Neutral Citation: 1999 ONFSCDRS 143

FSCO A97-001064

BETWEEN:

GARY DYER

Applicant

and

GENERAL ACCIDENT ASSURANCE COMPANY OF CANADA

Insurer

Before:

Fred B. Sampliner

Heard:

April 29, 1999, in Hamilton, Ontario. Submissions by telephone May 3, 1999

Appearances:

Paul Barrafato for Mr. Dyer Robert H. Rogers for General Accident Assurance Co. of Canada

The Applicant, Gary Dyer, was injured in a motor vehicle accident on December 24, 1992, and received weekly disability benefits from General Accident Assurance Co. of Canada ("GA"), payable under the Schedule.¹ On October 26, 1993, Mr. Dyer received his last disability payment from GA, and he signed a full and final release of his future weekly disability benefits. He claims the release is invalid and seeks further disability benefits. Mediation did not resolve the dispute, and Mr. Dyer applied for arbitration at the Financial Services Commission of Ontario to determine the issues pursuant to the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issues are:

Is the release enforceable?
Is the arbitration timely?

The release is enforceable.
The arbitration is timely.

On October 26, 1993, Gary Dyer met GA's adjuster to pick up an $800 check, representing two weeks of disability benefits. Mr. Dyer was a twenty-five-year-old high school graduate with a checkered work history. He received disability payments for injuries he sustained after being hit by a car while crossing the street in Hamilton. Mr. Dyer complained of neck and back pain, headaches and symptoms of depression after the accident. Mr. Dyer did not resume his pre-accident work as an auto dismantler at a wrecking yard.

At the time, Mr. Dyer had recently moved from his girlfriend's residence, and needed money for apartment rent. He did not know before the meeting with GA's adjuster that he would be asked to sign a release. At the meeting in GA's office, the adjuster agreed to give him the check only on condition that he sign a full and final release, giving up his rights to future disability benefits. The release left open his right to claim medical and rehabilitation benefits.

Mr. Dyer signed the release and took the $800 cheque. Both the cheque and the cheque stub contain the typed words "final payment." Mr. Dyer contends that his poor health, lack of sophistication and reliance on GA caused him to be mistaken about the nature of the release, that GA exercised undue influence over him, that he signed the release under duress, and that the transaction is unconscionable.

Background:

The adjuster, Ms. Djurdjevic, initially authorized disability payments after interviewing Mr. Dyer at his girlfriend's house shortly after the accident. She explained the potential benefits available toMr. Dyer, and because he had no permanent address, he arranged to pick-up his cheques at GA's offices.

Mr. Dyer began physiotherapy treatment for his soft tissue injuries. By June 1993, it was evident that Mr. Dyer was becoming depressed. He began drinking, and subsequently moved from his girlfriend's house, to live with various friends throughout that summer.

GA arranged psychological intervention to help Mr. Dyer deal with his stress and depression. His family physician and caseworker recommended continuing assistance, and that he should resume work.

Ms. Djurdjevic's notes from August 1993 indicate that Mr. Dyer missed four physiotherapy appointments during one week and one session with his counselor, Ms. Dvali. Mr. Dyer reported to her that he forgot about them, but did not miss all the appointments. Ms. Djurdjevic concluded that Mr. Dyer was not cooperating with rehabilitation or mitigating his damages. On August 26, 1993, Ms. Djurdjevic wrote, "Intent is to discontinue benefits within 1 to 2 months...."

The focal point of events is October 1993. Mr. Dyer signed a work schedule on October 1, 1993 at GA's office. He agreed to resume work as an auto dismantler with his pre-accident employer, and to increase his duties and hours through November 17, 1993. At the end of the work trial, Mr. Dyer was supposed to be working full time, with no restrictions on his duties.

Ms. Djurdjevic testified that at the October 1 meeting, Mr. Dyer requested eight weeks of disability benefits in advance. She offered four weeks, and the parties compromised at six weeks. Ms. Djurdjevic prepared a $2,400 check, representing his $400 disability benefit for six weeks, and gave it to him that day.

Mr. Dyer has no recollection of the meeting. He presented no evidence to support his contention that a portion of this cheque compensated him for therapy and personal expenses. I accept that the $2,400 he received on October 1, 1993 covered his disability benefits through November 19, 1993. Mr. Dyer attended at the salvage yard about one or two hours per day during the work trial.

Mr. Dyer's Evidence:

Mr. Dyer admitted that he has a poor memory of events after the accident. For example, he could not recall seeing his family doctor where it is clear from the doctor's initial disability certificate that he examined Mr. Dyer about two weeks after the accident. He recognizes his signature on the work schedule agreement, but initially said he had never seen the document before nor did he remember the meeting at which he signed it. However, later in his evidence, Mr. Dyer recalled that some words had been added after he signed.

Mr. Dyer's recall of the settlement meeting was detailed. He stated that he could not read the release himself due to lack of concentration, and that the adjuster failed to read him the terms of the document or explain it to him before he signed. He denies GA told him he was releasing his rights to claim further disability benefits, and alleges he was pressured to sign the release because there were four other women in the room beside Ms. Djurdjevic. Mr. Dyer claims he thought that the document he signed was a receipt for $800, representing two weeks additional disability payments.

Mr. Dyer was able to remember details where it suited his position. It seems inconsistent that he remembered that words were added to the October 1 work schedule, when he earlier testified that he had never seen the document before the hearing, and had no memory of the meeting to sign it. Likewise, if his memory of post-accident events is poor, he would not be able to recall specific details of the October 26, 1993 settlement meeting quite so well. I find Mr. Dyer concocted evidence to suit his position. I find it more probable he has little memory of the events, and I place little weight on his evidence.

Mistake:

Did Mr. Dyer sign the document under the mistaken belief it was not a release?

Mr. Dyer knew GA was moving towards terminating his benefits. Dr. McKnight examined him for the Insurer in September 1993, and released Mr. Dyer for gradual return to work at the salvage yard. The Early Treatment Centre reported that Mr. Dyer had plateaued in treatment, and released him on October 1, 1993. At the same time, his own family physician reported no objection to Mr. Dyer's resumption of gainful employment. I find that Mr. Dyer must have known before signing the release that medical experts determined he was physically capable of working.

The registered nurse assigned by GA to determine Mr. Dyer's psychological state also recommended that Mr. Dyer resume employment. After Ms. Dvali conducted interviews and psychological tests, she reported to GA on October 5, 1993 that Mr. Dyer demonstrated illness behaviour, anxiety and depression. At this same time, Mr. Dyer not only negotiated an advance payment of six weeks disability with GA, but made arrangements for and moved into a new apartment, and called GA for rent money. Despite psychological stress, I find that Mr. Dyer was capable of managing his life and financial affairs at the time of the release.

Ms. Djurdjevic had no specific recall of what she said to Mr. Dyer at the settlement meeting. Her evidence is that she would have followed standard practice by reading the terms of the release to Mr. Dyer, and explaining that the $800 was a final payment. I prefer Ms. Djurdjevic's statement that she would have followed standard practice, over Mr. Dyer's evidence.

Additionally, I do not accept Mr. Dyer's submission that he could not read the release. He has a high school education and demonstrated at the hearing that he can read. Even if he was psychologically confused at the time and did not read the release, I find he was able to read the words "final payment" which are clearly typed on both the cheque and stub.

There is nothing in the evidence to persuade me that Mr. Dyer's anxiety or depression rendered him incapable of fully understanding Ms. Djurdjevic's explanation or appreciating that he was signing a release of future disability claims. I find that GA explained the terms of the release to Mr. Dyer, and that he understood the terms of the transaction.

Mr. Dyer's actions after signing the release support the above findings. Shortly after receiving the $800 and signing the release, Mr. Dyer applied for and received reimbursement for travel expenses (December 1993). The claim form bears his handwriting, and certainly this indicates he understood the claims process. I find that Mr. Dyer knew he was able to claim other accident benefits after signing the release.

Mr. Dyer did not contact GA for additional weekly disability payments after signing the release. He testified that he called GA several times during November and December 1993 to request more disability benefits, but his evidence is unacceptable because it is not corroborated by GA's file notes, the adjuster or any other reliable evidence. GA's file notes might not show all his telephone calls, but Mr. Dyer's memory is self-admittedly unreliable.

GA’s file notes indicate that Mr. Dyer called to request a complete copy of his file on April 6, 1994, and advised the company that he had retained legal counsel. On April 22, 1994, he signed a release to obtain the records. Mr. Dyer’s lawyer wrote GA on December 2, 1994 requesting a neuropsychological assessment. Over a year had elapsed. He had legal advice, and I find no evidence during this period that Mr. Dyer claimed further disability benefits.

GA read the terms of the release and explained it to Mr. Dyer. He could read the words "final payment" on the check and stub. Without financial support at that time, it is simply implausible that Mr. Dyer would not contact GA to claim disability benefits if he thought it was open to him. I find Mr. Dyer understood and appreciated the significance of his signing the release on October 26, 1993, and that by accepting the $800 final payment he was terminating his rights to claim further disability benefits from GA as a result of this accident.

Duress:

The term "duress" is defined as "unlawful constraint exercised upon a man whereby he is forced to do some act that he otherwise would not have done."² Under common law, duress was restricted to threats of violence or physical injury, but the more modern view encompasses economic coercion as well.³

In this case, only Mr. Dyer and Ms. Djurdjevic signed the release. No evidence supports Mr. Dyer’s claim that four other women were present, nor did he explain what any GA official said or did which might convince me he was placed under physical or economic pressure to sign the release. I find that Mr. Dyer and Ms. Djurdjevic were alone on October 26, 1993, and that he was not under physical or economic duress when he signed the release.

Unconscionability/Undue Influence:

Lord Denning stated:

Gathering all together, I would suggest that through all these instances there runs a single thread. They rest on "inequality of bargaining power. By virtue of it, the English law gives relief to one who, without independent advice, enters into a contract on terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influence or pressures brought to bear on him by or for the benefit of the other. When I use the word "undue" I do not mean to suggest that the principle depends on proof of any wrongdoing. The one who stipulates for an unfair advantage may be moved solely by his own self-interest unconscious of the distress he is bringing to the other. I have also avoided any reference to the will of the one being "dominated" or "overcome" by the other. One who is in extreme need may knowingly consent to a most improvident bargain, solely to relieve the financial straits in which he finds himself. Again, I do not mean to suggest that every transaction is saved by independent advice. But the absence of it may be fatal.⁴

Professor Fridman states:

...that the bargain that was made was somehow unfair, that advantage was being taken knowingly, of a gullible ignorant, or particularly vulnerable or susceptible party, that there was some dire need on the part of the victim which rendered him incapable of making a sound decision, that his emotional state was such that he could not appreciate and weigh the advantages and disadvantages of the contract, and he was not allowed or encouraged to seek independent advice. (at p. 329)⁵

Mr. Dyer’s counsel refers me to a British Columbia judgment, where the court set aside a small personal injury settlement ($1,500) because the claimant lacked legal counsel and the sophistication to appreciate that the release was premature in respect of her condition.⁶ In a recent Ontario judgment, the court agreed with the tort insurer that a no-fault settlement was improvidently small, where the insurer failed to inform the unrepresented insured of his potential lifetime disability benefits.⁷ Neither insured person was found either gullible or ignorant in the two arbitration cases decided by this tribunal.⁸

The nub of the inquiry appears two-pronged. First, is the settlement amount grossly inadequate or unfair? If so, did one party take unfair advantage of another's vulnerable, gullible or ignorant state so that the individual’s will was overpowered?

The evidence here is that Mr. Dyer was capable of returning to work. His physiotherapist had released him. His family doctor and GA’s medical examiner recommended his gradual resumption of his job, and there is no contradictory medical opinion. While Ms. Dvali had concerns about his psychological distress, she also supported his work resumption. In light of the medical and psychological opinions recommending that Mr. Dyer resume work, I find that GA’s consideration for the settlement of two additional weeks of disability ($800) was not grossly inadequate or unfair.

Did GA abuse its dominant position at the bargaining table? First, there was no evidence that the parties haggled or argued after Ms. Djurdjevic explained the offer at the October 26 meeting.

By all accounts, Mr. Dyer simply signed and took the cheque. He contacted GA primarily when he needed money. It does not appear from this evidence that Mr. Dyer was an unwilling party at the time of the settlement. The evidence that he did nothing to advance his claim for disability benefits for a considerable period afterwards indicates that removing whatever momentary pressure GA exerted at the time of the release did not change Mr. Dyer's mind. I am not persuaded that GA exercised undue influence.

However, first party benefits are a privately-funded safety net for accident victims. The protections afforded by the insurance policy should not be given up lightly. In 1994 the government enacted regulations requiring no-fault insurers to make full written disclosure of the accident benefits being released at the time an insured person signs his or her rights away. This regulation also affords the insurance consumer the right to rescind the settlement during a 48-hour cooling-off period.⁹ Although this regulation was not in force at the relevant time in this case, first party insurers risk breaching their fundamental fiduciary obligation to their insured when they seek to push their inherently dominant bargaining position upon a weak, ignorant and needy individual without full disclosure.

I find that Mr. Dyer was in a weakened state. While he knew that he was releasing his rights to future benefits, I find he was not informed as to his potential future benefits. Mr. Dyer was entirely susceptible to GA's dominance at the bargaining table. The company should have terminated Mr. Dyer's benefits with a notice of assessment based on medical opinion, allowing Mr. Dyer time to consider his options.

GA more than likely knew that Mr. Dyer would sign the release just to get immediate money. In my opinion, this inequality of position stretches beyond strategic bargaining. It amounts to sharp practice.

However, in view of the medical and psychological opinions that Mr. Dyer could resume employment, I find that GA's $800 offer of two weeks of disability benefits is not grossly inadequate or unfair. Therefore, I find the settlement is not unconscionable.

Late Claim:

GA claims that Mr. Dyer is precluded from claiming further disability benefits because he did not file for mediation within the required time limitation. When an insurer refuses to pay a benefit, the claimant has two years from the notice date to contest the insurer’s refusal or non-payment of a benefit to file for mediation.¹⁰

Time Limit for Proceedings

A mediation proceeding under section 280 of the Insurance Act in respect of benefits under this Schedule must be commenced within two years of the insurer's refusal to pay the amount claimed in the application for no-fault 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.¹¹

The insurer's burden is to prove the event that triggers the commencement of the limitation period. The claimant must receive a clear and unequivocal refusal,¹² and the notice must set out the reason(s) for the refusal in writing.¹³ Arbitration decisions focus on whether claimants were sent either assessment notices or correspondence that are clear and unambiguous. GA argues that the release triggers the commencement of the two-year limitation period.

The standard release form is entitled "Release and Discharge." The first paragraph recites that Mr. Dyer will be paid $800. The second paragraph identifies that Mr. Dyer releases his claims against the company for weekly disability benefits as a result of the accident, excluding medical, rehabilitation and care benefit coverage. The third paragraph sets out that he gives up his right to mediate, arbitrate or litigate any claims, and in the fourth paragraph Mr. Dyer acknowledges that he releases all past, present and future injury claims. The $800 cheque and stub are typed with "final payment."

I have difficulty finding any similarity between a release and a termination notice. A release constitutes an agreement between two parties to resolve matters between them. A refusal to pay a benefit is a unilateral action by the insurer, mandated by legislation, to provide the insured person with notice of and reasons for the insurer's decision about his or her benefits.

Normally, reasons are not provided in a settlement agreement. While under the legislation, the insurer is required by law to clearly convey both the termination and reasons to an insured. I cannot accept that the drafters contemplated that a settlement agreement would suffice to satisfy the insurer's burden to provide the requisite notice to insureds.

Here, I find that neither the release or cheque provide Mr. Dyer with the required reasons for its refusal. GA has not satisfied its burden, and I find that the two-year limitation period did not commence October 26, 1993. There is no other evidence that GA provided a termination notice with reasons. Therefore, I find that Mr. Dyer’s application for mediation is timely. However, the release precludes Mr. Dyer's claim for further disability benefits.

EXPENSES:

Although unsuccessful, I find that Mr. Dyer's claim was sufficiently meritorious that I would award him his expenses of the arbitration process. I trust the parties can resolve the expense issue in the normal fashion.

July 22, 1999

Fred B. Sampliner Arbitrator

Date