Post-Accident Self-Employment Losses Must be Incurred as a Result of the Accident

The recent Licence Appeal Tribunal decision, Mears (Griffiths) v TD General Insurance (20-012014/AABS), concludes that when self-employment losses are incurred before an accident, a claimant must evidence how and why any post-accident self-employment losses are incurred as a result of an accident, in order to be considered in the calculation of income replacement benefits (IRBs).

In this claim, the Applicant was both employed as a health information professional and self-employed as a hair stylist at the time of the accident (i.e. April 22, 2016).  The Applicant attempted to return to employment from August 1, 2016 to January 21, 2017, however, was unable to continue beyond this period and ceased her self-employment on or before May 31, 2017.

The Applicant’s accounting reports quantified her IRBs by considering self-employment losses of $9,847, $35,049 and $29,294 during the fiscal years ended May 31, 2015, 2016 and 2017, respectively, per her income tax returns.

The Respondent’s accounting reports pointed out that the Applicant was incurring self-employment losses before the accident, as well as after the accident.  In fact, the Applicant incurred a greater loss during the fiscal year ended May 31, 2016, the majority of which was before the accident, than the fiscal year ended May 31, 2017, which was entirely after the accident.

Given this, the Respondent’s accounting reports do not consider any post-accident self-employment losses.  Specifically, “For the purpose of our calculations, given the average weekly business loss after the accident…is similar to the pre-accident weekly loss from June 1, 2015 to April 22, 2016…we have not considered the loss to be an additional loss due to the accident.”

The Adjudicator agreed with the Respondent’s position stating, “The losses…were occurring before the subject accident and cannot be claimed as any part of an IRB award for the period of time between April 30, 2016 and May 31, 2017.”

“Any IRB calculation must be based on a standard of proof demonstrating that any self-employment losses are the result of a subject accident.  Income records, CRA tax returns, other
financial documentation, or similar evidence needs to be presented showing the negative impact
of the subject accident on the ability of the applicant to operate the business in question.  The applicant has not provided this evidence.  Conversely, what the applicant has provided through CRA tax returns from the years 2014 through 2017 show a relatively consistent pattern of losses sustained…both before and after the subject accident.”

“We find that this is not enough of a decline or change in financial status to be clear that such losses are entirely a result of the accident.  Even if one wanted to assign some value to the accident here, it would be impossible to determine a number with any sense of accuracy, as no evidence was presented by the applicant to demonstrate how and why the business suffered losses as a result of her injuries.  We just have financial records, which as noted above, do not demonstrate that the accident caused the losses…”

Therefore, when an individual is incurring self-employment losses prior to an accident, it must be evidenced that any post-accident losses are incurred as a result of the accident in order to be considered when quantifying IRBs.

Read the decision in full detail here: Mears (Griffiths) v TD General Insurance (20-012014/AABS)