Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2003 ONFSCDRS 27

Appeal P02-00023

OFFICE OF THE DIRECTOR OF ARBITRATIONS

GREGORY FISH

Appellant

and

KINGSWAY GENERAL INSURANCE COMPANY

Respondent

Before:

Nancy Makepeace

Representatives:

Rachel Urman for Mr. Fish

Jamie Pollack for Kingsway General

Hearing Date:

February 11, 2003

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.1.8, as amended, it is ordered that:

The appeal is dismissed, and the arbitration order, dated August 1, 2002, is confirmed.
The parties shall bear their own appeal expenses.

March 4, 2003

Nancy Makepeace Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This appeal is about special awards for delayed benefit payment. Mr. Fish submits that the Arbitrator made an error of law in her interpretation of subsections 35(4) and 44(1) of the SABS-1996,¹ which govern the method and timing of income replacement benefit ("IRB") payments. He also claims she erred in failing to order a special award, under subsection 282(10) of the Insurance Act, in relation to Kingsway's delays in making IRB payments and arranging a direct billing plan with his pharmacy.

Although some aspects of the decision are problematic, I am not persuaded the Arbitrator erred in law.

II. BACKGROUND

Mr. Fish was seriously injured in a motor vehicle accident on June 24, 1999. He claimed accident benefits including income replacement benefits, attendant care benefits, medical benefits for prescription medications, and rehabilitation benefits for college tuition fees. The parties settled their dispute on November 28, 2001, about a week before an arbitration hearing that was scheduled to begin on December 3, 2001.

The agreement required Kingsway to pay ongoing IRBs and to "direct pay" his medication expenses. Mr. Fish claimed these payments were unreasonably delayed, warranting a special award under s. 282(10) of the Insurance Act. This dispute was heard at an arbitration hearing on April 11 and June 20, 2002.²The Arbitrator set out the relevant parts of the settlement agreement:

As part of the agreement, Kingsway paid Mr. Fish $45,000 "inclusive of all claims, interest, costs, G.S.T. and disbursements" and Mr. Fish released them from any claims arising from the accident for attendant care benefits, damage to clothing, and claims up to November 28, 2001 for medical and rehabilitation benefits, past income replacement benefits and a special award. Kingsway also agreed to pay Mr. Fish income replacement benefits (IRBs) so long as he qualified and at least until he finished the course he was enrolled in at Durham College. Kingsway also agreed to pay for some further psychological and bio-feedback treatment and Mr. Fish agreed to provide a list of disbursements incurred, which apparently then totalled some $9,300.

With respect to the specific issues in dispute here, the paragraphs below are taken directly from the agreement.

The insurer agrees to pay to the insured his Income Replacement Benefits within the time limits as set out in the Statutory Accident Benefit Schedule - Accidents on or After November 1, 1996.
The insurer agrees to direct pay the Insured's drug and prescription accounts at his pharmacy.³

Mr. Fish and his wife testified that IRB payments since the settlement were erratic, causing great distress and financial hardship to the family. The Arbitrator stated that she appreciated Mr. Fish's frustration:

Particularly in a case like this one, where an insurer has agreed to pay the benefits for a period into the future, direct deposit into Mr. Fish's bank account would be a significant improvement over the manual system Kingsway has in place.⁴

However, the Arbitrator agreed with Kingsway's interpretation of the IRB payment provisions in the SABS-1996 – the insurer must mail each payment within the two-week benefit period, but need not prove the insured person received it within that period. Accordingly, if the payment is late, interest is paid from the last day of the benefit period to the date of mailing.

The Arbitrator found that only one of the ten IRB cheques Mr. Fish received between November 28, 2001 and the April 2002 hearing was proved to be late, and Kingsway had paid interest on the overdue amount under the SABS. She found that the evidence of Mr. Fish and his wife about the timing of the remaining payments was not precise. The Arbitrator also found that Kingsway had overpaid Mr. Fish's IRBs by one week.

A cheque for the period November 21-28, 2001 had already been printed by the time the parties reached their agreement, and was mailed to Mr. Fish afterwards. The Arbitrator implied that the overpayment compensated for any delays. Accordingly, Mr. Fish was not entitled to a special award with respect to IRBs.

The Arbitrator found that the delay in setting up direct payment for Mr. Fish's prescription medications resulted in part from the omission of detailed arrangements in the agreement, misunderstandings between Mr. Fish's lawyers and Jan Rutherford, the independent adjuster Kingsway hired to administer his drug benefits, and difficulties Ms. Rutherford faced in making the arrangements with the pharmacy. Ms. Rutherford reached an agreement with Mr. Fish's pharmacy on January 28, 2002, but it was not until February 22, 2002 that she sent the pharmacy a $500 cheque from Kingsway to fund the direct payment account. As a result of the delay, Mr. Fish testified that he went without needed medications for some time.

The Arbitrator reached the following conclusion:

Mr. Fish is frustrated in dealing with a large cast of characters: his own lawyers, an adjuster, an insurance company, their lawyers, and numerous health practitioners, all as a result of the injuries he received in the accident. I sympathize with him and commend his efforts in upgrading his qualifications at Durham College, in a rigorous, condensed program. The communication and coordination among all parties concerned with the implementation of the two aspects of the agreement I am dealing with in this arbitration has not been exemplary. Particularly, Mr. Fish seems to have been left in the dark at times. On other occasions Ms. Rutherford was left out of the loop.

I have found that the delay in establishing a medication account in this case was unreasonable, largely attributable to Kingsway, and warrants imposition of a special award. The account should have been in place by December 19, 2001. However, setting the amount of the special award is problematic when no evidence whatsoever was presented of the cost of the prescriptions involved, and that is the base criterion upon which such an award is founded. [footnoted citation of s. 282(10) omitted]

Accordingly, I find myself unable to impose a special award, because I have no evidence of the amount of the benefit to which Mr. Fish would have been entitled over the period of unreasonable delay.⁵

III. ANALYSIS

On appeal, Mr. Fish submits that the Arbitrator erred in her interpretation of the IRB payment provisions of the SABS. He argues that s. 35(4) and s. 44(1), when read together and given their plain meaning, and considering their legislative evolution and purpose, require insurers to mail IRB cheques early enough to make reasonably sure the benefits are received by the insured person within the benefit period. He also submits that the Arbitrator made several factual errors that amount to errors of law. He challenges her finding that he was not entitled to an IRB cheque for the week of November 21-28, 2001;⁶ that no one explained to him why he continued to receive IRB cheques at the old rate ($252.98 per week) after the settlement agreement and did not receive top-up cheques (to $400 per week) until January 2002;⁷ and that he provided no precise evidence of unreasonable delay in payment of benefits since December 2001.

Kingsway relies on Arbitrator Palmer's reasoning about timely IRB payment. It submits that as appeals are restricted to questions of law,⁸ it is not open to Mr. Fish to re-try the arbitration by framing his appeal in terms of disregarding or misapprehending the evidence. In any event, Kingsway relies on the Arbitrator's assessment of the evidence.

I find that the Arbitrator misapprehended the evidence on several points, but I am not persuaded the errors are serious enough to affect the outcome of the appeal. I am not persuaded the Arbitrator erred in law.

C. Income Replacement Benefits

1. Method and Timing of Income Replacement Benefits Payments

Subsection 35(4) of the SABS-1996 states:

An insurer that is required to pay an income replacement, non-earner or caregiver benefit shall pay the benefit at least once every second week.

Subsection 44(1) deals with method of payment:

An insurer shall pay a benefit under this Regulation,

(a) by mailing or delivering a cheque payable to the person entitled to the benefit to the address where the person ordinarily resides; or

(b) with the consent of the person entitled to the benefit, by electronic funds transfer to an account in the name of the person.

Mr. Fish submits that the SABS-1996 requires an insurer to ensure, to the extent possible, that payments are received by the insured person during the benefit period, at least once every second week. He submits that the Arbitrator erred in law in finding that they need only be mailed within the benefit period. He submits that s. 44(1), which refers to "mailing or delivering," addresses only the method of payment; the timing of payment is governed by s. 35(4), which is mandatory ( "shall pay"). He submits that the plain meaning of "pay" involves an actual exchange of funds, not just making arrangements for a future exchange. In his submission, this interpretation gives s. 35(4) a purposive reading, since the SABS is intended to promote prompt payment of benefits on which insured persons rely. Mr. Fish also argues that the change in language from "shall mail or deliver," in s. 24(1) of the SABS-1990 and s. 62(2) of the SABS-1994, to "shall pay," in s. 35(4) of the SABS-1996, reflects the legislature's commitment to ensuring that benefits reach the insured person in a timely way.

I agree with Mr. Fish that, as a matter of common sense, an amount of money is paid when it is actually handed over, whether it is received in the mail, hand-delivered, or transferred electronically. However, I accept Kingsway's submission that the ordinary meaning of "pay" is not determinative because in s. 44(1), the drafters of the SABS defined the term to include "by mailing." Since the SABS-1996, like its predecessors, lacks a "mailbox rule," and the drafters of s. 35(4) must be presumed to know that surface mail is not instantaneous, like personal delivery or electronic funds transfer, the date of mailing is deemed to be the date of payment. If the drafters had intended to ensure that the insured person receive the benefit within the benefit period, it would have been easy to say so. I agree with Kingsway that the change in the wording of this provision is merely formal, not substantive.

Administrative convenience also favours Kingsway's position. Kingsway submits that Mr. Fish's interpretation would lead to "an absurd, unreasonable and unworkable result" because insurers cannot know or control how long mail delivery will take. Mr. Fish concedes allowances must be made for unpredictable delays. In his view, the insurer’s obligation is to take reasonable steps to ensure receipt within the benefit period. In this case, he argues, Kingsway should have allowed two or three days for the cheque to get from its Mississauga office to his home in Oshawa.

The speed of mail delivery depends on any number of factors, including geographical distance between an insurer's office and an insured person's home. I have no difficulty stating that insurers should make reasonable efforts to allow for mail delays and ensure prompt payment, but Mr. Fish's position would make it difficult to determine when payments are "overdue" and begin to attract interest under s. 46 of the SABS.

I know of no cases directly on point. It may be the issue is seldom litigated because mail delays are generally in the order of days, so that the difference in the interest payment is inconsequential. As well, when benefits are paid regularly on an ongoing basis, it may not matter to an insured person that the cheque for the benefit period ending on a Friday is received the following Wednesday, because he received his previous benefit cheque on the Wednesday exactly two weeks earlier. In this case, the real problem appears to have been Kingsway's pattern of erratic and delayed payment. Mildred Metcalfe, Kingsway's claims supervisor, testified that the Insurer frequently mails out six or eight IRB cheques at a time.⁹ This is not what is contemplated by s. 35(4), which requires insurers to pay IRBs "at least once every second week."

I am not persuaded the Arbitrator erred in law in her interpretation of s. 35(4), but this is not crucial to my decision, because I am not convinced the outcome would have been different if her decision on this point had gone the other way.

2. Income Replacement Benefits November 21-28, 2001

I agree with Mr. Fish that the Arbitrator erred in finding he was not entitled to IRBs for the week of November 21-28, 2001. Mr. Fish states that Kingsway "never claimed an overpayment, proffered any evidence in support of an overpayment or argued that there was an overpayment." Further, Mr. Fish says he was not given an opportunity to present evidence or make argument on the issue before the Arbitrator made her ruling. The transcript supports Mr. Fish's position. The only reference to the matter is in the evidence of Ms. Metcalfe. On cross-examination, she stated that after reaching the agreement, Kingsway "sent out the pre-issued cheques . . ."¹⁰ The factual dispute concerned when the top-up payments were made; there was no dispute about the "pre-issued cheques." Nor, contrary to the Arbitrator's suggestion,¹¹ was there any dispute about Mr. Fish's entitlement to the top-up in relation to that week.

Kingsway does not challenge Mr. Fish's statement that the matter was not addressed at the hearing. Kingsway submits that the Arbitrator's finding of fact is immune to review.

Rather than making a factual finding based on evidence, the Arbitrator seems to have deduced this conclusion from the wording of the agreement, in which Mr. Fish " released his claims against Kingsway for IRBs up to and including November 28, 2001." However, it does not necessarily follow that the release included payments already made. The parties may have understood that outstanding payments would be forthcoming in due course. Mr. Pollack's letter of December 10, 2001 seems to confirm this. Enclosed with the letter were three cheques for $505.96 representing IRBs for the six-week period November 21, 2001-January 2, 2002 at $252.98 per week, the pre-settlement rate. The letter continued:

As we discussed, these cheques were issued prior to the settlement. However, cheques representing the balance of his weekly income replacement benefit of a total of $400.00 per week will be paid under separate cover.¹²

I find there was no evidence for the Arbirator's conclusion that Mr. Fish was overpaid in relation to the benefits he received for the week of November 21-28, 2001.

The Arbitrator did not order repayment of the amount, but relied on the alleged overpayment as a reason for refusing a special award on subsequent payments.

3. The Delay in Making Top-up Payments

The settlement agreement required Kingsway to increase Mr. Fish's benefit rate from $252.98 to $400 per week. There was some delay in doing this. On December 7, 2001, Mr. Fish's lawyers faxed Kingsway's lawyers a letter complaining that Mr. Fish still had not received any cheques. Mr. Pollack responded with the letter of December 10, 2001, quoted above, which enclosed six weeks' benefits at the old rate and stated that the top-up cheques would be mailed under separate cover.

The Arbitrator's discussion of the point implied that Mr. Fish's lawyers had failed to explain this letter to him.¹³

When Mr. Fish was asked, in direct examination, whether he had received a copy of this letter, he said, "Probably, yeah. Yes. I did." Although the first part of this answer might have reflected some uncertainty, the remainder of Mr. Fish's testimony on point was clear. He received the letter and the three cheques. He testified he was upset and confused:

I had cheques that I wasn't sure I was even able to cash, the cheques in advance for the wrong amounts. I wasn't sure what that [sic] effect would have.¹⁴

Mr. Fish testified that he did not receive any top-up cheques in December. Ms. Metcalfe was reluctant to confirm this, but presented no evidence to the contrary. Lawyers for Mr. Fish complained about the delay in another letter to Kingsway's lawyers, dated December 13, 2001. Mr. Fish testified he did not receive the top-up until January. In a letter dated January 8, 2002, his lawyers confirmed he had received a cheque for the outstanding IRBs to January 2, 2002.

I agree with Mr. Fish there was no evidence that his lawyers failed to explain the delays to him. This has little bearing on the outcome of the appeal, but it is understandable that Mr. Fish and his lawyers want to correct the record.

4. Late Payment of Income Replacement Benefits in 2002

Mr. Fish submits that the Arbitrator erred in finding that his evidence about late cheques in 2002 was "imprecise; he presented no list, for example, of time periods covered by cheques and the date of their receipt by him."¹⁵

There was no question that the top-up cheques for 2001 were late, and the Arbitrator so found. The only precise evidence of what was clearly a late payment in 2002 concerned cheque number 226413, in the amount of $800.00. The cheque is dated February 13, 2002, date-stamped February 15, 2002, and indicates it covers IRBs for the two week period of March 14-27, 2002.¹⁶ On April 11, 2002, Mr. Fish testified that he received the cheque by mail the day before, along with the Explanation of Benefits, dated April 8, 2002, indicating that a cheque for interest of $3.94 would follow.¹⁷ Kingsway gave Mr. Fish that cheque on the morning of the hearing.¹⁸Accordingly, the benefit cheque was mailed 11 days after the end of the benefit period and received 14 days after the end of the period. On either party's interpretation of s. 35(4), it was late.

Mr. Fish also testified on April 11, 2002 that he had not yet received a cheque for the following period – March 28-April 10, 2002. Ms. Metcalfe testified she had mailed this cheque on April 9th or 10th.¹⁹ Even if Mr. Fish were entitled to receive the benefit by the end of the benefit period, this cheque would only have been late by two days at the time of the hearing. However, given that the cheque only had to be mailed within the benefit period, there was no evidence this cheque was late.

Mr. Fish also testified that he received the cheque for the benefit period before March 14-27, 2002 – presumably February 28-March 13, 2002 – one day late.²⁰ As Mr. Fish recognizes, the Arbitrator may not have mentioned this in her decision because of her conclusion that benefit cheques need only be mailed within the benefit period.

Beyond these specific delays, Mr. Fish complains of a pattern of late and erratic payment that makes budgetting difficult. For example, although he had not yet received his cheque for the March 28-April 10 benefit period, Mr. Fish had received an advance cheque, dated April 9, 2002, for the period April 11-24, 2002.²¹ I understand his frustration, as did the Arbitrator. However, without precise evidence of dates, amounts and benefit periods, the Arbitrator was left with little evidence of significant delay apart from the evidence about the top-up cheque that was presumably paid in early January 2002, and the cheque for March 14-27, 2002. Recently, in Persofsky and Liberty Mutual, Director Draper reaffirmed the necessity of determining the amount of benefits and interest payable under the SABS, "or at least a reasonable approximation," before considering a special award.²² But all that is beside the point. Even if Mr. Fish were right on every point, the facts of this case would not compel a special award.

5. Criteria for Ordering a Special Award

Section 46 of the SABS-1996 says that interest is payable on overdue benefits from the date they became overdue. The provision is mandatory. Interest is payable on overdue benefits once an arbitrator finds they were payable, even if the insurer had good reason to question the claim.²³ There is no need for a finding of insurer misconduct.

In contrast, though s. 282(1) of the Insurance Act states that the arbitrator " shall " order a special award if she finds that the insurer "has unreasonably withheld or delayed payments," not every delay is unreasonable and warrants a special award. As has often been stated, perfection is not the standard.²⁴ In this case, the Arbitrator's reasons suggest that she attributed the IRB delays to bureaucratic problems rather than any intent to frustrate the settlement agreement. I do not accept that a special award can be avoided by payment of compensatory interest under the SABS, but the Arbitrator's observation that Kingsway paid interest of $3.94 on the March 14-27, 2002 cheque appropriately reflects the importance of proportionality in special awards.²⁵

Other considerations might have favoured a special award in this case – the pattern of delay, the impact of the delays on Mr. Fish and his family, and the fact the delays followed a settlement agreement that allowed both parties to vacate an arbitration hearing date. However, I am satisfied the Arbitrator considered the appropriate factors in exercising her judgement. Because an arbitrator's decision whether to order a special award is highly dependent on her assessment of the facts as a whole, appeals adjudicators have been reluctant to intervene.²⁶ I am not persuaded justice requires me to do so in this case.

B. Medication Expenses

Mr. Fish submits that the Arbitrator erred in refusing a special award despite finding that the agreement with his pharmacy should have been in place by no later than December 19, 2001, and that the delay between January 28, 2002, when the agreement was reached, and February 22, 2002, when it was implemented, was " particularly unconscionable." He argues that there was sufficient evidence about medication expenses delayed to warrant a special award.

Mr. Fish challenges the Arbitrator's finding that Ms. Rutherford acted reasonably. One of his concerns relates to Ms. Rutherford's letter of December 5, 2001 to Kingsway, stating: "We have confirmed with Shopper's Drug Mart in Port Perry in writing they may bill you direct for prescriptions."²⁷ On December 6, 2001, Shopper's responded, stating that it had no direct billing arrangement with Kingsway, and accordingly could not accommodate her request.²⁸ On cross-examination, Ms. Rutherford admitted her letter was false and inaccurate.²⁹ Mr. Fish claims that Ms. Rutherford's letter was dishonest. I have a different impression. As I read the letter, Ms. Rutherford did not state she had received confirmation from the pharmacy, but rather she confirmed to them that they could direct-bill Kingsway for Mr. Fish's medications.³⁰

Ms. Rutherford admitted that she did not contact Kingsway or the pharmacy to pursue the matter for two months. Instead, she tried to find another pharmacy that would accept direct billing. She testified she did not know that Mr. Fish wanted to stay with that pharmacy and that the settlement agreement, confirmed in Ms. Urman's letter that day,³¹ specifically required Kingsway to make the arrangements there. Only after her efforts to find another pharmacy came to nought did she reach a verbal agreement with Shopper's in late January 2002, and it took another three and a half weeks to forward the cheque.³²

In my view, the evidence provided ample support for the Arbitrator's finding that

The communication and coordination among all parties concerned with the implementation of the two aspects of the agreement I am dealing with in this arbitration has not been exemplary. Particularly, Mr. Fish seems to have been left in the dark at times. On other occasions Ms. Rutherford was left out of the loop.³³

The Arbitrator's finding that Kingsway's delay in setting up the account was unreasonable was equally well-founded. That is not the issue.

The reason the Arbitrator refused a special award was that she had no precise evidence of the monthly cost of Mr. Fish's prescriptions. Mr. Fish relies on his testimony that the last medication receipts he gave Kingsway before signing the settlement agreement came to $317.00.³⁴ He submits the Arbitrator should have based a special award on that amount, or based on documentation suggesting that the bills submitted in mid-October 2001 totalled $290.76. However, the transcript reveals that immediately after this exchange, the Arbitrator reminded Mr. Bogoroch that she needed more information: "I want an answer to my question, how much the medication costs per month [were] in about the months of November and December, 2001."³⁵

As stated above, it is important for the parties to put specific dollar amounts, or a reasonable estimate, on their claims at arbitration, including special awards.³⁶ Ms. Urman concedes that, as a result of an oversight, the information requested by the Arbitrator was not provided when the hearing resumed two months later. Mr. Fish does not suggest that more specific information is now available. I am not satisfied the Arbitrator erred in concluding she had insufficient evidence as to the amount of benefits delayed. This ground of appeal also fails.

IV. EXPENSES

Mr. Fish's appeal, though unsuccessful, raised legitimate issues about the interpretation of s. 35(4) of the SABS-1996 and the quantification of delayed benefits in relation to a special award claim. Both parties conducted the appeal efficiently. I do not find it appropriate to make an expenses order in this case and, accordingly, the parties shall bear their own appeal expenses.