Neutral Citation: 1998 ONICDRG 52, 1998 ONFSCDRS 52

FSCO A97-001050

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

TERESA GARCIA

Applicant

and

LIBERTY MUTUAL INSURANCE COMPANY

Insurer

DECISION

Issues:

The Applicant, Teresa Garcia, was involved in three motor vehicle accidents on November 23, 1994, April 10, 1995 and December 14, 1996. She applied for and received income replacement benefits from the Insurer, Liberty Mutual Insurance Company (the "Insurer"), payable under the Schedule,¹ from November 30, 1994 until January 10, 1997. At that time the Insurer terminated benefits, taking the position that Mrs. Garcia had unreasonably failed to attend at an Insurer's Medical Examination ("IME") set up by the Insurer, pursuant to section 65 of the Schedule. Mrs. Garcia did attend a rescheduled IME on July 29, 1997 and the income replacement benefits were continued as of that date. The Insurer did not, however, pay the benefits for the period from January 10, 1997 to July 29, 1997. The parties were unable to resolve their disputes through mediation, and Mrs. Garcia applied for arbitration at the Financial Services Commission of Ontario² under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

The issues in this hearing are:

1. Is Mrs. Garcia entitled to be paid income replacement benefits for the period January 10 to July 29, 1997?

2. If so, is interest payable on the amount owing and from what date?

3. Is Mrs. Garcia entitled to a special award?

Both sides claim their expenses of the arbitration.

Result:

1. Mrs. Garcia is entitled to income replacement benefits from January 10 to July 29, 1997.

2. Mrs. Garcia is entitled to interest at the applicable rate from July 29, 1997 up to the date of payment.

3. Mrs. Garcia is entitled to a special award in the amount of $250.

If the parties cannot agree between themselves, I may be spoken with regard to the issue of expenses.

Hearing:

The hearing was held at the offices of the Financial Services Commission of Ontario in Toronto, Ontario, on September 28, 1998, before me, M. Guy Jones, Arbitrator.

Present at the Hearing:

Applicant:

Teresa Garcia

Mrs. Garcia's Representative:

Kevin Doan Barrister and Solicitor

Insurer's Representative:

George O. Frank Barrister and Solicitor

Insurer's

Clive Townsend

Officer:

Interpreter:

Raul Galvez

The proceedings were recorded by Ala Kleinberg, Court Reporter.

Witnesses:

For the Applicant:

Maria Garcia

Exhibits:

Five exhibits were filed.

Facts:

Mrs. Garcia suffered injuries when she was involved in a motor vehicle accident on November 23, 1994. She was also involved in further motor vehicle accidents on April 10, 1995 and December 14, 1996. Prior to the accidents Mrs. Garcia had been working as a food packager, however, as a result of the November 23, 1994 accident, she was unable to work. She applied for and received income replacement benefits from the Insurer commencing November 30, 1994.

The Insurer continued to pay income replacement benefits until January 10, 1997, at which time the Insurer terminated her income replacement benefits because she failed to attend at two IMEs set up pursuant to section 65 of the Schedule for January 7, 1997.

The Insurer subsequently set up IMEs again for January 23, 1997, which Mrs. Garcia again did not attend.

The Insurer set up yet another set of IMEs on July 29, 1997. On this occasion, Mrs. Garcia did attend and as a result of the IMEs, her income replacement benefits were reinstated as of July 29, 1997. The Insurer refused, however, to pay her the benefits covering the period during which she had failed to attend IMEs, being January 10 to July 29, 1997.

Findings and Analysis:

The applicable legislation

Counsel disagreed as to whether section 65 of the Schedule, as it was worded prior to January 1, 1995 should apply to this situation or the revised section 65, which became effective on January 1, 1995. When one examines the wording of both sections and the Schedule as a whole, very little would end up turning on which version of section 65 applies. For the purposes of this decision, I am prepared to follow the decision of Director's Delegate Draper in GAN Canada Insurance Company and Lehman (FSCO P97-00064, August 10, 1998). In that case, the Director's Delegate found that even though the motor vehicle accident occurred in 1994, it was the 1995 version of the Schedule amendments regarding the loss of earning capacity benefits that applied to Mr. Lehman. In Mrs. Garcia's case, the accident occurred in 1994 and the amendments to section 65 were effective January 1, 1995. The Insurer did not terminate the benefit until January 1997 and pursuant to Director's Delegate Draper's decision, I will apply section 65 as it was at the time of the termination of benefits in 1997.

The termination

The applicable parts of section 65 of the Schedule state:

65.—(1) An insurer may, for the purposes of any of Parts II to VIII, X and XIII and as often as reasonably necessary, give an insured person notice requiring the person to be examined by one or more persons specified by the insurer, each of whom is a member of a health profession or a person with expertise in vocational rehabilitation.

(2) An examination under subsection (1) shall be scheduled by the insurer and, for that purpose, the insurer shall make reasonable efforts to schedule the examination for a time that is convenient for the insured person and shall provide the insured person with reasonable notice of the examination.

(4) A notice referred to in subsection (1) shall state the expense to which the examination relates.

(5.1) If the insured person fails or refuses to submit to an examination under subsection (1), the insurer may withhold payment of the weekly benefits under Part II, section 15 or Part IV, V or VI until the person submits to the examination and, when the person submits to the examination, the insurer shall,

(a) resume payment of the benefits; and

(b) pay the benefits that were not paid.

The first issue to be determined is whether the Insurer was entitled to an IME in January 1997, pursuant to subsection 65(1) of the Schedule, which allows examinations "as often as is reasonably necessary." The evidence at the hearing was that Mrs. Garcia had ongoing injuries, including a herniated disc, arising out of the first accident and potentially disabling injuries arising out of the subsequent motor vehicle accidents. Prior to the proposed January 1997 IMEs, the Insurer had Mrs. Garcia seen on a number of occasions. Among others, she had had a medical rehabilitation DAC in October 1995, a Functional Assessment Evaluation ("FAE") in October 1995, an examination by Dr. Patkai in November 1995 and a disability DAC in August 1996. While a number of the reports found that Mrs. Garcia did not put forward her maximum effort and refer to various inconsistencies found during her examinations, the Insurer decided, nevertheless, to continue paying income replacement benefits.

As the first accident had occurred on November 23, 1994, the Insurer would normally be obligated to make a loss of earning capacity offer after the two-year anniversary of the accident, or in November 1996. However, in cases where an applicant has been involved in a subsequent accident, section 21(9) of the Schedule allows the extension of the time for the offer to two years after the second accident. It would appear that this is what happened in this case.

In any event, written notice of the IMEs for January 7, 1996 was given to Mrs. Garcia by way of a letter from Riverfront Medical Evaluation, Ltd., dated December 16, 1996. One examination was for an orthopaedic review and the other for an FAE.

Counsel for the Applicant took the position that the notice was invalid as it came from the Riverfront Medical Evaluation, Ltd. rather from the Insurer directly and thereby violated section 65(2) of the Schedule. I do not agree. It is clear, on the evidence, that the Insurer made the arrangements for Mrs. Garcia to be examined at the Riverfront Medical Evaluation, Ltd. The actual notice of the time and place of the examination was provided by Riverfront but it is clear from the letters that the examinations themselves were arranged by the Insurer. At best, there may have been a very technical noncompliance by the Insurer. The real question on this point, in my view, is whether Mrs. Garcia received notice. Despite somewhat vague and evasive responses by Mrs. Garcia on cross-examination on this point, I find that she did receive notice of the examinations.

I also find that the requests for the IMEs were reasonable at the time. In January 1997, the two-year anniversary date of the April 1995 motor vehicle accident was approaching. The Insurer was still paying income replacement benefits and had to make a decision as to whether or not to make a loss of earning capacity offer. This reasonably required medical input. In addition, the Insurer had not requested a medical assessment since August 1996, when comments were made as to the Applicant's possible lack of maximum effort as well as inconsistent findings regarding her condition.

While I am satisfied that it was reasonable for the Insurer to have an examination in January 1997, I am not satisfied with the explanation given by Mrs. Garcia for not attending the examinations. She testified that she did not attend on the advice of her lawyer. No further explanation was given. I find this unfortunate, as instead of this matter being dealt with quickly between the parties, a time-consuming and expensive arbitration has resulted.

In any event, further IMEs were set for January 23, 1997. On this occasion, the notice was sent on January 8, 1997 from an employee of the Insurer to Mrs. Garcia as well as her lawyer. Yet again, Mrs. Garcia did not attend and no explanation was given.

Finally, on July 9, 1997, Mrs. Garcia received notice of further IMEs for July 29, 1997 which she attended. As a result of those examinations, the Insurer decided to reinstate benefits as of July 29, 1997 but did not pay benefits for the period of noncompliance.

As noted above, section 65(5.1) requires that once the Applicant has attended the examination, the Insurer shall resume payments of the benefits and pay the benefits that were not paid.

Counsel for the Insurer argues that a literal of section 65(5.1) would not be reasonable and that it has to be read in conjunction with the rest of the Schedule. He argued that one must assume an element of reasonableness when reading section 65(5.1). He argues, for example, that on a literal reading of section 65, an Applicant could refuse to attend an Insurer's examination for a period of five years and then attend and the Insurer would be forced to pay the five years' benefits.

This hypothetical example, however, is far different from the facts of this case. Here we are dealing with a situation where the Applicant did agree to attend, albeit six months later. It is also worthy of note that as a result of the Insurer's examination, Mrs. Garcia was found to be still disabled and the Insurer paid ongoing benefits. I find that section 65(5.1) is very straight forward and unambiguous. Because of the circumstances of this case, it is unnecessary for me to decide whether section 65(5.1) needs to be interpreted with the element of reasonableness as counsel for the Insurer suggests. In this case, on its facts, there was noncompliance with section 65(5.1) and the Insurer accordingly must pay income replacement benefits from January 10 to July 27, 1997.

Interest:

Section 68 of the Schedule requires that the Insurer shall pay interest on any overdue amount for each day the amount is overdue at a rate of 2 per cent per month compounded monthly. Counsel for the Applicant argued that the amount was due and owing as of January 10, 1997. I do not agree. Until July 29, 1997, the Insurer had quite properly held back benefits. After that time, the benefits were due and owing and accordingly, the Insurer must pay interest pursuant to section 68 of the Schedule from July 29, 1997.

Special Award:

Counsel for the Applicant submitted that the Insurer should be subject to a special award for unreasonably delaying payments during two time frames:

(a) between January 10 and July 29, 1997; and

(b) from July 29, 1997 to the present.

Special awards are made pursuant to section 282(10) of the Insurance Act which allows an arbitrator to award a lump sum of up to 50 percent of the amount to which the Applicant was entitled at the time of the award, plus interest, if it is found that the Insurer unreasonably withheld or delayed payments. In this case, I have found that the benefits were properly withheld from January 10 to July 29, 1997.

I have also found, however, that the Insurer should have paid benefits as of July 29, 1997. Mere failure to pay a benefit does not necessarily result in a special award. The Insurer must not simply have made an error but must have acted unreasonably. I am satisfied, in this case, that the Insurer's failure to pay the benefits as of July 29, 1997 was unreasonable. The Applicant had complied with the obligation to submit to an examination and the insurer, after receiving the report, paid ongoing income replacement benefits, indicating that they accepted that Mrs. Garcia was still disabled. I am also concerned by a letter from the Insurer to Mr. Umanzor, an employee in the Applicant's law firm, wherein the Insurer wrote:

Under section 65(5.1), if the insured person fails or refuses to submit to an examination under subsection (1), the insurer may withhold payment of the weekly benefits under part (II) until the person submits to the examination. When the person submits to the examination, the insurer shall resume payment of the benefit and pay the benefits that were withheld.

While I accept that the writer was summarizing section 65(5.1), one is left with a sense that the Insurer was at least aware of the obligation to pay past benefits.

In considering a special award, it is necessary to take all factors into account, not just the actions of the Insurer but also those of the Applicant. In this case, Mrs. Garcia wrongly refused to attend an examination and the only reason she gave was that her lawyer had told her not to do so. Not only was no further reason given at the hearing but no reason was apparently given in January 1997. Indeed, no notice was given by the Applicant that she would not attend at the January 7, 1997 examination. In fact when a further examination was set for January 23, 1997, she again did not attend and gave no notice of her intention not to attend, nor a reason for not doing so. As a result, the Insurer incurred $1,000 in cancellation fees from the doctors.

In the circumstances, I am making a special award in the amount of $250 inclusive of interest.

Expenses:

In the event that the parties are unable to agree as to the disposition of expenses, I may be spoken to.

Order:

1. Mrs. Garcia is entitled to income replacement benefits from January 10 to July 29, 1997.

2. Mrs. Garcia is entitled to interest on the amounts owing at the applicable rate from July 29, 1997 to the present.

3. Mrs. Garcia is entitled to a special award of $250 inclusive of interest.

October 13, 1998

Guy Jones Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 635/94, 781/94 and 463/96. O.R. 776/93 was extensively modified by O.R. 781/94; accordingly, where necessary, "1994 Schedule "refers to the original O.R. 776/93, and "1995 Schedule "refers to O.R. 776/93 as amended.
2. 2Effective July 1, 1998, the Ontario Insurance Commission was changed to the Financial Services Commission of Ontario, pursuant to the Financial Services Commission of Ontario Act, S.O. 1997, c.28.