Reconsideration - The impact of the CERB and CRB on the calculation of an IRB

November 25, 2021

On Nov. 17, 2021, the Ontario Licence Appeal Tribunal released their Reconsideration decision in the matter of Jason Foster (“JF”) vs. Aviva General Insurance Company (“Aviva”) (19-014657/AABS – R).

As outlined in a previous article, JF was involved in a motor vehicle accident on May 8, 2019 and, as a result, was found to be entitled to Income Replacement Benefits (IRBs) for 104 weeks following the accident. At the time of the accident, JF was a self-employed sub-contractor providing drywall taping and plastering services, a long-time job he had secured through familial connections. JF was able to continue his self-employment following the accident on a part-time, modified basis until he was unable to do so and stopped working on April 14, 2020 after the onset of the pandemic as his employer was no longer able or willing to accommodate him due to his injuries. JF then applied for and received CERB/CRB and the issue became how do these benefits impact the calculation of an IRB?

The Adjudicator referenced subsection 4(1) of the SABS which defines “gross employment income” to mean “salary, wages and other remuneration from employment, including fees and other remuneration for holding office, and any benefits received under the Employment Insurance Act (Canada), but excludes any retiring allowance within the meaning of the Income Tax Act (Canada) and severance pay that may be received” and found that CERB is tantamount to “other remuneration from employment” and “although not exactly the same, it is essentially akin to Employment Insurance (“EI”) benefits in the context of the Schedule.” As such, the Adjudicator concluded that CERB/CRB is deductible from the IRB by virtue of paragraph 7(3)(a) of the SABS which allows the insurer to deduct “70 per cent of any gross employment income received by the insured person as a result of being employed after the accident and during the period in which he or she is eligible to receive an [IRB].

JF contended but Aviva agreed that the Adjudicator had erred in determining that CERB is deductible in the calculation of an IRB. Upon Reconsideration, the Vice-Chair determined that a legal error had indeed been made and that “the adjudicator incorrectly focused on the definition of “gross employment income” to conclude that CRB/CERB is deductible from IRBs pursuant to s. 7(3)(a) as “other remuneration from employment.” Whereas IRBs are directly connected to, and calculated with respect to, an insured’s pre-accident earnings, CERB is not calculated with reference to income from employment” and it is not analogous to “salary, wages and other remuneration from employment.”

Further, the Vice-Chair concluded that the Adjudicator had erred by not considering in his decision the distinction between CERB and CRB as benefits which are paid under two different Acts—the COVID-19 Emergency Response Act and the Canada Recovery Benefits Act—neither of which is the EI Act, as stipulated in the definition of “gross employment income.” Although absolutely true, how could the drafters of the SABS know to contemplate CERB/CRB in the calculation of an IRB, when they gave due consideration to social assistance payments and the Workplace Safety and Insurance Act? And as we have previously observed, although CRB and EI benefits differ in many respects, there is an apparent connection between them.

Nor did the Vice-Chair address the Adjudicator’s logic that “o the extent that an individual continues to receive income [after a motor vehicle accident], IRBs are not applicable or necessary” and, therefore, 70% of the gross weekly amount of CERB/CRB is deductible in the calculation of an IRB. However, considering the ordinary meaning of the words in the definition of “gross employment income”, the Vice-Chair aptly decided to the contrary.

Although not issues in this particular case, we can potentially infer from the Reconsideration in JF and Aviva that:

  • CERB/CRB is not “gross employment income” to be included in the calculation of pre-accident income for the purposes of calculating an IRB; and
  • those who are on CERB/CRB at the time of a motor vehicle accident and who otherwise do not meet any of the eligibility criteria in section 5 of the SABS are ineligible for an IRB.

This decision raises questions that will need to be examined in closer detail. BDO experts will continue to monitor the impact of this Reconsideration.

For more information please contact:

Janet L. Olsen, CPA, CA, CFE, CFF
Partner, Forensics
Financial Advisory Services

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