Neutral Citation: 1997 ONICDRG 24

Appeal P96-000026

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ALLSTATE INSURANCE COMPANY OF CANADA

Appellant

and

VICTOR KURONEN

Respondent

Before:

David R. Draper, Director's Delegate

Counsel:

Harry J. Daniel and Martin E. Tiidus (for Allstate Insurance)

Ron Weinberger (for Victor Kuronen)

APPEAL ORDER

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

The appeal is dismissed and the arbitration order, dated December 29, 1995, is confirmed.
Victor Kuronen is entitled to his reasonable appeal expenses, payable by Allstate Insurance Company of Canada.

January 31, 1997

David R. Draper

Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This is an appeal by the Allstate Insurance Company of Canada ("Allstate") from the arbitration decision, dated December 29, 1995. The arbitrator concluded that Victor Kuronen's claim for accident benefits was not invalidated by his failure to notify Allstate of his claim within 30 days of his accident and file an application within 90 days after that, as required by section 22(1) of Ontario Regulation 672, the Statutory Accident Benefits Schedule - Accidents Before January 1, 1994 (the "Schedule"). Allstate submits that Mr. Kuronen had no "reasonable excuse" for the delay and, therefore, the arbitrator should not have allowed his claim to proceed under section 22(2) of the Schedule.

Although Allstate's appeal is from a preliminary order, the parties agreed that it should be decided before proceeding with an arbitration hearing on the merits of Mr. Kuronen's claim. I accepted their request.

II. ANALYSIS

There is no dispute about the facts as summarized in the arbitration decision. The central issue is that Allstate did not receive notice of Mr. Kuronen's accident or his application for accident benefits until nearly 18 months after the accident. The accident took place on July 31, 1993, but Allstate heard nothing from Mr. Kuronen until January 24, 1995, when the second law firm he retained submitted an application for accident benefits. Allstate refused to pay benefits due to the delay.

Section 22 of the Schedule establishes the following time limits:

22.-(1) The insured person or the person otherwise entitled to make a claim shall,

(a) give initial notice of a claim to the insurer, in writing, within thirty days from the date of the accident or as soon as practicable thereafter; and

(b) furnish to the insurer within ninety days of the giving of the notice under clause (a) a completed application for statutory accident benefits respecting the accident and the resulting loss.

(2) A failure to comply with a time limit set out in subsection (1) does not invalidate a claim if the claimant has a reasonable excuse and so long as there is compliance within two years of the accident. [emphasis added]

Because Mr. Kuronen's application was made within two years of the accident, the question was whether he had a "reasonable excuse" for the delay, within the meaning of subsection 22(2). A hearing was held to decide this preliminary issue. The arbitrator heard from three witnesses - Mr. Kuronen, his family doctor and Allstate's claims representative. In addition, he received a number of exhibits and heard the submissions of counsel for both parties.

Mr. Kuronen claimed that many factors, including his accident-related injuries, prescription medication, drug and alcohol abuse, marital problems, homelessness and criminal proceedings, combined to delay his application for accident benefits. Allstate argued that by mid-October 1993, approximately 11 weeks after the accident, Mr. Kuronen had retained a lawyer to deal with his automobile accident. Despite this, no claim was made until his new lawyers wrote to the Economical Mutual Insurance Company ("Economical") in October 1994. It then took Mr. Kuronen and his lawyers until January 24, 1995 to contact the right insurance company - Allstate. Allstate argued that the failure of Mr. Kuronen and his lawyers to pursue a claim for accident benefits, perhaps through ignorance, does not amount to a "reasonable excuse."

In his decision, the arbitrator considered the purpose of section 22. He presumed that "one of the purposes of the 30-day notice provision in the no-fault coverage is to give the insurer the early opportunity to participate in this rehabilitation process, so that the insured recovers from his injuries as much and as soon as possible" (Decision, p.4). However, the insurer's right to early involvement is not absolute. The time limits can be extended if the claimant has a "reasonable excuse," as long as the application is made within two years of the accident.

The arbitrator cited the decision of the Director of Arbitrations in Oliveira and Zurich Insurance Company, (March 21, 1994, OIC File No. P-002691), that "[s]ection 22(2) of the Schedule must be interpreted within the entire scheme of the statutory accident benefits which is flexible and remedial." He also looked at the interaction between arbitration and court, concluding that the criteria for granting relief under section 22(2) must be similar to the criteria used by the court in granting relief from forfeiture. At page 6 of his decision, he summarized his approach as follows:

In my opinion, the reasonable excuse advanced by the claimant must be examined with regard to all the circumstances connected to the delay, including prejudice to the insurer, hardship to the claimant and whether it is equitable to relieve against the consequences of the failure to comply with the time limit.

The arbitrator then went on to consider the facts of the case in light of these considerations, finding that:

Allstate was not prejudiced by its lack of early involvement because it is unlikely that Mr. Kuronen would have complied with any rehabilitation efforts.
Mr. Kuronen did not consult a lawyer until approximately six weeks after the expiration of the 30-day notice period in section 22(1)(a). He had a reasonable excuse for this initial delay because his many personal problems affected his ability to pursue his legal rights in a timely fashion.
Mr. Kuronen had no knowledge of his entitlement to accident benefits. Therefore, he relied on his lawyers to protect his rights. When he had reason to believe that his first lawyer was not reliable, he retained a different law firm. His actions were reasonable, without any evidence of bad faith, concealment or deliberate misrepresentation on his part.
It would cause Mr. Kuronen undue hardship if his claim against Allstate was precluded, leaving him with no recourse other than to sue his first lawyer. Also, the purposes of the accident benefits legislation would be frustrated if he were not allowed to proceed with his claim.

Allstate submits that if the time limits in section 22(1) are to have any meaning, they should be applied in this case. Otherwise, it must bear the increased exposure caused by the apparent negligence of Mr. Kuronen's first lawyer.

In support of its position, Allstate also refers to the decision of the Director of Arbitrations in Oliveira and Zurich Insurance Company, cited above. In that case, Mrs. Oliveira was injured in an accident while a passenger in her son's car. Her son was insured by The Personal Insurance Company of Canada ("The Personal"). Mrs. Oliveira had her own automobile insurance policy with the Zurich Insurance Company ("Zurich"). She initially contacted The Personal and received payments for medical, physiotherapy and prescription expenses. She retained a new lawyer who continued to deal with The Personal, but also contacted Zurich by letter, dated April 7, 1992, approximately 15 months after the accident. Subsequently, both insurers took the position that the other should pay Mrs. Oliveira's benefits.

At the arbitration hearing, Zurich claimed that Mrs. Oliveira did not have a reasonable excuse for her late claim under its policy. Zurich also argued that the delay prevented it from intervening at an early stage and reducing her recovery time. Mrs. Oliveira claimed that the delay in applying to Zurich was caused by her injuries, treatment and resultant personal, work and family problems, as well as her former lawyer's neglect. The arbitrator found the primary reason for the delay was the fact that The Personal paid her expenses until early 1992. Although this was not Zurich's fault, he felt that it was too speculative to find that Zurich's earlier involvement would have speeded Mrs. Oliveira's recovery. As a result, the arbitrator concluded that Mrs. Oliveira had a reasonable excuse for her delay in contacting Zurich, and ordered Zurich to pay her accident benefits.

Zurich appealed this order. In dismissing the appeal, the Director of Arbitrations stated as follows:

More troublesome is the role played by the respondent's first lawyer in pursuing a claim on her behalf. While I agree with the appellant that ignorance of the statutory law cannot be a reasonable excuse, this was but one factor in the accumulation and compounding of errors made in the case.

The combination of incorrect documentation, The Personal's admission of liability and payment of submitted expenses, and the respondent's personal circumstances, all contributed to the delay in making a claim to the appellant. Each of these factors standing by itself is not enough, in my view, to constitute a reasonable excuse for failure to notify the appellant promptly. Taken together, however, the effect is that the respondent did whatever was required of her, was not disabused of her assumption as to who might be responsible for payment of any legitimate benefits, and when that was challenged, immediately took steps to make the appropriate claim. (p.8)

Allstate points to the Director's statement that "ignorance of the statutory law cannot be a reasonable excuse." In its submission, ignorance of the law was the only reason for Mr. Kuronen's delay in applying for accident benefits. It was not "but one factor in the accumulation and compounding of errors made in the case," as in Oliveira. Allstate submits that once Mr. Kuronen retained a lawyer, it was the lawyer's obligation to protect his interests, making his personal circumstances irrelevant. As counsel put it, the negligence of Mr. Kuronen's lawyer should not be visited on Allstate.

While I accept that ignorance of the law alone is not a "reasonable excuse," I am not persuaded that the involvement of a lawyer ends the inquiry. Mr. Kuronen's lawyer had certain duties, which he may not have met, but there was also evidence that Mr. Kuronen's personal problems affected his relationship with his lawyer. The lawyer did not participate in these proceedings and, therefore, it is difficult to make clear findings about the scope of his retainer or the advice he provided. In my view, the arbitrator properly focussed on Mr. Kuronen and whether he had a reasonable excuse for his delay in claiming accident benefits.

The arbitrator found that Mr. Kuronen's various personal problems, some accident-related and some not, explained his initial delay in contacting a lawyer, after which he monitored the progress of his case as best he could. When Mr. Kuronen decided he could no longer rely on his first lawyer, he went to a different law firm. The arbitrator found his actions reasonable, not involving any "bad faith, concealment or deliberate misrepresentation on his part" (p.12). There was ample evidence to support these findings and, therefore, I find no basis for interfering.

The central issue before the arbitrator was whether Mr. Kuronen should be held to strict compliance once he retained a lawyer. In dealing with this question, the arbitrator considered whether Allstate was prejudiced by the delay and found it was not. Based on Mr. Kuronen's "clear history of disregarding the advice of those interested in his recovery" (p.11), the arbitrator was not satisfied that Allstate's early involvement would have made any difference.

On appeal, the parties accepted that prejudice to Allstate was a relevant consideration, but disagreed about the arbitrator's finding that there was no prejudice. Allstate submits that if it had been involved at an earlier stage, it could have regulated Mr. Kuronen's treatment and recovery, thereby controlling its exposure.

The difficulty with Allstate's position is that it is asking me to review the arbitrator's factual findings. As stated in many previous decisions, it is not my role on appeal to second-guess the arbitrator's assessment of the evidence. He had the advantage of hearing the testimony and considering the exhibits in light of it. As a consequence, his decision should not be disturbed unless it is shown that he made an error leading to an injustice, or there was no evidence capable of supporting his findings.

I find no error in this case. The arbitrator heard testimony from Mr. Kuronen and his family doctor about his lack of compliance. Allstate's claims representative testified about what would have been done if Mr. Kuronen had provided earlier notice. Based on this evidence, the arbitrator found that Mr. Kuronen was sufficiently non-compliant that rehabilitation efforts would not have made any difference. I am satisfied that this finding was available to the arbitrator and should not be disturbed on appeal.

Allstate argued that is "mere speculation" that its earlier involvement would not have made any difference. In my view, this adds little to the analysis. Arbitrators are often called upon to make findings about circumstances that cannot be determined with absolute certainty. For example, insurers regularly ask arbitrators to find that someone who has not returned to work is capable of doing so. In this case, Allstate wanted the arbitrator to find that its early involvement would have made a difference, a finding just as "speculative" as the one the arbitrator made. The question, however, is not whether the finding is "speculative," but whether it is supported by the evidence.

As stated above, I am satisfied that there was sufficient evidence to support the arbitrator's findings. Therefore, the appeal is dismissed.

III. EXPENSES

Mr. Kuronen was successful in resisting Allstate's appeal and, therefore, should receive his reasonable appeal expenses. If the parties cannot agree on the amount, they may apply to the Registrar to a arrange an assessment. Arbitration expenses, including expenses of the preliminary issue, are reserved to the arbitrator hearing the merits of Mr. Kuronen's claim for accident benefits.