Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 1999 ONFSCDRS 233

Appeal P97-00051

OFFICE OF THE DIRECTOR OF ARBITRATIONS

HEATHER THOMPSON

Appellant

and

PEEL MUTUAL INSURANCE COMPANY

Respondent

Before:

Susan Naylor, Director’s Delegate

Counsel:

M. Stephen Rastin (for Heather Thompson)

S.J. Chip Petrillo (for Peel Mutual)

APPEAL ORDER

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

1. The appeal is dismissed and the arbitrator’s order dated August 20, 1997 is confirmed.

2. Heather Thompson is entitled to her filing fee plus 50% of the balance of her reasonable appeal expenses.

November 30, 1999

Susan Naylor Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This appeal concerns Heather Thompson’s entitlement to ongoing weekly income benefits after December 21, 1995. The statutory accident benefits rules that deal with accidents before January 1, 1994 - the Statutory Accident Benefits Schedule - Accidents before January 1, 1994, R.R.O. 1990, Reg. 672 (“the Schedule”) - apply in her case.¹

Mrs. Thompson was paid benefits to November 14, 1995, some weeks shy of the 156 week mark when the disability test changes. Shortly before the hearing, her insurer, Peel Mutual Insurance Company (“Peel”), agreed to bring benefits up to December 21, 1995, so as to restrict the hearing to the post-156 week disability test.

Mrs. Thompson was partially successful at arbitration. The arbitrator awarded her six months of additional benefits, but denied benefits beyond that time finding she would have been fit to do full-time work by then had she complied with a prescribed exercise regime. Mrs. Thompson argues the arbitrator exceeded his authority in penalising her for failing to make sufficient efforts to rehabilitate herself.

Mrs. Thompson does not appeal the denial of child care expenses, housekeeping expenses, physiotherapy and re-training costs. However, she appeals the arbitrator’s refusal to order Peel to pay a special award.

II. BACKGROUND

Mrs. Thompson was involved in an accident on December 14, 1992. She continues to suffer from low back pain which she says prevents her from performing her pre-accident job or alternative work.

A number of factors have complicated the situation. At the time of the accident, Mrs. Thompson was five months pregnant with her first child and had a history of back pain from endometriosis. She had a second child in mid-1994. Peel had concerns about Mrs. Thompson’s eligibility but ultimately agreed to pay weekly income benefits. It continued paying benefits until November 14, 1995. According to the arbitrator’s reasons, the decision to terminate benefits was made shortly after Peel received surveillance videotape which added to its concerns about the claim.

At the time her weekly income benefits stopped, Mrs. Thompson was in the course of a work hardening program. She went on to complete the program (which was funded by Peel) on November 24, 1995. The program involved a part-time work placement as a pharmacy assistant at a local drug store, with gradually increasing hours. The arbitrator held that this kind of work was a suitable alternative occupation, provided it was full-time.

The work trial was arranged in conjunction with an exercise program, developed by Mrs. Thompson’s physiotherapist, to improve her fitness and conditioning so she would be work-ready. Mrs. Thompson was doing the exercises at a local gym. Peel paid the cost of child care while Mrs. Thompson attended the gym and went to work. It terminated the child care expenses at the end of the work program.

After her weekly income benefits were terminated, Mrs. Thompson stopped going to the gym and doing her exercise program. She told the arbitrator she could not afford the cost of child care. She claimed that her condition deteriorated after her benefits ceased, blaming Peel for this, and sought ongoing weekly income benefits because she remained unable to manage full-time employment.

The arbitrator concluded that by the end of the work program in late November 1995, and by extension by December 21, 1995, (the 156 week mark), Mrs. Thompson was not yet ready for full-time work. He did find, however, that she was, on her own evidence, “just about capable of full-time work when benefits were terminated and ..needed just a little more time” (Decision, page 13). The arbitrator accepted that the trauma of the accident, along with other factors, materially contributed to Mrs. Thompson’s subsequent back pain, leading her to become deconditioned and requiring an exercise program to overcome her pain and improve her level of fitness.

The arbitrator went on to consider the duration of Mrs. Thompson’s disability. He found that by the time weekly income benefits were terminated, Mrs. Thompson did not need a supervised exercise program and could do the exercises on her own at home or at the gym. He rejected Mrs. Thompson’s explanation for discontinuing her exercise regime, finding that the gym provided an affordable child care service and that it was not clear, in any event, why Mrs. Thompson’s spouse could not help out with the children while she exercised at the gym or at home.

At page 13 of his decision, the arbitrator held that Mrs. Thompson was “responsible for her own motivation,” that she “needed to exercise to improve her fitness and overcome her pain,” and that “her failure to continue with her exercise program, either at home or at [the gym] was the sole cause of any continuing disability.”

The arbitrator then considered how long Mrs. Thompson would have needed to continue her exercise regime before being fully job-ready and ordered benefits for that additional period. He acknowledged that he received very little evidence on point, but referred to Mrs. Thompson’s own testimony, that of a colleague and her rehabilitation caseworker. The caseworker estimated that on October 20, 1995, when the caseworker’s services ended, Mrs. Thompson needed between eight and twelve months more exercise and treatment. Having regard to this evidence, the arbitrator concluded that “if Mrs. Thompson had continued with her exercise program for another eight months from October 20, 1995, she would have become fit enough to engage in full-time employment by June 20, 1996.” Accordingly, he awarded Mrs. Thompson benefits for the period December 21, 1995 (the start of the period in issue) to June 20, 1996.

Mrs. Thompson argues that the arbitrator inappropriately imported mitigation principles from contract and tort law and superimposed them on her claim for statutory benefits. She submits that the Schedule does not, either expressly or by necessary implication, impose a duty to mitigate or authorise the imposition of any penalty for non-compliance. The Schedule does not specifically address the obligation of insureds to pursue, or participate in, rehabilitation or prescribe consequences if a person fails to do so. In contrast, SABS-1994 and SABS-1996 specifically impose on insureds the responsibility to obtain reasonable treatment and participate in rehabilitation and allow insurers to reduce income replacement benefits by up to 50% if there is a failure to comply. There is a corresponding obligation on insureds to make reasonable efforts to return to their regular employment or obtain other appropriate work.² Mrs. Thompson submits these subsequent changes reinforce her position.

Mrs. Thompson relies on the decision of the Director of Arbitrations in Provenzano and Metropolitan Insurance Co. (OIC P-000380, August 26, 1993). In that case, the Director questioned whether she could “read into a no-fault insurance concept a contractual principle and require claimants to overcome an additional hurdle if they are prima facie entitled to income benefits under the Schedule.” The Director did not need to decide the question as she found there was no failure to mitigate. Mrs. Thompson argues that even in the context of disability insurance policies, the cases are not uniform in regards to the ability of courts to proportionately reduce benefits to which claimants have been found entitled, to reflect a failure to mitigate.³

In my view, the arbitrator did not impose an additional condition over and above the requirements of the Schedule. Rather, he considered Mrs. Thompson’s rehabilitation efforts as relevant evidence in determining whether she was disabled within the meaning of s. 12(1) and s. 12(5)(b) of the Schedule. In contrast, Provenzano and other decided cases raise the issue whether there is authority to reduce or eliminate benefits in respect of someone otherwise found to be entitled to them.

Entitlement to weekly income benefits depends on proof of the nature and extent of the individual’s disability. They are periodic payments and are paid only for the period of time the individual meets the requisite conditions. The person must be substantially unable to perform his or her essential employment tasks as a result of accident-related injuries. If the claim involves benefits for a period beyond 156 weeks, it must be established that “the injury continuously prevents the insured from engaging in any occupation or employment for which he or she is reasonably suited by education, training or experience” (Schedule, s.12(5)(b)). This contemplates an inquiry into whether the individual can do suitable work and if not, why not.

In numerous Commission cases, rehabilitation and return-to-work efforts have been regarded as relevant in determining whether the requisite degree of disability is established and its connection to the accident. Arbitrators have looked at whether, if an applicant’s level of functioning remains limited by pain, such limitations are a reasonable consequence of physical injuries or psychological problems related to the accident or whether they are attributable to the individual’s own self-limiting level of activity.⁴ These cases hold that an individual will not be held responsible for her condition if she suffers from psychological complications that explain why she has not taken appropriate steps to improve her level of functioning.

The principles emerging from the Commission cases do not break new ground, although their application may involve difficult questions of fact that must be decided appropriately on the evidence. Courts have considered similar factors in determining entitlement to accident benefits under Schedule – to the Insurance Act, R.S.O. 1980, c. 218, the predecessor to the Schedule,⁵ as well as in other disability contexts. The cases turn on the particular policy wording and context. However, the considerations reflected in the Commission cases are rooted in the entitlement requirements of the Schedule itself.

Entitlement to benefits under SABS-1994 or SABS-1996 will be determined in the context of those specific regimes. However, in my view, the changes to the regulations do not shed much light on the scope of factors that may be potentially relevant in determining disability under the Schedule. As stated in Bapoo v. Co-operators General Insurance Co. (1998), 1997 CanLII 6320 (ON CA), 36 O.R. (3d) 616 (C.A.), while legislative evolution may be a legitimate interpretative tool, the inferences to be drawn from changes in interpreting previous versions of the regulations are not necessarily clear. I do not find the conclusions to be drawn from the changes under consideration here self-evident.

In this case, I am not persuaded that the arbitrator erred in his disposition of Mrs. Thompson’s claim.

Mrs. Thompson sustained soft tissue injuries in the accident. According to the medical evidence, there was no lasting physical impairment. The prognosis for recovery was positive, with one exception, that of Mrs. Thompson’s family practitioner, whose evidence on point the arbitrator rejected. There was no potentially confusing divergence of opinion about treatment options. The arbitrator did not find that Mrs. Thompson suffered from significant psychological problems presenting a barrier to her own rehabilitation efforts or explaining continued disability. He found that the termination of benefits did not compromise Mrs. Thompson’s ability to continue with her exercise program or complete any further rehabilitation required. The competing demands of caring for a young family and coping with a long-term exercise program must be fairly recognised. However, the arbitrator’s findings in this regard were not challenged on appeal, nor is there any basis for concluding that they were unrealistic or unreasonable.

Mrs. Thompson relies on the fact that the arbitrator allowed benefits for some period of time. She suggests that since she did not improve, her benefits should have continued. I do not accept this position. Mrs. Thompson claimed weekly income benefits on an ongoing basis. By the time of the arbitration hearing, four-and-a-half years had elapsed since the accident. The arbitrator was prepared to accept that for some period of time after benefits were terminated it was reasonable to find a sufficient relationship between Mrs. Thompson’s limited level of functioning, her need for additional exercise and her rehabilitation needs. However, a finding that she met the criteria for entitlement as of December 21, 1995 does not amount to a finding that she continued to do so indefinitely.

In the end result, the arbitrator was simply not satisfied that the injuries Mrs. Thompson sustained in the accident continued to prevent her from engaging in suitable work. In determining the period of entitlement, he made allowances for the time it likely would have taken her to be job-ready if she followed the advice of her health care professionals to continue exercising. He estimated the time based on testimony adduced on that issue. He allowed a full six months extra benefits, even though, on her own evidence, Mrs. Thompson was nearly job-ready eight months earlier.

The arbitrator found that Mrs. Thompson would have become fit enough to engage in full-time employment had she continued exercising for another eight months. Mrs. Thompson complains that this finding was speculative and she should have been given an opportunity to adduce evidence as to the chances that the rehabilitation would not have worked. I am not persuaded that the arbitrator was unfair to Mrs. Thompson or that the evidence he relied on was inadequate. He was not called upon to assess damages⁶ but to determine, in retrospect, whether Mrs. Thompson was disabled within the meaning of s.12(5)(b) for a period up to the date of the hearing. He concluded that she probably would have been ready for full-time work after a further eight months and so was not disabled within the meaning of the Schedule beyond that time, on the evidence before him. This included the testimony of the caseworker in charge of coordinating Mrs. Thompson’s rehabilitation.

Mrs. Thompson distinguishes the cases cited on the basis that the arbitrator required her to take unilateral steps to rehabilitate herself after her weekly income benefits were wrongly terminated. She argues that Peel should bear the consequences until such time as it adopts a co-operative approach to her rehabilitation by re-instituting weekly income benefits and other payments and arranging further rehabilitation measures. She relies on an insurer’s obligation to act in the utmost good faith in dealing with its insured.

Mrs. Thompson’s weekly income benefits were terminated in the middle of a rehabilitation program. Such action on the part of an insurer deserves close scrutiny. However, a finding that a claimant is entitled to further benefits does not equate to a ruling that the insurer breached its obligation to act in good faith or that benefits were unreasonably terminated. If an insurer’s actions in prematurely terminating benefits compromise an insured’s rehabilitation, thereby delaying her recovery, the insurer will be liable for additional benefits. In addition, it risks a special award. Here, however, the arbitrator found that the insurer’s actions did not compromise Mrs. Thompson’s rehabilitation.

The date when an applicant ceases to be entitled to benefits may sometimes seem arbitrary. Director’s Delegate Draper faced such a complaint in Pisani and Simcoe & Erie General Insurance Co.; Pisani and Canadian General Insurance Co. (OIC P-0003529, and OIC P-005693, December 11, 1995). In that case, he stated that the determination of disability cannot necessarily be done with precision, and there is scope for an arbitrator to consider all the evidence and reach a result that is fair and sensible in the particular circumstances. In my view, this is what the arbitrator strove for here. I do not find that he erred in law in arriving at his conclusion, or that there is any basis to interfere with the result or to order a new hearing.

III. The Special Award

Mrs. Thompson also appeals the arbitrator’s refusal to grant her a special award under section 282(10) of the Insurance Act. The provision provides a remedy where benefits have been unreasonably denied. It reads:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the ....Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

Mrs. Thompson argues that the arbitrator erred in not finding that the termination of benefits was unreasonable. She complains that the arbitrator did not properly consider the significance of evidence that Mrs. Edmonstone, the insurer’s claims manager, made the decision to terminate benefits before she received medical evidence supporting the decision. She also states that, in considering whether Peel unreasonably withheld benefits, the arbitrator should have ignored the claims manager’s explanation that she was never satisfied as to the causal contribution of the accident and felt pressured into paying benefits.

In Maas and State Farm Mutual Automobile Insurance Co. (OIC P-002213, December 11, 1997), Director’s Delegate Draper commented on the nature of a special award. He noted that while such an award is not strictly discretionary, nonetheless, a finding of unreasonableness is highly dependent on the arbitrator’s view of the evidence. Therefore, deference should be given to the arbitrator’s findings on whether the insurer’s actions are unreasonable. Other cases have followed this approach and I adopt it here.

In his decision, the arbitrator indicated that Peel’s actions left something to be desired, but was not satisfied, when its actions were viewed in totality, that it unreasonably terminated benefits.

It is well-established that conduct giving rise to a special award need not be egregious or in bad faith. However, an insurer’s decision to terminate benefits is not necessarily unreasonable even though there may be some basis to criticise its actions. Where along the continuum a case falls is, largely, a matter within the judgment of the arbitrator hearing the evidence.

The arbitrator had the opportunity to hear the testimony of the witnesses, including the claims manager who was subjected to vigorous cross-examination. There is no basis to conclude that he failed to properly consider her testimony. Indeed, the transcript shows that the arbitrator questioned the claims manager about her testimony in relation to the very areas Mrs. Thompson complains about. I do not accept that the evidence directs a finding that Peel unreasonably withheld benefits. In all the circumstances, it was open to the arbitrator to fairly conclude that the termination was not unreasonable. While another adjudicator might have reached a different conclusion, the determination as to whether benefits were unreasonably withheld was best made by the arbitrator who appreciated the evidence first hand. I find no basis to interfere with the arbitrator’s decision.

III. EXPENSES

Mrs. Thompson seeks her appeal expenses. An award of expenses does not necessarily follow the result. Unsuccessful appellants have been awarded their expenses where their appeal raises an important issue, but expenses have been denied where the appeal simply involves a disagreement with the weight the arbitrator attributed to the evidence.

Mrs. Thompson’s appeal of the special award was in the latter category. It involved essentially the same arguments that had been put forward at arbitration. It was not a minor aspect of the appeal; a substantial part of Mrs. Thompson’s oral and written submissions was devoted to the issue.

I view the issue of mitigation differently. In my view, this raised reasonable questions including the implications of Provenzano and of the subsequent changes to the regulations. I am satisfied that this aspect of Mrs. Thompson’s case involved issues of sufficient significance justifying an expenses award. Having regard to all the circumstances, I award Mrs. Thompson the cost of her filing fee, together with 50% of the balance of her reasonable appeal expenses.

November 30, 1999

Susan Naylor Director’s Delegate

Date

In the absence of a rehabilitation clause, there is nevertheless an obligation on the claimant to undertake therapy or train for an alternative occupation...The disability insurance policy is a contract, and every plaintiff in a contract case has a duty to mitigate her loss:

Every plaintiff has a duty to minimise losses from personal injury by surgery or other medical treatment. The general rule of mitigation of damage applicable to both breach of contract and tort is that the aggrieved party must take all reasonable steps to mitigate the loss and cannot claim for avoidable loss...In the case of contract, damages for breach are reduced by the amount of loss that should have been avoided if the plaintiff had taken reasonable steps to mitigate...Failure to mitigate, however, does not mean that the total claim of the plaintiff is barred or has disappeared. It is merely reduced in cases of contract...to the loss the plaintiff would have suffered if he had acted reasonably.

However, in George v.Great-West Life Assurance Co. [1993] O.J. No. 1364 (Gen. Div.), Kennedy J. questioned the authorities that suggested an award could be reduced for a failure to mitigate, but concluded that, in any event, there was no such failure.

Footnotes

1. 1The two later schemes are the Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93, as amended (ASABS-1994”), and the Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, O. Reg. 403/96, as amended (ASABS-1996”).
2. 2SABS-1994, Part XVI and section 13; and SABS-1996, Part XII.
3. 3The state of the case-law was reviewed by R. Hayles in Disability Insurance - Canadian Law and Business Practices (Toronto: Carswell, 1994). Citing Blair J.A. in Ippolito v. Janiak (1982), 1981 CanLII 1677 (ON CA), 34 O.R. (2d) 151 (C.A.) aff’d (1985) 1985 CanLII 62 (SCC), 16 D.L.R. (4th) 1 (S.C.C.), as quoted in Martin v. Mutual of Omaha Insurance Co., [1992] I.L.R. 1-2795 (Gen. Div.), the author states at p. 274:
4. 4See e.g Audisho and State Farm Mutual Automobile Insurance Company, (OIC A-004981, November 7, 1994);Caron and General Accident Assurance Co. of Canada, (OIC A95-00264, February 24, 1998); Knott and Dominion of Canada General Insurance Co., (OIC A-951779, May 6, 1996); Fricke and Allstate Insurance Company of Canada, (OIC A-008892, September 28, 1995);
5. 5See, e.g. Newton v. General Accident Assurance Co. (1988) 31 C.C.L.I. 88; Roberts v. Safeco Insurance Co. (1988) A.C.W.S. (3d) 289
6. 6Ippolito v. Janiak (1985) 1985 CanLII 62 (SCC), 16 D.L.R. (4th) 1 at 19-20 confirms that, in damage assessments, the balance of probabilities test applies only to past events. With respect to what will happen or what would have happened, the court estimates “the chance of the relevant event occurring” and this chance, whether more or less than even, is “directly reflected in the amount of the damages” (p. 19-20). Wilson J. also comments on the relationship between mitigation and other concepts relating to the plaintiff’s post accident conduct (p. 18).