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Insurance (Auto) - "Employment". Coban v. Allstate Insurance Company [meaning of 'employment']
In Coban v. Allstate Insurance Company (Ont Div Ct, 2026) the Ontario Divisional Court allowed a joint SABS appeal-JR, this brought against a LAT finding that the applicant was "not 'employed' within the meaning s. 5(1) of the SABS and not eligible for income replacement benefits", this due to their receipt of "wage loss benefits from the WSIB" and nothing from their current employer.
The court engages in a statutory interpretation of the meaning of 'employed' in the context of SABS s.5(1) ['Income Replacement Benefits - Eligibility criteria']:(i) Section 5(1) of the SABS
[18] Section 5(1) of the SABS provides that “The insurer shall pay an income replacement benefit to an insured person who sustains an impairment as a result of an accident” if the insured person satisfies certain conditions, the relevant one of which is as follows:1. The insured person,
i. was employed at the time of the accident and, as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of that employment. ... The sole issue before the Tribunal and before this court is whether the appellant was “employed” within the meaning of this section at the time of the motor vehicle accident and therefore entitled to income replacements benefits, the amount of which remains to be determined. At the time of the accident, the appellant was working at Cole for eight hours per week. Cole did not pay him, but he was receiving $651.51 in loss of earnings benefits from the WSIB provided he fulfilled the conditions of his WTP, which included a requirement that he work at Cole.
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C. The Tribunal’s Decision
(i) Overview
[20] The Tribunal did not apply the principles of statutory interpretation in its decision. Rather, it relied on this court’s decision in Arab v. Unica Insurance, 2022 ONSC 5761, which it concluded stood for the proposition that “employed” meant “connected to income-earning and receiving wages in exchange for services being rendered.” While the Tribunal was satisfied that the appellant was in an employment relationship with Cole, it concluded that he did not receive remuneration “in exchange” for services to Cole because he would have received the same loss of earnings benefits if he had attended school and not worked at Cole. Based on this, the Tribunal concluded that “the remuneration was not dependent on whether he was actually providing those services.”
[21] With respect, I am of the view that in concluding as it did, the Tribunal erred in several respects, leading it to adopt an overly technical and narrow interpretation of the term “employed.” A proper application of the principles of statutory interpretation that considers the context and purpose of the provision and the overall legislative scheme results in a broader interpretation. Furthermore, the decision in Arab, which involved a completely different issue than in this case, did not interpret the term as narrowly as the Tribunal thought.
(ii) The Purpose of the SABS
[22] The SABS is an integral part of Ontario’s “no-fault” automobile insurance regime. Subject to certain exceptions set out in s. 267.5 of the Insurance Act which have no application in this case, the victim of an automobile accident has no right to sue in tort for economic loss resulting from the accident and the only compensation available is benefits from his or her own insurance company in accordance with the SABS. The purpose of the SABS is to cover most economic losses on a no-fault basis: C.H. Zingg and J.M. Flaherty, Accident Benefits in Ontario (Toronto: Thomson Reuters, 2025), at §1:5.
[23] It is well-established that a primary object of the SABS is consumer protection, the goal of which is to “reduce the economic dislocation and hardship of motor vehicle accident victims”: at para. 42 (citing Arts (Litigation Guardian of) v. State Farm Insurance Co. (2008), 2008 CanLII 25055 (ON SC), 91 O.R. (3d) 394 (S.C.J.), at para. 16; Smith v. Co-Operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, at para. 11; Clouthier v. Co-Operators General Insurance Co., 2025 ONSC 6798 (Div. Ct.), at para. 59. It follows from this that the general rule governing the interpretation of insurance contracts, that “coverage provisions should be construed broadly,” applies equally to insurance legislation: Somersall v. Friedman, 2002 SCC 59, [2002] 3 S.C.R. 109, at para. 47. (citing Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551, at para. 70).
[24] The purpose of income replacement benefits governed by s. 5(1) is just that – to replace income that the insured is no longer able to receive because of the accident. As noted earlier, in the context of motor vehicle accidents, the no-fault automobile insurance regime has largely replaced common law tort law, the purpose of which is to restore a plaintiff to the position he or she would have been in but for the tortious conduct of the defendant: Athey v. Leonati, 1996 CanLII 183 (SCC), [1996] 3 S.C.R. 458, at para. 20.
(iii) The Appellant’s Situation
[25] At the time of the motor vehicle accident, the appellant was a “worker” as defined in s. 2 of the WSIA, which includes not only a person employed under a contract of service, but also a student or a “learner.” The payments he was receiving from the WSIB were not a form of charity or social assistance, but payments pursuant to s. 43(1) of the WSIA for “a loss of earnings as a result of an injury” in the form of benefits from a public insurance program into which he or an employer had paid premiums. According to s. 43(3), the amount he received was contingent on his compliance with his WTP, which included his work at Cole. As the Tribunal accepted, the appellant was in an employment relationship with Cole. He received an income, not from Cole, but from the WSIB as compensation for a loss of earnings because of an injury.
[26] As a result of the automobile accident, the appellant is no longer in an employment relationship and he no longer receives the same income. As explained earlier, the purpose of the SABS is to cover economic losses and “reduce the economic dislocation and hardship” caused by the accident, including through income replacement. The source of the income is not what matters. What matters is that the appellant was in an employment relationship at the relevant time and receiving an income related to that employment. As a result of the automobile accident, he is no longer in an employment relationship and no longer receiving the income related to that employment. This is an employment-related economic loss resulting from the accident, which is exactly what the SABS is designed to compensate for.
(iv) Arab v. Unica Insurance
(a) The Decision
[27] Arab, on which the Tribunal relied, did not address the issue in this case. The appellant in that case had a job but stopped attending work on February 11, 2016. However, his employment was not formally terminated until November 30, 2016. He was involved in a motor vehicle accident on September 16, 2016. At the time, he was still in an employment relationship to the extent that his employment had not yet been formally terminated, but he was not attending work, nor was he being paid. The Tribunal concluded that he was not “employed” within the meaning of s. 5(1) of the SABS. This court agreed, at para. 29:Although the legislation does not define the term “employed”, when the term is read in its ordinary grammatical sense and considered within the context of Part II of the Schedule it is clear and unambiguous that section 5(1) is not just about the existence of a formal employment relationship. Its purpose is to determine the eligibility to income replacement benefits with reference to the exchange of wages, salary, or other remuneration for services, over a defined period. (b) The Basis for the Decision
[28] The Tribunal in this case placed great importance on the use of the word “exchanged” in the portion of Arab quoted above. However, the result in Arab did not turn on whether income or remuneration was “exchanged,” but rather on whether it was received. The appellant in Arab did not receive any income from any source, unlike the appellant in this case.
[29] The basis for the result in Arab is clear from the court’s reliance on a different Tribunal decision, T.M. v Aviva General Insurance, 2020 CanLII 45486 (ON LAT), referred to in para. 30, which involved facts similar to those in Arab. The Tribunal in that case concluded that the applicant was not “employed” because of the manner in which income replacement benefits are calculated pursuant to s. 7 of the SABS (at paras. 19-20):T.M. was not receiving employment income or any benefits under the Employment Insurance Act at the time of the accident. T.M. at the time of this proceeding has remained on unpaid leave. There is no evidence of T.M. receiving employment income.
Based on the aforementioned reasons, …I find the decision would lead to an absurd result for T.M. That being, T.M. is “employed”, but is entitled to $0 under the IRB.
This court’s subsequent application of Arab in Nouracham v. Aviva General Insurance Co., 2024 ONSC 2415 also makes it clear that it was the receipt of income, rather than whether it was the result of an “exchange,” that matters. In that case, the court affirmed the Tribunal’s conclusion that the applicant was not “employed” because “the accident did not occur during a period when the applicant was receiving remuneration for services. [Emphasis added]”: Nouracham, at para. 13. [30] The applicants in Arab, T.M. and Nouracham were not “employed” and eligible for income replacement benefits because at the relevant time, they had no income to replace. The result in those cases was consistent with the purpose of the legislative scheme as none of the applicants had established an employment-related economic loss because of the accident.
(c) Obiter Dictum
[31] Arab explains that the term “employed” in s. 5(1) of the SABS refers to situations where there is an employment relationship and employment-related income that the applicant no longer receives because of a motor vehicle accident. The result in Arab would have been the same if the court had not used the word “exchanged.” The word was, in effect, an obiter dictum.
[32] While the Tribunal was correct that Arab was binding on it, this does not mean that the definition of “employed” in that case should be transposed, word-for-word, to this case without regard to differences in facts and issues between the two cases. Yet this is what the Tribunal did, contrary to what was stated by Binnie J. in R. v. Henry, 20025 SCC 76, 2005 SCC 76 (CanLII), [2005] 3 S.C.R. 609, at para. 57:The notion that each phrase in a judgment of this Court should be treated as if enacted in a statute is not supported by the cases and is inconsistent with the basic fundamental principle that the common law develops by experience.
See also Canada (Attorney General) v. Power, 2024 SCC 26, 494 D.L.R. (4th) 191, at para. 343; R. v. Hajivasilis, 2013 ONCA 27, 114 O.R. (3d) 337, at paras. 20-21. (v) What the Appellant Would Have Received
[33] The Tribunal placed significant reliance on the fact that the appellant likely would have received the same loss of earnings benefits if he had only attended school and had not worked at Cole. This might have mattered if “employed” within the meaning of s. 5(1) of the SABS required that the appellant’s income be the result of an “exchange,” which, for the reasons I have outlined, it does not.
[34] Regardless of what the appellant would have received by way of loss of wage benefits if he had not been in an employment relationship, the fact is that he was in an employment relationship. What might have happened but did not was of no relevance to the issue the Tribunal had to consider. A young person employed in the family business would be no less eligible for benefits because her family might have supported her financially even if she did not work.
D. Conclusion
[35] As noted earlier, “[a]n appropriate interpretation is one that can be justified in terms of (a) its plausibility, that is, its compliance with the legislative text; (b) its efficacy, that is, its promotion of legislative intent; and (c) its acceptability, that is, the outcome complies with accepted legal norms; it is reasonable and just”: Piekut, at para. 49. In my view, interpreting the term “employed” in the context of s. 5(1) of the SABS as requiring an employment relationship and the receipt of employment-related income meets these requirements.
[36] The interpretation is plausible and complies with the legislative text. In this regard, it is noteworthy that the definition of the term “employee” in s. 1(1) of the Employment Standards Act includes “a person who receives training from a person who is an employer, if the skill in which the person is being trained is a skill used by the employer’s employees,” which would include the appellant. While the ESA and the SABS may not be strictly speaking in pari materia, comparing uses among different statutes is nonetheless an established statutory interpretation tool: Sullivan, at §13.01, 13.08.
[37] The interpretation is efficacious in that it promotes the legislative intent behind the SABS of compensating a loss of income resulting from an automobile accident.
[38] Finally, the outcome is reasonable and just. The appellant was receiving WSIB benefits not by choice, but because he was the victim of a workplace accident. Had he not been, he would in all likelihood have been employed and entitlement to income replacement benefits would not have been in question. The appellant sought “earning replacement benefits” to compensate for a loss of “wage loss benefits,” because through a series of misfortunes, he was unable to continue working because of two different types of accidents. He sought to rely on two types of insurance to which he would otherwise be entitled for compensation. Denying benefits essentially because a person has the misfortune of being the victim of both a workplace and an automobile accident is neither reasonable nor just.
[39] For these reasons, I have concluded that the Tribunal erred in law in concluding that the appellant was not “employed” within the meaning of s. 5(1) of the SABS. I am also of the view that the Tribunal’s decision was unreasonable.
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