P.B. v. The Co-Operators Insurance Company, 2020 CanLII 72511

Citation: P.B. vs. The Co-Operators Insurance Company 2020 ONLAT 19-008343/AABS

Released Date: 09/18/2020

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:

P.B.

Applicant

and

The Co-Operators Insurance Company

Respondent

AMENDED DECISION

ADJUDICATOR:

Jesse A. Boyce

APPEARANCES:

For the Applicant:

Roger R. Foisy Harpreet Sidhu Rusald Laloshi

For the Respondent:

Suzanne Clarke

HEARD:

Via written submissions

OVERVIEW

1P.B. was injured in an accident on July 20, 2017, and sought various benefits, including an income replacement benefit (“IRB”), from the respondent, The Co-Operators, pursuant to the Statutory Accident Benefits Schedule - Effective September 1, 2010 (''Schedule'').

2There is no dispute over P.B.’s disability as it pertains to meeting the test for IRB entitlement under the Schedule, as The Co-Operators has paid her certain amounts since the date of the accident. Instead, the parties’ dispute is now over the correct calculation of P.B.’s IRB entitlement.

3Specifically, the parties disagree over which of the six (yes, six) IRB calculations in evidence correctly assessed P.B.’s IRB entitlement and what effects, if any, her long-term disability (“LTD”) action and subsequent settlement release, her “other forms of compensation” and her CPP disability entitlements have as potential deductions that affect her IRB payment.

4The Co-Operators insists that it overpaid IRB to P.B. based on its calculations, which reduced the total amount payable as a result of the LTD release and CPP entitlement and is justified in its deductions under the Schedule and case law.

5P.B. disagrees, submitting that The Co-Operators has consistently miscalculated her IRB entitlement, that it is not entitled to a LTD deduction, that she is entitled to an IRB on an ongoing basis and is also owed past amounts for IRB. P.B. applied to the Tribunal for resolution of the dispute and now seeks an award under s. 10 of O. Reg. 664 due to The Co-Operators’ unreasonable withholding of her IRB payments.

ISSUES IN DISPUTE

6The following issues remain in dispute:

i. Is the applicant entitled to an IRB, in the weekly amount of $400.00, for the period of July 21, 2017 and ongoing, submitted on July 21, 2017, denied on August 24, 2017?

ii. Is the applicant entitled to interest on any overdue payment of benefits?

iii. Is the applicant liable to repay the respondent, $3,369.72 for IRB during the period from July 21, 2017 to July 30, 2019?

iv. Is the applicant entitled to an award under Ontario Regulation 664 because the respondent unreasonably withheld or delayed the payment of benefits?

result

7I find P.B. is entitled to an IRB in the amount of $400 per week for the period in dispute, in line with the calculations provided in the ADS Report, plus interest.

8I find P.B. is not liable to repay The Co-Operators IRB for the period in dispute.

9I find P.B. is not entitled to an award under s. 10.

ANALYSIS

Background

10While this case only concerns an IRB calculation, there are a few other pertinent facts that inform the dispute. At the time of the accident, it is undisputed that P.B. was a full-time employee with a pharmaceutical engineering company, working as Director of Operations since October 2013. She received a $120,000 salary, pro-rated to a 32-hour work week, with a 10% year-end bonus, reimbursement for her travel, car and phone expenses, as well as vacation and medical benefits. Following the accident, P.B. attempted to return to work but was unable to do so. It is undisputed that P.B. was never self-employed. An OCF-2 dated August 21, 2016 confirms that P.B. earned $96,000 in salary and $14,760 in “other compensation” in the 52 weeks pre-accident.

11On this information, The Co-operators calculated P.B.’s pre-accident gross weekly employment income at $2,049.23 per week, 70% of which is $1,434.46 per week. The IRB maximum of $400 per week applied. Through her employer, P.B. had access to LTD payable through Empire Life Insurance Company (“Empire”) at 66.67% of her monthly earnings, up to a $5,000 per month, with a 119-day elimination period from the onset of disability. Notably, the 119-day elimination period expired November 16, 2017. On January 9, 2018, Empire rejected P.B.’s LTD application, and no benefits were ever paid.

12Shortly after the denial, P.B. issued a Statement of Claim against Empire, seeking entitlement to LTD benefits from November 16, 2017 and ongoing as well as damages and fees. On October 18, 2018, P.B. settled the LTD action against Empire, signing an LTD Release that “suspended” her LTD claims for a two-year period from November 16, 2017 to November 16, 2019 in exchange for a lump sum payment of $120,000. The Release was provided to The Co-Operators.

13Via letter dated February 13, 2019, The Co-operators informed P.B. that her IRBs were recalculated, deducting the LTD settlement of $120,000 she had received from Empire. The Co-Operators claimed an overpayment of $2,217.07 occurred due to the deductibility of the LTD payment and, effective February 25, 2019, P.B.’s IRBs were reduced from $400.00 to $224.49 per week.

14On March 13, 2019, The Co-operators sent another explanation of benefits to P.B. with a new IRB calculation factoring in pro-rated bonuses from 2016 and 2017 and a single $400 payment that was not offset, resulting in an updated repayment request in the amount of $3,369.72. The Co-operators advised it would continue to withhold 20% of IRBs in the amount of $52.45 per week, so P.B. would only receive $209.80 per week from March 25, 2019 and onward.

15On June 13, 2019, The Co-operators delivered a copy of their AB file to P.B.’s current counsel. On July 31, 2019, P.B. filed her application with the Tribunal.

The competing IRB calculations

16As noted, there have been six IRB calculations proposed by the parties at various stages of this file between August 2017 and June 2020. Three IRB calculations were made by The Co-Operators in August 2017, February 2019 and March 2019 and a fourth calculation was done by Insignia on behalf of The Co-Operators in February 2020. To date, two IRB calculations have been completed on behalf of P.B.: The Great Oak Report in January 2020 and the ADS Report in June 2020. The four most recent reports all arrive at slightly different 52-week income totals and, in turn, propose different 70% of total gross income IRB totals under the Schedule: $1,416.10 by The Co-Operators in March 2019; $1,564.36 by Great Oak, $1,334.66 by Insignia and $1,477.66 by ADS.

17The difference is largely attributable to whether the LTD settlement should be deducted from the IRB. Relying on the Insignia Report, The Co-operators seeks $19,488.41 as IRB overpayment. In contrast, P.B. relies on the ADS Report’s calculation that the amount of IRB owed up to June 29, 2020 is $17,342.63, which includes $1,094.76 for interest payable under s. 51.

The LTD settlement is not deductible

18Section 7(1) of the Schedule states that “all other income replacement assistance, if any” are deducted from the weekly IRB base amount calculated under s. 7(2). Section 4(1) defines “other income replacement assistance” as (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 or (b) the amount of any gross weekly payment for loss of income, other than a benefit or payment described in subclauses (a)(i) to (iii) that may be available to the person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan but is not being received by the person and for which the person has not made an application.

19Against this definition, the dispute turns on whether P.B.’s acceptance of Empire’s $120,000 proposal constitutes income replacement assistance or whether it was a settlement of her entire claim. The former would likely entitle The Co-Operators to an IRB deduction, the latter would not. On the evidence, I find that P.B. entered into a settlement of her entire claim against Empire.

20As we know, P.B. was entitled to LTD benefits from Empire, commencing 119 days from the onset of her disability, being July 20, 2017. When her LTD application was denied on January 9, 2018, P.B. informed The Co-Operators and pursued her action against Empire. Critically, in addition to LTD benefits arising out of the policy and future LTD benefits to age 65, P.B.’s action against Empire made the following claims: aggravated, exemplary and punitive damages in the amount of $100,000; prejudgment and post-judgment interest; costs; HST; and, any other relief the court may deem just. On October 18, 2018, P.B. entered into the settlement with Empire, agreeing to $120,000 in exchange for a release from all claims made in the action against Empire, with the exception that she would be able to re-apply to the LTD carrier two years from the date of signing of the release, if she still met the disability test. On the face of the settlement document, I agree that P.B. received $120,000 in exchange for all claims brought against Empire to October 18, 2020, which included non-LTD claims such as aggravated, exemplary, and punitive damages, prejudgment and post-judgment interest, legal costs, disbursements, and applicable HST.

21In other words, although $120,000 represents the exact maximum amount of LTD that P.B. would have been entitled to for the two-year period (being $5,000 per month for 24 months), I disagree with The Co-Operators that the settlement is equivalent to income replacement assistance. Rather, I find it clear that the $120,000 settlement encompassed all of her claims against Empire as a result of its denial of her LTD so that P.B.’s action did not proceed in Superior Court.

22In submissions, The Co-Operators relies heavily on an “IRB/LTD calculation sheet” that was provided by P.B.’s previous counsel allegedly used during settlement negotiations. The Co-Operators submits that this calculation sheet—which lists P.B.’s pre-accident income, her 70% “gross” income, subtracts for collateral source income, identifies a “net” weekly benefit of $1,153.85 and proposes a weekly IRB entitlement of $469.28—is concrete evidence that P.B. settled her LTD claim for precisely two years for the maximum amount she would have been entitled to. While The Co-Operators “recognizes that the LTD claim was part of the larger action she brought against Empire,” it argues that there is no evidence, including in the calculation sheet, that P.B. negotiated for compensation arising out of her claims for aggravated, exemplary, and punitive damages, prejudgment and post-judgment interest, legal costs, disbursements, and applicable HST, as alleged, and that the LTD settlement was full and final.

23I disagree. I find the calculation sheet submitted by The Co-Operators is not compelling evidence of the settlement breakdown between P.B. and Empire that would allow it to properly deduct from an IRB and I afford it limited weight. On this document and the accompanying letter, I find there is no indication that this calculation sheet was actually used by P.B.’s previous counsel during negotiations or that it was not prepared sometime after the settlement, let alone that it constitutes evidence that P.B.’s settlement of her action replaced her actual LTD “received” payments. I agree with P.B. that the LTD Release and the Statement of Claim against Empire are the only reliable documentary evidence before the Tribunal that offer any true insight into how the LTD action was negotiated and what became P.B.’s settlement. Based on the LTD Release, I find it clear that P.B. settled all past and present claims under the policy; all future claims up to October 18, 2020; and, specifically, all other claims for extracontractual damages sought in the action. It was not confined to LTD.

The case law and double recovery

24Against this finding, I agree with P.B. that the two cases she relies on, Cromwell v. Liberty Mutual Insurance Co.¹ and Vanderkop v. Personal Insurance Company of Canada², are instructive as they relate to LTD settlement breakdowns. In Cromwell, the Superior Court found that a lump sum negotiated for future benefits and extracontractual damages did not constitute a payment for a specific period of benefits and therefore did not qualify as “net weekly payment for loss of income” and the insurer was not entitled to deduct the lump sum payment. In Vanderkop, the Court of Appeal determined that settling a claim is merely a decision to compromise in the pursuit of the action because once LTD benefits were denied, they were no longer “available” to the insured. In my view, these decisions call into question The Co-operators’ and Insignia’s allocation of the entire $120,000 LTD settlement to P.B.’s IRB calculation.

25Indeed, The Co-Operators submits that Cromwell does not apply given the quantum of the LTD settlement, the defined time period of same and the calculation sheet and that it is no longer good law. It argues that there is no confusion or uncertainty over how P.B.’s settlement was to be allocated. Relying on Cobb v. Long Estate³ and El-Khodr v. Lackie⁴, it submits that the LTD deduction is meant to prevent double recovery. Further, it submits that Vanderkop is not assistive to the Tribunal because The Co-Operators agrees that P.B. is entitled to IRB and because it followed appropriate procedures in claiming the deduction, unlike the facts of that case. Finally, it points the Tribunal to A.B. v. Waite⁵ to support its position that an LTD settlement is considered income replacement and should be deducted from P.B.’s weekly IRBs.

26I find the cases relied on by The Co-Operators are all distinguishable based on the fact that they all featured a breakdown of full and final settlements via Settlement Disclosure Notices. I agree with P.B. that a specific breakdown of the heads of damages is what is distinguishable from the facts of this case where P.B.’s settlement was a lump sum meant to cover all of her claims against Empire. I further agree with P.B. that these decisions are distinguishable because the Schedule requires a proper breakdown of amounts and a timeframe that an LTD payment was received in order to include any deduction in the calculation of IRBs, as per s. 7. Had P.B. settled her LTD claim for only past and future income benefits then that amount would likely be deductible from the IRB. However, I agree with P.B. that, for the reasons cited in Cromwell and Vanderkop, there is no way to distinguish or break down P.B.’s LTD lump sum settlement, which included other heads of damages, interest, costs and disbursements, despite The Co-Operators urging that it can be broken down based on the calculation sheet. On The Co-Operators’ interpretation and given my findings above, I am not persuaded that Cromwell is no longer binding.

27Finally, P.B. cites to Atwi v. Certas Direct Insurance⁶, where the Divisional Court also relied on Vanderkop, finding that “treating an LTD entitlement as being available to an insured so as to reduce an accident benefits insurer’s obligation to pay IRBs benefits would be to inappropriately place an insured in the position of having to litigate with their collateral benefits insurer for the benefit of the accident benefits insurer.” As in the Vanderkop case, P.B. had to “compromise” her claim against Empire. If P.B. had continued her action and a decision was rendered, she likely would have received a greater amount and, importantly, a decision would have provided a proper breakdown of any award. In such a case, The Co-Operators could then seek a repayment or deduction as that would likely result in a double recovery. Instead, P.B. did not receive any LTD benefits, but rather received a payout settlement for ceasing her action against Empire for denying her claim. In my view, this does not equate to a double recovery.

28Accordingly, I find that the LTD settlement between P.B. and Empire does not provide appropriate details to allow The Co-Operators to deduct the settlement from P.B.’s past IRB calculation because the settlement was not confined to payment for her LTD claims alone. In turn, I follow the decisions in Cromwell and Vanderkop and find that P.B.’s LTD settlement with Empire cannot be deducted from her past IRBs because no breakdown is available to satisfy the requirements of the Schedule.

P.B.’s car allowance, employment expenses and CPP

29While the LTD deduction is the major focus of this dispute, the parties also identified two sub-issues with the IRB calculation, being whether P.B.’s car allowance should be treated as employment income and whether employment expenses, generally, affect the IRB calculation under s. 4(1) of the Schedule.

30With regards to whether P.B.’s car allowance is treated as employment income under the Schedule, I agree with P.B. that a car allowance is not a “non-taxable benefit” since it formed part of her proposed remuneration, is included as income on her T4 slip and was reported as income to the CRA. Indeed, it does appear that this issue was resolved, as the three most recent accounting reports, including the Insignia Report, included the car allowance as employment income.

31Next, it is undisputed that at all material times, P.B. was considered an “employee” and was not “self-employed” as defined by the Schedule, so there is no weekly loss deduction from self-employment under s. 7 to account for. Accordingly, I agree with P.B. that to determine the weekly base amount for her IRB, her “gross employment income” under s. 4(1) must be determined, as it contains specific instructions on what is “excluded”. As P.B. submits, the Insignia Report attempts to calculate these employment expenses based on the FSCO decision Non-Marine Underwriters, Mbrs. of Lloyd’s and Sushil Dhir,⁷ which is confirmed in its report letter. Essentially, the Insignia Report suggests interpreting the Schedule in the same way for employed as for self-employed persons. P.B. contends that the approach in Dhir yields an unfair result, because “unlike self-employed persons, post-accident expenses for employed persons are not calculated toward IRBs.”

32I agree with P.B. As a FSCO decision, Dhir is not binding on me but on review, I agree that the decision dealt with an older version of the Schedule and a slightly different method of calculating IRBs, as at the time, it did not define “gross employment income”, which the current version of the Schedule does. On this basis, I agree with P.B.’s submissions that since the Schedule has been revised several times since Dhir, employment expenses for employed individuals could have been specifically excluded but were not. To follow Insignia’s approach would be to read in both pre-accident expenses and post-accident losses from IRB calculations for employed insureds, which I do not accept was the intent of the Schedule, which is consumer-protection legislation.

33With regards to CPP, The Co-Operators submits that while it cannot force P.B. to apply for CPP, it is entitled to an off-set for same where it may be available, as it is P.B.’s responsibility to mitigate her losses. It relies on the Tribunal’s decision in 18-000729/AABS⁸ which found that CPP disability is an “income continuation benefit plan” that can be deducted from IRB and submits that both Insignia and ADS deducted CPP disability from IRB. In reply, P.B. does not dispute that CPP disability is deductible, but asserts that she has never applied for same and maintains her position that even with the CPP disability deduction to her IRB, that it does not affect the calculation if LTD is not deducted. I agree.

34Finally, the parties agree that a $400.00 adjustment is appropriate considering the extra payment issued to P.B. in November 2016 for a missed statutory holiday payment in March 2016.

The ADS report and repayment

35On the evidence and given my findings above, I prefer the ADS Report calculation dated June 4, 2020 and find that it provides the most accurate account of P.B.’s IRB calculation and correctly excludes her LTD settlement as other income replacement assistance. P.B.’s IRB calculation shall be determined based on this report.

36In turn, I find that The Co-Operators is not entitled to a repayment of IRBs based on the Insignia Report, as alleged, as I find that it incorrectly deducted the entire amount of P.B.’s LTD settlement with Empire, contrary to applicable case law and ss. 4 and 7 of the Schedule.

Award under s. 10

37Last, P.B. also claims an award under s. 10 of O. Reg. 664 due to The Co-Operators’ unreasonable withholding and delaying the full payment of her income replacement benefits (“IRBs”) and its improper deduction of her LTD settlement that ignored applicable case law. Under s. 10, the Tribunal may award a lump sum of up to 50% of the total benefits and interest to which an insured person was entitled under the Schedule if it determines that an insurer unreasonably withheld or delayed the payments.

38P.B. submits that e-mails from The Co-Operators in December 2018 confirm that its adjuster was aware that it could only properly calculate IRBs if it knew how much from the Empire LTD settlement was deductible. She submits that the LTD release clearly applied to all claims pursued by P.B. in her court action and The Co-Operators never requested the Statement of Claim to verify what claims she advanced against Empire. P.B. asserts that the adjuster’s log note dated November 14, 2018 reveals she was aware of the 119-day waiting period, and the LTD settlement period from November 16, 2017 - October 18, 2020.

39Further, P.B. submits that even if The Co-operators believed it had a right to an LTD deduction resulting from P.B.’s LTD settlement, it “chose to apply the most stringent approach possible, in assuming the entire $120,000 was payable for actual LTD benefits.” P.B. submits that had a more reasonable approach in line with the actual LTD settlement been taken, the insurer would have realized that deducting the $120,000 over a 35-month period (November 16, 2017 - October 18, 2020), would still have required The Co-operators to pay the full IRB at $400.00 per week. Therefore, P.B. submits it is clear that The Co-operators took “a callous disregard in its application of an LTD deduction, even if it believed that it had a right to deduct anything from the IRBs.” P.B. seeks an award of 50% due to The Co-Operators’ “unyielding and stubborn behaviour” that led to a withholding of benefits over a period of approximately 16 months to-date, the last four of which P.B. has received no IRBs.

40In response, The Co-Operators submits that at no point did it act unreasonably, that it requested relevant information in a timely fashion and that its reports are in line with case law and the Schedule.

41I find an award is not appropriate. While I disagree with The Co-Operators’ approach and sincerely question how a sophisticated insurer required four attempts at an IRB calculation (and was still somehow incorrect), I do find the facts presented a genuine dispute over the applicability of P.B.’s LTD settlement with Empire to her IRB calculation. I find limited evidence that The Co-Operators unreasonably withheld or delayed the payment of IRBs.

CONCLUSION

42P.B. is entitled to an IRB in the amount of $400 per week for the period in dispute, in line with the calculations provided in the ADS Report, plus interest.

43P.B. is not liable to repay The Co-Operators IRB for the period in dispute. P.B. is not entitled to an award under s. 10.

Footnotes

1. 12008 CanLII 3409 (ON SC), 89 O.R. (3d) 352 (SCJ).
2. 22009 ONCA 511.
3. 32017 ONCA 717.
4. 42017 ONCA 716.
5. 52018 ONSC 2151.
6. 62015 ONSC 2683, at 10.
7. 7(Appeal Order P98-00024).
8. 8Applicant v. Northbridge Personal Ins. Co., 2020 CanLII 14425 (ON LAT).