Neutral Citation: 2001 ONFSCDRS 30

FSCO A99-001006

BETWEEN:

GEORGE KOTA

Applicant

and

MOTOR VEHICLE ACCIDENT CLAIMS FUND

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Suesan Alves

Heard:

February 6, 2001, at the Offices of the Financial Services Commission of Ontario in Toronto

Appearances:

Carolyn Amendola for Mr. Kota

Scott W. Densem for Motor Vehicle Accident Claims Fund

The Motor Vehicle Claims Fund, ("the Fund") submits that Mr. Kota is precluded from proceeding with arbitration because he filed an application for mediation more than two years after the Fund refused to pay him further "other disability benefits." Mr. Kota disagrees. Both parties seek expenses of this hearing.

The issues in this hearing are:

Is Mr. Kota precluded from proceeding to arbitration because he applied for mediation more than two years after the Fund refused to pay him further "other disability benefits?"
Is either party liable to pay the other's expenses of the motion?

Mr. Kota's application for mediation was timely. He is not precluded from proceeding to arbitration.
Mr. Kota is entitled to his expenses, fixed at $1,500.

By letter dated February 23, 2001, I advised counsel and the parties of my decision with reasons to follow. These are my reasons.

On October 26, 1996, Mr. Kota was riding his bicycle when he was struck by a motor vehicle. His injuries included a fractured elbow. Mr. Kota submitted an application to the Fund for statutory accident benefits payable under the Schedule.¹ The Fund initially rejected Mr. Kota's claim and directed him to submit his claims to another insurer. After further investigation, the Fund agreed that it should respond to Mr. Kota's claims for statutory accident benefits. The Fund then arranged an insurer's examination, and Mr. Kota was examined by Dr. G. M. Vincent, an orthopaedic surgeon.

The Fund submits that it terminated Mr. Kota's other disability benefits when it sent him one cheque for 17 weeks of "other disability benefits" along with an Explanation of Assessment. The Fund alleges that this documentation was sent to Mr. Kota in May 1997. On June 3, 1999, more than two years later, Mr. Kota filed an application for mediation.

Under section 281(5) of the Insurance Act, Mr. Kota must commence a mediation proceeding within two years of the date on which benefits are refused, or within such longer period as may be provided in the Schedule. There is no longer period provided in the relevant Schedule. The Fund submits that Mr. Kota's mediation application was out of time and he cannot therefore proceed to arbitration.

Mr. Kota disputes that the documents on which the Fund relies were a clear or unequivocal refusal of his other disability benefits. He submits that the Fund failed to comply with the mandatory stoppage requirements of section 64 of the Schedule when it purported to refuse his benefits, and that the two-year limitation period never began to run.

Clear & unequivocal refusal?

A limitation defence must be strictly construed since it denies the Applicant the opportunity to have his claims adjudicated.² In the case of Talany and Royal Insurance Company of Canada., Arbitrator Seife held that: "The purported notice of refusal itself must state, clearly and unequivocally, and in a simple straightforward fashion, the fact that the Insurer refuses to pay the benefit in question, and the reasons for the refusal."³ I agree with Arbitrator Seife that this is the appropriate test.

The Explanation of Assessment, dated 5/6/97, states that Mr. Kota is "Eligible" for other disability benefits. The boxes "Not eligible," or "Benefit Refused," were not checked off. The word "Eligible" does not support the Fund's position that further "other disability benefit" payments were being refused. It does not convey clearly and unequivocally that the Insurer refused to pay further other disability benefits after a specific date.

Immediately underneath "Eligible" is a box for "Reasons benefit(s) refused and other information..." In that space, the claims examiner wrote "Benefits paid from Nov 2, 1996 until Mar. 1/96 based on a Certificate from medical practitioner and confirmed by independent medical." I find this information, whether considered together with or apart from the word eligible, does not convey that the Fund did not intend to pay Mr. Kota further benefits.

The Fund submitted that the health practitioner certificate which Mr. Kota provided gave an estimate of six to eight weeks of disability. Since Mr. Kota furnished the Insurer with that certificate, he can be taken to have known its contents. The Fund further submitted that when that certificate is read together with the report of Dr. Vincent, who conducted the Insurer's examination, the reasonable conclusion was that Dr. Vincent's report justified payment of an additional nine or eleven weeks of benefits.

It is not clear to me that Mr. Kota was given a copy of Dr. Vincent's report. In the case of Grout and Pilot Insurance Company,⁴ Arbitrator Makepeace held that "when an insurer terminates benefits on the basis of a medical report, the report forms part of the insurer's reasons for termination, and should generally be provided to the insured person."

Ms. D. St. Amant, a Senior Claims Examiner with the Fund at the time the Explanation of Assessment was signed, testified that her usual practice was to prepare a requisition for a cheque and attach it to the Explanation of Assessment. She could not say that she sent a copy of Dr. Vincent's report to Mr. Kota. However, she thought that Dr. Vincent, or MACO, through whom the Insurer arranged the assessment, might have done so. In the absence of clear evidence that the report was provided to Mr. Kota, I am not prepared to find that Dr. Vincent's report was actually sent to him.

Even if Dr. Vincent's report had been sent to Mr. Kota, I am not persuaded that it would convey to a lay person, unfamiliar with such reports, and with the applicable test of disability under the Schedule, that in the opinion of the assessor, Mr. Kota was no longer disabled. The Report does state "I note this gentleman had a relatively sedentary lifestyle prior to his accident. I believe that he is functioning at the same level at this time." However, it then states "Mr. Kota does have a slight limitation of elbow movement, but this is totally within a functional range of movement and I believe that with a short course of physiotherapy, this will return to normal." In my view, despite the provisions of the Schedule, it is not uncommon for injured persons to equate a need for treatment with disability, albeit incorrectly. A lay person unfamiliar with the applicable test of disability might well conclude from the recommendation for physiotherapy that the report supported further entitlement to "other disability benefits"; not that it supported termination of benefits as of a specific date.

For these reasons, I conclude that the documents on which the Fund relies do not convey in clear or unequivocal language that Mr. Kota was being refused further other disability benefits.

Compliance with Section 64 of the Schedule?

An insurer may stop an insured person's weekly benefits on the basis that he or she is no longer disabled as a result of an accident only by following the detailed steps contained in section 64 of the Schedule. In the case of Francis and Allstate Insurance Company of Canada (FSCO P99-00014, June 11, 1999), Director's Delegate Draper analysed and detailed these steps as follows:

"The first step is for the insurer to give the insured person notice that it will stop paying weekly benefits on a specific date, not earlier than 14 days after he or she receives the notice.⁵ The notice must include reasons for the stoppage and inform the insured person of his or her right to request a DAC assessment.⁶ If the insured person asks to be referred to a DAC, the insurer must continue paying benefits pending the results of the assessment.⁷ If the DAC report states that the insured person no longer meets the disability test, the insurer can stop paying.⁸ However, if the report concludes that he or she continues to be disabled, the insurer must continue paying benefits.⁹ If either party disagrees with the DAC assessment, the matter can be pursued through the dispute resolution process, with the DAC report determining whether benefits must be paid in the interim.¹⁰ "

Director's Delegate Draper concluded that the refusal of benefits occurs only when an Insurer is authorized under section 64 to stop paying benefits and confirms its decision to do so. Based on the analysis in Francis, Arbitrator Manji concluded in the case of Goheen and Royal Insurance Company of Canada, (FSCO A97-002130 August 25, 1999), that where there was no refusal in compliance with the provisions of section 64 of the Schedule, the limitation period did not begin to run. I agree with Arbitrator Manji that this is the logical consequence of the analysis in Francis.

In this case, Ms. St. Amant acknowledged, and I find, that the Fund did not comply with the termination provisions of section 64 of the Schedule in at least two respects. Firstly, it did not provide Mr. Kota with the requisite two weeks' notice. Secondly, it did not inform Mr. Kota that if he disagreed with the termination, he could ask for a disability DAC assessment. Thus, I conclude the two-year time period for commencing mediation did not begin to run in this case in May 1997, or at all. For these reasons, I conclude that Mr. Kota is not precluded from proceeding with this arbitration hearing.

EXPENSES:

Counsel for the Insurer submitted that expenses should follow the event, while the Applicant submitted that he should receive his expenses in any event. I exercise my discretion to award Mr. Kota his expenses incurred in this preliminary issue hearing based on his success.

I suggested fixing the amount of expenses and sought counsel's submissions as to the appropriate amount. Counsel for the Insurer submitted that $1,500 would be appropriate; counsel for the Applicant that $3,500 would be appropriate. I fix the expenses at $1,500, which I find to be a more reasonable estimate having regard to the provisions of Section F and section 76 of the Dispute Resolution Practice Code — August 1, 1995.

March 6, 2001

Suesan Alves Arbitrator

Date