Larry Erickson v. The Guarantee Company of North America, 1992 ONICDRG 19

Ontario Insurance Commission

Neutral Citation: 1992 ONICDRG 19 File No.: A-000560

Between:

Larry Erickson Applicant

and

The Guarantee Company of North America Insurer

Decision

Issues:

The Applicant, Larry Erickson, was injured in a motor vehicle accident on November 4, 1990. He applied for and received accident benefits payable under Regulation 273/90 under the Ontario Insurance Act, R.S.O. 1990, c. 1.8, (the "No-Fault Benefits Schedule"). The Applicant's weekly income benefits were cut off effective May 27, 1991, based on an independent medical report dated March 11, 1991. The Applicant disputed the termination of his benefits.

The Applicant applied for mediation of his dispute with the Insurer. The mediation was unsuccessful, and the Applicant subsequently applied for the appointment of an arbitrator.

The issues to be determined at the arbitration hearing were:

(1) Is the Applicant entitled to weekly benefits from May 27, 1991 onwards?

(2) Is the Applicant entitled to a special award under section 282(10) of the Insurance Act because his weekly income benefits were unreasonably withheld?

The Applicant also claimed interest on any outstanding amounts and his expenses of the hearing.

Result:

The decision is:

1. The Applicant is entitled to weekly benefits from May 27, 1991 onwards.

2. The Applicant is entitled to a special award on the basis that his benefits were unreasonably withheld.

Hearing:

A hearing was held at Quelph, Ontario on January 22, 1992, before me, Frederika M. Rotter, Senior Arbitrator.

Present at the hearing were:

Applicant: Larry Erickson

Applicant's Representative: Bryan Holub, Barrister & Solicitor

Insurer's Representative: Don Wright, Claims Examiner

Witnesses: Jeff Dernoga, David Patterson

Documents Filed:

Application for Appointment of an Arbitration in Form 4, dated October 7, 1991.

Response in Form 5, dated November 6, 1991

Exhibits:

Exhibit 1: Medical Brief

Exhibit 2: Letter from Nancy Thornton, Claims Examiner, The Guarantee Company of North America, to the Applicant, dated June 7, 1991

Exhibit 3: Letter from Nancy Thornton, Claims Examiner, The Guarantee Company of North America, to the Applicant, dated June 11, 1991, and reply from the Applicant.

Exhibit 4: Letter from Dr. Rebecca Whitney-Douglas, Wellington Chiropractic Group, to Nancy Thornton of The Guarantee Company of North America, dated July 17, 1991

Exhibit 5: Letter dated May 31, 1991 and Medico-legal Report dated March 11, 1991 from Dr. John Darracott.

Exhibit 6: Report from Neil Pearson, Registered Physiotherapist, Canadian Back Institute, dated March 4, 1991.

Exhibit 7: Medical Report from Dr. D.B.J. Paquette to The Guarantee Company of North America, dated March 1, 1991

The Evidence:

The Applicant is a self-employed framer and renovator. He gave evidence at the hearing, describing his essential tasks as a carpenter, framer and home renovator. He described his occupation as extremely strenuous and heavy, requiring a great deal of back strength and stamina.

The Applicant described the motor vehicle accident of November 4, 1990 and his resulting injuries. He described the medical and chiropractic treatment he had received, and testified that he continued to experience debilitating pain in his left leg and lower back, which incapacitated him from resuming his former employment.

The Applicant's testimony regarding the disabling effect of his injuries was supported by extensive medical documentation, which was entered as exhibits to the hearing. The Applicant's orthopaedic surgeon, Dr. Donald Ross Armstrong, also gave viva voce evidence, outlining his credentials as an expert and supporting the Applicant's testimony regarding the duration and extent of his disability from his injuries. The specialist testified that in his opinion the Applicant was not yet ready to resume his employment as a framer.

The Applicant's two witnesses, Mr. Jeff Dernoga and Mr. David Patterson, are business associates who confirmed the Applicant's evidence with respect to the nature of his employment and his essential tasks.

The Applicant also testified that when his weekly income benefits were suspended, the Insurer suspended, as well, payments for his ongoing chiropractic treatment. The Applicant advised his chiropractor of this suspension, and the chiropractor responded by writing to the Insurer on July 17, 1991 (Exhibit 4) objecting to the suspension of these benefits. As a result, the Applicant's chiropractic benefits were reinstated. However, the Insurer did not reinstate the Applicant's weekly income benefits.

The Applicant also testified, in cross-examination, that medical reports prepared by Dr. Paquette dated November 4 and 22, 1991 (Exhibits 1-4, 1-5)) had been provided to the mediator and were available to the Insurer. He did not know whether the Insurer actually obtained the reports from the mediator.

After hearing the evidence of the Applicant and his witnesses, the Insurer's representative, Mr. Don Wright, gave viva voce evidence and made submissions on behalf of the Insurer. He indicated that, based on the evidence at the hearing, the Insurer was no longer disputing that the Applicant was disabled and had been disabled from his employment since the accident. He indicated that the Applicant's weekly income benefits would be reinstated forthwith.

Mr. Wright indicated that the Insurer had suspended the Applicant's benefits relying on the independent report from Dr. Darracott, dated March 11, 1991 (Exhibit 5), which suggested that the Applicant could be ready to return to work within eight weeks. The Insurer also relied on the report from the Canadian Back Institute (Exhibit 6) dated March 4, 1991, and a report from Dr. Paquette, the Applicant's family doctor, dated March 1, 1991 (Exhibit 7). Both these reports predicted or suggested that the Applicant might recover in about eight weeks.

Mr. Wright indicated that no one from the Insurer's office checked again or verified the Applicant's medical condition before taking the decision to suspend his benefits effective May 27, 1991. The Insurer simply relied on the predictions from March 1991. The Insurer did not attempt to speak with the Applicant's family doctor again, or seek an updated report on his status. Mr. Wright confirmed that when the Applicant had asked that his weekly income benefits be reinstated, the Insurer had taken the position that the benefits would not be reinstated until the Applicant provided a detailed report from his family physician, together with the results of a CT scan examination. The Insurer's representative indicated that he felt that the Insurer had a right to require this information and to insist on compliance.

Once mediation had been initiated, the Insurer did not attempt to follow up or update any of the medical information, or request that the Applicant attend at a second independent medical examination.

Mr. Wright confirmed that the Insurer had received a letter from the Applicant's legal counsel dated October 2, 1991, requesting a copy of Dr. Darracott's report. The Insurer did not respond to that letter, nor forward a copy of the report. Mr. Wright confirmed that on December 12, 1991 the Insurer had received all the medical information relied on by the Applicant at the hearing including the CT scan report dated August 21, 1991 (Exhibit 1-6). Mr. Wright stated that the Insurer did not feel that it was able to communicate with the Applicant with a view to settling the dispute, at that time, since the arbitration process had already been invoked. He stated that he did not know that it was possible to settle a matter after arbitration had been applied for.

Submissions:

The Applicant's counsel submitted that the Applicant was entitled to a special award under section 282(10) of the Insurance Act on the basis that the Insurer unreasonably withheld payments to the Applicant. Counsel submitted that it was unreasonable for the Insurer to suspend benefits effective May 27, 1991 based on predictions which had been made in March 1991, without making an effort to check whether those predictions were still valid and accurate.

Counsel also submitted that the Insurer had unlawfully required that the Applicant provide a detailed medical report from his doctor and the results of a CT scan before it would even consider reinstating his weekly income benefits. Counsel submitted that the Insurer had no right to make such a demand under sections 23(1) or (2) of the No-Fault Benefits Schedule, once the Applicant had complied with the requirements of section 23(1). Counsel submitted that, if the Insurer required further medical information, it had the option of scheduling an independent medical examination under section 23(2) as often as it deemed necessary.

The Insurer's representative submitted that the Insurer had the right to require that the Applicant provide further medical information. Had that information been provided when it was requested, the Insurer would have considering reinstating the Applicant's weekly income benefits.

Findings:

The No-Fault Benefits Schedule sets out the conditions under which benefits are to be paid to persons injured in automobile accidents in Ontario. Section 12 provides that weekly income benefits are payable if the injured person, as a result of the accident, has suffered a substantial inability to perform the essential tasks of his or her employment or occupation.

In this case, after hearing the Applicant's evidence, the Insurer is no longer disputing that the Applicant continues to suffer a substantial inability to perform the essential tasks of his occupation, and agrees that the Applicant is entitled to ongoing weekly income benefits.

Therefore, the only issue that remains to be determined is whether, in the circumstances, the Applicant is entitled to a special award on the basis that his weekly income benefits were unreasonably withheld.

Section 282(10) of the Insurance Act provides:

(10) 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 person is entitled under the No-Fault Benefits Schedule, shall award a lump sum of 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.

Under this provision, if I find that the Applicant's weekly income benefits have been unreasonably withheld, I am obliged to award him a special lump sum payment.

In this case, the Insurer's representative has already conceded that it erred in suspending the Applicant's benefits. I must decide whether that suspension was not only erroneous, but also unreasonable. The Oxford English Dictionary defines the term unreasonable as "1. going beyond the limits of what is reasonable or equitable; 2. not guided by or listening to reason." I adopt this definition.

I have concluded that the Insurer's actions in suspending the Applicant's benefits were unreasonable. I have arrived at this conclusion bearing in mind the following facts:

1. After receiving the medical reports in March 1991, the Insurer did not advise the Applicant that it intended to rely on those reports to terminate his benefits after eight weeks.

2. The Insurer suspended the Applicant's benefits without giving him any notice that such a suspension was contemplated or intended.

When an insurer plans or intends to terminate or suspend benefits, a reasonable course of action includes providing some advance notice to the insured person. The insured person is also entitled to be made aware of the reasons for the proposed action.

Section 24(8) of the No-Fault Benefits Schedule states:

(8) If the insurer refuses to pay an amount claimed in an application for no-fault benefits, the insurer shall forthwith give written notice to the insured person giving the reasons for the refusal. O. Reg. 273/90, s.24.

I note that the Insurer did not comply with this subsection.

If the insured person disagrees with the proposed action, he or she should be granted a reasonable opportunity to dispute the insurer's decision, by providing further information, before having benefits suspended. In this case, the Insurer took no such reasonable steps before proceeding to suspend the Applicant's benefits.

3. The Insurer made no attempt to update or verify its medical information with respect to the Applicant. It based its actions on medical reports containing predictions that were at least two months old.

In my view, a reasonable insurer must make some effort to ascertain the actual and current disability status of its insured before proceeding to terminate benefits. An insurer may reasonably make a decision based on suppositions and predictions where an insured person refuses to provide updated medical information as requested, or refuses to co-operate with the Insurer's requests for an independent medical examination. However, it is not reasonable to base a decision on less-than-current information, without at least first ascertaining whether pertinent current information is available.

4. The Insurer took the position that it would not consider reinstating the Applicant's benefits until he provided a detailed medical report from his doctor, and a CT scan report.

If an insurer considers that it requires further medical information in order to justify continuing to pay benefits to an individual, the insurer has recourse to the provisions of section 23 of the No-Fault Benefits Schedule, which state:

23 (2) In respect of claims under Part IV, the insurer may, on reasonable notice, require an examination of the insured person by a qualified medical practitioner, psychological advisor or chiropractor as often as it reasonably requires,...

(emphasis added)

However, section 23(2) provides that the insured person must be given reasonable notice that a medical examination is required. The Insurer cannot rely on section 23(2) to justify terminating benefits before an insured person has been given a reasonable opportunity to comply with a request for a medical examination.

5. Finally, the Applicant's benefits were terminated effective May 27, 1991. The Applicant applied for mediation and then arbitration of his dispute with the Insurer. The evidence before me indicates that up to the day of the arbitration hearing, January 22, 1992, the Insurer continued to justify its suspension of the Applicant's benefits by relying on the medical reports of March 1991. Although updated medical information was available to the Insurer well in advance of the arbitration hearing day, the Insurer made no effort to review or re-assess its position in light of that information.

I find that the Insurer acted unreasonably in refusing to re-evaluate its position in light of the new information available to it. Had the Insurer reviewed the medical reports provided, it might well have reversed its position and concluded that the Applicant was indeed disabled, as it did at the hearing; thereby sparing all parties concerned the expense and effort involved in preparing for and attending at a hearing.

Arbitration hearings are provided by the Ontario Insurance Commission as an efficient and cost-effective alternative to court actions in cases of dispute about no-fault benefits. However, proving a case at arbitration still requires parties, at some expense, to marshall evidence and witnesses. In this case, the Applicant had also retained the services of a solicitor. A reasonable insurer would satisfy itself that its position was still correct, and make every effort to evaluate the merits of the insured's position before proceeding to a hearing.

Because I find that the Insurer acted unreasonably in withholding the Applicant's weekly income benefits, I must order that a special award is payable in this case. However, I do have a discretion with respect to the amount of the award.

This is the first case where a special award has been ordered. Before assessing the amount of the award, I am prepared to entertain submissions about what criteria should be utilized when deciding the amount of a special award. I am therefore prepared to allow both parties four weeks time to file submissions about the principles and criteria to be considered and applied in assessing the amount of a special award in this case.

I remain seized of the issue of the quantum of the special award and will issue a final decision in this matter after considering the submissions of both sides.

Order.

1. The Applicant is entitled to weekly income benefits from May 27, 1991 onwards.

2. The Applicant is entitled to a special award under section 282(10) of the Insurance Act. The amount of the award will be assessed after receiving submissions from the parties.

3. The Applicant is entitled to the expenses that he has incurred in respect of this arbitration hearing, in accordance with Schedule 1 of Regulation 275/90, including interest.

June 2, 1992

Frederika M. Rotter Senior Arbitrator