Neutral Citation: 2002 ONFSCDRS 170

FSCO A01-000399

BETWEEN:

TIMOTHY MCDONALD

Applicant

and

GUARANTEE COMPANY OF NORTH AMERICA

Insurer

SECOND DECISION ON A PRELIMINARY ISSUE

Before: David J. Evans

Heard: August 30, 2001, in Woodstock, Ontario.

Appearances: Richard J.T. Shaheen for Mr. McDonald Terry R. Shillington for Guarantee Company of North America

The Applicant, Timothy McDonald, was injured in a motor vehicle accident on June 6, 1998. His injuries include a fracture of the L5 vertebra, cuts and contusions to the inner thigh, and a numb spot from the left hip down to the knee. He applied for and received income replacement benefits (IRBs) from Guarantee Company of North America ("Guarantee"), payable under the Schedule.¹ Guarantee terminated the IRBs on December 12, 2000. The parties were unable to resolve their disputes through mediation, and Mr. McDonald applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. The Commission has scheduled a hearing in which the substantive issues are Mr. McDonald's entitlement to IRBs more than 104 weeks after the accident and the amount of the IRBs.

The preliminary issues are:

Is Mr. McDonald precluded from receiving income replacement benefits because of the application of subsections 30(4) and (5) of the Schedule?
If the answer to question 1 is yes, is Guarantee entitled to a repayment of benefits from June 24 to November 24, 2000, totalling $6,487.19, plus interest, pursuant to ss. 47(1)(b) and 47(6) of the Schedule?

The parties agreed to add issue 2 as it flowed out of issue 1.

Who is entitled to the expenses of this preliminary issue hearing?

Mr. McDonald is precluded from receiving income replacement benefits because of the application of subsections 30(4) and (5) of the Schedule.
Guarantee is entitled to a repayment of benefits from June 24 to November 24, 2000, totalling $6,487.19, plus interest, pursuant to ss. 47(1)(b) and 47(6) of the Schedule.
Mr. McDonald is entitled to the expenses of this preliminary issue hearing

Background:

Mr. McDonald was charged and convicted of assault under s. 266 of the Criminal Code for assaulting a Richard Staples in the early morning hours of June 6, 1998. He was also injured in a motor vehicle accident that occurred that same morning. The issue is whether the assault and the accident overlapped. If they did, then under Part IX of the Schedule, Mr. McDonald was excluded from receiving benefits.

Part IX of the Schedule, entitled General Exclusions, consists of s. 30. Subsection 30(4) sets out several criteria for the exclusion related to criminal convictions:

30(4) If a person sustains an impairment as a result of an accident and,

(a) at the time of the accident, the person was engaged in . . . an act for which the person is charged with a criminal offence . . .

the insurer shall hold in trust any amounts payable under an income replacement benefit . . . until the charge is finally disposed of, at which time the amounts and any income on the amounts,

Subsection 30(5) goes on to define "criminal offence" in s. 30(4)(a) as meaning, among other things, "(d) any other criminal offence, whether or not the offence is related to the operation of an automobile."

The events in this case did not engage the trust mechanism, as Mr. McDonald pled guilty to the offence before even applying for benefits. Nonetheless, if he meets the criteria, he is disqualified under Part IX,² and under s. 47(1) he "shall repay to the insurer . . . (b) any income replacement or non-earner benefit that is paid to the person if he . . . was disqualified from payment under Part IX."

Mr. McDonald submitted that he was not still engaged in the assault at the time of the accident. Briefly, he had pushed Mr. Staples to the ground during an argument. He continued the argument beside a pickup truck, inside of which Mr. Staples had sought refuge. The truck then moved, and he sustained injuries while being dragged beside the truck. He argues that the assault had ended by the time the truck moved and that the "accident" did not occur until he was injured after the truck moved.

The term "accident" itself is defined in s. 2 of the Schedule as "an incident in which the use or operation of an automobile directly causes an impairment."

Mr. McDonald further submits that even if Part IX applies, Guarantee either waived its rights to repayment or should be estopped from exercising those rights.

Was Mr. McDonald still engaged in the assault at the time of the accident?

The events of June 6, 1998 were recited by the Crown prosecutor when Mr. McDonald appeared before the Provincial Court in Woodstock on August 18, 1998. Mr. McDonald testified that he appeared without counsel, spoke briefly with the duty counsel, and then entered a guilty plea.

Mr. McDonald was charged under s. 266 of the Criminal Code, (R.S. 1985, c. C-46) as amended. This section simply provides that every one who commits an assault (as defined below) is guilty of either an indictable offence or an offence punishable on summary conviction. The Crown proceeded by way of summary conviction.

The parties agreed to rely on the facts read into court by the Crown prosecutor, Ms. Iarocci, as set out in the transcript of the proceedings. The relevant part of the transcript reads as follows:

MS. IAROCCI: Your Honour, on Saturday, June 6th, 1998, 2:30 a.m., Mr. McDonald left the Woodstock Inn in the City of Woodstock. Out in the parking lot of the business, he proceeded to get involved in arguments with various patrons as they left the hotel. He was involved in some kind of dispute with a Nancy Dow when Richard Staples was coming out of the hotel.

He saw that Nancy Dow was having some problems with Mr. McDonald — that is Mr. Staples saw that Ms. Dow was having problems with Mr. McDonald — and Mr. Staples stepped in between Mr. McDonald and Ms. Dow telling him — the accused — if he had a problem, to deal with him rather than the female. Mr. Staples did not want to fight with Mr. McDonald, but only to separate him from Ms. Dow. Mr. McDonald then turned his attention towards Mr. Staples and began to argue with him. With both hands open, he shoved Mr. Staples on his chest, knocking him to the pavement. Mr. Staples started to pick himself up off the ground along with his lighter and cigarette. Mr. McDonald was still swinging but was not striking Mr. Staples. Mr. McDonald was very intoxicated at the time.

Staples started to walk away toward a vehicle in the parking lot that was going to give him a ride home. He managed to get into the passenger side of the pick up truck only to be followed by the accused. He did not have a chance to get the door closed because the accused was trying to get at him. Mr. Staples then managed to get his foot up on Mr. McDonald's chest and push him away from the open door of the vehicle. Before Mr. Staples could get the door closed, Mr. McDonald, once again, was back at Mr. Staples, grabbing him by the shirt. All the time, the driver of the truck was telling Mr. McDonald, the accused, to get away from his truck. The driver of the pick up truck then put his vehicle into gear and left the area.

Mr. Staples sustained several abrasions to the right elbow and wrist as a result of being thrown to the ground. He also received a scratch to his chest as a result of being grabbed. Those are the facts.

The Court then heard submissions about sentencing. Graham J. imposed a fine of $400 plus a 15 percent surcharge. The Court made no express findings about what acts formed the assault.

Mr. McDonald submitted that the only act of assault was his pushing of Mr. Staples to the ground.

I find that Mr. McDonald takes too narrow a view of the meaning of "assault." The term is defined in s. 265(1) of the Criminal Code:

(1) A person commits an assault when

(a) without the consent of another person, he applies force intentionally to that other person, directly or indirectly;

(b) he attempts or threatens, by an act or a gesture, to apply force to another person, if he has, or causes that other person to believe on reasonable grounds that he has, present ability to effect his purpose...

Thus, I find that the assault was not limited to the push. Under s. 265(1)(b), I find that it continued while Mr. McDonald "was still swinging" at Mr. Staples and then "was trying to get at him" at the pickup truck and even after Mr. Staples had pushed him away when, according to the transcript, "Mr. McDonald, once again, was back at Mr. Staples, grabbing him by the shirt." I find that even when he was not directly touching Mr. Staples, Mr. McDonald during those moments was attempting to apply force to Mr. Staples when he clearly had the ability to effect his purpose. I find that, according to the transcript, the assault only stopped when the truck moved away. Thus, I find that the assault continued right up until the very moment the truck moved.

In the alternative, Mr. McDonald submitted that he had stopped grabbing Mr. Staples before the truck moved. He testified that while reaching in to grab Mr. Staples, the truck was running, and its driver, Bill Ross, was telling him to get out. However, Mr. Staples then kicked him away. He had no further physical contact with Mr. Staples after that and was merely standing about three feet from the truck having a "verbal confrontation" through the open door. Mr. Ross, the driver, reversed the truck, hitting him with the open door and knocking him to the ground. Mr. Ross then drove forward, catching Mr. McDonald's coat and dragging him about 40 to 60 feet. It was during this dragging that he sustained his injuries.

I do not consider this testimony relevant. The parties agreed to rely on the transcript, which has a different sequence of events. I rely on the transcript. Furthermore, the Court found Mr. McDonald guilty of assault based on the evidence set out in the transcript. Those were the acts for which he was charged and convicted of a criminal offence, and those included acts beside the truck up until it moved.

Mr. McDonald also submitted that the "accident" did not occur until the moment in time when he was injured, namely when he was dragged beside the truck. He relied on the Vanderwal decision,³ wherein the Divisional Court held that "the words 'at the time of the accident' are clear and unambiguous. They refer to the moment in time when the accident occurred."

However, in Caldarola and Royal Insurance Company of Canada,⁴ the current Director held that Vanderwal does not require a microscopic dissection of the accident. Rather, the definition of "accident" focuses on the connection between the use or operation of the automobile and the injury: "While the use of 'incident' means that the injury must be linked to a particular use or operation, I am not persuaded that its plain meaning is limited to the instant the injury occurs or is caused."

I find based on Caldarola that the incident is not limited to the moment Mr. McDonald was being dragged beside the truck and that the incident started when the truck started to move — when Mr. McDonald was still committing the assault. I find that the incident continued until Mr. McDonald sustained injuries. Accordingly, I find that the assault continued at the time of the accident, that the exclusion applies, and that Mr. McDonald was and is not entitled to accident benefits.

Is Guarantee Entitled to a Repayment of Benefits Paid?

Paragraph 47(1)(b) provides that Mr. McDonald shall repay to Guarantee any income replacement benefit that is paid to him if he was disqualified from payment under s. 30. However, under s. 47(3), since he only received notice at the end of June 2001, he only has to repay benefits made from June 2000. By letter dated June 25, 2001, Ms. Maureen Robinson, the adjuster, advised him that Guarantee was seeking repayment of benefits "for the period June 24 - November 24, 2000 in the amount of $6,487.19."

However, Mr. McDonald argues that he should not have to repay the benefits because Guarantee waived its rights to the repayment, since it knew or should have known that he had been convicted. Alternatively, it should be estopped from repayment because he detrimentally relied on the payments.

The problem for Mr. McDonald is that both waiver and estoppel are equitable doctrines. Since he received benefits due to an accident that occurred while he was committing a criminal act, I find that such equitable doctrines are unavailable to him. Accordingly, I find that Mr. McDonald is required to make the repayments.

However, if I am wrong and these equitable doctrines are available to a person who has been charged and convicted of a criminal offence, I will consider the evidence.

Evidence Regarding Waiver:

Mr. McDonald submits that Guarantee was in possession of the facts necessary to establish the exclusion, namely that he had been charged and convicted, and voluntarily made payments that it was not obliged to. Therefore, by making the payments, Guarantee waived its rights to a repayment.

Mr. McDonald submitted that Guarantee had the necessary information when he applied for benefits and that it made no further inquiries. He first notified the Insurer of the accident about a month after he pled guilty.

Ms. Maureen Robinson testified that she has been an accident benefits claims examiner since 1993 and that she handled Mr. McDonald's claims for Guarantee. Her first contact occurred on September 22, 1998 when Mr. McDonald's broker provided the notice of claim, consisting of the basic information that he had been a pedestrian in a parking lot hit by a third party. The claim was given to the accident benefits department, which left messages for Mr. McDonald. Some time in October 1998 he came to the office, and a claims clerk just gave him the application package without going over the forms with him.

Mr. McDonald completed the application for accident benefits himself. The application is dated October 8, 1998, and the Insurer's date stamp shows it was received October 28, 1998. Under Part 3 (Accident Details), Mr. McDonald ticked "Yes (Give details)" beside the question "Were you charged?" and, although he did not give details in the space provided, he did describe the accident immediately below. The relevant boxes look like this (Mr. McDonald's writing is set in italics):

Were you charged?

þ Yes (Give details)

□ No

Give a brief description of the accident. If you suffered any injuries as a result of the accident, describe the cause and extent of the injuries. Confrontation With passenger in vehicle, Driver back up and dragged me down parking lot. Fractured Vertabrae (L5)

Ms. Robinson testified that she has no recollection of consciously considering the criminal charge.

Mr. McDonald testified that about two days after the application was received by Guarantee he was sent an explanation of benefits. That form and a later one in December 1998 all showed him as being eligible to receive benefits.

Ms. Robinson testified that there was an initial period between October 28 and sometime in December 1998 that she was going through a consideration and investigation stage with respect to Mr. McDonald's IRB claim. She sent him a positive explanation of benefits in December 1998.

Mr. McDonald submitted that he provided the additional information about the charge to Guarantee's agents who examined him. For example, he was referred to a kinesiologist, Greg Gillam. Mr. McDonald testified that he told Mr. Gillam that he was charged and convicted. The March 3, 1999 report by Greg Gillam, under Accident History, states: "He reported that the police arrived at the scene and he was charged with assault."

Ms. Robinson testified that she retained Mr. Gillam as an agent of Guarantee to assist in Mr. McDonald's rehabilitation and possible return to work. However, she denied receiving the report until the summer of 2000 and denied ever being told by Mr. Gillam that Mr. McDonald had been convicted. By July 2000 she also had the emergency report from the London Health Sciences Centre dated 18 June 1998, which notes that on the day of the accident "Mr. McDonald was involved in an altercation outside of a bar in which he was struck in the back with a car door and knocked to the ground." She also had Dr. Lacerte's report of May 17, 1999, which notes on p. 4 that "Mr. McDonald stated that he himself was charged with assault relating to an earlier altercation with the passenger of the truck." Ms. Robinson testified that she did not review these materials.

Waiver of the Repayment of Income Replacement Benefits:

Mr. McDonald relies on the description of waiver in the Budd appeal decision.⁵ Several principles were set out in that decision:

A party must knowingly forego reliance upon some known right or defect: one should not be able to waive rights of which one was not fully aware or apprised.⁶
The conduct purporting to be a waiver must be express and unequivocal.⁷
What must be ascertained is a conscious intention to abandon a known right.⁸

Mr. McDonald submits that he meets these criteria and that Guarantee waived its right to repayment. However, I find that there was no evidence that Ms. Robinson knowingly gave up Guarantee's rights, no evidence that her conduct ever purported to be an express and unequivocal waiver, and no evidence that she had a conscious intention to abandon a known right.

I find that Ms. Robinson made a mistake in not noticing the reference to the charge in the application or in the other materials and in not following up with Mr. McDonald. However, a mistake is not a waiver, and insurers are entitled to repayment even if they make mistakes, as s. 47(1)(a) provides that a person shall repay to the insurer any benefit "paid to the person as a result of an error on the part of the insurer." The exclusion is even broader under s. 47(1)(b), as the insurer need only establish the facts necessary to show that the insured person fits within the exclusion clause⁹ and does not even have to show mistake.

Mr. McDonald relied on the Desilva case, which dealt with the similar repayment provisions in the SABS -1994. In that case, the arbitrator (as he then was) held that he saw no reason to read the repayment provision "so widely that it encompasses those situations where the insurer, which is in possession of the facts necessary to establish the exclusion, voluntarily makes a payment that it is not obliged to." However, I find that Guarantee did not possess the facts to establish the exclusion because of Ms. Robinson's error. At most, Guarantee can be deemed to have known there was a charge, but it did not know there had been a conviction. I find that the Desilva case does not assist Mr. McDonald.

Accordingly, I find that Guarantee did not waive its rights to a repayment of benefits.

Estoppel Against the Repayment of Income Replacement Benefits:

In Bissoon,¹⁰ the Director summarized the principle of estoppel in the following manner:

If [the insurer], by words or conduct, made representation to [the applicant] with the intention and the result of inducing him to alter his position in a way that ended up being to his detriment, then it is estopped from arguing a position substantially at odds with its previous representation."

For the principle of estoppel to apply in this case, Mr. McDonald must demonstrate that Guarantee represented to him that it would not be relying on the conviction as a defence to his claim. He would also have to demonstrate that he relied on that representation to his detriment. He has not succeeded in proving either of these elements.

Most of the relevant evidence for waiver also applies to the estoppel argument. For the same reasons that I have found waiver does not apply, I find that Mr. McDonald fails on the first branch of the estoppel argument because Ms. Robinson and Guarantee made no such representations to him.

The only additional evidence relates to Mr. McDonald's alleged detrimental reliance. This reliance did not relate to his guilty plea, which would have provided a strong case for detrimental reliance if he had relied on anything Guarantee said or did. However, he pled guilty before even contacting Guarantee. I find there was no detrimental reliance regarding the guilty plea. Accordingly, his only claim for detrimental reliance is that he received the benefits.

Just as did Mr. Budd, Mr. McDonald argued that he would likely have made alternative arrangements in respect of his financial affairs, had the insurer denied benefits at the outset. However, Mr. McDonald only has to repay benefits from June 2000. His alternative arrangements all relate to big expenses he made after his benefits were already terminated at the end of 2000: in the early part of 2001, he spent about $37,500 on kitchen renovations, a new truck, and dental work for his children. I do not find these expenses to take Mr. McDonald's situation out of that of any person required to repay benefits.

In addition, he settled his tort claim, but he did so prior to the 104 week mark; if indeed he settled on the assumption that he would continue receiving benefits, I find that was purely speculative. I do not find that relevant because it was speculative and it preceded the repayment period.

I agree with the arbitrator in the Budd case, who wrote that despite any inherent difficulty faced by an insured in repaying IRBs already spent, the legislation specifically contemplates such repayment.

Accordingly, I find that Guarantee is not estopped from seeking repayment.

EXPENSES:

However, I see no reason to differ from my initial ruling that Mr. McDonald was entitled to his expenses of this preliminary issue hearing.

October 29, 2002

David J. Evans Arbitrator

Date