Neutral Citation: 1995 ONICDRG 101

File No. A-009270

ONTARIO INSURANCE COMMISSION

BETWEEN:

OCTAVIO HOLGUIN

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Issues:

The Applicant, Octavio Holguin, was injured in a motor vehicle accident on February 17, 1992. He applied for and received statutory accident benefits from the Insurer, Allstate Insurance Company of Canada ("Allstate"), payable under Ontario Regulation 672.¹ Allstate stopped weekly income benefits on March 3, 1992. The parties were unable to resolve their disputes through mediation. Mr. Holguin applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended. The Application for Arbitration is dated March 21, 1995. Allstate has brought this matter forward as a preliminary issue, on the basis that the Application for Arbitration was made out of time, pursuant to subsection 281(5) of the Insurance Act and section 26 of the Schedule.

The issues in this hearing are:

1. Is the Application for Arbitration by Mr. Holguin barred by the application of subsection 281(5) of the Insurance Act and section 26 of the Schedule?

2. Allstate also seeks a refund of its assessment fee of $2,000, imposed pursuant to section 10.4 of the Dispute Resolution Practice Code.

Result:

1. Mr. Holguin's Application for Arbitration is barred because it is out of time.

2. Allstate is not entitled to a refund of its assessment fee of $2,000.

Hearing:

The hearing was held before me in North York, Ontario, on June 23, 1995.

Present at the Hearing:

Applicant:

Octavio Holguin

Insurer's Representative:

Grant R. Dow Barrister and Solicitor

Insurer's Officer:

Gary Tsuji

Witnesses:

Octavio Holguin

Interpreter:

Shelley Younger

Omnicom Language Services

Evidence and Findings:

The facts here are straightforward. Mr. Holguin agreed with the facts as set out in the Proposed Statement of Facts in the Insurer's Brief and its supporting documentation.

In summary, Mr. Holguin applied for arbitration on March 21, 1995. He had been in an accident on February 17, 1992, and his benefits were terminated March 3, 1992. The issue is: when did he receive notice of Allstate's refusal to pay benefits?

Subsection 281(5) of the Insurance Act states that an applicant must commence his or her arbitration proceeding concerning a dispute about statutory accident benefits within two years of an insurer's refusal to pay the benefit claimed or within such longer periods as may be provided in the Schedule.

Section 26 of the Schedule, as amended, states as follows:

26.--(1) A mediation proceeding under section 280 of the Insurance Act or an arbitration or court proceeding under section 281 of the Act in respect of benefits under this Regulation must be commenced within two years from the insurer's refusal to pay the amount claimed in the application for statutory accident 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.

(2) Despite subsection (1), an arbitration or court proceeding under section 281 of the Insurance Act may be commenced within 90 days after the mediator reports to the parties under subsection 280(8) of the Act.

The method of analysis for the time limitation was set out by Arbitrator Naylor in Emilia Zeppieri and Royal Insurance Company of Canada, February 17, 1994, OIC File No. A-005237:

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.

I will now set out the facts in more detail.

Mr. Holguin was operating a vehicle insured by Allstate when he was involved in an accident on February 17, 1992. On March 17, 1992, the law firm of Lofranco & Sabetti (then Lofranco, Longley & Vickar) wrote to Allstate to advise that they had been retained to act for Mr. Holguin with respect to a claim for accident benefits. (The firm no longer represents Mr. Holguin. He represented himself at the hearing.) The law firm next wrote to Allstate on July 14, 1992, enclosing an application for accident benefits, and instructing Allstate's adjuster to deal with the law firm directly and not with the client. The application form is also dated July 14, 1992.

By letter dated July 23, 1992, Sarah Godden, senior claim representative at Allstate, replied to Lofranco & Sabetti and enclosed an Assessment of Claim by Insurer form. In her letter, Ms. Godden noted the five-month delay in submitting the application and asked for an explanation. She enclosed a cheque for $185 with the letter. I quote the third paragraph of her letter in full:

The medical report enclosed with the application is dated March 3rd, 1992 and we are therefore willing to extend payment of accident benefits up until that date. As we have no evidence on file to support a claim for ongoing disability, benefits cannot be extended past March 3rd, 1992 at this time.

On the Assessment of Claim form the box labelled "Portion of Claim Denied" under Weekly Income Benefits was checked off. The following two paragraphs read:

The insurer will pay the amount of $185.00 per week for the period 2/25/92 through 3/3/92.

Explanation:Application submitted 5 months post MVA. Medical report dated 3/3/92. No evidence on file to support an ongoing disability.

Ms. Godden in her letter requested information about Mr. Holguin's regular activities as an unemployed person, and advised that she would be arranging an independent medical examination of him. Dr. Michael C. Hall examined Mr. Holguin on August 6, 1992. Dr. Hall concluded in his report as follows:

[Mr. Holguin] is certainly fit at the present time to continue with all the normal activities of self care in which he was engaged prior to the accident. He is also fit to undertake work in the type of activity that he was most recently employed in, that is selling contracts for window cleaners, or selling water filters.

Lofranco and Sabetti wrote to Ms. Godden on August 19, 1992 by fax and regular mail. I quote the first three paragraphs of their letter:

Further to your letter, dated July 23, 1992, please find enclosed a copy of a medical report completed by our client's attending physician, Dr. Alvin Chan for your review and consideration.

Please be advised that our client has been attending Dr. Chan's office and chiropractor treatment with Dr. Milne on a regular basis since March 12, 1992.

Kindly process accident benefits owing to our client after you review.

Ms. Godden enclosed a copy of Dr. Hall's report in a letter to Lofranco & Sabetti dated September 3, 1992. I quote the entire body of the letter:

Please find enclosed a copy of Dr. Michael Hall's assessment report of August 6th, 1992 which you will note indicates your client is fully capable of performing his regular daily activities as an unemployed person.

We are unable to consider any further payment of accident benefits.

I would appreciate receiving a response to my letter of July 23rd, 1992.

Apparently nothing further happened on the file until the parties went to mediation, which was conducted February 28, 1994 to April 22, 1994. The matter did not settle.

By letter dated November 4, 1994, William Ridgway, senior claim representative at Allstate, replied to a letter apparently written by Lofranco & Sabetti on October 31, 1994, which had apparently enclosed a further medical report in support of Mr. Holguin's claim. Mr. Ridgway noted that Ms. Godden had denied the claim in her letter dated September 3, 1992, and as it was now more than two years since the denial, he was not in a position to consider paying anything further in the matter.

Finally, the Application for Arbitration is dated March 21, 1995.

Mr. Holguin gave evidence on his own behalf. Although a Spanish translator sat beside him, Mr. Holguin generally gave his evidence in English. I found some of his testimony confusing, especially when he tried to relate his dealings with the law firm that formerly represented him.

Mr. Holguin testified that shortly after the accident, he contacted Allstate. He then retained counsel, as Allstate had refused his claim. Everything subsequent about his case he learned through his lawyers. He remembers attending for the medical examination requested by Allstate, and he remembers attending at the mediation. He testified that after the mediation he regularly telephoned his solicitors to find out how his case was going. However, he was constantly told to wait and be patient.

Mr. Holguin testified that after retaining his lawyers he never talked with Allstate, other than at the mediation. He testified that he understood Allstate had never offered to pay his claim beyond what they had already paid.

I am satisfied from Mr. Holguin's testimony that he knew early on that Allstate was denying his claim.

I find that Allstate has consistently refused Mr. Holguin's benefits. Ms. Godden in her letter of July 23, 1992, and in the accompanying Assessment of Claim, refused Mr. Holguin's benefits. She reaffirmed the refusal in her letter of September 3, 1992, with the unequivocal words: "We are unable to consider any further payment of accident benefits." At the latest, Mr. Holguin through his solicitors had notice of the unequivocal refusal by September 1992.

Subsection 24(8) of the Schedule provides that if the insurer refuses to pay an amount claimed in an application for statutory accident benefits, the insurer shall forthwith give written notice to the insured person giving reasons for the refusal.

Statutory Condition 13, in subsection 234(2) of the Insurance Act, which was in force in 1992, stated:

Written notice may be given to the insured named in this contract by letter personally delivered to the insured or by registered mail addressed to the insured at the insured's latest post office address as notified to the insurer.

[Emphasis added.]

In this case, Mr. Holguin hired lawyers, who notified Allstate in writing that all further communications should be directed to them. There is no doubt that the lawyers were retained by Mr. Holguin to act on his behalf during the relevant period. I am satisfied that Ms. Godden's letter of September 3, 1992, meets the requirements of subsection 24(8) of the Schedule and of Statutory Condition 13 in these circumstances.

Furthermore, it was clear from Mr. Holguin's testimony that he knew his benefits were being refused, and his subsequent conduct in commencing mediation and, eventually, the arbitration, indicate that he and his lawyers knew of the continuing refusal. I am satisfied that the notice was received in September 1992, which was approximately two years and six months before an application for arbitration was filed.

I heard no evidence from Mr. Holguin that would provide a reason to prevent Allstate from relying on the limitation period. There is no suggestion that Allstate ever changed its position, nor is there any suggestion that Allstate tried to deceive Mr. Holguin.

The limitation period contained under section 281(5) of the Insurance Act confers no discretion to extend the time-limit for commencing the arbitration in this case.²

I find that the Application for Arbitration with respect to claims arising out of Mr. Holguin's claim for weekly benefits as a result of the accident of February 17, 1992, has not been filed within two years of the denial of the claim by the Insurer in September 1992. It is outside the time-limits set out in section 281(5) of the Insurance Act and section 26 of the Schedule. Therefore, Mr. Holguin cannot go to arbitration, and an arbitrator has no jurisdiction to hear his case.

Mr. Holguin seeks his costs of this application (which presumably would be only the filing fee), whereas Allstate seeks a repayment of its assessment fee pursuant to section 282(11.2) of the Insurance Act.

This application should not have been brought forward, as it was clearly out of time.

The Insurance Act was amended as of January 1, 1994, to include the following provision:

282(11.2) If an insured person commences an arbitration that, in the opinion of the arbitrator, is frivolous, vexatious or an abuse of process, the arbitrator may award an amount to be paid by the insured person to the insurer that does not exceed the amount assessed against the insurer in respect of the arbitration under section 14.

Mr. Holguin testified that he constantly tried to find out from his solicitors how his case was going. I found him to be earnest, concerned, and confused by the whole process. I am not prepared to order that he repay the Insurer's filing fee.

In light of my findings, however, Allstate may wish to consider applying to the Registrar for a refund of its filing fee.

Expenses:

I do not exercise my discretion to award Mr. Holguin the expenses of this hearing.

Order:

1. Mr. Holguin's Application for Arbitration is barred because it is out of time.

2. Allstate is not entitled to a refund of its assessment fee of $2,000.

July 26, 1995

David Evans Arbitrator

Date

Footnotes

1. 1Prior to January 1, 1994, Ontario Regulation 672 was called the No-Fault Benefits Schedule. After that date it became the Statutory Accident Benefits Schedule — Accidents Before January 1, 1994. In this decision, the term "Schedule" will be used to refer to Regulation 672.
2. 2Nazrur Rahman and Co-operators General Insurance Company, December 21, 1993, OIC File No. A-000854