Michael Toteda v. Zurich Insurance Company, 2001 ONFSCDRS 58

Financial Services Commission of Ontario

Neutral Citation: 2001 ONFSCDRS 58 FSCO A00-000246

Between: Michael Toteda (Applicant) and Zurich Insurance Company (Insurer)

Decision on a Preliminary Issue

Before: Shari Novick Heard: September 28, 2000, at the Offices of the Financial Services Commission of Ontario in Toronto. October 13, 2000 by teleconference. Written submissions were received on November 6, November 14 and November 15, 2000. Further submissions were received on March 29 and April 2, 2001. Appearances: Juan F. Carranza for Mr. Toteda Darrell P. March for Zurich Insurance Company

Issues:

The Applicant, Michael Toteda, was injured in a motor vehicle accident on July 27, 1996. He applied for and received statutory accident benefits from Zurich Insurance Company ("Zurich"), payable under the Schedule.¹ Zurich terminated the weekly income replacement benefits ("IRBs") they had been paying on June 25, 1997. Mr. Toteda asserted that he was entitled to further benefits. The parties were unable to resolve their disputes through mediation, and Mr. Toteda applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Mr. Toteda's Application for Arbitration was received by the Commission on February 28, 2000. The Insurer argues that his claim is time-barred, as the application was filed more than two years after the date that it refused to pay further benefits.

The preliminary issue is:

1. Is Mr. Toteda precluded from proceeding to arbitration because his application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 72(1) of the Schedule?

Result:

1. Mr. Toteda is precluded from proceeding to arbitration with his claim for income replacement benefits.

EVIDENCE AND ANALYSIS:

Background:

Mr. Toteda was employed at the time of the accident in July 1996, and received IRBs for a short period following the accident. In September of 1996 he commenced a work/study or "co-op" program at the University of Waterloo. The academic year ended in late April 1997, and he was paid IRBs during the month of May and until June 25, 1997. He then spent the rest of that summer working in Cuba, as part of the co-op program. He was not paid IRBs during the period that he worked in Cuba.

The Applicant returned to school in September of 1997 but was unable to continue with his studies, due to continuing difficulties he experienced as a result of the injuries he sustained in the accident. He began a new job in March of 1998, and worked for a period of one month. He then participated in an internship during the summer of 1998 as part of the co-op program at Waterloo, although he was not able to return to school to complete the academic part of the program the following fall. Mr. Toteda was paid a lump sum education disability benefit ("EDB") in October 1998 for the 1997-1998 school year.

Mr. Toteda was unable to complete the final work portion of his program in May 1999, and seeks reinstatement of his IRBs as of that date.

While Mr. Toteda had initially claimed that he was entitled to IRBs for periods in 1997 and 1998, he advised at the outset of the hearing of the preliminary issue that he was withdrawing that portion of his claim and was only seeking entitlement to IRBs from May 1, 1999 and onwards.

Mr. Toteda's Application for Arbitration was received by the Commission on February 28, 2000. While it only includes claims for the payment of further IRBs and the cost of replacing certain items alleged to have been damaged in the accident (since withdrawn), I note that the pre-hearing letter also identifies claims for certain supplementary medical expenses and the cost of various assessments as being in issue. I presume that the parties agreed at the pre-hearing that these issues should be added to the application, although there is no mention of it in the pre-hearing letter. The parties discussed these issues when they attended the preliminary issue hearing, but I was not advised of the outcome of these discussions. As the submissions I received regarding this preliminary issue did not refer to these other claims, I have not considered them in the context of the limitation arguments.

Statutory provisions:

Subsection 281(5) of the Insurance Act provides:

281(5) A proceeding in a court or an arbitration proceeding in respect of statutory accident benefits 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 Statutory Accident Benefit Schedule.

Certain provisions of the Schedule are relevant in this case. Section 72(1) states:

72(1) A mediation proceeding under section 280 of the Insurance Act or an arbitration or court proceeding under section 281 of the Act in respect of a benefit under this Regulation shall be commenced within two years from the insurer's refusal to pay the amount claimed or, if the person has engaged in an employment as permitted by section 14 or has returned to elementary, secondary or post-secondary education as permitted by section 17, within two years of the insurer's refusal to pay further benefits.

Section 14 of the Schedule is entitled "Temporary Return to Employment" and provides as follows:

14(1) A person receiving weekly income replacement benefits under this Part may return to or start an employment at any time during the 104 weeks following the onset of disability in respect of which the benefits are paid without affecting his or her entitlement to resume receiving benefits under this Part if, as a result of the accident, he or she is unable to continue in the employment.

14(2) After the 104-week period referred to in subsection (1), a person receiving weekly income replacement benefits under this Part may return to or start an employment for periods of up to ninety days without affecting his or her entitlement to resume receiving benefits under this Part if, as a result of the accident, he or she is unable to continue in the employment.

Section 17 refers to insured persons who temporarily return to their studies, and essentially mirrors the provisions of section 14.

The parties' arguments:

The Applicant acknowledges that the above provisions preclude applications for arbitration from being filed beyond two years after an insurer's refusal to pay the amount claimed, but asserted that his situation falls within the exceptions to this rule set out in subsection 72(1) of the Schedule. Specifically, counsel argued that Mr. Toteda "engaged in employment as permitted by section 14" when he worked during the summer of 1997 and again in 1998, and submitted that he is therefore entitled to request that his benefits be reinstated. He relied on the appeal decision in Wright² in which Director's Delegate Draper found that the right of an applicant who returns to work within two years after an accident to assert a later claim is "preserved when he or she attempts to return to work," in support of his argument.

The Insurer's refusal to pay further income replacement benefits was made on June 25, 1997. This denial was mediated in May of 1998. The Applicant did not apply again to the Insurer to have his benefits reinstated in May 1999, when he was unable to work. As I understand the argument, Mr. Toteda contends that the effective date of denial which triggers the commencement of the limitation period is May 1, 1999, when he determined that he was unable to work and was not paid the benefits that he was entitled to receive. He claims that as his application for arbitration was filed within two years of that date, it is not time-barred.

The Insurer submits that given its refusal of June 25, 1997, any application for arbitration brought after June 25, 1999 is barred by virtue of section 72 of the Schedule. Counsel contends that the refusal communicated to Mr. Toteda was clear and unequivocal, and has never been revoked. He also contended that an arbitrator has no discretion to extend the limitation period prescribed in the Insurance Act and Schedule.

Counsel for the Insurer submitted that Mr. Toteda's application is not saved by the exceptions cited in subsection 72(1), as he did not engage in employment as contemplated by section 14. He argued that section 14 does not apply to Mr. Toteda because, he was not "a person receiving weekly income replacement benefits under this Part" in May of 1999, noting that he had not received an IRB payment since June 1997, almost two years earlier. Counsel also submitted that the decision in Wright is not applicable to the facts of this case. He noted that Mrs. Wright had returned to work on a part-time basis while she continued to receive weekly IRBs and claimed that section 14 was intended to apply to that situation, as opposed to one in which an applicant such as Mr. Toteda begins working well after his benefits have been terminated.

Findings:

Considering the facts as presented and the language of the relevant provisions, I find that Mr. Toteda's application for arbitration was filed beyond the time frame permitted by section 72 of the Schedule. He is therefore precluded from proceeding with his claim for IRBs.

The circumstances of this case are somewhat complicated by the fact that Mr. Toteda began an academic program shortly after the accident that involved consecutive periods of study and work. However, he seeks payment of further IRBs, and the relevant provisions require that the focus remain on two dates — the date of the Insurer's refusal to pay the benefits claimed and the date the application for arbitration was filed. On the facts before me, the Insurer's decision to terminate IRBs was communicated to Mr. Toteda on June 25, 1997. His application for arbitration was filed in late February 2000, some eight months after the two-year deadline. At first glance, the answer is clear that the limitation period has been exceeded.

The result does not change when the intervening events are considered. Mr. Toteda worked in Cuba during the summer of 1997 as part of his work/study program. He attempted to return to his studies in September 1997, without success. He applied for mediation of the Insurer's refusal to pay IRBs beyond late June 1997 in March of 1998. The parties discussed the payment of a lump sum education disability for that academic year at the mediation that took place in May of 1998, and this was ultimately paid by Zurich in October 1998.

The Applicant asserts that he was unable to return to employment in May 1999, as required by his academic program. He did not, however, make a request to the Insurer that his benefits be reinstated at that time. If he had done so, this situation would arguably fit within the language of subsection 72(1) of the Schedule which extends the limitation period in cases in which an applicant temporarily returns to employment. While I do not agree with the Insurer's contention that section 14 only applies to insured persons who are receiving benefits under that part of the Schedule at the time they are returning to or starting work, I find that it is implicit in subsection 72(1) that a request be made that benefits be reinstated before the limitation period can be extended beyond the two years after the initial refusal.

Mr. Toteda made no request for reinstatement or payment of further benefits at any point after May 1, 1999. The Insurer was therefore not required to respond. In other words, there was no refusal "to pay further benefits" as contemplated by subsection 72(1), because there had not been any such request. Consequently, the date of the Insurer's initial refusal, namely June 25, 1997, remains the start date for the two-year limitation period.

The parties advised that Mr. Toteda received a lump sum education disability benefit payment from Zurich after the refusal to pay further IRBs in June 1997. This, however, does not change the result. An agreement to pay EDBs under section 16 does not negate an earlier refusal to pay IRBs or alter the fact that the limitation period with respect to the payment of IRBs began to run on June 25, 1997.

In my view, the Wright decision referred to above does not assist Mr. Toteda. That case dealt with the question of whether subsection 14(1) or 14(2) of the Schedule should be applied to Mrs. Wright's request for further benefits. In finding that subsection 14(1) applies to cases in which an insured person returns to or begins work within 104 weeks after the accident, Director's Delegate Draper stated:

In my view, what subsection 14(1) preserves is the insured person's right to assert a claim for IRBs based on an accident-related disability. If he or she returns to work at an early date, as obliged to do if possible, the insurer cannot assume that entitlement has ended or require a new application if faced with a subsequent claim. The insured person is entitled to go back to the insurer and ask that his or her IRBs be reinstated. The longer the return to work, the more difficult it is likely to be to establish the claim, but section 14 preserves the right to assert it.

(emphasis added)

Mr. Toteda alleges that he was unable to work as of May 1, 1999. His application for arbitration was not filed until February 28, 2000, some ten months later. He did not "go back to the insurer and ask that his... IRBs be reinstated," as set out in the above excerpt. I was not advised of what, if anything, was communicated between the Applicant and Zurich during that period. While I agree with the above statement that section 14 preserves an insured person's right to claim continued benefits if he or she returns to work on a temporary basis, the insured person is still obliged to request that the benefits be reinstated in a timely manner. In the absence of such a request or corresponding "refusal to pay further benefits" as contemplated in subsection 72(1) of the Schedule, I find that Mr. Toteda is precluded from proceeding with his claim for income replacement benefits.

Finally, I would request that the parties advise the Commission whether their dispute regarding the Applicant's claim for supplementary medical benefits and cost of assessments have been resolved, or whether the July 2001 dates scheduled for the hearing on the merits of Mr. Toteda's claim are still required.

EXPENSES:

I exercise my discretion to decline to award either Mr. Toteda or Zurich their expenses incurred in this preliminary issue hearing.

April 17, 2001

Shari L. Novick Arbitrator

Neutral Citation: 2001 ONFSCDRS 58 FSCO A00-000246

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

MICHAEL TOTEDA Applicant

and

ZURICH INSURANCE COMPANY 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. Toteda is precluded from proceeding to arbitration with his claim for income replacement benefits by virtue of the limitation period contained in subsection 72(1) of the Schedule.

April 17, 2001

Shari L. Novick Arbitrator

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 635/94, 781/94, 463/96 and 304/98.
2. 2Allstate Insurance Company of Canada and Wright (FSCO P98-00051, January 18, 1999)