Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 1998 ONICDRG 76, 1998 ONFSCDRS 76

Appeal P97-00068

OFFICE OF THE DIRECTOR OF ARBITRATIONS

DANUTA OLSZEWSKI and JERZY OLSZEWSKI

Appellants

and

CITADEL GENERAL ASSURANCE COMPANY

Respondent

Before:

David R. Draper, Director's Delegate

Counsel:

Evelyn M. ten Cate (for Danuta and Jerzy Olszewski)

James E. Dunn (for The Citadel)

APPEAL ORDER

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

The appeal is dismissed and the arbitration order dated November 28, 1997 is confirmed.
No appeal expenses are payable.

November 16, 1998

David R. Draper

Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This is an appeal by Jerzy Olszewski and Danuta Olszewski from an arbitration decision dated November 28, 1997. They claim the arbitrator erred in rejecting their “rolling time limit” argument and concluding that their claims for weekly income benefits are time-barred.

II. BACKGROUND

The dispute involves the interpretation of the time limit created by subsection 281(5) of the Insurance Act, R.S.O. 1990, c.I.8, as amended (“the Act”) and section 26 of the Statutory Accident Benefits Schedule - Accidents before January 1, 1994, O.Reg. 672/90, as amended (“the Schedule”). These provisions state:

281.–(5) A proceeding in a court or an arbitration proceeding in respect of statutory accident benefits must be commenced within two years after the insurer’s refusal to pay the benefit claimed or within such longer period as may be provided in the Statutory Accident Benefits Schedule.

26.–(1) A mediation proceeding under section 280 of the Insurance Act in respect of benefits under the Regulation must be commenced within two years from the insurer’s refusal to pay the amount claimed in the application for statutory accident benefits or, if the person has attended school or accepted, or returned to, an occupation or employment, as permitted by section 16, within two years of the insurer's refusal to pay further benefits.

(2) Despite subsection (1), an arbitration or court proceeding under section 281 of the Insurance Act may be commenced within 90 days after the mediator reports to the parties under subsection 280(8) of the Act.

These sections establish a two-year time limit. Although the Act says that the arbitration must be commenced within two years of the insurer’s refusal to pay benefits, this is extended by the Schedule. It provides that the mediation must be commenced with two years, followed by the arbitration or court proceeding within 90 days of the Report of Mediator.

The facts, as found by the arbitrator, are quite straightforward. Mr. and Mrs. Olszewski were involved in an automobile accident on November 27, 1990. As a result, Citadel General Assurance Company (“The Citadel”) paid them accident benefits under subsection 12(1) of the Schedule, including weekly income benefits. They continued to receive weekly income benefits for 156 weeks. However, The Citadel was not convinced they met the stricter, post 156-week test in paragraph 12(5)(b) and, therefore, notified them in letters dated October 18, 1993, that their weekly income benefits would be terminated on November 26, 1993.

Mr. and Mrs. Olszewski testified that when they received the termination notice, they took it to the lawyer who had been handling their tort claim since November 1992. Sometime in March 1995, they were contacted by another law firm. Without notifying them, their previous lawyer had withdrawn from their case and transferred the file to another law firm.

On January 29, 1996, more than two years after the termination of weekly income benefits, a lawyer from the new law firm applied for mediation. The mediation took place in April 1996, with The Citadel arguing that the limitation period had expired. The dispute was not resolved and in September 1996, Mr. and Mrs. Olszewski applied for arbitration. Their applications were consolidated into one proceeding.

The Citadel continued to argue that the Olszewskis’ claims were time-barred. In response, they claimed that the time limit is a “rolling time limit,” preventing them only from claiming benefits for periods more than two years before their application for arbitration.

By the time of the arbitration hearing in September 1997, I had issued my appeal decision in Kirkham and State Farm Mutual Automobile Insurance Company, (OIC P96-00069, January 27, 1997), rejecting the “rolling time limit” approach. I held that earlier case law did not apply because the 1990 legislation brought in a different type of limitation period. Under the new provisions, a claim for weekly benefits is treated as an ongoing claim and once the insurer refuses to pay or to continue paying, the insured person has two years to apply for mediation of that claim.

The arbitrator found that the Olszewskis “presented cogent reasons why a ‘rolling time limit’ should apply,” but concluded she was bound by Kirkham. As a result, she held that the mediation was not commenced within two years of the termination of weekly income benefits and dismissed the arbitration.

Mr. and Mrs. Olszewski filed their Notice of Appeal in December 1997, within 30 days of the arbitration decision. However, because Kirkham was under judicial review, the matter was put on hold pending the decision of the Divisional Court and then the Court of Appeal. On March 31, 1998, the Divisional Court dismissed Mr. Kirkham’s application for judicial review. He then sought leave to appeal this decision, but the Court of Appeal denied leave on July 9, 1998.

III. ANALYSIS

I agree with The Citadel that the Kirkham is binding and determines the outcome of this case. Mr. and Mrs. Olszewski claimed ongoing weekly income benefits. The Citadel refused to pay benefits beyond November 26, 1993, starting the clock running. This meant they had to apply for mediation by November 27, 1995 at the latest, which they failed to do. Consequently, they are not entitled to proceed to arbitration on their claims for weekly income benefits.

On appeal, it was submitted on behalf of the Olszewskis that Kirkham is not binding because the Divisional Court erred in applying a standard of correctness rather than patent unreasonableness. It is difficult to understand, however, why a stricter level of scrutiny weakens the decision. Writing on behalf of the Court, Justice O’Leary states that the legislation is “clear and unambiguous,” requiring an insured person to “commence his proceeding within two years after the insurer’s refusal to pay, or his claim is statute barred.” The Court agreed with and specifically adopted my reasons, noting that if I had not reached the correct decision, they would have intervened.

Further, the Court of Appeal denied Mr. Kirkham leave to appeal. It was argued that this cannot be seen as an endorsement of the Divisional Court’s reasons, but simply as a decision not to accept the appeal. That may be, but it leaves the Divisional Court decision in place and I can see no basis for refusing to follow it.

A number of other arguments made on behalf of the Olszewskis challenged the substance of the Kirkham decision, claiming that the legislation is ambiguous and should be liberally interpreted in favour of insured persons. However, these arguments were raised in Kirkham and other cases. The problem for the Olszewskis is that the Divisional Court rejected their position, finding the provisions clear and unambiguous.

Finally, it was suggested that Kirkham is distinguishable on the basis that the insurer provided more detailed reasons for the termination than The Citadel gave the Olszewskis. I agree with counsel for The Citadel that it is unfair to raise this issue for the first time in oral argument at the appeal hearing. However, I am also satisfied that Citadel provided adequate notice.

The Citadel sent both Mr. and Mrs. Olszewski an Assessment of Claim form and a covering letter stating that it would not be paying weekly income benefits after November 26, 1996. The letters refer to section 2.26 of the policy [s.15(5)(b) of the Schedule], explaining that insurers are not required to pay weekly income benefits for any period in excess of 156 weeks unless is has been established that the injury continuously prevents the insured person from engaging in any occupation or employment for which he or she is reasonably suited by education, training or experience. The letters also advised Mr. and Mrs. Olszewski of their right to appeal and enclosed an application for mediation.

For these reasons, I find no error in the arbitrator’s conclusion that Mr. and Mrs. Olszewski are precluded from proceeding to arbitration on their claims for weekly income benefits.

IV. APPEAL EXPENSES

I am not persuaded that the Olszewskis should recover their appeal expenses. While the appeal may have raised legitimate issues when it was filed, the court decisions in Kirkham left little room for argument.

The Citadel claims its expenses. However, because the Olszewskis applied for arbitration before November 1, 1996, the old expense provisions apply to them.[1] This means they cannot be ordered to pay the insurer’s expenses. The only other possibility is an assessment under subsection 282(11.2) of the Act, which can be ordered if the appeal was frivolous, vexatious or an abuse of process. I am not convinced, however, that it falls to this standard.

Therefore, the parties will bear their own appeal expenses.