Ontario income replacement benefits can be re-calculated based on re-filed income: FSCO

People with injuries who do not originally disclose their full incomes to tax authorities are nevertheless entitled to re-file their incomes and have that new number be included in their insurers’ recalculation of their income replacement benefits (IRBs).
The Financial Services Commission of Ontario (FSCO) came to this conclusion in the matter of Jose Escobar Uribe and Wawanesa Mutual Insurance Company.
Uribe was injured in a motor vehicle accident in December 2006. He claimed IRBs based on an Employer’s Confirmation of Income showing income of about $20,000 in the 52 weeks before his accident.
Wawnesa calculated and paid IRBs to Uribe on the basis of his reported $20,000 income. (The insurer also required an agreement that Uribe would repay benefits.)
But Uribe also claimed to have worked as a pipe fitter for his employer — a numbered company that installed fire sprinkler systems — between June 2006 and October 2006. Uribe testified he was not able to obtain a T-4 slip from the company for this work, so he did not include this income when he filed his 2006 tax return. He said he did this on the advice of a tax preparation service.
But after consulting with an accountant, Uribe re-filed his taxes, including the disputed amount, and the Canada Customs and Revenue Agency (CCRA) issued a 2006 Notice of Reassessment for an additional $327 in income tax.
Wawnesa disputed Uribe’s claim that his reassessed income should trigger a re-calculation of his IRBs.
Originally, a FSCO arbitrator sided with Wawanesa, saying Subsection 64.1(2) of the Statutory Accident Benefits Schedule (SABS) precluded Uribe’s new, higher income from being included in the IRB calculation.
Subsection 64.1(2) says the amount of the income used to calculate IRBs “may be adjusted to reflect any change in the amount of the person’s income reported or determined in accordance with the Income Tax Act.”
The arbitrator found that S. 64.1(2) did not apply in this case, because the CCRA itself had not initiated the reassessment to include Uribe’s additional income.
S. 64.1(2) “only deals with reassessments by taxing authorities,” the arbitrator ruled, and does not deal with reassessments “due to the insured’s failure to fully disclose his income in his original return.”
On appeal, FSCO arbitrator David Evans said the arbitrator’s interpretation of s. 64.1(2) was too narrow.
“I fail to see in s. 64.1 the requirement that the applicant is forever bound by that initial declaration and cannot make a further declaration to the CCRA,” Evans said.
“There are still consequences for an applicant who fails to initially report income. Benefits — if they were paid — were paid at the lower rate excluding that income.”