Insurers Cannot Reasonably Calculate IRBs Based on Late Tax Returns and Inconsistent Supporting Information

The recent Licence Appeal Tribunal (LAT) decision, Hibbert v Aviva General Insurance (20-009328/AABS), determined that the Respondent cannot be reasonably expected to calculate the Applicant’s income replacement benefit (IRB) quantum based on tax returns that were filed late with inconsistent, unverified and incomplete supporting evidence.

In this decision, the Applicant was involved in a motor vehicle accident on February 13, 2017, and as a result, applied for an IRB based on pre-accident employment in the fitness and sound engineering industries.

The Respondent initially paid the Applicant a weekly benefit of $245 per week based on his Employer’s Confirmation Forms (OCF-2), one of which was signed by the Applicant’s girlfriend at the time. The Respondent also requested additional information to determine eligibility for a greater IRB quantum.

Upon receipt of the Applicant’s 2016 to 2019 tax returns, which were filed during 2020 and 2021, the Respondent noted that during 2016 the Applicant solely reported self-employment income rather than employment income. In addition, during 2017 (the year of the accident), the Applicant reported no employment or self-employment income.

The Respondent reviewed the Applicant’s 2016 tax return and “found the gross sales reported to be comparable to a sales journal for gross sales from Personal Training and Bootcamps but was unable to identify amounts paid to the applicant from Cornerstone Fitness and could not identify any sources of income from sound engineering.” In response, the Applicant advised that he reported his self-employment from fitness and sound engineering collectively. The Respondent’s accounting report noted that if the total sales reported in 2016 of $42,031 were from two sources, then his sales journal was misleading and not reliable.

The Respondent also reviewed various e-transfer receipts and bank statements but was unable to determine if the amounts reported by the Applicant for tax purposes were reasonable and plausible. The Respondent attempted to gather additional explanations of the Applicant’s bank deposits and transfers, however, they had not been provided with sufficient information to quantify his IRBs.

In response, the Applicant testified that he no longer had access to all of his bank records as one account had been closed and another had bad been joint with an ex-girlfriend.

Given the above inconsistencies, the Adjudicator dismissed the Applicant’s accounting report stating that they “…assumed that the information reported by the applicant in his 2016, 2018, 2019 and 2020 tax returns was valid for the purpose of its calculations. There was no verification…of the income information in these tax returns, which were based on applicant self-reporting and had not been audited.”

The Adjudicator concluded that, “As stated earlier, under section 33(1)1 of the Schedule, an applicant has a duty to provide ‘information reasonably required to assist the insurer in determining the applicant’s entitlement to a benefit.’ The onus is on the applicant to prove his income when applying for an income replacement benefit. While a self-employed person might not be held to a standard of precision when it comes to recordkeeping, this does not absolve an individual of the onus to provide credible evidence related to quantum upon which an income replacement benefit can be assessed.”

“The Tribunal finds that the information which the applicant has provided about his income and business arrangements is so inconsistent, unverified and incomplete that the respondent cannot be reasonably expected to rely upon such information.”

Read the decision in full detail here: Hibbert v Aviva General Insurance (20-009328/AABS)