Neutral Citation: 1999 ONFSCDRS 175

FSCO A98-001271

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

FRANCESCA STRACUZZA

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Beth Allen

Heard:

By way of written submissions and documentary evidence which were received by June 28, 1999.

Appearances:

Andrew King for Ms. Stracuzza

Ian D. Kirby for Allstate Insurance Company of Canada

Issues:

The Applicant, Francesca Stracuzza, was injured in a motor vehicle accident on January 27, 1996. She applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("Allstate"), payable under the Schedule.¹ Allstate submits that Ms. Stracuzza qualifies for income replacement benefits (IRBs) under section 7 of the Schedule and accordingly paid this category of benefits from February 3, 1996 to April 12, 1996. Ms. Stracuzza claims that she qualifies for weekly education benefits (EDBs) pursuant to section 15 of the Schedule. Allstate says that if I find that Ms. Stracuzza is qualified for weekly EDBs, her claim is statute-barred since she filed for mediation beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act, R.S.O. 1990, c.I.8, as amended (the Act). The parties were unable to resolve their disputes through mediation, and Ms. Stracuzza applied for arbitration at the Financial Services Commission of Ontario under the Act.

The preliminary issues are:

1. Does Ms. Stracuzza qualify for weekly EDBs pursuant to subsection 15(1), paragraph 1 (iii) of the Schedule?

2. Is Ms. Stracuzza deemed to have elected to be paid EDBs pursuant to subsection 61(5) of the Schedule?

3. Is Ms. Stracuzza barred by the two-year limitation period in subsection 281(5) of the Act from proceeding to arbitration on the issue of her entitlement to weekly EDBs?

Result:

1. Ms. Stracuzza qualifies for weekly EDBs pursuant to subsection 15(1), paragraph 1 (ii) of the Schedule.

2. The deeming provision in subsection 61(5) does not apply in the circumstances of Ms. Stracuzza's case.

3. Ms. Stracuzza is not precluded by the limitation period in subsection 281(5) of the Act from proceeding to arbitration on the issue of her entitlement to weekly EDBs.

EVIDENCE AND ANALYSIS:

Background:

The parties proceeded by way of written submissions and supporting documentary evidence.

Ms. Stracuzza was involved in an accident on January 27, 1996. On May 5, 1995, approximately ten months before the accident, she completed the nine-month diploma portion of a course at Image Group Hairstyling Academy (Image), obtaining nail technology and hairstyling diplomas. She had graduated from secondary school three years before the accident. At the time of the accident, she was working as a hairstylist apprentice, doing the on-site practical portion of the apprenticeship, which she had commenced in September 1995 at "Suki", a division of Heads International Hairdressing Group Inc. There, she earned an hourly wage. Ms. Stracuzza had registered as an apprentice with the OntarioTraining and Adjustment Board on December 14, 1995. According to Ms. Stracuzza, she was unable to return to hairstyling due to her accident-related injuries until March 11, 1996, when she resumed her position at Suki on a part-time basis. She undertook full-time responsibilities at the end of April 1996. She claims that as a result of her injuries, she never completed her apprenticeship and therefore did not obtain her license.

Ms. Stracuzza applied for accident benefits by an Application for Accident Benefits dated February 12, 1996. Allstate paid IRBs under section 7 of the Schedule based on Ms. Stracuzza's income from Suki, at the rate of $135.96 per week from February 3, 1996 until April 12, 1996. Ms. Stracuzza argues that she is entitled under section 61 of the Schedule to elect to be paid EDBs under subsection 15(1) of the Schedule instead of IRBs and accordingly to be paid at the higher EDB rates² for the full two-year period from February 3, 1996 until January 26, 1998. At issue is whether Ms. Stracuzza qualifies for EDBs.

Subsection 15(1), paragraph 1 states:

15.- (1) An insured person who sustains an impairment as a result of an accident is entitled to a weekly education disability benefit if the insured person meets the following qualifications:

1. The insured person,

i. was less than sixteen years of age at the time of the accident,

ii. was enrolled on a full-time basis in elementary, secondary or post-secondary education at the time of the accident, or

iii. completed his or her education less than one year before the accident and was not employed, after completing his or her education and before the accident, in an employment that reflected his or her education or training.

The Parties' Submissions:

Subsection 15(1), paragraph 1(iii) of the Schedule provides a weekly EDB to insured persons who completed their education less than one year before the accident and were not employed at the time in a job reflecting their education and training. Ms. Stracuzza claims that she qualifies for a weekly EDB under subsection 15(1), paragraph 1(iii) because the accident occurred less than a year after she completed the diploma portion of the program. She further argues that the practical portion which she was attending at the time of the accident did not constitute employment reflecting her education and training. For insured persons qualifying under this provision, a benefit is payable for the period within two years of the accident that they suffer a substantial inability to engage in employment that reflects their education and training.

Section 61 permits an insured person who could be entitled to more than one weekly benefit, to elect which benefit she wishes to receive. The insurer is obligated to notify the insured of her optional benefit entitlements and election and, within 30 days of notification, the insured must elect the benefit she prefers. If the insured fails to elect within 30 days, she is deemed to have elected the highest weekly benefit.

Ms. Stracuzza submits that since she was entitled to elect to receive EDBs rather than IRBs, Allstate is required by the deeming provision, subsection 61(5), to pay her the higher EDB during the two-year period of her claim.

The relevant text from section 61 states:

61.- (1) No more than one weekly benefit shall be paid to an insured person under this Regulation for the same period of time.

(2) If it appears from an application for benefits under this Regulation that, in the absence of subsection (1), a person would be entitled to receive more than one weekly benefit under Part II, section 15 and Part IV, the insurer shall notify the person that the person must, within thirty days of receiving the notice, elect which weekly benefit he or she wishes to receive.

(3) Within thirty days of receiving the notice, the person shall elect which weekly benefit he or she wishes to receive

(4) Pending receipt of the person's election, the insurer shall pay one of the weekly benefits to which the person is entitled and, when the insurer receives the election, the insurer shall adjust the amount of the weekly payments retroactively to the date the person became entitled to the weekly benefits that the person has elected.

(5) If the person does not elect which benefit he or she wishes to receive within the thirty day period referred to in subsection (3), the person shall be deemed to have elected the highest weekly benefit.

Regarding the limitation issue, Ms. Stracuzza submits that the Explanation of Assessment dated February 29, 1996 which Allstate relies upon to trigger the limitation period, does not constitute a "refusal" of benefits as required by subsection 281(5) of the Act. Accordingly, she submits she is not barred from claiming EDBs. Subsection 281(5) states:

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 period as may be provided in the Statutory Accident Benefits Schedule. [emphasis added]

Allstate argues that Ms. Stracuzza was employed at the time of the accident and therefore qualifies for IRBs rather than EDBs. Allstate points to the fact that Ms. Stracuzza was employed by Suki as an apprentice and earned income from which the regular statutory deductions were taken. Allstate submits that section 7 of the Schedule, which provides IRBs for insured persons who were employed or somehow connected to employment in the various ways specified under this provision, applies to Ms. Stracuzza's case. Allstate also points to section 5 of the Schedule which states that "a person is employed if, for salary, wages, other remuneration or profit, the person is engaged in employment, including self-employment..."

Allstate cited the Moore³ arbitration decision where the applicant worked as an apprentice automobile mechanic and the amount of his income, and hence the quantum of his IRB, was in dispute. In considering the amount of his IRB, the applicant was treated as an employed person pursuant to section 5 of the Schedule.

Allstate submits in the alternative that, even if Ms. Stracuzza meets the requirements for an EDB, she filed for mediation (and therefore arbitration) of the EDB issue beyond the two-year limitation period provided in subsection 281(5) of the Act. Ms. Stracuzza's Application for Mediation was filed on June 9, 1998. Her Application for Arbitration contains two date-stamps by the Commission, September 30, 1998 and October 7, 1998. According to Allstate, the Explanation of Assessment by Insurance Company dated February 29, 1996 (the "Assessment") constitutes a refusal to pay EDBs and accordingly, the limitation period began to run from February 29, 1996.

Analysis:

Does Ms. Stracuzza qualify for an EDB?

I find that Ms. Stracuzza qualifies for EDBs rather than IRBs. I come to this conclusion by applying subsection 15(1), paragraph 1 (ii) of the Schedule rather than 15(1), paragraph 1 (iii), as Ms. Stracuzza argues. As I see it, the objective of Ms. Stracuzza's program was to acquire a hairstylist license, which goal would only be attainable once both the diploma and practical portions of the course were successfully completed.

Ms. Stracuzza brought evidence to show that her apprenticeship program meets the requirements of "post-secondary education" as contemplated by the Schedule.The Commissioner's Guideline No. 4/95, Guideline for Identifying Individuals Who Qualify for Education Disability Benefits, defines "post-secondary education level" as set out below:

.....includes programs taken at community colleges, universities and equivalent institutions approved by the minister responsible for education or programs taken at institutions in other jurisdictions with approval by a comparable authority. [emphasis added]

Ms. Stracuzza also filed evidence that indicates that Image (where she obtained her diplomas) is approved by the Ontario Ministry of Education and Training as a hairstyling school. She filed a copy of a License to Operate a Hairstyling School issued to Image by the Ministry. Evidence before me also indicates that Image is recognized by the Ontario Student Assistance Program (OSAP) for Canada Student Loans, which according to documents filed, is funding provided for "university, college or post-secondary school." Ms. Stracuzza also submitted an informational document about apprenticeship opportunities, issued by the Ministry, which reveals that the Ministry provides apprenticeship certification for hairstylists.This document also notes that apprenticeship programs require at least a grade 10 secondary school education, some requiring a higher level. This suggests that a person can only enter an apprenticeship program after completing some secondary school education.

Rather than viewing the in-class and practical portions of the training separately as Ms. Stracuzza did, I find that a more reasonable approach is to regard the practical portion of her apprenticeship at Suki, together with the preceding in-class, diploma portion of the program, as the complete post-secondary educational program. From this perspective, at the time of the accident, Ms. Stracuzza was doing the practical portion of her program as an apprentice hairstylist, the successful completion of which would have led to the objective of obtaining a hairstylist's license. Therefore, as required by subsection 15(1), paragraph at the time of the accident, Ms. Stracuzza was still enrolled on a full-time basis in a post-secondary education program.

Regarding Allstate’s reliance on the Moore case, I find that this case does not assist Allstate since it does not deal with the EDB issue.

Is Ms. Stracuzza entitled to an election under section 61?

According to the section 61 election provision, if it appeared from the Application that Ms. Stracuzza might be entitled to more than one benefit, Allstate would be obligated to notify her of her right to elect the benefit she preferred to be paid. From the information Ms. Stracuzza provided on her Application about attending school, it appears to me that this information indicates that Ms. Stracuzza could be entitled to EDBs. Allstate however found she did not qualify for EDBs and provided Ms. Stracuzza the Assessment advising her of the benefit to which it thought she was entitled. Consequently, Allstate did not meet its obligation under subsection 61(3) to notify Ms. Stracuzza of her right to an election and hence the deeming provision does not apply. Subsection 61(5) provides that if an insured fails to formally elect a category of benefits, she is deemed to have elected the higher benefit by default. EDBs are the higher benefit, so if Allstate had properly notified Ms. Stracuzza, she is deemed to have elected EDBs. This is however a moot point, since I ultimately find Ms. Stracuzza is qualified for EDBs.

Is Ms. Stracuzza’s claim for EDBs statute-barred?

Subsection 281(5) of the Act requires that an applicant apply for arbitration within two years after the insurer's refusal to pay "the benefit claimed." However, the Application for Accident Benefits form does not directly ask for an affirmative or negative answer as to whether an applicant is claiming a particular type of benefit, except as regards claims for expenses. The parts of the Application which pertain to the weekly benefits, ask applicants to provide background data pertaining to the particular type of benefit without requiring them to answer whether or not they are claiming that benefit. For instance, in the part of Ms. Stracuzza's Application entitled "Student Attending School," there is a checkmark in the "yes" box next to the question: "Were you attending school on a full-time basis at the time of the accident or had you completed your education less than one year before the accident?" Below this, the full name and address of Image is written along with the date last attended and the program or level. The appropriate part of the Application also contains employment information.

Although the Application does not expressly require an applicant to indicate whether she is claiming (a) particular weekly benefits(s) as contemplated by subsection 281(5), in the absence of evidence or arguments to the contrary, it is reasonable to infer under these circumstances, that Ms. Stracuzza intended to alternatively claim EDBs and IRBs. Allstate argues that the Explanation of Assessment by Insurance Company ("the Assessment") dated February 29, 1996, triggered the running of the two-year limitation period.

In the section of the Assessment entitled, "Other Disability Benefits," the "Not Eligible" box contains a checkmark. The comment box below the words, "Reasons benefit(s) refused and other information: (attach additional sheets if necessary)," contains the following statement:

Insured person does not qualify under s. 15(1) as employed in an occupation reflected in her education and training.

In the portion of the Assessment entitled, "Education Benefits," the box next to "Not Eligible" contains a checkmark, while the "Benefit Refused" box does not.

I agree with Ms. Stracuzza's submission that the Explanation of Assessment which Allstate relies upon as the refusal to pay benefits which triggered the limitation, is not actually a refusal of the benefit claimed as contemplated by the Schedule.TheZeppieri⁴ arbitration decision established important standards that must be met by notices of refusal.

The refusal relied upon must be clear and unequivocal, and must be communicated to the applicant. Section 24(8) of the regulation indicates that the notice must be in writing, and provide reasons for the refusal.The onus is on the insurer to establish that an applicant has received the proper notice.

Allstate did not provide a clear reason for finding Ms. Stracuzza ineligible for EDBs. As I see it, Allstate merely attempted to paraphrase a portion of subsection 15(1), paragraph 1 (iii) without explaining further the basis for its view that Ms. Stracuzza was engaged in employment reflecting her education and training. Moreover, the paraphrase actually misrepresents the test in subsection 15(1), paragraph (iii) by stating that Ms. Stracuzza "does not qualify under s.15(1) as employed in an occupation reflected in her education and training," when the test actually requires consideration of whether her "employment ... reflected... her education or training." [emphasis added]. This misstatement makes ambiguous Allstate's reason for finding Ms. Stracuzza ineligible for EDBs. In a recent arbitration case, I cited a principle which is appropriate in this case: "[L]imitation provisions must be strictly construed since the result may be a denial of substantive rights."⁵ I therefore find that the limitation period was not triggered by the February 29, 1996 Assessment.

Ms. Stracuzza's claim for EDBs under section 15 is not statute-barred from proceeding to arbitration.

EXPENSES:

The parties made no submissions as to expenses. The matter of expenses for this proceeding might best be decided at the conclusion of the hearing on the merits.

September 20, 1999

Beth Allen

Arbitrator

Date

Neutral Citation: 1999 ONFSCDRS 175

FSCO A98-001271

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

FRANCESCA STRACUZZA

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. Stracuzza is qualified for EDBs pursuant to subsection 15(1), paragraph 1(ii) of the Schedule.

2. The deeming provision under subsection 61(5) of the Schedule does not apply to Ms. Stracuzza's circumstances.

3. Ms. Stracuzza is not barred by the limitation period in subsection 281(5) of the Act from proceeding to arbitration on her entitlement to EDBs.

September 20, 1999

Beth Allen

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, 463/96 and 304/98.
2. 2According to the Report of Mediator dated August 27, 1998, Ms. Stracuzza claims an EDB at the rate of $244.47 per week (less the amounts already paid by Allstate and post-accident income she earned) from February 3, 1996 until December 31, 1996 and at the rate $254.55 per week from January 1, 1997 until December 31, 1997 and at the rate of $257.31 per week from January 1, 1998 until January 26, 1998.
3. 3Moore and Motor Vehicle Accident Claims Fund, (FSCO A96-000326, March 12, 1999)
4. 4Zeppieri and Royal Insurance Company of Canada,(OIC A-005237, February 17, 1994)
5. 5Zoubian and Zurich Insurance Company, (FSCO A98-001129, June 11, 1999)