Income Replacement Benefits (2010-05-18)

May 18, 2010, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

Arbitrator: Edward Lee
Decision Date: March 9, 2010


Mr. Passarello was injured in a motor vehicle accident on May 12, 2000. He applied for and received statutory accident benefits from Wawanesa Mutual Insurance. Wawanesa terminated weekly income replacement benefits on March 6, 2006.  The issues in the hearing were to determine if  Mr. Passarello was entitled to receive a weekly income replacement benefit from March 31, 2006 and ongoing, pursuant to section 4 of the Schedule. Also, the hearing was to determine the amount of weekly income replacement benefit that Mr. Passarello was entitled to receive pursuant to section 6.

Mr. Passarello was involved in a car accident on May 12, 2000. Following his accident, he was paid income replacement benefits of $400.00 per week by Wawanesa until March 31, 2006 when his benefits were terminated following a series of Insurer's medical examinations.

A preliminary issue hearing was conducted by Arbitrator Fadel on July 27, 2009 to determine if Mr. Passarello was a self-employed individual or an employee before his motor vehicle accident. Arbitrator Fadel determined on October 16, 2009 that Mr. Passarello had been self-employed. In this hearing, Wawanesa sought a determination of whether Mr. Passarello was entitled to income replacement benefits ("IRBs") after March 31, 2006, and the quantum of such IRBs.


Mr. Passarello was fifty years old at the time of the accident in May 2000, he never completed Grade 11, and his employment history included working for 10 years for a building supply centre where he travelled from store to store, designing and merchandising. He also worked in the building and construction trades, doing renovations and upgrades, although his family had been in the locksmithing business. He trained, apprenticed and ultimately obtained his locksmithing certificate in 1996. He began his own locksmithing business in 1996, acquiring an existing business for $12,000.00. He worked full-time, from 6:00 a.m. to 11:00 p.m. or midnight at times.

Soon after purchasing his business, he was able to increase annual sales to $50,000.00. In 1998, he incorporated the business and acquired Ace Locksmith Inc. He hired servicemen to work for him and his wife to work as an accountant.

Soon he quadrupled sales. His work included installing locks, concealed door closers and doors with half-inch panels of glass. He made installations on ladders. He also did safe work, changing the combinations of safes at businesses where employees had been fired or let go. Sometimes he made these changes on location; other times he removed these safes to make the repairs. He installed and replaced safe digital locks.

He worked often six or six-and-a-half days a week and weekends, as well as doing emergency calls at night. In 1998 and 1999 he did as much as $300,000.00 in sales. In late 1999, he was planning to buy his brothers' locksmithing businesses.

In 1999 and 2000, he employed three servicemen. He handled the managerial and administrative duties of the business and also made service and cold calls. Much of his revenue was channeled back to the store, resulting in a low income on his T-4 slips. Sometimes he took no salary, returning the money back into the business.

All this changed after his accident on May 12, 2000. Immediately, he began to have problems with his low back, neck, arm numbness, migraine headaches and dizziness.

After two years he returned to work in the summer of 2002 for approximately two hours a day, three days a week. He assumed the role of an administrator and overseer, mingling with customers and pricing invoices. After two hours, the work would become too strenuous, and the pain in his back, neck, right shoulder and leg too great. He increased his hours, going to four hours, three to four days a week, but he found this more stressful and sometimes could not go in the next day.

In 2002, he merged his business with Imperial Lock and moved to a larger retail store. Things began to go downhill. After two-and-a half years the business moved to a smaller location. He continued doing administrative work, going in three to four hours a day, three to four times a week. He cut the odd key. He never returned to full duties, because he could not carry the toolbox. He could not climb ladders, go up stairs, or do safe or door work. Eventually he was doing 4-5 hours a day, 3-4 times a week, but by 2007, his hours had decreased to 10-12 hours a week because of anxiety and pain in his neck, back and leg.

The business began to face serious financial problems. While on medications, he had problems operating machinery. He could not carry plywood or power tools. He was unable to lift or bend. Sometimes he spent entire days in bed. He had been on medication for pain, depression and anxiety since 2002, and at times he took as many as 7 to 8 Tylenol III's per day. He was also on a patch for his pain.

He attended at Chronic Pain Solutions run by Dr. GL in 2008 and 2009 because of his chronic pain syndrome. He did not complete the three-stage programme because of extenuating personal circumstances including depression, marital problems and the loss of his home.

Dr. GL:

Dr. GL was the treating chiropractor from Chronic Pain Solutions and was one of the contributors to the report from Chronic Pain Solutions. He has practiced in pain management for five to six years, the accepted means to gain this expertise in this field. Dr. GL testified that he usually received patients when they were 1 to 2 years post motor vehicle accident, and treated them with a success rate of 15-20%. According to Dr. GL, the earlier they came in, the better the rate of his success.

Mr. Passarello consulted Dr. GL in January 2008, some seven-and-a-half years post accident, and was treated at the clinic until February 2009. Dr. GL diagnosed chronic post traumatic headache, chronic cervico-thoracic facet joint syndrome with suspected cervical radiculitis, and chronic mechanical low back pain with suspected radiculitis.
Dr. GL testified that he found Mr. Passarello credible and observed no malingering.
Mr. MJ:

Mr. MJ was the vocational evaluation specialist who conducted an insurer's examination on Mr. Passarello in 2006. He concluded that Mr. Passarello was not completely disabled from performing a job for which he was suitable by education, experience and training. He listed jobs he considered suitable for Mr. Passarello, none of which required further training. The physical demands for these jobs were at the "limited" or "light" level.

On cross-examination, Mr. MJ testified that he did not review the reports of the other assessors before producing the summary report. Most importantly, he did not take into account the hours of work a person could perform per day when considering whether a person could meet the post-104 week test. He agreed that Ms. W's Functional Capacity Evaluation did not conclude that Mr. Passarello could do eight hours of work per day, but he relied on the opinion of Dr. RZ, an orthopaedic surgeon who said there was no contraindication to increasing Mr. Passarello's hours of work.

Further, Mr. MJ recognized that Mr. Passarello had been self-employed and had worked flexible hours in his previous employment. He agreed that it would have been harder for him to return to a structured employee-employer relationship, and that all the jobs he identified required such a structured relationship. It was relevant to Mr. Passarello's ability to return to work that in a structured job he would have been unable to modify his own work hours. This had not been taken into account in his report.

Mr. MJ acknowledged that being an alarm dispatcher required one to work an eight-hour shift, and that the jobs listed in his report were a step backward for someone who had been running his own business. Mr. MJ also agreed that Mr. Passarello would qualify for the identified occupations, but he could not say when Mr. Passarello would be ready to return to these jobs.

Importantly, Mr. MJ determined in his report that Mr. Passarello might "not meet employer expectations" in regard to physical tolerances. He agreed that this might have inhibited his ability to get these jobs. He agreed that the most reliable indicator of return to work was an actual physical attempt. In his opinion, it was more difficult for people with Chronic Pain Syndrome to return to work.

Mr. MJ also stated that he had no reason to doubt Mr. Passarello's credibility and saw no signs of malingering, and agreed that self-limiting behaviours could have been due to pain, depression and anxiety.

Dr. LK:

Dr. LK conducted a psychological evaluation as part of the insurer's multidisciplinary examination. She determined that the psychological factors preventing him from returning to full time employment were factors affecting his experience of pain. He felt pain in his nervous tissues, from an audit, from being estranged from his daughter, and other stressors affecting his condition. He felt he could not work because of his pain.
She made the following comment: “Mr. Passarello is convinced that his physical condition warrants surgery and that he will deteriorate as he gets older. He does not appear to have learned pain management strategies, ways to improve his sleep, or normalize his daily activities with the goal of getting back into some type of business. To this end, it is my opinion from a psychological standpoint that Mr. Passarello would benefit from a referral to a specialized multidisciplinary pain management and functional restoration program. From a psychological perspective, I see no need for other investigations or referral to specialists.”
On cross-examination, Dr. LK testified that she believed Mr. Passarello had been working as much five hours per day, five days a week in 2006. Dr. LK also found him credible and saw no evidence of malingering. Importantly, her report indicated that Mr. Passarello was administered validity testing and the results showed no indication of undue attempt to exaggerate his cognitive difficulties or to present as unduly impaired.

Dr. RZ:

Dr. RZ was the orthopaedic surgeon who conducted an orthopaedic assessment as part of the insurer's medical examinations in January 2006. In his report he noted that Mr. Passarello was currently taking the following medications: Meloxicam, Aspirin, Atenolol, Lisinopril, Nexium, and Effexor. Tylenol III was taken when needed. He came to the conclusion that Mr. Passarello had developed chronic pain and that he would have permanent restrictions with respect to prolonged standing, bending and lifting. However, from an orthopaedic perspective, the permanent restrictions did not prevent him from returning to a more sedentary type of employment.

In cross-examination, Dr. RZ stated that he had previously examined Mr. Passarello in December 2002, and in both examinations he discerned no credibility problems with Mr. Passarello's presentation. In his previous report of December 2002 he had already determined that Mr. Passarello had reached maximum recovery, two-and-a-half years post accident.
He agreed that in January 2006, Mr. Passarello was working only half the hours he had been working in December 2002, and he was showing deterioration rather than an improvement. Although he noted that Mr. Passarello could not sustain LIGHT work for eight hours in the FAE testing, he opined that there was no orthopaedic impairment to Mr. Passarello increasing his hours of work at the sedentary level. He agreed that productivity was a factor in meeting the test of total disability.


The pertinent arguments of this case involved the following sections of the Schedule:
“5(2) The insurer is not required to pay an income replacement benefit, (b) for any period longer than 104 weeks of disability, unless, as a result of the accident, the insured person is suffering a complete inability to engage in any employment for which he or she is reasonably suited by education, training or experience.”

It was clear that the arbitrator had to first decide whether Mr. Passarello suffered from a "complete inability". If Mr. Passarello did not suffer from such a complete inability, were the jobs suggested by Wawanesa suitable to him by education, training and experience?


What is a "complete inability" within the meaning of section 5(2)?

The section 5(2) test for complete inability encompasses more than a mere enumeration or breaking down of the component tasks of any job, and an analysis as to whether the applicant can perform those tasks individually. The applicant must substantially be able to do the alternative job, considered as a whole. It must also take into account "real world" demands, including questions of productivity, reasonable hours of work and employer expectations and requirements.

In the real world, Mr. Passarello would have had to work eight hours per day, five days a week on a full time basis, in a structured employee-employer relationship answering to the demands of his employer and meet employer expectations.

Did Mr. Passarello meet the section 5(2) test for "complete inability"?

Witnesses from both sides agreed that Mr. Passarello suffered from chronic pain syndrome. Dr. RZ, the insurer's orthopaedic surgeon, determined that Mr. Passarello had not only developed chronic pain, but also permanent restrictions with respect to prolonged standing, bending and lifting. Dr. LK, the insurer's psychologist, diagnosed Mr. Passarello with Pain Disorder Associated with Psychological Factors and a General Medical Condition. Nevertheless, both these witnesses opined that Mr. Passarello did not meet the post 104-week test because they believed he could perform a sedentary job of light or limited physical demand

The flaw with these opinions was that neither addresses whether Mr. Passarello would be able to do this work for an eight hour day on a full time basis, as required in the "real world". Dr. LK also relied on Marcel Jean's vocational evaluation report and his list of suitable employments, but Mr. MJ testified that he did not take into account the hours of work a person needed to perform per day when evaluating them for the post 104-week test. Mr. MJ agreed that the Functional Capacities Evaluation only showed that Mr. Passarello could work two to six hours a day, and could not conclude that he could work up to eight hours a day.

Dr. RZ acknowledged that Mr. Passarello did not demonstrate the ability to maintain work at the "light" level for an eight-hour day, although he found that "from and orthopaedic perspective, there were no findings upon examination, which would preclude Mr. Passarello from performing work at this level." He also extrapolated from Mr. MJ's report (which detailed Mr. Passarello's part-time work) to conclude that there was "no contraindication to increasing his [Mr. Passarello's] hours." Again, Mr. MJ never considered whether a person could work an eight hour day in the enumeration of his list of suitable jobs. Therefore, the arbitrator was not convinced by these opinions that Mr. Passarello could work eight hour days, five days a week.

The arbitrator was not convinced that this observation of "self limiting" behaviour meant Mr. Passarello was able to perform work at the LIGHT level for an eight-hour day. Even Mr. MJ admitted that self-limiting behaviours could be due to pain, depression and anxiety.

In this regard, the arbitrator preferred the evidence proffered by Mr. Passarello himself. First, it is noteworthy that all witnesses, including Dr. RZ, Dr. LK and Mr. MJ, testified they found Mr. Passarello to have been credible. None discerned evidence of malingering on his part. Dr. LK, psychologist, administered validity testing and found that he completed it appropriately with "no indication of undue attempt to exaggerate his cognitive difficulties or to present as unduly impaired."

The arbitrator found Mr. Passarello a credible witness. He testified at length before the arbitrator in a forthright manner, describing his work history and his continued attempt to work at and to maintain his business after his accident in 2000. The evidence convinced the arbitrator that before his accident, he was a successful, self-made entrepreneur who built his business from a modest beginning. The arbitrator accepted his testimony in regard to the hours he worked, and the duties, level and intensity of the work he performed.

The arbitrator accepted that he attempted to return to work part time, commencing some two years after his accident, and that because of pain and the other impairments resulting from his accident, he was only able to perform the sedentary administrative and managerial components of his former job. There was no evidence that at any time during the seven years when he continued the business that he worked eight hours a day, five days a week. At the most, it seems he was able to work four to five hours a day three to four days a week, but this declined to about ten to twelve hours per week in 2007.

The arbitrator also accepted his testimony that after his accident, business went downhill, despite his efforts. Arbitrators have held that the most reliable indicator of the ability to return to work is an actual physical attempt and the arbitrator found that Mr. Passarello made an honest attempt to return to perform the sedentary, light level, administrative duties of his previous job. He was not able to do so on a full-time basis.

Therefore, if was found that Mr. Passarello was incapable of working an eight-hour day on a consistent five day per week basis, because of his chronic pain situation and other impairments resulting from the accident. In the "real world", without the ability to set his own part-time hours, Mr. Passarello would have likely been unable to meet employer requirements and demands in terms of reasonable hours and productivity. All the identified jobs would have required Mr. Passarello to work full time hours in a structured employer-employee relationship. It was found that Mr. Passarello was completely disabled from performing them. Thus, he was entitled to receive a weekly income replacement benefit of $185.00 per week.
Posted under Accident Benefit News, Automobile Accident Benefits, Car Accidents, Chronic Pain, Disability Insurance, Pain and Suffering

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