V902 – Income Replacement Benefit – Navigating the Issue of Outstanding Taxes
When a person is disabled from employment following a car accident, they often turn to their accident benefit insurer for an income replacement benefit. When reviewing entitlement to a benefit, the insurer will base its calculation on the person’s average pre-accident earnings. It is noteworthy that the Statutory Accident Benefit Schedule includes a clause providing that any pre-accident income that has not been reported for tax purposes ought not to be included in the calculation.
We occasionally meet clients who have failed to report, or who have failed to fully report, their income prior to their motor vehicle accidents. In such cases, insurers will often confirm that despite eligibility there is no benefit owed as the pre-accident average earnings are assessed as being nil. Such a situation is often rectified by way of paying the outstanding taxes in the post-accident period. While insurers are often accepting of this strategy, others will reject that there is an obligation to assess entitlement for income reported in the post-accident period.
The attached decision, 18-002145, F.L. and Certas, considers this important issue. In this case, Certas took the position, based on s.4(5) of the SABS, that it was not required to pay the full entitlement to income replacement benefit even after the taxes had been filed post-accident. Further, Certas put forward a request that the previously paid income replacement benefit be repaid by the client to the insurer.
In this decision, Vice-Chair Kershaw confirms the insurer’s obligation to issue the full entitlement to income replacement benefit. She stated:
“While the applicant provided no explanation for why he had not filed his [income tax returns] for such a long period of time, I am satisfied that his income is as stated given the Employer’s Confirmation of Income and the fact that the applicant has now reported those amounts with Revenue Canada. It is of note that the respondent has not at any time alleged fraud or misrepresentation by the applicant. In the circumstances of this case, given that the applicant has filed his [income tax returns] and shown himself to be entitled to the [income replacement benefit], and in light of the fact that the respondent did not ask for any additional financial information until almost two years after the accident, I find that the applicant is entitled…”
With this decision, we recognize that clients do indeed maintain their right to access entitlement to income replacement benefit even if the pre-accident income is reported for tax purposes in the post-accident period.
18-002145, F.L. and Certas Insurance Home and Auto Company