Citation: TD Home and Auto Insurance Company v. Polat, 2023 ONLAT 21-008503/AABS

Licence Appeal Tribunal File Number: 21-008503/AABS

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:

TD Home and Auto Insurance Company

Applicant

and

Cigdem Polat

Respondent

DECISION

ADJUDICATOR:

Taivi Lobu

APPEARANCES:

For the Applicant:

Nick Mahdavi, Counsel

For the Respondent:

Pasquale Maiolo, Paralegal

Court Reporter:

Davon Makse, Victory Verbatim

HEARD: by Videoconference:

March 15, 2023

OVERVIEW

1Cigdem Polat, the respondent, was involved in an automobile accident on April 9, 2015 and sought benefits from TD Home and Auto Insurance Company, the applicant, pursuant to the Statutory Accident Benefits Schedule - Effective September 1, 2010 (the “Schedule”).

2Based on reports of the respondent’s employment at a bakery, the respondent was paid income replacement benefits (IRBs) by the applicant in the amount of $308.00 per week from the period April 16, 2015 to May 10, 2017 - totaling $33,264.00. By letter dated April 24, 2017, the applicant notified the respondent that payment of IRBs were being stopped as of May 10, 2017, as section 44 insurer’s examinations had determined that the respondent did not meet the test pertaining to her ability to work two years post-accident.

3On April 16, 2018, the respondent filed an application with the Tribunal, appealing the applicant’s denial of her IRBs beyond 104 weeks post-accident. Despite proper notice, the respondent did not participate in case conference proceedings which were scheduled and rescheduled at the Tribunal to allow for her participation. The applicant required that the respondent attend at an examination under oath, which she did in February 2019. The respondent then withdrew her appeal with the Tribunal on May 14, 2019.

4On March 26, 2020, the respondent filed a second appeal disputing the same denial of IRBs beyond 104 weeks post-accident. A written preliminary issue hearing was ordered by the Tribunal. The respondent did not file any submissions. By decision dated April 30, 2021, the respondent was found to be statute-barred from proceeding with her claim as the appeal was filed beyond the two-year limitation period set out in section 56 of the Schedule. Costs of $250.00 were awarded against the respondent because of her “concerning pattern of applying to the Tribunal and then failing to comply with Tribunal orders and neglecting to participate in the proceedings.” The costs award was characterized as deterrence against unreasonable and frivolous conduct on the part of the respondent which interfered with the Tribunal’s ability to carry out a fair, efficient and effective process.

5On February 25, 2021, after the respondent had failed to file written submissions or evidence in relation to her second appeal to the Tribunal, the applicant sent a letter to the respondent under section 52 of the Schedule, stating that it had determined that the respondent had never been an employee of the bakery and requested the respondent to repay the $33,264.00 paid as IRBs. Four similar follow-up letters were sent by the applicant to the respondent on March 19, 2021, April 29, 2021, October 7, 2021 and September 1, 2022. The respondent did not respond to these letters.

6On June 25, 2021 the respondent filed this application to the Tribunal seeking an order for repayment of the IRBs paid to the applicant.

ISSUES

7The issues in dispute are:

i. Is the applicant entitled to a repayment of $33,264.00 for IRBs paid to the respondent?

ii. Is the applicant entitled to interest?

iii. Is the applicant entitled to recover $250.00 in costs awarded in the previous written hearing?

iv. Is the applicant entitled to costs from this application?

RESULT

8I find that:

i. The applicant is entitled to a repayment of IRBs paid in the amount of $33,264.00.

ii. The applicant is entitled to interest payable from March 12, 2021 according to the bank rate as of that date, as defined in sections 52(5) and (6) of the Schedule;

iii. An order for $250.00 in costs was made in a previous proceeding and no further order from the Tribunal is required with respect to its recovery;

iv. The applicant is entitled to $50.00 for the costs of this proceeding.

ANALYSIS

Background

9At issue is whether the respondent materially misrepresented her employment at the bakery which was operated by her husband.

10When applying for accident benefits, the respondent has represented her pre-accident status as being employed. On her first application form (OCF-1) for accident benefits filed in May 2015, the respondent identified her employment as being a customer service role at the bakery from March 1, 2015 to April 9, 2015, at 40 hours per week, with the gross income for this period being $2,500.00. In this OCF-1 she stated that she was the caregiver for a child born December 2013.

11The following month, on June 26, 2015, the respondent filed a second application form for accident benefits. This OCF-1 dated June 26, 2015 identified her employment as being from March 14, 2015 to April 8, 2015, her job as cashier/customer service at 2209581 Ontario Ltd (the corporate entity for the bakery). Her gross income on the second OCF-1 was identified as $440/week. Hours worked were not identified. The second application form showed the respondent as being the caregiver for the previously identified child, as well as two older children born in 2010 and 2007.

12An employer’s confirmation form (OCF-2) was also filed on June 26, 2015. It was signed by the respondent’s husband on behalf of the bakery. The information in this OCF-2 corresponded to the second OCF-1 of the same date, showing the respondent as having a salary of $440.00 for each of the four weeks before the accident, as well as showing the respondent’s employment as being from March 14, 2015 to April 9, 2015. The contact person identified for the business and completing the form was the respondent’s husband.

13Based on the information filed by the respondent and the bakery, the applicant paid IRBs to the respondent from April 2015 up until May 10, 2017. The IRBs were terminated in 2017 as the applicant determined that the respondent was not eligible for IRBs after the two-year mark: insurers’ examiners found that she did not suffer a complete inability to engage in any employment for which she was reasonably suited.

14In 2018, the respondent appealed the termination of the IRBs to the Tribunal – an appeal which she later withdrew (in May 2019). While the first appeal was still before the Tribunal, the appellant required that the respondent attend an examination under oath under section 33(2) of the Schedule to obtain information to determine if she was entitled to IRBs. At the examination under oath of February 25, 2019, the respondent agreed to produce to the applicant a range of documentation, including financial documentation related to her work at the bakery.

15While the respondent had not yet produced the documentation identified in the 2019 examination-under-oath, in 2020 she refiled the appeal of the IRB refusal. By letter dated February 25, 2021, the applicant advised the respondent that it had conducted a thorough review of the file, noted that the respondent had not produced financial documents related to her work at the bakery and concluded that the respondent had never been an employee of the bakery. In that same 2021 letter, the applicant provided the respondent with the first of a series of notices for repayment of IRBs under section 52 of the Schedule.

16On June 25, 2021, the applicant applied to the Tribunal for repayment of the $33,264.00 of IRBs which it had paid to the respondent.

17Pursuant to section 52 of the Schedule, a person is liable to repay to the insurer any benefit paid as a result of wilful misrepresentation or fraud. The onus is on the insurer to demonstrate that the benefit was paid as a result of wilful misrepresentation or fraud.

Were income replacement benefits paid as a result of wilful misrepresentation or fraud?

18The applicant took the position that the respondent never worked at the bakery and that she had misrepresented her employment in her application for accident benefits. At the hearing, the respondent submitted that she worked at the bakery since January 2015, making an average of $2,000 per month which was paid in cash.

19I find that the evidence supports the applicant and shows on a balance of probabilities that the respondent wilfully misrepresented her employment at the bakery. Under section 52(3) there is no time limit on the duty to repay where the amount was originally paid as a result of wilful misrepresentation or fraud.

20It is undisputed that for close to a decade before 2015, the respondent was not in the workforce. What is in question is whether she began working full-time shortly before the accident in 2015 at her husband’s bakery.

21I find the representations made by and on behalf of the respondent to the applicant, and the evidence produced about the respondent’s alleged employment, to be inconsistent and not credible. The respondent had multiple opportunities to correct and clarify discrepancies presented about her employment circumstances: She first filed an initial OCF-1 in May 2015; she filed different information in a second OCF-1 in June 2015; she testified at the examination under oath in February 2019; she had multiple opportunities to provide documentary evidence; and she had full opportunity to present witness evidence at the hearing before the Tribunal. However, whatever additional information was provided only served to make the respondent’s employment appear more improbable.

22As a result of numerous discrepancies, I do not find the information and evidence presented by the respondent to be credible. The two sets of accident benefit applications filed by the respondent state that she first began working at the bakery on two different dates - March 1, 2015 (as per the May 2015 OCF-1) and March 14, 2015 (as per the June 2015 OCF-1). The OCF-2 completed in June 2015 by the respondent’s husband on behalf of the bakery stated that she worked there starting March 14, 2015. In a letter apparently created in response to 2022 production requests, the respondent’s husband, writing on behalf of the bakery, stated that the respondent had started work in January 2015. At the examination-under-oath in February 2019 the respondent testified as having worked for a month before the accident (March 2015). At the Tribunal hearing the respondent testified that she worked at the bakery from January 2015 up to the date of the accident – over three months. No explanation was provided for the major differences in the reported start dates.

23In the May 2015 OCF-1, the respondent stated she worked 40 hours per week. There was no correction to the hours of work in either the subsequent OCF-1 or the OCF-2 filed in June 2015. At the 2019 examination under-oath the respondent testified that she worked part-time Monday to Friday when her children were in school with no overtime or extra hours. The 2022 letter provided by her husband on behalf of the bakery stated that the respondent’s work hours were 9 a.m. to 3 p.m.

24The respondent’s pay was reported as being as $2,500 for March 1 – April 9, 2015 (May 2015 OCF-1); $440 per week (June 2015 OCF-1 and June 2015 employer’s OCF-2); and $2,000 per month cash (undated letter from husband/Bakery in apparent response to 2022 production requests). The bakery’s accounting and payroll records documented the respondent’s pay as $2,000 per month subject to deductions for EI and CPP with pay cheques in net amounts of $1,877.84 for January 31, February 28, and March 31, 2015 respectively, $512.89 for April 30, 2015, and $204.41 for May 14, 2015.

25There are no deposits in the respondent’s bank statements that could arguably correspond with deposits for any wages from the bakery. At the hearing the respondent testified that she was paid in cash and would spend it without depositing it. This is contrary to the bakery’s accounting/payroll records of cheques issued.

26The respondent’s tax records were also included in evidence by the applicant. These did not clarify any of the issues and only raised further questions. For example, there were two T-4s filed for by the respondent in 2015, with the amounts of both differing and neither of which coinciding with the payroll/accounting records produced.

27At the examination-under-oath, the respondent was asked to describe her work at the bakery. Her descriptions were largely reliant on prompts from applicant’s counsel at the examination. Other than indicating that her husband did the baking, the respondent stated that no one else worked at the bakery with her. When describing her work, there was no suggestion of any shift changes, of anyone who would cover if she was going to be late or otherwise unavailable, or for that matter, anyone else being employed at the bakery during the time of the respondent’s purported employment.

28I also do not find the respondent’s reported employment credible given the evidence of her life-circumstances. It is undisputed that up until 2015, the respondent had not been in the workforce for at least nine years since arriving in Canada from England in 2006. There was no suggestion that after all that time there was a life event or circumstance causing the respondent to enter the workforce in 2015 (be it January 1, March 1 or March 14, 2015). This was a time in her life when the respondent was the primary caregiver of her three children, aged one, four and seven. There was no suggestion of any childcare arrangements in 2015 to accommodate her new work schedule other than the respondent’s statement at the examination-under-oath that “When the kids are at school I go [to work], before they leave school I go home.”

29At the examination under oath, the respondent stated that when the accident happened on April 9, 2015, she was on her way to work. Her one-year-old child was in the car-seat when the accident happened. The time of the accident was reported on two separate OCF-1s as 9:30, 10:00 and 10:59 a.m. There was no explanation as to why she was driving to work after her 9:00 a.m. employment start time or why her child was with her. The respondent’s description of her activity at the bakery did not suggest that she brought any children to work.

30In terms of the respondent’s relationship with the bakery, the evidence included a corporation profile report showing the respondent as being president, administrator and director of the corporate numbered company operating as the bakery since 2009. The respondent testified that she was not involved with this and that the bakery was her husband’s business. This hearing is not about the bakery’s business practices; however, such documentation shows the respondent as being positioned with authority with regard to the business and its records. It also presents the respondent in a very different role than that of a customer service employee.

31Given the inconsistencies and discrepancies about the respondent’s claimed employment, the contradictory documentation, and the respondent’s non-arms length relationship with the bakery (by way of both her husband and her role as shown on the corporate profile repot), I draw an adverse inference from the respondent’s failure to call any witnesses to clarify material inconsistencies and to provide evidence to corroborate that the respondent was actually employed.

32Lastly, Steven Polisuk, a chartered business valuator and certified fraud examiner, testified on behalf of the applicant at the hearing. He had reviewed the documentation relating to the respondent’s entitlement to IRBs and rejected the validity of the respondent’s representations about her work. He calculated the overpayment of IRBs as being at $33,264.00. As outlined above, I find that the evidence at the hearing supports Mr. Polisuk’s assessment and conclusions. The respondent has not provided any persuasive evidence to the contrary.

33On the evidence before me I find that the respondent materially misrepresented her employment in 2015. I find that the applicant has demonstrated on a balance of probabilities that the IRBs were paid as a result of the respondent’s material misrepresentations. Accordingly, under section 52(1), the respondent is liable to repay the IRBs to the applicant.

Interest

34The applicant has sought interest on the repayment amount as of February 25, 2021.

35The respondent was first notified of the amount to be repaid by letter dated February 25, 2021 addressed to the respondent’s home address and copied to her legal representative, with follow-up letters seeking repayment dated March 19, 2021, April 29, 2021, October 7, 2021, and September 1, 2022.

36I am satisfied that the repayment notices meet the requirement of the Schedule. They state that the applicant had determined that the respondent was not eligible for an income replacement benefit and that the applicant had determined the respondent had not been an employee of her spouse’s bakery. They also state that the repayment request was for $33,264.00 and was being made under section 52 of the Schedule where “a person is liable to pay the insurer any benefit that is paid to that person as a result of willful misrepresentation or fraud.” The repayment sought was based on the misrepresentation of the basis for all of the IRBs paid.

37In the September 1, 2022 letter to the respondent, the applicant also requested repayment of an additional $160.40 which the applicant had paid to the respondent in 2016 as interest with a delayed IRB payment. However, this sum of $160.40 was not included in the amount claimed in the application made to the Tribunal. The applicant did not seek to amend the amount of the repayment sought to include the $160.40 for the interest payment made by the applicant to the respondent. I will therefore assume that the applicant has waived the request for repayment of this sum.

38I find that the interest calculations are properly based on the applicant’s February 25, 2021 notice for repayment and under section 52(5) the effective date for interest calculations is 15 days after this notice was given – March 12, 2021.

39With regard to the rate of interest, section 52(5) specifies that the insurer may charge interest on the outstanding balance to be repaid, which is to be calculated at the bank rate in effect on the 15th day after notice has been given. Accordingly, the rate to be charged for interest in this case, is the bank rate as of March 12, 2021. The bank rate here is defined under section 52(6) as the rate “established by the Bank of Canada as the minimum rate at which the Bank of Canada makes short term advances to the banks listed in Schedule 1 to the Banks Act (Canada).”

Conclusion - Repayment

40I find that IRBs were paid as a result of wilful misrepresentation and that the applicant is entitled under section 52 of the Schedule to repayment of all IRBs paid, with interest on overdue amounts at the bank rate defined under section 52(5), calculated from March 12, 2021.

Recovery of previously ordered costs

41The applicant has asked to recover $250.00 in costs awarded in a previous written hearing. This order was made in a previous proceeding and no further determination from the Tribunal is required with respect to that order.

Costs

42The applicant sought costs of $500.00 for the hearing, submitting that the respondent failed to file a response to the application, provide a hearing brief or a witness list. The applicant also submitted that the respondent did not comply with all production orders – missing deadlines or otherwise not providing productions as ordered.

43Pursuant to rule 19.1 of the Common Rules of Practice and Procedure, October 2, 2017 (“the Rules”), costs may be requested where a party believes another party has acted unreasonably, frivolously, vexatiously, or in bad faith.

44Costs had been ordered against the respondent in relation to a previous proceeding which the respondent had launched against the insurer and in which she then failed to participate. The current application was brought by the insurer.

45While the respondent did not file a response to the application, a hearing brief or a witness list, the respondent did participate at the case conference, made some efforts to comply with productions ordered, and participated at the hearing. The respondent did not present any witnesses other than herself and the applicant consented to this.

46A party before this Tribunal should not be surprised by the case they have to meet at the hearing. I find the respondent’s failure to file a response to the application, meet production requirements and provide a witness list to be unreasonable. There were nonetheless some efforts to otherwise comply with the process of this application. Accordingly, I find that a nominal order of $50.00 for costs against the respondent is appropriate.

ORDER

47I order as follows:

i. The applicant is entitled to a repayment of IRBs paid in the amount of $33,264.00

ii. The applicant is entitled to interest payable from March 12, 2021 according to the bank rate as of that date, as defined in sections 52(5) and (6) of the Schedule.

iii. An order for $250.00 in costs was made in a previous proceeding and no further order from the Tribunal is required with respect to its recovery.

iv. The applicant is entitled to $50.00 for the costs of this proceeding.