Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 1999 ONFSCDRS 107

Appeal P98-00047

Appellant

and

Respondent

Before:

David R. Draper, Director's Delegate

Counsel:

Andrew R. Kerr (for Wanda Gray)

Guy Farrell (for Zurich Insurance Company)

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

The appeal brought by Wanda Gray is dismissed and the arbitration order, dated August 31, 1998 is confirmed.
The appeal brought by Zurich Insurance Company is allowed in part. Paragraph 1 of the arbitration order, dated January 29, 1999, is rescinded and the following paragraph is substituted:
Wanda Gray is entitled to her reasonable arbitration expenses, limited to preparation for and attendance at the hearing on March 6, 1998, payable by Zurich Insurance Company.
Wanda Gray is entitled to her reasonable appeal expenses, payable by Zurich Insurance Company.

June 11, 1999

David R. Draper

Director's Delegate

Date

Wanda Gray appeals from an arbitration decision dated August 31, 1998. The issue is whether someone who suffers a "partial inability to carry on a normal life" can claim loss of earning capacity benefits ("LECBs") under O. Reg. 776/93, as amended, the Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996 ("the SABS-1994"). Ms. Gray's argument is based on a distinction between "qualification" and "payment." In her submission, the LECB provisions apply because she continued to qualify for weekly Caregiver Benefits ("CGBs") by meeting the "partial-inability " test, although they were not payable because she did not meet the "complete-inability" test.

In a second decision, dated January 29, 1999, the arbitrator awarded Ms. Gray her arbitration expenses. Zurich Insurance Company ("Zurich") challenges this order.

A. Background

Ms. Gray was seriously injured in a snowmobile accident on January 10, 1994. At the time, she was caring for her 15 month old son and working approximately two evenings per week as a bartender. Her automobile insurer, Zurich, accepted her claim and paid her caregiver benefits ("CGBs") under the SABS-1994.

According to s.18(1), an insured person is "entitled" to CGBs if he or she meets the following "qualifications":

At the time of the accident, the insured person was residing with a person in respect of whom the insured person was the primary caregiver and the person receiving the care was less than sixteen years of age or required the care because of physical or mental incapacity.
The insured person was not employed on a full-time basis and was not self-employed at the time of the accident.
As a result of and within two years of the accident, the insured person,

i. suffers a substantial inability to engage in the caregiving activities in which he or she engaged at the time of the accident [the "substantial-inability test"], or

ii. suffers a partial or complete inability to carry on a normal life [the "normal-life test"].

The normal-life test has two sub-tests. "Partial inability to carry on a normal life" (the "partial-inability test") and "complete inability to carry on a normal life" (the "complete-inability test") are defined in sections 2 and 3 of the SABS-1994.

According to s.18(2) of the SABS-1994, CGBs are "payable" during the period the insured person meets the substantial-inability test or the normal-life test, subject to an exception central to this appeal. Subsection 18(4) provides that if the insured person qualifies under the normal-life test, no CGBs are "payable" more than 104 weeks after he or she first qualified unless the complete-inability test is met. Meeting the partial-inability test is not sufficient.

Zurich stopped paying CGBs on February 14, 1995, well before the 104-week mark, taking the position that Ms. Gray did not meet any of the disability tests. She disagreed, leading to an arbitration hearing before Arbitrator Palmer in the spring of 1996 – after the 104-week mark had passed.

Arbitrator Palmer found that by the date of the termination, Ms. Gray no longer met the substantial-inability test. With respect to the normal-life test, she found that Ms. Gray continued to suffer from a partial inability to carry on a normal life. As a result, she ordered Zurich to pay CGBs from February 15, 1995 to January 10, 1996 – the 104-week mark – but not after.

Neither party appealed this decision. However, Ms. Gray argued that although she was not entitled to receive CGBs beyond 104 weeks, she could still claim LECBs under s.21(1)6, which provides as follows:

21.- (1) Subject to subsections (7) to (9), an insurer shall promptly deliver a written offer to an insured person with respect to the payment of weekly loss of earning capacity benefits if one or more of the following circumstances occurs:

The insured person qualified for weekly caregiver benefits under Part IV, is unable as a result of the accident to earn what he or she could reasonably have earned at the time of the accident, elects at any time 104 weeks or more after the onset of the disability in respect of which he or she first qualified for weekly caregiver benefits to be governed by this Part instead of Part IV or V and,

i. continues to qualify for weekly caregiver benefits, or

ii. ceases to qualify for weekly caregiver benefits because there is no longer any person who meets the qualifications set out in subsection 18(5).

[emphasis added]

In Ms. Gray's submission, the SABS-1994 distinguishes between qualification and payment. She claims that "continues to qualify" refers to the qualifications in s.18(1), including the partial-inability test. In her submission, therefore, she continued to qualify for CGBs by meeting the partial-inability test, although Zurich was relieved from paying benefits by the operation of s18(4). Zurich disagreed, arguing that to qualify for LECBs, Ms. Gray had to meet the disability test in effect at the time of her election – the complete-inability test.

Zurich asked Arbitrator Palmer to reopen the hearing to deal with Ms. Gray's entitlement to LECBs. Ms. Gray objected, claiming it was a separate issue that should go through the normal process of mediation and then arbitration, if necessary. Arbitrator Palmer accepted Ms. Gray's position, concluding that she could not assume jurisdiction over an issue that was not raised until after the hearing concluded.

The LECB dispute then went to mediation, without resolution. As a result, a second arbitration hearing was scheduled before a different arbitrator, Arbitrator Alves, in March 1998. The hearing proceeded without witnesses, based on agreed facts and submissions. The focus of the dispute was the meaning of the phrase, "continues to qualify for weekly caregiver benefits," in s.21(1)6i of the SABS-1994. Does it refer only to the test in s.18(1), including the partial-inability test, as Ms. Gray contends, or to s.18(2), including the exception in s.18(4) requiring her to meet the post-104 week test, as Zurich claims?

Unfortunately, it appears there was some confusion about Arbitrator Palmer's decision. Arbitrator Alves read it to mean that Ms. Gray did not meet any of the disability tests, including the partial-inability test, beyond January 10, 1996. On this basis, she concluded that Ms. Gray was not entitled to an LECB offer. However, the parties read the decision differently. On appeal, Zurich accepts that Ms. Gray continued to meet the partial-inability test up to and beyond the 104-week mark. However, it argues that LECBs are paid "instead of" weekly benefits,¹ and that she must "continue to qualify" for CGBs,² meaning that she must meet the substantial-inability or complete-inability test.

B. Analysis

This appeal raises a straightforward question about when the insured person has access to LECBs. Do the LECB provisions apply to someone who qualified for CGBs under the normal-life test and continues to meet the partial-inability test up to and beyond the 104-week mark? Unfortunately, the answer is not obvious. Although the provisions dealing with weekly benefits and LECBs are clearly intended to work together, they are complicated and difficult to apply in some situations, creating uncertainty for insurers and insured persons.

At a policy level, Zurich claims that LECBs are meant for those most likely to have suffered economic losses. As a result, the legislation creates an entitlement for insured persons who have a closer connection to the workforce and/or more serious injuries. It follows, Zurich contends, that LECBs are only intended for caregivers who suffer impairments sufficiently serious that they are either substantially unable to engage in their caregiving activities (the substantial-inability test) or suffer a complete inability to carry on a normal life (the complete-inability test).

In contrast, Ms. Gray emphasizes that the right to claim LECBs is different from the right to receive them. In her submission, while it is less likely that someone with a long-term, but relatively minor, disability will be able to establish a loss, he or she should be allowed to make a claim unless the legislation clearly removes that right, which she contends it does not.

I was not provided with anything clearly pointing to either policy objective. In any event, the legislation must be considered according to the ordinary rules of statutory interpretation.

As noted above, Ms. Gray contends that "qualification" has a specific meaning in the SABS-1994, distinct from "payment." For caregivers, she claims that the qualifications are found in s.18(1), not in the provisions dealing with payment. In support of this position, she relies on the following principles of statutory interpretation:³

(1) The presumption of perfection – it must be assumed that legislation is drafted accurately and correctly.

(2) The presumption of consistent expression – the same word should be given the same meaning throughout the legislation, while different words are assumed to reflect different meanings, not just stylistic variation.

(3) Presumption against abolishing rights – it is presumed that legislation does not intend to abolish, limit, remove or interfere with rights and, therefore, legislation that curtails rights is to be strictly construed.

(4) Remedial legislation – the SABS-1994 is remedial legislation and, therefore, should be given a large and liberal interpretation that best achieves the legislative intent.

(5) Presumption in favour of claimants in social welfare legislation – social welfare legislation, such as the SABS-1994, is to be liberally construed to advance the benevolent purpose of the legislation, with ambiguities being resolved in favour of the claimant.

While I accept these rules and presumptions, I am not persuaded that the legislation can reasonably bear Ms. Gray's interpretation. For reasons that follow, I conclude that the phrase, "continues to qualify," used in s.21(1)6i, has a different meaning than, "qualifications," in s.18(1). To "continue to qualify" at 104-weeks, an insured person who "qualified" for CGBs must meet either the substantial-inability test or the total-inability test. This analysis results in similar LECB tests for each type of weekly benefit:

An insured person who qualified for income replacement benefits ("IRBs") must suffer a substantial inability to perform the essential tasks of his or her employment.⁴
An insured person who qualified for education disability benefits ("EDBs") must suffer either a substantial inability to continue his or her education or a complete inability to carry on a normal life.⁵
An insured person who qualified for other disability benefits ("ODBs") must suffer a complete inability to carry on a normal life.⁶

In my opinion, this approach is supported by both a detailed and general analysis of the SABS-1994.

1. The words used in the SABS-1994

The fundamental flaw in Ms. Gray's argument is that s.18(1) and s.21(1)6i do not use the same words. Subsection 18(1) lists the "qualifications" required for entitlement to CGBs. In contrast, s.21(1)6i states that caregivers can elect to claim LECBs at any time beyond the 104-week mark if they "qualified" for CGBs and "continue to qualify" at the time of the election. As discussed in the next section, a list of qualifications that must be met to be considered for a particular type of weekly benefit is not necessarily the same as qualifying for those benefits over time.

Further, a close reading of the SABS-1994 does not support Ms. Gray's contention that the legislation consistently distinguishes between qualification and payment. The clearest example is found in s.21(1)6. This case involves paragraph i of this clause, but paragraph ii is also instructive. It allows caregivers to elect LECBs when they no longer have any qualifying dependants. The election is allowed at any time 104 weeks after the onset of disability if the insured person "ceases to qualify for weekly caregiver benefits because there is no longer any person who meets the qualifications set out in subsection 18(5)."

Subsection 18(5) deals with payment, not qualification. It provides that amount of the CGBs depends on the number of people the insured person is caring for who are less than 16 years old, or require care due to physical or mental incapacity. If Ms. Gray's analysis were correct, s.21(1)6 would be unnecessary; the caregiver whose dependant turns 16 after the 104-week mark would simply elect LECBs on the basis that he or she continues to meet the qualifications in s.18(1). In my opinion, therefore, the use of the phrase, "continues to qualify," in s.21(1)6 strongly suggests that "qualify" does not have the narrow meaning urged by Ms. Gray.⁷

I also note that for caregivers, the LECB process is triggered by s.21(2), which states:

21.- (2) If a person qualifies for weekly caregiver benefits under Part IV 104 weeks after the onset of the disability in which he or she first qualified for those benefits, the insurer shall promptly provide the person with notice that he or she may be entitled to make the election referred to in paragraph 6 of subsection (1).

In my view, it is significant that this provision refers to qualifying under Part IV, not s.18(1). This suggests that "qualifies" has a meaning broader than the qualifications listed in s.18(1).

2. The structure of the SABS-1994

Ms. Gray's approach is also undermined when s.21(1)6i is considered in context. The SABS-1994 establishes four types of weekly benefits: IRBs, EDBs, CGBs and ODBs. The sections dealing with the first three benefits have a similar structure, raising three separate questions:

(1) Who is in entitled to this claim this type of weekly benefit?

To be "entitled" to the weekly benefit, the insured person must meet the " qualifications" set out in the section. The qualifications require the insured person to meet certain personal characteristics at the time of the accident and the relevant disability test.⁸

(2) For what period are benefits payable?

Generally, benefits are payable during the period that the insured person continues to meet the relevant disability test, subject to certain exceptions.⁹The exceptions are different depending on the type of weekly benefit, but each includes a provision stating that benefits are not payable for the first week of the disability.¹⁰

(3) What is the amount of the benefit?

The calculation of the benefit is different for each type of weekly benefit.¹¹

The legislative structure for the residual category of weekly benefits, ODBs, is somewhat different. Section 19 does not use the term, "qualification" in the same way. "Entitlement" to ODBs is based on meeting the disability test and not qualifying, or ceasing to qualify, for the other types of weekly benefits.

The key term in subsections 7(1), 15(1), 18(1) and 19(1) is "entitlement." These sections answer the first question set out above – who is entitled to claim this type of weekly benefit? They do not, however, determine the insured person's right to receive those benefits, either initially or over time. There are many examples of the distinction between entitlement and payment.¹² It does not follow, however, that the same distinction exists between qualification and payment.

Using Ms. Gray's approach, the interaction between s.21(1)6 and s.18(1) is awkward at best. According to s.18(1) the insured person qualifies for CGBs if he or she meets the personal qualifications in clauses 1 and 2, and the disability test in clause 3. The disability test requires that "as a result of and within two years of the accident," the insured person meets the substantial-inability test or the normal-life test. The problem is that once this test is met, it is met. It is difficult to say that one continues to reside with a dependant at the time of the accident, or continues to have a disability that arises within two years of the accident.

In my opinion, s.18(1) is better viewed as a triggering provision, identifying those who are entitled to be considered under the caregiver provisions.¹³ Similarly, subsections 7(1), 15(1) and s.19(1) are triggering provisions for the other weekly benefits. The insured person's entitlement to receive benefits, and to continue receiving them, depends on other provisions dealing with various factors affecting entitlement, including the relevant disability test.

The facts of this case provide an example. Because Ms. Gray was working at the time of the accident, she also would have qualified for IRBs under s.7(1)1, assuming her injuries substantially prevented her from performing the essential tasks of her employment. Section 61 makes it clear, however, that she could not have received both IRBs and CGBs. She would have been required to elect one or the other.¹⁴ Ms. Gray's narrow approach to the term, "qualified," suggests that even if she had elected to receive IRBs, she could still have insisted on LECB offer under the caregiver provision if she met the qualifications in s.18(1). I do not accept that this is how the legislation was meant to operate.

This approach also fits the wording of s.21(1)6. The first requirement is that the insured person "qualified for weekly caregiver benefits." This part of the test looks backwards, linking with s.18(1). Ms. Gray qualified for CGBs because at the time of the accident, she was not employed full-time or self-employed, was living with her son and was his primary caregiver, and within two years of the accident, she met the relevant disability test.

Clause 21(1)6 also considers the insured person's current situation. He or she can elect to claim LECBs if, at the time of the election, he or she "continues to qualify for weekly caregiver benefits." I agree with Zurich that this wording is important, incorporating the insured person's ongoing entitlement to weekly benefits.

3. Interpreting the SABS-1994

Perhaps most importantly, Ms. Gray's approach misconstrues the nature of the legislation. The SABS-1994 is directed at the prompt and regular payment of accident benefits, not abstract determinations of entitlement. When an insurer receives an application for weekly benefits, it must decide whether benefits are payable and, if so, at what rate. If benefits are payable, they are to be delivered at least once every two weeks unless payment is stopped according to the appropriate procedures, including s.64.¹⁵ If the insured person continues to qualify for weekly benefits, the insurer may be required to pay LECBs instead of weekly benefits.

In my view, the key is that LECBs are a separate type of benefit. However, the weekly benefit provisions determine whether they come into play. For caregivers, the critical point is 104 weeks after the onset of the disability. If the insured person still qualifies for CGBs at that point, the insurer must provide notice that he or she "may be entitled" to make an election under s.21(1)6. The insured person can then elect at any point to claim LECBs instead of CGBs¹⁶ if he or she:

"qualified for caregiver benefits";
is unable to earn what he or she could reasonably have earned at the time of the accident; and
"continues to qualify for weekly caregiver benefits," or ceases to qualify because he or she no longer has any qualifying dependants.

Viewed in this context, I conclude that "continues to qualify" refers to the insured person's benefit status at the time of his or her election. If the insurer has not stopped paying benefits, the LECB provisions will be triggered. In my opinion, this applies whether or not the disability test changes at the 104-week mark. If an insurer believes that an insured person receiving CGBs under the normal-life test does not meet the complete-inability test, it should give notice under s.64(2) of its intention to stop paying CGBs at the 104-week mark. If it does not, the LECB provisions apply.

In contrast, if the insurer stops paying CGBs before the 104-week mark, the LECB process is not triggered. That is the situation here. Zurich initially accepted that Ms. Gray was entitled to CGBs because she met the qualifications in s.18(1). She was paid CGBs on the basis that she continued to meet at least one of the disability tests. However, well before the 104-week mark, Zurich concluded that she no longer met any of the disability tests. It followed the procedures in s.64, as it was entitled to do, notifying her that her CGBs would stop on February 14, 1995. Ms. Gray's recourse was to challenge the decision through the dispute resolution process, which she did. If the DAC had found that she continued to meet the disability test, Zurich would have been obliged to reinstate her weekly benefits pending the outcome of any dispute. However, that was not the finding here.

If Arbitrator Palmer had found that Ms. Gray met either the substantial-inability or complete-inability test, Zurich would have been obliged to resume paying CGBs and pay the benefits owing from the date of the termination.¹⁷ At that point, the LECB process would have been triggered based on the determination that Ms. Gray continued to qualify for CGBs. Although not essential to this decision, it is my view that if she elected to claim LECBs, her entitlement would have been based on her situation at that point, not looking back to the 104-week mark.¹⁸

In this case, however, the arbitrator found that Ms. Gray did not meet the complete-inability test. As a result, the LECB provisions were never triggered. As a result, I agree with the arbitrator's conclusion that Ms. Gray is not entitled to claim LECBs.

III. Arbitration and Appeal Expenses

Despite Ms. Gray's lack of success, the arbitrator ordered Zurich to pay her expenses.¹⁹ As a general rule, expense orders will not be disturbed lightly on appeal.²⁰ However, because of the confusion about the issue the arbitrator was to decide, the parties agreed that I should revisit the question of arbitration expenses, as well as dealing with appeal expenses.

Until November 1, 1996, insurers could not recover their arbitration or appeal expenses. While an insured person could be ordered to pay an assessment if the proceeding application was frivolous, vexatious or an abuse of process,²¹ he or she could not be ordered to pay the insurer's expenses.

The approach to expenses under this legislation was developed through arbitration and appeal decisions, as summarized by Director's Delegate Naylor in Allison and Markel Insurance Company of Canada, (OIC P-001231, August 21, 1996):

The principle that applicants with legitimate claims, conducted reasonably, can expect to recover their allowable expenses, win or lose, has been adopted in numerous subsequent decisions, and can be taken to be the basic ground rule. While arbitrators have uniformly accepted this general principle, they have built on the criteria set out in McCormick. Expenses have been denied, for example, where the claim is found to have been without any merit, in the case of fraud or dishonesty or when documents have been fabricated.

This case-by-case development is to be expected in an evolving adjudication process, as individual arbitrators bring their perspectives to bear on the numerous fact situations presented. It seems to me that the general thrust of these decisions is reasonable and consistent with the purpose and scheme of the legislation. It balances the need for access to the system, with a relatively mild deterrent to undeserving claims or undesirable behaviour. [pp.6-7, footnotes omitted]

The rules for expenses changed, however, with the Automobile Insurance and Rate Stability Act, S.O. 1996, c.21. Because Ms. Gray applied for arbitration after November 1, 1996, these proceedings are governed by the new rules.

Section 282(11) of the Insurance Act now allows expenses to be awarded to either the insured person or the insurer:

282.- (11) The arbitrator may award, according to the criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.

The criteria for awarding expenses are found in section 12(2) of O.Reg. 464/96, which states as follows:²²

12.- (2) An arbitrator may award expenses to an insurer or insured person under subsection 282(11) of the Act if the arbitrator is satisfied that the award is justified, having regard to the following criteria:

Each party's degree of success in the outcome of the proceeding.
Conduct of the insurer or insured person that tended to shorten or facilitate the proceeding or that tended to prolong, obstruct, or hinder the proceeding, including failure to comply with undertakings or orders.
Whether the proceeding or any position taken by the insurer or the insured person during the proceeding was manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process.
The degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding.
If the insurer or the insured person requests, any written offers to settle made after the conclusion of mediation and before the conclusion of the arbitration in accordance with the rules of practice and procedure applicable to the proceeding, including the terms of the offers, the timing of the offers and the responses to the offers, having regard to the result of the proceeding.
Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.

In my view, the new expense provisions signalled a change. Although most of the criteria have been discussed in earlier decisions, the analysis was affected by the fact that only one party could be awarded its expenses. Arbitrators now have an obligation to consider the legislated criteria, including the result, applying them to both parties. However, I agree with the arbitrator that the criteria do not reflect a move to the kind of results-based approach used by the courts. Success is only one criterion in an open-ended list and, therefore, must be weighed against the other relevant considerations. I also agree with the arbitrator that the criteria, specifically clause 6, leave room for concerns about the access to the dispute resolution system. One aspect of accessibility is that insured persons should have a reasonable opportunity to raise novel issues of interpretation, particularly those of general importance.

The arbitrator awarded Ms. Gray her expenses on the basis that her argument raised a novel issue of importance to the parties that was not "manifestly unfounded." I agree with Zurich that this standard is too low. However, the arbitrator's assessment of the strength of Ms. Gray's argument was based on her understanding of the facts, which left Ms. Gray in a weaker position than before me. I do not accept Zurich characterization of her argument as possible, but remote. She raised legitimate questions about complicated legislation that had not been considered in previous decisions.

While I conclude that Ms. Gray should be awarded her arbitration expenses, I am concerned about her refusal to have Arbitrator Palmer deal with this issue. The record reveals that this was a tactical decision, involving a troubling level of "arbitrator shopping." Even assuming Ms. Gray had a right to split the dispute in the manner she did, I find that her actions prolonged the proceedings within the meaning of s.12(2)2, justifying a reduction in her expenses. In the circumstances, I conclude that the arbitrator's order should be varied to limit Ms. Gray's arbitration expenses to those incurred preparing for and attending the hearing on March 6, 1998.

With respect to appeal expenses, I find that Ms. Gray was essentially forced to appeal due to the confusion over the issue the arbitrator was to decide. Although she was not successful, I conclude that her arguments were sufficiently novel and important that she should recover her expenses regardless.