Neutral Citation: 1998 ONICDRG 74, 1998 ONFSCDRS 74

FSCO A96-001468

BETWEEN:

RUPERT MIKE

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION

The Applicant, Rupert Mike, was injured in a motor vehicle accident on May 15, 1995. He applied for and received weekly income replacement benefits of $22.68, after deduction of collateral benefits, from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.¹ State Farm terminated these benefits on June 30, 1995. The parties were unable to resolve their disputes through mediation, and Mr. Mike 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:

Is Mr. Mike entitled to weekly income replacement benefits of $207.48 from July 1, 1995 and $423.48 from October 14, 1995 and ongoing?
Is Mr. Mike entitled to chiropractic expenses of $813?
Were collateral benefits in the form of long term disability payments from London Life "available" to Mr. Mike within the meaning of subsection 75(1)2 of the Schedule?
Did the Insurer fail to comply with the notice procedures regarding termination under section 64 of the Schedule, and, if so, what are the consequences?
If the Insurer failed to comply with section 64 of the Schedule, is Mr. Mike entitled to a Special Award?

Mr. Mike also claims interest on any amounts owing and his expenses incurred in the hearing.

Mr. Mike is entitled to weekly income replacement benefits from July 1, 1995, with interest, as set out in the Order.
Mr. Mike is not entitled to chiropractic expenses of $813.
Collateral benefits were not available to Mr. Mike within the meaning of subsection 75(1)2 of the Schedule after September 25, 1995, and the Insurer is not entitled to deduct their value from weekly income benefits owing.
The Insurer failed to comply with the notice procedures regarding termination under section 64 of the Schedule and Mr. Mike is entitled to a special award as a result.
Mr. Mike is entitled to a lump sum special award of $5,000 inclusive of interest pursuant to section 282(10) of the Insurance Act.
Mr. Mike is entitled to his expenses incurred in respect of the hearing.

The hearing was held at the offices of the Financial Services Commission of Ontario in North York, Ontario, on November 3, 4 and 5, 1997 and February 9, April 18 and May 1, 1998 before me, Susan Sapin, Arbitrator. Those present and exhibits filed are contained in the Appendix to this decision.

Background

Mr. Mike was stopped at an intersection on his way to work, leaning forward to tune his radio, when he was rear-ended by another vehicle travelling at approximately 30 to 40 km/h. His seat slid forward, then all the way back. The back of his seat broke, leaving him extended backward at a 45 degree angle. The rear fender of his 1982 Toyota Corolla collapsed over the rear wheels and the frame buckled over the doors on both sides. The car was written off. Mr. Mike was taken to hospital by ambulance. No x-rays were taken. He was prescribed painkillers and released.

As he felt no immediate pain, Mr. Mike returned to work the next day but left after three hours due to pain in his neck, shoulders and lower back. He went to see his family doctor of 12 years, Dr. S.W. Teow, who sent him to Dr. Mezei, a chiropractor. Mr. Mike began chiropractic treatment and physiotherapy the next day. He stated that he attended five days a week for the next five months.

Mr. Mike had worked at Starkey Labs, a manufacturer of hearing aids, for just over 10 years prior to his motor vehicle accident, working his way up from buffer to hearing aid technician to quality control supervisor, a position he had held since 1988.

He returned to modified duties four hours per day on August 8, 1995 and attended therapy in the afternoons. Lost wages were paid through short-term sickness benefits from Starkey's private insurance carrier, London Life, until they expired on September 25, 1995. Mr. Mike attempted to increase his hours of work to six hours per day but testified that he was unable to do so due to pain in his lower back.

His manager, Vince Maye, advised him on October 13, 1995 that unless he obtained a doctor's certificate stating that he was able to work a full eight-hour day, he would not be allowed to return to work. Starkey Labs issued a Record of Employment dated October 18, 1995 for employment insurance purposes, which stated that Mr. Mike had applied for long-term disability (LTD) benefits through its carrier, London Life, and that Starkey's file was "pending awaiting satisfactory medical evidence of total disability." The employer informed London Life that modified or part time work did not exist.³ This effectively placed Mr. Mike on an unpaid leave of absence from Starkey Labs. As he never returned to work after October 13, 1995 and did not receive LTD benefits, Starkey terminated his employment in February 1996.

Entitlement to Income Replacement Benefits:

1. The Test

Mr. Mike is entitled to income replacement benefits pursuant to paragraph 7(1)1 of the Schedule if he establishes, on a balance of probabilities, that he was employed at the time of the motor vehicle accident and that the accident caused an impairment which renders him substantially unable to perform the essential tasks of that employment within two years of the accident.

He maintained that he was unable to continue working due to neck, shoulder and low back injuries sustained in the accident. Mr. Mike seriously injured his knee playing soccer in 1993 and underwent surgery to repair it. He maintained that he reinjured his knee in the motor vehicle accident and that this aggravated his low back pain.

The Insurer argued that any disability suffered by Mr. Mike is due to his knee injury, which is not related to the accident, and that by November 1995, he had recovered from neck and back injuries sustained in the accident.

2. Essential Tasks

Mr. Mike was responsible for supervision and quality control for eight hearing aid technicians, who would each manufacture 50 to 60 hearing aids per day if salaried and 80 to 90 per day if working piece rate. Mr. Mike would examine each batch of ten while seated at his U-shaped work station and would fix most defects himself by trimming, grinding or buffing the hearing aids, using equipment at his station. He would then walk over to a computer where he would stand to enter the hearing aid serial numbers into the computerized inventory. The company operated on a just in time manufacturing system, so if production was slow due to a backlog, Mr. Mike would manufacture one or two batches of hearing aids himself. He stated that his employer had been very good about accommodating him when he returned to work after his 1993 knee injury.

Vida Sernas, an occupational therapist, conducted a job analysis on May 16, 1997 at Starkey Labs and testified at the hearing. Her report verified that the essential tasks of Mr. Mike's job were sitting 80 percent of the time, forward reaching, cervical bending and fingering. Ms. Sernas met with Vince Maye, the production supervisor, but never met with or spoke to Mr. Mike. She stated that Mr. Maye told her that employees were allowed to take "voluntary" five-minute stretch breaks in addition to the 30-minute lunch period but that these breaks were not contained in any written policy. Mr. Mike stated that it was not possible or realistic for either him or the technicians to take frequent stretch breaks.

Ms. Sernas concluded in her report that Mr. Mike's job was supervisory in nature and did not require sustained positioning or a quota of production, and that he could stand and change position at will. She did not observe any employees taking stretch breaks in the 60 minutes she spent at Starkey. She was not aware at the time that technicians worked on a piece rate or that the supervisor was required to inspect each hearing aid. She admitted that if that were the case, Mr. Mike would be sitting in a sustained position for a prolonged period of time and would have to know how to change his position to alleviate symptoms, and would perhaps have less time to stand and stretch than the employer implied.

In contrast to Ms. Sernas' brief visit, Mr. Mike's testimony about the realities of his workplace is based on 11 years of experience at Starkey Labs. Further, as Ms. Sernas spoke only with Mr. Maye, who Mr. Mike testified was rarely present on the floor, I find Mr. Mike's testimony about his job duties to be more accurate than the evidence of Ms. Sernas. I find that his job entailed prolonged sitting in a sustained position for most of the work day and that he did his work with infrequent breaks. As no part-time or modified work was available I find that an essential task of his employment was that he work an eight-hour day.

3. Disability

I find that Mr. Mike was unable to complete the essential tasks of his employment from the date of the accident until the date of the hearing and ongoing, for different reasons at different times. Because I find that the evidence shows that Mr. Mike's knee problems played a greater role in his disability after his November 1995 knee surgery, I have considered the evidence relating to disability in two parts, before and after the surgery.

a) Disability prior to the November 23, 1995 knee surgery

Mr. Mike's evidence

Mr. Mike testified that he could not do his job full time due to low back pain from the time he returned to work on August 8, 1995 until he was told to leave his job on October 13, 1995. On November 23, 1995, he underwent a major surgical reconstruction of his left knee to correct instability and alleviate pain in the medial compartment.⁴ At the time of the hearing, he stated that he continued to be unable do his old job at Starkey Labs primarily due to his low back pain, which prevented him from being able to do the continuous sitting required. He stated that he could do his job with a sore knee, as sitting did not hurt his knee because it did not require him to put any weight on it.

I find no reason to disbelieve Mr. Mike that it was his back pain and not his knee that prevented him from working full time prior to November 23, 1995. He had returned to work soon after his 1993 knee surgery and had worked full time for at least a year prior to the accident. He quickly returned to work part time after the accident. On September 25, 1995, he reported to London Life that he tried to increase his hours of work but could not due to pain in his lower back. This is corroborated by the employer's payroll change notice which states that Mr. Mike was unable to work full time due to a low back injury. His employer made it clear to him that there was no job for him unless he could work full time, and informed both Mr. Mike and London Life that there was no modified or part-time work available. Mr. Mike had a family to feed, and he testified that he was too proud to go on welfare. He had been with Starkey 11 years in a well-paid job.

Other evidence supports Mr. Mike's view that his accident-related low back injuries were the major reason for his inability to work. On November 7, 1995 Dr. Teow reported to London Life that Mr. Mike was currently disabled from his work due to myofascial injuries to his neck and back. The 1993 knee injury was identified only as an additional condition or complication which contributed to his absence from work.

The Insurer's evidence

I find Mr. Mike's evidence that he was disabled was not seriously challenged by the Insurer's medical evidence.

On November 7, 1995, Mr. Mike attended an Insurer's Medical Examination (IME) conducted by Dr. Fred Langer, an orthopaedic surgeon, who spent about an hour with him. He reported that Mr. Mike complained of neck and low back pain that was aggravated by staying in one position for a long time, standing, sitting or bending, and a sore left knee that had also ached prior to the accident. As Dr. Langer found no significant objective findings on examination with respect to the neck and back, he concluded that these soft-tissue injuries had healed. He stated that Mr. Mike could be working if his knees were normal and attributed his disability to the degenerative process in the left knee. Dr. Langer later contradicted this statement in his testimony at the hearing when he stated that there was no reason why Mr. Mike could not do his job with a sore knee because he would be sitting down and could rest his knee if it were sore. Because of this contradiction and as there is no evidence that, at the time of his November 7 report, Dr. Langer appreciated the continuous sitting required in Mr. Mike's job, I do not place much weight on his report. It is clear that Dr. Langer did not consider Mr. Mike's complaints of low back pain to be credible and that he simply dismissed them. The report provides no alternate explanation for Mr. Mike's low back pain.

Neither does the report of Dr. Rocco Guerriero, the chiropractor who performed a Designated Assessment Centre assessment of his treatment needs on November 14, 1995. His report indicates that Mr. Mike complained of left knee pain, and neck and constant low back pain that was aggravated by sitting, standing and walking and that prevented him from increasing his hours of work. Dr. Guerriero was puzzled that Mr. Mike was adamant in rating his back pain as "10 out of 10" because he found that Mr. Mike presented himself in a straightforward and cooperative manner and did not try to exaggerate or embellish his inabilities, and because his examination did not reveal any significant residual impairment that could explain Mr. Mike's back pain, except for "...mild muscular hypertonicity that may account for some degree of pain in the lower back." He concluded the soft-tissue injuries were resolving. Although it is clear he did not disbelieve Mr. Mike's back pain, he offered no explanation for it and, in fact, recommended additional chiropractic treatment for it. He offered no opinion about Mr. Mike's ability to work. I find the report unhelpful in determining whether Mr. Mike was unable to work.

For these reasons, I find that, on a balance of probabilities, all of the evidence up to November 23, 1995 supports Mr. Mike's testimony that he was disabled from working up to that point due to low back pain.

b) Disability after the knee surgery of November 23, 1995

At the hearing, Mr. Mike maintained that he continued to be disabled from his work due to chronic pain in his low back, depression and anxiety. On November 23, 1995, Mr. Mike underwent the major surgical reconstruction of his left knee. The knee required further surgery to remove staples, and for debridement and lavage, on July 17, 1997 and again two weeks later, after it became infected. On the basis of the medical evidence discussed below, I find that Mr. Mike was continuously disabled from his work from November 23, 1995 up to the date of the hearing, due to low back pain caused partly by unresolved low back injuries and partly by aggravation by the knee condition. I find that Mr. Mike was suffering from a gradually deteriorating knee prior to the accident and that it caused him sufficient discomfort and functional impairment to prompt him to seek corrective surgery. However, although I find that the surgery and its sequelae were not caused by the accident, for the reasons explained below, I find that, even after November 23, the accident was a significant contributing factor to his disability.

4. Causation

The Insurer maintained that Mr. Mike had recovered from his low back injury by the time of his knee surgery in November 1995 and that any disability prior to or after that date resulted from the pre-existing knee injury. It further argued that the post-accident knee problems were not related to the accident.

There is no question that the original 1993 soccer injury and subsequent surgery were significant. As Dr. Langer testified, the soccer injury was about as serious an injury to the knee as one could have. Mr. Mike, an athletic man who enjoyed sports, could no longer play soccer and was left with atrophied quadriceps muscles in the left leg in spite of his constant efforts to prevent this. He accepted that his knee could never be 100 percent again.

On September 8, 1995, Mr. Mike consulted Dr. Hugh Cameron, an orthopaedic surgeon, who noted the unsatisfactory state of his knee and referred him to Dr. John Cameron, a specialist in reconstruction, for a high tibial osteotomy to correct the outward stretching of the knee. Mr. Mike did not mention to either doctor that he had been in a motor vehicle accident. An x-ray taken that day revealed a surgical defect from the reconstruction done after the original soccer injury in 1993 as well as degenerative arthritis. Dr. John Cameron saw Mr. Mike the same day and noted that Mr. Mike was wearing out the medial compartment of his knee. He performed the November 23, 1995 surgery, sawing off the top of the tibia and tightening the anterior and lateral ligaments to straighten and stabilize the leg. His post-operative report stated that the reason for the surgery was that Mr. Mike was "gradually drifting into varus⁵ with medial compartment pain."

Mr. Mike testified that he thought it was the accident that aggravated his knee and led to his November 1995 surgery, because he felt he had "jerked" or strained it in the accident. He did not maintain that he had hit his knee in the accident. He argued that his low back pain was aggra-vated by the worsened knee condition.

I find that Mr. Mike sincerely came to believe that he must have injured his knee in the accident. However, I find that the evidence does not support this belief.

In a telephone conversation with an adjuster on May 24, 1995, nine days after the accident, ⁶Mr. Mike stated that he felt no pain radiating to his legs and had no trouble walking. He told the adjuster of his previous soccer injury to his left knee. The adjuster specifically asked: "Was it at all injured in this accident?"to which Mr. Mike replied: "No, no, no, no, this was way before...it didn't bother me in the accident because I didn't hit my leg or anything."⁷ His application for accident benefits signed July 4, 1995, seven weeks after the accident, lists his injuries as neck, upper and lower back but not the knee. Mr. Mike's explanation for the discrepancy between this evidence and later comments he made to his doctors that he injured his knee in the accident, is that he believed that reinjury to his knee must have been a "delayed reaction." Although I find that Mr. Mike sincerely believed this to be true and that he communicated this belief to his doctors, I find that there is no independent documentary evidence to support this belief.

Counsel for Mr. Mike argued that the June 1, 1995 Health Practitioner's Certificate signed by Dr. Mezei indicates that Dr. Mezei reported a strained knee as one of the accident-related injuries. However, the "Examination Findings" and "Diagnosis" narrative sections of this document describe only lumbo-sacral and cervical joint strain. In the "Injury Codes" section the numerical codes for these injuries are circled and listed first as being most severe. The codes for "Knee" and "Strain..." are also circled and listed last, as least severe. Dr. Mezei did not testify. While this document might otherwise indicate that the knee was injured in the accident, in light of other evidence to the contrary, I cannot accept this cryptic document as sufficient proof that it was.

In a letter to State Farm dated October 18, 1995, Dr. John Cameron reported that he was unaware that Mr. Mike had been in a car accident until Mr. Mike telephoned him on September 19 to tell him that he had "fractured his leg" in the accident. In spite of this new information, Dr. Cameron stated: "I would presume that any subsequent injury or trauma to this knee would result in increasing discomfort and perhaps some atrophy of his quadriceps but the majority of his pathology would nevertheless be related to the 1993 soccer injury."⁸

Mr. Mike also told Dr. Langer he did not hit his knee when the latter examined him on November 7, 1995, although Dr. Langer reported that Mr. Mike did say that he felt himself "jerk about." I accept Dr. Langer's opinion at the hearing that any trauma or injury to Mr. Mike's already vulnerable knee in the accident would have been immediately apparent by way of swelling or discomfort.

Dr. Krystyna Prutis, a physiatrist who examined Mr. Mike on December 8, 1995, two weeks after his surgery, reported that Mr. Mike sustained two knee injuries which culminated in ligamentous injury, the first being the soccer injury and the second the motor vehicle accident. She stated that "He remembers distinctively that his knee twisted during the impact." She noted that his main complaint during the visit was pain and swelling of the left knee, not surprising two weeks post-surgery, and that he was "a healthy gentleman otherwise." Mr. Mike testified that he did not re-member telling Dr. Prutis that he twisted his knee in the motor vehicle accident, and explained that she probably concluded he was otherwise healthy because, as he was sent to see her after his surgery specifically for his knee, he did not tell her about his back pain. Whether or not Dr. Prutis accurately recorded what he told her, her conclusion that Mr. Mike injured his knee in the car accident is clearly based on what she thought he said. As her report discloses no other objective basis for her conclusion, I place no weight on Dr. Prutis' report as it relates to causation.

Dr. Teow's February 15, 1996 medical note to London Life diagnosed Mr. Mike's disability at that time as due to his knee, back and chronic pain, in that order.

Dr. Morris Charendoff, an orthopaedic surgeon, reported on July 30, 1996 that "...the car seat broke and his knee was 'jerked.' He apparently subsequently required surgery." The report discloses no basis for Dr. Charendoff's apparent assumption that the car accident and surgery were connected. Dr. Charendoff reported that Mr. Mike's gait was satisfactory, that the range of motion of his lumbar spine was 25 per cent of normal with pain in the left side, and that he had sustained multiple post-traumatic soft tissue injuries which were not resolving.

Dr. Nestor Fernandez, a general practitioner, took over Mr. Mike's care in April, 1996. His October 4, 1996 report stated that Mr. Mike believed that the motor vehicle accident had exacerbated his previously existing knee condition but stated that "...there is, however, no evidence...to enable me to make a decision in this regard." Mr. Mike told him that his continuing neck and low back pain were solely the result of the motor vehicle accident. Based on objective findings and patient history, Dr. Fernandez concluded that Mr. Mike suffered from persistent, unresolved soft-tissue injuries to the low back and neck as a result of the motor vehicle accident. He found that the left knee condition, compounded by the low back pain was "most disabling," as was post-traumatic anxiety, insomnia, stress and depression. He was concerned about the development of a chronic pain disorder or syndrome. His clinical note for July 22, 1996, states:

"...patient anxious, depressed secondary to instability of the left knee causing strain of the low back."

Dr. Andrew Gwardjan, a specialist in physical medicine and rehabilitation, reported on June 27, 1996: "The patient presents with mechanical low back pain exacerbated by abnormal gait bio-mechanics due to left knee problem resulting in asymmetrical gait pattern with shortened stance phase on the affected side."

From Mr. Mike's testimony and the evidence of his own doctors, I conclude that there is no evidence that he suffered injury or trauma to his knee in the accident. As I have found that he could work with a sore knee, any disability due to the knee would be the result of the pre-existing condition, and the November surgery itself, or the effect of either or both on Mr. Mike's lower back. As I heard no evidence from Mr. Mike about how long it took for him to recover from his knee surgery or when he might have expected to be able to work, I accept Dr. Langer's testimony that a minimum of 3 to 4 months would be required. From Dr. Teow's February 1996 medical certificate, I conclude that at that time Mr. Mike was still primarily disabled due to his knee because he was recuperating from surgery. I find therefore that he is not entitled to benefits for the duration of his recovery from surgery, which I find to be from November 23, 1995 to March 23, 1996.

By April 1996, however, it appears from the clinical notes and records and report of Dr. Fernan-dez that Mr. Mike was suffering as much from chronic unresolved low back and neck pain as from his knee pain and that he was disabled by a combination of these injuries compounded by psychological factors.

I believe Mr. Mike that his back pain is genuine and accept the opinion of Dr. Fernandez and Dr. Gwardjan that it is caused partly by the knee condition and partly by unresolved low back injuries due to the motor vehicle accident.

Dr. Langer also agreed that Mr. Mike's knee would cause him mechanical low back pain, although he stated that he would not have expected it to be worsening, as Mr. Mike claimed. I find that this lends weight to the opinions of Mr. Mike's doctors that his accident-related back injuries never healed in the first place and were now compounded by the knee condition.

Dr. Langer also testified about the nature and progress of low back injuries in general. It was his opinion that low back injuries in rear-end collisions are rare because the pelvis is normally restrained by the seatbelt during the impact. Counsel for Mr. Mike argued that Mr. Mike's accident was more severe than a typical rear-end collision due to the extent of the damage to the vehicle and the relatively high speed of the vehicle that hit Mr. Mike. Also, the seat broke, leaving Mr. Mike leaning backwards at a 45 degree angle, and Mr. Mike had been leaning forward at the time. Counsel argued that due to these factors, Mr. Mike likely suffered more serious neck and low back injuries than one might otherwise expect from a rear-end collision. Dr. Langer was not aware of these accident details and agreed his opinion might be different had he known about them. Although counsel for Mr. Mike presented no independent medical evidence to support his theory, I find that it is a reasonable and plausible explanation for Mr. Mike's consistent complaints of low back pain since the accident.

I further find that Mr. Mike's depression and other psychological difficulties resulted in part from chronic low back pain and the loss of his job, both of which were directly caused by the accident. I find therefore that the accident contributed significantly to his disability as a whole.

5. Surveillance

I find nothing in the Insurer's surveillance videotape that would persuade me to change any of my conclusions.

Entitlement to chiropractic expenses:

Mr. Mike claimed chiropractic expenses of $813. Other than a reporting letter from Dr. Mezei to State Farm dated February 5, 1996 that included a request for payment for various types of treatment for the neck, low back and knee, there was no other evidence presented respecting the amount claimed. The letter did not specify the amount to be paid. No evidence of when the expense was incurred was presented. I find therefore that there is insufficient information upon which to make a determination that Mr. Mike is entitled to this expense.

Availability of collateral benefits:

State Farm argued that LTD benefits were "available" to Mr. Mike from London Life and that it should be allowed to deduct them from any weekly benefits payable pursuant to Section 75 of the Schedule. This section provides that an insurer may deduct from weekly benefits that it is required to pay, any payments for loss of income available to the insured person as a result of the accident under any income continuation benefit plan.

A March 22, 1996 letter to Mr. Mike from London Life stated that the medical information requested from and provided by Dr. Teow did not support total disability as defined by the London Life LTD policy.⁹ As Mr. Mike did not provide his employer with medical evidence either declaring him fit to return to full time work or supporting entitlement to LTD benefits, Starkey Labs terminated his employment on March 13, 1996.¹⁰

State Farm bears the onus of adducing clear evidence that LTD benefits were available to Mr. Mike.¹¹ I find that it has not done so. The evidence before me is clear that Mr. Mike was refused LTD benefits because, in the opinion of London Life, he did not qualify for them on the medical evidence presented. I find therefore that they were not available to him and therefore State Farm is not entitled to deduct their value from weekly income benefits payable.

Did the Insurer fail to comply with termination procedures under section 64?

Counsel for Mr. Mike argued that the Insurer failed to comply with the termination procedures mandated by section 64 of the Schedule, and that as a result, Mr. Mike was deprived of the opportunity to request a disability DAC assessment.

The Insurer argued that Mr. Mike chose not to exercise his right to request a disability DAC assessment and therefore it was relieved of the obligation to arrange one.

Section 64 provides that an insurer shall not stop payment of weekly income replacement benefits on the ground that the insured person no longer suffers from a disability as a result of the accident unless certain requirements are met. The insurer must give notice that it intends to stop paying benefits, specifying the reason, and must specify in the notice the date it will stop payments, which cannot be less than 14 days after the person receives the notice. The notice must also set out the procedure for arranging a DAC assessment. The insurer may then stop benefits only if it does not receive written notice from the insured person that he or she requests a DAC assessment. Section 64 is mandatory.

I find that State Farm did not comply with section 64, for the following reasons.

Ivan Ing, State Farm's adjuster, sent Mr. Mike a letter dated June 20, 1995, stating that the Insurer had received the Health Practitioner's Certificate (HPC) and Employer's Confirmation of Income form, but not Mr. Mike's completed application form. Mr. Ing enclosed a new application form and asked Mr. Mike to fill it out. This Mr. Mike did, dating it July 4, 1995.¹²Meanwhile, Mr. Ing sent Mr. Mike an Explanation of Assessment form dated June 29, 1995. A checkmark in the appropriate box indicated that Mr. Mike was eligible for income replacement benefits. However, in the box entitled "Notes on calculating your income replacement benefit....", a handwritten note by Mr. Ing states: "As per your OCF 3,¹³ your doctor states that you can return to work as of 7/1/95. Thus IRB ceases as of 6/30/95. If you dispute this, pls. notify us in writing within 14 days of your receipt of this letter." Mr. Mike also received a check for $90.72, or three weeks' worth of IRBs, after deduction of his London Life STS benefits. I find that this form alone clearly violates section 64(3), which states that the insurer cannot stop benefits earlier than 14 days after the insured person receives notice. It also does not provide the details about the DAC process required by section 64.

Mr. Ing testified that normally this form would be mailed to the insured person together with a copy of a standard form termination letter. He confirmed that there was no copy either of the form or of a termination letter to Mr. Mike in the State Farm file. He did not recall whether in fact either document was ever sent. I find that Mr. Mike only received the assessment form itself, which I find to be confusing and contradictory on its face, and a cheque. There is no evidence that Mr. Mike received any information about his right to request a disability DAC assessment. On this basis alone I would find that the termination of benefits was improper and that Mr. Mike was deprived of the opportunity to request a DAC assessment.

Further actions by State Farm did nothing to remedy this situation or to persuade me that it complied substantially with the termination procedures set out in section 64. Mr. Ing testified that he called Mr. Mike on August 4, 1995, because he wanted an update. He stated that his log notes indicated that Mr. Mike was "not too talkative," "frustrated," and "feels we don't care about him." He told Mr. Mike that he had sent him a letter and that if he disputed it they could send him to a DAC. He did not recall if he explained to Mr. Mike what a DAC assessment was. He stated that Mr. Mike said he'd leave things as they were because he couldn't be bothered with the claim for the little bit of money he was getting from the claim,¹⁴ and that he would try to return to work part time but doubted he could do so full time. Mr. Ing said he told Mr. Mike to respond to the letter within 14 days of receipt of the cut-off letter and that he could not reinstate him because he did not respond within 30 days. As both these deadlines had clearly passed by the time of the telephone call, I find that Mr. Ing's conversation with Mr. Mike did nothing to remedy the Insurer's non-compliance with section 64 or to clarify the situation from Mr. Mike's point of view.

In addition, when asked on cross-examination if he explained to Mr. Mike that he could still be entitled to benefits if he returned to work part time, Mr. Ing stated that he did not believe he did so. There is no evidence that anyone at State Farm ever took the time to explain to Mr. Mike his entitlements or rights. As section 59 of the Schedule clearly requires that the Insurer do so, I find that the Insurer bears a positive obligation to establish that it did meet these requirements. As it has presented no evidence to this effect, I find that it failed in its statutory obligation to Mr. Mike.

I find that Mr. Mike's comment to Mr. Ing that the Insurer did not care about him was an accurate assessment of the situation. I find that his comment that there was no point in pursuing his benefits was made in frustration and resignation and in the assumption that he could expect nothing more from State Farm, and was made without any informed understanding of his rights or the consequences of his statement. I find that under the circumstances, State Farm cannot rely on Mr. Mike's statement to excuse themselves from the mandatory termination procedures set out in section 64, or from their failure to properly notify him of his right to a disability DAC assessment as set out in the Schedule. I find that by not complying with these procedures, and by not fully explaining his entitlements to him, or their interaction with his London Life benefits, State Farm deprived Mr. Mike of his right to request either a DAC assessment or part-time benefits.

What are the consequences of State Farm's failure to comply with section 64?

Counsel for Mr. Mike argued that State Farm is required to pay weekly benefits to Mr. Mike until the DAC assessment process is completed upon receipt of a report, regardless of whether or not I find that Mr. Mike continued to be disabled. He relied on several cases in support of this argument.¹⁵ Having reviewed these cases I do not find that they support this proposition. I prefer instead Director Delegate David Draper's reasoning in Henry and Allstate Insurance Company of Canada, (P96-00064, July 23, 1997), which deals directly with this issue:

"...section 64 deals with process, not entitlement. It protects the flow of benefits by controlling the insurer's right to cancel them. Benefits must be paid pending the DAC assessment even though the insurer claims the person is no longer entitled. This obligation to pay, however, does not create an entitlement that is immune from later challenge....the legislation was not intended to give insured persons an automatic right to extend their entitlement by requesting a DAC assessment, regardless of the merits of their claim." (p.5)

As I have in fact found Mr. Mike to be disabled, I do not need to address this issue. However, had I found Mr. Mike not to be disabled, and still found that State Farm did not comply with section 64, I would have applied the above reasoning to award benefits only up until such time as the parties could have reasonably expected to receive a DAC disability assessment report, had State Farm complied with the Schedule.

Is Mr. Mike entitled to a special award?

The Insurer argued that the only recourse for substantial non-compliance with section 64 would be a special award.¹⁶ Subsection 282(10) of the Insurance Act requires an arbitrator to order a special award should the arbitrator find that an insurer has unreasonably withheld or delayed payments. The award is a lump sum of up to 50 per cent of the amount to which the insured person was entitled to at the time of the award, with interest.

Although I do not necessarily agree that it is the only recourse, I find that in these circumstances a special award is an appropriate remedy for both non-compliance with sections 64 and 59 of the Schedule and for what I find to be the Insurer's careless handling of the file.

Mr. Mike attended the Insurer's medical examination with Dr. Langer on relatively short notice and cooperated in an open and forthright manner. I find that in being required to submit to this examination, rather than to a disability DAC assessment of which he was deprived, Mr. Mike lost the opportunity for a more impartial, timely and potentially positive assessment as well as the opportunity to continue receiving benefits, at the very least until the date of the receipt of a DAC report. I also find that the expiry of his London Life STS benefits in September 1995 and the abrupt cessation of his part-time employment income in October caused him considerable financial and emotional hardship at a time when I find he should have been entitled to receive benefits from State Farm. Prior to the accident, he lived with his common-law wife and three of his children, and financially supported his remaining three children.¹⁷ He testified that since the accident he is separated from his wife and lives at home with his mother.

I find that State Farm's non-compliance with section 64 resulted in an unreasonable withholding of Mr. Mike's benefits and in considerable financial hardship to him.

That the file was carelessly handled is evident from some of State Farm's correspondence to Mr. Mike. Mr. Ing sent a third Explanation of Assessment form to Mr. Mike dated September 25, 1995, refusing IRBs on the basis that there was no ongoing medical documentation to support a disability from work. In the box entitled "reasons any amounts are not paid," Mr. Ing's hand-written note states: "Your medical plan at Starkey labs is your primary carrier for medical coverage...and you must submit all medical expenses to your workplan first." I find that this document reinforced Mr. Mike's impression that he could expect little more from State Farm and that he should be pursuing his claim with London Life.

Linda Harness, another State Farm employee, sent yet another form letter to Mr. Mike dated November 3, 1995, asking him to attend the insurer's examination with Dr. Langer on November 7, "concerning the disability for which State Farm is paying weekly benefits." The letter states that if Mr Mike failed to attend, "State Farm may withhold payment of your weekly benefits until you do attend. "¹⁸ Ms. Harness was clearly aware that Mr. Mike had not returned to work full time.¹⁹ However, as there was no record on the State Farm file to indicate that State Farm had already terminated weekly benefits effective June 30, Ms. Harness may not have been aware of this fact. Regardless of whether she knew or not, I find this letter to be a further example of State Farm's insensitive and sloppy handling of Mr. Mike's file.

There are, however, some mitigating factors. It is clear from the documents themselves that certain key medical reports of Dr. Teow and Dr. Mezei were sent to London Life and not to State Farm at all; I accept the statement of counsel for the Insurer at the hearing that the Insurer was not even aware that some of the documents existed until the day of the hearing. This may be due to Mr. Mike's understanding from State Farm that information was to go first to London Life as his primary carrier, or to confusion on the part of his doctors about where to send their medical reports and requests for payment. Regardless, this clearly contributed to State Farm's difficulty in properly adjusting the file.

Considering all of the circumstances, I award a lump sum special award of $5,000, inclusive of interest.

Order:

The Insurer shall pay Mr. Mike weekly income replacement benefits as follows:

a) $22.68 per week from July 1, 1995 to September 25, 1995;

b) $207.48 per week from September 26, 1995 to October 13, 1995;

c) $423.48 per week from October 14, 1995 to November 23, 1995;

d) $423.48 per week from March 23, 1996 and ongoing.

The Insurer shall pay interest on these amounts in accordance with section 68 of the Schedule.

The Insurer shall pay Mr. Mike a special award of $5,000 inclusive of interest.
The Insurer shall pay Mr. Mike his expenses of the arbitration.

November 12, 1998

Susan Sapin

Arbitrator

Date

Appendix

Present at the Hearing:

Applicant:

Rupert Mike

Mr. Mike's

Carman Tiano

Representative:

Barrister and Solicitor

State Farm's

Jeremy R. Solomon

Representative:

Barrister and Solicitor

State Farm's

Phyllis Bergmans

Officer:

Witnesses: