Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2002 ONFSCDRS 127

Appeal P01-00034

OFFICE OF THE DIRECTOR OF ARBITRATIONS

MINDI SMITH

Appellant

and

CITADEL GENERAL ASSURANCE COMPANY

Respondent

Before:

Nancy Makepeace, Director's Delegate

Counsel:

Rod Hare and Mark Rowe (for Ms. Smith)

Jonathan B. Schrieder (for Citadel)

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 arbitration decisions, dated June 27, 2001 and August 16, 2001, are confirmed.

2. The parties shall bear their own appeal expenses.

August 20, 2002

Nancy Makepeace

Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Ms. Smith appeals the arbitration decision dismissing her claim for payment of $2,000 for two reports prepared at the request of Profile Evaluations.¹ In a subsequent decision, the Arbitrator ordered Ms. Smith to pay Citadel's arbitration expenses, in the amount of $2,461.99.² I granted Ms. Smith's motion to combine the appeals and stay the expenses order pending the outcome of the appeal.

I find that the appeals have no merit.

II. BACKGROUND, ISSUES AND THE PARTIES' POSITIONS

Ms. Smith was injured in a motor vehicle accident on February 21, 2000. As her entitlement to the two Profile reports is the only issue in dispute, the Arbitrator received limited evidence about her injuries. Citadel does not dispute that she suffered soft tissue injuries to her neck and back. Ms. Smith testified that she returned to her pre-accident occupation as a data entry clerk, on a part-time basis, about two weeks after the accident. By May 2000, when Profile retained Ms. Sue-Anne Lee, a certified kinesiologist, to prepare an In-Home Assessment and a Worksite Assessment, Ms. Smith had returned to work, although she claims she could not work the long hours she had worked before the accident. She was still receiving physiotherapy treatment, paid for by Citadel.

Ms. Lorraine Park, a Citadel adjuster, refused Profile's May 16, 2000 invoice on the basis that Ms. Lee's reports duplicated two reports prepared a month earlier, at the Insurer's request, by Ms. Janice Ray, who is also a certified kinesiologist. At the arbitration hearing, Citadel added another basis for refusing payment. It argued that the Profile reports were not obtained for the purpose of the regulation, as required under s. 24 of the SABS-1996³ Mr. Hare submitted that Citadel was restricted to the duplication argument raised in its initial refusal. Arbitrator Renahan rejected that submission, finding that the issue in dispute was Ms. Smith's entitlement to the benefit claimed.

Section 24 requires the insurer to pay for "all reasonable expenses incurred by or on behalf of an insured person for the purpose of this Regulation in obtaining and attending an examination or assessment or in obtaining a certificate, report or treatment plan, . . ." A number of Commission decisions have considered the requirements for a claim under this section. The Arbitrator found that the phrase, "for the purpose of this Regulation" includes "an assessment or report made for a medical or rehabilitation purpose or for the purpose of claiming a benefit available under the Regulation."⁴ He accepted that the Profile assessments were obtained for rehabilitation purposes.

Turning to the requirement that the expenses claimed be reasonable, the Arbitrator applied the two-part analysis set out in Tsimidis and Liberty Mutual Insurance Company: (i) was it reasonable to conduct the assessments? and (ii) was the cost reasonable?⁵ In deciding the first question, the Arbitrator considered "who asked for the assessments and why, was the referral reasonable and did the insured have a medical or rehabilitation need that was not met or that required assessment?"⁶ He reaffirmed that "determining the purpose of a report is a different process from determining the usefulness of the opinion it expresses."⁷ He compared the Lee (Profile) reports and the Ray (Citadel) reports, and concluded there was little difference between them. He expressly rejected Mr. Hare's submission that the Profile reports were better because they dealt with pre-accident status: "The Ray reports refer to Ms. Smith's limitations which refers to her pre-accident status."⁸

The Arbitrator heard oral evidence from Ms. Smith, Ms. Catherine McRae Hill (a paralegal who worked on the file at the time of the assessments), Mr. Hare, Ms. Ray and Ms. Lee. He also considered the records of Dr. Ronald Oda, Ms. Smith's family doctor, who completed the Profile referral form:

The only evidence Dr. Oda gave as to why he asked for the assessments was in response to a letter from Profile asking for confirmation that the assessments were useful. Dr. Oda replied that "Both these reports were reviewed and were of value in giving me a better understanding of the impact of her injuries both at home and in the workplace." I was not directed to and could not find any reference to Profile's assessments in Dr. Oda's clinical notes and records. I heard no explanation as to what Dr. Oda thought about Profile performing a Worksite Assessment when he had asked for an Attendant Care Form 1 report. For these reasons, I do not place much weight on Dr. Oda's evidence.⁹

The Arbitrator drew the following conclusions about the Profile reports:

I received very little evidence . . . on the use of these reports to anyone. Although I categorized the recommendations in the reports as those for rehabilitation purposes, I heard no evidence to persuade me that the Ray recommendations were inadequate or that the Profile assessments were better than the Ray assessments or that Ms. Smith received any benefit from the Profile assessments. I heard no evidence that anyone had any concern that Ms. Smith had medical problems or rehabilitation needs or other needs that were not addressed. After reading the reports, I cannot determine the use of the Profile reports.

Accordingly, I am not satisfied that it was reasonable for Dr. Oda to make the referrals for the Profile assessments.¹⁰

As a result, the claim was denied. The Arbitrator stated that he would have allowed $1,200 for the two reports if he had found the referral was reasonable.

The Arbitrator rejected Ms. Smith's allegation of improper conduct on the part of Citadel and Ms. Ray. He also rejected Citadel's request for an assessment under s.282(11.2) of the Insurance Act because he did not find the claim "an abuse of process or . . . frivolous or vexatious."

III. ANALYSIS AND CONCLUSIONS

Under s. 283(1) of the Insurance Act, appeals are restricted to questions of law. On Ms. Smith's behalf, Mr. Hare submits that the Arbitrator made "unreasonable errors in fact" that amount to errors of law, and that any errors of mixed fact and law should be treated as questions of law because of the precedential nature of the case. I need not address the standard of review because I find that the Arbitrator’s conclusions were well-founded on any standard.

I need spend little time addressing Mr. Hare’s argument that Citadel is restricted to the ground for refusal set out in its initial notice. The issue has been discussed in a number of arbitration and appeal decisions. I explained my view in Tesfai and Allstate Insurance Company of Canada:

Sections 41 and 68 of the SABS-1996 require an insurer to give written notice of its reasons for refusing a claim for benefits under s.24. [footnote omitted] The purpose of this requirement is to ensure that the insured person has the information he or she needs to decide whether to dispute or accede to the refusal. By requiring the insurer to disclose its reasons for denying a claim, the notice requirement also reinforces the insurer’s obligation to give full and fair consideration to every claim. Accordingly, an insurers initial reasons for refusing a claim are to be taken seriously, and insurers should be prepared to defend their initial reasons at arbitration. An insurer who provides inadequate or equivocal reasons runs the risk of a finding that the notice was not sufficient to trigger commencement of the two-year limitation period. In some cases, an insurer’s failure to provide adequate reasons may warrant a special award. However, FSCO adjudicators have long recognized that the legislative objective of promoting early claims assessment and ongoing communications between the parties requires that parties be given some leeway in reassessing and developing their positions after the initial refusal.¹¹ In this case, I am not satisfied that Allstate should be held to its initial reasons for refusing the claim, or that its conduct was unreasonable or improper.¹²

Mr. Hare argues that the arbitrator denied natural justice by refusing to allow Ms. Smith to pursue this issue. The transcript tells a different story. The Arbitrator ruled on this point after hearing Mr. Hare’s submissions during his opening statement. Despite that ruling, Mr. Hare restated his argument vigorously on a number of occasions during the hearing, and again in closing. The Arbitrator’s ruling was consistent with rulings made in at least two previous arbitration decisions (Sivanesan and Aleman), and Mr. Hare represented the insured person in the latter. Mr. Hare continued to press the point in the appeal hearing, despite the subsequent release of the appeal decisions in Tesfai and Aleman. His refusal to accept the Arbitrator’s ruling did not advance Ms. Smith’s interests.

This is not a case that warrants a detailed review of the evidence. Mr. Hare submits that the Arbitrator focused on the "actual use" of the Profile reports, rather than Ms. Smith’s reason for obtaining them. He relies on Commission authority that cautions against assessing the value of a report, for purposes of s. 24, based on hindsight. This argument would be more persuasive if Mr. Hare had not himself focused on the relative usefulness of the Profile and Citadel reports, arguing that the Profile reports were more useful because they addressed Ms. Smith’s pre-accident abilities. The Arbitrator did not err in finding little difference in the two reports. In any event, the cases do not go so far as to suggest that an arbitrator must ignore the absence of any evidence that the report was used "by anyone, for any purpose."¹³

Mr. Hare’s position is that an insured person is entitled to a s. 24 assessment as a routine part of the treatment and claims process, including an assessment to provide "a second opinion" where the insured person has been assessed by someone chosen by the insurer. As a number of Commission decisions have now made clear, this is not the law.¹⁴ The real problem for Mr. Hare was that the evidence of Ms. Smith, Ms McRae Hill, and Dr. Oda, which was accurately summarized by the Arbitrator at pp. 11-13 of his decision, did not establish any particular reason for the referral. Another arbitrator might have found that the Profile reports were not obtained for the purpose of the regulation. In any event, the Arbitrator considered the appropriate factors in concluding the referral was not reasonable. I find no error in his conclusion.

The Arbitrator stated that he sees "nothing wrong with a service provider using this forum to collect its account. The accessibility of this [dispute resolution] process to organizations that provide medical or rehabilitation assistance may result in injured insured persons receiving services they might not otherwise receive."¹⁵ However, Profile did not treat Ms. Smith. Nor were its assessments used to plan or monitor her treatment or rehabilitation, or support a benefit claim. In Tesfai and Allstate, I stated my view that while s. 24 extends beyond the examinations, assessments, certificates, treatment plans and reports specifically mentioned in the SABS-1996, it does not contemplate stand-alone assessments initiated by service providers without reference to treatment needs or claims for other benefits.¹⁶

Although the general rule is that accident benefits must be paid to the person entitled to the benefit, s. 44(2)(a) of the SABS-1996 states, "an insurer may arrange to be invoiced directly and to pay directly for goods or services provided in respect of an insured person." Direct billing by service providers can benefit insurers and insured persons, as well as service providers, by reducing administrative costs. As suggested by the Arbitrator, it also encourages early treatment and rehabilitation, an important goal of the accident benefit scheme. Without deciding the point, I note that the wording of the clause – "an insurer may arrange" – suggests direct billing should be arranged with the insurer in advance. In any event, with respect to medical and rehabilitation claims, treatment is generally to be pre-approved (with some exceptions, including "pay pending dispute" benefits), and an application and treatment plan, including conflict of interest statement, is required under s. 38 of the SABS-1996. These requirements do not apply to assessments for the purpose of supporting a claim. That gap creates the potential for referrals that are driven by an assessment facility’s interests, rather than the needs of the insured person. In this case, the evidence provides strong support for the Arbitrator’s finding that "Profile is the entity which stood to win or lose in this proceeding."¹⁷

There are other problems with assessor-driven s. 24 claims. The insured person may have little involvement in litigation decisions, beyond signing an open-ended authorization on first attending the facility. Ms. Smith was in just this situation. She testified that she did not know why the Profile referral was made, and she did not know how the reports were used. On May 9, 2000, the date of Profile’s in-home assessment, she signed two forms, entitled "Release of Medical & Other Information Form" and "Disclosure Consent Agreement." The latter form states that she is liable for Profile’s account if she enters into a release of the claim without protecting Profile, and states that she agrees, "if necessary," to have Profile represent her in any proceedings, "including mediations, arbitrations, court actions or proceedings, acting in accordance with [her] representative’s permission." On May 25, 2000, two days after Citadel refused to pay Profile’s account, Ms. Smith signed another document, called "Authority to Bind." She testified she did not understand this document when she signed it.¹⁸ None of these documents gave Ms. Smith any protection. None explained that Citadel could claim its arbitration or appeal expenses from her, under s. 281(11) of the Act, or that s. 282(11.2) authorizes an assessment against an insured person, if the arbitrator concludes that she commenced an arbitration that was frivolous, vexatious or an abuse of process.

Ms. Smith’s non-involvement in Profile’s decision-making was most apparent in her testimony relating to Profile’s complaints concerning Citadel’s conduct. Although these issues took up a disproportionate amount of time at the arbitration hearing, they merit only brief comment. Mr. Hare argued that Citadel should have followed the procedure set out in s. 38, including providing a treatment plan and conflict of interest notice, before asking Ms. Ray to conduct her assessments. He argued that by arranging these assessments, Citadel was in a conflict of interest, and improperly interfered with Ms. Smith’s treatment and rehabilitation.

However, what s. 38 addresses is the procedure to be followed when the insured person claims a medical and rehabilitation benefit. It is intended to provide a quick and orderly way of adjusting these claims and resolving disputes. It does not prevent an insurer from implementing an assessor’s rehabilitation recommendations with the insured person’s agreement. Ms. Ray’s involvement in Ms. Smith’s rehabilitation consisted of providing an Obus form, foot stool, document tray, and gel wrist rest, and adjusting Ms. Smith’s work station and car seat. Ms. Smith testified that she had no complaints about Citadel providing this assistance, though it did not enable her to return to full-time work. As noted by the Arbitrator, "[a] long line of cases starting with Gaba and Allstate Insurance Company, (OIC A-000624, August 21, 1992) have urged insurers to cooperate in the rehabilitation of their insureds."¹⁹ There was no evidence that Citadel attempted to intervene in Ms. Smith’s treatment or rehabilitation or control her choice of treatment-provider. The Arbitrator was appropriately dismissive of these allegations. Anyway, although Ms. Ray and Ms. Park were confused about the statutory authority for the assessments, there is no question they were authorized under s. 42 of the SABS-1996, to which s. 38 does not apply.

For these reasons, I find no error in the Arbitrator’s decision that Citadel need not pay for the Profile assessments.

IV. EXPENSES

This appeal was without merit, and fairness suggests Citadel should be reimbursed for its appeal expenses. However, I was given no authority for ordering a service provider or its representative to pay an insurer’s expenses. This leaves the alternative of ordering Ms. Smith to pay them. But Ms. Smith did not participate in the appeal hearing, and, although she signed the Notice of Appeal, I doubt she has had any practical control over the proceeding. I agree with the Arbitrator that it was Profile that stood to win or lose. Reluctant as I am to leave Citadel out-of-pocket in this matter, I am not prepared to order Ms. Smith to pay a further amount, in addition to the $2,461.99 the Arbitrator ordered her to pay for arbitration expenses. In making that order, the Arbitrator considered the criteria prescribed in the Expense Regulation. He recognized accessibility concerns, but concluded that Ms. Smith should pay Citadel’s arbitration expenses because of Citadel’s complete success, and because of Mr. Hare’s conduct, which tended to prolong the proceeding. This was an appropriate exercise of his discretion. Therefore, although I have reached a different conclusion with respect to appeal expenses, I am not satisfied the Arbitrator erred in ordering Ms. Smith to pay Citadel’s arbitration expenses.

August 20, 2002

Nancy Makepeace

Director’s Delegate

Date

Footnotes

1. 1(FSCO A00-000984, June 27, 2001).
2. 2(FSCO A00-000924, August 16, 2001).
3. 3The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
4. 4Arbitration decision, p. 10.
5. 5(FSCO P99-000013, August 28, 2000).
6. 6Arbitration decision, p. 11.
7. 7Arbitration decision, p. 13, applying Salvaggio and Simcoe & Erie General Insurance Company and Wellington Insurance Company, (FSCO 097-00062, January 21, 1999) and Tsimidis and Liberty Mutual, note 4 above.
8. 8Arbitration decision, p. 14.
9. 9Arbitration decision, pp. 11-12.
10. 10Arbitration decision, p. 15.
11. 11Sivanesan and CIBC Insurance, (FSCO A99-000872, January 4, 2001); Smith and Citadel General Assurance Company, (FSCO A00-000984, June 27, 2001), under appeal; Nunes and St.Paul Fire and Marine Insurance Company, (FSCO A00-000501, August 15, 2001), under appeal; Aleman and State Farm Mutual Automobile Insurance Company, (FSCO A00-000498, March 6, 2001), appeal dismissed, (FSCO P01-00014, September 21, 2001). In the latter decision, released after the appeal hearing in this case, Director's Delegate McMahon also considered, and rejected, the appellants argument that the insurer should be held to the position set out in the Response to the Application for Arbitration. This issue does not arise in the instant case because Allstate's Response avers that the examinations were not done for the purpose of the Regulation, services were duplicated, and the fees were unreasonable - the same position they took at the appeal hearing. Delegate McMahon stated, "The overriding factor must be fairness. In most cases, the decision will turn on whether or not the insured person will be unduly prejudiced by the new defence." (p.6). [footnote in original]
12. 12(FSCO P00-00048, December 21, 2001), confirming (FSCO 99-000321, July 26, 2000). Director Draper took the same approach in Nunes and St. Paul Fire & Marine Insurance Company, (FSCO P01-000037, April 24, 2002), confirming (FSCO A00-000501, August 15, 2001). The appeal decision in Nunes was released after the appeal hearing in the instant matter.
13. 13The arbitrator's phrase, at p. 9 of Aleman and State Farm, was approved by Delegate McMahon on appeal.
14. 14In addition to the decisions referred to in notes 10 and 11, above, see M.D. and Halifax Insurance Company, (FSCO P00-00049, May 16, 2001).
15. 15Arbitration decision, p. 16.
16. 16Tesfai and Allstate, note 11, above, at p.14.
17. 17Ms. Smith's testimony suggested that Ms. McRae Hill was the source of the Profile referral, though Dr. Oda was also involved. Arbitration transcript, April 23, 2001, pp. 36-7.
18. 18Arbitration transcript, April 23, 2001, p. 50.
19. 19Arbitration decision, p. 8.