Neutral Citation: 1997 ONICDRG 218

OIC A97-000553

ONTARIO INSURANCE COMMISSION

BETWEEN:

DENNIS FORTNEY

Applicant

and

LOMBARD GENERAL INSURANCE COMPANY OF CANADA

Insurer

DECISION ON INTERIM BENEFITS

Issue:

This case is about whether an insurer is relieved of its obligations under section 64 (stoppage in weekly benefits) of the Schedule¹ where the parties engage in settlement discussions, or alternatively, where the insurer disputes the benefit amount. It also considers whether an applicant is entitled to interim benefits solely on the basis of a breach of section 64, or whether he/she must also meet certain threshold criteria.

The Applicant, Dennis Fortney, was injured in a motor vehicle accident on November 23, 1994. He received income replacement benefits (IRBs) from Lombard General Insurance Company of Canada (Lombard). Lombard terminated IRBs on September 26, 1996, on the basis that Mr. Fortney was no longer disabled because of the accident. Although Mr. Fortney requested a DAC²assessment, the parties agreed to postpone the assessment pending settlement discussions. When settlement efforts failed, and Mr. Fortney renewed his request for a DAC assessment, Lombard argued that by agreeing to discuss settlement Mr. Fortney waived his right to the assessment or further IRBs pending the arbitration hearing. Lombard also now argues, in the alternative, that because it disputes the benefit amount it is not obliged to comply with section 64 of the Schedule.³

Mr. Fortney seeks an interim award reinstating his IRBs at the rate in place when Lombard terminated benefits, being $602.90 per week. I find that Lombard was obliged to comply with the provisions of section 64, regardless of any settlement discussions or the dispute over the benefit amount. I also find that although Mr. Fortney meets the threshold criteria for interim benefits, he is entitled to a reinstatement of his benefits solely on the basis of Lombard's breach of section 64.

The issue in this hearing is:

1. Is Mr. Fortney entitled to an interim order reinstating his IRBs, on the basis that Lombard failed to comply with the benefit stoppage procedure under section 64 of the Schedule?

Result:

1. Lombard shall reinstate Mr. Fortney's income replacement benefits, payable at $602.90 weekly, from September 26, 1996 onward, subject to compliance with section 64 and any order of the hearing arbitrator.

2. Lombard shall pay interest on any outstanding income replacement benefits, in accordance with section 68 of the Schedule.

Facts:

The facts are largely undisputed. On November 23, 1994, Mr. Fortney sustained numerous injuries in a car accident. They included neck and shoulder strains, neurological impairment, and emotional trauma. At the time of the accident, he was self-employed as a truck driver and hauler of scrap metal. A Job Analysis, prepared at Lombard's request, indicates that Mr. Fortney performed strenuous work, requiring frequent heavy lifting and carrying.

Lombard paid IRBs to Mr. Fortney at the rate of $602.90 per week, on the basis of an opinion it obtained from the chartered accountancy firm of Coopers & Lybrand (Coopers).

By letter dated September 9, 1996, Lombard advised Mr. Fortney that it intended to terminate benefits on September 26, 1996, because "due to medical and surveillance documents we will [sic] have determined that you are no longer disabled from your occupation." Mr. Fortney promptly⁴ advised Lombard that he wished to be assessed at a DAC.

Soon after, Lombard proposed, and Mr. Fortney agreed, to postpone the DAC assessment pending settlement discussions. When settlement efforts failed, Mr. Fortney promptly renewed his request for a DAC assessment and asked Lombard to continue paying IRBs pending the DAC assessment, in accordance with section 64 of the Schedule. For reasons which remain unclear, Lombard has not, to date, arranged for a DAC assessment, despite repeated requests by Mr. Fortney and his cooperation in supplying the required forms. More important, Lombard refused to reinstate Mr. Fortney’s IRBs on the basis that he "waived" any entitlement to IRBs when he agreed to discuss settlement.⁵

Submissions and Findings

1. Did Lombard breach section 64?

Section 64 sets out the procedure by which an insurer may stop paying weekly benefits. It permits the insurer to stop payments on at least 14 days notice to the insured person, unless he provides a written notice that he wishes to be assessed at a DAC. In that case, the insurer must continue to pay weekly benefits unless and until it receives a report from a DAC stating that the insured person is no longer disabled as a result of the accident.

I find no evidence whatsoever that Mr. Fortney waived any of his rights under section 64. I also find that Lombard violated section 64 in a most egregious manner. Mr. Fortney agreed, in good faith and at Lombard's request, to postpone the DAC assessment pending settlement discussions. Once those failed, and Mr. Fortney renewed his request for a DAC assessment and ongoing benefits, Lombard was obliged to comply with the provisions of section 64. Instead, it used Mr. Fortney’s willingness to try to resolve the claim as an excuse to deny a DAC assessment and the benefits which he was entitled to receive. Moreover, Lombard argues that Mr. Fortney must obtain a ruling from the hearing arbitrator before it is obliged to pay further benefits. As the hearing is not scheduled until October 1998, Mr. Fortney will be without benefits for more than two years.

Lombard suggests that section 64 only applies where, as stated in subsection (1), the Insurer terminated benefits on "the ground that the insured person no longer suffers from a disability as a result of the accident." Lombard submits that in this case it terminated benefits for other reasons, namely a dispute over the correct amount of weekly benefits, and therefore section 64 does not apply. Although I agree that section 64 may not apply where the Insurer stopped benefits because of a dispute over quantum, I find that in this case Lombard's true reason for terminating benefits was because it believed Mr. Fortney was no longer disabled. When Lombard first advised Mr. Fortney that it was terminating benefits, it relied on "medical and surveillance documents" that, in its view, suggested he was able to work. Although Lombard also then requested information regarding Mr. Fortney's post-accident income, it never suggested that it was terminating benefits on that basis.

Lombard pointed out that it has gathered evidence that Mr. Fortney has been earning income since the accident, and it has reports from Coopers suggesting that its original calculations should be modified. Nevertheless, quantum is not formally in issue in this arbitration hearing. Although Lombard attempted, unsuccessfully, to have quantum added as an issue at the pre-hearing, it has never sought mediation of the issue.

Lombard further submits that because quantum is disputed but not formally in issue, I do not have the jurisdiction to order reinstatement of benefits at a specified amount. It suggests that OIC case law provides that where quantum is not included as an issue at the hearing, an arbitrator cannot order benefits to be paid at a specific rate.⁶ Lombard argues that I can have no more authority on an interim motion than the arbitrator in this case would have at the main hearing. It submits that I may, at most, order Lombard to reinstate benefits "at an appropriate amount," to be determined by Lombard.

Mr. Fortney replies that he is being "sandbagged" by Lombard. He argues that even though this case was always primarily about entitlement, Lombard now wishes to "muddy the waters" with a quantum dispute in order to get around its failure to comply with section 64. Mr. Fortney argues that Lombard is obliged to reinstate benefits at the rate in place when benefits were terminated - a rate which Lombard set upon advice from its own expert. That Lombard has since obtained a more favourable opinion from the same expert should not cloud what was, at the time benefits were terminated, primarily a dispute over entitlement.

I find much merit in Mr. Fortney’s position. It would be unfair to allow an insurer to use a dispute over quantum to defeat or limit a claim for interim benefits where, as here, it originally terminated benefits because it challenged entitlement. Although Lombard insists that the benefit amount is seriously in dispute in this case, it has never formally put quantum in issue. It originally assessed the amount of benefits on the basis of an opinion it solicited from Coopers. It later requested and received further information from Mr. Fortney, which caused Coopers to revise its opinion. Yet Lombard did not then seek mediation of the issue of quantum. When Mr. Fortney advised Lombard at the pre-hearing that he would not consent to have quantum added as an issue for the hearing, Lombard replied that it would mediate the issue,⁷ but has not done so.

If Lombard is correct, insurers could frustrate legitimate claims for interim benefits by raising ancillary or peripheral disputes over the benefit amount. This contradicts the purpose of section 64, namely to protect against the untimely termination of benefits to which an applicant is entitled. Where, as here, quantum has never formally or properly been put in issue, I find that I have jurisdiction to order interim benefits at the rate in place when the Insurer terminated benefits, being, in this case, $602.90 per week.

2. Can Mr. Fortney rely on Lombard' breach of section 64 alone, or must he also meet certain threshold criteria?

Mr. Fortney asserts that Lombard's breach of section 64, on its own, entitles him to a reinstatement of benefits.⁸ He relies on the decision of Sweete and Jevco Insurance Company⁹where Senior Arbitrator Rotter awarded interim benefits after finding that the Insurer had violated section 64.

Although the Insurer's breach of section 64 was undoubtedly a critical factor in Arbitrator Rotter's decision, it is not clear that it formed the sole basis for her order, as she also found that the applicant had "a bona fide claim for entitlement to benefits. Both parties acknowledge that he sustained a head injury and the dispute seems to centre on the extent and severity of his injuries..! find he has met the first threshold criterion for interim benefits..."

I note as well that in Harkness and Economical Mutual Insurance Company,¹⁰ Arbitrator Allen found that although "a breach of section 64 by the insurer might be a factor to be considered in determining an applicant’s entitlement to interim benefits, the applicant must first meet the threshold prima facie test and establish the urgency of his or her claim." Arbitrator Allen found that Mr. Harkness failed to establish that he had a prima facie case for entitlement, and therefore dismissed his claim. Unlike this case, however, in Harkness neither party addressed the question of whether a breach of section 64, on its own, entitles an applicant to interim benefits; Arbitrator Allen noted that Mr. Harkness based his claim for interim benefits strictly on the Insurer’s failure to comply with section 64, and "neither party made legal submissions nor were they guided by the legal principles developed by arbitrators who have made decisions in exercise of their authority to make interim orders."

In my view, section 64 is a critical part of the accident benefit scheme under Bill 164 which, compared to its predecessor,¹¹ significantly expanded both the range and amount of benefits available to an applicant. At the same time, Bill 164 removed the right to sue in tort for economic loss, no matter how serious the injury. This means that an applicant must recover any economic losses solely from the Schedule. I find that section 64 was designed to protect against a premature or arbitrary termination of IRBs. Its mandatory language and elaborate scheme require that insurers act cautiously and correctly before ending what may be an applicant’s only source of income replacement. This goal would be defeated if, upon a clear breach of section 64, applicants had no recourse to immediate relief, and were forced to wait several months or even years before they recovered income losses. Although an aggrieved applicant can recover a special award if the hearing arbitrator finds that an insurer unreasonably withheld benefits, this penultimate remedy cannot substitute for prompt, regular payments during the period of entitlement.

I do not intend by these comments to suggest that any trivial or technical violation of section 64 justifies a reinstatement of benefits. As I noted in Singh and Allstate Insurance Company¹² substantial compliance with the requirements of section 64 may well be sufficient. However, in this case, where the Insurer utterly failed to comply with section 64, I find it appropriate to make an award for interim benefits on that basis alone.

In case I am wrong in this conclusion, I will go on to consider whether the applicant has also met the threshold criteria for interim benefits.

3. Did Mr. Fortney meet the threshold criteria for interim benefits?

The first criteria concerns the merits of the case for entitlement. Mr. Fortney filed medical evidence which, left unanswered, makes it highly probable that he would be found entitled to further IRBs. In a report dated August 3, 1995, Dr. R. J. Carbin, who examined Mr. Fortney on behalf of Lombard, stated:

This patient has persistent disability related to the right rotator cuff tendinitis caused by his accident of November 23, 1994. He also has evidence of nerve root irritation into his hands and pain, numbness and weakness in both of his hands as a result of these injuries.

Dr. Carbin concluded that Mr. Fortney "remains disabled from his job because of his right shoulder injury and should continue with the physiotherapy as previously undertaken."

In April 1996, Dr. J. B. Schnitter found Mr. Fortney's right shoulder pain "most limiting." He concluded that Mr. Fortney "would not be able to return to his previous work." In July 1996, the Columbia Rehabilitation Centre found that Mr. Fortney was unable to physically perform his previous duties as a truck driver and hauler of scrap metal. And in his report of November 13, 1996, almost two months after Lombard terminated benefits, Dr. L. Holland advised that Mr. Fortney's residual complaints "prevent him from performing the essential tasks of his pre-accident employment." Dr. Holland noted that although it was "clear" that Mr. Fortney could not perform his job, because of his financial needs Mr. Fortney returned to work in October 1996. Unfortunately, while "attempting to manipulate a jack to change a tire...the neck and arm pain made it impossible for him to stabilize the jack causing the vehicle to fall and pin him underneath." Because of this incident, Mr. Fortney was hospitalized from October 14 to 19, 1996.

Various arbitrators have commented on the standard of proof that an applicant must meet in order to recover interim benefits, ranging from a "prima facie"¹³ case to a "convincing case"¹⁴ or even a "very probable"¹⁵ case. Whatever standard is used, I find that Mr. Fortney has produced sufficient evidence to justify a reinstatement of benefits. The medical evidence creates a very strong case that Mr. Fortney was unable to perform the essential tasks of his pre-accident employment at the time Lombard terminated benefits. Lombard filed nothing to refute that evidence.

Some arbitrators have also referred to a second criterion of necessity or urgency. The fact that Mr. Fortney returned to work because of financial need, to his peril and despite his doctor’s opinion that he could not do so, shows some necessity or urgency for an interim award. I note as well that Mr. Fortney has now been without benefits for 15 months, and must wait another 10 months before his arbitration hearing, a situation which creates further financial stress. I therefore find sufficient evidence of necessity or urgency to warrant an interim award.

Conclusion:

I find that Lombard was obliged to comply with the provisions of section 64, regardless of any settlement discussions or the dispute over the benefit amount. I also find that although

Mr. Fortney meets the threshold criteria for interim benefits, he is entitled to a reinstatement of his benefits solely on the basis of Lombard’s breach of section 64.

Expenses:

I may be spoken to regarding expenses, as the parties did not address this issue at the motion.

Order:

1. Lombard shall reinstate Mr. Fortney's income replacement benefits, payable at $602.90 weekly, from September 26, 1996 onward, subject to compliance with section 64 and any order of the hearing arbitrator.

2. Lombard shall pay interest on any outstanding income replacement benefits, in accordance with section 68 of the Schedule.

December 24, 1997

Deena Baltman Arbitrator

Date

Appendix

Hearing:

The hearing was held by teleconference, on December 8, 1997, before me, Deena Baltman, Arbitrator. I received written submissions from Mr. Fortney in advance of the hearing.

Present at the Hearing:

Applicant:

Dennis Fortney

Mr. Fortney’s Representative:

Robert W. Garcia Barrister and Solicitor

Lombard’s Representative:

Patrick J. Mazurek Barrister and Solicitor

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents after December 31, 1993, and before November 154, 1996, called "the Schedule" in this decision. The Schedule is Ontario Regulation 776/93, as amended.
2. 2Designated Assessment Centre
3. 3I allowed Lombard to argue this point during the motion, even though it filed no written materials and failed to alert Mr. Fortney to its position in advance of the motion, contrary to Rule 65.4 of the Dispute Resolution Practice Code.
4. 4By letter dated September 17, 1996
5. 5As set out in the Insurer’s Response to the Application for Arbitration, and confirmed in the pre-hearing report dated November 19, 1997.
6. 6Lombard did not identify specific cases. I note, however, that in Slivecka and Canadian General Insurance Company (September 27, 1995), OIC A-008342, Arbitrator Makepeace decided that she did not have jurisdiction to determine the amount of benefits payable to the applicant because the benefit rate was not in issue at mediation or at the pre-hearing.
7. 7According to both counsel. Counsel for Lombard also stated that he advised at the pre-hearing that he would attempt, following mediation, to "piggyback" the issue of quantum onto the existing claim, so that it could be arbitrated jointly with the entitlement issue. Counsel for Mr. Fortney denied that any such assertion was made at the pre-hearing.
8. 8During argument, Lombard conceded that if I found that section 64 governed this case, its breach thereof would likely, on its own, entitle Mr. Fortney to a reinstatement of benefits. However, neither counsel nor I considered the Harkness case during the course of the hearing, which suggests otherwise (see below).
9. 9(October 24, 1997), OIC A96-000614
10. 10(December 10, 1996), OIC A96-001420
11. 11Ontario Regulation R.R.O. 672 (the "No-Fault Benefits Schedule”)
12. 12(October 4, 1994), OIC A-000999
13. 13Malabanan and Canadian General Insurance Company (July 26, 1996), OIC A96-00084
14. 14Gomez and Pilot Insurance Company (May 10, 1995), OIC A-013080
15. 15Cripps and AXA Insurance Company (Canada) (August 8, 1997), OIC A-073360