The decision from the Licence Appeal Tribunal (LAT) in the matter of Mary Manuel and Certas Direct Insurance Company (“Certas”) (Tribunal File Number: 19-008341/AABS), addresses the issue as to whether Employment Insurance (“EI”) maternity leave benefits received after an accident are deductible in the calculation of the income replacement benefit (“IRB”) payable and whether employer top up benefits are also deductible, if they are available to the insured but were not received and for which the insured did not apply.
In this matter, the parties agreed that Ms. Manuel was entitled to an IRB as a result of a motor vehicle accident that occurred on March 4, 2019. Ms. Manuel commenced maternity leave a few weeks after the accident and received EI maternity leave benefits of $407 per week starting April 8, 2019. Although she had employer maternity leave top up benefits available to her, Ms. Manuel did not apply to receive the top up benefits.
The applicant’s position was that EI maternity leave benefits should be considered as either a ‘temporary disability benefit’ or ‘other income replacement assistance’, as per the definitions set out in subsection 47(3) and paragraph 4(1)(a) of the Statutory Accident Benefits Schedule – Effective September 1, 2010 Ontario Regulation 34/10 (“SABS”), respectively, on the basis that each definition specifically excludes EI benefits and would therefore render the EI maternity leave benefits not deductible for the purposes of calculating the IRB payable.
The Adjudicator did not accept the applicant’s argument on the grounds that in order for EI maternity leave benefits to be a ‘temporary disability benefit’ within the confines of the SABS, one would have to determine that “childrearing is an impairment …I do not find that was the intent of the wording in the regulation”.
Further, following the analysis of the LAT in the matter of S.W. and Aviva Insurance Company of Canada (“Aviva”) (Tribunal File Number: 17-005302/ABSS), that the various references to EI benefits in the SABS need to be considered separately and only in respect of each specific entitlement, the Adjudicator found that the definition of gross employment income under subsection 4(1) of the SABS, which means “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)…,” includes EI maternity leave benefits and, as a result, “EI benefits that cover disability or sickness are not deductible from an IRB because they have been specifically excluded by s. 4(1) and s. 47(3)”.
Ms. Manuel also put forth the argument that EI maternity leave benefits would not be deductible pursuant to paragraph 7(3)(a) of the SABS on the basis that gross employment income is only deductible if it is “received …as a result of being employed after the accident”.
Consistent with the finding of the Financial Services Commission of Ontario in the matter of Antoinette Nelson and State Farm Mutual Automobile Insurance Company (FSCO A1 4000848). as well as that of the LAT in the matter of S.W. and Aviva, the Adjudicator found that Certas could deduct 70% of the gross EI maternity leave benefits received and the employer top up benefits, pursuant to subsection 7(3) of the SABS, on the basis “that maternity leave is not unemployment and therefore EI maternity benefits and employer top-up fall within the definition of “gross employment income”” under subsection 4(1) of the SABS.
In this particular matter, Ms. Manuel had not applied for, and therefore had not received any employer top up benefits. As such, it would seem that there would be no amount to deduct as post-accident employment income, as subsection 7(3) of the SABS allows for the deduction of 70% of “gross employment income received [emphasis added] by the insured person…during the period in which he or she is eligible to receive an income replacement benefit”.
Alternatively, if the employer top up benefits were found to be collateral benefits, pursuant to paragraph 4(1)(b) of the SABS, then the IRB otherwise payable could be reduced by the employer top up benefits available to Ms. Manuel, but not received, because she had not applied to receive the benefits. However, to meet the definition of ‘other income replacement assistance’, as per paragraph 4(1)(b) of the SABS, one would have to conclude that the employer maternity top up benefits are available to Ms. Manuel as a result of the accident, rather than as result of her becoming a parent. It is worth noting that when deducting ‘other income replacement assistance’ in the calculation of a weekly IRB, 100% of the gross weekly payment for loss of income is deducted from 70% of gross pre-accident income (plus 70% of any post-accident self-employment losses incurred as a result of the accident), prior to application of the policy limit, pursuant to subsections 7(1) and 7(2) of the SABS.
In this matter, the Adjudicator found that if other collateral benefits are available, the insured is obligated to apply for those benefits, and therefore, found that Certas, as the payor of last resort, may reduce the IRB otherwise payable by 70% of the top up benefits that were available to Ms. Manuel, even though she had not applied to receive those benefits.
This seems to suggest that employer maternity top up benefits that are available to the insured person, but have not been applied for, may be considered as collateral benefits for SABS purposes, but are deducted as post-accident employment income.
As a result, when calculating an IRB, EI maternity leave benefits continue to be deductible at 70% of the gross weekly benefit received, pursuant to paragraph 7(3)(a) of the SABS, as do 70% of gross weekly employer maternity top up benefits that are available to the insured, whether they are received or not.
For further information, please contact:
Alana R. Naganobu, CPA, CA, CFF, Senior Manager, Forensic Accounting, BDO Canada LLP