Ontario Insurance Commission
Neutral Citation: 1995 ONICDRG 148 File No.: A-011880
Between:
Noroz Ali Azadi Applicant
and
Allstate Insurance Company of Canada Insurer
Decision on a Preliminary Issue
The Applicant, Noroz Ali Azadi, was injured in two motor vehicle accidents. The first occurred on September 20, 1990. The second occurred on January 13, 1991. He applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("the Insurer"), payable under the Schedule.1 After these benefits were terminated by the Insurer, 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.
The issue in this preliminary hearing is:
- Is the Applicant's claim for weekly benefits arising out of the motor vehicle accident of September 20, 1990 barred by the operation of section 281(5) of the Insurance Act on the basis that the Applicant did not file for mediation within two years from the date of the Insurer's refusal to pay these benefits?
Result:
- The Applicant did not file for mediation with two years of the Insurer's refusal to pay weekly benefits arising from the accident of September 20, 1990. Consequently the Applicant's claim for these benefits is barred by the operation of section 281(5) of the Insurance Act, and the Applicant is precluded from proceeding to arbitration on this issue.
Hearing:
The hearing was held in North York, Ontario, on September 25, 1995, before me, Stewart McMahon, arbitrator.
Present at the Hearing:
Applicant's Representative: Harry Brown, Barrister and Solicitor Insurer's Representative: Samantha Simpson, Barrister and Solicitor Insurer's Officer: Gary Tsuji
Witnesses: Mr. James Cozzi, who was called by the Applicant, was the only witness.
Exhibits: 11 exhibits were filed by the parties. They are listed as Appendix 1 to this decision.
Background
Section 279(1) of the Insurance Act provides that disputes with respect to an insured person's entitlement to statutory accident benefits are to be resolved in accordance with sections 280 to 283 of the Act, and the Schedule.
Section 280 of the Act provides for the mediation of such disputes and section 281(2) provides that resort to arbitration or the courts can only be had if mediation fails.
Section 281(5) provides for a limitation period in the following terms:
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.
Section 26 of the Schedule similarly provides that mediation must be commenced within two years from the date of refusal:
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.....
The combined effect of these sections is to require an insured to commence mediation proceedings within two years from the insurer's refusal to pay benefits. Failure to do so will result in the applicant's claim being statute barred, and will preclude the applicant from proceeding to arbitration.
In this case, as in many others, the key to the dispute lies in determining the date that benefits were refused. Here the task is complicated by the following factors: (1) Mr. Azadi was involved in two accidents approximately four months apart, (2) the Insurer began paying benefits after the first accident, (3) the Insurer then stopped paying approximately four months after the second accident, and (4) a short time later began paying benefits again, retroactive to the initial date of termination.
When the benefits were subsequently terminated, the Applicant filed for mediation with respect to each of the accidents. There is no dispute as to the timeliness of the application for mediation with respect to the second accident, but the Insurer takes the position that mediation was not filed for within two years of the refusal to pay benefits arising from the first accident. The Applicant maintains that the second round of payments was a reinstatement of the benefits being paid with respect to the first accident. The Insurer maintains they were benefits being paid with reference to the second accident.
Evidence and Findings:
On September 20, 1990 the Applicant was involved in a motor vehicle accident ("first accident"). He applied for and began to receive weekly income benefits effective one week following this accident.
On January 13, 1991 the Applicant was involved in a second accident ("the second accident ").
On May 10, 1991, Mr. Mark Potts, a senior claims representative with the Insurer, wrote to the Applicant's solicitor advising that weekly benefits were being terminated effective that day. I note that in the "re" line at the top of the letter, the date of the subject accident is identified as September 20, 1990, and the claim number referred to is with respect to the first accident. The basis for the refusal was an IME conducted after the first accident, but before the second accident, which concluded that the Applicant was no longer disabled.
Mr. Brown, who appeared as counsel for the Applicant on the preliminary hearing, but who I note was not the Applicant's solicitor at the time of the events discussed, admitted that the letter of May 10, 1991 was clear and unequivocal, and was effective notice to the Applicant that his claim for weekly benefits arising from the first accident were being refused effective May 10, 1991.
Mr. Azadi's solicitors responded by way of a letter dated May 31, 1991. The contents of the letter are set below.
Dear Sir:
Re: My Client/Your insured : Ali Noroz Azadi
Your Claim Number : MEO49312 A87
Motor Vehicle Accident : September 20, 1990
Thank you for your letter of May 10, 1991.
You base your position upon the December Independent Medical Examination by Dr. Hall.
You fail to realize that your company was notified of the second accident which occurred on January 13, 1991.
Your December Independent Medical Examination is therefore out of date and is neglecting a significant event.
Please call me to discuss. Failing to do so, I will file a Form #1, Dispute Settlement.
I further advise you that my client is tentatively scheduled for an operation which is a result of his injuries of these accidents as in Dr. Hall's Independent Medical Examination.
The author of the letter was Mr. James Cozzi, who was called as the sole witness at the hearing. James Cozzi is the brother of Peter Cozzi who acted as the Applicant's solicitor. James Cozzi has been a law clerk since 1978, and began working with his brother in 1989. A large part of Peter Cozzi's practice is devoted to motor vehicle litigation, and a significant amount of that litigation involves statutory accident benefits. James Cozzi generally dealt with the day to day handling of the "no-fault "files, and at that time was in the habit of drafting letters in his brother's name.
James Cozzi testified that when he drafted the letter he was, of course, aware of the second accident, but that the purpose of his letter was to secure a "reinstatement" of benefits with respect to the first accident. I do not accept this contention. While it is true that the reference line stipulates the first accident, Mr. Cozzi himself gave evidence that he attached little importance to this. Even a cursory reading of the second, third and fourth paragraphs of the letter make it abundantly clear that the focus is the second accident. Mr. Cozzi suggests that in terminating benefits, the Insurer has forgotten about the second accident, and that in light of this, the IME undertaken by the Insurer after the first accident was out of date.
While it is true that the focus of the letter was the fact of a second accident, I am satisfied that Mr. Cozzi did not turn his mind to the legal consequences flowing from the fact that the Applicant had been in more than one accident. I believe that the most that can be said is that Mr. Cozzi approached the question of Mr. Azadi's entitlement to benefits as a global or a single question. As is borne out by later statements made by Mr. Cozzi, it is apparent that he did not approach the matter of Mr. Azadi's entitlement to benefits as two distinct questions, namely his entitlement to benefits as a result of disability arising from the first accident, and his entitlement to benefits as a result of a disability arising from the second accident.
The Insurer's response to James Cozzi's letter was prepared by Sandra Godden, a claims representative, and is dated June 17, 1991. I note that the reference line identifies the date of the subject accident as being January 13, 1991, and the claim number does not correlate to the earlier September 1990 accident. Mr. Cozzi admitted that the reference on both the accompanying and subsequent cheques referred to the second and not the first accident.
Mr. Cozzi admitted that at the time he probably did not note that the Insurer's reference was to a new claim number, and that the date of the accident referred to was January 13, 1991. In fact he stated that if he had noted the change, it probably would not have caused him any concerns because he was dealing with multiple accidents, and his attention was focused on having the benefits "reinstated" and complying with the requirements for an additional IME.
James Cozzi testified that in his experience insurers rarely pay claims before an IME is conducted. Mr. Brown urged upon me that in light of this evidence, I ought to infer that despite the reference to the second accident on the cheque and in the letter, the benefits were a reinstatement of the benefits attributable to the first accident. I do not find this logic compelling. Firstly, I do not accept Mr. Cozzi's evidence that it is rare for insurers to pay claims pending the receipt of an IME. Secondly, in this case, the Insurer had evidence from the IME that prior to the second accident, the Applicant was no longer disabled. I conclude that if any inference is to be drawn, the more natural one would be that the payments were with respect to the second accident.
The report of the second IME was delivered to the Applicant's solicitors in late June or early July 1991. James Cozzi testified that upon a review of that report, it became apparent to him that the payments being made by the Insurer must have been attributable to the first accident. I have some difficulty in accepting this evidence. As stated above, it is my view that Mr. James Cozzi was not distinguishing between entitlement based upon the two accidents, except to the extent that he maintained that the occurrence of the second accident ought to have resulted in the continuance of the benefits.
If he did in fact conclude from a review of the report that the Insurer must have been paying with reference to the first accident, this was a dangerous conclusion in the extreme. Firstly on a review of that report, I am not satisfied that this conclusion is justified. While it is true that the doctor concludes that the complaints are essentially the same, the doctor does not distinguish between the effects of the first and second accident. Secondly, there was no change in the Insurer's actions after receipt of the IME report that would signal that it was making continued payments with reference to the first accident. To the contrary, as stated above, the cheques continued to refer to the second accident.
James Cozzi was asked if he made any inquiries of the Insurer to ascertain if the payments being made by the Insurer were attributable to the first or the second accident. He answered that he did not.
Approximately a year later, on July 14, 1992, the Insurer wrote to the Applicant's solicitor advising that an investigation revealed that the Applicant had been working throughout his alleged disability, and asking that Mr. Cozzi confirm the date of Mr. Azadi's return to work. Again the date of the accident and the claim number identify the second accident.
On January 7, 1993 the Insurer applied for mediation, seeking a repayment of benefits. The date of the incident is identified as being January 13, 1991. In the accompanying Assessment of Claim by Insurer dated January 4, 1993, it is stated that;
the insurer will pay the amount of $185 per week for the period 1-20-91 through return to work
The Report of Mediator states that the mediation failed because Mr. Cozzi indicated that he no longer represented the Applicant, and had no idea where Mr. Azadi could be found.
The Applicant's solicitors apparently wrote to the Insurer on June 7, 1993, to advise that Mr. Azadi was contemplating surgery. The Insurer's response dated June 25, 1993 maintains the reference to the second accident. Information was sought concerning the surgery and further reference was made to the post-accident employment.
On July 7, 1994 the Applicant's solicitor filed two separate applications for mediation, one in respect of each accident. This appears to be the first time that the Applicant's solicitors approached the question of their client's entitlement to benefits as two distinct questions. The Report of Mediator dated October 18, 1994, reveals that the Insurer took the position that Mr. Azadi's claim arising from the first accident was statute barred as not having been commenced within two years of the date of refusal.
Argument and Analysis
After a review of the evidence as a whole, I do not accept Mr. Brown's assertion that when the Insurer commenced payments in May of 1991, it was reinstating the benefits owing as a result of the September 20, 1990 accident. As acknowledged by Mr. Brown, the letter of May 10, 1991 is unequivocal; the weekly benefits with reference to the September 20, 1990 accident were being terminated. I quote from the penultimate paragraph of the letter; "please note that I am closing this aspect of the file". I can find no evidence to suggest that the Insurer reopened that aspect of the file, and in particular that the payments commencing May 31, 1991 and made retroactive to May 11, 1991 were attributed to the September 20, 1990 accident. On the contrary, the evidence as a whole suggests that the payments were made with reference to the January 13, 1991 accident.
As an alternate argument, Mr. Brown urged upon me that in the particular circumstances of this case where the Applicant was involved in two accidents only a few months apart, causing similar injuries, and the second round of payments was retroactive to the first round of payments, that the Insurer was obliged to ensure that the Applicant understood that the second round of payments was in respect of the second accident, and that it was maintaining its denial with respect to the first accident. Mr. Brown points to the fact that in all of the correspondence from the Applicant's solicitors the "re" line identifies the first accident. He suggests that in light of this fact, the Insurer had a positive duty to dispel any potential confusion.
A number of arbitral decisions have held that when an Insurer is relying on section 281(5) to bar a potential claim, the insurer must establish that it gave its insured a clear notice of its refusal to pay benefits. Mr Brown cited the following passage from Arbitrator Seife's decision in Jack Talany and Royal Insurance Company of Canada, May 3, 1995, OIC File No. A-009300:
In my view, the purported notice of refusal itself must state, clearly and unequivocally, and in a simple straightforward fashion, the fact that the insurer refuses to pay the benefit in question, and the reasons for the refusal. The position of the insurer must be ascertained from an objective reading of the notice itself, independent of any prior communication between the parties.
Arbitrator Mackintosh underscores the importance of a clear written notice where there are several incidents, overlapping claims, and ongoing negotiations, in N.R. and Wellington Insurance Company, July 6, 1995, OIC File No. A-000104.
There are sound reasons for imposing this obligation upon the insurer. However in this case the Insurer fulfilled that obligation by way of the May 10, 1991 letter, which as noted previously, Mr. Brown acknowledges to have been a clear and unequivocal refusal to pay further weekly benefits, with respect to the first accident.
I accept that if subsequent actions of the Insurer had cast doubt on whether or not that denial was being maintained, there might be an additional obligation to either reaffirm the denial, or issue a fresh denial, as the case may be. However I do not find any evidence to suggest that the Insurer did anything to cause any uncertainty, or to suggest that its position concerning the denial of weekly benefits attributable to the first accident had changed in any way. I am not satisfied that the mere fact of the second round of payments, when seen in the entire context of the dealings between the parties, is sufficient to establish a course of conduct that would require the Insurer to reaffirm its earlier denial.
The Applicant's counsel suggests that the reference to the claim numbers and the date of the accident in the reference lines of the Insurer's correspondence, and on the cheques, ought to be ignored or given little weight. I disagree. The Insurer was dealing with a firm of experienced solicitors . The use of "re" lines is widespread amongst both insurance companies and lawyers. References to dates cannot simply be ignored, where there is nothing in the body of the letter to contradict them.
Likewise the Applicant's solicitors ought to have been aware of the significance of the change in claim numbers, particularly so where they had been given clear notice that the Insurer was closing off the weekly benefits attributable to the first accident.
In conclusion I find that the refusal to pay further weekly benefits attributable to the accident of September 20, 1990, was communicated to the Applicant on or about May 10, 1991. The Applicant did not apply for mediation concerning his entitlement to further weekly benefits attributable to the accident of September 20, 1990, until July 7, 1994, well in excess of two years after the date of the refusal. The Applicant's claim for weekly benefits arising from the motor vehicle accident of September 20, 1990 is barred by the operation of section 281(5) of the Insurance Act, and the Applicant is accordingly precluded from proceeding to arbitration on this issue.
Expenses
With respect to the question of the Applicant's expenses of the preliminary hearing, I note that the parties are scheduled to proceed to arbitration with respect to the entitlement to weekly benefits arising from the accident of January 13, 1991, and that the hearing is scheduled to commence on Monday, October 30, 1995. I leave the question of the expenses of this preliminary hearing to the discretion of the arbitrator conducting the main hearing.
Order:
- The Applicant's claim for weekly benefits arising from a motor vehicle accident on September 20, 1990 is barred by the operation of section 281(5) of the Insurance Act, on the basis that he did not apply for mediation within two years of the Insurer's refusal to pay these benefits. The Applicant is accordingly precluded from proceeding to arbitration on this issue. This order does not preclude the Applicant from proceeding with the arbitration of the issue of his entitlement to weekly benefits with respect to the motor vehicle accident of January 13, 1991.
October 17, 1995
Stewart M. McMahon Arbitrator
Appendix 1
Exhibits
Exhibit #1 Letter of Mr. M. Potts, to Mr. P. Cozzi, dated May 10, 1991.
Exhibit #2 Letter of Mr. P. Cozzi, to Mr. M. Potts, dated May 31, 1991.
Exhibit #3 Letter of Ms. S. Godden, to Mr. P. Cozzi, dated June 17, 1991.
Exhibit #4 Letter of Mr. P. Cozzi, to Mr. M. Potts, dated June 24, 1991.
Exhibit #5 Letter of Ms. S Godden, to Mr. P Cozzi, dated July 14, 1992.
Exhibit #6 Letter of Mr. B. Barber, to Mr. P. Cozzi, dated June 25, 1993.
Exhibit #7 Letter of Ms. S Godden, to Mr. P. Cozzi, dated July 18, 1991, together with the report of Dr. M. Hall, dated June, 27, 1991.
Exhibit #8 Report of Dr. M. Hall dated, dated December 10, 1990.
Exhibit #9 Report of Dr. M. Hall, dated, May 2, 1991.
Exhibit #10 Report of Dr. A. Donskoy, dated March 7, 1991.
Exhibit #11 Report of Dr. A. Donskoy, dated August 2, 1991.