Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 1999 ONFSCDRS 174

Appeal P99-00002

Appellant

and

Respondent

Before:

David R. Draper, Director’s Delegate

Appearances:

Alan Leibovitch and Lorne A. Farovich (for Monica Simms)

Karen McGuire (for Markel Insurance)

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 19, 1998 is confirmed.
Markel Insurance Company of Canada shall pay Monica Simms appeal expenses fixed at $750.

September 20, 1999

David R. Draper Director’s Delegate

Date

This is an appeal by Monica Simms from an arbitration decision dated November 19, 1998. She claims the arbitrator erred in dismissing her application for arbitration on the basis that it was filed beyond the two-year limitation period. More specifically, she submits that the arbitrator erred in concluding:

(1) that the insurer’s letter, dated February 22, 1995, provided clear and unequivocal notice of termination; and

(2) that notice to Ms. Simms’ lawyer was sufficient to start the limitation period running, without a copy being sent to her.

The factual situation, as found by the arbitrator, is straightforward. Ms. Simms was injured on October 26, 1992, while a passenger on a TTC bus. She received accident benefits, including non-earner benefits of $185 per week and caregiver benefits of $50 per week under s.13 of R.R.O. 1990, Reg. 672, the Statutory Accident Benefits Schedule - Accidents Before January 1, 1994 (“the Schedule”). These weekly benefits continued until February 7, 1995, when they were terminated. Notice of the termination was sent to Ms. Simms’ lawyer, Mr. D. Wilson, by letter dated February 22, 1995. Enclosed with this letter was an Assessment of Claim by Insurer form and a report prepared by Workable Centres Inc.

Subsection 281(5) of the Insurance Act, R.S.O. 1990, c.I.8, states that an arbitration proceeding must be commenced within two years of the insurer’s refusal to pay the benefits claimed, or within such longer period as may be provided in the Schedule. The Schedule adjusts the time limit in recognition that mediation is a mandatory first step in the process:

(1) A mediation proceeding under section 280 of the Insurance Act in respect of benefits under this Schedule must be commenced within two years from the insurer’s refusal to pay the amount claimed in the application for statutory accident benefits . . .

(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.

Ms. Simms did not apply for mediation until May 5, 1997, more than two years after the termination letter and enclosures were sent to Mr. Wilson. The TTC raised the limitation issue, and the dispute was not resolved. At arbitration, Ms. Simms argued that the TTC’s notice of termination did not satisfy the requirements of s.24(8) of the Schedule:

(8) 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 the reasons for the refusal.

According to Ms. Simms, the TTC’s notice was deficient in two respects: it was not “clear and unequivocal,” and it was sent to her lawyer, not her.

A. “Clear and Unequivocal”

The two-year time limit runs from the insurer’s refusal to pay benefits. Therefore, notice of the refusal is critical. Subsection 24(8) of the Schedule requires the insurer to provide written notice with reasons for the refusal. Arbitration and appeal decisions have consistently demanded that the notice be “clear and unequivocal.”¹ I agree with this approach.

Ms. Simms does not argue that the arbitrator applied the wrong test, but claims she erred in applying it to the facts of the case. While it is not obvious this raises a question of law, as now required by s.283(1) of the Insurance Act, I find little merit in her argument.

The termination letter from the TTC to Mr. Wilson states as follows:

Further to your letter of February 1, 1995. We have now received the Workable Centres Inc. Orthopaedic Multidisciplinary Assessment and enclose a copy for your review.

It appears there is no further weekly disability entitlement and no further payments will be made subsequent to February 7, 1995.

Enclosed is the Ontario Automobile Assessment of Claim by Insurer. Thank you for your cooperation.

The Assessment of Claim by Insurer enclosed with the letter deals with three types of benefits: weekly non-earner benefits, caregiver benefits, and supplementary medical and rehabilitation benefits. With respect to supplementary medical and rehabilitation benefits, the box for “claim accepted in entirety” is checked. For both weekly non-earner and caregiver benefits, the box for “portion of claim denied” is checked. The form indicates that weekly non-earner benefits have been paid for the period November 2, 1992 through February 7, 1995, and that caregiver benefits will be paid for the same period. The explanations provided are as follows:

Weekly non-earner benefits: “Weekly benefits paid represents period of disability. Medical documentation no longer support an inability to perform daily essential tasks.”

Caregiver benefits: “Medical documentation no longer supports an inability to perform daily essential task.”

The report of Workable Centres, also enclosed with the TTC’s termination letter, concludes: “On the basis of the Functional Abilities Evaluation, it appears that Ms. Simms is able to perform all of her pre-accident essential tasks as a Caregiver/Homemaker.” The arbitrator did not accept Ms. Simm’s submission that the notice was deficient because the covering letter itself did not provide the reasons for the termination. Nor did she find the phrase, “it appears,” confusing. At page 6 of her decision, she concludes as follows:

Mr. Wilson had no trouble understanding the letter. On cross-examination, he testified that he understood it to mean that the TTC was not going to pay any more benefits. I find no ambiguity in the letter or the Workable report. I find the use of “it appears” to be merely polite, and I am not persuaded that this phrase detracts from the main point of the letter, which is that “no further payments will be made subsequent to February 7, 1995.”

I find that the TTC’s February 22, 1995, read together with the enclosed Assessment of Claim form and Workable report, provided clear and unequivocal notice of termination with written reasons, as required by subsection 24(8).

This conclusion is amply supported by the evidence. On appeal, Ms. Simms repeats her argument that the insurer’s letter must provide clear and unequivocal notice, without reliance on enclosures. I do not agree. While the Assessment of Claim by Insurer is not a legislated form under the Schedule, it is a standard form approved by the Commissioner of Insurance. Its use in this case was entirely appropriate. Further, I see no reason to criticize the TTC for enclosing the Workable Centres report with its termination letter. It was the basis of the decision to stop paying weekly benefits and, therefore, properly shared with Ms. Simms.

The arbitrator’s conclusion is strengthened when the termination letter is considered in context, as she did. By late November 1994, the TTC had concluded that Ms. Simms was not entitled to any further weekly benefits.² However, as a result of discussions between Mr. Wilson and the adjuster, her benefits were reinstated pending an assessment at Workable Centres.³ When the TTC received the report concluding that “it appears that Ms. Simms is able to perform all of her pre-accident essential tasks as a Caregiver/Homemaker,” the adjuster forwarded a copy to Mr. Wilson, advising that “no further payments will be made subsequent to February 7, 1995.” As set out above, this termination letter was supported by an Assessment of Claim by Insurer, stating that the medical documentation does not support entitlement to weekly benefits beyond February 7, 1995. It is difficult to see how the TTC could have been much clearer.

Finally, Ms. Simms contends that the test is not whether Mr. Wilson understood the termination notice, but whether she would have understood it if it had been sent to her. This argument confuses the “clear and unequivocal” issue with the question of notice to the insured person’s lawyer, dealt with below. In any event, it is my view that the termination letter and enclosures provided clear and unequivocal notice, whether directed to Mr. Wilson or Ms. Simms.

B. Notice to the Insured Person’s Lawyer

The more substantial question is whether the notice of termination was inadequate because it was not sent directly to Ms. Simms. However, for reasons that follow, I agree with the arbitrator’s analysis. Put simply, where an insured person has retained a lawyer to act on his or her behalf, it is appropriate for the insurer to communicate through the lawyer, not directly with the insured person.

Ms. Simms relies on s.24(8) of the Schedule, repeated here for easy reference:

(8) 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 the reasons for the refusal.

[emphasis added]

At the arbitration hearing, the TTC conceded that the notice of termination was sent to Mr. Wilson, not Ms. Simms. Mr. Wilson acknowledged receiving the notice, but could not remember discussing it with Ms. Simms. In the circumstances, the arbitrator was not satisfied that Ms. Simms knew or ought to have known that her weekly benefits had been terminated. However, she held, correctly in my view, that this did not end the matter. The remaining question was whether the wording of s.24(8) supersedes the common law rule that “notice to a solicitor about a matter of which it is part of the solicitor’s duty to inform himself or herself is actual notice to the client.”⁴

In her decision, the arbitrator expresses the view that insurers should, as a matter of policy, give notice to both the insured person and his or her lawyer. She concludes, however, that where the insured retains counsel to conduct all dealings with the insurer on her behalf, service on the lawyer is sufficient.

Ms. Simms argues, as she did at arbitration, that this interpretation is contrary to the plain meaning of s.28(4). While the section clearly requires notice to the insured person, nothing in the legislation restricts his or her right to be represented by a lawyer. As the TTC points out, it must respect this decision. Once a lawyer is involved, direct communication with the insured person can be seen as interference in the lawyer-client relationship. Ms. Simm’s literal interpretation would suggest the opposite approach C that the TTC was required to send notice to her, not her lawyer. Like the arbitrator, I am not persuaded this is the intended meaning of s.28(4).

Ms. Simms also contends that the arbitrator’s decision is contrary to previous arbitration and appeal decisions. In no other case, she argues, has adequate notice been found where the insured person did not know that his or her benefits had been terminated. However, two of the decisions deal with a different issue C the insurer’s inability to establish that its notice of refusal was received by anyone.⁵ More relevant are the decisions in Holguin and Allstate Insurance Company of Canada, (OIC A-009270, July 26, 1995) and Liberio and Constitution Insurance Company of Canada, (OIC A95-000422, September 11, 1996), both of which were considered by the arbitrator.

In Holguin, the insured person retained counsel who instructed the insurer to deal with them, not their client. As a result, all subsequent communications, including the insurer’s refusal to pay further weekly benefits, were sent to the lawyers, not the insured person. More than two years after weekly benefits were terminated, the insured person applied for arbitration, apparently without the involvement of the law firm. The arbitrator held that notice to the law firm was sufficient to start the limitation period:

In this case, Mr. Holguin hired lawyers, who notified Allstate in writing that all further communications should be directed to them. There is no doubt that the lawyers were retained by Mr. Holguin to act on his behalf during the relevant period. I am satisfied that Ms. Godden’s letter of September 3, 1992, meets the requirements of subsection 24(8) of the Schedule and of Statutory Condition 13 in these circumstances.

Furthermore, it was clear from Mr. Holguin’s testimony that he knew his benefits were being refused, and his subsequent conduct in commencing mediation and, eventually, the arbitration, indicate that he and his lawyers knew of the continuing refusal. I am satisfied that the notice was received in September 1992, which was approximately two years and six months before an application for arbitration was filed.

While the facts in Holguin are similar to Ms. Simms’ situation, the arbitrator found that Mr. Holguin knew his benefits were being terminated. That is not the case here.

In Liberio, another arbitrator expressed a different view about the sufficiency of notice to a representative C a legal assistant in a law firm. After rejecting the insurer’s argument that the dispute had been settled, the arbitrator also rejected its contention that the application for arbitration was out-of-time. The primary reason was that the refusal was not clear and unequivocal. As a result, her comments on service can be viewed as obiter. Nevertheless, she held that even if the insurer’s communications with the legal assistant had provided clear and unequivocal notice of its refusal to pay benefits, the limitation period would not have run because there was no evidence that the refusal was communicated to Mr. Liberio. Although the arbitrator refers to the Holguin decision, it is not clear whether she rejected its analysis or distinguished it on its facts.

The arbitrator followed the decision in Holguin, applying it despite Ms. Simms’ lack of knowledge. I agree with her reasons. In my opinion, she correctly considered the role of lawyers, concluding that notice under s.28(4) is properly given to a lawyer with actual or ostensible authority to receive it. To the extent that the decision is inconsistent with Liberio, I prefer it.

The obiter comments of Justice Greer in Dineff v. Progressive Casualty Insurance Company of America (1994), 1994 CanLII 7338 (ON CTGD), 21 O.R. (3d) 67 (Gen. Div.) provide some support for the arbitrator’s interpretation. The issue in that case was whether the insurer could send the accident benefits to the insured person despite instructions from her lawyers, with supporting documentation, that the benefits should be sent to them. Justice Greer issued a declaration that the insurer was not precluded from sending the benefits to the insured person, distinguishing the payment of benefits from notice:

Notice, however, is a legal concept. The insurer would have no problem using a solicitor’s address for such notice if the solicitor was prepared to accept notice on behalf of the insured.

Finally, Ms. Simms argues that the instructions given to the insurer in Holguin were much broader, challenging the arbitrator’s finding that she retained counsel to “conduct all dealings with the insurer on her behalf.”⁶ In support, she refers to the Direction sent with Mr. Wilson’s initial letter to the TTC. It instructs the TTC to send Mr. Wilson “any and all information which they may require from you, pertaining to myself.” In Ms. Simm’s submission, this does not reflect the kind of broad authority found by the arbitrator, or present in the Holguin case. Ms. Simms’ position ignores what actually happened. Mr. Wilson’s request for information was only the first step. He advanced her claims for accident benefits by arranging for medical assessments, submitting bills, negotiating with the adjuster to extend weekly benefits three times, and even having the benefit cheques sent to his office. All of this was done without objection from Ms. Simms. In the circumstances, the arbitrator had good reason to conclude that by the time weekly benefits were finally terminated in February 1995, the TTC was entitled to rely on Mr. Wilson’s authority to receive notice on behalf of Ms. Simms. Indeed, the objections would have been far stronger if it had failed to do so.

For these reasons, the appeal is dismissed.

III. APPEAL EXPENSES

Appeal expenses do not necessarily follow the result. The question is whether they are justified in favour of either party based on the criteria set out in R.R.O. 1990, Reg. 664, as amended by O.Reg. 464/96. Although Ms. Simms was unsuccessful, her appeal raised an issue of general importance on which there were inconsistent arbitration decisions. I am satisfied that she should recover her reasonable appeal expenses, although they should be limited. The arguments on appeal were essentially the same ones presented at arbitration, requiring little additional preparation. Also, I agree with the TTC that two representatives were not needed to present the appeal. In the circumstances, appeal expenses will be fixed at $750, inclusive of disbursements.