Sandra Clark v. Royal Insurance Company of Canada, 1997 ONICDRG 45

Neutral Citation: 1997 ONICDRG 45

OIC A96-000509

ONTARIO INSURANCE COMMISSION

BETWEEN:

SANDRA CLARK

Applicant

and

ROYAL INSURANCE COMPANY OF CANADA

Insurer

DECISION No. 2

Issues:

The Applicant, Sandra Clark, was injured in a motor vehicle accident on August 16, 1992. 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 August 23, 1995. The parties were unable to resolve their disputes through mediation and Mrs. Clark applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

An arbitration was held on November 18, 19, 20 and 21, 1996 in Ottawa before me Joyce Miller, Arbitrator. Written submissions were received on November 29, 1996 and December 11, 1996. On January 21, 1997 I issued my decision ordering that weekly income benefits be paid to Mrs. Clark. I also invited the parties to present written submissions on the issue of whether Mrs. Clark is entitled to a special award.

The issues in this hearing are:

1. Is Mrs. Clark entitled to a special award pursuant to section 282(10) of the Insurance Act?

Result:

1. Mrs. Clark is entitled to a special award of $7,500 plus interest.

Hearing:

Written submissions on the issue of a special award were received from the parties on February 13 and 17, 1997.

Present at the Hearing:

Mrs. Clark's Representative:

John J. Cardill

Barrister and Solicitor

Royal's Representative:

Stanley C. Tessis

Barrister and Solicitor

ANALYSIS AND FINDINGS

1. The Jurisdiction Issue

Royal submitted that I have no jurisdiction to grant a special award on the basis that it was not given any notice that a special award was being considered.

For the following reasons I find that I have jurisdiction to consider a special award.

Section 282(10) provides:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payment, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 percent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.[emphasis added]

In Anizor and Royal Insurance Company of Canada² Arbitrator Palmer held that pursuant to section 282(1) of the Insurance Act, an arbitrator has an inherent jurisdiction to grant a special award once she finds that an insurer has acted unreasonably, "whether or not such a claim has been raised in the Application for Appointment or an Arbitrator, Reply by Insurer, at the pre-hearing conference, or otherwise."

In Leitgeb and Allstate Insurance Company³ Director's Delegate, David Draper, concurred with the reasoning in Anizor. In Leitgeb he stated as follows:

I agree with the arbitration decisions that have held that a special award is not a claim to be advanced like a claim for benefits. See for example Victoria Anizor and Royal Insurance Company of Canada, January 24, 1995, OIC File No. A-003702; Carmen Palumbo and Dominion of Canada General Insurance Company, April 13, 1995 [OIC File No. A-007314]. Rather, it is a statutory authority, or a direction, given to the arbitrator to make an award if he or she finds that not only are benefits owing to the applicant, but that they were unreasonably withheld or delayed by the insurer.

In my view, this has at least two consequences. First, the arbitrator can order a special award whether or not it was raised in mediation or at the pre-hearing. This is subject to the principles of fundamental justice and fairness, which probably require some notice to the insurer that a special award is being considered. Second, the special award provision does not create an entirely separate basis for production. An applicant seeking production from an insurer's records must demonstrate some reasonable basis for its relevance to the issues before the arbitrator.

In Nelson and Canadian General Insurance Company⁴ Arbitrator Draper (as he then was) stated:

I accept that fairness requires that the insurer have some notice that a special award is being considered, and be given a opportunity to respond. It is not obvious to me, however, that section 8 of the Statutory Powers Procedure Act, limits the ability of an arbitrator to order a special award.

From the above cases two principles can be abstracted: one, an arbitrator has a statutory jurisdiction to consider and grant a special award pursuant to section 282(10) of the Insurance Act; and two, the principles of fundamental justice and fairness require some notice to the insurer that a special award is being considered.

In its submissions, Royal stated that: "In this arbitration, there was absolutely no notice that a special award was being asked for or being considered." With respect this is not true.

I gave Royal clear notice in my decision of January 21, 1997, that a special award was being considered. Moreover, Royal was given an opportunity to make submissions on the issue of a special award. In fact, Royal did make submissions on this issue which I have taken into consideration in my analysis below.

For all of the above reasons, I find that I have an statutory jurisdiction to consider a special award in this case, and that Royal was given sufficient notice to make submissions on this issue.

2. The Substantive Issue

Pursuant to section 282(10) of the Insurance Act an arbitrator "shall" grant a special award once she finds that an insurer has acted unreasonably in withholding or delaying payments.

In Plowright and Wellington Insurance Company⁵ Arbitrator Palmer made the following comments with respect to what can be considered as unreasonable behaviour on the part of an insurer:

"Unreasonable" behaviour by an Insurer in withholding or delaying payments can be seen as behaviour which was excessive, imprudent, stubborn, inflexible, unyielding or immoderate.

I agree with this definition.

Taking the above definition into consideration, I exercise my jurisdiction to grant Mrs. Clark a special award.

After a detailed review of the evidence I find that, at the three year anniversary date of Mrs. Clark's accident, Royal chose to terminate her weekly income benefits on a flimsy excuse: namely, an error made when Dr. Menard filled out a medical form. In this form Dr. Menard mistakenly indicated that Mrs. Clark could return to full-time work. At the time of the termination Royal had ample evidence that Mrs. Clark could not return to full-time work.

As noted in my decision of January 21, 1997, Mrs. Clark had a very serious accident which devastated her life. Despite the pain that physically disabled her within a year after the accident, Mrs. Clark was determined to get back to work as quickly as possible. This was confirmed not only in her doctor's clinical notes and records, but also in the records of Accu-Med which was retained by Royal.

On May 10, 1995, after Mrs. Clark was terminated from her "dream job" with the Member of Parliament, Len Hopkins, because she could not physically do the job, Dr. Menard wrote to Royal's adjuster and informed him that, despite her efforts, Mrs. Clark was unable to handle her previous domestic and occupational workload. He felt that Mrs. Clark would likely have to deal with chronic pain for the rest of her life, and would probably never be employable full-time in a job which makes even moderate physical demands on her.

In June 1995, Royal sent Mrs. Clark to the March of Dimes on a work-hardening program. In its report of July 18, 1995, the March of Dimes noted that Mrs. Clark was cooperative and participated with interest in the program. Nevertheless, after observing Mrs. Clark for seven days, it concluded that at that time Mrs. Clark was not a suitable candidate for the work-hardening program due to the "limited tolerances" she experienced in the first phase, and the lengthy commute. The March of Dimes' report recommended that Mrs. Clark receive guidance with respect to pain management techniques. Royal did not pursue this recommendation.

On August 10, 1995, the Canadian Back Institute (CBI) produced a contradictory report wherein it stated, on the one hand, that Mrs. Clark did not meet the sitting requirement of her job and was unable to perform a number of other functions required of her job. On the other hand, they found no physical impediments preventing Mrs. Clark from returning to full-time work. The CBI arrived at this conclusion notwithstanding that Mrs. Clark had been unable to conclude the testing because of pain.

In its report the CBI recommended that Mrs. Clark undergo a gradual integration into a new position, part-time, four hours a day. It also recommended that Mrs. Clark attend a pain management program. None of these recommendations were carried out by Royal. On her own initiative, Mrs. Clark underwent a six-week, in-patient pain management program. Royal did not pay her benefits for the period she was in the hospital.

On August 17, 1995, Mr. Gervais of Accu-Med met with Dr. Menard who advised that Mrs. Clark could attempt part-time work. Despite Dr. Menard's opinion, which was recorded in a sign-back letter and a report to Royal, the Insurer terminated Mrs.Clark's weekly income benefits on August 23, 1995. Royal did so on the basis of the medical form signed by Dr. Menard on August 24, 1995.

Royal chose to rely on the medical form signed by Dr. Menard on August 24, 1995 to terminate Mrs. Clark's benefits. It ignored his letter of explanation on October 4, 1995, where Dr. Menard stated it was never his intention to approve Mrs. Clark to return to full-time work. His recommendation was that Mrs. Clark attempt to return to part-time work.

I found Dr. Menard a credible witness. Although he clearly cared for his patient, Dr. Menard did not act as an advocate for Mrs. Clark. Dr. Menard presented his evidence in a fair and even-handed manner, under very vigorous cross-examination by Royal's counsel. I accept Dr. Menard's evidence that he never intended to release Mrs. Clark to full-time work on August 24, 1995. Nor was it his opinion that Mrs. Clark could do part-time work. His letter of October 4, 1995 clearly confirms that Dr. Menard only recommended that Mrs. Clark attempt part-time work.

From October 1994 until October 1995, except for sending Mrs. Clark to the March of Dimes in June 1995 on a work-hardening project, Royal did not take an active role in assisting her to return to work. All four jobs that Mrs. Clark found in 1995 were gotten on her own initiative. Except for a part-time job working at the Limoges Residence, which basically required her to sleep over at the residence, the evidence shows that Mrs. Clark was physically unable to carry out any of the other jobs she attempted.

Royal was made aware that Mrs. Clark could not physically do even part-time work for Len Hopkins through the reports of Accu-Med to Royal.

The reports of Accu-Med to Royal talk about assisting Mrs. Clark to return to work. In fact, there was no evidence to show that after October 1994 Royal assisted Mrs. Clark in any meaningful way in the area of vocational rehabilitation. Nevertheless, on October 18, 1995, Accu-Med recommended to Royal that the rehabilitation file on Mrs. Clark be closed. According to Accu-Med it had done a Labour Market Survey and had identified several full-time jobs that Mrs. Clark could do.

Although Mrs. Clark had the skills and experience for the identified jobs, Accu-Med did not provide any medical evidence to support its view that Mrs. Clark could physically do these jobs. In fact Accu-Med clearly ignored Dr. Menard's opinion that Mrs. Clark could not work full-time. It offered no medical evidence to the contrary.

As noted above, in reviewing the evidence, I was left with the clear impression that Royal was determined to terminate Mrs. Clark's weekly benefits at the three year anniversary of the motor vehicle accident. It terminated Mrs. Clark's benefits despite substantial evidence showing that, on a number of occasions, Mrs. Clark had attempted to return to work on her own initiative, but was unable to work on a part-time basis, even at her "dream job."

In terminating Mrs. Clark's weekly income benefits, Royal had no reliable medical evidence to support its view that Mrs. Clark could return to work full-time on August 23, 1995. It did not even attempt to send Mrs. Clark for an Insurer's Medical Examination. Instead, Royal opportunistically used Dr. Menard's medical form of August 24, 1995 as an excuse to terminate Mrs. Clark's benefits.

I find that Royal's actions in terminating Mrs. Clark's weekly income benefits likely contributed to Mrs. Clark's anger, depression and suicidal ideation, which Dr. Menard reported in his clinical notes in October 1995.

Moreover, I find that at the time of the arbitration hearing, Royal had a paucity of medical evidence to support its position. Mrs. Clark, however, had a consistent and substantial amount of medical evidence to prove that she was disabled from working. Nevertheless, Royal proceeded with the arbitration and only presented two private investigators as witnesses. In my decision I found the investigator's evidence not very helpful.

For all of the above reasons I find that Royal's actions were unreasonable, pursuant to section 282(10) of the Insurance Act. I, therefore, exercise my jurisdiction to grant Mrs. Clark a special award.

In determining the quantum of my award I take into consideration the comments made by other arbitrators.

In Erickson and The Guarantee Company of North America⁶ Senior Arbitrator Rotter stated that:

... that a special award, if ordered, must be substantial enough to have a deterrent effect. It should be more than a nominal amount, which could be viewed as a licence to act unreasonably.

... the special award should take into consideration the time and resources expended by the insured person in asserting and securing his or her rights.

In B. and Non-Marine Underwriters, Members of Lloyd's, London, England⁷ Arbitrator Kirsch stated that the maximum special award of 50% under section 282(10) of the Insurance Act ought to be reserved for those cases where the insurer shows flagrant misconduct or bad faith in assessing the applicant's claim for additional benefits.

For the following reasons I find that Royal's behaviour amounted to bad faith.

First, on August 23, 1995, Royal did not have any meaningful medical evidence on which to base its termination of Mrs. Clark's benefits. Royal chose to terminate her benefits based on a contradictory form signed by Dr. Menard, Mrs. Clark’s family doctor. More significantly, Royal chose to ignore Dr. Menard's letter of October 4, 1995 which clearly stated that he was not releasing Mrs. Clark to full-time work.

Second, both the reports of the March of Dimes and the CBI recommended that Mrs. Clark be given assistance with pain management. As well, several weeks before Royal terminated Mrs. Clark’s benefits, the CBI report recommended that Mrs. Clark undergo a gradual integration into the work force. Royal did not follow-up on any of these recommendations.

Third, Royal was aware that Mrs. Clark had spent six weeks in hospital (except for weekends) from December 1995 to January 1996, undergoing a pain management program. Nevertheless, Royal did not pay Mrs. Clark any benefits for this period of disability.

Fourth, shortly before the arbitration hearing, despite Mrs. Clark protests, Royal insisted she attend an Insurer's Medical Examination with Dr. Rush in Toronto, although she lived an hour away from Ottawa. Royal never called Dr. Rush as a witness so that he could be cross-examined on his report. In my decision, I found Dr. Rush's report to be biased and irrelevant. I noted that he spent ten pages of his report discussing the literature on fibromyalgia - when the diagnosis of all Mrs. Clark's doctors was that she was suffering from chronic pain syndrome.

And finally, right up to the date of the arbitration hearing, Royal continued to ignore substantial and significant medical evidence of Mrs. Clark's disability, and required her to undergo a four-day hearing to prove her case.

After my decision on January 21, 1997, the parties confirmed that the amount that Royal paid to Mrs. Clark was $15,819.96.⁸

Accordingly, for all of the above reasons, I find that pursuant to section 282(10), Royal is required to pay Mrs. Clark a special award of $7,500 plus interest.

Order:

1. Royal shall pay Mrs. Clark a special award of $7,500 plus interest.

March 11, 1997

Joyce Miller Arbitrator

Date

Footnotes

1. 1Prior to January 1, 1994, Ontario Regulation 672 was called the No-Fault Benefits Schedule. After that daate 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. 2Anizor and Royal Insurance Company of Canada (January 24, 1995), OIC A-0003702
3. 3Leitgeb and Allstate Insurance Company (November 16, 1995), OIC P-012407
4. 4Nelson and Canadian General Insurance Company (July 19, 1995), OIC A-006686
5. 5Plowright and Wellington Insurance Company (October 29, 1993), OIC A-003985
6. 6Erickson and the Guarantee Company of North America (July 16, 1992), OIC A-000560
7. 7B and Non-Marine Underwriters, Members of Lloyd's, London, England (June 24, 1996), OIC A-013947
8. 8This figure was arrived at after deducting the set-off and CPP benefits.