Ontario Insurance Commission
Neutral Citation: 1994 ONICDRG 89
File No. A-008268
BETWEEN:
LORENZO RESCIGNO Applicant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer
DECISION ON PRELIMINARY ISSUE
Issues:
The Applicant, Lorenzo Rescigno, was injured in a motor vehicle accident on October 21, 1992. He applied for and received statutory accident benefits from the Insurer, payable under Ontario Regulation 6721. Weekly income benefits were terminated by the Insurer on July 9, 1993. The parties were unable to resolve their disputes through mediation and the Applicant applied for arbitration under the Insurance Act, R.S.O. 1990, c. I.8, as amended.
A pre-hearing discussion in this case was held on August 3, 1994, before me, Asfaw Seife, arbitrator. The Applicant attended, represented by Mr. Nestor Kostyniuk. Ms. Fatima Janmohamed attended on behalf of the Insurer, represented by Ms. Gina Brannan.
One of the purposes of the pre-hearing was to identify the issues that will be the subject of this arbitration. During the discussions, the Applicant and the Insurer agreed that the following issues are to be determined in this arbitration:
Is the Applicant entitled to weekly income benefits under section 12 of the Schedule from July 9, 1993 onwards?
Is the Applicant entitled to a special award against the Insurer for unreasonably delaying or withholding payments, under section 282(10) of the Insurance Act?
Is the Applicant entitled to interest on any overdue amounts?
However, the parties did not agree that the amount of weekly income benefits which the Applicant is entitled to receive after July 9, 1993, is an issue in this arbitration. The Insurer sought to add this issue in the arbitration; the Applicant objected.
As a result, I must decide the preliminary issue of whether the Insurer can have the amount of the Applicant's weekly income benefits decided in this arbitration. The parties have agreed that this preliminary issue be decided by way of written submissions. The exchange and filing of submissions was completed on August 19, 1994.
Result:
The Insurer may not raise, in this arbitration, the issue of the amount of weekly income benefits to which the Applicant is entitled after July 9, 1993.
Background:
The following facts are not disputed:
The Applicant was paid weekly income benefits under section 12 of the Schedule in the amount of $600 per week until July 9, 1993, when they were terminated by the Insurer.
The Applicant applied for mediation after the termination. The Report of Mediator indicates, and the parties agree, that the issues raised at mediation were the Applicant's entitlement to weekly income benefits after July 9, 1993, and certain supplementary medical and rehabilitation benefits. The issue of the amount of the weekly income benefits was not raised at mediation by either party and was never mediated.
The supplementary medical and rehabilitation benefits were settled at mediation; however, the dispute over eligibility to weekly income benefits was not resolved. On April 5, 1994, the Applicant filed an Application for Appointment of an Arbitrator, listing entitlement to weekly income benefits as the only issue and claiming a special award against the Insurer.
In its response to the Application for Appointment of an Arbitrator, the Insurer stated, "[m]edical documentation and our investigation suggests that the insured is not substantially disabled from his essential tasks. Prior medical history has not been provided." The Insurer did not question or raise as an issue the amount of weekly income benefits payable to the Applicant.
The issue of the amount of weekly income benefits was raised for the first time, by the Insurer, during the pre-hearing discussions on August 13, 1994.
Submissions:
The Insurer claimed that after his benefits were terminated, and subsequent to the date of mediation, the Applicant applied for Canada Pension Plan disability benefits and received income from employment.
In her submissions, the Insurer's counsel states:
If the Arbitrator determines that Mr. Rescigno is entitled to benefits beyond July 9, 1993, the questions related to this determination are:
What is the amount of the weekly income benefit to be paid?; and
Is the calculation of the weekly income benefit affected by the receipt of "any payments for loss of income"(section 12(4)(b) of the Schedule) or "any income received from any occupation or employment subsequent to the accident"(section 15 of the Schedule)?
I would submit that these are questions which are related to and therefore consequentially flow from the matter being arbitrated.
The Insurer concedes that the issue of the amount of weekly income benefits was not raised at mediation by either party. As I understand it, the thrust of her argument appears to be that this issue "reasonably and consequentially flows" from the determination of the Applicant's entitlement to weekly income benefits, and therefore the Insurer is entitled to have it determined by the arbitrator, notwithstanding that it was never mediated and that the Applicant objects to its inclusion in this arbitration.
The Applicant's counsel submits that the Insurer is not entitled to raise the issue of the level of benefits because the issue was never mediated. He suggests that the arbitration of this issue is premature. He states that the Insurer's questioning of the amount of weekly income benefits can wait for another day; forcing the Applicant to produce documents and information at this time will unduly increase his legal bill and unduly lengthen this arbitration hearing.
The Applicant's counsel submits:
If Mr. Rescigno fails on this issue [entitlement to weekly benefits], no further proceedings are necessary.
If Mr. Rescigno succeeds, then he and State Farm can negotiate, or proceed to Mediation if that will assist them, in calculating the correct amount of weekly benefit.
The Law:
Section 280(1) of the Insurance Act ("the Act") 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 statutory accident benefits or in respect of the amount of statutory accident benefits to which the insured person is entitled.
Section 281(1) of the Act provides that if mediation fails, the insured person may bring a proceeding in a court of competent jurisdiction or may refer the matter to an arbitrator. Section 281(2) states that no person may bring a proceeding in a court or refer a matter to arbitration unless mediation has first been sought and failed.
The jurisdiction of the arbitrator is governed by the provisions of section 282(3) of the Act which states that the arbitrator "shall determine all issues in dispute and such other issues as the parties may agree." (emphasis added)
Findings:
Both parties agree that the "dispute" in respect of the amount of the Applicant's weekly income benefits was never submitted to mediation. In fact, it is not at all clear to me that, at this time, a "dispute" or disagreement about the amount of the Applicant's weekly income benefits after July 9, 1993, even exists. The Insurer's concerns appear to relate to a dispute that could arise in the event the arbitrator decides the Applicant is entitled to weekly income benefits after the date of termination.
It is clear, from the above-cited provisions of the Act, that a condition precedent to accessing the dispute resolution process established under the Act is the existence of a dispute between the parties in respect of either entitlement to statutory accident benefits or the amount of such benefit. Where there is such a dispute, an important and mandatory stage of the process is that the dispute first be referred to a mediator to attempt to effect a settlement. Only if mediation fails can the dispute be referred to arbitration.
In this case, if a dispute does exist over the amount of weekly income benefits, this dispute has not been referred to mediation by either party, and consequently, in my view, the arbitrator has no jurisdiction to resolve the dispute by an order, in the absence of agreement by both parties.
The Insurer has cited a number of arbitration decisions in support of its position that the issue of the amount of weekly income benefits "reasonably and consequentially flows" from the "matter" of the Applicant's eligibility to benefits. (R. DeCicco and State Farm Mutual Automobile Insurance Company, December 18, 1991, OIC File No. A-000277, appeal decision May 1, 1992, OIC File No. P-000277, C. Ayertey and Toronto Transit Commission, April 5, 1994, OIC File No. A-004077 (preliminary issue) and P. Kotsiakos and State Farm Mutual Automobile Insurance Company, July 26, 1994, OIC File No. A-002354) I agree that these decisions, when read together, suggest that when an arbitrator is called upon to determine "the matter" referred to her/him, the arbitrator must define that matter, and in each case determine the scope of the arbitration. Once the matter referred to arbitration is defined by the arbitrator, any questions or concerns that naturally arise or consequentially flow from the "matter" comprise the issues in dispute.
In this case, the matter which the Applicant has referred to arbitration is his entitlement to weekly income benefits after July 9, 1993. I do not agree with the Insurer's argument that, in the circumstances of this case, the issue of the amount of weekly income benefits "reasonably and consequentially flows" from the matter the Applicant has referred to arbitration.
In Kotsiakos, deciding the question of whether an issue the Insurer sought to add in the arbitration reasonably and consequentially flowed from the matter the Applicant referred to arbitration, Arbitrator Shemin Manji considered the nature of the arbitrator's inquiry and the type of evidence which may be led by the parties. I agree with the approach taken by Arbitrator Manji.
The evidence is that the Insurer terminated weekly income benefits because it was satisfied that the Applicant was no longer disabled to the extent required by the Schedule. The Insurer is not claiming that the Applicant was ineligible to receive weekly income benefits during the period before July 9, 1993, and neither was the termination of his benefits related to the amount of his weekly income.
In my view, the nature of the inquiry in respect of the Applicant's entitlement to weekly income benefits is whether, as a result of the accident, the Applicant is substantially unable to perform the essential tasks of his pre-accident employment after July 9, 1993. The parties will likely lead medical evidence on the issue, and evidence about his essential tasks. The nature of the inquiry into the determination of the correct amount of weekly income benefits, on the other hand, entails evidence of employment, financial records about income from employment before or after the accident, the receipt or availability of collateral benefits and the calculation of his gross weekly income.
In my view, the inquiry into and evidence about the Applicant's eligibility to benefits and the inquiry into and the evidence about the amount he is entitled to receive have no bearing on each other. Therefore, I find that the issue of the amount of weekly income benefits does not reasonably or consequentially flow from the matter referred by the Applicant to arbitration.
Accordingly, I find that the Insurer is precluded from raising the issue of the amount of the Applicant's weekly income benefits in this arbitration. The scope of this arbitration is confined to those issues identified on page two of this decision.
September 26, 1994
Asfaw Seife Arbitrator
Date