Neutral Citation: 2000 ONFSCDRS 229

FSCO A99–000823

BETWEEN:

ANGELO LIONTI and GIOVANNA LIONTI

Applicant

and

SECURITY NATIONAL INSURANCE COMPANY

c/o MONNEX INSURANCE MANAGEMENT INC.

Insurer

REASONS FOR DECISION

Before: Lawrence Blackman

Heard: November 21, 2000, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Ian A. Little for Angelo and Giovanna Lionti

Thomas H. Clemenhagen for Security National Insurance Company c/o Monnex Insurance Management Inc.

Issues:

The Applicants, Angelo and Giovanna Lionti, were injured in a motor vehicle accident on November 24, 1998. They applied for and received statutory accident benefits from Security National Insurance Company c/o Monnex Insurance Management Inc. (“Security”), payable under the Schedule.¹ Security initially terminated Mr. and Mrs. Lionti’s weekly income replacement benefits on April 26, 1999 and May 31, 1999 respectively. The parties were unable to resolve their disputes through mediation and Mr. and Mrs. Lionti applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended (the “Insurance Act”).

The issues in this hearing are:

Are Mr. and Mrs. Lionti entitled, pursuant to section 14 of the Schedule, to $2,645 for an Obus Forme - V Queen mattress and foundation?
Are Mr. and Mrs. Lionti entitled to interest on their respective overdue income replacement benefits pursuant to section 46 of the Schedule?
Are Mr. and Mrs. Lionti entitled to interest on the cost of the Obus Forme - V Queen mattress and foundation, pursuant to section 46 of the Schedule?
Are Mr. and Mrs. Lionti entitled to their expenses in respect of this arbitration proceeding, pursuant to subsection 282(11) of the Insurance Act?

Result:

Mr. and Mrs. Lionti are entitled to payment of $1,851.50 for an Obus Forme - V Queen mattress (inclusive of tax), together with interest in accordance with section 46 of the Schedule.
Mr. and Mrs. Lionti are entitled to interest on their respective overdue income replacement benefits pursuant to section 46 of the Schedule to the date of payment of those benefits.
Mr. and Mrs. Lionti are entitled to their expenses of this arbitration proceeding, in accordance with Ontario Regulation 664, R.R.O. 1990, as amended by Ontario Regulation 464/96.

EVIDENCE AND ANALYSIS:

Background:

On November 24, 1998, Mr. Lionti was driving his car westbound on Highway 7, north of Toronto. Upon bringing his vehicle to a full stop and positioning it to make a left-hand turn, his car was struck in the rear by another vehicle. As a result of that impact, Mr. Lionti’s vehicle was pushed into oncoming traffic and was struck on the front passenger side by a third vehicle. Mr. Lionti’s motor vehicle was written-off following this collision.
Mr. Lionti’s wife, Mrs. Giovanna Lionti, and the couple’s three-year old daughter were both passengers in Mr. Lionti’s vehicle. Mrs. Lionti, who was a front-seat passenger, lost consciousness following this accident for what she later described to Dr. P. Tepperman as a “few seconds.” Mrs. Lionti was taken by ambulance from the accident scene to hospital, from which she was released the same day.
At the time of this accident, Mr. Lionti had been employed for about a year at a realty office as a salaried district manager.
Mrs. Lionti had two jobs at the time of this accident. She was employed full-time as an administrative assistant and controller and part-time (some 20 hours a week in the evenings and on weekends) as a real estate agent. Concurrently, Mrs. Lionti was responsible, when not at her paid employment, for most of the household chores and for the care of their young child.
As a result of the accident, Mrs. Lionti suffered, in part, neck, shoulder and low back pain, as well as a reactive depression. A December 1998 total body scan revealed that she had sustained fractures of the anterior portions of three ribs. Mr. Lionti sustained a whiplash type injury with pain to his neck, shoulder and low back, as well as what the couple’s family doctor, Dr. G.A. Miceli, referred to as an “anxiety state.”
The medical reports filed indicate that both Mr. and Mrs. Lionti had an unremarkable medical history before the November 24, 1998 car accident,² which was confirmed by their oral testimony. There is no evidence that either Mr. or Mrs. Lionti suffered any similar or significant pre-accident health problems.
Mr. and Mrs. Lionti were involved in a second motor vehicle accident on August 14, 1999. Dr. P. Tepperman, in his March 2000 insurer’s medical assessments, was of the view that Mrs. Lionti had sustained, in part, cervical and lumbosacral myofascial strains in the first accident, which were aggravated by the second accident. Dr. Tepperman found that Mr. Lionti had sustained “an uncomplicated lumbosacral myofascial strain in the first accident, which was exacerbated to some degree by the second accident.” Dr. Tepperman opined, based on the history given and the medical reports provided, that the November 24, 1998 accident was far more serious than the second accident.
On April 6, 1999, Mr. and Mrs. Lionti purchased an Obus Forme - V Queen mattress and foundation from Sleep Country Canada. The cost was $1,610 for the mattress, $690 for the foundation and $345 for sales tax. These items were delivered to the Liontis on April 10, 1999. The Liontis submitted an Application for Expenses to Security, dated April 14, 1999, which included this expense as well as a brief note from Dr. Miceli, dated April 8, 1999, which stated, very succinctly: “Rx Obus Forme Mattress 1x.” The Insurer agrees that it received the Application in April 1999; their date stamp appears to read April 19, 1999. The evidence of the Applicants was that Security never responded to this request. Security did not call any witnesses and there was no evidence on this point to contradict the Applicants.

Obus Forme mattress and foundation — the statutory requirements:

Mr. and Mrs. Lionti claim the mattress/foundation expense pursuant to paragraph 14(2)(h) of the Schedule. The relevant requirements are that:

either of the Applicants sustained an impairment as a result of an accident;
the expense was incurred by them or on their behalf;
the expense was incurred as a result of the November 24, 1998 accident;
the expense is a good or service of medical nature;
the good or service is not experimental in nature;
the expense is reasonable and necessary; and,
the good or service is required by either of them.

Arguments and Findings:

The parties agree, and I so find, that both Mr. and Mrs. Lionti sustained impairments as a result of the November 24, 1998 accident. I find that the myofascial strains and the resultant pain which the Applicants sustained in the 1998 accident, by themselves constitute “impairments” as defined by section 2 of the Schedule, that is “a loss or abnormality of a psychological, physiological or anatomical structure or function.” I accept the uncontradicted evidence of the Applicants that they have purchased the Obus Forme mattress and foundation and have incurred the $2,645 expense.
Security argues that the mattress and the foundation are not goods or services of a medical nature. It maintains that the expense is neither reasonable or necessary. Further, it argues that the Applicants did not comply with the requirements of section 38 of the Schedule and hence are precluded from reimbursement of this claim.
The documentary medical evidence confirms the Applicants’ oral evidence that they have both suffered from sleep disturbance since the November 1998 accident, in significant part due to low back pain sustained in that accident,³ although anxiety, nightmares and the second accident have all been contributing factors. Specifically, I note the Austin Treatment & Rehabilitation Centre March 26, 1999 statement (predating purchase) that Mr. Lionti “subjectively feels that his low back is worsening at this time and that his sleep is very disrupted due to pain.” Likewise, the Insurer’s medical report of Dr. H. Seiden, dated March 3, 1999, notes that Mr. Lionti states that his back pain is aggravated by lying down and “describes his sleep as being terrible.” The earlier (January 20, 1999) report of Career Navigators notes Mrs. Lionti’s sleep disturbances amidst continuing complaints of pain, requiring extra-strength Tylenol every four to six hours and Tylenol #2 at bed time.
I accept the evidence of the Applicants that their old “standard” Queen size mattress did not give them relief, even when they tried different sleeping positions and put down extra size pillows. I further accept their evidence that the Obus Forme mattress has improved their sleep, although the medical reports do note continuing sleep difficulties which belie, to some extent, the level of sleep improvement testified to by the Applicants. However, I do accept the evidence in the Designated Assessment Centre (DAC) report of Physiogenic Rehabilitation Services, dictated July 8, 1999, that the purchase of the mattress had made sleep a little bit easier. Adopting the causation test in Athey v. Leonati,⁴ I find that the back pain sustained by both Applicants in the November 24, 1998 accident materially contributed to their sleep disturbance which resulted in their incurring the mattress/foundation expense. I further find that the proper test is not whether the good or service in question remedied completely their problem, but whether it was a reasonable option to pursue.
I find that the mattress is a good of a medical nature. Arbitrators have found mattresses to have been reasonable and compensable expenses both under the 1990 Schedule⁵ and the 1994 Schedule.⁶ The 1990 Schedule’s “basket clause,” however, refers to goods and services “whether medical or non-medical in nature.” The 1994 Schedule’s “basket clause,” paragraph 36(1)(h), restricts recovery to “other goods and services of a medical nature that the insured person requires.” Arbitrator Palmer, in Kats and Axa Insurance (Canada),⁷ held that an orthopaedic mattress would qualify as a good or service of a medical nature. I agree. Dorland’s Illustrated Medical Dictionary,⁸ defines “medical” as pertaining to “medicine,” and defines the latter, in part, as “any drug or remedy.” The March 21, 2000 report of Work Return Inc. states that Mrs. Lionti “uses an orthopaedic mattress and cervical pillow to maximize support and provide optimal positioning during sleep.” I find the Obus Forme mattress to be a reasonable option as a “remedy” for sleep disturbance. The Insurer does not claim that the mattress is experimental in nature.
The Applicants testified that they decided to purchase the mattress and foundation after seeing Dr. Miceli. Their evidence was that Dr. Miceli stated that Obus Forme mattresses have a reputation of helping people with back problems and that purchasing a mattress was a good idea. Security, in its submissions, noted that Dr. Miceli’s prescription note is dated two days after the mattress and foundation were purchased. The Insurer asked me to find that Dr. Miceli did not, in fact, recommend the mattress to the Applicants, but rather that they went to him after the fact to justify a fait accompli.
Unfortunately, the significance of the date of Dr. Miceli’s note was not put to the Applicants in their cross-examination and hence they were not given an opportunity to explain what appears to be a discrepancy in their evidence. Although arbitrators are not required to strictly adhere to the rules of evidence, the principle of fairness and the search for the truth dictate that before one impeaches “the credit of a witness on a certain point in argument,” the contradictory statement should be put to them. This is the rule in Browne v. Dunn (1894), 1893 CanLII 65 (FOREP), 6 R.. 67 (H.L.), as formulated in The Conduct of an Action.⁹ The failure to allow the Applicants an opportunity to explain the apparent discrepancy considerably weakens the Insurer’s argument.
In any event, I rely only in small part on Dr. Miceli’s note, as Dr. Miceli fails to explain in his note, or elsewhere, why this expense is reasonable, necessary and required.
I rely more on the September 20, 1999 Multi-Disciplinary Assessment Centre DAC report which speaks of the significance of sleep as a factor affecting one’s pain threshold and the ability to overcome one’s symptoms. I find sleep restoration, by itself, to be a reasonable and necessary medical and rehabilitative goal. I take the March 21, 2000 comment of Work Return Inc. that Mrs. Lionti “uses an orthopaedic mattress and cervical pillow to maximize support and provide optimal positioning during sleep” as implicit approval of the mattress as a remedial option. Indeed, other medical reports encouraged the use of an Obus Forme cervical pillow to increase neck support and decrease neck and shoulder strain (Career Navigators, January 20, 1999 regarding Mrs. Lionti) and an Obus Forme Back support to maintain proper positioning and decrease muscle stiffness (Work Return Inc., March 2000 for both Mr. and Mrs. Lionti).
On the basis of the above-noted evidence, and in absence of any evidence to the contrary, I find, on a balance of probabilities, that the Liontis were both in pain following the November 24, 1998 accident, that their pain affected their sleep, that obtaining relief from that pain and improving their sleep was reasonable and necessary, and that the Obus Forme mattress cost which they incurred was a reasonable, necessary and required medical expense to meet that goal.
I am not persuaded that the foundation is reasonable, necessary and required. The only evidence that I received concerning the foundation was hearsay evidence by Mr. Lionti that a salesman at Sleep Country Canada told him that he had to buy the foundation and the mattress together for them to work properly and to keep the warranty effective.
Director’s Delegate Naylor commented generally on hearsay evidence in Ahmed and Allstate Insurance (June 23, 1998, FSCO P96-00068), as follows:

The strict rules of evidence do not apply to Commission proceedings. Hearsay evidence is allowed but the considerations of fairness, reliability and relevance underlying the rules should inform an arbitrator’s approach.

Director’s Delegate Draper stated in MacAulay and General Accident (October 13, 1999, FSCO P98-00010) that:

While hearsay is admissible under s.15 of the Statutory Powers Procedure Act, R.S.O. 1990, c.S.22, arbitrators must carefully consider its limitations. Because hearsay evidence cannot be tested on cross-examination, it may be unfair to assume its accuracy — particularly if it is the only evidence on a crucial finding. However, in a system where hearings are to be quicker, more informal, and cheaper than the courts, hearsay evidence is inevitable. There is no fixed rule. Each case must be considered on its particular facts.

Mr. Lionti’s hearsay evidence, in essence, endeavours to bring in expert evidence on a crucial point through the back door. I have no information as to the name of the salesman or his qualifications. I have no explanation as to why a new foundation was indeed necessary for the proper remedial effect of this particular mattress. The Insurer is prejudiced both in lack of notice of this evidence, as required by section 38 of the Dispute Resolution Practice Code, Third Edition, April 15, 1997, and by an inability to cross-examine, not on whether the alleged statement was made but whether the opinion purportedly expressed is reliable. I have no reason to think that evidence on this point was not readily obtainable from the retailer, from the manufacturer, from a medical or rehabilitation practitioner or from other sources.
Security submits that, contrary to subsections 38(1) and (2) of the Schedule, the Applicants failed to submit an application for the mattress and foundation prior to the expense being incurred and have failed to submit any treatment plan as part of that application. The Insurer submits that these are mandatory provisions. It argues that the failure of the Applicants to comply with these provisions precludes them from recovery.
The Applicants submit that the failure of the Insurer to comply with subsection 38(18) by either, within 30 days after receiving the application, paying the expense or giving notice of its reasons for not paying, negates subsections (1) and (2) and creates a reverse onus on the Insurer to establish that the expenses are neither reasonable nor necessary.
I find, consistent with the caselaw of this Commission, that the onus of proof is on the Applicants to prove their entitlement on a balance of probabilities. I further find that:

contrary to subsection 38(1) of the Schedule, the Applicants incurred the mattress and foundation expense before submitting their application to Security;
providing a treatment plan to an insurer within 30 after incurring the expense, under subsection 38(17), is a prerequisite to the application of subsection 38(18) (which allows an applicant relief from the subsection 38(1) requirement); and,
the Applicants have never provided Security with a treatment plan.

Therefore, the remedial provisions of subsection 38(18) itself do not relieve the Applicants of their requirements under subsection 38(1).

However, the Schedule consists of a myriad of interconnected rights and obligations to achieve mutual fairness and openness between insureds and insurers in the processing of claims, which go beyond the precise requirements of section 38. Paragraph 32(2)(c) of the Schedule dictates that insurers are obliged to promptly provide information to assist persons in applying for benefits. I find this to be a continuing obligation, and that this obligation includes the responsibility for insurers to advise persons submitting claims as to what information is missing in an application and what it requires to properly process the claim.
In this case, despite having had the Liontis’ request for payment since April 1999 and having the Applicants seen by various medical examiners, the only evidence of Security’s response to this expense request has been a “boiler plate” statement (in its October 27, 1999 Response) that “[t]he claim for an Obus Forme mattress is not reasonably necessary.” It does not behove a first-party insurer to respond to a claim with silence on a procedural requirement (especially where the remedy of the default is specifically provided) in a complicated contract of insurance and then play “gotcha” litigation at the arbitration hearing.
Subsections 38(1) and (2) set out certain mandatory requirements on an applicant. Subsection 32(2) sets out certain mandatory requirements on the insurer. Neither provision, however, sets out the precise consequences of a breach of the respective requirements. Section 38 does not state that no benefit is payable where there is a failure to comply with subsections (1) and (2). Section 32 does not state that benefits are automatically payable where the insurer does not assist the insured person in applying for benefits.
Rather, I read sections 32 and 38 in harmony to require insurers to promptly provide information to assist the person in applying for benefits. This would include advising the insured person of the need for a treatment plan before incurring medical or rehabilitation expenses, the cost of the treatment plan being covered under section 24. However, there are certain medical and rehabilitation expenses, such as pain medication, which should not necessarily be delayed until a treatment plan form is obtained by the insured, completed by a health professional and submitted to the insurer. Hence, the remedial provisions of subsections 38(17) and (18) should be made known to insureds.
Certainly where there is no evidence that the insurer has complied with its own obligations under section 32, the consequences of non-compliance by the applicant with section 38 are best determined by the adjudicator. That requires consideration of the purpose of that provision.
Section 38 in large part pertains to the disclosure of any conflict of interest between, on the one hand, the health professional preparing the plan or the representative of the insureds and, on the other hand, the treatment recommended. In this case, no evidence was provided or argument raised by Security about any conflict of interest, real or speculative, including that of its own medical experts who recommended various Obus Forme products for the Liontis. I have no evidence that the Insurer has been prejudiced by its failure to receive such a plan. In this case, I have placed almost no reliance on the report of the family doctor, Dr. Miceli, but rather, have relied on the medical evidence of a variety of DAC and insurer examiners.
Where neither party has fully met their respective obligations under the Schedule, I find it appropriate to deal with the matter on the merits and not on the technicalities under section 38. Accordingly, as set out above, I find that the Applicants are entitled to payment of $1,851.50 for an Obus Forme - V Queen mattress, including sales tax, plus interest in accordance with section 46 of the Schedule.

Interest on overdue Income Replacement Benefits

The Insurer terminated Mr. and Mrs. Lionti’s income replacement benefits (“IRBs”) on April 26, 1999 and May 31, 1999 respectively.
The Insurer subsequently paid the outstanding IRBs, but did not pay any interest on the overdue benefits.
Security concedes that interest is payable under section 46 of the Schedule on the IRBs for the period that they were overdue. The Insurer, however, does not agree with the Applicants’ submission that it is responsible for paying interest on the overdue interest.
I agree with Security’s submissions. Section 46 states that:

(1) An amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this Part.

(2) If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.

Subsection 46(2) sets out a prerequisite that payment of a benefit under the Schedule must be overdue for interest to be owing. I find that the term “benefit” in this context refers to payments payable under Parts II to VIII of the Schedule. Interest is not a “benefit.” It is not found in Parts II to VIII. Rather, it is a penalty found under the procedural provisions of Part X of the Schedule. I note in support of this distinction that subsection 282(10) of the Insurance Act differentiates between benefits and interest. Secondly, I find that in any event, interest cannot be “overdue” as defined in the Schedule, as there is no time limit within which interest is payable under Part X. Hence, only as long as a substantive benefit is overdue is interest payable at 2 per cent per month compounded monthly. I find that the use of the word “compounded” applies to the quantum of the penalty. I do not find that its usage is intended to create an entitlement not otherwise existing. Once the principal benefit is paid in full, the outstanding interest, while still payable and potentially subject to a special award (as subsection 282(10) of the Insurance Act speaks of withheld or delayed “payments,” not benefits), no longer accrues interest under section 46.¹⁰

EXPENSES:

The Applicants were largely successful in this hearing. They cooperated with Security to shorten this proceeding. The parties advise that there is no Offer to Settle for my consideration in connection with an award of expenses.

Accordingly, I exercise my discretion, in accordance with Rule 77 of the Dispute Resolution Practice Code, and in accordance with Ontario Regulation 664, R.R.O. 1990, as amended by Ontario Regulation 464/96, to award the Applicants their expenses of this arbitration proceeding.

December 27, 2000

Lawrence Blackman Arbitrator

Date