Neutral Citation: 2000 ONFSCDRS 162 FSCO A00-000358

Between: Patricia Slater, Applicant and Loyalist Insurance Company, Insurer

Decision on a Motion for Interim Benefits

Before: Shari Novick Heard: July 25, 2000, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances: David S. Wilson for Mrs. Slater. Albert M. Conforzi for Loyalist Insurance Company.

Issues:

The Applicant, Patricia Slater, was injured in a motor vehicle accident on December 21, 1998. She submitted an application for statutory accident benefits to Loyalist Insurance Company ("Loyalist"), payable under the Schedule.¹ Loyalist initially paid some of the benefits claimed, but did not pay any of the income replacement benefits ("IRBs") requested by Mrs. Slater.

At a mediation held on January 5, 2000, Loyalist agreed to pay the amount of $7,787.10 on account of the income replacement benefits owing, and to arrange for a disability DAC. Mrs. Slater subsequently applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The DAC report, dated June 2, 2000, indicates the assessors' conclusion that Ms. Slater "has a continuing inability to carry out the full time essential tasks of her occupation due to impairments resulting from her accident."

In late June 2000, Mrs. Slater brought a motion, pursuant to section 65 of the Dispute Resolution Practice Code — Third Edition, for interim benefits to be paid pending the resolution of her dispute with Loyalist.

The issue on this motion is:

Is Mrs. Slater entitled to interim benefits pursuant to section 279(4.1) of the Insurance Act?
Is Loyalist liable to pay a special award pursuant to section 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mrs. Slater?

Mrs. Slater also claims interest on any amounts owing and her expenses incurred on this motion.

Result:

Loyalist agrees to pay $21,841.32, inclusive of interest, to Mrs. Slater on account of income replacement benefits owing to September 20, 2000, the date scheduled for the commencement of the hearing on the merits. Loyalist also agrees to pay $300 per week to Mrs. Slater from the date of the hearing until the date the arbitration award is issued.
Loyalist is liable to pay a special award in the amount of $6,500, inclusive of interest.

Evidence and Analysis:

The Applicant filed a lengthy affidavit, attaching several exhibits, in support of her motion.

At the time of the accident, Mrs. Slater was employed as a part-time sales representative with The Llewellyn Group Inc., a company providing security services to various businesses. She alleges that she had contracted to begin full-time employment with this company as of January 1, 1999, approximately 10 days following the accident, but was not able to do so as a result of the injuries she sustained in the accident. A written contract of employment between Mrs. Slater and The Llewellyn Group to this effect has been produced. Mrs. Slater was to be paid on a commission basis, and the contract filed sets out the commission structure that would apply to her earnings. Mrs. Slater also filed a letter from the CEO of the company, in which he predicted that she would likely have earned between $40,000 and $60,000 in commission on her sales in 1999.

Counsel for Mrs. Slater forwarded the required information in support of her IRB claim in June of 1999. Loyalist acknowledged receipt of the information and advised that it was seeking to confirm certain details of the contract with the principal of The Llewellyn Group. For reasons that were not explained at the motion, the Insurer subsequently wrote to Applicant's counsel in July 1999 to advise that Mrs. Slater's IRBs would cease as of August 13, 1999, despite the fact that no payments had been made to that point. The Insurer subsequently advised that it had referred information that it had received relating to Mrs. Slater's post-accident earnings to its forensic accountants. Despite persistent requests from Applicant's counsel to the outside adjuster retained by Loyalist that the outstanding benefits be paid, no payments were made on account of Mrs. Slater's claim for IRBs for approximately six months.

Mrs. Slater then applied for mediation. At the mediation session held on January 5, 2000 Loyalist agreed to pay $7,787.10 towards the income replacement benefits owing on the basis of its accountant's report, although it was acknowledged that that would only cover the period from January 1, 1999 to July 29, 1999. The Insurer also agreed to arrange a disability DAC. The evidence indicates that the Insurer did not pay any further IRBs to Mrs. Slater pending the disability DAC, which took place in May 2000.

At the commencement of the motion, the Insurer offered to make a lump sum payment to Mrs. Slater to bring her income replacement benefits up to date. Counsel for the Applicant rejected the figure put forward, and after some negotiation, the Insurer agreed to pay the amount of $21,841.32 to Mrs. Slater on account of IRBs owing, inclusive of interest. This amount was arrived at by multiplying the number of weeks from the beginning of her entitlement to the date scheduled for the hearing on the merits by the rate of $300 per week, and by deducting the earlier payment of $7,787.10. Mrs. Slater claims that she is entitled to a benefit of $400 per week, less 80% of any post-accident income earned. The Insurer takes the position that the appropriate weekly figure is somewhat less.

The parties agreed that the issue of the appropriate quantum of IRBs would be decided at a hearing scheduled to commence on September 20, 2000.

Special Award:

The Applicant claimed that Loyalist should be ordered to pay a special award on $17,641, the amount of IRBs (less the applicable interest) that were owing as of the date of the motion. Counsel contended that an award of 50% of this figure was warranted, in light of the Insurer's continued refusal to acknowledge Mrs. Slater's rights under the Schedule. Counsel argued that it was appropriate to order a special award at this stage of the proceedings, and relied on the decision in Simpson and Trafalgar Insurance Company of Canada (FSCO A98-000215, July 16, 1998) in which the arbitrator ordered that a special award be paid after finding in favour of the insured on a motion for interim benefits.

The Insurer submitted that a special award was not merited at this stage, given that it had agreed to make a lump sum payment at the commencement of the motion, which resulted in the matter being resolved on an interim basis. Counsel contended that the issue should be left to the hearing arbitrator's discretion after a full hearing on the merits, citing the comments of Arbitrator Killoran in Boniface and Liberty Mutual Insurance Company (FSCO A97-002106, July 6, 2000) to this effect on a motion for interim benefits. Finally, counsel argued that interim orders of this nature should only be made in cases of serious financial hardship. He pointed to the fact that Mrs. Slater had earned approximately $20,000 in post-accident income during 1999 and claimed that she consequently did not exhibit the requisite hardship.

I find that a special award is warranted at this stage of the proceedings. Section 282(10) of the Insurance Act mandates an arbitrator to order a special award in cases where an insurer has unreasonably withheld or delayed payments to the Applicant. In my view, the question of whether to consider this question at an interim stage or to defer the inquiry until the hearing on the merits has been completed should depend upon the circumstances of each case. If the basis for the interim benefits order is an insurer's contravention of the procedural provisions of the Schedule, it may make sense to decide the issue at that stage of the proceeding. I do not agree with the Insurer's contention that a lack of evidence of financial hardship on an applicant's part is enough to postpone the consideration of whether a special award is warranted until the completion of the hearing on the merits. The focus of the special award analysis is the insurer's conduct, and unlike the analysis required when determining whether interim benefits should be awarded, an applicant's financial circumstances need not be taken into account.

The documentation filed by the Applicant in this case is replete with examples of unreasonable behaviour on the part of the Insurer. While it took some six months for the Applicant to retain counsel and gather the necessary information to support her IRB claim, once she did so she pursued her rights actively and consistently. In contrast, the material filed suggests that the Insurer took the opposite approach. It initially did not respond to inquiries made by Applicant's counsel, and then took a series of steps that substantially delayed the process. Loyalist did not pay any benefits until six months after the information was provided by Mrs. Slater, and then only after the parties' attendance at a mediation at the Commission. The Insurer also agreed at the mediation to arrange for a DAC assessment, but paid no benefits to Mrs. Slater pending the assessment. This refusal contravenes the requirements of section 37 of the Schedule, and constitutes an unreasonable withholding of benefits on its own.

As noted above, the DAC assessors determined that Mrs. Slater remained substantially disabled from performing the essential tasks of her employment in June 2000. Their report is dated June 2, 2000 but it was not until the motion for interim benefits on July 25, 2000, some seven weeks later, that Loyalist offered to pay a lump sum amount to bring Mrs. Slater's income replacement benefits up to date. The Schedule mandates the payment of IRBs on a periodic basis: while the Insurer's offer to pay the amount owing did lead to a resolution of the motion for interim benefits, these actions do not make up for the unreasonable manner in which it conducted itself over the prior 12 months.

I note that other arbitrators, in addition to Arbitrator Palmer in the Simpson case, have ordered that special awards be paid in the face of an insurer's contention that it would be inappropriate to do so prior to the completion of a hearing on the merits², or in the case where a payment had been made prior to the commencement of the hearing³.

As stated above, the hearing on the proper quantum of IRBs, payable to Mrs. Slater is scheduled to take place in approximately four weeks. While I can appreciate the practicality of deferring consideration of the special award issue until then, the basis of the claim for a special award is the actions, or inaction, of the Insurer during the period prior to the motion for interim benefits. The upcoming hearing on the merits will likely focus on the evidence that both parties will marshall relating to Mrs. Slater's pre-accident and post-accident earnings, and the validity of the employer's prediction that she would have earned between $40,000 and $60,000 in 1999. In my view, it is more appropriate to order the Insurer to pay a special award at this stage, at the point where its actions leading up to the motion have been closely examined, as opposed to putting it off for consideration after the evidence on quantum is considered.

I find that the Insurer's unreasonable withholding of benefits and disregard for Mrs. Slater's rights under the Schedule warrants a special award amounting to $6,500, inclusive of interest.

Expenses:

The issue of Mrs. Slater's entitlement to her expenses of this motion are left to the hearing arbitrator, to be determined at the completion of the hearing on the merits.

August 31, 2000

Shari L. Novick Arbitrator

Arbitration Order