In a June 2019 Tribunals Ontario Reconsideration Decision,¹ the decision of the License Appeal Tribunal (LAT) in May 2018 was overturned and the insured’s pre-accident farming income in one corporate entity was reduced by self-employment business losses in another.

The tribunal vice chair held that the adjudicator in the LAT decision made “a significant error” in failing to consider the corporate losses, and thereby wrongly affirmed an income replacement benefit (IRB) entitlement of $400 versus $0 per week, all other things being equal.   

The tribunal vice chair justified the decision:

• By stating that “section 7(2)(i) and (ii) and 2 set out the methodology of calculating weekly base amount as 70 per cent of the pre-accident gross weekly employment income and weekly self-employment income less the pre-accident weekly losses from self-employment”²
• After quoting the text of section 7(2)(i)³ which determines the “weekly base amount,” by stating that “based on the language above the losses from self-employment can be used to reduce the pre-accident employment income when calculating the insured’s pre-accident gross income”⁴

However, and notwithstanding the underlining of the word “less” for emphasis in the decision, section 7(2)(i) does not mean what is claimed by the tribunal vice chair.

Section 7(2)(i) of the current SABS⁵ specifies: “70 per cent of the amount, if any, by which the sum of the insured person’s gross weekly employment income and weekly income from self-employment exceeds the amount of the insured person’s weekly loss from self-employment…”

This is a convoluted provision which requires precise unravelling, as it lies at the crux of this issue. To make it simpler, we will use the actual quanta involved in this case. WSW was both a businessman and a farmer. He was injured in a motor vehicle accident on Oct. 11, 2013. WDW earned farming income reported as self-employment income on his 2012 T1 income tax return of $52,995, and incurred business losses in a separate and distinct corporation of $50,055, as reported in its corporate tax return for the last fiscal year before the accident. The fact that the corporation had a noncontiguous year-end was not considered relevant. All tax returns were filed before the accident.

Note that the word “less” is not used or inferred anywhere in section 7(2)(i), as asserted by the tribunal vice chair with emphasis. Rather, the amount by which the sum of the insured’s gross weekly employment income ($0) and weekly income from self-employment (i.e., $52,995 from “A”) exceeds the amount of the weekly loss from self-employment (i.e., -$50,055 from “B”) is $103,010. (i.e., simple arithmetic dictates that the amount by which a positive number exceeds a negative number, is the difference between them (with smaller numbers it is clear to see that the amount by which 8 exceeds -2 = 10 and not 6).

While we recognize that this result is nonsensical in this context, it is nevertheless the literal meaning of the legislation, and it is highly questionable if it can be justified to infer the very opposite in order to overturn an earlier decision. In the earlier decision, the adjudicator simply omitted the losses in the corporation.

Had the legislature intended the formula to result in $52,995-$50,055=$2,940 as purported,⁶ it likely would have been drafted more simply, possibly using the word “less,” or “net,” for example as follows: “…the net amount of the sum of the insured person’s gross weekly employment income and weekly income from self-employment and weekly loss from self-employment…” or better yet, provided a simple mathematical formula to dispel any doubt such as in section 8 for determining the after age 65 IRB ramp down.

Instead, we are indeed left with significant doubt as to the legislative intent. This doubt is amplified by the fact that this provision was newly introduced into the current statutory accident benefits schedule (SABS), following at least three Financial Services Commission of Ontario (FSCO) decisions⁷ under previous incarnations of the SABS. In all three cases, self-employment losses were held to not be deductible from income from other sources in determining the weekly base amount.

In principle, consider if pre-accident, an insured earned employment income of $30,000, and tried in the same year to start a business, incurring losses of $16,000 in a corporation. Could it really have been the intention of the drafters to amend consumer protection legislation to punish an insured vis-à-vis their IRBs for the losses incurred in this separate venture, awarding him or her the same IRBs as someone who earned only $14,000 from employment or self-employment income?

The vice chair’s approach is particularly punitive given that, subject to a minimum entitlement of $185 per week after 104 weeks, the resulting weekly base amount is employed as the basis for the insured’s future IRBs for the full duration of their IRB entitlement.    

Stemming from this principle and the FSCO precedent, the wording of section 7(2)(i) may therefore be equally interpreted as having been intended to codify the preclusion of setting off pre-accident losses in one business from income from employment or from another business source, however clumsily worded. This had previously been the practice of several other expert accountants and insurers. Given the support of FSCO precedent was “a significant error” made? If yes, by whom?

¹ Aviva Insurance Canada v. W.D.W. 17-005894/AABS
² Ibid, at paragraph 33.
³ Ibid at paragraph 21.
⁴ Ibid at paragraph 22.
⁵ Ontario Regulation 34/10 Statutory Accident Benefits Schedule – Effective Sept. 1, 2010.
⁶ Aviva Insurance Canada v. W.D.W. 17-005894/AABS, at paragraph 35.
⁷ Marilyn Henderson-Briehl and ING Insurance Company of Canada (FSCO A01-001620), Connie Lisowecki and Dominion of Canada General Insurance Company (FSCO A07-000610) and Leon Francis Rocheleau and Allstate Insurance Company of Canada (FSCO A05-002849).