Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2003 ONFSCDRS 108

Appeal P02-00017

Appellant

and

Respondent

Before:

Stewart M. McMahon

Representatives:

Ian D. Kirby for Pafco Insurance

Brian Sherman for Mr. Langdon

Hearing Date:

February 14, 2003

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

The appeal is allowed in part. Paragraphs 2 and 3 of the arbitration order dated June 7, 2002 are rescinded and replaced with the following.
Pafco Insurance Company shall pay Mr. Langdon interest in accordance with s. 46(2) as follows:

On the first invoice: from 30 days after receipt of the invoice;

On the balance of the first 15 sessions: from 30 days after receipt of the second invoice;

On the balance of the first 54 sessions: from 30 days after receipt of the fifth invoice.

Pafco Insurance Company shall pay Mr. Langdon a special award of $500.

July 17, 2003

Stewart M. McMahon Director's Delegate

Date

This decision is being released concurrently with Glinka and Dufferin Mutual Insurance Company, (FSCO P01-00002); Khaledi and Allstate Insurance Company of Canada, (FSCO P01-00046); and Amoa-Williams and Allstate Insurance Company of Canada, (FSCO P01-00052). Each of the accidents occurred after November 1, 1996 and, accordingly, these claims are made pursuant to the SABS-1996¹ The common issue can be stated as follows: if a Designated Assessment Centre ("DAC") reports that a medical expense is not reasonable and necessary, but an arbitrator ultimately decides that some, or all, of the expenses are payable, is the insured person entitled to interest on these expenses? Section 46(2) of the SABS-1996 states that an "insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly." Therefore, the resolution of this issue depends on if, and when, the payment became overdue.

In this case, the Arbitrator awarded Mr. Langdon interest on the treatment expenses awarded after arbitration. She also ordered Pafco to pay a special award of $1,000, on the basis that it failed to honour its obligations following the release of a DAC report. Pafco has paid the benefits awarded but challenges the order that it pay interest. Pafco also challenges the imposition of a special award.

A. When do benefits become overdue?

I disagree with the suggestion made by some insurers that a benefit can never be overdue in the event of a dispute, because the claimant has not yet proven the benefit is "due." However, I also reject the suggestion that a finding by an adjudicator that a benefit is owing, necessarily means the unpaid benefit was overdue, and therefore attracts interest.

The SABS-1996

At the risk of seeming to over-simplify an issue that has engendered a lot of debate, s. 46(1) of the SABS-1996, defines overdue. It states "[a]n amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this Part" [emphasis added]. Part X, which is entitled "Procedures for Claiming Benefits," contains the rules governing payment of the various benefits contained in the SABS. The specific rules relating to medical and rehabilitation benefits are found in s. 38. Therefore, for our purposes, s. 46 (1) can be read as follows:

An amount payable in respect of a medical benefit is overdue if the insurer fails to pay the benefit within the time required by s. 38.

In light of this, the first step in establishing a claim for interest pursuant to s. 46(2) is identifying the applicable payment obligation imposed by s. 38. The second step is to ascertain if the insurer has fulfilled that obligation within the stipulated time. I have highlighted the words "within the time required," because they suggest to me that careful attention must be paid to the point at which the insurer is obliged to make a payment. This temporal connection is reinforced by the wording of s. 46(2), which states that interest is payable "from the date the amount became overdue."

With one exception, I discuss below, if a disputed expense is submitted to a DAC assessment, and the report does not state the expense is reasonable and necessary, s. 38 does not impose any payment obligations, short of a finding by an adjudicator that a benefit is owing.² In the absence of an obligation to pay in advance of the order, there is no foundation for a finding that the amount was payable prior to the order.

The easiest way to establish that the insurer is not under an obligation to pay, prior to adjudication, is to walk through s. 38 highlighting the instances in which the insurer is obliged to pay.

Subsections 38(1) and (2) require the insured person to submit an application and treatment plan before expenses are incurred. Subsection 38(8) states that within 14 days of receiving these documents, the insurer must deliver a notice to the insured person stating whether it will pay for some, all, or none of the proposed treatment.

The insurer's acknowledgment that it will pay for at least some of the treatment triggers the first obligation to pay an expense. Subsection 38(11) states that the insurer shall pay for these services within 30 days of receiving the invoice. A failure to honour this obligation will result in a finding that the amount payable is overdue. Pursuant to s. 46(2) the insurer will be obliged to pay interest on this amount from 30 days after receipt of the invoice.

Subsections 38(12) and (13) provide that the insurer must arrange a DAC assessment if it has not agreed to pay for all of the proposed treatment. However, in keeping with the fact that this takes time, and the prevailing medical view is that soft tissue injuries respond best if treated promptly, s. 38(16) provides that even though the insured person is to be assessed by a DAC, the insurer must pay for the lesser of the first 15 sessions with a chiropractor or physiotherapist, or the total of such expenses incurred within six weeks after the accident.³ Section 38 does not contain any explicit statement about when these expenses must be paid. Counsel for Allstate in the Amoa-Williams case suggested that to be consistent, the insurer should pay for these services within 30 days of receipt of the invoice. This makes sense to me. This represents the second instance in which s. 38 imposes an obligation on the insurer to pay an expense. If an insurer fails to pay for these limited services within 30 days of receiving the invoice, the amount payable is overdue, and hence the insurer would also be responsible for the payment of interest pursuant to s. 46(2).

The insurer's obligations on receipt of the DAC report are set out in s. 38(14). Subject to a determination by an adjudicator, if the DAC reports that "an expense is reasonable and necessary for the insured person's treatment or rehabilitation, the insurer shall pay for the expense." Section 38(14) is silent on when this benefit must be paid. Again, to be consistent, the most apparent time is within 30 days of receipt of an invoice. This represents the third instance in which s. 38 imposes an obligation on the insurer to pay a benefit. Accordingly, these expenses are overdue if the insurer fails to pay them within 30 days of receipt of the invoice. It follows that interest is payable on these overdue payments in accordance with s. 46(2).

However, s. 38(14)(b) states that, subject to adjudication, if the DAC report is negative, the insurer is not required to pay for the expenses. The insured person can decide to pursue the treatment and commence legal proceedings, but the insurer is under no obligation to pay the expenses until there is a positive decision from a judge or arbitrator that the treatment was reasonable and necessary. This finding will oblige the insurer to pay for the expenses incurred by the claimant. The question remains, does it also trigger an obligation to pay interest pursuant to s. 46(2)? To my mind, the answer is no.

When considering the interest provisions found in the SABS, it is important to keep in mind that they are not the same as the pre-judgement interest provisions in s. 128 of the Courts of Justice Act, which provide (with some exceptions) that pre-judgement interest is payable whenever a party is entitled to an order for the payment of money. The event that triggers an obligation to pay interest in a civil proceeding is a finding that money is payable. In contrast, the event that triggers an obligation to pay interest pursuant to s. 46(2) of the SABS-1996 is not merely the determination that a benefit is owing – it requires an additional finding that the insurer failed to pay the benefit within the time required by s. 38. In the event that a matter is referred to a DAC, and the DAC releases a negative report, there is no obligation to pay until there has been a determination after trial or arbitration. Accordingly, I can see no basis for a finding that the insurer's failure to pay, in advance of the adjudicator's ruling, can be characterized as a failure to pay the benefit within the time required by s. 38.

This conclusion can be bolstered by asking when the insurer should have paid the benefit (in other words, when would the benefit be overdue on the grounds that the insurer had failed to pay in a timely fashion)? The only real option is 30 days from receipt of the account. But that is the date that applies in the event of a positive DAC. Clearly, the legislature intended a different result in the event of a positive DAC versus a negative DAC.

The evolution of the interest provisions in the 1990 and 1994 versions of the SABS supports this reading of the SABS-1996.

The SABS-1990

The 1990 version of the SABS was quite straightforward. It contained a general section that governed the payment of all benefits. Weekly benefits were defined as overdue if not paid within 10 days of receipt of a completed application. Medical and rehabilitation benefits were overdue if not mailed within 30 days of receipt of the application. With some minor exceptions, that are not relevant for our purposes, there were no provisions that displaced or nullified the insurer's obligation to pay benefits merely because of the existence of a dispute. Section 24(4) stated that "[t]he insurer will pay interest on overdue payments from the date they become overdue at the rate of 2% per month."

In Sebastian and Canadian Surety Company, (FSCO P96-00032, July 28, 1998), Director's Delegate Naylor considered a claim for interest on an award of weekly benefits. The principal dispute related to the amount of the benefit. The insurer argued that interest should only be awarded from the time Mr. Sebastian produced all the documents necessary to allow it to calculate the amount of his benefit. The Director's Delegate rejected this submission. She held that the obligation to pay interest pursuant to s. 24(4) of the SABS-1990 was mandatory and that there is "no residual authority or discretion." She then asked the question – when were the payments overdue? To answer that question she went directly to the payment obligations set out in s. 24. Because the insurer had failed to pay the full amount of the benefit within the time set out in s. 24(1) she concluded the benefit was overdue, and hence attracted interest from that date forward. This direct tie between an examination of the payment obligations set out in the SABS and the obligation to pay interest, is consistent with the approach I have adopted in the cases before me.

In Sebastian, the insurer argued that at 2% per month, the interest provisions were designed to punish the insurer for reprehensible conduct, and therefore, interest should not be awarded short of this kind of wrongdoing. The Director's Delegate rejected this submission. However, she acknowledged that the interest provisions in the SABS had a dual component. In addition to compensating the claimant for the value of the money withheld, she concluded that it was designed "to further the system's fundamental goal of ensuring prompt payment of benefits..." I had made the same observation a few months earlier in an arbitration decision dealing with caregiver benefits. See Urquhart and Zurich Insurance Company, (OIC A96-000368, February 26, 1998).

The SABS-1994

When considering the significance of these "prompt payment" comments, in the context of the 1994 and 1996 versions of the SABS, it is important to note that in Sebastian the Director's Delegate observed that "[t]he emphasis at the outset is on speedy payment with a minimum of formality." Both the SABS-1994 and the SABS-1996 contain a significant amount of process and formality, including detailed rules about when payments must be made, and when they do not have to be made. In light of these changes it is too simple to say that the interest provisions are part of a larger scheme designed to encourage prompt payment. Instead, it is now more accurate to say that the interest provisions are part of a larger scheme designed to encourage the insurer to pay in accordance with the rules and time-frames set out the in the SABS. Bill 164 removed the right to sue for pecuniary losses. Accordingly, the statutory accident benefits contained in the SABS-1994 were significantly expanded. There was a corresponding increase in the amount of process that attached to the application and payment provisions. For our purposes, the most important change was the introduction of the DAC system that was designed to provide the parties with an independent assessment of the claim. The DAC opinion is not the final word on the parties' rights and obligations – that is reserved to the judge or arbitrator – but the outcome of the DAC generally defines their rights and obligations pending adjudication. See M.D. and Halifax Insurance Company, (FSCO P00-00049, May 16, 2001).

The provisions governing the payment of all the principal benefits contain sections, similar to those found in the SABS-1990, that stipulate the insurer must pay on receipt of an application. In most cases, these obligations are accompanied by corresponding statements that the amount payable is overdue if the insurer fails to comply with these obligations. For example, the payment provisions governing weekly benefits are found in s. 62. Subsections 62(1) and (2) state that the insurer shall start paying these benefits within 14 days of receipt of an application, and every second week thereafter. Section 62(4) states that the amount payable is overdue if the insurer fails to comply with these obligations. Section 68 states that "the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of two per cent per month compounded monthly."

All of the decisions considering the interest provisions in the SABS-1994 deal with weekly benefits. The first decision to consider these provisions in any detail was Bajic and Pafco Insurance Company Limited and Zurich Insurance Company, (FSCO P00-00050, June 5, 2001). On appeal, the Director upheld an order that the insurer was responsible for the payment of interest on IRBs found to be owing after an arbitration hearing. The insurer argued interest should not accrue until the arbitration, and any appeals therefrom, were completed. The Director stated that overdue must be given some meaning, but was not prepared to go as far as the insurer urged. To ascertain if interest was owing, the Director examined the payment provisions in s. 62 and determined that the insurer was obliged to start paying IRBs within 14 days of receipt of an application, and to continue paying every two weeks thereafter, for as long as the insured was entitled to benefits. In light of these provisions, the Director found that the payments were overdue and awarded the insured person interest pursuant to s. 68. It is worth noting that the claimant did not request a DAC, and consequently, the case does not consider the interaction between the DAC rules and the definition of overdue.

Faraj v. Prudential of America General Insurance Co., [1999] O.J. No. 4574, did involve a consideration of the interaction between the DAC provisions and the payment of interest on IRBs. Mr. Faraj requested a DAC which reported he was no longer eligible for benefits. In accordance with the applicable provisions, the insurer terminated benefits following the release of the DAC report. However, while preparing for the ensuing litigation the insurer obtained a report from one of its own experts that contradicted the DAC. A few months later the insurer reinstated benefits and ultimately paid the arrears, but refused to pay interest pursuant to s. 68. Justice Thompson rejected the insurer's argument that the benefits were not overdue prior to reinstatement because there was still a dispute about causation up to that point. However, he also rejected the insured's argument that the amount was overdue as of the date of termination. Justice Thompson concluded that until the insurer's own expert contradicted the DAC assessment the insurer had "done everything it was required to do and nothing was overdue until someone said it was overdue." In the circumstances, he ordered interest, pursuant to s. 68, from the date of the report forward.

In Mercier v. Royal and Sun Alliance Company of Canada, 2003 CanLII 21638 (ON SC), [2003] O.J. No. 1233, Justice Quinn rejected the reasoning in Faraj, stating that in his view, the court put "too sharp a point on the meaning of 'overdue.'" He expressed the view that "[w]here it has been adjudged that benefits have been improperly withheld from a plaintiff, I can see no reasons in law or logic why those benefits should not attract interest." With respect, I disagree. I do not think it is possible to put too fine a point on the definition of overdue. To the contrary, a determination of entitlement to interest pursuant to s. 68 turns on a finding of overdue. I harken back to my earlier comment about the differences between the interest provisions in the Courts of Justice Act and the SABS. However, I note with interest that, after making these general comments, Justice Quinn embarked on the type of analysis that I have suggested is essential to an assessment of any claim for interest pursuant to the SABS. He looked at the insurer's obligations in s. 62(1) and (2) and the definition of overdue. Unfortunately, for our purposes, he did not go on to inquire into what, if any, effect the DAC provisions have on the issue of whether a payment is overdue.

The Court of Appeal has considered the question of interest on weekly benefits awarded after trial. In Attarvar v. Allstate Insurance Company of Canada, 2003 CanLII 7430 (ON CA), [2003] O.J. No. 213, the Court upheld a decision that interest was payable on the difference between the loss of earning capacity benefit ("LECB") paid by the insurer, which was based on the outcome of a DAC assessment, and the amount ultimately determined at trial. The payment of LECBs is also governed by s. 62 and, accordingly, the insurer is under the same obligation to begin paying these benefits within 14 days of receipt of an application, and every two weeks thereafter, and these payments are overdue if the insurer fails to comply with this obligation. Justice Laskin rejected the insurer's argument that the shortfall in the LECBs was not overdue because it had followed the DAC's recommendations. He noted that if the legislature had intended this result there would have been a statement to this effect in s. 62.

The common thread in all of these decisions is the link between the insurer's failure to meet its statutory obligation to pay the amount owing on receipt of the application, and a finding that the payment was overdue and hence attracted interest. The Court of Appeal took the matter one step further in the context of LECBs when it determined that a reading of s. 62 did not support the contention that the DAC rules were intended to supplant the obligation to pay the full amount of the benefit on receipt of the application.

These cases are important because they reinforce the link between the payment provisions contained in s. 62 and the interest provisions in s. 68. However, ultimately, the provisions governing the payment of medical and rehabilitation benefits are far more important to our deliberations because these sections contain direct links between the DAC rules and the definition of overdue.

The sections governing these benefits start with the universal obligation to pay on receipt of an application. However, from this starting point the insurer is given a number of sequential options governing the response to the claim. As the insurer moves through these options, the previous rules that define when it must pay are displaced by a fresh set of rules, and statements defining when the amount payable is overdue.

The most straightforward example of this sequence is found in the rules governing rehabilitation benefits. Section 45.1(1) states that the insurer shall mail or deliver benefits within 14 days of receipt of an application, and s. 45.1(2) stipulates that payments are overdue if the insurer fails to comply with this obligation. However, if the insurer asks for a certificate from a medical practitioner attesting to the reasonableness and necessity of the treatment, s. 45.1(3) states that ss. 45.1(1) and (2) do not apply. Instead, a new rule takes effect that obliges the insurer to pay within 14 days of receipt of the certificate, and the payment is overdue if the insurer fails to comply. Similarly, s. 45.1(4)(a) states that if an insurer refers a rehabilitation claim to a DAC, ss. 39.1(1)(2) and (3) no longer apply. The net effect of this sequence is that once the matter is referred to a DAC, the previous rules that define the insurer's payment obligations and the corresponding statements about when a payment is overdue, become irrelevant. In large measure, this sequence does what the Court of Appeal said was absent in the LECB context.

The rules governing payment on receipt of the DAC report are set out in s. 45.1(4)(b) and (c). They provide that the insurer must pay the disputed expense within 14 days of receipt of a positive DAC report, and the payment is overdue if the insurer does not comply. Therefore, if the insurer arranges a DAC assessment, but then fails to pay for any expenses the DAC states are reasonable and necessary, it will also be responsible for the payment of interest from 14 days after receipt of the report.

Can interest be payable pursuant to s. 68 in the event of a negative DAC report? A plain reading of s. 45 and 45.1 suggests the answer is no. It is clear from the opening words of s. 45(11) that the insurer's ultimate obligation to pay for treatment is determined by the adjudicator, not the DAC. However, interest pursuant to s. 68 only attaches to that award if the payment became overdue at some point in time. In the absence of any requirement to pay on receipt of a negative DAC, the benefit ultimately awarded by the adjudicator is not overdue prior to adjudication.

The provisions with respect to the payment of medical benefits under the SABS-1994 are a little more complicated. The provisions governing the payment of some types of medical expenses track the rehabilitation provisions. In other cases, a referral to a DAC does not automatically displace the insurer's obligation to pay on receipt of the certificate. However, on my reading of these provisions, once the DAC report is released, the insurer's prior obligations are displaced, and its ongoing obligations, pending adjudication, are determined by the outcome of the DAC.

Conclusion

Interest is not payable in the SABS-1994 context because the initial obligation to pay is displaced once a referral is made to a DAC, and because the only obligation to pay imposed by the DAC provisions is tied to the release of a positive DAC report. The SABS-1996 is even more straightforward because there is no initial obligation to pay. In the absence of an obligation to pay, there is no statutory basis for saying that the insurer failed to pay the disputed expense "within the time required by s. 38." In light of this, there can be no basis for a finding that the benefit was overdue, and hence no basis for the imposition of interest pursuant to s. 46(2).

In addition to a plain reading of the provisions, I think that the rationale for the interest provisions in the SABS also supports a conclusion that interest should not be payable in the event of a negative DAC report.

Modern theories of pre-judgement interest suggest that it is designed to compensate the successful party for the loss in the value of money that occurs in the interval between the time they became entitled to the money, and the date of judgement. At the same time, it deprives the unsuccessful party of any benefit they may have gained from holding onto the money. See M.A. Waldron, The Law of Interest in Canada (Scarborough: Carswell, 1992) at p.127. In this sense, pre-judgement is designed to be neutral. These theories were developed in the context of pre-judgement interest rates tied to commercial rates. However, at 2% per month (either simple or compound), the interest payable pursuant to the SABS is not neutral. It does more than compensate the insured for the delay, or deprive the insurer of any benefit gained from the use of the money pending judgement. It represents a penalty that is imposed in the event of an overdue payment.⁴ This penalty component is the incentive designed to encourage the insurer to pay within the time-frames set out in the parts of the SABS that define the insurer's payment obligations. Imposing interest in the event of non-compliance encourages the insurer to meet its obligations. However, this incentive is negated if the interest is payable in any event.

This interpretation of the interest provisions means that a claimant will not be compensated for the loss in the value of benefits that are not paid until after judgement. This is an important consequence that cannot be ignored. However, any consideration of the relationship between the obligation to pay interest and the DAC provisions must consider all the consequences that flow from the release of a DAC report. A positive DAC report triggers an obligation to pay for disputed benefits pending the outcome of the litigation. This is a significant departure from traditional contract principles, and represents a significant advantage in favour of the claimant. The inability to claim interest after a negative DAC is part of the balancing integral to this system. In addition, if the claimant is ultimately unsuccessful at trial or arbitration, they will be obliged to repay the benefits that post-date the DAC, but it is not obvious to me that the insurer is entitled to demand interest on the repayment. In this respect, the interest provisions following a DAC report work in tandem.

For all of these reasons, I am satisfied that if the insurer refers a dispute over medical benefits to a DAC, which delivers a negative report, but a judge or arbitrator later finds that the treatment is reasonable and necessary, the insurer will be responsible for payment of the treatment, but will not be responsible for the payment of interest pursuant to s. 46(2), prior to adjudication because the amount awarded was not overdue before that time.

Having said this, the question of whether interest is payable will often be complicated by the fact that it is not uncommon for the DAC to assess the person after most of the treatment contained in the initial treatment plan has already been undertaken. This problem can be exacerbated by the fact that the DAC reports often comment only in prospective terms, and it can be difficult to determine what, if any, opinion they are proffering on the past treatment. All of the cases before me exhibit these difficulties. However, for the purposes of these appeals, counsel have largely ignored these elements and with one significant exception, have argued the matter on the basis that the DAC rejected the proposed treatment, but the insured person chose to pursue the treatment anyway, and ultimately succeeded in establishing entitlement to the benefits in issue. One significant wrinkle in the Khaledi and Langdon cases is the existence of a dispute over the hourly rate charged by the treatment centres. I will deal with this issue in the individualized portions of the affected decisions.

B. Application of the law to Mr. Langdon's situation

Mr. Langdon was injured when his motor vehicle was struck from the rear on March 12, 1999. The Arbitrator found that he sustained a concussion and whiplash type injuries to his neck and upper back. Mr. Langdon was referred to Target Rehabilitation Centre which began to treat him immediately. Target prepared a treatment plan that proposed four to six weeks of active and passive treatment at an estimated cost of $3,200. Pafco rejected this treatment plan and arranged a DAC. At the end of the first treatment plan, Target filed a second plan that called for an additional four to six weeks of treatment.

The DAC reported in June 1999 that Mr. Langdon required two further weeks of treatment. Despite this opinion, Mr. Langdon continued to attend at Target for ongoing treatment until December 1999. Mr. Langdon attended for 99 sessions at a cost of $150 per session.

In November 1999, Pafco paid for the first 54 sessions. During the appeal, Mr. Langdon advised that this number coincided with the number of sessions recommended by the DAC. However, Pafco paid at the rate of $50 per session, not the $150 charged by Target. In a decision dated June 2, 2002, the Arbitrator found that all 99 sessions were reasonable and necessary, but that the pre-session fee of $150 was not reasonable. She fixed the per-session fee at $60.

On the question of interest, the Arbitrator referred to the decisions in Glinka, and Khaledi, noting that she preferred the reasoning in Khaledi. She also noted that in contrast to those cases, the DAC that assessed Mr. Langdon opined that a significant portion of the treatment at issue was reasonable and necessary. Target issued 11 invoices over the course of the eight months it treated Mr. Langdon. The Arbitrator found that the payments were overdue 30 days after each of these invoices were received by Pafco, and hence interest was payable from these dates onward.

For the reasons set out in the common part of these reasons, I conclude that the Arbitrator erred in awarding Mr. Langdon interest on the expenses associated with the treatment beyond what the DAC stated was reasonable and necessary (sessions 55 through 99). However, I see no error in her conclusion that Mr. Langdon was entitled to interest on the first 54 sessions with one proviso.

As discussed earlier, the basic premise behind s. 38 is that the assessment will take place before the bulk of the contested treatment is undertaken. However, in keeping with the need to facilitate prompt treatment of typical soft tissue injuries, the legislation requires an insurer to pay for the first 15 sessions with a physiotherapist or chiropractor. It would appear that it took some time to arrange the DAC assessment, and Mr. Langdon undertook approximately 45 sessions before the report was delivered. However, Mr. Langdon indicated during the appeal hearing, that he was not blaming Pafco for the delay. Target invoiced Pafco for approximately 40 of these sessions prior to the release of the DAC report.

I see no reason why a claimant cannot submit invoices for the first 15 sessions as soon as they are undertaken, as was done in this case. The payment for these sessions became overdue 30 days after delivery of the invoices. Consequently, I agree with the Arbitrator's conclusion that Pafco is responsible for the payment of interest on these payments pursuant to s. 46(2) starting 30 days after delivery of the invoices.

However, I do not think Pafco should be responsible for the payment of interest on the balance of the first 54 sessions until after the release of the DAC report, because it was not until the receipt of that report that Pafco was under any obligation to pay for these additional sessions. The first invoice that post-dates the DAC is dated June 28, 1999. Payment for the balance of the first 54 sessions became overdue 30 days later, and the Insurer is responsible for the payment of interest on these amounts pursuant to s. 46(2).

III. DID THE ARBITRATOR ERR IN AWARDING MR. LANDGON A SPECIAL AWARD OF $1,000?

Notwithstanding the Arbitrator's ultimate finding that the appropriate per-session fee was $60, she found that when Pafco received the DAC report, it was obliged to pay the full cost of the treatment set out in the treatment plans [based on $150 per session]. In her view, it did not have the discretion to reduce the fee to accord with its own beliefs of what was reasonable [$50 per-session]. She found that this breach amounted to an unreasonable withholding of the benefits owing at that time, and therefore imposed a special award of $1,000. I agree with the Arbitrator's conclusion that Pafco was obliged to pay the full amounts set out in the treatment plans, and that accordingly, the payments were unreasonably withheld. However, I disagree with the way she calculated the amount of the special award.

It is the responsibility of the DACs conducting medical and rehabilitation assessments to comment on, or make recommendations about, the reasonableness of the goods and/or services in dispute, including their expense. In addition, DACs can comment on the reasonableness of fees as they relate to treatment. [emphasis added]

If Pafco took issue with the per-session fee, its option was to ask the DAC to address the question and, if it did not agree with the DAC's conclusion, to challenge the claim through the dispute resolution system. In the interim, it was under an obligation to pay the full amount set out in the treatment plan.When Pafco did not pay the full amounts set out in the treatment plans, it failed to honour its obligations and the Arbitrator quite correctly found that the Insurer had "unreasonably withheld payments." However, I agree with Pafco's submission that the award cannot stand because of the way the arbitrator calculated the amount on which to base the special award.

According to s. 282(10) of the Insurance Act, the maximum amount the Arbitrator could have awarded was "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." The amount to which Mr. Langdon was entitled "at the time of the award" was the difference between the $50 per session paid by Pafco, and the $60 per session the Arbitrator awarded Mr. Langdon. This amounts to $540. Even if the interest is factored in, the maximum special award could not have been $1,000. Accordingly, the Arbitrator's order cannot stand.

This result is unfortunate in some respects, because it represents a disconnect between the amount of the payment that was unreasonably withheld, and the amount on which the special award is based. At an earlier stage in the proceedings Mr. Langdon might have had other options, such as moving for an interim order compelling Pafco to pay in accordance with the DAC report. However, I am satisfied that the wording of s. 282(10) leaves no room for any other result when calculating the maximum amount of the special award.

The parties asked me to fix the amount of the special award if I concluded that it must be based on $540 plus interest. Although the Arbitrator is in the best position to fix the amount, I agree that the cost of returning the matter to the Arbitrator is too high given the amounts involved. The Arbitrator found that Pafco's breach was not as "egregious" as it might have been, and that it called for a "relatively small special award." My assessment of the amount of the special award must be based on this finding. The only thing I would add is that when the benefits withheld are small, there is some room to fix a number that is closer to the maximum than would otherwise be appropriate, to avoid a special award that is all but meaningless. Given these factors, I fix the amount of the special award at $500.

IV. EXPENSES

The appeal was successful, but I did not accept all of Pafco's arguments on the interest issue, and it is still obliged to pay Mr. Langdon some interest. In addition, it will still have to pay Mr. Langdon a special award, albeit at a lesser amount. However, more importantly, the decisions on the interest issue at the arbitration level have been split, and there is a general benefit to having this issue decided at the appellate level. Mr. Langdon was represented by an owner of the treatment centre, and it was apparent that the representative was dealing with the appeal principally as a matter of self-interest. In these circumstances, each party shall bear their own expenses of the appeal.