Neutral Citation: 1993 ONICDRG 36
A-002621
ONTARIO INSURANCE COMMISSION
BETWEEN:
RAJ AGGARWAL
Applicant
and
ALLSTATE INSURANCE COMPANY
Insurer
DECISION ON PRELIMINARY ISSUE
Issues:
The Applicant, Raj Aggarwal, was injured in a motor vehicle accident on July 14, 1991. She applied for and received accident benefits from the Insurer, payable under Ontario Regulation 672 (the "No-Fault Benefits Schedule"), enacted under the Insurance Act, R.S.O. 1990, c. 1.2.
Weekly disability benefits were paid by the Insurer until December 21, 1991, when they were terminated. The Applicant disputed the cutoff and applied for mediation of her dispute with the Insurer. On March 2, 1992, a mediation report was issued which stated that the weekly income and supplementary medical benefits had been settled by the parties. The Applicant claims that she did not agree to a full and final settlement of her weekly income benefits. She applied for arbitration under the Insurance Act.
The preliminary issue in this hearing is:
Did the Applicant settle the weekly income benefit issue at mediation?
The Applicant also claims her expenses of the preliminary issue hearing.
Result:
The Applicant did not settle her weekly benefits claim at mediation.
The Applicant is entitled to her expenses.
Hearing:
The hearing was held in North York, Ontario, on May 26, 1993, before me, Fred B. Sampliner, arbitrator.
Present at the Hearing:
Applicant's
Raj Gupta
Agent:
(Applicant's son)
Applicant's
Frank Loreto
Representative:
Barrister & Solicitor
Insurer:
Brad Barber
Allstate claims manager
James Krause
Allstate claims adjuster
Insurer's
James Flaherty
Representative:
Barrister & Solicitor
Witnesses:
Elizabeth Pacheco, Barrister & Solicitor
Raj Gupta, the Applicant's agent and her son
James Krause, Allstate's claims adjuster
Exhibits:
There were nine exhibits filed at the hearing. These exhibits are listed in Appendix A.
Evidence and Findings:
The following facts are not in dispute. The Applicant was injured in a motor vehicle accident on July 14, 1991, which entitled her to apply to her insurance company for benefits under the No-Fault Benefits Schedule. The Applicant was not employed on the accident date, and received benefits from the Insurer under section 13 of the Schedule. Section 13 provides for weekly payments of $185.00 to the injured person, so long as the individual is substantially disabled from performing the essential tasks of his or her daily life. The Insurer paid weekly benefits until December 21, 1991, when it felt that the Applicant could return to her pre-accident activities.
The Applicant did not agree with her Insurer, and applied for mediation of the dispute in accordance with section 279 of the Insurance Act. A face-to-face mediation was conducted by Mr. Sydney Steinman on February 27, 1992. The Applicant, Mr. Gupta (the Applicant's son and agent), Elizabeth Pacheco (the Applicant's representative), Brad Barber and James Krause (Allstate's representatives) attended the mediation.
The February 27, 1992 mediation resulted in the creation of two documents from the Ontario Insurance Commission ("Commission"). First, the mediator issued a report, dated March 2, 1992 (Exhibit 3). Paragraph 6 of the report states:
- ISSUES SETTLED
The following issue(s) have been settled:
Weekly Income Benefits:
Amount:
$6,000.00
Details:
The insured has agreed to accept this amount paid to her as a lump sum, inclusive of interest.
Supp. Med. & Rehab. Benefits:
Amount:
$450.00
Details:
The insurer shall re-imburse the insured this amount which was paid by the insured to obtain her doctor's medical opinion.
Just below that section, in paragraph 7 the report states:
- ISSUES REMAINING IN DISPUTE
I have concluded that the following issue(s) remain in dispute:
NONE APPLICABLE
The mediator sent a Confirmation of Settlement form to the parties on March 2, 1992 (Exhibit 4). Both the Applicant and the Insurer signed the Confirmation of Settlement forms and returned them to the Commission (Exhibits 5 and 7). The confirmation includes the statement:
I confirm that the terms of settlement between the Insured person and the Insurer in respect to no-fault benefits are accurately set out under item 6, "Issues Settled", in the Report of Mediator dated January 29, 1992 by Sydney Steinman.
After the parties signed the Confirmation of Settlement forms, the Insurer paid and the Applicant received the settlement amount. The factual agreement stops here.
The Applicant characterizes the $6,000.00 that the Insurer paid her as a reinstatement of her weekly benefits from the December 21, 1991 cutoff until July 1992. The Applicant argues that the failure of the documents to contain the words "full and final release" indicates that the matter was not settled.
The Insurer states that the parties negotiated and entered into a final settlement at mediation, which they argue is clearly evidenced by the documents. The Insurer maintains that I should not inquire beyond the documents, that the words of the document indicate a final settlement, and that I should accept them as conclusive proof of a final settlement.
In Leon Albert Bailey and CAA Insurance Company (Ontario) (O.I.C. File No. A-001139, dated October 29, 1992, p. 9), Arbitrator Mackintosh stated:
In a mandated mediation system, each party must retain the right to forego settlement. The power to reject a proposed settlement provides the primary protection for the fairness of the process. In addition, the freely obtained consent of the parties makes it more likely their interests will be served and settlements will be voluntarily complied with. Accordingly, the question of whether a settlement was actually achieved in mediation must always be investigated when raised. I therefore find that the Report of Mediator is not conclusive of the issue of whether settlement was achieved at mediation. The Applicant is entitled to inquire into this issue. (emphasis added)
As stated in Bailey, the report represents no more or less than the recorded opinion of the mediator.
I find that this mediator's report is not clear. No terms in the report alerted the Applicant that she was extinguishing her right to future weekly benefits. Words like "full and final release", or "you give up your rights to further weekly benefits" would, in my view, clearly indicate termination of a right to any reasonable person. Instead, the mediator's report simply states that the Applicant will accept a lump sum of money. Since the report does not designate whether this is a full or partial settlement, the intentions of the parties must be gleaned through the other evidence presented at the hearing.
The mediator did not testify about the settlement discussions at mediation. Section 11 of the Insurance Act provides that a mediator shall not testify without the consent of the Commissioner. Exhibit 2 is a copy of the Insurer's letter to the Ontario Insurance Commission, dated May 13, 1993, requesting that the Commissioner allow the mediator to testify at the arbitration hearing. In a letter dated May 17, 1993, the Commissioner refused to allow the mediator to testify (Exhibit 9). I heard testimony about the parties' understanding of the agreement.
Elizabeth Pacheco, an articling student who represented the Applicant at the face-to-face mediation, testified it was her impression the settlement was not final. Ms. Pacheco stated that discussions which she heard at the mediation centred around the negotiated lump sum to settle the claim. She heard nothing at mediation indicating exactly what the negotiated lump sum represented. According to Ms. Pacheco, it was implied, though not explicitly stated, that the Applicant could re-apply for future weekly benefits.
It is significant that most of the negotiations took place indirectly, through the mediator, who shuttled back and forth between the parties. Ms. Pacheco said that the parties did not talk together very long. They were separated through the majority of the mediation process. This situation created great potential for misinterpretation of the purported settlement terms. Senior Arbitrator Naylor said it succinctly: "Inevitably, in the course of the process - as in any process - misunderstandings may occur as to the intent of the parties", Nikolaos Mouriopoulis and The Citadel General Assurance Company (O.I.C. File No. A-002166, at page 8). In this case, the misunderstanding became more apparent to me with each succeeding witness.
The Applicant's son, Raj Gupta, testified. He stated that his mother had attended the mediation, and that he had acted as his mother's agent and adviser throughout the proceeding. Because his mother did not speak or understand English well, Mr. Gupta had also acted as his mother's interpreter. He said he had explained his understanding of the negotiations and settlement terms to his mother.
The Applicant did not testify at the arbitration hearing. Her testimony would have been helpful. However, it was not disputed that the Applicant was over eighty years of age and rather frail, making it difficult for her to appear to testify. Since the Applicant's entire understanding of the agreement at mediation was obtained through her son's translations, I accept Mr. Gupta's testimony as probative of the Applicant's understanding of the settlement.
Mr. Gupta stated that he thought the settlement was not final. It was his opinion that the $6,000.00 represented a reinstatement of his mother's weekly benefit from the cutoff date to sometime in July 1992. Mr. Gupta could not identify the exact date in July when the $6,000.00 would have ceased to cover his mother's $185.00 weekly benefit. But, according to Mr. Gupta, it seemed that the insurance company had agreed that his mother would be disabled at least until the end of July 1992. Therefore, he felt that the Insurer was paying his mother the $6,000.00 lump sum, in advance, representing her weekly benefits from the December 21, 1991 cutoff date until the end of July 1992. After July 1992, Mr. Gupta felt his mother could re-apply to the Insurer for additional weekly benefits if she continued to be substantially disabled from her pre-accident activities.
I find that Mr. Gupta's actions subsequent to the mediation are consistent with his interpretation of the settlement. James Krause, the Insurer's claims adjuster, testified that neither the Applicant, her son or her lawyer contacted the Insurer after the conclusion of the mediation settlement, until the latter part of June 1992. Mr. Krause stated that in June 1992 he received a letter from Mr. Gupta claiming that his mother was still disabled and asking for additional weekly benefits. Mr. Krause testified that afterwards he and Mr. Gupta had several telephone conversations to discuss the claim for further benefits. The Insurer's evidence, confirming the four-month gap between the mediation and the letter to the Insurer requesting additional benefits, supports the Applicant's son's testimony that he believed the settlement covered his mother's weekly benefits until the end of July 1992.
Mr. Gupta testified that he went to the law office where Ms. Pacheco worked on March 6, 1992. There Mr. Gupta received the confirmation of settlement, the settlement cheque, and the lawyer's letter (Exhibit 1). The letter states: "As Elizabeth Pacheco explained to you, the settlement negotiated at the February 27, 1992 mediation hearing does not preclude your mother from re-applying for additional accident benefits after July, 1992." The letter adds weight to the Applicant's view that there was no final settlement at the mediation hearing.
James Krause, the Insurer's claims adjuster, testified. He had carriage of the claim from December 1991 through the mediation. At the mediation, Mr. Krause stated that there were no discussions about a partial settlement. He understood that the settlement was final. He closed his file after signing and returning the Confirmation of Settlement form (Exhibit 7), and payment of the agreed sum.
In Mehmet Tuzin and Allstate Insurance Company of Canada (O.I.C. File No. A-000596, dated May 28, 1992), the parties executed a full and final release before filing for mediation. The parties dealt directly with each other. Although the Applicant did not speak English well, it appeared to Arbitrator Palmer that Mr. Tuzin understood he was being paid a lump sum in lieu of receiving further weekly benefits.
In contrast with Tuzin, the parties in the instant case did not deal directly with each other when they entered into the purported settlement. It is apparent to me, from the testimony and the actions taken after mediation, that neither the Applicant or her representatives understood that the agreement was final. Moreover, the applicant in Tuzin has signed a very clear release, whose terms had been explained to him. Here, I cannot find that any reasonable person would interpret the mediator's report to reflect a full and final release.
This decision should encourage insurance companies to more carefully reflect the parties intentions in settlement documents. Where an insurer is seeking to permanently exclude the insured's right to further benefits, it should take steps to obtain a release or other agreement which clearly and specifically sets forth the bargain struck.
Repayment:
As a result of the misunderstanding, I find that the Insurer has paid $6,000.00 to the Applicant by mistake. Section 27 of the No-Fault Benefits Schedule states:
(1) A person must repay to the insurer any benefit received under this Schedule that is paid to the person through error or fraud.
(4) The insurer may charge interest from the day the amount owing to the insurer under this section is determined at the bank rate on that day.
Repayment will depend on whether the Applicant is entitled to weekly benefits after the December 22, 1991 cutoff. Consequently, it would be premature to order repayment until the Applicant's disability period is determined at arbitration hearing.
Expenses:
The Applicant seeks an award of her expenses in this hearing on the preliminary issue, pursuant to section 282(11) of the Insurance Act. The prescribed expenses are set forth in Schedule 1 of the Dispute Resolution Practice Code and Ontario Regulation 664 (R.R.O. 1990), Dispute Resolution Expenses.
The outcome of this hearing determined whether the Applicant's entire case should proceed to hearing. The hearing was essential and the Applicant's conduct reasonable. In accordance with the principles set forth in Ralph McCormick and Economical Mutual Insurance Company (O.I.C. File No. A-000139, dated October 2, 1991), I award the Applicant her expenses of this arbitration.
Order:
The Applicant did not settle her weekly benefits, and the Applicant may proceed to arbitration on this issue.
The Applicant's repayment of the $6,000.00 settlement amount is stayed pending the outcome of the arbitration hearing.
The Applicant is entitled to her expenses incurred in respect to the arbitration.
June 17, 1993
Fred B. Sampliner Arbitrator
Date
APPENDIX A
Exhibits:
Exhibit 1
Letter from John McLeish to Raj Gupta, dated March 6, 1992.
Exhibit 2
Letter from John McLeish to Raj Gupta, dated May 10, 1993.
Exhibit 3
Certified copy of mediation report, dated March 2, 1992.
Exhibit 4
Copy of the mediator's cover letter to Allstate, dated March 2, 1992.
Exhibit 5
Certified copy of Confirmation of Settlement, signed by the Applicant on March 6, 1992.
Exhibit 6
Copy of letter from John McLeish to Allstate, dated March 6, 1992.
Exhibit 7
Certified copy of Confirmation of Settlement, signed by the Insurer on March 6, 1992.
Exhibit 8
Copy of letter from James Flaherty to the Ontario Insurance Commission, dated May 13, 1993
Exhibit 9
Letter from the Ontario Insurance Commission to James Flaherty, dated May 17, 1993.
APPENDIX B
Cases and authorities submitted by the Insurer:
Vieczorek et al. v. Piersma et al., (1987) 1987 CanLII 4403 (ON CA), 58 O.R.(2d) 583
Waddams, S.M., The Law of Contracts, 2nd edition, 1984, p.234