Neutral Citation: 2001 ONFSCDRS 149

FSCO A01-000010

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

CHET SHUBROOK

Applicant

and

LOMBARD GENERAL INSURANCE CO. OF CANADA

Insurer

Before: Shari Novick

Heard: July 10, 2001, in Hamilton, Ontario.

Appearances: George S. Gage for Mr. Shubrook Tracy Brooks for Lombard General Insurance Co. of Canada

Issues:

The Applicant, Chet Shubrook, was injured in a motor vehicle accident that occurred during the course of his employment on November 27, 1997. He elected to receive workers' compensation benefits and was paid weekly benefits by the Workers' Compensation Board for over two years. In March 2000, he withdrew his election and filed a tort claim in court in which he seeks general damages for pain and suffering as well as damages for loss of future economic earning capacity.

Mr. Shubrook also claims statutory accident benefits from Lombard General Insurance Co. of Canada ("Lombard"), payable under the Schedule.¹ Lombard raises two preliminary objections to the claim.

The parties were unable to resolve their disputes through mediation, and Mr. Shubrook applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issues are:

Is Mr. Shubrook precluded from proceeding to arbitration because he did not notify the Insurer of his intention to apply for benefits within 30 days after the circumstances arose that gave rise to his entitlement to benefits, in accordance with subsection 32(1) of the Schedule?
Is Mr. Shubrook precluded from proceeding to arbitration pursuant to section 59 of the Schedule because his election under section 10 of the Workers' Compensation Act to sue in court was made primarily for the purpose of claiming benefits under the Schedule?

Result:

Mr. Shubrook did not breach the requirements of subsection 32(1) of the Schedule, or, if he did, he had a "reasonable explanation" for doing so pursuant to subsection 31(1).
Mr. Shubrook's election under section 10 of the Workers' Compensation Act was not made primarily for the purpose of claiming benefits under the Schedule, and he is therefore not precluded under section 59 from proceeding to arbitration.

EVIDENCE AND ANALYSIS:

Facts

Mr. Shubrook testified briefly at the hearing, and the parties filed exhibit briefs containing medical records as well as extensive correspondence to and from the Workplace Safety and Insurance Board² and between the parties. I find that this evidence establishes the following facts:

Mr. Shubrook was working as a telephone line installer and repair person on November 27, 1997 when the van he was driving was struck by another vehicle from behind. He initially complained of headaches and a sore shoulder and went home to rest. His pain worsened later that day and he attended the emergency department at Henderson General Hospital in Hamilton. He was examined there and discharged, under instructions to take pain medication and consult his family doctor if his symptoms persisted.

Mr. Shubrook saw his family doctor shortly afterwards and was prescribed pain medication. He was also referred for physiotherapy. A subsequent x-ray of his spine revealed no abnormalities. He was also referred to a neurologist who arranged a CT scan and EEG, both of which yielded normal results. All of the health care professionals consulted by Mr. Shubrook at that point agreed that the appropriate diagnosis was a cervical sprain with muscle contraction headaches.

Mr. Shubrook consulted with various lawyers in the aftermath of the accident and was advised that his injuries did not meet the threshold for pursuing a tort claim.³ On December 29, 1997, approximately one month after the accident, he signed a Workers' Compensation Board ("WCB") election form indicating his choice to claim benefits under that scheme.

Over the following months Mr. Shubrook continued to attend physiotherapy and was referred to Dr. Alexander Pyper, an orthopaedic surgeon. Assessments and examinations were also conducted by other doctors, at the request of the WCB.

In February 1998, one of the doctors who assessed Mr. Shubrook on behalf of the WCB determined that he was fit to return to work. He then returned to modified duties, but continued to complain of neck pain. He stopped working in October 1998, as he no longer felt able to perform his duties. He began receiving trigger point injections from Dr. Kaminer around that time. Mr. Shubrook requested that his WCB benefits be reinstated, but his claim was denied.

After experiencing some relief from the injections he was receiving from Dr. Kaminer, Mr. Shubrook attempted to return to work in early December 1998. He began performing light duties on a part-time basis, gradually increasing his hours. This lasted for approximately three weeks, after which he again stopped working due to pain.

In view of Mr. Shubrook's continuing symptoms, Dr. Pyper requested that an MRI be conducted on his cervical spine. This was done in February 1999 and revealed a disc herniation at C5-6, with associated spinal stenosis. The report also noted "mild to moderate cord compression". Shortly thereafter, Mr. Shubrook's WCB benefits were reinstated for the period he had missed work.

After consulting with Dr. Kesh Reddy, a neurosurgeon, Mr. Shubrook underwent a cervical discectomy in July 1999. While he initially felt better after the surgery, his condition worsened and he subsequently underwent spinal fusion surgery by Dr. Orr in late September 1999. He testified that the surgery was not entirely successful, and that he has not been able to return to work to date.

Given the findings on the MRI and his two spinal surgeries, Mr. Shubrook again sought legal advice regarding his rights to obtain compensation for his injuries. He was advised in the early fall of 1999 that his spinal injuries likely met the threshold for pursuing a tort action, but that in order to file a tort claim he would have to withdraw his claim for workers' compensation benefits.

On October 4, 1999 Mr. Shubrook commenced a tort claim seeking general damages for pain and suffering as well as loss of future economic earning capacity. In addition to suing the driver of the vehicle that struck his vehicle, Mr. Shubrook named Lombard as a defendant in its capacity as the insurer of the vehicle owned by his employer, and asserted that he is entitled to coverage pursuant to the underinsured and/or uninsured provisions in that policy. Examinations for discovery in that action have now taken place.

On October 5, 1999 Mr. Shubrook's counsel sent a letter to Lombard in its capacity as the insurer responsible for paying statutory accident benefits. The letter provided particulars of the accident, and enclosed a completed Application for Accident Benefits and an Activities of Daily Living form. However, the application form forwarded was applicable to Bill 164 accidents. A letter was sent a few days later to Applicant's counsel from someone in the Claims department at Lombard, advising that the matter was being investigated.

On January 25, 2000, over three months later, a claims adjuster from Lombard wrote Mr. Shubrook’s counsel and advised that the incorrect application forms had been filed and that "we will look into this matter only if we receive a proper application form completed and returned within 20 days." However, no Bill 59 application forms were provided. Despite being advised of the mistake, Mr. Shubrook's counsel again forwarded the Bill 164 application forms to Lombard in late February 2000. Finally, on March 20, 2000 Lombard forwarded the proper blank forms applicable to Bill 59 accidents to Mr. Shubrook's counsel, and these were completed and submitted on April 12, 2000.

In March of 2000 counsel for Mr. Shubrook wrote the WCB to advise that his client had decided to pursue a tort action against the at-fault driver and accordingly would like to withdraw the election he had made in December 1997 to collect workers' compensation benefits. On June 9, 2000 a senior legal counsel at the Board confirmed in writing that Mr. Shubrook was entitled to withdraw his earlier election and that he would not be receiving any further benefits from the Board.

Is the application for arbitration out of time?

The relevant provisions are set out below:

(1) A person's failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation.
(1) A person who wants to apply for a benefit under this Regulation shall notify the insurer within 30 days after the circumstances arose that gave rise to the entitlement to the benefit, 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;

(3) The person shall submit an application for the benefit to the insurer within 30 days after receiving the application forms.

The Insurer's argument focussed on the requirement in subsection 32(1) that notice be provided within 30 days. It argued that Mr. Shubrook did not apply for benefits within 30 days after the circumstances arose that gave rise to his entitlement to benefits. Interestingly, Lombard did not take the position that Mr. Shubrook ought to have applied for accident benefits within 30 days of the accident. Instead, counsel for the Insurer submitted that the "clock" should start to run in September or October 1999 when Mr. Shubrook received legal advice that he could sue in tort and claim statutory accident benefits. She noted that it was not until April 12, 2000 that the proper application form was forwarded to Lombard and she contended that as six months separated these two events, Mr. Shubrook's application was out of time.

Lombard also argued that the Applicant should not be able to rely on the "reasonable explanation" provision found in section 31. The Insurer noted that Mr. Shubrook was represented by competent counsel at the relevant time, who is familiar with the area of accident benefits, and claimed that he should have been aware of the need to file the appropriate application forms.

The Applicant's counsel agreed that the 30-day clock only started ticking when Mr. Shubrook was advised that he would be entitled to pursue a tort claim and claim accident benefits as a result of his accident-related injuries. However, he argued that the letter he sent to Lombard on October 5, 1999 advising of the particulars of the accident and enclosing the Bill 164 Application and Activities of Daily Living forms fulfilled the requirements of subsection 32(1).

Counsel for the Applicant contended that once Mr. Shubrook gave notice of his claim in the October 5 letter, section 32 of the Schedule transferred responsibility to Lombard to promptly provide the appropriate application forms. He noted that the Insurer did not provide the proper forms until late March 2000, and that they were then promptly completed and returned to Lombard shortly thereafter.

I agree with the parties that, on the facts of this case, the 30-day time limit set out in subsection 32(1) should not commence on the date of the accident. Given the early medical diagnosis and prognosis for Mr. Shubrook's injuries, his decision to elect to claim workers' compensation benefits was understandable. It was only after the MRI was conducted in February 1999 that Mr. Shubrook's medical practitioners changed their diagnosis and recommended that he undergo the cervical discectomy and subsequent spinal fusion. When these interventions did not result in a complete recovery, Mr. Shubrook was advised that he would likely meet the threshold for pursuing a tort claim. On these facts, I find that the circumstances giving rise to Mr. Shubrook's entitlement to statutory accident benefits were not reasonably known to him until the early fall of 1999.

The question then becomes whether or not Mr. Shubrook notified Lombard of his intention to claim accident benefits within the appropriate time frame. Section 32 of the Schedule sets out the obligations of the parties with respect to the application process. Subsection (1) requires a person intending to apply for benefits to "notify the insurer within 30 days after the circumstances arose that gave rise to the entitlement to the benefit, or as soon as practicable thereafter." It does not state that a completed application for benefits must be received, containing all of the relevant material.

I find that the letter of October 5, 1999 from Mr. Shubrook's counsel satisfied the notice requirement under subsection 32(1). The letter provided the details of the accident and insurance coverage. It enclosed an application form describing the medical treatment he received, and indicating the name of his employer. It also indicated that he had filed a claim with the WCB. It would have clearly been useful if his counsel had explained in the accompanying letter that Mr. Shubrook had initially elected to collect WCB benefits but had then decided to withdraw his election in favour of pursuing a tort claim. However, in my view, this omission does not justify a finding that Mr. Shubrook failed to comply with subsection 32(1).

Nor am I prepared to find that Mr. Shubrook failed to comply with subsection 32(1) merely because the pertinent information was supplied on the incorrect forms. Lombard was required under subsection 32(2)(a) of the Schedule to supply the correct forms promptly, but did not do so.

In the event that the 30-day time limit in subsection 32(1) begins to run on the date of the accident, contrary to the parties' agreement and my finding, I find that Mr. Shubrook had a "reasonable explanation" within the meaning of subsection 31(1) for not complying with this time limit. As set out above, Mr. Shubrook's application for statutory accident benefits logically followed the reassessment of his injuries and his commencement of a tort action, and, in my view, constitutes a "reasonable explanation" for any failure to comply with the time limit stipulated by subsection 32(1).

Accordingly, the Insurer's argument that Mr. Shubrook's application is out of time must fail.

Was Mr. Shubrook's election made primarily for the purpose of claiming accident benefits?

Director's Delegate Draper considered the issue of an applicant's right to re-elect to sue and claim statutory accident benefits after initially electing to claim workers' compensation benefits. In Davis and Pafco Insurance Company Limited (OIC P97-00010, July 22, 1997), he analysed the changes brought about by Bill 164 regarding the interplay between the workers' compensation system and the statutory accident benefits system. He determined that an insured person can re-elect to sue and claim accident benefits, as long as he or she has not yet received worker's compensation benefits for non-economic loss ("NEL benefits") or future economic loss ("FEL benefits"), and as long as the re-election was not made primarily for the purpose of claiming statutory accident benefits.

Section 59 of the current Schedule is identical in wording to section 76 of Bill 164. The relevant parts are set out below:

(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.

Lombard's submissions on this point focussed on the length of time that elapsed between the accident and Mr. Shubrook's decision to withdraw his election to claim workers' compensation benefits in favour of starting a tort action and claiming accident benefits. Counsel for the Insurer submitted that the Insurer would be prejudiced by Mr. Shubrook being permitted to bring an application at this late date, more than three years after the accident. She pointed out that the last medical assessment conducted on Mr. Shubrook by someone other than his family doctor took place in February 1998 at the behest of the WCB. Counsel argued that the Insurer was prejudiced by not having had the opportunity to investigate the claim and have Mr. Shubrook's medical condition assessed by doctors of its choosing. She noted that the test for entitlement to income replacement benefits under Bill 59 becomes more stringent at the 104-week point, and contended that it is difficult for an insurer to evaluate such a claim in the absence of medical information relating to the preceding period.

Counsel for the Applicant responded that while prejudice to the Insurer may be a factor to consider under section 31 of the Schedule, it is not relevant under section 59. Here, the sole question is whether or not the election was made primarily for the purpose of claiming statutory accident benefits. Counsel also noted that there is no reference in subsection 59(2) to any time limit within which an election has to be made. He argued that the medical evidence clearly indicates that Mr. Shubrook's injuries would meet the threshold for pursuing a tort action, and pointed out that there is no dispute regarding the other driver's liability for the accident.

Counsel for Mr. Shubrook contended that his client's decision to withdraw his election to claim workers' compensation benefits in favour of suing in court and seeking accident benefits was based solely on the fact that that was the only manner in which he could access compensation for pain and suffering as well as for future economic loss. Counsel also noted that the Applicant would be eligible for a higher amount of weekly benefits if he had remained in the workers' compensation system, as those benefits take into account annual raises that he would have earned if he had continued to work, whereas the scheme in the Schedule does not allow for this.

I note from the material filed that Mr. Shubrook's medical condition was closely monitored all along by the WCB, and that all the medical assessors he has seen have copied the WCB on their reports. This material has been available to Lombard for awhile, and could have been used by them to investigate and adjust the claim filed. This is a very different situation than those cases in which a late claim is filed a long time after the injuries were sustained, and the insurer has no knowledge of the applicant's condition after the accident, or any input into the rehabilitation efforts made. Lombard was first advised of Mr. Shubrook's intention to claim accident benefits in October 1999, and has made no efforts in the ensuing two year period to have his medical condition or functional abilities assessed.

In any event, while I can appreciate the Insurer's concern about not having had the opportunity to assess his medical condition from the outset, I agree with the Applicant's submission that the provision in question does not allow for a consideration of possible prejudice to an insurer. The only question to consider is whether or not the election was made primarily for the purpose of claiming accident benefits. Given the evolving nature of the medical evidence, I am persuaded that Mr. Shubrook's re-election was motivated by a genuine belief, based on legal advice, that he stands to achieve greater recovery through a tort action in the courts.

I note that unlike the applicant in Davis, supra, Mr. Shubrook was still collecting WCB benefits when he decided to re-elect. Moreover, had he continued to collect WCB benefits, he would likely have been entitled to a higher weekly amount than is permitted under the Schedule, which does not take annual salary increases into account. Finally, I note that the test for entitlement to benefits beyond 104 weeks of disability is fairly stringent, and may be more difficult to meet than the requirement for continued benefits under the WCB scheme.

Accordingly, I find that Mr. Shubrook is not precluded from proceeding to arbitration by virtue of subsection 59(2).

Conclusion

For the reasons set out above, both of the Insurer's preliminary objections are dismissed. The hearing on the merits will proceed as scheduled, commencing on October 29, 2001.

EXPENSES:

I exercise my discretion to award Mr. Shubrook his expenses incurred in this preliminary issue hearing. If the parties cannot agree on the appropriate amount owing, they shall advise me prior to the commencement of the hearing on the merits, and an assessment of expenses will be arranged.

October 11, 2001

Shari L. Novick Arbitrator

ARBITRATION ORDER

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

Mr. Shubrook is not precluded from proceeding to arbitration by virtue of the time limit in subsection 32(1) of the Schedule.
Mr. Shubrook's decision to re-elect and sue in court was not made primarily for the purpose of claiming benefits under the Schedule, and he is therefore not precluded by subsection 59(2) from proceeding to arbitration.