Financial Services Commission of Ontario

Commission des services financiers de l'Ontario

Neutral Citation: 1999 ONFSCDRS 214

Appeal P99-00050

Appellant

and

Respondent

Before:

David R. Draper, Director's Delegate

Counsel:

Brian Bangay (for Jevco Insurance Company)

Robert H. Littlejohn (for Jeffery Blake)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The application for variation/revocation brought by Jevco Insurance Company from an interim arbitration order, dated September 14, 1999, with reasons provided on October 28, 1999, is rejected under Rule 47.2(b) of the Dispute Resolution Practice Code—Third Edition.
No appeal expenses are payable.

November 9, 1999

David R. Draper Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This is an application for variation/revocation brought by Jevco Insurance Company ("Jevco") from an arbitration order requiring it to pay interim income replacement benefits, plus interest, to Jeffrey Blake for the period from June 3, 1997 until 14 days after receipt of the Designated Assessment Centre report.

Because Jevco's application is from an interim order, leave is required. Rule 58.2 of the Dispute Resolution Practice Code—Third Edition states: "A party may not apply to vary or revoke a preliminary or interim order until all of the issues in dispute have been finally decided, unless the Director orders otherwise." The question addressed in this decision is whether the application should be allowed to proceed.

II. BACKGROUND AND ANALYSIS

Mr. Blake injured his right ankle in a motorcycle accident on October 13, 1994. As a result, Jevco paid him income replacement benefits ("IRBs") at $292.07 until June 2, 1997. Mr. Blake applied for mediation, claiming that his IRBs should be higher and disagreeing with the zero offer he received from Jevco for loss of earning capacity benefits ("LECBs"). When the disputes were not resolved, Mr. Blake applied for arbitration.

The procedural complications in this case involve the role of the Designated Assessment Centres ("DACs") under the SABS-1994.¹ The arbitrator found that Jevco arranged for WORK ABLE, a Designated Assessment Centre, to conduct a Residual Earning Capacity ("REC-DAC") assessment when Mr. Blake objected to its zero LECB offer. The assessment was scheduled to take place in February 1997, but Mr. Blake did not attend. Jevco corresponded with Mr. Blake's family doctor about the reasons for his non-attendance and then rescheduled the assessment. Mr. Blake attended at WORK ABLE over a two-week period starting March 31, 1997, undergoing a medical evaluation, a physiotherapy evaluation, a psychovocational assessment and a one-week situational assessment. The assessors issued a report dated May 1, 1997. Although the report is lengthy, including individual reports from the various assessors, the summary states: "The assessment findings do not represent a valid profile of Mr. Blake's ability to earn based on his poor effort secondary to a strong pain focus and the resultant poor worker behaviours evidenced. No residual earning capacity can be determined."

On May 23, 1997, Jevco wrote to Mr. Blake, stating that the REC-DAC had been unable to determine his residual earning capacity because he failed to co-operate. In the same letter, Jevco informed Mr. Blake that it was terminating his income replacement benefits, and would not be paying LECBs because his entitlement was zero.

The arbitration hearing was scheduled to start on July 19, 1999. However, despite an agreement reached at a pre-hearing discussion in June 1998, a follow-up Residual Earning Capacity - Designated Assessment Centre ("REC-DAC") had not been arranged. As a result, the arbitrator was faced with a number of preliminary issues.

First, Jevco argued that the arbitration should be stayed due to Mr. Blake's failure to co-operate with the REC-DAC. As the arbitrator points out, however, s.23(6) of the SABS-1994 gives REC-DACs a specific option if the insured person fails to co-operate—it can refuse to issue a report and inform the insurer that no report has been submitted because of the insured person's failure to co-operate. In that case, the insurer can notify that the insured person that it will be paying LECBs based on its offer until a REC-DAC report is received. Also, s.23(4) states that until there is a REC-DAC report, the dispute cannot proceed through the dispute resolution system.

In this case, WORK ABLE did not inform Jevco that it was not issuing a report due to Mr. Blake's failure to cooperate. It issued a report that, while flawed, does not state that Mr. Blake failed to cooperate. Those words are not used. Additionally, the occupational therapist involved in the assessment provided a statement clarifying her view that Mr. Blake had a serious injury and was not malingering. The arbitrator held, therefore, that s.23(6) did not apply.

Second, the arbitrator had to decide whether the hearing should be adjourned for another REC-DAC assessment. She felt that it would be helpful to have a report that complies with s.27(5) of the SABS-1994 and because WORK ABLE was able to do an assessment relatively quickly, she adjourned the IRB and LECB issues. There was also an issue about whether the first REC-DAC report should be considered in the hearing, but the arbitrator left that to be determined by the hearing arbitrator.

Third, Mr. Blake asked that the hearing proceed on his claim for housekeeping expenses. Jevco opposed the request, arguing that housekeeping expenses should only be dealt with on an interim basis, with any order being subject to review by the hearing arbitrator. The arbitrator held that because this was a discrete issue, not dependent on the weekly benefits claims, it could proceed. Based on the testimony of three witnesses and five exhibits, she concluded that Mr. Blake was entitled to housekeeping expenses, ordering Jevco to pay $500 for outstanding expenses and, thereafter, $50 per week.

Fourth, the arbitrator dealt with interim disbursements and benefits. She ordered that Jevco pay interim disbursements of $1,738, subject to a further order by the hearing arbitrator. This part of the order is not challenged in Jevco's application for variation/revocation. The contested issue is the arbitrator's order with respect to interim benefits, as follows:

Subject to further Order of the hearing arbitrator, Jevco shall pay Mr. Blake interim income replacement benefits at the rate of $292.07 from June 3, 1997 until 14 days after a REC DAC assessment report is received which fulfills the requirements of section 27(5) of the Schedule. Jevco shall pay these amounts forthwith. Thereafter, benefits should be paid in accordance with section 23(5) and 23(5.1) of the Schedule pending determination of the dispute.

The arbitrator's decision is based on her interpretation of the SABS-1994, particularly s.23(5). She rejected Jevco's submission that my decision in Lehman and GAN Canada Assurance Company, (OIC P97-00064, August 10, 1998) stands for the proposition that pending a REC-DAC report, the insurer can stop paying IRBs and pay LECBs according to its offer. I agree. The focus in Lehman was whether the 1994 version of the SABS-1994 applied, requiring the insurer to pay IRBs until the dispute was resolved.

The arbitrator followed three arbitration decisions, two decided after Lehman, holding that where the insured person rejects the insurer's offer in respect of residual earning capacity, or both residual earning capacity and pre-accident earning capacity, the insurer cannot switch to LECBs until 14 days after receiving the REC-DAC report.² This interpretation was recently approved by Director's Delegate Naylor in her appeal decision in Rocca³ Therefore, there is considerable support for the arbitrator's approach.

Jevco's objection stems from the timing of the arbitrator's orders. She decided at the hearing on July 19 or 20, 1999, to adjourn the hearing with respect to the amount of Mr. Blake's IRBs and LECBs, interest and expenses. This was confirmed in a letter dated July 28, 1999, scheduling the hearing for September 20-23, 1999. The letter also advised the parties that the decision on the other issues would follow shortly.

In the meantime, the REC-DAC assessment went ahead at WORK ABLE over two weeks in early August 1999. The report is dated September 13, 1999, and favours Jevco. Contrary to Mr. Blake's claim that his residual earning capacity is zero, the assessors found that it was $21,424 per year.

The arbitrator gave her remaining orders in letter form on September 14, 1999. There is no suggestion, however, that she was aware of the REC-DAC report.

After receiving the REC-DAC report, Mr. Blake asked for an adjournment of the upcoming arbitration hearing to allow him to obtain a labour market survey. Jevco did not consent, at least in part due to the fact that its counsel had not yet had a chance to review the REC-DAC report. After hearing submissions from counsel, the Registrar granted an adjournment until November 30, 1999.

At that point, Jevco applied for a variation or revocation of the arbitrator's order for interim benefits. This application was briefly put on hold until the arbitrator released her full reasons, which are dated October 28, 1999. I then heard oral submissions from counsel by telephone conference on November 4, 1999, with Mr. Blake arguing that the variation/revocation application should not be allowed to proceed.

Jevco argues that the new REC-DAC report confirms its position. It should not be penalized, it argues, because the first REC-DAC report is flawed. In Jevco's submission, the fairest solution is to let the second REC-DAC report stand in place of the first report. As a result, it would pay IRBs up to 14 days after receipt of the first report, and then would be entitled to pay according to its zero LECB offer.

While Jevco's position may be understandable, I am not persuaded for two reasons. First, the original REC-DAC report is not obviously unhelpful to Mr. Blake. It can be read to mean that his residual earning capacity was compromised by a legitimate pain problem. Second, and more importantly, the arbitrator made her decision based on the procedural obligations set out in the SABS-1994, recognizing that the second REC-DAC report might favour Jevco. I am not persuaded, therefore, that the application for variation/revocation should be allowed to proceed. The hearing is less than a month away. Jevco should pay the amounts ordered and pursue any remedies it feels are appropriate before the hearing arbitrator.