Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2002 ONFSCDRS 202

Appeal P02-00018

Appellant/Respondent

and

Respondent/Appellant

Before:

David Draper

Representatives:

Jeremy Solomon for Ms. Coles

Kevin Mitchell for Dominion

Hearing Date:

November 8, 2002

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

The appeal brought by Pina Coles is dismissed.
The appeal brought by Dominion of Canada General Insurance Company is allowed. Paragraphs 1, 2, 3 and 5 of the arbitration order, dated June 12, 2002, are rescinded.
I remain seized of the following questions:

a) What are the issues remaining in dispute?

b) Should these issues be referred back to the same Arbitrator, a different Arbitrator, or be decided by me?

December 18, 2002

David R. Draper Director of Arbitrations

Date

The main issue before the Arbitrator was whether Pina Coles met the post-156 week test in s. 12(5)(b) of the SABS–1990.¹ In a decision dated June 12, 2002, the Arbitrator concluded that she did not and, therefore, was not entitled to weekly income benefits beyond November 1993. There is no appeal from this part of the decision.

The Arbitrator was also asked to determine whether Ms. Coles had been overpaid for the period up to November 1993 and, if so, whether she was required to repay the excess amount under s. 27 of the SABS-1990. Ms. Coles resisted this claim, but did not advance any claim that she had been underpaid until the last day of the hearing. In final submissions, her lawyer argued for the first time that her weekly income benefits should not have been reduced by the amount of the disability benefits she received from two other insurers.

Although Dominion of Canada General Insurance Company ("Dominion")² objected that Ms. Coles had "waited too long" to raise this argument, the Arbitrator decided the issue. She concluded that Ms. Coles' disability benefits were not deductible and, as a result, ordered Dominion to pay an additional $52,257.21 for weekly income benefits up to the 156-week mark. However, because Ms. Coles did not raise this issue until the last day of the hearing, she only ordered interest from the date of her decision.

Both parties appeal. Ms. Coles claims the Arbitrator erred in failing to order interest from the date each payment for weekly income benefits became due. Dominion submits that the Arbitrator erred in:

taking jurisdiction over an issue that was not properly before her;
awarding any interest; and
denying its claim for a repayment.

For reasons that follow, I conclude that it was open for Ms. Coles to raise the deductibility issue, but her failure to do so until final submissions was unfair. Whether this is framed as a lack of proper notice, or a denial of the principles of natural justice or fairness, the Arbitrator's order cannot stand.

It is difficult to imagine that this case reflects the Legislature's vision when it introduced expanded first-party, no-fault benefits and a user-friendly dispute resolution process. Ms. Coles was involved in a minor accident in October 1990, four months after Bill 68 came into effect.³ Three years later, a dispute arose and came into mediation. Nine years after that, the litigation continues despite three arbitration decisions, an appeal decision and a decision of the Divisional Court on judicial review. Perhaps not surprisingly, the issues in this appeal arise from questions about the various decisions and complications caused by the passage of time.

A. Scope of the Appeal

Ms. Coles submits that Dominion's appeal cannot succeed because it challenges the Arbitrator's factual finding that the amount of her weekly income benefits remained in dispute. In response, Dominion claims that its appeal raises questions of law, but to the extent that it challenges findings of fact, that is allowed due to the age of the dispute.

As part of the Bill 59 amendments to the Insurance Act that came into effect in November 1996, appeals were restricted to questions of law. However, starting with my decision in Henriques and Motor Vehicle Accident Claims Fund, (OIC P97-00002, August 21, 1997), appeal adjudicators have consistently held that the new section applies only to cases where the application for arbitration is filed after November 1, 1996.⁴ Ms. Coles agrees that the application for arbitration is the critical date, but submits that her last application was filed after November 1, 1996.

As outlined in more detail below, this dispute dates from 1993. The first application for arbitration was filed in 1994. Although Ms. Coles filed a second application for arbitration in April 1997, it was largely overtaken by later events. The main issues in this appeal were raised in Ms. Coles' original application for arbitration, which was referred back to arbitration by the Director's Delegate. Because this original application was filed long before the 1996 amendments, I conclude that this appeal is governed by the old section, which simply reads: "A party to an arbitration may appeal the order of the arbitrator to the Director."⁵

B. Did the Arbitrator err in taking jurisdiction over an issue that was not properly before her?

This question must be considered within the context of the lengthy history of this litigation. Due to ongoing disagreements between the parties about the specific issues in dispute, I have gone into an unusual level of detail in my review.

On October 30, 1990, Ms. Coles was involved in a low-speed, chain reaction collision. She stopped and the car behind hit her back bumper, pushing her into the car ahead. The repair bill was slightly over $1,000. She was taken by ambulance to emergency at Sunnybrook Hospital, where she was examined, given Tylenol 3, and discharged to the care of her family doctor.

At the time of the accident, Ms. Coles was 41 years old and had three almost-grown children. She was self-employed as a dressmaker and seamstress. Following the accident, she applied to Dominion for accident benefits, including weekly income benefits. In her application, she indicated that she was self-employed, earning $8,000 (gross) per month. She also disclosed that she was covered by disability insurance with The Citadel.

Ms. Coles' entitlement to weekly income benefits was considered under the "own occupation" test in s. 12(1) of the SABS-1990. Dominion accepted that she could not return to her pre-accident work and, therefore, was entitled to benefits. However, it also had to determine the amount. According to s. 12(4), weekly income benefits are the lesser of $600, and 80 per cent of the insured person's gross weekly income "less any payments for loss of income . . . received by or available to the insured person under the laws of any jurisdiction or under any income continuation benefits plan." Gross weekly income is calculated under s. 12(7) of the SABS-1990 based on average gross weekly income for the four or fifty-two weeks preceding the accident. Because Ms. Coles was self-employed, s. 12(7)3 was also relevant. It states: "Business expenses which cease as a result of the accident shall be deducted from a person's income from self-employment before calculating his or her gross weekly income."

Dominion initially paid Ms. Coles at the maximum rate of $600, with no deduction for the benefits she received from The Citadel. Then, in January 1991, Dominion wrote to her, advising that no further payments would be made until she fulfilled her agreement to provide income tax returns and other business documents confirming her pre-accident income.

That same month, Ms. Coles retained the law firm of Lofranco, Longley and Vickar. In February 1991, Ms. Coles' lawyer forwarded additional documentation to Dominion, including a new application form, a number of financial statements relating to the business, and a medical report completed by the family doctor.

Dominion's file indicates that there were discussions with Ms. Coles' lawyer about the proper amount of the weekly income benefits. On March 11, 1991, Dominion sent a detailed letter, calculating Ms. Coles' weekly income benefits at $701.23 per week based on her Statement of Earnings for the year ending December 31, 1989.⁶

Despite the determination of weekly income benefits at $701.23 per week, Dominion did not pay this amount. It took the position Ms. Coles' disability benefits from The Citadel ($4,000 per month for two years, starting one month after the accident) reduced her weekly income benefits to zero. Consequently, Dominion advised Ms. Coles that it would not be paying any further weekly income benefits until her entitlement under The Citadel policy ended. Further, Dominion calculated that she had been overpaid by $3,600 because her disability benefits had not been taken into account previously, and asked her to repay this amount.

After further discussions with Ms. Coles' lawyer, Dominion agreed to pay weekly income benefits at a higher rate on the understanding that it would be given proof that Ms. Coles was not conducting business, but had ongoing business expenses. This calculation was based on gross weekly income of $1,441.46 per week. According to the SABS-1990, weekly income benefits are 80% of this amount ($1,153.17), less deductible collateral benefits ($923.08 per week), resulting in weekly income benefits of $230.09.⁷

It is not obvious to me how the figure used for gross weekly income was calculated. However, the implementation of this change was explained in a letter to Ms. Coles' lawyer dated May 10, 1991. Dominion agreed to pay three weeks at $600 per week based on the one week waiting period in s. 12(5)(a) of the SABS-1990 and four initial weekly not covered by The Citadel. Following that, it agreed to pay $230.09 per week on an ongoing basis.⁸

In June 1991, seven months after the accident, Dominion asked for additional financial information to verify Ms. Coles' pre-accident income.⁹ It also arranged for a claims investigation. From this investigation, Dominion learned that, in addition to her benefits from The Citadel, Ms. Coles was receiving disability benefits of $200 per week from Dominion Automobile Association ("DAA").¹⁰

There followed a period of approximately 18 months (June 1991 - December 1992) during which no weekly income benefits were paid.¹¹ Dominion's position is set out in a letter to Ms. Coles' lawyer dated September 3, 1991.¹² Using the same basic numbers as the last calculation, it maintained that from November 28, 1991, when The Citadel started paying benefits, Ms. Coles was only entitled to $30.09 per week when the $200 per week from DAA was also taken into account. Using this rate, Dominion claimed that she had been overpaid by $7,829.

Although Dominion continued to have questions about Ms. Coles' pre-accident income, it never challenged her entitlement to benefits. In other words, it accepted that she continued to meet the "own occupation" test in s. 12(1).

By December 1992, Ms. Coles's entitlement to benefits from The Citadel and DAA ran out. Dominion acknowledged its obligation to resume paying weekly income benefits at $600 per week.¹³ This continued for almost a year, until October 1993, when Dominion advised Ms. Coles that it was terminating her weekly income benefits effective November 5, 1993, on the basis that she did not meet the post-156 week test in s. 12(5)(b) of the SABS-1990, which states as follows:

(5) The insurer is not required to pay a weekly benefit under subsection (1),

(b) for any period in excess of 156 weeks unless it has been established that the injury continuously prevents the insured from engaging in any occupation or employment for which he or she is reasonably suited by education, training or experience.

This test is often referred to, somewhat inaccurately, as the "any occupation" test. In its letter, Dominion took the position that Ms. Coles was capable of "performing other occupations."¹⁴ It also advised her that it was discontinuing her housekeeping benefits effective October 30, 1993.

Ms. Coles immediately applied for mediation.¹⁵ The mediation took place in early January 1994, but did not resolve the issues in dispute. Ms. Coles then applied for arbitration. The issues were the same. She claimed ongoing weekly income benefits from November 5, 1993, at $600 per week, and housekeeping expenses. The amount was not contentious because, by that point, Ms. Coles' entitlement to benefits from The Citadel and DAA had ended. She also claimed interest, a special award and arbitration expenses. In response, Dominion simply asserted that Ms. Coles did not meet the post-156 week test or require housekeeping services.¹⁶

At the pre-hearing, the issues were defined to include the amount of Ms. Coles' weekly income benefits and Dominion's claim that she was overpaid, as follows:¹⁷

Do the injuries sustained by Mrs. Coles in the motor vehicle accident continuously prevent her from engaging in any occupation or employment for which she is reasonably suited by education, training or experience? What is the appropriate amount of any weekly income benefits which is payable? Is Dominion of Canada General Insurance Company entitled to a repayment?
Are housekeeping services required by Mrs. Coles for her treatment or rehabilitation?
Interest, special award, expenses.

Dominion argues, with considerable strength, that Ms. Coles' only claim with respect to weekly income benefits was that they should continue beyond November 5, 1993, at the maximum rate of $600 per week, on the basis that she met the post-156 week test in s. 12(5)(b). While she resisted Dominion's claim for repayment, there is no indication that she claimed she had been underpaid for the period up to November 1993.

The Arbitrator shifted the focus. On the first day of the hearing, she questioned when the "any occupation" test came into play. More specifically, she asked whether the 156-week period continued to run during weeks where no weekly income benefits were payable, and directed counsel to address this issue in their final submissions.¹⁸

During the hearing, the parties agreed that Dominion would provide a schedule of the weekly income benefits paid to Ms. Coles. This schedule indicated that Dominion paid $41,342.79. In a covering letter, Dominion claimed that Ms. Coles' entitlement up to the 156-week mark was $35,439.09, resulting in an overpayment of $5,903.70. As above, this calculation was based on Ms. Coles' being entitled to weekly income benefits of $30.09 during periods when she was receiving benefits from The Citadel and DAA.¹⁹

The Arbitrator released her decision on February 13, 1995. Most of it dealt with the interpretation of s. 12(5)(b) and, more specifically, whether the 156-week period continued to run during weeks when no accident benefits are payable. The Arbitrator posed three possible interpretations:

156 weeks runs continuously from the date of the accident: According to the Arbitrator, this would mean that the post-156 week, "any occupation" test in s. 12(5)(b) would become applicable as of October 30, 1993 (or November 6, 1993, depending on how the first week is treated).
156 weeks means 156 weeks of disability: According to the Arbitrator, this would lead to the same result as the first option because Ms. Coles claimed to be disabled continuously from the date of the accident.
156 weeks means 156 weeks of payment: According to the Arbitrator, this would mean that the 156-week period would only run during weeks for which some amount of weekly income benefits was payable.

For reasons set out in her decision, the Arbitrator concluded that the third option — 156 weeks of payment — was the correct interpretation. Although the Arbitrator did not determine the exact amount of Ms. Coles' weekly income benefits, and despite Dominion's position that she was entitled to at least $30.09 per week during each week following the accident (other than the initial one-week waiting period), she found that: "it is clear on the evidence before me that the payments under the Citadel policy, for the time it was in effect, exceeded 80% of Ms. Coles' gross weekly income from employment. Accordingly, by the formula of section 12(4)(b) of the Schedule, for the entire period during which those benefits were paid (which I understand to be 24 months, beginning 31 days post-accident), Dominion of Canada was not obliged to make any payments to Ms. Coles." [emphasis in the original] Based on this finding, the Arbitrator concluded that the 156-week period was extended by 24 months and, consequently, the "own occupation" test was still applicable.

The Arbitrator went on to consider Ms. Coles' entitlement to weekly income benefits up to the date of her decision based on the "own occupation" test. She found that even on Dominion's evidence, Ms. Coles was not able to return to her pre-accident occupation. As a result, she ordered Dominion to pay weekly income benefits, including interest under s. 24(4) of the SABS-1990, until the date of the decision — February 13, 1995.

The Arbitrator did not determine the amount owing under her order. Instead, she stated as follows:

It will be a complex task to determine the exact amount owing to Ms. Coles, taking into consideration the various provisions of the Schedule with respect to interest, the overpayments in 1990 and 1991 and the lack of payments since November 1993. As well, the amounts which Ms. Coles admitted she earned after the accident should be deducted, according to the provisions of section 15 of the Schedule. I leave it to the parties to settle the amount owing. In the event that they cannot resolve the exact sum, then either party may apply to bring this matter back before me for determination.

It is clear that the deductibility of Ms. Coles' collateral benefits was not a contentious issue at this arbitration hearing. Indeed, the Arbitrator's entire analysis turned on them being deductible. If they were not, the 156-week period would have ended in November 1993, and the Arbitrator would have had to determine Ms. Coles' entitlement under the post-156 week, "any occupation" test.

Dominion retained new counsel who appealed the Arbitrator's order. In the Notice of Appeal, Dominion claimed that the Arbitrator erred in her interpretation of the 156-week period, but also in deciding this issue when it was not before her, and in failing to deal with issues that were before her, including its claim for repayment.²⁰

Before any further steps were taken in the appeal, counsel exchanged correspondence on the benefits owing under the Arbitrator's order. They could not reach an agreement.²¹ Therefore, the matter went back to the same Arbitrator, as contemplated in her order.

At this second hearing, neither party stuck with the figure that they had used previously for Ms. Coles' gross weekly income ($1,441.46). Ms. Coles' lawyer used a lower figure ($923.25) based on net income for the 10 months of 1990 before the accident, ongoing expenses, and depreciation.²² This resulted in weekly income benefits of $738.60. According to the submissions, this was the amount payable "before adjustment for collateral benefits." Taking the benefits from The Citadel and DAA into account, he calculated that Ms. Coles' was entitled to $70,923.57 up to February 13, 1995.

From this amount, Ms. Coles' lawyer acknowledged that Dominion made payments totalling $41,342.79. He also acknowledged that Ms. Coles earned some post-accident income, estimated at $100 per month after expenses, for a total of $2,120.00. As a result, the total claimed was $27,460.78, plus interest "in accordance with the Regulation on the said monies as it fell due."

Dominion's approach differed significantly. It disagreed with Ms. Coles' use of the net income figure from her business records. Instead, it did a calculation based on her gross income, deducting only those expenses that ceased after the accident. Using this approach, Dominion came to a figure for gross weekly income ($1,425.66) that was slightly lower than the amount used previously, but higher than Ms. Coles' new amount. This led to weekly income benefits of $1,140.53 ($1,425.66 x 80%) "before any adjustment for collateral benefits."²³

It is unusual for the Insurer to argue for a higher rate of benefits. However, this calculation, if accepted, would have had other implications. During the period Ms. Coles was receiving benefits from The Citadel and DAA, her weekly income benefits would not have been reduced to zero, but to $17.45 per week [$1,140.53 - $923.08 - $200]. Consequently, even if the Arbitrator's analysis of s. 12(5)(b) was correct, Ms. Coles' entitlement under the "own occupation" test would have ended in November 1993, and the issue would have been whether she met the "any occupation" test after that date — the issue in dispute when the arbitration started.

Because its calculation meant that Ms. Coles' was entitled to a payment for each week through the 157 weeks following the accident (including the one-week waiting period), Dominion only calculated her entitlement up to November 2, 1993, not February 13, 1995, as Ms. Coles had done. Using this approach, Dominion calculated an overpayment of $7,481.70.²⁴

Ms. Coles filed responding submissions. She claimed that even if Dominion's approach was correct, its calculations were flawed and, when corrected, her weekly income benefits would be $1,060.40. As a result, her weekly income benefits from December 1, 1990 to November 30, 1992, would still be zero after deducting her collateral benefits from The Citadel and DAA.²⁵

It is clear from these submissions that there still was no issue about the deductibility of Ms. Coles' collateral benefits. Both parties agreed or assumed that they were deductible.

The Arbitrator released her supplementary decision on September 13, 1995. She accepted the calculations done by Ms. Coles' lawyer, concluding that the correct amount for weekly income benefits was $738.60. She also accepted the submissions made on behalf of Ms. Coles that when her collateral benefits were taken into account, she was not entitled to any weekly income benefits from December 1, 1990 to November 30, 1992. Using this approach, the Arbitrator awarded Ms. Coles the precise amount she claimed — $27,460.78, plus interest under s. 12(4) of the SABS-1990 to February 13, 1995.

Following the release of this decision, the appeal went ahead. Dominion argued that the Arbitrator should not have dealt with the 156-week issue in her original decision. It claimed that this issue was not mediated or raised by the parties and, in any event, a proper calculation of Ms. Coles' benefits leads to payments for each week up to the 156-week mark. Dominion also maintained its claim for repayment of $7,963.45 based on its slightly revised calculation.²⁶

In April 1997, while the appeal decision was still pending, Ms. Coles filed a new application for arbitration, claiming weekly income benefits after February 13, 1995 — the date of the first arbitration decision. Apparently, this was done to meet the two-year time limit from Dominion's refusal to pay benefits beyond this date. This application did not proceed in any meaningful way due to subsequent events, set out below.²⁷

Director's Delegate Naylor released her appeal decision in July 1997. She did not decide whether the Arbitrator erred in dealing the 156-week issue, but concluded that the "any occupation" test in s. 12(5)(b) of the SABS-1990 comes into play after 156 weeks of disability, not 156 weeks of payment. As a result, she rescinded the Arbitrator's order that Ms. Coles was entitled to weekly income benefits up to the date of that order, and referred the issue of Ms. Coles' entitlement to weekly income benefits beyond November 1993 back to arbitration.

Although Dominion raised the issue of overpayment in the appeal, the Director's Delegate did not comment on the Arbitrator's calculation of Ms. Coles' weekly income benefits. Instead, she rescinded the Arbitrator's supplementary order that Dominion pay Ms. Coles $24,460.78, plus interest, and made the following order: "The amount of benefits payable to Ms. Coles and the amount of repayment owed to Dominion of Canada General Insurance Company, if any, are remitted to the Arbitrator for determination."

The scope of this order is important. Because the Arbitrator had awarded benefits well beyond the 156-week mark as properly interpreted, the Delegate's decision to rescind the order makes sense. It is less obvious why she did not comment on the Arbitrator's calculations. If she had accepted the Arbitrator's approach, which adopted the submissions made on behalf of Ms. Coles, the resulting calculation suggests an overpayment of $10,020.22, an amount higher than Dominion was claiming:

October 30 - November 5, 1990

Nil

November 6, 1990 - November 30, 1990 ($738.60 - $200 from DAA)

$ 1,923.57

December 1, 1990 - November 30, 1992 (WIBs reduced to zero by benefits from The Citadel and DAA)

Nil

December 1, 1992 - November 5, 1993 ($600 per week x 49 weeks)

$ 29,400.00

TOTAL

$ 31,323.57

Amount paid

$(41,343.79)

Overpayment

$(10,020.22)

I find it significant that the Director's Delegate remitted the issues in dispute to "the Arbitrator" for determination. The suggestion is that the matter would go back to the same Arbitrator to decide the issues originally put to her — Ms. Coles' entitlement to weekly income benefits beyond November 5, 1993, based on the "any occupation" test, and the proper amount of the weekly income benefits and Dominion's claim for repayment.²⁸ The importance for this appeal is that the proper calculation of Ms. Coles' weekly income benefits was intentionally left open.

Following the release of the appeal decision, the matter did not go back to the Arbitrator. Ms. Coles applied for judicial review. She claimed the Director's Delegate erred in overturning the Arbitrator's interpretation of the 156-week period. As discussed previously, this meant that Ms. Coles was arguing that her collateral benefits reduced her weekly income benefits to zero.

By the time the Divisional Court heard Ms. Coles' application for judicial review in May 1999, there had been significant developments in the case law relating to the deductibility of collateral benefits. In Cugliari v. White, the question was whether the plaintiff's Canada Pension Plan disability benefits were payments for "loss of income under the laws of any jurisdiction" and, therefore, deductible from his damages under s. 267(1)(c) of the Insurance Act. In April 1998, the Ontario Court of Appeal upheld the decision of the Divisional Court that they were not deductible.²⁹ Leave to appeal was denied by the Supreme Court of Canada in December 1998, five months before the judicial review hearing in this case.³⁰

As the Arbitrator states, Cugliari was followed closely by the insurance industry. However, it was also followed closely by lawyers who represent insured persons, as it signaled a significant change in favour of their clients.

In January 1999, still before the Divisional Court heard Ms. Coles' application, the arbitration decision in Wilcox and Economical Mutual Insurance Company, (FSCO A98-000058, January 26, 1999) was released. This decision dealt with the deductibility of benefits received under a private disability policy from weekly benefits under the SABS-1994.³¹ The Arbitrator held that the benefits were not deductible.³² Importantly, this decision does not stand for the proposition that collateral benefits are never deductible. A close analysis is required to determine if the particular benefits are "payments for loss of income . . . received by or available to the insured person under the laws of any jurisdiction or under any income continuation benefits plan," within the meaning of s. 12(4)(b) of the SABS-1990.

Despite these decisions, Ms. Coles went ahead with her application for judicial review. She maintained her position that the 156-week period was extended because her weekly income benefits were reduced to zero during the period that she received collateral benefits from The Citadel and DAA. On May 18, 1999, the Divisional Court dismissed her application, concluding that the appeal decision was correct. Consequently, the issues in dispute went back to arbitration as set out in the appeal order.

Although the Delegate's decision suggested that the issues would be heard by the same Arbitrator, she was no longer available. Consequently, the parties agreed that the matter would be heard by someone else.

Prior to the hearing, a pre-hearing was held in August 1999. Among other purposes, pre-hearings are used to identify the issues in dispute and to arrange for the exchange of any documents required in respect of these issues. The intention is to promote fairness by avoiding surprises. Many previous decisions have held that the parties can readjust their positions at this stage, as long as the issue, fairly broadly construed, has been mediated, and considerations of natural justice and fairness are met.³³

In this case, the calculation of Ms. Coles' weekly income benefits had long been in issue and remained in dispute. The Arbitrator could not decide Dominion's claim for repayment without determining the proper amount of the weekly income benefits. In these circumstances, I agree with the Arbitrator that the issue in dispute should not have been construed narrowly. In my opinion, therefore, it was open for either party to raise issues related to the calculation. The problem is that Ms. Coles did not do so. While the pre-hearing letter makes it clear that Dominion pursued its claim for repayment "based upon a miscalculation of self-employment income prior to the accident and Ms. Coles' receipt of collateral benefits," Ms. Coles did nothing to alert Dominion or the Arbitrator that she was claiming her collateral benefits were not deductible.³⁴

In March 2000, two months before the arbitration hearing was scheduled to start, I released my appeal decision in Wilcox, upholding the Arbitrator's conclusion that the collateral benefits in that case were not deductible from the insured person's weekly benefits.³⁵ Any time pressures were further relieved when the arbitration hearing was adjourned on consent until January 2001. Although the hearing started on January 29, 2001, it was adjourned again to deal with various production issues. It resumed in April 2001, more than a year after the appeal decision in Wilcox was released, and continued over ten days in April, July, August and September 2001.

The main focus of the hearing was on the first issue — Ms. Coles' entitlement to weekly income benefits from November 1993 under the "any occupation" test. It is clear, however, that Dominion pursued its claim for repayment. According to the Arbitrator, it initially challenged Ms. Coles' evidence about her pre-accident income and expenses.³⁶ This suggests that Dominion was pursuing the claim broadly, not only challenging the original Arbitrator's approach to the calculation of weekly income benefits, but also the figures she relied upon.

Interestingly, Ms. Coles objected to Dominion's challenge, arguing that the original Arbitrator had already decided this issue and, therefore, it should not be re-litigated. As set out above, if the original Arbitrator's approach were fully adopted, Ms. Coles would be facing an overpayment of over $10,000. In any event, my understanding is that the Arbitrator did not prevent Dominion from challenging Ms. Coles' pre-accident income and expenses, although it eventually chose not to do so.³⁷

In contrast, Ms. Coles did not assert any claim that she was entitled to additional weekly income benefits for the period up to November 1993. Her lawyer made opening submissions, but did not raise any issue about the deductibility of the collateral benefits.³⁸ On appeal, he argued that he asked Ms. Coles questions about her policies with The Citadel and DAA relevant to his submissions on deductibility, but had no obligation to alert Dominion to their significance. I disagree. Both parties were entitled to know the case they had to meet. Given the history of this matter, Ms. Coles' argument that her collateral benefits were not deductible was a complete reversal of the position she had taken for more than ten years. Not only that, it involved a substantial amount of money — $52,257.21, as determined by the Arbitrator.

The Arbitrator agreed that Ms. Coles should have raised the deductibility issue earlier, but found the delay "understandable given the way this case developed." First, this is inconsistent with the position taken by Ms. Coles' lawyer on appeal that he was sufficiently aware of the issue that he asked relevant questions during examination-in-chief. Second, even if there was some degree of confusion about the issues in dispute, this does not negate the requirement of fairness. The fact remains that until final submissions, neither Dominion nor the Arbitrator knew that Ms. Coles was claiming she had been underpaid over the first 156 weeks because her collateral benefits were not deductible. It is not surprising, therefore, that the Arbitrator heard "limited evidence and submissions" on the factual issues needed to determine whether this case fit within the Wilcox analysis.³⁹

In explaining her decision, the Arbitrator expressed her view that, just as Dominion had adjusted Ms. Coles' benefits when it learned about her collateral benefits, it should have adjusted them again when it learned that the Supreme Court of Canada had denied leave in Cugliari. This is not fair. The application of Cugliari to the facts of this case was not obvious, at least at that time, because it did not deal with the deductibility of private disability insurance from accident benefits. Also, as set out above, Ms. Coles, who was represented by experienced counsel, was actively pursuing the opposite position in her application for judicial review before the Divisional Court.

Finally, counsel for Ms. Coles stated that he offered Dominion an adjournment. While adjournments are often an effective way to deal with unexpected developments, I am not convinced it was sufficient in this case. Ms. Coles fundamentally shifted the issues in dispute after the evidence was in, effectively raising a new and substantial claim for benefits based on an argument directly contrary to the position she had taken for many years. Dominion objected, arguing that she should not be allowed to raise the claim so late in the process. In my view, fairness demanded that this issue be addressed first. Once the Arbitrator decided that the deductibility issue was properly before her, Dominion should have been given an opportunity to present evidence and make submissions on whether the particular benefits were payments for loss of income, within the meaning of s. 12(4)(b) of the SABS-1990.

For all these reasons, I conclude that the Arbitrator erred in ordering Dominion to pay additional weekly income benefits for the period up to November 1993, without giving it an adequate opportunity to respond. I am not persuaded, however, that Ms. Coles is precluded from pursuing this argument. Therefore, despite my reluctance to prolong this dispute any further, I conclude that the issue of the amount payable in respect of weekly income benefits for the initial 156-week period remains in dispute. In order to maintain some control over the proceedings, I intend to reconvene the appeal hearing to determine the precise scope of this issue, what additional evidence, if any, is required, and who should decide it.

C. Did the Arbitrator err in awarding interest from the last day of the hearing?

Ms. Coles claims that the Arbitrator erred in refusing to order interest on her weekly income benefits before October 15, 2001. In her submission, she applied for the benefits at the correct rate and Dominion should pay interest on any failure to do so. Otherwise, she contends, it would be unduly enriched by having retained the use of the funds for all this time.

The issue of interest could be viewed as moot due to my disposition of Dominion's appeal. However, the dispute remains open and, therefore, I am exercising my discretion to proceed with Ms. Coles' appeal for the purpose of providing some guidance to the parties in any subsequent proceeding.

Ms. Coles' position has some initial attraction. Insured persons often rely on the insurer to determine the amount of their benefits. In this case, however, Ms. Coles was represented by counsel from an earlier stage who took an active role in negotiating the amount of the weekly income benefits. She not only accepted the deductibility of her collateral benefits, she actively argued that they were deductible before the Divisional Court, after Cugliari and the arbitration decision in Wilcox had already been released. She did not challenge the deductibility of her collateral benefits until the last day of the arbitration hearing — October 15, 2001. In the circumstances, I agree with the Arbitrator that the benefits cannot be viewed as "overdue," within the meaning of s. 24(4) of the SABS-1990, at any point before that date.

III. EXPENSES

At the appeal hearing, counsel agreed that I should deal with both arbitration and appeal expenses following the release of this decision. This issue will be discussed further at the resumption of the appeal hearing.