Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2002 ONFSCDRS 200

Appeal P02-00009

Appellant

and

Respondent

Before:

Nancy Makepeace

Counsel:

Richard F.L. Rose for Allstate Insurance

David S. Wilson for Mr. Sellathamby

Hearing Date:

July 26, 2002

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The appeal is dismissed, and the arbitration order, dated May 8, 2002, as amended, is confirmed.
Each party shall bear its own appeal expenses.

December 17, 2002

Nancy Makepeace Director’s Delegate

Date

The issue in this appeal is whether the SABS-1996¹ allows an insurer to stop paying income replacement benefits, based on an insurer examination (“IE”), after receiving a Designated Assessment Centre (“DAC”) report that supports the insured person’s disability claim. The appeal raises questions about the interaction of s. 37 of the SABS-1996 (weekly benefit termination process) and s. 42 (insurer examinations).

A. The Arbitration Decisions

Arbitrator Bayefsky gave a detailed outline of the facts at pages 4-9 of his decision dated May 8, 2002. The essential facts are these.

Mr. Sellathamby was injured in a motor vehicle accident on June 29, 1999. A week later, Allstate Insurance Company of Canada (“Allstate”) started paying him income replacement benefits (“IRBs”) under s. 4 of the SABS-1996.

On October 1, 1999, Dr. K. Massiah, an orthopaedic surgeon, examined Mr. Sellathamby at Allstate’s request, under s. 42 of the SABS-1996. It was Dr. Massiah’s opinion that Mr. Sellathamby was not substantially disabled from returning to his pre-accident employment as a result of accident-related impairments. On that basis, Allstate issued a stoppage notice in accordance with s. 37(1).

Mr. Sellathamby requested a DAC (Designated Assessment Centre) assessment, as he was entitled to do under s. 37(3) of the SABS-1996. He objected to Allstate’s reliance on an orthopaedic report, because he claimed psychological disability, based on an October 27, 1999 report of Dr. B.R. Raghunan, a psychologist. In response, Allstate withdrew its stoppage notice, cancelled the DAC assessment it had arranged, and arranged an insurer examination with Dr. R. Hershberg, a psychiatrist.

On November 18, 1999, Dr. Hershberg reported that he did not believe Mr. Sellathamby was psychiatrically disabled, despite suffering accident-related anxiety and depression. Allstate issued a second stoppage notice on November 30, 1999. Again, Mr. Sellathamby requested a disability DAC assessment. This was done at the Mississauga Physical Rehabilitation Centre on January 21 and March 23, 2000. The consensus opinion of Dr. C. Stants, a chiropractor, and Ms. Terry, a kinesiologist, was that Mr. Sellathamby’s accident-related physical impairments were “not substantial enough to preclude him from performing his pre-accident activities of daily living and employment.” However, Dr. D. Prendergast, a psychologist on the DAC team, concluded that Mr. Sellathamby was “disabled from returning to his pre-accident level of employment” by accident-related anxiety, pain and social avoidance.

On April 25, 2000, Allstate wrote to Dr. Prendergast, asking him the following questions:

Please indicate how long you feel Mr. Sellathamby will remain substantially disabled from his pre-accident employment?

What treatment would he require to assist in his return to work? Please give me specifics, including how often treatment would be warranted, and for what duration of time.

Dr. Prendergast replied that the disability DAC guidelines did not allow him to address these questions, though they could be addressed in a medical and rehabilitation DAC assessment.

On May 15, 2000, Allstate directed the same questions to Dr. Hershberg. Dr. Hershberg did not examine Mr. Sellathamby again, but prepared a second report, dated May 24, 2000 based on a file review. He did not specifically answer Allstate’s questions, but criticized Dr. Prendergast’s report and reaffirmed his view that Mr. Sellathamby was not disabled.

On June 1, 2000, Allstate required Mr. Sellathamby to be examined by Dr. M. Ross, a psychologist. Initially, Allstate’s request was framed in terms of attendant care and housekeeping expenses. When Mr. Sellathamby reminded the adjuster that he was not claiming attendant care benefits, and that housekeeping benefits had been terminated, Allstate issued a corrected request, dated June 21, stating that the insurer examination was requested in relation to income replacement benefits. Mr. Sellathamby objected, arguing that s. 37(5) does not allow an insurer another insurer examination after receiving a “positive” DAC report (one that supports the insured person’s claim to disability benefits). However, he attended for the examination, and on November 29, 2000, Dr. Ross issued his opinion that Mr. Sellathamby was not psychologically disabled. On December 16, 2000, Allstate issued a third stoppage notice, effective January 2, 2001. Mr. Sellathamby elected not to request a DAC assessment, and benefits were terminated on that date.

Mr. Sellathamby applied for mediation of the dispute, and when mediation failed, he applied for arbitration in February 2001, arguing that “the only procedure available to the insurer [following a positive DAC report] is to commence a dispute mechanism, and pending the resolution of the dispute, continue to pay the weekly benefits. The insurer has ignored this requirement.”

At the pre-hearing on July 9, 2001, Mr. Sellathamby brought a motion for interim benefits, pursuant to s. 279(4) of the Act. Arbitrator Sandomirsky dismissed the motion in a decision dated September 14, 2001. She accepted the established principle that interim benefits may be ordered where the insurer contravened benefits in “blatant disregard” of the Act or the SABS. However, based on the motion record, which did not include all the pertinent medical reports, she was not persuaded that Allstate’s decision to have Mr. Sellathamby examined by Dr. Ross contravened the SABS. She found that Allstate’s failure to disclose Dr. Hershberg’s second report, to which Dr. Ross had alluded,

demonstrated a disregard for an open and fair claims management process. However, given that there are no provisions in the Schedule which specifically precluded Allstate from obtaining another opinion from a physician, I cannot conclude that Allstate’s decision to obtain the report from Dr. Hershberg was a blatant disregard of the Schedule.²

An arbitration hearing was scheduled for January 28-29, 2002. Mr. Sellathamby claimed ongoing income replacement benefits beyond January 2, 2001, housekeeping and home maintenance services, interest on overdue benefits, a special award, and arbitration expenses.

On the first day of the hearing before Arbitrator Bayefsky, Mr. Sellathamby restated his s. 37(5) argument as part of his claim for ongoing benefits. Allstate submitted that Mr. Sellathamby was precluded from raising this issue because it was res judicata. The Arbitrator heard argument on the issue, and recessed until the following day, when he gave an oral ruling. He concluded that while Arbitrator Sandomirsky had decided two issues with respect to s. 42 (whether Allstate’s request for an insurer examination by Dr. Ross was reasonable, whether Allstate was required to disclose Dr. Hershberg’s second report), she had not decided whether s. 37(5) required Allstate to continue paying benefits after receiving Dr. Ross’s report. In addition, she considered these questions in the context of an interim benefits motion, not an entitlement hearing. Arbitrator Bayefsky noted that the issues before him were entitlement to income replacement benefits and a special award. Arbitrator Sandomirsky had decided neither issue. Therefore, Arbitrator Bayefsky concluded he had jurisdiction to hear Mr. Sellathamby’s arguments.

Mr. Sellathamby then indicated, through counsel, that he wished to proceed with the s. 37(5) argument, leaving the substantive entitlement question for another day. Allstate agreed, and this was accepted by the Arbitrator.

On March 21, 2002, the Arbitrator gave his order in a brief letter (because of the labour-management dispute at that time) stating that reasons would follow in due course:

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The Insurer shall pay the Applicant income replacement benefits from January 3, 2001, onward, pending the resolution of the dispute.

Allstate appealed the order and requested a stay pending resolution of the appeal. By that time, the strike was over, and I advised the parties that they need not take further steps in the appeal until the Arbitrator’s written reasons were released.

Arbitrator Bayefsky delivered his reasons on May 8, 2002. He concluded that Allstate required Mr. Sellathamby to be examined by Dr. Ross because it did not accept Dr. Prendergast’s DAC report. He rejected Allstate’s argument that it requested the insurer examination to assess Mr. Sellathamby’s changing condition. He stated:

there is nothing [in the evidence] to suggest that the Applicant’s condition had changed in the two and a half months since the DAC. The Insurer sought a new IME simply on the basis of Dr. Hershberg’s paper review and critique of the DAC report.³

The Arbitrator noted that the questions asked of Dr. Ross were broad-ranging, and included the very questions addressed by the DAC. He held that Allstate’s ongoing payment of benefits for a time after the DAC did not absolve it of the obligation to comply with s. 37. That section, in his view, gives an insurer one alternative to accepting the DAC report – applying for mediation, followed by a civil action.⁴ The Arbitrator did not accept that an insurer would be barred from commencing civil proceedings because of paying benefits pending resolution of the dispute pursuant to s. 37(5). Arbitrator Bayefsky also dismissed Allstate’s alternative argument that any interim orders should be limited to the first 104 weeks. He noted that there is no such limitation in s. 37(5). He also expressed concern that the remedy should put the parties in the position they would have been in if the Insurer had complied with the procedural provisions of the SABS.

The arbitration hearing was scheduled for completion on May 22-23, 2002.

In the meantime, Arbitrator Bayefsky invited submissions about how his interim benefits order affected the balance of the arbitration. He heard the parties’ submissions by telephone conference on May 14, 2002. Mr. Sellathamby argued that he should not be required to continue with the arbitration in light of Allstate’s contravention of s. 37(5). Allstate agreed, for partly practical reasons. The Arbitrator stated that while the parties’ agreement was not determinative, he agreed that Allstate could not force Mr. Sellathamby to adjudicate the remaining issues. In Supplementary Reasons, dated May 17, 2002, he made the following order:

The arbitration concerning the Applicant’s entitlement to income replacement benefits is concluded. The arbitration may continue with respect to the Applicant’s claims for housekeeping benefits and a special award.

The parties subsequently reached a partial resolution of their dispute, and Arbitrator Bayefsky acknowledged these agreements in correspondence dated May 21, 2002:

This will acknowledge receipt of Mr. Wilson’s letter of today’s date, indicating that the parties have resolved the Applicant’s claims for housekeeping benefits and a special award, as well as the matter of arbitration expenses. The parties have also reached an agreement on the matter of interest, in respect of which I issue the following Order:

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

My order of March 21, 2002, is hereby amended as follows:

The Insurer shall pay the Applicant income replacement benefits from January 3, 2001, onward, plus interest, pending the resolution of the dispute.

In light of these developments, the remaining dates of the arbitration are hereby cancelled.

He further amended the order on June 19, 2002, adding:

The Insurer shall pay the Applicant a special award in the amount of $17,000.
The Insurer shall pay the Applicant his reasonable expenses of the arbitration proceeding.

B. The Appeal

Allstate commenced an appeal of Arbitrator Bayefsky’s first decision on April 22, 2002 and moved for a stay of the Arbitrator’s order pending the outcome of the appeal. Mr. Sellathamby tendered an affidavit in support of his submission that the stay motion should be denied because it would impose financial hardship. Allstate sought to cross-examine Mr. Sellathamby on his affidavit. I heard the parties’ submissions by telephone conference on June 20, 2002.

By that time, the parties had narrowed their dispute. Allstate agreed to resume payment of income replacement benefits from May 10, 2002 and pay half the IRBs owing to that date in a lump sum of $17,000.⁵

I granted Allstate’s stay motion in part. I stayed payment of the remaining arrears of income replacement benefits, the interest on that amount, and (by agreement of the parties) the special award. I did not stay the expenses award. Given my resolution of the stay motion, I did not find it necessary to consider Mr. Sellathamby’s affidavit.

III. ANALYSIS AND FINDINGS

A. The Parties’ Positions

On appeal, the parties restated the arguments they made before Arbitrator Bayefsky.

Allstate submits that the Arbitrator erred in finding that s. 37(5) gives an insurer only two options on receipt of a positive DAC report – continuing to pay benefits without disputing entitlement, or continuing to pay benefits while disputing entitlement through the dispute resolution system. Allstate notes that the section says the insurer “may dispute” entitlement through dispute resolution. Since Amay’ is permissive, Allstate argues that s. 37(5) does not provide a complete code. There is a third option, in Allstate’s view: where the parties agree that benefits are payable, an insurer may continue to adjust the claim, including requesting additional insurer examinations, while paying benefits. Allstate submits that s. 37(5) does not apply in this situation. In addition, Allstate says that s. 280(1) does not allow an insurer to commence mediation where it does not dispute benefit entitlement.

In any event, Allstate submits that s. 37(5) does not preclude an insurer from requiring an insurer examination under s. 42, as often as reasonably required in the normal course of adjusting an ongoing claim. Reasonableness is an objective standard, in Allstate’s view. The Arbitrator erred in second-guessing its motivation for requiring the examination.

Finally, Allstate argues that the Arbitrator should not have ordered it to pay benefits beyond 104 weeks because the DAC team did not consider whether Mr. Sellathamby satisfied the stricter test imposed by s. 5(2)(b) of the SABS-1996. That section says that an insurer is not required to pay income replacement benefits

for any period longer than 104 weeks of disability, unless, as a result of the accident, the insured person is suffering a complete inability to engage in any employment for which he or she is reasonably suited by education, training or experience.⁶

Mr. Sellathamby submits that after receiving a positive DAC report, s. 37(5) requires an insurer to pay ongoing benefits until the matter is finally disposed of pursuant to sections 279-283 of the Act. He recognizes that an insurer can require an insurer examination in accordance with s. 42 and can use the report in an arbitration or court hearing on entitlement, but he submits the insurer cannot stop paying benefits on that basis. In Mr. Sellathamby’s view, there are no time limits on the effect of s. 37(5). The mere passage of time after a DAC does not entitle an insurer to act contrary to its findings, whether based on an insurer examination report or for any other reason. Mr. Sellathamby says that a “bright line” approach is required because the SABS is consumer protection law. He relies on the following statement by Justice Gonthier, writing on behalf of the majority of the Supreme Court of Canada in Smith v. Co-operators General Insurance Company:

As I have mentioned above, insurance law is, in many respects, geared towards protection of the consumer. This approach obliges the courts to impose bright-line boundaries between the permissible and the impermissible without undue solicitude for particular circumstances that might operate against claimants in certain cases.⁷

Although that decision dealt with what is required for an insurer’s notice of termination of benefits to be effective in triggering the limitation period, I agree that it mandates a consumer protection approach to the statutory accident benefit scheme,⁸ and particularly its remedial procedural provisions.

B. Insurer Examinations and DAC Reports

Subsection 42(1) of the SABS-1996 permits an insurer to have the insured person examined by an expert of the insurer’s choosing, “[f]or the purpose of determining whether an insured person is entitled to a benefit.” An insurer examination may be required “as often as is reasonably necessary,” pursuant to s. 42(3). Although insurers often treat s. 42 examinations like “defence medicals” under s. 105 of the Courts of Justice Act, Commission adjudicators have stated that the purpose of an insurer examination under s. 42 and its predecessors is for claims adjustment. However, an insurer may require an insurer examination after benefits are terminated and the insured person applies for mediation in the case of a “continuing and evolving claim for ongoing benefits” or if the request is otherwise reasonable.⁹

DAC assessments were introduced in the SABS-1994 and retained in the current version of the SABS. As Director Draper stated in M.D. and Halifax Insurance Company, the aim of the DAC system is to provide “an impartial assessment where the parties are unable to agree on the insured person’s entitlement to accident benefits.”¹⁰ Neither party chooses which DAC will perform the assessment; s. 53 of the SABS-1996 requires that the assessment be done by the closest DAC with the appropriate expertise. The timing of a DAC assessment – like the choice of the assessor – is dictated by the SABS. Section 37 prescribes the process an insurer must follow to terminate income replacement benefits:

37.(1) If the insurer determines that a person is not entitled or is no longer entitled to receive an income replacement, non-earner or caregiver benefit, the insurer shall give the person notice of its determination, with reasons,

(a) within 14 days after receiving an application for the benefit; or

(b) if the insurer has been paying the benefit to the person, no later than the date the next payment of the benefit is due.

(2) If notice is given under clause (1) (b), the insurer shall specify in the notice a date for stopping the benefit and the insurer may stop payment of the benefit in accordance with the notice.

(3) If notice is given under clause (1) (b) for the reason that the person no longer suffers from the disability in respect of which the benefit was paid,

(a) the date specified under subsection (2) shall be at least 14 days after the person receives the notice;

(b) the notice under clause (1) (b) shall inform the person that he or she has the right to require an assessment in accordance with section 43 by giving the insurer written notice before the date specified under subsection (2); and

(c) despite subsection (2), the insurer shall not stop payment of the benefit if, within 14 days after receiving the notice under clause (1) (b), the person gives the insurer written notice that he or she requires an assessment in accordance with section 43.

(4) If the person gives the insurer written notice under clause (3) (c) that he or she requires an assessment and the report from the designated assessment centre states that the person no longer suffers from the disability in respect of which the benefit was paid, the insurer may stop paying the benefit after it has provided the person with notice of its reasons for stopping payment.

(5) If the person gives the insurer written notice under clause (3) (c) that he or she requires an assessment and the report from the designated assessment centre states that the person continues to suffer from the disability in respect of which the benefit is paid, the insurer may dispute the obligation to pay the benefit in accordance with sections 279 to 283 of the Insurance Act, and, pending the resolution of the dispute, the insurer shall pay the benefit.

(6) Nothing in this section prevents a person from disputing a stoppage in the payment of a benefit in accordance with sections 279 to 283 of the Insurance Act and section 50 of this Regulation and, if it is finally determined that payment of the benefit should not have been stopped, the insurer shall,

(a) resume payment of the benefit; and

(b) pay any amounts under the benefit that were not paid.

If an insured person fails to co-operate with an insurer examination or a DAC assessment, the insurer may suspend his benefits for the period of non-compliance, and the insured person may be barred from commencing mediation.¹¹

Sections 37 and 42 leave two questions unanswered: (i) can an insurer require an insurer examination after reinstating benefits in accordance with a positive DAC?; and (ii) in what circumstances, if any, can an insurer terminate benefits following a positive DAC report, before final resolution of the dispute in accordance with sections 279-283 of the Act?

In my view, M.D. and Halifax Insurance Company answers the first question. In that case, the insured person was referred for assessment after receipt of a negative medical-rehabilitation DAC report, and took the position that s. 24 of the SABS-1996 gives insured persons “a virtually unfettered right to obtain their own medical assessments at the insurer’s cost, including a second opinion to challenge an unfavourable DAC assessment.” Director Draper concluded that there was no authority for such a broad reading of s. 24. I agree with the Director’s conclusions about the role of DAC assessments:

The SABS-1996 also controls the refusal or cancellation of benefits. If the insurer determines that the insured person is not entitled to weekly benefits, including IRBs, it can stop paying, but only by following the steps in s.37. This involves notice to the insured person, including the date on which benefits will stop. If the insured person disagrees, he or she has the right to a DAC assessment, with the insurer being obliged to continue paying benefits pending the outcome. Unlike certificates, treatment plans and insurer examinations, neither party chooses the DAC. The assessment is done by the closest DAC with the appropriate expertise. The cost, including the insured person’s transportation expenses, is paid by the insurer under s.24.

The DAC report is not just another opinion. Although either party can challenge it through the dispute resolution system, the DAC’s conclusion governs the payment of benefits in the meantime. If it finds that the insured person meets the test for IRBs, or that the medical and rehabilitation expenses are reasonable and necessary, the insurer must pay. If, as in this case, the DAC reaches the opposite conclusion, the insurer does not have to pay. The “losing” party’s option is to apply for mediation and, if the dispute is not resolved, proceed to court or arbitration.¹²

In my view, Mr. Spiegel’s submissions ignore the pivotal role given to DACs by the legislation. Despite his suggestions to the contrary, they are not simply another insurer examination. Their function is to take the dispute out of the back-and-forth of competing partisan reports by providing an impartial assessment. That is the protection provided in the SABS-1996 – an independent assessment at a DAC, not a DAC assessment and then a second opinion by someone of the insured person’s own choosing if the DAC’s opinion is not helpful. An assessment arranged for the purpose of challenging the DAC through the dispute resolution process is better viewed as a litigation expense, recoverable through negotiation or as arbitration or court costs. [footnote omitted]

Insurers must also respect the role of DACs. If the DAC does not support its position, the insurer has a choice. It can accept the conclusion and pay benefits, or apply for mediation. It cannot require the insured person to attend an insurer examination for the purpose of challenging the DAC’s opinion. An insurer examination only becomes appropriate if it is reasonably required to determining the insurer [sic] person’s ongoing entitlement, or in response to a new claim.¹³

As stated above, the underlying goal is to achieve a reasonable balance between the parties. In a completely straightforward case, the DAC may provide a clear dividing line between the claims process and the dispute resolution process. However, other cases may be complicated by multiple claims or the passage of time. As a result, the facts of each case will be critical in determining whether the assessment is a reasonable expense under s.24, or the insurer examination is reasonably required to determine entitlement.¹⁴ [emphasis added]

The letter to Allstate from Mr. Sellathamby’s counsel suggested that he recognized this point in stating, “I suspect that at some future point, your client may be entitled to an updated assessment, however, certainly not so soon after the DAC has reported its findings.”¹⁵ The Arbitrator stated the law correctly: “an insurer can set up an IME to determine an insured’s ongoing entitlement, but not to challenge the DAC’s conclusions.”¹⁶

The Arbitrator was not persuaded that the matter was decided by Allstate’s continuing payment of benefits or its statement that it was not disputing Mr. Sellathamby’s benefits “at this time.”¹⁷ To determine whether the IE requirement was reasonable and permitted by the SABS, the Arbitrator stated that he must “consider the total context of the insurer’s conduct.” On appeal, Allstate submits that the Arbitrator made an error of law in second-guessing Allstate’s reasons for requiring the insurer examination by Dr. Ross.

Allstate relies on Scott and TTC (Markel Insurance).¹⁸ In that case, an early decision made under s. 23(2) of the SABS-1990, a predecessor to s. 42, the issue was whether the insurer was entitled to have the insured person examined by an orthopaedic specialist and a psychiatrist. The insured person argued that the SABS did not allow two examinations by different specialists, and that the insurer could obtain the information it sought by asking her family doctor to clarify his disability certificate. In concluding that the required examinations were reasonable, Arbitrator Naylor established some basic principles governing arbitral review of IE requests, including the principle that multiple examinations, including multiple examinations by different specialists, may be reasonable in some circumstances. Allstate relies on the following statement:

The exercise of the right to a medical examination under the [SABS] is inherently intrusive and an invasion of individual privacy. However, it is legislatively mandated. Neither the wording nor the intent of the provision support a narrow or unduly restrictive right of examination. “Reasonableness” is an objective standard. Some latitude must be left for a range of circumstances, which fall within its parameters. It is not for an arbitrator to “second-guess” the actions or motives of the company in requiring a medical examination.¹⁹ [emphasis added]

As I read this passage, the Arbitrator was saying only that she was prepared to allow an insurer some leeway and discretion in deciding how to exercise its right to require an insurer examination. Arbitrator Naylor did not say an insurer’s request was beyond arbitral review.²⁰ Indeed, such a position would be inconsistent with her statement that reasonableness is an objective standard. In Scott and TTC, she considered the circumstances of the insurer’s requests in detail before concluding they were reasonable. That has been the consistent approach of Commission adjudicators.

Director’s Delegate Naylor returned to the issue in F.S. and Belair Insurance Company. The question in that case was whether an insurer may require an insurer examination in preparation for an arbitration hearing. The Delegate confirmed arbitral authority that the rights granted insurers pursuant to s. 23(2) of the SABS-1990 were not restricted to the period before the termination of benefits or the commencement of mediation:

Otherwise, an insurer might not have a fair or effective opportunity to evaluate the claim. This is especially true in a case such as this, which involves ongoing benefits where the basis of the claim substantially changed after mediation was commenced.²¹

However, this did not preclude arbitral review:

Determining the appropriateness of a request for an examination requires a balancing of the interests of the parties, in the context of the particular facts. The timing of a request is a factor in considering its reasonableness; it becomes very important where it would delay the process. The closer a request is made to a hearing, the closer the scrutiny of its reasonableness, to ensure that there is no avoidable delay or that the insured’s preparation for the hearing is not prejudiced. Trial brinkmanship is not a feature of the dispute resolution process. In this case, Belair might have requested the examination somewhat earlier than it did. However, I do not believe that the delay was so serious as to render the request unreasonable.²²

The timing of the request was also an important factor in Arbitrator Bayefsky’s analysis. In my view, the Arbitrator received compelling evidence that Allstate wanted the insurer examination in order to challenge the DAC report, and not to assess Mr. Sellathamby’s ongoing condition.

The main evidence came from the timing of events. In his March 23, 2000 DAC report, Dr. Prendergast gave his opinion that Mr. Sellathamby was psychologically disabled from returning to his pre-accident employment. A month later, on April 25, 2000, Allstate wrote to Dr. Prendergast, asking how long he expected Mr. Sellathamby to be disabled and what treatment would be warranted. On May 12, 2000, Dr. Prendergast replied that the DAC Guidelines did not allow him to answer these questions.

Three days later, Allstate asked the same questions of Dr. Hershberg, who, after an insurer examination in November 1999, had reported he did not think Mr. Sellathamby was disabled by anxiety and depression. Allstate’s referral letter to Dr. Hershberg did not refer to any change in Mr. Sellathamby’s condition since the DAC assessment was done, and did not ask Dr. Hershberg to examine Mr. Sellathamby again. Dr. Prendergast’s DAC report and Dr. Hershberg’s first report were enclosed. Not surprisingly, Dr. Hershberg disagreed with Dr. Prendergast’s conclusions.

Allstate then arranged the insurer examination with Dr. Ross for July 25, 2000, four months after the date of Dr. Prendergast’s report. Allstate’s letter to Dr. Ross asked essentially the same questions that had been asked of Dr. Hershberg in November 1999. The letter did not reflect a concern that Mr. Sellathamby’s condition had changed since the DAC.

In my view, the timing of events and the contents of Allstate’s referral letters to the doctors left the Arbitrator little alternative but to conclude that Allstate’s plan was to obtain an IE report that would challenge the DAC report. If the Arbitrator had any remaining doubt, it would have been resolved by considering Allstate’s internal memos, especially the June 1, 2000 memo agreeing it would be “prudent to set up an IE with another doctor, given conflicting opinions.” The conflicting opinions were those of Dr. Prendergast, who provided a DAC report, and Dr.

Hershberg, who examined Mr. Sellathamby at Allstate’s request. In treating Dr. Prendergast’s report as “just another opinion,” Allstate ignored “the pivotal role given to DACs by the legislation,” described by the Director in M.D. and Halifax. This was not a close call, and I find no error in the Arbitrator’s conclusion that the insurer examination was intended to challenge the DAC report.

In any event, whether Allstate’s IE request was reasonable was not the issue before the Arbitrator. The question was whether Allstate terminated Mr. Sellathamby’s benefits improperly. In my view, this question could have been answered without any reference to Allstate’s reasons for requesting the report. The essential point is that Allstate relied on the IE report to terminate Mr. Sellathamby’s benefits in the face of a positive DAC report.

My analysis is not affected by Allstate’s decision to continue paying benefits, as required by s. 37(5), while it arranged the insurer examination. Contrary to Allstate’s submission, there is no reason an insurer cannot commence mediation and a civil proceeding while paying disputed benefits “pending resolution of the dispute.”

At the end of June 2001 (about six months after his benefits were terminated), the more stringent entitlement test under s. 5(2)(b) of the SABS-1996 took effect in Mr. Sellathamby’s IRB claim. Although the issue was not in dispute in this appeal, I am inclined to think Allstate could have “restarted the process” at that time by issuing another stoppage notice under s. 37(1), if the information then available indicated Mr. Sellathamby did not satisfy the post-104 week test.²³ But that is not what happened. Allstate’s stoppage notice of December 16, 2000 was based on the opinion of Dr. Ross, who conducted an insurer examination and disagreed with Dr. Prendergast, the DAC assessor, about Mr. Sellathamby’s entitlement to “pre-104 week benefits.” Allstate was entitled to dispute the DAC assessment, and to rely on IE reports and other evidence in any arbitration or civil proceeding. What it was not entitled to do was to terminate Mr. Sellathamby’s benefits, based on an IE report, in the face of a DAC report that supported Mr. Sellathamby’s claim under s. 5 of the SABS-1996. This was a contravention of s. 37(5).²⁴

Allstate submits, in the alternative, that if an interim benefits order was appropriate, it should not have extended beyond the 104 week mark. Subsection 37(5) requires, simply, that benefits be paid “pending the resolution of the dispute.” It contains no temporal limitation, and is not made subject to s. 5(2)(b). Like the Arbitrator, I find this compelling evidence of legislative intent. Amongst other things, by the time the SABS-1996 was drafted, the legislature must be presumed to have known that many disputes about “pre-104 week” benefits are not resolved until well after the 104-week point. A different outcome might have been mandated had Allstate issued a proper stoppage notice based on the test under s. 5(2)(b). In the absence of a post-104 week process, I am not persuaded the SABS allows an insurer to rely on s. 5(2)(b) to limit the protection provided by s. 37(5).

I find no error in the Arbitrator’s order for payment of interim benefits. Accordingly, the appeal is dismissed.

B. A Comment on Process

The parties agreed that if Allstate failed in its appeal, its recourse is to commence mediation and a civil proceeding with respect to Mr. Sellathamby’s entitlement to income replacement benefits after January 3, 2001. I make the following comments for the guidance of parties in future cases.

The Arbitrator’s IRB order, as amended on May 21, 2002, was as follows:

The Insurer shall pay the Applicant income replacement benefits from January 3, 2001, onward, plus interest, pending the resolution of the dispute. [emphasis added]

The final words of the order are puzzling, because the Arbitrator had already ordered, on May 17, 2002, that

The arbitration concerning the Applicant’s entitlement to income replacement benefits is concluded.

An arbitrator’s authority to make orders comes from s. 279 of the Act:

Dispute Resolution, Procedure to be Followed.

279(1) Disputes in respect of any insured person’s entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled shall be resolved in accordance with sections 280 to 283 and the Statutory Accident Benefits Schedule.

Orders

(4) The Director and every arbitrator appointed by the Director shall determine issues before them by order and may make an order subject to such conditions as are set out in the order.

Interim Orders

(4.1) The Director and every arbitrator appointed by the Director may make interim orders pending the final order in any matter before the Director or arbitrator.

Section 287 of the Act, the “protection of benefits” section states that an insurer shall not, after an adjudicator’s order, reduce benefits on the basis of an alleged change of circumstances, alleged new evidence or an alleged error, “unless the insured person agrees or unless the Director or an arbitrator so orders in a variation or appeal proceeding under section 283 [appeal] or 284 [variation].” Section 284 allows either the insured person or the insurer to apply to the Director to vary or revoke an adjudicator’s order on the basis of a material change in circumstances, fresh evidence, or an error in the order. The restricted basis for review of benefit orders reflects the legislative intent that arbitral decisions be final, although subject to appeal.

By contrast, interim benefits are interlocutory in nature. Interim orders for the payment of benefits are intended to protect the flow of benefits to an insured person where there is reason to believe he will ultimately succeed in proving entitlement. Although I agree with the Arbitrator that s. 37(5) does not allow an insurer to terminate benefits at the 104 week mark in the face of a positive DAC report, an insurer’s reluctance to pay extended benefits based on a report that pre-dated the change in the test is understandable. Interim benefits are not intended to be indefinite in duration. They are made “pending the final order.” They are subject to the arbitrator’s final order, and repayable if the insured person is ultimately found not to be entitled.

What happens, then, if an insured person applies for arbitration, but elects not to proceed to an entitlement hearing after being awarded interim benefits? In my view, Mr. Sellathamby’s submission that he need not proceed should have been treated as a motion to withdraw his application for arbitration.

Rule 70 of the Dispute Resolution Practice Code states that an adjudicator may permit a withdrawal where all parties agree. Where a party does not agree, an adjudicator “may permit the withdrawal on such terms and conditions as he or she considers just.” As Arbitrator Novick noted, “[e]lements of fairness to both parties, as well as concern for the integrity of the dispute resolution process must inform the decision.”²⁵ Arbitrators have generally allowed an applicant to withdraw early in the process, but have sometimes ordered payment of all or part of the insurer’s expenses. A different approach may be warranted once the hearing has begun.

In a few cases, a withdrawal motion has been refused on the basis that allowing it would be detrimental to the integrity of the process. For example, in Alexander and Zurich, the applicant moved to withdraw, in order to commence a civil proceeding, after Arbitrator Novick refused a motion for production of documents on the fourth day of the hearing. The withdrawal motion was refused:

While I can understand the temptation of abandoning a process that is not unfolding according to plan, the interests of the other party must be considered. Granting permission to withdraw from a process after witnesses have completed their testimony, as has occurred here, can result in real unfairness.

Moreover, the impact that this would have on the arbitration process generally must be considered. In my view, granting a request to withdraw in the middle of a hearing to enable an applicant to pursue her claim anew in court would be detrimental to the integrity of the process. Aside from the waste of limited resources that would have been expended, allowing a party to begin a hearing and then withdraw to proceed in court on the same issue would fly in the face of the stated mandate of the dispute resolution process to determine disputes between insured persons and their insurers in a quick and relatively inexpensive manner.²⁶

After obtaining an interim benefits order based on his procedural argument, Mr. Sellathamby’s withdrawal had the effect of forcing Allstate to commence a civil proceeding about the same issue he had brought to arbitration – entitlement to income replacement benefits. Although to my knowledge neither party has commenced any other proceeding in any forum, this case gives rise to the same concerns about multiple proceedings discussed by the Director in Mangat and Non-Marine Underwriters, Members of Lloyd’s, (FSCO P00-00020, August 1, 2000).

This matter has been the subject of three reasoned decisions, as well as two supplementary orders. Not one of these five arbitral orders considered whether Mr. Sellathamby met the disability tests set out in s. 5 of the SABS-1996. In my view, this proceeding was not disposed of in accordance with the Commission’s mandate to resolve disputes in the quickest, most just and most cost-effective way possible.

IV. EXPENSES

Although Allstate was unsuccessful in its appeal, I am not satisfied I should exercise my discretion to make an appeal expenses order. Allstate raised legitimate issues about the Arbitrator’s decision. For the reasons given, I find that Mr. Sellathamby’s pursuit of procedural remedies, coupled with his decision not to proceed to an entitlement hearing, did not facilitate a cost-effective resolution of this dispute. Each party shall bear its own expenses.