Pursuant to s. 7(3)(b) of the SABS, post-accident business income is deductible from the claimant’s IRBs.
Date Heard: November 8, 2016 | Full Decision [PDF]
The claimant was a self-employed pharmacist who had claimed IRBs.
The insurer deducted the pharmacy’s post-accident business income from the claimant’s IRBs, claiming that it is entitled to do so under s. 7(3)(b) of the SABS.
At arbitration, the Arbitrator found that the pharmacy’s post-accident income was not considered “earned income” for the purposes of s.7(3)(b) of the SABS, and therefore the insurer ought not to have deducted the pharmacy’s post-accident income from the claimant’s IRBs. In coming to this conclusion, the Arbitrator had relied on a definition of “earned income” from the Income Tax Act (ITA).
The Arbitrator stated that the ITA definition of “earned income” includes the taxpayer be “actively engaged in the business.” The Arbitrator concluded that the tasks that the claimant performed in the pharmacy post-accident were insufficient to be considered “actively engaged in the business”. Accordingly, the Arbitrator concluded that the claimant’s post-accident income was not considered “earned income” and hence not deductible.
The insurer appealed.
On appeal, Director’s Delegate Evans held that [1] the Arbitrator misinterpreted the phrase “actively engaged in the business” in s. 146 of the ITA, [2] the definition of “earned income” in s. 146 is not relevant to the SABS, and [3] the phrase “earned income” does not appear as such in s. 7(3) of the SABS.
Director’s Delegate Evans held that a self-employed person’s income is the profit from the business, both before and after the accident. Post-accident profit is therefore deductible from IRBs.
In addition, the cost of the claimant’s lack of active participation in the business post-accident had already been taken into account in calculating the IRB amount. Failing to then allow the deduction for the same reason effectively meant that the claimant’s lack of active participation was counted twice in the IRB calculation.
Director’s Delegate Evans allowed the appeal, holding that the claimant’s post-accident business income from her pharmacy is deductible from her IRBs for the purposes of s. 7(3)(b) of the SABS.
Counsel for the Appellant: Helen D.K. Friedman, Ashleigh T. Leon
Counsel for the Respondent: Nicole Corriero
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