Neutral Citation: 1994 ONICDRG 13
File No. A-005237
ONTARIO INSURANCE COMMISSION
BETWEEN:
EMILIA ZEPPIERI
Applicant
and
ROYAL INSURANCE COMPANY OF CANADA
Insurer
DECISION on PRELIMINARY ISSUE
Issues:
The Applicant, Emilia Zeppieri, was injured in a motor vehicle accident on October 31, 1990. She received weekly benefits from Royal Insurance Company of Canada (Royal Insurance), payable under Ontario Regulation 672.1 These benefits were paid until May 31, 1991, when they were terminated. Benefits were subsequently reinstated from June 15, 1992 onwards. Benefits were not paid for the period between June 1, 1991 to June 14, 1992. On September 13, 1993, Mrs. Zeppieri applied for arbitration with respect to her entitlement to benefits for this period.
The issue in this hearing on a preliminary issue is:
Has Mrs. Zeppieri applied for arbitration within two years after the Insurer's refusal to pay the benefits claimed, pursuant to s. 281(5) of the Insurance Act?
Result:
Mrs. Zeppieri has not applied for arbitration within two years after the Insurer's refusal to pay the benefits claimed, pursuant to s. 281(5) of the Insurance Act.
Hearing:
The hearing was held in North York, Ontario, on January 19, 1994, before me, Susan Naylor, Arbitrator.
Present at the Hearing:
The Applicant:
Emilia Zeppieri
Applicant's Representative:
Giulia Falbo Ahmadi Barrister and Solicitor
Insurer's Representative:
Stanley C. Tessis Barrister and Solicitor
Insurer's Officer:
Barbara Bolduc Royal Insurance
The proceedings were interpreted by Joseph Dionigi, an interpreter in Italian.
The parties filed an agreed statement of facts. Counsel for the Applicant disagreed with three paragraphs in the statement of facts. These paragraphs are set out in a letter, dated January 17, 1994.
Four exhibits were filed at the hearing. They were:
Exhibit 1
Notice of Motion, and attachments filed on behalf of the Insurer, dated December 23, 1993
Exhibit 2
Affidavit of Emilia Zeppieri, sworn on January 18, 1994
Exhibit 3
Affidavit of Josie Palazzo, sworn on January 18, 1994
Exhibit 4
One-page computer print-out
Barbara Bolduc, a representative of Royal Insurance, gave oral testimony. Mrs. Zeppieri and Josie Palazzo, a legal secretary and law clerk with the firm, Zeppieri & Associates, gave affidavit evidence.
Evidence and Findings:
Section 281(5) of the Insurance Act states:
A proceeding in a court or an arbitration proceeding in respect of no-fault benefits must be commenced within two years after the insurer's refusal to pay the benefit claimed or within such longer period as may be provided in the No-Fault Benefits Schedule, 1990, c.2, s. 65, part.
Section 121 empowers the Lieutenant Governor in Council to enact regulations setting time limits in respect of mediation and arbitration. The time limit for arbitration or litigation set out in s. 281(5) has not been extended under the Schedule. However, s. 26 of the Schedule establishes a time limit for commencing mediation. It states:
A mediation proceeding under s. 242b (now, s. 280) of the Insurance Act in respect of benefits under this Schedule must be commenced within two years from the insurer's refusal to pay the amount of benefits claimed in the application for no-fault benefits, or if the person has attended school or accepted, or returned to, an occupation or employment, as permitted by section 16, within two years of the insurer's refusal to pay further benefits.
The limitation period contained under s. 281(5) of the Insurance Act contains no provision for extension, other than by regulation. No regulation was enacted extending the time. I agree with the comments of Arbitrator Palmer in Nazrur Rahman and Co-operators General Insurance Company, OIC file A-000854, dated December 21, 1993, when she stated:
I find no provision in the statute or regulation which would confer on me the discretion to extend the time-limit for commencing the arbitration in this case.
In M (K) v. M (H) (1992), 1992 CanLII 31 (SCC), 3 S.C.R. 6, the Supreme Court of Canada identified three rationales underlying limitation periods. These were:
certainty — the need for a finite process,
evidentiary considerations — to avoid relying on stale evidence, and
diligence — claims must be brought in a timely fashion.
It is useful to bear these rationales in mind in interpreting the provisions of the Insurance Act that establish limitation periods.
The issue before me in this case is when the limitation period started to run.
The key facts are as follows:
Following the accident in October 1990, Royal Insurance paid Mrs. Zeppieri approximately seven months' disability benefits. It also paid for physiotherapy treatment, medical expenses and housekeeping expenses.
In the spring of 1991, Royal Insurance arranged for Mrs. Zeppieri to be examined by an orthopaedic specialist. Based on the report of that examination, Royal Insurance concluded that Mrs. Zeppieri no longer qualified for disability benefits. Ms. Barbara Bolduc of Royal Insurance was responsible for handling Mrs. Zeppieri's claim. She communicated the decision to terminate disability benefits in a letter to Mrs. Zeppieri dated May 6, 1991. The letter said:
We have now received a copy of the Orthopaedic Surgeon's report concerning the injuries sustained in the above accident. We have mailed a copy of this report to your Family Doctor for his file and review.
Based on Dr. Stubbs' assessment of your current condition, he feels you should now resume your employment duties working for your husband. In order to allow you some time to become accustomed once again to working full-time, we are extending your disability benefits up to May 31, 1991, giving you approximately one month to start work slowly. After this date, we will no longer consider the weekly disability payments.
Drs. Stubb's [sic] advises that you are continuing to benefit from the physiotherapy and recommends it be continued for a few more months. The housekeeping expenses will be paid for until the end of May 1991, after which time, you should be able to do the cleaning again (with the help of isabella [sic]).
If you have any questions concerning the above or any other part of your claim, please call me at any time. We enclose a Claims Assessment by Insurer form outlining the assessment of your claim and a further disability payment up to May 31, 1991 for $664.62.
A copy of the letter, cheque and Claims Assessment form were attached to Exhibit I.
It was acknowledged that Mrs. Zeppieri received the letter and cheque together shortly afterwards, and cashed the cheque on May 10, 1991. She did not receive any further weekly benefits from Royal Insurance until 1993. In her affidavit, Mrs. Zeppieri denied receiving the Assessment of Claim form enclosed in Ms. Bolduc's letter. She stated that she received the form some time later.
After she received the May letter, Mrs. Zeppieri contacted Ms. Bolduc on a number of occasions between May and August, 1991, both in connection with ongoing medical and rehabilitation claims and in order to have her disability benefits reinstated. Mrs. Zeppieri was told to discuss the specialist's letter with her family physician and that disability benefits would not be reinstated, unless there was new medical evidence to support her case. Mrs. Zeppieri stated that she was never told of her option to apply for mediation or of the two-year time period for doing so.
Some ten months later, in mid-June 1992, Mrs. Zeppieri retained the law firm, Zeppieri & Associates, to represent her in her dealings with Royal Insurance.
An affidavit sworn by Josie Palazzo, a legal secretary and law clerk with Zeppieri & Associates was filed as Exhibit 3. It attested to written and telephone communication between herself and representatives of Royal Insurance from June 15, 1992 to the end of June 1993. The letters are signed "per Enio Zeppieri." However, Ms. Palazzo attested that she prepared the letters herself and signed them on Mr. Zeppieri's behalf. She referred to them as her letters throughout the affidavit, and, for ease of reference, I have done the same in this decision.
In her affidavit, Ms. Palazzo stated that Mrs. Zeppieri's solicitors were never told about the letter terminating benefits by either their client or the insurance company. Mrs. Zeppieri told her at the outset that the last payment she received was "sometime at the end of May, 1991." Mrs. Palazzo wrote to Royal Insurance immediately on the firm being retained, enclosing some medical reports and asking the insurance company to "kindly reconsider" paying further disability benefits.
She also asked Royal Insurance to confirm in writing the total amount of payments received by Mrs. Zeppieri from the date of the accident to the present time.
Royal Insurance did not respond to the letter and did not advise Ms. Palazzo of the amount of benefits paid. Between June 1992 and November 1992, Ms. Palazzo followed this letter with numerous phone calls, further letters and updated medical reports. According to the affidavit, Ms. Palazzo had to submit the medical reports four times, before Royal Insurance acknowledged receiving them.
On November 6, 1992, Ms. Palazzo spoke to Catherine Gardner, a representative of Royal Insurance. Ms. Gardner indicated that she was not satisfied that the medical information submitted supported the payment of benefits and suggested that Mrs. Zeppieri attend a functional capacity evaluation.
Following the assessment, in late January 1993, Ms. Palazzo received a single settlement proposal from Royal Insurance. She rejected the settlement offer on behalf of the Applicant in a letter dated January 29, 1993 (Exhibit 3, Tab G). The letter enclosed tax returns for Mrs. Zeppieri and requested payment "for the period of May 1991, to the present date."
On February 8, 1993, Ms. Palazzo telephoned Ms. Gardner to find out about the status of Mrs. Zeppieri's claim. Ms. Gardner told Ms. Palazzo that Royal Insurance had decided to reinstate benefits retroactively from June 15, 1992 to February 21, 1993. She confirmed the decision in a memorandum sent to Ms. Palazzo, marked Exhibit 3, Tab H. Royal Insurance did not reinstate benefits for the period prior to June 15, 1992, and nothing was said about payment for this period.
The evidence is that Royal Insurance was prepared to pay ongoing benefits on the basis that Mrs. Zeppieri suffered a relapse of her condition in 1992. It is not clear from the evidence when Ms. Palazzo learned of the basis for the Insurer's decision to differentiate between the periods before and after June 14, 1992. However, it is clear that Ms. Palazzo learned of this some time before mid-May 1993. Her affidavit states, at paragraph 37, that on May 18, 1993, Eric Collins, the Insurer's agent "confirmed" that Royal Insurance accepted that Mrs. Zeppieri had suffered a relapse in 1992 and she noted:
I continued to discuss with him how Mrs. Zeppieri could be admittedly disabled in 1992, but not in 1991 when she was still under the doctor's care.
Ms. Palazzo's affidavit does not indicate when these discussions commenced.
Shortly after the decision was made to reinstate benefits after June 14, 1992, Ms. Palazzo wrote to Royal Insurance, inquiring about the status of benefits for the earlier period. The letter, dated February 18, 1993, and marked Exhibit 3, Tab I, stated:
We would greatly appreciate it if you would review and reconsider paying our client for the period June 1, 1991 to June 14, 1992, being 52 weeks.
Ms. Palazzo continued to communicate with Royal Insurance by letter, telephone, and, on one occasion in early May, in a face-to-face meeting. Information continued to be exchanged. In connection with Mrs. Zeppieri's claim for ongoing benefits, medical examinations were arranged for mid-April and late June, and arrangements were made for an accountant to examine Mrs. Zeppieri's financial affairs. Royal Insurance periodically extended Mrs. Zeppieri's disability benefits, and additional claims were submitted for medical and other expenses. However, Royal Insurance representatives said nothing about reinstating disability benefits before June 15, 1992.
On May 3, 1993, Ms. Palazzo wrote again to Mr. Collins. The letter, marked Exhibit 3, Tab L, ended:
Also, we are still awaiting for instructions from you with respect to our client disability benefits for the period of April 1, 1991 to June 14, 1992.
On May 18, 1993, Ms. Palazzo telephoned Mr. Collins. It was at this time that Mr. Collins confirmed that a Mr. Andrews, the adjuster handling the file, was prepared to pay benefits after June 1992 on the basis of a relapse, but did not accept that Mrs. Zeppieri was disabled for the prior period. According to her affidavit, Ms. Palazzo:
asked Eric (Mr. Collins) to discuss this issue with Mr. Andrews, the supervisor, and get back to (her).
Mr. Collins did not get back to Ms. Palazzo, as requested. Since she had not heard from him, Ms. Palazzo followed up by telephone some two weeks later on June 3, 1993. Mr. Collins advised her that Royal Insurance would pay ongoing benefits, and certain other expenses, and confirmed this in writing on the same day. The letter explained the break-down of payment of benefits, and ended:
Referring to your client's claim for Disability Benefits extending from April 1, 1991 to June 14, 1992, we have confirmed your position as discussed in our telephone conversation of May 18, 1993. Again, once we confirm our Principal's instructions in this regard, we will advise you accordingly.
After the conversation with Mr. Collins, mediation proceedings were instituted. The application for appointment of a mediator filed on behalf of Mrs. Zeppieri was dated June 3, 1993 and marked Exhibit 1, Tab 2.
Subsequently, on June 22, 1993, the Insurer's agent wrote to Ms. Palazzo in regards to the outstanding claim for prior benefits, stating:
our Principals have reconfirmed their position as discussed in our telephone conversation of May 18, 1993. Accordingly, we will leave it to you to discuss whatever action you deem necessary.
Mediation was conducted on August 5, 1993. It was unsuccessful. The Report of Mediator confirming that the mediation had failed was issued on August 9, 1993. Approximately one month later, Mrs. Zeppieri filed for arbitration. Her application for appointment of an arbitrator was dated September 13, 1993.
On the face of the documents, Mrs. Zeppieri initiated both mediation and arbitration more than two years after the date benefits were terminated on May 31, 1991.
Counsel for the Applicant submitted that Royal Insurance did not refuse benefits within the meaning of s. 281(5) of the Insurance Act, on May 31, 1991. She submitted that the Insurer's final refusal of benefits did not take place for another two years, until June 22, 1993, and that the limitation period ran from this latter date.
She submitted that Mrs. Zeppieri did not receive the Claims Assessment form with the other documents sent on May 6, 1991. Although she received it later on, it was not clear when she received it. Counsel argued, in effect, that valid notice under s. 281(5) must be in the form of an Assessment Claims form, approved by the Ontario Insurance Commission.
It is unnecessary to determine when Mrs. Zeppieri received the Assessment of Claims form. Section 281(5) of the Insurance Act provides that an arbitration must be commenced within "two years after the insurer's refusal to pay the benefit claimed..."
The refusal relied on must be clear and unequivocal, and must be communicated to the applicant. Section 24(8) of the regulations indicates that the notice must be in writing, and provide reasons for the refusal. The onus is on the insurer to establish that an applicant has received the proper notice.
I am satisfied that Ms. Bolduc's letter of May 6, 1991, which the Applicant acknowledged receiving, provided adequate notice of the Insurer's decision to terminate benefits.
The Assessment of Claim form is a standard form, approved by the Ontario Insurance Commission. Its use by the insurance industry facilitates a uniform and structured means of communicating decisions about benefits. It is not, however, a prescribed form under the regulations, nor is it a required method for communicating the refusal of benefits.
The evidence is, and I so find, that Mrs. Zeppieri clearly understood from the letter that her benefits were being discontinued as of May 31, 1991. There was no confusion on this point. Mrs. Zeppieri received no further disability benefits after this date, and told her lawyers from the outset, that her benefits had stopped "sometime at the end of May 1991."
Counsel for the Applicant also submitted that Royal Insurance did not advise Mrs. Zeppieri of her options after termination, or of the limitation periods set out in the legislation.
Counsel for Mrs. Zeppieri argued that the Insurer's subsequent course of conduct led her solicitors to believe that the issue of Mrs. Zeppieri's benefits was still under active consideration. She argued that the running of the limitation period was postponed by virtue of this subsequent course of dealings. Counsel submitted that the law firm was never made aware, with any certainty, of when Mrs. Zeppieri's benefits had been terminated or the fact that benefits had been refused. She submitted that benefits were not definitively refused until June 22, 1993.
An insurer may be estopped from raising a limitation period against an applicant, in circumstances in which the applicant reasonably relies on the insurer's conduct, to the applicant's detriment. However, Mrs. Zeppieri did not rely on Royal Insurance in this regard. She retained a law firm to act on her behalf in mid-June 1992, a year before the expiry of any limitation period. It was the responsibility of her solicitors to ensure that her rights under the legislation were adequately protected.
It is unnecessary for me to determine whether Mrs. Zeppieri's knowledge should be imputed to her lawyer. I am satisfied that Mrs. Zeppieri's lawyers knew for themselves that benefits had been terminated as of May 31, 1991, and were pressing Royal Insurance to reconsider its decision.
Ms. Palazzo's affidavit confirms her understanding of when benefits were terminated. She acknowledged being told at the outset that weekly benefits had stopped "sometime at the end of May, 1991," and wrote to Royal Insurance, asking it to "reconsider" this decision. On January 29, 1993, she asked for payment for "the period of May 1991, to the present date." After ongoing benefits had been reinstated, she asked Royal Insurance to "review and reconsider" paying benefits "for the period of June 1, 1991 to June 14, 1992" (letter, February 18, 1993, Exhibit 3, Tab I).
There is little evidence of any uncertainty in the matter throughout Ms. Palazzo's dealings with the Insurer.
Counsel relied upon a misstatement of the period as being "from April 1, 1991 to June 14, 1992" contained in a letter from Ms. Palazzo, dated May 3, 1993. This mistake was repeated in the Insurer's response of June 22, 1993. Counsel for the Applicant submitted that this reference indicated a lack of certainty on the part of the Applicant's lawyers as to the date of termination.
Given the above correspondence, the reference can equally be explained as a simple mistake made by Ms. Palazzo in the course of writing the letter. Moreover, there was no evidence to suggest that Ms. Palazzo understood the termination date to be after May 31, 1991, even if she understood it to be earlier than that date.
Counsel for the Applicant submitted that Royal Insurance had requested further information about Mrs. Zeppieri's claim, and was reconsidering its decision to terminate benefits. She submitted that benefits were not refused until this reconsideration process was completed, and confirmation of the denial was communicated to the Applicant.
Insurance companies are responsible for investigating new information provided after benefits are terminated and must fairly re-evaluate an applicant's claim in light of the new information provided. The re-evaluation of claims on an ongoing basis is integral to a system of periodic benefits, and is a continuing obligation owed to an applicant.
The fact that an insurance company reconsiders a prior decision to terminate benefits (as it must do) does not mean that a refusal of benefits only can take place at the completion of that process. To interpret the language of s. 281(5) in this manner would largely deprive it of meaning.
In my view, a two-step process must determine whether the limitation period applies in the circumstances of this case. First, it is necessary to ask whether, and when, there was a refusal to pay benefits; and second, whether the insurer may rely on a limitation period that runs from the date of the refusal.
In some cases, where there is a protracted and continuous process of negotiations, it may be difficult to determine when the insurer refused to pay benefits. In this case, however, I find that benefits were clearly and unequivocally terminated as of May 31, 1991.
The Applicant's solicitors asked Royal Insurance to reconsider its decision, and provided additional information in support of the Applicant's case. I must determine whether, in its subsequent dealings with the Applicant and her solicitors, anything in the conduct of the Insurer bars it from relying on the limitation period. In my view, the usual principles of estoppel govern the enforceability of the limitation period.
In this case, Mrs. Zeppieri's lawyers pressed Royal Insurance to reinstate benefits for the best part of a year. In mid-February 1993, Royal Insurance agreed to reinstate benefits after June 14, 1992. However, it did not reinstate benefits for the period prior to that date. Mrs. Zeppieri's solicitors were aware of the Insurer's decision to pay ongoing benefits on the basis of a relapse. The solicitors continued to press Royal Insurance to change its mind, and then to re-confirm its position. This communication was almost entirely at the initiative of Mrs. Zeppieri's solicitors. I am unable to find that Royal Insurance misled Mrs. Zeppieri's solicitors in regards to the status of her claim for benefits for the period in issue, or induced in them a false sense of security about the running of the limitation period. Therefore, I find that Royal Insurance is not estopped from relying on the limitation period, running from the date benefits were terminated on May 31, 1991.
Both counsel proceeded on the assumption that, if I found that benefits were refused as of May 31, 1991, the operation of the limitation period would bar benefits for the full period from June 1, 1991 to June 14, 1992. I invited counsel to address the applicability of prior case-law which established that an insurer's obligation to pay benefits, and therefore, an applicant's cause of action, accrued from week to week. I received no submissions which would assist me in reaching a different result than the one I have arrived at. I therefore make no findings in respect to this issue.
Expenses:
I am satisfied that Mrs. Zeppieri raised a bona fide issue in regards to her rights under the Schedule. I exercise my discretion under s. 282(11) of the Insurance Act to award Mrs. Zeppieri the expenses she has incurred in respect to this hearing, as set out in Ontario Regulation 664, R.R.O. 1990. I remain seized of this matter in the event the parties cannot agree about the amount of these expenses.
Order:
The Applicant has not applied for arbitration within two years after the insurer's refusal to pay the benefits claimed, pursuant to s. 281(5) of the Insurance Act. Therefore, she may not proceed to arbitration in respect to the claim for disability benefits from June 1, 1991 to June 14, 1992.
The Applicant is entitled to her expenses incurred in respect to the arbitration.
February 17, 1994
Susan Naylor Arbitrator
Date