Neutral Citation: 1996 ONICDRG 153

OIC A95-000422

BETWEEN:

FRANCO LIBERIO

Applicant

and

CONSTITUTION INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

The Applicant, Franco Liberio, was injured in a motor vehicle accident on August 12, 1990. On March 21, 1991, he applied for and received statutory accident benefits from Constitution Insurance Company of Canada ("Constitution"), payable under Ontario Regulation 672.¹ Constitution refused to pay any benefits. On July 17, 1991, the parties participated in a mediation.

Constitution contends that the mediation of July 17, 1991 resulted in a final settlement of Mr. Liberio's entitlement to statutory accident benefits.

Mr. Liberio did not agree that there had been a full and final settlement of his future entitlement to benefits. On June 12, 1995, he applied for mediation with respect to the correct amount of his entitlement for weekly benefits. This issue was not resolved. Constitution contested the mediation on the basis that Mr. Liberio had missed the time limit for mediation pursuant to section 26(1) of the Schedule² On September 26, 1995, Mr. Liberio applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Did the parties permanently settle Mr. Liberio's accident benefits at the July 17, 1991 mediation?
If the answer to issue number one is "no," then, is Mr. Liberio barred from arbitration on the basis that he had missed the time limit pursuant to section 281(5) of the Insurance Act?
Is Mr. Liberio entitled to his expenses?
Is Mr. Liberio required to pay Constitution $2,000.00 pursuant to section 282(11.2) of the Insurance Act?

Mr. Liberio did not settle his accident benefits claim at the July 17, 1991 mediation.
Mr. Liberio's benefits were not properly terminated, and therefore, he has not missed the time limit to proceed to arbitration.

The hearing was held at the offices of the Ontario Insurance Commission in North York, Ontario, on July 22, 1996, before me, Joyce Miller, Arbitrator. In addition, the parties provided written submissions on August 14, 1996 (Constitution), August 20, 1996 (Mr. Liberio) and on August 23, 1996 (Constitution).

Present at the Hearing:

Mr. Liberio's Colleen M. Hanycz Representative: Barrister and Solicitor

Constitution's Joseph F. Lo Greco Representative: Barrister and Solicitor

Exhibits:

Exhibit 1 Insurer's Document Brief

Background:

Mr. Liberio was involved in a motor vehicle accident on August 12, 1990. At the time he was driving an unregistered and uninsured motor vehicle. On March 21, 1991, he applied for weekly accident benefits from Constitution, the insurer of the driver of the other vehicle, under section 12(1) of the Schedule. Constitution refused to pay any benefits on the basis that Mr. Liberio was unable to prove that he was working at the time of the motor vehicle accident. Mr. Liberio applied for mediation.

The mediator's report of July 18, 1991³ notes the following agreement between the parties:

The insurer will pay Weekly Benefits from August 19, 1990 to February 25, 1991 at the rate of $185.00 per week. This benefit is being paid under O.Reg. 273/90 Section 12(7) iii or alternatively under Section 13(3). Consideration will be given to ongoing and/or increased benefits on the insurer's receipt of further medical evidence and/or employment documentation as outlined in #2, #3 and #4 below.
The insurer will contact Quality Designs to determine the dates of the insured's employment there. If it can be established that the insured worked for 180 days in the twelve month period preceding the accident, then the insured's Weekly Income Benefits will be paid under O.Reg. 273/90 Section 12.
Alternatively, the insurer and the insured's representative will meet together with Chris Vradis in an attempt to definitely establish the insured's employment status on August 12, 1990. If the insured was employed at the date of loss, his benefits will ad adjusted accordingly, and will be calculated in accordance with O.Reg. 273/90 Sections 12 (4) and (7). This meeting will be arranged by the insured's representative.
The insured's representative will obtain a further medical report from the insured's treating physician. He will ask the doctor to address the question of "substantial inability" with respect to both definitions regarding employed and unemployed persons, as determined under O.Reg. 273/90 Section 12(1) and Section 13 (1).

On November 6, 1991, Constitution wrote to Mr. Liberio's representative at that time, Mr. Joseph Caprara, a legal assistant in the offices of Barry Edson and Associates, with a copy to the Ontario Insurance Commission (OIC). In this letter, it indicated that:

... we now have information to indicate that as of November 29, 1990 your client was working. Therefore we have overpaid your client Disability Benefits from November 29, 1990 to February 25, 1991. The total amount of weeks we overpaid was 12 weeks at $185.00 per week for $2, 220.00 and we are now looking towards you for reimbursement of our subrogated interest.⁴

On December 12, 1991, Constitution wrote to Mr. Caprara requesting a cheque in the amount of $2,220.00 with respect to the alleged overpayment.⁵

On January 3, 1992, Mr. Caprara wrote to Constitution, with a copy to the OIC. In his letter, he stated:

... it is my position that Mr. Liberio was continuously disabled from the date of loss, August 1990 to May 1991 and that during this period he may have attempted to work. ...

The only issue to resolve now is, in fact, the quantum of benefits that he has received to date.⁶

On January 15, 1992, Constitution wrote to Mr. Caprara, with a copy to the OIC. In its letter, it stated:

Our investigation indicates that Mr. Liberio works at John Uniques Auto Collision whenever he is contacted by them. They have advised that whenever they need Mr. Liberio for extra work they will contact him. They also advised us that he is working at other shops. It is our opinion that Mr. Liberio is not substantially disabled to work.⁷

Submissions:

Constitution submits that the agreement at mediation in the mediator's report constituted a full and final settlement between Constitution and Mr. Liberio, thus barring him from proceeding to arbitration.

In the alternative, Constitution submits that the letters of November 6, 1991 and/or January 15, 1992 constituted a "clear and unequivocal" denial of accident benefits, and therefore, Mr. Liberio is barred from proceeding to arbitration pursuant to section 281(5) of the Insurance Act.

Analysis and Findings:

Issue 1: Did the parties permanently settle Mr. Liberio's accident benefits at the July 1992 mediation?

For the following reasons, I find that the agreement at mediation in July 1992 did not constitute a full and final settlement of Mr. Liberio's accident benefits.

In Bailey⁸ Arbitrator Mackintosh held that the Report of Mediator is not conclusive of the issue of whether settlement was achieved at mediation. It is, as Arbitrator Sampliner noted in Aggarwal,⁹ "... no more or less than the recorded opinion of the mediator."

In my view, the mediator's report does not reflect a full and final settlement of Mr. Liberio's accident benefits. Nothing in this report would lead one to believe that this agreement permanently terminated Mr. Liberio's right to claim further benefits. In fact, the agreement quite clearly leaves open the issues of future benefits and quantum. It states that weekly benefits were to be paid at $185.00 per week from August 19, 1990 to February 25, 1991 and that future benefits and a higher amount would be considered by Constitution on reviewing medical evidence and employment documentation.

I do not accept Constitution's submissions that once they reviewed Mr. Liberio's case and concluded that he was not disabled he was permanently barred from proceeding to arbitration on the issue of weekly benefits. This appears to be a complete misunderstanding of what constitutes a permanent settlement of an insured's claim for accident benefits. If an outstanding issue remains in dispute between parties, the insurer alone cannot decide this issue. This is what arbitration is for.

I agree with Arbitrator Sampliner in Aggarwal where he states that: "Where an insurer is seeking to permanently exclude the insured's right to further benefits, it should take steps to obtain a release or other agreement which clearly and specifically sets forth the bargain struck." In my view, the agreement at mediation did not clearly and specifically exclude Mr. Liberio's right to further benefits.

My conclusion that a full and final settlement did not take place at the July 1991 mediation is reinforced by the actions of Constitution after the mediation. In my view, Constitution's correspondence to Mr. Liberio's representative requesting the return of an overpayment for weekly benefits, as well as declaring that Mr. Liberio is no longer disabled, is clear proof that Constitution was not treating the agreement at mediation as a full and final settlement between the parties.

Accordingly, I find that the mediation agreement of July 18, 1991 did not constitute a full and final settlement between Constitution and Mr. Liberio.

Issue 2: Is Mr. Liberio barred from arbitration on the basis that he had missed the time for filing for arbitration pursuant to section 281(5) of the Insurance Act?

Constitution submits that the letters of November 6, 1991 and/or January 15, 1992 constituted "clear and unequivocal" notice to Mr. Liberio that his benefits were being terminated. Therefore, pursuant to section 281(5) of the Insurance Act, he is barred from proceeding to arbitration because he was out of time.

Section 281(5) of the Insurance Act provides:

(5) 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 Schedule. [emphasis added]

Section 26 of the Schedule provides:

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 further benefits.

(2) Despite subsection (1), an arbitration or court proceeding under section 281 of the Insurance Act may be commenced within 90 days after the mediator reports to the parties under subsection 280(8) of the Act.O.Reg.779/93, s.5.

In Zeppieri,¹⁰ Senior Arbitrator Naylor held that where an insurer wished to terminate an insured's accident benefits the refusal 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 proper notice." [emphasis added]

I find that Constitution has not discharged its burden of proof.

In my view, Constitution's correspondence to Mr. Liberio's legal representative dealt with Constitution's desire to have its benefits repaid. It did not provide "clear and unequivocal" notice of the termination of Mr. Liberio's accident benefits. Even if the correspondence could be interpreted as a "clear and unequivocal" notice of termination of benefits, Constitution did not present any evidence to show that the notice of termination was ever communicated to Mr. Liberio himself.

In requesting written submissions, I specifically pointed out to counsel that they consider the case of Holguin,¹¹ In that case one of the issues considered was whether a notice of termination of benefits to the applicant's counsel was sufficient notice to the applicant. It was held that because the applicant had hired lawyers who had notified the insurer in writing that all further communications to the applicant should be directed to his counsel, then notice of termination to his counsel was sufficient.

In the present case, both the November 6, 1991 and January 15, 1992 letters were written to Mr. Caprara with a copy to the OIC. No copy was sent to Mr. Liberio. No evidence was presented by Constitution to show that the notice to Mr. Caprara constituted notice to Mr. Liberio that his benefits were being terminated.

Terminating an applicant's benefits is a very serious matter with onerous consequences. Proper notice to an applicant is imperative. In this case, I find that notice to Mr. Caprara was not proper notice to Mr. Liberio. No evidence was presented to show that Mr. Liberio had any knowledge or understanding that Constitution was terminating his benefits.

Accordingly, I find that Constitution did not give Mr. Liberio proper notification of its refusal to pay accident benefits. Mr. Liberio is, therefore, not barred from proceeding to arbitration.

Expenses:

As I have found that Mr. Liberio is not barred from proceeding to arbitration, I leave the issues of expenses and Constitution's request for costs to the discretion of the hearing arbitrator.

Order:

Mr. Liberio is entitled to proceed to arbitration.

September 11, 1996

Joyce Miller 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.
Report of Mediator July 21, 1995
Supra note 2
Exhibit 1, Insurer's Document Brief, Tab 14, Letter from Constitution to Joseph Caprara with a copy to the OIC, November 6, 1991
Ibid., Tab 14, Letter from Constitution to Mr. Caprara, December 12, 1991
Ibid., Tab 15, Letter from Mr. Caprara with a copy to the OIC, dated January 3, 1992
Ibid, Tab 16, Letter from Constitution to Mr. Caprara with a copy to the OIC, dated January 15, 1992
Bailey and CAA (Ont.) Decisions #1, #2 and #3 (October 29, 1992, June 11, 1993 and October 19, 1994), OIC A-001139
Aggarwal and Allstate Insurance Company (June 17, 1993; appeal date: June 30, 1994), OIC A-002621
Zeppieri and Royal Insurance Company of Canada (November 14, 1995), OIC A-005237
Holguin and Allstate Insurance Company (July 26, 1995), OIC A-009270

Franco Liberio v. Constitution Insurance Company of Canada, 1996 ONICDRG 153

Case Summary