Neutral Citation: 1997 ONICDRG 68

OIC A96-001176

ONTARIO INSURANCE COMMISSION

BETWEEN:

SHANNON KUCHIAK

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

DECISION

Issues:

The Applicant, Shannon Kuchiak, was the common-law spouse of Michel Proulx who died as a result of a motor vehicle accident on March 10, 1994. She applied for and received statutory accident benefits from Wawanesa Mutual Insurance Company ("Wawanesa"), payable under the Schedule.¹ Ms. Kuchiak claims that she is owed interest for accident benefits paid to her by Wawanesa pursuant to section 51(4)(a). The parties were unable to resolve their disputes through mediation, and Ms. Kuchiak applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

1. What is the amount of interest that Ms. Kuchiak is entitled to pursuant to section 68 of the Schedule?

2. Is Ms. Kuchiak entitled to a special award pursuant to section 282 (10) of the Insurance Act?

Ms. Kuchiak also claims interest on any amounts owing, and her expenses incurred in the hearing.

Result:

1. Ms. Kuchiak is not entitled to any interest pursuant to section 68 of the Schedule.

2. Ms. Kuchiak is not entitled to a special award.

3. Ms. Kuchiak is entitled to her expenses.

Hearing:

The hearing was held in Thunder Bay, Ontario, on March 27, 1997, before me, Joyce Miller, Arbitrator.

Present at the Hearing:

Applicant:

Shannon Kuchiak

Ms. Kuchiak's

Kristopher H. Knutsen

Representative:

Barrister and Solicitor

Nancy Campbell

Law Clerk

Wawanesa's

Greg Birston

Representative:

Barrister and Solicitor

Skip Bonnett

Law Clerk

Witnesses:

Shannon Kuchiak

Exhibits:

Four exhibits were filed.

Background

The parties proceeded by way of an Agreed Statement of Fact.² In addition, Ms. Kuchiak testified very briefly.

(a) Testimony of Ms. Kuchiak

On March 10, 1994, Michel Proulx, who was 18 years old, died when he was hit by a car while riding his bike. Ms. Kuchiak, who was 17 years old at the time, was living with Mr. Proulx and was nine months pregnant.

Ms. Kuchiak testified that she had been living with Mr. Proulx for about one year. She stated that at the time of the accident she was estranged from her mother and was a ward of Children's Aid. Her sole support was Mr. Proulx. Mr. Proulx was unemployed and was receiving welfare.

Ms. Kuchiak testified that a few days after the accident she retained Mr. Knutsen as her lawyer. She also reconciled with her mother.

Ms. Kuchiak stated that she never spoke to an insurance representative. After the accident, she had a mild nervous breakdown, and her mother handled all the insurance matters for her. As well, Mr. Knutsen kept her informed about her insurance claim.

(b) The Documentary Evidence

On March 22, 1994, Mr. E.R. Jones, the adjuster who was handling the file concerning Michel Proulx, wrote to Wawanesa. He stated that he was "...awaiting contact from a lawyer," and that he would "... have to determine the exact relationship between Michel Proulx and Shannon Kuchiak." It was the opinion of the adjuster that if Ms. Kuchiak had a common-law relationship with Mr. Proulx then "Shannon Kuchiak may ... be entitled to $50,000.00 and the baby [who was born on March 26, 1994] may be entitled to $10,000.00."³

On April 8, 1994, Mr. Jones reported to Wawanesa that "The Solicitors are now preparing documentation to prove Mr. Proulx and Miss Kuchiak's relationship had existed for longer than one year and as such, they will be looking for a payment of $50,000.00."⁴

On April 20, 1994, Mr. Jones forwarded a Death Benefit Application form to Ms. Kuchiak's solicitors.⁵

On April 27, 1994, Mr. Knutsen wrote to Mr. Jones. He stated that he was submitting the Death Benefit Application "... on behalf of Shannon Kuchiak as the result of the death of her common-law spouse, Michel Proulx." The letter also stated that "An application is also being made for dependant benefits for the child, Alexa Proulx."⁶

The application for death benefits was signed by Mr. Knutsen on behalf of Ms. Kuchiak on April 27, 1994.⁷

The application form lists two applicants, Ms. Kuchiak and her daughter, Alexa Proulx. Under Ms. Kuchiak's name, her relationship to the deceased is marked off as "spouse." The box for "dependant" is not marked off. Under Alexa Proulx's name, her relationship to the deceased is marked off as "dependant."⁸

On July 7, 1994, Mr. Jones wrote to Wawanesa. He stated that he had consulted with a lawyer, Mr. Birston. Mr. Jones indicated in the letter that "... we are not in a good position, to deny

Shannon the $50,000.00 benefit" and that "... Mr. Birston believes the $50,000.00 should be paid, but not the $10,000.00 benefit, as the child was unborn."⁹

Sometime later in July 1994, Wawanesa paid the $50,000.00 death benefit to Ms. Kuchiak.

On March 14, 1995, Mr. Knutsen wrote to Mr. Jones that "It is our view that [Ms. Kuchiak] also qualifies under Section 51(4)(a) for a further death benefit of $10,000.00 as a surviving dependant of her late spouse."¹⁰ With this letter, Mr. Knutsen enclosed an application on behalf of Ms. Kuchiak, which was signed by Mr. Knutsen and dated March 3, 1995.¹¹ [emphasis added]

On March 20, 1995, Mr. Jones reported to Wawanesa that he would be meeting with Mr. Birston to discuss whether Ms. Kuchiak "... would be entitled to a further $10,000.00, due to the fact that she was dependent upon her late spouse."¹²

A lengthy correspondence ensued between Mr. Knutsen and Mr. Jones, who required proof of Ms. Kuchiak's dependency, and between Mr. Knutsen and Social Services, who could supply the relevant proof. The correspondence began on April 6, 1995 with a letter from Mr. Jones requesting information about the social assistance that Mr. Proulx received and ended on March 1, 1996 with a letter from Mr. Jones wherein he enclosed a cheque for $10,000.00.¹³

In his letter of March 1, 1996, Mr. Jones stated: "In my Principals' opinion, no interest would be applicable, as the necessary information was only received one month ago."¹⁴

On April 10, 1996, Mr. Knutsen wrote to Mr. Jones stating that interest was owing and that it should run from the first application for death benefits on April 27, 1994.

The parties proceeded to mediation on the issue of interest owing. Following a failed mediation, Wawanesa calculated the interest payable to be $2,311.48 for the period from the second application for death benefits on March 14, 1995 to the payment of the death benefit on March 1, 1996.¹⁵ On November 7, 1996, Wawanesa paid Ms. Kuchiak $2,311.48.¹⁶

Issue for Arbitration

The issue to be decided at this arbitration is whether interest is owed on the $10,000.00 from the first application for death benefits on April 27, 1994, or from the date of the second application of March 14, 1995, until March 1, 1996.

Submissions

(a) Ms. Kuchiak

Ms. Kuchiak's position is that the interest on the death benefit for $10,000.00 should run from the date of the first application on April 27, 1994.

Ms. Kuchiak submitted that pursuant to section 59¹⁷ of the Schedule Wawanesa was required to inform her in writing of what benefits were available to her. Wawanesa should have let her know that she was entitled to dependent benefits, and it did not do so. Moreover, her mother was in contact with the adjuster about her relationship with Mr. Proulx, and, therefore, the adjuster should have been aware of her situation as a dependant of Mr. Proulx.

Ms. Kuchiak submitted that I should infer from the correspondence of the adjuster that after receiving the application of April 27, 1994, that Ms. Kuchiak was not only a dependant of Michel Proulx as his common-law spouse and, therefore, entitled to $50,000.00, but that she was also a dependant of Mr. Proulx pursuant to section 51(4)(a) and was entitled to $10,000.00.

Ms. Kuchiak submitted that the fact that the box for dependant in the application of April 27, 1994 was not checked off should not be held against her, as the legislation is remedial and does not require such specific details from the applicant. As well, she submitted that the letters accompanying the two applications for death benefits should not be considered, but that the applications should be considered on their own.

(b) Wawanesa

Wawanesa submitted that nothing in the April 27, 1994 application or the letter attached to it indicated that Ms. Kuchiak was seeking death benefits pursuant to section 51(4)(a). Not only did the letter and the application clearly state that she was seeking benefits as the common-law spouse of Michel Proulx, but the box for dependent benefits was not checked off.

Moreover, after receiving the first application of April 27, 1994, nothing in the correspondence of the adjuster suggested that he was considering anything other than the death benefits for a spouse and a dependant unborn child, as per the application.

Wawanesa first became aware of the request for the additional death benefit through the letter and second application received from Mr. Knutsen on March 14, 1995, requesting death benefits pursuant to section 51(4)(a).

Wawanesa submitted that spousal death benefits were paid in July 1994 as a result of the application of April 27, 1994. Prior to the application of March 14, 1995, there is no evidence to show that a request for benefits pursuant to section 51(4)(a) was made by Ms. Kuchiak or refused by Wawanesa pursuant to section 67(4).

Wawanesa submitted that the interest payable on the additional death benefit should be calculated from the date of the application of March 14, 1995 until Wawanesa paid the benefit on March 1, 1996. Having paid the interest for this period, Wawanesa submits that no further monies are owing.

The Law

67. (1) Subject to subsection 65 (5) an insurer shall mail or deliver a benefit that is payable under section 16 or Part XI, XII or XIII to the person entitled within thirty days after the insurer receives an application for the benefit.

(2) An amount payable under section 16 or Part XI, XII or XIII is overdue if the insurer fails to comply with subsection (1).

(3) When a benefit is paid under section 16 or Part XI, XII or XIII, the insurer shall provide the insured person with a written explanation of how the amount of the benefit was determined.

(4) If the insurer refuses to pay a benefit under section 16 or Part XI, XII or XIII, it shall give the insured person notice of the reasons for the refusal within 30 days after receiving an application for the benefit.

68. If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.

Analysis and Findings

Pursuant to sections 67 and 68 an insurer shall pay interest on an overdue amount thirty days after receiving an application for a benefit pursuant to Part XI (Death Benefits) of the Schedule until the benefit is paid.

In this case, two applications for death benefits were made, one on April 27, 1994, and the other on March 14, 1995. The question I must answer is: from which application date should interest run for the $10,000.00 dependent death benefit paid to Ms. Kuchiak pursuant to section 51(4)(a)?

In order for Ms. Kuchiak to be successful in this case, she must prove on a balance of probabilities that the interest on the death benefit paid to her pursuant to section 51(4)(a) began to run 30 days after she sent in her application on April 27, 1994.

Section 59¹⁸ outlines the procedure for applying for accident benefits. In the case of Hean Kheng H'ng and Allstate Insurance Company of Canada,¹⁹ Arbitrator John Friendly undertook an in-depth analysis of section 59. I agree with his comments that:

The process of notification and application, within the context of the legislative scheme as a whole, anticipates the claim will be presented by the applicant in sufficient detail to permit the insurer to act upon it and meet its obligations for timely payment under the Schedule.

... An application is not limited to a particular form. It may include additional information contained in a covering letter, and documentation enclosed or appended.

For the following reasons, I find that Ms. Kuchiak has not discharged her burden of proof.

First, I do not accept Ms. Kuchiak’s submission that Wawanesa failed in its obligation to advise her that she was eligible for the $10,000.00 death benefit and was, therefore, liable for the interest from the date of the first application.

According to Ms. Kuchiak, a few days after the accident, she hired a lawyer to pursue her claim for death benefits. She testified that she never had any contact with Wawanesa or its agents. She was ill and left it to her mother and her lawyer to handle her claim. Her lawyer received the application for benefits from Wawanesa, filled it out and signed it on her behalf. Ms. Kuchiak testified that her counsel kept her informed at all times about how the claim was progressing. I find that in this particular fact situation it was the responsibility of her lawyer, and not of Wawanesa, to inform her of her rights and to make the appropriate choices on her behalf.

Second, nothing in the application of April 27, 1994 would lead one to believe that Ms. Kuchiak was claiming death benefits as Mr. Proulx's dependant, in addition to her claim for death benefits as Mr. Proulx's common-law spouse.

Third, I give little weight to Ms. Kuchiak's submission that her mother had informed the adjuster of Ms. Kuchiak's dependency on Michel Proulx and that this could be inferred from the adjuster's correspondence to Wawanesa.

I note that Ms. Kuchiak's mother did not testify. I was told that there was no particular reason why she was not called as a witness. I, therefore, draw an adverse inference from the fact that Ms. Kuchiak's mother did not testify.

In my view, after reviewing the adjuster's correspondence, the only thing that can be reasonably inferred is that he viewed the application of April 27, 1994 as one for death benefits for Ms. Kuchiak as the common-law spouse of Mr. Proulx, and dependent benefits for her daughter, Alexa Proulx. Nothing in the correspondence suggests that the adjuster was aware that Ms. Kuchiak was making an additional claim as a dependant of Mr. Proulx, pursuant to section 51(4)(a).

I do not accept Ms. Kuchiak's submission that I should ignore the fact that the box for a claim as a dependant was not checked off. Had the covering letter stated that in addition to her claim for death benefits as a common-law spouse, Ms. Kuchiak was claiming death benefits as a dependent, I might have considered that Wawanesa had had some notice that she was seeking benefits pursuant to section 51(4)(a).

However, the covering letter clearly stated that Ms. Kuchiak was seeking death benefits as Mr. Proulx's common-law spouse, and dependent benefits for her daughter, Alexa. Nothing in the covering letter of the first application indicates that Ms. Kuchiak was claiming death benefits pursuant to section 51(4)(a).

Finally, I am reinforced in my opinion by the fact that after Ms. Kuchiak received $50,000.00 in death benefits from Wawanesa she did not pursue Wawanesa for an additional $10,000.00 through mediation, because of a refusal by Wawanesa to pay this benefit. Instead, on March 14, 1995, her counsel sent Wawanesa a second application (which he filled out and signed) requesting "further" death benefits.

I note that if one read the second application, without the covering letter, it would be impossible to know that Ms. Kuchiak was seeking further benefits pursuant to section 51(4)(a). However, the documentary evidence shows that once the adjuster received the March 14, 1995 letter with the second application he began to consider the possibility of paying Ms. Kuchiak a further death benefit, which Wawanesa did on March 1, 1996.

For all of the above reasons, I find that the application for a death benefit pursuant to section 51(4)(a) was made on March 14, 1995 and not on April 27, 1994.

Accordingly, since Wawanesa has paid the interest on monies owing for the period of March 14, 1995 to March 1, 1996, I find that Ms. Kuchiak is not entitled to any further interest.

Is Ms. Kuchiak entitled to a special award?

Ms. Kuchiak submitted that Wawanesa should be ordered to pay a special award under section 282(10) of the Insurance Act because it unreasonably withheld the payment of interest owed pursuant to section 68.

Section 282(10) states:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, 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 per cent 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.

An arbitrator has jurisdiction to consider a claim for a special award under section 282(10) of the Insurance Act once she finds that an insurer has acted unreasonably. A special award is based on the amount owing at the time of the award. Because I have concluded that no interest is owing, I have no authority to order a special award in this case.

Expenses

Pursuant to section 282(11) arbitrators have generally exercised their discretion to award an unsuccessful applicant his or her expenses so long as the application had some merit and was not tainted by misconduct. This practice was expressed by Director's Delegate Naylor in Allison and Markel Insurance Company of Canada:

Applicants are reasonably assured that they will recover their expenses if they are unsuccessful, unless their case is without merit or their conduct is sufficiently serious to disqualify them.²⁰

Accordingly, pursuant to section 282(11) I exercise my discretion to award Ms. Kuchiak her expenses.

Order:

1. Wawanesa is not required to pay Ms. Kuchiak any interest pursuant to section 68 of the Schedule.

2. Ms. Kuchiak is entitled to her expenses incurred in respect of the arbitration.

April 21, 1997

Joyce Miller

Arbitrator

Date

APPENDIX A

SHANNON KUCHIAK

and

WAWANESA MUTUAL INSURANCE COMPANY

AGREED STATEMENT OF FACTS

1. Michel Proulx sustained fatal injuries in a motor vehicle accident which occurred on March 10, 1994.

2. Shannon Kuchiak was the common-law spouse of the late Michel Proulx at the time of his death.

3. An Application for Death Benefits dated April 27, 1994 was submitted to Wawanesa Mutual Insurance Company on behalf of Shannon Kuchiak.

4. Wawanesa Mutual Insurance Company paid a death benefit to Shannon Kuchiak as the spouse of Michel Proulx in the amount of $50,000.00.

5. A further Death and Funeral Payment Request was submitted to the insurer in correspondence dated March 14, 1995.

6. A death benefit of $10,000.00 was paid to Shannon Kuchiak as a surviving dependent of the late Michel Proulx on March 1, 1996.

7. An Application for Mediation was submitted on behalf of Shannon Kuchiak dated May 10, 1996 for payment of interest on the $10,000.00 death benefit.

8. A mediation was held on July 4, 1996.

9. The Wawanesa Mutual Insurance Company paid the sum of $2,000.00 for interest on the $10,000.00 benefit by way of correspondence from their counsel dated August 23, 1996.

10. A Pre-Hearing discussion was held on Thursday, October 31, 1996.

11. The Wawanesa Mutual Insurance Company made a further payment of $311.48 for interest on the $10,000.00 death benefit by way of correspondence from their counsel dated November 7, 1996.

CARREL + Partners

Mar. 13, 1997

Per ____________________

Date

Solicitors for SHANNON KUCHIAK

BUSET & PARTNERS

Per ____________________

Date

Solicitors for WAWANESA

MUTUAL INSURANCE COMPANY

(2) The insurer shall promptly provide the person with,

(a) the appropriate application forms;

(b) a written explanation of the benefits available under this Regulation; and

(c) written information to assist the person in applying for benefits, including information to assist the person in making any possible elections.

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents after December 31, 1993, and before November 1, 1996, called "the Schedule" in this decision. The Schedule is Ontario Regulation 776/93, as amended by Ontario Regulation 635/94.
2. 2See Appendix A
3. 3Exhibit 1, Tab 1 at p. 2, excerpt from a letter by the adjuster, Mr. E.R. Jones, to Wawanesa, dated March 22, 1994.
4. 4Exhibit 1, Tab 3, Letter from Mr. Jones to Wawanesa dated April 8, 1994
5. 5Exhibit 1, Tab 4, Letter from E.R. Jones to Ms. Campbell, Law Clerk to Mr. Knutsen
6. 6Exhibit 1, Tab 5, Letter from Mr. Knutsen to Mr. Jones dated April 27, 1994.
7. 7Exhibit 1, Tab 6, Death or Funeral Benefit Application, dated April 27, 1994
8. 8Ibid.
9. 9Exhibit 1, Tab 10, Letter from Mr. Jones to Wawanesa dated July 7, 1994.
10. 10Exhibit 1, Tab 11, letter from Mr. Knutsen to Mr. Jones.
11. 11Exhibit 4, Ontario Automobile Insurance Death and Funeral Payment Request
12. 12Exhibit 1, Tab 13, Letter to Wawanesa from E.R. Jones dated March 20, 1995
13. 13Exhibit 1, See Tabs 14 to 35
14. 14Exhibit 1, Tab 35 Letter form Mr. Jones to Mr. Knutsen dated March 1, 1996.
15. 15Exhibit 1, Tab 42 Letter from counsel for Wawanesa, Beset & Partners, to Mr. Knutsen
16. 16Ibid
17. 1759.-(1) A person who wants to apply for benefits under this Regulation shall notify the insurer within thirty days after the circumstances arose that gave rise to the entitlement to benefits, or as soon as practicable thereafter.
18. 18See footnote 16
19. 19Hean Kheng H ng & Tan Ai Keng and Allstate Insurance Company of Canada (March 7, 1997), OIC A96-000988.
20. 20Allison and Markel Insurance Company ofCanada, (August 21, 1996), OIC Appeal P-001231