Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 1999 ONFSCDRS 44 Appeal P98-00043

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ZURICH INSURANCE COMPANY Appellant

and

C.L. Respondent

Before: David R. Draper, Director's Delegate

Counsel: Lee Samis (for Zurich Insurance Company) Jean-Marc Lefebvre (for C.L.)

APPEAL ORDER

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

The appeal is allowed and paragraphs 1, 2, 4 and 5 of the arbitration order, dated August 19, 1998, are rescinded.
Unless the parties agree otherwise, a new arbitration hearing will be held before a different arbitrator appointed by the Director.
C.L. is entitled to her reasonable appeal expenses, payable by Zurich Insurance Company.

March 24, 1999

David R. Draper Director’s Delegate Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This is an appeal by Zurich Insurance Company ("Zurich") from an arbitration order dated August 19, 1998. It claims the arbitrator erred in concluding that the respondent, C.L., is entitled to ongoing weekly income benefits, housekeeping expenses and certain prescription expenses. Zurich also challenges her order requiring it to pay a special award of $2,000.

II. BACKGROUND

Mrs. L was involved in an automobile accident on October 8, 1991. She was taken by ambulance to the hospital, where she remained for three weeks. She was diagnosed with a fractured nose and compression fractures in her lower spine: a 35% anterior compression fracture at L1 and minimal compression fractures at T11 and T12. She was given a rigid brace to keep her spine in place, but her nose did not require surgery. Although her fractures healed well, Mrs. L continued to complain of disabling pain in her lower back.

At the time of the accident, Mrs. L was 55 years old. She was a homemaker, living with her husband in a small village between Ottawa and Montreal. Her life revolved around her home and family, including six children and 13 grandchildren. The arbitrator found that in addition to her housework and recreational activities, Mrs. L frequently babysat her grandchildren, looking after one or more of them during school holidays and when their parents were having marital problems.

Zurich accepted Mrs. L's claim and paid accident benefits under Ontario Regulation 672, as amended, the Statutory Accident Benefits Schedule - Accidents Before January 1, 1994 ("the Schedule'"). This included weekly benefits of $185 per week and housekeeping/personal care expenses of $175 per week. Zurich also retained Associative Rehabilitation Inc. ("ARI") to help Mrs. L with her rehabilitation. Through ARI and her caregivers, Mrs. L was provided various assistive devices, including staircase railings, a shower chair and bars, a portable back support and a cervical pillow. Additionally, she was referred for physiotherapy, a chronic pain management programme and psychological counselling.

Despite these interventions, Mrs. L continued to claim that she was unable to engage in many of her pre-accident activities. Zurich paid benefits for more than three years, but then terminated her housekeeping/personal care benefits on November 4, 1994, and her weekly benefits on June 5, 1995. The main issues at arbitration were whether Mrs. L was entitled to benefits beyond those dates.

The arbitration hearing took place over four days in December 1997. In addition to the documentary evidence presented by both parties, Mrs. L called six witnesses: herself; her husband, one of her daughters, a niece, her family doctor (Dr. John Fairfield) and an orthopaedic surgeon retained by her lawyer to prepare a medical-legal report (Dr. Denis R. Desjardins). Zurich did not call any witnesses. Following the hearing, the parties filed lengthy written submissions.

The arbitrator accepted Mrs. L's claim for weekly benefits, ordering Zurich to pay $185 per week from June 5, 1995 and ongoing, but only partially accepted the claim for housekeeping benefits. She ordered Zurich to pay housekeeping benefits from November 9, 1994 and ongoing, but at the rate of only $70 every four weeks. The arbitrator also ordered Zurich to pay certain prescription expenses. Finally, she ordered Zurich to pay a special award of $2,000, inclusive of interest, on the basis that it unreasonably terminated Mrs. L's housekeeping/caregiver benefits. Zurich appeals from these orders.

III. THE APPEAL

The scope of the appeal should be clarified. The Insurance Act, R.S.O. 1990, c.I.8, was amended to limit appeals to questions of law. However, this restriction applies only to arbitrations commenced on or after November 1, 1996, when the amendments came into effect.¹ Because Mrs. L's application for arbitration was received just before this date, the appeal is not limited to questions of law. However, previous decisions make it clear that even under the earlier provisions, factual findings will not be lightly disturbed on appeal.

Zurich's appeal arguments are extensive, challenging the arbitrator's factual findings, her interpretation of the legislation and her application of the law to the facts of this case. The arguments can be divided into five categories:

The arbitrator made a number of findings that are unsupported by the evidence.
The arbitrator failed to deal adequately with the impact of Mrs. L's other problems, unrelated to the accident, on her ability to engage in various tasks.
The arbitrator did not place sufficient importance on Mrs. L's failure to pursue treatment and rehabilitation.
The arbitrator applied the wrong test of entitlement under s.13(8)(b) of the Schedule.

Due to the nature of the arguments, I reviewed the entire record, including a full transcript of the arbitration hearing. This clearly was a difficult case. Mrs. L does considerably less than she did before the accident, largely due to back pain she attributes to the accident. However, the arbitrator had to deal with the difficult issues of whether Mrs. L was continuously prevented from engaging in her normal activities, whether her limitations were due to her accident-related injuries, not her many other unrelated problems, and whether the activities she was prevented from engaging in represented substantially all of her normal activities. While Zurich raises significant questions about the arbitrator's factual findings, I am most concerned with her interpretation of the post-156 week test in s.13(8)(b) of the Schedule.

A. The Post-156 Week Test

Mrs. L's weekly benefits were initially paid under s.13(1) of the Schedule. Entitlement under this provision is based on a "substantial inability to perform the essential tasks in which . . . she would normally engage" (emphasis added). However, the test changes after 156 weeks:

13.- (8) The insurer is not required to pay a weekly benefit under this section,

(b) for any period in excess of 156 weeks unless it has been established that the injury continuously prevents the insured person from engaging in substantially all of the activities in which the person would normally engage.

(emphasis added)

This is a stricter test, paralleling the change in the test for employed persons in s.12. While many arbitration and appeal decisions have considered the post-156 week test in s.12, relatively few have interpreted s.13(8)(b).² However, there are also some decisions under the successor to the Schedule, considering language very similar to s.13.³

The arbitrator extracted four principles from the previous decisions:

(1) One must view a particular activity as a whole and not focus exclusively on its constituent elements.

(2) One must look at the quality of the activity (i.e., whether the individual's ability to carry out the activity is changed markedly or the character of the activity is not comparable).

(3) In determining whether the person is prevented from engaging in an activity, the focus is on what he or she can do independently. Assistance and modifications should be considered only to the extent that they are reasonable and practical.

(4) Deciding whether the person's disability extends to substantially all of his or her activities does not involve a numeric calculation. As one arbitrator interpreted it, it means "most or nearly all" activities.

The arbitrator then applied these principles to the facts of this case, concluding as follows:

I find on the evidence that pain from her injuries affects all of the activities in which Mrs. L would normally engage, albeit to varying degrees. Applying the principles above I would categorize her pre-accident activities as follows: personal care, household chores, meal preparation (particularly in conjunction with entertaining children and grandchildren on Sundays and holidays), looking after children, walking or driving short distances, walking or driving long distances, weeding the garden, sexual relations, riding a bicycle, cross-country skiing, dancing and running errands. I find that she can engage in substantially all of her personal care activities, walk short distances (a block or so) and drive short distances such as to Alexandria, 7 miles away. I find that Mrs. L is continuously prevented from engaging in the remainder of her activities. In particular I find that as Mrs. L is now a passive participant in family gatherings and visits with grandchildren, where she formerly hosted these events and did all the work, she cannot be said to be engaging in the same activity because it has so markedly changed. I find the activities in which she is continuously prevented from engaging to make up most of or substantially all of the activities in which she would normally engage.

I find therefore that Mrs. L is entitled to benefits pursuant to subsection 13(8)(b) of the Schedule from June 5, 1995 and ongoing.

With respect, I am unable to agree with this analysis. Instead of treating s.13(8)(b) as a stricter test, I am left with the impression that the arbitrator broadened the test, with Mrs. L's entitlement turning on her reduced ability to engage in non-essential activities. This stems, in my opinion, from a misinterpretation of s.13(8)(b).

I have no difficulty with the arbitrator's first principle, taken from the Urquhart decision, that activities should not be unreasonably broken down into their constituent tasks. For example, the proper question is whether the person's injuries prevent him or her from showering, not whether he or she can do each individual, physical act involved in showering. However, neither the Urquhart decision nor this principle suggests the kind of grouping of activities done by the arbitrator.

As I understand it, the arbitrator's approach involves grouping the person's pre-accident activities into logical categories, asking whether he or she is prevented from engaging in substantially all of the activities in that category, and then asking whether he or is prevented from engaging in substantially all of the categories of activities.⁴ The problem with this approach is that the outcome depends on how the activities are categorized. Looking at the decision, the arbitrator chose categories which suggest that Mrs. L's household chores and personal care are to be treated the same as activities such as weeding the garden and cross-country skiing. That cannot be correct.

The problems with the arbitrator's categorization approach are amplified by her fourth principle. The post-156 week test requires the insured person to establish that he or she is prevented from engaging in substantially all of his or her normal activities. The arbitrator refers to and seems to apply the J.P. decision, interpreting "substantially all" to mean "most or nearly all." In my opinion, however, "most" is not an appropriate synonym for "substantially all," because it suggests a simple majority. As stated in the Sheppard decision, the test is not met by establishing that the insured person is unable to engage in a "goodly number" or even a majority of his or her pre-accident activities.⁵ Consequently, Mrs. L's entitlement cannot rest on the arbitrator's finding that she is unable to engage in "most of or substantially all of the activities in which she would ordinarily engage."

I also have reservations about the arbitrator's use of the second and third principles. As principles, I agree that the quality of the activity and the need for assistance are considerations. At some point, a person's ability to engage in an activity may be so limited, or so dependent on assistance, that it cannot be realistically said that he or she is capable of engaging in that activity. However, the wording of s.13(8)(b) must be respected. "Continuously prevented" imposes a higher standard than "substantial inability," the wording used in the pre-156 week test in s.13(1). I agree with the analysis in Urquhart, followed in Sheppard, that any qualitative analysis of the person's ability to engage in an activity must be done against the backdrop of the ultimate question - whether he or she is continuously prevented from engaging in that activity.

The test in s.13(8)(b) is a strict one. This is reflected, properly in my view, in decisions such as Urquhart and Marchildon. As a general approach, I accept the following analysis from Marchildon:

While the pre-156 test focuses only on essential tasks, the post-156 test focuses on substantially all activities in which the insured would normally engage. Thus, an applicant must establish inability, not only with respect to his or her essential tasks, but with substantially all the activities in which he or she would normally engage. The degree of functional impairment is also stricter. Pre-156, the applicant must establish that he or she suffers a substantial inability to engage in the essential tasks. Post-156, the applicant must establish that he or she is continuously prevented from engaging in the relevant activities.

While the post-156 test is strict, it should not be read so strictly as to make it virtually impossible for anyone to qualify. In cases such as the present one, where pain is the primary factor which allegedly prevents the Applicant from engaging in her former activities, the question is not whether the Applicant can physically do these activities, but whether the degree of pain she experiences, either at the time, or subsequently, is such that she is practically prevented from engaging in those activities.

After reviewing the record, it is not obvious that Mrs. L would have qualified for ongoing benefits if the arbitrator had applied the proper test. As an example, I agree with Zurich that it is difficult to reconcile the arbitrator's conclusion that Mrs. L needs housekeeping assistance for only two days every four weeks with a finding that she is continuously prevented from engaging in substantially all of her normal pre-accident activities. However, Zurich conceded, and I agree, that I am not in a position to substitute my own opinion. Therefore, unless the parties are able to resolve the dispute, it will need to be reheard by another arbitrator, including any issues that Zurich may have about repayment.

This is not to ignore Zurich's other arguments about Mrs. L's entitlement to weekly benefits and housekeeping expenses. However, given my conclusion that the dispute must be reheard, I am reluctant to address the evidence in any detail.

B. Special Award

The arbitrator ordered Zurich to pay a special award of $2,000, inclusive of interest, on the basis that it acted unreasonably in terminating Mrs. L's housekeeping benefits. Zurich challenges this order on two grounds. First, it claims it did not have adequate notice that it was facing such an order. Second, it submits that the evidence does not support a finding that it unreasonably withheld or delayed the payment of any benefits.

On the procedural issue, I am not persuaded by Zurich's argument. It was alerted to the possibility of a special award at the pre-hearing held in May 1997, seven months before the hearing. Despite Zurich's objections, the pre-hearing arbitrator ordered that Mrs. L's claim for a special award would be included in the hearing as long as she provided particulars within 30 days. Mrs. L met her obligation when her lawyer sent particulars to Zurich's lawyers by letter dated June 4, 1997.

While the arbitrator was entitled to consider ordering a special award, I conclude that her findings do not support the order. Mrs. L argued that Zurich unreasonably terminated both her weekly benefits and housekeeping benefits. With respect to the weekly benefits under s.13 of the Schedule, the arbitrator held that although she reached a different conclusion, Zurich's refusal to pay benefits beyond 1995 was not unreasonable. Therefore, she did not order a special award due to the non-payment of weekly benefits.

According to the arbitrator, Zurich stopped paying housekeeper benefits because Mrs. L was no longer willing to comply with rehabilitation and because she no longer needed paid housekeeping services because her husband had taken on the work. At page 22 of her decision, the arbitrator states that although she found legitimate reasons for Mrs. L's non-participation in rehabilitation, she found "no fault with the Insurer's failure to come to the same conclusion." She clearly had sympathy for Zurich's position, finding that it "was faced with an unusual and intractable challenge in Mrs. L and that it fully explored all conventional methods in trying to assist her to resume her daily activities."

Having found that Zurich had an acceptable basis for terminating the benefits, I would have expected that to be the end of the inquiry. However, the arbitrator goes on to say that Zurich clearly applied the wrong test in refusing to pay housekeeper benefits because Mr. L was already doing the work. In the arbitrator's opinion, this was unreasonable and deserving of a special award.

I am not persuaded that benefits can be unreasonably withheld or delayed where the insurer had an acceptable basis for not paying them, even if its second reason was wrong. The situation might have been different if the arbitrator had found that the termination was based on the second reason, not the first, but that was not her finding. Therefore, even if I had upheld the other parts of the arbitration order, I would have rescinded the special award. This does not suggest, however, that arbitrator rehearing the matter is precluded from considering a special award based on the evidence presented at that hearing.

C. Form of the Order

Zurich also objects to the form of arbitration order in paragraphs 1 and 2, ordering it to pay ongoing benefits at a particular amount. While it acknowledges that arbitrators often use this wording, it contends the order is overly broad, leaving insurers unable to deal with changes in the person's entitlement. For example, Zurich suggests that the insurer would be required to continue paying benefits at the rate ordered even if the insured person started receiving income or collateral benefits that are clearly deductible. Taken to the extreme, the insurer might be obliged to continue paying benefits even if the insured person dies.

Although Zurich's concerns are understandable, the ongoing nature of arbitration orders is specifically contemplated in s.287 of the Insurance Act. This section prevents insurers from reducing benefits ordered by an arbitrator unless the insured person agrees or a new order is made in an appeal or variation proceeding.

This issue, while interesting, need not be decided in this appeal. It is better left for the consideration of arbitrations, both as a general question and in the context of the specific cases before them.

IV. APPEAL EXPENSES

To its credit, Zurich did not oppose Mrs. L's request for appeal expenses whatever the outcome. The parties are encouraged to agree on the amount. If that is not possible, an assessment can be arranged through the Registrar's office.