INCURRED EXPENSES: DEFINING “ECONOMIC LOSS” IN LIGHT OF SIMSER V. AVIVA

Posted May 1, 2013

Changes to Section 3 of the Statutory Accident Benefits Schedule (“the SABS”) were introduced by the Government of Ontario on September 1, 2010. The changes require an insured to prove expenses have been incurred in order to receive attendant care, housekeeping, and med/rehab benefits. Section 3(7)(e) of the SABS states that in order for an expense to be “incurred”, and thus payable by the insurer, it must satisfy the following conditions:

  1. the insured person has received the services;
  2. the insured person has paid or promised to pay or is otherwise legally obligated to pay the expense; and
  3. the person who provided the goods or services:
    1. did so in the course of the employment, occupation or profession in which he was ordinarily engaged, but for the accident; or
    2. the person sustained an economic loss as a result of providing those goods or services to the insured person.

It is the last condition [subsection 3(7)(e)(iii)(B)] that has created much debate amongst automobile insurers, health care providers, personal injury lawyers, and accident victims alike, as the Legislature offered no further definition for the type of “economic loss” the insured needed to sustain in order to qualify the expense as an “incurred” expense.

Recently there have been two decisions that address the application of “economic loss” for the purpose of incurred expenses. In the Ontario Superior Court decision of Henry v. Gore Mutual Insurance Company 2012 ONSC 3687, a mother who worked full-time as an assistant manager of a retail store took a leave of absence from her job to care for her injured son. It was clear that the mother in this case was a non-professional caregiver who had lost income as a result of providing care services. The issue was whether the quantum of her income loss could be used by the insurer to determine the quantum of the insured’s attendant care entitlement. The court held that there was no correlation between the quantum of the caregiver’s economic loss and the amount of the insured’s benefit entitlement. Rather, economic loss was a “threshold decision”, which once found would trigger an insurer’s obligation to pay the benefit at the assessed amount.

While this judgment was helpful in fitting the economic loss component into the larger SABS scheme, there were still questions as to the actual definition of economic loss. The mother in Henry sustained a clear, easily established and easily quantified income loss due to missed time from work. There are many non-professional caregivers (generally family members of accident victims) who will not fit so easily into the “lost income” category of economic loss. The question is, can these caregivers establish other forms of economic loss in a manner that will satisfy the incurred expense analysis?

On January 18, 2013, FSCO released its decision in Simser v Aviva (FSCO A11-004610, January 16, 2013), which sought to define “economic loss”. In Simser, relatives of Kevin Simser provided attendant care and housekeeping services to him following a motor vehicle accident on November 10, 2010. Julie Simser testified that she provided care to Kevin, but was able to work her normal job with slightly modified hours (going to work early and leaving throughout the day). Unfortunately, Julie could not provide documentation that supported her assertion that she was not paid when she was not at work. Kasey Simser also claimed to have provided care to Kevin, and lost time from school as a result. Again, no evidence was tendered with regard to Kasey’s claim, and instead Julie Simser simply testified that Kasey had lost time from school to care for Kevin.

Counsel for Simser supported the economic loss claim with a report by Dr. Jack Carr, an economist, who advised the arbitrator that in the field of economics, “economic loss” included a loss of opportunity to engage in labour or leisure activities and not simply an income loss. Counsel for Simser argued that economic loss should be given a broad definition given the SABS’ consumer protection purpose. Aviva, Simser’s insurer, argued that “economic loss” should be given an ordinary, everyday definition in line with the definition in Black’s Law Dictionary:

Economic loss: A monetary loss such as lost wages or lost profits. The term usually refers to a type of damages recoverable in a lawsuit. For example, in a products-liability suit, economic loss includes the cost of repair or replacement of defective property, as well as commercial loss for the property’s inadequate value and consequent loss of profits or use.

Arbitrator Lee preferred Aviva’s definition, stating that all service providers will expend or lose time by providing a service to the insured, and if Dr. Carr’s “loss of opportunity” definition were to be used, “every service provider will incur an economic loss in every instance.” Arbitrator Lee did not completely shut the door to the “loss of opportunity” category stating, “there may be specific occasions where a loss of opportunity might equate to an ‘economic loss’ … I do not find that ‘economic loss’, should in every instance, encompass the loss of time, leisure, labour and opportunity”. Arbitrator Lee concluded that the economic loss must relate to some form of financial or monetary loss and denied the payment of the benefits claimed by the Simser family.

Julie and Kasey Simser also made claims for out-of-pocket expenses (fuel charges, parking fees, 4 and restaurant bills) incurred as a result of caring for Kevin. Simser’s counsel argued that by paying these expenses, the insurer had already recognized an economic loss in relation to providing caregiving services.

Arbitrator Lee refused to accept this argument, distinguishing this loss from the concrete income loss established in Henry and found that a mere $50 in miscellaneous charges was insufficient to trigger the full payment of attendant care and housekeeping benefits. Arbitrator Lee reasoned that if he were to accept this argument then, “every service provider would be able to circumvent the amended regulations by purchasing a single meal in a restaurant, a tank of gas, or as suggested by counsel, by paying one cent on a bus ticket.”

Arbitrator Lee’s decision with regard to out-of-pocket expenses seems to contradict his earlier remarks regarding economic loss being financial or monetary in nature. The regulation does not require “income loss” but rather “economic loss” and an out-of-pocket expense is clearly a monetary loss.

As a judgment, Simser suffers from a lack of good evidence regarding “loss of opportunity” by Julie and Kasey Simser. It could be that a future case with better evidence and credible witnesses would result in a more advantageous judgment for family member caregivers. The case is currently under appeal, and we will have to wait to see whether “economic loss” will be given a broader definition than the cautious one given by Arbitrator Lee, who seemed to be overly concerned with keeping the proverbial “floodgates” closed.

View PDF version: Accident Benefit Reporter | Volume 14, Issue 1 | May 2013

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