Neutral Citation: 1997 ONICDRG 230

OIC A96-001555

ONTARIO INSURANCE COMMISSION

BETWEEN:

DANUTA OLSZEWSKI JERZY OLSZWESKI

Applicants

and

CITADEL GENERAL ASSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Issues:

The Applicants, Danuta and Jerzy Olszewski, were injured in a motor vehicle accident on November 27, 1990. They applied for and received statutory accident benefits from Citadel General Assurance Company ("Citadel"), payable under Ontario Regulation 672.¹ Citadel terminated weekly income benefits on November 26, 1993. The parties were unable to resolve their disputes through mediation, and Mrs. Olszewski applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issue in this hearing is:

1. Are Mr. and Mrs. Olzsewski precluded from proceeding to arbitration pursuant to section 281(5) of the Insurance Act?

Result:

1. Mr. and Mrs. Olzsewski are precluded from proceeding to arbitration.

Hearing:

The hearing was held in London, Ontario, on September 22, 1997, before me, Joyce Miller, Arbitrator. Written submissions were received from both parties by October 17, 1997.

Present at the Hearing:

Applicant:

Danuta Olszewski

Jerzy Olszewski

Mr. and Mrs. Olszewski's

Brian A. Foster

Representative:

Barrister and Solicitor

Evelyn ten Cate

Barrister and Solicitor

Citadel's

Nan Diaram

Representative:

Barrister and Solicitor

Witnesses:

Danuta Olsewski

Jerzy Olszewski

Exhibits:

Two exhibit books were filed. The parties also each filed a book of authorities.

The proceedings were recorded and an interpreter fluent in the Polish language was present.

BACKGROUND:

Mr. and Mrs. Olszewski were involved in a motor vehicle accident on November 27, 1990. Citadel paid weekly income benefits to Mr. and Mrs. Olszewski for 156 weeks pursuant to section 12(1) of the Schedule. By a letter dated October 18, 1993 Citadel notified Mr. and Mrs. Olszewski that their weekly income benefits would be terminated on November 26, 1993.

Mr. and Mrs. Olszewski testified that on receipt of the termination notice they immediately took the letter to their lawyer who had been handling their tort claim since November 1992. Sometime in March 1995, Mr. and Mrs. Olszewski were contacted by another law firm. Their lawyer, without notifying them, had withdrawn from their case and had transferred their file to this other law firm.

On January 29, 1996, a lawyer from the new law firm filed an application for mediation regarding the termination of weekly income benefits. A mediation was held and failed. Citadel took the position that Mr. and Mrs. Olszewski were precluded from proceeding to arbitration because the limitation period had expired.

The issue I must decide is whether Mr. and Mrs. Olszewski are precluded from proceeding to arbitration pursuant to section 281(5) of the Insurance Act on the basis that they are out of time.

The Law

Section 26(1) of the Schedule provides that:

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.

Section 281(5) of the Insurance Act states that:

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.

Until recently arbitrators have interpreted section 281(5) of the Insurance Act as what I describe as a "fixed limitation period" and where an applicant was found to be out of time, he or she was precluded from proceeding to arbitration. However, in the case of Kirkham and State Farm Mutual Automobile Insurance Company² the Arbitrator relied on a line of court decisions interpreting the limitation period for accident benefits in effect prior to the 1990 amendments to the Insurance Act. These cases applied to what has been referred to as a "rolling limitation period."

The previous limitation period provided that:

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

The court decisions prior to 1990 held that a new cause of action arises as each payment of weekly benefits becomes due. So long as entitlement to the benefits continues, the limitation period only bars claims originating more than the prescribed period before the commencement of the action.⁴

In Kirkham the Arbitrator found that the amendment to the limitation period in section 281(5) of the Insurance Act was not so fundamentally different in nature to the one it replaced and therefore did not require a departure from the traditional interpretation applied by the courts.

The Arbitrator noted that pursuant to section 24(3) of the Schedule an insurer is required to deliver weekly benefit payments at least once every second week while it remains liable to the insured person. From this he concluded that an applicant's right to bring an application for arbitration accrues as each payment of weekly benefits becomes due. He, therefore, held that where an insurer has refused to make payment, the limitation period in section 281(5) only bars an applicant from proceeding to arbitration on claims for weekly benefits for the two-week pay periods which ended more than two years before the application for arbitration was brought.

The reasoning in Kirkham was rejected by the Director's Delegate in State Farm and Kirkham.⁵It was the view of the Director's Delegate that the enactment of section 281(5) "... reflected a change in the nature of the limitation period" and therefore the "rolling limitation period" no longer applied.

In Morgan and Allstate Insurance Company,⁶ a decision which was subsequent to the Kirkham appeal, the Arbitrator found that the "rolling limitation period" had merit. He noted that the 1990 amendments to the limitation period were remedial and were meant merely to increase the limitation period to two years and give certainty as to when the limitation period began. However, the Arbitrator concluded that he was bound by the decision of the Director's Delegate in Kirkham and found that the applicant was out of time.

Position of Mr. and Mrs. Olszewski

Mr. and Mrs. Olszewski relied on the reasoning in Kirkham and Morgan that section 281(5) of the Insurance Act should be interpreted as a "rolling limitation period." They submitted that I was not bound by the decision of the Director's Delegate in Kirkham and referred to the decision in Vo and Maplex General Insurance Company⁷ where the Arbitrator held that OIC arbitrators are not bound by the doctrine of stare decisis, even in the face of a decision of a Director's Delegate.

Position of Citadel

Citadel submitted that the reasoning in the appeal decision of Kirkham should be accepted as it is consistent with the body of case law that has been built up over time by arbitration decisions. As well, Citadel submitted that a decision of the Director (or her delegate) is binding upon an arbitrator. It pointed out that the legislation gives a party the right to appeal to the Director (or her delegate) to review a decision of an arbitrator. For an arbitrator to find that a decision of the Director (or her delegate) is not binding is to render the appeal process completely meaningless and to place the decision of the Director (or her delegate) on the same level as an arbitrator's decision. Citadel pointed out that after the appeal decision in Kirkham the Arbitrator in the Morgan case found that he was bound by the decision of the Director's Delegate in Kirkham.

Findings:

I find that Mr. and Mrs. Olszewski have presented cogent reasons as to why a "rolling limitation period" should apply. Nevertheless, I agree with Citadel's submission that I am bound by the decision of the Director's Delegate in Kirkham. In Poirier and Royal Insurance Company of Canada⁸ the Arbitrator rejected the finding in Vo that an arbitrator is not necessarily bound by the decision of a Director's Delegate. I agree with his conclusion that: "... to fulfill the legislative intention to create an effective internal appeal system under the Insurance Act, Director's decisions must be and are binding on arbitrators."

Accordingly, I find that Mr. and Mrs. Olszewski's application for mediation on January 29, 1996 was not commenced within two years of the termination of their weekly income benefits by Citadel on November 26, 1993, and therefore, pursuant to section 281(5) of the Insurance Act, their application for arbitration on September 18, 1996 is dismissed.

Expenses:

Pursuant to section 282(11) of the Insurance Act I exercise my discretion to award Mr. and Mrs. Olszewski their expenses in this arbitration.

Order:

1. Mr. and Mrs. Olszewski's application for arbitration is dismissed.

2. Mr. and Mrs. Olszewski are entitled to their expenses incurred in respect of the arbitration.

Footnotes

1. 1Prior 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 On or Between June 22, 1990 and December 31, 1993. In this decision, the term "Schedule" will be used to refer to Regulation 672.
2. 2(August 15, 1996), OIC A96-000141
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. 4That is, if a one-year limitation period began on January 1, 1990 and an applicant commenced an action on January 1, 1993, then if the applicant was entitled to any benefits, the "rolling limitation period" barred the claim up until January 1, 1992.
5. 5State Farm Mutual Automobile Insurance Company and Kirkham (January 27, 1997), OIC P96-00069
6. 6(May 26, 1997), OIC A96-000666
7. 7(October 4, 1993), OIC A-002777
8. 8(September 30, 1997), OIC A-011605