Attendant Care Benefits–Net It Is!

FSCO appeal holds that attendant care benefits payable are based on the “net” economic loss incurred by the non-professional attendant care provider.

Aviva Canada Inc. and Morten (FSCO Appeal P16-00084A)

The issue in the Aviva and Morten Appeal was whether attendant care benefits (“ACB”) were payable based on the gross wages lost by the non-professional attendant care providers or the approximate net value of same that Aviva Canada Inc. (“Aviva”) had determined for the period in question.

Background and Case Facts

Ms. Sierra Morten was injured in a motor vehicle accident on December 11, 2014 and sought accident benefits from Aviva, payable under the Statutory Accident Benefits Schedule—Effective September 1, 2010, Ontario Regulation 34/10, as amended (“SABS”).

Ms. Morten's father and stepmother, Mr. Morten and Ms. Granger, missed work periodically in order to provide attendant care to Ms. Morten. They both provided confirmation letters from their respective employers, which confirmed the hours they missed, along with the hourly rate of pay they would have earned.

As accountants, we are routinely engaged to quantify economic losses for ACB purposes. In this case, there was no dispute that Mr. Morten and Ms. Granger sustained economic losses in providing attendant care to Ms. Morten; however, in dispute was whether the quantum of ACBs should be paid on a gross or net basis. In this regard, Aviva had already paid the ACBs, but deducted 30% from the gross wages lost to arrive at an approximation of the net wages lost, which Aviva submitted was the economic loss.

Aviva's submission at arbitration (Morten and Aviva FSCO A16-002496) (“Original Decision”) was that if a family member missed work, that family member only lost their net pay, so the proper interpretation of “economic loss” ought to be net pay. However, Ms. Morten took the position that the SABS did not permit Aviva to make any deduction to the economic loss suffered by her father and stepmother before paying the ACBs. That is, Ms. Morten considered the “economic loss” to be the gross wages lost by her care providers. Therefore, the total amount in dispute was equivalent to the difference between the gross pay and the net pay approximated by Aviva. In the Original Decision, Arbitrator Charles D. Matheson agreed with Ms. Morten and found that the quantum of the economic loss was the gross wages lost and not their approximate net value that Aviva had determined.

The main premise for Arbitrator Matheson's decision was his assumption that ACBs are taxable for personal income tax purposes. Therefore, if ACBs are based on the net amount of wages after taxes, as submitted by Aviva, when reported as income for tax purposes by the care provider, they in turn would be taxed, such that there would be “double taxation”.

The Appeal

However, Director's Delegate David Evans noted that the parties agree that ACBs are not taxable to non-professional attendant care providers and so, “Arbitrator [Matheson] erred in law in basing his decision on that erroneous assumption…there is little aside from the erroneous finding that ACBs are taxable that supports the Arbitrator's conclusions”. In fact, Delegate Evans noted that Arbitrator Matheson listed as “Legislation and Case Law Considered”, but did not discuss, T.C. and Personal Insurance Company of Canada (FSCO A13-009880). This decision made the exact opposite finding, whereby the Arbitrator concluded “the payments being received by the applicant for the attendant care…are not considered income from self-employment”.

In the original Decision, Arbitrator Matheson noted, that absent any formulas or processes in the SABS for the deductions to ACB, Aviva acted outside its authority and interpreted the legislation incorrectly. Specifically, Arbitrator Matheson concluded, “the deductions made by the Insurer, which the Insurer submitted were in lieu of statutory deductions, negatively impacted the service providers. As the service providers would have to claim the income from the attendant care benefits paid by Aviva, the lack of said contributions would in themselves impact their respective future finances…I am not persuaded that the intention of the legislature would be to further enrich the Insurer by arbitrarily picking a 30% deduction rate, without any mandatory reconsideration or repayment process for a non-professional attendant care service provider.”

In Delegate Evans' analysis, he referred to the February 1, 2014 amendments to the SABS, which limited the economic loss sustained by the non-professional service provider. In this regard, subsection 19(4) of the SABS now provides that the amount of the ACB shall not exceed the economic loss sustained by the non-professional attendant care provider during the period while, and as a result of, providing the attendant care. Delegate Evans concluded that this provision therefore has two requirements for recovery of the cost of attendant care services by non-professional attendant care providers: “temporal – the economic loss must be sustained during the period while providing attendant care – and causal – it must be sustained as a result of providing attendant care.”

Based on the above, Delegate Evans concluded that Arbitrator Matheson did not address the “temporal” requirement for economic loss and he relied on Simser v. Aviva Canada (FSCO, 2015 ONSC 2363) (“Simser”), wherein the Divisional Court associated the economic loss sustained during the period while providing attendant care, and that subsection 19(4) does not provide for payment based on a future economic loss.

In Simser, the Divisional Court provided the example of a student who deferred graduation to provide attendant care, resulting in a delay of paid employment. Therefore, the economic loss for lost opportunity would only occur if the student provided services during the period when they otherwise would have commenced employment.

Delegate Evans determined that the source deductions for income tax, Canada Pension Plan (“CPP”) contributions and Employment Insurance (“EI”) premiums can be viewed in the same light as in the example provided in Simser. As such, there was no economic loss sustained by the non-professional attendant care provider because they would not have received the benefit of these contributions/premiums during the periods they provided attendant care. Rather, they only represented a potential future economic loss. Delegate Evans concluded that ACBs should not include any amounts that the non-professional care provider did not lose, namely income tax, CPP and EI, during the period that they provided services and therefore, it was acceptable for Aviva to apply a reasonable percentage to the gross wages lost to determine the net wages lost.¹

For more information on this decision, please contact us.

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1) Delegate Evans noted, “Presumably, the 30% reduction derives from the calculation of income replacement benefits in s. 7 of the SABS. For instance, gross post-accident income is first reduced by 30% before being deducted from an IRB: s. 7(3).”

Disclaimer

The article is for educational purposes only and not intended to be a source of legal advice.