Coseco Insurance Co. / HB Group / Direct Protect v. Suzi Gebru, 2002 ONFSCDRS 3

Financial Services Commission of Ontario

Neutral Citation: 2002 ONFSCDRS 3 Appeal: P01-00043

OFFICE OF THE DIRECTOR OF ARBITRATIONS

COSECO INSURANCE CO//HB GROUP/DIRECT PROTECT Appellant

and

SUZI GEBRU Respondent

Before: David R. Draper, Director of Arbitrations

Counsel: Alexander M. Voudouris (for Coseco Insurance) Carolyn Amendola (for Ms. Gebru)

APPEAL ORDER

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

1. The appeal is dismissed and the arbitration order dated September 11, 2001 is confirmed.
2. The appellant shall pay Ms. Gebru's reasonable expenses.

January 7, 2002

David R. Draper Director of Arbitrations

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This appeal involves the relationship between accident benefits and workers' compensation. Coseco Insurance Co./HB Group/Direct Protect (Coseco) claims the arbitrator erred in law in concluding that Ms. Gebru is not precluded from receiving accident benefits on the basis that her election to bring an action in court instead of receiving workers' compensation benefits was made primarily for the purpose of claiming accident benefits.

II. ANALYSIS

Section 59 of the SABS-1996¹ sets out the relationship between workers' compensation and statutory accident benefits. The relevant subsections provide as follows:

59. (1) The insurer is not required to pay benefits under this Regulation in respect of any insured person who, as a result of an accident, is entitled to receive benefits under any workers' compensation law or plan.

(2) Subsection (1) does not apply in respect of an insured person who elects to bring an action referred to in section 10 of the Workers' Compensation Act so long as the election is not made primarily for the purpose of claiming benefits under this Regulation.

Therefore, the general rule is that automobile insurers are not required to pay benefits if the insured person is entitled to workers' compensation benefits. However, if the insured person makes an election under the workers' compensation legislation to sue in court instead of claiming workers' compensation benefits, the automobile insurer must pay benefits provided that the election was not made primarily for the purpose of claiming accident benefits. If it is unclear whether the insured person's injuries are covered by workers' compensation, the automobile insurer can require an assignment of workers' compensation benefits before paying accident benefits.²

At arbitration, the issue was the proviso in s.59(2) — whether Ms. Gebru was precluded from receiving accident benefits because she elected to bring an action in court primarily for the purpose of receiving accident benefits. Coseco called the other driver and an independent witness to establish that Ms. Gebru ran a red light, arguing that if she could not succeed in court, her election should not be accepted as genuine. In response, Ms. Gebru relied on the appeal decision in Salmon and Toronto Transit Commission (Markel Insurance), (OIC P-000235, June 15, 1992), a case decided under the SABS-1990³. She claimed that it stood for the proposition that arbitrators cannot consider the viability of the court action in determining the bona fides of an election. The arbitrator rejected this argument, holding as follows:

The test under section 59 of the current Schedule is different from the test under the 1990 Schedule. The test is whether the election to bring an action was made primarily for the purpose of claiming statutory accident benefits. I do not find these words ambiguous. I find nothing in these words which limit my jurisdiction to determining whether the action is a bona fide action in respect of threshold-type injuries. If I found that an action was not viable in terms of the defendant's solvency or liability or otherwise, I could determine that the injured worker brought the action primarily for the purpose of claiming statutory accident benefits and that, pursuant to section 59 of the current Schedule, the insurer was not required to pay benefits.

The arbitrator then dealt with Ms. Gebru's second argument — that the viability of her court action should be evaluated at the time she made it, not with the benefit of hindsight. He expressed sympathy for this argument, holding that although evidence after the election might shed light on Ms. Gebru's motivation, the question was whether at the time she elected to proceed in court, she did so primarily for the purpose of claiming accident benefits.

Coseco does not quarrel with this analysis. In any event, I agree with it. Coseco claims, however, that the arbitrator went on to render s.59 meaningless by applying a subjective standard. In its submission, having accepted that Ms. Gebru went through a red light, he should have concluded that her election was not bona fides.

As I read the decision, that is not what the arbitrator found. Quite properly, he did not focus exclusively on the viability of Ms. Gebru's court action. The regulation makes it clear that the issue is the insured person's reason for making the election. While arbitrators must consider "objective" factors in evaluating the insured person's motivation, including the strength of the court action, the steps taken to pursue the claim, and any advantages that might have led the insured person to prefer accident benefits over workers' compensation, it is difficult to see how the test itself can be "objective."

In my opinion, the arbitrator approached the issue correctly and provided clear reasons for his decision. He considered the appropriate factors, including the credibility of the witnesses, and found that when Ms. Gebru elected to proceed in court, she did so in good faith. The decision ends with the controversial paragraph, set out below:

The only evidence up to the time of the hearing of this preliminary issue is that both Mrs Gebru and Mrs. Defreitas [the other driver] thought they were traveling on a green light when the collision occurred. Mrs. Defreitas and her witness presented persuasive evidence at the hearing of this preliminary issue that Mrs. Defreitas was traveling on a green light when the collision occurred. However, that evidence does not persuade me that at the time Mrs. Gebru commenced her Court action, she knew that the collision occurred because she had failed to stop at a red light. At best, it would persuade me that Mrs. Gebru honestly mistook that she was traveling on a green light. Such a mistake might make her liable for the collision in a Court action. However, it would not mean that she commenced the Court action so that she could claim statutory accident benefits. I heard no evidence to persuade me at the time that Mrs. Gebru commenced her Court action, she or her representative felt that a Court action had no chance of success.

This paragraph, in my view, underlines the arbitrator's factual finding that Ms. Gebru made her election in good faith. The evidence of the other driver and the independent witness might have convinced him otherwise, but it did not. In essence, he found that at the time Ms. Gebru made her election, she believed she was travelling on a green light and, therefore, had a viable claim against the other driver. That finding was open to him and does not involve any error of law.

Coseco referred to a number of arbitration and appeal decisions in support of its position. In its submission, they establish that if the insured person's court action has no chance of success, whether due to issues of the threshold, time limits, or liability, the election to sue cannot be bona fides. In my view, the decisions do not go that far.

The first two, Salmon, cited above, and Graham and State Farm Mutual Automobile Insurance Company, (OIC A96-000871, June 30, 1997), confirmed on appeal, (FSCO P97-00044, October 16, 1998), are of little assistance because they were decided under the SABS-1990. As the arbitrator states, the test in s.59 of the SABS-1996 is different and unambiguous. Further, even these decisions do not suggest that the arbitrator should engage in a detailed evaluation of the viability of the court action involving issues of credibility.

The next three decisions involve s.76 of the SABS-1994,⁴ which deals with the relationship between workers' compensation and accident benefits in the same terms as the SABS-1996. In Davis and Pafco Insurance Company Limited, (FSCO A96-000640, February 3, 1997), the arbitrator held that Mr. Davis could not re-elect to sue after receiving workers' compensation benefits and then claim accident benefits. On appeal, I upheld the result, but for different reasons.⁵ I concluded that while re-elections are allowed in certain circumstances, Mr. Davis was not entitled to accident benefits because his re-election was made primarily for the purpose of claiming accident benefits. In reaching that conclusion, I made the following comments upon which Coseco relies (emphasis added):

Section 76(2) of the SABS - 1994 recognizes the injured worker's right to choose and puts those who have a bona fide action in the same position as other automobile accident victims. They can sue for their non-economic losses and claim income replacement benefits and expenses under the SABS - 1994.

The legislation is designed to allow this choice between compensation options, but only where the person is making a real choice. . . .

I agree that the medical evidence is not particularly strong. While I was not given sufficient case law to conclude that Mr. Davis's tort claim has no chance of success, I am convinced that its weakness further undermines the bona fides of his re-election.

(pp.13 and 17)

In my opinion, nothing in this decision is inconsistent with the approach taken by the arbitrator. The strength of the action is a legitimate consideration, but only as it relates to the insured person's purpose in bringing it. In Davis, there were other factors, particularly the timing of the decision to re-elect, that led me to conclude that the election was made primarily for the purpose of claiming accident benefits.

In Sofantzidelis and AXA Insurance (Canada), (OIC A95-000384, May 7, 1997), the situation was reversed. The insured person received accident benefits, but the insurer subsequently claimed repayment on the basis that he was entitled to workers' compensation benefits. Mr. Sofantzidelis' primary argument was that he was not covered by workers' compensation, which the arbitrator rejected. Alternatively, he claimed that he elected to proceed in court and, therefore, was entitled to receive accident benefits according to s.76 of the SABS-1994. The arbitrator also rejected this argument, finding that Mr. Sofantzidelis started his court action primarily for the purpose of claiming accident benefits. In doing so, she considered various factors, including the timing of the court action and the lack of any effort to prosecute it. On appeal, I upheld the arbitrator's decision, stating as follows:

The arbitrator held, correctly in my view, that Mr. Sofantzidelis had the onus of proving that he fit within the exception provided by subsection 76(2). His main problem was that the arbitrator was not prepared to accept his evidence about the commencement of the court action. Her assessment that he was not a credible witness was within her authority and I am not prepared to second-guess it.

While I accept that the timing of a court action is not determinative, it is a legitimate factor in assessing the insured person's motivation. The arbitrator considered that Mr. Sofantzidelis' action was started shortly after the pre-hearing, where the workers' compensation issue was discussed, followed shortly by the letter from Mr. Spector stating that the issue was resolved by the court action. I agree with the arbitrator that this timing is significant. (p.16)

In Coseco's submission, this decision demonstrates that the test involves more than simply asking the insured person whether he or she believes the action is viable. While this is true, the arbitrator did not just accept Ms. Gebru's word about the bona fides of her election. He considered a number of factors, including her credibility, and made findings of fact that led him to conclude that the election was not made primarily for the purpose of claiming accident benefits.

Finally, Coseco refers to the arbitration decision in Asiama and Commercial Union Assurance Company, (OIC A96-001263, March 31, 1998. In that case, the arbitrator found that the insured person thought his choice was between workers' compensation benefits and accident benefits, choosing the latter because it offered better coverage. She went on to state as follows:

Even without Mr. Asiama's admission that he brought a court action only to support his claim for accident benefits, I find that his court action is not bona fide. The claim was likely doomed because it was issued eight days after the two-year anniversary following the accident. Moreover, the medical evidence is scant and unlikely to support the threshold test of entitlement under Bill 164, being "serious impairment of an important physical, mental or psychological function." Finally, even if his injury met this test, his claim is also subject to a $10,000 deductible.

I conclude that Mr. Asiama's action is not bona fide but was brought solely for the purpose of claiming accident benefits. Consequently, Mr. Asiama is precluded from claiming accident benefits.

As in the other decisions, the arbitrator treated the strength of the court action as a factor to be considered in evaluating the insured person's motivation in electing to proceed in court. I agree with this approach, although for reasons set out above, I conclude that this is precisely what the arbitrator did. He considered the evidence of the other driver and the witness, but found that Ms. Gebru elected to proceed in court believing she had a viable action, not for the primary purpose of claiming accident benefits. There was evidence to support this conclusion and, therefore, no basis for me to interfere on appeal.

For these reasons, the appeal is dismissed.

III. APPEAL EXPENSES

Applying the factors set out in Ontario Regulation 664, R.R.O. 1990, as amended, I have no hesitation in awarding Ms. Gebru her reasonable appeal expenses.

January 7, 2002

David R. Draper Director of Arbitrations

Footnotes

1. 1Ontario Regulation 403/96, as amended, the Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996.
2. 2SABS-1996, s.59(5).
3. 3R.R.O. 1990, Reg. 672, as amended, the Statutory Accident Benefits Schedule — Accidents Before January 1, 1994.
4. 4Ontario Regulation 776/93, as amended, the Statutory Accident Benefits Schedule—Accidents after December 31, 1993 and before November 1, 1996.
5. 5(FSCO P97-00010, July 22, 1997).