Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2000 ONFSCDRS 134

Appeal P00-00037

GUARDIAN INSURANCE COMPANY OF CANADA Appellant

and

PATRICIA ARMSTRONG Respondent

Before: Stewart M. McMahon, Director's Delegate

Counsel: Joan Takahashi (for Guardian) Colin Still (for Ms. Armstrong)

APPEAL ORDER ON STAY APPLICATION

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

Pursuant to sub-section 283 (6) of the Insurance Act, the Arbitration order dated May 23, 2000 is partially stayed.
The accumulated arrears from October 16, 1996 to December 31, 1999 are stayed pending the disposition of the appeal.
The arrears accumulated from January 1, 2000 to date, are to be paid forthwith, together with interest, and henceforth the loss of earning capacity benefit is to be paid as it comes due.
The arbitrator's order of expenses is not stayed.

July 20, 2000

Stewart M. McMahon Director’s Delegate

Date

REASONS FOR DECISION ON STAY APPLICATION

I. NATURE OF THE APPEAL

Ms. Patricia Armstrong was injured in a motor vehicle accident on January 31, 1994. She was paid income replacement benefits until October 1996, at which point Guardian Insurance Company ("Guardian") terminated weekly benefits on the basis of a residual earning capacity designated assessment centre report stating that her residual earning capacity exceeded her pre-accident capacity.

After a lengthy hearing, the arbitrator awarded Ms. Armstrong a loss of earning capacity benefit (LECB) of $459.58 per week. Guardian has appealed the decision, challenging the arbitrator's rulings on the amount of both the pre-accident earning capacity and the residual earning capacity. Ms. Armstrong has cross-appealed, challenging the arbitrator's ruling on the amount of her pre-accident capacity and certain ancillary rulings.

Guardian has asked for a stay of the arbitrator's ruling pending the release of the appeal order. Ms. Armstrong opposes the request.

This preliminary decision deals solely with the request for a stay.

II. ARGUMENT AND ANALYSIS

What are the applicable principles when considering a stay application?

Generally speaking, filing an appeal in a civil proceeding governed by the Rules of Civil Procedure,¹ or filing an appeal from the decision of an administrative tribunal governed by the Statutory Powers Procedure Act,² stays the order until the disposition of the appeal. Contrary to this general practice, s.283 (6) of the Insurance Act, provides that a stay from the order of an arbitrator ruling on accident benefit claims is the exception rather than the rule. It reads as follows:

An appeal does not stay the order of the arbitrator unless the Director decides otherwise.

The first decision to deal with this provision was Canadian Home Assurance Company and Scavuzzo, (OIC P-000626, May 2, 1992), a decision of M.P. Richardson. After reviewing a number of civil cases the director's delegate set out three criteria that should be considered in a stay application. They are:

the bona fides of the appeal,
the substance of the grounds for appeal, and
the hardship to the respective parties if the stay is granted or refused

These criteria have been accepted in subsequent decisions and generally form the basis for the exercise of the Director's discretion. I adopt these principles.³

Application of the principles

There is nothing to suggest that this appeal has not been brought in good faith.

When considering the second criteria (the substance of the appeal) it is appropriate to keep in mind that the stay application is being considered on the basis of a review of; the arbitrator's reasons, the Notice of Appeal and the Response to Appeal. Neither party has as of yet filed written submissions, nor has there been oral argument. In some cases it will be apparent that the grounds of appeal do not raise any serious issues for consideration. Such a finding would likely dispose of the appellants request for a stay. Likewise, there may be instances where it is apparent on the face of the documents that the appeal is likely to succeed, thereby bolstering the stay request. In many cases, such as the present, the ultimate outcome of the appeal is not yet apparent. In these cases, the Director or her delegate must still scrutinize the materials to ensure that the Notice of Appeal raises legitimate issues, that if successful, could lead to an overturning of the arbitration decision, in part or in whole. In cases where the ultimate outcome is not yet apparent, the hardship factor takes on added importance.

The Insurer argues that the Arbitrator's decision is "patently wrong" and inconsistent with the findings of the residual earning capacity designated assessment centre (REC DAC). The arbitrator had to make a number of factual and legal determinations and procedural rulings. Her decision is lengthy and it is apparent that she considered both the evidence and submissions. Whether the decision is ultimately upheld or overturned is the function of the appeal process, but I can see no basis for suggesting that the decision is "patently wrong." The fact that her findings differed from those of the REC DAC does not make her decision wrong. As was stated by Director's Delegate Draper in State Farm and Walker, (OIC P96-000036, December 3, 1996), the arbitrator is obliged to consider the views of the DAC team in the context of the evidence as a whole, but is not bound by the DAC report.

The Insurer cites nine "errors of law" in its Notice of Appeal. The first states that the arbitrator failed to apply the proper criteria when she determined Ms. Armstrong's residual earning capacity. The Notice does not particularize the error. It appears from the arbitrator's reasons, that one of the main points of contention related to Ms. Armstrong's relocation from Toronto to Peterborough. The Insurer argued that Ms. Armstrong's residual capacity should be determined by reference to the job market in Toronto, where she lived at the time of the accident. Ms. Armstrong argued that it should be based upon the more restricted opportunities available in Peterborough, where she lived at the time her residual earning capacity was being assessed. The arbitrator rejected Guardian's theory in favour of the Ms. Armstrong's. This issue raises a question of law that is suitable for appeal, and that if successful, would have a significant affect on the amount of the LECB.

The second "error of law" cited in the Notice of Appeal states that the arbitrator failed to apply the proper criteria when determining Ms. Armstrong's pre-accident earning capacity. Again, the error is not particularized within the second ground of appeal. However by examining subsequent grounds, it would appear that the principal issue relates to the arbitrator's decision to convert Ms. Armstrong's part-time earnings in the year before the accident into a full-time equivalent. Ms. Armstrong was employed full-time as of the date of the accident, but only part-time for most of the year. Guardian argues that the conversion provisions are only applicable if the insured person is working part-time as of the date of the accident. This issue raises a question of law that is suitable for appeal, and that if successful would have a significant affect on the amount of the LECB.

Given my finding that the first two grounds of appeal raise legitimate issues for appeal, I need not consider the remaining grounds.

As with many cases, the most important factor is the hardship question.

Guardian argues that the order should be stayed because there is good reason to believe that Ms. Armstrong may be unable to repay the benefits if the arbitrator's order is reversed. Guardian also asserts that Ms. Armstrong will be unwilling to repay the benefits in the event that the award is overturned. Nothing was cited in support of this second contention. I will not deal with it further.

Ms. Armstrong has been out of work since the accident. She concedes she is impecunious and asserts this as reason for not staying the order. She suggests that amongst other hardships, she has already lost an apartment, and that this and other difficulties should not be perpetuated by withholding benefits the arbitrator has determined she is entitled to.

When considering this question, it is important to keep in mind the nature of the benefits in issue. The LECB is designed to compensate the individual for the shortfall in their earning capacity after the accident. In Ms. Armstrong's case, because the Arbitrator found that she would be unable to secure suitable employment, the LECB effectively replaces her lost wages. It is trite to say that most people depend upon a secure stream of income, or some form of income replacement, to purchase the necessaries of life. In these circumstances, withholding ongoing benefits that the arbitrator has ruled Ms. Armstrong is entitled to, represents a very real hardship

The fact that a stay is the exception rather than the rule, suggests to me that the drafters of the legislation recognized that the insurer is in a much better position than the insured person to bear the risks inherant in not staying the arbitrator's order. This logic is compelling when considering ongoing payments that allow the insured person to pay for the necessaries of life or to obtain treatment. The logic is less obvious when applied to arrears. If there are large arrears and the insured person has little in the way of other assets, Guardian's concerns about being able to recoup any monies paid may have more resonance. This suggests to me that it may frequently be appropriate to treat the ongoing benefits differently than the arrears. This logic appears to have found favour with the director's delegate in Scavuzzo, as she stayed the arrears but not the ongoing payments.

With respect to ongoing benefits, when weighing the certain hardship to Ms. Armstrong as against the potential hardship to the Insurer, I have no hesitation in saying that the Insurer has failed to convince me that the general rule in favour of ongoing payments should be displaced by a stay.

With respect to the arrears, approximately 178 weeks elapsed between the end of October 1996, when benefits were terminated, and late May 2000 when the Arbitrator's order was released. Based upon an LECB of $459.58, the accumulated arrears are almost $82,000, before interest.

The risk that the Insurer might have significant difficulty recovering such a sum, if it were all to be paid in advance of the appeal, is too large to be ignored. At the same time, for approximately three years, Ms. Armstrong has been without the use of money that the arbitrator concluded she was entitled to. It is a fair presumption that Ms. Armstrong's life was altered drastically and that she has had to go without many of the things she had become accustomed to. The payment of interest, even at the rate provided for in the SABS-1994⁴, cannot wholly compensate for this loss. Further delaying the payment of these monies exacerbates that loss. This must be factored in, and weighed against the potential risk borne by the Insurer.

I conclude that the appropriate disposition is to order the immediate payment of a portion of the arrears while staying payment of the bulk of the outstanding amount. I am guided in my disposition by the numerous decisions released by my fellow delegates in which only a partial stay of the arrears has been ordered.⁵

I can discern no obvious period that should be covered by the stay, nor does any particular amount suggest itself to me as more appropriate than any other amount. For want of a more compelling date, I have determined that the outstanding arrears from October 16, 1996, to December 31, 1999 will be stayed pending the disposition of the appeal. An amount equal to the outstanding arrears from January 1, 2000 to the date of the arbitrator's order, together with applicable interest is to be paid forthwith, together with ongoing payments as they become due.