Neutral Citation: 2003 ONFSCDRS 101

FSCO A02-001682

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

DARREN FISK

Applicant

and

ING INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before:

Catherine Skinner

Heard:

April 14 and April 15, 2003, in Kenora, Ontario.

Appearances:

Edward Tawkin for Mr. Fisk

John H. Hornak for ING Insurance Company of Canada

Issues:

The Applicant, Darren Fisk, was injured in a motor vehicle accident on October 13, 2000. He applied for and received statutory accident benefits from ING Insurance Company of Canada ("ING"), payable under the Schedule.¹ ING terminated weekly income replacement benefits on June 10, 2002. The parties were unable to resolve their disputes through mediation, and Mr. Fisk applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The parties requested that I make a determination only on the issue of whether Mr. Fisk wilfully misrepresented a material fact in relation to his claim for accident benefits.

The parties agreed on the results that would follow from my determination of the issue of wilful misrepresentation. The parties made no submissions about the appropriate remedies in this case and did not request a determination on the issue of remedies.

The parties also agreed that I should determine the issue of entitlement to a special award pursuant to Subsection 282(10) of the Insurance Act.

The issues in this hearing are:

1. Did Mr. Fisk wilfully misrepresent material facts with respect to his application for a benefit?

2. Is Mr. Fisk entitled to a special award pursuant to Subsection 282(10) of the Insurance Act?

Result:

1. Mr. Fisk did not wilfully misrepresent a material fact with respect to his application for income replacement benefits.

2. Mr. Fisk is not entitled to a special award.

BACKGROUND:

Darren Fisk was injured in a rear end collision near Kenora on October 13, 2000. At the time of the accident, Mr. Fisk was employed by Northlands Inc., working on heavy equipment clearing bush. Mr. Fisk applied for and received income replacement benefits from ING in the amount of $400 per week for the period from October 20, 2000 to June 10, 2002.

ING terminated income replacement benefits on June 10, 2002, relying on Section 48 of the Schedule. ING claims that Mr. Fisk misrepresented his employment status to Dr. C. Hoy, a specialist in physical and rehabilitation medicine who conducted an insurer's examination ("IE") of Mr. Fisk on April 10, 2001. ING also claims that Mr. Fisk wilfully misrepresented a material fact in relation to his application for accident benefits because he did not inform ING that he worked for Dorsey Contracting from April 11, 2001 to May 22, 2001.

EVIDENCE AND ANALYSIS:

The Law:

Section 47 of the Schedule provides that:

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

(a) any benefit under this Regulation that is paid to the person as a result of... wilful misrepresentation...

Section 48 of the Schedule provides that:

48.(1) If an insured person has wilfully misrepresented material facts with respect to an application for a benefit, the insurer may terminate payment of the benefit.

In Michalowski and St. Paul Fire & Marine Insurance Company,² Arbitrator Blackman considered the application of Section 48 of the Schedule. Relying on the analytical approach taken in that case, I find that ING bears the onus of proving that there was a misrepresentation in this case, that it was wilful and that what was misrepresented was a material fact respecting an application for accident benefits.

Did Mr. Fisk misrepresent his employment status to Dr. Hoy?

The parties made no submissions on the issue of whether Sections 47 and 48 apply to representations made to IE doctors. They appear to assume, and so I accept without deciding, that Sections 47 and 48 may apply to representations made to IE doctors in some circumstances.

Evidence:

On April 10, 2001, Mr. Fisk attended an IE with Dr. Hoy, a specialist in physical and rehabilitation medicine practising in Winnipeg. Upon arriving at Dr. Hoy's office, Mr. Fisk completed a questionnaire entitled "About Your Work." In the questionnaire, under the heading "Work status today," Mr. Fisk indicated that he was receiving disability benefits. Significantly, Dr. Hoy did not ask Mr. Fisk personally about his employment status.

ING submits that, on April 10, 2001, Mr. Fisk had already accepted employment from Dorsey Contracting and knew that he would be starting on April 11, 2001. Accordingly, Mr. Fisk misrepresented his employment status when he indicated on the questionnaire that he was receiving disability benefits.

In support of its position, ING called Mr. Mark Ilot to testify. Mr. Ilot is the owner and operator of Dorsey Contracting. Mr. Ilot testified that he placed an advertisement in the local newspaper in February 2001 for a person to work in his shop and operate a skidder. Mr. Fisk sent him a resume. Mr. Ilot did not recall a specific date on which he offered Mr. Fisk a job. His testimony does suggest, however, that he offered employment to Mr. Fisk before April 10 since he recalls Mr. Fisk saying he had appointments with one or more doctors and could not start until the 11th. Mr. Ilot confirmed that Mr. Fisk began work on April 11, 2001.

Mr. Fisk testified that Mr. Ilot did not offer him a position with Dorsey Contracting until the evening of April 10, 2001. Mr. Fisk indicated that he received a phone call from Mr. Ilot on the evening of April 10, after Mr. Fisk and his wife, Cherie Lengyel, had returned from the appointment with Dr. Hoy in Winnipeg. Both Mr. Fisk and Ms. Lengyel testified that Mr. Ilot called before sunset on April 10.

In cross examination, ING questioned Mr. Fisk about the timing of the alleged phone call on April 10. It presented a receipt from The Keg restaurant in Winnipeg, indicating that Mr. Fisk was in Winnipeg at 7:50 pm on April 10. It questioned how Mr. Fisk could have received a phone call in Kenora before sunset when he was in Winnipeg at 7:50 pm that same evening.

Analysis:

On the issue of the timing of the offer of employment at Dorsey Contracting, I prefer Mr. Ilot's evidence to that of Mr. Fisk. Mr. Fisk's evidence concerning the timing of the telephone call is not consistent with the documentary evidence in this case which indicates that he was in Winnipeg until 7:50 pm. Although Mr. Fisk explained that the receipt from the Keg was obtained by friends with whom he was dining, Ms. Lengyel testified that she and Mr. Fisk dined alone at the Keg that evening.

Overall, Mr. Ilot has no interest in the outcome of this case and his testimony concerning the timing of the job offer was more plausible than that of Mr. Fisk. I find that Mr. Fisk knew about his employment at Dorsey Contracting on April 10, 2001 when he completed the questionnaire at Dr. Hoy's office.

I do not find, however, that Mr. Fisk's representation on that questionnaire constitutes a wilful misrepresentation. Mr. Fisk had not begun work on April 10, 2001 and he was receiving disability benefits from ING at that time. His representation in the questionnaire is therefore truthful.

The more significant question is whether his omission of information concerning his employment status constitutes a wilful misrepresentation. In his closing submission, counsel for Mr. Fisk submitted that an omission is not sufficient to constitute a wilful misrepresentation. Instead, he submitted that there must be a direct representation that is false in order for there to be a wilful misrepresentation.

This issue has been addressed in the Michalowski³ decision. Arbitrator Blackman found that an omission, or silence, may amount to a misrepresentation in circumstances where the evidence has persuaded "the finder of fact that both the requisite intent and the requisite materiality have been established." I agree with this analysis and accept that, in some circumstances, an omission may amount to a wilful misrepresentation.

In this case, I do not find that Mr. Fisk's omission of information during his examination by Dr. Hoy constitutes a wilful misrepresentation. Arbitrators have interpreted the term "wilful misrepresentation" as meaning an intentional or deliberate misrepresentation of a fact.⁴ I do not infer from the evidence that Mr. Fisk intentionally or deliberately set out to mislead Dr. Hoy or ING when he failed to indicate that he would be starting work the next day. Dr. Hoy did not ask Mr. Fisk personally about his employment status and there was no opportunity to indicate the exact nature of his employment status on the questionnaire. It would be equally reasonable to infer that Mr. Fisk did not appreciate that he had any obligation to reveal such information to Dr. Hoy.

The evidence does not support a finding that Mr. Fisk's omission was a deliberate attempt to conceal fundamental information concerning his application for accident benefits. I find that Mr. Fisk did not wilfully misrepresent a material fact concerning his employment status to Dr. Hoy on April 10, 2001.

Did Mr. Fisk wilfully misrepresent his employment status to ING?

ING submits that Mr. Fisk failed to advise it that he worked at Dorsey Contracting from April 11, 2001 to May 22, 2001. It was only in May 2002 that ING discovered that Mr. Fisk had worked for Dorsey Contracting the year before. ING submits that Mr. Fisk's failure to inform it of his employment at Dorsey Contracting constitutes a wilful misrepresentation of a material fact.

Evidence:

In support of its position, ING relies on the testimony of Rob Neill, an independent adjuster with NWO in Kenora, who handled Mr. Fisk's claim file on behalf of ING. In May 2002, Mr. Ilot, of Dorsey Contracting, informed Mr. Neill that Mr. Fisk had worked for him from April 11, 2001 to May 22, 2001. When Mr. Neill confronted Mr. Fisk with this information, Mr. Fisk indicated that he had already informed Mr. Neill by letter about his return to work at Dorsey Contracting. That same day, Mr. Fisk came to Mr. Neill's office with a copy of the letter informing Mr. Neill of his employment. Mr. Neill had never seen the letter before that day and could not find a copy of it in his file. Mr. Neill subsequently made a report to ING about Mr. Fisk's employment at Dorsey Contracting. Mr. Neill was not involved in the decision to terminate Mr. Fisk's benefits.

Mr. Fisk testified that he sent a letter to Mr. Neill within one or two days of beginning work at Dorsey Contracting in April 2001. The letter stated that Mr. Fisk was attempting a return to work effective immediately. Mr. Fisk indicated that the letter he mailed to Mr. Neill had a handwritten date on it. The copy of the letter filed in evidence is undated.

Mr. Fisk confirmed that, upon being confronted by Mr. Neill, he went to Mr. Neill's office with a copy of the letter he had previously sent. Mr. Neill told him that he would look for a copy of the letter in his file. Mr. Fisk did not hear again from Mr. Neill as to whether he had found a copy. The next communication he had from ING was the letter of June 10, 2002, terminating his benefits on the basis of his wilful misrepresentation of his employment status.

Mr. Fisk explained that he did not question the continuing payments of income replacement benefits during his period of employment with Dorsey Contracting because he believed that ING owed him money for property damage to his vehicle. He felt that the payments of income replacement benefits would offset the money owed to him on his property damage claim.

In this regard, Mr. Neill testified that, after some preliminary discussion at the onset of the claim, he and Mr. Fisk never discussed damage to Mr. Fisk's automobile. Mr. Fisk never wrote to him concerning damage to the automobile and Mr. Neill assumed that Mr. Fisk was not pursuing his claim for property damage. Mr. Pottker, the vehicle appraiser, testified that he attempted to reach Mr. Fisk on the telephone to discuss damage to his automobile caused by the October 12 accident. He left three or four messages, but Mr. Fisk never returned his call.

ING attempted to impugn Mr. Fisk's credibility on the issue of the letter and on several collateral issues.

ING urges me to find that Mr. Fisk did not send a letter to Mr. Neill in April 2001, but rather that he composed and printed a letter in May 2002, when confronted with the information concerning his employment. ING points out that all of Mr. Fisk's other letters to Mr. Neill were dated and that they all arrived at the NWO office without incident.

In this regard, Mr. Fisk explained that his wife Cherie Lengyel wrote most of his other letters but that he wrote the letter concerning his employment at Dorsey Contracting. This is the reason that the letter sent to Mr. Neill concerning Dorsey Contracting was not dated. Mr. Fisk cannot explain why the letter did not arrive at the NWO office but he confirms that he mailed it within a few days of beginning work at Dorsey Contracting.

In challenging Mr. Fisk's credibility, ING also highlighted a number of discrepancies between his testimony and the documentary evidence in several collateral areas. For example: Mr. Fisk's Initial Contact Form dated October 25, 2000 indicates that he had worked for Northwoods Inc. for two years; his application for benefits indicates that he had worked since August 15, 2000; the OCF 2 Employer's Confirmation of Income indicates that he had worked for Northwoods Inc. since October 15, 1999; and in Dr. Hoy's questionnaire he indicated that he had been hired one year before. This information is all at odds with Mr. Fisk's testimony that he had worked for approximately one month before the accident of October 13, 2000. It is also at odds with Ms. Lengyel's testimony that Northwoods Inc. was incorporated in March 2000 and did not exist prior to that date.

ING also referred to some inconsistencies in the reporting of income earned at Northwoods Inc. Mr. Fisk's income tax return for 2000 does not indicate any income earned from employment at Northwoods Inc. Ms. Lengyel, the owner and operator of Northwoods Inc., could not recall when a T4 slip for income earned at Northwoods Inc. was created. She testified that a T1 adjustment was prepared to report Mr. Fisk's earnings from Northwoods Inc. in March 2003, after ING requested Mr. Fisk's income tax return for 2000 at the pre-hearing conference in this matter. Ms. Lengyel could not recall the name of the accountant who prepared the T1 adjustment.

Analysis:

ING claims that Mr. Fisk wilfully misrepresented a material fact concerning his employment status by failing to advise it that he had returned to work at Dorsey Contracting. ING has attempted to meet its onus by impugning Mr. Fisk's credibility on the issue of the letter and on several collateral issues. It also relies on Mr. Neill's testimony that he was unaware of Mr. Fisk's employment with Dorsey Contracting until May 2002, one year after the employment ended.

Although I find that ING has met its onus of proving that Mr. Fisk engaged in a wilful misrepresentation, I do not find that he misrepresented a material fact.

On the question of whether there was a misrepresentation, I do not accept Mr. Fisk's and Ms. Lengyel's testimony that Mr. Fisk mailed a letter to NWO within a few days of beginning work at Dorsey Contracting in April 2001. Based on the unexplained inconsistencies in their evidence and discrepancies between their testimony and the documentary evidence in several collateral areas noted above, I find that their testimony is not reliable. Mr. Fisk did not adequately explain why the letter is undated, why he wrote this letter while his wife wrote all other letters to NWO, or why he printed off two copies of the letter at the time. His evidence concerning the letter lacked detail and consistency and I find it unreliable. Overall, it is implausible that NWO received every other letter sent by Mr. Fisk, but did not receive this one. Mr. Fisk's failure to advise NWO of his return to work constitutes a misrepresentation.

I find that Mr. Fisk's omission in this case was wilful. The term wilful has been interpreted as meaning deliberate or intentional. Mr. Fisk testified that he was aware of the need to apprise ING of any change in his employment status, but despite this he did not advise ING of his work with Dorsey Contracting.

I do not accept Mr. Fisk's explanation that he believed the continuing weekly benefits paid during his period of employment were meant to offset his property damage claim. There is no evidence that he had any conversation with Mr. Neill concerning such an offset. I do not find that there was any reasonable basis for Mr. Fisk to have believed that his income replacement benefits were being offset against reimbursement for property damage. I find therefore that Mr. Fisk engaged in a wilful misrepresentation by failing to advise ING of his return to work at Dorsey Contracting.

My conclusion in this case turns on my finding that Mr. Fisk's wilful misrepresentation was not of a material fact. In Michalowski, Arbitrator Blackman considered the meaning of the term "material" as it is used in Section 48 of the Schedule:

A major consideration in determining the correct meaning of the adjective "material" as used in section 48 must be the remedy available to the Insurer... The question of whether the misrepresentation is "material" will depend on the facts of the particular case, and may include a consideration of, amongst other things, what is misrepresented, what is obtained as a result of the misrepresentation, the relationship in monetary and other terms between the misrepresentation and the potential benefit available, and the availability of other provisions to assist the insurer (such as section 47 which deals with repayments)."

The Arbitrator went on to conclude that the applicant's failure to advise the insurer of short-term, part-time employment during a period when he was not receiving weekly benefits was not material.

In Szabo and CAA Insurance Company,⁵ Arbitrator Evans also considered the definition of the term "material." In that case, the applicant had misrepresented facts relating to his employment status when he applied to CAA for benefits. Determining that this was a misrepresentation of a material fact, the Arbitrator distinguished the decision in Michalowski in the following terms:

... I find that Michalowski is distinguishable as it dealt with an applicant's failure to advise an insurer of post-accident income and not with a fundamental aspect of the relationship between the two parties. A misrepresentation may be so basic or fundamental to this relationship - such as insurance coverage - that it may be found material without a profit and loss analysis... "

I rely on the analysis in Michalowski and Szabo, and find that a consideration of materiality must be made with reference to the specific facts of the case. An important consideration is whether the fact misrepresented is fundamental to the relationship between insurer and insured. In this case, Mr. Fisk misrepresented the fact that he returned to work for a period of approximately six weeks and that he earned approximately $3700 in income. It is undisputed that Mr. Fisk has not returned to work since May 22, 2001. The extent of Mr. Fisk's disability is not in dispute. Section 47 of the Schedule permits a repayment to ING of any overpaid benefits during the six-week period of employment.

In consideration of these factors, I find that Mr. Fisk's misrepresentation was not "material" within the context of Section 48 of the Schedule. I find that Mr. Fisk's return to work for a period of six weeks is not a sufficiently fundamental aspect of the relationship between himself and ING to be material. This case is distinguishable from Szabo, where the applicant's misrepresentation of his employment status affected his eligibility for benefits, the amounts and the commencement and termination dates for weekly benefits. In this case, Mr. Fisk failed to report post-accident income and ING has a remedy available to it for the recovery of any overpaid benefits during that period.

The parties agreed on the results to flow from my decision on this issue and, accordingly, I make no determination on the issue of remedy.

Special Award

The evidence does not support a finding that ING unreasonably withheld or delayed the payment of benefits in this case. Although I disagree with ING's interpretation of Section 48 of the Schedule in this case, I do not find it unreasonable.

EXPENSES:

The parties did not make submissions with respect to arbitration expenses. If they cannot now agree on the issue of expenses, they may request an appointment for a determination of expenses.

July 2, 2003

Catherine Skinner Arbitrator

Date

Neutral Citation: 2003 ONFSCDRS 101

FSCO A02-001682

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

DARREN FISK

Applicant

and

ING 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. Fisk did not wilfully misrepresent a material fact in relation to his application for accident benefits.

2. Mr. Fisk is not entitled to a special award.

July 2, 2003

Catherine Skinner 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, 114/00 and 482/01.
2. 2(FSCO A98-001492, July 9, 1999)
3. 3Ibid.
4. 4Adu-Poku and Kingsway General Insurance (OIC A96-000433, August 20, 1997)
5. 5(FSCO A02-000678, March 14, 2003)