Neutral Citation: 2001 ONFSCDRS 51

FSCO A97-001511

BETWEEN:

FRANK TOROK Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA Insurer

DECISION ON A PRELIMINARY ISSUE HEARING

Before: Joyce Miller

Heard: October 23, 24, 25 and 26, 2000, at the Offices of the Financial Services Commission of Ontario in Toronto. Written submissions were received by January 3, 2001

Appearances: Eric D. Zeldin for Mr. Torok Ian D. Kirby for Allstate Insurance Company of Canada

Issues:

The Applicant, Frank Torok, was injured in three separate motor vehicle accidents which took place on February 26, 1992, August 26, 1992, and August 22, 1995. Following each accident he applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("Allstate"), payable under the 1990 Schedule,¹ and 1994 and 1995 Schedules²

Allstate terminated weekly income replacement benefits on March 25, 1996. Until his third accident in August 1995, Mr. Torok was receiving $767.50 per week. After the third accident, Allstate reduced his benefits to $185 per week, based on its position that Mr. Torok at the time of the third accident had not been employed in the previous 156 weeks and therefore was only entitled to a non-earner weekly benefit. The parties were unable to resolve their disputes through mediation, and Mr. Torok applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issue in this hearing is:

Did Mr. Torok have "available" to him any income continuation benefit plan under subparagraph 12(4)(b)(i) of the 1990 Schedule or pursuant to paragraph 75(1)2 of the 1995 Schedule?

Result:

Mr. Torok did not have any income continuation benefit plan "available" to him under either the 1990 Schedule or the 1995 Schedule.

EVIDENCE:

Mr. Torok is 64 years old. At the time of the first accident, Mr. Torok had been working for approximately 25 years as a welder/fitter for H.J. Langen & Sons Inc. ("Langen"), manufacturers of packing machinery. As part of his job, he was responsible for reading plans from blueprints and welding parts together.

After the first accident, Mr. Torok applied to Allstate for accident benefits. Mr. Torok testified that at the time he filled out his application for accident benefits, he did not have a lawyer. He left most of the form blank. He just filled in his name, address and telephone number, and signed the form. Mr. Torok, who was born in Hungary, testified that he was not literate in the English language. He stated that he could read English, but did not understand everything he read. He could not write English.

Allstate's log notes indicate that a few days after the first accident, Mr. Torok advised them that he had medical insurance coverage from work, including disability coverage, which Mr. Torok understood to be a week of sick leave credits.³ Mr. Torok testified that he did not know the name of the disability insurer, that he had never received a pamphlet describing the benefits available to him, and had never made a claim for disability from this insurer.

On March 18, 1992, Mr. Torok's employer provided Allstate with an Employer's Confirmation of Income. They provided Allstate with two of these forms, one was typed, and one was handwritten. Both these forms were signed by Mr. Henderson Ifill. Under the heading "Collateral Sources of Income or Benefits," the following questions were answered in the negative: "Any income continuation benefits plan?," "Any sick leave plan?," and "Is claimant entitled to receive supplementary medical, rehabilitation or care benefits under any insurance plan or law?"

On March 20, 1992, Mr. Torok signed an authorization which allowed Allstate to obtain any information from his employer including details of collateral sources of income or benefits.⁴

In June of 1992, Mr. Torok reached an agreement with his employer to continue his medical benefits and life insurance benefits. Mr. Torok testified he was under the impression that the only benefits he had from his employment were medical benefits and life insurance benefits. He stated that he was told that the disability plan did not cover car accidents.

In August 1992, Mr. Torok had a second car accident. Mr. Torok applied for accident benefits and provided Allstate with a second Employer's Confirmation of Income form from his employer, dated September 1, 1992. Again, this form indicated that Mr. Torok was not entitled to any collateral disability benefits.⁵

On September 3, 1992, Mr. Torok signed another authorization which allowed Allstate to obtain any information from his employer including details of collateral sources of income or benefits.⁶ On September 22, 1992, Mr. Torok also signed an authorization, this time for Direct Rehab to obtain his employment information.⁷ In a letter to Mr. Ifill dated January 30, 1995, Mr. Jim Krause, a representative from Allstate, confirmed a telephone conversation that he had with Mr. Ifill on October 5, 1994 regarding any information about a long-term disability carrier. Mr. Krause states in the letter that Mr. Ifill did not respond to his inquiry.⁸

Allstate then hired an investigator, Wilfred H. Barker, to obtain information regarding any long-term disability benefits to which Mr. Torok might be entitled. Mr. Barker wrote to Mr. Ifill on March 22, 1996, enclosing a photocopy of an authorization signed by Mr. Torok. In this letter Mr. Barker asked Mr. Ifill various questions, including questions regarding Mr. Torok's entitlement to long-term disability benefits.⁹ There is no evidence that Mr. Ifill responded to Mr. Barker's letter.

On March 25, 1996, Allstate terminated Mr. Torok's benefits.

After Mr. Torok's accident benefits were terminated, Allstate continued its investigation for information regarding any collateral benefits available to Mr. Torok. On April 19, 1996, Mr. Barker wrote to Mr. Krause advising him that Mr. Ifill was not returning his telephone calls and was otherwise not cooperating.¹⁰

On May 29, 1996, Mr. Barker was able to meet with Mr. Ifill. In a letter to Allstate, Mr. Barker stated that Mr. Ifill advised him that Mr. Torok was not eligible for long-term disability because Langen's insurer, Imperial Life, became their insurer on January 1, 1993 when Mr. Torok was no longer working for Langen. The letter notes that Mr. Ifill did not provide the investigator with any information as to whether there was a previous carrier.¹¹

On July 8, 1996, Mr. Ifill advised the investigator that Langen's previous insurer was Maritime Life. However, Mr. Ifill was not prepared to provide any further information including the policy number until he received a copy of Mr. Barker's last report.¹²

On August 30, 1996, Mr. Krause sent Mr. Ifill a copy of the investigative report, and again inquired about any long-term disability to which Mr. Torok might be entitled.¹³

Mr. Ifill did not respond to Allstate's letter.

The next time a request was made to Langen regarding possible collateral benefits was in 1999, after Mr. Torok had applied for arbitration.

On April 22, 1999, Mr. Torok's then counsel, Mr. Michael, wrote to Mr. Ifill requesting information regarding any disability benefits that Mr. Torok was in receipt or was entitled to receive through a policy with Langen. He advised Mr. Ifill that Mr. Torok was ordered to produce this information by an arbitrator, and enclosed an authorization signed by Mr. Torok.¹⁴ Mr. Ifill did not respond to this letter. Mr. Michael wrote again on May 27, 1999, again asking for the information regarding long-term disability benefits and advising Mr. Ifill of the urgency of meeting to obtain this information.¹⁵ Mr. Ifill did not respond to this second letter.¹⁶

In the end, Langen responded to a subpoena by Allstate and provided a photocopy of Mr. Torok's employment file. From this, Allstate was able to identify the group policy insurance number for Maritime Life.

On May 3, 2000, Mr. Torok's present counsel wrote to Maritime Life requesting a copy of its policy and advised that Mr. Torok would be making an application for long-term disability benefits. On May 15, 2000, Maritime Life provided Mr. Torok with a copy of the policy, but sent the application for long-term disability to his employer, and not to Mr. Torok.¹⁷.

On July 24, 2000, Mr. Torok's employer provided his counsel with the application forms. On September 6, 2000 Mr. Torok completed the application forms and returned them to Maritime Life. On September 14, 2000, Maritime Life wrote to Mr. Torok's counsel confirming that his claim was denied because Mr. Torok had not furnished the insurer with written proof of loss for disability within the prescribed limitation period, namely within six months after termination of the first month following his qualifying for disability.¹⁸

Susan Tombs, testifying on behalf of Maritime Life, stated that the decision to deny Mr. Torok's claim was independent of any review of any medical documentation. In fact, she stated that no medical documentation had been reviewed. She stated that the sole reason Mr. Torok was denied benefits was because his application was out of time.

Ms. Tombs testified that had Mr. Torok applied on time in order for him to qualify for benefits, he would have had to satisfy Maritime Life's definition for disability. This definition is as follows:

Totally disabled, shall mean the employee is incapacitated to the extent that the employee is not able to perform any and every duty of any occupation or employment for which the employee is reasonably qualified by education, training or experience. Such incapacity must result from a medically determinable physical or mental impairment. [emphasis added]

The Law:

The issue to be decided at this preliminary issue hearing is whether Mr. Torok had "available" any income continuation benefit plan under subparagraph12(4)(b)(i) of the 1990 Schedule in respect of his accidents in 1992 and pursuant to subsection 75(1)(2) of the 1995 Schedule regarding his accident in August 1995.

The burden of proof rests with Allstate to prove, on a balance of probabilities, that Mr. Torok had disability benefits "available" to him under an income continuation benefit plan at Langen.¹⁹

Subparagraph 12(4)(b)(i) of the 1990 Schedule provides:

(4) Subject to subsection (5), the weekly benefit under subsection (1) will be the lesser of,

(b) 80 per cent of the insured person's gross weekly income from his or her occupation or employment, less any payments for loss of income, except Unemployment Insurance benefits,

(i) received by or available to the insured person under the laws of any jurisdiction or under any income continuation benefit plan, [emphasis added]

Paragraph 75 (2)(b) of the 1995 Schedule provides as follows:

(2) ... no deduction shall be made for,

(b) payments under a sick leave plan that have not been received by the insured person but are available to the insured person; or

Subsection 268(6) of the Insurance Act provides that collateral benefits are payable in priority to any weekly income statutory accident benefits. Therefore, if Mr. Torok was entitled to long-term disability benefits from his employment, then such payments of benefits would be made in priority to any obligation Allstate would otherwise have for the payment of statutory accident benefits. Pursuant to subparagraph 12(4)(b)(i) of the 1990 Schedule, the benefits do not have to have been in fact paid, but they must be "available to" the applicant.

In Vo and Maplex General Insurance Company,²⁰ Arbitrator Draper dealing with a similar issue concluded that:

The effect of finding that payments for loss of income are available is to reduce the person's weekly income benefits, even though he or she has not actually received the payments. In my view, therefore, the evidence must clearly establish that the payments are, in fact, available, [emphasis added]

In Vo, Arbitrator Draper found that benefits were not available to Mr. Vo because the test of eligibility by the disability insurer was a stricter test than the test for eligibility for weekly income benefits provided in the Schedule. As well, he found that there was no indication that Mr. Vo made a tactical decision not to apply for benefits, but rather, that he simply was unaware that he might be eligible.

In Saqui, Arbitrator Baltman adopted the reasoning in Vo to support her finding that where the applicant was denied benefits from the disability insurer because he had applied out of time for benefits, he did not have these benefits "available" to him pursuant to subsection 12(4) of the Schedule. As well, like in Vo, she found that where the disability insurer's definition for disability was much stricter than that of the Schedule, she was not prepared to find that collateral benefits would be "available" to the applicant.

Findings:

I accept that, when Mr. Torok finally obtained the group policy number and applied to Maritime Life for collateral benefits, he was denied solely on the basis that he was out of time.

At the hearing, Allstate speculated that Mr. Torok may have known at an early date the name of the collateral insurer and the group policy number, but had chosen not to reveal it to Allstate and hence contributed to the fact that collateral benefits would not be available to him.

I find that the evidence does not substantiate this speculation. I did not receive any evidence to show that Mr. Torok was trying to hide any information from Allstate. In fact, there is ample evidence to show that starting from shortly after the first accident, Mr. Torok co-operated fully with Allstate by advising Allstate that he had medical insurance coverage and disability coverage, which he understood to be one week of sick leave credits; by providing Employer's Confirmation of Income forms; and by signing several authorizations for Allstate to obtain any information it needed from his employer regarding the issue of whether he had collateral benefits.

I find that there is no indication that Mr. Torok made a tactical decision not to apply for benefits from Maritime Life. Accordingly, I find that Mr. Torok did not attempt to hide any information from Allstate and should not be faulted for applying for collateral benefits outside the limitation period. Accordingly, I find that collateral benefits were not "in fact" available to Mr. Torok because he had applied for benefits beyond the limitation period.

I also find that, like the findings in Vo and Saqui, if Mr. Torok was eligible for weekly income benefits under the Schedule, it does not follow that he would also be eligible under the stricter test in Maritime Life's policy. The test for disability in the Schedule requires that Mr. Torok have "a substantial inability to perform the essential tasks"of his employment. Maritime Life's test is a stricter test and requires that Mr. Torok prove total disability, which is defined to mean that he "is not able to perform any and every duty of any occupation or employment."

Allstate submitted that the courts have given an expansive interpretation of definitions similar to the definition contained in Maritime Life's policy so as to conform to the wording in the Schedule. While this may be so, I have no evidence from Maritime Life on how expansively it views its definition when related to the specific medical facts of this case. In short, without evidence from Maritime Life I am not in a position to provide an interpretation of its definition that would conform to the definition in the Schedule. Accordingly, I find that on its face the test of eligibility in Maritime Life's policy appears to be much stricter than the test for weekly benefits in the Schedule and therefore it does not follow that, if Mr. Torok was eligible for weekly income benefits under the Schedule, he would also be eligible under the stricter test in Maritime Life's policy.

For all of these reasons I find Allstate has not discharged its burden of proof and that collateral benefits from Maritime Life are not available to Mr. Torok, not only because he was out of time in his application for benefits, but also because of the stricter test of eligibility he would have to meet in Maritime Life's policy.

EXPENSES:

The issue of expenses is left to the discretion of the hearing arbitrator.

April 4, 2001

Joyce Miller Arbitrator

Date