Neutral Citation: 1996 ONICDRG 195

OIC A96-000681

ONTARIO INSURANCE COMMISSION

BETWEEN:

TAHIR SALAH ABDI

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

DECISION ON PRELIMINARY ISSUE

Issues:

The Applicant, Tahir Salah Abdi, was involved in a motor vehicle accident on February 8, 1994. He applied for statutory accident benefits from Wawanesa Mutual Insurance Company ("Wawanesa"), payable under the Ontario Regulation 776/93.¹ The Insurer, denied Mr. Abdi's claim for income replacement benefits. The parties were unable to resolve their disputes through mediation and Mr. Abdi applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

At the prehearing on this matter held on August 8, 1996, the Insurer claimed that Mr. Abdi had applied for arbitration later than two years after the Notice of Denial of the claim and that Mr. Abdi was therefore barred from proceeding with his claim.

The preliminary issue on this application is:

Is Mr. Abdi precluded from proceeding to arbitration pursuant to section 281(5) of the Insurance Act, on the basis that he applied for arbitration later than two years after the date of denial by the Insurer?

RESULT:

1. Mr. Abdi is precluded by section 281(5) of the Insurance Act from proceeding to arbitration with regard to his claim for Income Replacement Benefits.

2. Mr. Abdi is entitled to his expenses of the hearing.

HEARING:

The hearing was held in North York, Ontario, on September 25, 1996 before me, M. Guy Jones, Arbitrator.

PRESENT AT THE HEARING:

Applicant:

Tahir Salah Abdi

Insurer's Representative:

Mr. Steve B. Macaulay

Barrister and Solicitor

Insurer's Officer:

Mr. Steve Christodoulou

WITNESSES:

Mr. Steve Christodoulou

Mr. Tahir Salah Abdi

EXHIBITS:

Eight Exhibits were filed.

FACTS:

Mr. Abdi was involved in a motor vehicle accident on February 8, 1994. On March 2, 1994, Mr. Abdi filled out an Application for Income Replacement Benefits and provided it to the Insurer, the Wawanesa Mutual Insurance Company. As a result, Mr. Steve Christodoulou, an adjuster with the Insurer, met with Mr. Abdi and took a statement which, among other matters, set out what Mr. Abdi said his pre-accident income was.

As a result of this, and subsequent investigations, on March 21, 1994, Mr. Christodoulou, on behalf of the Insurer, sent a letter to Mr. Abdi advising him that the Insurer would not be honouring his claim for weekly income benefits, and set out the reasons for doing so. Enclosed with this letter was an "Explanation of Assessment by Insurance Company," which also set out the reasons for the refusal.

On April 4, 1994, Mr. Abdi attended at Mr. Christodoulou's office. Mr. Christodoulou was not available at that time and therefore Mr. Abdi returned on April 5, 1994.

At the hearing, Mr. Abdi maintained that he did not receive Mr. Christodoulou's letter of March 21, 1994 and that he only attended in order to provide information about his pre-accident income. Mr. Christodoulou, on the other hand, testified that Mr. Abdi attended to discuss the denial of the claim by the Insurer. Mr. Christodoulou made notes of the meeting on the same day as the meeting, which were filed at the arbitration hearing. The notes clearly indicate that the denial of the claim was discussed. In light of this, I accept the evidence of Mr. Christodoulou over that of Mr. Abdi and conclude that not only was the issue of the denial of the claim discussed, but also that Mr. Abdi did in fact receive the letter of March 21, 1994.

Mr. Abdi then, on April 21, 1994 applied for mediation on the issue of weekly income replacement benefits and on April 27, 1994 Mr. Christodoulou sent Mr. Abdi yet another letter confirming the denial and the reasons for it.

Following the unsuccessful mediation in June, 1994, Mr. Abdi and the Insurer did discuss the question of Mr. Abdi's pre-accident earnings and indeed an accountant was hired by the Insurer to investigate the issue.

Mr. Abdi, however, did not attempt to file his application for arbitration until January 15, 1996. At that time he apparently completed the application form and may have attended at the offices of the Insurance Commission. He did not, however, pay the required $100 filing fee at that time and did not leave his application with the Commission. It was not until May 2, 1996, that Mr. Abdi submitted the application for arbitration and the required filing fee. This is confirmed by the fact that the Ontario Insurance Commission clearly stamped the date May 2, 1996 on the application form. Accordingly I find that the application was not filed until May 2, 1996.

ANALYSIS:

Section 281(5) of the Insurance Act, R.S.O. 1990, c.I.8 as amended, states:

A proceeding in a Court or an arbitration proceeding in respect of statutory accident 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 Statutory Accident Benefits Schedule.

Section 121 empowers the Lieutenant Governor in Counsel to enact regulations setting time limits in respect of mediation and arbitration. While Section 72 of the Schedule has extended the limitation period in certain situations, those extensions do not apply in this case, and accordingly, the Application for Arbitration must be filed within two years of the denial of benefits by the insurer. As numerous arbitrators have held, the arbitrator has no discretion to extend the limitation period.²

It is worth noting that unlike the notice requirements in the legislation that were in effect prior to January 1, 1994, section 62(8) of the Schedule does not require the notice of refusal to pay benefits to be in writing. It is also worthy of note that Notice of Stoppage of benefits covered by section 64 (3) of the Schedule requires written notice.

While it may be that a formal written notice of the refusal to pay benefits is not required under section 62(8), there is no doubt that the notice must be clear, unequivocal, and communicated to the applicant. The onus is on the insurer to establish that the applicant has received proper notice.

The notice sent to Mr. Abdi by letter on March 21, 1994 is, in my view, clear and unequivocal. It states, in part:

"This is to inform you that we will not be honouring your claim for Weekly Income Replacement Benefits."

The letter went on to give reasons for the refusal and also enclosed an "Explanation of Assessment by Insurance Company" setting out the reasons for the refusal.

Despite Mr. Abdi's claim that he did not receive this letter and the subsequent refusal letter from the Insurer, I am satisfied, for the reasons stated above, that he did receive the letters. I am also satisfied that the denial was explained to Mr. Abdi in his meeting with Mr. Christodoulou on April 5, 1994.

Mr. Abdi, in the course of the hearing, alleged that the Insurer, subsequent to the denial of benefits, entered into discussions with him as to the amount of his pre-accident income in order to determine the appropriate amount of weekly benefits he should be paid. Mr. Abdi took the position that the refusal to pay benefits had thereby been rescinded, or that the limitation period had at least been waived.

I accept that the Insurer did enter into discussions with Mr. Abdi as to the amount of his pre-accident income. Indeed, it is clear that after Mr. Abdi put the matter into mediation the Insurer hired an accountant to determine what his pre-accident income was.

I find that mere negotiations and the consideration of any new evidence brought forward by the applicant does not necessarily negate an Insurer's denial. Indeed, the Insurer should consider new documentation brought forward by the applicant. This does not mean, however, that the Insurer has thereby rescinded it's denial of the claim. If the Insurer misled or deceived the Applicant about its position during the course of the negotiations, then it may well be that the denial is rescinded. In this case, however, there is no evidence and of any misrepresentation on the part of the Insurer. I find that the Insurer did not rescind the denial.

In light of my findings, I am of the view that Mr. Abdi cannot proceed with his application for income replacement benefits from February 8, 1994 to May 2, 1994. The question remains, however, as to whether or not Mr. Abdi can pursue the arbitration of income replacement benefits after May 2, 1994, as he filed his application for arbitration within two years of that date. This raises the question of whether section 281(5) of the Insurance Act sets a fixed, one-time, period in which to apply for arbitration for certain benefits, or whether a new cause of action arises each time the benefits become due.

Prior to the enactment of section 281(5) and the promulgation of the Schedule on June 20, 1990, accident benefit provisions were contained in Schedules to the Insurance Act. The applicable limitation period under those Schedules was:

Every action or proceeding against the Insurer for the recovery of a claim under these sections shall be commenced within one year from the date on which the cause of action arose and not afterwards.³

The courts consistently held that the wording of this section of the Insurance Act, and the sections of the applicable Schedules, created a situation where the limitation period would only bar claims originating more than one year (as the limitation period then was) before the commencement of an action for the recovery of the claim.

Mr. Justice Osler, in Morgan v. Dominion Insurance Corporation (1980) 1980 CanLII 1632 (ON HCJ), 118 D.L.R. (3rd) 675 (Ont. H. Ct. of J.) stated:

With respect to any given week, therefore, there must be in existence entitlement to a benefit and refusal or failure by the defendant to pay it. If therefore, disability is established, the cause of action with respect to benefits arises and may be asserted from week to week.

In 1990, section 281(5) of the Insurance Act was amended and the words "cause of action" were removed, and the words "within two years of the insurer's refusal to pay" were added. Thus, section 281(5) of the Insurance Act now reads:

A preceding in a court or an arbitration preceding in respect of statutory accidents 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 Statutory Accidents Benefits Schedule.

Section 72(1) of the Schedule, uses essentially the same language. It states:

A mediation preceding under section 280 of the Insurance Act or an arbitration or court proceeding under section 281 of the Act in respect of a benefit under this Regulation shall be commenced within two years from the insurer's refusal to pay the amount claimed or, if the person has engaged in an employment as permitted by section 14 or has returned to elementary, secondary or post-secondary education as permitted by section 17, within two years of the insurer's refusal to pay further benefits.

The effect of the change of the wording has been considered by Arbitrator Renahan in, Kirkham and State Farm Mutual Automobile Insurance Company (August 15, 1996), OIC A96-00141. In that case Arbitrator Renahan decided that the change in the wording from the former legislation was not so different that a new interpretation should be placed upon the limitation period. With the greatest of respect, I do not agree with Arbitrator Renahan on this point. In my view, the changes in the wording are significant and it is trite law to say that the legislature does not change the wording of legislation without a reason for doing so.

Arbitrator Renahan has suggested that the change in the wording was made in order to reflect the fact that the 1990 amendments to the Insurance Act allowed the insured to bring a preceding either in court or to arbitration and accordingly the wording had to be changed.

The term "cause of action" may mean one thing for one purpose and something different for another.⁴ A review of that term in Black's Law Dictionary, revised sixth editions, reveals that while the term refers to a right to seek judicial remedy before the courts, it is not necessarily restricted to the courts.⁵

Even if the term "cause of action" were limited to court actions, the legislature could have very easily made a minor amendment to section 281(5) by adding the words "or proceeding" or such similar term to the section. Accordingly, I do not believe that the legislature made the major amendment to section 281(5) simply to take into account the fact that a dispute could be taken to arbitration in addition to the courts. In my view, the alteration of the section to attach the limitation period to the date of the insurer's refusal to pay is reflective of the entirely new accident benefit system established in 1990. The old system has been replaced by a fairly complex scheme, whereby an applicant must provide notice of the accident to the insurer within a certain period of time, and provide further details of the claim within another time frame. Similarly, the insurer must respond to the applicant within a certain specified time frame and in a specified way. This includes the obligation on the part of the insurer to provide the applicant with clear and unambiguous reasons for a refusal to pay benefits.

What the legislature has done, in my view, is to set up a new system for dealing with accident benefits claims. As it has often been stated, the system was designed to work quickly, efficiently, and within minimum of uncertainty.

In my opinion, there is no ambiguity in section 281(5) of the Insurance Act and section 72(1) of the Schedule. A plain reading of the section suggests that an applicant has two years from the insurer's date of refusal to pay a benefit to commence a proceeding in the courts or by way of arbitration. Accordingly, Mr. Abdi's claim for income replacement benefits expired two years from the date of the insurer's refusal.

EXPENSES:

In light of the relative novelty of the legal issue involved, I exercise my discretion under section 282(11) to allow Mr. Abdi his expenses incurred in the arbitration.

ORDER:

1. Mr. Abdi is precluded from proceeding to arbitration with regard to income replacement benefits.

2. Mr. Abdi is entitled to his expenses of the hearing.

November 21, 1996

M. Guy Jones Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after January 1, 1994, called "the Schedule" in this decision. The Schedule is Ontario Regulation 776/93, as amended by Ontario Regulation 635/94.
2. 2Zeppieri and Royal Insurance Company of Canada (February 17, 1994), OIC A-005237; and Rahman and Cooperators General Insurance Company (December 21, 1993), OIC A-000854.
3. 3Insurance Act, R.S.O. 1970, c.224, Schedule E, s.s.(7)(c) and Insurance Act, R.S.O. 1980 c.218, Schedule C, s.s.(7)(c).
4. 4Denezuelan Meat Export Company v. U.S., D.C.C. Md., 12 F.Supp. 379.
5. 5"Cause of Action,": The fact or facts which gives a person a right to judicial redress or relief against another. The legal effect of an occurrence in terms of redress to a party to the occurrence. A situation or state of facts which would entitle a party to sustain action and give him right to seek a judicial remedy in his behalf. Thompson V. Zurich Ins. Co., D.C.M., inn., 309 F. Supp. 1178, 1181. Fact, or state of facts, to which law sought to be enforced against a person or thing applies. Facts which give rise to one or more relations of right-duty between two or more persons. Failure to perform legal obligation to do, or refrain from performance of, some act. Matter for which action may be maintained. Unlawful violation or invasion of right. The right which a party has to initiate a judicial proceeding, Black's Law Dictionary, revised sixth edition.