Under Ontario’s no-fault regime, certain weekly indemnity benefits are available on a no-fault basis as compensation for loss of income.

In the case of self-employed individuals, the income replacement benefits are calculated with reference to the period 52 weeks before the accident or the last fiscal year completed before the accident.

For self-employed individuals, income replacement benefits are determined by calculating 80 per cent of their net earnings after income tax and Canada Pension Plan deductions. The self-employed individual is entitled to an income replacement benefit of 80 per cent of the pre-accident net income calculated in this manner.

In respect of any post-accident employment, the insurer may deduct from the amount of the income replacement benefit 80 per cent of the net income received by the injured individual.

In addition, if the person is self-employed and incurs losses from his self-employed business as a result of the accident, the insurer shall add 80 per cent of the amount of the weekly income replacement benefits payable to the person or losses from self-employment incurred as a result of the accident. This is to a maximum of $400 or higher if additional coverage was carried.

Under the no-fault regime, certain individuals whose entitlements are more difficult to calculate (such as farmers, small business owners, and self-employed individuals) may be negatively affected by the complexity of the process in determining their compensation.

First, income replacement benefits are based on an individual’s historical income preceding the accident. There is no provision in the no-fault regime to compensate individuals for loss of the opportunity to earn profits or increased profits or to earn a better income than that which they may have experienced historically.

The tort system is the most responsive of all automobile insurance systems in addressing the needs and circumstances of each self-employed individual. In calculating the loss of income and loss of earnings capacity of a self-employed business, the courts consider the actual circumstances of the business, the income earnings potential of the business and the future income earnings potential of the business and the future income earnings prospects of the individual that could be factored into the calculation of the loss of future income earnings capacity.

In this manner, a self-employed individual can receive full compensation for all financial losses he or she sustained as a result of the accident.

In an effort to explore litigation issues in the specific context of damage quantification for the purposes of litigation, we point to two different examples of interesting claims that have been advanced on the behalf of plaintiffs that should be given consideration.

First, is an example of a corporation that is run by the plaintiff in which the plaintiff is the sole directing mind. A few years go the Supreme Court of Canada in D’Amato v. Badger (1996), 137 D.L.R. (4th) 129, [1996] 2 S.C.R. 1071, awarded D’Amato personally 50 per cent of the quantum or $36,650 based on the “alter ego principle.” This expression describes a person, who, by ownership or otherwise, is seen as indispensable to the company.

In that case, D’Amato had been a partner in an autobody repair shop. As a result of injuries suffered in an automobile accident, D’Amato’s ability to contribute to the operation of the business was severely and permanently restricted.

Furthermore, there was evidence to suggest that the business was in financial difficulty, owing to its losses subsequent to D’ Amato’s injuries, and might have to be sold.

For small businesses like D’Amato’s, the potential claim related to a loss of business volume could be warranted. It is not difficult to fathom the idea that the loss of a skilled technician or unique skill set could result in a loss of business, or that there could be significant added costs imposed on a business to find, train, and supervise replacement workers in a small business enviroment.

If plaintiffs are able to provide evidence in support of their economic damages, they will be able to claim further business losses and additional costs.

Second, is the example of a small business owner who is disabled and the value of whose business decreases even when replacement workers are hired and the business owner faces losing his business. In that case, Hossny v. Ramsooder (2001), 110 A. C. W. S. (3d) 543 (S.C.J.), the plaintiff had opened a specialty butcher shop two years prior to the accident.

After the accident, he closed the shop for five weeks and then employed others to help him while he worked shorter hours. He tried to sell the business and it was eventually closed a year after his accident.

The court found that the plaintiff had put a tremendous amount of effort into the business and that he would have wanted to, and would have continued to operate but for the accident. The court commented on the fact that the loss of regular customers in the weeks that followed the accident, Hossny’s inability to work long hours or to do the heavy lifting and carrying involved, and the need to employ and pay unskilled labour were the factors that contributed to the failure of the business. Hossny was entitled to damages for the loss of his business as a capital asset because the court found that the business would not have failed if he had not been injured. The value of the business was assessed at $40,000.
For small business like Hossny’s the potential claim relating to the loss of the value of the business is warranted. In cases of a business owner who is disabled and whose business is failing, it is crucial to consider both the loss of future earning capacity and the value of the business. Without considering both of these potential pecuniary losses, a lawyer may be failing to address all consequential claims.

The self-employed plaintiff is entitled to claim for his diminished income on an ongoing basis. But when the business itself is damaged or even terminated as a result of the owner being unable to carry on his former duties of operating the business, then this is a separate head of damages for the loss of a capital object - a business.

When one looks at a case like this, the loss of income is analogous to the fruit of a tree and the business itself is the tree. By awarding damages for loss of income, the court is compensating the injured business owner for the fruit from his tree, i.e., the business.

Self-employed individuals’ losses not only represent lost profits, but can also represent loss of a skilled technician or unique skill set that could result in a loss of business, or a loss of the value of that business.

Whatever is represented by the total damage claim, the combined total of lost profits, loss of a skilled technician or loss of the value of the business need to be properly factored into consideration in determining the self-employed income loss claims in personal injury actions.

By Saqib Durrani and Gordon Krofchick

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