Neutral Citation: 2002 ONFSCDRS 30

FSCO A01-000215

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

PAMELA SIMPSON

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before:

David Leitch

Heard:

December 14, 2001, at the offices of the Financial Services Commission of Ontario in Toronto

Appearances:

David S. Wilson for Ms. Simpson

John D. Dean for Allstate Insurance Company of Canada

Issues:

The Applicant, Pamela Simpson, was injured in a motor vehicle accident on May 4, 2000. She applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("Allstate" or "the Insurer"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Simpson applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

As indicated in my earlier decision in this case, dated November 16, 2001, the following three issues remain to be decided. They were argued at the continuation of the hearing on December 14, 2001.

1. Is Allstate entitled, under section 60 of the Schedule, to deduct from the Applicant's income replacement benefits a benefit she received from Trafalgar Insurance Company of Canada ("Trafalgar") in respect of a motor vehicle accident on November 1, 1995?

2. Is Allstate entitled, under section 47 of the Schedule, to recover from the Applicant's income replacement benefits the amount of the benefit she received from Trafalgar ?

3. Is Allstate required, under section 282(10) of the Insurance Act, to pay a special award to the Applicant?

Result:

1. Allstate is entitled to deduct from the Applicant's income replacement benefits the amount of the benefit she received from Trafalgar.

2. Allstate is entitled to deduct 20 percent from each payment of the Applicant's income replacement benefits in order to recover an amount in respect of the benefit she received from Trafalgar. The parties agreed that the total amount of the deduction is to be calculated at the rate of $250 per week for the period May 11, 2000 to April 25, 2001.

3. Allstate is required to pay a special award to the Applicant in the amount of $2,060.67.

Issue 1: Deductibility of the section 32 supplement:

Background

As a result of the accident of May 4, 2000, the Applicant claimed and received income replacement benefits from Allstate from one week after the accident until November 22, 2000²when benefits were terminated. In early May 2001, Allstate reinstated the Applicant's income replacement benefits, retroactively for the period November 22, 2000 to April 25, 2001, and from June 26, 2001 and ongoing.³ However, Allstate also started deducting 20 percent from each payment of these reinstated benefits in order to recover the amount of a benefit the Applicant received in April 2001 from Trafalgar Insurance in respect of another motor vehicle accident on November 1, 1995.⁴ Before addressing the parties' arguments regarding Allstate's right to make this deduction, it is necessary to set out the following background information and legislative references.

As a result of the Applicant's injuries sustained in her accident of November 1, 1995, Trafalgar accepted her entitlement to loss of earning capacity benefits payable under Part VI of the Schedule applicable to that accident.⁵ The Applicant was receiving these benefits when she was involved in the accident of May 4, 2000 and continued to receive them thereafter. Allstate seeks no deduction with respect to the Applicant's continued receipt after the accident of May 4, 2000 of what I will call, for the sake of convenience, her basic loss of earning capacity benefits.⁶Rather, it seeks a deduction with respect to a temporary supplement to loss of earning capacity benefits which Trafalgar paid the Applicant after the accident of May 4, 2000 pursuant to section 32 (1) of the Schedule applicable to the accident of November 1, 1995. That section reads as follows:

32.-(1) If a person who is entitled to receive weekly loss of earning capacity benefits as a result of an accident and who is engaged in an employment becomes unable for a temporary period, as a result of the accident, to engage in employment in which the person could earn the gross annual income that was used to determine the person's residual earning capacity for the purpose of determining the amount of the person's weekly loss of earning capacity benefit, the insurer shall, during that period, pay the person a weekly supplement to the loss of earning capacity benefits.

The Applicant applied to Trafalgar for a section 32 supplement by letter dated November 10, 2000.⁷ By letter dated April 19, 2001, Trafalgar's lawyer stated that her client would pay the supplement at the rate of $250 per week for a 52-week period "'without prejudice'...as to whether this supplement is payable or the quantum of that supplement."⁸ The Applicant received a lump sum payment from Trafalgar "a few days" prior to signing an Affidavit on April 25, 2001.⁹ At the hearing, the parties agreed that if Allstate was entitled to the deduction, the total amount of the deduction is to be calculated at the rate of $250 per week for the period May 11, 2000 to April 25, 2001.

Allstate seeks this deduction pursuant to subsections 60(1), paragraph 1 and 60(3)(c) of the Schedule applicable to the May 4, 2000 accident. These subsections read as follows:

60. (1) The insurer may deduct the following amounts from the amount payable to an insured person as an income replacement or non-earner benefit:

61. Any temporary disability benefits being received by the insured person in respect of a period following the accident and in respect of an impairment that occurred before the accident.

60.(3) In this section,

"temporary disability benefit" means,

c) benefits paid under Part II, III or IV or section 32 of Ontario Regulation 776/93

The arguments:

Mr. Wilson, for the Applicant, argues that paragraph 1 of subsection 60(1) imposes both a temporal pre-condition and a causal pre-condition for the deductibility of temporary disability benefits from income replacement benefits. He maintains that the causal pre-condition is created by the concluding words of the paragraph, "...in respect of an impairment that occurred before the accident." These words will be rendered meaningless, he submits, if Allstate is permitted to deduct the section 32 supplement merely because it satisfies the temporal pre-condition created by the words "...received by the insured person in respect of a period following the accident." Mr. Wilson refers to the definition of "impairment" in section 2(1) of the Schedule, "...a loss or abnormality of a psychological, physiological or anatomical structure or function." He asserts that the "loss or abnormality" which triggered Trafalgar's payment of the section 32 supplement was, or was caused by, the accident of May 4, 2000. In support of this assertion, Mr. Wilson relies upon the fact that the section 32 supplement was paid following his letter to Trafalgar in which he stated that his client was "entitled to the temporary supplement as of May 4, 2000."¹⁰He also alludes to the evidence that the Applicant had returned to modified work well prior to May 4, 2000, despite the continuing impairment caused by the accident of November 1, 1995.¹¹This evidence, he submits, supports a finding that the supplement was paid in respect of the impairment caused by the accident of May 4, 2000, not "...in respect of an impairment that occurred before the accident" of May 4, 2000. He acknowledges that the deduction sought by Allstate would be authorized if there was evidence linking Trafalgar's payment of the supplement to a deterioration in the impairment caused by the accident of November 1, 1995 but he denies the existence of such evidence.

During the course of Mr. Wilson's submissions, I expressed concern that his argument led to a form of double recovery. On the one hand, the Applicant received income replacement benefits from Allstate after the accident of May 4, 2000 because, as a result of that accident, she suffered "a substantial inability to perform the essential tasks"¹² of her employment. On the other hand, Mr. Wilson was now arguing that the Applicant applied for and received the section 32 supplement from Trafalgar because she had become "unable for a temporary period....to engage in employment," again as a result of the accident of May 4, 2000. Mr. Wilson responded that subsection 60(1) paragraph 1 was clear and that I should interpret it, as written, without concern about double recovery. He also noted that if the payment made by Trafalgar was not a proper payment under section 32, then it is clearly not deductible under subsection 60(3)(c) or under any of the other categories of temporary disability benefit defined by subsection 60(3).

Mr. Dean, for Allstate, challenges Mr. Wilson's assertion that the supplement was only paid in respect of the impairment caused by the accident of May 4, 2000. He notes that the impairment caused by the accident of November 1, 1995 continued to exist beyond May 4, 2000 and that the Applicant continued to receive her basic loss of earning capacity benefit in respect of that impairment. Mr. Dean points out that in accordance with the requirements of section 32, the Applicant was only entitled to a temporary supplement to her basic loss of earning capacity benefits if her temporary inability to engage in employment was "as a result of the accident" of November 1, 1995. He asserts that the Applicant's temporary inability to engage in employment after May 4, 2000 was, in part at least, as a result of the continuing impairment caused by the accident of November 1, 1995. In support of this assertion, Mr. Dean relies upon the following statement made by the Applicant in her Affidavit of April 25, 2001: "... I would be entitled to a temporary supplement to my LECB [loss of earning capacity benefit] as my inability to work after May 4, 2000 was materially contributed to by the medical status created by the injuries caused in the November 1, 1995 accident."¹³

Analysis and conclusion:

My concern about double recovery has not been allayed by Mr. Wilson. I am nevertheless prepared to assume, without deciding, that the Applicant is entitled to double recovery so long as the evidence establishes that her section 32 supplement was not "received...in respect of an impairment that occurred before the accident" of May 4, 2000. For the reasons which follow, I conclude that the evidence before me does not support this finding and that Allstate is, therefore, entitled to the deduction it seeks.

Simply put, the Applicant's argument is that since she was working until May 4, 2000 and since she received the section 32 supplement from that date, this benefit must have been received solely as a result of the accident of May 4, 2000.

This argument glosses over the fact that the section 32 supplement was only payable if the Applicant's temporary inability to work was "as a result of the accident" of November 1, 1995. I acknowledge that the supplement is a "pay pending dispute resolution" benefit under section 32(3) of that Schedule and that Trafalgar paid it on a "without prejudice" basis. Nevertheless, in applying for the supplement, Mr. Wilson necessarily advanced the proposition that his client's temporary inability to work after May 4, 2000 was, in part at least, "as a result of the accident" of November 1, 1995.

Of much greater importance for my decision, the Applicant's argument ignores the various medical reports which specifically addressed the issue of causation. I set out below what I consider to be the relevant parts of these reports.

On August 17, 2000, the Applicant was examined on Allstate's behalf by Dr. James B. Rathbun, an orthopaedic surgeon, whose report contains the following summary and conclusion:

Ms. Simpson is a 53 year old woman, who has been involved in two motor vehicle accidents. The first occurred in November, 1995. She would appear to have suffered a prolonged and continuous disability as a result of this accident, and these symptoms have persisted right up to and immediately following the accident, here, under consideration.

As a result of her second accident which occurred on the 4th of May, 2000, she would appear to have sustained soft tissue injuries to her neck and to her low back.

I would say the treatment to date has been satisfactory and what she presents with at the present time, is identical to what she appeared to have presented with, from the notes, immediately prior to the second accident in May.

The major problem, in my opinion, is that there is a very large psychogenic component to this woman's symptoms, and it is this aspect of the problem which would appear to be prolonging her disability.

I would suggest that this client is not suffering from an orthopaedic impairment that would prevent her from performing the activities of daily living or her employment.

Were it not for her large psychogenic magnification of symptoms she could return to her previous employment immediately.¹⁴

Dr. Rathbun wrote a second letter to Allstate on September 19, 2000 which contains the following additional comments with respect to causation:

Upon reviewing my notes and records I would feel Ms. Simpson's symptoms of psychogenic magnification occurred following her first motor vehicle accident in 1995. I feel these symptoms have continued and persisted, right up to the second accident, which is the one under consideration, of the 4th of May, 2000. I feel, therefore, that this situation arose, not as a result of the accident under consideration, particularly, but rather as a result of her first accident, which is not under consideration at this time.

I feel she has no residual orthopaedic disabilities as a result of the accident under consideration. I feel her psychogenic magnification of symptoms began with her first accident, and is therefore not related to the current one.¹⁵

In order to counter Dr. Rathbun's opinions, Mr. Wilson first sought and obtained a report dated January 19, 2001 from the Applicant's family physician, Dr. Roger Dacre, which reads, in part, as follows:

I don't agree with Dr. Rathbun concerning her condition both pre and post accident on 4/5/2000 is [sic] identical, his comments about her functioning level at the time of the second accident were not correct in that she had returned on modified duties to one of her pre-1/11/95 accident jobs which she was not able to do after the 4/5/2000 accident.

He suggests that the symptoms are partly affected by her chronic pain and depression as a result of the loss of function she has experienced, this may be so, but this is as a result of the injuries sustained. My evaluations before and subsequently don't lead me to same conclusions as this orthopaedic surgeon after his brief examination.

As a result of a material contribution of the injuries suffered in the MVA of 4/05/2000, Ms. Simpson has become unable to engage in any employment.¹⁶

Next, Mr. Wilson obtained the opinion of Dr. Sydney Gershon, identified in the Applicant's Affidavit simply as "a specialist with whom I have been attending for some time."¹⁷ His report to Mr. Wilson, dated March 15, 2001 (which also fails to mention his specialty), offers the following opinion about the issue of causation:

There are two categories of problems happening here. One involves true organic disease. One involves a functional overlay. Unfortunately, it is often difficult to assess reasons for functional complaints.

Were it not for the May 04, 2000 motor vehicle accident this lady would be back at work now trying as best she can to put in her four days per week at the hotel. Clearly this May 14, 2000 accident has contributed materially to her present illness.

On the 3rd page of your letter you quote Dr. Rathbun who states that "she was suffering from significant and continuing low back pain complaints from her first accident when she became involved in the second accident." In my note above, I have outlined from my assessments that clearly she is suffering more following the second accident compared to her situation in 1999.

You then quote Dr. Rathbun as saying "what she presents with at the present time is identical to what she appeared to have presented with from the notes immediately prior to the second accident in May." I cannot comment on the situation immediately prior to the accident of May 2000.¹⁸

In a later report to Mr. Wilson, dated September 12, 2001, Dr. Gershon wrote:

From her past work history prior to her accident I learn that this lady was extremely motivated and hard working. I am forced to conclude that were it not for the motor vehicle accidents of November 01, 1995 and May 04, 2000, Pamela Simpson would probably be gainfully and fully employed at this point in time.¹⁹

Next, Mr. Wilson arranged for the Applicant to be examined by Dr. Brian S. Kirsh, a psychiatrist,

on May 18, 2001. He diagnosed a Chronic Pain Disorder which, in his opinion, rendered the Applicant unable to work in any occupation. He then expressed the following opinion about causation:

The accident of November 1, 1995 lead [sic] to the beginning of her Chronic Pain Disorder and left her vulnerable to deterioration after another such accident. This injury continues to materially contribute to her present medical status and ability to work.

The accident of May 4, 2000 was also a material factor contributing to her current state of health. Had this second accident not occurred, she would be working today.²⁰

Allstate arranged for the Applicant to be examined by Dr. Peter Bernstein, a clinical psychologist, on June 26, 2001. His report, dated July 3, 2001, provided a diagnosis of "Pain Disorder Associated with Psychological Factors" which, in Dr. Bernstein's opinion, did not prevent the Applicant from returning to work. He expressed the opinion that the Applicant "met the criteria for the abovenoted diagnosis prior to her involvement in the motor vehicle accident that occurred on or about May 4, 2000."²¹

Finally, in a report to Mr. Wilson dated August 31, 2001, Dr. Kirsh wrote: "The first accident caused her condition, which was then substantially deteriorated by the second accident."²²

In my view, these medical opinions, read as a whole, do not support a finding that the Applicant's inability to work after May 4, 2000 was attributable solely to the impairment caused by the accident of that date. Dr. Rathbun was clearly of the opinion that the November 1, 1995 accident constituted the sole cause of her ongoing psychological disability. Dr. Bernstein also felt that the Applicant's psychological problems predated the accident of May 4, 2000. For their part, Dr. Gershon and Dr. Kirsh perceived the November 1, 1995 accident as contributing, together with the May 4, 2000 accident, to the Applicant's ongoing disability. Their statements that the Applicant would have been working were it not for the accident of May 4, 2000 cannot, therefore, be interpreted to mean that, in their opinions, this accident was the sole cause of her disability. Nor, in my view, can Dr. Dacre's opinion be so interpreted. His opinion that the May 4, 2000 accident made "a material contribution" to her inability to work does not constitute an opinion that it was the sole cause of this disability.

Based on this medical evidence, I find that the Applicant's inability to work after May 4, 2000 was, in part at least, as a result of the accident of November 1, 1995. In my view, this finding would have been sufficient to trigger Trafalgar's obligation to pay the Applicant the section 32 supplement, had Trafalgar contested its obligation to do so on the same evidence.²³ This finding is also, in my view, sufficient to establish that the section 32 supplement was received by the Applicant "...in respect of an impairment that occurred before the accident" of May 4, 2000, namely, the loss or abnormality caused by the accident of November 1, 1995. Allstate is, therefore, entitled to deduct this supplement from the Applicant's income replacement benefits.

Issue 2: Repayment of the section 32 supplement

Section 47(1)(c) of the Schedule reads as follows:

47. (1) A person shall repay to the insurer,

(c) any income replacement, non-earner or caregiver benefit or any benefit under Part VI, to the extent of any payments received by the person that are deductible from those benefits under this Regulation.

Mr. Wilson did not dispute that in the event I reached the conclusion which I have now reached, this provision would apply and that Allstate has complied with the requirements imposed by the other subsections of section 47. Accordingly, Allstate was, and may still be, entitled to deduct 20 percent from each payment of the Applicant's reinstated income replacement benefits in order to recover the agreed amount in respect of the section 32 benefit she received from Trafalgar.²⁴

Issue 3: Special Award

Background

The Applicant alleges that Allstate's decision to terminate her income replacement benefits from November 22, 2000 to April 25, 2001 resulted in the payment of these benefits being unreasonably withheld or delayed until early May 2001 when they were retroactively reinstated, subject to the deduction discussed above.²⁵ She, therefore, seeks a Special Award pursuant to section 282(10) of the Insurance Act which reads as follows:

(10) If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule. R.S.O. 1990, c. I.8, s. 282 (10); 1993, c. 10, s. 1.

There is no dispute that Allstate's decision to suspend benefits was based on Dr. Rathbun's reports of August 17 and September 19, 2000, quoted earlier in this decision. In addition, the following evidence is pertinent to the Applicant's special award claim.

On receipt of the first of Dr. Rathbun's reports, Allstate's claim representative, Ms. Paula De Jesus, wrote back to Dr. Rathbun asking for clarification as to whether the Applicant's psychogenic problems were disabling, whether they were caused by the accident of May 4, 2000 and whether a psychological assessment should be conducted.²⁶ In his reply of September 19, 2000, Dr. Rathbun appeared to ignore the first question. He answered the second question, as noted earlier, by expressing the opinion that the Applicant's psychological problems began with the November 1, 1995 accident and were unrelated to the accident of May 4, 2000. As to the third question, Dr. Rathbun concluded his letter of September 19, 2000 with this statement:

From that point of view [that the Applicant's psychological problems began with the November 1, 1995 accident and were unrelated to the accident of May 4, 2000], I feel further investigation from a psychological point of view is not indicated.²⁷

Based on this report, Ms. De Jesus ordered no further evaluation.²⁸ Rather, she issued a termination letter to the Applicant dated October 16, 2000 which enclosed a copy of Dr. Rathbun's "clarification letter" and which advised the Applicant, "you no longer continue to suffer from a substantial inability to perform the essential task [sic] of you employment."²⁹

Mr. Wilson responded to Ms. De Jesus by letter dated October 31, 2001 in which he observed:

You have chosen to rely upon a medical assessment which is obviously deficient. The frailties of the orthopaedic assessment are obvious. What is just a bit unusual, however, is the fact that not only does your orthopaedic surgeon feel competent in providing you with a psychological opinion, you are content to accept same.³⁰

The next day, November 1, 2000, Mr. Wilson filed for mediation,³¹ without first requesting the assessment of his client at a Designated Assessment Centre. In her reply to Mr. Wilson's letter of October 31, 2000, dated December 4, 2000,³² Ms. De Jesus did not address the appropriateness of Allstate's reliance on Dr. Rathbun's reports.

Mr. Joseph Rachky, a senior staff claim consultant with Allstate, took over the file from Ms. De Jesus prior to mediation.³³ Mr. Rachky testified at the hearing that in preparing for mediation on February 1, 2001, he became aware of Dr. Dacre's report of January 19, 2001. He further testified that since this report indicated that the Applicant was suffering from problems of a psychological nature and since Dr. Rathbun's examination of August 17, 2000 was the only examination yet conducted on Allstate's behalf, he made arrangements for the Applicant to be examined by Dr. Bernstein, a psychologist.

However, the evidence establishes that Mr. Rachky maintained Allstate's position that the Applicant's income replacement benefits were properly terminated in November 2000. He did so both at mediation, which failed,³⁴ and in signing Allstate's Response to the Application for Arbitration dated February 23, 2001, which explained Allstate's position as follows: "our medicals say insured can return to work."³⁵ "Our medicals" was clearly a reference to the two reports from Dr. Rathbun as no other insurer examination had yet been conducted. Indeed, despite Allstate's later reinstatement of benefits back to the date of termination, Mr. Dean continued to maintain in his opening statement at the hearing that the Applicant's income replacement benefits had been properly terminated in November 2000.

During the course of his cross-examination, Mr. Rachky made the following admissions. Dr. Rathbun's first report only expressed the opinion that the Applicant had no "orthopaedic impairment" that would prevent her from returning to work. It would be reasonable to infer from this report that the Applicant was psychologically disabled because Dr. Rathbun stated first, that the psychogenic component of the Applicant's symptoms was "prolonging her disability," and second, that "were it not for her large psychogenic magnification of symptoms she could return to her previous employment immediately."³⁶ Dr. Rathbun's second report expressed no additional opinion, one way or the other, about whether the Applicant was psychologically disabled. It was "probably not" reasonable for Allstate to have relied upon the opinion of Dr. Rathbun, an orthopaedic specialist, as to the cause of the Applicant's psychological disability. It would have been more reasonable and entirely feasible for Allstate to have obtained an opinion on this issue from a psychologist or psychiatrist and to have done so before terminating the Applicant's benefits. Allstate relied upon Dr. Rathbun's reports in terminating the Applicant's benefits in November 2000, despite Mr. Wilson's letter dated October 31, 2000 objecting to Allstate's acceptance of a psychological opinion from an orthopaedic surgeon.

Analysis of the arguments and conclusion:

Mr. Dean urges me to reject the Applicant's claim for a special award on the following grounds.

Mr. Dean submits that from the perspective of the treatment sought by the Applicant herself prior to the termination of her benefits in November 2000, Allstate had no indication that she suffered from a psychological disability as a result of the accident of May 4, 2000. I reject this argument. Even if I had received evidence establishing the nature of all the treatment sought by the Applicant herself prior to the termination of benefits, and I am not satisfied that I received such evidence, Dr. Rathbun's report of August 17, 2000 informed Allstate that there was "a very large psychogenic component to this woman's symptoms."

Dealing next with the cause of the Applicant's psychological problems, Mr. Dean argues that while Allstate's acceptance of Dr. Rathbun's opinion may not have met a standard of perfection, it did meet the standard of reasonableness established by section 282(10) of the Insurance Act. I reject this argument also. It is contrary to both the commendably candid answers given by Mr. Rachky on his cross-examination and the case law which establishes an insurer's obligation to choose and rely upon the opinions of examiners with appropriate qualifications.³⁷ Mr. Rachky implicitly recognized Allstate's breach of this obligation by making arrangements for the Applicant to be examined by Dr. Bernstein, a psychologist. However, he only did so after mediation in February 2001 (his first involvement with the file) and without reversing the termination based on Dr. Rathbun's opinion until early May 2001 (though he did not receive Dr. Bernstein's opinion until July 2001). I find that this conduct resulted in Allstate unreasonably delaying the payment of the Applicant's income replacement benefits for the period November 22, 2000 to April 25, 2001.³⁸

The Applicant is, therefore, entitled to a special award but in what amount? Dealing first with the percentage of the special award, Mr. Dean submits that any unreasonableness in his client's conduct was mitigated by two factors. The first was the Applicant's decision not to request an assessment at a Designated Assessment Centre. It is true that such a request would have led to the continuation of the Applicant's benefits, as Ms. De Jesus duly pointed out in her letter of termination to the Applicant.³⁹ I nevertheless find that the reasonableness of Allstate's termination must be assessed in light of the information available to it at the time,⁴⁰ not in light of the Applicant's later decision to forego her right to an assessment at a Designated Assessment Centre.

A second mitigating factor, according to Mr. Dean, arises from the fact that Allstate was not the only insurer who delayed payments to the Applicant during the relevant period. He notes that while Mr. Wilson requested payment of the section 32 supplement by letter dated November 10, 2000,⁴¹ Trafalgar only paid the supplement in a lump sum a few days before April 25, 2001.⁴²This is roughly the same six-month period during which I have found Allstate unreasonably delayed payment of the Applicant's income replacement benefits. Mr. Dean observes that had Trafalgar paid the section 32 supplement more promptly, the effects of Allstate's termination of benefits would have been substantially mitigated. This may be true but since the amount of the supplement did not exceed the amount of the income replacement benefits, Trafalgar's payment of the former would not have extinguished Allstate's obligation to pay the latter.

More significantly, and as Mr. Dean acknowledges, Allstate was not entitled to deduct the section 32 supplement from the Applicant's income replacement benefits, pursuant to section 60(1) paragraph 1 of the Schedule, until she actually received it from Trafalgar. Since the Applicant did not receive the supplement from Trafalgar until a few days before the end of the six-month period, Allstate was obliged to continue paying her full income replacement benefits during this period unless it had some other reasonable ground for reducing or terminating these benefits. Trafalgar's tardiness in paying the supplement did not constitute such a ground; nor, in my opinion, does it now constitute a shield against Allstate's liability to pay a special award in respect of its delayed payment of the Applicant's income replacement benefits during this period.

On the other hand, Allstate's decision to reinstate the Applicant's income replacement benefits about six months after terminating them and about six months before the hearing does, in my opinion, constitute a valid mitigating factor.⁴³ This was not a case where the insurer reinstated benefits on the eve of the hearing.

All things considered, I find Allstate liable to pay a special award to the Applicant at the rate of 25 percent. The next question is, to what amount should this percentage apply?

I agree with Mr. Dean that the special award should not apply to my earlier finding that accrued vacation pay is to be included in the calculation of the Applicant's income replacement benefit. While I distinguished the present case from the Howden case,⁴⁴ Allstate's position with respect to vacation pay was neither unreasonable nor deserving of a special award.

Mr. Dean also submits that the special award should not apply to the full amount of the Applicant's weekly income replacement benefit but rather to the amount of that benefit that remains after deducting $250 per week in respect of the section 32 supplement she received from Trafalgar. In support of this argument, Mr. Dean notes that according to section 282(10) of the Insurance Act, the special award only applies to "the amount to which the person was entitled at the time of the award." As I understood his argument, Mr. Dean maintains that by recognizing Allstate's right to deduct the section 32 supplement from the income replacement benefit for the period May 11, 2000 to April 25, 2001, I simultaneously recognize that, "at the time of the [special] award," the Applicant's entitlement to income replacement benefits for the period November 22, 2000 to April 25, 2001 was only the reduced amount which remains after making this deduction, that amount being $88.16 per week.⁴⁵

This argument exploits what a Director's Delegate has called the "problematic" wording of section 282(10) but it ignores the same Director's Delegate's ruling that the section is not to be interpreted in a way which "would take delayed payments out of the equation, a result that was clearly not intended."⁴⁶ In my view, Mr. Dean's argument leads to this very result and would misconstrue my finding with respect to Allstate's right to deduct.

With respect, my recognition of Allstate's right to deduct the section 32 supplement from the income replacement benefit is not properly construed as a finding that the Applicant was only entitled to the difference between the two benefits during the period November 22, 2000 to April 25, 2001. I have defined Allstate's right to deduct the section 32 supplement by reference to "$250 per week for the period May 11, 2000 to April 25, 2001" merely because that is how the parties agreed to calculate the total amount to be deducted. I did not decide that, had Allstate continued paying income replacement benefits rather than terminating them on November 22, 2000, it would have been entitled to make deductions in respect of the section 32 supplement throughout the period May 11, 2000 to April 25, 2001. On the contrary, as already noted, Allstate's right to deduct the supplement crystallized only after the Applicant received it from Trafalgar at the end of April 2001 and, of course, only after Allstate reinstated the Applicant's income replacement benefits in early May 2001. Until the first of these events, the Applicant was entitled to receive full income replacement benefits from Allstate at the rate of $338.16 per week. It follows that the 25 percent special award applies to Allstate's delayed payment of this amount .

The accepted formula for the calculation of a special award is the percentage of the special award, as determined by the arbitrator, multiplied by the total of: (a) the amount of the overdue benefit; (b) overdue interest calculated at the rate of 2 percent per month, compounded monthly, in accordance with section 46 of the Schedule; and, (c) special award interest on both the overdue benefit and the overdue interest calculated at the rate of 2 per cent per month, compounded monthly, in accordance with section 282(10) of the Insurance Act.⁴⁷

In this case, the amount of the Applicant's income replacement benefits for the period November 22, 2000 to April 25, 2001 is $7,392.18 (21.46⁴⁸ weeks multiplied by $338.18 per week). However, these benefits only became overdue, and their payment was only unreasonably delayed, as each two week benefit period⁴⁹ went by without a payment. In addition, these benefits stopped being overdue and unreasonably withheld when Allstate reinstated benefits on or about May 1, 2001. Taking these facts into consideration, I calculate the amount of overdue interest to be $410.02 and the amount of special award interest to be $440.46. The 25 percent special award, therefore, applies to the total amount of $8,242.66 ($7,392.18 + 410.02 + 440.46). Accordingly,

I order Allstate to pay the Applicant a special award in the amount of $2,060.67.

EXPENSES:

There is no reason, based on either the results she achieved or the way in which she conducted her case, to deny the Applicant her claim for hearing expenses. Allstate will, therefore, pay the Applicant's expenses in relation to both the hearing on October 29 and 30 and November 1, 2001 and the hearing on December 14, 2001.

February 6, 2002

David Leitch Arbitrator

Date

Neutral Citation: 2002 ONFSCDRS 30

FSCO A01-000215

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

PAMELA SIMPSON

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

ARBITRATION ORDER

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

1. Allstate is entitled to deduct from the Applicant's income replacement benefits the amount of the benefit she received from Trafalgar.

2. Allstate is entitled to deduct 20 percent from each payment of the Applicant's income replacement benefits in order to recover an amount in respect of the benefit she received from Trafalgar. The parties agreed that the total amount of the deduction is to be calculated at the rate of $250 per week for the period May 11, 2000 to April 25, 2001.

3. Allstate is required to pay a special award to the Applicant in the amount of $2,060.67.

February 6, 2002

David Leitch Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96 and 303/98.
2. 2The first paragraph of my earlier decision states that this date was unclear but the date of November 22, 2000 is now established by Exhibit 15 and by agreement of the parties. I note that the same paragraph of my earlier decision misstates the date of Application for Arbitration. The correct date is February 5, 2001, not February 5, 2000.
3. 3Exhibit 3, Tab 3
4. 4ibid.,
5. 5The Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93 as amended by Ontario Regulations 781/94 and 304/98.
6. 6The amount of this basic benefit has been subject to indexation adjustments: Exhibit 2, Tab 2, paragraph 8.
7. 7Exhibit 6
8. 8Exhibit 5. Trafalgar is also referred to as Allianz in this letter. I assume that, for present purposes, Trafalgar and Allianz are one and the same insurer.
9. 9Exhibit 2, Tab 2, paragraph 32
10. 10Exhibit 6
11. 11Exhibit 2, Tab 2, paragraphs 5, 9, 15 and 19
12. 12Section 4 paragraph 1 of the Schedule applicable to the accident of May 4, 2000.
13. 13Exhibit 2, Tab 2, paragraph 32
14. 14Exhibit 7, Tab 1
15. 15ibid., Tab 2
16. 16Exhibit 1, Tab 4
17. 17Exhibit 2, Tab 2, paragraph 13
18. 18Exhibit 2, Tab 5
19. 19Exhibit 1, Tab 9.
20. 20ibid., Tab 6.
21. 21Exhibit 7, Tab 3.
22. 22Exhibit 1, Tab 7.
23. 23Of course, I am not making a finding in that regard as Trafalgar is not a party to this proceeding. In any event, I am informed by the parties that the Applicant's claims against Trafalgar have been settled.
24. 24Exhibit 3, Tab 3, paragraph 6
25. 25ibid., Tab 3, paragraph 3
26. 26Exhibit 11
27. 27ibid., Tab 2
28. 28Exhibit 10, p.11
29. 29Exhibit 4, Tab 1
30. 30ibid., Tab 2
31. 31ibid., Tab 3
32. 32Exhibit 12
33. 33Exhibit 8, Tab 2
34. 34Exhibit 4, Tab 4
35. 35This document was not entered into evidence but forms part of the Commission's file.
36. 36Exhibit 7, Tab 1
37. 37Dawson and Kingsway General Insurance Company, (OIC A96-000413, October 3, 1996) and Fimiani and Liberty Mutual Insurance Company, (FSCO A97-001518, January 11, 2000).
38. 38The Applicant received the reinstated payments shortly after April 25, 2001 but Mr. Wilson indicated during argument that he was limiting his client's special award claim to that date.
39. 39Exhibit 4, Tab 1
40. 40Smith and Allstate Insurance Company of Canada, (FSCO A97-00179, July 4, 2001)
41. 41Exhibit 6
42. 42Exhibit 5, Exhibit 2, Tab 2, paragraph 32
43. 43This reinstatement does not prevent me from ordering a special award: see the Directors' Delegates decisions in the cases of Jensen and GAN Canada Insurance Company, (OIC P96-00079, March 31, 1999) and Chafe-Moote and Prudential of America General Insurance Company, (Canada), (FSCO P99-00044, September 8, 2000).
44. 44Howden and Pafco Insurance Company Limited, (FSCO A99-000961, April 7, 2000)
45. 45Exhibit 3, Tab 3, paragraph 4
46. 46Supra, see note 43, Chafe-Moote.
47. 47Graper and Liberty Mutual Fire Insurance Company, (FSCO A00-000133, March 30, 2001)
48. 4849.86 weeks (between May 11, 2000 and April 25, 2001) minus 28 weeks (between May 11, 2000 and November 22, 2000) as per Exhibit 3, Tabs 2 and 3.
49. 49Section 35(4) of the Schedule.