Neutral Citation: 2003 ONFSCDRS 139

FSCO A03-000262

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

SEYED SINA OLFATI

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

David J. Evans

Heard:

July 3, 2003, at the offices of the Financial Services Commission of Ontario in Toronto.

Written submissions were received on July 14, 2003.

Appearances:

Majid Yazdani for Mr. Olfati

Darrell March for Wawanesa Mutual Insurance Company

Issues:

The Applicant, Seyed Sina Olfati, was injured in a motor vehicle accident on June 1, 2002. He applied for statutory accident benefits from Wawanesa Mutual Insurance Company ("Wawanesa"), payable under the Schedule.¹ Wawanesa has not paid any benefits, relying on Mr. Olfati's non-attendance at the insurer's examination (IE). The parties were unable to resolve their disputes through mediation, and Mr. Olfati applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

Is Mr. Olfati precluded from proceeding to arbitration on all issues in dispute because of his failure to make himself reasonably available for an insurer's examination with respect to his housekeeping claim, pursuant to sections 42 and 50 of the Schedule?

Result:

Mr. Olfati is not precluded from proceeding to arbitration on any issues in dispute.

EVIDENCE AND ANALYSIS:

Mr. Olfati, a student, alleges that he was injured in an accident on June 1, 2002. He completed an Application for Accident Benefits on June 19, 2002, claiming a number of benefits, including housekeeping.

Subsection 42(1) of the Schedule allows an insurer, for the purpose of determining whether an insured person is entitled to a benefit such as housekeeping, to require the insured person to attend an IE to be examined by one or more qualified persons specified by the insurer. Specific notice must be given by the insurer to the insured person.

On August 16, 2002, Ms. Cathie Darling, a claims adjuster with Wawanesa, wrote to Mr. Olfati advising him that she had scheduled an IE for an in-home occupational therapy assessment with Ms. Lyndy Goldlust for September 6, 2002, "with regard to your housekeeping needs. As per section 42(8), it is essential that you attend this assessment. Failure to do so will jeopardize your housekeeping benefits." [Bold in the original]

The letter only refers to an IE of the housekeeping claim. Its only warning of the penalties for failing to attend the IE is the reference to subsection 42(8), which provides that benefits are suspended and none are payable for the period after giving notice of the IE and until the insured submits to the examination.

On September 9, 2002, Ms. Goldlust wrote to Ms. Darling advising her that the IE was cancelled:

The claimant was called prior to arriving at the assessment and I was advised by his father that the claimant was at school and would not be home for the assessment. He stated he had faxed a letter to Wawanesa Insurance.

Mr. Olfati's father, Mr. Seyed M. Olfati, testified that when Ms. Darling's letter of August 16, 2002 arrived, he asked his representative to obtain a new IE date because his son was just starting college and would be at school on September 6. He testified that he also faxed a letter to his representative. Wawanesa submits that it received no such communication before the IE date.

Wawanesa submits that Mr. Olfati is now barred from disputing any of his claims, relying on the provision in paragraph 50(b) that an insured person shall not commence a mediation proceeding (and by extension an arbitration proceeding) unless he or she made himself or herself reasonably available for any IE required by the insurer.

First, I find that Wawanesa's proposed remedy is too broad in seeking to bar Mr. Olfati from accessing arbitration on any of his claims. The notice to Mr. Olfati referred only to his house-keeping claims. (Even in a follow-up letter to Mr. Olfati on September 25, 2002, Ms. Darling only referred to housekeeping and set out that no such claim would be payable for the period from the initial notice until he attended an IE.)

I accept the principle enunciated by Arbitrator Palmer in Avdalimov² that the exclusion provisions in section 50 should be read narrowly. Thus, in Martinov,³ Arbitrator Skinner held that an insured's failure to attend an IE with respect to housekeeping and caregiving expenses did not preclude her from proceeding to arbitration with respect to a claim for the costs of examinations.

Wawanesa relies on the Lopez appeal decision⁴ in support of its position. However, in that case the applicant had failed to attend a disability assessment regarding her claim for income replacement benefits (IRBs), and she sought arbitration only for her IRBs. She was excluded from arbitration with respect to her IRBs. I find no support for Wawanesa's broad position in Lopez.

Accordingly, I find that any exclusion of Mr. Olfati under clause 50(b) is only with respect to his housekeeping claim.

However — and this brings me to my second point — I find that the notice to Mr. Olfati is fatally flawed because Ms. Darling's letter only referred to clause 50(b) and did not set out in straight-forward and clear language, directed towards an unsophisticated person, the full effects of not attending an IE.

I adopt the reasoning of Arbitrator Blackman in Antony,⁵ where he also discussed a faulty IE notice:

Of greater concern is the single statement in RBC's April 25, 2003 letter that "failure to attend these appointments may affect your entitlement to benefits unless notification is received by our office." The Schedule gives an insurer very significant remedies where its insured fails or refuses to submit to an IME, [insurer's medical examination] including, under paragraph 42(8)(b), that no benefit is payable for the period after giving notice of the IME and until the insured submits to the examination. Such critical and material consequences are hardly made clear in RBC's letter.

I agree with the Applicant's submission of the applicability of the comments of the Supreme Court of Canada in Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] S.C.J. No. 34, that "insurance law is, in many respects, geared towards protection of the consumer . . . [which] obliges the courts to impose bright-line boundaries between the permissible and the impermissible without undue solicitude for particular circumstances that might operate against claimants in certain cases."

Arbitrator Blackman went on to hold that the insurer did not meet its general obligation "to set out the consequences of non-attendance with sufficient specifics such that an insured can make an informed decision whether or not to attend." I find that to be equally the case here.

The Insurer submits that, first, Antony does not apply because, unlike in this case, the insurer had warning that Ms. Antony would not attend the IEs and, second, "the Insurer's termination of benefits was based upon the Insurer's objective interpretation of the relevant criteria . . ." I do not find the submissions persuasive, as they do not address the issue of the faulty notice.

The Insurer submits that the Smith case does not apply because it dealt with the more severe consequences of an entire claim being denied from adjudication for failure to meet a limitation period. However, that is the effective consequence in this case should I accept Wawanesa's argument. Furthermore, I do not find that submission persuasive because the Supreme Court was emphasizing the importance of consumer protection, and Wawanesa's notice fails to meet that expectation. Finally, the combined effects of sections 42 and 50 are indeed severe, as the applicant potentially is permanently denied certain benefits and cannot dispute them until he or she complies — as Arbitrator Blackman pointed out.

The follow-up letter Ms. Darling sent on September 25, 2002 did specifically and clearly mention at least one adverse effect of non-attendance — that benefits are not payable for the period of non-attendance. However, the letter was not a renewed notice of an IE. Ms. Darling provided no new date for an IE. Instead, Ms. Darling set out the adverse effect and then put the onus on Mr. Olfati to set up an IE: "At this time, it is your responsibility to contact the writer (in writing) to reschedule the Insurer's Examination." I find that in these circumstances the additional information the second letter provided did not cure the defects of the notice.

Accordingly, I find that Smith applies and I agree with the reasoning of Antony.

I find that the notice was defective on another fundamental ground, as subsection 42(4) of the Schedule requires that the insurer "shall make reasonable efforts to schedule the examination for a time that is convenient for the insured person . . ." However, Ms. Darling's notice required Mr. Olfati to contact her:

If you cannot make this appointment, we require 72 hours notice and a valid reason for cancellation. If proper notification is not received you will be responsible for any cancellation fees.

I find that this letter does not meet the requirements of subsection 42(4) because the Insurer made no efforts to schedule the IE at a convenient time for Mr. Olfati, let alone any reasonable efforts. Wawanesa submitted that Lopez stands for the proposition that once it is established that the IE itself is reasonable, the applicant is obliged to explain or provide a reason for the non-attendance. However, the situations differ: as noted above, Lopez dealt with a disability assessment and not an IE, and Ms. Lopez herself had requested the assessment, whereas here Wawanesa requested it. Furthermore, an aspect of the reasonableness of an IE is its timing; I find that where an insurer makes no efforts to schedule a convenient time for an IE, it cannot then say the onus is on the applicant to advise it of the timing problem.

Accordingly, I find that Mr. Olfati is not precluded from proceeding to arbitration on any issues in dispute because of Wawanesa's faulty IE notice.

EXPENSES:

I leave the matter of expenses to the main hearing.

September 16, 2003

David J. Evans Arbitrator

Date