Private collateral benefits represent income - IRBs reduced to $0 - Amini and AIG

December 28, 2017, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

Amini and AIG Insurance

Decision Date: October 26, 2017
Heard Before: Adjudicator Anne Sone

INCOME REPLACEMENT BENEFITS: self employed truck driver; applicant submits that his private collateral benefits coverage is not a deductible benefit under an “income continuation benefit plan”; insurer submits it is income; Arbitrator determines that it is income and therefore IRBs are $0

Wahid Amini was injured in a car crash on February 24, 2015.  He applied for SABs from AIG but they disputed paying weekly income replacement benefits. When mediation failed, Mr. Amini applied for arbitration at the FSCO.  

Issues:

1. Is Mr. Amini entitled to receive a weekly income replacement benefit in the amount of $400 per week from March 2, 2015 to date and onwards?

Result:

1. Mr. Amini is not entitled to receive a weekly income replacement benefit from AIG.

Mr. Amini was self-employed as a truck driver as a 50% owner of an unincorporated partnership. He earned gross business income of $288,658 and incurred operating costs of $167,061.41 in 2014. At the time of the car accident, Mr. Amini had collateral benefits coverage through NAL Insurance.

The NAL policy provides for potential entitlement to a monthly benefit up to $3,000 per month, and has received gross amount of $3,000 per month from NAL. Mr. Amini suffers a substantial inability to perform the essential tasks of his employment due to the accident. The parties agree that Mr. Amini is totally disabled as contemplated by the NAL policy.

Mr. Amini has not received any income replacement benefits pursuant to the provisions of the Schedule from AIG.  If the $3,000 per month received by Mr. Amini from NAL is not deductible his income replacement benefit entitlement is $400 per week. If the $3,000 per month received by Mr. Amini from NAL is deductible his income replacement benefit entitlement is $0 per week.

Mr. Amini submits that:

• he was self-employed, and the benefits paid to him from the NAL policy were not calculated with reference to his income from employment. Therefore, the disability benefits he received do not constitute an income continuation plan and are not deductible.
• The nature of the disability benefits paid does not qualify as a payment for a loss of income. The disability benefits are used to compensate for the disability. The policy provides that the disability benefits shall not be integrated with any payments pursuant to the Schedule. Therefore, the disability benefits form a separate payment that is paid in addition to any monies the Applicant is entitled to under the Schedule’s regime.
•  Under the common law private insurance exemption, the disability benefits are exempt from the double recovery rule and therefore should not be deductible.

AIG submits the following:

• An insurer is entitled to credit for the payments received by Applicant when quantifying the Applicant’s entitlement to income replacement benefits, if it is able to satisfy that the payments are deemed to be made under an income continuation benefit plan.
• In general, the question centres on the nature of the payments made to the Applicant and whether the collateral payment constitutes payments for loss of income.
•  In considering whether the collateral payments are payments for loss of income, one must look at the actual policy within the context of the specific wording of the legislation.

The Arbitrator reviewed the NAL Insurance Policy for Disability Benefits and the Schedule. Subsection 7(1) of the Schedule provides that “the weekly amount of an income replacement benefit payable to an insured person … is the weekly base amount … less the total of all other income replacement assistance.” Accordingly, an insurer is entitled to deduct periodic payments of insurance received by an applicant when quantifying an applicant’s entitlement to income replacement benefits, if it is able to satisfy that:

• the applicant was employed while the contract for insurance was in effect;
• the maximum benefit payable is limited to an amount calculated with reference to income from employment.

Under subparagraph 3(7)(d)(ii)(A) of the Schedule, payments for loss of income are deductible from statutory income replacement benefits under certain circumstances. One of the requirements is that the Applicant was employed while the contract for insurance was in effect.

Mr. Amini submits that since Mr. Amini was self-employed rather than employed, his private collateral benefits coverage is not a deductible benefit under an “income continuation benefit plan” under subparagraph 3(7)(d)(ii)(A) of the Schedule.

In the Income Replacement Section of the NAL policy, there is a set of definitions on page 8. The NAL policy defines “Employment or Employed” as follows:

• For a self-employed individual: Actively running his/her business for at the time of the application.

These sections of the NAL policy mean that for the purposes of the policy, “employed” includes a contracted driver of a transportation company working on a full-time basis.  According to the Agreed Statement of Facts, Mr. Amini was a self-employed contracted driver of a transportation company working on a full-time basis at the time of his accident.

On that basis the Arbitrator determined that Mr. Amini was “employed” in this case for the purposes of subparagraph 3(7)(d)(ii)(A) of the Schedule.

Schedule B to the Agreed Statement of Facts contains a calculation showing the amount of the eligible benefit due to Mr. Amini from the NAL policy. The calculation refers to 67% of his gross income, and pays him $3,000 per month, the maximum applicable monthly amount payable under the NAL policy. This reference to the 67% of Mr. Amini’s gross income in Schedule B persuaded the Arbitrator that the Disability Benefit he is receiving from the NAL policy is intended to cover his loss of income, as opposed to his Pre-Tax Business Overhead expenses or a combination of both.

Under the loss of income section, the NAL policy states as follows: “Your Disability Benefit will not be integrated with any automobile accident insurance plan, e.g. the Statutory Accident Benefits of the Ontario Automobile Policy (OAP).”

AIG interprets this statement to provide a warning to insureds that they may not be entitled to income replacement benefits from their accident benefit insurer. In other words, the benefits would not integrate based on the “double recovery” principle and an insured was barred from seeking recovery from both the accident benefits insurer and NAL Insurance.

Mr. Amini disagrees with this interpretation and posits that if the drafters of the NAL policy meant to warn insureds that they may not be entitled to income replacement benefits from their accident benefits insurer, they would have explicitly done so.

Although the NAL policy does not specifically mention the potential effects of the non-integration of the NAL policy with Schedule benefits, it clearly sets forth through its wording, bolding and underlining that there will not be any integration of the loss of income portion of the NAL policy with the Schedule. Although further statements/examples in the NAL policy may have made the implications more apparent, they were not necessary to express the clear intention not to integrate the NAL policy with Schedule benefits.

Is the Common Law Private Insurance Exception Applicable?

The private insurance exception, also known as the collateral benefits rule, is a common law principle that provides that payments received under an insurance policy are not deducted from an injured plaintiff's tort award even though this exception may overcompensate the plaintiff.

Mr. Amini submits that consistent with the private insurance exception to the double recovery rule, the Ontario Court of Appeal held in Demers v. Monty and B.R. Davidson Mining & Development Ltd., that benefits received pursuant to a private insurance policy accrue to the insured’s benefit, as opposed to that of the insurer, and therefore should not be deductible.

The Arbitrator agreed with AIG that this common law principle does not apply to cases involving a dispute for benefits under the Schedule, particularly where the wording of the Schedule clearly denies the applicability of this exception when determining entitlement to benefits under the Schedule.

Should the NAL Policy Benefit be deducted from Mr. Amini’s Income Replacement Benefits?

According to Stojanov, the law concerning deductibility requires consideration of the entire policy within the specific wording of the Schedule with the overriding question being “what are the payments for?” This question focuses on the nature of the payments from the NAL policy to Mr. Amini, and especially whether they constitute payment for loss of income. The NAL policy provides for a disability benefit that is intended to cover a loss of income.

Under subsection 7(1) of the Schedule, the total of all other income replacement assistance is to be deducted from the weekly amount of an income replacement benefit payable to an insured person, and under paragraph 4(1)(a) of the Schedule, “other income replacement assistance” means “the amount of any gross weekly payment that is received by the person as a result of the accident  under any income continuation benefit plan.”

In order for the income replacement assistance from the NAL policy to be deductible from income replacement benefits owed to Mr. Amini by AIG, two conditions must be met. Subparagraph 3(7)(d)(ii)(A) of the Schedule requires that Mr. Amini must be employed while the contract of insurance is in effect, and subparagraph 3(7)(d)(ii)(B) of the Schedule requires that the maximum benefit payable is limited to an amount calculated with reference to Mr. Amini’s income from employment.

The Arbitrator determined that both of these requirements have been satisfied.

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It is important that you review your accident benefit file with one of our experienced personal injury / car accident lawyers to ensure that you obtain access to all your benefits which include, but are limited to, things like physiotherapy, income replacement benefits, vocational retraining and home modifications.