Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 1998 ONFSCDRS 61

Appeal P97-00069

OFFICE OF THE DIRECTOR OF ARBITRATIONS

GAN CANADA INSURANCE COMPANY

Appellant

and

MARK McCONACHIE

Respondent

Before:

Susan Naylor, Director's Delegate

Counsel:

Larry J. Kielbowich (for GAN Canada)

John D. Johnson (for Mark McConachie)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The arbitrator's order dated December 18, 1997 is confirmed and the appeal is dismissed.
Mark McConachie is entitled to his appeal expenses.

October 28, 1998

Susan Naylor

Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This is an appeal of a special award ordered under section 282(10) of the Insurance Act, R.S.O. 1990, c. 1-8, as amended ("the Act"). The section states as follows:

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.

Mr. McConachie was involved in an automobile accident on August 29, 1993. At the time, he was 28 years old and unemployed. He subsequently developed low back pain with right-sided sciatica. Other problems have resolved. He claimed weekly benefits and other benefits under the Statutory Accident Benefits Schedule - Accidents before January 1, 1994, R.R.O. 1990, Reg. 672.

GAN Canada Insurance Company ("GAN Canada") never paid Mr. McConachie any weekly benefits. It took the position that his injuries did not interrupt his essential tasks and that his ongoing back problems related to a pre-existing condition. The arbitrator disagreed. In an arbitration decision dated December 18, 1997, he held that not only was Mr. McConachie entitled to weekly benefits for the full three years following the accident, but GAN Canada's denial of benefits was unreasonable and warranted a sizeable special award. He ordered GAN Canada to pay a lump sum of $10,000 inclusive of interest to the date of the order, and post-judgement interest at 2% per month, non-compounded, thereafter. The lump sum represents roughly one-third of the value of Mr. McConachie's outstanding benefits, without factoring in interest.

GAN Canada appeals the special award. It argues that the evidence does not support a finding that its denial of benefits was unreasonable. It submits that its refusal to pay was based on expert medical opinion on which it was entitled to rely and that there was a legitimate difference in opinion between the doctors on the case. I agree with GAN Canada that, if this were the case, a special award would not be warranted. However, for reasons given below I do not accept that this reflects the complete picture.

II. FINDINGS AND ANALYSIS

A special award is predicated on the denial of benefits being unreasonable. As prior cases have held, an insurer's actions may be unreasonable, even though they are not egregious or in bad faith.¹ However, arbitrators should be careful not to judge insurer actions with the benefit of hindsight nor to scrutinise the actions of company representatives as if under a microscope. As one arbitrator puts it: "the standard is not one of perfection."² In my view, however, the arbitrator did not make this mistake.

In Maas and State Farm Automobile Insurance Company, (OIC P96-00080, December 11, 1997), Director's Delegate Draper commented on the nature of a special award. He noted that while it is not strictly discretionary - the provision states that the arbitrator "shall" order a special award if he or she finds that the insurer unreasonably withheld or delayed the payment of benefits - a finding of unreasonableness is highly dependent on the arbitrator's view of the evidence. Therefore, on appeal, considerable leeway will be given to the arbitrator's findings.

Mr. McConachie's case was complicated by a history of prior back problems, starting in 1988. In 1991, he strained his back in a work accident and was off work for a period of time. The evidence shows that despite this history, Mr. McConachie led an active life, which included working on renovations to his mother's home, weight lifting and various outdoor recreational activities.

The medical records show that Mr. McConachie complained of chronic back pain and right leg symptoms in the three years following the accident, which limited his activities. His family doctor, Dr. Kruger, reported that Mr. McConachie was independent in self-care but had problems with more demanding tasks. GAN Canada focused on the former and appeared to disregard the latter, even though the test for benefit is broader than self-care activities.

In October 1994, GAN Canada's own orthopaedic expert, Dr. Paitich, attributed Mr. McConachie's continuing symptoms to a right-sided traumatic disc herniation at L4-5 or L5- S1 suffered in the accident. He recommended further tests to confirm his diagnosis. Later investigations showed he was right about Mr. McConachie's symptoms being organically based, but wrong about the diagnosis. Dr. Paitich implicitly accepted Mr. McConachie's complaints about his functional limitations.

Like Dr. Paitich, other doctors also suspected an organic problem. Dr. Massiah, the orthopaedic specialist Mr. McConachie started to see in October 1994, also suspected a disc protusion with nerve root entrapment, but a CT scan and lumbar myelogram did not reveal any abnormalities. Despite the tests results, Dr. Massiah reported on February 10, 1995 that Mr. McConachie was "severely symptomatic..[and] totally disabled for all but very sedentary activity". He confirmed that these symptoms were not related to Mr. McConachie's prior work-related accident.

Mr. McConachie was put on the waiting list for an MRI to see whether this would reveal anything further. In May 1996, he was sent to see Dr. Ruvien Lexier, an orthopaedic specialist chosen by GAN Canada. With GAN Canada's co-operation, Dr. Lexier was able to arrange an MRI within a relatively short period of time. He felt the MRI was necessary to rule out a disc prolapse being responsible for Mr. McConachie's symptoms.

Dr. Lexier conducted the MRI on August 9, 1996. The results showed the presence of bilateral foraminal stenosis at L5-S1 caused by a combination of a disc bulge and Grade 1 retrolisthesis of L5 over S1. These findings were significant because they confirmed the existence of a physical basis for Mr. McConachie's continuing complaints, although a different diagnosis than previously suspected.

Dr. Lexier commented on these results in a brief report dated August 28, 1996. He concluded that the findings were more in keeping with a congenital or developmental condition and so were not likely causally related to the automobile accident. He also concluded that Mr. McConachie was fit to resume his pre-accident tasks. His view was not shared by Mr. McConachie's doctors. Dr. Stewart, Mr. McConachie's neurologist, Dr. Massiah, the orthopaedic specialist and Dr. Kruger, his family doctor, all issued reports concluding that the accident had likely aggravated Mr. McConachie's pre-existing back condition and accounted for his continuing symptoms at least in part. Dr. Stewart explained that the accident could have enhanced the forward slippage of S1 under L5, thereby impinging on the nerve root. He described Mr. McConachie's post traumatic symptoms as genuine.

The arbitrator characterised GAN Canada's refusal to pay benefits before it had the benefit of the MRI results as "not entirely unreasonable". He accepted that up until then, Mr. McConachie's symptoms were largely subjective - "it was a question of believing Mr. McConachie or not" - and had been linked to pre-existing problems, non-organic factors and problems of motivation. There was also no expert opinion linking Mr. McConachie's continuing back problems to the accident. However, the arbitrator felt there was no excuse to withhold benefits after GAN Canada had received the MRI results and Dr. Stewart's October 17, 1996 report. He concluded that GAN Canada shuold have given fair and full consideration to Mr. McConachie's claim in light of the new information but maintained a stubborn and inflexible position, rendering its continued refusal to pay benefits deserving of a special award.

GAN Canada argues that the arbitrator found its actions to be reasonable up until late-1996. After that time, it reasonably relied on Dr. Lexier's opinion in the face of competing medical views, and should not be faulted for doing so.

The arbitrator's reasons indicate that he did not focus solely on the period after the MRI had taken place. It was GAN Canada's continued refusal to pay benefits in the face of the cumulating evidence that led him to view its denial of benefits as unreasonable.

GAN Canada did not pay any weekly benefits to Mr. McConachie. This was despite the fact that his claim was supported by Dr. Kruger, Dr. Massiah and by Dr. Paitich, GAN Canada's own expert. Mr. McConachie was not paid while waiting for any of the tests the doctors thought necessary to diagnose the problem, despite their concerns (which turned out to be valid) about a possible accident-related disc problem. The evidence also indicates that his claim was held up by misguided requests for information of questionable or limited relevance.

It was the cumulative effect of GAN Canada's actions, culminating in its treatment of the new information it received in late 1996, that confirmed the arbitrator's impression of intransigence. This view was reinforced by GAN Canada's failure to obtain amplification of its expert's brief opinion in the face of the dissenting views of Mr. McConachie's doctors. A number of cases have emphasised an insurer's continuing duty to re-evaluate a decision to deny benefits as new information comes to its attention.³ There was plenty of evidence to support the arbitrator's finding that this did not happen here, and GAN Canada must pay the consequences.

GAN Canada argues that the arbitrator should have taken the timing of the arbitration into account. It only received key reports shortly before the hearing was scheduled to start and it was reasonable in the circumstances to submit the dispute to adjudication.

The facts simply do not support GAN Canada’s submissions. The reports of Dr. Stewart and Dr. Kruger were available in October, 1996. The hearing was originally scheduled to start at the end of that month but was postponed until February, 11, 12 and 13, 1997. This was to allow time to have Mr. McConachie re-examined by Dr. Massiah. Dr. Massiah’s report of January 21, 1997 was consistent with Dr. Stewart’s opinion, which GAN Canada had in its possession for more than three months. All the medical evidence presented at the hearing was in report-form. In light of the facts, it cannot be argued that GAN Canada was justified in proceeding to a hearing.

GAN Canada also argues that the arbitrator made adverse credibility findings against Mr. McConachie and should have taken this into account in determining whether a special award was deserved. In assessing the reasonableness of the insurer's conduct, the behaviour of both parties may be relevant. However, I agree with Mr. McConachie that the arbitrator accepted most of his evidence and that the case turned on the medical evidence. On these facts, GAN Canada cannot rely on credibility concerns to justify its complete denial of benefits.

I find no basis to interfere with the arbitrator's finding that GAN Canada unreasonably withheld Mr. McConachie's weekly benefits. GAN Canada did not appeal the amount of the award and I received no submissions on that issue. The appeal is therefore dismissed.

III. EXPENSES

Mr. McConachie was successful in resisting GAN Canada's appeal and is entitled to his appeal expenses.