Neutral Citation: 1997 ONICDRG 34

OIC A95-000693

ONTARIO INSURANCE COMMISSION

BETWEEN:

CHARALAMBOS LAMBROPOULOS

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Issues:

The Applicant, Charalambos Lambropoulos, was involved in motor vehicle accidents, one on July 25, 1991 and two others on July 29, 1991. He applied for and received weekly income benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under Ontario Regulation 672.¹ Benefits were terminated by State Farm on November 19, 1992. On November 30, 1995, Mr. Lambropoulos filed an Application for Arbitration with regard to the weekly income benefits. The Insurer took the position that the claim was barred from proceeding to arbitration as it had not been brought within two years of the refusal by the Insurer to pay benefits, pursuant to section 281(5) of the Insurance Act, R.S.O. c.I.8, as amended and section 26 of the Schedule. The parties were unable to resolve their dispute through mediation, and Mr. Lambropoulos applied for arbitration under the Insurance Act.

The preliminary issue on this application is:

1. Is Mr. Lambropoulos precluded from proceeding to arbitration pursuant to section 281(5) of the Insurance Act on the basis that he applied for arbitration later than two years after the date of denial by the Insurer?

Result:

1. Mr. Lambropoulos is precluded by section 281(5) from proceeding to arbitration with regard to his claim for weekly income benefits.

2. Mr. Lambropoulos is entitled to his expenses of the hearing.

Hearing:

The hearing was held at the offices of the Ontario Insurance Commission in North York, Ontario, on October 28, 1996, before me, M. Guy Jones, Arbitrator. Written submissions were received on December 23, 1996 and January 3, 1997.

Present at the Hearing:

Applicant:

Charalambos Lambropoulos

Mr. Lambropoulos's Representative:

Mr. William McClelland Barrister and Solicitor

State Farm's Representative:

W. Casey Van Moorlehem Barrister and Solicitor

State Farm's Officer:

Mr. Douglas Kinsman

Witnesses:

Mr. Mark Moore

Mr. Tony Lafazanis

Exhibits:

Three Exhibits were filed.

Facts:

This matter involves a claim by the Applicant, Mr. Charalambos Lambropoulos, for weekly income benefits as a result of injuries suffered in motor vehicle accidents, one which occurred on July 25, 1991, and two others which occurred on July 29, 1991. The Insurer terminated weekly income benefits on November 19, 1992. An Application for Arbitration was filed by Mr. Lambropoulos on November 30, 1995. The Insurer has taken the position that Mr. Lambropoulos is barred from proceeding to arbitration by reason of his failure to apply for arbitration within two years of the Insurer refusing to pay the benefit claimed in the application for statutory benefits, pursuant to section 281(5) of the Insurance Act and section 26 of the Schedule.

In order to determine if the Applicant is indeed barred from proceeding to arbitration, it is necessary to set out in some detail the series of events leading up to this dispute.

After initially paying Mr. Lambropoulos the sum of $600 per week, it is clear that the Insurer had reservations about the proper amount to be paid, as well as his entitlement based on his medical condition. On November 19, 1992, a notice of termination, in the form of an Assessment of Claim by Insurer, was sent to Mr. Lambropoulos. The form stated, in part, "Based on an IME conducted by Dr. Langer on Oct. 21/92 we are no longer able to consider payment of your weekly benefit." Mr. Lambropoulos filed for mediation of the entitlement issue.

Mr. Lambropoulos was represented by a solicitor at the mediation session on February 2, 1993 and the Insurer was represented by two employees of the insurance company. At that time, a Memorandum of Agreement was entered into between the parties. While the Agreement covered a number of points, paragraphs 4 and 5 are important ones for the purposes of this arbitration. They state:

4. Benefits will be reinstated retroactive to the date of termination and will be paid to the date of the IME. The benefit level will be determined as indicated in #1 and #3 above and take into account any overpayment or underpayment to date.

5. Eligibility for ongoing benefits will be determined by the IME. The insured does not agree to be bound by the opinion of the IME doctor.

After some initial difficulties, an IME was performed by Dr. Hugh Cameron on October 29, 1993 whose report was faxed to Mr. Lambropoulos' solicitor with an accompanying letter on November 22, 1993. That letter stated in part, "Please find enclosed a copy of Dr. Cameron's report which indicates that Mr. Lambropoulos is capable of returning to work, if he was so inclined. "

The remainder of the letter deals with the issue of quantum. The Insurer requested a repayment of some $43,359.84, based on the difference between the amount that had been paid and the amount the Insurer says should have been paid.

Payment of benefits were terminated by the Insurer as of October 16, 1993 due to the claimed overpayment by the Insurer rather than on November 22, 1993 when the IME was delivered to Mr. Lambropoulos' solicitor.

As alluded to earlier, it is worthy of note that while the dispute regarding entitlement was taking place, the dispute regarding the quantum of benefits was also proceeding, and to a certain extent they became intertwined. On November 8, 1993, Mr. Lambropoulos' solicitor received an Assessment of Claim by Insurer form from the Insurer which denied a portion of Mr. Lambropoulos' claim stating, "Based on Coopers & Lybrand's report of Oct. 15/93 benefits have been overpaid in the amount of $45,252.96." As Mr. Moore, the insurance adjuster, testified at the hearing, he added to the entitlement of weekly income benefits the sum of $185.00 between October 16, 1993 and November 22, 1993 resulting in an overpayment of $43,359.84.

Subsequent to the November Assessment of Claim by Insurer being sent out, a series of letters were sent back and forth between Mr. Lambropoulos' solicitor and the Insurer concerning the issues of entitlement and quantum.² This includes a letter faxed on November 23, 1993 to Mr. Lambropoulos' solicitor stating: "With respects [sic] to Mr. Lambropoulos enrolling in ESL courses, this issue is moot as your client has been deemed capable of returning to work."³

On February 27, 1995, Mr. Lambropoulos' solicitor filed an Application for Appointment of a Mediator wherein he indicated that Mr. Lambropoulos was disputing weekly income benefits and referred in the form to: (1) Level of benefits - assessment - Nov. 4, 1993; (2) Cutoff of benefits - assessment - Nov. 19, 1992.

The mediator released his report on April 27, 1995. The Application for Arbitration was filed with the Ontario Insurance Commission on November 30, 1995.

Analysis:

Section 281(5) of the Insurance Act states:

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.

Section 26 of the Schedule states:

(1) 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.

(2) Despite subsection (1), an arbitration or court proceeding under section 281 of the Insurance Act may be commenced within 90 days after the mediator reports to the parties under subsection 280(8) of the Act.

In order for there to have been a proper notice of refusal to pay benefits, there must be compliance with section 24(8) of the Schedule which states:

If the insurer refuses to pay an amount claimed in an application for statutory accident benefits, the insurer shall forthwith give written notice to the insured person giving the reasons for the refusal.

The leading case with respect to the notice process is Zeppieri and Royal Insurance Company of Canada (February 27, 1994), OIC A-005237. In that case, Senior Arbitrator Naylor, as she then was, stated:

... a two-step process must determine whether the limitation period applies in the circumstances of this case. First, it is necessary to ask whether, and when, there was a refusal to pay benefits; and second, whether the insurer may rely on a limitation period that runs from the date of the refusal.

Senior Arbitrator Naylor then went on to say that the notice must be clear and unequivocal. Numerous arbitrators since then have adopted this position.

In determining whether notice has been clear and unequivocal in this case, it is necessary, in my view, to look not just at one document but to look at the entire series of events leading up to the notice, as well as the actions of the parties after the notice, in order to properly determine if the necessary notice was given. In coming to this conclusion, I am aware of the decision of Arbitrator Seife in Talany and Royal Insurance Company of Canada (May 3, 1995), OIC A-009300, wherein he indicated that one looks only at the termination letter and no further. While that may have been an appropriate approach in that case, I am of the view that in this case it is necessary and important to look beyond the one document, in order to determine if proper notice was given. In this regard, I adopt the approach of Arbitrator Sampliner in Zere and Royal Insurance Company of Canada (April 22, 1994), OIC A-001825, wherein he looked at the entire circumstances of the notice, including correspondence both before and after the notice was given. Upon reviewing the facts of this case, I am of the opinion that the Insurer did give clear and unequivocal notice of the decision to terminate benefits. The initial notice was given on November 19, 1992 by way of an Assessment of Claim by Insurer wherein the adjuster stated, "Based on an IME conducted by Dr. Langer on Oct. 21/92, we are no longer able to continue payment of your weekly benefit."

I am of the view, however, that this notice was set aside, at least temporarily, by the decision of the Insurer to pay benefits up to the date of a further IME agreed to in the Memorandum of Agreement dated February 19, 1993. At that time, there was a very clear agreement, not only that the Insurer would pay benefits up to the time of the IME but also that "eligibility for ongoing benefits will be determined by the IME." The agreement went on to state that "The insured does not agree to be bound by the opinion of the IME doctor." From this I infer that the Insurer did agree to be bound by the IME doctor's report.

A review of Dr. Cameron's report of October 29, 1993, makes it very clear that he was strongly of the view that Mr. Lambropoulos could return to work, and the letter from the Insurer of November 22, 1993 to Mr. Lambropoulos' solicitor, enclosing the report, restates Dr. Cameron's opinion. It is clear that the Insurer adopted and relied upon Dr. Cameron's opinion.

In my view, there could have been little doubt in Mr. Lambropoulos' solicitor's mind of the meaning of Dr. Cameron's report and the attached letter from the Insurer. This would have been reinforced by the Insurer's letter to Mr. Lambropoulos' solicitor of November 23, 1993, wherein the adjuster stated "With respects [sic] to Mr. Lambropoulos enrolling in ESL courses, this issue is moot as your client has been deemed capable of returning to work."

My opinion that Mr. Lambropoulos' solicitor was aware of the termination is further reinforced by Mr. Lambropoulous' "Application for Appointment of a Mediator," filled out by his solicitor, wherein he indicated "weekly income benefits - cut off of benefits - assessment - Nov. 19, 1992".

Accordingly, taking all the facts into consideration, I find that the Insurer provided Mr. Lambropoulos with a clear and unequivocal notice of termination of his weekly income benefits on November 22, 1993.

Having decided that a proper notice of termination to Mr. Lambropoulos was given on November 22, 1993, it still remains to be determined whether or not the insurance company can rely on the limitation period running from that date. Counsel for the Applicant argued that the Insurer, by its conduct in dealing with Mr. Lambropoulos after November of 1993 had, in essence, lulled the Applicant into a belief that negotiations were ongoing and therefore the company ought not to be allowed to rely on the limitation period.

While each case must be decided on its own set of facts, it is clear that insurance companies are not simply to close their files when they deny benefits. They are to evaluate new evidence if it becomes available, and change their position should the situation warrant. As Senior Arbitrator Naylor, in Zeppieri, stated:

Insurance Companies are responsible for investigating new information provided after benefits are terminated and must fairly re-evaluate an applicant's claim in light of the new information provided. The re-evaluation of claims on an ongoing basis is integral to a system of periodic benefits, and is a continuing obligation owed to an applicant.

The fact that an insurance company reconsiders a prior decision to terminate benefits (as it must do) does not mean that a refusal of benefits only can take place at the completion of that process. To interpret the language of section 281(5) in this manner would largely deprive it of meaning.

While I accept that the Insurer, by its conduct may, in some cases, lull an applicant into a belief that a refusal to pay benefits has been waived, I do not believe that this is the situation in this particular matter. As Mr. Lambropoulos' solicitor pointed out in his submissions, there were protracted discussions between the Applicant and the Insurer after termination with regard to the issue of quantum and entitlement. I do not believe, however, that the discussions were such that the Insurer in any way waived its right to rely on its denial, especially as it relates to entitlement. Accordingly, the company is entitled to rely on the limitation period in this matter.

Time Frame Covered by the Limitation Period:

Counsel for the Applicant has submitted that if the limitation period applies, then it only precludes claims for weekly benefits for periods ending more than two years before the Application for Arbitration was filed. This would preclude claims for periods ending before November 30, 1993.

This issue has been before the Insurance Commission in a number of cases recently. I dealt with the matter in Abdi and Wawanesa Mutual Insurance Company (November 21, 1996), OIC A96-000681, and Senior Arbitrator Mackintosh dealt with it in Do and Royal Insurance Company of Canada (September 6, 1996), OIC A95-000643. In both cases, the "rolling time limit" position was rejected. In Kirkham and State Farm Mutual Automobile Insurance Company (August 15, 1996), OIC A96-000141, Arbitrator Renahan accepted that there is a "rolling time limit" and, accordingly, only those benefits covering the period more than two years before the Application for Arbitration are covered by the limitation period. This decision was subsequently appealed and overturned by the Director's Delegate, David Draper, on January 29, 1997. Despite the very detailed and able submissions of the Applicant's counsel, I remain of the view that the legislative changes of 1990 created a fixed limitation period, and I choose to follow the decision of the Director's Delegate in Kirkham.

Can the Limitation Period be Extended?

Counsel for the Applicant submitted that in the event that the limitation period applies, the arbitrator has the authority to extend it and should do so in this case. He relies upon section 67.1 of the Dispute Resolution Practice Code which states:

The adjudicator may on such terms as he or she considers appropriate:

(a) set aside any time limit set out in these Rules for doing any act, serving any notice, filing any document or holding any proceeding;

(b) decide that any Rule does not apply in respect of a proceeding.

One must then look to section 11 of the Dispute Resolution Code, which states:

1. A mediation or arbitration must be started no later than:

(a) two years from the date the insurer refused to pay an amount claimed; or

(b) as provided in the Statutory Accident Benefits Schedule.

Despite Rule 11.1, an insured person may apply for arbitration within 90 days after the mediator reports to the parties in the Report of Mediator.

This limitation provision is, of course, essentially the same as that set out in section 281(5) of the Insurance Act and section 26 of the Schedule. While I accept that a wide reading of section 67 could set aside the limitation period set out in section 11 of the Dispute Resolution Practice Code, I do not accept that I, as arbitrator, have the power to set aside the limitation periods as set out in section 281(5) of the Insurance Act or section 26 of the Schedule. As a result, I find that I do not have the authority to extend the limitation period in this case. In this regard, I specifically follow the reasoning of Arbitrator Palmer in Rahman and Co-operators General Insurance Company (December 21, 1993), OIC A-000854.

In light of my findings above, it is unnecessary for me to address the question of what prejudice there would be to the parties as a result of enforcing or not enforcing the limitation period as well as whether or not the Applicant's lack of diligence in bringing forth the claim should defeat any request to extend the limitation period.

Expenses:

While Mr. Lambropoulos was unsuccessful in this matter, the issue with regard to the "rolling limitation period" was an unresolved one at the time submissions were made in this matter, and accordingly, I am exercising my discretion to award Mr. Lambropoulos his expenses incurred in this arbitration.

Order:

1. Mr. Lambropoulos is precluded from proceeding to arbitration with regard to the weekly income benefits.

2. Mr. Lambropoulos is entitled to his expenses of the hearing.

February 18, 1997

M. Guy Jones Arbitrator

Date

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. 2See Exhibit 2, Tabs 8 to 16 and Exhibit 3, Tabs 12 to 26
3. 3Exhibit 3, Tab 9