Court File and Parties

CITATION: State Farm Mutual Automobile Insurance Company v Kulaveerasingam, 2018 ONSC 7626

DIVISIONAL COURT FILE NO.: DC-18-709-00JR

DATE: 2018-12-20

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: State Farm Mutual Automobile Insurance Company, Appellant -and- Kumuthakumary Kulaveerasingam and Financial Services Commission of Ontario, Respondents

BEFORE: F.L. Myers J.

COUNSEL: Cary Schneider, for the Appellant David Wilson, for the Respondent Deborah McPhail, for FSCO

HEARD at Toronto: December 19, 2018

ENDORSEMENT

[1] The insurer moves to stay the decision of a FSCO Director’s Delegate dated May 30, 2018 pending the final resolution of the insurer’s application for judicial review. The challenged decision effectively denied the insurer the right to recover approximately $10,000 of income replacement benefits that it overpaid to the insured.

[2] After the quantum of IRBs was set and ordered at a prior arbitration, the insured became entitled to receive CPP benefits. As a result, the amount of the insured’s IRBs going forward is decreased to account for her ongoing receipt of the CPP collateral benefit. The issue in this judicial review proceeding involves whether the insurer was entitled to recover the approximate amount of $10,000 that it says it overpaid to the insured as a result of the payment to her of CPP benefits retroactive to a time at which she had already received IRBs at the higher rate set before her entitlement to CPP was known.

[3] The insurer has already recovered the funds that it says it overpaid by making unilateral deductions against the insured’s IRBs. It then moved to vary the prior arbitration order so as to lower the insured’s ongoing IRB entitlement and to regularize the insurer’s receipt of the retroactively overpaid funds. The insured acknowledges that she received an overpayment. However, she argues that the insurer was not entitled to recover the overpayment under the retroactivity terms of the Statutory Accident Benefits Schedule and especially not by self-help in breach of s. 287 of the Insurance Act, RSO 1990, c I.17.

[4] The insured may well be entitled to keep the amount that the insurer overpaid to her. That is what the Director’s Delegate ordered. The Schedule and statutory scheme regulate and carefully limit insurers’ rights to recover overpaid funds. This is deliberate statutory and regulatory policy.

[5] There is no automatic stay of the order of the Director’s Delegate pending judicial review of that decision. The insured therefore says that she is entitled to be paid now both the amount of the overpayment and the costs ordered in her favour by the Director’s Delegate. But the insurer argues that if it is required to pay the disputed overpayment and costs to the insured now, it will not likely be able to recover the funds if it succeeds in this judicial review proceeding. It relies on the evidence of a legal assistant from the insured’s lawyer’s office who swears that the insured is not working and that her income is limited to her IRBs and CPP. The insurer rightly notes that absent a stay it will likely suffer irreparable harm which the Supreme Court of Canada defines to include “harm which...cannot be cured, usually because one party cannot collect damages from the other.” RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311.

[6] In Nadarajah v RBC General Insurance Company (unreported decision of the Divisional Court dated July 17, 2014) Corbett J. dismissed a motion to stay a FSCO decision pending judicial review on the following basis:

Where, as here, there is a process for deciding the question of interim benefits, this court should intervene with a stay only in an exceptional case. Payment of interim benefits carries with it, in virtually every case, the risk that the claimant will be unable to repay the benefits, if unsuccessful in the final result. The presumption should be against a stay given the language of the statute and the equities between an insurance claimant and an insurer…[I]f it was necessary to stay or adjourn the hearing scheduled for June 2015 to permit the [judicial review] to be completed, it would still be necessary to determine whether interim benefits ought to be paid.

[7] I agree with Corbett J. that in the ordinary course a court will not likely grant a stay of an accident benefits decision pending the hearing of an application for judicial review commenced by the insurer. In the ordinary course a stay would terminate or limit the payment of medical, housekeeping, or income replacement benefits that have been set by the tribunal and are probably sorely needed by the insured. Even if the insurer may bear a risk of suffering irreparable harm without a stay, the balance of prejudice as between an insured who needs her benefits and an insurer presumptively favours the insured.

[8] Mr. Wilson argues that, as was the case in Nadarajah, if a stay is granted in this case, then the court is opening the door to granting a stay in virtually every case. I disagree. In this case, the insured is receiving her IRBs at the proper amount going forward. A stay will not limit or terminate the insured’s receipt of her IRB’s in the interim period between now and the hearing of the judicial review proceeding. She is continuing to receive exactly what she is entitled to receive pending the hearing of the judicial review application. What is in issue is a one-off sum of money collected by the insurer that relates to a disagreement as to the proper amount of benefits to which the insured was entitled at a prior time. While the insured may very well be entitled to the funds, an argument that she is being delayed in receiving an overpayment above the amount of benefits to which she was entitled does not involve the same type or magnitude of prejudice as an ordinary case where a stay will limit the ongoing payment of basic benefits at the amount set under the Schedule. A stay in this case will not undermine in the least the ordinary presumptive balance of prejudices referred to by Corbett J. when interim benefits are in issue in the ordinary case such as in Nadarajah.

[9] In my view, the balance of convenience adds little to the analysis in this case. The delay to an insured of receiving a windfall does not provide a countervailing balance to offset the risk of irreparable harm being suffered by the insurer. Rather, this case is on all fours with the decision in an earlier proceeding between these two parties Kulaveerasingam v State Farm Mutual Automobile Insurance Company (April 7, 2017, Divisional Court File No. 448/16).

[10] I am satisfied that there are serious issues to be resolved in the judicial review proceeding. The degree of perfection required or imperfection that is permissible in an insurer’s notice of overpayment and the scope of the decision of the court on this issue in Intact Insurance Company v Marianayagam, 2016 ONSC 1479 are issues for a panel of this court. There may also be a question of whether s. 287 of the Insurance Act was breached and what effect, if any, that may have (if that question is properly raised in this proceeding as claimed by the respondent).

[11] In all, there is a serious issue to be tried, the insurer will likely suffer irreparable harm if it is required to pay the funds in its hands to the insured pending the hearing of the judicial review, and the balance of convenience does not favour the insured. Therefore, in my view, a stay is appropriate and is ordered pending the final outcome of the judicial review application. The costs decision made by the Director’s Delegate will likely fall if the main decision is quashed. It is therefore appropriate for the costs decision to be stayed as well.

[12] Costs of this motion are fixed at $3,500. The question of which party, as between insurer and insured, should be entitled to costs of this motion is reserved to the panel that hears the application for judicial review. Although the insurer has succeeded on this motion, I can envision circumstances in which the panel may determine that this motion ought not to have been brought despite its success. Accordingly, I leave the question of liability for costs to the panel that resolves the judicial review on the merits. FSCO does not seek costs and is not liable for costs.

F.L. Myers J.

Date: December 20, 2018