Neutral Citation: 1995 ONICDRG 183
A-010205
ONTARIO INSURANCE COMMISSION
BETWEEN:
JAMAL ABDULBAKI
Applicant
and
ROYAL INSURANCE COMPANY OF CANADA
Insurer
DECISION ON A PRELIMINARY ISSUE
Issues:
The Applicant, Jamal Abdulbaki, claims to have been injured in a motor vehicle accident on October 25, 1992. He 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 January 29, 1994. 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.
On Thursday, September 14, 1995 the Insurer made an offer to settle the Applicant's claims in a letter which was delivered to the Applicant's counsel by facsimile transmission. The Applicant's counsel accepted this offer and requested a "draft release" in a letter delivered by facsimile transmission the next day. On Monday, September 18, 1995 the Insurer's counsel delivered a letter by facsimile transmission rescinding the settlement on the basis of fraud, relying upon information received that day.
The issues in this hearing on a preliminary issue are:
Does an arbitrator have jurisdiction to determine whether an applicant and an insurer have entered into a binding contract of settlement and make a settlement order, where there is no agreement by the parties to grant the arbitrator jurisdiction?
If the answer to question 1 is yes, in the circumstances of this case was there a binding contract (without deciding whether that contract can be rescinded by the Insurer for fraud)?
If the answer to both questions 1 and 2 is yes, must an Applicant seeking to enforce a settlement contract withdraw the claim for those benefits which he says were settled?
The Applicant also claims his expenses incurred in the hearing on the preliminary issue.
Result:
An arbitrator has jurisdiction to determine whether an insurer and insured person have achieved an enforceable settlement agreement.
In this case, no such agreement was achieved.
The Applicant is entitled to his expenses incurred with respect to the hearing of the preliminary issue.
Hearing:
The hearing on a preliminary issue was held in North York on October 12, 1995 before me, K. Julaine Palmer, Arbitrator.
Present at the Hearing:
Applicant's
Michael J. Huclack
Representative:
Barrister and Solicitor
Insurer's
John J. Aikins
Representative:
Barrister and Solicitor
The hearing on a preliminary issue proceeded without witnesses, based on an Agreed Statement of Facts. The cases and authorities referred to by counsel are set out in Schedule B to this decision.
Evidence and Findings:
Background:
The Applicant claims benefits arising out of a motor vehicle accident which occurred on October 25, 1992. He sought mediation on the issues of his entitlement to various statutory accident benefits and the amount of those benefits. The mediation failed. Mr. Abdulbaki then delivered an application for arbitration seeking further weekly income benefits, supplementary medical and rehabilitation benefits and an order determining the amount of weekly benefits. The arbitration was scheduled to proceed September 25, 26, 27 and October 12, 1995.
On Thursday, September 14, 1995 the Insurer made an offer to settle the Applicant's claims in a letter which was delivered to the Applicant's counsel by facsimile transmission. The Applicant's counsel accepted this offer and requested a "draft release" in a letter delivered by facsimile transmission the next day, Friday September 15. On Monday, September 18, 1995 the Insurer's counsel delivered a letter by facsimile transmission rescinding the settlement on the basis of fraud, relying upon information received that same day.
At the time the Insurer's letter rescinding the agreement was sent, the parties had done nothing further to finalize the settlement. No "written notice" had been delivered by the Insurer, as required by section 9.1-(2) of Ontario Regulation 780/93. No draft release had been sent to the Applicant, no release had been executed, no money had been exchanged and the application for arbitration had not been withdrawn.
The Applicant wishes the matter of settlement to be added to the arbitration. He seeks an order that the parties have settled their disputes and that the Insurer is required to comply with its agreement. The Insurer denies that there has been a settlement. In any case it contends that an arbitrator has no jurisdiction, either to determine whether a settlement exists or to order compliance with any agreement, when the agreement does not deal with the issues of entitlement to benefits or the amount of benefits, as set out in section 279 of the Insurance Act. In addition, the Insurer submits that the issue whether there was a binding settlement has not been mediated. Neither has the issue of repayment of all benefits to the Insurer, on the basis of fraud, yet been mediated. Mediation, the Insurer submits, is a precondition to arbitration, according to section 281(2) of the Insurance Act.
Findings:
1. Jurisdiction of Arbitrator
The Legislature established the system of dispute resolution set out in the Insurance Act, R.S.O. 1990, c.I.8, as amended, in 1990. The dispute resolution system is an integral part of the scheme of enhanced statutory accident benefits and reduced access to the tort system provided by Bill 68. The jurisdiction of the dispute resolution system is set out in section 279 of the Insurance Act:
279.—(1) Disputes in respect of any insured person's entitlement to no-fault benefits or in respect of the amount of no-fault benefits to which an insured person is entitled shall be resolved in accordance with sections 280 to 283 and the Statutory Accident Benefits Schedule.
[emphasis added]
Accordingly, mediators and arbitrators consider questions of entitlement and amount. In my view, the first issue in this case can be seen as a preliminary question, the determination of which is a precondition to the determination of entitlement to statutory accident benefits. The ultimate question before me at the arbitration hearing is whether Mr. Abdulbaki is entitled to further statutory accident benefits. In some cases, this question may be answered directly by the presentation of evidence about an applicant's medical condition. However, in other cases, arbitrators are first called upon to determine such questions as "was there an accident, as defined in the Schedule," "was the applicant an insured person, as defined in the Schedule," "did the applicant sustain an injury in the accident." In this case, in the first instance, the question is whether a settlement of the issue of entitlement has already taken place.
Insurers often appear before arbitrators seeking to enforce a settlement agreement which they believe is firm, in order to defend an application by an insured person for further statutory accident benefits. In this case, the Insurer submits that what the applicant is seeking to have determined is not a matter of entitlement or the amount of benefits, but rather a matter of contract law which could lead to an award of damages or specific performance.
In my view, given the timing of the events which led to this hearing on a preliminary issue and the necessity for the Commission to control its processes, this issue should not be approached in the way the Insurer suggests. An application for an arbitration to consider Mr. Abdulbaki's future entitlement to weekly income benefits was before the Commission. Ten days before the hearing was to begin, the Insurer made an offer to settle the Applicant's claims, which was accepted the next day. The next business day, the Insurer reneged on the offer, for reasons which are not important here.
The Applicant now seeks to compel the Insurer to perform the agreement, before the tribunal where he had applied for a hearing. The matter of Mr. Abdulbaki's entitlement to weekly income benefits and other benefits has been mediated; however, one of the issues in dispute in the matter has become the purported settlement of those claims.
My authority or jurisdiction to determine whether these parties have settled their case is not expressly set out in the Insurance Act or the Schedule. However, I believe that the present case is an example of the doctrine of jurisdiction by necessary implication. Arbitrator Manji referred to this doctrine in her decision in the case of Maria Granic and Allstate Insurance Company of Canada, January 30, 1995, OIC File No. A-006615. In that case, she cited a decision of the Federal Court of Appeal, Reference Re National Energy Board Act, (1986), 1986 CanLII 4033 (FCA), 19 Admin. L.R. 301, where the Court indicated the this doctrine can be applied only if:
the implied jurisdiction is required as a matter of practical necessity to permit the agency to accomplish its mandate; and
the question of the implied jurisdiction to perform an act is not one which Parliament or the Legislatures have expressly addressed in other legislation.
In my view, it would be absurd for me to say to the Applicant that the question of whether he and the Insurer have entered into a binding contract of settlement of the issues in the arbitration is beyond my jurisdiction. To force an Applicant, who has chosen this forum in preference to the traditional courts, to now go to the courts to determine whether his arbitration was settled would be to make a mockery of the system of dispute resolution as established by the Legislature.
2. Was there a binding contract in this case?
In this case, an offer to settle a claim was made and an acceptance communicated. In consideration of a sum of money to be paid by the Insurer, the Applicant agreed to relinquish all claims against the Insurer arising out of the accident of October 25, 1992. I consider that one of the terms of the agreement was the requirement that the Insured person deliver a release of all his claims against the Insurer. The fact that a release has not been delivered does not mean there was no agreement—the situation is analogous to the delivery of a transfer deed after the execution of an Agreement of Purchase and Sale in a sale of real estate.
The preceding paragraph sets out the settlement negotiation procedure followed by solicitors for many years, under the common law rules of contract. However, in this case, Regulation 780/93, the "Settlement Regulation," has modified those common law rules. The Regulation is set out in its entirety at Schedule A to this decision.
The Settlement Regulation requires the insurer to give the insured person a written notice, with specific content, "before a settlement is entered into." The Settlement Regulation also provides for a two-day "cooling off period" during which time the insured person can rescind the tentative settlement. If the insurer does not comply with the terms of the Settlement Regulation, then the insured person may rescind the tentative settlement at any time.
In my view, the written notice contemplated by the Settlement Regulation must be delivered before an effective settlement can be achieved by the parties to the agreement. Although the wording of the regulation is somewhat awkward because it refers throughout to both an effective settlement (as achieved by following the procedure prescribed by the regulation) and a tentative settlement by the same word "settlement," in my view, the plain meaning is clear. First, negotiations by the parties result in a tentative settlement, then the insurer will deliver a comprehensive written notice to the insured person. After two business days elapse, an effective settlement will have been achieved.
Accordingly, the answer to the second question is that no enforceable settlement was achieved by these parties.
In the circumstances, I need not answer the third question.
Expenses:
I exercise my discretion under section 282(11) of the Insurance Act to award the Applicant his expenses of this hearing on the preliminary issue. In the event the parties cannot agree as to the amount of the expenses, either party may apply to the Commission for an assessment of expenses.
Order:
An arbitrator has jurisdiction to determine whether an insurer and insured person have achieved an enforceable settlement agreement.
In this case, no such agreement was achieved.
The Applicant is entitled to his expenses incurred with respect to the hearing of the preliminary issue.
December 12, 1995
K. Julaine Palmer
Arbitrator
Date
Schedule A
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. Schedule A`set out full text of Regulation 780/93
Schedule B
Insured's Brief Index:
Stephen Salmon and TTC, June 29, 1992, OIC File No. P-000235;
Randy A. Saunders and Canadian General Insurance Company, April 8, 1993, OIC File No. A-001531;
Mehmet Tuzin and Allstate Insurance Company, May 28, 1992, OIC File No. A-000596;
Ben Bennett and Allstate Insurance Company, October 19, 1993, OIC File No. A-002389;
Mauricio Peixeiro and Allstate Insurance Company, March 21, 1994, OIC File No. A-005097;
Data General (Canada) Ltd. v. Molnar Systems (1991) 1991 CanLII 7326 (ON CA), 3 C.P.C. (3d) 180 (Ont. C.A.);
Cellular Rental Systems Inc. v. Bell mobility Cellular Inc.; March 20th, 1995, Ontario Court (Gen. Div.);
Simcoe Real Estate Ltd. v. Golf Valley Investments; September 27th, 1988, Ontario Court (Gen. Div.);
Britnell v. Macfie Explorations 1954 O.W.N. 889 (H.C.J.)
Insurer's Brief Index:
Maria Granic and Allstate Insurance Company, January 30, 1995, OIC File No. A-006615;
Lorenzo Rescigno and State Farm Mutual Automobile, September 26, 1994, OIC File No. A-008268;
Rosa DeCicco and State Farm Mutual Automobile Insurance Company, February 21, 1992, OIC File No. A-000277;
Comfort Ayertey and TTC, April 5, 1994, OIC File No. A-004077;
Wictoria Kowaliw and Wawanesa Insurance Company, November 18, 1994, OIC File No. A-007153;
Fahimeh Abedi and Pilot Insurance Company, June 22, 1994, OIC File No. P-002705;
Leon Albert Bailey and CAA, June 11, 1993, OIC File No. A-001139(2);
Francine Alexander and Constitution Insurance Company, November 25, 1994, OIC File No. A-007573;
Waddams, The Law of Contracts, Third Edition, pp. 18-22, 28-37 and 459-466