Neutral Citation: 2001 ONFSCDRS 155

FSCO A01-000399

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

TIMOTHY MCDONALD

Applicant

and

GUARANTEE COMPANY OF NORTH AMERICA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

David J. Evans

Heard:

August 30, 2001, in Woodstock, Ontario.

Appearances:

Richard J.T. Shaheen for Mr. McDonald

Terry R. Shillington for Guarantee Company of North America

Issues:

The Applicant, Timothy McDonald, was injured in a motor vehicle accident on June 6, 1998. He applied for and received statutory accident benefits from Guarantee Company of North America ("Guarantee"), payable under the Schedule.¹ Guarantee terminated weekly income replacement benefits (IRBs) on December 12, 2000. The parties were unable to resolve their disputes through mediation, and Mr. McDonald applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. A hearing has been scheduled to start on January 15, 2002 in which the substantive points are Mr. McDonald's entitlement to IRBs more than 104 weeks after the accident and the amount of the IRBs.

The preliminary issues are:

1. Is Mr. McDonald precluded from receiving income replacement benefits because of the application of subsections 30(4) and (5) of the Schedule?

2. If the answer to question 1 is yes, is Guarantee entitled to a repayment of benefits from June 24 to November 24, 2000, pursuant to paragraph 47(1)(b) of the Schedule?

The parties agreed to add issue 2 as it flowed out of issue 1.

3. Who is entitled to the expenses of this preliminary issue hearing?

Result:

1. Mr. McDonald is not precluded from receiving income replacement benefits because of the application of subsections 30(4) and (5) of the Schedule.

2. It is not necessary to consider issue 2.

3. Mr. McDonald is entitled to the expenses of this preliminary issue hearing.

EVIDENCE AND ANALYSIS:

Background:

Mr. McDonald suffered an impairment as a result of a motor vehicle accident in the early morning hours of June 6, 1998. He was also convicted of assault under section 266 of the Criminal Code (Canada) because of events just before and around the time of the accident. Guarantee submits that the provisions of the Schedule preclude Mr. McDonald from receiving further income replacement benefits because of that conviction and also require him to repay some of the benefits he has received.

The events of that night were recited when Mr. McDonald appeared before the Provincial Court in Woodstock on August 18, 1998. Mr. McDonald testified that he appeared without counsel, spoke briefly with the duty counsel, and then entered a guilty plea.

The parties agreed to rely on the facts read into court by Crown prosecutor Iarocci as set out in the transcript of the proceedings.² The relevant part of the transcript reads as follows:

MS. IAROCCI: Your Honour, on Saturday, June 6th, 1998, 2:30 a.m., Mr. McDonald left the Woodstock Inn in the City of Woodstock. Out in the parking lot of the business, he proceeded to get involved in arguments with various patrons as they left the hotel. He was involved in some kind of dispute with a Nancy Dow when Richard Staples was coming out of the hotel.

He saw that Nancy Dow was having some problems with Mr. McDonald — that is Mr. Staples saw that Ms. Dow was having problems with Mr. McDonald — and Mr. Staples stepped in between Mr. McDonald and Ms. Dow telling him — the accused — if he had a problem, to deal with him rather than the female. Mr. Staples did not want to fight with Mr. McDonald, but only to separate him from Ms. Dow. Mr. McDonald then turned his attention towards Mr. Staples and began to argue with him. With both hands open, he shoved Mr. Staples on his chest, knocking him to the pavement. Mr. Staples started to pick himself up off the ground along with his lighter and cigarette. Mr. McDonald was still swinging but was not striking Mr. Staples. Mr. McDonald was very intoxicated at the time.

Staples started to walk away toward a vehicle in the parking lot that was going to give him a ride home. He managed to get into the passenger side of the pick up truck only to be followed by the accused. He did not have a chance to get the door closed because the accused was trying to get at him. Mr. Staples then managed to get his foot up on Mr. McDonald's chest and push him away from the open door of the vehicle. Before Mr. Staples could get the door closed, Mr. McDonald, once again, was back at Mr. Staples, grabbing him by the shirt. All the time, the driver of the truck was telling Mr. McDonald, the accused, to get away from his truck. The driver of the pick up truck then put his vehicle into gear and left the area.

Mr. Staples sustained several abrasions to the right elbow and wrist as a result of being thrown to the ground. He also received a scratch to his chest as a result of being grabbed. Those are the facts.

Mr. McDonald was sentenced to a fine of $400 plus a surcharge of 15 per cent.

In October 1998 Mr. McDonald sought income replacement benefits (IRBs) for injuries sustained when the pick up truck moved. He filled in the Application for Accident Benefits himself. Under Part 3 (Accident Details), Mr. McDonald ticked "Yes (Give details)" beside the question "Were you charged?" (note that the form does not ask if the claimant was convicted of a criminal offence) and, although he did not give details of the charge in the tiny space provided, he did give a brief description of the accident immediately below. The relevant boxes look like this (Mr. McDonald's writing is set in italics):

Were you charged?

þ Yes (Give details)

□ No

Give a brief description of the accident. If you suffered any injuries as a result of the accident, describe the cause and extent of the injuries. Confrontation With passenger in vehicle, Driver back up and dragged me down parking lot. Fractured Vertabrae (L5)

Guarantee started paying IRBs but terminated them in late 2000 on the basis that Mr. McDonald did not meet the test for benefits more than 104 weeks after the accident.³ Mr. McDonald then applied for mediation and arbitration, seeking reinstatement of the IRBs. The main hearing is on this issue.

In June 2001, Guarantee's adjuster, Ms. Maureen Robinson, realized that Mr. McDonald had been charged with a criminal offence and subsequently convicted for those events that occurred around the time of the accident. By letter dated June 25, 2001, Ms. Robinson served notice pursuant to paragraph 47(1)(b) and subsection 47(2) of the Schedule that Guarantee was seeking repayment of benefits paid from June 24 to November 24, 2000.

Ms. Robinson limited the repayment claim because subsection 47(3) sets out that the obligation to repay a benefit does not apply unless notice is given within 12 months after the payment was made.⁴ This limitation does not apply if the benefit was paid as a result of wilful misrepresentation or fraud,⁵ but there was no allegation of misrepresentation or fraud here.

Guarantee now relies on Part IX of the Schedule, entitled "Exclusions," and in particular subsections 30(4) and (5) of that Part, to argue that Mr. McDonald was and remains precluded from receiving IRBs. It argues that at the time of the accident Mr. McDonald was engaged in those acts for which he was charged and convicted.

The Law and Findings:

Part IX, General Exclusions,⁶ provides in subsections 30(1) and (2) that the insurer "is not required to pay an income replacement benefit" for activities related to the operation of a motor vehicle —such as driving an uninsured motor vehicle, driving without a valid driver's licence, driving or being a passenger in a vehicle driven without the vehicle owner's consent. (Clause 30(2)(a) also provides an exclusion related to the insurance policy itself that is not applicable here.) It is only in these subsections that the words "[t]he insurer is not required to pay an income replacement benefit" appear. I find that these words create a general disqualification from payment of IRBs that is not limited to a certain time period.

The equivalent sections in earlier Schedules were Section 17 of the 1990 Schedule⁷ and Part XIV of the 1994/95 Schedule⁸ These sections in addition contained provisions that the "insurer is not required to pay" IRBs for certain types of criminal convictions such as convictions for driving while impaired, for operating an automobile while the concentration of alcohol in the operator's blood exceeds the limit permitted by law, for failing to provide a breath sample, or for committing an indictable offence related to the operation of the automobile.⁹

However, the provisions relating to criminal offences were removed from subsections 30(1) and (2) of the Schedule and now appear in subsections 30(4) and (5). I find it significant that the words "the insurer is not required to pay an income replacement benefit" because of a criminal conviction are never set out in this Schedule, unlike in the earlier Schedules. The rules of statutory interpretation would lead me to conclude that subsections 30(4) and (5) are now the complete code relating to any exclusions for criminal convictions. Any disqualification from payment because of a criminal conviction must be found in those subsections.

For reasons set out below, I find that any disqualification from payment of IRBs in subsections 30(4) and (5) is limited to a certain time period and that the time period in question does not apply to Mr. McDonald's claim.

I will first deal with how subsection 30(4) could apply to Mr. McDonald. Clause 30(4)(a) requires that at the time of the accident he was engaged in an act for which he was charged with a "criminal offence." The phrase "criminal offence" as used in clause 30(4)(a) is defined in subsection 30(5):

30(5) In clause (4) (a),

"criminal offence" means,

(a) operating an automobile while the ability to operate the automobile is impaired by alcohol or a drug,

(b) operating an automobile while the concentration of alcohol in the operator's blood exceeds the limit permitted by law,

(c) failing to comply with a lawful demand to provide a breath sample, or

(d) any other criminal offence, whether or not the offence is related to the operation of an automobile.

As can be seen, the definition includes the offences from the 1990 Schedule and the 1994/1995 Schedule (driving while impaired or with an excess blood level, or refusing a breath test). These earlier Schedules also included an exclusion for convictions "of an indictable offence related to the operation of the automobile."¹⁰ That exclusion has been expanded, as clause 30(5)(d) includes in the definition "any other criminal offence, whether or not the offence is related to the operation of an automobile."

Under the previous Schedules, the assault conviction would not have precluded Mr. McDonald from receiving benefits, as he was not operating the automobile at the time of the accident nor could the offence be related to the operation of an automobile. However, the assault conviction could preclude him under clause 30(5)(d), as it is "any other criminal offence," provided that Mr. McDonald was engaged in the assault at the time of the accident.

Mr. McDonald argued that the assault had concluded by the time of the accident. While I have my doubts on that point, it is not necessary for me to decide it because of the time-limitation set out in subsection 30(4):

(4) If a person sustains an impairment as a result of an accident and,

(a) at the time of the accident, the person was engaged in, or was an occupant of an automobile that was being used in connection with, an act for which the person is charged with a criminal offence; or

(b) the person is charged under section 254 of the Criminal Code (Canada) with failing to comply with a lawful demand to provide a breath sample in connection with the accident,

the insurer shall hold in trust any amounts payable under an income replacement benefit, a non-earner benefit or a benefit under section 20, 21 or 22 until the charge is finally disposed of, at which time the amounts and any income on the amounts,

(c) shall be returned to the insurer, if the person is found guilty of the offence or an included offence; or

(d) shall be paid to the person entitled to the payment, if the person is not found guilty of the offence or an included offence.

Subsection 30(4) applies where a person sustains an impairment as a result of an accident. The further condition set out in clause 30(4)(a) is that at the time of the accident the person was engaged in "an act for which the person is charged with a criminal offence." If that condition is met, the insurer then "shall hold in trust any amounts payable" under an IRB. Pursuant to clauses 30(4)(c) and (d), at the time "the charge is finally disposed of" (meaning presumably after trial and any appeals), the amounts (and any income on the amounts) are either returned to the insurer (clause (c)) or "paid to the person entitled to the payment" (clause (d)), depending on whether or not the person is found guilty of the offence or an included offence.¹¹

The only exclusion is set out by necessary implication in clauses 30(4)(c) and (d): since the person found not guilty of the offence is "the person entitled to the payment" under clause (d), it follows that the person found guilty of the offence was not entitled to — that is, disqualified from — payment. However, the "payment" in question is only "any amounts payable under an income replacement benefit. . .until the charge is finally disposed of."

Thus, even assuming that Mr. McDonald was engaged in the assault at the time of the accident, I find that subsection 30(4) only applies to benefits payable during the period up to the time the charge was "finally disposed of," which was the conviction on August 18, 1998. Nothing in Part IX speaks to any benefits owing for the period after the charge was finally disposed of, which is the only relevant period in this hearing.

Guarantee submitted that criminal convictions are part of the general exclusions in section 30 and that criminal convictions were clearly intended to be an exclusion. However, as I have noted above, criminal convictions were removed from the general provisions in subsections 30(1) and (2), which are the only subsections containing the phrase "[t]he insurer is not required to pay an income replacement benefit." I do not believe it is necessary or reasonable to read the words "criminal conviction" back into those subsections, as they were specifically removed by the legislature and dealt with by subsections 30(4) and (5).

Furthermore, the legislature may well have found it reasonable that the exclusion should only apply up until the time the matter is disposed of. The legislature saw fit to greatly expand the definition of "criminal conviction" in subsection 30(5) as compared to the earlier Schedules. A reasonable counterbalance, then, was to limit the application of the exclusion to the period up to the time "the charge is finally disposed of." As a practical matter, an applicant defending serious disputed charges could end up receiving little or no benefits. A trial and any appeals or even re-trials after appeals could easily take more than 104 weeks from the time of the accident, the maximum period of benefit for many claims under the Schedule. The time of final disposition, then, could arrive when most benefits under the Schedule are no longer payable, so the convicted Applicant would receive no benefits.

Since the Schedule does not specifically provide that Mr. McDonald is disentitled to benefits after his charge was finally disposed of, it follows that he is not precluded from receiving income replacement benefits because of the application of subsections 30(4) and (5) of the Schedule. The answer to issue 1, then, is "No."

It is not necessary for me to consider issue 2, repayment from June 24, 2000, as I only had to consider it if my answer to issue 1 was "Yes." For clarity, I do find that Mr. McDonald was disqualified for payment of IRBs up to the time of the conviction for the purposes of the repayment provisions.¹² However, the notice came too late from the Insurer.

The main hearing may proceed on the issues as set out in the pre-hearing letter of June 18, 2001.

EXPENSES:

The pre-hearing in this matter was conducted on June 18, 2001. The fourth edition of the Dispute Resolution Practice Code (DRPC) applied to it and to this preliminary issue hearing.¹³ Pursuant to Rule 77, the parties jointly informed me at the end of the hearing that I did not need to consider any offer to settle with respect to expenses. The parties then made submissions on entitlement to expenses based on the criteria set out in Rule 75.2. Mr. McDonald was successful (Rule 75.2(a)). Furthermore, I was given to understand that this is the first case on point, so Mr. McDonald was dealing with a novel and complex issue (Rule 75.2(d)). In these circumstances, I exercise my discretion to award Mr. McDonald his expenses incurred in this preliminary issue hearing.

I would also like to commend the parties for their conduct that shortened and facilitated the hearing.

October 30, 2001

David J. Evans Arbitrator

Date

Neutral Citation: 2001 ONFSCDRS 155

FSCO A01-000399

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

TIMOTHY MCDONALD

Applicant

and

GUARANTEE COMPANY OF NORTH AMERICA

Insurer

ARBITRATION ORDER

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

1. Mr. McDonald is not precluded from receiving income replacement benefits because of the application of subsections 30(4) and (5) of the Schedule.

2. Mr. McDonald is entitled to the expenses of this preliminary issue hearing.

October 30, 2001

David J. Evans Arbitrator

Date

APPENDIX

PART IX GENERAL EXCLUSIONS

30. (1) The insurer is not required to pay an income replacement benefit, a non-earner benefit or a benefit under section 20, 21 or 22 in respect of a person who was the driver of an automobile at the time of the accident,

(a) if the driver knew or ought reasonably to have known that he or she was operating the automobile while it was not insured under a motor vehicle liability policy;

(b) if the driver was driving the automobile without a valid driver's licence;

(c) if the driver is an excluded driver under the contract of automobile insurance; or

(d) if the driver knew or ought reasonably to have known that he or she was operating the automobile without the owner's consent.

(2) The insurer is not required to pay an income replacement benefit, a non-earner benefit or a benefit under section 20, 21 or 22,

(a) in respect of any person who has made, or who knows of, a material misrepresentation that induced the insurer to enter into the contract of automobile insurance or who intentionally failed to notify the insurer of a change in the risk material to the contract; or

(b) in respect of an occupant of an automobile at the time of the accident who knew or ought reasonably to have known that the driver was operating the automobile without the owner's consent.

(3) Clause (2) (b) does not prevent an excluded driver or any other occupant of an automobile driven by the excluded driver from recovering accident benefits under a motor vehicle liability policy in respect of which the excluded driver or other occupant is a named insured.

(4) If a person sustains an impairment as a result of an accident and,

(a) at the time of the accident, the person was engaged in, or was an occupant of an automobile that was being used in connection with, an act for which the person is charged with a criminal offence; or

(b) the person is charged under section 254 of the Criminal Code (Canada) with failing to comply with a lawful demand to provide a breath sample in connection with the accident, the insurer shall hold in trust any amounts payable under an income replacement benefit, a non-earner benefit or a benefit under section 20, 21 or 22 until the charge is finally disposed of, at which time the amounts and any income on the amounts,

(c) shall be returned to the insurer, if the person is found guilty of the offence or an included offence; or

(d) shall be paid to the person entitled to the payment, if the person is not found guilty of the offence or an included offence.

(5) In clause (4) (a),

"criminal offence" means,

(a) operating an automobile while the ability to operate the automobile is impaired by alcohol or a drug,

(b) operating an automobile while the concentration of alcohol in the operator's blood exceeds the limit permitted by law,

(c) failing to comply with a lawful demand to provide a breath sample, or

(d) any other criminal offence, whether or not the offence is related to the operation of an automobile.

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. 2Exhibit 1.
3. 3Pursuant to paragraph 5(2)(b), the insurer is not required to pay IRBs "for any period longer than 104 weeks of disability, unless, as a result of the accident, the insured person is suffering a complete inability to engage in any employment for which he or she is reasonably suited by education, training or experience."
4. 4The letter, Exhibit 5, mistakenly refers to subsection 57(3); section 57 relates to accidents outside Ontario.
5. 5Subsection 47(4)
6. 6The text of Part IX is set out in the Appendix.
7. 7Statutory Accident Benefits Schedule—Accidents Before January 1, 1994, R.R.O. 1990, Reg. 672, as amended.
8. 8Statutory Accident Benefits Schedule—Accidents After December 31, 1993 and Before November 1, 1996, O.Reg. 776/93, as amended.
9. 9Subsection 17(1) of the 1990 Schedule provides that the "insurer is not required to pay benefits under subsection 12 (1)," which is the subsection relating to income replacement benefits; subsection 58(1) of the 1994/1995 Schedule provides that "insurer is not required to pay income replacement benefits under Part II" of that Schedule.
10. 10Clause 17(1)(a) of the 1990 Schedule, clause 58(1)(a) of the 1994/1995 Schedule.
11. 11It should be noted that the trust mechanism never took effect in this case. Mr. McDonald entered his guilty plea two months after the accident. He did not apply for benefits until four months after the accident, namely after he had already been convicted.
12. 12Section 47.
13. 13DRPC (4th), Rule 1.6