Neutral Citation: 2000 ONFSCDRS 116

FSCO A99-000679

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

JOAN MACDONALD

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

David Leitch

Heard:

June 15, 2000 in Hamilton, Ontario with additional evidence and oral argument heard by telephone on June 21, 2000

Appearances:

James I. Marini for Ms. MacDonald

John Pavoni for Allstate Insurance Company of Canada

Issues:

The Applicant, Joan MacDonald, was injured in a motor vehicle accident on October 13, 1995. Effective one week after the accident, Allstate Insurance Company of Canada ("Allstate") paid Ms. MacDonald caregiver benefits, one of several kinds of weekly statutory accident benefits payable under the Schedule.¹ In accordance with an election form signed by Ms. MacDonald on June 3, 1996, Allstate continued paying her caregiver benefits until 104 weeks after the accident. Sometime thereafter, Ms. MacDonald sought to change her choice of benefits from caregiver benefits to income replacement benefits, one of the other kinds of weekly statutory accident benefits payable under the Schedule. Allstate refused this "re-election." The parties were unable to resolve their dispute through mediation, and Ms. MacDonald applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:²

1. Is Ms. MacDonald entitled to re-elect income replacement benefits?

Result:

1. Ms. MacDonald is entitled to re-elect income replacement benefits.

The law:

The election of weekly benefits is governed by sections 59 and 61 of the Schedule and I set out below the provisions pertinent for the present case:

59.—(2) The insurer shall promptly provide the person with,

(a) the appropriate application forms;

(b) a written explanation of the benefits available under this Regulation; and

(c) written information to assist the person in applying for benefits, including information to assist the person in making any possible elections.

(3) The person shall submit an application for the benefits to the insurer within ninety days of receiving the application forms.

61.—(1) No more than one weekly benefit shall be paid to an insured person under this Regulation for the same period of time.

(2) If it appears from an application for benefits under this Regulation that, in the absence of subsection (1), a person would be entitled to receive more than one weekly benefit under Part II, section 15 and Part IV, the insurer shall notify the person that the person must, within thirty days of receiving the notice, elect which weekly benefit he or she wishes to receive.

(3) Within thirty days of receiving the notice, the person shall elect which weekly benefit he or she wishes to receive.

(4) Pending receipt of the person's election, the insurer shall pay one of the weekly benefits to which the person is entitled and, when the insurer receives the election, the insurer shall adjust the amount of the weekly payments retroactively to the date the person became entitled to the weekly benefits that the person has elected.

(5) If the person does not elect which benefit he or she wishes to receive within the thirty day period referred to in subsection (3), the person shall be deemed to have elected the highest weekly benefit.

(7) Subject to subsection (6), an election under this section may not be changed.

The facts:

Ms. MacDonald's claim was adjusted by Michelle Diletti, a Senior Staff Claim Representative with Allstate. Ms. Diletti testified that in her first meeting with Ms. MacDonald at her home on October 27, 1995, she reviewed the various parts of a blank Application for Accident Benefits form, explaining the rules of eligibility as she went, including the rules with respect to eligibility to income replacement benefits. According to Ms. Diletti's testimony, Ms. MacDonald told her that she had not worked in the last three years as she was in school, upgrading her qualifications.

Ms. MacDonald testified that Ms. Diletti told her she was not eligible for income replacement benefits because she was not working at the time of the accident, and that Ms. Diletti made no reference to any other rules of eligibility with regard to this form of benefit. Ms MacDonald further testified that she completed the form, dated November 3, 1995³, after Ms. Diletti left her home and without any further assistance from Ms. Diletti or anyone else. However, as mentioned below, Ms. MacDonald appears to have spoken to someone at what was then the Ontario Insurance Commission, now the Financial Services Commission of Ontario, before completing this form.

Upon receiving the completed form, Ms. Diletti sent Ms. MacDonald a letter and an Explanation of Assessment form, both dated November 9, 1995⁴. The letter informed Ms. MacDonald that she was eligible for caregiver benefits, but that her eligibility for education benefits and income replacement benefits could not be determined without additional information. This was confirmed in the Explanation of Assessment form through question marks in the income replacement and education eligibility boxes, and through a reference to the need for further information as explained in the accompanying letter. While neither the letter nor the Explanation of Assessment form referred specifically to rules of eligibility, the letter referred, by implication, to the potential application of the three-year eligibility rule for income replacement benefits. It reads, in part:

We would also like to confirm your employment in the past three years as outlined in your application. You had stated that you were employed at Henderson Hospital till May 1993, were you on a lay off, long term disability or was this apart of your education program? Please provide the writer with this information so that we can further assess the income replacement benefit. (Emphasis in the original)

In addition, Ms. Diletti stated the following in her letter of November 9, 1995:

Given that there are areas that require further clarification, we will not furnish you the election of benefits till we can properly assess your eligibility under the policy and a proper election can be made. In the meantime we will agree to honor the primary caregiver benefit till the above information is received and an election is made.

The need for clarification with respect to Ms. MacDonald's eligibility to income replacement benefits is apparent on reading her Application for Benefits. In Part 8, dealing with caregiver benefits, Ms. MacDonald responded yes to the question "were you employed at any time during the three years before the date of the accident?", and she wrote in that she was "still on staff at Henderson Hospital until May 1993 but not actively working." In Part 9 of the Application form, dealing with her "employment situation at the time of the accident", Ms. MacDonald checked off the category "unemployed, have not worked in the past three years", writing in here that she had "been in school BS&N [Bachelor of Science and Nursing] program. Was RN & went back to [improve] education and salary. Termination at Henderson officially, May 1993." Part 10 of the Application form, which solicited Ms. MacDonald's employment history in the four weeks, 52 weeks or three years prior to the accident, was left blank but contained references to her receipt of a Canada Pension Plan permanent disability pension and her belief, based on information obtained from the Ontario Insurance Commission, that this pension was not deductible. At the hearing, Ms. MacDonald denied that she ever asked the Ontario Insurance Commission for information about her eligibility to income replacement benefits or about which form of benefits to elect. However, in log note #29, Ms. Diletti recorded the following after speaking to Ms. MacDonald on November 8, 1995: "she has spoken with the Insurance Commission and they advised her to elect primary caregiver, as she will be disabled for a very long time."

At the hearing, Ms. Diletti testified that she was not sure whether or not Ms. MacDonald qualified for income replacement benefits based on the Application for Benefits and admitted that Ms. MacDonald may have so qualified. She further denied that she ever told Ms. MacDonald that she was not so qualified. Ms. Diletti impressed me as an honest witness but, in light of what follows, I can only accept her denial insofar as it describes her oral communications with Ms. MacDonald.

Having received no response to her letter of November 9, 1995, Ms. Diletti sent Ms. MacDonald a letter dated March 29, 1996⁵. This letter enclosed an Election form and another Explanation of Assessment form, also dated March 29, 1996.⁶ Unlike her letter of November 9, 1995, this letter only identified the need to obtain information clarifying Ms. MacDonald's entitlement to education benefits; it made no mention of income replacement benefits. More significantly, the Explanation of Assessment form indicated that Ms. MacDonald was simply "not eligible" for income replacement benefits, without any mention of the need for further supporting information. It also indicated that her eligibility for education benefits was "pending" receipt of further supporting information and that she was eligible for caregiver benefits.

Ms. Diletti testified that her letter of March 29, 1996 also enclosed a pamphlet entitled "Election of Benefits"⁷, published by the Insurance Bureau of Canada, which contains, among other things, a brief explanation of the rules of eligibility for income replacement benefits.

In response to my questions, Ms. Diletti admitted that she had no new information in March, 1996 which she did not have in November, 1995 and that she had "no idea" why the Explanation of Assessment of March, 1996 indicated "not eligible", whereas the Explanation of Assessment in November, 1995, based on the same information, indicated a question mark with respect to eligibility and referred to the need for further information.

On June 3, 1996, Ms. MacDonald elected caregiver benefits and returned the Election form together with a letter⁸ which contained the following observation: "It appears that it is to my benefit to continue with 'caregiver' benefits as opposed to 'education benefits'...". Ms. MacDonald testified that when she wrote this letter, she understood that she was eligible for caregiver benefits, that her eligibility for education benefits was "up in the air" and that she was not eligible for income replacement benefits. Ms. MacDonald admitted on cross-examination that, before signing the Election form, she may have "looked at" the pamphlet entitled "Election of Benefits", but that she received this pamphlet from the Ontario Insurance Commission. She testified that she did not have legal advice before signing the Election form.

Analysis and Conclusion:

To properly determine the statutory accident benefits available to an insured person, the insured person and the insurer's adjuster must exchange accurate information. The insured person must provide the insurer's adjuster with the information requested in the Application for Benefits and the insurer's adjuster must, after analysing the information provided by the insured person, send the insured person an Explanation of Assessment setting out the benefits available to him/her under the Schedule.

As I wrote in the case of Pepin and Security, dealing with the previous Schedule:

In my view, the explanation of benefits an adjuster provides to an insured person must, above all, be responsive to the facts of the accident and its consequences for the insured person. An adjuster cannot provide such an explanation without first eliciting some initial information from the insured person or on his/her behalf.

The Schedule created a method for the adjuster to obtain this initial information from the insured person. After notifying the insurer of the accident, sections 22 and 29 of the Schedule required the insured person to apply for statutory accident benefits by completing a prescribed form called an Application for Benefits.⁹

Sections 59(2)(a), (b) and (3) of the Schedule applicable to the present case envisage the same process for the exchange of information between the insured person and the insurer's adjuster.

I find that, in the present case, the process contemplated by the Schedule was properly followed in the initial phases. However, this initial exchange of information only established Ms. MacDonald's entitlement to caregiver benefits; it did not resolve questions or doubts about whether income replacement and education benefits were also available to Ms. MacDonald..

Section 61(2) of the Schedule states that "[i]f it appears from an application for benefits that ... a person would be entitled to receive more than one weekly benefit ... the insurer shall notify the person that the person must, within thirty days of receiving the notice, elect which weekly benefit he or she wishes to receive." [My emphasis] In my view, the presence of the word "appears" means that section 61 extends to situations where the application for benefits generates, or ought to have generated, a significant question or doubt in the insurer's adjuster's mind about the availability to the insured person of any of more than one form of weekly benefit.

Section 59(2)(c) of the Schedule states that the insurer is to provide the insured person with "information to assist the person in making any possible elections." In my view, this language, when read in conjunction with section 61(2), imposes an obligation or duty on the insurer's adjuster to indicate to the insured person the reason why the adjuster retains a significant question or doubt about the availability to the insured person of any of more than one form of weekly benefit. This reason may assist the insured person to understand how to establish his/her entitlement to a weekly benefit and hence constitute "information to assist the person in making any possible election".

Applying this interpretation to the facts of the present case, I find that Ms. Diletti's first letter and Explanation of Assessment to Ms. MacDonald, dated November 9, 1995, adequately communicated Ms. Diletti's questions or doubts about Ms. MacDonald's entitlement to income replacement and education benefits. However, I also find that Ms. Diletti's second letter and Explanation of Assessment to Ms. MacDonald, dated March 29, 1996, effectively withdrew Ms. Diletti's questions or doubts about the availability of income replacement benefits and substituted therefor a simple statement that Ms. MacDonald was "not eligible" for such benefits. I further find that this change was communicated to Ms. MacDonald in the same correspondence that enclosed the Election form, but that it was not prompted by any resolution in Ms. Diletti's mind of the questions and doubts she had identified in her first letter and Explanation of Assessment.

I note that Ms. Diletti could have taken the same course of action with respect to the availability of income replacement benefits as she took with respect to the availability of education benefits; that is, pointed out to Ms. MacDonald that since she had not supplied Allstate with the information Ms. Diletti had previously requested, her eligibility to both forms of benefits remained open to question or doubt. I acknowledge that this course of action may have prolonged the election process but section 61(4) of the Schedule contemplates the possibility of delays in the election process, without specifically referring to 30 day delays, and provides an interim solution: "Pending receipt of the person's election, the insurer shall pay one of the weekly benefits to which the person is entitled." In this case, that interim solution would have allowed Ms. Diletti to keep the commitment she made to Ms. MacDonald in her letter of November 9, 1995 when she wrote: "Given that there are areas that require further clarification, we will not furnish you the election of benefits till we can properly assess your eligibility under the policy and a proper election can be made."

Nevertheless, the law, as stated in section 61(2) and (3), permits an insurer to issue a time-limited notice of election. However, in issuing a notice under section 61, an insurer is not, in my opinion, entitled at the same time to inform the insured person that he/she is not eligible for a benefit for which he/she has not provided supporting information unless the insurer also clearly identifies the lack of supporting information as the reason the insured person is "not eligible." Otherwise, the insured person may be misled¹⁰ into thinking there is nothing further he/she can do to qualify for the benefit and be thus deprived of his/her right to elect between the different forms of weekly benefits to which he/she may, in fact, be entitled.

I find that that is what happened in this case. Whatever her prior understanding may have been, I accept Ms. MacDonald's evidence that upon receiving the Explanation of Assessment dated March 29, 1996, she understood that she was only being called upon to choose between caregiver and education benefits, as she was not entitled to income replacement benefits. She confirmed that understanding, by implication, in the letter she returned with the completed Election form.

I find that by informing Ms. MacDonald that she was simply "not eligible" to income replacement benefits, the Insurer misled her into thinking there was nothing further she could do to qualify for that benefit and, thus, deprived her of her right to elect between the three forms of weekly benefits to which she may, in fact, have been entitled.

I note that there is no evidence before me that the question or doubt about the availability to Ms. MacDonald of income replacement benefits was resolved by any information she obtained from the Ontario Insurance Commission. In any event, the obligation I find to be created by sections 61(2) and 59(2)(c) of the Schedule is imposed on insurers, not on the Commission.

In these circumstances, I conclude that Ms. MacDonald retains the right to elect income replacement benefits.

EXPENSES:

I exercise my discretion to award Ms. MacDonald her expenses incurred in this preliminary issue hearing.

June 28, 2000

David Leitch

Arbitrator

Date

Neutral Citation: 2000 ONFSCDRS 116

FSCO A99-000679

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

JOAN MACDONALD

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

ARBITRATION ORDER

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

1. Ms. MacDonald is entitled to re-elect income replacement benefits.

June 28, 2000

David Leitch

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. 2A second issue, having to do with the provision of a certificate under section 37 of the Schedule, was resolved at the hearing and not the subject of arbitration.
3. 3Exhibit 4, Tab 6B.
4. 4The letter is found at Exhibit 4, Tab 5A and the Explanation of Assessment form is Exhibit 12.
5. 5Exhibit 4, Tab 5D.
6. 6Exhibit 11.
7. 7Exhibit 10.
8. 8Exhibit 14.
9. 9Pepin and Security National (FSCO A99-000498, January 24, 2000).
10. 10See Olivito and Dominion of Canada General Insurance Company, (OIC A-96-001429, October 6, 1997)