Citation: Definity Insurance Company v. Abdul Hussein, 2025 ONLAT 24-000713/AABS

Licence Appeal Tribunal File Number: 24-000713/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:

Definity Insurance Company

Applicant

and

Nayef Abdul Hussein

Respondent

DECISION

ADJUDICATOR:

Rasha El Sissi

APPEARANCES:

For the Applicant:

Jeremy Hanigan, Counsel

For the Respondent:

Self-represented

HEARD:

By way of written submissions

OVERVIEW

1Nayef Abdul Hussein, the respondent, was involved in an automobile accident on March 8, 2019, and sought benefits pursuant to the Statutory Accident Benefits Schedule – Effective September 1, 2010 (including amendments effective June 1, 2016) (the “Schedule”).

2The applicant, Definity Insurance Company, paid an income replacement benefit (“IRB”) to the respondent pursuant to the Schedule totalling $39,942.85 from October 6, 2020 until August 15, 2022.

3On August 17, 2023, the applicant terminated IRB under section 53 of the Schedule on the basis that the respondent wilfully misrepresented material facts by submitting records that inaccurately represented his income, because of which the applicant paid him IRB.

4On August 17, 2023, the applicant requested repayment of the entire amount paid in IRB under section 52 of the Schedule and specified that interest would be charged starting on September 6, 2023.

5On January 18, 2024, the applicant applied to the Licence Appeal Tribunal – Automobile Accident Benefits Service (the “Tribunal”) for resolution of the dispute on the basis that the IRB payments to the respondent were made as a result of the respondent’s wilful misrepresentation.

ISSUES

6The issues in dispute are:

i. Is the applicant entitled to a repayment of $39,942.85 relating to its payment of IRB for the time period of October 6, 2020 to August 15, 2022? (Note: The case conference and order released on June 26, 2024 (“CCRO”) refers to an end date of September 4, 2022, but the applicant’s submissions indicate the applicant paid the respondent IRB until August 15, 2022. The respondent did not address this. Hence, I have changed September 4, 2022 to August 15, 2022.)

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

Entitlement to Non-earner benefit

7In his submissions, the respondent stated that if he was not entitled to IRB, he would have been entitled to non-earner benefit (“NEB”).

8The applicant denied that the respondent would have met the standard for NEB, in its reply.

9I note that the issue of the respondent’s entitlement to NEB as a result of the accident was not raised as in issue in dispute at the case conference on June 18, 2024, according to the CCRO. Further, the respondent did not bring a motion to request to add this issue as an issue in dispute to this written hearing.

10I find there is no dispute for me to resolve under section 280 of the Insurance Act and that it would be procedurally unfair to add NEB to the issues in dispute because of the lack of prior notice to the applicant that NEB would be part of the case to be decided.

RESULT

11The applicant is not entitled to repayment of IRB.

ANALYSIS

12I find that the applicant is not entitled to repayment of IRB, because I have not found the respondent’s misrepresentation of his pre-accident income, as a result of which the applicant paid him IRB, was wilful.

Law

13Section 53 of the Schedule provides that an insurer may terminate the payment of benefits to an insured person, if he or she has wilfully misrepresented material facts with respect to the application for the benefit; and if the insurer provides the insured person with a notice setting out the reasons for the termination.

14Section 52(1)(a) of the Schedule provides that a person is liable to repay the insurer any benefit paid as a result of an error on the part of the insurer, the insured person or any other person, or as a result of wilful misrepresentation or fraud. Section 52(2)(a) provides that the insurer shall give a person notice of the amount required to be repaid. Section 52(3) provides for a 12-month limitation period to give notice of repayment, unless the amount was originally paid as a result of wilful misrepresentation or fraud. Interest is provided for in subsection 52(5).

15The applicant bears the onus to prove, on a balance of probabilities, that it is owed repayment of IRB.

16The applicant focused its arguments for repayment solely on “wilful misrepresentation”, and did not allege “error” due to the expiry of the 12-month limitation period. The applicant submits that it paid the applicant IRB for the time period of October 6, 2020 to August 15, 2022 and that it provided the respondent with notice of the amount required to be repaid on August 17, 2023.

Transcript of examination under oath

17The applicant submits that the respondent made admissions during his examination under oath held on March 10, 2023, pursuant to section 33 of the Schedule. The applicant submits that the evidence of the respondent’s misrepresentations in his 2018 income tax return (the importance of which is discussed below) was only adduced when he attended the examination under oath.

18Therefore, the transcript of this examination (“Transcript”) is highly relevant evidence in this case. It is also lengthy, at 2,622 questions and answers, and detailed.

19The respondent submits that he was heavily medicated on Oxycodone during the examination and that he was not in the right state of mind to be put under rigorous questioning for 10 hours while being under the influence. The respondent submits that he has been prescribed Oxycodone for 5 years.

20The applicant submitted, in reply, that there is no evidence to support that the respondent’s testimony in the Transcript is unreliable. The applicant noted that the respondent agreed to participate in the examination under oath, and that there was no expert evidence to support that he was unfit to undergo the examination.

21Having read the Transcript, I note that the respondent states that he has taken 3 “Oxy” pills so far on the day of the examination. He states that he takes 2-3 pills on a good day compared to a day when he has a lot of pain, which is upwards of 8-10. He also states that he discussed with his social worker and lawyer whether he should take Oxy on the day of the examination. He states he decided to act normally in his consumption of Oxy that day. I find from this testimony, that the applicant had taken a low to moderate number of Oxy pills on the day of the examination, considering his habits. I do not find any indication in the Transcript that he was not in his right state of mind, though he sometimes said he was confused by the applicant’s questions. When the applicant repeated or rephrased the questions, he was able to answer.

22I also note that the respondent did not direct me to any medical evidence or a medical opinion that this amount of medication would impair his ability to understand or respond to questioning.

23Based on the available evidence, I do not find there is a reason to discount the weight I give to the respondent’s testimony in the Transcript because of his Oxycodone consumption.

Income Tax Return Evidence

24I find that the amount of IRB the respondent received from the applicant, before deductions or adjustments subsequent to the accident, was based on his 2018 income tax return.

25To explain the importance of the 2018 income tax return evidence, the applicant cited Wawanesa Mutual Insurance Company v. S.P, 2019 CanLII 126183 (ON LAT), para. 23, which contains the following general comments about the amount of IRB payable to an insured:

“IRB is a benefit paid to an insured who was employed at the time of the accident. The amount of IRB payable is calculated based on the income reported by the insured. There are many ways to prove income and one of the most reliable proof of income for an insured is their notice of assessment from the CRA.”

26In the case of a self-employed person, as the respondent indicates he was in his Transcript testimony, section 4(3) of the Schedule states that his or her weekly income or loss from self-employment at the time of the accident is the amount that would be 1/52 of the amount of the person’s income or loss from the business for the last completed taxation year as determined in accordance with Part I of the Income Tax Act (Canada). [Emphasis added]

27Therefore, I find that the amount the respondent declared as income in his 2018 income tax return (accepted without change by CRA) was material to his application for IRB, as a result of the accident in 2019, within the meaning of section 53 of the Schedule.

Wilful Misrepresentation

28The applicant’s primary contention is that the respondent inflated his income in his 2018 income tax return in order to qualify for IRB. For context, the applicant points to the respondent’s 2017 income tax return, which showed a net business loss. The applicant submits that this misrepresentation was deliberate and calculated, i.e., wilful. The respondent denied that this is valid.

29The applicant submitted in evidence the respondent’s 2018 and 2017 income tax returns and 2018 notice of assessment (no change from filing). The respondent did not submit any income tax evidence.

30I will deal first with whether the respondent misrepresented his 2018 income in his 2018 income tax return. I will deal second with whether this misrepresentation was wilful.

31The applicant cited the definition of “misrepresentation” accepted by the Tribunal in 17-000272 v. T.T., 2017 CanLII 87539 (ON LAT), para. 21 (“T.T.”). This definition comes from Black’s Law Dictionary. It defines misrepresentation as, “any manifestation by words or other conduct by one person to another that, under the circumstances, amounts to an assertion not in accordance with the facts.”

32I accept that the amount of the applicant’s income reported in his 2018 income tax return of $48,600 was an assertion that was not in accordance with the facts, for the purposes of his IRB application. This is because of his Transcript testimony, which indicates in considerable detail that his business income and expenses were “off the books” and in cash. As a result, the respondent testified that he “ball parked” his income for the purposes of his 2018 income tax return. I find that a “ballpark” of total income received in cash, without records, over a full year will necessarily not be in accordance with the facts.

33The applicant contests the inclusion of $20,000 in the respondent’s 2018 business income from Mayday Towing, a business operated by a friend, for work as an independent contractor. The applicant submits that the respondent knew this income could not be ascertained as he was paid in cash and there were no records. In his Transcript testimony, the respondent stated he couldn’t recall an exact number for his 2018 earnings from Mayday Towing, but it was upwards of $18,000, from what he could recall.

34The applicant also contests the inclusion of $28,000 from the sale of the applicant’s business Simply Tires, etc. in the applicant’s 2018 reported business income. In his testimony, the respondent states that, during 2018, he was the sole proprietor of Simply Tires, etc., until he sold that business to his cousin and uncle. The respondent testified that $28,000 of his reported business income in 2018 represents the proceeds of the sale of Simply Tires, etc.

35The applicant submits that the inclusion of $28,000 inflated the respondent’s 2018 reported business income because the respondent did not have any back-up documentation to support that he owned Simply Tires, etc.’s tools and equipment, that he sold them, and for how much. The respondent did not address this in his submissions or have an explanation in his Transcript testimony.

36For these reasons, I find that the applicant misrepresented his 2018 income for the purposes of his IRB application.

Wilful

37I am not satisfied, on a balance of probabilities, that the evidence provided by the applicant demonstrates a wilful misrepresentation on the respondent’s part that led to the applicant paying him IRB.

38The applicant’s argument is that the misrepresentation was wilful because the respondent knew he could not accurately quantify any of his income earned in 2018. Therefore, the applicant contends that the respondent filed an income tax return that fabricated and inflated his pre-accident income in order to collect IRB payments.

39As noted, the evidence for this depends in part on the respondent’s Transcript testimony, as the applicant submitted that it did not ascertain the misrepresentation until the examination under oath.

40Having read the Transcript, I find that the respondent was consistent and coherent in his explanations of his business practices in the relevant period, though he acknowledged he did not run his business properly, and in my opinion, his decisions would not be considered wise or informed. He blamed this on lack of schooling and the poor example set by the relatives from whom he originally acquired Simply Tires, etc. and learned the tire business.

41However, the respondent did not point me to, nor did I read, any admissions in his Transcript testimony that he fabricated his 2018 income tax return, or behaved in a certain way, e.g., decided to include the sale proceeds in income, to inflate his pre-accident income and therefore qualify for IRB. In the Transcript testimony, after the applicant’s questions, he says that maybe he should refile without the Simply Tires, etc. proceeds and get “something in return”.

42The applicant attempts to bridge this gap by reference to two document-based facts supported by evidence before me. First, the applicant points to the fact that the respondent’s reported 2018 income was much higher than his 2017 income, based on a comparison of his income tax returns for the two years. Second, the applicant states that it mailed the respondent an accident benefit package on March 11, 2019, six weeks before the respondent filed his 2018 income tax return (on April 22, 2019). In this package, the applicant says the respondent was alerted to his requirement to provide documented income to apply for IRB. The applicant submits that, upon learning of this requirement, the respondent filed his 2018 income tax return in which he falsely declared the extent of his income.

43I do not find that these facts prove, on a balance of probabilities, that the respondent fabricated his 2018 income tax return to qualify for IRB. My reasons are as follows.

44First, the applicant provides an explanation in his Transcript testimony for why he had losses in 2017 compared to income in 2018. He testified that prior to selling Simply Tires, etc., it was not making much money because he was not a licensed mechanic so he could not provide customers a full range of auto services without hiring another person. Second, in his submissions he indicates that he had to raise funds in 2018 because he split from his wife in April, and he needed somewhere to live permanently. Though there is no other evidence before me to corroborate these points, there is also no reason not to believe the respondent because the explanations are consistent with the rest of his testimony that day about his business losses and breakdown of the marriage.

45Second, I do not find wording in the accident benefit package dated March 11, 2019 that substantiates the applicant’s contention that it alerted the respondent to his requirement to provide documented income to apply for IRB. The only possible language is a general statement that “basic accident benefits”, of which IRB is one, “are subject to eligibility and qualification”. There is no discussion of the type of documentation required to apply for IRB.

46Third, because of the amount of income the respondent declared in 2018 relative to his expenses, he incurred a tax liability of $8,627.90, understood to be due immediately. I struggle to understand why he would do so in order to collect IRB 17 months in the future. I note that he continued to work for Mayday Towing in 2019 and did not start to receive IRB until October 6, 2020, when he provided a disability certificate (OCF-3).

47The respondent stated in his submissions that he applied for IRB on his lawyer’s advice and that advice was received after April 2019, i.e., he denied any connection between applying for IRB and his 2018 income tax return.

48The applicant directed me to several cases in which the Tribunal has found a wilful misrepresentation. In addition to T.T., the applicant points to Aviva General Insurance Company v Muthusamythevar, 2020 CanLII 94791 (ON LAT); Subaskaran v. RSA Insurance, 2021 CanLII 53173 (ON LAT); and Ababio v TD Insurance Meloche Monnex, 2021 CanLII 97247 (ON LAT). I did not find these helpful as there was limited discussion of the meaning of “wilful” and the facts of the misrepresentations were quite different.

49I find useful the discussion of “wilful” in Economical Mutual Insurance Company v. E.M., 2018 CanLII 13147 (ON LAT) (“E.M.”). In E.M., the Tribunal referred to Black’s Law Dictionary for the proposition that a voluntary act becomes wilful in law only when it involves conscious wrong or evil purpose on the part of the actor, or at least inexcusable carelessness, whether the act is right or wrong. In E.M., the Tribunal stated that the term wilful is stronger than voluntary or intentional and is subjective.

50I am persuaded to follow the definition the Tribunal adopted in E.M. Given that the Schedule is intended to be consumer-protection legislation, and that the finding of a wilful misrepresentation has serious consequences for the insured person, it is important to give meaning to “wilful”.

51On a totality of the evidence, I find that the applicant has not provided evidence to establish that the respondent fabricated his 2018 income on his return with a conscious wrong or evil purpose to falsely qualify for IRB, or with inexcusable carelessness whether he falsely qualified for IRB or not.

52Therefore, the applicant is not entitled to a repayment of $39,942.85 relating to its payment of IRB to the respondent for the time period of October 6, 2020 to August 15, 2022.

Notice

53The applicant submits that it provided the respondent with notice of the amount of IRB required to be repaid on August 17, 2023. As I have not found a wilful misrepresentation, it is not necessary for me to consider the applicant’s notice.

Interest

54The insurer may charge interest on the outstanding balance of the amount to be repaid calculated in the manner provided in section 51(5) of the Schedule. As I have found there is no amount to be repaid, interest does not apply.

ORDER

55For the above reasons I find that the applicant is not entitled to repayment of IRB.