Neutral Citation: 1991 ONICDRG 6

File No. A-000277

ONTARIO INSURANCE COMMISSION

BETWEEN:

ROSA DECICCO

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION

Issues:

This motion raises a question of the jurisdiction of an arbitrator under the Insurance Act, when an insured person has applied for arbitration. The question is whether the arbitration is limited strictly to the issues that the Applicant has chosen to raise in her application, or whether it extends more broadly to issues that are disputed by the Insurer, notwithstanding that the Applicant does not agree to have them arbitrated.

The question arises because under the legislation only an insured person may opt for arbitration.

The Motion

(a) The Application

The Applicant was injured in a motor vehicle accident on June 29, 1990. She was insured under an automobile insurance policy issued by the Insurer and applied for statutory no-fault benefits under the policy. Every motor vehicle liability policy provides for the no-fault benefits specified in Ontario Regulation 273/90 ("No-Fault Benefits Schedule"), which is enacted under the Insurance Act, R.S.O. 1980, c. 218, as amended by the Insurance Statute Law Amendment Act, 1990, S.O. 1990, c.2, ("the Act").

The Applicant received weekly income benefits until April 3, 1991, when they were terminated. She also received care benefits until September 16, 1990. The Applicant disputed the termination of these benefits and applied for mediation, which was unsuccessful. The Applicant therefore applied for arbitration. Her application was confined to her continuing entitlement to weekly income benefits and care benefits.

(b) The Insurer's Response

In its Amended Response to the Application, the Insurer disputed the entitlement of the Applicant to weekly income benefits and care benefits beyond the date of termination, and the amount of such benefit. In addition, it raised three other questions.

First, the Insurer disputed the Applicant's right to the care benefits that had been provided to her up to the time they were terminated. It asked for an order requiring the Applicant to repay any benefits that the arbitrator found to be owing.

Second, the Insurer had paid the Applicant for the costs of transportation to and from medical treatment. Under s. 6(7) of the No-Fault Benefits Schedule, an insurer must pay expenses of this kind pending the resolution of any dispute about the payments. The Insurer disputed the payments, and asked for an order requiring repayment.

The Applicant had not raised the payments In her Application.

Thirdly, the Insurer refused to pay expenses for rehabilitation that had been claimed by the Applicant. It sought a ruling from the arbitrator that it was not required to pay this claim.

The Report of Mediator, dated May 24, 1991, indicates that only the Applicant's entitlement to weekly benefits and care benefits had been mediated.

(c) The pre-hearing discussion

On September 20, 1991, a pre-hearing discussion was held. The Dispute Resolution Practice Code governing arbitrations, at paragraph 17, identifies the purpose of the pre-hearing discussion as, among other things, "identifying and obtaining agreement as to the issues for arbitration". Counsel for the Applicant challenged the jurisdiction of the arbitrator to hear and determine the three questions raised in the Insurer's Response. He argued that the arbitrator could only determine the question of the Applicant's continuing right to weekly income benefits and care benefits from the date of their termination onwards, because those were the only questions that the Applicant had referred to arbitration. Therefore, a telephone conference call was held on October 2, 1991, to hear the submissions of both parties. The Applicant was represented by Mr. Altor Shields. Counsel for Insurer was Mr. Harry Brown.

(i) the Applicant

Counsel for the Applicant submitted that the jurisdiction of an arbitrator is defined and limited by the Act. He argued that the Act carefully distinguished between the rights that it confers upon an insured person and those it confers upon both the insured and the insurer. Section 242c(1) provides that only any insured person may chose to go to court or to proceed to arbitration for a determination of his or her rights to no-fault benefits. Therefore, the legislation allows an arbitrator to hear and determine only those issues that are raised by an applicant in the application for appointment of an arbitrator, unless both parties agree that other issues can be dealt with. He argued that even though an insurer could not raise additional issues without the consent of the applicant, the insurer still had recourse to the court in the event of a dispute.

(ii) the Insurer

Counsel for the Insurer conceded that, by reason of the wording of s. 242c(1), only an insured person had the right to commence arbitration proceedings. However, he argued that once such proceedings had been commenced, an insurer was entitled to raise other disputed issues, including a request for repayment of benefits that had been overpaid. He questioned whether the legislation allowed an insurer to go to court and suggested that the Legislature may have intended to exclude insurers from proceeding to court once arbitration had been initiated, to avoid the possibility of inconsistent decisions. Also, insurers are required to pay certain benefits until a dispute about them is resolved. This, he submitted, implies that the insurer has the right to dispute any such benefits, and recover any amounts found to be overpaid. In support of his position, he cited a previous arbitration decision in Moxon and State Farm Insurance (F. Rotter, arbitrator, July 18, 1991), in which an applicant had been ordered to repay benefits. However, he conceded that the issue of the arbitrator's jurisdiction to make such an order had not been raised with the arbitrator in that case.

Findings and Decision

An arbitrator conducting an arbitration hearing under the Act exercises purely statutory powers. Unlike a court, an arbitrator has no inherent powers and his or her arbitral authority must derive – either expressly or by implication – from the Act. The Act is remedial legislation. Accordingly, its provisions must be accorded a liberal interpretation that best achieves the scheme and purpose of the statute.

The Act creates a statutory scheme for resolving disputes over no-fault benefits. S. 242a(1) provides that disputes over no-fault benefits must be resolved in accordance with these provisions. The legislative scheme establishes a two-stage process that must be followed in resolving such disputes.

First, there is mandatory mediation of disputes. This gives insureds and insurers an opportunity to resolve such disputes consensually, before resorting to adjudication and an adversarial process.

Second, after mediation has been attempted and has failed, unresolved issues may be decided by adjudication – that is, through the courts or an arbitration scheme set up by the Act.

The Act distinguishes between rights and remedies that are conferred only on insured persons, and those that are conferred on both insureds and insurers. In the first case, the statutory provisions refer only to "the insured person". Where the legislation applies to both insureds and insurers, it expressly refers to them both or to a "party". Finally, the legislation may refer to a "person". This potentially is the broadest term of all, and is generally construed to mean both individuals and corporations, unless the specific statutory context indicates otherwise.

Mediation proceedings may be instituted at the initiative of either the insured person or the insurer. Section 242b(1) states that:

Either the insured person or the insurer may refer to a mediator any matter in dispute in respect of the insured person's entitlement to no-fault benefits or in respect of the amount of no-fault benefits to which the insured person is entitled.

The application of s. 242b to both the insured and the insurer is reinforced in s. 242b(2) which provides that the party seeking mediation starts mediation by filing an application.

In contrast, under s. 252c(1), only the insured person has the choice of whether to bring litigation proceedings in court or to refer a dispute to binding arbitration. S. 242c(1) provides:

If mediation fails, the insured person may bring a proceeding in a court of competent jurisdiction or may refer the matter to an arbitrator.

The distinction is mirrored in s. 242d(1) which states that arbitration is initiated when an insured person seeking arbitration files an application. Referring a matter to mediation or arbitration is synonymous with filing the appropriate application.

However, neither litigation or arbitration can take place until mediation has been tried and has failed. S. 242c(2) states:

No person may bring a proceeding in any court or refer a matter to arbitration unless mediation has first been sought and has failed.

Until an applicant initiates the arbitration process by submitting an application, an arbitrator has no jurisdiction in respect of the matter.

Once an applicant has referred the matter to arbitration, the jurisdiction of the arbitrator is defined by s. 242d(3). It states:

The arbitrator shall determine all issues in dispute and such other issues as the parties may agree.

The question that I must answer is what is the scope of the "matter" that the Applicant has referred to arbitration, and what are the "issues in dispute" in this case. To understand the meaning of these terms, it is necessary to construe them in the light of entire statutory context in which they operate, and particularly, the mediation provisions that precede them.

S. 242b(1) provides that the insured and insurer may refer to a mediator, "any matter in dispute in respect of the insured person's entitlement to no-fault benefits or in respect of the amount of no-fault benefits _{... "}

Once a matter in dispute has been referred, the mediator is charged with enquiring into "the issues in dispute", and of settling "as many of the issues" as possible (s. 242b(4)). Where mediation fails, the mediator must provide a report that includes "the mediator's description of the issues that remain in dispute" (S. 242b(8)).

A similar dichotomy is found in regards to the arbitration process. Under s. 242c(1), an insured person has the option of proceeding to litigation or referring "the matter" to arbitration. Once an application has been made, the arbitrator must determine "all issues in dispute" and "such other issues as the parties may agree". At the conclusion of the process, under s. 242a(4), every arbitrator is required to "determine issues before them by order".

The legislation appears to draw a distinction between a "matter" and "issues". "Matter", it is suggested, is the broader term, and means the thing in dispute; "issues", the specific questions of fact or law that form the basis of the dispute.

The use of the definite article in the term, "the matter" suggests that the thing in dispute must be the dispute that has been previously referred to mediation "in respect of an insured person's entitlement to no-fault benefits or ... the amount of no-fault benefits..". Furthermore, the "issues in dispute" in arbitration reasonably correspond to those that have been identified as remaining in dispute by a mediator under s. 242b(8). Both the language and the policy of the Act support this interpretation. S. 242c(2) precludes arbitration until mediation has been sought. The terminology used in the arbitration provisions mirrors that used in the mediation provisions.

The wording and scheme of the statute is therefore best reconciled by construing "the matter" referred to arbitration as a dispute between an insurer and insured over a specific no-fault benefit claimed. The questions that either party raises in relation to an applicant's entitlement to the benefit or to the amount of the benefit in dispute comprise the issues.

These questions are "issues in dispute" under s. 242d(3) if they have been identified as such in the course of mediation, they remain unresolved, and they are raised by either party to the arbitration. If such issues have not been mediated, however, they are not arbitrable under the terms of s. 242d(3) unless both parties consent to their inclusion.

However, the scope of the issues before the arbitrator should not be defined in a narrow and technical way. The authority of the arbitrator extends to anything that reasonably and consequentially flows from the issues that are before her. In my view, this includes an applicant's liability to repay any benefits found to have been overpaid in light of the arbitrator's findings.

Repayment of overpaid benefits is governed by s. 27 of the No-Fault Benefits Schedule. S 27(1) states:

A person must repay to the insurer any benefit received under this Schedule that is paid to the person through error or fraud.

S. 27(2) and (3) require a person to repay weekly income and weekly benefits for disability where the person was disqualified or to the extent he or she was in receipt of other deductible payments.

An applicant's liability to repay a benefit under s. 27 of the No-Fault Benefits Schedule relates directly to the applicant's entitlement to the benefit or the amount of the benefit payable. In my view, therefore, an order for the repayment of benefits – if raised by a party – falls squarely within the jurisdiction of the arbitrator.

This interpretation represents a reasonable and sensible construction of the statutory language, and best attains the objectives of the legislation. There are compelling practical and policy reasons that support this interpretation.

If an insurer is compelled to proceed to court, notwithstanding a pending arbitration, the parties will be exposed to multiple proceedings in different forums. The parties run the risk of inconsistent decisions. The general policy of the law is against multiple proceedings. They may result in disputes over no-fault benefits being dragged out interminably. The purpose of the legislation in providing a speedy and inexpensive means of redress will thereby be frustrated.

Moreover, where the evidence before the arbitrator shows that an applicant has received more than he or she is entitled to, or for a longer period, neither commonsense nor sound policy is served by requiring an insurer to relitigate the entire question in court in order to effect a statutory right to repayment. This would not enhance the integrity of the dispute resolution process; nor would it provide any disincentive to fraudulent or vexatious claims.

Furthermore, defining the jurisdiction of an arbitrator by the strict terms of the application would encourage formality and technicality in the process. This would be inconsistent with the purpose of arbitration, which is intended to be informal and accessible. Arbitration cases should be determined on their merits with speed and simplicity, not judged on the basis of their form.

For these reasons, I find that the question of entitlement of the applicant to care benefits for the period before they were terminated, and her liability to repay any such benefits is necessarily and properly before me in this arbitration.

However, an insurer is not entitled to raise a dispute regarding entitlement to or the amount of a different benefit, as this represents a new matter that has not been referred to arbitration by the applicant. In this arbitration, therefore, the Insurer is not entitled to dispute the transportation expenses that have been paid to the Applicant, nor the Applicant's claim for rehabilitation expenses.

Counsel for the Insurer questioned whether insurers have a right to proceed to court, where an arbitration proceeding has been commenced. He submitted that the policy against multiple proceedings would provide a valid rationale for such a prohibition. He therefore argued that insurers must be allowed to raise new matters in the arbitration as otherwise they would have no alternative means of redress.

It is a fundamental principle of law that a statute should not be construed to take away a party's resort to the courts in the absence of the clearest language. No express provision bars access to the courts by insurers.

Furthermore, s. 242c(2) states that "no person" may bring a proceeding in a court or refer a matter to arbitration until mediation has been sought. The use of the generic "person" implies a residual right of insurers to resort to the courts. It is for the court to determine how to proceed in the face of parallel processes, for example, through the court's discretion to temporarily stay proceedings. Further concerns about multiple or duplicative proceedings are for the Legislature to deal with.

I am also not persuaded by counsel's contention that the liability of an insurer to pay certain benefits pending a dispute pursuant to s. 232(8) of the Act implies that the insurer is entitled to include the disputed benefit in an arbitration proceeding, without the consent of the applicant. If there was no application for arbitration on which to "piggy-back" this matter, the Insurer in this case would be required to resort to the courts for redress. That remains the resort of the Insurer.

Applying the above to this case, therefore, I find as follows:

The questions of the entitlement of the Applicant to care benefits for the period before they were terminated, the amount of such benefits, and the Applicant's liability to repay any such benefits are necessarily and properly before me in this arbitration because these issues represent "issues in dispute" in this proceeding.

The questions of the Applicant's entitlement to rehabilitation expenses and transportation expenses, and the amount of such benefits, are not "issues in dispute" in this proceeding, and therefore are beyond the jurisdiction of the arbitrator.

ORDER:

1. The issue of the Applicant's entitlement to care benefits from the date payment commenced to the date benefits were terminated, and the amount of such benefits, is properly an "issue in dispute" for determination by the arbitrator in these proceedings, under s. 242d(3) of the Insurance Act, as amended.

2. The issue of the Applicant's liability to repay care benefits paid to her is properly an "issue in dispute" for determination by the arbitrator in these proceedings under s. 242d(3) of the Insurance Act, as amended.

3. The issues of the Applicant's entitlement to transportation or rehabilitation expenses, and the amount of such benefits, are not properly "issues in dispute" in these proceedings under s. 242d(3), and therefore fall outside the jurisdiction of the arbitrator.

18/12/91

Susan Naylor

Arbitrator

Date