Neutral Citation: 1997 ONICDRG 205

Appeal P96-00080

Appellant/Respondent

and

Respondent/Appellant

Before:

David R. Draper, Director's Delegate

Counsel:

James A. Scarfone (for Sherre Maas)

Joseph J. Sullivan (for State Farm)

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The appeals are dismissed and the arbitration order dated October 16, 1996, is confirmed.
Sherre Maas is entitled to two-thirds of her appeal expenses related to the appeal brought by State Farm Mutual Automobile Insurance Company.

December 8, 1997

David R. Draper

Director's Delegate

Date

Both parties appeal from an arbitration decision dated October 16, 1996. State Farm Mutual Automobile Insurance Company ("State Farm") claims that the evidence does not support the arbitrator's conclusion that Sherre Maas is entitled to weekly income benefits beyond 156 weeks. It also submits that there is no basis for the arbitrator's order that it pay a special award.

Ms. Maas argues that not only was the arbitrator justified in ordering a special award, the amount should be higher than $5,000. She also claims that the arbitrator erred in allowing State Farm to deduct the full amount of the disability benefits she receives through her employer and from the Canada Pension Plan.

Ms. Maas was injured in an automobile accident on January 29, 1991. At the time, she was 32 years old, married and had two children, ages five and six. She and her family live in a rural area near Simcoe, Ontario, where both she and her husband grew up. After being out of the workforce to care for her children, Ms. Maas returned to work in September 1990. For the 16 months before the accident, she was employed by the Norfolk Fruit Growers' Association as a full-time manual labourer, grading and packing apples.

The accident involved a fall. Ms. Maas slipped on some ice as she was getting out of her van, landing on her buttocks. She claims that the resulting injuries have prevented her from returning to work. Her complaints include back and leg pain, numbness in her pelvic area, an inability to stand or sit straight, memory loss and emotional problems.

State Farm paid Ms. Maas weekly income benefits of $265.13, less her other disability benefits, under section 12(1) of Ontario Regulation 672, Statutory Accident Benefits Schedule - Accidents Before January 1, 1994 ("the Schedule"). These benefits were paid on the basis that she was unable to return to her pre-accident employment. After 156 weeks, however, the test becomes stricter. According to section 12(5)(b), State Farm was not required to continue paying weekly income benefits unless Ms. Maas established that she was continuously prevented from engaging in any occupation or employment for which she "is reasonably suited by education, training or experience." State Farm stopped paying weekly income benefits, effective February 6, 1994, claiming that she did not meet this test.

Ms. Maas applied for mediation on a number of issues. Some were resolved, but her entitlement to further weekly income benefits was not. Consequently, she applied for arbitration. The arbitration hearing was lengthy, taking place over six days during the period from late October 1995 to mid-January 1996. Twenty-five exhibits were filed and 12 witnesses were called, including four doctors and a rehabilitation coordinator. After the evidence was completed, both parties filed detailed written submissions.

The question of causation was a major focus at the arbitration hearing. State Farm claimed that Ms. Maas' ongoing problems were not related to her January 1991 accident. In its submission, this accident was a relatively minor incident in the life of someone who already had significant physical and emotional problems. State Farm also argued that even if Ms. Maas' problems were accident-related, there was nothing to prevent her from doing non-physical work.

On October 16, 1996, the arbitrator issued a 40-page decision. He concluded that Ms. Maas met the post-156 week test and ordered State Farm to pay her weekly income benefits from February 6, 1994, the date of termination, plus interest. He also ordered State Farm to pay a special award of $5,000, inclusive of interest, because he found that its decision to terminate Ms. Maas' benefits was unreasonable. However, the arbitrator did not accept Ms. Maas' argument that her weekly

income benefits should only be reduced by 80 per cent, not 100 per cent, of the disability benefits she received through her employer and the Canada Pension Plan.

As stated above, both parties appealed. The appeal record includes the arbitration exhibits and a full transcript of the arbitration hearing. In addition, I received detailed written submissions and heard oral submissions.

A. Weekly Income Benefits

State Farm acknowledges that my role on appeal is not to second-guess the arbitrator's assessment of the evidence. It claims, however, that he made important factual findings based on inadequate evidence, while ignoring contrary evidence.

This is a difficult case. It involves legitimate questions about the seriousness of Ms. Maas' January 1991 accident, its impact on her pre-accident physical and emotional health, the contribution of a number of post-accident incidents, the lack of organic explanations for some of her ongoing problems, and the types of alternative work that might be suitable for her. The evidence is extensive, but contradictory. In particular, the medical professionals approached the matter from different perspectives based on their own area of expertise, their views about pain-based disability, their familiarity with Ms. Maas' medical and personal history, and whether they were focussing on assessment or treatment.

In its appeal submissions, State Farm refers to evidence supporting its position. So does Ms. Maas. After reviewing the appeal record, I accept that another arbitrator might have viewed the evidence differently. However, that is not the test. The question is whether the arbitrator's conclusions are supported by the evidence. Despite the detailed and able submissions of State Farm's counsel, I am not convinced that the arbitrator acted outside the scope of his authority. He addressed the difficult questions raised in this case and reached conclusions based on the evidence he found most reliable.

State Farm submits that there was a "massive" amount of evidence that Ms. Maas' ongoing problems were not caused by the January 1991 accident, much of which the arbitrator did not refer to in his decision. For example, it points to the reports of Dr. D.L. Keshav, a psychiatrist who saw Ms. Maas before the accident, and a clinical note of Ms. Maas' family doctor indicating that nine days before the accident, she was taking 20 Tylenol per day.

As I said in Barrick and General Accident Assurance Company of Canada, (November 7, 1996, OIC P-011448)¹, arbitrators are not expected to discuss every piece of evidence in their decisions. They must give the parties, particularly the unsuccessful party, a reasonable explanation of the outcome. In my view, this decision meets that standard.

The arbitrator did not ignore Ms. Maas' pre-accident condition. He accepted that she had physical and emotional problems, but found that at the time of the accident, they did not prevent her from working full-time, caring for her children, doing virtually all the housework, and doing volunteer work in the community. There is ample evidence to support this finding.

The arbitrator also considered whether Ms. Maas' later problems resulted from the accident, or were simply a resurfacing of her earlier problems. A number of witnesses, including Ms. Maas, her husband, her family doctor, her sister and a neighbour, all testified about the dramatic change in her activities after the accident. Although they were challenged on cross-examination, their evidence was not sufficiently compromised that the arbitrator could not rely on it. Nor was the contrary evidence presented by State Farm so definitive that the arbitrator had to accept it. As a result, I find no reason to interfere with the arbitrator's assessment.

State Farm also objects to the arbitrator's finding that Ms. Maas is not qualified for anything other than unskilled, physical labour, and his criticism that it should have done more to assess her functional abilities and offer retraining. I find little merit in State Farm's submission that the arbitrator erred in finding that Ms. Maas only had a grade 12 education. While she received three grade 13 credits, the arbitrator correctly states that the "highest education Ms. Maas attained is grade 12." More importantly, she is many years removed from school, making her experience more important than her grade level.

State Farm concedes that Ms. Maas' work experience is limited, but argues that her volunteer work shows that she is capable of pursuing non-physical work. That may be so, but the real question is whether she was ready to do so. As I read the decision, the arbitrator did not reject the possibility that Ms. Maas might be able to work in a light-duty position, but not without further rehabilitation and perhaps some retraining.

It is clear that the arbitrator was concerned that State Farm's reevaluation of Ms. Maas' entitlement to accident benefits took place while she was still involved in a multi-disciplinary rehabilitation program at the Traffic Injury Rehabilitation Clinic, a placement arranged by the rehabilitation company retained by State Farm to coordinate Ms. Maas' rehabilitation. He found that State Farm focussed too much on the 156-week mark and not enough on the rehabilitation efforts. I am satisfied that there was evidence to support this assessment and, therefore, the order will stand.

B. Special Award

The arbitrator ordered State Farm to pay a special award of $5,000.00, inclusive of interest, under section 282(10) of the Schedule, which states:

282.- (10) If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

Both parties appealed this part of the arbitration order. State Farm claims that the evidence does not support the arbitrator's conclusion that it unreasonably terminated Ms. Maas' benefits, while Ms. Maas argues that the amount should be higher.

(i) Procedural requirements

In its arbitration submissions, State Farm argued that a special award should not be ordered because it was not given notice before the hearing that it would be an issue, as required by section 8 of the Statutory Powers Procedure Act ("SPPA"):

Where the good character, propriety of conduct or competence of a party is an issue in a proceeding, the party is entitled to be furnished prior to the hearing with reasonable information of any allegations with respect thereto.

[emphasis added]

The arbitrator did not decide this issue because he found that State Farm waived any procedural requirements by failing to object when the possibility of a special award was raised on the fourth day of the hearing. On appeal, State Farm contends that it did nothing to waive compliance with section 8 and reasserts its argument.

I recently dealt with the insurer's right to notice in Clark and Royal Insurance Company, (September 26, 1997, OIC P97-00008), holding that 282(10) of the Insurance Act:

. . . gives arbitrators the authority to impose a special award based on the evidence presented at the hearing, whether or not notice was given before the hearing. In other words, a special award is always a possibility if the arbitrator finds that the insurer unreasonably withheld or delayed the payment of benefits. The specific notice requirements in section 8 of the SPPA do not apply, although the more general common law principles of natural justice and fairness must be met.

In Clark, I found that the requirements of natural justice and fairness were not met because the insurer was not given an opportunity to present evidence on the question of a special award. In this case, the special award was raised before the end of the hearing and State Farm called its Claims Superintendent to explain how they handled the claim. I am satisfied that in the particular circumstances of this case, the common law principles of natural justice and fairness were met.

As a result, I find no violation of either section 8 of the SPPA or the common law principles of natural justice and fairness.

(ii) Was a special award warranted?

The awarding of a special award is not strictly discretionary. According to section 282(10), the arbitrator "shall" order a special award if he or she finds that the insurer unreasonably withheld or delayed the payment of benefits. A finding of unreasonableness, however, is highly dependent on the arbitrator's view of the evidence. Since the arbitrator had the opportunity to observe the witnesses, including State Farm's Claims Superintendent, I am not prepared to interfere with his assessment unless he erred in some significant way.²

State Farm submits that there was nothing unreasonable about its actions. With the 156-week mark approaching, it arranged for Ms. Maas to be assessed by Dr. J. Mah, an orthopaedic surgeon. Because his report raised some question about her mental ability to return to work, State Farm had her assessed by Dr. Zamora, a psychiatrist. State Farm claims that it relied on the reports of Dr. Mah and Dr. Zamora, while Ms. Maas did not provide any medical evidence that she met the 156-week test until one week before the arbitration hearing.

As discussed above, the arbitrator had difficulty with the way State Farm approached the question of Ms. Maas' ongoing entitlement. Rather than working with her family doctor and the Traffic Injury Rehabilitation Clinic, it sent her to two new doctors and acted on their reports without much apparent regard for the views of her treating physicians and therapists. Further, the arbitrator found that State Farm's adjuster attempted to influence Dr. Mah by incorrectly stating in the referral letter that its reports showed that Ms. Maas was not disabled.

Like the entitlement issue, other arbitrators might have viewed the evidence differently. I am satisfied, however, that the arbitrator's assessment was open to him. Insurers should not approach post-156 week entitlement as if it is a discrete decision unrelated to what has gone on to that point. Decisions to pay benefits and to adopt particular rehabilitation strategies will affect the way an insured person organizes his or her life. While the insurer is entitled to reevaluate its position based on new information, it should do so based on a consideration of all of the available information.

State Farm argues that Ms. Maas did not provide any medical evidence supporting her post-156 week entitlement until one week before the arbitration hearing. However, this ignores the voluminous information available through Federal Rehabilitation Services, the company retained by State Farm to coordinate Ms. Maas' rehabilitation. While this material may not specifically address the post-156 week test, it is clear that her treating physicians supported her claim for ongoing assistance. There is also no suggestion that State Farm requested and was denied the views of either Ms. Maas' family doctor or the and the Traffic Injury Rehabilitation Clinic before deciding to terminate her benefits.

The adjuster's letter to Dr. Mah is also a legitimate consideration. It is clearly important that any new assessments be based on accurate information about the history of the matter. A summary may be helpful, but it must be accurate. Any appearance that the assessor has been misled or told what to say will quickly undermine the value of the assessment.

Finally State Farm submits that the arbitrator is inconsistent about the importance of psychiatric evidence. This argument is based on the following statements from page 33 of the decision:

Dr. Zamora's opinion [his psychiatric opinion] can hardly be said to provide a proper ground for termination given that Ms. Maas' complaint was mainly physical in nature. . . .

Most of the medical evidence in the possession of State Farm as it was contemplating termination showed that Ms. Maas was physically disabled and was experiencing considerable psychological difficulties associated with her pain.

When read in context, I am not persuaded that these statements are inconsistent. The arbitrator dealt with Dr. Zamora's report after finding that Dr. Mah's opinions did not provide a clear basis for concluding that Ms. Maas was physically capable of returning to work. The implication is that State Farm could not rely on psychiatric evidence that Ms. Maas could return to work in the absence of evidence that she was physically able to do so. In any event, the arbitrator went on to observe that even Dr. Zamora felt that Ms. Maas would need vocational training before engaging in light sedentary duties.

(iii) The amount of the special award

Once an arbitrator decides that a special award is warranted, the amount is left to his or her discretion. Previous appeal decisions have taken a narrow approach to reviewing discretionary decisions.³ I find no error in the arbitrator's approach in setting the amount of the special award and, therefore, have no basis for disturbing the order.

C. Collateral Benefits

Ms. Maas argues, as she did at the arbitration hearing, that State Farm should only be allowed to deduct 80 per cent of the disability benefits she received through her employer and from the Canada Pension Plan. She also raises a new argument. Based on the recent decision in Cugliari v. White (1996), 1996 CanLII 11778 (ON CTGD), 31 O.R. 42 (Div.Ct.), under appeal, she submits that her weekly income benefits should not be affected at all by the benefits she receives from the Canada Pension Plan.

State Farm claims that the deductibility of Canada Pension Plan benefits was not before the arbitrator, only the extent of the deduction, and, therefore, it is not an appropriate appeal issue. I agree. At page 35 of his decision, the arbitrator specifically states that the question of deductibility was not before him:

The issue of whether either or both of these benefits are deductible from her weekly income benefits as payments for loss of income under section 12(4)(b) of the Schedule is not before me. The only and discrete issue put before me by agreement of the parties at the commencement of the hearing is whether State Farm is entitled to deduct from Ms. Maas' weekly income benefits 100 per cent or 80 per cent of collateral benefits received by her.

The arbitrator's formulation of the issues is supported by the introductory remarks of counsel, found at page 13 of the transcript. Therefore, I conclude that the deductibility of Canada Pension Plan benefits should not be decided in this appeal.

The decision in Cugliari is important, affecting many accident benefits cases. However, that does not mean it can be raised in this appeal without ever having first been considered at the arbitration level. The parties will need to consider the decision in Cugliari, including the fact that an appeal is pending, and other arbitration decisions that have considered it. If an agreement cannot be reached about the proper treatment of Ms. Maas' Canada Pension Plan disability benefits, the dispute resolution process may need to be used again.

With respect to the extent of the deduction, I dealt with that question in Edgar and Wellington Insurance Company, (March 27, 1996, OIC P-005441), where I rejected the argument being made by Ms. Maas:

In my opinion, the grammatical structure of section 12(4)(b) does not support Ms. Edgar's position. The plain meaning is that 80 per cent of the insured person's gross weekly income is to be calculated, "less any payments for loss of income." Ms. Edgar's interpretation is further undermined by the fact that it leads to an inconsistent approach to the calculation of benefits under sections 12 and 13. [p.4]

I heard nothing in this case to convince me that my analysis in Edgar is wrong, or that I should take a different approach here. Therefore, this part of Ms. Maas' appeal is dismissed.

IV. EXPENSES

Where an insurer unsuccessfully appeals an arbitration decision, the insured person has routinely been awarded his or her expenses. I find no reason to depart from that approach here. However, Ms. Maas also appealed. I found her appeal to have little merit and, in my view, this is a factor that should be considered in the awarding of expenses. As a result, State Farm will be responsible for paying Ms. Maas' reasonable appeal expenses related to its appeal, reduced by one-third.