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LAT Decision – Foster and Aviva re: CERB Benefits

There has been concern over the impact or the proper treatment of the Canadian Emergency Response Benefit (“CERB”) and Canadian Recovery Benefit (“CRB”) in calculations of Income Replacement Benefits (“IRB’s”) under the Statutory Accident Benefits Schedule (“SABS”).

A new LAT decision was released in September 2021 regarding the deductibility of CERB benefits, Foster and Aviva[1].  This decision states that CERB is deductible from an IRB benefit, however, due to the wording and reasons provided, there are some clarifications that will need to be addressed before this matter is completely resolved.

Gross Employment Income

The arbitrator concludes that CERB meets the definition of “gross employment income” under section 4(1) of the SABS as stipulated below:

“gross employment income” 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), but excludes any retiring allowance within the meaning of the Income Tax Act (Canada) and severance pay that may be received; [2]

The arbitrator refers to section 7(3)(a) of the SABS which stipulates:

The insurer may deduct from the amount of an income replacement benefit payable to an insured person, (a)  70 per cent of any gross employment income received by the insured person as a result of being employed after the accident and during the period in which he or she is eligible to receive an income replacement benefit;[3]

The arbitrator concludes that the CERB / CRB are to be considered in pre-loss income as both payments meet the definition of gross employment income and are also deductible in the post-loss period as employment income under section 7(3).

In summary, it is economically neutral to include CERB / CRB as pre-loss income and deduct it as post-loss income, that way there are no windfalls (i.e. receiving CERB and IRB’s at the same time) or shortfalls (i.e. no pre-loss income due to being off work on CERB).

Employment Insurance

The decision requires clarification related to the direct references to the treatment of CERB like EI. The arbitrator states:

  • In paragraph 52, that CERB “is essentially akin to Employment Insurance (“EI”) benefits in the context of the schedule[4]; and
  • In paragraph 55, the arbitrator says that “I would treat JF’s receipt of CRB/CERB in the same manner as EI benefits”.[5]

However, EI Benefits are specifically excluded as other income replacement benefit assistance as stipulated in the SABS as follows:

“other income replacement assistance” means, in respect of an insured person who sustains an impairment as a result of an accident,

(a)  the amount of any gross weekly payment for loss of income that is received by or available to the person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan, other than,

(i)  a benefit under the Employment Insurance Act (Canada),

(ii)  a payment under a sick leave plan that is available to the person but is not being received, and

(iii)  a payment under a workers’ compensation law or plan that is not being received by the person because the person has elected under the workers’ compensation law or plan to bring an action and is not entitled to the payment

Under section 7(1) of the SABS,

The weekly amount of an income replacement benefit payable to an insured person who becomes entitled to the benefit before his or her 65th birthday is the lesser of “A” and “B” where, “A” is the weekly base amount determined under subsection (2) less the total of all other income replacement assistance, if any.[6]

Based on the SABS, as EI is not other income replacement benefit assistance, EI is not deductible in the post-loss period under section 7(1) of the SABS.

Summary

The arbitrator clearly states that CERB is deductible from the IRB calculated[7] and given the direct reference to 7(3)(a) of the SABS appears to opine that CERB/CRB should be considered as post-accident income.

The issue arises with the arbitrator’s reference to CERB/CRB being similar to EI, as EI is not deductible as a collateral benefit in the post-accident period per 7(1) of the SABS.

We will have to see if this decision is appealed or wait for the release of other decisions to provide clarity on how to treat CERB/CRB in IRB calculations.

If you have any questions or wish to discuss IRB’s with a Forensic Accountant, please feel free to contact the writers or any representative at MDD Forensic Accountants.

Amanda Paci, CPA, CMA, CFF
apaci@mdd.com
Phone: 905-523-6363 ext. 301

Sheri Gallant, CPA, CMA, CFF
apaci@mdd.com
Phone: 519-432-1123 ext. 101

  1. Foster vs. Aviva General Insurance, 2021 ONLAT 19-014657/AABS

  2. O. Reg. 34/10: STATUTORY ACCIDENT BENEFITS SCHEDULE – EFFECTIVE SEPTEMBER 1, 2010

  3. Ibid.

  4. Foster vs. Aviva General Insurance, 2021 ONLAT 19-014657/AABS

  5. Ibid.

  6. O. Reg. 34/10: STATUTORY ACCIDENT BENEFITS SCHEDULE – EFFECTIVE SEPTEMBER 1, 2010

  7. Foster vs. Aviva General Insurance, 2021 ONLAT 19-014657/AABS

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