Neutral Citation: 2003 ONFSCDRS 68

FSCO A02-000845

BETWEEN:

HAROLD TROTTIER

Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before: Eban Bayefsky

Heard: January 29, 2003, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Andrew Kerr for Mr. Trottier

Peter Trueman for Royal & SunAlliance Insurance Company of Canada

Issues:

The Applicant, Harold Trottier, was injured in a motor vehicle accident on December 20, 1999. He applied for and received statutory accident benefits from Royal & SunAlliance Insurance Company of Canada ("Royal"), payable under the Schedule.¹ Royal terminated weekly income replacement benefits as of May 26, 2002. The parties were unable to resolve their disputes through mediation, and Mr. Trottier applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

What is the quantum of weekly income replacement benefits that Mr. Trottier is entitled to receive, pursuant to section 6 of the Schedule? Specifically, are the collateral benefits received by Mr. Trottier deductible, pursuant to section 7(1) of the Schedule?
Is Mr. Trottier liable to repay any income replacement benefits, together with interest, pursuant to section 47 of the Schedule on the grounds that Royal was entitled to deduct the collateral benefits paid to Mr. Trottier?
Is Mr. Trottier entitled to receive a rehabilitation benefit for home renovations of approximately $1,500, claimed pursuant to section 15 of the Schedule?
Is Royal liable to pay Mr. Trottier a special award pursuant to section 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mr. Trottier?
Is Royal entitled to an award pursuant to section 282(11.2) of the Insurance Act on the grounds that Mr. Trottier commenced an arbitration that was frivolous, vexatious or an abuse of process?
Is either party entitled to its expenses of the arbitration, pursuant to section 282(11) of the Insurance Act?
Is Mr. Trottier entitled to interest for the overdue payment of benefits, pursuant to section 46(2) of the Schedule?

Result:

The long-term disability benefits Mr. Trottier received from Clarica Life Insurance Company are deductible from his income replacement benefits. The quantum of Mr. Trottier's income replacement benefits is $237.05 per week, as of May 26, 2002.
Mr. Trottier shall repay to Royal $40,267.52, plus interest of $475.16, in relation to the deductible benefits he received from Clarica.
Mr. Trottier is not entitled to a rehabilitation benefit for the cost of home renovations.
Royal shall pay Mr. Trottier a special award of $350.
Royal is not entitled to an award pursuant to section 282(11.2) of the Insurance Act.
If required, the parties may now make submissions on the issue of expenses.
Royal shall pay Mr. Trottier interest of $230.55 on his income replacement benefits.

EVIDENCE AND ANALYSIS:

Background

The hearing proceeded on the basis of a 6-page agreed statement of fact, with a binder of supporting documents. The salient facts are as follows.

The Applicant was injured in a motor vehicle accident on December 20, 1999. He suffered neck and back injuries, which prevented him from carrying out his job as a custodian at a secondary school in Collingwood, which was part of the Simcoe County Board of Education. Through his employment, the Applicant has access to a long-term disability ("LTD") policy issued by Clarica Life Insurance Company ("Clarica"). The policy provides benefits to injured workers at the rate of 66 2/3 per cent of their usual gross monthly pay. Benefits are payable if the claimant is "totally disabled," as defined under the policy. The Applicant and employer each paid half of the premium. Participation in the disability coverage was voluntary.

By an Explanation of Benefits Payable, dated January 27, 2000, the Insurer advised the Applicant as follows:

We have received your employer's confirmation of income and disability certificate. We see on your [employer's] form you are eligible to receive an income benefit from Clarica Life Ins. under [policy] number 04056-5. We require written confirmation as to the amount you are receiving per week. Once this information is received we will be able to calculate your entitlement to receive an income replacement benefit.

By an Explanation of Benefits Payable, dated February 15, 2000, the Insurer began paying IRBs at the rate of $393.73 per week.

On February 2, 2001, the Applicant applied to Clarica for LTD benefits. He had not done so earlier, because he believed he did not qualify. By letter dated March 30, 2001, Clarica denied the Applicant's claim on the basis that he applied too late and that he did not meet the test of disability. In September 2001, the Applicant retained his current counsel, Mr. Kerr, to pursue his claim for benefits from Clarica.

On December 3, 2001, the Insurer notified the Applicant that they intended to terminate his IRBs on the basis that he did not meet the 104-week test. In response, Mr. Kerr requested a vocational assessment to determine the extent of the Applicant's disability. Mr. Kerr also requested a Designated Assessment Centre ("DAC") assessment. The Insurer stated that it would set up a DAC which would include a vocational assessment. The Insurer was not prepared to arrange for a separate vocational assessment.

The DAC occurred in March 2002 and the DAC report was issued on May 2, 2002. The DAC concluded that the Applicant did "not meet the demands of his previous vocation as a custodian/stationary engineer." The DAC further concluded that "if Mr. Trottier were to match a specific [job's] physical demands, [then] he would not be considered to be substantially disabled, as each potential job will have different demands." In March and May 2002, the Applicant had provided the Insurer with reports from Dr. S. Wong, a physiatrist, and Mr. S. Glenney, an occupational therapist, which raised significant questions about the Applicant's ability to successfully return to alternative employment. The Insurer nevertheless terminated benefits as of May 26, 2002 on the basis of the DAC report.

On June 28, 2002, Clarica advised the Applicant that they had accepted his claim and would be paying him benefits from April 20, 2000 to June 30, 2002. Based on the proportion of tax paid on the gross benefits, the Applicant's net benefit after tax would be $367.65 per week. Clarica paid the Applicant $42,107.87 for the April 2000 to June 2002 period. On July 22, 2002, the Applicant advised the Insurer that he was in receipt of benefits from Clarica. Mr. Kerr charged the Applicant $12,750.61 for his legal work in obtaining the Clarica benefits.

On August 14, 2002, the Insurer advised the Applicant that the Clarica payments were collateral benefits and, as such, were deductible from his IRBs. The Insurer asked that the Applicant immediately arrange for repayment.

The Insurer filed for mediation at the Commission on August 23, 2002, claiming a repayment of $42,107.87. On September 16, 2002, the Applicant wrote the Insurer, stating that the Insurer's August 14, 2002 letter did not comply with the Schedule, in part, on the basis that it did not enable the Applicant to determine how much the Insurer believed it was entitled to be repaid. The broader dispute between the parties on entitlement proceeded to arbitration and, on September 24, 2002, a week before the pre-hearing conference, the Insurer advised the Applicant that it conceded his continuing entitlement to IRBs after the 104-week mark. However, no benefits have been paid to the Applicant, apparently due to inadvertence.

On October 3, 2002, the parties mediated the repayment issue. The Report of Mediator notes that the Insurer claimed a repayment of $42,107.87. The matter did not settle.

By letter dated November 21, 2002, the Insurer notified the Applicant of the amount of the overpayment and the manner in which it was calculated. The Insurer stated that "previously, the amount indicated was not the overpayment, but rather the total amount of income replacement benefits paid by us to Mr. Trottier." The Insurer calculated the overpayment to be $40,267.52.

In October 2002, at the request of Clarica, the Applicant applied for Canada Pension Plan ("CPP") disability benefits. In late November, the Plan advised the Applicant that he was approved for benefits at the rate of $204.82 per week in 2001 and $210.97 per week for 2002. The Applicant's CPP benefits are deductible from his Clarica benefits. The back pay the Applicant received from the Plan for the period October 1, 2001 to November 30, 2002, totalling $12,718.91, was paid directly by the Plan to Clarica. On January 27, 2003, the Applicant formally advised the Insurer that he had been accepted for CPP disability benefits and the amounts thereof.

Submissions

The Applicant submitted that his LTD benefits are not deductible from his IRBs since they are not "payments for loss of income" received under an "income continuation benefit plan" within the meaning of section 7(1)1(i) of the Schedule. The Applicant, therefore, maintained that he need not repay the Insurer any benefits. He submitted that, even if the LTD benefits are deductible, the Insurer only gave him notice of the amount to be repaid on November 21, 2002 and, therefore, that he need only repay benefits from 12 months prior to that date, pursuant to section 47(3) of the Schedule. The Applicant also submitted that, if the Insurer is entitled to a repayment, then it should be reduced by the legal fees he incurred in obtaining the LTD benefits, particularly if the Insurer is entitled to a repayment beyond the 12 month period. The Applicant maintained that, if the Insurer is entitled to a repayment, then interest can only be charged from December 6, 2002, which is 15 days from the day notice was given, pursuant to section 47(6) of the Schedule. The Applicant stated that he was entitled to interest on whatever amounts were owing as of the date of termination, regardless of his recent receipt of CPP benefits. The Applicant stated that he was entitled to the cost of renovating his home, as it was necessary to reduce the effects of his disability and to facilitate his reintegration into family life, pursuant to section 15 of the Schedule. The Applicant submitted that he was entitled to a special award of 50 per cent on the amounts owing, since the Insurer terminated benefits on the basis of a deficient and erroneous DAC report.

The Insurer submitted that the Applicant's LTD benefits are deductible since they are payments for the loss of income under an income continuation plan. The Insurer, therefore, argued that it was entitled to a repayment of all of the LTD benefits, not just those in the 12 months prior to the notice. The Insurer stated that, even if the 12 month period applied, notice was, in fact, given on January 27, 2000, not November 21, 2002. The Insurer submitted that legal fees ought not to be deducted from any repayment, either as a matter of legislative interpretation or as a matter of policy. Regarding the payment of interest, the Insurer did not appear to dispute the Applicant's basic position that, if it is entitled to a repayment, then interest should commence as of 15 days from the day notice was given. The Insurer stated that, if the LTD benefits are not deductible, then it should pay the Applicant interest from the date IRBs were terminated, namely, May 26, 2002, but that if the LTD benefits are deductible, then it should only pay the Applicant interest from the date he gave the Insurer notice of his entitlement to CPP benefits, namely, January 27, 2003. The Insurer argued that the Applicant's claim for the cost of renovating his home fails to meet various criteria under the Schedule, for example, the need for a treatment plan. Finally, the Insurer submitted that, despite the DAC's flaws, it properly relied on the report, and, in any event, it conceded the Applicant's substantive entitlement to benefits in a timely manner, namely, before the pre-hearing conference.

Findings

Deductibility of LTD Benefits

I find that the Applicant's LTD benefits are deductible since they are payments for the loss of income under an income continuation plan. The relevant jurisprudence² sets out various indicia to determine this question. No one factor is determinative. The nature of a collateral benefit must be determined having regard to all of the circumstances of the case. In my view, the principal consideration is the degree to which the payments are tied to the insured's pre-accident employment. I find that the present case is most similar to the cases of Striker, De Frias and LeDonne, all of which found that the benefits in question were deductible. I find the present case distinguishable from Cugliari and Wilcox, both of which found that the benefits in question were not deductible.

The Applicant properly noted, as enunciated in Cugliari, that the legislative purpose of the provisions on the deduction of collateral benefits is the "elimination of double recovery." However, in Cugliari, the Court stated that this objective would not be furthered "when the conditions for eligibility do not require that the recipient be employed at the time of the disability or that the recipient demonstrate pecuniary loss." I find that these two criteria are either not present in the instant case or are significantly different. Further, as noted in Striker, to determine the true nature of the benefits in question, it is necessary to review the terms of the policy as a whole. This is particularly the case where the plan does not contain a general statement of intent (as existed in Striker and LeDonne). I find that various provisions in the policy establish that the payments are for the loss of income pursuant to an income continuation benefit plan, and are, therefore, deductible.

Like Striker, and unlike Cugliari and Wilcox, pursuant to section E-1 of the policy, in order to be a member of the plan (that is, an insured under the policy), a person must be actively working and regularly working for the Simcoe County Board of Education. Under section F-1, a person is automatically enrolled in the insurance plan when he or she becomes eligible to be a member. A member has the choice of opting out of the plan, but the Applicant did not do so. Unlike Wilcox (where the employer was not involved in arranging or paying for the policy in question), members pay half of the insurance premium and the employer pays the other half. Under section F-3, a member's insurance coverage terminates on the earlier of the date that he or she is no longer working for the Board of Education or the date he or she reaches the termination age specified in the summary of insurance. In a manner similar to LeDonne, insurance coverage terminates during a work stoppage (which includes strikes and layoffs), unless otherwise arranged beforehand.

While the member need not demonstrate pecuniary loss, under section L-1 benefits are only payable if the member is "totally disabled," meaning that the impairment must prevent him or her from performing the regular duties of any occupation for which he or she is minimally qualified and which provides income equal to or greater than the monthly disability benefit. The amount of the monthly disability benefit is calculated by applying the benefit formula (namely, 66 2/3 per cent of earnings) to the insured's monthly rate of income. As in Striker, De Frias and LeDonne, but not Cugliari and Wilcox, entitlement to benefits under the plan, as well as the quantum of those benefits, are directly tied to an insured's pre-accident employment income. Unlike Wilcox, pursuant to section D-1, since earnings are needed in order to calculate benefit amounts, an insured is responsible for reporting changes in earnings, and Clarica is entitled to inspect an insured's payroll records to verify amounts of insurance.

As in Striker, a member's LTD benefits are integrated with any income received under an approved rehabilitation programme, such that the member's post-accident benefits do not exceed 100 per cent of his or her pre-disability earnings. Post-accident financial assistance is again tied to the level of pre-accident earnings. Both Striker and the present case contain provisions rationalizing the receipt of LTD benefits and other disability benefits. The current policy includes in this calculation benefits paid under an automobile insurance policy. These provisions go to the avoidance of double recovery, suggesting that the deduction of the LTD benefits would be consistent with this principle, to the extent that the member would not receive a sum greater than the amounts permitted under either the policy or the Schedule.

Under section L-3 of the policy, Clarica holds subrogation rights which are directly tied to the member's "rate of earned income." For example, Clarica "will assert [its] right to subrogate when the amount of Long Term Disability benefits paid, together with the third party liability, exceeds 100% of the member's rate of earned income." Clarica's rights of subrogation are also explicitly tied to a member's receipt of an award for future loss of income: "If the member receives an award for future loss of income under a judgement or compromised settlement, we will withhold Long Term Disability benefits until the income from the award has been depleted." These provisions suggest that the policy is for the loss of income under an income continuation plan.

Under section L-2, benefits under the plan become payable from the later of the end of the qualifying period or the date the member is no longer entitled to receive regular earnings, benefits under a salary continuance plan or a short term disability income plan. The payments, therefore, begin where other income streams end. Pursuant to Appendix 5-1, benefits are paid to the age of 65 which, as stated in Striker, "has traditionally been accepted as a common date for retirement from employment."

Therefore, having regard to the policy as a whole, I find that the LTD benefits received by the Applicant are in the nature of payments for the loss of income under an income continuation plan and are, therefore, deductible from the Applicant's income replacement benefits.

Repayment

Pursuant to section 47(1)(c) of the Schedule, a person shall repay any IRBs "to the extent of any payments received by the person that are deductible from those benefits under this Regulation." Under section 47(2), the insurer is required to give the person notice of the amount of the repayment. Pursuant to section 47(3), the obligation to repay a benefit "does not apply unless notice under subsection (2) is given within 12 months after the payment was made."

I have found that the Applicant's LTD benefits are deductible from his IRBs. On June 28, 2002, the LTD carrier, Clarica, advised the Applicant that they had accepted his claim for LTD benefits and paid him benefits from April 20, 2000 to June 30, 2002, with a weekly benefit rate of $367.65. The Insurer complied with section 47(2) by giving the Applicant notice of the amount to be repaid on November 21, 2002. Pursuant to section 47(3), the obligation to repay applies since the notice was given within 12 months after the payment was made.

The Applicant suggested that he should only be required to repay his benefits 12 months back from the date of the notice. I reject this. The Insurer gave the Applicant full notice of the amount to be repaid within 12 months of the payment being received. I note that, as early as January 2000, the Insurer had suggested to the Applicant that his LTD benefits would be deducted from his IRBs. This was confirmed in January 2001. Section 47(1)(c) makes clear that a person's IRBs are to be repaid to the extent of "any" payments that are deductible. This suggests that the Applicant must repay all LTD benefits received by him. I see no significance in the fact the LTD benefits were paid in relation to a two-year period, for even if the Applicant were right in his interpretation of section 47(3), in the present case, the Applicant only received the benefits as of June 2002 and the Insurer gave notice of the repayment within 12 months of this time. I find that the Applicant's situation falls squarely within the terms of section 47 and that he must repay the amount noted by the Insurer, namely, $40,267.52.

Deduction of Legal Fees from Repayment

The Applicant argued that if, as a matter of fairness, the Insurer were entitled to a repayment of benefits more than 12 months before the November 2002 notice, then, as a matter of fairness, he should be entitled to deduct from the repayment the legal fees he expended in obtaining the LTD benefits in the first instance. I have found that the Applicant is required to repay the Clarica benefits, not as a matter of fairness, but on the clear terms of the Schedule and the facts of this case. Given this conclusion, I find it unnecessary to consider whether, as a matter of fairness, the Applicant should be able to withhold the amount he incurred in legal fees in pursuing the Clarica benefits.

Interest

Pursuant to section 47(6) of the Schedule, an insurer may charge interest on an amount repayable under section 47 from the fifteenth day after notice is given under section 47(2), at the bank rate in effect on that day. In the present case, the Insurer did not give full and clear notice of the amount to be repaid until November 21, 2002. Fifteen days from November 21, 2002 was December 6, 2002. I, therefore, find that the Insurer is entitled to interest on the repayment as of December 6, 2002. The bank rate on December 6, 2002 was 3 per cent. Interest at that rate on the overpayment of $40,267.52 from December 6, 2002 to the date of this decision, April 29, 2003, is $475.16.

Regarding the Applicant's entitlement to interest, pursuant to section 46 of the Schedule, the Insurer must pay the Applicant interest from the date the overdue amount became overdue. An amount is overdue "if the insurer fails to pay the benefit within the time required under this Part." In light of the Insurer's concession in September 2002 that the Applicant was entitled to IRBs beyond the 104-week mark, I find that the Insurer should pay the Applicant interest based on the date it terminated his benefits, namely, May 26, 2002.

Since the Applicant was entitled to receive LTD benefits from Clarica and since these were deductible, the quantum of his IRBs would be $26.08 per week ($393.73 per week for IRBs minus $367.65 per week for LTD benefits). However, the parties agree that, since the Applicant was entitled to CPP benefits and since these were deductible from his LTD benefits, the quantum of his IRBs increases to $237.05 per week ($393.73 per week for IRBs minus only $156.68 per week for LTD benefits).

The Insurer argued that it was only required to pay interest on the $26.08 per week as of May 26, 2002 (since that was the proper amount owing at that time) and that it need only pay interest on the higher rate as of the date the Applicant notified it of his entitlement to CPP benefits, namely, January 27, 2003. I agree that the Insurer cannot be said to have failed to pay an amount owing if it did not know until just prior to the hearing that the amount was, in fact, outstanding. Therefore, while the quantum of the Applicant's IRBs is $237.05 per week as of May 26, 2002, the Insurer did not fail to pay that amount until January 27, 2003. The only outstanding amount not paid by the Insurer prior to that time was the $26.08 per week. Therefore, for the purposes of calculating interest, the amounts overdue are $26.08 per week from June 9, 2002 (the first bi-weekly payment date after the termination of IRBs on May 26, 2002) to January 26, 2003 and $237.05 per week from January 27, 2003 to April 29, 2003.

Pursuant to section 46(2), the Insurer must pay interest on the overdue payments from the date they became overdue at the rate of 2 per cent per month, compounded monthly. Interest at 2 per cent per month, compounded monthly, on $26.08 per week from June 9, 2002 to January 26, 2003 is $133.88. Interest at 2 per cent per month, compounded monthly, on $237.05 per week from January 27, 2003 to April 29, 2003 is $96.67. The Insurer must pay the Applicant interest of $230.55, on his income replacement benefits.

Cost of Home Renovation

The Applicant claimed $1,500 for the costs of renovating his home (namely, putting an addition on his house), pursuant to section 15 of the Schedule. He submitted that this was necessary to reduce the effects of his disability and to facilitate his reintegration into family life. However, the Applicant offered no evidence in support of this argument. In any event, the Applicant's claim would appear to be more properly brought under section 22 of the Schedule (for home maintenance services), since in his OCF-12 Form on the Activities of Daily Living, he states that he "can not work on my house edition [sic]." The Insurer has already paid the maximum $100 per week for housekeeping and home maintenance services under section 22 of the Schedule.

The only other evidence in the materials potentially relevant to this issue is the comment in the May 2001 Functional Ability Examination ("FAE") on the need for housekeeping and home maintenance services to the effect that there were no findings to prevent the Applicant from gradually resuming all of his pre-accident activities.

The Applicant did not provide the Insurer a treatment plan for the home renovation, as required by section 38 of the Schedule. Pursuant to section 15(7) of the Schedule, expenses incurred to renovate an insured's home are deemed not to be reasonable and necessary if the renovations are only to give the person access to areas of the home not needed for ordinary living. The Applicant offered no evidence on the purpose of the home renovation or whether it was for access to parts of his home needed for ordinary living.

For all of these reasons, I find that the Applicant is not entitled to the costs of renovating his home.

Special Award

The Applicant submitted that he was entitled to a special award since the Insurer terminated benefits on the basis of a deficient and erroneous DAC report. I agree that the Insurer unreasonably relied on the DAC to terminate benefits. The Insurer conceded that the DAC did not do what it was obliged to do, namely, to indicate whether or not the Applicant suffered a complete inability to engage in any employment for which he was reasonably suited by education, training or experience. The DAC simply concluded that if the Applicant matched a certain job's physical requirements, then he would not be considered substantially disabled. While DAC assessments carry significant weight in the adjustment and dispute resolution process, an insurer is not, in my view, entitled to rely on a DAC report to terminate benefits where the DAC fails to provide an answer to the essential question before it. This is particularly the case where, as here, the DAC provides little, if any, guidance on the dispute between the parties, namely, the Applicant's employability. The Insurer also relied on the DAC to terminate the Applicant's IRBs, despite significant medical evidence to the contrary. In these circumstances, I find that the Insurer unreasonably withheld payments to the Applicant and that it should pay him a special award.

The Insurer did not dispute that it could be liable to pay a special award despite its entitlement to a repayment. I find that I can impose a special award in this case since the repayment concerns a period prior to the Insurer's improper termination of benefits. The repayment also relates to the quantum of the Applicant's benefits, whereas the special award relates to the Insurer's conduct and the Applicant's substantive entitlement to benefits. I find that the Insurer should pay a special award, despite the deductibility of the Applicant's collateral benefits, since it unreasonably withheld the payment of any benefits as of May 26, 2002.

The Applicant sought a special award of 50 per cent of the amounts owing (the maximum under section 282(10) of the Insurance Act). The Insurer submitted that, even if it were liable to pay a special award, it should only be determined on the $26.08 per week that was owing as of May 26, 2002. The method of calculating special awards is set out in the recent appeal decision of Persofsky.³

The first step is to determine which, if any, benefits were unreasonably withheld. As with the payment of interest, I find that the Insurer cannot be said to have unreasonably withheld an amount prior to the time it was notified that the amount was, in fact, outstanding. However, while the Insurer ought to pay interest on the benefits it failed to pay once the benefit rate changed (due to the Applicant's CPP entitlement), I am not prepared to find that the Insurer unreasonably withheld these benefits for the purposes of a special award. The Insurer was only advised of the Applicant's receipt of CPP benefits on January 27, 2003. At the hearing two days later, the Insurer conceded that, if the Applicant's LTD benefits were deductible from his IRBs, then his receipt of CPP benefits would increase the rate of his IRBs from $26.08 per week to $237.05 per week. Given the very short time between the notice and the hearing, and the fact that the hearing would finally determine the quantum of the Applicant's weekly benefits, I am not prepared to find that the Insurer unreasonably failed to pay benefits at the higher rate for the purposes of a special award. I, therefore, find that the special award ought to be calculated on the basis of $26.08 per week from May 26, 2002 to the date of this decision, April 29, 2003.

The next step in the Persofsky analysis is to determine the benefits that are owing to the Applicant, including interest, having regard to which benefits were unreasonably withheld. Based on $26.08 per week from May 26, 2002 to April 29, 2003, the benefits plus interest owing are $1,430.04 (principal of $1,285.37, plus interest of $144.67).

The third step is to calculate the maximum special award that can be granted, pursuant to section 282(10) of the Insurance Act. This is 50 per cent of the sum of the benefits owing ($1,430.04) and monthly compound interest on this amount from the time it first became payable (May 26, 2002) to the date of the decision (April 29, 2003). Interest of 2 per cent per month, compounded monthly, on $1,430.04 is $352. The sum of these figures is $1,782.04. The maximum special award possible in this case (namely, 50 per cent of this sum) is $891.02.

The final step is to determine an appropriate lump sum special award, based on the maximum special award possible, and having regard to the particular circumstances of the case. I am not prepared to impose the maximum award, as sought by the Applicant. While the Insurer unreasonably relied on the DAC to terminate the Applicant's IRBs, the Insurer re-evaluated its position relatively quickly (four months from the date of termination) and conceded the Applicant's entitlement to further IRBs prior to the pre-hearing conference. To this extent, the Insurer acted in a timely fashion and avoided the need for a more involved arbitration hearing. However, the Insurer has yet to pay the Applicant any benefits, apparently due to inadvertence. I received no evidence as to why, precisely, the Insurer has failed to pay the Applicant any benefits, despite its having conceded the Applicant's entitlement to those benefits some four months before the hearing. However, I am cognizant of the relatively small amount of benefits outstanding as of the date of termination (the only significant dispute between the parties having been the deductibility of the Applicant's LTD benefits, on which I have found in the Insurer's favour). Therefore, having regard to the maximum special award possible, and in the particular circumstances of this case, I find that an appropriate lump sum special award is $350.

Return of Insurer's Assessment Fee

While I have found against the Applicant on most of the issues in this case, I see no basis for a finding that the Applicant commenced an arbitration that was frivolous, vexatious or an abuse of process. I decline to make an award under section 282(11.2) of the Insurance Act.

EXPENSES:

If required, the parties may now make submissions on the issue of expenses.

April 29, 2003

Eban Bayefsky Arbitrator

Date