CAA Insurance Company (Ontario) v. Rajinder Sandhu, 2001 ONFSCDRS 35

Financial Services Commission of Ontario

Neutral Citation: 2001 ONFSCDRS 35

Appeal P00-00043

OFFICE OF THE DIRECTOR OF ARBITRATIONS

CAA INSURANCE COMPANY (ONTARIO) Appellant

and

RAJINDER SANDHU Respondent

Before: Susan Naylor, Director's Delegate

Counsel: Lauren Bloom and Lee Samis (for CAA Insurance) Ron E. Folkes (for Mr. Sandhu)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The appeal is dismissed and the arbitrator's order dated June 28, 2000 is confirmed.

2. Rajinder Sandhu is entitled to his appeal expenses.

March 8, 2001

Susan Naylor Director's Delegate

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This is an appeal by CAA Insurance Company (Ontario) ("CAA") from a preliminary decision, holding that Rajinder Sandhu's application for mediation is not time-barred.

II. BACKGROUND

Section 64 of the Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93, as amended (SABBS-1994),¹ establishes a process that must be followed where the insurer wants to stop weekly benefits on the grounds that the insured person is no longer disabled. This process gives the person access to an independent assessment mechanism (the designated assessment centre or "DAC" assessment). Subsection 64(13) confirms that he or she may dispute the stoppage through the dispute resolution process established under Part VI of the Insurance Act, R.S.O. 1990, c.1.8. However, the insurer's obligation to pay benefits while the dispute resolution process is still underway is contingent on the outcome of the DAC assessment.

Section 281(5) of the Act and s.72 of SABS-1994 set the time frame for bringing proceedings. Under the former, a court or arbitration proceeding must be commenced "within two years after the insurer's refusal to pay the benefit claimed or within such longer period as may be provided in the ... Schedule." Section 72(1) of SABS-1994 applies this two-year limit to mediation, as well as arbitration, with some qualifications.²

The two-year time limit is triggered by the insurer's "refusal to pay." The appeal involves the interplay between this requirement and the stoppage provisions in s.64.

To stop benefits, the insurer first must give at least 14 days written notice to the insured under s.64(2). The notice must set out the date of the stoppage, the reasons and information about the DAC assessment option.³ Section 64(3) says that the insurer "may stop payment on or after the date specified" unless the person requests an assessment by a DAC in which case, by implication, payments must continue. After the assessment is completed, the DAC must prepare a report, copied to the insurer, the insured and his or her health practitioner.⁴

This case focuses on s.64(11) which states simply: "If the report states that the insured person is no longer suffering from a disability resulting from the accident in respect of which the weekly benefits are paid, the insurer may stop paying the benefits." However, if the report states that he or she continues to be disabled, the insurer may "dispute" its obligation to pay benefits, while paying benefits in the meantime.⁵

It was accepted by the parties and the arbitrator that s.64(11) does not require an insurer to provide written notice that it is stopping benefits after the DAC releases its report. The only notice provided for is the initial notice under s.64(2). This is in contrast to the current statutory accident benefits regime.⁶

The question then arises as to when the limitation period starts to run in such a situation. CAA takes the position that the clock starts from the date it stopped benefits after receiving the DAC report. The arbitrator ruled that before CAA could be said to have refused benefits, it had to confirm its decision to stop payments. Since he found on the facts that CAA had not done this, CAA was disqualified from relying on the limitation period.

III. FACTS

The events surrounding the termination were contested at the arbitration. The facts can be boiled down to the following:

CAA decided to terminate Mr. Sandhu's income replacement benefits after receiving the results of an insurer-initiated medical examination. It sent him a letter dated October 3, 1996, stating that his benefits would end on October 23, 1996.

The letter contained the information required by s.64(2). Mr. Sandhu requested a DAC assessment, so payments were reinstated pending the outcome. The assessment took place in late January/early February. The DAC report stated that Mr. Sandhu was no longer disabled.

The arbitrator found that Mr. Sandhu received the full report or a summary report dated February 14, 1997 within two weeks of the assessment.⁷ He also found that benefits stopped around that time and that Mr. Sandhu did not think that CAA would be sending him additional benefits.

CAA sent Mr. Sandhu a letter dated February 20, 1997, referring to the DAC results, enclosing a last benefit cheque and telling him no further benefits would be payable after February 25, 1997. The arbitrator found that Mr. Sandhu did not receive the letter and never cashed the cheque.

The next thing that happened was seven months later, when CAA wrote Mr. Sandhu a letter dated October 2, 1997, telling him that the file was going to be closed due to lack of activity. This prompted a response from Mr. Sandhu's lawyer, complaining that Mr. Sandhu had yet to receive a letter denying income replacement benefits.⁸ CAA replied by letter dated November 4, 1997, enclosing its previous February 20, 1997 correspondence. Mr. Sandhu's position is that the time started running, at the earliest, at this point.

Mr. Sandhu did not apply for mediation until May 19, 1999, more than two years after the events of February 1997, but less that two years after CAA's November 1997 letter. He applied for arbitration on October 26, 1999.

The arbitrator disregarded CAA's February 20, 1997 letter, finding that Mr. Sandhu did not receive it, at least not until it was re-sent in November 1997. He held that, in any event, CAA could not rely on it because it was not copied to Mr. Sandhu's lawyer and did not contain information about the dispute resolution procedure as required by s.71 of SABS-1994.

This finding was not appealed and CAA did not rely on its letter on appeal. The appeal was restricted to the argument that the stoppage of benefits following release of the DAC report is sufficient to trigger the time limit, either in itself or at least where an inference can be drawn that the insured understood the situation.

The arbitrator held that although CAA was authorised to stop benefits once the report was released, it had to confirm its decision to do so if it wanted to rely on the time limit. Otherwise, the refusal would not be unequivocal as an insured would not necessarily know where he or she stood. Confirmation was required, notwithstanding what might have been Mr. Sandhu's actual understanding of the situation that he may have been able to piece together. The arbitrator also held that CAA's initial notice of October 3, 1996 was not effective notice or confirmation of its refusal, because it pre-dated the DAC report. He based his decision on reasoning in the appeal decision, Francis and Allstate Insurance Company of Canada, (FSCO P99-00014, June 11, 1999).

In Francis, the issue was whether the limitation period ran from the date in the insurer's initial notice of stoppage under s.64(2) rather than the date payments ceased following the DAC report. There was no time problem if the time clock was postponed until after the DAC assessment, as the applicant argued. Director's Delegate Draper concluded that the s.64(2) notice was not the "refusal" but notice of the insurer's intention to stop paying benefits, contingent on the insured person's response. At p.9 of his decision, he states:

The refusal comes when the insurer is authorized under the section to stop paying benefits and confirms its decision to do so. (emphasis added)

The delegate concluded that the insurer was not authorised to stop payments until the DAC report was released, stating:

Once the DAC releases its report, the insurer can stop paying if the report states that the insured person no longer meets the relevant disability test. This, in my view, is the refusal to pay benefits that starts the time limit. Consequently, Ms. Francis application for mediation was filed within the two-year time limit. (emphasis added)

Although not strictly necessary to his decision, the delegate went on to consider when specifically the clock starts running. He listed as possible options, the date of the report, the date of receipt, the date the insurer confirms termination or some other date. He expressed doubts about the arbitrator's emphasis on the date the insurer received the report. In his view, since the purpose of the provision was to protect the flow of benefits until the report was available, this suggested that, once the report was released, the insurer could refuse to make the next payment, starting the clock running.

The arbitrator relied on the first quote from Francis. On appeal, CAA relies on the second. CAA argues that it was authorised to stop payment once it received the results of its independent medical examination. CAA's notice of October 3, 1996 confirmed its decision. Nothing further was required after the release of the DAC report beyond the act of stopping payments.

IV. CONCLUSION

The starting position is that CAA is seeking to rely on a limitation period. To do so, it must show that it refused to pay the benefit, and that it did so more than two years before Mr. Sandhu applied for mediation. This is a somewhat different question than whether CAA was entitled to stop payments under the terms of s.64.

The principles governing refusals are well-established. To trigger the time limit, the insurer's refusal must be clear and unequivocal. It must be communicated to the insured. The onus is on the insurer to demonstrate that it meets these requirements. Even if an insurer is entitled to stop payments without further notice following a DAC under the terms of s.64, for a time limit to run, a higher degree of certainty may be required.

Although the analysis in Francis is helpful, it is possible to overstate its significance in this case. The focus in Francis was on whether the initial notice started the time limit running. It was not critical in that case whether the time ran from the stoppage of benefits following receipt of the report or from some type of formal confirmation. That question was left open on the facts.

Delegate Draper suggests that before the time limit starts to run, authorisation and confirmation is needed. The authorisation he refers to is authorisation under s.64(11), which "gives the insurer the authority to stop paying benefits if the DAC report says the insured person no longer meets the disability test." Confirmation is some step subsequent to that. I do not think by "confirmation of the insurer's decision" Delegate Draper could have meant the insurer's initial notice, as CAA argues. That would be redundant, since an insurer is not authorised to stop payments unless it first issues the appropriate notice.

The release of the DAC report, in itself, does not end benefits. Subsection 64(11) says the insurer may stop payments, not that it must do so. The insurer is called on to exercise judgement as to what action to take in light of the outcome and findings of the DAC. As a matter of commonsense, an insurer needs to do something to let the insured know, with reasonable certainty, that it is acting on the report.

Unless this is done, insureds will not have the certainty of knowing that the time limit has started to run, and when it did. As the arbitrator comments, neither the release of the DAC report or the stoppage of payments are necessarily unequivocal acts.

Section 71 of SABS-1994 reinforces the arbitrator's overall conclusion that some communication between the insurer and insured is necessary at the time an insurer refuses a benefit. That section requires insurers to provide information in writing about the dispute resolution procedure if they are refusing benefits. In Smith v. Co-operators General Insurance Company (2000), 2000 CanLII 4138 (ON CA), 183 D.L.R. (4th) 385, (leave to appeal granted) the Court of Appeal held that the insurer cannot be said to have refused benefits within the meaning of the statutory scheme unless and until it complies with the requirements of s.71.

If stoppage in accordance with s.64 procedures is all that is required to trigger the time limit, consumers facing termination where disability is the issue would have less protection than in other situations. That is because the obligation under s.64(2) only extends to providing information about the assessment option, not information about dispute resolution procedures.⁹ Notwithstanding the permissive language of s.64(3) or s.64(11), I do not accept that it insulates insurers from having to comply with s.71 if they want to rely on the time limit.

The certainty here is that Mr. Sandhu received notice that CAA stopped benefits as a result of receiving the DAC report, when he got CAA's letter of November 4, 1997. He may have thought that CAA would not be sending additional benefits, but the extent, basis and timing of his understanding of the situation was left to inference. The arbitrator was not dealing with clean facts. The evidence was muddled. Letters and payments were found to have gone missing. From the February 20, 1997 letter, it appears that Mr. Sandhu's lawyer was not always brought into the picture.

At the end of the day, the case came down to whether CAA, on whom the responsibility lay, showed that it had refused benefits in a sufficiently clear manner as to trigger the time limit and defeat Mr. Sandhu's claim. The arbitrator ruled that it had not. In all the circumstances, I see no basis to interfere with his decision.

V. EXPENSES

Mr. Sandhu was successful in opposing the appeal. He is entitled to his reasonable expenses.

March 8, 2001

Susan Naylor Director's Delegate

Footnotes

1. 1O. Reg. 776/93 was substantially amended by O. Reg. 781/94. All references to SABS-1994 are to the amended version.
2. 2Section 72(2) extends the time for arbitration, allowing someone to apply within 90 days after the mediator's report, but only if the application for mediation is itself in time. None of the qualifications apply here.
3. 3SABS-1994, s.64(2) and (4).
4. 4SABS-1994, s.64(10).
5. 5SABS-1994, s.64(12).
6. 6See the Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, O. Reg. 403/96, s.37(4), the equivalent section to s.64(11), which provides that if the DAC states that the person is no longer disabled "the insurer may stop paying the benefit after it has provided the person with notice of its reasons for stopping payment."
7. 7A copy of the full DAC report was not filed in evidence at the arbitration. The DAC sent a three-page Summary report, copied on its face to Mr. Sandhu care/of his lawyer, marked Exhibit 3, which stated that the full report had been forwarded. For the purposes of the appeal, nothing turns on whether Mr. Sandhu received the full report in addition to the Summary. Although the respondent suggested on appeal that the arbitrator made no finding that Mr. Sandhu's lawyer received either document, the inference that he received the Summary is clear since the arbitrator specifically referenced the correspondence indicators in the Summary in concluding that Mr. Sandhu received it.
8. 8He also complained that payments were missing. Two cheques were eventually reissued.
9. 9Under s.64(2) the information required is restricted to the reasons for the stoppage, and the information contained in subsections 64(3) to (7) i.e. relating to the assessment option.