Neutral Citation: 1999 ONFSCDRS 81

FSCO A97-002118

BETWEEN:

MANKESHWAR KURICHH

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Donald Hale

Heard: April 26, 1999, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Ravinder Sawhney for Mr. Kurichh

Joanna M. Chadwick for Allstate Insurance Company of Canada

Issues:

The Applicant, Mankeshwar Kurichh, was injured in a motor vehicle accident on June 29, 1991. He applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("Allstate"), payable under the Schedule.¹ Allstate terminated weekly income benefits on June 30, 1994. The parties were unable to resolve their disputes through mediation, and Mr. Kurichh applied for arbitration at the Financial Services Commission of Ontario ("FSCO") under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

Is Mr. Kurichh precluded from proceeding to arbitration because his application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 26(1) of the Schedule?

Result:

Mr. Kurichh is precluded from proceeding to arbitration on the issue of his entitlement to weekly income replacement benefits because the application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 26(1) of the Schedule.

Background

As noted above, Mr. Kurichh was injured in an automobile accident on June 29, 1991. He applied for and received weekly income benefits of $185 per week pursuant to section 12(1) of the Schedule beginning on July 6, 1991. In addition, the Insurer paid various claims relating to Supplementary Medical and Rehabilitation Benefits under section 6 of the Schedule. By letter dated May 19, 1994, Mr. Hisham Fahmy, Senior Staff Claim Representative with Allstate, advised Mr. Kurichh's counsel, Mr. Murray Ages, that the three-year anniversary of the accident would occur on June 29, 1994 and that Mr. Kurichh would no longer qualify for any "disability or rehabilitation benefits". Further to this communication, on June 27, 1994 Mr. Fahmy again wrote to Mr. Ages indicating that Mr. Kurichh's "rehabilitation and disability benefits will be discontinued as of June 30th."

Attached to this second letter was an Assessment of Claim form stating that "your disability and rehabilitation benefits will cease as of June 30th." On July 13, 1994, Mr. Kurichh telephoned Mr. Fahmy and communicated his displeasure at having his weekly income benefits terminated. Mr. Fahmy's notes of this conversation clearly indicate that he told Mr. Kurichh that Allstate would not reinstate these benefits. By letter dated August 25, 1994, Mr. Ages advised Mr. Fahmy that he had "contacted the Ontario Insurance Commission for their mediation forms with regard to loss of income."

Throughout the fall of 1994, 1995 and the early part of 1996, Mr. Fahmy continued to periodically contact Mr. Kurichh directly. At the preliminary issue hearing, Mr. Fahmy referred to notes which he made contemporaneously with these contacts. Mr. Fahmy stated clearly, and his notes confirm, that at no time did he indicate to Mr. Kurichh, either directly or indirectly, that Allstate would consider reinstating Mr. Kurichh's weekly income benefits. The issues which were addressed in these discussions appear to relate primarily to Mr. Kurichh's claims for reimbursement for property damage to his automobile and for medical and rehabilitation benefits. On July 26, 1995 and December 15, 1995, Mr. Fahmy met with Mr. Kurichh at his home. During these meetings, an offer was made to settle all of Mr. Kurichh's outstanding claims. This offer was not accepted by Mr. Kurichh.

By letter dated May 10, 1996, Allstate was notified by Mr. Ravinder Sawhney that he was now acting as Mr. Kurichh's solicitor. On July 9, 1996, Mr. Sawhney applied for mediation of Mr. Kurichh's claim for on-going weekly benefits, as well as further Supplementary Medical Rehabilitation and Care benefits. The mediation of this dispute took place on September 23, 1996 by way of a telephone conference call involving the mediator, Mr. Kurichh, Mr. Sawhney and Mr. Fahmy. The Report of Mediator dated September 23, 1996 clearly describes the results of the mediation and sets out in detail the result that was reached regarding each of the issues addressed in the mediation, including the weekly income benefit claim. The Report of Mediator was mailed to the parties on September 23, 1996. Mr. Fahmy's notes of the mediation discussion indicate that the mediation failed. Mr. Kurichh stated in his evidence that neither he nor Mr. Sawhney received a copy of the Report of Mediator until Mr. Sawhney requested a copy directly from the Mediator on September 5, 1997.

On June 27, 1997, Mr. Sawhney forwarded to the Mediator copies of certain records relating to a claim for transportation expenses which had been advanced at the mediation on September 23, 1996. He stated in the covering letter to those records that "I look forward to a quick continuation and a formal close of the mediation based on the enclosed documents." On August 21, 1997, Mr. Sawhney again wrote to the Mediator expressing his belief that "the matters of dispute have not been finally mediated yet..." and that "The mediation of all issues is to be continued so that we can proceed to arbitration if mediation fails."

Following his receipt of the Report of Mediator on or about September 5, 1997, Mr. Sawhney filed an Application for Arbitration on November 19, 1997. Among the issues included in the application is the question of Mr. Kurichh's entitlement to weekly income benefits of $185 per week from June 30, 1994. In its response, Allstate raised the application of section 281(5) of the Insurance Act as a statutory bar to a claim for weekly income benefits as this claim was not brought within two years of the date when those benefits were terminated.

Arguments

Mr. Kurichh disputes the Insurer's position that he is statute-barred from proceeding to arbitration on the issue of his entitlement to weekly income benefits. He submits that the mediation which occurred on September 23, 1996 remained ongoing as issues relating to transportation expenses were still unresolved, pending his submission of the necessary proof of claim, which took place on June 27, 1997. For this reason, and because he alleges that he and his counsel were not provided with the Report of Mediator until September 5, 1997, Mr. Kurichh suggests that the limitation period described in section 26(1) of the Schedule did not expire until ninety days following the conclusion of mediation, i.e. December 5, 1997.

Mr. Kurichh also argues that the termination of benefits notice provided by Allstate on June 27, 1994 was insufficient as it indicated that "rehabilitation and disability" benefits were being terminated as of June 30, 1994, without specifying that this in fact referred to the weekly income benefit under section 12 of the Schedule.

Mr. Kurichh submits that Allstate is also precluded from relying on the operation of the statutory limitation period as a result of its actions. Mr. Kurichh suggests that as a result of his conversations with Mr. Fahmy in July and December 1995, he was left with the impression that the issue of the reinstatement of his weekly income benefit remained open. He relies on the fact that settlement offers were made on these occasions as proof that Allstate had not closed the door on this aspect of his claim. Mr. Kurichh is also of the view that the discussions which he had with a rehabilitation consultant retained by Allstate and with Mr. Fahmy throughout 1995 and 1996 with respect to the provision of a home "work station" demonstrated Allstate's understanding that the issue of the reinstatement of his weekly income benefit was still under consideration.

Mr. Kurichh submits that the Application for Arbitration was made within the time prescribed by the Insurance Act and the Schedule and that FSCO is at fault in not providing either he or his counsel with copies of the Report of Mediator until nearly a year after the mediation took place. Accordingly, Mr. Kurichh suggests that both FSCO and the Insurer are estopped from relying on the limitation period as it was FSCO's error which led to the delay in filing the Application for Arbitration. In support of this argument, Mr. Kurichh relies on the decision of Mr. Justice Somers of the Ontario Court (General Division) in Cordova v. Allstate Insurance Company of Canada (1998) 1998 CanLII 14706 (ON CTGD), 41 O.R. (3d) 795 where it was held, at pg. 799, that "it behooves the insurance company to follow precisely the statutory requirements." This case addressed a situation where a regulation dealing with the settlement of a claim under the Insurance Act was not fully complied with by the Insurer. Mr. Justice Somers declined to give effect to the settlement because the regulation was not adhered to by the Insurer. Mr. Kurichh submits that in the present circumstances the Insurer should also be required to adhere strictly to its statutory obligations.

Allstate relies on the application of section 281(5) of the Insurance Act which states:

A proceeding in a court or an arbitration proceeding in respect of no-fault benefits must be commenced within two years after the insurer's refusal to pay the benefit claimed or within such longer period as may be provided in the No-fault Benefits Schedule.

The two year limitation period is extended as a result of the operation of section 26(2) which states:

Despite subsection (1), an arbitration or court proceeding under section 281 of the Insurance Act may be commenced within ninety days after the mediator reports to the parties under subsection 280(8) of the Act.

Allstate submits that because the Application for Arbitration was not filed until November 19, 1997, it falls outside the statutory limitation period and Mr. Kurichh is, accordingly, precluded from proceeding to arbitration on the issue of his entitlement to weekly income benefits. At the preliminary issue hearing, the Insurer also pointed out that since the Application for Mediation was not filed until July 9, 1996, it too falls outside the two-year time period prescribed by section 26(1) of the Schedule as it ought to have been filed within two years of the date of the termination of benefits, i.e. before June 30, 1996. However, for the reasons explained below, it is not necessary for me to address this issue.

Allstate maintains that the termination notice provided to Mr. Kurichh's counsel, Mr. Ages, on June 27, 1994 gave clear and unequivocal notice of its intention to discontinue the payment of weekly income benefits after June 30, 1994. It argues that despite the use of the words "disability benefits" rather than weekly income benefits, both Mr. Kurichh and his counsel clearly understood the import of the termination. In support of this statement, Allstate refers to the notes taken by Mr. Fahmy following his telephone conversation with Mr. Kurichh on July 13, 1994 and Mr. Ages' letter of August 25, 1994 in which he indicates his intention to bring an Application for Mediation on the issue of "loss of income".

Allstate also relies on the evidence of Mr. Fahmy and his contemporaneous notes of his conversations with Mr. Kurichh to support its position that at no time did Allstate indicate to the Applicant or his counsel that the issue of entitlement to weekly income benefits was open for discussion. While Mr. Fahmy readily acknowledges that discussions took place in 1994, 1995 and 1996 with respect to the other aspects of Mr. Kurichh's accident benefits claim, and that settlement discussions took place in July and December 1995, his evidence was clear that at no time did Allstate indicate to Mr. Kurichh that the subject of his income benefits was still in issue.

Allstate also points out that no evidence was tendered which would demonstrate that its representatives gave any indication of its intention to waive the application of the limitation period or agreed to its extension. Similarly, Allstate argues that there is no evidence that its representatives took any actions which could be construed as placing it in a position where it is estopped from relying on the limitation period.

Allstate relies on the decision of Mr. Justice Cavarzan of the Ontario Court of Justice (General Division) in Greenidge v. State Farm Mutual Insurance Co. [1997] O.J. No. 5243, which was confirmed by the Ontario Court of Appeal on February 1, 1999 [1999] O.J. No. 232. In deciding not to grant relief from forfeiture under section 129 of the Insurance Act, in a situation where an action under section 281(1) of the Act had been commenced beyond the statutory limitation period, the Court held that:

In my opinion the provisions relied upon by the defendant are not mere procedural steps for obtaining benefits under the contract of insurance; they constitute a condition precedent. A failure to comply with this condition precedent is not an instance of imperfect compliance; it is non-compliance for which the court has no discretion to grant relief under section 129 of the Insurance Act.

Allstate also relies on the decision of Arbitrator Naylor in Zeppieri and Royal Insurance Co. of Canada (OIC A-005237, February 17, 1994), which was confirmed on appeal (OIC P-005237, December 22, 1994) by Director of Arbitrations Sachs. Allstate submits that the facts of that case are similar to the present one and address the application of the same statutory provisions. At page 7 of the arbitration decision, a two-step process is referred to in determining whether a limitation period applies in the circumstances:

First, it is necessary to ask whether, and when, there was a refusal to pay benefits; and second, whether the insurer may rely on a limitation period that runs from the date of the refusal.

Allstate submits that there was a clear and unequivocal refusal to pay weekly income benefits after June 30, 1994. It also argues that it is entitled to rely on the limitation period as it did not conduct itself in such a manner as to raise a question of estoppel and did not waive its right to rely on the limitation period.

Finally, Allstate submits that if a statutory limitation period applies in the circumstances of this case, I have no discretion to extend the time or to grant relief from forfeiture following the decision in Greenidge.

Analysis and Conclusion

In Zeppieri, the issue to be determined was when the limitation period claimed by the Insurer started to run. This is also the issue which I am required to adjudicate. Allstate submits that the two-year limitation period started to run from the date of the termination of Mr. Kurichh's weekly income benefits, on June 30, 1994. It also recognizes that the time for filing the application was extended for a further ninety days following the conclusion of the mediation on September 23, 1996, or until December 22, 1996. Accordingly, Allstate submits that the Application for Arbitration made on behalf of Mr. Kurichh on November 19, 1997 was filed outside the limitation period, which had expired nearly eleven months earlier. Mr. Kurichh argues that the limitation period did not begin to run until his counsel received a copy of the Report of Mediator on or about September 5, 1997, in which case the Application for Arbitration made on November 19, 1997 was timely.

I find that the termination notice provided to the Applicant's counsel by letter dated June 27, 1994 was a clear and unequivocal statement of Allstate's intention to cease paying weekly income and rehabilitation benefits as of June 30, 1994. In my view, the evidence tendered by the Insurer with respect to the discussion between Mr. Kurichh and Mr. Fahmy on July 13, 1994 demonstrates that Mr. Kurichh understood that his weekly income benefits had been cancelled as a result of the June 27, 1996 notice. In addition, Mr. Ages, who was Mr. Kurichh's counsel at the time, advised Allstate on August 25, 1994 of his intention to seek mediation on the issue of "income loss", thereby demonstrating his understanding that Mr. Kurichh's weekly benefits were terminated.

In my view, the plain wording of Allstate's June 27, 1994 letter and the accompanying Assessment form leave no doubt that Allstate's payment of these benefits was going to end effective June 30, 1994. I find that the actions of Mr. Kurichh and Mr. Ages demonstrate their recognition of this fact. I cannot agree with the submissions of Mr. Kurichh that this notice was invalid as it did not specifically refer to weekly income benefits. In my view, the evidence is clear that the parties understood the consequences of the notice and the information which it conveyed. Accordingly, I find that the two-year limitation period began to run on June 30, 1994, which is the date of the "Insurer's refusal to pay the benefit claimed" as prescribed by section 281(5).

I also accept the evidence of Mr. Fahmy that at no time during his discussions with Mr. Kurichh during late 1994, 1995 and early 1996 did he indicate that Allstate was reconsidering the reinstatement of weekly income benefits. On the contrary, I find that Mr. Fahmy consistently took the position with Mr. Kurichh that the continuation of these benefits past the 156-week point was "not an issue" with Allstate. For this reason, I do not accept Mr. Kurichh's position that Allstate's conduct may have led him to believe that his weekly income benefits would be reinstated at some point following their termination on June 30, 1994. While information was exchanged and payments made for other medical/rehabilitation benefits during this period, it cannot be said that Allstate's conduct was relied upon by Mr. Kurichh to his detriment insofar as the weekly income benefits are concerned. Similarly, I find no merit in the argument that the running of the limitation period was postponed as a result of Allstate's conduct. Mr. Kurichh was represented by counsel from at least May 10, 1996 and it was counsel's responsibility to ensure that his rights under the legislation were adequately protected.

As noted above, Mr. Kurichh argues that the ninety-day extension to the limitation period in section 26(2) following the completion of mediation should have begun running only on September 5, 1997, when he indicates that his counsel received a copy of the September 23, 1996 Report of Mediator. Allstate entered into evidence a letter from Acting Senior Arbitrator Jones of FSCO which indicates that the Report of Mediator was sent to the parties on September 23, 1996. I do not accept the evidence of Mr. Kurichh that neither he nor his counsel received this document until September 5, 1997. In my view, it defies logic to take the position that letters sent both to counsel and Mr. Kurichh were not delivered or were not returned to this office as undeliverable. I find on a balance of probabilities that Mr. Kurichh and/or his counsel received the Report of Mediator in late September 1996. Accordingly, the ninety-day extension to the limitation period ran from the date of that report, namely, September 23, 1996.

The letters from Mr. Sawnhey to the Mediator dated June 27, 1997 and August 21, 1997, which were not tendered as evidence, but formed part of the record in this matter, at best indicate only that counsel misunderstood what had occurred at the mediation which took place on September 23, 1996. At worst, I find these letters to be self-serving attempts by counsel to characterize the mediation which had been completed on that date as continuing. In my view, counsel was under a positive obligation to make the necessary inquiries as to the whereabouts of the Report of Mediator following the mediation of September 23, 1996 within a reasonable time, if had not been received by either him or his client. I further find that counsel was also obliged to take such other steps as would have been necessary to satisfy himself that the mediation was, in fact, not concluded on September 23, 1996 in order to protect the interests of his client. I find that no such efforts were made until Mr. Sawhney wrote to the Mediator on June 27, 1997, some nine months after the conclusion of the mediation.

As a result, I find that the portion of the Application for Arbitration which relates to the issue of Mr. Kurichh's entitlement to weekly income benefits is statute-barred due to the operation of section 281(5) of the Insurance Act and section 26(2) of the Regulation. The two-year period under section 281(5) began to run on June 30, 1994 when Mr. Kurichh was notified that his weekly income benefits were terminated. The two-year period was extended for a further ninety days following the date of the Report of Mediator, to December 22, 1996. Accordingly, I find that the application seeking the arbitration of the issue of entitlement to weekly benefits made on November 19, 1997, is out of time.

Expenses:

I have decided to exercise my discretion not to award Mr. Kurichh his expenses incurred in this preliminary issue hearing for the following reasons. In my view, the evidence relating to the receipt of the Report of Mediator upon which the Applicant based his argument that the limitation period began to run on September 5, 1997 was not credible. The Applicant and his counsel failed to diligently pursue his claim for weekly income benefits after they were terminated on June 30, 1994. As a result of inaction of the Applicant and his counsel, the limitation period intervened to put an end to this aspect of the Applicant's claim. In summary, I find that the positions put forward by the Applicant in this preliminary issue hearing were untenable and that the Insurer should not be required to pay Mr. Kurichh's expenses under these circumstances.

May 6, 1999

Donald Hale Arbitrator

Date

ARBITRATION ORDER