FINANCIAL SERVICES COMMISSION OF ONTARIO

Neutral Citation: 1999 ONFSCDRS 182 FSCO A98-001308

BETWEEN:

VINCENT A. DOUGLAS Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Shemin N. Manji

Heard: June 21, 1999, at the Offices of the Financial Services Commission of Ontario in Toronto. Written submissions were received by June 29, 1999 (on the preliminary issue) and June 30, 1999 (on expenses).

Appearances: Ms. Shalna Reid, Articling Student, from Mr. Davies Bagambiire's office, for Mr. Douglas. Mr. Bagambiire, Mr. Douglas' solicitor on record, did not attend at the hearing but made written submissions on the preliminary issue and on the issue of expenses subsequent to the hearing. H. Allan Bakker for Wawanesa Mutual Insurance Company

Issues:

The Applicant, Vincent A. Douglas, was injured in a motor vehicle accident on February 13, 1996. He applied for statutory accident benefits from Wawanesa Mutual Insurance Company ("Wawanesa"), payable under the Schedule.¹ Wawanesa did not pay Mr. Douglas any income replacement benefits. Mr. Douglas first applied for mediation in respect of his claim for weekly income replacement benefits in April 1996.² He subsequently withdrew this application for mediation. Mr. Douglas re-applied for mediation on April 28, 1998. The parties were unable to resolve their dispute through mediation, and in October 1998 Mr. Douglas applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Wawanesa submits that Mr. Douglas' applications for mediation and arbitration cannot proceed as they were filed after the two-year limitation period prescribed in the Insurance Act and Schedule.

The preliminary issues are:

1. Is Mr. Douglas precluded from proceeding to arbitration in respect of his claim for income replacement benefits because his applications for mediation and arbitration were filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 72(1) of the Schedule?

2. Is either party entitled to its expenses of this preliminary issue proceeding?

Result:

1. Mr. Douglas is not precluded from proceeding to arbitration in respect of his claim for income replacement benefits.

2. Wawanesa is entitled to its expenses for its attendance at and preparation for the hearing on April 20, 1999. Mr. Douglas is entitled to his expenses for his attendance at and preparation for the hearing on June 21, 1999.

EVIDENCE AND ANALYSIS:

Background and Issue:

On February 13, 1996, Mr. Douglas was driving his automobile, when he was hit by another automobile. The accident occurred on Highway 401 near the Brimley Road exit, in Toronto. Mr. Douglas sustained injuries in the accident. Following the accident he first attended at the Ajax-Pickering Hospital and subsequently at the office of his family doctor, Dr. W.B. Soutar. He complained of headaches and neck, back and chest pain. When Dr. Soutar examined him on March 7, 1996, he concluded that Mr. Douglas had sustained a moderately severe myofascial cervical, thoracic and lumbar strain and a bruised chest as a result of the accident. He was of the opinion that Mr. Douglas' symptoms were severe enough to disable him from all work and heavy activities of daily living. Dr. Soutar was of the opinion that Mr. Douglas was likely to be disabled for at least four to six more weeks.

In the 52 or 156 weeks prior to the accident, Mr. Douglas had been self-employed as a taxi driver. At the time of the accident, Mr. Douglas was employed with the Durham Roman Catholic Separate School Board as a teacher, although it is not clear from the evidence when he commenced this employment and whether this employment was full or part-time. Mr. Douglas initially reported the accident to and claimed statutory accident benefits from the company which had insured his automobile — OTIP/RAEO Insurance Company Inc. He was advised by that company that his automobile insurance policy had lapsed and that his automobile was not insured at the time of the accident. Mr. Douglas then reported the accident and made his claim for statutory accident benefits to Wawanesa who insured the motor vehicle that hit him.

Mr. Douglas' initial dealings with Wawanesa were verbal. The first document that was forwarded by or on behalf of Mr. Douglas to Wawanesa was Dr. Soutar's Health Practitioner's Certificate dated March 7, 1996. Mr. Douglas did not submit his Application for Accident Benefits until after he applied for mediation at the Commission and after he received an Explanation of Assessment by Insurance Company from Wawanesa. Mr. Douglas' Application for Mediation is dated April 1, 1996. Wawanesa's first Explanation of Assessment by Insurance Company is dated April 4, 1996. And, Mr. Douglas' Application for Accident Benefits is dated April 19, 1996.

Wawanesa issued a second Explanation of Assessment by Insurance Company after it received Mr. Douglas' Application for Accident Benefits. This Explanation of Assessment is dated April 25, 1996.

A mediation was scheduled between the parties for August 1, 1996. However, the mediation did not proceed on the scheduled date because sometime in July 1996 the mediator was advised by Mr. Douglas and/or his counsel, Mr. Davies Bagambiire, that there were no issues in dispute between Mr. Douglas and Wawanesa.³

Mr. Douglas re-applied for mediation in respect of his claim for income replacement benefits in April 1998. The mediation took place between May 11, 1998 and July 3, 1998 and failed. At mediation, Wawanesa raised the issue of whether Mr. Douglas was barred from proceeding to mediation because, according to Wawanesa, he did not apply for mediation within the time prescribed in the Schedule. Mr. Douglas subsequently applied for arbitration in October 1998.

In this arbitration, Wawanesa seeks an order, pursuant to subsection 281(5) of the Insurance Act and section 72 of the Schedule, prohibiting Mr. Douglas from proceeding to arbitration because of his failure to re-apply for mediation and to apply for arbitration within two years of April 4, 1996, or in the alternative, within two years of April 25, 1996 — the dates of its Explanations of Assessment by Insurance Company. Royal submits that both of its Explanations of Assessment by Insurance Company dated April 4 and April 25, 1996 advise Mr. Douglas of Wawanesa's refusal to pay Mr. Douglas any income replacement benefits.

subsection 281(5) of the Insurance Act provides that an insured person may only refer issues in dispute to an arbitrator 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. Section 72 of the Schedule requires that a mediation, as well as an arbitration proceeding, must be commenced within two years of the insurer's refusal to pay the amount claimed. It also extends the time limit for commencing an arbitration proceeding. As long as a mediation proceeding is commenced within two years of the insurer's refusal to pay benefits, the dispute can be referred to arbitration within ninety days after the mediator reports to the parties on the outcome of the mediation.

Wawanesa has raised a limitation period defence which must be strictly construed, because the result is to deny Mr. Douglas the opportunity to have his claim adjudicated. The words "the insurer's refusal to pay the benefit claimed" in subsection 281(5) of the Insurance Act have been interpreted strictly by arbitrators in numerous decisions starting with Zeppieri and Royal Insurance Company of Canada⁴ to require that the refusal be clear and unequivocal. The decisions have also stated that the burden of proof is on the insurer to establish that it provided the insured person with a clear and unequivocal refusal. I agree with these decisions.

In this case, I find that Mr. Douglas is not precluded from proceeding to mediation and arbitration in respect of his claim for income replacement benefits because there was no clear and unequivocal refusal to pay these particular benefits by Wawanesa until January 23, 1997 at the earliest. Mr. Douglas re-applied for mediation and applied for arbitration within two years of this date.

No Clear and Unequivocal Refusal

Wawanesa submits that it is clear from the fact that Mr. Douglas applied for mediation in April 1996 in respect of his claim for income replacement benefits, which application was subsequently withdrawn, that he considered that Wawanesa had refused or denied this claim prior to April 1996. Wawanesa submits that Mr. Douglas confirmed, in cross-examination, that when he filed for mediation he considered his claim for these benefits had been refused and he wanted to resolve this dispute with Wawanesa as soon as possible.

I did not understand Mr. Douglas' testimony to be that when he applied for mediation he considered his claim for benefits had been refused. In both his examination-in-chief and cross-examination, Mr. Douglas testified that he applied for mediation because he was not getting anywhere with Wawanesa. He testified that his calls were not being returned. He thought the mediation process would speed up the resolution of his claim for benefits. Even if it had been Mr. Douglas' belief that Wawanesa had refused his claim for income replacement benefits, the question still is whether there was a clear and unequivocal refusal to pay benefits by Wawanesa. As I stated recently in Goheen and Royal Insurance Company of Canada,⁵ I believe that the test is an objective one. An applicant's understanding of an alleged notice of refusal is not determinative of the issue. In this case, I heard no evidence that there was a clear and unequivocal refusal to pay income replacement benefits by Wawanesa before Mr. Douglas applied for mediation in April 1996. In any event, any refusal by Wawanesa would have been premature. Under subsection 62(8) of the Schedule, an insurer's obligation to give the insured person notice of its reasons for refusal arises after it receives an application for benefits:

If the insurer refuses to pay weekly benefits under Part II, it shall give the insured person notice of the reasons for the refusal,

(a) within 14 days after receiving an application for the benefits, if the refusal occurs before the application is approved;

(b) by the day on which it would have paid the next weekly benefit, if the refusal occurs after the application is approved.

Mr. Douglas had not even received the appropriate application forms from Wawanesa and had not submitted a formal application for income replacement benefits before he applied for mediation in April 1996.

Wawanesa submits that it is clear from both of its assessment forms dated April 4, 1996 and April 25, 1996 that it was refusing Mr. Douglas' claim for income replacement benefits. These assessment forms were both issued after Mr. Douglas applied for mediation.

The assessment forms on which Wawanesa relies are commonly used by insurers to advise insured persons of their decisions regarding benefits claimed. Each form states, in part, under the heading "Explanation of Assessment by Insurance Company:"

We have assessed your claim for accident benefits. This form tells you how we calculated your benefits. If you disagree with our assessment, please contact us immediately.

Below this statement, under a section entitled "Part 2: Weekly Benefits," the four categories of weekly benefits are listed, i.e., Income Replacement Benefits, Education Benefits, Caregiver Benefits and Other Disability Benefits. Under each category of weekly benefits, there are three boxes: Eligible, Not Eligible and Benefit Refused. Under the income replacement benefit category, there is also a larger box entitled "Notes on calculating your income replacement benefit, including income or payments from other sources." At the end of Part 2 there is a box entitled "Reasons benefit(s) refused and other information."

In the assessment form dated April 4, 1996, under the category "Income Replacement Benefits," Wawanesa checked the box marked "Not Eligible." The box entitled "Notes on calculating your income replacement benefit, including income or payments from other sources," was left blank. In the box entitled "Reasons benefit(s) refused and other information," Wawanesa wrote: "We must obtain further Information and Request the Entire Accident Benefit Be completed & Returned. Also, please provide us with a letter from your Insurer OTIP indicating lapsed policy. Please advise who provided you with the Health Practitioner's Form? Enclosed is an Accident Benefit Package"[sic].

I am not able to find, based on a reading of this form, that Wawanesa provided Mr. Douglas with a clear and unequivocal refusal to pay income replacement benefits. Wawanesa indicates in this form that it will only entertain a claim for income replacement benefits after Mr. Douglas has completed and returned the Application for Accident Benefits and after he has provided Wawanesa with a letter from OTIP confirming that his automobile policy had lapsed at the time of the accident.

Wawanesa's actions after this assessment form was sent to Mr. Douglas confirm that this form was not intended as a refusal to pay income replacement benefits. After Mr. Douglas submitted his Application for Accident Benefits dated April 19, 1996 to Wawanesa, Wawanesa sent Mr. Douglas the second assessment form and a letter dated April 25, 1996 in which it set out its assessment of his claim for income replacement benefits based on the information contained in his Application for Accident Benefits.

In any event, this first assessment form was premature. Mr. Douglas had not yet submitted the appropriate application for statutory accident benefits forms prior to receiving this assessment form from Wawanesa. It appears that Mr. Douglas received the appropriate application forms from Wawanesa for the first time with Wawanesa's assessment form of April 4, 1996.⁶

I am also not able to find that the second assessment form dated April 25, 1996 conveyed to Mr. Douglas clearly and unequivocally that he was being refused income replacement benefits. Under Part 2 of the form, entitled "Weekly Benefits, Income Replacement Benefits," the box marked "Eligible" was checked and the box marked "Benefit Refused" was also checked. And, in the box entitled "Reasons benefit(s) refused and other information," Wawanesa wrote: "We require your 1993, 1994 & 1995 Income Tax Return as filed with Revenue Canada in order to assess your claim/benefit."

The second assessment form indicates that Wawanesa was of the opinion that Mr. Douglas was eligible to receive the benefits claimed but that Wawanesa was withholding payment pending receipt of the requested documentation which would allow it to properly calculate the precise benefit payable. This is confirmed in the letter from Wawanesa to Mr. Douglas dated April 25, 1996 that accompanied the form. The letter states, in part, as follows:

UPON REVIEWING YOUR APPLICATION SUBMITTED TO US ON APRIL 25, 1996, WE REQUIRE YOUR 1993, 1994 AND 1995 INCOME TAX RETURN AS FILED WITH REVENUE CANADA. PLEASE SUBMIT YOUR TIME SHEETS FOR THE PERIOD YOU WERE SELF-EMPLOYED AS A TAXI DRIVER. THE ABOVE INFORMATION IS REQUIRED TO ESTABLISH THE MOST BENEFICIAL BENEFIT ALLOWED TO YOU. [Emphasis added]

A further letter to Mr. Douglas from Wawanesa dated June 17, 1996 further confirms that the second assessment form was not intended as an unequivocal refusal to pay weekly benefits. It states as follows:

I have received the Discharge Report, [sic] from the Canadian Back Institute, dated May 28, 1996, indicating your non-compliance with your rehabilitation program, as set out in the Client Agreement which you signed on May 17, 1996.

Please be advised that, notwithstanding that the issue of your entitlement to weekly income replacement benefits remains unresolved, this correspondence will serve as your notice that benefits will be reduced, in accordance with Part XVI, Section 73, a copy of which is attached for your information.

[Emphasis added]

Wawanesa submits that its statement in this letter that the issue of Mr. Douglas' entitlement to income replacement benefits remained unresolved, meant that the issue was unresolved after mediation was filed.

I do not accept this submission. The letter makes no reference to mediation. Rather, it indicates that Wawanesa had determined that Mr. Douglas was entitled to income replacement benefits (how could Mr. Douglas' benefits be reduced if he was not entitled to any?), however, it had not made a decision in respect of the amount to which he would be entitled.

In the circumstances of this case, I do not find that the limitation periods in subsection 281(5) of the Insurance Act and section 72 of the Schedule started to run on April 4, 1996 or on April 25, 1996.

Mr. Douglas did not submit the information requested from him by Wawanesa in its second assessment form and accompanying letter, in order for his benefits to be calculated. On January 23, 1997, in response to Mr. Bagambiire's letters asking for the reasons why Mr. Douglas was not receiving benefits, Wawanesa sent Mr. Bagambiire a letter wherein for the first time it set out its refusal and its reasons for refusal: "We wish to advise you that Mr. Douglas did not substantiate his wage loss claim with Wawanesa and therefore, was denied any benefits. He was also non-compliant with attending the Canadian Back Institute".

Thus, the earliest date on which I can find that the limitation periods in subsection 281(5) of the Insurance Act and section 72 of the Schedule started to run was January 23, 1997. Mr. Douglas applied for mediation in April 1998 and for arbitration in October 1998. Both applications were filed well within two years of January 23, 1997 — the date I find to be Wawanesa's refusal to pay income replacement benefits.

EXPENSES:

The criteria for awarding expenses are set out in Ontario Regulation 464/96 and section 73 of the Dispute Resolution Practice Code and include a consideration of the conduct of each party that tended to shorten or facilitate the proceeding or that tended to prolong, obstruct or hinder the proceeding.

The hearing of this preliminary issue was originally scheduled to take place at the offices of the Commission on April 20, 1999 at 10:00 a.m. Mr. Douglas' counsel, Mr. Bagambiire, did not appear at the hearing and the hearing was adjourned. Wawanesa submits that even if Mr. Douglas is successful in this case, Mr. Douglas should be ordered to pay Wawanesa's expenses for its attendance at the hearing scheduled for April 20, 1999.

Mr. Douglas submits that I should not make such an order. He submits that the reason Mr. Bagambiire did not appear at the hearing on April 20, 1999 was the T.T.C. strike that was in effect at the time. He submits that the strike made it impossible for Mr. Bagambiire to attend at the offices of the Commission even though he was ready and willing to be there. He submits that as soon as Mr. Bagambiire learned that he would not be able to attend at the Commission, he contacted and advised the Commission of his predicament. It was then determined that it would be proper to adjourn the hearing to a future date.

I do not accept Mr. Douglas' submission that Mr. Bagambiire contacted and advised the Commission of his predicament as soon as he learned that he would not be able to attend. The T.T.C. strike took place on April 19 and 20, 1999. Mr. Bagambiire could have called the Commission and Wawanesa's counsel earlier than on the morning of the hearing to advise that he would not be able to attend at the Commission so that Wawanesa would not have had to incur the expense of attending the hearing on April 20. At 10:39 a.m. on April 20, 1999, after the time the hearing was scheduled to commence, the Commission received, by facsimile, a letter from Mr. Bagambiire's office advising that Mr. Bagambiire would not be able to attend at the hearing because he was "...out of the office, without a vehicle and does not have any alternate means of transport due to the current TTC strike... "

I also do not accept Mr. Douglas' submission that the strike made it impossible for Mr. Bagambiire to attend at the offices of the Commission because he was without a vehicle. Mr. Bagambiire could have taken a taxi, rented a vehicle or asked a friend, relative, someone in his office or Mr. Douglas to give him a ride to the offices of the Commission.

In these circumstances, I agree with Wawanesa that it is entitled to its expenses for attendance at and preparation for the hearing on April 20, 1999.

In respect of the hearing on June 21, 1999, Mr. Bagambiire, once again, failed to attend at this hearing. He sent his articling student, Ms. Reid, to ask that the hearing be adjourned. I did not grant the adjournment and the hearing proceeded with Ms. Reid representing Mr. Douglas. Both Mr. Douglas and Wawanesa agree that the expenses for the hearing on June 21, 1999 should follow in the cause. However, Wawanesa submits that if expenses are awarded to Mr. Douglas, they should be reduced because Mr. Bagambiire himself failed to attend this hearing and even though the hearing proceeded in his absence, Mr. Bagambiire's failure to attend caused numerous delays during the hearing when Ms. Reid sought instructions from him.

I agree that Ms. Reid's need to seek instructions from Mr. Bagambiire, prior to the commencement and during the course of the hearing, lengthened the hearing. However, I note that Ms. Reid's conduct at the hearing also shortened the proceeding. She was very cooperative and did not object to Wawanesa filing as evidence quite a few documents, even though Mr. Douglas had not received any advance notice that Wawanesa would be relying on those documents at the hearing.

Mr. Douglas is entitled to expenses for his attendance at and preparation for the hearing on June 21, 1999.

September 24, 1999

Shemin N. Manji Arbitrator

Date

ARBITRATION ORDER

Neutral Citation: 1999 ONFSCDRS 182 FSCO A98-001308

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

VINCENT A. DOUGLAS Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY Insurer

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

1. Mr. Douglas may proceed to arbitration in respect of his claim for income replacement benefits.

2. Mr. Douglas shall pay Wawanesa its expenses of the hearing on April 20, 1999. Wawanesa shall pay Mr. Douglas his expenses of the hearing on June 21, 1999.

September 24, 1999

Shemin N. Manji 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. 2Mr. Douglas' Application for Mediation is dated April 1, 1996. However, I heard no evidence on precisely when this Application was submitted to the Mediation Unit at the Commission. The evidence is that it was sometime early in April.
3. 3Letter dated July 29, 1996 from the mediator at the Commission to Mr. Douglas and Mr. Bagambiire advising them that she was closing Mr. Douglas' file because they had recently indicated to her that there were no issues in dispute between Mr. Douglas and Wawanesa (Exhibit 10). I received no other evidence as to why the mediation did not proceed.
4. 4(OIC A-005237, February 17, 1994)
5. 5(FSCO A97-002130, August 25, 1999)
6. 6Subsection 59(2) of the Schedule requires the insurer, after it has been notified of the accident by the person who wants to apply for benefits under the Schedule, to promptly provide the person with the appropriate application forms, a written explanation of the benefits available under the Schedule and written information to assist the person in applying for benefits, including information to assist the person in making possible elections.