ONTARIO INSURANCE COMMISSION
Neutral Citation: 1995 ONICDRG 176
BETWEEN:
Kulwant Soordhar, Applicant
and
Citadel General Assurance Company, Insurer
DECISION ON A PRELIMINARY ISSUE
The Applicant, Kulwant Soordhar, was injured in a motor vehicle accident on January 19, 1991. She applied for and received statutory accident benefits from the Insurer, payable under Ontario Regulation 672.1 Weekly income benefits were terminated by the Insurer on September 17, 1992. 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 hearing is:
- Did the parties enter into a binding settlement, thereby precluding the Applicant from proceeding with the arbitration?
Result:
- The parties did not enter into a binding settlement, and accordingly, the Applicant may continue with the arbitration.
Hearing:
The hearing was held in North York, Ontario, on August 21, and 31, 1995, before me, Stewart M. McMahon. At the conclusion of the hearing both parties requested an opportunity to submit further written materials. I asked the parties to file the additional material by September 8, 1995. The Applicant filed her materials on September 1, 1995. The Insurer did not file its materials until September 13, 1995.
Present at the Hearing:
Applicant: Kulwant Soordhar
Applicant's Representative: H.M. Lewin, Barrister and Solicitor
Insurer's Representative: Patrick Mazurek, Barrister and Solicitor
Witnesses:
The Applicant was called to give evidence. In addition, at the commencement of the hearing the parties filed a number of documents which each counsel stipulated accurately represented the material facts.
Exhibits:
Nine exhibits were filed by the parties. They are listed in Schedule 1
Evidence:
From the documents filed, and the evidence given by Mrs. Soordhar, the relevant facts can be summarized as follows.
The arbitration hearing was scheduled to commence on Monday March 20, 1995. On Friday March 17, 1995 the Applicant attended at her solicitors' office to review a formal offer submitted by the Insurer. During this meeting with Mr. Lewin she reviewed and then signed a letter of instruction directing him to accept the Insurer's offer.
Upon receipt of the written instructions, Mr. Lewin notified Mr. Mazurek, the Insurer's counsel that the offer was accepted. Both counsel faxed brief letters to the Commission advising of the resolution of the dispute, and the hearing was cancelled.
On Tuesday March 28, eleven days after the offer was accepted, Mr. Mazurek delivered correspondence to Mr. Lewin that contained the following documents:
(i) Three copies of a 'Final Release and Notice," in accordance with the requirements of the "Settlement Regulation"
(ii) Draft Minutes of Settlement
(iii) Draft Consent
(iv) Draft Order
(v) The settlement funds
The letter stipulated that Mr. Lewin was to:
Please hold the settlement funds in escrow, pending the lapse of two business days subsequent to Ms. Soordhar executing the Release. In any event do not release settlement funds until we have seen a signed and dated copy of the Release.
On Wednesday March 29, Mr Lewin's secretary spoke to the Applicant by phone and arranged for her to attend at Mr. Lewin's office on Friday March 31. Mrs. Soordhar met with Mr. Lewin and advised him that she was no longer prepared to settle in accordance with the terms of the offer. Mr. Lewin immediately faxed a letter to Mr. Mazurek stating:
Our client attended our office on March 31, and having read and received the final release and notice instructed us to refuse and rescind this settlement and instructed us to deliver this written notice to you in accordance with clause 3 of the final release and notice. Written confirmation further to this fax will be forwarded to you shortly by mail together with return of your client's cheque for the previously agreed settlement.
The Applicant admitted on cross-examination that by the time she attended at Mr. Lewin's office, she had already made up her mind that the offer she had earlier agreed to accept was inadequate.
Argument and Analysis:
In the normal course of affairs, a settlement is negotiated by the solicitors exchanging offers until eventually an offer is presented by one party that is acceptable to the other. Under common law rules of contract, once the acceptance of that offer is communicated to the offeror, the settlement becomes binding and can be enforced by either party. Both parties agree that under these rules a binding settlement was negotiated on Friday March 17. The dispute arises over the impact of section 9.1 of Regulation 664 of R.R.O 1990 as amended by section 7 of Regulation 780/93 (hereinafter referred to as the Settlement Regulation"), on the settlement process.
The wording of the regulation is set out in it's entirety below, I have taken the liberty of highlighting the passages I will refer to.
SETTLEMENTS — STATUTORY ACCIDENT BENEFITS
9.1—(1) In this section, "settlement" means an agreement between an insurer and an insured person that finally disposes of a claim or dispute in respect of the insured person's entitlement to one or more benefits under the Statutory Accident Benefits Schedule.
(2) Before a settlement is entered into between an insurer and an insured person, the insurer shall give the insured person a written notice that contains the following:
A description of the benefits that may be available to the insured person under the Statutory Accident Benefits Schedule and any other benefits that may be available to the insured person under a contract of automobile insurance.
A description of the impact of the settlement on the benefits described under paragraph 1, including a statement of the restrictions contained in the settlement on the insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act.
A statement that the insured person may rescind the settlement within two business days after the settlement is entered into by delivering a written notice to the insurer.
A statement that the tax implications of the settlement may be different from the tax implications of the benefits described under paragraph 1.
If the settlement provides for the payment of a lump sum in an amount offered by the insurer and, with respect to a benefit under the Statutory Accident Benefits Schedule that is not a lump sum benefit, the settlement contains a restriction on the insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act, a statement of the insurer's estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value.
A statement advising the insured person to consider seeking independent legal, financial and medical advice before entering into the settlement.
(3) A settlement may be rescinded by the insured person, within two business days after the settlement is entered into, by delivering a written notice to the insurer.
(4) If the insurer did not comply with subsection (2), the insured person may rescind the settlement after the period mentioned in subsection (3) by delivering a written notice to the insurer.
(5) A restriction on an insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act is not void under subsection 279 (2) of the Act if,
(a) the restriction is contained in a settlement; and
(b) the insurer complied with subsection (2). O. Reg. 780/93, s. 7.
In general terms the "Settlement Regulation" does two things. Firstly, it requires the insurer to prepare and give to the insured person a written notice that contains, amongst other things, a description of the benefits which might be available to the insured person, a description of the settlement terms including an estimate of the commuted value of any lump sum, a description of the impact of the settlement on the insured person's entitlement to further benefits and a statement advising the insured person to seek legal, financial and medical advice before entering into the settlement. Secondly it provides for a cooling off period of two business days within which the insured person may rescind any settlement entered into.
Subsection (1) defines "settlement" as "an agreement... that finally disposes of a claim or dispute in respect to the insured person's entitlement to one or more benefits..."
The principle issue I face in this case is discerning if there was a settlement, as defined by the regulation, and if so, at what point it was entered into.
Mr. Mazurek contends that the "Settlement Regulation" has no effect on the parties ability to enter into a settlement in the normal fashion, and that it merely provides for a ex post facto disclosure followed by a two day cooling off period. Seen from this perspective the delivery of the written notice is only a pre-condition to the settlement becoming irrevocable.
Based on this analysis Mr. Mazurek argues that the agreement entered into on Friday March 17 was a settlement, that became irrevocable 48 hours after the delivery of the written notice. Mr. Mazurek further argues that the delivery of the statement to the opposing counsel is effective delivery to the Insured. Based on these assertions he contends that the settlement became binding on Thursday March 30, two days after the settlement papers were delivered to Mr. Lewin's office. If Mr. Mazurek's argument is correct, when the Applicant attended at her solicitor's office on Friday March 31, it was already too late for her to rescind the settlement.
The alternate interpretation of the Regulation is that it provides for a mandatory procedure to be followed by the parties if they wish to enter into an agreement 'that finally disposes of a claim or dispute in respect of the insured person's entitlement to...benefits," and that the delivery of the written notice is a pre-condition to entering into any such settlement. If this interpretation is correct the settlement of claims for Statutory Accident Benefits involves a three stage process. First, the parties negotiate the terms of the settlement. Second, the insurer prepares and gives to the insured the written notice required by the 'Settlement Regulation." Third, the parties enter into the settlement, whereupon the insured has two business days to rescind the settlement. Notwithstanding Mr. Mazurek's argument concerning the way the 'Settlement Regulation" ought to be interpreted, I note that in this case the Insurer treated the delivery of the written notice as a pre-condition to entering into a settlement. In this regard I refer to schedule B" to the written notice which contains the Insurer's estimate of the commuted value of the benefits potentially claimable by the Applicant. In paragraph 1 of that schedule the Insurer states;
The settlement being proposed by the insurer provides for the payment of ...
Paragraph 2 of the schedule reads:
The proposed settlement contains a restriction which prohibits ...
Reference can also be made to Mr. Mazurek's own letter of March 27, 1995, referred to above, in which he directs Mr. Lewin to hold the funds 'pending the lapse of two full business days subsequent to Ms. Soordhar executing the release."
Mr. Lewin did not directly address the question of when the settlement was entered into. However he stated that in his view the "Settlement Regulation" contemplates that the "cooling off period does not begin to run until the Applicant herself receives the notice. Based on this argument he contends that his letter of March 30; which was delivered on the same day that Mrs. Soordhar received the notice, effectively terminated the agreement.
Mr. Mazurek acknowledged that the wording of subsection (2)
Before a settlement is entered into between an insurer and an insured person, the insurer shall give the insured person a written notice...
appears to contemplate that the delivery of the notice is a pre-condition to entering into a settlement. However he points to subsection (4) to support his contention that the delivery of the notice may follow after the settlement is entered into, and that its delivery is only a pre-condition to the settlement becoming irrevocable. Subsection (4) provides
If the insurer did not comply with subsection (2) [the delivery of the notice] the insured person may rescind the settlement after the period mentioned in subsection (3) by delivering a written notice to the insurer.
If one presumes that delivery of the notice is a pre-condition to entering into a "settlement," if the written notice was not delivered, there would be no settlement to rescind as provided for in subsection (4). I agree with Mr. Mazurek that it is problematic to reconcile the wording of subsection (4) with the contention that the delivery of the notice is a precondition to entering into a settlement. I do not however accept Mr. Mazurek's contention that it therefore follows that the delivery of the notice is not a pre-condition to entering into a settlement. I am persuaded on a reading of the section as a whole that the drafters intended that the delivery of the notice be a pre-condition to entering into a settlement. It is my view that the drafters contemplated that the parties would negotiate the basis for a settlement, following which the insurer would prepare the settlement documents including the notice provided for in subsection (2). If after receipt and review of the disclosure statement the insured person is still content to dispose of his or her claim on the basis of the settlement proposal, and confirms that intention by notifying the insurer that the settlement proposal is accepted, then and only then does the cooling off" period commence.
Mr. Mazurek argued, that this three step process is too cumbersome and affords the insured too many opportunities to resile from what would otherwise be a binding settlement. He argued that the insured is adequately protected by a two stage process in which the delivery of the written notice follows the formal settlement, and that the cooling off" period commences upon the delivery of that notice. There is some merit to this argument, however I am satisfied that to accede to it would be to ignore the clear wording of subsection (2) which provides for the delivery of the notice before a settlement is entered into.
In light of the fact that I have concluded that the delivery of the written notice is a pre-condition to entering into a settlement it follows that the cooling off" period never commenced, and hence I need not consider Mr. Mazurek's contention that the 'cooling off period commenced with the delivery of the notice to the Applicant's counsel. However I offer a few general comments. Firstly Mr. Mazurek's argument was largely based upon the existence of a solicitor client relationship and the usual practice followed for the service of legal papers. However the 'Settlement Regulation" does not speak of the delivery of the written notice in those terms. It states that the 'Insurer shall give the insured person a written notice..."
Secondly it is clear that the intention of the drafters of the Regulation was to afford the insured a period of contemplation to consider all of the information contained in the notice. If the delivery of the notice to the insured's counsel is effectively giving it to the insured, then the period of contemplation becomes purely illusory as demonstrated by this case. Mr. Lewin's secretary spoke with the Applicant the day after the receipt of the notice, and arranged an appointment within two days. It is hard to imagine how an earlier appointment could have been arranged, yet on the strength of Mr. Mazurek's analysis the "cooling off period had already expired by the time the Applicant attended at her solicitors office.
Alternatively, Mr. Mazurek submitted that the "Settlement Regulation" only applied to the resolution of disputes concerning those Statutory Accident Benefits provided for in Regulation 776/93, the Statutory Accident Benefits Schedule-Accidents on or after January 1, 1994, often referred to as the SABS.
While it is true that the "Settlement Regulation" also came into force on January 1, 1994, it was not a part of Regulation 776/93. The settlement procedure came into force as part of Regulation 780/93 which amended R.R.O. 664.
In addition in subsection (1) of the "Settlement Regulation" it states that the section is concerned with the settlement of claims for benefits under the Statutory Accident Benefits Schedule, without restricting it to either the schedule applicable to accidents before January 1, 1994 or the schedule applicable to accidents after January 1, 1994. If the drafters had intended the regulation to apply only to the SABS surely they would have indicated in subsection (i) that it referred to Statutory Accident Benefits - Accidents on or After January 1, 1994.
In light of the fact that the 'Settlement Regulation" is not a part of the SABS itself and the wording of the 'Settlement Regulation" does not restrict its application to the SABS, I can see no reason for restricting its application.
In correspondence delivered thirteen days after the hearing, Mr. Mazurek asked for leave to file written submissions on whether or not the Settlement Regulation" had a retroactive effect. There is no reason why Mr. Mazurek could not have explored this matter fully at the hearing and I am not prepared to reopen the matter. However, I briefly state that in my view the Settlement Regulation"has no retroactive effect. Retroactivity refers to the application of legislation to facts which predate the coming into force of the legislation. In this case the relevant facts are those concerning the proposed settlement of the claim for benefits. That event took place well after the coming into force of the 'Settlement Regulation." In my view the fact that the accident giving rise to the claim predated the effective date of the regulation does not render its effect retroactive.
For all of the above reasons I find that the parties did not enter into a binding settlement, and accordingly the Applicant is not precluded from proceeding to arbitration.
Expenses:
As the Applicant was successful, I exercise my discretion to award Ms. Soordhar her expenses of the hearing on this preliminary issue. However, in light of the fact that on the first scheduled day for the hearing of this preliminary issue the Applicant's counsel was not ready to proceed, the Applicant's expenses will be restricted to one hearing day plus preparation. If the parties cannot resolve the question of expenses they may apply for an assessment of the expenses.
Order:
The Applicant is entitled to proceed with the Arbitration
The Applicant is entitled to her expenses limited to one day of hearing plus preparation.
December 5, 1995
Stewart M. McMahon Arbitrator
Schedule 1
Exhibit 1: Settlement Documentation
Exhibit 2: Letter from P. Mazurek to Sally Baker dated March 17, 1995
Exhibit 3: Letter from H.M. Lewin to Sally Baker dated March 17, 1995
Exhibit 4: Letter from P. Mazurek to H.M. Lewin dated March 17, 1995
Exhibit 5: Affidavit of Karen Towler dated August 18, 1995
Exhibit 6: Letter from Sally Baker to Norman Biback dated March 30, 1995
Exhibit 7: Letter from H.M. Lewin to P. Mazurek dated March 31, 1995 together with fax transmission sheet
Exhibit 8: Letter from H.M. Lewin to P. Mazurek dated April 4, 1995
Exhibit 9: Letter from P. Mazurek to H.M. Lewin dated March 27, 1995