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

October 28, 2021

On April 29, 2020, BDO released an e-blast that discussed how CERB and CRB impact the calculation of an IRB—an issue that has created many questions and further need for clarification ever since. Almost a year and a half later, on September 15, 2021, the Ontario Licence Appeal Tribunal weighed in with their decision in the matter of Jason Foster (“JF”) vs. Aviva General Insurance (“Aviva”) (19-014657/AABS).

JF was involved in a motor vehicle accident on May 8, 2019 and, as a result, was found to be entitled to 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 stopped working on April 14, 2020.

At issue was whether JF’s inability to work was due to the injuries he sustained in the accident or, as Aviva argued, was as a result of the global COVID-19 pandemic, as evidenced by his application for and receipt of the CERB/CRB benefits made available by the federal government to those who are not able to retain employment due to the pandemic. The Adjudicator disagreed with Aviva stating that “JFs return to work was limited and that he was limited in his stamina, strength, and overall capacity to complete tasks”. Although Aviva argued that JF was untruthful in his application for CERB/CRB—since the basis for entitlement to those benefits is a loss of employment due to the pandemic—therefore, JF should be considered an untrustworthy witness. In addition, the Adjudicator found that while the basis for the entitlement to CERB/CRB was undisputed, this should not be considered mutually exclusive of JF’s symptoms as a result of the accident. Therefore, he accepted JF’s argument that he was unable to work in a part-time modified basis after the onset of the pandemic as his employer was no longer able or willing to accommodate JF due to his injuries.

Given JF’s ongoing entitlement to IRBs, what impact does the CERB/CRB he received following the accident have on the quantification of his 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”.

Consistent with the information presented in our April 2020 eblast, the Adjudicator 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]”.

Although not at issue in this case, it can be inferred from this decision that CERB/CRB is also gross employment income to be included in the calculation of pre-accident income for SABS purposes.

However, although the Adjudicator considered the difference between CERB/CRB and EI benefits “that CERB is not paid into”, he did not consider the claw back rules in place that prevent an individual to receive both EI benefits and an IRB. That being said, the eligibility criteria for the CERB specified that after the first claim period the individual may earn income—up to $1,000 per month—and still qualify for the CERB, and there was a requirement to repay it if the individual returned to work earlier that expected or received retroactive pay from their employer. With respect to CRB, $0.50 of the benefit for every dollar of net income earned over $38,000 on an individual’s 2020 personal income tax return must be repaid up to the maximum of the CRB received.

Also not considered in this decision is 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. The CRB was introduced as a replacement for the always temporary CERB that was no longer available as of September 27, 2020. The other notable difference between CERB and CRB is that CRB is administered through the Canada Revenue Agency (CRA), whereas CERB was administered through either Service Canada, as is the case with EI benefits, or the CRA.

In addition, as of September 12, 2021, EI claimants who have used all of their weeks of EI regular benefits and still need income support may be eligible to receive the CRB, provided they meet the eligibility criteria. This will allow EI claimants to access the same maximum number of weeks of benefits as CRB claimants. Although CRB and EI benefits differ in many respects, there is an apparent connection between them.

The Adjudicator observed that “IRBs are intended to minimize the impact of a loss of income caused by an accident” and “is not a punitive or deterrent remedy, but a benefit to which an applicant is entitled by virtue of paying insurance premiums”. On this basis, the Adjudicator concluded that “To 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.

This decision also raises questions around 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 they eligible for an IRB by virtue of clause 5(1)(1)(ii)(A) “receiving benefits under the Employment Insurance Act (Canada) at the time of the accident”?

As there has been a request for Reconsideration of the findings in JF and Aviva, it further demonstrates the need for guidance around the CERB/CRB and its impact on both the determination of eligibility for an IRB and the calculation of an IRB from the perspectives of both the pre and post-accident periods of analysis.

For more information, please contact:

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

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