Neutral Citation: 2000 ONFSCDRS 64

FSCO A97-001019

BETWEEN:

BRIAN P. HENDERSON

Applicant

and

LOMBARD GENERAL INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before:

Fred Sampliner

Heard:

October 4, 5, 6, 1999, in Thunder Bay, Ontario.

Appearances:

Alex W. Demeo for Mr. Henderson

Albert Conforzi for Lombard General Insurance Company of Canada

On November 1, 1994, Brian P. Henderson sustained serious injuries in a work-related trucking accident on a Minnesota highway. He initially applied to the Workers' Compensation Board of Ontario ("WCB"), which paid his medical and rehabilitation expenses as well as wage losses through August 1996. When Mr. Henderson decided to claim accident benefits under the Schedule¹ in 1996 instead of WCB benefits, Lombard General Insurance Company of Canada ("Lombard") denied his right to switch systems. In 1998, Lombard conceded Mr. Henderson's entitlement to claim accident benefits.

This arbitration primarily concerns Mr. Henderson's claims for interest on the delayed payment of his accident benefits and a special award under subsection 282(10) of the Insurance Act for Lombard’s unreasonable delay and withholding of his accident benefits. Secondarily, Mr. Henderson claims that his weekly disability benefit should be slightly higher than Lombard’s calculation and that he is entitled to some additional rehabilitation expenses.

The hearing was held by the Financial Services Commission of Ontario under the authority of the Insurance Act, (R.S.O. 1990, c.I.8 as amended) (the "Act") to determine these issues:

Is Mr. Henderson entitled to reimbursement for the expense of the rehabilitation evaluation and report by Aetna Health Management and for the services recommended therein?
Is Mr. Henderson entitled to reimbursement for medical and rehabilitation services that were funded by the WCB?
Is Mr. Henderson's income replacement benefit $597.71 or $608.08 per week?
From what dates does interest accrue on Mr. Henderson's overdue benefits?
Is Mr. Henderson entitled to a special award?
Is Mr. Henderson entitled to his expenses of the arbitration process?

Mr. Henderson is entitled to reimbursement for the evaluation and report of Aetna Health Management, and to funding for all of the services recommended therein, except for the interdisciplinary evaluation.
Mr. Henderson is not entitled to reimbursement for the medical and rehabilitation services that were funded by the WCB.
Mr. Henderson’s income replacement benefit is $608.08 per week.
Mr. Henderson is entitled to interest according to the Schedule from May 1, 1998 on the cost of the Aetna rehabilitation evaluation and report and the rehabilitation services as ordered therein. Mr. Henderson is entitled to interest according to the Schedule from July 3, 1997 on all overdue income replacement benefits.
Mr. Henderson is entitled to a $65,000 lump sum special award, inclusive of all interest.
Mr. Henderson is entitled to his expenses of the arbitration process.

The Accident:

At the time of the accident, Mr. Henderson was asleep in the rear bunk of a tractor-trailer rig, which his partner was driving on a Minnesota highway. His partner lost control of the vehicle while rounding a curve and the truck overturned. Mr. Henderson found himself awake, standing on his head, with his skull locked between two pieces of metal after the truck finally stopped. With his windpipe partially blocked, Mr. Henderson used his fingers to keep his air passage clear until firemen arrived at the scene of the accident. They first intubated his trachea and managed to free Mr. Henderson from the wreckage about two-and-half hours later. He was transported to a hospital in Duluth, Minnesota, where he spent the next two-and-half days recuperating from multiple cuts, bruises and fractures of his lumbar spine.

Claim for a Special Award:

Much of the evidence in this case relates to Lombard’s conduct in handling Mr. Henderson’s claims for accident benefits. I have analysed this evidence in a historical context. The first reason is to provide a framework to understand the complex circumstances. Second, Lombard’s underlying breach of statutory or common law duties with respect to claims handling is relevant to my determination whether it has unreasonably delayed and withheld accident benefits, under subsection 282(10) of the Insurance Act, which provides:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule. R.S.O. 1990, c. I.8, s. 282 (10); 1993, c. 10, s. 1.

History of the Claim:

Lombard's First Contact With Mr. Henderson

Mr. Henderson reported the truck accident to Lombard when he returned to Thunder Bay. His uncontradicted testimony is that he acted on advice from Lombard’s adjuster in filing for workers compensation benefits. The WCB covered Mr. Henderson’s hospitalization expenses in the United States, his rehabilitation in Canada and began paying him compensation for his wage loss.

Lombard acknowledges that it has never sent Mr. Henderson any claim forms or brochures about his available accident benefits. For the following reasons, I do not agree with Lombard’s submission that an insurer is not responsible to assist an insured person in deciding whether to claim accident benefits or workers compensation.

The insured person who is involved in a work-related accident must choose to claim either workers' compensation benefits or statutory accident benefits.² The insured person cannot sue an alleged tortfeasor for negligence if he is entitled to benefits in the workers' compensation system. But the insured person can maintain a lawsuit for negligence causing a work-related accident if the WCB allows him to opt out of that system by approving an assignment of the person’s accident benefits.³ The choice is obviously complex.

I agree with Arbitrator McMahon in the Branchaud decision that the drafters of the 1994 version of the Schedule significantly expanded the insurers obligation to explain the accident benefits scheme to claimants.⁴

....an adjuster negotiating with an unrepresented insured for a full and final release, cannot restrict his explanation of available benefits to the Ontario schedule. Rather, I suggest that the adjuster has a positive obligation to point out the possibility of the election. It would then be the insured person's responsibility to ascertain which benefit scheme would be more advantageous.

Although the Branchaud case involved an insurer's failure to explain the differences between Quebec and Ontario statutory benefits during settlement negotiations, it is my view that Lombard’s obligations to Mr. Henderson are at least equal.

The Schedule contains explicit provisions which serve as a basis for the insured person’s reasonable expectation that his insurance company will explain the various coverages. Under section 59 of the Schedule, an insurer has an initial positive obligation to provide three important pieces of information to an insured once it knows of a potential claim.

(1) A person who wants to apply for benefits under this Regulation shall notify the insurer within thirty days after the circumstances arose that gave rise to the entitlement to benefits, or as soon as practicable thereafter.

(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.

Arbitrators have held that for the insured person to make a binding decision to elect one of the four types of disability benefits under the Schedule,⁵ the insurer is obliged to assist the insured person to make an informed decision.⁶ I find these obligations apply to Lombard.

Part XVII of the Schedule also makes specific provision for the election between the accident benefits and workers' compensation systems.⁷

Workers' Compensation Benefits

76.-(1) The insurer is not required to pay benefits under this Regulation in respect of any insured person who, as a result of an accident, is entitled to receive benefits under any workers' compensation law or plan.

(2) Subsection (1) does not apply in respect of an insured person who elects to bring an action referred to in section 10 of the Workers' Compensation Act so long as the election is not made primarily for the purpose of claiming benefits under this Regulation.

(3) If a person is entitled to receive benefits under this Regulation as a result of an election made under section 10 of the Workers' Compensation Act, no benefits are payable to the person under Part II, III, IV or V in respect of any period of time before the person makes the election.

(4) If a person who would be entitled to benefits under this Regulation in the absence of subsection (1) elects to bring an action referred to in section 10 of the Workers' Compensation Act and there is a dispute concerning the insurer's liability to pay an expense for a vocational rehabilitation program that the person was attending at the time of the election and continues to attend, the insurer shall pay the expense pending resolution of the dispute.

(5) Despite subsection (1), if there is a dispute about whether subsection (1) applies to a person, the insurer shall pay full benefits to the person under this Regulation pending resolution of the dispute if,

(a) the person makes an assignment to the insurer of any benefits under any workers compensation law or plan to which he or she is or may become entitled as a result of the accident; and

(b) the administrator or board responsible for the administration of the workers' compensation law or plan approves the assignment.

By including specific references to the accident benefits/workers compensation election in three out of the five subsections, the legislature signifies the importance attached to insurers obligation to explain this election to their insureds. I do not accept Lombard’s submission that the Schedule does not contemplate inclusion of this election between the two systems as part of an insurance company's obligations under section 59(1)(c) of the Schedule.

The Supreme Court of Canada does not favour restrictive interpretations.⁸

Insurance contracts and the interpretative difficulties arising therein have been before the courts for at least two centuries, and it is trite to say that where an ambiguity is found to exist in the terminology employed in the contract, such terminology shall be construed against the insurance carrier...

In my view, there is no ambiguity in the references made by the words "any possible elections" in section 59(2)(c) of the Schedule, but if there was, I would decide in the insured's favour. I do not accept Lombard's interpretation of its obligation under subsections 59 and 76 of the Schedule.

Lombard also argues that Mr. Henderson did not advise the company he planned to pursue a tort claim and could not have advised him about the ramifications of his decision at the time of his initial contact. Lombard bases its position on the undisputed evidence that Mr. Henderson first talked to a lawyer in the United States in May 1995 regarding a possible tort claim.

Lombard’s argument essentially reverses the legislation’s requirement that insurers must first inform the insured about the benefits and elections. Nothing in the Schedule or case law supports Lombard’s view that Mr. Henderson was under an obligation to inform the company he had chosen to pursue a tort claim, and I reject this argument.

Based on the explicit provisions of sections 59 and 76 of the Schedule, I find that if an insured person informs an insurer that he is involved in a work-related motor vehicle accident, the insurer is responsible to provide a basic outline of the relationship between the workers' compensation and the accident benefits systems. The Insurer must also inform him of his right to sue and the right to make an election between the two systems.

On the undisputed evidence, I find that Lombard failed to provide Mr. Henderson with any claim forms, any written explanation of the accident benefits available. I also find that Lombard failed to explain the interface between accident benefits/workers compensation and his right to sue or explain his available elections. As a consequence of Lombard's failure to meet its statutory duties under section 59 of the Schedule, I find that Mr. Henderson did not make an informed choice to claim workers' compensation benefits as contemplated by sections 59 and 76 of the Schedule, and that his application to the WCB was a direct result of Lombard's failure to meet its statutory obligations.

Mr. Henderson’s evidence concerning his lawsuit is uncontroverted. He called a lawyer in Thunder Bay about three or four weeks after the accident to inquire about his right to file a lawsuit for the truck accident. He stated that he would have retained counsel at that time if he had known about the choices available between accident benefits and workers compensation. I also accept Mr. Henderson’s evidence that he first formally consulted a lawyer in the United States regarding the truck accident in May 1995. The fact that he later initiated a lawsuit in Minnesota at the same time that he was receiving workers' compensation in Canada establishes he was ignorant that he did not have the right to sue, and that he was determined to pursue his common law rights against the tortfeasors.

Lombard describes Mr. Henderson's assertion that he would have consulted a lawyer as purely self-serving. I reject Lombard's submission, and find I can reasonably conclude from the evidence that Mr. Henderson would have chosen accident benefits in order to preserve his right to sue the tortfeasor if Lombard had initially put the choice to him. I find that Lombard's breaches of its statutory duties was a significant contributing factor to the delay in Mr. Henderson's application for accident benefits and the payment of his claims. If Lombard had met its duties shortly after Mr. Henderson notified the company of the accident, I find it more likely that he would have been able to obtain an approved assignment from the WCB where he had received few or no benefits.

Lombard's Second Contact With Mr. Henderson

Mr. Henderson sought accident benefits from Lombard a second time in May 1995, after the WCB refused to reimburse him for personal articles that were lost or damaged in the collision. Under section 56 of the Schedule, an insured person has coverage for prescription eyewear, clothing and other personal articles that are damaged or destroyed in an accident. When Mr. Henderson submitted the claim to Lombard, the company told him by letter⁹ that he must look to the WCB for benefits. This letter did not explain to Mr. Henderson how he might contest the company's denial.

Section 71 of the Schedule states:

Right to Dispute

If an insurer refuses to pay a benefit that a person has applied for under this Regulation or reduces the amount of a benefit that a person received under this Regulation, the insurer shall inform the person in writing of the procedure for resolving disputes relating to benefits under sections 279 to 283 of the Insurance Act.

This provision reflects the drafters intent that the lay consumer be informed how to access mediation, arbitration and court facilities to dispute an insurer’s decision. The legislature logically placed this requirement on the insurer at the time of its refusal to pay benefits.

Shortly after Lombard rejected Mr. Henderson's May 1995 claim, the Commissioner of the Ontario Insurance Commission (predecessor to the current Financial Services Commission of Ontario) issued Commissioner's Guideline No. 2/95¹⁰ to illustrate the standard of conduct expected from insurers when adjusting claims under the Schedule:

Guideline for Statutory Accident Benefits Applications, the Claims Process and the Mediation Process

Commissioner's Guideline No. 2/95 Financial Services Commission of Ontario

PRINCIPLES FOR STATUTORY ACCIDENT BENEFITS APPLICATIONS AND THE CLAIMS PROCESS

Insurer's Responsibilities

Inform claimants about the kind of accident benefits that are available under the SABS, let claimants know all the procedures to be followed and documentation needed when applying for benefits. When asked, insurers must give a copy of the SABS without charge to any person entitled to benefits.

Give claimants the application for benefits package and other applicable forms, and help claimants complete all forms.

Provide claimants with specific requests for additional relevant information.

Make sure that all requests for information from claimants and third parties are relevant to the claimant's entitlement to benefits.

Evaluate all applications for benefits fairly and quickly.

Let claimants know about all decisions made concerning their claim within the times specified in the SABS, give the reasons for those decisions, and make sure that payments due to claimants are made within the times specified in the SABS.

Pay for reasonable measures to reduce or eliminate the effects of any disability resulting from injuries sustained by a claimant in an accident and to help their reintegration into their family, the labour market and the rest of society.

Cooperate with representatives retained or appointed by claimants to help claimants with their claims.

Make sure notices to claimants are in writing and in plain language.

Make sure requests for a claimant to undergo an assessment or examination are to obtain necessary information.

Make sure assessors or evaluators who are asked by the insurer to examine a claimant accommodate the claimant when scheduling appointments to minimize inconvenience to the claimant.

[Italics added for emphasis]

The evidence is uncontested that after Mr. Henderson requested coverage in May 1995, Lombard again failed to provide Mr. Henderson with accident benefits information and claim forms. The evidence also clearly establishes, and I find, that the company's May 15, 1995 letter did not meet its statutory duty under section 71 of the Schedule to explain to the Applicant how he might contest the denial of his claim. I find that Lombard's failure to give Mr. Henderson information about his accident benefits and right to contest its denial led Mr. Henderson to delay applying for other accident benefits and to abandon any challenge of Lombard's decision to deny his entitlement in May 1995.

The WCB and Mr. Henderson's Lawsuit

In the summer of 1996, the WCB discovered that Mr. Henderson had filed a lawsuit in the United States regarding the truck accident. The WCB lawyer wrote Mr. Henderson to explain that he must choose whether to continue receiving workers compensation benefits and dismiss his US lawsuit, or alternatively, elect accident benefits and pursue his tort claim. The WCB would not approve an assignment under section 76 of the Schedule and section 10 of the Workers Compensation Act unless Mr. Henderson fully reimbursed the nearly $75,000 in WCB benefits already paid. Mr. Henderson did not seek legal advice from an Ontario lawyer. He sent a copy of the WCB’s letter demanding reimbursement to Lombard on July 16, 1996.

At this time, the WCB was also putting pressure on Mr. Henderson to resume work, although his family physician and treating surgeon were quite sceptical of his ability to handle long-distance driving due to his difficulty concentrating. Mr. Henderson was reluctant to sleep overnight in the truck cab again or load heavy items, both job requirements of his pre-accident employment. However, he agreed that he could do short-haul trucking and perform mechanical work. Thus, when WCB terminated his wage loss benefits in September 1996, Mr. Henderson started working as a supervisor at an autobody shop. He has since worked fairly steadily as an automobile and truck mechanic.

The evidence is that Lombard re-opened Mr. Henderson’s claim after he sent the July 1996 WCB letter. Lombard answered him almost five months later, in December 1996. The company’s response correctly pointed out that under section 76 of the Schedule, Mr. Henderson was not eligible for accident benefits because he needed an approved assignment from the WCB before his claims could be considered. His dilemma at that time was that the WCB wanted him to repay $75,000 in a lump sum before approving the assignment.

Lombard’s letter also advised Mr. Henderson he had two years after the November 1994 accident date to make any claims to the company. Lombard admitted at the hearing that its representation of the time limitation was incorrect since the Schedule allows an insured person two years from a denial of a claim to mediate a dispute about the insurer's decision.¹¹

Mr. Henderson testified that he thought Lombard’s five-month delay had jeopardized his right to dispute the company’s rejection of his claim, and that he was now out of time. Lombard offered no excuse for the five-month delay in answering his inquiries, accounting for only a short period when its adjuster was on vacation.

The evidence is that Mr. Henderson promptly hired a lawyer after receiving Lombard’s December 1996 letter. On January 29, 1997, his lawyer sent Lombard a formal application for accident benefits, a health practitioner’s certificate stating that he could not drive a transport truck and an unapproved workers compensation assignment. On February 6, 1997, Mr. Henderson’s lawyer sent Lombard confirmation of his pre-accident employment income so that his benefit might be calculated. The following month, Lombard received a recommendation from one of Mr. Henderson’s treating experts that he undergo stress counselling and brain injury rehabilitation before his return to long-distance driving.

Lombard admits it did not send a written response, acknowledge his application formally or send him a written assessment of his claims for accident benefits. Instead, the Insurer’s representative telephoned Mr. Henderson’s lawyer on March 7, 1997 to reiterate Lombard’s fundamental disagreement that Mr. Henderson could opt out of the workers' compensation system in order to maintain his negligence suit and switch to the statutory accident benefit system. In April 1997, Mr. Henderson filed for mediation of his dispute with Lombard.

Lombard’s Third Contact

The evidence reveals that in the fall of 1996 Lombard knew Mr. Henderson’s WCB benefits were in jeopardy, and repeated its previous mistakes by failing to promptly inform him in writing about the accident benefits available under the Schedule, the system of the elections, and his right to dispute its decisions.¹² Lombard also failed to fairly evaluate his application for accident benefits or send him written reasons for not paying his claims.¹³ Although there is no evidence that Lombard intended to deceive Mr. Henderson as to the limitation period, the company did not demonstrate utmost good faith to ensure that its representation of the limitation period affecting his claim was accurate.¹⁴

While the evidence certainly indicates that Lombard neglected both its statutory duties under the Schedule and common law duty to treat Mr. Henderson with utmost good faith in December 1996 and early 1997, it prompted the Applicant to hire a lawyer and file for mediation almost immediately. Thus, I do not find that Lombard's failures at that time contributed to any delay or withholding of his accident benefits.

Lombard's Entitlement Argument:

The evidence of Lombard's reliance upon the Commission's decisions to defend its position in 1997 and 1998 is relevant to the special award. In early 1997, Lombard used the Davis arbitration decision¹⁵ to argue that Mr. Henderson could not switch from the workers' compensation system. This case stood for the proposition that once an insured becomes entitled to workers compensation benefits he or she cannot switch from the scheme.

However, the evidence is that Lombard did not change its position respecting Mr. Henderson’s entitlement after the Davis arbitration decision was overturned on appeal by the Director's Delegate. In July 1997,¹⁶ Director's Delegate Draper opined that so long as an insured had not received non-economic loss or future economic loss payments from the WCB, he or she could re-elect if the decision was not made primarily for the purpose of claiming accident benefits. There is no evidence that Mr. Henderson received or was entitled to receive non-economic or future economic loss benefits from the WCB at any time. Moreover, in November 1997, a FSCO arbitrator discussed the relevance of the Davis appeal decision with the parties at a prehearing conference, clearly indicating that Lombard had actual knowledge of the state of law.

Lombard admitted at the hearing that it did not change its position respecting Mr. Henderson’s entitlement until February or March 1998. The undisputed evidence is that Lombard issued its first cheque in partial payment of Mr. Henderson's benefits and its first written "Explanation of Assessment" in response to his claims in May 1998, 9 months after the July 1997 appeal decision in Davis and 18 months after Mr. Henderson's January 1997 application for accident benefits.

On this evidence, I reject Lombard’s submission that it relied in good faith on the case law. I find that Lombard had no basis to deny Mr. Henderson's entitlement to accident benefits or to delay payments after the Davis appeal decision in July 1997. I further find that its recalcitrant position directly contributed to the unreasonable delay and unconscionable withholding of Mr. Henderson’s accident benefits.

Lombard's Claims Handling Practices:

The evidence in this case demonstrates that Lombard sought to deflect responsibility for compensating Mr. Henderson to the WCB from the outset. The company did not in any way challenge the substance of Mr. Henderson's claims until the arbitration in 1998. Before that time, Lombard did not ask him to submit additional evidence to support his disability claim or rehabilitation needs. Nor did Lombard request an independent medical review of his condition, seek clarification of his employment status or income, calculate his benefit, send him any brochures or application forms, issue assessments of his specific claims, offer or pay benefits or promptly answer his requests for information. In addition, Lombard misinformed Mr. Henderson as to the limitation period, and refused to admit his entitlement for a significant period without any basis in law.

I find that Lombard ignored its positive obligations to the Applicant. Mr. Henderson submitted that these facts demonstrate a pattern of flagrant disregard for an insurer’s responsibilities under the Schedule, which the Director of Arbitration might review to assess whether further investigation by the Superintendent is required.¹⁷

Treatment of Mr. Henderson’s Medical and Rehabilitation Claims:

Mr. Henderson seeks reimbursement and funding for the following rehabilitation: the 1997 evaluation and report by Aetna Health Management ("Aetna"), a program of occupational therapy/functional living skills, speech pathology treatment, a structured program at the Hand and Upper Limb Clinic, and an interdisciplinary evaluation of his needs. For the following reasons, I find all of the recommended services, except the interdisciplinary evaluation, are reasonable and necessary as a result of Mr. Henderson’s accident injuries.

I find Mr. Henderson’s slow steady progress in resuming his daily activities after the accident was hampered by physical as well as psychological problems. He wanted to drive again, but had nightmares about the accident and feared sleeping in the cab. Dr. B. Cameron, his family physician, and other consulting specialists refused to certify that he could safely resume long-haul trucking on a full-time basis.

I find Mr. Henderson’s treating health care professionals had good reason to be concerned about releasing him to drive a transport truck. Assessments in 1995 and 1996 indicated that he had problems with fine motor coordination, particularly with his left hand, balance, fatigue, slow/slurred speech and occasional light-headedness.

Although the Downsview Rehabilitation Centre ("Downsview") released him to return to work in April 1996, its own occupational therapist noted in the WCB records that Mr. Henderson’s left-hand dysfunction and fatigue might affect his job performance. The neurosurgical consultation notes confirm that the WCB understood Mr. Henderson’s left-hand problem. Although neuropsychological testing showed improved executive and verbal functions, it also revealed that Mr. Henderson retained mild word-finding/recall problems, together with significant levels of anxiety. These substantive tests indicate that Mr. Henderson continued to suffer some marked psychological difficulties.

The WCB’s finding that Mr. Henderson could resume long-haul trucking was based primarily on the April 1996 opinion of Dr. C. Werry, a neurosurgeon at Downsview Rehabilitation Centre. Preliminary brain imaging showed "white matter", which served as a basis for speculation that Mr. Henderson might have multiple sclerosis. Dr. Werry seems to partly base his work-return recommendation on the probability that some symptoms were due to this unrelated degenerative condition. However, further testing did not confirm that Mr. Henderson had multiple sclerosis. The evidence is consistent, and I find that Mr. Henderson’s left-hand/arm symptoms result from the accident.

Dr. Werry does not address Mr. Henderson’s rehabilitation needs or explain how he can be expected to safely operate a long-distance transport truck with recurrent fatigue, left-hand dysfunction, easy distractibility and high levels of anxiety. I put more weight on the cautious suggestion by the WCB’s consulting neuropsychologist that Mr. Henderson be re-tested in 12 months for a final diagnosis. I find the evidence is consistent that Mr. Henderson has continued to suffer left-arm/hand dysfunction since the accident.

Despite contraindications from his treating health care practitioners, the WCB terminated both Mr. Henderson's wage loss and vocational rehabilitation benefits after he refused to resume truck driving. His neurologist (Dr. Anup Chaudhuri), his physiatrist (Dr. John Hargadon), and his neuropsychologist (Dr. Garry Hawryluk) recommended counselling and/or brain injury rehabilitation to treat his post-traumatic stress and cognitive difficulties. Dr. Hawryluk best describes the manifestations of Mr. Henderson's psychological state in his February 1997 report:

Overall, the foregoing appeared consistent with the consequences of a mild head injury, effecting [sic] principally the capacity to focus, direct, and regulate attention and concentration, to maintain freedom from distractibility, and to efficiently process information presented. A memory deficit was also apparent, particularly for nonverbal information, in an individual who also demonstrated features of language based disturbance.

Mr. Henderson’s family members indicated to Aetna during interviews that he changed from being a strong, quick-witted and optimistic person before the accident to a slow, short-tempered, disorganized and frustrated individual afterwards. Their confirmation of his difficulties is consistent with Mr. Henderson's testimony and his health practitioner's reports. This evidence supports Aetna’s recommendations that he attend retraining, join a head injury support group¹⁸and receive speech therapy.

In 1999, Lombard requested a team evaluation at the Sudbury Physiotherapy Centre ("Sudbury Centre"), where it was found that Mr. Henderson still suffered from imbalance, left-hand incoordination and lifting difficulties, together with decreased attention span, concentration and memory problems and loss of stamina. The Sudbury Centre concluded that while Mr. Henderson was functioning reasonably well as a mechanic, he was not fit to resume his former job as a long-distance truck driver. Although the Sudbury Centre’s report does not address Mr. Henderson’s rehabilitation needs, the opinion confirms that he continued to suffer the same physical and psychological problems as he did at the time of the 1997 Aetna evaluation. Considering the ongoing nature of his physical and psychological problems, I find it was reasonable and necessary that Mr. Henderson obtain an evaluation of his treatment needs from Aetna in 1997, that he is entitled to the $1,027.15 for the cost of that evaluation.¹⁹ Based on the 1999 evaluation, I find that Aetna’s recommendations for the following services are reasonable and necessary treatment for Mr. Henderson’s accident injuries, and that he is entitled to funding for speech language pathology ($1,290), occupational therapy/functional living skills ($800), and a structured program at the Hand and Upper Limb Clinic ($1,600). In sum, I find that Mr. Henderson is entitled to $4,717.15 in rehabilitation benefits under section 40 of the Schedule.

I was not provided with evidence to support Aetna’s recommendation for another interdisciplinary evaluation of Mr. Henderson’s treatment needs. Therefore, I am unable to accept Mr. Henderson’s claim that another evaluation is either reasonable or necessary at this time.

Mr. Henderson claims that he is entitled to reimbursement for the $25,690.44 in medical and rehabilitation expenses that the WCB paid on his behalf prior to his 1996 termination of benefits. In April 1997, Lombard received a certified copy of the workers' compensation expense memorandum, which outlined the cost of Mr. Henderson’s ambulance services, in-patient hospital services, transportation, diagnostic testing, medical reports and physical and psychological therapy he received as a result of his accident injuries.

Mr. Henderson’s counsel submitted that funds from the July 1998 settlement of Mr. Henderson’s lawsuit arising from this accident were paid to satisfy the WCB claim, and that he received nothing directly from the tortfeasor. However, Mr. Henderson did not produce any documents to verify the settlement or the funds paid to the WCB.

Lacking evidence to substantiate that settlement funds either wholly or partially satisfied the WCB-funded expenses, I find that Mr. Henderson is not obligated or out-of-pocket for the cost of these services, and that he is not entitled to reimbursement at this time. Consequently, I find that Lombard’s failure to assess these expenses when they were submitted in April 1997 did not cause or contribute to the unreasonable withholding or delay in payment of his accident benefits. Lombard did not respond to Aetna's recommendations for Mr. Henderson's rehabilitation, which were received in early October 1997. This evidence is relevant to the determination of a special award because the legislature enacted specific subsections of the Schedule²⁰ and the Insurance Act ²¹ mandating insurers to pay certain disputed medical and rehabilitation expenses pending resolution of the dispute:

Where the statutory accident benefits Schedule provides that the insurer will pay a particular statutory accident benefit pending resolution of any dispute between the insurer and an insured, the insurer shall pay the benefit until the dispute is resolved, 1990, c. 2, s. 57, part.

I wholeheartedly agree with Arbitrator Blackman's statement concerning this provision.²²

Preventing any delay of an insured's access to a restricted range of goods and services, is the paramount legislative concern.

The intent is to provide insureds with immediate access to treatment of their accident-related injuries without the necessity of first proving entitlement. In a first-party system, the insured’s rehabilitation involves a joint partnership with their insurer.²³

I find that the health care services Aetna recommended (except for the medical reports), fall within the so-called "pay now, dispute later" statutory provisions. I further find that after the issuance of the Davis appeal decision, Lombard had no justification to delay its responsibilities to evaluate Mr. Henderson’s medical and rehabilitation expenses. I find that the company failed to meet its statutory duty to pay these expenses pending resolution of this dispute, resulting in an unreasonable delay in paying his medical and rehabilitation benefits.

The Amount of Mr. Henderson's Income Replacement Benefit:

Lombard admits that Mr. Henderson has an ongoing entitlement to income replacement benefits. However, there is a small dispute about the weekly amount.

Mr. Henderson claims a $608.08 income replacement benefit, based on his earnings during the four weeks prior to the accident. Lombard's calculation of $597.11 per week is based on the 52-two week period before the accident.

Mr. Henderson worked three out of the four weeks immediately preceding the accident. His slightly higher benefit results from extrapolating his three-week income over the four weeks during that period. Lombard challenges Mr. Henderson’s right to do so.

Under Part II of the Schedule, a person who was employed at the time of the accident may choose to calculate his benefit based on his income during the four weeks, 52 weeks or the 156 weeks prior to the accident.²⁴ An employee may extrapolate income over the four-week period except in unusual circumstances outlined in subsection 9(7) of the Schedule²⁵

I received no evidence to suggest that Mr. Henderson falls within the statutory exceptions which would bar him from extrapolating his income over the four-week period. Nor did I receive any evidence that Lombard demanded or that Mr. Henderson chose to designate any one of the other time periods for purposes of the calculation.²⁶ Therefore, I cannot accept Lombard’s submission that Mr. Henderson’s benefit is $597.11, and that he must base his pre-accident income on the 52-week period prior to the accident. I find that Mr. Henderson is entitled to extrapolate his four-week pre-accident income, and that his income replacement benefit is $608.08 per week.²⁷

Interest:

Disability benefits, as well as medical and rehabilitation benefits, draw mandatory two percent interest, compounded monthly, after the benefits are overdue.²⁸ A benefit becomes overdue 14 days following the receipt of an insured’s application.²⁹ Arbitrators have consistently stated that the provision was intended to promote timely payments when an insurer is provided with sufficient documentation to determine claims.³⁰ On the facts of this case, I find it appropriate to use the date that Lombard had sufficient documentation to evaluate the claim after the issuance of the Davis appeal clarified the law on Mr. Henderson’s right to switch from the workers compensation system.

Mr. Henderson sent Aetna's report to Lombard with a request for reimbursement on March 27, 1998. Allowing 5 days for delivery and 14 days for Lombard to review Mr. Henderson's documentation,³¹ I find that he is entitled to interest on the cost of Aetna’s report and services (totalling $4,717.15) from May 1, 1998.³²

Although Lombard received all of the information necessary to process Mr. Henderson’s income replacement benefits by mid-March 1997, the Davis appeal had not yet been issued and the Applicant had not obtained the necessary approved assignment from the WCB at that time. Therefore, I find that Mr. Henderson is entitled to interest on income replacement benefits from the date of the Davis appeal decision on July 22, 1997.

Special Award:

The Insurance Act empowers an arbitrator to penalize an insurer and compensate an insured person whose benefits are unreasonably delayed or withheld. Lombard conceded in its closing submissions that Mr. Henderson should receive a special award, but submitted it should be small.

Lombard argues that this dispute arose out of a novel point of law, similar to McDonald(s) and State Farm Insurance Companies.³³ In that case, the parties required guidance on legal interpretation of the legislation from the Director of Arbitrations. Here, the legal issue whether Mr. Henderson could switch systems was resolved by the Davis appeal decision long before this hearing, and I cannot accept Lombard’s argument.

Lombard knew or should have known its entire defence had evaporated at the November 1997 prehearing, but did not change its view until February 1998. Even if I accept that Lombard, a sophisticated Insurer represented by legal counsel, did not know the ramifications of the Davis appeal decision when it came down, its continued delay and withholding of Mr. Henderson’s accident benefits after the prehearing certainly demonstrates an inflexible and unyielding attitude.³⁴ I find that Lombard treated Mr. Henderson as if he were an adversary.

Lombard’s position is likewise not defensible because the figures show it failed to pay more than half of Mr. Henderson’s outstanding income replacement benefits at the time of the hearing. According to the agreed amounts submitted, Mr. Henderson’s income replacement benefits totalled $90,784.93 to the end of September 1999, taking into account his post-accident income. Lombard paid a total of $53,139.84 towards his income replacement benefits, $9,051.50 of which represents interest.

Lombard again offered no reasonable excuse why more than six months after it acknowledged Mr. Henderson’s entitlement it still paid him less than half of the principal income replacement benefits owing. Using the agreed figures, I find that Lombard has unreasonably withheld and delayed payment to Mr. Henderson of over $45,000 of income replacement benefits under section 7 of the Schedule at the time of the hearing.

Lombard also submitted no evidence refuting the opinions from Mr. Henderson’s health care consultants that he required left-arm/hand treatment, speech therapy, and an occupational therapy/functional living skills program recommended by Aetna in 1997. In fact, both parties experts (including the WCB s) consistently recognized Mr. Henderson’s left-arm/hand dysfunction. I find that Lombard unreasonably withheld $4,717.15 in funding for Mr. Henderson’s rehabilitation needs under section 40 of the Schedule.

In Quarrington,³⁵ the insurance company's denial of dental implants up to the hearing was found "highly unreasonable" because it ignored recommendations from both parties experts. Arbitrator Baltman found the insurer's conduct fell short of bad faith, and she granted 40 percent of the principal benefits as a special award. The sole Commission decision where an arbitrator penalized the insurer by awarding more than the withheld benefit involved a mere $85 disputed item.³⁶ These are not factually analogous cases to use as a yardstick to tailor this special award.³⁷

Although Lombard has made payments to Mr. Henderson as a mitigating factor in its favour ($53,139.84 since May 1998), it committed serious breaches over a long period of time. Lombard failed to send Mr. Henderson claim forms and information about accident benefits, neglected its duty to evaluate and respond to his claims, delayed answering his queries, mis-stated the limitation period, and refused to honour his entitlement rights under established precedent. I find that Lombard's numerous failures of duty caused or significantly contributed to the unreasonable delay and withholding of Mr. Henderson’s accident benefits from the time he initially contacted the company in November 1994 to the date of the hearing.

In my view, the special award must be proportional to both the gravity of the breaches and the amounts that have been withheld and delayed.³⁸ I have added the rehabilitation expenses and income replacement benefits unreasonably withheld plus the overdue interest and deducted Lombard’s payments. The amount is in excess of $90,000 to the date of the hearing.

The jurisdictional limitation of an arbitrator’s authority under section 282 of the Insurance Act is determined by the following formula:³⁹

benefits withheld/delayed + 2 percent overdue interest + 2 percent special award interest

2

To the date of the hearing, I find that the income replacement benefits and rehabilitation benefits unreasonably withheld or delayed from Mr. Henderson, plus applicable interest according to the Schedule, and special award interest under the Insurance Act total over $160,000.⁴⁰

On the one hand, the significant nature of Lombard’s deficiencies in handling Mr. Henderson’s claim together with the number of years over which they occurred demands a significant award calculated to deter future conduct of the type exhibited here. On the other hand, the fact that Lombard did make significant payments and that Mr. Henderson was able to resume working to support himself and his family to ameliorate the effect cause me to reduce the amount from the maximum. Under the circumstances of this case, I find it appropriate to grant Mr. Henderson a lump sum special award of $65,000 inclusive of all interest.

EXPENSES:

Mr. Henderson has succeeded on nearly all issues in his claim. His counsel presented the case effectively and efficiently. I exercise my discretion to award Mr. Henderson his expenses of the arbitration process. The parties may speak to me further if they require an assessment of these expenses.

March 31, 2000

Fred Sampliner Arbitrator

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