Neutral Citation: 1994 ONICDRG 71
File No. A-003051
ONTARIO INSURANCE COMMISSION
BETWEEN:
LUCY BEILER
Applicant
and
ALPINA INSURANCE COMPANY, LIMITED
Insurer
SUPPLEMENTARY DECISION
Issues:
The parties request a post-decision consideration of two legal issues: the interest applicable to the special award, and section 13(4) benefits (Statutory Accident Benefits Schedule - Accidents Before January 1, 1994)1 for a child who was en ventre sa mère at the time of the accident. The interest on the special award was not raised by the parties until after the decision, but it is vital to the determination of the entire award.
The parties also request a re-determination of Mrs. Beiler's entitlement to section 13(4) benefits for her son, who was en ventre sa mère at the time of the accident. The February 22, 1994 decision was based on my understanding that the dispute was limited to the period from the accident until the child's birth. That was incorrect. The dispute is not limited by any time period, and therefore it must be decided de novo.
Hearing:
The parties' submissions were heard by me, Arbitrator Fred B. Sampliner, on June 9, 1994. Case law briefs were presented by the parties and they referred to the following court cases in their oral submissions:
Dehler v. Ottawa Civic Hospital et al., (1979), 1980 CanLII 1878 (ON CA), 25 O.R. (2d) 748 (H.C.J.)
Vasey et al v. Economical Mutual Insurance Company, (1986), 1986 CanLII 2558 (ON HCJ), 54 O.R. (2d) 692 (Ont. Div. Ct.)
Present at the Hearing were:
Applicant:
Lucy Beiler
Applicant's
Brian Eby
Representative:
Barrister and Solicitor
Insurer's
Wayne F. McCormick
Representative:
Barrister and Solicitor
Analysis and Findings:
1. Interest on the special award.
Section 282(10) of the Insurance Act, R.S.O. 1990, c.I.8., as amended by the Insurance Statute Law Amendment Act, 1993, S.O. 1993, c.10, states:
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.
Grammatically, the section is one long run-on sentence. The meaning of the section is not obvious until the phrases are separately examined.
First, section 282(10) provides that before an arbitrator can make a special award, he or she must find that the insurer unreasonably withheld or delayed payment. The arbitrator is then mandated to award a lump sum payment over and above the benefits to which the insured person is entitled.
The second half of section 282(10) goes on to describe the limits of an arbitrator's discretion to make a special award. Counsel for Mrs. Beiler submits that the phrase:
...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...
should be read as a separate phrase from the words following them:
...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 interpretation, the arbitrator can vary the lump sum portion of the special award up to a maximum 50 per cent of the benefits awarded, but the arbitrator has no control over the interest on the special award. That is, each benefit payment plus the regular 2 per cent simple interest due under section 24(2) of the Schedule, together with the special award, bears an additional 2 per cent compound interest from the time the amount is payable.
If this interpretation is correct, interest on the special awards could well become the largest portion of an order. The compound interest rate is equivalent to about 36 per cent per annum. If the special award bears interest at this rate and is figured on the accumulating balance of the benefits awarded over the many months that it takes for matters to reach a final decision, then the special award interest increases the total dramatically.
Thus, the compound interest becomes the most important factor in a special award. And since the arbitrator lacks any discretion to control the amount of the interest, the lump sum over which the arbitrator has discretion becomes less important. This limits the arbitrator's ability to adjust the size of the award to fit the insurer's conduct. Such a limitation of the arbitrator's ability to assess and control the size of the award is, in my opinion, repugnant to the intent of section 282(10) within the framework of the no-fault scheme.
An important aspect of the current statutory accident benefits scheme is the fostering of a less litigious and more reasonable approach to handling claims on a first party basis. In my opinion, section 282(10) is intended to provide a powerful tool for arbitrators to both compensate accident victims for an insurer's unreasonable conduct in failing to pay benefits and to appropriately penalize the insurer. Implicit to this section is the arbitrator's discretion to set the amount of the special award to reflect the severity of the unreasonable conduct, subject to a legislatively determined limitation.
The limitation is determined by reading the above phrases of section 282(10) together. By doing so, it becomes clear that once the insurer's conduct has been judged unreasonable, then the upper limit of the arbitrator's authority to issue a special award is equal to 50 per cent of:
benefits awarded + two per cent simple interest under section 24(2) + two per cent compound interest
I find that two per cent compound interest is not added to any lump sum special award under section 282(10) of the Insurance Act. Instead, the special award bears interest like any other order which is enforceable under the Courts of Justice Act, R.S.O. 1990.
2. Section 13(4) benefits for the child who was en ventre sa mère at the time of the accident.
An unborn child's entitlement to survivor's benefits under section 11(2)(c) of the Schedule was considered by Senior Arbitrator Rotter in Michael Ridgley and Zurich Insurance Company, April 13, 1994, OIC File No. A-004083. The arbitrator found that the section excludes children who were en ventre sa mèreat the time of the accident. She interpreted the legislature's intent in using the words "who was a dependant at the time of the accident" as specifically limiting recovery to those dependants who were born alive on the accident date.
Similar wording is used in Section 13(4). The section states that the insurer will pay a $50.00 weekly benefit to the insured person:
...for each person who at the time of the accident was residing with the insured person and in respect of who the insured person was the primary caregiver....
I agree with Senior Arbitrator Rotter's reasoning and the court decisions upon which she relied, many of which were also cited by counsel in this case. Like section 11 (2) referred to in the Ridgley case, the key to the meaning of section 13(4) lies in the words "at the time of the accident". In my view, those words refer to the status of the dependant at the time of the accident. The time reference clearly expressed by those words provides that the insured person is entitled to compensation for those dependants who were born alive and residing with the insured person at the time of the accident.
I heard no submissions concerning expenses, and accordingly make no order.
Order:
The special award ordered in the February 22, 1994 decision bears interest pursuant to the Courts of . Justice Act, R.S.O. 1990.
Mrs. Beiler is not entitled to section 13(4) benefits for Anthony Beiler, Jr.
August 9, 1994
Fred Sampliner Arbitrator
Date