Kuperman v. Allstate Insurance Company of Canada, 2002 ONFSCDRS 36

Financial Services Commission of Ontario

Neutral Citation: 2002 ONFSCDRS 36 FSCO A01-000647

BETWEEN:

FIMA KUPERMAN Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Judith Killoran Heard: December 20, 2001, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Lori Minervino for Mr. Kuperman Todd J. McCarthy for Allstate Insurance Company of Canada

Issues:

The Applicant, Fima Kuperman, was injured in a motor vehicle accident on August 19, 1998. He applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("Allstate"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Kuperman applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended (the "Act").

The preliminary issue is:

1. Is Mr. Kuperman precluded from proceeding to arbitration because his application for arbitration was filed beyond the limitation period set out in subsection 281(5) of the Act and section 51 of the Schedule?

Result:

1. Mr. Kuperman is not precluded from proceeding to arbitration.

EVIDENCE

The case before me is about the nature of the notice required to be given by an insurer so that the insurer may rely on the statutory limitation period.

The parties filed an Agreed Statement of Facts which is summarized below:

1. Mr. Kuperman was involved in a motor vehicle accident on August 19, 1998. On September 25, 1998, Mr. Kuperman attended Integrated Health Recovery after being referred by Dr. Livshin. He was assessed by Dr. Vladimir Levitin, chiropractor and clinic director. A treatment plan and report were completed.

2. The treatment plan consisted of eighteen treatment sessions over six weeks from September 25, 1998 to November 10, 1998 totalling $2,660.00. Mr. Kuperman attended Integrated Health Recovery from September 25, 1998 and received treatment which totalled $1,252.50.

3. On October 18, 1998, the treatment plan and assessment report were faxed from Integrated Health Recovery to Allison Brand, the adjuster at Allstate handling the file. On November 3, 1998, Ms. Brand responded with a letter and Explanation of Benefits as follows:

We are agreeing to pay for all the goods and services contemplated in the treatment plan consisting of: laser, ultrasound, interferential therapy, chiropractic mobilization, active exercises and massage. The time frame is 6 weeks. The cost will be negotiated.

4. In section 5 of the Explanation of Benefits the amount claimed for the treatment plan is $2,660. Under the section entitled: "Reasons why expenses are not payable," it says "Please see attached letter."

5. Integrated Health Recovery sent the following invoices to Allstate:

   1. Invoice 7953 dated September 28, 1998 in the amount of $350 for the initial assessment report, including the treatment plan.
   2. Invoice 8027 dated October 15, 1998 in the amount of $387.50 for services from September 28, 1998 to October 5, 1998.
   3. Invoice 8235 dated October 30, 1998 in the amount of $320 for services from October 22, 1998 to October 27, 1998.
   4. Invoice 8398 dated November 13, 1998 in the amount of $195 for services on November 3, 1998.

6. On December 3, 1998, Allstate gave notice with respect to three separate amounts claimed by Integrated Health Recovery; that is, the sums of $350, $320 and $387.50. Allstate indicated by way of an Explanation of Benefits that its assessment of the amount payable for each of these three items was $275, $185 and $240 respectively, for a total of $700. The cheque for $700 was forwarded by separate cover with no Explanation of Benefits attached.

7. On December 23, 1998, Allstate forwarded another Explanation of Benefits with respect to the amount claimed by Integrated Health Recovery for $195. Allstate assessed the amount payable as $125. The cheque for $125 was forwarded under separate cover with no Explanation of Benefits attached. In total, Allstate paid $825 and Mr. Kuperman claimed for the remaining $427.50.

8. On October 4, 1999, Integrated Health Recovery faxed a list of outstanding accounts to Allstate, including Mr. Kuperman's account. No response was received from Allstate. On December 10, 1999, Ms. Lori Minervino of Integrated Health Recovery left a telephone message for Ms. Brand to discuss the outstanding account. No return call was received. On January 4, 2000, Integrated Health Recovery filed an Application for Mediation.

9. A mediation with respect to the benefits claimed was conducted on April 11, 2000. The mediation failed. On May 15, 2001, the Financial Services Commission of Ontario received the Application for Arbitration filed by Integrated Health Recovery.

10. On June 12, 2001, Bill Gold of Allstate filed a Statement of Service responding to the Application for Arbitration advising Integrated Health Recovery that the statutory limitation period had expired. Ms. Minervino called Mr. Gold to discuss the issue and was advised that the Explanation of Benefits for the two payments made by Allstate had been issued.

11. On July 3, 2001, Mr. Gold sent a cover letter attaching the two Explanations of Benefits dated December 3, 1998 and December 23, 1998, respectively.

THE LAW

Legislation

The limitation period for statutory accident benefit proceedings is set out in subsection 281(5) of the Insurance Act and section 51 of the Schedule.

Subsection 281(5) of the Act provides, in part, that an insured person may only refer issues in dispute to an arbitrator within two years after the insurer's refusal to pay the benefits claimed or within such longer period as may be provided in the Schedule.

Section 51 of the Schedule requires that a mediation, as well as an arbitration proceeding, must be commenced within two years from the insurer's refusal to pay the amount claimed. As well, it extends the time limit for commencing an arbitration proceeding. Provided that a mediation proceeding is commenced within two years of the insurer's refusal to pay benefits, the dispute can be referred to arbitration within 90 days after the mediator reports to the parties on the outcome of the mediation.

Section 49 of the Schedule specifies:

If an insurer refuses to pay a benefit that a person has applied for under this Regulation or reduces the amount of a benefit that a person received under this Regulation, the insurer shall inform the person in writing of the procedure for resolving disputes relating to benefits under sections 279 to 283 of the Insurance Act.

Case Law

Zeppieri,² which was upheld on appeal has been relied on in many arbitration decisions. It sets out a two-step approach to determine whether a limitation period is applicable. First, it is necessary to ask whether, and when, there was a refusal to pay benefits and second, whether an insurer may rely on a limitation period that runs from the date of the refusal.

There is a consistent body of arbitral jurisprudence that the limitation period found in subsection 281(5) and section 51 of the Schedule is not triggered until the insurer establishes that the applicant received proper notice; that is, that the refusal was clear and unequivocal and was communicated to the applicant in writing, with supporting reasons.

In Smith v. Co-operators General Insurance Company,³ the appellant contended that Co-operators was not entitled to rely on the limitation provision found in the Act on the ground that Co-operators failed to comply with section 71 (now section 49) of the Schedule. The appellant submitted that Co-operators was required to advise her of the statutory limitation period and that its failure to do so disentitled them from relying upon the statutory limitation defence. The Court of Appeal ruled that the statutory scheme should be read as an integrated whole such that an insurer cannot be said to have refused to pay benefits until it has complied with section 71.

In the words of Mr. Justice Sharpe: "... the purpose of s. 71 is to require an insurer to tell an unsophisticated person, in a simple and easy to understand written form, the procedure for resolving disputes pursuant to the statute." The majority of the court interpreted that to mean that the insurer was required to advise an applicant that if she wished to challenge the decision to terminate benefits, she had a right to request mediation through the Ontario Insurance Commission (now the Financial Services Commission of Ontario). In that way, the insurer would provide the precise information that the appellant needed at that point in her dispute, thereby satisfying the section 71 requirements and the consumer protection purpose of the enactment and its regulations.

While Mr. Justice Borins agreed with the majority's characterization of the purpose of section 71 and the conclusion that the limitation period does not start to run until the insurer has complied with section 71, he dissented on the requirements necessary for compliance with section 71. Mr. Justice Borins concluded that to comply with section 71, an insurer should provide, as a minimum, the following information:

• that the insured has the right to dispute the insurer's refusal to pay;
• that the right to arbitrate or file a claim depends upon the insured having sought mediation;
• that the right to arbitrate or file a claim is subject to a two-year limitation period, running from the insurer's refusal to pay; and
• that the release of the mediator's report extends the limitation period by 90 days.

Mr. Justice Borins found that the information provided by the insurer did not tell the insured person in a simple and easy to understand written form that the person had recourse to the dispute resolution process governed by sections 279 to 283 of the Act. Therefore, the limitation period did not begin to run and the appellant should not be precluded from proceeding with her claim. Smith was appealed to the Supreme Court of Canada. It was heard and a decision reserved on November 6, 2001.

ANALYSIS AND CONCLUSION

In Dachner v. Laurentian Pacific Insurance,⁴ the British Columbia Court of Appeal stated:

In my opinion, when an insurer seeks to rely on the running of a period of limitation whose commencement is fixed by the conduct of the insurer in denying coverage under a policy of insurance, the denial of coverage must be clear and unequivocal. I am also of the view that the evidence of equivocation need not be extensive or, indeed, strong.

The notice given by Allstate to Mr. Kuperman was deficient in many crucial aspects. The first Explanation of Benefits together with the letter of November 3, 1998 was deceptive in that it stated: "We are agreeing to pay for all the goods and services contemplated in the treatment plan ..." This cannot be treated as a clear and unequivocal denial.

The second Explanation of Benefits dated December 3, 1998 has no checks in the box entitled "item not payable" and instead, for each amount claimed has listed a lesser amount in the "amount payable" column. In the area entitled "Reasons why expenses are not payable," is written "cheque to follow." It, too, fails to provide a clear and unequivocal denial.

The third Explanation of Benefits dated December 23, 1998 also has no checks in the box entitled "item not payable" and instead has listed a lesser amount in the "amount payable" column. In the area entitled: "Reasons why expenses are not payable." is written "cheque to follow." This, too, fails to provide a clear and unequivocal denial.

As Director's Delegate Makepeace stated in Turner and State Farm Mutual Automobile Insurance Company:⁵

The balance of convenience also favours a strict notice requirement. The insurer has power to issue the notice, triggering the limitation period, and the requirement that the notice be clear and unequivocal is not onerous. On the other hand, an insured person who is statute-barred from proceeding with a claim is severely prejudiced: the claim is forever barred, no matter how meritorious.

Allstate never indicated to Mr. Kuperman that any payment was final and no further payments would be made.

Second, another component of a "clear and unequivocal denial" is missing from all three so-called notices. No reasons are offered in any of them for the reduction in the amount payable. It is left to the applicant, and indeed, the arbitrator, to speculate about why the amounts have been reduced. Is it because the number of treatment sessions has been reduced? If so, is it the quantity of laser, ultrasound, interferential therapy, chiropractic mobilization, active exercises or massage treatments which has been reduced? Or could it be that the number of treatment sessions has been approved but the treatment fee per session has been reduced? Are the amounts for treatment sessions being paid in installments? No answers have been provided to these questions.

Allstate may not rely on the statutory limitation period set out in subsection 281(5) of the Act and section 51 of the Schedule. Allstate did not provide Mr. Kuperman with a clear and unequivocal refusal of medical and rehabilitation benefits. It also did not provide to Mr. Kuperman reasons for reducing the amount of the medical and rehabilitation benefits to be paid. Therefore, Mr. Kuperman may proceed to an arbitration hearing.

EXPENSES:

I exercise my discretion to award Mr. Kuperman his expenses incurred in this preliminary issue hearing.

February 15, 2002

Judith Killoran Arbitrator

Date

Neutral Citation: 2002 ONFSCDRS 36 FSCO A01-000647

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

FIMA KUPERMAN 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. Mr. Kuperman is not precluded from proceeding to arbitration.
2. Mr. Kuperman is entitled to his expenses of the preliminary issue hearing.

February 15, 2002

Judith Killoran 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, 303/98 and 114/00.
2. 2Zeppieri and Royal Insurance Company of Canada, (OIC A-005237, February 17, 1994); upheld on appeal (OIC P-005237, December 22, 1994)
3. 32000 CanLII 4138 (ON CA), [2000]O.J. No. 408, appeal to S.C.C. heard and reserved on November 6, 2001.
4. 41989 CanLII 2723 (BC CA), [1989], 37 C.C.L.I. 212 (B.C.C.A.) p. 220
5. 5(FSCO Appeal P00-00046, February 1, 2002)