Neutral Citation: 2001 ONFSCDRS 132

FSCO A99-001160

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

MANJIT SINGH

Applicant

and

COMMERCIAL UNION ASSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

Joyce Miller

Heard:

December 4, 5, 6 and 7, 2000, written submissions were received by March 15, 2001

Appearances:

Gurcharan Anand for Mrs. Singh

Lisa Trabucco for Commercial Union Assurance Company

Issues:

The Applicant, Manjit Singh, was injured in a motor vehicle accident on June 28, 1997. She applied for and received statutory accident benefits from Commercial Union Assurance Company ("Commercial Union"), payable under the Schedule.¹ Commercial Union terminated weekly income replacement benefits on June 28, 1998. The parties were unable to resolve their disputes through mediation, and Mrs. Singh applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Preliminary Issue:

A four-day arbitration hearing was set to proceed on December 4, 2000 on the issue of whether Mrs. Singh was entitled to further income replacement benefits, the quantum of her income replacement benefit and whether, pursuant to subsection 282(10) of the Insurance Act², she was entitled to a special award.

On November 29, 2000 the parties settled the income replacement benefit issue. Commercial Union agreed to reinstate Mrs. Singh's income replacement benefit and agreed to pay Mrs. Singh $60,956.86 for income replacement benefits owed, plus interest of $27,472, for a total of $88,428.86.

At the start of the hearing on December 4, 2000 I was advised of this settlement and also of Mrs. Singh's desire to proceed on the issue of a special award. At the beginning of the hearing Mrs. Singh had not yet received any payment from the Insurer.³

The Insurer took the position that I did not have the jurisdiction to hear the issue of a special award. The Insurer submitted that once the income replacement issue was settled there was no outstanding issue for arbitration, and therefore the issue of a special award is moot. Commercial Union relied on the cases of Grozdanovsky and Wawanesa⁴ and Bianca and General Accident⁵ as authority for the proposition that where no benefits are owing a special award cannot be made.

Mrs. Singh relied on a number of cases where special awards were ordered despite the insurer having paid outstanding benefits prior to the arbitration hearing. One of these cases was the fairly recent appeal decision by Director's Delegate Draper in Prudential and Chafe-Moote.⁶

In the Chafe-Moote⁷ arbitration decision, Arbitrator Killoran awarded the applicant a special award with respect to benefits that were paid more than a month prior to the arbitration hearing. The insurer appealed, one of the grounds being that the arbitrator erred in ordering a special award when there were no benefits owing.

Director’s Delegate Draper rejected the insurer’s submission. He stated that:

Section 282(10) is clearly meant to encourage the timely payment of benefits, as are various sections of the SABS-1994. A special award is payable if the insurer unreasonably withholds or delays payments. The amount of the special award is based on a percentage of the amount to which the person was entitled at the time of the award. [emphasis in the original]

Director's Delegate Draper went on to state that he agreed with previous arbitration and appeal decisions⁸ which have held that "... insurers cannot avoid a special award by paying benefits shortly before the arbitration hearing." He stated that while the wording of subsection 282(10) is somewhat problematic, he nevertheless agreed with this analysis. He stated "[ t]o hold otherwise would take delayed payments out of the equation, a result that clearly was not intended."

Finding:

I ruled that the hearing should proceed on the issue of a special award. I found that the cases of Grozdanovsky and Bianca can easily be distinguished. Unlike the cases that allowed a hearing on a special award to proceed where outstanding benefits were paid shortly before the hearing, in both Grozdanovsky and Bianca the applicants were unsuccessful in their claims for benefits, and therefore the issue of a special award was moot. Accordingly, I found that pursuant to the case law, and more specifically Director's Delegate Draper's reasoning in Chafe-Moote,⁹ I had the jurisdiction to hear the issue of a special award.

Accordingly, the issues in this hearing are:

1. Is Mrs. Singh entitled to a special award pursuant to subsection 282(10) of the Insurance Act?

2. Is Mrs. Singh entitled to her expenses of this arbitration proceeding?

Result:

1. Mrs. Singh is entitled to a special award of $61,829.52 pursuant to subsection 282(10) of the Insurance Act.

2. If required, I may now be spoken to on the issue of the expenses of this arbitration proceeding.

Background

Mrs. Singh is 48 years old. She is married and has three children.¹⁰

Mrs. Singh emigrated from India in 1973. She married in 1981. When she arrived in Canada, she began working in a factory. In 1987, she decided to upgrade her education. Her goal was to become a registered nurse. To reach her goal, Mrs. Singh began taking courses to complete high school education.

In 1992, Mrs. Singh's husband was severely burned in a gas fire explosion. As a result of this accident Mr. Singh has been disabled from engaging in any full-time employment. He has not received any disability benefits as a result of this accident. From 1992 on Mrs. Singh has been the sole financial supporter of her family.

In 1994, Mrs. Singh completed a one-year training course as a healthcare aide. At the time of the June 28, 1997 car accident,¹¹ Mrs. Singh was working as a healthcare aide at Tullamore Nursing Home. As well, several weeks before the accident she began working as a general helper on a part-time basis in a fabric store, Krishma Fashion.

The Mediation Memorandum¹² of October 4, 1999 describes the motor vehicle accident of June 28, 1997 as follows:

Ms. Singh was a front seat passenger in a stationery [sic] vehicle that was rear ended. The impact was severe and her car was written off. She was jolted and struck her head and face against the interior of her car. She was collared, placed on a backboard and taken by ambulance to hospital. At hospital she complained of severe pain to her head, the left side of her neck, left shoulder and low back. X-rays of the neck and back were normal. She was prescribed medication and discharged to the care of her family doctor.

The following morning she was examined by Dr. Surinder Sidhu. He diagnosed a cervical and lumbar strain and referred her for physiotherapy. She commenced physiotherapy at Pro Action on July 11, 1997 and was undergoing daily treatment at the time of the second car accident.

The Mediation Memorandum of October 4, 1999 described the second motor vehicle accident on November 4, 1997 as follows:

Ms. Singh was a front seat passenger in a vehicle driven by her husband. As they were coming out of a parking lot their car was rear ended. The impact was severe and there was considerable damage to their vehicle. This collision aggravated her pre-existing neck and low back injury. She did not seek any immediate medical attention. The following morning she was examined by Dr. S. Sidhu. He made the following diagnosis:

a) Cervical strain;

b) Lumbar strain;

c) Depression;

d) Fibromyalgia.

She was prescribed Plaxil, Flexeril, Zantac and Tylenol 3 and was advised to continue with her physiotherapy.

After the first car accident Mrs. Singh began to receive physiotherapy treatments. Although there was no dispute regarding medical rehabilitation benefits, Commercial Union required Mrs. Singh to attend a medical rehabilitation DAC.¹³

On October 6, 1997, Mrs. Singh was assessed by Dr. Carol Heusser, a psychologist, as part of the medical rehabilitation DAC.

In her report of October 15, 1997, Dr. Heusser stated that Mrs. Singh was suffering from a Major Depressive Episode and that she met the diagnostic criteria for Post Traumatic Stress Disorder. As well Dr. Heusser stated, that although it was "too soon after her MVA to make a diagnosis of Chronic Pain Disorder...there is a risk that her pain behaviour will become entrenched, further impeding her rehabilitation."

Regarding the issue of causality, Dr. Heusser concluded that "... Ms. Singh's psychological complaints ... appear to be the result of the motor vehicle accident of June 28, 1997. In spite of the stress associated with having to work 60 hours or more a week and raising a family, there are no indications in the supplied documentation of pre-accident psychological problems."

Dr. Heusser recommended that Mrs. Singh be referred to a psychologist for cognitive behavioural therapy. Dr. Heusser stated that the treatment would need to first address Mrs. Singh’s depression, as well as her post traumatic stress symptoms. Dr. Heusser noted that Mrs. Singh had suicidal ideation and that this should be monitored closely.

Dr. Heusser recommended that Mrs. Singh should have a total of 16 to 18 sessions with a psychologist. As well, she recommended that Ms. Singh's family physician review her anti-depressant medication, especially in the light of her suicidal thoughts. She noted that she was forwarding a letter to Dr. Sidhu with these recommendations.

Dr. Sidhu referred Ms. Singh to a psychiatrist, Dr. B.D. Sood. Ms. Singh was assessed by Dr. Sood on November 21, 1991 and had a follow-up assessment on January 12, 1998. Dr. Sood's diagnosis was that she was suffering from a motor vehicle accident related depression, which was a mixture of major depression and adjustment disorder type of depression, as well as symptoms of post traumatic stress disorder.

On February 25, 1998, Mrs. Singh attended an insurer's medical examination with Dr. Sergio Bacal, a psychologist.

Based on a telephone conversation with Dr. Bacal on April 3, 1998, the adjuster for Commercial Union, Lucilla Kwan, sent out a notice of stoppage of weekly benefits to Mrs. Singh effective June 28, 1998. In this notice, Ms. Kwan states as the reason for benefits stoppage: "It is the opinion of Dr. Bacal that Mrs. Singh is able to return to her employment in four months from date of the Insurer examination."

Prior to terminating Mrs. Singh's benefits on June 28, 1998, Dr. Bacal's full report of his examination of February 25, 1998 was received by the Insurer on April 29, 1998. In his report, Dr. Bacal diagnosed Mrs. Singh as having a "Major Depressive Disorder." Dr. Bacal said that this diagnosis was based not only on her current complaints, but also on the clinical findings on assessment which revealed numerous signs of severe depression. He stated that his opinion was also in keeping with that of her treating psychiatrist, Dr. Sood, and the DAC psychological assessor, Dr. Heusser, both of whom concluded that Mrs. Singh was suffering from a Major Depressive Disorder.

Dr. Bacal stated that it was also apparent, as had been predicted by Dr. Heusser, Mrs. Singh had now developed a Chronic Pain Syndrome which was significantly compounded by psychogenic inferences.

Dr. Bacal stated that given the stressful conditions of her life prior to the accident that "...it is quite likely that Mrs. Singh developed an insidious, masked depressive disorder, which was kept suppressed, being the main breadwinner and only source of financial and emotional sustenance to her family."

Dr. Bacal stated that in his view "[t]he first accident unleashed, and aggravated to some extent, her pre-morbid depression, precipitated limited post-traumatic stress symptomatology, and provided the opportunity for the emergence of a psychogenic pain disorder." Dr. Bacal went on to state that "[t]hese disturbances were aggravated to some extent by her second accident in November 1997. From this etiological perspective, the car accidents are seen as contributing factors rather than as main causative events of her current disability."

Dr. Bacal stated that "...considering the severity of her emotional disturbance and psychogenic pain, I believe that Mrs. Singh would have substantial difficulty returning to any form of gainful employment." Dr. Bacal went on to state "[c]onsidering her present status, in my opinion she requires not less than four months of weekly psycho-therapy sessions before her depressive symptoms and associated pain disorder begin to importantly subside, and this may well extend into six months of psycho-therapy, from the date of this assessment. I do not believe that less frequent therapy (i.e. bi-weekly or monthly) would be conducive to a more positive outcome." [emphasis added]

Dr. Bacal concluded "...for the duration of her treatment (at least over the next 4 months from the date of this assessment), she should be considered psychologically disabled from performing the essential tasks of her usual occupations as a nursing aide or store clerk, as a result of substantial psychological impairments induced by her major depressive disorder and a pain disorder associated with psychological factors." [emphasis added]

Also, prior to Mrs. Singh's termination of her benefits Commercial Union received a DAC report on April 24, 1998 from Dr. Arthur Ameis, who had assessed Mrs. Singh on March 2, 1998.

In his report, Dr. Ameis stated that his predominate clinical impression of Mrs. Singh was that she was "profoundly depressed" with psychomotor retardation. He stated that it was his "...impression that her physical pain complaint has a predominately psychogenic origin, by which I do not intend to suggest a state of fabrication: depression, poor posture, deconditioning and muscle tension can all produce similar symptomatology" [emphasis added].

Dr. Ameis' clinical impression was that at that time Mrs. Singh should be "...brought into hospital for a period of more intense monitoring."

After receiving Dr. Bacal’s and Dr. Ameis reports, Commercial Union chose to maintain its decision of April 3, 1998 to terminate Mrs. Singh's benefit on June 28, 1998.

After the first accident Commercial Union immediately hired Acumen Rehabilitation Management Inc. ("Acumen") to conduct job site analyses on both of Mrs. Singh's jobs, as well as an in-home occupational therapy assessment. These assessments were conducted on July 12, 13 and 16, 1991. The reports by Acumen provided the Insurer with complete details of the essential tasks of Mrs. Singh's employment at both jobs.

The job site analysis at Tullamore Nursing Home (Tullamore) indicated that Mrs. Singh was entitled to 11 weeks of collateral benefits, at a rate of 61.66 percent of her gross salary. The report also indicated that Mrs. Singh seldom took sick leave and had good attendance.

On August 8, 1997 Mrs. Singh applied for accident benefits. On August 11, 1997 the Insurer was provided with an Employer's Confirmation of Income for both of Mrs. Singh's jobs. The Confirmation from Tullamore, like the Acumen report, indicated that Mrs. Singh was entitled to collateral benefits for 17 weeks through Sun Life Insurance. On September 2, 1997 the adjuster, Lucilla Kwan, called Tullamore to confirm the amount and duration of the collateral benefits.

Commercial Union did not commence paying Mrs. Singh an income replacement benefit until September 19, 1997. The amount of the income replacement benefit, $35.82, disregarded the income from Mrs. Singh's part-time employment at Krishma Fashion. As well, the Insurer disregarded the fact that at that time Mrs. Singh had only been paid short-term disability benefits for the period of July 8, 1997 to July 27, 1997¹⁴ and deducted a collateral benefit of $290.40 beyond July 27, 1997.

On November 20, 1997 Commercial Union adjusted Mrs. Singh's income replacement benefit¹⁵to reflect her income from Krishma Fashion. Commercial Union, however, continued to deduct the collateral benefit up until it terminated Mrs. Singh's benefit on June 28, 1998. It did so despite receiving a letter from Sun Life in May 1998 confirming that Mrs. Singh's collateral benefit was payable only to November 3, 1997, representing the maximum period payable under the short-term disability policy. The Insurer did not adjust the income replacement benefit until November 29, 2000.

As noted above, Mrs. Singh's benefits were reinstated by a Letter of Agreement on November 29, 2000. As well, on December 7, 2000, Mrs. Singh was paid her income replacement benefits up-to-date from June 28, 1998, including the collateral benefits that were deducted by Commercial Union from November 3, 1991 to June 28, 1998. The one issue that now remains to be decided is whether Mrs. Singh is entitled to a special award.

In addition to the evidence and testimony presented at the hearing, the parties provided detailed written submissions on the issue of a special award which are summarized below.

Submissions:

Mrs. Singh's Submissions

Mrs. Singh submitted that following her application for accident benefits the Insurer embarked on a course of delay, denial and termination of her benefits, notwithstanding its knowledge that she was entitled to such benefits. Mrs. Singh submitted that this course of conduct continued up to the date of the arbitration hearing.

Mrs. Singh provided lengthy written submissions supported by very detailed documentary evidence and references to the testimony in the transcript of the arbitration hearing. Mrs. Singh submitted that the Insurer's unreasonable conduct, which resulted in her benefits being improperly delayed, denied or terminated, include the following:

1. Commercial Union failed to commence payment of benefits promptly.

2. Commercial Union ignored information regarding her pre-accident income.

3. Commercial Union improperly deducted collateral benefits.

4. Commercial Union improperly terminated benefits.

(a) The Insurer failed to consider medical reports from treating physicians and failed to re-evaluate.

(b) The Insurer ignored opinions and evidence from its own experts and from DACs.

5. Commercial Union ignored treatment recommendations.

6. Commercial Union failed to pay housekeeping expenses.

7. Commercial Union failed to deal promptly with communications from the Applicant and her representatives.

8. Commercial Union’s behaviour was stubborn, obstinate and inflexible.

1. Failure to commence prompt payment of benefits

Mrs. Singh submitted that despite the fact that she had established a prima facie entitlement to benefits by August 14, 1997, Commercial Union only commenced to pay her an income replacement benefit of $35.82 on September 19, 1997. Mrs. Singh submitted that the Insurer delayed payment of her income replacement benefit notwithstanding that:

• it conducted job site analyses for both Mrs. Singh's part-time and full-time jobs on July 13 and 16, 1997, respectively;

• it conducted an in-home occupational therapy assessment on July 12, 1997, the report of which included complete details about Mrs. Singh’s employment;

• it had received a comprehensive statement from Mr. and Mrs. Singh on August 1, 1997;

• it had received a completed application for accident benefits together with Employer's Confirmation of Income forms from both the full-time employer and part-time employer on August 14, 1997.

Mrs. Singh submitted that, although Commercial Union was entitled to request further information, which it did with respect to the short-term disability insurer and copies of payroll cheques from the part-time employer, the Insurer was not, however, entitled to delay or refuse payment of accident benefits pending receipt of this information, once prima facie entitlement was established by Mrs. Singh.

2. Information ignored regarding pre-accident income

Mrs. Singh submitted that when Commercial Union commenced to pay her income replacement benefits on September 19, 1997, it did not include her income from her part-time employment at Krishma Fashion. Mrs. Singh submitted that Commercial Union disregarded the income from her part-time employment, and did not pay her an income replacement benefit for this job until November 20, 1997 notwithstanding that the Insurer had the following detailed information about Mrs. Singh's part-time employment including:

• a job site evaluation at Krishma Fashion conducted by Acumen Rehabilitation at the request of the Insurer on July 12, 1997;

• the comprehensive statement given by Mr. and Mrs. Singh dated August 1, 1997 and the application for accident benefits and Employer’s Confirmation of Income forms from Krishma Fashion received by the Insurer on August 14, 1997; and

• copies of three cheques from Krishma Fashion received by the Insurer on or before September 12, 1997.

Mrs. Singh submitted that the evidence reveals that on September 12, 1997¹⁶ Commercial Union instructed its "forensic accountant" to disregard Mrs. Singh’s income from her part-time employment when calculating her entitlement to income replacement benefits. Mrs. Singh submitted it was not until November 20, 1997 that Commercial Union adjusted her income replacement benefit to include her income from Krishma Fashion.

3. Improper deduction of collateral benefits

Mrs. Singh submitted that when Commercial Union began to pay her income replacement benefit on September 19, 1997 it deducted $290 from her weekly income replacement benefit purportedly representing payments received from the short-term disability insurer, Sun Life.¹⁷Mrs. Singh submitted that the Insurer made this deduction notwithstanding that it knew that Mrs. Singh had only received short-term disability benefits for the period of July 8, 1997 to July 27, 1997.

Mrs. Singh submitted that in May 1998 Commercial Union had received correspondence from Sun Life further confirming the particulars of her entitlement to short-term disability benefits, namely that collateral benefits were payable only to November 3, 1991,¹⁸ and that this represented the maximum period payable under the short-term disability policy. Mrs. Singh submitted that despite this information, the Insurer failed to retroactively adjust Mrs. Singh’s benefit. Mrs. Singh submitted, Commercial Union continued to delay "topping up" her benefit until the eve of the arbitration.

Mrs. Singh pointed out that Commercial Union in its evidence and submissions had conceded it had particulars of the duration of the collateral benefits as of September 12, 1991 and that it knew by May 20, 1998 of the amount of the short-term disability benefits paid, as well as the duration of those benefits. Mrs. Singh submitted that Commercial Union's alleged reason for not paying up the difference in her income replacement benefit, namely, that it needed to have a copy of the entire Sun Life file to confirm the amount and duration of collateral benefits received from Sun Life, was "preposterous." Mrs. Singh submitted that, in fact, Commercial Union was demonstrating a wilful blindness and a willingness to ignore all information and evidence provided by her in order not to pay the outstanding amounts.

4. Improper termination of benefits

Mrs. Singh submitted that notwithstanding the overwhelming medical evidence confirming an ongoing disability, Commercial Union decided on April 3, 1998 to terminate Mrs. Singh's benefits effective June 28, 1998. Mrs. Singh submitted that the Insurer terminated her benefit based on a telephone conversation that the adjuster had with Dr. Sergio Bacal. Dr. Bacal, a psychologist, had performed an insurer's medical examination on February 25, 1998. In his report, he stated that Mrs. Singh continued to suffer from a major depressive disorder and chronic pain syndrome and that she required:

not less than four months of weekly psycho-therapy sessions...[which] may well extend into six months...[and that] for the duration of her treatment (at least over the next 4 months from the date of this assessment), she should be considered psychologically disabled... [emphasis added]

Mrs. Singh submitted that notwithstanding Dr. Bacal’s opinion that she needed treatment that may well extend up to six months following his initial assessment, Commercial Union did not arrange a follow-up assessment but went ahead and terminated her benefits within four months of Dr. Bacal’s assessment.

Mrs. Singh submitted that Commercial Union acted unreasonably when it terminated her benefits on June 28, 1998, by failing to re-evaluate its decision and by failing to consider the medical reports of her treating physicians as well as the opinions and evidence from its own experts and from the DACs which confirmed her ongoing disability.

Mrs. Singh submitted that at the hearing Commercial Union’s representative, Mr. Cecil Jaipaul, testified that in May 2000 the Insurer had concluded that Mrs. Singh was entitled to outstanding income replacement benefits, nevertheless, this was never communicated to Mrs. Singh or her representative, nor were any benefits paid until the eve of the arbitration.

(a) Failure to consider medical reports from treating physicians

Mrs. Singh submitted that notwithstanding that Commercial Union was provided with numerous reports from her medical practitioners that she could not return to work because of a major depressive disorder and chronic pain syndrome, Commercial Union gave no consideration to reinstating Mrs. Singh’s benefits. These reports include:

• A report of June 24, 1998 from Mrs. Singh's treating psychologist, Dr. R. Samuel, received by the Insurer on June 30, 1998, confirming Mrs. Singh’s continued inability to return to work.

• A report in August 1998 by Dr. Samuel confirming that Mrs. Singh continued to suffer from a major depressive disorder and required treatment in a psychiatric facility.

• A report by Dr. Samuel in September 1998, again confirming that Mrs. Singh continued to suffer from a major depressive disorder and required in-patient psychiatric treatment.

• A report by Dr. Sood, Mrs. Singh's psychiatrist, dated April 27, 1999 confirming that Mrs. Singh suffered from a chronic pain syndrome and depression and that she was "completely and totally disabled as far as coping from any gainful employment is concerned' [emphasis added].

• A report from Dr. Samuel dated May 17, 1999 confirming that Mrs. Singh remained "unable to return to her previous work assignment or to another gainful employment" as a result of a post-traumatic distress disorder and major depressive episode, and also confirming a direct relationship between these conditions and the car accident [emphasis added].

• A report from Dr. E. Tunks dated February 10, 2000 confirming that Mrs. Singh suffered from "a chronic pain disorder, major depressive episode, and dysthymia as a result of which she was disabled" [emphasis added].

(b) Ignoring opinions and evidence from the Insurer's own experts and from the DACs

Mrs. Singh submitted that in addition to the reports from her treating medical practitioners, Commercial Union had significant information from its own medical assessors and from the DAC assessors that would have required them to consider reinstating Mrs. Singh's benefits. These reports include:

• A medical DAC psychological assessment which was conducted by Dr. P. Rankine on August 19, 1999. In her report of September 29, 1999, Dr. Rankine confirmed a diagnosis of Major Depressive Episode, Post-Traumatic Stress Disorder and Chronic Pain Syndrome as a result of the car accident and "strongly recommend[ed] that Mrs. Singh participate in a day-treatment psychiatric program with a multidisciplinarian approach." In her report, Dr. Rankine specifically confirmed that the results of her assessment were consistent with those reported in the previous psychological assessments that Mrs. Singh had undergone since the accident. Mrs. Singh submitted that notwithstanding the receipt of this report, the Insurer did not reinstate Mrs. Singh's benefits.

• In April 2000, Commercial Union agreed to have Mrs. Singh assessed by a psychologist, Dr. D. Cowman. Her report of April 10, 2000 stated that Mrs. Singh was suffering from a Major Depressive Episode of severe proportions and required extensive counselling. Dr. Cowman recommended 30 sessions of psychotherapy and transportation to appointments. Mrs. Singh submitted that Dr. Cowman's recommendation was rejected by Commercial Union on April 20, 2000 notwithstanding that the Insurer had absolutely no evidence to suggest that the recommendation was inappropriate. As well, Mrs. Singh submitted that the Insurer, on receipt of the report, did not give any consideration to reinstating her benefits.

• Commercial Union further agreed to arrange a functional capacity evaluation (FCE) which was conducted by David Simpson, Kinesiologist, on April 19, 2000. Mr. Simpson's report of April 25, 2000 confirmed that Mrs. Singh was unable to meet her job demands as a healthcare aid or general helper. Mrs. Singh submitted that despite this report the Insurer did not give any consideration to reinstating her benefits.

• At Commercial Union’s request, Mrs. Singh was assessed by a psychiatrist, Dr. R. Hershberg, on May 3, 2000. Dr. Hershberg's report of May 31, 2000 confirmed that Mrs. Singh's critical presentation "preclude[d] any return to meaningful employment." The report stated that Mrs. Singh "remain[ed] quite disabled as a result of her Pain Disorder and Secondary Depressive Illness."

Dr. Hershberg recommended a day-treatment program associated with a hospital department of psychiatry, including a social worker to address the "pressing family and financial concerns." Dr. Hershberg felt that "at least four to six months" of treatment would be required. He also recommended that Mrs. Singh receive assistance from an occupational therapist. Mrs. Singh submitted that Commercial Union failed to implement Dr. Hershberg's recommendations. She submitted that after a request by her counsel the Insurer agreed on October 4 to arrange occupational therapy assistance for Mrs. Singh, but in fact never did despite several further requests from her lawyer.

5. Ignoring treatment recommendations

Mrs. Singh submitted that from a few months after the accident Commercial Union refused to provide, arrange or approve psychological counselling despite recommendations from its own assessors. When Commercial Union finally approved her psychological counselling sessions, despite the recommendations of the medical assessors that she receive a minimum of 16 to 18 counselling sessions, the Insurer only approved of five counselling sessions with Dr. R. Samuel. It was only on the intervention of Dr. Samuel that Commercial Union increased these counselling sessions to 10. Mrs. Singh submitted this was contrary to all the recommendations in Commercial Union's possession that there be a minimum of 16 treatments for psychological counselling.

Mrs. Singh submitted the following evidence to support her submission that Commercial Union ignored recommendations from its own medical assessors:

• The Commercial Union's adjusters' notes for September 9, 1997 notes that the Insurer’s occupational therapist advised the adjuster that Mrs. Singh’s condition had deteriorated and that she "may need psychological] counselling."

• Dr. G. Abraham confirmed in his med/rehab DAC report dated October 14, 1997 that Mrs. Singh’s psychological difficulties would need to be addressed.

• The DAC reports of Dr. C. Heusser (psychologist) of October 8 and 15, 1997 concluded that Mrs. Singh was suffering from a Major Depressive Episode, Post-Traumatic Stress Disorder and Chronic Pain Syndrome as a result of the car accident and recommended 16 to 18 counselling sessions.

• The occupational therapy assessment by Acumen Rehabilitation, conducted on the Insurer’s instructions at Mrs. Singh’s home, recommended on November 26, 1997, inter alia, psychological counselling for Mrs. Singh.

• On the instructions of Commercial Union, a representative of Acumen Rehabilitation met with Mrs. Singh's family doctor, Dr. Sidhu, to address the issue of psychological counselling. As well, the representative at Acumen Rehabilitation met with Mrs. Singh's psychiatrist, Dr. Sood. In its report of January 9, 1998, the Acumen representative confirmed Mrs. Singh’s doctor’s opinion that her depression was severe and disabling.

• On February 2, 1998, Mrs. Singh saw Dr. Bacal at the request of Commercial Union. Dr. Bacal had recommended not less than four months of weekly psychotherapy sessions (17 treatments) which may well extend to six months (25 treatments).

• On March 2, 1998, Mrs. Singh was assessed by Dr. Ameis at the Insurer's request. His report of that same date confirmed that Mrs. Singh was "profoundly depressed" and recommended hospitalization.

Mrs. Singh submitted that the report of her own psychologist, Dr. Samuel, dated May 11, 1999, included a recommendation for 30 further counselling sessions. Mrs. Singh submitted that this was denied by Commercial Union in its Explanation of Benefits dated June 4, 1999, notwithstanding that it had absolutely no basis to suggest that the recommendation was inappropriate.

6. Failure to pay housekeeping expenses

Mrs. Singh submitted that on September 4, 1991 and November 26, 1991, Commercial Union's occupational therapist recommended housekeeping assistance for Mrs. Singh. Notwithstanding this recommendation by its own occupational therapist, the Insurer took no steps to provide or arrange any housekeeping assistance. In June 1998, Mrs. Singh submitted housekeeping expenses totalling $3,900 for the period of August 1991 to June 1998. Mrs. Singh submitted that on July 20, 1998 the Insurer denied payment of these benefits notwithstanding the in-home assessment it had commissioned with the occupational therapist and which confirmed that Mrs. Singh needed housekeeping assistance. Mrs. Singh submitted that this expense remained unpaid until the pre-hearing of April 2000 when the Insurer finally agreed to pay this expense.

7. Commercial Union failed to deal promptly with communications from the Applicant and her representatives

Mrs. Singh submitted that Commercial Union not only failed to adjust her claim appropriately, but it failed to respond to communications from Mrs. Singh and her representatives in a timely manner or at all to ensure that it was properly adjusted.

Mrs. Singh submitted that Commercial Union failed to return telephone calls from herself and from her husband in November 1997; failed to respond to Mrs. Singh's letter of April 3, 1998 and failed to return telephone calls from Mr. Singh in April 1998 notwithstanding that Mr. Singh left messages indicating that he wished to discuss the adjusting of Mrs. Singh's benefit. Mrs. Singh submitted that because of the Insurer's failure to return Mr. Singh's telephone calls, the improper delay and denial of benefits continued.

Mrs. Singh submitted that Commercial Union also ignored communications from her counsel. Mrs. Singh submitted that her counsel wrote to the Insurer on November 16, 1999 with respect to the med/rehab DAC psychological assessment conducted by Dr. Rankine in August 1999 and the Explanation of Assessment issued by the Insurer on October 11, 1999, which denied Mrs. Singh’s request for psychological treatment. Mrs. Singh submitted that although this letter was received by the Insurer, no response was made to it.

Mrs. Singh submitted that her counsel wrote to Commercial Union on February 3, 2000 with respect to implementing Dr. Rankine’s recommendations, that she participate in a day-treatment psychiatric program, but that the Insurer failed to respond to this letter. Mrs. Singh submitted that her counsel wrote again to Commercial Union's representative on March 5, 2000, but no response was received to this letter.

8. Commercial Union's behaviour was stubborn, obstinate and inflexible

Mrs. Singh submitted that Commercial Union’s behaviour can quite properly be characterized as "stubborn, inflexible and unyielding."

Mrs. Singh submitted that Commercial Union’s conduct of delay and denial was motivated by its intention to terminate Mrs. Singh's benefits at the earliest possible opportunity, regardless of the information and evidence provided to it with respect to her entitlement. Mrs. Singh submitted that the Insurer's conduct goes well beyond the limits of what was reasonable or equitable and the Insurer was clearly not guided by nor listened to reason.

Mrs. Singh submitted that not only did Commercial Union not properly adjust her claim, but it tried to take advantage of her dire circumstances after the car accident. Mrs. Singh submitted that in January 1998 notwithstanding the issues of ongoing entitlement to income replacement benefits, and notwithstanding Commercial Union's knowledge of Mrs. Singh's need for further treatment and rehabilitation at an unknown but significant cost, Commercial Union offered $3,000 to settle the entire accident benefits claim. Mrs. Singh submitted that this offer was made with full knowledge by the Insurer of the Singh family's dire financial circumstances caused by the accident and by Commercial Union's improper denial of benefits.

Mrs. Singh submitted that at all times Commercial Union was fully aware of Mrs. Singh's dire family and financial circumstances. These included:

• Mr. and Mrs. Singh having to borrow money from relatives and friends.

• They had to use food banks for two and a half years.

• Their mortgages and property taxes had fallen into arrears.

• They had to apply for welfare assistance which was denied because they owned a house.

• They could not afford to have their children participate in various school, social and other activities.

• Their eldest son had to obtain employment to help support the family.

• Their eldest son had to be admitted to a psychiatric facility for depression and had dropped out of school as a result.

Mrs. Singh submitted that these circumstances put a heavy onus upon Commercial Union to ensure that it adjusted Mrs. Singh's claim appropriately.

Mrs. Singh submitted that Commercial Union's conduct to Mrs. Singh was so egregious as to demonstrate malice or bad faith. Mrs. Singh submitted that these factors support a special award at the highest end of the scale. The amounts withheld have been substantial (over $88,000) and the delay was substantial (from July 6, 1997 to November 29, 2000). Mrs. Singh submitted that Commercial Union's conduct was flagrant, and accordingly the maximum special award is justified.

Insurer's submissions:

Commercial Union submitted that the Applicant's claim for a special award centres around two separate circumstances: one, the Insurer's termination of income replacement benefits effective June 28, 1998, and two, the Insurer’s continued deduction of short-term disability benefits for a period when the Applicant did not receive these benefits. Commercial Union submitted that medical and rehabilitation benefits were not in issue for the December 4, 2000 arbitration hearing and therefore should not be considered as part of the special award issue for income replacement benefits.

1. The Termination of Benefits

Commercial Union submitted that when it terminated Mrs. Singh's benefits effective June 28, 1998 it did so on the basis of an insurer's medical examination conducted by Dr. Bacal. Although, Commercial Union conceded that in hindsight the termination of income replacement benefits was "not very strong," it submitted that it was not unreasonable that Commercial Union relied on the medical information in its possession. Commercial Union submitted that according to Dr. Bacal's report, Mrs. Singh should have been capable of returning to work in four months time. Accordingly, it submitted, its conduct was not "excessive, inflexible or immoderate, nor was it a decision made without justification."

Commercial Union submitted that after it had received further insurer's examination reports it decided in May 2000 that Mrs. Singh was entitled to continuing income replacement benefits. Commercial Union submitted that the delay between the receipt of the insurer's medicals and Commercial Union's decision to pay back and reinstate Mrs. Singh's income replacement benefits in November 2000 was because the adjuster who was handling the file had left Commercial Union’s employment in June or July 2000. The new adjuster on the file, Mr. Jaipaul, only had an opportunity to first review the file in September or October 2000. As well, Commercial Union was awaiting a copy of the Sun Life file to confirm the amount and duration of the collateral benefits received from Sun Life, in order to calculate any top-up amount owing as well as interest.

2. Deduction of short-term disability benefits

Commercial Union submitted that the Applicant had provided conflicting and/or incomplete information from the outset of the claim with respect to the availability, duration and amount of short-term disability benefits available from Sun Life and therefore it could not be faulted for its desire to clarify and ascertain the amount and duration of benefits payable by Sun Life in order to calculate the correct amount of IRBs owing.

Commercial Union submitted that the conflicting and/or incomplete information is evident from a review of the following documents:

• At Exhibit #3, Tab 1, is an adjuster’s note dated 4 July, 1997 which records the details of a conversation with the applicant. It reads "no disability benefit";

• The Application for Accident Benefits, (Exhibit #3, Tab 3, part 9) states the applicant has disability coverage with Sun Life, but there is no amount nor duration indicated;

• The Employer’s Confirmation of Income (Exhibit #3, Tab 4, parts 4 and 5) reveals the applicant is eligible to receive income continuation benefits through Sun Life and the weekly indemnity is 17 weeks. No amount is stated.

• At Exhibit #3, Tab 6, an adjuster’s note dated 2 September, 1997 reveals a conversation with Lorraine at Tullamore Nursing Home, and reads "she ll get collateral direct from Sun Life 66.67% of regular gross, no tax to be deducted."

• At Exhibit #3, Tab 8, there is a handwritten fax from L. Kwan, the adjuster, to Jeff Smith, accountant, advising him the applicant will receive "17 weeks from 8/7/97 to 29/11/97. 66.67% of regular gross earnings. No tax to be deducted."

• At Exhibit #3, Tab 9, the adjuster, L. Kwan, forwards to Mr. Smith a weekly indemnity pay stub from Sun Life Insurance revealing she earned $901.50 net from July 8 to July 27, 1997. Based on this information, BDO Hayes, Smith provided calculations of the applicant’s weekly IRB entitlement both with and without any collateral benefit deductions. (Exhibit #3, Tab 11).

• In a statement provided by the applicant dated September 26, 1991 (Exhibit #3, Tab 12), she states at page 1 that "I must have short term disability benefits since I'm getting some money from Sun Life". The applicant does not advise the amount nor duration of the Sun Life benefit.

• At Exhibit #3, Tab 11, the IRB is adjusted to include the income from both jobs and it is determined the IRB payable is $133.16 after deduction of the net STD benefit of $290.40. Mr. Smith's calculations can also be found at tab 11;

• The applicant was involved in a second accident on November 4, 1991 and submitted an application for accident benefits to the insurer dated January 21, 1998. (Exhibit #3, Tab 19). At part 9 the applicant states she has disability coverage through Sun Life but does not provide the amount nor duration, arguably raising the possibility she is or will be entitled to Sun Life benefits resulting from the second accident;

• At Exhibit #3, Tab 25, is a handwritten note from the applicant dated April 3, 1998 and date stamped received May 20, 1998, enclosing a letter from Sun Life stating "benefits have been approved to November 3, 1991. This completes the maximum weekly indemnity payable for the present period of disability." There is no mention of the second accident.

• Following this, further conflicting information is received by the insurer. An adjuster's note dated July 4, 1998, (Exhibit #3, Tab 21, last five lines) is a note of a telephone call with the applicant's solicitor and reads "expired 26 weeks - Sun Life".

The Insurer submitted that when it had received the relevant information from Sun Life in May 1998, its failure to top-up Mrs. Singh's benefit "... was not unreasonable conduct in that it was not excessive, inflexible or immoderate," it was simply "inadvertent."

3. Medical and Rehabilitation Issues

Commercial Union submitted that since medical and rehabilitation issues were not in dispute for the arbitration, they are not relevant to the issue of a special award. Commercial Union submitted that it relies on the release signed by Mrs. Singh on May 8, 2000 which is evidence of the resolution of all issues, other than income replacement benefits up to April 3, 2000.

In the alternative, the Insurer submits that if medical and rehabilitation issues are relevant to the hearing on a special award, the Insurer submits that its conduct and disregard were not unreasonable.

Commercial Union submits that when Dr. Rankine recommended a day-treatment psychiatric program the Insurer did not fund such a program because it did not receive a Treatment Plan proposing such treatment as is required by section 38 of the Schedule.

Commercial Union submitted that it cannot be faulted for not funding a program when it did not receive a Treatment Plan from Mrs. Singh's own doctors. Commercial Union submitted that at the pre-hearing in April 2000 it agreed to have the Applicant re-assessed with respect to her need for psychological and psychiatric treatment. Commercial Union submitted that it did in fact have the Applicant assessed by Dr. Cowman, a psychologist, on April 10, 2000 and that it agreed to fund Dr. Cowman's treatment plan. Commercial Union submitted that its decision to re-assess and agree in October 5, 2000 to fund treatment as recommended by Dr. Cowman shows good faith, reasonableness and flexibility.

4. Mitigating Factors

Commercial Union submitted that there was no unreasonable delay nor withholding of benefits and therefore Mrs. Singh is not entitled to a special award. However, the Insurer submitted that if it is found that its conduct was unreasonable, then it asks that mitigating factors should be considered.

First, Commercial Union agreed to pay the benefits prior to the arbitration hearing so as not to force the Applicant through a hearing on the merits for claim for entitlement. Commercial Union’s conduct should not be penalized when it agreed to re-assess and reconsider its position in the light of new evidence.

Second, Commercial Union submitted that Mrs. Singh did not dispute the termination of her income replacement benefits in June 1998. Commercial Union submitted that it had no knowledge of Mrs. Singh's disagreement with the termination of her income replacement benefits until receipt of an application for mediation on September 9, 1999. Commercial Union submitted that Mrs. Singh's lack of action to dispute the termination of her benefits for one and a half years, for which she provided no explanation, should be considered in the arbitrator’s decision.

And finally, Commercial Union submitted it cannot be faulted nor penalized for clarity of hindsight and flexibility, nor for changing its position and paying benefits after careful re-evaluation.

5. Quantum of the Special A ward

Commercial Union submits that if a special award is found to be owing, the amount of the special award should be far less than the maximum 50 percent of the amount owed, which is $88,428.86. The special award must be a percentage of the amount of $88,428.86 as that figure represents income replacement benefit payments due for the period July 6, 1997 to December 4, 2000 of $60,956.86, plus interest on overdue payments in the amount of $27,472.00. The Insurer stated that there were no other benefits nor interest owing on the date those benefits were paid.

The Insurer emphasizes that, pursuant to the Schedule, interest payable on overdue payments at 2 percent per month, compounded monthly, a rate of interest significantly greater than the current bank rate which, in fact, constitutes a punitive award. The Insurer, therefore, submits it has already paid a penalty for any delay in paying the income replacement benefit payments.

Commercial Union submitted that in this case, there are no benefits nor interest owed. The sum of $88,428.86 was paid December 7, 2000 and represented benefits current to December 4, 2000. There is no further interest owing on that amount. It submits that no interest is payable on any special award unless and until an arbitrator decides a special award is warranted. The Insurer relies on the arbitration decision of Beiler and Alpina Insurance Company¹⁹ by Arbitrator Sampliner.

Commercial Union further submitted that, if it is found that benefits were unreasonably delayed, then the delay was, at the most, five months. Commercial Union submitted that it did not have all of the medical information until June 5, 2000. Commercial Union submitted that it must be allowed to have a reasonable time in which to read and digest the assessments in order to re-assess and reconsider its position. The decision to reinstate benefits was made November 29, 2000 and therefore Commercial Union submits that any delay was at most five months, although it maintains this delay was not unreasonable.

Commercial Union relies on the decision of Ms. B. and Non-Marine Underwriters,²⁰ where it was held that the maximum special award of 50 percent should be reserved for those cases where the insurer shows flagrant misconduct or bad faith, and the appeal decision of Director's Delegate Draper in Prudential and Chafe-Moote (supra) in which he states:

The higher end of the percentage scale should be reserved for especially egregious conduct on an insurers part, without mitigating factors.²¹

Mrs. Singh's Reply Submissions

In response to Commercial Union's submissions, Mrs. Singh presented the following points in Reply:

1. Applicant did not dispute the termination of her income replacement benefits

Mrs. Singh submitted that Commercial Union had a positive obligation to reinstate benefits if it became aware of information confirming her entitlement to such benefits, regardless of whether or not a dispute was raised by her, particularly when the Insurer knew that Mrs. Singh suffered from a psychiatric disability which might impede her ability to deal with the accident benefits claim.

Mrs. Singh submitted that Commercial Union ignored the fact that it knew that she was suffering from a Major Depressive Episode and further ignored that it received at least four reports from Mrs. Singh’s doctors confirming an ongoing disability.

Mrs. Singh submitted that, in any case, when she did dispute her termination of benefits on September 9, 1999, Commercial Union continued to maintain its denial and refused to adjust the benefit until November 27, 2000. Mrs. Singh submitted that this confirms that Commercial Union’s knowledge of a dispute by her was irrelevant to its decision to deny her benefits.

Mrs. Singh submitted that this was a spurious attempt by Commercial Union to legitimize its failure to pay benefits to which she was entitled to, and it is indicative of the Insurer’s manner of dealing with Mrs. Singh from the time of the accident.

2. Deduction of Short-term Disability Benefits

Mrs. Singh submitted that Commercial Union maintains in its submissions that it had conflicting and/or incomplete information with respect to the availability, duration and the amount of the short-term disability benefits available from Sun Life. Mrs. Singh pointed out that Commercial Union cited eleven points in support of its contention. However, Mrs. Singh submits, in fact, the only conflict evident in the eleven points is the "adjuster’s note of July 4, 1997," which reads in part "no disability benefit." Mrs. Singh submitted all other information and documentation cited by the Insurer is consistent.

Mrs. Singh submitted that Commercial Union concedes in its submissions that it knew by May 20, 1998 the amount of the short-term disability benefits in fact paid to her, as well as the duration for which those benefits were paid. Mrs. Singh submitted that, notwithstanding this, no adjustment was made to top-up her benefits.

Mrs. Singh submitted that for Commercial Union to suggest in its submissions that it was under the impression that she continued to receive short-term disability benefits on an ongoing basis demonstrates a wilful blindness and willingness to ignore all information and evidence provided to it by her.

3. Failure to submit a treatment plan

Mrs. Singh submitted that, in fact, treatment was proposed by several of her doctors. At no time did Commercial Union request a treatment plan nor suggest that its refusal to pay for treatment was because no treatment plan had been submitted.

4. Interest

Mrs. Singh submitted that Commercial Union suggests in its submissions that the amount of the special award should be reduced because interest totalling $27,472 was paid to Mrs. Singh and that this was a "punitive award." Mrs. Singh submitted that this submission on the part of Commercial Union ignores the provisions of the Schedule which provides for interest on all late payments, without regard to whether the late payments arose as a result of an unreasonable delay on the part of an insurer or not. There is nothing punitive about the interest entitlement. The issue of a special award arises from an insurer's conduct and the inquiry is whether an insurer’s conduct was unreasonable, not merely whether the payment was late or not.

5. Conduct of the Applicant

Mrs. Singh submitted that Commercial Union raised the question of her conduct, for example, by not disputing the termination of her benefits in June 1998. Mrs. Singh submitted that, in fact, she cooperated fully in every way with Commercial Union. She attended all medical examinations arranged by the Insurer. She gave the Insurer complete access to any and all information it required or requested. She signed all authorizations requested by the Insurer. She never refused to provide Commercial Union with any information requested. Accordingly, Mrs. Singh submitted that Commercial Union's suggestion that her conduct should mitigate against a special award is totally without merit.

ANALYSIS AND FINDINGS:

1. The Law

Pursuant to subsection 282(10) of the Insurance Act, an arbitrator shall grant a special award up to 50 percent of the benefit awarded, with interest on all amounts owing (including unpaid interest), once the arbitrator finds that an insurer has acted unreasonably in withholding or delaying payment.

In the leading case on special awards, Erickson and Guarantee,²² Senior Arbitrator Rotter, held that "unreasonable" means "1. Going beyond the limits of what is reasonable or equitable; 2. not guided by or listening to reason." She held that wilful or deliberate misconduct or bad faith are not required to support a special award. However, she stated that these additional factors in the conduct of the insurer, beyond unreasonableness, should be taken into consideration when assessing the quantum of the special award. She further held that the special award should be substantial enough to have a deterrent effect and should be more than a nominal amount, which could be viewed as a licence to act unreasonably. I agree with these comments.

In another leading case, Plowright and Wellington Insurance Company,²³ Arbitrator Palmer made the following comments, which I agree with, on what can be considered to be unreasonable behaviour on the part of an insurer:

"Unreasonable" behaviour by an Insurer in withholding or delaying payments can be seen as behaviour which was excessive, imprudent, stubborn, inflexible, unyielding or immoderate.

2. Entitlement to a Special Award

Although Mrs. Singh provided very detailed evidence regarding Commercial Union’s unreasonable conduct and treatment of her claim from as soon as she applied for accident benefits (including not only her claim for income replacement benefits, but also med/rehab benefits and housekeeping) up until the settlement of her claim on November 29, 2000, I have based my decision on the conduct of Commercial Union only in respect of the issues set down for the arbitration on December 4, 2000, namely, her entitlement to income replacement benefits and the amount of the benefits.

The burden of proof rests with Mrs. Singh to show that on a balance of probabilities she is entitled to a special award. For the following reasons I find that Mrs. Singh has discharged her burden:

On April 3, 1998, the Insurer advised Mrs. Singh that her income replacement benefit would be terminated as of June 28, 1998. Mr. Jaipaul testified that Commercial Union's decision to follow through on its initial decision to terminate Mrs. Singh's weekly benefits would have been based upon the medical reports it had in its file. These reports would have included:

• A medical and rehabilitation assessment by Dr. G. Abraham, a kinesiologist and doctor of sports medicine, in his report of October 14, 1997 states that he suspected that most of Mrs. Singh’s behaviour was psychologically based. He states that because of her psychological difficulties, she would not be a suitable candidate for a physical therapy program or work hardening. He states that she appears to be more a chronic-pain type of patient. He recommends that "she should be assessed by a psychiatrist for the possible institution of antidepressants."

• A medical and rehabilitation DAC report dated October 15, 1997 by Dr. Carol Heusser states that Mrs. Singh met the DSM IV diagnostic criteria on Major Depressive Episode and Post Traumatic Stress Disorder. Dr. Heusser states that "...the causality of Ms. Singh’s psychological complaints, ..appear to be the result of the motor vehicle accident of June 28, 1997." Dr. Heusser notes that "[i]n spite of the stress associated with having to work 60 hours or more a week and raising a family, there are no indications in the supplied documentation of pre-accident psychological problems." [emphasis added]

• The reports of Dr. Sood dated November 27, 1997 and January 12, 1998 where he confirms that Mrs. Singh is suffering from a major depression with symptoms of Post Traumatic Stress Disorder.

• A Disability Certificate dated January 22, 1998 from Mrs. Singh's family doctor wherein he notes that Mrs. Singh is suffering from depression, neck and back strain and fibromyalgia. He notes that these impairments prevent Mrs. Singh from performing her pre-accident activities and from returning to work.

• An Insurer’s Medical Examination by Dr. Bacal on February 25, 1998. In his report Dr. Bacal states that Mrs. Singh is suffering from "a Major Depressive Disorder" and that he found that she is substantially disabled from performing the essential tasks of her employment. He recommends that she have "not less than four months of weekly psychotherapy sessions...and that it...may well extend into six months of psychotherapy from the date of this assessment."

• A DAC report dated March 2, 1998 by Dr. Arthur Ameis. In this report, Dr. Ameis states that his predominate impression of Mrs. Singh is that she was "profoundly depressed with psychomotor retardation." He opined that Mrs. Singh might better respond to treatment if she was brought into hospital for a period of more intense monitoring.

I find that in face of such consistent medical evidence that Mrs. Singh was suffering from a major depression that disabled her from performing the essential tasks of her employment, Commercial Union's conduct in terminating Mrs. Singh's benefits was unreasonable.

It is clear from Dr. Bacal's report of February 25, 1998, which Commercial Union received on April 29, 1998, that Dr. Bacal did not provide a definitive date as to when Mrs. Singh would be able to return to work. Dr. Ameis report of March 2, 1998, received by Commercial Union on April 24, 1998, not only notes that Mrs. Singh is profoundly depressed, but suggests that she would better respond to treatment if she was hospitalized.

Once Commercial Union received Dr. Bacal’s and Dr. Ameis reports, it had an obligation and a duty before terminating Mrs. Singh’s benefits on June 28, 1998 to re-evaluate its original decision and to confirm whether or not Mrs. Singh was substantially disabled from performing the essential tasks of her employment. Commercial Union did not do this. I find that when Commercial Union terminated Mrs. Singh’s benefits on June 28, 1998 it did not have any meaningful evidence on which to base its termination. I, therefore, find that Commercial Union's conduct in terminating Mrs. Singh's income replacement benefit on June 28, 1998 with out re-evaluating its decision was unreasonable.

After Mrs. Singh’s benefits were terminated, Commercial Union received numerous reports, both from Mrs. Singh’s medical practitioners and from its own medical assessors, confirming that Mrs. Singh was suffering from a severe depression and was disabled from returning to work. These reports include:

• A report by Dr. Rex Samuel dated June 24, 1998 and received by the Insurer on June 30, 1998 states that Mrs. Singh suffered from severe depression, anxiety and stress caused by her two motor vehicle accidents and that she was unable to resume her previously normal activities at work, home, family and society.

• On August 5, 1998, Dr. Samuel wrote a report in which he stated that Mrs. Singh was suffering from such a major depressive disorder that in his opinion she required in-patient assessment and treatment in a psychiatric hospital.

• On September 15, 1998, Dr. Samuel reported that he discharged Mrs. Singh from further psychological treatment because in his view the proper course of treatment would be an in-patient hospitalization that would ensure comprehensive medical supervision and constant nursing care, with eventual occupational rehabilitation.

• On April 27, 1999, Dr. Sood wrote a report which the Insurer received as part of the Mediation Memorandum in the fall of 1999. This report stated that Mrs. Singh is completely and totally disabled from working.

• On May 17, 1999, Dr. Samuel wrote to the Insurer requesting approval of a treatment plan for 30 treatments for Behavioural-Cognitive Psychotherapy with a Punjabi-speaking clinical psychologist. On June 4, 1999, this request was denied, no reasons were given, except that it was noted that Mrs. Singh would be sent to a medical rehabilitation DAC.

• In August 1999, Mrs. Singh was sent by Commercial Union for a psychological assessment with Dr. Patricia Rankine. In her report of September 29, 1999, Dr. Rankine confirmed what other psychological assessors have found, namely, that Mrs. Singh was suffering from a Major Depressive Disorder and Post Traumatic symptoms, as well as a Chronic Pain Syndrome. Dr. Rankine "strongly" recommended that Mrs. Singh participate in a day-treatment psychiatric program with a multidisciplinarian approach.

• A report of Dr. Eldon Tunks, a psychiatrist, prepared for the Applicant on February 10, 2000, stated that Mrs. Singh was suffering from chronic pain, major depression with dysthymia which together amounted to a "double depression". Dr. Tunks found that because of Mrs. Singh's psychiatric condition she was disabled and unable to engage in any full-time employment.

• Commercial Union sent Mrs. Singh for a psychological assessment with Dr. Deborah Cowman. In her report of April 10, 2000, Dr. Cowman diagnosed Mrs. Singh with a Major Depressive Episode of severe proportions, pain disorder as well as anxiety. Dr. Cowman recommended that she have 30 psychotherapy treatments. (This recommendation was first denied by the Insurer).

• Commercial Union sent Mrs. Singh for a psychiatric assessment with Dr. R. Hershberg. In his report of May 31, 2000, Dr. Hershberg diagnosed Mrs. Singh with having a Chronic Pain Syndrome and Secondary Depressive Disorder. He stated that "[c]learly Ms. Singh's current clinical presentation precludes any return to meaningful employ [sic]." Dr. Hershberg recommended a day-treatment program in a psychiatric facility for at least four to six months.

Despite all of the medical reports supporting Mrs. Singh's disability, Commercial Union did not re-evaluate or reinstate Mrs. Singh’s income replacement benefit until November 2000. Mr. Jaipaul testified that Commercial Union had concluded by May 2000 that Mrs. Singh’s income replacement benefits should be reinstated and paid up-to-date. Mr. Jaipaul explained that Commercial Union did not do so because the adjuster, David Hopkins, had left the company sometime in June or July and that he (Mr. Jaipaul) had acquired the file sometime in August or September of 2000.

I give no weight to Commercial Union's excuse for not reinstating Mrs. Singh's benefits after it received Dr. Hershberg's report. This intention to reinstate was never conveyed to Mrs. Singh. Most importantly, there was no notation of this intention in the adjuster’s notes. In fact, there are no adjusting notes in Mrs. Singh's file from May 1, 2000 to the date of the arbitration. Accordingly, I find that Commercial Union's conduct in not considering the medical evidence it received after June 28, 1998 and its failure to re-evaluate Mrs. Singh’s claim for weekly benefits was unreasonable.

In addition to turning a blind eye to very significant medical evidence regarding Mrs. Singh’s disability, I also find that Commercial Union, in withholding the full amount of Mrs. Singh’s income replacement benefit, acted unreasonably.

At the hearing, Mr. Jaipaul conceded that as of September 12, 1997, Commercial Union knew the amount and the duration of Mrs. Singh’s collateral benefits. As well, Commercial Union had information at that time which indicated that Mrs. Singh had not received any collateral benefits beyond July 27, 1997. Commercial Union, nevertheless, continued to deduct a collateral benefit of $290.40. On April 3, 1998, Mrs. Singh forwarded to Commercial Union a letter from Sun Life, the collateral benefit carrier, dated March 17, 1998. This letter, which Commercial Union claimed it did not receive until May 20, 1998, confirmed that Mrs. Singh was paid the maximum benefits available to her which was 17 weeks.

Although Commercial Union had ample information by May 20, 1998 that after November 3, 1997 Mrs. Singh was no longer entitled to any collateral benefits, it did not adjust the amount of her income replacement benefit to reflect this information until November 29, 2000.

Mr. Jaipaul speculated that Commercial Union did not adjust the amount because Mrs. Singh had had a second accident on November 4, 1997 and it was possible that she may have been eligible for further collateral benefits. I give no weight to this speculation. In my view, this is an empty, hindsight rationalization. There is no evidence whatsoever that Commercial Union ever indicated this fact to Mrs. Singh, nor did it make any notation in its file that this was the reason it was refusing to adjust the amount of Mrs. Singh’s income replacement benefit.

Mr. Jaipaul testified that another reason for not adjusting Mrs. Singh’s income replacement benefit was because it needed to see the full file from Sun Life. I find this to be a spurious excuse. The evidence shows that in February 2000 Mrs. Singh gave Commercial Union an authorization to acquire the full file from Sun Life. Commercial Union did not seek this file. In July 2000, Mrs. Singh gave Commercial Union a second authorization for it to acquire the full Sun Life file. Again, the Insurer did not seek the file. In fact, it was not until November 11, 2000 that Commercial Union acquired the Sun Life file. The file, once received, did not indicate anything different than what Commercial Union knew as far back as September 12, 1997 regarding the amount and duration of Mrs. Singh's collateral benefits.

I also give no weight to Commercial Union's submission that it had received conflicting evidence with respect to Mrs. Singh's collateral benefits and therefore was unable to calculate the correct amount of Mrs. Singh's income replacement benefits. There is no indication in the evidence that Commercial Union ever communicated to Mrs. Singh that it could not adjust the amount of her income replacement benefits because it had conflicting information. I agree with Mrs. Singh's submission that in the eleven points cited in support of the Insurer's contention, the only conflict evident is the adjuster's note of July 4, 1997, which reads in part "no disability benefit." After that date, it is clear from the evidence that Commercial Union was aware of the amount and the duration of Mrs. Singh's collateral benefits.

Accordingly, I find that Commercial Union's conduct in refusing to adjust the amount of Mrs. Singh's income replacement benefit after November 3, 1998, in face of all the objective information it had, was unreasonable.

Accordingly, for all the above reasons I find that Mrs. Singh is entitled to a special award.

3. Quantum of the Special Award

Commercial Union submitted that the interest of $27,472 paid on the outstanding benefits that were owed was at a rate which is greater than the current bank rate and is therefore a punitive award. Commercial Union, therefore, submitted that it has already paid a penalty for the lateness of the income replacement benefit payments.

I agree with Mrs. Singh's submission that the Schedule provides for interest on all late payments, without regard to whether the late payments arose as a result of an unreasonable delay on the part of an insurer or not. Pursuant to subsection 46(2) of the Schedule, interest on overdue benefits are payable as soon as they become overdue. The intention of the Legislature was to provide compensation to an insured person for not having use of her money for the period from when the benefits became overdue. This interest is distinct from a special award.

A special award arises from an insurer’s conduct and an inquiry into whether its conduct was reasonable. Subsection 282(10) of the Insurance Act reflects the Legislature's intention that, where benefits have been unreasonably delayed, a special award shall be paid in addition to outstanding benefits and accrued interest. Accordingly, I find that the outstanding interest of $27,472 prescribed by the Schedule is not considered a penalty payment for the unreasonable conduct of an insurer pursuant to subsection 282(10) of the Insurance Act.

Subsection 282(10) limits the maximum amount of a special award to 50 percent of the benefits to which an applicant is entitled to. Arbitration decisions have held that the higher end of the percentage scale should be reserved for especially egregious conduct on an insurer's part without mitigating factors.²⁴ In Ms. B. and Non-Marine Underwriters, Members of Lloyds,²⁵ Arbitrator Kirsch stated that the maximum special award of 50 percent is reserved for cases of flagrant misconduct or bad faith.

Commercial Union asks that I consider mitigating factors when assessing the quantum of the special award. These mitigating factors include the fact that Mrs. Singh did not dispute the termination of her income replacement benefits until September 9, 1999, and that Commercial Union paid up her benefits prior to the arbitration hearing, thus relieving Mrs. Singh from going through a hearing on the merits for a claim for entitlement.

I find the first point made by Commercial Union to be spurious. I agree with Mrs. Singh's submission that Commercial Union had a positive obligation to reinstate benefits once it became aware of information confirming her entitlement to such benefits. I find Commercial Union was obliged to re-evaluate Mrs. Singh’s claim regardless of whether or not a dispute was raised by her, particularly when Commercial Union knew that Mrs. Singh suffered from a psychiatric disability which might impede her ability to deal with the accident benefits claim. In any case, as Mrs. Singh submitted, when she did dispute her termination of benefits on September 9, 1999, Commercial Union continued to maintain its denial and refused to adjust her benefits until just before the arbitration hearing.

The fact that an insurer decides to pay up an applicant’s benefit just before the arbitration hearing might in certain circumstances be a mitigating factor. However, based on the facts of this particular case; the length of time during which benefits were withheld (over three years); the overwhelming amount of medical evidence from both Mrs. Singh's medical practitioners and Commercial Union's own medical assessors supporting Mrs. Singh's claim; and the very detrimental effect that the withholding of these benefits have had on Mrs. Singh's life and that of her family, I do not find that it was a significant mitigating factor to pay Mrs. Singh her benefits prior to the arbitration hearing. In fact, when one reviews the evidence, it is clear that Commercial Union is the one who benefited from not proceeding to arbitration on the issue of entitlement.

As I have stated in a prior decision²⁶, terminating an applicant's income replacement benefit is a very serious matter with potentially serious consequences. An insurer, contemplating the termination of income replacement benefits or maintaining a denial, must act reasonably, and consider all of the documentation before it. It is clear in this case that Commercial Union maintained an immoderate, stubborn and inflexible attitude throughout the handling of Mrs. Singh's claim. I find that Commercial Union's conduct in handling Mrs. Singh's claim not only was unreasonable, but that its behaviour amounts to flagrant misconduct.

As I stated above, Commercial Union's conduct was unreasonable in initially terminating Mrs. Singh’s income replacement benefit when it did not have any meaningful medical evidence on which to base its termination. Commercial Union’s conduct was unreasonable when it refused to adjust the amount of Mrs. Singh’s benefit, although it had the information to do so. Commercial Union's conduct was unreasonable when after June 28, 1998 it refused to re-evaluate or adjust Mrs. Singh’s claim in the face of overwhelmingly significant and material evidence which substantiated her claim. This unreasonable conduct on the part of Commercial Union created a great deal of harm to Mrs. Singh and her family. Not only did Mrs. Singh suffer frustration from the callous way Commercial Union treated her, but she and her family suffered enormous hardship.

In order to survive, Mrs. Singh and her husband had to go into debt and borrow money from relatives and friends. Their mortgage and property taxes fell into arrears. They had to use food banks in order to eat. Because of lack of money their children were deprived from participating in the normal social and school activities. Their eldest son, a high school student, had to obtain employment to help support the family. This same son was admitted to a psychiatric facility for depression in the fall of 2000 and dropped out of high school.

Commercial Union knew at all times that Mrs. Singh was the sole supporter of her family²⁷ when it terminated and continued to deny her weekly benefits. I find that Commercial Union's unreasonable conduct in adjusting Mrs. Singh's claim significantly contributed to the hardship of the Singh family. I find that this factor adds to the size of the special award.

Accordingly, for all of the above reasons, I find that Commercial Union's behaviour in terminating and withholding Mrs. Singh's income replacement benefit amounted to flagrant misconduct. Accordingly, I find that such egregious behaviour on the part of Commercial Union entitles Mrs. Singh to the maximum special award of 50 percent.

4. Calculating the amount of the Special Award

The amount of income replacement benefits that the Insurer owed Mrs. Singh at the time of the arbitration amounted to $60,956.86, plus interest of $27,472, for a total of $88,428.86. The formula generally accepted by arbitrators for determining the amount of the special award, is calculated by adding: Benefits Withheld or Delayed, plus two percent per month overdue interest, plus 2 percent per month special award interest.²⁸

Applying this formula, the amount to be considered for the special award is $123,659.04.²⁹ Fifty percent of this amount is equal to $61,829.52. Accordingly, I find that Mrs. Singh is entitled to a special award of $61,829.52.

EXPENSES:

If required, I may now be spoken too on the issue of the expenses of this arbitration proceeding.

September 11, 2001

Joyce Miller Arbitrator

Date

Neutral Citation: 2001 ONFSCDRS 132

FSCO A99-001160

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

MANJIT SINGH

Applicant

and

COMMERCIAL UNION ASSURANCE COMPANY

Insurer

ARBITRATION ORDER

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

1. Commercial Union shall pay Mrs. Singh a special award of $61,829.52 pursuant to subsection 282(10) of the Insurance Act.

2. If required, I may now be spoken too on the issue of the expenses of this arbitration proceeding.

September 11, 2001

Joyce Miller Arbitrator

Date

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.

The meaning of s. 282(10) is not straightforward. It is capable of being read a number of ways. The threshold inquiry is whether payments have been unreasonably withheld or delayed. In ordinary parlance, payments "withheld" means payments not granted, payments "delayed" means payments paid late. It is difficult to see how the addition of "delayed payments" can be given any content if late payment strips the arbitrator of jurisdiction to make an award. [emphasis in the original]

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96 and 303/98.
2. 2Subsection 282(10) provides that:
3. 3Mrs. Singh was paid the outstanding income replacement benefits and accrued interest on December 7, 2000.
4. 4Grozdanovsky and Wawanesa Mutual Insurance Company (FSCO A99-000289, April 1, 2000)
5. 5Bianca and General Accident Assurance Company of Canada (OIC A-006109, May 5, 1995)
6. 6Appeal decision Prudential of America General Insurance Company (Canada) and Chafe-Moote (FSCO P99-00044, September 8, 2000)
7. 7Chafe-Moote and Prudential of America General Insurance Company (Canada) (FSCO A99-000016, August 6, 1999)
8. 8Lopez and State Farm Mutual Automobile Insurance Company, (FSCO P98-00031, September 20, 1999); Jensen and GAN Canada Insurance Company, (FSCO P96-00079, March 31, 1999); Rocca and AKXA Insurance Company, (FSCO A97-000903, March 10, 1999); and Quarrington and Jevco Insurance Company (OIC A-010804, July 17, 1995).
9. 9I note that Director’s Delegate Draper’s finding in Chafe-Moote is consistent with and follows the reasoning of Director's Delegate Naylor in Jensen and Gan Canada. In that case the insurer took the position that unless the arbitrator finds that there are benefits owing at the time of his or her disposition of the case and orders them to be paid, then the arbitrator has no jurisdiction to order a special award. Director’s Delegate Naylor held that an arbitrator does have jurisdiction to order a special award even when the insurer concedes entitlement before an arbitration hearing is concluded. She stated:
10. 10At the time of the accident the children were 10, 11, and 15 years old.
11. 11Mrs. Singh was also involved in a second accident on November 4, 1997.
12. 12Exhibit 6, evidence filed by Mrs. Singh
13. 13Designated Assessment Centre
14. 14Correspondence from Sun Life dated August 27, 1997 and received by the Insurer in early September indicated that Mrs. Singh was only paid short-term disability benefits from July 8, 1997 to July 27, 1997.
15. 15The amount was adjusted to $113.16
16. 16Exhibit 3, Tab 10, Report dated September 16, 1997 from Jeffrey C. Smith, C.A. to Lucilla Kwan, wherein he confirms that as per her request on September 12, 1997, income from Krishma Fashion was not included in his calculation of Mrs. Singh's pre-accident income.
17. 17Mrs. Singh submitted that on September 19, 1997, the Insurer forwarded an Explanation of Benefits to her, setting out an income replacement benefit payable at $35.82 per week.
18. 18Exhibit 3, Tab 25, Correspondence from Sun Life to Mrs. Singh dated March 11, 1998 wherein Sun Life acknowledges that based on medical evidence it had received that Mrs. Singh was entitled to the maximum benefits of the policy and enclosed a cheque for the period up to November 3, 1991.
19. 19(OIC A-003051, August 9, 1994)
20. 20Ms. B. and Non-Marine Underwriters, Members of Lloyds, London, England (OIC A-013941, June 28, 1996)
21. 21Director's Delegate Draper in fact does not say this. In his decision he quotes Arbitrator Naylor in Rocca and AXA Insurance (supra) and states that he agrees with her.
22. 22Ericson and The Guarantee Company of North America (OIC A-000560, June 2, 1992)
23. 23(OIC A-003985, October 29, 1993)
24. 24Rocca and Axa Insurance (supra) and Prudential and Chafe-Moote (supra) appeal decisions
25. 25(OIC A-013947, June 28, 1996)
26. 26Hernandez and Zurich Insurance Company (FSCO A96-001123, August 28, 1998)
27. 27Exhibit 3, Tab 2 — statement the Insurer took on August 1, 1997 from Mr. and Mrs. Singh
28. 28For example see Beiler and Alpina (supra); Murray and Wawanesa Mutual Insurance Company (OIC A-003224, August 23, 1996); Henderson and Lombard General Insurance Company of Canada (FSCO A97-001019, March 31, 2000; Graper and Liberty Mutual Fire Insurance Company (FSCO A00-000133, July 20, 2001)
29. 29Applicant's submissions, Schedule 2, "Interest Calculation for Special Award"