Neutral Citation: 1995 ONICDRG 196

File No.: A-951897

ONTARIO INSURANCE COMMISSION

BETWEEN:

Victor Kuronen

Applicant

and

Allstate Insurance Company of Canada

Insurer

DECISION ON PRELIMINARY ISSUE

Issues:

The Applicant, Victor Kuronen, was injured in a motor vehicle accident on July 31, 1993. On January 24, 1995 he gave initial notice to the Insurer of his claim for statutory accident benefits under Ontario Regulation 672¹. The Insurer argues that Mr. Kuronen's claim is invalid because of his failure to comply with the time limit set out in section 22(1) of the Schedule. Mr. Kuronen argues that he has a reasonable excuse within the meaning of section 22(2) of the Schedule for failing to comply with the time limit. The parties were unable to resolve their dispute 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 on a preliminary issue is:

1. Is the Applicant's claim invalid by reason of his failure to comply with section 22(1) of the Schedule?

Result:

1. The Applicant's claim is not invalid by reason of his failure to comply with section 22(1) of the Schedule.

Hearing:

The hearing was held in Hamilton, Ontario, on Tuesday, November 14, 1995.

Present at the Hearing:

Applicant: Victor Kuronen

Applicant's Representative: Ron Weinberger Barrister and Solicitor

Insurer's Representative: Harry J. Daniel Barrister and Solicitor, assisted by Martin Tiidus Barrister and Solicitor

Insurer's Officer: Cathy Cameron-Smith

Witnesses: Victor Kuronen Dr. Owsianik Cathy Cameron-Smith

The proceeding was recorded by Elaine Ritseman of the office of Mark Nimigan, Official Examiner.

Exhibits:

The parties filed two exhibits and five document briefs. The parts of the document briefs which were admitted as exhibits were marked as such at the hearing.

Background:

Mr. Kuronen was injured while a pedestrian, when he was struck by a motor vehicle on July 31, 1993. He gave initial notice of his claim to the Insurer approximately 18 months after the motor vehicle accident. He claims he has a reasonable excuse for failing to comply with the 30-day notice provision in section 22 of the Schedule.

Section 22 of the Schedule provides as follows:

22.-(1) The insured person or the person otherwise entitled to make a claim shall,

(a) give initial notice of a claim to the insurer, in writing, within thirty days from the date of the accident or as soon as practicable thereafter; and

(b) furnish to the insurer within ninety days of the giving of the notice under clause (a) a completed application for statutory accident benefits respecting the accident and the resulting loss.

(2) A failure to comply with a time limit set out in subsection (1) does not invalidate a claim if the claimant has a reasonable excuse and so long as there is compliance within two years of the accident.

Factors to be considered in determining whether an excuse is reasonable

The purpose of the notice provision in that part of automobile insurance policies insuring against liability to third parties is to permit an insurance company to make an investigation immediately, so that it can take steps to defend the claim, and thus not be at the mercy of the claimant.² One of the goals of the no-fault accident scheme is that insurers and insured persons work together to achieve a consensus as to the appropriate rehabilitation.³ I presume that one of the purposes of the 30-day notice provision in the no-fault coverage is to give the insurer the early opportunity to participate in this rehabilitation process, so that the insured recovers from his injuries as much and as soon as possible. Compliance with the notice provisions is a condition precedent to any recourse the insured has against the insurer. Failure to comply with the notice provisions results in forfeiture of the insured's rights. Insurance Acts throughout Canada have given the courts the power to relieve against forfeiture where there has been imperfect compliance with a statutory condition. Section 129 of the Ontario Insurance Act provides as follows:

Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

This power has been found to apply to contractual conditions⁴ and regulatory provisions⁵.

The purpose for relieving against non-compliance with a notice provision in an insurance policy is expressed in Falk Bros. Industries Ltd. v. Elance Streel Fabricating Co. Ltd., (S.C.C.) 1989 CanLII 38 (SCC), [1989] I.L.R. 1-2506 as follows:

The purpose of allowing relief from forfeiture in insurance cases is to prevent hardship to beneficiaries where there has been a failure to comply with a condition for receipt of insurance proceeds, and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer.

To exercise its discretion, the courts consider whether it is inequitable to allow the forfeiture, having regard to the prejudice to the insurer.⁶

In OliVera and Zurich Insurance Company, March 21, 1994, Director Sachs said, "Section 22(2) of the Schedule must be interpreted within the entire scheme of statutory accident benefits which is flexible and remedial."

Section 22(2) of the Schedule does not use the words "relief from forfeiture". However, the effect of section 22(2) is to give the arbitrator the power to relieve against the forfeiture of the insured's rights where the arbitrator finds that the claimant has a reasonable excuse for failing to comply with the notice requirements. Section 22(2) of the Schedule is a remedial section and as such should be given an appropriately broad interpretation. In my view, the considerations that apply to a court relieving against forfeiture for failure to comply with a time limit should equally apply to the issue of whether a claimant has a reasonable excuse for failing to comply with the section 22(1)(a) time limit. Both issues concern the reasons for an insured's failure to comply with a time limit in a notice provision and whether the insured should be relieved of the consequences of his failure to comply.

Further, under section 281 of the Insurance Act the insured person may bring his proceeding in court or refer the matter to an arbitrator. Under section 129 of the Insurance Act, the court has discretion to relieve against forfeiture where there has been imperfect compliance with a statutory condition as to the proof of loss. As stated above, this provision also applies to regulations. I can see no reason why the legislature would formulate different tests in the court system and the arbitration system for relief from forfeiture where there has been imperfect compliance with the 30-day notice provision.

In my opinion, the reasonable excuse advanced by the claimant must be examined with regard to all the circumstances connected to the delay, including prejudice to the insurer, hardship to the claimant and whether it is equitable to relieve against the consequences of the failure to comply with the time limit. Bearing these considerations in mind, I turn to the facts of this case.

Evidence:

Victor Kuronen was 38 years old at the time of the motor vehicle accident. I heard no evidence that he was named in an automobile insurance policy. However, he was married and his spouse was a named insured in a policy issued by Allstate Insurance Company of Canada ("Allstate"). He separated from his wife shortly after the accident.

I heard evidence that Mr. Kuronen abused drugs and alcohol both before and after the accident and that he underwent unsuccessful attempts at rehabilitation. I also heard evidence that he did not comply with doctors' instructions concerning his treatment and recovery. I review this evidence in some detail as it is relevant to the issue of whether the Insurer has been prejudiced by being deprived of the opportunity to assist in Mr. Kuronen's rehabilitation at an early stage. The Insurer argues that if it had been involved at an early stage, Mr. Kuronen would likely have recovered from his injuries sooner and that the Insurer's exposure to expenses for rehabilitation and weekly income benefits would have been minimized.

At the time of the motor vehicle accident of July 31, 1993, Mr. Kuronen was recovering from a fractured clavicle and taking a number of prescription drugs and drugs he purchased "on the street." He testified that he was also drinking 24 bottles of beer and 40 ounces of liquor a day.

On July 31, 1993 he suffered fractures to his ribs, left tibia and fibula when he was struck by a motor vehicle. He underwent surgery for an open reduction and internal fixation of his tibia and fibula. He was released from hospital after 11 days with instructions not to bear weight on his injured leg. Mr. Kuronen spent the next two weeks in bed. He spent September 1 and September 2 in jail after being arrested on a charge of assault. After he was released from jail, he spent September 4 to September 7 in jail for breaching a condition for his release. After his next release from jail, Mr. Kuronen lived on the street for a short period before his church arranged accommodation for him.

On August 17, 1993, Dr. Bednar, Mr. Kuronen's orthopaedic surgeon notes:

On examination today, he quite proudly admits to having walked freely on the limb against our advice ... This man should not be weight-bearing ... For the umpteenth time today, I have stressed this to him in no uncertain terms.

Throughout the records there are notes of Mr. Kuronen's failure to comply with instructions that he not bear weight on his left leg until it heals.

Mr. Kuronen had no knowledge of his entitlement to statutory accident benefits. A criminal lawyer referred him to a motor vehicle accident lawyer in mid-October 1993. Mr. Kuronen said that he saw the lawyer two or three times and expected him to take care of everything.

The lawyer took steps to investigate the accident and notify the driver of the claim. There is no evidence that the lawyer claimed accident benefits from the insurer of the vehicle that struck Mr. Kuronen. I heard no argument that Mr. Kuronen was not insured under his wife's policy with Allstate. The lawyer did not write to Allstate.

In October 1994, Mr. Kuronen retained his present lawyer because he was not satisfied that the former lawyer was doing anything. On October 25, 1994 the new lawyer wrote to the insurer of the vehicle which struck Mr. Kuronen. On January 20, 1995, approximately 18 months after the accident the new lawyer wrote to Allstate advising it for the first time of the claim for accident benefits.

Throughout this period Mr. Kuronen was taking Percocet, a narcotic pain killer, Fiorinal with codeine, Prozac for depression and Tylenol No. 3, all prescribed by his family doctor, Dr. Owsianik. He was also taking drugs he bought "on the street" including Tylenol No. 3, Tylenol No. 4, Dilaudid, a potent narcotic used for terminally ill cancer patients, and marijuana. He also was drinking heavily.

Dr. Owsianik prescribed Antabuse, a drug which makes the patient sick if taken with alcohol. Mr. Kuronen tried the drug once or twice. Dr. Owsianik also suggested that Mr. Kuronen return to Teen Challenge, a community program to help people with drug and alcohol abuse. There was no evidence that Mr. Kuronen returned to the program.

In February 1994, Dr. Bednar, the orthopaedic surgeon, was somewhat alarmed to find that x-rays showed open fracture lines. On March 4, 1994, Mr. Kuronen underwent another surgery in which the fixation plates were removed from the tibia and an intra medullary nail was inserted. Two weeks later Dr. Bednar recorded his concern that Mr. Kuronen was still not complying with his instructions on weight bearing, when he appeared at the fracture clinic using only a cane.

In July 1994, Mr. Kuronen fell off a motorcycle and re-injured his leg. X-rays taken in August showed that the fragments of the tibia shaft had not yet united. Dr. Bednar reported that Mr. Kuronen was still smoking despite his "best exhortations", and that the smoking may be delaying the union of his tibia fragments. On October 24, 1994 Mr. Kuronen was re-admitted to hospital.

The intra medullary nail was removed and a plate and an iliac bone graft were used to repair the non-union. Three days after the surgery Mr. Kuronen was contravening instructions in the hospital by smoking and bearing weight on the left leg. He discharged himself from the hospital early.

On November 10, 1994 Dr. Owsianik terminated his relationship with Mr. Kuronen when he learned that Mr. Kuronen had been using another family doctor to obtain prescriptions for drugs. On November 16, 1994 Mr. Kuronen attended the fracture clinic and Dr. Bednar recorded that Mr. Kuronen "proudly admits to 'double doctoring'."

In December 1994, Dr. Bednar was alarmed to find that x-rays revealed the plate had broken. Mr. Kuronen suggested that the plate broke some time ago when he fell down stairs. On March 2, 1995 Dr. Bednar found mobility at the non-union site of the tibia. Although he was prepared to urgently admit Mr. Kuronen for surgery, Mr. Kuronen refused, as he had "too much going on" for an operation and needed at least a month.

On April 13, 1995 Mr. Kuronen was readmitted to hospital for surgery. The broken plate was removed in parts and two new plates were screwed in. Dr. Bednar wrote in the post-operative note that he applied a second plate because he was concerned about the patient's repeated history of non-compliance and slow healing.

The Insurer's claims representative testified that if the Insurer had received the application for accident benefits in a timely fashion, a rehabilitation caseworker would have been immediately appointed to ensure that Mr. Kuronen attended appropriate rehabilitation. Failure to attend would have resulted in termination of benefits.

Analysis:

I am not satisfied that the Insurer was prejudiced by the 18 month delay in being notified of this claim. Mr. Kuronen had a clear history of disregarding the advice of those interested in his recovery. He disregarded Dr. Bednar's advice on weight-bearing and smoking. He not only disregarded Dr. Owsianik's advice to use Antabuse and return to the Teen Challenge rehabilitation program, he proudly admitted to using Dr. Owsianik and another family doctor to double the amount of prescription drugs he was taking. He discharged himself early from the hospital and he refused immediate surgery when it was recommended. I am not satisfied that Mr. Kuronen's recovery, and therefore the Insurer's exposure to pay accident benefits, would have been any different if the Insurer had appointed a rehabilitation caseworker immediately after the accident. Based on the evidence I heard, no expense for rehabilitation would have been reasonable.

In my view, Mr. Kuronen has a reasonable excuse for the 18 month delay in notifying the Insurer of his claim for accident benefits. Mr. Kuronen first consulted a lawyer to handle claims arising out of the accident in mid-October 1993, about six weeks after the expiration of the 30-day time limit specified in section 22(1). During that period he was suffering from the effects of his injuries and suffering from the break-up of his marriage. He was either in jail, living on the street or looking for accommodation. As well, his addiction to alcohol and drugs affected his ability to pursue his legal rights in a timely fashion. He had a reasonable excuse for the six-week delay to mid-August 1993.

Mr. Kuronen had no knowledge of his entitlement to no-fault accident benefits. From mid-August 1993 to the present, he has relied on the advice of two law firms. Mr. Kuronen thought he could rely on these firms and when he had reason to believe that the first firm was not reliable, he moved to the second firm. In my view, he acted reasonably. He is not responsible for the failure of these firms to notify Allstate of his claim in a timely manner. I find no evidence of bad faith, concealment or deliberate misrepresentation on his part.

Lastly, it would cause undue hardship to Mr. Kuronen if his claim against Allstate were forfeited because of his failure to strictly comply with the notice provisions. If his claim were forfeited, his only recourse would be to sue his former lawyer for negligence.

One of the purposes of the no-fault accident benefit system is to provide defined benefits to insured victims of motor vehicle accidents in a timely manner. Another purpose is to provide a speedy, informal, convenient and inexpensive process to resolve disputes as to entitlement and amount of benefits. Both purposes of the legislation would be frustrated if Mr. Kuronen's only recourse was to sue his former lawyer for negligence.

The parties did not make submissions with respect to expenses. Expenses of the hearing of the preliminary issue will be in the discretion of the hearing arbitrator.

Order:

1. Mr. Kuronen's failure to comply with the time limit set out in section 22(1) of the Schedule does not invalidate his claim.

December 29, 1995

William J. Renahan 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. 2Marcoux v. Halifax Fire Insurance Co., (S.C.C.) [1948] D.L.R. 143
3. 3Gaba and Allstate Insurance Company, August 21, 1992, O.I.C. A-000624
4. 4Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co. Ltd. (S.C.C.) 1989 CanLII 38 (SCC), [1989] I.L.R. 1-2506
5. 5Morrone v. CAA Insurance Co. (Ont. Ct. Gen. Div.) October 16, 1995
6. 6Cook v. Gold Circle Insurance Company, (Ont. S.C.) [1987] I.L.R. 1-2208