Muriel Francis v. Allstate Insurance Company of Canada, 1999 ONFSCDRS 17

Neutral Citation: 1999 ONFSCDRS 17

FSCO A97-001109

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

MURIEL FRANCIS

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION ON A PRELIMINARY ISSUE

Before:

Dirk VanderBent

Heard:

October 29, 1998, in Kitchener, Ontario

Appearances:

Mark S. Grossman for Ms. Francis

John Pavoni for Allstate Insurance Company of Canada

Issues:

The Applicant, Muriel Francis, was injured in a motor vehicle accident on September 29, 1994. She applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("Allstate"), payable under the Schedule.¹ Allstate terminated payment of weekly caregiver benefits on August 24, 1995. The parties were unable to resolve their disputes through mediation, and Ms. Francis applied for arbitration at the Financial Services Commission of Ontario² under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue in this hearing is:

1. Is Ms. Francis' claim for weekly caregiver benefits out of time or "statute-barred", by reason of non-compliance with section 72(1) of the Schedule?

The main issue to be addressed is whether the two year limitation period runs from August 17, 1995, the date Ms. Francis first received notice from Allstate that it was terminating her weekly caregiver benefit. If so, her application for mediation, which was filed on October 10, 1997, was clearly out of time. However, Ms. Francis argues that the limitation period runs from October 25, 1997, the date that a report was received from the Designated Assessment Centre ("DAC") which conducted a disability assessment pursuant to section 64 of the Schedule. If she is correct, her application for mediation was filed in time.

Also, an ancillary question arose whether I should consider granting Ms. Francis a special award.

Result:

1. Ms. Francis applied for mediation within the prescribed time limits.

2. Ms. Francis' entitlement to a special award has not been addressed in this decision, and is deferred to the hearing arbitrator who adjudicates the dispute respecting her claim for weekly caregiver benefits.

EVIDENCE AND ANALYSIS:

Agreed Statement of Facts:

No witnesses testified at the hearing. The parties proceeded by way of agreed statement of facts and documentary exhibits. I have recorded the facts in detail, as the termination of Ms. Francis' weekly caregiver benefit, and the subsequent process conducted pursuant to section 64 of the Schedule³, is central to the arguments advanced on the limitation period issue.

Using an Explanation of Assessment form, completed on August 9, 1995, Allstate advised that Caregiver Benefits would be discontinued as of August 24, 1995, and stated "this serves as your 14 day notice". Ms. Francis was also advised that no further medical expenses, transportation or housekeeping expenses would be considered after August 11, 1995. This document was forwarded to her lawyer, Mr. McDonald, under cover of letter, dated August 11, 1995, and received by him on August 17, 1995. He in turn forwarded it to Ms. Francis on the same day by courier delivery.

By letter, dated August 29, 1995, received by Allstate on August 30, 1995, Mr. McDonald requested that Allstate arrange for an examination at a DAC, and requested that, in the interim, Allstate bring Ms. Francis up to date on her disability payments. As a result of this request, an assessment was arranged and the DAC assessor's report was issued on October 12, 1995, and received by Allstate on October 25, 1995. The report stated that Ms. Francis was not substantially disabled from performing her pre-injury roles as a caregiver.

Allstate prepared a further Explanation of Assessment, dated October 27, 1995, which stated that no further benefits were due to Ms. Francis based on the DAC assessment.

On October 10, 1997, Ms. Francis filed an Application for Mediation with the Ontario Insurance Commission. In this application, Ms. Francis disputed the termination of her Caregiver Benefits and Loss of Earning Capacity Benefits. Allstate responded, raising the issue of the limitation period, and the mediation failed.

On January 6, 1998, Ms. Francis filed an Application for Arbitration with the Commission.

Analysis:

In considering the limitation period issue, it is important to identify precisely when Allstate was permitted to terminate payment of Ms. Francis' weekly caregiver benefits. Pursuant to section 64(4) of the 1995 Schedule, Allstate could not terminate these benefits earlier than 14 days after Ms. Francis received Allstate's termination notice. On the facts, this date was September 1. As Ms. Francis delivered written notice requesting a DAC assessment, prior to September 1, she delivered her request within the 14 day time limit prescribed by section 64(3) and, accordingly, Allstate was prohibited from stopping payment of Ms. Francis' caregiver benefit until October 25, 1995, the date on which Allstate received the DAC report.

The statutory provisions relevant to the limitation period issue are as follows:

Section 281(5) of the Insurance Act provides:

(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. [emphasis added]

Section 72 of the Schedule provides:

(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 a benefit under this Regulation shall be commenced within two years from the insurer's refusal to pay the amount claimed . . .

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

[emphasis added]

Allstate argued that a "refusal to pay the amount claimed" refers to the insurer's decision to terminate benefits, as communicated in writing to the insured person. Allstate further asserted that a 'refusal to pay' is not synonymous with a 'stoppage of payment'. Allstate emphasized that the Schedule did not intend to give insured persons an automatic right to extend their entitlement by requesting a DAC assessment, (citing Henry and Allstate⁴ as authority for this proposition). As I understand Allstate's argument, the refusal contemplated by section 72 refers to an insurer's denial of an insured's continued entitlement to receive a benefit. Since the payment provisions of section 64 are not determinative of entitlement, it follows that section 64 should not qualify the interpretation of section 72 in any way. Ms. Francis argued that the limitation period in section 72 could not commence before the date Allstate was authorized by the Schedule to terminate her benefit. While section 72 is capable of being construed either way, I prefer Ms. Francis' interpretation.

It is important to note that a limitation defence must be strictly construed since it denies the insured person the opportunity to have her claim adjudicated.⁵ While I agree with Allstate that section 64 payment obligations do not automatically extend entitlement, neither section 72, or section 281(5) of the Insurance Act, refers to entitlement. Under both sections, the time limit commences upon an insurer's "refusal to pay" [emphasis added]. Paying a benefit is not synonymous with entitlement.⁶

The provisions of section 64 include directions respecting payment of weekly benefits. The question therefore is one of interpretation. Does section 72 stand alone, or can it be qualified by the provisions of section 64? Although not cited in the authorities provided to me, I note that a similar question arose in Bouassali and Zurich.⁷ The issue in Bouassali was whether oral communication of the insurer's refusal could trigger the commencement of the limitation period in section 26 of the former Schedule (which is virtually identical to section 72). Although section 26 was silent on the point, on appeal, Director's Delegate Naylor found that section 26 was qualified by section 24(8) which required the insurer to provide written notice of its refusal. In reaching this conclusion, she observed that the wording of section 24(8) tracked the language of section 26, as both sections referred to the insurer's refusal. She also stated:

s. 281(5) must be viewed in light of the regulatory scheme as a whole, and particularly the Schedule. It provides a minimum, base-line, two-year limit, which may be extended, but not reduced, in the Schedule. . . .

The limitation period set out in s. 281(5) is not a stand-alone provision, but forms part of an integrated package of rules governing entitlement to statutory accident benefits. The statutory provisions indicate that the scheme's objectives include clarity of process and a clear definition of the obligations of insurers and insureds to each other.

Section 64(1) provides that "An insurer shall not stop payment . . . except in accordance with this section." [emphasis added] I find that section 64 tracks the language of section 72, as section 64 limits an insurer's ability to refuse to pay a weekly benefit.

Allstate emphasized that section 64(13) provides that nothing in section 64 prevents an insured person from disputing a stoppage in benefits, and argued that this subsection suggests that section 64 was not intended to have any impact on the interpretation of section 72. I do not agree. First, it must be noted that the stoppage, referred to in this subsection, is the stoppage which takes effect at the time the DAC report is received. Hence this subsection does not provide further insight on this issue, one way or the other. Secondly, this argument ignores section 71.1, which delays an insured person's right to commence mediation when he/she has requested a section 64 assessment. If the limitation period was intended to commence upon receipt of the insurer's notice to terminate the weekly benefit, why would the insured person be barred from initiating an application for mediation until the DAC process is completed? Such an approach would, in my view, introduce inconsistency in the interpretation of the Schedule. One of the purposes of section 72 is to encourage insured persons to promptly pursue dispute resolution procedures. It would be inconsistent to fix the earliest date an insured person can be expected to file an Application for Mediation, at a time when the insured person is barred from filing such an application, pursuant to section 71.1.

To paraphrase the wording of Director's Delegate Naylor's decision in Bouassali, construing section 64 as part-and-parcel of a refusal of a claim as contemplated by the legislation, gives coherence to the framework of the regulations and is consistent with the objectives of the legislative scheme. Accordingly, I find that an insurer's refusal to pay an amount claimed, as contemplated by section 72, is circumscribed by the provisions of section 64. Where an insured person satisfies the requirements of section 64 to elect assessment by a DAC, the limitation period specified in section 72 does not commence until the insurer receives the report of the Designated Assessment Centre. I find, therefore, that Ms. Francis' application for mediation was filed in time.

Allstate alternatively argued that, even if section 64 could have the potential of delaying the effect of an insurer's refusal, the fact remains that in this case, no payments were made in accordance with section 64. Allstate asserted that Ms. Francis' dispute on this point arose on August 24, 1995 (the date payments were stopped) and, as she failed to apply for mediation of this issue within two years, her entire claim remains barred pursuant to section 72. I am not persuaded by this argument. First, I find that Allstate cannot rely on its own breach of the contract, in order to enforce a provision against Ms. Francis, particularly where this provision is a limitation defence. Secondly, the argument is somewhat circular. If the Schedule provides, as I have found, that the refusal contemplated by section 72 is the refusal made after the DAC report is delivered to the insurer, then it is this refusal which is the triggering event, not the insurer's failure to pay, or the existence of a cause of action.⁸

Given that I have decided the main issue in favour of Ms. Francis, it is not necessary for me to address her arguments respecting the deficiency of Allstate's notice. However, in the event that my decision on the main issue is incorrect, I include my findings on this issue.

Ms. Wilcox argued that Allstate's notice in August, 1995 was not clear and unequivocal, because it failed to comply with the requirements of section 64. I do not agree. I find that the Explanation of Assessment, dated August 9, 1995, was clear in its statement that benefits would discontinue, and any ambiguity respecting the finality of this position was eliminated by the covering correspondence which indicated that the payment to August 24, 1995 was the final payment Allstate would make. Any deficiencies in meeting the requirements of section 64 do not relate to the termination itself, which is clear and unambiguous. These deficiencies relate only to Ms. Francis' remedies in the face of Allstate's refusal. In any event, I find that Ms. Francis was not prejudiced by any deficiencies, as she clearly was aware that she was entitled to a DAC assessment, which Allstate arranged for her. Also, she was clearly aware of her right to receive weekly benefits until the DAC report was received.

Ms. Wilcox then argued that the second Explanation of Assessment, dated October 27, 1995, had the effect of obfuscating the August 24th notice, and therefore the latter notice effectively overrides the former. I am unable to accept this argument. Previous arbitration decisions make it clear that an insurer may further evaluate entitlement issues, and enter into settlement negotiations after a refusal to pay benefits, and that such conduct will not vitiate the refusal. In any event, the second notice did nothing but reaffirm Allstate's initial position, so it only served to reinforce Allstate's refusal, not obfuscate it.

In conclusion, I find that Allstate's correspondence dated August 11, 1995, and accompanying Explanation of Assessment, constituted clear and unequivocal notice of Allstate's intention to terminate the benefit. Had I not found in Ms. Francis' favour on the main issue, I would have concluded that her application for mediation was out of time.

Special Award:

Allstate still had not rectified its breach of its section 64 payment obligation to the date of this hearing, and I received no explanation for this conduct. While this suggests the possibility that Ms. Francis may be entitled to a special award pursuant to section 282(10) of the Insurance Act, I have not addressed this issue. This hearing was restricted solely to adjudication of the question whether Ms. Francis was barred from obtaining adjudication of her claim for weekly caregiver benefits. Section 282(10) provides for a special award "in addition to awarding the benefits and interest to which an insured person is entitled . . .". As I have not adjudicated the dispute respecting Ms. Francis' claim for caregiver benefits, I do not find that I am authorized to consider a special award at this time. Accordingly, Ms. Francis' entitlement to a special award will have to be considered by the arbitrator who adjudicates this claim.

Expenses of this hearing:

The parties did not make submissions to me on this issue, and I therefore have reserved making an order in this regard. The parties may return this issue before me, if they are unable to resolve the matter between themselves.

January 26, 1999

Dirk C. VanderBent Arbitrator

Date

Neutral Citation: 1999 ONFSCDRS 17

FSCO A97-001109

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

MURIEL FRANCIS

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Ms. Francis' claim for weekly caregiver benefits, is not barred by the provisions of section 281(5) of the Insursance Act, and section 72 of the Schedule.

2. Any claim for expenses of this hearing may be returned before me for adjudication if the parties are unable to resolve this issue.

January 26, 1999

Dirk C. VanderBent Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 635/94, 781/94 and 463/96. O.R. 776/93 was extensively modified by O.R. 781/94; accordingly, where necessary, "1994 Schedule "refers to the original O.R. 776/93, and "1995 Schedule "refers to O.R. 776/93 as amended.
2. 2Effective July 1, 1998, the Ontario Insurance Commission was changed to the Financial Services Commission of Ontario, pursuant to the Financial Services Commission of Ontario Act, S.O. 1997, c.28.
3. 3Although Ms. Francis' accident occurred in 1994, her benefit termination occurred in 1995, and I have therefore applied the 1995 Schedule. See Lehman and Gan Canada Insurance Company (FSCO P97-00064, August 10, 1998) appeal. Counsel agreed that this version of section 64 applied in the circumstances of this case.
4. 4(Henry and Allstate Insurance Company of Canada (OIC P96-00064, July 23, 1997) appeal
5. 5DiPietro and Allstate Insurance Company of Canada (OIC A97-001522, June 8, 1998)
6. 6Beason and Guardian Insurance Company of Canada (OIC P96-000018, December 4, 1996) appeal
7. 7Arbitration decision Bouassili and Zurich Insurance Company (FSCO A97-000029, August 28, 1998), upheld on appeal (FSCO P98-0039, November 20, 1998)
8. 8See Kirkham and State Farm Mutual Automobile Insurance Company (OIC P96-00069, January 27, 1997) appeal