Income Replacement Benefits: Replacing Lost Wages After a Crash

Income Replacement Benefits: Replacing Lost Wages After a Motor Vehicle Accident

For many people injured in a motor vehicle accident, an inability to work may be the most devastating consequence. From the loss of dignity and day-to-day purpose that working provides, to the financial insecurity many are thrown into, injury-related unemployment has the potential to prolong the suffering one endures long after the accident. Fortunately, Ontario’s Statutory Accident Benefits (SABS) regime offers some relief for those who find themselves in this situation, regardless of who was at fault for the accident.

Eligibility

Income Replacement Benefits (IRBs) are available to part-time, full-time, and self-employed workers alike – and even to some claimants who were not working at the time of the accident, provided they were employed for at least 26 weeks of the 52 weeks leading up to the accident or were receiving employment insurance benefits at the time of the accident. Eligibility for IRBs begins 7 days after the date of the accident.

You are eligible to receive IRBs from your motor vehicle insurer if, as a result of and within 104 weeks after the accident, you suffer a “substantial inability” to perform the “essential tasks” of your employment. The “essential tasks” of your employment will be determined based on how you and your employer characterize your position in the OCF-2 form you submit to your insurer. Whether you suffer a “substantial inability” to perform these tasks will depend on the specifics of your accident-related impairments. These need not be physical impairments – if you have sustained psychological injuries as a result of the accident, so long as they compromise your ability to perform the essential tasks of your employment, you may still be entitled to IRBs.

The particular wording of this section suggests that even if you return to your job following the accident, if you are only able to do so on modified duties, and none of which constitute “essential tasks” of your previous role, you may still be eligible for IRBs. Likewise, even if you return to your job on normal duties, only to find that your ongoing accident-related impairments prevent you from engaging in your essential tasks, your initial return will not prejudice your claim for IRBs.

Once 104 weeks have passed since the accident, you are only entitled to IRBs if you suffer a “complete inability” to engage in any employment for which you are “reasonably suited by education, training, or experience.” These benefits will last for as long as you are completely unable to engage in such employment. This is a higher standard, but insurers and adjudicators will not impose any unreasonable expectations. For example, if you are physically/mentally capable of procuring new employment, but this would require you to engage in “substantial upgrading or retraining,” you will still be deemed to meet the complete inability standard.^[1]

Beginning on July 1, 2026, eligibility for IRBs will no longer be automatic. Instead, policyholders will have to purchase coverage for IRBs as optional benefits in their insurance policies.

Calculation of Benefits

Despite their name, IRBs do not totally “replace” your lost income – rather, the quantum of the benefits you receive only partially reimburses you for the income you would have earned but for the accident.

If you were not self-employed, the formula for calculating the quantum of IRB benefits you are entitled to is straightforward. It is simply 70% of the gross weekly income you received leading up to the accident, up to a statutory limit of $400 per week, minus any applicable deductions (detailed below). So, if you earned $500 per week in your pre-accident employment, supposing there are no applicable deductions, you would be entitled to $350 per week in IRBs.

If you were self-employed, the formula is 70% of your pre-accident gross weekly income minus any weekly expenses you would have had to incur in order to earn such income. So, if you earned $500 per week in self-employment income, but incurred $100 in weekly business expenses in order to do so, you would only be entitled to $280 per week in IRBs (again, subject to any generally applicable deductions).

The $400 statutory cap on IRBs does not apply if, as part of your policy with your insurer, you have purchased optional coverage, raising the cap to $800 per week. And beginning on July 1, 2026, once eligibility for IRBs stops being automatic, the universal $400 cap will be scrapped and replaced by whatever amount is fixed by the optional benefit in the particular claimant’s insurance policy.

Deductions

The quantum of the IRBs you are entitled to receive based on your pre-accident gross weekly income is often not the final figure, as insurers are allowed to deduct from this figure 1) 70% of any post-accident gross employment you earn during the period in which you are eligible to receive IRBs; and 2) any other income replacement assistance you receive as a result of the accident pursuant to the laws of any jurisdiction or to any income continuation benefit plan – for example, Canada Pension Plan Disability (CCPD) benefits.

The first kind of deduction envisions a scenario in which an accident has left a claimant substantially unable to engage in the essential tasks of one’s employment, but nonetheless able to engage in other less physically/cognitively demanding employment in the meantime.

The second kind of deduction is designed to ensure claimants do not “double dip” with respect to benefits intended to compensate injured persons for income lost as a result of an accident.

Despite some initial confusion, recent decisions have confirmed that benefits received under the Employment Insurance Act, while explicitly excluded from the ambit of the second kind of deduction, are nonetheless able to be deducted by insurers under the first kind of deduction – that is, as “gross employment income.” However, this means that only 70% of the value of these benefits are able to be deducted, in contrast to other income continuation benefits such as CPPD benefits, of which 100% may be deducted by insurers.

It is important to remember that your insurer is allowed to deduct any income replacement assistance that is available to you, regardless of whether you have applied for or are actually receiving such assistance. Further, a recent decision of the Licence Appeal Tribunal has confirmed that claimants have an obligation to apply for any other income continuation benefits available to them before turning to IRBs, which are intended to be a last resort.

Conclusion

While IRBs do not act as a substitute for income earned prior to a motor vehicle accident, they can go a long way toward easing the financial strain many claimants find themselves under thereafter. If an accident-related injury has left you unable to work, it is important to speak with an experienced personal injury lawyer to make sure you receive the full extent of your entitlements under the SABS regime.

^[1] Burtch v Aviva Insurance Company of Canada, 2009 ONCA.