Neutral Citation: 1995 ONICDRG 150

File No.: A-015289

ONTARIO INSURANCE COMMISSION

BETWEEN:

DOREEN LAMB

Applicant

and

PILOT INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Issues:

The Applicant, Mrs. Doreen Lamb, was injured in a motor vehicle accident on January 20, 1992. She applied for and received statutory accident benefits from the Pilot Insurance Company ("Pilot"), payable under section 12 of Ontario Regulation 672.¹ These benefits were paid until August 11, 1992, when they were terminated. Mrs. Lamb applied for mediation on November 29, 1994 and for arbitration on April 3, 1995 with respect to ongoing weekly income benefit. Pilot states that Mrs. Lamb is precluded from proceeding on to arbitration because her application was brought beyond the two year limitation under section 281(5) of the Insurance Act, R.S.O. 1990, c.I.8, as amended. Mrs. Lamb states that she is able to proceed to arbitration because Pilot has never provided her with a written denial of benefits, nor has Pilot complied with section 24(8) of the Schedule. Mrs. Lamb claims that the limitation periods in section 281 (5) of the Insurance Act and section 26 (1) of the Schedule do not apply to her application and that she is entitled to proceed to arbitration. The parties were unable to resolve their disputes through mediation and the Applicant applied for arbitration under the Insurance Act.

The preliminary issue is:

1. Did Mrs. Lamb commence her arbitration proceedings within the time-limits prescribed under section 281 (5) of the Insurance Act and under section 26 of the Schedule?

Result:

1. Mrs. Lamb commenced her arbitration proceeding within the time-limits prescribed by section 281 (5) of the Insurance Act and section 26 of the Schedule and she is entitled to proceed to arbitration in this case.

2. Mrs. Lamb is entitled to her expenses incurred in respect of the hearing on a preliminary issue.

Hearing:

The hearing of the preliminary issue was held in North York, Ontario, on September 26, 1995, before me, Bruce Robinson, Arbitrator.

Present at the Hearing:

Applicant's Representative:

Mr. Andrew R. Kerr Barrister and Solicitor

Insurer's Representative:

Ms. Grace Pang Barrister and Solicitor

The application was heard on the basis of an Agreed Statement of Facts, certain agreed correspondence, and Mrs. Lamb's affidavit of September 22, 1995.

Exhibits

Exhibits are contained in Schedule A.

Evidence and Findings:

The limitation period for commencement of an arbitration proceeding is set out in section 281(5) of the Insurance Act as follows:

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 Scheduee, 1990, c.2, s. 65, part.

The time-limit for arbitration or litigation set out in section 281(5) has not been extended under the Schedule. However, section 26 of the Schedule establishes a time limit for commencing mediation. It states:

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 benefits.

Accordingly, Mrs. Lamb has two years from Pilots refusal to commence an arbitration. Section 24(8) of the Schedule prescribes the manner in which Pilot must communicate its refusal to pay benefits. It states:

"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 the reasons for the refusal."

The issue in this case is when, if at all, did the two year limitation period started to run.

Pilot argues that it sent a letter dated August 11, 1992 to Mrs. Lamb and that this letter constitutes written notice of refusal to pay any further benefits, as required by section 24(8) of the Schedule. Therefore, Pilot argues that Mrs. Lamb is precluded from proceeding on to arbitration as her application was brought beyond the two year limitation period. This relevant portion of this letter states:

" With regard to the above noted claim, please find a cheque in the amount of $307.69 representing claimed milage and a cheque in the amount of $1,387.73 representing total disability payments from May 29th, 1992 through to July 19th, 1992. Please be advised that we have now paid you up to the time your attending physician advised you could return to work. If you still find yourself disabled at this time kindly have your attending physician complete the enclosed Ontario Automobile Insurance Medical or Psychological report."

Pilot sent a further letter dated September 11, 1992 which stated:

"We are in receipt of your recent submission and thank you for same.

A cheque in the amount of $609.82 has been issued and sent to you, representing Total Disability payment from July 20, 1992 through to and including August 11, 1992 in accordance with Dr. Lawrence Bell's documentation. A cheque has also been issued in the amount of $492.70 representing re-imbursement (sic) for chiropractic treatments and milage incurred.

With respect to your housekeeping claim, I would refer you to our correspondence of August 11th, 1992 in which we outline that we must have a letter from your Doctor outlining that you do indeed require these services because of injuries sustained in the above noted accident and we will require an explanation from your Doctor as to what particular duties you cannot perform and how long you will require assistance for both in duration and on a weekly basis. I have read Dr. Bell's letter of August 21st, 1992 and although he is confirming that you require housekeeping services because of your motor vehicle accident related injuries, he is not outlining what activities you require assistance with and how long you will require assistance in these activities for both duration and on a weekly basis. Once we have received this important information from your Doctor, further consideration will be given towards your claim for housekeeping activities.

Should you have any questions or concerns with regard to this, please do not hesitate to contact me at the above noted telephone number.

We have also taken the liberty of enclosing a supply of Applications for Additional Accident Benefits for your convenience."

The joint statement of facts and the affidavit of Mrs. Lamb set out the circumstances giving rise to the hearing. Mrs. Lamb was involved in a car accident on January 20, 1992. At the time of the accident she worked for Snow North Performance Inc. as an office clerk. She sustained injuries in the accident and was initially off work four or five days immediately after the accident. She then returned to work until May 21, 1992. She applied to Pilot for weekly income benefits pursuant to section 12 of the Schedule in August 1992. The Insurer paid weekly income benefits from May 29, 1992 until August 11, 1992.

The Insurer terminated the weekly income benefits based on the August 11, 1992 letter of Mrs. Lamb's chiropractor Mr. Lawrence Bell, which stated:

"I have advised my patient Doreen Lamb that she may return to work on August 12, 1992."

Mrs. Lamb contacted her employer to advise them that she was ready to go back to work on August 12, 1992. Unfortunately there was no work available and she was laid off.

Mrs. Lamb states in her affidavit as follows:

"I knew that Dr. Garry and Dr. Bell felt that I could try to return to work and therefore, even though I was still hurting, I did not think there was any point in asking Pilot for further benefits, and I did not do so. I simply claimed Unemployment Insurance benefits. I felt that by the time another job came up through Unemployment, I would have recovered enough to take it. I never dreamed that I would still be having the same problems by the time the Unemployment benefits ran out."

Mrs. Lamb stated in her affidavit that in the fall of 1993, she seemed to get worse and she asked Pilot for wage loss benefits in a letter of December 3, 1993. Pilot sent her to see Dr. Mascarenhas on August 4, 1994 and this doctor supplied Pilot with a report which Mrs. Lamb thought "was a favourable report." When no payments were received, Mrs. Lamb contacted Ms. Page, the new representative of Pilot. Mrs. Lamb's affidavit evidence, which was not contradicted or challenged at the hearing, states:

"By this point, I felt I was getting the runaround. When I told Ms. Page this, she told me that I should consult a lawyer and commence mediation and arbitration proceedings. This was the first time that anyone at Pilot Insurance had indicated to me that they might not or would not eventually pay my income replacement benefits when I supplied them with sufficient information. I did not ever ask Pilot for wage loss benefits after August 11, 1992, until just prior to my letter of December 3, 1993. They never told me that they would not pay these benefits or gave any indication that they would not pay these benefits until the conversation that I had with Patricia Page referred to above."

Mrs. Lamb then applied for mediation on November 29, 1994 and for arbitration on April 3, 1995.

Mrs. Lamb argues that she was never given written notice of Pilot's refusal to pay benefits, and therefore the limitation never started to run and she is entitled to proceed on to arbitration.

The Law:

As an arbitrator, I do not have any jurisdiction to extend the limitation for commencement of the arbitration process.²

I adopt the test set forward in Emilia Zeppieri and Royal Insurance Company, February 17, 1994, OIC File No. A-005237, where Senior Arbitrator Naylor stated:

"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 dealing with Section 281(5) of the Insurance Act she stated:

"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."

(Emphasis added)

Prior cases have considered the wording that is required to meet the test requirements set out by Arbitrator Naylor.³ The onus rests with the insurer under section 24(8) and it is a heavy onus. The purpose of this section is to require an insurer to tell an unsophisticated person, in a simple and easy to understand written form, that the insurer will not pay certain benefits and why it has decided not to pay. This notice must stand on its own⁴. A termination of payments by an insurer alone does not comply with the notice requirements of section 24(8).⁵

The Insurer submits that the letter of August 11, 1992 is the written notice advising Mrs. Lamb of its refusal to pay benefits. In applying the test set out in Zeppieri I find that the letter of August 11, 1992 is not clear and unequivocal, as required by section 24(8) and by the case law.⁶ There is no indication in this letter that Pilot is refusing to pay benefits. The letter was, in fact, subject to different interpretations by the parties, as evidenced in the uncontradicted affidavit of Mrs. Lamb. The Insurer simply sent a cheque to Mrs. Lamb and indicated that the payment covered a period up to July 19, 1992. It would have been very easy for the Insurer to state that it was refusing to pay her claims for weekly income benefits from that time forward. The Insurer does not say anything about terminating benefits, but instead encloses a further form for Mrs. Lamb to take to her physician.

The subsequent letter of September 11, 1992 does not mention any refusal to pay benefits. Again the Insurer enclosed "a supply of Applications for Additional Accident Benefits." I accept Mrs. Lamb's affidavit evidence that she was not aware of any refusal by Pilot to pay benefits.

I find that Pilot has failed to satisfied the first test in the Zeppieri decision. It has not clearly and unequivocally set forth a refusal to pay Mrs. Lamb’s benefits. Turning to the second step in the Zeppieri decision, I find that Pilot can not rely on the limitation period prescribed by section 281(5) of the Insurance Act, as the period never started to run.

I find that Pilot has failed to comply with section 24(8) of the Schedule and therefore, Mrs. Lamb is entitled to proceed to arbitration.

Expenses:

The Applicant seeks an award of her expenses in this hearing on the preliminary issue, pursuant to section 282(11) of the Insurance Act The prescribed expenses are set forth in Schedule 1 of the Dispute Resolution Practi'ce Code and Ontario Regulation 664 (R.R.O. 1990), Dispute Resolution Expenses.

The outcome of this hearing determined whether the Applicant's entire case should proceed to hearing. The hearing was essential and the Applicant's conduct reasonable. In accordance with the principles set forth in Ralph McCormick and Economical Mutual Insurance Company, October 2, 1991, OIC File No. A-000139, I award the Applicant her expenses of this arbitration.

Order:

1. Mrs. Lamb is entitled to proceed on to an arbitration in this case.

2. Mrs. Lamb is entitled to her expenses incurred in respect of the hearing on a preliminary issue.

October 19, 1995

Bruce Robinson Arbitrator

Date

Schedule A

1. Affidavit of Doreen Lamb dated September 22, 1995

2. Correspondence brief of Pilot Insurance Company

3. Joint statement of facts

4. Applicant's brief of authorities

5. Letter from Dr. Bell dated August 11, 1992

6. Memorandum of law of the Applicant

7. Memorandum of law of the Insurer

"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."

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
3. 3Zeppieri; Octavio Holguin and Allstate Insurance Company, July 26, 1995, OIC File No. A-009270; Violet Wiggan and Simcoe & Erie General Insurance Company, October 14, 1993, OIC File No. A-004204;and Jack Talany and Royal Insurance Company, May 3, 1995, OIC A-009300
4. 4In Talany Arbitrator Seife stated:
5. 5N.R. and Wellington Insurance Company, July 6, 1995, OIC File No. A-000104
6. 6Talany