ACCIDENT BENEFITS NEWSLETTER - APRIL 2003

- Catherine Zingg

Insurance Act - s. 282(12) - Bias

In Hezavian v. Allstate Insurance Company of Canada, P02-00006, March 5, 2003, (Mr. Baradaran, agent for the Applicant/Appellant; Todd McCarthy, for the Insurer/Respondent0), the applicant made a claim for medical and rehabilitation benefits and housekeeping.  The applicant's claims for psychological treatment, physiotherapy, massage treatment and housekeeping expenses were dismissed.  The cost associated with an assessment and treatment plan by Dr. R. Samuel and a functional capacity evaluation by Metro Rehabilitation and Assessment Centre was also dismissed.  Ms. Hezavian appealed the decision, alleging that the arbitrator was biased.  The appeal was dismissed and Ms. Hezavian was ordered to pay Allstate the expenses of the appeal, fixed at $1,000.00.  With respect to Mr. Baradaran's failure to order a transcript, Director's Delegate McMahon remarked:

Mr. Baradaran's decision to press on with the appeal without any supporting evidence, represents a disturbing failure to recognize his obligations as an advocate.  His conduct is all the more blameworthy given that it is apparent that the appeal was prompted by the remarks in the arbitrator's decision about Mr. Baradaran's competence (p. 2).

s. 32 - Notice and Application for Benefits

s. 36 - Election of Income Replacement, Non-Earner

or Caregiver Benefit

In Antony v. RBC General Insurance Company, A02-000217, March 12, 2003, the applicant elected to claim caregiver benefits and later sought to change her election in order to claim income replacement benefits.  RBC argued that the original election was valid and could not be changed.  Arbitrator Leitch allowed Ms. Antony to re-elect income replacement benefits from one week after the accident.  After meeting with RBC's adjuster, Ms. Antony was aware that caregiver benefits would pay more than income replacement benefits and therefore she elected to receive caregiver benefits.  The arbitrator found that RBC did not inform Ms. Antony that caregiver benefits might not be payable for as long a period as income replacement benefits.  Having reviewed the decision in Smith v. Co-operators General Insurance Company, [2002] S.C.J. No. 34, S.C.C., the arbitrator stated: 

In keeping with the 'bright line boundaries' approach endorsed by the Supreme Court, it is also my opinion that in challenging the validity of his/her election on the grounds that the insurer failed to provide this piece of information, an insured person should not bear the onus to prove that he/she would have elected differently had the insurer provided complete information.  On the contrary, in the event of such challenge, the onus of proof in my opinion, should fall upon the insurer to establish that it complied with its obligations under 32(2)(d) of the Schedule, by providing the insured person with complete information prior to his/her making an election (p.14).

s. 48 - Termination of Benefits for Material Misrepresentation

In Szabo v. CAA Insurance Company (Ontario), A02-000678, March 14, 2003, the applicant claimed to be unemployed at the time of the accident.  Later he claimed that he was employed and sought income replacement benefits.  The benefits were denied on the basis that he had wilfully made a material misrepresentation with respect to his Application for Benefits.  At the preliminary issue hearing, it was admitted in an agreed statement of facts,that Mr. Szabo had misrepresented facts relating to his employment status when he applied to CAA for benefits and that he did so wilfully.  CAA was advised that Mr. Szabo had misrepresented his employment status because he was afraid that if he had informed them that he was employed this would cause WSIB to terminate his benefits (p.3). 

Mr. Szabo argued that his employment status was not material because he did not obtain anything by misrepresenting it and relied on the decision in Michalowski v. St. Paul Fire & Marine Insurance Co., A98-001492, July 9, 1999, in support of this argument.  The arbitrator rejected this submission, finding that the case cited did not go so far as to say that stupidity excuses cupidity (p.4).  Arbitrator Evans further stated:

Essentially, Mr. Szabo argues that employment status is material enough for him to receive IRBs but not material enough for him to be denied them.  I do not see such a fine distinction.  I have found that employment status is material.  I further find that Mr. Szabo's failure to profit from his misrepresentation does not render an otherwise material fact immaterial (p.4).

Accordingly, it was found that Mr. Szabo was precluded from receiving IRBs under s. 48 of the Schedule because of his wilful misrepresentation of material facts on his Application for Accident Benefits.     

Settlement Regulations - s. 9.1(1) and (2)

Following a motor vehicle accident on August 7, 2000, which occurred in the state of New York, Mr. Nguyen submitted an Application for Accident Benefits on August 23, 2000.  On June 7, 2001, a settlement offer was accepted by Mr. Nguyen.  A Full and Final Release was forwarded to him for his signature, along with a disclosure statement.  Upon reviewing the release, Mr Nguyen changed his mind and did not sign it.  No settlement funds were forwarded.  At mediation in November 2001, Wawanesa argued that no benefits were payable as the matter had been settled in June 2001.  In January 2002, Mr. Nguyen applied for arbitration.  In its Response to the Application for Arbitration Wawanesa did not raise the issue of the alleged settlement.  Mr. Nguyen argued that the insurance company was therefore estopped from relying upon this argument.  Arbitrator Killoran found that she had jurisdiction to decide the settlement issue as s. 282(3) of the Insurance Act states that the arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer.  Wawanesa had raised the settlement issue in a pre-hearing letter in which it asked whether the parties had reached a binding agreement which settled Mr. Nguyen's entitlement to statutory accident benefits.  The applicable settlement regulation was s. 9.1(1) and (2) of Regulation 664, as amended by O. Reg. 784/93.  Arbitrator Killoran found that the matter had been settled for the following reasons:

I find the reasoning in Birjasingh (1999) O.J. 4546,O.S.C., most persuasive.  More specifically, I concur with Justice Nordheimer's ruling that: 'the refusal of the resiling party to sign the release cannot be relied upon as invalidating the settlement.  If the settlement is found to be enforceable, then the court merely orders that the release be signed as part of the relief granted'.  I find that the settlement in this case is enforceable.  First, there was an oral agreement on May 7, 2001.  That oral agreement was committed to writing on the same day in a letter from Wawanesa to Mr. Nguyen's counsel.  Wawanesa complied with the requirements of the settlement regulation by forwarding disclosure and a release on June 7, 2001.  Mr. Nguyen had the option of delivering a written notice to Wawanesa of his intention to rescind the settlement within two business days after receipt of the settlement documents.  He did not do so.  I do not accept Mr. Nguyen's argument that it was not necessary to forward notice of an intention to rescind the agreement as there was no agreement because no release was signed.  An agreement between the parties had been concluded to which a signed release was not a prerequisite (p.8). Nguyen v. Wawanessa Mutual Insurance Company, A01-001593, February 19, 2003.

SABS-1994

s. 29 - Pre-Accident Earning Capacity

s. 30 - Residual Earning Capacity

s. 75 - Collateral Benefits

In Schneider v. Economical Mutual Insurance Company, A01-001520, March 11, 2003, the applicant received IRBs for 104 weeks post-accident and then Economical made a LECB offer of zero.  The LECB offer was based on a figure of $234.21 for pre-accident earning capacity and a residual earning capacity of $274.76, based on work as a retail trade manager (p.3).  Mr. Schneider had disputed the LECB offer and a DAC assessment was arranged.  Upon learning that Mr. Schneider had returned to work, however, the DAC assessment was cancelled. 

Counsel for the applicant submitted that s. 29(1) and (4) should be interpreted as permitting an insured to calculate his PEC based on his best consecutive 52 weeks out of the 156 weeks immediately prior to the accident (p.6).  Arbitrator Wilson accepted this argument.  Although the period did not correlate precisely with T4's and employment records, it was found to be irrelevant as s. 29(4)(a) specifically allows the applicant to choose his best 52 weeks in the 156 weeks prior to the accident.  His PEC was found to be $375.36 as a result. 

A REC DAC had examined Mr. Schneider's residual earning capacity.  A number of possible vocational alternatives were put forward such as manager in retail trade, clerical occupations, skilled trades and service occupations etc.  The arbitrator questioned these recommendations given that the REC DAC also reported that Mr. Schneider felt depressed, angry and fearful.  Furthermore, it stated that he found it troublesome to deal with customers as he felt that he had lost confidence.  Upon reviewing the evidence, Arbitrator Wilson found that Mr. Schneider's residual earning capacity was zero, commenting:

I find it highly improbable that a person described as introverted, shy, and socially insecure, who tends to withdraw from others and is indecisive and tired, (see report of Dr. McKillop, April 26, 2001) would be able to undertake such tasks with any degree of success.  I find it even less likely that an employer would hire a worker such as Mr. Schneider, if he was informed of limitations such as those listed above (p.11). 

The arbitrator rejected the insurer's insertion that Mr. Schneider's failure to keep a job after the accident was a continuation of a pattern that existed before the accident.  There was evidence that Mr. Schneider's decision to leave Beckers arose due to the stress of dealing with employees, and accounting for the disappearance of a significant sum of money, for which, he could, ultimately, be responsible (p.14).  The arbitrator found that Mr. Schneider's departure from Beckers was a reasoned career choice, rather than an unreasoning flight from an untenable situation, that seemed to be characteristic of his departures from post-accident employment (p.14). 

It was held that Mr. Schneider's loss of earning capacity benefits should have commenced at the beginning of the post 104 week period based on a REC of zero.  It was noted that s. 15 of the Schedule allowed for deductions of post-accident income from IRBs.  The arbitrator found that this section did not apply to LECBs and that the only deductible that applies to PART VI is s. 75(1).  It was held that income from Mr. Schneider's post-accident employment was not a collateral benefit and therefore was not deductible from his LECB.  The arbitrator commented:

In Hodgson v. Walsh [1998] O.J. No. 3268, Thomson J. held that diminished earning capacity was a pecuniary loss.

Loss of earning capacity is an award of damages based on the recognition that a plaintiff's capacity to earn money is an asset which has been taken away.  Damages for loss of earning capacity are properly awarded to compensate the injured party for the loss of a capital asset consisting of income earning capacity, rather than loss of income.  It is appropriate, therefore, that Mr. Schneider's income post-accident not be deducted from the LECB payable to him, since the LECB is a periodic payment for a loss of a capital asset, not income replacement (p.19).