Neutral Citation: 1999 ONFSCDRS 144

FSCO A99-000104

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

LILIANNE P. STRINGER

Applicant

and

ZURICH INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Asfaw Seife

Heard:

May 5, 1999, in Ottawa, Ontario

Appearances:

Douglas W. Smith for Mrs. Stringer

Peter G. Hagen for Zurich Insurance Company

Issues:

The preliminary issue in this case is whether Mrs. Stringer is precluded from proceeding to arbitration because her Application for Mediation was not filed within the two-year period prescribed under subsection 281(5) of the Insurance Act, R.S.O. 1990, c.I.8, and subsection 26(1) of the Schedule.¹

The parties filed an Agreed Statement of Facts and Ms. Stringer testified at the hearing. The facts are not contested. Ms. Stringer was injured in a motor vehicle accident on September 23, 1990. She applied for and received weekly income benefits, supplementary medical and rehabilitation benefits from Zurich Insurance Company ("Zurich") for nearly five years, under the Schedule.

By a letter dated August 17, 1995, Zurich wrote to Ms. Stringer as follows:

We wish to advise that as per the independent psychiatric evaluation by Dr. Selwyn Smith, there was no evidence to suggest that you have experienced a post-traumatic stress disorder and appropriate physical evaluation has not supported the diagnosis of any physical disorder. Further, there is a clear and convincing evidence that your difficulties predated the accident.

In view of this, we have to advise that your weekly benefits, housekeeping expenses and prescreiptions covers [sic] will be terminated as from August 26, 1995. Your last weekly benefit cheque for the period August 13, 1995 to August 26, 1995 has been requested from Zurich and will be sent to you direct. Regarding housekeeping expenses, we shall pay up to August 26, 1995 upon receipt of the supporting documents.

Ms. Stringer received the August 17, 1995 letter and the Assessment of Claim by Insurer form on August 21, 1995. She testified that she read the letter and understood from it that Zurich was refusing to pay her any benefits beyond August 26, 1995.

On August 25, 1995, Ms. Stringer contacted Teresa Fan, Zurich's agent, regarding the termination of her benefits. Ms. Fan advised her that Zurich would not change its position. Ms. Stringer advised Ms. Fan that she would get a lawyer to handle her case. Shortly after, Ms. Stringer contacted Mr. David Casey, the lawyer who had been representing her on this claim since 1993. She gave him the termination letter. Mr. Casey discussed with her the significance of the letter and told her that he would look after everything for her.

Ms. Stringer testified that she was under the impression that Mr. Casey was going to commence legal proceedings regarding the termination of her benefits; however, Mr. Casey did nothing. She subsequently found out that Mr. Casey was no longer practising law.

In December 1996, Ms. Stringer retained her present lawyer, Mr. Doug Smith. In May 1997, after receiving Ms. Stringer's file from Mr. Casey, Mr. Smith contacted Zurich in an effort to determine the status of Ms. Stringer's file. He was advised by a representative of Zurich that the last transaction date on the file had been May 10, 1996, and that the file was closed.

By letter dated November 1, 1997 (received by Zurich on November 17, 1997), Mr. Smith advised:

Since taking carriage of the file, I have had the opportunity to:

a) review the file of her first solicitor;

b) meet with both the client and her family on several occasions;

c) review all of the available medical documentation;

d) speak with Ms. Stringer's current physician.

I am confident that benefits were discontinued prematurely, as my client continues to suffer to this day in exactly the same fashion as she was prior to benefits being stopped. From my review of the file materials it would appear that the report of Dr. Selwyn M. Smith was instrumental in your company's decision to cease all benefit payments.

In an effort to respond to my client's situation, I am requesting that we proceed with mediation and that your offices forward the necessary mediation forms so that we may address my client's concerns and respond to the report of Dr. Smith. I can also indicate that my client is intent on proceeding with this matter and my instructions are to proceed with litigation should it prove impossible to reinstate her motor vehicle benefits.

Zurich forwarded mediation forms to Mr. Smith on November 17, 1997.

On July 28, 1998, almost three years after Zurich issued the termination letter, Ms. Stringer filed an Application for Mediation, seeking a reinstatement of her benefits. Mediation failed and the Report of Mediator was issued on November 4, 1998. On February 2, 1999, Mr. Smith filed an Application for Arbitration on behalf of Ms. Stringer.

Analysis:

Subsection 281(5) of the Act provides that 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 Schedule.

Subsection 26(1) of the Schedule states:

26.—(1) A mediation proceeding under section 280 of the Insurance Act or an arbitration or court proceeding under section 281 of the Act in respect of benefits under this 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.

Subsection 24(8) of the Schedule provides that if the insurer refuses to pay an amount claimed in an Application for Statutory Accident Benefits, the insurer shall forthwith give written notice to the insured person giving reasons for the refusal.

It has been established in several arbitration decisions that the notice under subsection 24(8) of the Schedule must communicate to the applicant the insurer's refusal to pay a benefit and the reasons for the refusal, in a clear and unequivocal manner.²

Zurich argues that its letter of August 17, 1995 and the Assessment of Claim by Insurer constitute proper notice of its refusal to pay under section 24(8) of the Schedule. Zurich contends that Ms. Stringer must be precluded from proceeding with the arbitration because she applied for mediation more than two years after Zurich's refusal to pay her benefits.

Ms. Stringer's counsel conceded that Zurich's notice of refusal is clear and unequivocal. However, he submitted that Ms. Stringer "understood the termination letter on the face of it but was not aware of the process." He stated: "The letter may be clear and unequivocal to others but not to Ms. Stringer." He stated that Ms. Stringer is an unsophisticated individual who relied on others to guide her. He stated that she has limited education, a language barrier and mental health problems which she suffered as a result of the accident.

I do not agree with Mr. Smith's submissions. Ms. Stringer testified in English, with occasional assistance from a French language interpreter. Contrary to Mr. Smith's assertion, she testified that she read and understood the letter of August 17, 1995 as being Zurich's refusal to pay her further benefits. She stated that she gave the letter to her first lawyer who apparently took no action on it. She retained Mr. Smith in December 1996. However, Ms. Stringer's Application for Mediation was not filed until July 28, 1998, almost three years after the termination of her benefits.

I find that Ms. Stringer did what an ordinary, unsophisticated person would do under the circumstances. She consulted with lawyers without delay and depended upon them to give her advice and to take the necessary legal steps to preserve her legal rights. Unfortunately, this was not done.

In the result, I find that Zurich gave Ms. Stringer a clear and unequivocal notice of its refusal to pay benefits on August 17, 1995. Ms. Stringer commenced mediation proceedings on July 28, 1998, more than two years after that date. Therefore, she is precluded from accessing the dispute resolution process.

EXPENSES:

The question of expenses is deferred. I may be spoken to if the parties are unable to agree on this issue.

July 22, 1999

Asfaw Seife Arbitrator

Date