Neutral Citation: 1997 ONICDRG 109

OIC A96-000996

ONTARIO INSURANCE COMMISSION

BETWEEN:

ALBINA PEREIRA

Applicant

and

STATE FARM INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Issues:

The Applicant, Albina Pereira, was injured in a motor vehicle accident on May 28, 1994. She applied for and received statutory accident benefits from State Farm Insurance Company payable under the Schedule.¹ State Farm refused to fund further rehabilitation services by the service provider, Trauma Services. Mrs. Pereira seeks payment by State Farm under section 40 of the Schedule of an outstanding and ongoing account with Trauma Services. The parties were unable to resolve their dispute through mediation and Mrs. Pereira applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

State Farm raised a preliminary issue: whether an arbitrator has the jurisdiction, under the Insurance Act, R.S.O. 1990, c.I.8, as amended (the "Act") to hear Mrs. Pereira's claim against State Farm for Trauma Services' account for services rendered to Mrs. Pereira. In general, State Farm claims that Trauma Services is the real applicant and that is not the intention of the Act that service providers use the Commission to collect their accounts.

The hearing on the merits of the claim is scheduled to be heard on December 1, 2, 3 and 4, 1997.

Issues:

The issues in the preliminary hearing are :

1. Do I have the jurisdiction under the Act to hear this claim for rehabilitation services under section 40 of the Schedule provided by Trauma Services to Mrs. Pereira?

2. Is Mrs. Pereira entitled under section 282 (11) of the Act to her expenses incurred in the arbitration?

Result:

1. I have the jurisdiction to hear Mrs. Pereira's claim under section 40 of the Schedule for rehabilitation services provided by Trauma Services.

2. I reserve my decision on the expenses issue until I make my final Order.

Hearing:

The hearing was held in Hamilton, Ontario before me, Arbitrator, Beth Allen on, April 21, 22, 23 and 25, 1997. I heard the preliminary issue on April 21, 1997 and continued on the remaining days to hear evidence on the main issue. The hearing on the main issue will resume on December 1, 2, 3 and 4, 1997.

Written submissions on the preliminary issue were delivered by State Farm on April 30, 1997, submissions in response by Mrs. Pereira on May 9, 1997 and submissions in reply by State Farm on May 13, 1997.

Present at the Hearing into the Preliminary Issue:

Applicant: Albina Pereira

Mrs. Pereira's Representative: Lou Ferro Barrister and Solicitor

State Farm's Representative: Douglas N. Patton Barrister and Solicitor

State Farm's Officer: Ian Cairns Claims Superintendent

Witnesses: Albina Pereira Ellen Helden

Interpreter: Jim Parnell Omnicom Professional Language Services Ltd.

Court Reporter: Diane Leblanc Mark Nimigan Court Reporting Enterprise Inc.

Exhibits:

Exhibit 1 Permission to Allow Trauma Services to Get Help From the Mediation/Arbitration Services of the Ontario Insurance Commission dated February 5, 1996 Authorization dated January 3, 1997

Exhibit 2 Applicant's Supplementary Documents Brief

Exhibit 3 Insurer's OIC Brief

Written Submissions:

Final Submission of State Farm dated April 30, 1997

Mrs. Pereira's Response to State Farm's Final Submission dated May 9, 1997

State Farm's Reply dated May 13, 1997

Authorities: State Farm's Brief of case law and legislation (five tabs).

Tab 1 Adusei and Royal Insurance Company (March 3, 1994), OIC A-004404.

Tab 2 International Managed Health Care Inc. et al. v. Toronto Transit Commission, (19 April 1995), (S.C.C.) [unreported].

Tab 3 Insurance Act, R.S.O. 1990, c.I-8 as amended, ss. 281 and 282.

Tab 4 Insurance Act, R.S.O.1990, c.I-8 as amended, s. 224(1).

Tab 5 Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34 as amended, ss. 52, 53, and 54.

Evidence and Findings:

Factual Background

Mrs. Pereira was involved in a motor vehicle accident on May 28, 1994. Since the accident she has complained mainly of headaches, pain in her cervical spine, shoulders and chest and numbness in her right leg.

From about August 1995 until the date of the hearing, Trauma Services has been involved with Mrs. Pereira's rehabilitation. State Farm funded only a portion of the assessment and treatment provided by Trauma Services. Mrs. Pereira claims that the services provided by Trauma Services meet the requirements of section 40 of the Schedule, and accordingly the outstanding and ongoing bill ought to be paid by State Farm. State Farm contends preliminarily that the application for arbitration was not properly brought in accordance with the Act and as such an arbitrator has no jurisdiction to hear the claim.

State Farm filed as an Exhibit a document entitled "Permission to Allow Trauma Services to Get Help From the Mediation/Arbitration Services of the Ontario Insurance Commission" (the "Permission"). This document is dated February 5, 1996 and Mrs. Pereira confirmed in testimony that she read, understood and signed the document. The Permission states as follows:

I, Albina Pereira, understand Trauma Services will be providing medical care and case management services to me as a result of my car accident and if my insurance company feels that they want a mediator to help reach an agreement on the service provided by Trauma Services then I would like Trauma Services to apply for mediation on my behalf and to work with the mediator to try to resolve any request my insurance company may have regarding Trauma Services. If the mediator cannot help fix the problem, I would like Trauma Services to ask an arbitrator to help my insurance [sic] and Trauma Services agree on a compromise.

I understand Trauma Services will deal with my insurer about their accounts and will not ask me directly to pay for the cost of the service as long as I am willing to have Trauma Services, on my behalf, ask the mediator/arbitrator to help settle any questions my insurance company doesn't understand and includes retaining legal services provided it's at no cost to myself.

In addition, I also give permission to Trauma Services to prepare expense forms on my behalf and submit them to my insurance company as may be necessary. I understand any time I want to I can have free access to any information I feel I may need from Trauma Services in relation to the mediation/arbitration process and I can speak to my Nurse or Case Facilitator about any issue relating to the payment of the accounts by my insurance company.

Mrs. Pereira testified that she signed the Permission because State Farm had stopped paying for her rehabilitation treatment. She indicated that Ms. Valerie Wilson, a nurse clinician with Trauma Services, explained to her the aspects of the document she did not understand.

According to the Report of Mediator dated April 19, 1996, Mrs. Pereira attended mediation on February 21, 1996 and April 19, 1996 to deal with the outstanding Trauma Services account. The Report indicates Mr. Clae Willis, a case facilitator with Trauma Services and Mr. Frank Zambosco, Barrister and Solicitor, represented her at mediation. Mediation failed. Mrs. Pereira applied for arbitration by an Application for Arbitration dated June 10, 1996. The Application is in Mrs. Pereira's name, as the applicant, and Ms. Karen Boelhouwer, a case facilitator with Trauma Services, is Mrs. Pereira's representative.

A prehearing discussion was held on November 14, 1996. Mrs. Pereira did not attend. Trauma Services' counsel, Mr. Lou Ferro, attended to represent her. In the prehearing letter dated December 4, 1996, the prehearing arbitrator expressed concern that Mrs. Pereira was not present at the prehearing. The arbitrator also ordered Mr. Ferro to file a proper authorization by Mrs. Pereira allowing him to act as her legal representative. Mr. Ferro filed with the Commission a document entitled "Authorization" dated January 3, 1997 and signed by Mrs. Pereira. The Authorization states:

I, Albina Pereira, do hereby appoint Lou Ferro as my agent for all proceedings at the Ontario Insurance Commission in relation to the above-mentioned loss insofar as my medical rehabilitation care issues are concerned and specifically in relation to Arbitration No: A96-000920-SALE.

During the hearing, Mrs. Pereira testified substantially in English, relying on the interpreter mainly for interpretation of technical terminology. At the hearing, Mr. Ferro requested that she read the Authorization, and after a brief period she indicated she had done so. In answer to questions in chief about her legal representation, Mrs. Pereira testified that she understood the Authorization and that Mr. Ferro was representing her on her rehabilitation claim. She explained that while she did not know the meaning of "arbitration," she understood Mr. Ferro was representing her at the proceedings today. Mrs. Pereira said she signed the Authorization because State Farm left her with nothing.

Mrs. Pereira testified that Trauma Services' treatment has greatly improved her accident-related medical conditions. She conceded that today her life is much better and she is able to cope with her pain.

Submissions:

State Farm's Submissions

State Farm submits that Trauma Services and not Mrs. Pereira has brought the arbitration to recover outstanding and ongoing expenses incurred for services rendered to Mrs. Pereira. Although the application contains Mrs. Pereira's name as the applicant, State Farm submits that Trauma Services commenced the proceedings for its own benefit and as such an arbitrator has no jurisdiction to hear the claim. State Farm adduced evidence to challenge the legal arrangement between Mrs. Pereira and Trauma Services and between Mrs. Pereira and Mr. Ferro, her legal representative.

State Farm contends that an arbitrator's jurisdiction is limited to hearing applications from an "insured person." It relies on section 281 (1)(b) of the [Insurance Act]² (the "Act") which it submits grants jurisdiction to an arbitrator to hear a dispute brought by an insured in respect to statutory accident benefits. Section 281 (1)(b) states:

281.(1) Subject to subsection (2),

(a) ...

(b) the insured person may refer the issues in dispute to an arbitrator under section 282;

(c) ...

"Insured person" is not defined under Part VI (Automobile Insurance) of the Act. However, as State Farm pointed out, the term "insured" is defined in section 224 (1) of the Act as a person, whether named or unnamed, who is insured by a contract and entitled to statutory accident benefits under the contract. State Farm contends that Trauma Services does not meet the definition of an insured.

State Farm argued that the Permission signed by Mrs. Pereira was an assignment to Trauma Services of her right to commence arbitration proceedings. It relied on a Commission arbitration decision, Adusei³ and a Small Claims Court decision, International Managed Health Care⁴ to support its argument that only an insured person and not a treatment provider may bring arbitration proceedings.

In the Adusei case the insured received treatment of accident-related injuries from a treatment facility. The treatment facility billed the insurer directly for the cost of services to the insured. The insurer declined to pay the treatment provider. The treatment provider commenced arbitration proceedings in its own name under an authorization by which the treatment provider contended that the insured person legally assigned his right to commence the arbitration. The insured attended the hearing not as the applicant, but as a witness at the request of the treatment provider. Further, the insured took no position on the issues in dispute and admitted that he did not sign the authorization in contemplation of arbitration. The insurer argued that the insured and not the treatment provider is permitted by the Act to commence arbitration proceedings. The arbitrator held that in the absence of a statutory provision allowing treatment providers to commence arbitration proceedings, the authorization signed by the insured is not effective to convey this right to the treatment provider.

In the International Managed Health Care case the treatment provider sought payment through the court from the insurer for an outstanding account for treatment it provided to the insured. The insured authorized the treatment provider to institute, prosecute and to compromise any of his claims for accident benefits. The insured also authorized the insurer to pay the treatment provider directly on the account. The Court observed that the authorization was an apparent attempt to do indirectly what could not be done directly. It held that the authorization given by the insured to the treatment provider is not an assignment sufficient to allow the treatment provider to pursue the action in its own name.

To further support its position, State Farm challenged the validity of the Authorization by which Mrs. Pereira retained Mr. Ferro's services. It submitted that because Mrs. Pereira executed the Authorization six months after the commencement of arbitration, it has no effect on the issue to be decided. State Farm also adduced some evidence that suggests that Mr. Ferro has an interest in Trauma Services. It alluded to the fact that Mr. Ferro, the legal representative for Trauma Services, and not Mrs. Pereira's previous lawyer commenced the arbitration, and to the fact that Mr. Ferro's law office is located on the premises of Trauma Services.

Mrs. Pereira's Submissions

Mrs. Pereira submits that she, not Trauma Services, commenced the arbitration to claim expenses for medical and rehabilitation services rendered to her by Trauma Services. She further argues that she has a definite interest in the proceedings and the outcome. She said that her medical condition improved as a result of the treatment provided by Trauma Services.

Mrs. Pereira distinguished her situation from the case authorities advanced by State Farm. She contends that she neither assigned nor subrogated any of her rights under her policy nor conveyed to Trauma Services any right to commence legal proceedings in its own name. This, Mrs. Pereira submits, was what the insureds attempted and failed to achieve in the Adusei and International Managed Health Care cases.

Mrs. Pereira submitted that by signing the Permission she did not give Trauma Services the right to prosecute or compromise her claims; she retained those rights for herself. Mrs. Pereira argues that she only authorized Trauma Services to negotiate her claim with State Farm with the assistance of mediators and arbitrators at the Commission; and permitted Trauma Services to forebear payment of the account by her in return for her commencing the arbitration proceeding.

Mrs. Pereira also disputes State Farm's challenge to the integrity of the lawyer/client relationship between herself and Mr. Ferro. Mrs. Pereira submits that by attempting to align Mr. Ferro with Trauma Services, State Farm is implying that Mr. Ferro is acting against her interests. Mrs. Pereira argues that it is not open to an insurer to review the lawyer/client relationship of the insured. She submits that a presumption exists that lawyers understand and follow the ethical standards imposed by their profession's governing body when advising their clients .

Mrs. Pereira submits therefore that an arbitrator has the jurisdiction to hear her claim for rehabilitation benefits.

Analysis and Conclusion:

After considering the parties' submissions, I conclude that I have the jurisdiction under the Act to hear the claim for rehabilitation benefits for services rendered to Mrs. Pereira by Trauma Services. I reached this conclusion for the following reasons:

An arbitrator's jurisdiction to hear an insured's claim about entitlement to accident benefits is statute based. The Act contains provisions - sections 279 to 283 - which govern the dispute resolution process. Once the dispute has undergone mandatory mediation and mediation has failed, the insured can either take the dispute to court or access the arbitration process as set out under the Act. Under the Act an arbitrator derives the broad statutory authority to "determine all issues in dispute and such other issues as the parties may agree."⁵ [italics added]. However, an arbitrator's authority to hear accident benefit disputes is limited by the Act and Schedule to those brought by insureds in regard to entitlement and the benefit amount. To commence the arbitration process, the insured must file an application for arbitration.

I find on the facts before me that Mrs. Pereira properly brought her dispute before an arbitrator as required by the Act.

I find that the circumstances of Mrs. Pereira's case are distinguishable from the Adusei and the International Managed Health Care cases. Having regard to the terms of the Permission and the Authorization and the testimony, I find that Mrs. Pereira permitted Trauma Services' representatives to represent her at the prehearing and hearing. I do not find that she assigned or gave up her right to commence the arbitration. She retained this right, allowing Trauma Services' representatives to file the application on her behalf. By the second paragraph of the Permission, she agreed that Trauma Services deal directly with State Farm about its accounts in exchange for not being billed directly or being charged legal fees. In essence, she agreed to cooperate with Trauma Services in recovering its account from the Insurer by commencing the proceeding and attending to testify as to the benefits of Trauma Services' treatment.

I therefore do not accept State Farm's position that by this arrangement Mrs. Pereira assigned to Trauma Services her right to commence arbitration. The insureds in the cases cited by State Farm, clearly sought to assign rights to the treatment providers so that the treatment providers might commence arbitration proceedings in their own names. In the Adusei case the insured apparently admitted to having no interest in the outcome of the proceeding. In contrast, Mrs. Pereira, who continued to receive treatment at the time of the hearing, expressed a clear interest in the proceedings.

I accept that Mrs. Pereira read and understood the implications of the Permission before she signed it and I do not believe it is open to an arbitrator to go behind an agreement entered into by freely contracting parties. Important policy considerations underpin my decision. Arrangements whereby treatment providers directly bill insurers for insureds' treatment allow insured persons, many of whom are impecunious, to receive treatment they would otherwise not receive were they required to pay the treatment provider in advance. On the treatment provider's part, there would be little certainty that its accounts would be satisfied were insureds billed directly. Pursuing an insured for recovery through the courts may also not guarantee satisfaction of the account.

Similarly, I do not accept State Farm's challenge to the validity of the Authorization. Again, I accept that Mrs. Pereira read and understood this document before she signed it. Mrs. Pereira testified that she retained Mr. Ferro to represent her at the arbitration hearing because State Farm terminated her rehabilitation benefits. Mrs. Pereira is free to retain the lawyer of her choice to represent her. It is not open to an arbitrator to inquire behind the retainer or to question its timeliness or who the lawyer is.

State Farm made no allegations, and I do not find, that abuse of process, fraud, undue influence, or any other vitiating factor exists in this case. Mrs. Pereira commenced the arbitration in accordance with the legislation and as such I have the jurisdiction to decide the issue of her entitlement under section 40 of the Schedule to compensation for rehabilitation expenses.

Expenses:

I reserve my decision on the expenses issue until I make my final Order.

Order:

Mrs. Pereira is entitled to proceed to arbitration under section 40 of the Schedule on the issue of her entitlement to rehabilitation benefits.

June 19, 1997

Beth Allen 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. 2R.S.O. 1990, c. I-8 as amended
3. 3Adusei and Royal Insurance Company of Canada (March 3, 1994), OIC A-004404
4. 4International Managed Health Care Inc. and Dich Quang Le v. Toronto Transit Commission, (19 April 1995), S.C.Ct., Court File No. T6260/94, [unreported].
5. 5Section 282 (3) under the Act.