Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2003 ONFSCDRS 48

Appeal P01-00045

ZURICH NORTH AMERICA CANADA Appellant

and

LUCIA STARGRATT Respondent

Before: Nancy Makepeace

Counsel: Arthur Camporese for Zurich Andrew R. Kerr for Ms. Stargratt

Hearing: April 25, 2002

APPEAL ORDER

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 1 and 2 of the arbitration order of October 4, 2001 are revoked and the following substituted:
Ms. Stargratt is entitled to caregiver benefits for expenses incurred between March 14, 1998 and March 14, 2000.
The matter is referred back to the Arbitrator for determination of Ms. Stargratt's entitlement to caregiver benefits beyond March 14, 2000, in accordance with my reasons.
Ms. Stargratt is entitled to attendant care benefits for expenses incurred between March 14, 1998 and March 14, 2000.
The matter is referred back to the Arbitrator for determination of the interest and special award owing.
Zurich shall pay Ms. Stargratt's appeal expenses, as agreed or assessed.

March 31, 2003

Nancy Makepeace Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Zurich appeals from a decision, dated October 4, 2001, in which the Arbitrator ruled that Ms. Stargratt is entitled to caregiver, attendant care and physiotherapy benefits under the SABS-1996,¹ and a special award in the amount of 50 percent of outstanding benefits. It submits that the Arbitrator erred in law by finding that Ms. Stargratt had "incurred" caregiver and attendant care benefits, although she did not pay her sister and parents for the help they provided and they did not demand payment. It also submits that the Arbitrator exceeded his jurisdiction in raising the issue of a special award on his own initiative, or alternatively, that he failed to give adequate notice. Zurich raised legitimate issues on all three points, but I am not persuaded the Arbitrator erred.

Zurich raised three new issues at the appeal hearing. Ms. Stargratt objected that these were new issues, but did not request an adjournment, and in fact, made submissions on all three points. I am not satisfied she suffered any real prejudice because of the belated introduction of these issues, and they are dealt with in this decision. I find that the Arbitrator erred in his treatment of the 104-week limit set out in s. 13(4) and s. 18 (2) of the SABS-1996, and therefore his order must be varied with respect to the duration of caregiver and attendant care benefits. Zurich also objects to the form of the order, which does not state the amount of benefits and interest ordered and does not set out the amount of the special award. I agree these are defects in the order. The matter will be referred back to the Arbitrator to be determined in accordance with my order.

II. BACKGROUND

At the time of the motor vehicle accident on March 14, 1998, Lucia Stargratt was the 29-year-old at-home mother of Alexandra, who was 15 months old. Her husband, Dan Stargratt, had started his first teaching job, on Manitoulin Island, and returned to their Sudbury apartment on weekends. Ms. Stargratt did most of the childcare, cooking and housework.

After the accident, Ms. Stargratt complained of pain in her left shoulder and the left side of her neck. She also claimed that the accident aggravated her pre-existing tremor, especially on the left side, and this, along with her soft tissue injuries, made it difficult for her to take care of her daughter. About two weeks after the accident, Ms. Stargratt developed severe low back pain, including numbness in the toes of both feet. She was now completely unable to care for Alexandra and had difficulty with housework and basic activities of daily life.

Ms. Stargratt's parents and her sister, Anita D'Angelo, a student, looked after her and Alexandra when Mr. Stargratt was away. Zurich initially denied Ms. Stargratt's claim for caregiver benefits and attendant care benefits on the basis that no expenses had been "incurred," as required by subsections 13(2) (caregiver benefits) and 16(2) (attendant care benefits) of the SABS-1996, because Ms. Stargratt had not paid her family members. Zurich later took the position that Ms. Stargratt's impairments resulted from her pre-existing tremor and her subsequent sudden onset low-back pain, not the motor vehicle accident.

The arbitration hearing was held over seven days in March and June 2001. The Arbitrator heard oral evidence from Ms. Stargratt, her husband, her sister, and her parents. Both parties called medical experts to testify about the severity of Ms. Stargratt's soft tissue injuries and the effect of the accident on her pre-existing tremor. This causation question was the main focus of Zurich's case. The Arbitrator found Ms. Stargratt "a persuasive and credible witness as to her condition and capabilities both before and after the motor vehicle accident."² He accepted that as a result of her tremor, she "suffered a level of disability" before the accident,³ and was, "for practical purposes," unemployable,⁴ but accepted her claim that she was functional as a mother and homemaker. He rejected the evidence of Zurich's experts that Ms. Stargratt's tremor would have deterioriated over time in any event, and found that the accident "greatly increased" the severity of the tremors.⁵ The Arbitrator accepted that "the combination of soft tissue pain and increased tremors made it impossible for Ms. Stargratt to carry out her caregiver, personal care and homemaking functions after the accident,"⁶ and that she was having difficulties with caregiving before she developed low back pain. Accordingly, the Arbitrator concluded that Ms. Stargratt suffered a substantial inability to engage in caregiving activities as a result of and within 104 weeks of the accident, as required by s. 13 of the SABS-1996. These findings were supported by the evidence and well within the Arbitrator's authority.

The meaning of "incurred" was an important issue at the hearing. The Arbitrator held that it extends beyond amounts paid before benefits are claimed, and embraces "a broader range of obligations."⁷ He concluded that Ms. Stargratt incurred caregiver and attendant care expenses, and was therefore entitled to benefits. However, he found, correctly, that she could not claim caregiver benefits in relation to her second child, Noah, because he was born after the accident, on June 23, 1999.

Zurich does not challenge the Arbitrator's finding that Ms. Stargratt's sister and parents provided caregiver and attendant care services. Nor, for the purposes of this appeal, does Zurich dispute the Arbitrator's finding that Ms. Stargratt needed these services as a result of the accident. Zurich submits the Arbitrator erred in his interpretation of the word "incurred."

At the end of the third day of the hearing, the Arbitrator advised the parties he would be considering a special award. He gave no particulars, and did not mention the issue again. Ultimately, he granted a special award of 50 per cent of the outstanding benefits.⁸ The Arbitrator's order does not set out the amounts payable with respect to the special award or benefits ordered.

III. ANALYSIS AND FINDINGS

A. Caregiver and Attendant Care Benefits: The Meaning of "Incurred"

The SABS-1996 provides caregiver benefits "for reasonable and necessary expenses incurred as a result of the accident in caring for a person in need of care." Similarly, s. 16(2) of the SABS-1996 provides attendant care benefits "for all reasonable and necessary expenses incurred by or on behalf of the insured person as a result of the accident" for attendant care services.

Ms. Stargratt provided a chart summarizing the hours and duration of the services provided by her sister and parents, but candidly admitted in her testimony that she did not pay them and they did not expect payment. Nevertheless, the Arbitrator found that Ms. Stargratt had incurred caregiver and attendant care expenses. The benefits ordered were substantial.

The Arbitrator gave the following reasons for finding that Ms. Stargratt "incurred" caregiver and attendant care expenses. First, he found that she was "not an exceptionally sophisticated applicant," and likely did not understand the "special meaning" Zurich put on the word "incurred." Therefore, "her apparent admission that she had 'incurred' no expenses, cannot be given any serious weight."⁹ Second, he found that "Ms. Stargratt's need for personal assistance should have been obvious to the Insurer from their first contact with her."¹⁰ Third, the Arbitrator found that Ms. Stargratt "clearly felt an obligation" to her family, especially "her sister who dropped out of her professional training to help her."¹¹ She could not pay them because she had insufficient funds. And she had insufficient funds, in part, because Zurich denied her benefits. By implication, the Arbitrator found this an absurd and unacceptable interpretation of the regulation.

Finally, the Arbitrator found that Zurich's interpretation was "overly restrictive."¹² He relied on the line of cases represented by Smith (Committee of) v. Wawanesa Mutual Insurance Company.¹³ That case was decided under the pre-1990 standard policy, which provided for payment of "all reasonable [medical] expenses incurred within four years from the date of the accident . . ." Just before the expiry of the four-year period, the insured's doctors and therapists identified certain treatments the insured would need, including psychological treatment. The referral was not made until after the end of the four-year period, and the insurer argued that there was no entitlement because the insured had not incurred a legal liability to pay for psychological services within the four-year period. The Ontario Divisional Court upheld the ruling of the motions judge that the expenses were recoverable: "[i]t is sufficient if the reasonable necessity of the service or item and the amount of the expenditure are determined with certainty before the end of four years." Since "incur" was capable of a narrower and wider meaning, the determinative consideration was the need to adopt a remedial and purposive interpretation that would not "require an insured person to finance, or to pledge her credit, in order to secure the very benefits for which she is insured." Applying these reasons to the case at hand, the Arbitrator concluded that the SABS-1996 "does not restrict caregiving [or attendant care] claims to actual out-of-pocket expenses."¹⁴

Zurich submits that the Arbitrator erred in relying on Smith v. Wawanesa. Its position is that the language of the SABS-1996, like that of its predecessor, the SABS-1994,¹⁵ requires the expense actually to have been paid by the insured person before being claimed. In contrast, the medical, rehabilitation and attendant care provisions of the SABS-1990¹⁶ did not include the word, "incurred," but referred to "expenses resulting from the accident." Zurich relies on Arbitrator Baltman's comment, in Quarrington and Jevco Insurance Company, a SABS-1990 case, that the legislature would have included the word "incurred" if it had intended to require that an insured pay for dental treatment before claiming the benefit.¹⁷ Accordingly, in Zurich's view, the legislature's decision to add the word back into the two subsequent versions of the SABS reflects its intent to provide entitlement only for out-of-pocket expenses already paid.

I reject this. In my view, the amendments to the SABS-1994 and the SABS-1996 did not affect the meaning of the word "incurred." The evolution of these provisions and case-law puts Arbitrator Baltman's comment in context.

The SABS-1990

In Bannon v. McNeely (1998), 1998 CanLII 4486 (ON CA), 38 O.R. (3d) 659, and Hope v. Canadian General Insurance, 2002 CanLII 44899 (ON CA), [2002] O.J. No. 1643, the Ontario Court of Appeal held that s. 6(3) of the SABS-1990 restricts entitlement to those medical and rehabilitation services received within ten years of the accident, and does not extend to needs that are identified within the benefit period but provided afterwards. The effect of these decisions is that Smith v. Wawanesa is not good law in the context of the SABS-1990. The Court did not address the issue before me in this appeal.

Plows and Jevco Insurance Company and Quarrington and Jevco Insurance Company are the leading cases for the well-established proposition that s. 6(1) did not require the insured person to obtain the claimed services and pay for their cost in order to claim the benefit.¹⁸ Arbitrator Rotter accepted Mr. Plow's claim that he needed a modified wheelchair van as a result of catastrophic injuries sustained in the accident. She rejected Jevco's argument that he could not make the claim until he bought the van. She contrasted s. 6(1) with s. 6(2), which provided an allowance for "visitors' expenses actually incurred."¹⁹ Mr. Quarrington needed dental implants costing $25,000 as a result of the accident. Until shortly before the hearing, Jevco refused, insisting he get a less expensive removable denture. The only issue remaining was Mr. Quarrington's claim for a special award. Arbitrator Baltman granted the award, finding that Jevco had contravened s. 6(7), the "pay pending dispute" provision, despite the fact that Mr. Quarrington had not obtained the treatment. She stated,

Subsection 6(7) refers to expenses "described": nothing in the wording limits its application to expenses actually paid for by the Applicant. Had that been the legislative intent, it would have been a simple matter to restrict the wording in the subsection to "an expense incurred", or other similar language.

The goal of the "pay pending dispute" provision is to ensure that beneftis which are urgently required be paid for promptly, even where there is a dispute with respect to those benefits. That should happen regardless of whether an applicant can afford to fund the expense and then claim reimbursement.²⁰

The SABS-1990 set out a different benefits scheme for at-home mothers than its successors. If injured in a SABS-1990 accident, Ms. Stargratt would have been entitled to a weekly (no-income) benefit of $185 per week under s. 13(1), as well as an additional benefit of $50 a week, under s. 13(4), as Alexandra's primary caregiver. These benefits would not have depended on Ms. Stargratt incurring any expenses for caregiving.

In addition, s. 7(1) of the SABS-1990 required the insurer to pay

(a) the reasonable cost of a professional caregiver or the amount of gross income reasonably lost by a person other than the insured person as a result of the accident in caring for the insured person; and

(b) all reasonable expenses resulting from the accident in caring for the insured person after the accident.

Unlike s. 13(4), which compensated for the insured person's inability to take care of others, s. 7 compensated for the cost of care for the injured person.

Arbitral jurisprudence established that while family members who provided non-professional care for the insured person and did not lose income as a result could not recover under s. 7(1)(a), they could be compensated under the general "all reasonable expenses" language of s. 7(1)(b), usually at minimum wage, and upon reasonable evidence of the nature and amount of care provided. Despite some overlap in the benefits provided by s. 7(1)(b) and s. 6(1)(f), arbitrators accepted that s. 7 "carved out" from s. 6(1)(f) "those expenses related to the personal care of the insured person."²¹ The relationship between the two kinds of benefits was clarified in the SABS-1994 and the SABS-1996.

In Monachino v. Liberty Mutual Fire Insurance Company (2000), 2000 CanLII 5686 (ON CA), 47 O.R. (3d) 481, the Ontario Court of Appeal held (2:1), that neither s. 7 nor s. 6 was broad enough to cover payment for the value of services provided by a non-professional caregiver (Mr. Monachino's mother, who was not employed). Finlayson J., with whom Moldaver J. agreed, stated there were three pre-conditions to entitlement under s. 7(1)(a): "a cost must be incurred, it must be reasonable and it must be for a professional caregiver." [para 10] With respect to s. 7(1)(b) and s. 6(1)(f), Finlayson J. held that "the key word . . . is 'expenses' and this means 'cost incurred':"

Care giving services by members of a loving family are not an expense or a cost in the contemplation of this statutory framework. They can sometimes be compensated for in other areas, such as under the Family Law Act in a proper case, but they do not fit within the language of the sections of the no-fault schedule we are dealing with. [para 12]

Accordingly, while I prefer the dissenting judgment of Justice Weiler in that case, it appears Ms. Stargratt would not have been eligible for attendant care benefits under s. 7 of the SABS-1990, absent a finding that her sister or her parents lost income in caring for her.

Zurich relies on Justice Finlayson's statement that "a cost must be incurred" for a caregiver expenses claim. However, this comment must be understood in the context of the issue in that case – whether the SABS-1990 provided reimbursement for care provided by non-professional family members who have not lost income in order to provide care. As Arbitrator Wilson stated, the amendments to the SABS-1996 made it clear that benefits are available in these circumstances. The drafters' decision "to retain the use of the word 'incurred,' a word that had been judicially interpreted as part of earlier no-fault provisions,"²² suggests they contemplated the less formal care arrangements typical of families. I find this a compelling argument.

The SABS-1994

If Ms. Stargratt had been injured in a SABS-1994 accident, she would have been entitled to a weekly caregiver benefit of $250, under s. 18, in relation to her inability to perform the caregiving activities in which she was engaged at the time of the accident. She would also have been entitled to attendant care benefits. Subsection 47(2) of the SABS-1994 expressly stated that attendant care may be provided by a family member who did not have professional qualifications.

The medical, rehabilitation and attendant care provisions of the SABS-1994 compensated for "all reasonable expenses incurred by or on behalf of the insured person."²³ In several cases, insurers argued, relying on the change from the SABS-1990, that this required the insured person to have paid for the disputed goods or services before claiming them. I rejected this argument in Caruso and General Accident Assurance Company of Canada, a medical benefits case.

I find section 36(1) ambiguous in that it does not specify whether the expense must have been incurred in the past or will be incurred in the future. The ambiguity is resolved by section 69 of the Schedule, which sets out a process for prior approval of medical and rehabilitation benefit claims. In my view section 69 provides a complete response to the Insurer's submission.

Moreover, I can find nothing in the dispute resolution provisions of sections 36(4) and (5) and sections 38, 39 and 39.1 to suggest that they do not apply where the insured person has not yet incurred the expense. Indeed, section 39(10)(b) requires a DAC assessor to prepare a report which includes "recommendations relating to the future provision of goods and services referred to in section 36 to the insured person" [emphasis added]. In my view, this provision is intended to assist insurers and insured persons to agree on the provision of goods and services before expenses are incurred.²⁴

In effect, I was not persuaded that requiring the insured person to pay for needed goods and services before claiming reimbursement from the insurer was consistent with the introduction of a procedural code intended to facilitate early access to medical and rehabilitation benefits. Arbitrator Sapin came to the same conclusion with respect to rehabilitation benefits in Gosling and Zurich Insurance Company, (OIC A96-001277, December 5, 1997). Similarly, Arbitrator Baltman held, in Haripersaud and State Farm Mutual Automobile Insurance Company, that the insured person had "incurred" medical benefits when she signed an agreement with a treatment facility promising to pay the facility if the insurer paid her the treatment cost.²⁵ In Tustin and Canadian General Insurance Company, Arbitrator Palmer awarded attendant care benefits in relation to services received from family members, without requiring evidence of payment.²⁶Arbitrator Allen reaffirmed the availability of benefits for non-professional services provided by family members in Tzatzkin and Liberty Mutual Insurance Company, finding the insured person's desire to continue being cared for by her daughter "reasonable, since in addition to their shared cultural background, Mrs. Tzatzkin may benefit from the continuity of Marta's service."²⁷

The SABS-1996

Arbitral jurisprudence under the SABS-1996 has continued to hold that an expense may be "incurred" though it has not actually been paid. Arbitrator Sapin provided a helpful analysis of the interpretive grounds for giving "incurred" a broad reading in S.D. and TTC Insurance Company Limited. The insured person claimed benefits under s. 22 of the SABS-1996, which provides for payment of "reasonable and necessary additional expenses incurred by or on behalf of an insured person as a result of an accident for housekeeping and home maintenance services . . ." [emphasis added]. The services had been provided, but not paid for. Arbitrator Sapin stated:

In my view, such an interpretation accords with the intent of the Schedule. In most cases, where an insured person is unable to afford to pay for a commercial housekeeping service or arm's length assistance, the natural tendency is for family members to pitch in to do the necessary work. An insured person, particularly an unsophisticated or impecunious one, has very little choice if he or she wishes to continue to live in a reasonably clean home. The very fact of the insured person's need for assistance, and the provision of that assistance by the family member, creates the incurred obligation. I see no reason why an insurer should benefit from the fact that an insured person is forced to rely on family help, to avoid paying for the additional housekeeping services required as a result of the accident. TTC's response to Mrs. D's application for housekeeping expenses to pay for her husband's services, that they were not payable because they were not "incurred," on the basis that "One would think the services of a spouse are gratuitous given the special oath of marriage," [footnote omitted] is not only fatuous, but clearly contrary to the intent of the Schedule, which provides limited compensation for certain services if they are necessary and reasonable as a result of the accident, specific criteria that do not include ability to pay, or the availability of a husband.

The evidence was clear that Mrs. D and her husband, who are both over 65 years old, live on fixed pension incomes. Mrs. D testified that even to pay for small items such as Epsom Salts to ease her pains amounted to "spending what I don't have." I have no difficulty finding that Mrs. D could not possibly contemplate paying for housekeeping services unless TTC reimbursed her, and thus was forced due to financial hardship to rely on her husband for the help she needed.²⁸

Arbitrator Blackman came to the same conclusion in L.F. and State Farm Mutual Automobile Insurance Company, another case where the insured person's family provided attendant care without a promise or expectation of payment.²⁹ I adopt the view of Arbitrators Sapin and Blackman.³⁰ As I read Quarrington, Arbitrator Baltman's reasoning did not depend on the absence of the word "incurred" from the SABS-1990. Her analysis, on which Arbitrators Sapin, Blackman and Wilson expanded, applies as well to the SABS-1996. Further, s. 2(7) of the SABS-1996 expressly allows for payment for non-professional attendants, and this often means friends and family. This is a sensible policy, since friends and family may provide better care than third-party service providers, and at lower cost. Informal arrangements are typical amongst family members. There is little to be gained by encouraging family members to prepare sham agreements in these circumstances.

The SABS-1996 retained and strengthened the process-driven approach to benefit payment introduced in the SABS-1994. The process, described in Part X, starts with the insured person's timely notice and application for benefits. On receipt of the initial notice described in s. 32(1), the insurer is required to provide information and assistance:

(2) The insurer shall promptly provide the person with,

(a) the appropriate application forms;

(b) a written explanation of the benefits available under this Regulation;

(d) information on any possible elections relating to income replacemen, non-earner and caregiver benefits.

Ms. Stargratt claimed that Zurich failed to meet its initial obligations under s. 32(2) of the SABS-1996 to advise her what benefits she could receive.

Insurers are entitled to require documentation of caregiver and attendant care services claimed, and they have reason to ask more questions when family members provide the services. Although detailed contemporaneous record-keeping is ideal, evidentiary requirements should be tailored to the informal context. In this case, there is no question that the services were provided. I agree with the Arbitrator that Zurich knew Ms. Stargratt needed help. Her application for accident benefits stated she could not do her chores or anything involving lifting her left arm. Her letter to Zurich's adjuster, Dorothy White, faxed on April 3, 1998, two days after the accident, stated,

I am in need of a caregiver to look after my daughter and do household chores as I am unable. My sister is in school and is unable to help. My mother is recovering from her own illness (leukemia) and gets tired very easily. As it is now, I have [illegible] back to my parents' home, and my apartment is empty. My husband works out of town, so I am alone. If you have any questions about my current situation, please contact me.³¹

Ms. White's letter of May 12, 1998 indicated that she had called Ms. Stargratt earlier that day to discuss some issues that were not clear in the application, and she confirmed their discussion in her letter:

You indicated that from Monday to Friday you reside with your parents in their home, and on Friday evenings, you return home with your husband until Sunday. This arrangement has only begun since the accident, and is due to the fact that your husband lives and works out of town during the weekdays. You have not advised when you will return home during the week.

You indicated that on form OCF 10, Election Form, you chose Caregiver Benefits. Initially, you explained, you checked off, Non-Earner benefit, but decided on caregiver. You neglected to white-out the first check mark. You confirmed that it was caregiver.³²

The Arbitrator quoted from Ms. White's second letter sent on May 12, 1998:

Under this section, the caregiver benefit shall pay for reasonable and necessary benefits incurred as a result of the accident in caring for a person in need of care. Along with the name, address, phone number, of the caregiver, we require the social insurance number, a detailed list of all caregiving duties that she did, and a receipt showing that payment was received. The maximum payable under this section is $250.00. You indicated during our conversation, and on your expense sheet, that no monies had been paid, and an expense has not been incurred.³³

In cross-examination, Ms. Stargratt admitted she did not discuss paying her mother or her sister after receiving this letter, and did not maintain a log of the services rendered.³⁴ This would have been very damaging to Ms. Stargratt's claim if Zurich had explained to her that she could claim for services received from family members, or invited her to provide particulars of the services provided. Instead, this letter implied that services must be provided by a third-party service-provider. Accompanying the letter was an Explanation of Benefits form, indicating that Ms. Stargratt was not eligible for Non-Earner Benefits because she elected Caregiver Benefits, and was not eligible for Caregiver Benefits because she had not incurred any expenses.³⁵ The transcript supports the Arbitrator's assessment that Ms. Stargratt was not particularly sophisticated in insurance matters and did not think to ask whether she could pay family members to help her.

It is clear that Ms. Stargratt enjoyed the care of a close and loving family, who simply took on the task of looking after her and her daughter after the accident. Zurich's failure to explain that she could pay her family for looking after her is the critical factor in my decision that the Arbitrator did not err. I might add that this omission was compounded by Zurich's failure to explain the implications of Ms. Stargratt's election of caregiver benefits over non-earner benefits. Non-earner benefits, available under s. 12 of the SABS-1996, would have provided her a weekly payment of $185, whether or not expenses were incurred. She might have used this money to pay her family or hire third-party service providers. Without any weekly benefits, she had few alternatives to accepting unpaid help from her family. In these circumstances, I agree with the Arbitrator that Ms. Stargratt is not precluded from claiming benefits because her family did not expect or demand payment.

For the same reasons, I do not accept Zurich's argument that the Arbitrator erred in failing to limit Ms. Stargratt's benefits pursuant to s. 33, which requires an insured person to provide the information the insurer reasonably requires to assess the claim. Ms. Stargratt did not provide supporting documentation for her claim because Zurich's refusal gave her no reason to believe there was any point in doing so. The information was provided in June 1998, three months after the accident, when she retained counsel and reasserted her claim. Zurich's response was to refuse benefits based on Dr. Wardill's insurer examination report, stating that Ms. Stargratt's main impairment was not accident-related. Lack of supporting documentation was not Zurich's reason for refusing benefits.

B. Duration of Benefits

The Arbitrator's order is silent as to the duration of benefits. No termination date is given. The Arbitrator's reasons indicate that Ms. Stargratt is entitled to caregiver and attendant care benefits beyond the 104 week anniversary of the accident. This was an error. Subsection 13(4) of the SABS-1996 states:

The insurer is not required to pay a caregiver benefit for any period longer than 104 weeks of disability, unless, as a result of the accident, the insured person is suffering a complete inability to carry on a normal life. [emphasis added]

Subsection 18(2) states:

No attendant care benefit is payable for expenses incurred more than 104 weeks after the accident. [emphasis added]

The limit set out in s. 18(2) does not apply in cases of catastrophic impairment, pursuant to s. 18(3). The Arbitrator found that as this was not a case of catastrophic impairment, the 104 week limit applies to both benefits. Implicitly, he treated the 104-week period as 104 weeks of benefits. Since Ms. Stargratt was not awarded benefits for periods when her husband was living at home, the Arbitrator extended her entitlement beyond the 104 week anniversary of the accident.

Subsection 18(2) is clear: Ms. Stargratt cannot recover for attendant care services provided more than 104 weeks after the accident. The order will be varied accordingly.

Subsection 13(4) refers to "104 weeks of disability," not "104 weeks of benefits." As Ms. Stargratt claims that she met the s. 13 disability test continuously from the time of her accident, the same termination date – March 14, 2000 – applies to her caregiver benefits claim unless she suffered from a complete inability to carry on a normal life after that date. The matter will be referred back to the Arbitrator for determination in accordance with my order.

C. Interest

Zurich submits that interest on the caregiver and attendant care benefits awarded should be limited. The Arbitrator did not make an interest order, and his reasons omit any mention of it. The matter will be referred back to him for his determination.

D. Special Award Jurisdiction

Ms. Stargratt did not ask for a special award at mediation, in her two applications for arbitration, in the two pre-hearings of this matter, or in her counsel's opening statement. At the conclusion of evidence on March 15, 2001, the third day of the hearing, the Arbitrator made the following comments:

And before we adjourn this to Sudbury in June, I would like to raise one other matter. I did inquire with the applicant's counsel yesterday if you're going to be raising the issue of special award. Because of the peculiar nature of that particular award, I am asking the parties to be aware that I may be addressing this matter, the matter of special award in this particular matter and I invite them to make any submissions or present any evidence that they may feel is relevant to that question.³⁶

Zurich had not opened its case when the Arbitrator identified the potential for a special award. At that point, he had heard from Ms. Stargratt, her husband and two of her doctors. When the hearing resumed in June 2001, he heard from her sister and parents, her family doctors, and two doctors called by Zurich. The transcript reveals no subsequent comment from anyone about the special award issue. Closing submissions were not transcribed. Ms. Stargratt's counsel states that both parties addressed the issue in closing. Zurich changed counsel for the appeal, and its new counsel was unable to comment on the point.

Zurich submits that the Arbitrator exceeded his jurisdiction in raising the possibility of a special award on his own initiative.

An arbitrator's special award jurisdiction arises from s. 282(10) of the Insurance Act, which is as follows:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together wth 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.

It has long been accepted that the issue of a special award may be introduced by an arbitrator though not pleaded by the applicant. The leading case is Clark and Royal Insurance Company of Canada, in which Director's Delegate Draper rejected the insurer's contention that the arbitrator could not order a special award because it did not receive notice of that issue before the hearing:

In my opinion, however, section 282(10) gives arbitrators the authority to impose a special award based on the evidence presented at the hearing, whether or not notice was given before the hearing. In other words, a special award is always a possibility if the arbitrator finds that the insurer unreasonably withheld or delayed the payment of benefits. The specific notice requirements in section 8 of the SPPA³⁷ do not apply, although the more general common law principles of natural justice and fairness must be met.

This interpretation is consistent with my decision in Leitgeb and Allstate Insurance Company of Canada, (November 16, 19 95, OIC P-012407). Although that appeal dealt with the scope of pre-hearing productions, I held that the insured person's assertion that a special award should be ordered should not be treated as a separate claim. Director's Delegate Naylor recently followed Lettgeb in Tagarin and Simcoe & Erie General Insurance Company, (February 26, 1996, OIC P-004660), holding that she could consider a special award although it had not been an issue at the arbitration.³⁸

Zurich submits that these decisions depended on s. 282(3) of the Act, as it read between 1990 and 1996:

The arbitrator shall determine all issues in dispute and such other issues as the parties may agree.

This provision was amended by the Automobile Insurance Rate Stability Act,³⁹ known as "Bill 59," to read as follows:

The arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer.

Zurich notes the deletion of the reference to party agreement, and submits that the amended section restricts an arbitrator's jurisdiction to issues raised by the parties, and thereby ousts any independent jurisdiction with respect to a special award. Zurich submits that the cited cases relied on that now superseded jurisdiction. I reject this argument.

In my view, the legislature must be presumed to have known of the Leitgeb-Clark line of cases when it amended s. 282(3). It is significant, therefore, that the amended s. 282(3) does not refer to special awards. Nor was s. 282(10) amended to restrict arbitral authority. This would have been easy to do by adding five words – "on request by the insured person" – at the beginning of that subsection. I do not accept that the legislature intended this amendment to curtail special award jurisdiction.

The amendment to s. 282(3) must be understood in light of the disputes that arose under the old provision about an insurer's right to raise new issues in response to an insured person's application for arbitration. In a number of cases, insurers were unsuccessful in raising new issues, and were forced to seek relief in the courts, which added to the number and complexity or proceedings. The amendment to s. 282(3) retained the asymmetry of initial access (only the insured person is entitled to apply for arbitration after a failed mediation) but expanded arbitrators' authority to consider all the issues in dispute between the parties.⁴⁰I agree with Ms. Stargratt that the amendments were intended to expand arbitral authority, not restrict it.

Moreover, none of the pre-Bill 59 special award jurisdiction decisions turned on an insurer's agreement that the issue could be added to the hearing agenda. None of the decisions linked the independent arbitral jurisdiction to the then-current wording of s. 282(3). Instead, they asserted an inherent jurisdiction to consider a special award, relying on the statutory mandate set out in s. 282(10).⁴¹Arbitrators have adopted the same principle in at least two Bill 59 cases, though without any analysis of the impact of the amendments to s. 282(3).⁴²

There is good authority for this view. Unlike an award of punitive damages, a special award does not require a separate actionable wrong. Nor is it a benefit provided under the SABS. The plain wording of s. 282(10) – "shall award" – requires an arbitrator to issue a special award if he or she finds that the insurer unreasonably withheld or delayed payments. The power is reserved to arbitrators and, by virtue of s. 283(7), appeals officers, and is not granted to judges or arbitrators appointed under the Arbitrations Act, 1991. It is an administrative remedy related to the Commission's regulatory functions. A related provision is s. 288, which requires the Director of Arbitrations to review arbitration orders and recommend that the Superintendent investigate an insurer's business practices if the Director is of the opinion that one or more arbitrations or appeals "reveal unfair or deceptive business practices."⁴³ Consistent with this approach, a long line of arbitration and appeal decisions has held that special award jurisdiction is not dependent on the insured person having requested this remedy, but may be independently considered by the arbitrator in every case, provided that the requirements of natural justice are satisfied.

It remains the law that arbitrators have independent jurisdiction to consider and make a special award, subject to the requirements of fairness.

E. Special Award Notice

Zurich submits that having raised the issue, the Arbitrator should have explained the basis for considering a special award in sufficient detail to enable the Insurer to respond effectively. It also argues that the Arbitrator's use of the word "may," in his initial comments, was insufficient to put it on notice that it needed to respond. Zurich also takes issue with the Arbitrator's timing. Zurich says that having heard nothing further from the Arbitrator, it assumed it had satisfied his concerns. It contends that the Arbitrator should have revisited the issue after Zurich completed its case.

I am not persuaded Zurich was deprived of a fair hearing, although the Arbitrator's handling of the notice issue fell short of the ideal.

In the leading case, Clark and Royal, the special award issue was not raised at all during the arbitration hearing. Arbitrator Miller raised it in her first decision, stating "it may well be argued" that the insurer terminated benefits unreasonably. She gave the parties an opportunity to present written submissions on point, but did not offer an opportunity to present new evidence. Delegate Draper accepted the insurer's submission that it would have presented its case differently, for example, by calling the adjuster to testify about the handling of the claim, if it had known it was at risk of a special award. He concluded this process did not meet the requirements of natural justice and fairness.

It is normally for the insured person to demand a special award, and problems of late notice have arisen most often in that context. Some guidelines can be derived from those decisions. An insured person's demand for a special award should be identified as early as possible in the process, and well before the hearing. Ideally, the issue should be identified in the application for arbitration, which now includes a section for this purpose, and discussed at the pre-hearing. Particulars should be provided.⁴⁴ As Commission adjudicators have said on a number of occasions in connection with insurer examinations, surveillance evidence and documentary production issues, trial brinkmanship and trial by ambush are not part of the Commission's dispute resolution process. Nor is a demand for a special award to be added to the hearing issues for tactical purposes.

However, certain factors tend to stand in the way of early identification of special award issues in some cases. Because unrepresented insured persons may not be familiar with special awards, notice requirements will generally be applied more flexibly in those cases. Another problem in some cases is late or incomplete exchange of documents, including insurer claims files.⁴⁵ Finally, the main focus of the parties in arbitration proceedings is benefits entitlement, and questions of insurer conduct may not get the same attention until the benefits issues are fully developed. These factors warrant a flexible and practical approach to notice requirements.⁴⁶

A number of decisions have applied Clark and Royal in various fact situations where the issue of a special award was first raised during the hearing. Whether the arbitrator allows the issue to be added, and whether it is necessary to recall witnesses, admit new evidence or adjourn the hearing to address the new issue, depend on the stage of the hearing when the issue is raised, the reason for the late notice, the apparent strength of the request, and the prejudice to both parties from allowing or excluding the special award issue. The decisions suggest that the insurer will generally not be able to exclude the issue if it is raised for the first time in the applicant's opening statement, as long as particulars are provided and the insurer is given a reasonable amount of time to line up appropriate evidence. An adjournment may be appropriate, and as always, it is open to the arbitrator to order the at-fault party to bear the additional expenses resulting from any delay.⁴⁷

An insured person who delays raising the issue until the evidence phase of the hearing takes a risk that the request will be dismissed as untimely, if the new issue necessitates recalling witnesses, adjourning to allow for additional evidence to be gathered, or significantly expanding the scope or length of the hearing. For example, in Cante and State Farm, Arbitrator Joachim dismissed the applicant's special award claim summarily based on inadequate notice and insufficient evidence.⁴⁸ However, in Maas and State Farm, the insured person was ultimately successful in obtaining a special award, despite having raised the issue at the start of the fourth day of the hearing. Because of the late notice, the arbitrator ordered her to provide particulars and gave the insurer a week to prepare its case on the issue. The insurer called its claims superintendent to testify about how the claim was handled, and did not object to the adequacy of notice until closing submissions. Arbitrator Seife found that this was too late. The insurer had waived its right to object and, in any event, had been given an opportunity to respond. The decision was confirmed on appeal.⁴⁹

If the evidence phase of the hearing has closed when the issue is raised, the insurer must at least be given a reasonable opportunity to consider re-opening its case to present new evidence about the handling of the claim. In Z.T. and Mississquoi, where the special award was claimed only in the applicant's closing submissions, Arbitrator Blackman referred the matter back to a telephone pre-hearing discussion "to clarify the particulars of Z.T.'s claim for a special award, deal with any further production concerns, and determine whether further oral evidence is necessary or whether submissions, either oral or in writing, are sufficient."⁵⁰

Special problems arise where it is the arbitrator, not the insured person, who raises the issue. In A.BB. and Royal, Director's Delegate Naylor revoked the special award ordered by the arbitrator on the basis that the insurer did not receive adequate notice. The following two excerpts from her decision explain that conclusion:

A.B. did not seek a special award. At the outset of the hearing, as is usual, counsel clarified the issues for the hearing including listing the expenses in issue. The arbitrator referred to his jurisdiction to order a special award in the context of the requi rement that reasonable notice be given. He asked A.B.'s counsel, in relation to the medical expense claims, whether such a claim was being made and was told that it was not being advanced. [footnote omitted]

On the second day, A.B. gave brief testimony with respect to the expenses she had previously listed. The arbitrator again raised the issue of the special award. He stated that notwithstanding that A.B.'s counsel was not seeking the special award, he was giving counsel for the insurer early warning that this was something he was going to be considering and "something that the insurer might wish to address either in cross-examination or in calling their own witnesses." [footnote omitted]

Although, as the arbitrator noted, A.B. was the first witness, her testimony was interrupted on a number of occasions so that various doctors could be scheduled. By the time the arbitrator revisited the issue of the special award on the second day, Dr. Shamess, the DAC doctor, had already given his testimony and had been discharged. The arbitrator's reasons do not reflect that Royal had already started its case, proceeding on the basis that it would not have to address a special award. In the absence of clear direction from the arbitrator, a party cannot reasonably be expected to take the step of recalling an expert witness.⁵¹

Applying these principles to this case, I reach the following conclusion. Ideally, the Arbitrator should have given particulars when he raised the special award issue. However, the timing made this difficult, because Zurich had not yet called its first witness. Furthermore, Zurich did not request further particulars, an adjournment to prepare additional evidence, or an opportunity to further cross-examine Ms. Stargratt or the witnesses who had already testified on her behalf. Zurich had three months to consider what additional evidence it would present when the hearing resumed. On appeal, Zurich contends it would have presented its evidence differently, if it had been given particulars at an earlier stage of the hearing, but does not refer to any specific changes it would have made. In these circumstances, I am not persuaded the Arbitrator left it too late to raise the issue.

In a sense, Zurich contends the Arbitrator raised the issue too early, before he had heard the Insurer's witnesses. I expect this was the reason he gave no particulars. He had a concern, but recognized that Zurich's evidence might resolve it. He wanted to raise the issue before the hearing adjourned, to ensure that Zurich had sufficient notice, but he had not heard enough evidence to allow even tentative conclusions. Nonetheless, in my view, he should have gone further, and identified the evidence he had heard that led him to raise the issue. Alternatively, he could have returned to the issue after the close of Zurich's evidence, indicating what concerns, if any, remained, subject to both parties' closing arguments.

The Arbitrator probably worried that if he gave particulars, this might suggest he had prejudged the issue or "entered the fray" on Ms. Stargratt's behalf. This is one of the risks faced by an arbitrator who raises any issue on his own initiative. The highly contentious nature of special awards adds to the risk. Delegate Naylor discussed this problem in A.B. and Royal:

Arbitrators have authority to raise a special award on their own initiative. However, the approach should be circumspect. This is particularly so where the applicant, with the benefit of counsel and all the facts, signals clearly that he or she is not questioning that the insurer acted reasonably. There is nothing inappropriate in an arbitrator, as a starting position, taking his or her cue from that applicant as to whether the insurer's actions warrant further scrutiny.

Furthermore, if the arbitrator proceeds, he or she must be crystal-clear as to the concerns to which the inquiry relates and the procedural implications, in order that the parties may have a fair opportunity to address the issue. [at p. 18]

There is no suggestion in this case that Ms. Stargratt responded to the Arbitrator's statement by saying she was not questioning Zurich's conduct. Nevertheless, I agree with the general tenor of Delegate Naylor's cautionary comments. The same concerns surround the practice, adopted in some arbitration proceedings following the Clark decision, of routinely raising the possibility of a special award in every case if the issue is not raised in the applicant's opening statement. Notice given at this stage, before the insured person has begun to present evidence, will generally be so completely lacking in particulars or context, that I question whether it is "notice" at all. If this is done, it should be regarded as a statement of the law and a reminder to the parties to consider insurer conduct questions. It is not a substitute for effective notice that the insurer should respond to particular evidence suggestive of unreasonably withholding or delay.

Arbitrator Wilson's comment came on the third day of hearing. By that time, he had heard at length from Ms. Stargratt, who testified for a day and a half. Judging from the transcript (without, of course, having the opportunity to assess her demeanour), she made a believable and sympathetic claimant. Both counsel questioned her about her claim for caregiver and attendant care benefits, and Zurich's response. It should have been clear to Zurich that Ms. Stargratt was challenging its initial handling of her claim. The Arbitrator then heard from Mr. Stargratt, who testified about his wife's need for help after the accident and the family's efforts in this regard. Two doctors then testified on Ms. Stargratt's behalf: Dr. John McCall, an orthopaedic surgeon, and Dr. Earl Consky, a neurologist with a subspecialty in movement disorders. In my view, the timing of the Arbitrator's comment should have made it clear to Zurich that he was not just asserting his authority to consider a special award, but actively considering a special award because of the evidence he had heard.

The hearing resumed for four more days of evidence in June 2001. Ms. Stargratt's parents, her sister, and Dr. John Mulloy, her family doctor, completed the evidence on her behalf at lunch on the fifth day of the hearing. Zurich then presented its witnesses over the next two days: Dr. J.C. Wardill, an orthopaedic specialist, and Dr. Robert Chen, a neurologist with a subspecialty in movement disorders, both of whom assessed Ms. Stargratt for Zurich, and Dr. B.G. Bloomfield, a family doctor who treated Ms. Stargratt for a time. Neither Ms. White nor any other Zurich representative was called to testify about the Insurer's handling of the claim. Zurich's choice of witnesses reflects its focus on the causation question, in which it was unsuccessful. I am not persuaded Zurich's failure to address the special award question raised by the Arbitrator can be blamed on late notice or lack of particulars.

In any event, Zurich's appeal on the notice point fails because I have no reason to question the representation of Ms. Stargratt's counsel that he addressed the special award issue in his closing submissions. This made it unnecessary for the Arbitrator to revisit the issue. If Zurich failed to respond in its own closing submissions, it cannot now complain of surprise. In fact, Ms. Stargratt's counsel contends Zurich did address the issue in closing, and Zurich's counsel on the appeal does not challenge this, stating simply that he does not know.

The notice given Zurich fell short of the ideal, but I am satisfied it was adequate.

F. The Amount of the Special Award

The Arbitrator failed to specify the amount of the special award ordered. Instead, he simply ordered Zurich to pay "a special award of 50 percent of the outstanding benefits." As a result, Zurich has no idea how much it has been ordered to pay. Director Drapers recent decision in the Persofsky case reaffirmed that an arbitrator making a special award must set out the amount of the award in the order.⁵²Accordingly, the matter will be referred back to the Arbitrator for his determination of the amount payable.

IV. EXPENSES

Zurich shall pay Ms. Stargratt's appeal expenses, as agreed or assessed.