CITATION: Personal Insurance Company v. Hoang, 2014 ONSC 81

DIVISIONAL COURT FILE NO.: 260/13

DATE: 20140324

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

SACHS, WILTON-SIEGEL AND NOLAN JJ.

BETWEEN:

PERSONAL INSURANCE COMPANY

Applicant

– and –

CHRISTOPHER HOANG, a minor, by his litigation guardian, San Trieu and THE FINANCIAL SERVICES COMMISSION OF ONTARIO

Respondents

Todd J. McCarthy, for the Applicant

Robert M. Ben, for the Respondent, Christopher Hoang

Joe Nemet, for the Respondent, The Financial Services Commission of Ontario

HEARD at Toronto: December 20, 2013

REASONS FOR DECISION

NOLAN J.

Introduction

[1] Personal Insurance Company ("the Insurer") seeks judicial review of two decisions of the Director's Delegate ("the Delegate") of the Financial Services Commission of Ontario ("FSCO"), one dated June 22, 2012 and the other April 30, 2013. In these two decisions, the Delegate upheld a decision of an arbitrator of FSCO awarding Christopher Hoang ("Christopher") payment of tuition and related expenses for a private school for the 2008-2009 year under s. 15 of the Statutory Accidents Benefits Schedule, O. Reg. 403/96 ("SABS"), and payment of a special award against the Insurer for unreasonably withholding or delaying the payment of benefits. The Delegate, however, did not uphold the quantum of the special award on the ground that the reasons given by the arbitrator for the amount were not sufficiently clear and referred that issue back to arbitration.

[2] The arbitrator had also awarded Christopher a payment for the cost of a rehabilitation services worker. That award was not appealed to the Delegate.

[3] In coming to his first decision, the Delegate did not consider the transcripts of the hearing before the arbitrator. They had been inadvertently and accidentally placed in a different file. Upon discovering the transcripts on July 5, 2012, he immediately notified the parties through counsel by letter dated July 6, 2012. Since the transcripts had not been referred to by either party during the oral hearing and neither counsel had corrected the Delegate when he reviewed the list of documents before him at the start of the hearing on April 25, 2012 (a list that did not include transcripts), the Delegate was unaware they had been filed.

[4] In his letter of July 6, 2012, the Delegate made reference to a portion of his June 22, 2012 decision in which he upheld the decision of the arbitrator with respect to the special award and made reference to the documented reasons that the Insurer had given for denying the benefit claim for the private school expenses. That portion stated in part as follows:

No other documentary evidence setting out the Appellant's reasons for denial were referenced by the Appellant. A representative of the Appellant testified at the arbitration hearing. This oral evidence was not provided nor was it referred to on appeal. Legal submissions speculating as to the basis upon which the Appellant may or must have reached its decision to deny benefits is not a substitute for evidence. [Emphasis added.]

[5] In his letter, the Delegate advised counsel that he sought to clarify his first decision on the basis of rule 65.6 of the Dispute Resolution Practice Code (Fourth Edition, Updated August 2011) ("the Code"), which provides that an adjudicator may at any time clarify a decision or order that contains a misstatement, ambiguity, or other similar error. The Delegate also requested submissions from counsel by July 31, 2012 before addressing the matter further.

[6] Counsel appeared before the Delegate on September 4, 2012. They agreed that rule 65.6 of the Code permitted the Delegate to consider the transcripts of the hearing in order to fully determine the issue of whether the arbitrator had erred in law by granting a special award. The Delegate granted a period of 60 days within which counsel could provide written submissions restricted to the transcripts in relation to the same issue.

[7] After receiving and considering submissions from both counsel and considering the transcripts, the Delegate issued his second decision on April 30, 2013. The second decision confirmed the special award against the Insurer.

Order Requested

[8] The Insurer requests an order setting aside both of the Delegate's decisions and substituting an order that dismisses the claim for the special award and the private school tuition expenses. Counsel for FSCO sought to make submissions only on the standard of review. At the hearing, the parties agreed that the standard of review for the two decisions of the Delegate was reasonableness. Thus, no oral submissions were made by counsel for FSCO.

Background

[9] On August 6, 2004, Christopher Hoang was struck by a car and sustained a catastrophic brain injury. He was six-years-old at the time and insured under an automobile insurance policy. Since the accident, he has been supported by a multi-disciplinary rehabilitation team comprised of a case manager, psychologists, a speech language therapist, occupational therapist, and a school representative (Christopher's "Team").

[10] In 2008, Christopher was showing satisfactory scholastic functioning based on his report cards from school including teacher's comments and self-reports. However, an assessment by a neurologist and paediatrician, Dr. MacGregor, who had examined Christopher on behalf of the defendant insurer in a separate tort proceeding, found that Christopher was at a high risk for emerging cognitive and behavioural deficits during his adolescent years. Christopher's parents looked into enrolling Christopher in the Bond Academy, which is a specialized private school. His parents raised the idea with Christopher's Team and the Team recommended that Christopher attend the Bond Academy. Members of the Team were of the view that the Bond Academy would provide Christopher with more individualized support after school, provide a better setting for facilitating and maintaining friendships, and would sustain Christopher's academic success. Christopher subsequently applied for the private school tuition benefit from the Insurer.

[11] On October 25, 2008, the Insurer denied his claim for tuition and expenses for the Bond Academy. In coming to that decision, the Insurer relied on the opinions of two of its experts, Dr. L. Tuff and Dr. Dumitrascu, who disagreed that attending the Bond Academy would be helpful to Christopher. The Insurer also relied on Christopher's report cards, which showed his academic success. In addition, the Insurer relied on the report of Dr. E. MacNiven, a neuropsychologist hired by the Insurer, despite knowing that her report was preliminary, that her report was based on tests that were not standardized for children of Christopher's age, and that the tests were administered within a short period of other neurological tests, thus bringing into question the validity of the testing because of the "practice effect." At the time this decision was made, the Insurer also had reports from Christopher's Team strongly recommending he attend the Bond Academy. As a result of denying his claim, Christopher was not enrolled in the Bond Academy in the 2008-2009 year and continued in public school.

The Arbitration

[12] The parties unsuccessfully attempted mediation after which Christopher applied for arbitration at FSCO, which proceeded on April 26, 27, 28, May 2, 3, and 5 in 2011.

[13] The arbitrator ordered the Insurer to pay Christopher $13,300.00 plus interest for tuition and related educational expenses for the Bond Academy, $30,193.90 plus interest for the cost of a rehabilitation support worker for Christopher, and made a special award fixed at $28,000, inclusive of interest.

[14] The Insurer appealed the tuition payment and the special award to the Director's Delegate.

Standard of Review

[15] Subsection 283(1) of the Insurance Act, R.S.O. 1990, c. I.8, restricts appeals of orders of arbitrators to a Director's Delegate to errors of law.

[16] At the hearing, all the parties agreed that the applicable standard of review for Director's Delegate decisions is reasonableness. Since Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, numerous Divisional Court and Court of Appeal decisions have confirmed that Director's Delegates' statutory interpretation of SABS and entitlements to Ontario no-fault motor vehicle accident benefits are subject to a reasonableness standard: see e.g. TTC Insurance Company Limited v. Watson, 2008 49337 (Ont. Div. Ct.), at paras. 14-16; Aviva Canada Inc. v. Murugappa, 2009 34045 (Ont. Div. Ct.), at paras. 5-6; Wawanesa Mutual Insurance v. Motor Vehicle Accident Claims, 2010 ONSC 1949 (Div. Ct.), at paras. 3-4; Wawanesa Insurance v. Uribe, 2010 ONSC 5904 (Div. Ct.), at paras. 9-10; and Pastore v. Aviva Canada Inc., 2012 ONCA 642, 112 O.R. (3d) 523, at paras. 18-22.

[17] Director's Delegate decisions are protected by a full privative clause in s. 20(2) of the Insurance Act. Such decisions are made in the context of a specialized adjudicative regime established by the Insurance Act and are deserving of deference.

[18] In Powerline Plus Ltd. v. Ontario (Energy Board), 2013 ONSC 6720 (Div. Ct.), Wilton-Siegel J. provides a helpful and succinct analysis of the application of the reasonableness standard, at paras. 30-33:

For clarity, the application of the reasonableness standard is concerned mainly with whether a tribunal has offered an adequate explanation for the decision it has reached, and not whether the reviewing court believes that the decision is optimal. The court recognizes that there is often more than one acceptable and rational outcome to the disposition of a particular issue and that, when a tribunal chooses a final decision amongst these different outcomes, that decision is entitled to deference and respect: see Canada (Citizenship and Immigration) v. Khosa, 2009 SCC 12, [2009] 1 S.C.R. 339, at para. 25.

The principles governing the standard of reasonableness were recently addressed by the Supreme Court in Newfoundland and Labrador Nurses' Union v. Newfoundland and Labrador (Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708, where the Court affirmed the following principles, at paras. 11-15:

1. Tribunals have a margin of appreciation within the range of acceptable and rational solutions;

2. Reasonableness is concerned mostly with the existence of justification, transparency, and intelligibility within the decision-making process;

3. Reasonableness is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law;

4. Even if the reasons given do not seem wholly adequate to support the decision, the court must first seek to supplement them before it seeks to subvert them; and

5. Courts should not substitute their own reasons, but they may, if they find it necessary, look to the record for the purpose of assessing the reasonableness of the outcome.

Under a reasonableness standard, therefore, as the Supreme Court stated at para. 16 of Newfoundland and Labrador Nurses' Union, the role of reviewing courts is to focus on whether the tribunal has offered an adequate explanation for the decision it has reached:

Reasons may not include all the arguments, statutory provisions, jurisprudence or other details the reviewing judge would have preferred, but that does not impugn the validity of either the reasons or the result under a reasonableness analysis. A decision-maker is not required to make an explicit finding on each constituent element, however subordinate, leading to its final conclusion. In other words, if the reasons allow the reviewing court to understand why the tribunal made its decision and permit it to determine whether the conclusion is within the range of acceptable outcomes, the Dunsmuir criteria are met. [Citations omitted.]

This echoes the oft-quoted passage from Law Society of New Brunswick v. Ryan, 2003 SCC 20, [2003] 1 S.C.R. 247, in which the Supreme Court stated, at para. 55:

A decision will be unreasonable only if there is no line of analysis within the given reasons that could reasonably lead the tribunal from the evidence before it to the conclusion at which it arrived. … This means that a decision may satisfy the reasonableness standard if it is supported by a tenable explanation even if this explanation is not one that the reviewing court finds compelling.

Issues

[19] The issues are as follows:

1. Whether the Director's Delegate erred in interpreting ss. 15(2) and (5) of SABS to uphold the private school tuition claim?

2. Whether the Director's Delegate decision to uphold the special award against the Insurer was reasonable?

3. Whether the Director's Delegate erred in interpreting ss. 15(2) and (5) of SABS to uphold the private school tuition claim?

[20] Section 15 of SABS sets out the circumstances in which an insurer shall pay a rehabilitation benefit to an insured who sustains impairment resulting from an accident. Subsection (2) of s. 15 provides that the benefit shall pay for "reasonable and necessary measures undertaken by an insured person to reduce or eliminate the effects of any disability resulting from the impairment or to facilitate the insured person's reintegration into his or her family, the rest of society and the labour market." Subsection (5) of s. 15 provides that the benefit shall pay for "all reasonable and necessary expenses incurred by or on behalf of the insured person as a result of the accident for a purpose referred to in subsection (2) for (a) life skills training; … (c) social rehabilitation counselling; … (g) vocational or academic training" and "(l) other goods and services that the insured person requires".

[21] The arbitrator held, among other things, that it was not necessary for Christopher to have applied for admission to the Bond Academy to satisfy the requirement of "measures undertaken" for the purposes of s. 15(2). She held the actions taken by Christopher and his family were more than sufficient to meet these requirements.

[22] The arbitrator also held that the phrase "vocational or academic training" in clause 15(5) (g) must be interpreted in a purposeful manner. On this basis, she concluded the clause should refer to either vocational or academic training. Based on the foregoing, she found that Christopher was entitled to the payment claimed in respect of tuition and related expenses of the Bond Academy.

[23] The Insurer took the position that the decision of the Delegate to uphold the arbitrator's award for private school tuition was unreasonable and made the following submissions:

i) The Delegate failed to apply the plain meaning of ss. 15(2) and (5) of SABS. The requirement that the measure be "undertaken" required evidence of Christopher's enrollment and attendance at the private school, even assuming reasonableness, necessity, and a broad meaning of the word "incurred". Since evidence showed that Christopher did not attend private school in 2008-2009, the benefit for private school tuition could not have been payable. As well, the Bond Academy tuition does not come under clause 15(5)(g) of SABS as "vocational or academic training". Therefore, to be recoverable, it must fall under clause 15(5)(i)"the other goods and services that the insured person requires". Christopher did not "require" the Bond Academy as he was receiving an educational program through the public school system.

ii) The Delegate failed to consider the lifetime monetary limits of SABS benefits and the amount already provided to Christopher when finding that the Bond Academy expenses were reasonable and necessary.

iii) The Delegate failed to take into account all the evidence of Mr. Harry Movios who testified on behalf of the Insurer as to why the claim for private school tuition and expenses was refused. In its factum and oral submissions, the Insurer quoted numerous parts of Mr. Movios' testimony at the hearing and argued that neither the arbitrator nor the Delegate gave sufficient consideration to various aspects of his testimony.

iv) One of the members on Christopher's Team, Dr. VanDeuren, improperly took on the role of "advocate" for Christopher and stepped outside his role as an expert. The arbitrator put unreasonable weight on his opinion and in doing so made an incorrect decision. The Delegate unreasonably upheld the arbitrator's decision.

v) The opinion of Dr. E. McKinnon, a neuropsychologist on Christopher's Team, that Christopher would benefit from attending the Bond Academy was made without consultation with and input from Christopher. Her opinion was not based on all the information that could have been available and the arbitrator should have given it less weight; and thus, the Delegate unreasonably upheld the arbitrator's decision.

vi) The claim for tuition for the Bond Academy arose out of the unrealistic and demanding expectations of Christopher's parents based on their inappropriate expectations of Christopher in relation to both his academic achievements and his behaviour.

Analysis

[24] By decision dated June 22, 2012, the Delegate upheld the private school tuition payment ordered by the arbitrator as "reasonable and necessary""incurred" and "undertaken". The Delegate found there was evidence before the arbitrator that Christopher's scholastic functioning was at risk in the future and that the Bond Academy would reduce his emerging cognitive and behavioural issues and facilitate his integration into society. On this basis, he concluded the arbitrator did not make an error of law in finding that the Bond Academy benefit was reasonable and necessary. There was also evidence that Christopher's parents had explored the possibility of enrolling Christopher at the Bond Academy, Christopher's Team agreed with his parents, and the Team advised the Insurer that the Bond Academy would offer Christopher opportunities not available in the public school system to address the effects of his specific accident-related disability. On this basis, the Delegate held that the arbitrator did not err in finding that the Bond Academy tuition was "undertaken or entered upon" for the purpose of s. 15(2) of the SABS. In reaching this conclusion, he also held that "undertaken" was capable of a wider meaning as well as a narrow meaning, and a narrower meaning was inconsistent with the broader meaning of "incurred" addressed below.

[25] In determining that the Bond Academy tuition was reasonable and necessary, incurred and undertaken, the Delegate carefully considered s. 15 of SABS, which was addressed earlier in these reasons.

[26] The Delegate concluded that the arbitrator did not err in law in finding that the Bond Academy benefit claim fell within clause 15(5)(g) of the SABS as vocational or academic training. While not explicit, the Delegate appears to have proceeded on the basis that this claim was in respect of "academic training". This is a reasonable conclusion.

[27] The Delegate also carefully considered the relevant case law. He found that the case law dealing with the word "incurred" under other similar provisions of SABS applied equally to the word "incurred" in s. 15(5) of SABS. The Delegate noted that courts and arbitrators alike have held that the word "incurred" in SABS should be interpreted broadly to prevent insurers from benefitting from an insured's lack of financial resources and to protect insureds. An insured need not actually receive services or pay expenses or become legally obliged to do so in order to "incur" the expense. It is sufficient if the reasonableness and necessity of the service and the amount of the expenditure could be determined with certainty. He reiterated the rationale for this approach from the jurisprudence: insurers may deny payment of services with impunity believing that arbitrators will later not order payment when they can no longer be of benefit to the insured.

[28] As mentioned, the Delegate also found that case law has determined that the meaning of "undertaken" in s. 15(2) of SABS must be broadly interpreted. A narrow meaning of "undertaken" would be inconsistent with the broad definition accorded to "incurred" by the Court of Appeal in Monks v. ING Insurance Company of Canada, 2008 ONCA 269, 90 O.R. (3d) 689, at paras. 46-52, and would undermine the remedial legislative purpose of SABS that accident victims should promptly receive statutory accident benefits to which they are entitled. Moreover, the Delegate noted that Monks made no distinction between the word "incurred" and "undertaken."

[29] I see no merit in the argument that the Delegate improperly applied ss. 15(2) and (5) of SABS. In Smith (Committee of) v. Wawanesa Mutual Insurance Co. (1998), 1998 18861 (ON SC), 42 O.R. (3d) 441 (Div. Ct.), at p. 448, A. Campbell J. referred to the wider meaning of "incurred", which includes an understanding that an expenditure is incurred "as soon as it is known with certainty that it is necessary and its amount is ascertained." As well, a wider meaning is to be encouraged since "the provision should be construed contra proferentem, the coverage interpreted broadly and the time limitation narrowly": see Smith, at p. 448. A. Campbell J. continued with another reason why a broad interpretation of the word "incurred" was appropriate, at pp. 448-449:

[A] remedial and purposive interpretation suggests that unfairness would result from a narrow interpretation. As Osler J. pointed out in

MacDonald the narrow interpretation penalizes the insured who lacks the money or the credit to pay, or to become legally obliged to pay for, the insured services. As the motions judge point out in this case:

… if the defendant's position were correct it would allow those persons who could pay for services in advance to be in a much better position to recover than those who could not. This, as a matter of policy, would be totally unfair.

A purposive and remedial interpretation requires that the legislation be read so as not to require an insured person to finance, or to pledge her credit, in order to secure the very benefits for which she is insured. [Footnotes omitted.]

[30] Arbitrator Baltman in Kennelly v. Wawanesa Mutual Insurance Co., [2000] O.F.S.C.I.D. No. 17 (Arb. Baltman) (Q.L.), took a similar broad approach to the meaning of the word "incurred", even when the treatment for which the claim was made was no longer available. Ms. Kennelly had sought payment for speech pathology treatments. Her claim was refused by Wawanesa.

[31] Arbitrator Baltman awarded Ms. Kennelly the cost of future speech pathology treatments as well the cost of the treatments she had missed. The arbitrator found no merit to Wawanesa's argument that this would result in a windfall to Ms. Kennelly and reasoned that not awarding the cost of missed but necessary treatments would encourage insurers to deny benefits for needed services that claimants were entitled to"believing that an arbitrator will not later order them to pay for the treatments, however reasonable, because they can no longer be of benefit to the applicant": see Kennelly, at para. 61. Arbitrator Baltman went on to say as follows, at paras. 62-63:

Nor am I persuaded that this amounts to a windfall for Ms. Kennelly. She was deprived of a service that she was entitled to by statute. The termination of therapeutic support delayed her recovery, increased her frustration over her impairments, and caused her to lose some of the gains she had made over the previous year. Moreover, the insurer has had the benefit of these monies throughout the time they should have been dispensed to Ms. Kennelly.

For all these reasons, I find that the expenses in question were incurred.

[32] A broad interpretation was accorded to the word "incurred" by the Court of Appeal in Monks, at paras. 46-52, where "measures undertaken" under s. 15(2) was used as an example of a cost or expense "incurred":

ING's submission that the ongoing benefits declarations ignore the SABS provisions that contemplate the payment of benefits only for "incurred" expenses must also fail.

There is no dispute that one of the pre-conditions to the receipt of accident benefits under the SABS is that the cost or expense in question be "incurred". For example, ss. 14(2) and 16(2) of the SABS provide that medical and attendant care benefits must pay for "all reasonable and necessary expenses incurred by or on behalf of the injured person as a result of the accident" (emphasis added) and s. 15(2) states that a rehabilitation benefit must pay for "all reasonable and necessary measures undertaken" by the insured person. [Emphasis added.] … Rather, the issue in contention is the meaning to be accorded to the word "incurred" as used in the SABS.

ING argues that the word "incurred" as employed in the SABS requires a legal liability for payment or a certainty that the claimed expense will arise. This is said to preclude, for example, the declaratory relief granted with respect to home modifications because Ms. Monks can choose whether or not to renovate her home.

The courts, however, have rejected a narrow construction of the word "incurred" as used in accident benefits schedules. In Belair Insurance Co. v. McMichael (2007), 2007 17630 (ON SCDC), 86 O.R. (3d) 68 at para. 24, when considering the meaning of "incurred" in the context of the attendant care provisions of the SABS, the Divisional Court cited with approval the following statement in Wawanesa Mutual Insurance Co. v. Smith (1998), 1998 18861 (ON SC), 42 O.R. (3d) 441 (Div. Ct.) at paras. 38-39:

A purposive and remedial interpretation requires that the legislation be read so as not to require an insured person to finance, or to pledge her credit, in order to secure the very benefits for which she is insured.

I conclude that an insured … need not actually receive the items or services or spend the money or become legally obliged to do so. It is sufficient if the reasonable necessity of the service or item and the amount of the expenditure are determined with certainty before the end of [the specified time limit under the applicable benefits schedule]. [Emphasis added.]

See also MacDonald v. Travelers Indemnity Co. (1987), 1987 4062 (ON SC), 60 O.R. (2d) 385 (H.C.J.) at paras. 244-245.

A similar approach to the interpretation of "incurred" under predecessor schedules to the SABS has also been adopted by arbitrators involved in the resolution of disputes about the payment of accident benefits: see Kennelly v. Wawanesa Mutual Insurance Co., [2000] O.F.S.C.I.D. No. 17 at paras. 58-63, cited in Belair, supra at para. 25.

This interpretive approach is consistent with the principles applicable to the construction of insurance coverage provisions. It is well-established that insurance coverage provisions are to be interpreted broadly, while coverage exclusions or restrictions are to be construed narrowly, in favour of the insured. At the time of Ms. Monks' third accident, the SABS was deemed to be incorporated in every standard automobile insurance policy in Ontario by virtue of s. 268(1) of the Act. Consequently, to the extent that the word "incurred" as used in the SABS restricts the coverage available to Ms. Monks under her ING policy, it must be assigned a narrow meaning.

Moreover, a broad interpretation of the word "incurred" under the SABS is consistent with the policy objective that accident victims promptly receive the statutory accident benefits to which they are entitled under the Act and their automobile insurance policies. It also prevents an insurer from benefiting from an insured's lack of financial resources. As Wilson J.A. observed in Coombe at p. 736: "The legislation was designed for the protection of the insured and should be construed in the way most favourable to him."

[33] In this case, the arbitrator found that Christopher's family had undertaken an investigation of the appropriateness of the Bond Academy for Christopher by taking a tour of the school and raised the issue with and obtained agreement and support from his Team, and the Delegate upheld the arbitrator's decision. Christopher was unable to enroll in the Bond Academy because the Insurer denied the tuition expense as a rehabilitation benefit under SABS. Noting that in Monks the Court of Appeal made no distinction between "undertaken" and "incurred", the Delegate came to a reasonable decision based on the evidence that Christopher had a need to attend the Bond Academy, the cost for doing so was determinable, and the benefit was properly payable, which accords with the remedial and purposive interpretation to be attributed to ss. 15(2) and 15(5) of SABS.

[34] There is also no merit to the argument that the Delegate failed to consider the limits of SABS benefits when determining that the Bond Academy expenses were reasonable and necessary. That is neither the role of the arbitrator nor the Delegate. Rather, s. 15 of SABS sets out the requirements for determining whether a rehabilitation benefit, such as private school expenses, is payable. It does not include a consideration of the limits of SABS benefits.

[35] The argument of the Insurer regarding the Delegate's failure to give sufficient consideration to the evidence of Mr. Movios is also without merit. It is trite law that a judge, arbitrator, or any decision-maker can accept some, all, or none of the evidence of a witness and that re-weighing evidence is not the role of this court on a judicial review. Upon extensive review of the evidence submitted by the Insurer, the arbitrator found that Mr. Movios' evidence was of no assistance because he was not the claims advisor at the time the benefit was denied on October 25, 2008 and the person who was in that position, Ms. Kool, was not called as a witness.

[36] The arbitrator had also found that Ms. Kool solely relied on the report of Dr. MacNiven to deny the tuition and related expense claim, despite her knowledge that Dr. MacNiven's report was preliminary, among other things. The arbitrator concluded that the Insurer's reasons were insufficient to deny Christopher's claim and gave fulsome reasons for preferring the evidence of Christopher's Team and Dr. McKinnon regarding the needs of Christopher and the remedial assistance required to reduce academic and social problems for him in the future.

[37] In his first decision, the Delegate carefully reviewed the reasons of the arbitrator with respect to both the Bond Academy and the special award and found that the arbitrator had a sufficient evidentiary basis to come to the conclusion she did in relation to the evidence she accepted. In his second decision, after the Delegate had reviewed the transcript with the consent of the parties and considered the submissions of counsel for both parties with respect to the evidence in the transcripts, it is clear that the Delegate found that there were even more reasons to support the arbitrator's conclusion with respect to the special award.

[38] I find no merit to the Insurer's submission that the arbitrator gave unreasonable weight to the opinion of Dr. VanDeuren who the Insurer accused of being an "advocate". On reviewing the portion of the transcript where the exchange between counsel for the Insurer and Dr. VanDeuren took place, it is clear that the doctor was testifying as a spokesperson for the Team who recommended that Christopher attend the Bond Academy. There is no compelling evidence that he had stepped out of that role to be "Christopher's advocate". The Team believed that the program provided the services that were necessary for Christopher's continued rehabilitation.

[39] The Delegate reasonably concluded that the Insurer was not looking at Christopher's future needs and had relied primarily on the fact that his academic records were good at that stage of his life. Given his young age at the time the claim was made and the opinion of Dr. MacGregor as to his future needs, the Delegate's decision to uphold the award was eminently reasonable.

[40] There is also no merit to the argument of the Insurer that less weight should have been given to Dr. McKinnon's opinion regarding the benefits to Christopher of attending the Bond Academy because she did not consult with Christopher to obtain his thoughts and feelings about changing schools. With respect, Christopher was ten-years-old when the claim was made. It is clear from the totality of the expert evidence that there was no consensus with respect to Christopher's needs for the special academic and social programs available to him at the Bond Academy. The views of a ten-year-old as to his future needs arising from his brain injury would not have altered Dr. McKinnon's expert opinion. The Delegate's decision to uphold the arbitrator's findings is owed deference.

[41] Finally, the Insurer's argument that the tuition claim was the result of the unreasonable and inappropriate expectations of Christopher's parents, both in relation to his academic success and behavioural issues, has no merit. While the representatives of the Insurer may have found Christopher's parents difficult to deal with, the logical extension of the Insurer's argument is that the members of Christopher's Team were nothing more than the puppets of the parents—recommending to the Insurer whatever the parents wanted for Christopher. There is no evidence to support this suggestion.

2. Whether the Director's Delegate's decision to make a special award against the Insurer was reasonable?

[42] Section 282(10) of the Insurance Act provides that if the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator "shall" award a lump sum as a special award.

[43] The Insurer made the following arguments with respect to the special award:

(i) The Delegate unreasonably affirmed the arbitrator's order of a special award, while allowing the appeal with respect to quantum of the award, which was sent back to arbitration. The evidence clearly demonstrated that the Insurer did not take an unreasonable, unyielding, stubborn, blinkered or inflexible approach to Christopher's claims for private school expenses and a rehabilitation support worker, which was necessary to make a special award.

(ii) When the Delegate reconsidered his first decision, reviewed the transcripts, and released a second decision on April 30, 2013, he created an apprehension of bias. The entitlement to a special award ought to have been denied in the Delegate's first decision on June 22, 2012 and the failure to do so was unreasonable. Reconsidering his first decision based on transcripts that had been filed but not previously considered by him was also unreasonable. As a result, the only reasonable order to make is an order setting aside the special award altogether.

(iii) The fact that the arbitrator came to a different conclusion than the Insurer's adjuster based on the same evidence should not justify a special award. To do so would mean that special awards will be routinely granted because benefits are later found owing by an arbitrator based on the arbitrator's consideration of the merits of the case. The question of misconduct by an insurer should not arise simply because the arbitrator makes a different judgment call than an adjuster. If there is delay in paying the benefit, two percent per month compounded interest would properly compensate the Insured for any delay in payment.

Analysis

[44] The arbitrator made two overlapping findings in concluding that the Insurer's conduct required a special award.

[45] The arbitrator found that the Insurer had acted unreasonably in denying Christopher's claims for the expenses associated with admission to the Bond Academy and the services of a rehabilitation support worker. This was based on a finding that the Insurer failed to reasonably assess the medical information available from Christopher's Team and the medical professionals who treated him from the Hospital for Sick Children and Bloorview Kids Rehabilitation Hospital.

[46] The arbitrator also held that the Insurer's failure to pay for the services of a rehabilitation support worker, given Christopher's tender years, his catastrophic impairment, and the medical opinion that rehabilitation support worker services were necessary for his progress, amounted to a stubborn refusal to pay a reasonable and necessary benefit. This finding was based on a determination that the Insurer's reliance on the assessments of Dr. MacNiven, Dr. Tuff, and Dr. Dumitrascu in the face of the overwhelmingly consistent opinions and reasoning of Christopher's Team and the other professionals who treated Christopher amounted to an unreasonable disregard of the available information relating to the two rehabilitation benefits.

[47] The Delegate confirmed the arbitrator's order for a special award against the Insurer by reasons dated June 22, 2012, as well as by reasons dated April 30, 2013, following his reconsideration of the issue with regard to the hearing transcripts. He found that whether the Insurer unreasonably withheld or delayed payment to Christopher was a finding of fact. Thus, to constitute an error of law, the arbitrator's finding of fact must have been made in the complete absence of supporting evidence.

[48] The Delegate was not persuaded there was an absence of evidence before the arbitrator regarding whether the Insurer had unreasonably withheld payments associated with admission to the Bond Academy and the services of a rehabilitation support worker.

[49] With respect to the Bond Academy treatment plan, the Delegate pointed to the problems with Dr. MacNiven's report noted above that undermined its validity. The Delegate found that the Insurer's reliance on evidence of Christopher's past and current academic success and socialization disregarded the fact that the private school claim was rooted in a concern that Christopher's future success was at risk.

[50] The arbitrator also found that the Insurer had unreasonably withheld payments for a rehabilitation services worker for Christopher. The arbitrator found that such a worker fulfilled a significant role in Christopher's rehabilitation and that the worker's role was misunderstood by a number of the Insurer's experts. This finding was not appealed by the Insurer to the Delegate.

[51] With respect to the rehabilitation support worker, the Delegate concluded that the arbitrator's finding above was supported by the fact that the Insurer relied on reports of Dr. MacNiven, Dr. Tuff, and Dr. Dumitrascu that do not and/or cannot opine on significant aspect of the two plans. He noted that Dr. MacNiven acknowledged that speech language therapy falls outside her professional capacity and that the reports of Dr. Tuff and Dr. Dumitrascu failed to deal with occupational therapy and speech therapy elements of the rehabilitation support worker plan since such treatment was not within their sphere of expertise.

[52] It is clear the arbitrator found in her reasons that the denial of the claim for a rehabilitation services worker was unreasonable along with the denial of the claim for Bond Academy tuition and related expenses. The unreasonableness of both denials formed the basis for the arbitrator's order of payment of a special award.

[53] Although the Delegate upheld the special award, he remitted the issue of quantum back to arbitration as he found that the arbitrator's analysis was not reasonably intelligible on how the counterbalancing relevant considerations were weighed in determining the amount of the award. He was entitled to come to this conclusion.

[54] After discovering the inadvertently filed transcripts, the Delegate by way of the procedure set out earlier in these reasons, reconsidered his decision regarding the special award in light of the transcripts and both counsels' submissions. By decision dated April 30, 2013, the Delegate again confirmed the appropriateness of making a special award, finding that the evidence contained in the transcripts, including Mr. Movios' testimony, further enhanced the evidentiary foundation for the award. After the Insurer's denial of the Bond Academy claim in October 2008, Mr. Movios had declined to meet with Christopher's Team and chose not to review a DVD of interviews of those team members. The Delegate found that the Insurer failed to consider the totality of the available evidence in relation to the provisions of ss. 15(2) and (5) of SABS and the relevant case law interpreting those provisions when determining whether to allow the claims. The Delegate found that Mr. Movios' actions were inconsistent with an insurer's responsibility to adjust a file in a fair and even-handed manner and to remain open to additional information as it comes forward.

[55] In my view, the Delegate reasonably found a sufficient evidentiary basis to make a special award. The Insurer relied on a preliminary report of Dr. MacNiven riddled with problems. The Insurer failed to read its own expert reports critically. The psychological assessments were based on a misapprehension of the proposed rehabilitation support services and could not opine on certain aspects of the proposed services. The Insurer relied on Christopher's past report cards to find he was performing well and disregarded the concern for Christopher's future academic and developmental success. The Insurer failed in its duty to remain open to additional information about Christopher's impairments following its denial of the Bond Academy claim. As found by the arbitrator, the Insurer had also improperly denied the rehabilitation services worker claim.

[56] I find no merit in the assertion of the Insurer that the reconsideration by the Delegate of his June 22, 2012 decision, after discovering the transcript, created an apprehension of bias and was unreasonable. The Delegate found the transcripts in another file, advised counsel, obtained their consent, and received both oral and written submissions from them regarding the evidence in the transcripts concerning the making of the special award. The time to make an objection on the basis of bias was after the Delegate's letter of July 6, 2012, not after receiving the Delegate's decision of April 30, 2013 that upheld the special award.

[57] The Insurer's argument that the special award was not justified because the result of the Delegate's and arbitrator's decisions was simply a difference of opinion as to whether the benefits claimed by Christopher were reasonable and necessary is not supported by a plain reading of these decisions. Both the arbitrator and the Delegate gave lengthy reasons why the requested services were reasonable and necessary given Christopher's circumstances and why the Insurer's refusal to grant the claim was unreasonable since the claim was related to Christopher's future rather than current needs.

[58] Moreover, the fact that children are more vulnerable than adults when it comes to the timely provision of necessary services cannot be in dispute. Children's needs change as they move from childhood to adolescence to adulthood. They will never pass through those phases again. In Peters v. Aviva Canada Inc., [2006] O.F.S.C.D. No. 62 (Arb. Wilson) (Q.L.), a FSCO Director's Delegate endorsed the following factors to be considered in the making of a special award, at paras. 95-96:

'The effect of the Insurer's unreasonable withholding or delaying of payments on the Applicant is also a factor to be taken into consideration in making a special award'

'[T]he award should be proportionate to: (i) the blameworthiness of the insurer's conduct; (ii) the vulnerability of the insured person; (iii) the harm or potential harm directed at the insured person; (iv) the need for deterrence; [(v)] the advantage wrongfully gained by the insurer from the misconduct; and (vi) should take into account any other penalties or sanctions that have been or likely will be imposed on the insurer due to its misconduct.' [Emphasis added.]

In this case the making of the special award was reasonably proportionate to Christopher's vulnerability as a ten-year-old who was beginning to transition into adolescence and to the harm that could result to Christopher in the future from withholding or delaying payments for the rehabilitation services worker and the tuition of the Bond Academy.

Quantum of Special Award

[59] Having determined that the Delegate's decision to uphold the grant of a special award was reasonable, I turn now to the Delegate's decision to refer the issue of quantum of that award to arbitration. Counsel for both the Applicant and the Respondents urged the court to fix the quantum of the special award if this court upheld the grant of the special award. The court was advised at the hearing that the original arbitrator has retired and all aspects of Christopher's tort claim have been determined by a court. Thus, another arbitration before a different arbitrator would unduly prolong the proceeding and add considerable expense.

[60] The court has been provided with the complete appeal record that was before the Delegate as well as the transcripts of the hearing before the arbitrator. Given the unusual circumstances of this case and the fact that both counsel wish this court to determine the amount of the special award, I agree that we should do so.

[61] The way in which the quantum of a special award is to be determined is set out in s. 282(10) of the Insurance Act:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

[62] Section 46 of SABS sets out the amount of interest to be paid in respect of the payment of overdue benefits:

(1) An amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this Part.

(2) If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.

[63] Pursuant to these provisions, the maximum special award is calculated in part on accrued interest under SABS from the date the benefit should have been paid to the date of the arbitrator's award and in part on further interest from the date the benefit should have been paid to the date of the arbitrator's award calculated under s. 282(10) of the Insurance Act. In this case, the date of the arbitrator's award was September 29, 2011.

[64] The proper approach to fixing the amount of a special award under s. 282(10) of the Insurance Act was established in Persofsky v. Liberty Mutual Insurance Company., [2003] O.F.S.C.I.D. No. 11 (Director Draper), at para. 53:

1. Determine the benefits owing to the insured person, including interest calculated under the applicable version of the SABS;

2. Decide whether the insurer unreasonably withheld or delayed the payment of these benefits. If so, the insurer will be ordered to pay a lump sum amount in addition to the benefits and interest calculated in #1;

3. If the insurer did not act unreasonably in respect of all the benefits owing under #1, determine the amount of the benefits that were unreasonably withheld or delayed, and the interest payable on these benefits under the applicable version of the SABS.

4. Determine the maximum special award that can be awarded under s. 282(10), or at least a reasonable approximation. This is done by taking the amount in #1 or #3, whichever is applicable, and adding the additional interest component in s. 282(10) – two per cent per month, compounded monthly. To be clear, this calculation includes interest on the unpaid SABS interest. The maximum special award is 50 per cent of this total. Expressed as a formula, the calculation is as follows:

Maximum special award = 50% x (benefits that were unreasonably withheld or delayed + interest on these benefits calculated under the SABS + compound interest calculated according to s. 282(10))

5. Consider all relevant factors (discussed below) to determine an appropriate lump sum special award, not a percentage, that responds to the facts of the case and bears a reasonable relationship to other special awards, and does not exceed the maximum.

6. Provide reasons for concluding that the special award is payable, and for the amount of the award.

7. In the order, express the special award as a specific, lump sum amount. No interest is payable on this amount, except as part of the enforcement process. [Footnotes omitted.]

[65] With respect to the relevant factors to be considered, Director Draper in Persofsky set out the following non-exhaustive list, at para. 74:

• The amount of the benefits unreasonably withheld or delayed.

This is clearly a major factor in calculating the maximum amount that can be ordered. In my view, it is also an important consideration in fixing the size of the special award. However, the amount of the claim is not an absolute measure of the gravity of the insurer's conduct. The refusal of a large claim is not necessarily more blameworthy than a small, but essential claim.

• The time the benefit is withheld or delayed.

Again, this is clearly a factor in calculating the maximum, and generally will be an important consideration in the size of the award. However, it is a factor that must be carefully considered. Due to the double interest component in the calculation under s. 282(10), particularly now that interest under the SABS is compounded, the potential size of a special award increases quickly with the passage of time. While timeliness is a high value under the SABS that arbitrators should enforce, arbitrators should take a hard look at the period over which the delay was unreasonable.

• Failing to respect important obligations under the SABS.

The SABS include important procedural and other protections, including notice requirements and pay-pending-dispute provisions. The failure to respect these obligations, particularly if the failure is persistent, undermines the system. Therefore, a higher special award may be required to serve the goal of deterrence.

• Other factors that increase the gravity of the insurer's conduct.

Bad faith is not required for a special award and, therefore, is not the focus of the inquiry. However, evidence of bad faith may increase the amount of the special award. As set out in Whiten, the degree of blameworthiness may be influenced by various factors. For example, a higher special award may be justified if the insured person is especially vulnerable, particularly if the insurer is aware of the likely impact of its actions.

• Mitigating factors

Even where the insurer has acted unreasonably, other factors may reduce the size of the special award. For example, any actions by the insured person that make the claim more difficult to determine, or delay the process, may be relevant considerations.

• Other penalties

Arbitrators should consider the whole picture. If the insurer will suffer other consequences as a result of its misconduct, that should be taken into account. Investigation and prosecution by the Superintendent is a possible example, but only if it is likely to occur.

Interest has been a matter of some debate. While I agree with the Arbitrator in Graper that interest and special awards are distinct responses, I conclude that the insurer's obligation to pay interest at the high rate imposed by the SABS may be a factor in assessing the proportionality of the award.

[66] Regarding the benefits owed by the Insurer to Christopher for the Bond Academy tuition and expenses, the amount owing as of September 1, 2008 was $13,300.00. Given that the date at which interest is to be calculated is the date of the award (in this case September 29, 2011), the total unpaid SABS interest calculated in accordance with s. 46(2) is $14,355.02. The compound interest on those amounts, calculated according to s. 282(10) of the Insurance Act, is $29,848.76. The total amount of the benefits plus interest owing under SABS and compound interest under s. 282(10) of the Insurance Act is $57,503.79.

[67] Regarding the benefits owed by the Insurer to Christopher for the rehabilitation services worker, the effective dates for the benefits to be paid were December 11, 2009 in the amount of $14,303.72, May 11, 2010 in the amount of $7,666.05, and August 8, 2010 in the amount of $8,224.13.

[68] With respect to the $14,303.72 that should have been paid December 11, 2009, the interest owing as of the date of the award in accordance with s. 46(2) of SABS is $7,636.10. The amount of compound interest calculated according to s. 282(10) of the Insurance Act is $11,712.67. Together, the total amount of the benefit, the SABS interest, and the compound interest is $33,652.49.

[69] With respect to the $7,666.05 payable May 11, 2010, the amount of the SABS interest owed as of September 29, 2011 is $2,984.08. The compound interest calculated in accordance with s. 282(10) of the Insurance Act is $4,145.66, for a total amount of benefits, SABS interest, and compound interest of $14,795.79.

[70] With respect to the $8,224.13 payable August 8, 2010, the amount of the SABS interest owed as of September 29, 2011 is $2,563.60. The compound interest calculated according to s. 282(10) of the Insurance Act was $3,362.72, for a total amount of benefits, SABS interest, and compound interest of $14,150.45.

[71] The total amount owing in benefits along with SABS interest and s. 282(10) interest is $120,102.52 (arising from $57,503.79 + $33,652.49 + $14,795.79 + $14,150.45). Therefore, the maximum special award that can be granted for the Insurer's unreasonable withholding or delay of the Bond Academy tuition and expenses and the rehabilitation services worker is in and around $60,051.26, which is 50 per cent of $120,102.52.

[72] Having determined the maximum amount of the special award that can be made, I turn now to the task of fixing the amount of the special award. Persofsky provides significant guidance in this regard: summarized, it is clear that the purpose of a special award is to punish an insurer for misconduct and to deter it and others from future similar actions. The decision-maker determining the quantum of the award, in this case the court, must consider all the relevant factors to determine an appropriate lump sum within the maximum amount that can be granted. The amount must relate to the facts of the case and bear a reasonable relationship to other special awards, thus satisfying the principles of rationality and proportionality established by the Supreme Court of Canada regarding punitive damages: see Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595.

[73] I have set out earlier in this judgment the factors from Persofsky to be considered in fixing the quantum. I have considered the amount of the benefits that the Insurer unreasonably withheld from Christopher plus interest and the length of time that payment of those benefits had been withheld. I have also taken into account Christopher's young age and the importance of providing him with proper services during his childhood so as to mitigate the consequences of his brain injury as he becomes an adolescent and then an adult. After considering these and the other factors set out in para. 74 of Persofsky, I find that the appropriate quantum of the award is 30 per cent of the maximum special award, namely $20,000.

Conclusion

[74] For these reasons, the application for judicial review is dismissed and the quantum of the special award is fixed at $20,000. The parties agreed on the issue of the costs payable by the Applicant if it was unsuccessful. Accordingly, the Applicant shall pay the Respondents' costs in the amount of $5,000, all inclusive.

Nolan J.

Sachs J.

Wilton-Siegel J.

Date of Reasons for Judgment:

Date of Release: 20140324

CITATION: Personal Insurance Company v. Hoang, 2014 ONSC 81

DIVISIONAL COURT FILE NO.: 260/13

DATE: 20140324

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

SACHS, WILTON-SIEGEL AND NOLAN JJ.

BETWEEN:

PERSONAL INSURANCE COMPANY

Applicant

– and –

CHRISTOPHER HOANG, a minor by his litigation guardian, San Trieu and THE FINANCIAL SERVICES COMMISSION OF ONTARIO

Respondent

REASONS FOR JUDGMENT

Nolan J.

Date of Reasons for Judgment: 20140324

Date of Release: 20140324