Neutral Citation: 2002 ONFSCDRS 119

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FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

GREGORY FISH

Applicant

and

KINGSWAY GENERAL INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

K. Julaine Palmer

Heard:

April 11 and June 20, 2002 in Toronto

Appearances:

Richard Bogoroch and Rachel Urman for Mr. Fish.

Jamie Pollack and Arie Odinocki for Kingsway General Insurance Co.

Issues:

In this case, the issue is whether an Insurer unreasonably withheld or delayed payments that it agreed to make as part of a settlement of an arbitration.

The Applicant, Gregory Fish, was injured in a motor vehicle accident on June 24, 1999. He received statutory accident benefits from Kingsway General Insurance Company ("Kingsway"), payable under the Schedule¹ The parties disagreed about Mr. Fish's entitlement to several benefits under the Schedule. They were unable to resolve their dispute through mediation and Mr. Fish applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. The arbitration hearing was scheduled for early December 2001, but the parties settled their dispute on November 28, 2001.

The issues in this hearing are:

1. Did Kingsway unreasonably withhold or delay payments it agreed to make as part of a settlement of an arbitration, thereby entitling Mr. Fish to a special award, under the provisions of subsection 282(10) of the Insurance Act?

2. Who should pay the expenses of the arbitration?

Result:

1. Kingsway unreasonably delayed some payments it agreed to make as part of a settlement of an arbitration; however, because of a lack of evidence, I cannot determine any amount for a special award under the provisions of subsection 282(10) of the Insurance Act.

2. If the parties are unable to agree, the issue of the expenses of the arbitration may be addressed on a resumption of the hearing.

EVIDENCE AND ANALYSIS:

Overview

Mr. Fish was seriously injured in a motor vehicle accident on June 24, 1999. He testified he has not worked since the accident, although he did make an attempt for several weeks in July 1999. Mr. Fish was self-employed in a computer sales and installation business with his wife. As a result of his inability to work, the Fish's lost their business. Eventually, they were also evicted from their home. For close to two years Mr. and Mrs. Fish and their three children have lived with relatives. In the late summer of 2001, Mr. Fish spent five weeks in hospital, as a result of fears he would harm himself, and five weeks, thereafter, in a day hospital group therapy program.

The dispute between Mr. Fish and Kingsway was scheduled to come to an arbitration hearing in early December 2001. However, about a week before the hearing was to begin, the parties settled their dispute. Mr. Fish now complains about unreasonable delays or withholding of benefits in the implementation of this settlement.

Specifically, he complains about three aspects of delay:

1. unreasonable delay in receiving his bi-weekly income replacement benefits cheques for $400 per week;

2. unreasonable delay in setting up a means by which he could receive medication from his pharmacy in Port Perry; and

3. unreasonable delay in payment of his fees at Durham College.

On July 23, 2002 I received a letter from Mr. Fish's lawyers advising that he wished to "withdraw the issue of late payment of Durham College's invoices from the issues in dispute at the arbitration." I have received no objection to this request from Kingsway's lawyers. Accordingly, I will not address this issue in my reasons.

Regarding the income replacement benefits, I find, after a close examination of the payment records before me, that Mr. Fish is not entitled to a special award on this account. Regarding the medication, I find, indeed, there was an unreasonable delay in setting up a means by which Mr. Fish could receive his medication from his pharmacy in Port Perry.

My reasons follow.

The Settlement Agreement

As part of the agreement, Kingsway paid Mr. Fish $45,000 "inclusive of all claims, interest, costs, G.S.T. and disbursements" and Mr. Fish released them from any claims arising from the accident for attendant care benefits, damage to clothing, and claims up to November 28, 2001 for medical and rehabilitation benefits, past income replacement benefits and a special award. Kingsway also agreed to pay Mr. Fish income replacement benefits (IRBs) so long as he qualified and at least until he finished the course he was enrolled in at Durham College. Kingsway also agreed to pay for some further psychological and bio-feedback treatment and Mr. Fish agreed to provide a list of disbursements incurred, which apparently then totalled some $9,300.

With respect to the specific issues in dispute here, the paragraphs below are taken directly from the agreement.

7. The insurer agrees to pay to the insured his Income Replacement Benefits within the time limits as set out in the Statutory Accident Benefit Schedule - Accidents on or After November 1, 1996.

8. The insurer agrees to direct pay the Insured's drug and prescription accounts at his pharmacy.

Income Replacement Benefits

The provisions of section 35 of the Schedule require that an insurer pay an income replacement benefit "at least once every second week," unless the insurer prepays amounts. According to section 44 of the Schedule, an insurer must pay Mr. Fish's benefits by mailing or delivering a cheque to his residence or, with his consent, by electronic funds transfer to his bank account. The first income replacement benefit must be paid within 14 days after the insurer receives the application (s. 35(2)). If a benefit is not paid within the time required, the insurer must pay interest for each day the amount is overdue at the rate of two per cent per month (s. 46).

The Schedule does not specify any allowance of days for mail to arrive at the insured person's home. Kingsway pays its income replacement benefits on a bi-weekly basis. Kingsway has interpreted the Schedule’s provisions as requiring it to mail the cheques within the two-week period that is represented by the cheque. If the cheque does not go out within that time period, interest is paid from the last day of the period to the day of mailing.

Mr. Fish testified that his receipt of income replacement cheques from Kingsway since November 28, 2001 has been erratic. He testified it causes him and his family great stress because he cannot count on the cheque being delivered on time every two weeks on a certain day, like a pay cheque. Unfortunately, Mr. Fish's evidence about date of receipt of cheques was imprecise; he presented no list, for example, of time periods covered by cheques and the date of their receipt by him. Mrs. Fish testified that her husband became anxious when a cheque was due, but likewise, her evidence was not detailed about any cheques that arrived late since December 2001.

Mildred Metcalfe, claims supervisor for Kingsway, testified that her interpretation of the payment provisions is that a cheque must be mailed from Kingsway’s offices before the end of the two-week period for which it is specified. She also testified that the IRB cheque processing at Kingsway is performed manually and is not computerized. Frequently six or eight cheques at a time are issued. Sometimes cheques sit in the file. For example in this case, the cheque for the period March 14 to 27, 2002 was dated February 13, 2002.

Kingsway has paid interest on overdue cheques in this claim. A copy of a cheque stub was filed showing $3.94 in interest paid on April 8, 2002 for a total of 15 days of interest on income replacement benefits for the period March 14 to March 27, 2002.

Ms. Metcalfe testified that after the agreement of November 28, 2001, in December 2001, she sent out the pre-issued cheques totalling $252.98 per week, because they were already printed, and later topped up those cheques to $400 per week, sometime later in December 2001.

Mr. Fish filed a copy of a letter from Kingway's lawyers to his lawyers, dated December 10, 2001, in which three cheques payable to Mr. Fish were enclosed, representing payments for the six weeks from November 21, 2001 to January 2, 2002 at the previous rate of $252.98 per week. Mr. Fish admitted receiving these cheques and indicated that it was the first time since the accident he had received any income replacement cheques in advance. The letter also explained that the balance to a total of $400 per week would be paid under separate cover and mailed to Mr. Fish directly.

Mr. Fish testified he did not receive the top-up cheque until January 2002. He was not precise about the date. However, I find that he received the cheque by January 8, 2002, according to his lawyer's letter of that date to Kingsway's lawyers. Mr. Fish also complained that he received no explanation of why he continued to receive cheques for $252.98 per week after the agreement of November 28, 2001. I find that the reason for this measure was adequately explained in the letter of December 10, 2001 from Kingsway’s lawyers to Mr. Fish’s lawyers. I accept Mr. Fish’s evidence that no one explained it to him.

In the agreement of November 28, 2001 Kingsway undertook to honour its obligations regarding timeliness of delivery of IRB payments, as set out in the Schedule. I agree with Ms. Metcalfe's interpretation of the IRB payment provisions of the Schedule and find that the cheque for the period November 21 to December 5, 2001 should have been mailed by Kingsway no later than December 5, 2001. However, this cheque was not available for Mr. Fish until December 10, 2001 when it was picked up by his lawyers from Kingsway’s lawyers office. It may have been overdue, depending upon one's view of a reasonable time for a cheque to arrive by mail at Mr. Fish's home. The delivery process itself violates section 44 of the Schedule which requires mailing to Mr. Fish’s residence.

In any event, in the agreement of November 28, 2001, Mr. Fish released his claims against Kingsway for IRBs up to and including November 28, 2001. Kingsway also agreed to pay him $400 per week thereafter. Thus, according to the terms of the agreement, Mr. Fish was not entitled to a cheque for the week of November 21 to 28, 2001. He was overpaid by about $252.98, with the cheques he received on December 10, 2001.

This overpayment more than amply covers the interest due by Kingsway with respect to any late payment for the period November 28 to December 5, 2001, if indeed the payment were late. The overpayment also covers the interest on any overdue top-up amounts of $147.02 per week from November 28, 2001 until January 2, 2002, which Mr. Fish received sometime on or before January 8, 2002.

I have no evidence of the amount of the cheque for the top-up amounts in January 2002. It may be that Mr. Fish received $882.12 (6 weeks x $147.02), in which case he was overpaid, in total, $400 for the week of November 21-28, 2001, not $252.98.

I appreciate Mr. Fish’s frustration in being unable to rely on his income replacement benefits being in his bank account on a certain day, every two weeks. Particularly in a case like this one, where an insurer has agreed to pay the benefits for a period into the future, direct deposit into Mr. Fish’s bank account would be a significant improvement over the manual system Kingsway has in place. However, in the end, Mr. Fish has proved no entitlement to a special award with respect to late payment of income replacement benefits from November 28, 2001 to the date of hearing. The evidence he presented about late arrival of cheques was too imprecise. Of the nine or ten cheques he would have received from November 28, 2001 to the date of the hearing in April 2002, only one cheque was proved to have been late, and Kingsway paid interest in that case. The cheques paid in December 2001 and January 2002 resulted in a sizeable overpayment to Mr. Fish that appears to have been overlooked.

Prescriptions

Kingsway hired Ms. Jan Rutherford, an independent insurance adjuster, to administer Mr. Fish’s statutory accident benefits. However, Ms. Rutherford did not participate in the negotiation of the November 28, 2001 settlement agreement.

I find Ms. Rutherford’s attempt to implement a direct payment scheme for Mr. Fish’s medication was inadvertently foiled in the beginning by Mr. Fish’s own lawyers who requested her by letter dated November 28, 2001 to "write to his pharmacy immediately . . . to advise that they may invoice the insurer directly from this point forward."

From the tone and content of the letter, Ms. Rutherford testified she understood that this was something that had been discussed between the pharmacy and Mr. Fish’s lawyers. Having examined the letter carefully, I find that was a reasonable assumption on her part. Accordingly, she wrote to the drugstore in early December 2001, confirming that the druggist could, indeed, bill Kingsway directly, as a result of the agreement to settle the arbitration. She provided the particulars that would be required on the invoices.

Unfortunately, this scheme was not agreed to by the pharmacy, so Ms. Rutherford began to search for another area drugstore that would agree. I find she or her assistant contacted seven pharmacies in Port Perry, Oshawa, and Uxbridge to no avail. I find this was a reasonable response on her part based on the information available to her at the time. At that point Ms. Rutherford had no understanding that Mr. Fish wished to deal only with the pharmacy she first approached.

Ms. Rutherford wrote directly to Mr. Fish’s lawyers on December 5, 2001 detailing the problems she had encountered in attempting to arrange direct invoicing of Kingsway for Mr. Fish's medication. I find she received no response to this letter from Mr. Fish’s lawyers. I also find that a long letter from Mr. Fish’s lawyers to Kingsway’s lawyers dated December 13, 2001 dealing with many issues, in which they suggest an advance deposit be made to the pharmacy, never came to Ms. Rutherford’s attention. Kingsway’s lawyers should have passed along the suggestion to Ms. Rutherford, although it is curious that Mr. Fish’s lawyers would not make the suggestion directly to Ms. Rutherford herself.

As a result of a telephone call from Mr. Fish's psychologist, Dr. Angela Fountain, Ms. Rutherford arranged, as an interim measure, that the psychologist could submit invoices for Mr. Fish's drugs to Kingsway with her personal statements of account for treatment. According to Ms. Rutherford, Dr. Fountain offered this unusual service to facilitate Mr. Fish receiving his medication until permanent arrangements could be made. Dr. Fountain had previously undertaken such a service for children receiving treatment from her, according to Mr. Fish’s testimony. At the time of their conversation, Ms. Rutherford understood Mr. Fish was present in Dr. Fountain’s office. Two fax communications dated December 9 and 12, 2001 to Dr. Fountain were filed by Kingsway. In the first fax, Ms. Rutherford asks Dr. Fountain to provide a receipt for medication she funded for Mr. Fish between December 6 and 10, 2001. In the second fax, Ms. Rutherford asks for Dr. Fountain’s help in finding a pharmacy that will accept direct billing to Kingsway. Ms. Rutherford testified that, ultimately, she never received any invoices from Dr. Fountain relating to medication.

Ms. Rutherford testified that, according to her notes, by early January 2002 she had not received any word from Dr. Fountain or anyone on Mr. Fish's behalf as to how the prescription account could be set up, so she instructed her assistant to try to find other pharmacies. By the third week of January 2002, Ms. Rutherford understood Mr. Fish wished to purchase his medication exclusively from the first pharmacy Ms. Rutherford had initially contacted, so she again made telephone enquiries with the pharmacist-owner of the shop, this time about Kingsway putting money on deposit, from which the druggist would draw for Mr. Fish’s medications. Mr. Brown, the pharmacist-owner, was on vacation for part of January, according to Ms. Rutherford’s testimony. Ms. Rutherford spoke directly with Mr. Brown on January 28, 2002 and wrote the next day to Mr. Fish's lawyers confirming an agreement had been reached. She also wrote to the pharmacist confirming the list of medications that would be covered. Ms. Rutherford requisitioned a cheque from her principals on February 4, 2002 and forwarded Kingsway's cheque for $500 to the pharmacy on February 22, 2002.

Ms. Rutherford testified in her 13 years as an independent adjuster, she had had occasion to set up direct payment accounts, with taxi companies, for example, but never with pharmacies. She testified that taxi companies will invoice an insurer on a monthly basis.

Mr. Fish testified that he suffers from emotional problems as a result of the accident, including paranoiac delusions. He testified that he was born in Port Perry and has resided there almost all his life. He has dealt with the particular pharmacy in Port Perry since his children were infants. He testified that he called the pharmacy several times to find out if an account had been arranged for his medication. He was distressed, angry and believed this was a delaying tactic on Kingsway's part. Mr. Fish acknowledged that although he had received a significant sum of money from the settlement of November 28, 2001, he was not able to make rational decisions about its use; he was unable to cope. He felt that if he paid for any medication from his own pocket, maybe an account would never be set up at the pharmacy. Mrs. Fish testified that she tried to persuade her husband, but he was convinced that if he paid for the drugs himself, he would not get another cheque. Mrs. Fish testified she wanted her husband to get better and for Kingsway to treat him with respect; she felt this delay demonstrated no respect or caring on Kingsway's part.

Analysis

In the agreement of November 28, 2001 Kingsway agreed "to direct pay the insured's drug and prescription accounts at his pharmacy." The agreement is silent as to how such an arrangement will be implemented, or what should occur should the pharmacy not be in agreement with "direct payment," as occurred here. This a defect in the agreement, for which both parties are responsible. I find that Ms. Rutherford acted reasonably and responsibly in the manner in which she attempted to facilitate this part of the settlement in early December 2001. The evidence is not clear that anyone other than Mr. Fish, his wife and Dr. Fountain knew that Mr. Fish was going without medication from the time Dr. Fountain agreed to intervene in mid-December 2001until a January 8, 2002 letter from Mr. Fish’s lawyers to Kingsway’s lawyers, which was not copied to Ms. Rutherford.

It is unreasonable for an agreement for the payment of medication needed on a daily basis to take almost three months to be put into place. I find Ms. Rutherford, Kingsway’s agent, acted reasonably, with the information she had at the time, in attempting to facilitate Mr. Fish’s timely receipt of his medication over the period from the end of November to early January 2002. However, in mid-December 2001, Kingsway’s lawyers should have passed the suggestion of Mr. Fish’s lawyers to her, along with the information about Mr. Fish not wishing to change pharmacies. Kingsway’s lawyers should have seen that an arrangement was put into place as had been agreed. The time that elapsed from January 28, 2002 until February 22, 2002 when Ms. Rutherford mailed Kingsway’s cheque to the pharmacy in Port Perry was particularly unconscionable. After reaching an oral agreement with the pharmacist-owner on January 28, 2002, Kingsway and its agents should have made vigorous efforts to fund the account as quickly as possible.

In my opinion, the account with the pharmacy should have been in place by no later than December 19, 2001, three weeks after the agreement was signed. Unfortunately, I have no evidence of the monthly cost of Mr. Fish's prescriptions—about five to seven drugs appear to be involved. At the close of Mr. Fish's testimony I inquired about the cost of the medications. His lawyers responded that they did not have the figures and offered a vague submission about $317 in October. In the documentary evidence, I find a reference to medication bills submitted in mid-October in the amounts of $178.51 and $112.25 (total: $290.76). No evidence was presented about the cost of the medication Mr. Fish was prescribed over the period November 28, 2001 to February 28, 2002, for example, even when the hearing resumed two months later.

Mr. Fish is frustrated in dealing with a large cast of characters: his own lawyers, an adjuster, an insurance company, their lawyers, and numerous health practitioners, all as a result of the injuries he received in the accident. I sympathize with him and commend his efforts in upgrading his qualifications at Durham College, in a rigorous, condensed program. The communication and coordination among all parties concerned with the implementation of the two aspects of the agreement I am dealing with in this arbitration has not been exemplary. Particularly, Mr. Fish seems to have been left in the dark at times. On other occasions Ms. Rutherford was left out of the loop.

I have found that the delay in establishing a medication account in this case was unreasonable, largely attributable to Kingsway, and warrants imposition of a special award. The account should have been in place by December 19, 2001. However, setting the amount of the special award is problematic when no evidence whatsoever was presented of the cost of the prescriptions involved, and that is the base criterion upon which such an award is founded.²

Accordingly, I find myself unable to impose a special award, because I have no evidence of the amount of the benefit to which Mr. Fish would have been entitled over the period of unreasonable delay.

EXPENSES:

Mr. Fish claims his expenses of this arbitration. Expenses of the arbitration are referred to in paragraph 3(e) of the settlement agreement of November 28, 2001. If the parties cannot agree on this issue, a party may apply to re-open the hearing to present further submissions on this issue.

August 1, 2002

K. Julaine Palmer Arbitrator

Date

Neutral Citation: 2002 ONFSCDRS 119

FSCO A00-001241

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

GREGORY FISH

Applicant

and

KINGSWAY GENERAL 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. The Application is dismissed.

2. The issue of the expenses of the arbitration is not yet determined.

August 1, 2002

K. Julaine Palmer Arbitrator

Date

(10) If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the statutory accident benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

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, 303/98, 114/00 and 482/01.
2. 2Subsection 282(10) of the Act reads as follows: