Canadian Underwriter

Aviva wins appeal regarding EI deductions from IRB benefits

September 6, 2022   by David Gambrill

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Aviva Canada successfully appealed a tribunal decision that called for the insurer to pay full auto insurance income replacement benefits (IRB), with no deduction, on top of the sickness benefits she was already receiving under the Employment Insurance Act (EIA).

Tania Spence was injured in a motor vehicle accident on Mar. 4, 2019. At the time of the accident, she was employed full-time as a registered nurse.

As a result of her injuries, she applied for the IRB benefit from her auto insurer, Aviva. Based on her gross annual income, she was entitled to receive IRB of $400 per week for the period from June 23, 2019, to Oct. 26, 2019.

However, during the period of IRB entitlement, Spence also received EI sickness benefits of $562 per week.

Under the terms of Ontario’s Statutory Accident Benefits Schedule (SABs), 70% of Spence’s EI sickness benefits were deductible from her IRBs, Aviva contended. Consequently, the insurer paid Spence a weekly IRB of $6.60.  Spence disputed this approach, arguing her EI sickness benefits were specifically excluded as a deduction under SABs.

The Licence Appeal Tribunal (LAT) found in favour of Spence, a decision that Aviva successfully appealed at the Ontario Divisional Court. On Sept. 1, the Ontario Divisional Court found LAT’s adjudicator made three errors in interpreting the SABs.

“These three errors by the adjudicator – finding an ambiguity in the [SABs] legislation where none existed, finding that only income from active employment qualifies as gross employment income, and finding that the EI sickness benefits paid to Ms. Spence qualified as temporary disability benefits – led the adjudicator to conclude incorrectly that EI sickness benefits are to be treated differently than other EI benefits under the [SABs],” Ontario Divisional Court Justice Gregory Ellies wrote for the three-judge panel. “As I have explained, they are not….

“[The LAT adjudicator’s] decision that the sickness benefits ought not to have been deducted from Ms. Spence’s IRBs, therefore, cannot stand. I would allow the appeal and set aside his decision.”

Section 4.1(a) under the SABs defines the term “gross employment income” as “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).”

Essentially, the LAT adjudicator found ambiguity in how SABs treated EI sickness benefits. For example, he found EI sickness benefits were required to be excluded from definitions of “other income replacement assistance” [Section 7(1) of the SABS] and a “temporary disability benefit” [Section 47(1) of the SABS].

The divisional court noted these distinctions did not create ambiguity. In fact, they were intended to prevent double counting of deductions from an insurer’s IRB payments.

“Excluding EI benefits from these definitions ensures that EI benefits which might otherwise meet the definitions are not deducted twice: once as gross employment income and again as either other income replacement assistance or as a temporary disability benefit,” the court found. “This ensures consistency of treatment, not the opposite.”

Also, the court noted, past LAT decisions have confirmed an insured need not be engaged in active employment for income received after the accident to qualify as gross employment income. The court noted eligibility for EI  benefits is based on someone having received employment income up to the point of the auto accident.

“The scheme of the [SABs] is to treat all EI benefits as income, regardless of the reason for or the time at which they are received,” Ellies ruled, noting a primary purpose of SABs is to avoid overcompensation.

Finally, the EI sickness benefits Spence received are not the same as temporary disability benefits, the court ruled.

Temporary disability benefits are paid for “an impairment that occurred before the accident,” as Ellies wrote. But in Spence’s case, the EI sickness benefits she received “were being paid in connection with the very accident with respect to which she had applied for IRBs.”

It was therefore not open for the LAT to rule the EI sickness benefits were temporary disability benefits, the court ruled.


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