Pre-Accident Cash Income Should Be Verified As Opposed To Accepted At Face Value

Should pre-accident cash income that has not been evidenced with supporting documentation be considered at face value when calculating an individual’s income replacement benefits (IRBs)?

We often encounter this question from claimants and insurers.  Our position has been that the onus is on the claimant to establish entitlement and quantum of IRBs.

A recent Licence Appeal Tribunal decision confirms our belief that insurers are not obligated to accept information provided from a claimant at face value without supporting documentation corroborating the amounts claimed.

Specifically, the Michael Baranov and Aviva General Insurance (19-011094/AABS) decision determines that insurers may require claimants to provide supporting documentation to verify their pre-accident cash income.

In this decision, the adjudicator states, “Based on the evidence before me, I find that the applicant has not proven on a balance of probabilities the amount of his self-employment income on which his accountant’s calculation is based.”

Specifically, the adjudicator ruled that the insured (applicant) was entitled to the quantum of IRBs determined by the insurer (respondent) based on the last fiscal year completed before the accident as opposed to the amount calculated by the applicant’s accountant based on the 52 weeks before the accident.  The applicant’s bank statements were used as a basis for quantifying his self-employment cash revenues during the 52 weeks before the accident.

The respondent requested on numerous occasions, however, was not been provided with documentation supporting the applicant’s claimed cash income during the 52 weeks before the accident (i.e. invoices, sales summaries, etc.).

The applicant argued that their self-employment activities were paid in cash and deposited to their bank account.  The applicant’s accountant accepted this rationale at face value and considered the bank deposits to be cash income in their calculation of the applicant’s IRBs.

However, as the applicant did not evidence their cash income during the 52 weeks before the accident, the adjudicator questioned the credibility of this information as it is entirely based on the applicant’s word opposed to any supporting third party documentation.

Specifically, the adjudicator stated, “The applicant has not filed purchase orders, invoices, any sales summary or time records relating to the services provided as a self-employed contractor. Clarity appears to have accepted and relied on what it was told by the applicant.”

“I find that it is not credible or reliable financial information, that the applicant’s customers, which appear to be businesses in their own right, would always pay him without any documentation, often in cash and that all of that cash would be deposited into the applicant’s bank accounts.  No evidence was put forward from the applicant’s customers to confirm this method of dealing or to corroborate how much his customers paid him in the 52 weeks preceding the accident.  I give Clarity’s reports little weight because they are based entirely on information provided by the applicant which is uncorroborated and not reliable because Clarity seems to have accepted at face value that the applicant was getting all this income from businesses without issuing invoices and getting payment in cash or cheques that were deposited to his bank account.”

The applicant counters that they were relatively young, earning modest income and did not keep accounting books and records for their self-employment.  Notwithstanding this, the applicant contends that their bank statements are a reliable source of their pre-accident cash income.

Additionally, the applicant argues that other adjudicators have ruled that a self-employed individual is not held to a standard of precise determination of their income as the objective is to simply find a reasonable basis for quantifying IRBs.

Again, the adjudicator disagreed and concluded that, “While Clarity chose to rely on the bank statements as the only documentation, I find that in this particular case for purposes of establishing income at this hearing for IRB calculation, on a balance of probabilities, the bank statements, without more documentation, are not sufficient.”

“Here, the applicant has no documentation to support his self-employment income other than his bank statements and did [not] put forward any evidence from his customers to substantiate his gross income even though he only had two customers pre-accident.”

“The onus of proof of income is on the applicant on a balance of probabilities.  I find that he has failed to meet it.  As a result, the applicant is not entitled to the quantum of IRB as he calculated it but is entitled to the quantum calculated by the respondent.”

Therefore, without supporting documentation corroborating the amounts claimed, insurers are not obligated to accept information provided by claimants at face value as the onus is on the claimant to establish entitlement and quantum of IRBs.

Read the decision in full detail here:

Michael Baranov and Aviva General Insurance (19-011094/AABS)