan. First, the applicant meets criteria A as he was employed when he bought the policy with Industrial Alliance up until the date of the accident. Secondly, the benefit is described as an income replacement in the policy documentation and is calculated based upon 75% of the applicant’s gross weekly earnings to a maximum of $700.00. For the reasons that follow, I agree with the respondent.
17First, I find that s.3 (7)(d) applies to self-employed individuals. Section 3(7)(d) sets out the definition of “Payments for loss of income under an income continuation benefit plan” It is found in part 1 of the Schedule under the heading “Definitions and Interpretation.” Subsection (ii) sets out that the definition includes “periodic payments of insurance” and qualifies these payments in two ways. First, to “persons that are employed while the contract for insurance is in place” and second, “that the maximum benefit payable is limited to an amount calculated with reference to the insured person’s income from employment.” In my view, this section does not differentiate between employed and self-employed individuals.
18I find that the applicant had to be employed (regardless of the fact that he was self-employed) in order to qualify for payment of an IRB under the Schedule. I also find that the Schedule purposely sets out the differences with respect to how IRBs are to be calculated given the complex accounting and risks associated for self-employed individuals. Therefore, if the legislature did not intend for s.3(7)(d) to apply to self-employed individuals it would have specifically stated that they are excluded.
19Second, I find the weekly indemnity benefit falls within the definition of an income continuation benefit plan. An analysis of the purpose of the benefit is important in coming to this determination. I find that the evidence submitted by the applicant did not support his interpretation of the policy. In my view, the evidence supports that the disability benefit received by the applicant is an income replacement. For example, the confirmation of Insurance Coverage dated February 23, 2016, from insurance broker National Truck League Insurance Solutions defines the benefit as “income replacement (24 hour coverage)2. Further, in order for the applicant to qualify for the benefit he had to be gainfully employed on a full-time basis immediately before the date of loss.3 I find this directly connects the disability benefit to the applicant’s employment.
20In addition, the disability benefit from Industrial Alliance is calculated based on 75% of the applicant’s gross weekly earnings up to a maximum of $700 per week [emphasis mine] for total disability. This satisfies section B of 3(7)(d). Therefore, the disability benefit is a payment for lost income.4 The applicant argued that 75% of his gross-employment was much higher than $700 per week. Therefore, the disability benefit was not calculated based on his gross weekly income but was in a fixed amount. I did not place much weight on this argument as the $700 represents the maximum benefit payable. The disability benefit could have been lower if the applicant had made less money.
21Furthermore, a letter to the applicant from Industrial Alliance dated February 25, 2016 confirms that if the weekly accident indemnity for total disability (either alone or in concert with any other benefits) exceeds 75% of the insured person’s pre-disability gross earnings, it would be reduced by any amount exceeding said percentage.” The letter then went on to describe the other benefits which could reduce his disability benefit. Those included Canada Pension Plan, Worker’s Compensation and income benefits provided through any government plan of automobile insurance etc.5
22I find the list of benefits which could be deducted from his disability benefit are all designed to compensate an individual for lost income as a result of disability. This reinforces that the purpose of the applicant’s disability benefit was for lost income. This is also meant to prevent double recovery for anything that exceeds 75%.6 The claims representative with Industrial Alliance also confirmed that it would be the first payor over an automobile insurer acknowledging it as a collateral benefit 7
23I also find the disability test for entitlement to the disability benefit under the Industrial Alliance policy is very similar to the test to qualify for an IRB under the Schedule. For example, under the Industrial Alliance policy during the first three years of disability the insured must be unable to perform the substantial or material duties pertaining to his or her occupation. After three years the insured must be continuously unable to engage in any gainful occupation or employment for which he could reasonably become qualified by training, education or experience.8 I find this comparable to the substantial and complete inability tests to qualify for an IRB under section 5(1) and 6(2)(a) of the Schedule. In my view, this further supports that the disability benefit is part of an income continuation benefit plan as the disability test to qualify are very similar to the disability tests in the Schedule to qualify for an IRB.
24Finally, I agree with the respondent that the case law relied upon by the applicant is distinguishable from the present case. The applicant relied on the Financial Services Commission of Ontario (FSCO) decision of Wilcox v. Economical (1999) FSCO A98-0000589, and FSCO appeal decision (2000) P99-00015. In Wilcox, the arbitrator found that a disability benefit the insured was receiving was not part of an income continuation benefit plan. While FSCO decisions are not binding on this Tribunal they may be persuasive. The two major differences between Wilcox and the present case is the policy in Wilcox did not require the insured to be employed at the time of disability in order to be entitled to the benefit and the amount was fixed and was not calculated based on the insured’s earnings.10
25As already established above, in order for the applicant to be entitled to the disability benefit under the Industrial Alliance policy he had to be gainfully employed prior to the date of disability and the benefit was calculated based on 75% of the applicant’s gross weekly earnings up to a maximum of $700 a week.
26The applicant also relied on the Court of Appeal decision in Demers v. Monty (2012) ONCA 384. In that decision the court found a private insurance exception to the rule against double recovery and determined in a tort case the insurance company should not benefit from an individual purchasing a private policy when calculating damages. The Court determined that double recovery would accrue to the benefit of the insured as opposed to the insurer. In my view, the Demers case is not persuasive as it is a tort file arising from a 1999 car accident. Different legal principles apply to tort files versus insurance contracts for accident benefits.
27For all of the above reasons, I find the Industrial Alliance disability benefit to be payments for loss of income under an income continuation benefit plan. Therefore, the respondent is entitled to deduct the payment of the disability benefit from the applicant’s IRB.
Overpayment/Repayment Issue
28Section 52 (1) of the Schedule requires an insured to repay an insurer any benefit paid to the person as a result of an error, or as a result of wilful misrepresentation or fraud, if the insurer gives notice of the amount that is required to be repaid.
29Section 52 (2) of the Schedule provides that if an insured is liable to repay an amount the insurer is required to give the insured notice of the amount to be repaid and that it intends to collect the amount by reducing the payment of benefits by up to 20% of the amount of the benefit. Section 52(3) provides that if the insurer does not give notice within 12 months after the payment of the amount that is to be repaid, the insured ceases to be liable to pay the money back.
30The respondent did not send the applicant notice of the overpayment until December 8, 2017, a year and ten months after it had begun paying the applicant an IRB in the amount of $400.00 per week. The OCF-9 enclosed a copy of the updated accounting report and informed the applicant that as of July 18, 2017, it had made an overpayment in the amount of $33,997.23 and that it would be making a 20% deduction to the applicant’s $36.20 weekly IRB payment. This did not constitute proper notice as the overpayment amount was incorrect, there was no time period for when repayment was being claimed and there was no breakdown in the accounting report of how the respondent calculated the overpayment of $33,997.23. The respondent sent the applicant another OCF-9 dated December 12, 2017 which was equally as vague.
31The respondent submits that pursuant to s.52(1)(c) of the Schedule it is entitled to repayment for amounts paid in the previous 52 weeks as of February 3, 2018, the date it provided the applicant with proper notice. The applicant did not make any submissions with respect to why the OCF-9 dated February 3, 2018 was insufficient notice. I find the OCF-3 constituted proper notice as it advised the applicant that the amount owing for the previous 12 months was $18,911.88, less $58.08 repaid, provided the authority upon which it was seeking repayment, the time period of overpayment and provided the justification with respect to why an overpayment was made.
32I agree with the respondent that the OCF-9 dated February 3, 2018, was proper notice pursuant to the Schedule. The respondent is entitled to repayment from February 3, 2017 to February 3, 2018.
COSTS
33The applicant requests costs under Rule 19 of the LAT’s Rules of Practice and Procedure. The Tribunal may make an award of costs, where a party has proven that the other has acted unreasonably, frivolously, vexatiously or in bad faith during the course of the hearing. I found the applicant’s submissions with respect to costs insufficient as he did not explain how the respondent’s behavior during this proceeding met the threshold for unreasonable conduct in this process.
34Therefore, I do not find an order for costs is appropriate.
CONCLUSION:
(i) The disability benefit paid to the applicant by Industrial Alliance in the amount of $700.00 per week is a payment under an “income continuation benefit plan.” Therefore, the respondent is entitled to deduct the amount from the applicant’s weekly IRB.
(ii) The respondent is entitled to repayment from February 3, 2017 to February 3, 2018.
(iii) The applicant is not entitled to costs.
Released: March 21, 2019
___________________________
Rebecca Hines
Adjudicator
Footnotes
- Statutory Accident Benefit Schedule, O Reg. 34/10 – Effective September 1, 2010.
- Applicant’s Document Brief, Tab 15.
- Applicant’s Reply Submissions, Tab 2.
- Applicant’s Document Brief, Tab 17.
- Applicant’s Document Brief, Tab 16.
- Applicant’s Document Brief, Tab 16.
- Applicant’s Reply Submissions, Tab 2
- Applicant’s Reply Submissions, Tab 1
- Wilcox v. Economical (1999) FSCO A98-000058; Economical v. Wilcox (2000),FSCO (P99-00015)
- Wilcox v. Economical, pg 3.