Hussain v. Gore Mutual Insurance Company, 2025 CanLII 126034 (ON LAT)
The recent Hussain decision coming from the Licence Appeal Tribunal (LAT) represents a positive finding for applicants who receive employment income in cash and just how far an insurer may go in demanding additional documentation to prove one’s income and employment.
In this case, the insurer denied the applicant’s claim for income replacement benefits (IRBs) alleging he had wilfully misrepresented his employment status. Following a three-day hearing, the LAT found that while the applicant’s application contained some errors and inconsistencies, these resulted from obvious language barriers and circumstances beyond his control, rather than intentional fraud. The insurer should have calculated IRBs based on the income accepted by the Canada Revenue Agency (CRA), rather than demanding excessive additional documentation and alleging a fabricated employment relationship.
FACTS
The applicant was involved in an automobile accident on November 10, 2022, and subsequently sought statutory accident benefits from his insurer, Gore Mutual Insurance Company (Gore Mutual). When Gore Mutual denied his claims for IRBs, the applicant applied to the LAT for resolution of this dispute.
At the time of the accident, the applicant was employed as a handyperson/helper for a small construction company in Cornwall. His employment began on September 21, 2022, and he received a net income of $800 per week paid in cash. His work involved physical tasks including overhead painting, lifting, carrying and installation of flooring. Part of the arrangement with his employer was that his employer would remit the taxes to CRA on his behalf on top of the $800 per week he received in cash.
Unfortunately, there were several errors in the applicant’s application that ultimately plagued the insurer’s adjustment of the claim.
For instance, the initial disability certificate (OCF-3) incorrectly stated that he was not working at the time of the accident (he was employed at the time of the accident, but the accident did not occur while he was working). The Employer Confirmation Form (OCF-2) also contained errors, including listing his gross income as $800 per week when this was actually his net income and provided an incorrect employment start date. Additionally, various documents were filed late by the applicant’s employer, including the Record of Employment and remittance notices, delaying and further bogging down the applicant’s claim. The employer had also changed accountants during this period, creating further documentary inconsistencies, including errors in paystubs. Complicating matters further, the applicant had limited English language comprehension skills which impacted his ability to fill out the various forms.
After requesting copious documentation, including various bank statements, T4s, pay statements, employment files, confirmation of the taxes remitted to CRA, as well as an Examination Under Oath (EUO), Gore Mutual denied the applicant’s claim for IRBs on October 16, 2024, citing willful misrepresentation under section 53 of the Statutory Accident Benefits Schedule (SABS).
Medical evidence established that the applicant was substantially unable to perform the essential tasks of his construction employment. However, the insurer took the position that the employer-employee relationship had been fabricated between two friends from the Pakistani community in Cornwall to assist the applicant with his entitlement to IRBs under the SABS. The insurer pointed to social media images showing the applicant and his employer together in social settings as evidence of their friendship, and thus, it was not an arm’s length, employer-employee relationship.
THE LAW
Under section 5(1) of the SABS, to be entitled to IRBs, an applicant must prove on a balance of probabilities that they were employed at the time of the accident and that as a result of, and within 104 weeks of the accident, they suffered a substantial inability to perform the essential tasks of that employment.
Section 53 of the SABS permits an insurer to terminate the payment of benefits if the insured person has willfully misrepresented material facts with respect to the application for benefits. The term “willful” is not defined in the SABS. The adjudicator looked at the definition in Black’s Law Dictionary, which states that “willful” means voluntary and intentional, involving conscious wrong or evil purpose on the part of the actor, or at the very least, inexcusable carelessness. Importantly, “willful” is a stronger term than merely “voluntary” or “intentional.” The insurer bears the burden of proving willful misrepresentation.
Regarding the calculation of income, section 4(2)(1) of the SABS governs this determination. The Tribunal also cited the LAT decision in N.Z. v. Economical Insurance, 2020 CanLII 63563 (ON LAT), which held that employment income accepted by the CRA should be used for determining the applicant’s income. The Notice of Assessment itself serves as verification of pre-accident income.
ANALYSIS
The LAT found that Hussain was entitled to IRBs of $400 per week from November 17, 2022, to November 9, 2024, plus interest. Central to this determination was the finding that Gore Mutual had not established, on a balance of probabilities, that Hussain willfully misrepresented material facts with respect to his application for benefits.
While the Tribunal acknowledged that errors existed in the documentation submitted by the applicant, it found that these errors did not constitute “willful” misrepresentation as required under section 53. The adjudicator concluded that where errors were made, they were either made by others involved in the application process or were made by the applicant himself, but not as part of a conscious wrong or for the purpose of misleading his insurer. The LAT found that Hussain’s difficulties with the English language were evident both in his testimony at the hearing and in the transcript of his EUO. These language barriers contributed to many of the errors in the documentation.
The LAT also found that many of the deficiencies were matters beyond the applicant’s control. The lack of a complete employment file was the employer’s responsibility, not the employees. Likewise, the late filing of employer documents to the CRA, including the Record of Employment and remittance notices. The respondent’s own accountant testified that an employee has no control over what an employer submits to the CRA. The Tribunal declined to draw a negative inference against the applicant for his employer’s perceived failure to keep complete records.
Regarding the payment arrangement, the LAT rejected the insurer’s argument that cash payment indicated a fabricated relationship. The adjudicator found that there are many instances in which cash payment is an accepted form of payment from an employer to an employee, and that the existence of such an arrangement does not preclude the formation of a bona fide employer-employee relationship.
The LAT found that Gore Mutual’s requests for additional documentation beyond what was necessary to calculate his IRBs were excessive. Since the applicant provided his 2022 CRA Notice of Assessment, which verified his pre-accident income, this should have served as the basis for calculating his income replacement benefits. The insurer’s continued requests for independent pre-accident documentation were excessive.
The LAT was also unpersuaded by the insurer’s argument that social media images showing Hussain and his employer together demonstrated a close friendship that invalidated the employment relationship. The adjudicator accepted that in a small, tight-knit community, individuals may know each other through various social interactions, including attendance at mosque and other social events. However, the fact that both individuals appeared in the same social settings was not evidence of a close relationship resulting in a fabricated employer-employee relationship.
From a medical perspective, the LAT found that the applicant had established, on a balance of probabilities, an inability to perform the essential tasks of a handyperson/helper at his pre-accident employment. However, the LAT denied his claim for a vision assessment in the amount of $525 and a recliner chair in the amount of $3621.71, due to lack of contemporaneous medical evidence supporting the need for such an assessment or that either treatment plans were reasonable and necessary.
Finally, the LAT denied the applicant’s request for a special award under section 10 of Regulation 664. While the adjudicator found that the insurer reached an incorrect interpretation of the SABS for IRBs, its requests for documentation did not amount to unreasonably withheld or delayed payments. The insurer’s numerous requests for additional documentation stemmed in part from errors made by the applicant himself.
CONCLUSION
Insurers may not deny IRBs based on allegations of “willful” misrepresentation without proving intentional misconduct or conscious wrongdoing, as mere documentary errors or inconsistencies—particularly those arising from language barriers, employer record-keeping failures or other circumstances beyond the applicant’s control—may be insufficient to meet the high threshold of “willful” misrepresentation. The decision reinforces that once a claimant provides CRA-accepted income documentation through a Notice of Assessment, insurers should be able to use that information to calculate benefits.
Additionally, the test to receive a special award appears to remain an exceedingly high threshold for an applicant to meet.