Neutral Citation: 1995 ONICDRG 70
File No. A-004002
ONTARIO INSURANCE COMMISSION
BETWEEN:
ANAND BOODHAI
Applicant
and
ALLSTATE INSURANCE COMPANY OF CANADA
Insurer
SUPPLEMENTARY DECISION
Reasons for Decision:
In a decision, dated November 21, 1994, I ordered as follows:
Mr. Boodhai is not entitled to any additional weekly income benefits.
Mr. Boodhai is not entitled to weekly income benefits in excess of the minimum amount of $185.60 per week.
Mr. Boodhai was overpaid by $14,086.40. The overpayment resulted from error or fraud and, therefore, must be repaid to Allstate.
Allstate is not required to pay a special award.
Mr. Boodhai is entitled to his expenses related to this arbitration.
I have been asked to deal with two issues arising out of this order. First, is the Allstate Insurance Company of Canada ("Allstate") entitled to interest on the overpayment of $14,086.40, and, if so, how should it be calculated? Second, is Allstate required to pay Mr. Boodhai his expenses, or can it set them off against the overpayment? I heard oral submissions by telephone conference on February 24, 1995 from Mr. Pradeep B. Pachai on behalf of Mr. Boodhai, and from Mr. Ian Kirby on behalf of Allstate.
Mr. Pachai submitted that Allstate should not be entitled to an order for interest or set-off because neither issue was raised in the Response by Insurer, or at the hearing. The arbitration process is meant to be relatively informal. The parties must submit the required forms, the Application for Appointment of an Arbitrator and the Response by Insurer, but these are not treated as formal pleadings. In order to avoid surprises, a pre-hearing is then held to clarify the issues in dispute and to arrange for the exchange of relevant documents.
In this case, Allstate consistently maintained that not only was Mr. Boodhai not entitled to any further weekly income benefits, he was overpaid as a result of error or fraud. In its Response, Allstate specifically asked for repayment according to section 27(1) of the Schedule. At the hearing, Allstate also resisted Mr. Boodhai's claim for expenses. I am not persuaded that it comes as any surprise to Mr. Boodhai that Allstate is seeking interest on the overpayment, or that it wishes to deduct his expenses from the amount that he is required to repay. Further, Mr. Boodhai was given a full opportunity to make submissions on both issues. I conclude, therefore, that Allstate is not precluded from raising the issues of interest and set-off.
1. Interest
Mr. Boodhai was ordered to repay $14,086.40 to Allstate according to section 27 of Ontario Regulation 6721, which states in part:
27.-(1) A person must repay to the insurer any benefit received under this Regulation that is paid to the person through error or fraud.
(4) The insurer may charge interest from the day the amount owing to the insurer under this section is determined at the bank rate on that day.
(5) In subsection (4), "bank rate" means the bank rate established by the Bank of Canada as the minimum rate at which the Bank of Canada makes short term advances to the banks listed in Schedule 1 to the Bank Act (Canada).
I accept Mr. Kirby's submission that Allstate is entitled to charge interest under section 27(4). The more difficult question is from what date. Mr. Pachai submitted that interest should be calculated only from November 21, 1994, the date of the arbitration decision, either as a matter of the interpretation of section 27(4), or as an exercise of discretion. Mr. Kirby argued that Allstate is allowed to charge interest from the date when the overpayment was made, and suggested an approach for calculating the interest in this case.
The interpretation of section 27(4) is not obvious. In my opinion, however, it does not limit the insurer to interest from the date of an arbitration decision. The Schedule sets out the benefits that insurers are required to pay. Although decisions may be reviewed through the dispute resolution process, the initial decisions are made by the insurer. I believe that the "determination" in section 27(4) is the determination of the overpayment by the insurer. When the insurer determines that the insured person has been overpaid under sections 27(1), (2) or (3), it can require the insured person to repay the amount of the overpayment, and is authorized by section 27(4) to charge interest from that date at the bank rate on that day.
Because the insurer can decide whether or not to charge interest, it is my view that the insurer must give the person notice that interest is being charged. I would expect that this would generally be done at the same time the person is notified of the overpayment. In this case, however, Mr. Boodhai was not advised that interest would be charged. I conclude, therefore, that interest should run only from November 21, 1994, the date of the arbitration decision at the bank rate on that date. The parties agreed that the appropriate bank rate is 5.6 per cent.
2. Set-off
Mr. Kirby submitted on behalf of Allstate that arbitrators have the authority to determine entitlement to accident benefits, including overpayments, and expenses. It follows that arbitrators can deal with the consequences of those determinations. In support of this proposition, he cited my decision in Melinda J. Upper and Canadian General Insurance Company, June 3, 1994, OIC File No. A-002855, in support. Mr. Kirby argued that the arbitration decision effectively gives Allstate a judgment for $14,086.40, the amount of the overpayment, and gives Mr. Pachai a judgment for the amount of his arbitration expenses. He submitted that equitable jurisdiction was not required to offset one against the other.
Mr. Pachai submitted that set-off is an equitable remedy and arbitrators have no inherent jurisdiction to apply it. He referred to my decision in Tha Huu Dinh and Pafco Insurance Company Limited, October 5, 1994, OIC File No. A-007053, for the proposition that an arbitrator's jurisdiction must be found in the legislation. He submitted that since there is no specific authority to deal with claims of set-off, the arbitrator has no jurisdiction to deal with it.
Arbitration hearings often involve more than one issue and, therefore, the possibility of mixed success arises. For example, an arbitrator might decide that the applicant was overpaid with respect to weekly income benefits, but is entitled to further rehabilitation benefits. Or, as in this case, the applicant could be awarded his expenses, even though he had been overpaid by the Insurer. The question is whether the arbitrator is limited to reaching separate conclusions about each issue.
The Insurance Act, R.S.O. 1990, c.I.8, as amended, establishes a dispute resolution process for "disputes in respect of any insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled."2 Section 279(4) sets out the arbitrator's role:
279.-(4) The Director and every arbitrator shall determine issues before them by order and may make an order subject to such conditions as are set out in the order.
In my opinion, the legislation authorizes the arbitrator to make an order that responds to the issues raised by the parties. The central concern in most cases is whether the insurer is obligated to pay any more money to the applicant. I believe that it follows that the arbitrator can consider the success of the parties on the various issues and make an order that determines what is to be paid.
Allstate claims that it should not be required to pay Mr. Boodhai his expenses because he owes over $14,000. Rather, it should be allowed to reduce the overpayment by the amount of his expenses. I agree. The authority to award expenses is found in section 282(11) of the Insurance Act. It states:
282 (11) The arbitrator may award to the insured person such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations to the maximum set out in the regulations.
In my view, it is clear that the award of expenses is to the insured person, not his or her representative. I am not prepared to order Allstate to pay additional amounts to Mr. Boodhai when I have determined that he is required to repay such a substantial sum. I conclude, therefore, that rather than making any further payments to Mr. Boodhai, Allstate may reduce his overpayment by the amount of his expenses, calculated according to Ontario Regulation 664.
3. Future claims
Mr. Kirby also asked me to deal with the impact of the overpayment on Allstate's obligation to pay any future claims for other accident benefits. In other words, if Mr. Boodhai is entitled to any further benefits, is Allstate required to pay him, or can the amount of any such benefits be set off against the remaining overpayment? I declined to deal with this issue because no notice was given that it would be raised, and because it is still speculative.
Order:
Mr. Boodhai is required to repay to Allstate $14,086.40, minus his expenses related to the arbitration, plus interest on this amount calculated from November 21, 1994 at the bank rate of 5.6 per cent.
June 14, 1995
David R. Draper
Arbitrator
Date
Footnotes
- Prior 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.
- Section 279(1) of the Insurance Act.