Linda Harris v. Royal Insurance Company of Canada, 1997 ONICDRG 41

Ontario Insurance Commission

Neutral Citation: 1997 ONICDRG 41

OIC A95-000267

BETWEEN:

LINDA HARRIS Applicant

and

ROYAL INSURANCE COMPANY OF CANADA Insurer

DECISION ON PRELIMINARY ISSUES

Issues:

The Applicant, Linda Harris, was injured in a motor vehicle accident on December 25, 1991. She applied for and received statutory accident benefits from Royal Insurance Company of Canada ("Royal"), payable under Ontario Regulation 672.¹ Royal terminated weekly income benefits on September 1, 1994. The parties could not resolve their disputes through mediation and Ms. Harris applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

1. Is the Insurer entitled to an order dismissing the Application for Arbitration dated August 16, 1995?

2. Is the Insurer entitled to proceed with the hearing on the issue of whether it is entitled to repayment of weekly benefits paid after December 25, 1991?

Result:

1. The Application for Arbitration is dismissed.

2. The hearing to determine if the Insurer is entitled to a repayment of weekly benefits paid after December 25, 1991 is adjourned to April 16, 1997.

Hearing:

The hearing opened at the offices of the Ontario Insurance Commission in North York, Ontario, on February 24, 1997.

Present at the Hearing:

Royal's Representatives: Vance H. Cooper and John Aikins, Barristers and Solicitors

Before: William J. Renahan, Arbitrator

The proceeding was recorded by Cheryl Hunt of Professional Court Reporters Inc.

Background:

A decision on a preliminary issue in this matter was issued on January 23, 1997. The Applicant sought benefits as a result of injuries she sustained in two motor vehicle accidents, which she claimed occurred on March 26, 1991 and December 25, 1991. The Insurer paid weekly benefits until September 1, 1994. On the hearing of a preliminary issue the Arbitrator found that the Applicant misrepresented to the Insurer that she was involved in the motor vehicle accident of December 25, 1991. The Arbitrator wrote²:

Section 27(1) of the Schedule states that "a person must repay to the insurer any benefit received under this Schedule that is paid to the person through error or fraud." In this case, I find that the Applicant misrepresented to the Insurer that she and her daughter were occupants of the Glickman car at the time of the accident. This is a serious misrepresentation. However, in the circumstances, I do not order repayment of benefits paid after December 25, 1991 because I am not satisfied that these benefits were paid entirely in connection with the second accident. For the reasons given above, I have the impression that the Insurer may have continued to pay benefits after the second accident without carefully distinguishing the two claims. In order to make a finding as to which, if any, benefits have been overpaid, an Arbitrator will need to hear evidence about the Applicant’s injuries and disability following the first accident, and the Insurer’s adjustment of the Applicant’s claims relating to the period after the second accident. Accordingly, the decision on the Insurer's request for a repayment order is reserved until the hearing resumes on the remaining issues in dispute arising out of the first accident.

Section 282(11.2) of the Act gives an Arbitrator discretion to order the Applicant to pay the Insurer an amount up to the amount of the Insurer's arbitration assessment of $2,000 if, in the opinion of the Arbitrator, the application for arbitration was "frivolous, vexatious or an abuse of process." Given the Applicant’s misrepresentation with respect to the December 25, 1991 accident, I find that her application for arbitration was an abuse of process in so far as it concerned the second accident. The Applicant is ordered to pay the Insurer $1,000 - half of its $2,000 assessment - before February 24, 1997. This order is subject to any final order made by an Arbitrator. This matter may not proceed to hearing until and unless this amount is paid. If the matter does not proceed, the assessment must be paid in any event. [emphasis added]

The Arbitrator ordered:

1. I find that the Applicant was not involved in a motor vehicle accident on December 25, 1991.

2. The hearing will resume on February 24, 25, 26 and 27, 1997 as scheduled, with respect to issues arising out of the March 26, 1991 accident, the Insurer’s claim for repayment of benefits paid after December 25, 1991, the Insurer's assessment and the Applicant's claim for reimbursement of her expenses in this proceeding.

3. The Applicant will pay the Insurer $1,000 by February 24, 1997. If the matter does not proceed, the assessment must be paid in any event.

Copies of the decision and Notice of Hearing were mailed to the Applicant and her counsel. The Applicant, through her counsel, filed a Notice of Appeal of the Arbitrator's decision. Accordingly, I am satisfied that the Applicant and her counsel received the decision and knew that the hearing was scheduled to commence February 24, 1997. Neither the Applicant or her counsel appeared at this hearing which opened on February 24, 1997. Mr. Aikens represented the Insurer with respect to the application for benefits arising out of the motor vehicle accident of March 26, 1991. Mr. Cooper represented the Insurer with respect to the Insurer’s claim for repayment of benefits it paid with respect to the alleged motor vehicle accident of December 25, 1991.

Counsel advised me that the Applicant has not paid the $1,000 as ordered by the Arbitrator. Both counsel asked that I proceed with the hearing and deal with the Insurer’s claim for repayment. In the alternative, Mr. Aikens asked that I dismiss the Application for Arbitration and Mr. Cooper asked that I adjourn the hearing to deal with the issue of repayment.

Analysis:

In her decision, the Arbitrator ruled that "This matter may not proceed to hearing until and unless this amount [$1,000] is paid [by the Applicant to the Insurer]." A hearing is a proceeding with issues of fact or of law to be tried, in which witnesses are heard and evidence presented.³ The difficulty arises in this case because the Insurer wishes to proceed with the hearing but the Arbitrator wrote that the hearing may not proceed until and unless $1,000 is paid to the Insurer. I assume the Arbitrator was referring to Ms. Harris claim for benefits proceeding to hearing. It is unreasonable to conclude that Ms. Harris could prevent the Insurer from proceeding to hearing on the issue of repayment simply by refusing to pay the $1,000. However, I am concerned that Ms. Harris may think that no hearing, including a hearing on the issue of repayment, will proceed so long as she does not pay the $1,000. In my view, it would be unfair to proceed with a hearing at this time in the absence of Ms. Harris where she might think that a hearing will not proceed so long as she does not pay the $1,000.

Accordingly, I will not hear evidence on the issue of repayment at this time.

I find that the effect of the Arbitrator’s order is that Ms. Harris could not proceed to the hearing of her claim for accident benefits unless she paid $1,000 to the Insurer before February 24, 1997. Since Ms. Harris failed to pay the $1,000 by February 24, 1997, her Application for Arbitration dated August 16, 1995 is dismissed.

The next question is whether an arbitrator has jurisdiction to hear an insurer’s claim for repayment where the insured's claim has been disposed of. A number of decisions have noted that an insured has some control over issues to be determined at an arbitration⁴ and that the insurer’s claim should be determined within the context of the insured's claim. However, the provisions in the Insurance Act governing an arbitrator’s jurisdiction were amended on November 1, 1996. This Application for Arbitration was filed before November 1, 1996 and the hearing will be held after November 1, 1996.

Prior to November 1, 1996, section 282(3) of the Insurance Act provided as follows:

The Arbitrator shall determine all issues in dispute and such other issues as the parties may agree.

Section 282(3) was repealed by the Automobile Insurance Rate Stability Act, 1996, which came into force November 1, 1996, and replaced by a new section 282(3) which provides:

The Arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer.

In Driedger on the Construction of Statutes, the author writes:

Procedural legislation is about the conduct of actions. It indicates how actions will be prosecuted, proof will be made and rights will be enforced in the context of legal proceedings. Such legislation is presumed to apply prospectively for it applies only to stages in proceedings or procedural events that occur after its coming into force. . . . it is presumed to apply immediately to on-going proceedings, including those commenced but not completed before its coming into force.⁵ [emphasis in original]

New procedures for dispute resolution, including neutral evaluation and private arbitrations, came into effect November 1, 1996, and deal with the conduct of applications for statutory accident benefits. In my view, the new section 282(3) is part of these new procedures. Since the new section 282(3) is procedural in nature, it is presumed to apply prospectively to applications heard after November 1, 1996.

Section 282(3) was repealed and replaced by a section which requires that an arbitrator determine all issues in dispute, whether the issues are raised by the insured or insurer. It is my opinion that under the new section 282(3) an arbitrator has jurisdiction to hear the issue of repayment even though the issue was raised by the Insurer, and even though the issues raised by the Applicant have been disposed of.

Since the Arbitrator ruled that the hearing would not proceed unless the $1,000 is paid, the hearing on the issue of repayment will not proceed today, February 24, 1997.

The hearing is adjourned to April 16, 1997 to hear evidence and submissions on the following issues:

1. Is the Insurer entitled to repayment pursuant to section 27(1) of the Schedule of the weekly benefits it paid to the Applicant after December 25, 1991?

2. Is the Insurer entitled to an assessment against the Applicant pursuant to section 282(11.2) of the Insurance Act?

Order:

1. The Applicant’s Application for Arbitration dated August 16, 1995 is dismissed.

2. The hearing is adjourned to April 16, 1997 to hear evidence and submissions on the following issues:

   a. Is the Insurer entitled to repayment of the weekly benefits it paid to the Applicant after December 25, 1991 pursuant to section 27(1) of the Schedule?

   b. Is the Insurer entitled to an assessment against the Applicant pursuant to section 282(11.2) of the Insurance Act?

March 7, 1997 Date

William J. Renahan Arbitrator

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. 2Harris and Royal Insurance Company of Canada January 23, 1997), OIC A95-000267
3. 3Black’s Law Dictionary, Sixth Edition, West Publishing Co., St. Paul, Minnesota, 1990.
4. 4DeCicco and State Farm Mutual Automobile Insurance Company (December 18, 1991), OIC A-000277, Appeal Decision February 21, 1992, OIC P-000277; Ayertey and Toronto Transit Commission (Markel Insurance Company of Canada) (April 5, 1994), OIC A-004077; Kotsiakos and State Farm Mutual Automobile Insurance Company (July 26, 1994), OIC A-002354 (under appeal); Aladejebi and State Farm Mutual Automobile Insurance Company, September 27, 1994), OIC A-005933
5. 5Sullivan, Ruth, Driedger on the Construction of Statutes, Third Edition, Butterworths, Toronto, 1994, p. 543.