Neutral Citation: 2004 ONFSCDRS 112 FSCO A03-000023

Between: Sukwinder Kaur Virk, Applicant and Liberty Mutual Insurance Company, Insurer

Reasons for Decision

Before: Susan Sapin Heard: November 12, 2003, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Pradeep B. Pachai for Mrs. Virk Peter Kazdan for Liberty Mutual Insurance Company

Facts:

This case proceeded by way of an Agreed Statement of Facts. The Applicant, Sukwinder Kaur Virk, was 24 weeks pregnant when she was injured in a motor vehicle accident on November 25, 1995. She was admitted to hospital and the next day gave birth to a son, Pushinder Virk, by emergency cesarean section. Pushinder died 15 days later on December 11, either from complications arising from his premature birth, or from injuries sustained in the accident. On December 27, 1995, Mrs. Virk applied for statutory death benefits and funeral expenses for her child under the Schedule.¹ Liberty Mutual Insurance Company ("Liberty Mutual") denied payment of these expenses by letter dated January 16, 1996.

On October 31, 2003, Liberty Mutual paid for the funeral expenses incurred, but not the death benefit. The parties were unable to resolve their disputes through mediation, and Mrs. Virk 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:

Is Mrs. Virk entitled to death benefits of $10,020 for the death of her child under subsection 51(5) of the Schedule?
Is Mrs. Virk liable to repay to Liberty Mutual all or part of the $3,000 assessment fee it paid to the Financial Services Commission of Ontario to arbitrate this matter, because she commenced an arbitration that is frivolous, vexatious or an abuse of process under subsection 282(11.2) of the Insurance Act?
Is Liberty Mutual liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mrs. Virk?
Is either party liable to pay the arbitration expenses of the other under subsection 282(11) of the Insurance Act?
Is Mrs. Virk entitled to interest on any benefits found to be overdue under section 68 of the Schedule?

Result:

Mrs. Virk is entitled to death benefits of $10,020.
Liberty Mutual is not entitled to the return of its assessment fee.
Liberty Mutual is liable to pay a special award of $1,500.
If the parties are unable to come to an agreement on the matter of arbitration expenses, either party may request, in writing, an appointment before me to determine expenses within 30 days of the date of this decision, in accordance with Rule 79.1 of the Dispute Resolution Practice Code (Fourth Edition, May 31, 2001).
Mrs. Virk is entitled to interest on the amount of the $10,020 death benefit found to be owing as a result of this arbitration decision, under section 68 of the Schedule, from the date of this decision.

Issues:

The issue in this case is whether Pushinder, an unborn child at the time of the accident, qualified at the time of the accident, as a person, an insured person and a dependant, within the meaning of the Schedule, thereby entitling his mother to the statutory death benefit. This question turns on the interpretation of the words "person," "insured person," and "dependant," as those words are used in sections 1, 4, 51 and 52 of the Schedule.

Liberty argued that Pushinder, because he was not yet born when the accident occurred, did not meet any of the above definitions at the time of the accident, and so no death benefit was payable to his mother upon his death 15 days later.

The terms in question are found in various parts of the Schedule. The parts that are relevant to this decision read as follows:

PART I - INTERPRETATION

DEFINITIONS

In this Regulation, . . . "insured person," in respect of a particular motor vehicle liability policy, means,

(a) the named insured, any person specified in the policy as a driver of the insured automobile, the spouse of the named insured, and any dependant of the named insured or spouse, if the named insured, specified driver, spouse or dependant,

(i) is involved in an accident . . . [emphasis added]

DEPENDANTS

For the purpose of this Regulation, a person is a dependant of another person if the person is principally dependent for financial support or care on the other person...

PART XI - DEATH BENEFITS

51(5) If an insured person dies as a result of an accident and, at the time of the accident, the insured person was a dependant, the insurer shall pay $10,020,

(a) to the person upon whom the insured person was dependent. . .

PART XII - FUNERAL BENEFITS

52(1) The insurer shall pay the funeral expenses incurred in respect of an insured person who dies as a result of an accident.

"Person" is not defined in the Schedule or the Insurance Act.

Arguments of the Parties

At the hearing, Liberty Mutual conceded that, when Pushinder died, he was a dependant of his mother and therefore an "insured person" who died as a result of the accident within the meaning of sections 1 and 52 of the Schedule. It was on that basis that Liberty Mutual ultimately agreed to pay Pushinder's funeral expenses.

However, Liberty Mutual maintained that it is not liable to pay a death benefit under section 51(5) because Pushinder did not meet the requirement of being a "dependant" at the time of the accident. Liberty Mutual argued that Pushinder could not be defined as a dependant, because the correct interpretation of section 4 requires that a dependant, by definition, must first be a "person," and an unborn child is not a person at law.

Both parties accept, and Mrs. Virk relies upon, the long-established common law principle that an unborn child is not a "person" at law, but may acquire certain property rights while in utero, rights which it can assert if it is subsequently born alive. In Christo and Royal Insurance Company of Canada,² an appeal decision of this tribunal under the SABS 1990, the no-fault regime that preceded the SABS 1994 at issue in the case before me,³ the then Director's Delegate upheld the decision of the arbitrator at first instance, that a child who suffered accident injuries while in utero could claim medical benefits after he was born. In doing so, Delegate Draper emphasised the importance of this principle in the motor vehicle insurance context:

. . . the courts have long relied on a legal fiction to deal with the unfairness that would result if a child could not seek compensation in tort for an injury he or she suffered en ventre sa mere. The legal fiction is summarised in Seede et al. B. CamcoInc. (1985), 1985 CanLII 1938 (ON HCJ), 50 O.R. (2d) 218:

In Ontario there is no right of action in an unborn child to recover damages nor in favour of an unborn child unless the child is born alive. On the other hand, when the unborn child becomes a living child through birth and suffers damages as a result of prenatal injuries caused by the fault or the negligence of another the cause of action is completed. This right to the born-alive child is provided by the law on the basis of a fiction in respect of property rights clothing an unborn child who is subsequently born alive with the same rights as a child living at the time of the death of the benefactor. . .

Mrs. Virk argues that it makes no sense that Pushinder be treated as an insured person for the purpose of the funeral benefit under subsection 52.1 of the Schedule, but not for the purpose of the death benefit under subsection 51(5), with the absurd result that her child is both an insured person and not an insured person under the same statute. Mrs. Virk points out that the situation becomes even more anomalous when one considers the actual result in Christo, where Delegate Draper confirmed the arbitrator's decision to apply the legal fiction and concluded that a child injured in a motor vehicle accident while en ventre sa mère and subsequently born alive, is an "insured person" for the purposes of claiming statutory accident benefits in relation to his or her own accident-related injuries.

Liberty Mutual maintains that the en ventre sa mère principle does not apply in this case, because although Pushinder became both a dependant and an insured person by virtue of his being born alive, he was neither, by definition, at the time of the accident. It submits that the words "at the time of the accident" cannot be ignored or "read out" of the legislation, and they constitute a "temporal qualifier" that operates as a specific criterion for eligibility, and which "ousts" the en ventre sa mère principle. These very specific words, therefore, harsh as it may seem, must be taken to reflect the intention of the legislature to specifically exclude from the death benefit the class of persons to which Pushinder belonged, namely, infants in utero injured in an automobile accident who, though subsequently born alive, succumb to their injuries.

ANALYSIS:

The parties referred to a number of arbitration and court decisions dealing with the en ventre sa mère principle, and its application in the insurance law context.⁴

Liberty Mutual argued that the leading case on point is that of Ridgley and Zurich Insurance Company (OIC P-004083, April 14, 1998), an appeal decision of this Commission under the SABS-1990, in which then Director of Arbitrations Sachs upheld an arbitrator's decision to deny death benefits to the applicant, Michael Ridgley, a child born about four and half months after his father died in a motor vehicle accident. In that case, the hearing arbitrator held that Michael was not entitled to the death benefit, because he was not a "person" and therefore not a "surviving dependant" of his father, at the time of his father's death.

Although Ridgley was decided under the SABS-1990, and the facts and some of the relevant statutory language differ from those in Mrs. Virk's case, Liberty Mutual argued that the decision is directly on point and determinative of the issue in this case. I do not agree for a number of reasons.

Firstly, in Christo, the Director's Delegate rejected as too narrow the identical legal argument made by Liberty Mutual in this case, that an unborn child could not be a "person." After considering a number of court and arbitration decisions interpreting the SABS-1990 and its predecessors, Delegate Draper concluded:

In my view, the arbitrator properly interpreted the term "insured person" within its legislative context. Social and legal controversy about the status of the foetus strongly suggests that there is no ordinary or common meaning of "person" when applied to unborn children. The question is whether, within the context of section 6 of the Schedule, "insured person" includes a child who was involved in an accident while en ventre sa mere .

I do not read any of the cases cited as establishing that the term "person" can never include a subsequently born child.

. . .in each case, there was something in the legislation to convince the decision-maker that a child not yet born at the time of the accident could not meet the requirements for eligibility. The focus of section 6, in contrast, is on the person's current medical and rehabilitation needs "resulting from the accident," not on his or her status at the time of the accident. Like the arbitrator, I am not persuaded that the use of the term "insured person" is sufficient to preclude the operation of the en ventre sa mère fiction." [Emphasis added].

I agree with this reasoning and further find that it is reasonable to conclude from this statement that the word "person" in section 51 of the SABS -1994 does not contain within it a single or ordinary meaning and is therefore ambiguous; and that it follows that terms or definitions that use the word "person," or incorporate it either explicitly or implicitly, such as the definition of "insured person" in section 1 of the SABS -1994, or "dependant" in sections 4 and 51, do not necessarily contain a single meaning, and are therefore also correspondingly ambiguous.

In arriving at the above conclusion in Christo, Delegate Draper considered the arbitrator's decision in Ridgley, as well as many of the court and arbitration decisions considered in both the Ridgley arbitration and appeal decisions. The Ridgley appeal decision, however, although released 18 months after the appeal decision in Christo, makes no mention of either Christo arbitration or appeal decision. This is unfortunate, because, to the extent that both decisions turn on whether an unborn child can be a "person," a "dependant," or an "insured person" (although I am not convinced Ridgley does in fact turn on that interpretation, as explained below), the decisions are inconsistent, in that Christo applies the legal fiction regarding unborn children to permit a claim for statutory benefits, whereas Ridgley disallows a claim, in part at least, on the basis that an unborn child cannot be a dependant because it was not a "person" at the time of the accident.

The only way to reconcile these two appeal decisions is to accept Liberty Mutual's argument that, in the case before me, there is "something" in the Schedule that determines the result. This "something," according to Liberty Mutual, is the requirement in subsection 51(5) that the unborn child be a "dependant," and therefore a "person," at the time of the accident. The inclusion of these specific words in subsection 51(5), therefore, effectively sets up an eligibility requirement the unborn child, by definition, cannot meet.

Liberty Mutual bases this argument on the reasoning in Ridgley, where, in determining whether the "person" referred to in equivalent provisions of the SABS-1990 included those not yet born, Director Sachs distinguished cases standing for the proposition that specific words of exclusion are required to preclude a child from acquiring rights en ventre sa mère,⁵ on the basis that the words "at the time of the accident" in the SABS-1990 were a "temporal qualifier" sufficient, without more, to operate to prevent the unborn child from acquiring the right to claim a death benefit. In arriving at this conclusion, Director Sachs opined that "the case law relating to the right of a person who sustains injuries before birth to maintain an action for damages, or to assert rights acquired while unborn after birth, is not particularly helpful in determining whether the 'person' referred to in the [SABS-1990] includes those not yet born. Nor do they [sic] answer the issue of the point in time specified by the [SABS-1990] as to when the status of being a surviving dependant must exist."

I find this reasoning to be unnecessarily narrow and restrictive, and that the words "at the time of the accident" do not operate as a "temporal qualifier" to exclude unborn children from the death benefit provision, for three reasons. Firstly, it is not clear to me that the jurisprudence upholding the rights of unborn children and requiring specific words of exclusion to eliminate those rights can or should be so easily dismissed, based solely on the notion of a "temporal qualifier" - at best, a poor and unclear substitute for specific words of exclusion.

Secondly, I do not accept the conclusion that the "temporal qualifier"ousts the en ventre sa mère fiction because the reasoning behind it is based on a circular, and therefore fallacious, argument, in that it assumes at the outset, the very thing it is supposed to demonstrate; that is, that Pushinder was not a person at the time of the accident because he was not born at that time. A fallacious argument is neither rational nor valid. A circular argument in particular promotes intellectual dishonesty by assuming the conclusion it is intended to prove. Such arguments have no place in the law. Furthermore, applying such an argument in this particular case results in a narrow and restrictive interpretation that defeats the very purpose of the legal fiction, the whole point of which is to "backdate" the rights of a child subsequently born alive to the time it would have acquired those rights had it been born, i.e. while still in womb. As explained below, this narrow interpretation, in my view, also defeats the purpose of statutory accident benefits legislation in general, and the purpose of the death benefit in particular.

Finally, I find it is simply not necessary to read the words "at the time of the accident" in subsection 51(5) as ousting the legal fiction.

The en ventre sa mère fiction is a longstanding legal principle of fundamental importance. As noted in Montreal Tramways Co. v. Léveillé, 1933 CanLII 41 (SCC), [1933] S.C.R. 456, the leading case on this issue, this legal fiction, as a means of protecting the rights of unborn children by treating them as if they were already born, dates from Roman times, when it was part of the Digest of Justinian, lib. 1, tit. 5, ss. 7 and 26, and remains entrenched in civil law codes around the world to this day, including the Quebec Civil Code. It was acknowledged as a principle of general application in the common law of England at least by 1748.⁶ It would take more than a "temporal qualifier" and questionable logic, in my view, to unseat so fundamental and entrenched a principle of law.

Neither is it reasonable to deduce from the words "at the time of the accident," and from the fact that unborn children are not specifically mentioned in the Schedule, that the legislature must have intended to exclude them from the death benefit in particular. This narrow interpretation is contrary to common sense and to the very purpose of no-fault accident benefits, which codifies compensation for what would otherwise be, at common law, tortious injuries.

I find support for this view in the words of McKenzie J. of the Supreme Court of British Columbia in Smith v. Insurance Corp. of British Columbia⁷ a decision in which he determined that a child not born at the time of a motor vehicle accident was entitled to a death benefit on account of her father's death in the accident. McKenzie J. noted that, unlike the British Columbia Automobile Insurance Act and its regulations, which were silent about a child en ventre sa mère, the Province's Family Relations Act specifically defined 'child' to include '. . . a child not yet born on the death of the child's father or mother but subsequently born alive . . .' Regarding that expanded definition, McKenzie J. stated:

It would run contrary to common sense to exclude this unborn child from the death benefit for lack of specific words in the Automobile Insurance Act and regulations such as those just quoted. One obvious purpose of the Act is to provide financial help for survivors and surely a child yet unborn stands in as great a need as any already born and a highly restrictive interpretation, not consistent with the beneficial intent of the Act, would have to be applied to bar qualification for her. In Kirkpatrick v. Maroughan (1927) LX OLR 195 at 197 Middleton, J.A. said: "The word 'child' includes a child en ventre sa mère unless the context indicates otherwise." [Emphasis added]

Similarly, I find, given the paramount importance of the legal fiction, and the principle emphasised in Christo, that the use of the terms "person" and "insured person," (and, by extension, "dependant") are not of themselves sufficient to preclude the operation of the en ventre sa mère fiction. The starting point of any analysis should be that the word "person" also includes a child en ventre sa mère, unless the context indicates otherwise.

With respect to the purpose of the death benefit in general, and whether Pushinder's mother should be entitled to it in this case, I find the decision of the Ontario Court of Appeal in Fraczek v. Pascual, [2003] 64 O.R. (3d), p. 437, to be not only instructive regarding context, but persuasive. In that case, the Court considered the entitlement of parents to death benefits under the SABS-1996 upon the death of their 17 year old dependent child in a motor vehicle accident. In articulating the purpose of the statutory death benefit, Cronk, J. considered the recommendations for reform of Ontario's no-fault accident benefit regime made by Osborne J. in his 1988 Report of Inquiry into Motor Vehicle Accident Compensation in Ontario:

The purpose of the death benefit envisaged by s.25(2)(5)(i) of the 1996 SABS [equivalent to s. 51(2)(5)(a) of the 1994 SABS], in my view, conforms to the observations of Osborne J. In recognition of the value of life, it is intended to provide modest, but not insignificant, short-term financial assistance to those who survive the loss of a dependant. For that reason, the benefit is available to defined classes of persons including, but not limited to, parents who suffer the loss of a dependent child through the tragedy of a motor vehicle accident. That legislative purpose informs the interpretation of s.25(2)(5)(i).⁸

Further on in the decision, when discussing insurers' risk exposure, Cronk, J. made a comment I find particularly apt to Mrs. Virk's situation: "the value of life intended to be recognised by the death benefit does not vary with the date of death." Nor, I would add, does it vary with the duration of that life. Pushinder's death was no less of a tragedy or loss to his mother because he lived only 15 days. Further, once born alive, his life had no less value under the statute than would the life of any living child who died in or as a result of a motor vehicle accident, and for whom his mother would be entitled to the death benefit.

I was presented with no evidence of, or any jurisprudence supporting any compelling legal, policy or social reason, why Mrs. Virk should not be entitled to the death benefit in the particular circumstances of this case, or that such a result is in any way unreasonable, unjust, absurd, or in any way contrary to the purpose of the statute.

Finally, in my view, it is simply not necessary to read the words "at the time of the accident" in subsection 51(5) so as to render the en ventre sa mère legal fiction inoperable, nor, in fact, was such an interpretation necessary to the decision in Ridgley, an interpretation upon which Liberty Mutual relies.

I note that the wording of the subsection 11(2) death benefits provision in the SABS-1990 under consideration in Ridgley is similar to that of subparagraph 52(5)(a) of the SABS-1994 at issue here:

11(2) If, as a result of an accident, an insured person dies . . ., the insurer will pay . . .

However, whereas the SABS-1994 defines a "dependant" as a person who is "principally dependant for financial support or care . . .," subsection 3(2) of the SABS-1990 restricts the definition to "a person [who] is "principally dependant for financial support . . ."

In Ridgley, the determination that a "dependant" had to be a "person" at law at the time of the accident, by definition, was made first. In my view, as noted, proceeding in this way puts the cart before the horse, and leads to an interpretation of the legislation that is unnecessarily narrow. Given the importance of the en ventre sa mère principle in the common law of tort and negligence that informs the no-fault context, it should be taken as a given at the beginning of any analysis that the legal fiction applies. The legal fiction, as expressed in Montreal Tramways, couldn’t be more clear: a child in utero is deemed to have been born alive

. . . if for its advantage. Therefore when it was subsequently born alive and viable it was clothed with all the rights of action which it would have had if actually in existence at the date of the accident.⁹

I do not see how the inclusion of the words 'at the time of the accident' in subsection 51(5) changes the a priori presumption that the words "person" or "insured person" include an unborn child, or affects the en ventre sa mère principle in any way, or must lead to the conclusion that an unborn child could not have been a person at the time of the accident. The only status of the unborn child that is at issue is the same as it would be for anyone else, i.e. dependency at the time of the accident.

Using the en ventre sa mère legal fiction as a starting point, then, the next step is to determine whether the insured person was a "dependant" at the time of the accident, i.e. whether the insured person met the conditions for dependency set out in the legislation.

On this point, I find that the case before me is distinguished from Ridgley, because of the different wording of the definition of "dependant."

In Ridgley, Director Sachs held that "The individual must be a surviving dependant. . .To determine if there is dependency, subsection 3(2) is applied: the individual must be a "person" who is financially dependent on the deceased or his or her spouse." Leaving aside the question of whether Michael Ridgley had to be a "person" at the time of the accident, and looking at the actual wording of the decision, I find the real, and sufficient, reason the Director found he was not eligible was because he did not meet the criteria of being "principally financially dependent" while in utero:

The requirements to meet the definition of a surviving dependant eligible to receive the benefit are, in this case, that Michael is someone who has the status of a person dependent for financial support on Duane or Lisa Ridgley [his parents] at the time of the accident. As he was not yet born, his ability to acquire the right is circumscribed by the wording of the Schedule. Accordingly, on birth, there was no claim Michael could assert. The appeal is dismissed . . .

The words of the Schedule, in my view, limit the ability to become entitled to death benefits to those who, at the time of the accident, are surviving dependants as defined. [emphasis added]

In my view, the words "principally financially dependent" do not accurately or adequately describe the true nature of a child's dependency while in the womb. The reality is that the dependency of a foetus goes far beyond financial; while in the womb, the child depends upon its mother directly, utterly and completely for life itself. At that point, finances barely enter into it, except perhaps in the most remote or indirect fashion. In fact, it is this utter dependency, vulnerability and inability to act on its own behalf that gave rise to the en ventre sa mère principle in the first place.

In the SABS-1994, however, the legislators expanded the definition of "dependant" in the SABS-1994, and in so doing, introduced a broader, more flexible, alternative concept of dependency that included care. The direct result was to expand the class of persons included in the provision. I do not see how, on any straightforward and ordinary interpretation of the word "care," a child en ventre sa mère could not be considered to be "principally dependent for care on the other person" when the other person is its own mother. This interpretation makes common as well as legal sense.

I find, therefore, that Pushinder met the statutory requirement of being a dependant at the time of the accident because he was principally dependent for care on his mother while in utero.

As such, and because there is no question that Pushinder was both a dependant and an insured person when he was born alive after the accident and when he died as a result of it, I find, on the plain reading of subsection 51(5)(a), that Mrs. Virk, as "the person upon whom the insured person was dependent," is entitled to the death benefit of $10,020 payable upon Pushinder's death. In the event it is a concern, I do not find that this conclusion requires extending the common law legal fiction of en ventre sa mère beyond its original purview of protecting only the rights of the child itself, because the SABS-1994 itself grants Mrs. Virk a statutory right to claim a death benefit on the basis of her son’s status under the statute. In my view, the fact that the child acquired his status as a result of the application of a legal fiction, which is nothing more than an exercise of interpretation, is immaterial, and does not affect his mother’s right to claim what has now become, by operation of the statute, a legitimate right of her own.

Finally, to address Liberty Mutual's argument that the words "at the time of the accident" cannot be read out of the legislation and so made redundant, I suggest that the words 'at the time of the accident' were not put into subsection 55(1) specifically to exclude what I find to be the extremely rare circumstance of a child injured in utero who is born alive and then succumbs to his accident injuries, but rather to exclude from the application of the death benefit a more likely class of persons - for example, parents or (former) individual caregivers who, at the time of the accident, were not actually providing financial support or care to the deceased. In my view, this would be the parents or (former) individual caregivers of persons whose status changed prior to a motor vehicle accident, such as teenagers who leave home to work, collect social assistance or otherwise seek independence; children no longer entitled to support from a divorced or separated parent, or who become foster children; the elderly entering nursing homes, or persons financially dependent or dependent for care upon individuals because of mental or physical disability who must transfer to institutional care. These people, in my view, constitute a far larger class of persons, and one which it makes sense that legislators would turn their minds to.

It is also worth noting that times, and the law, albeit more slowly, have changed since Ridgley was decided. The new, expanded definition of dependency in the SABS-1994 was also adopted in the current Schedule. When one looks at some of the older cases that influenced the reasoning in Ridgley,¹⁰ it is evident that, although those cases dealt with similar legislative provisions, those provisions specified narrower categories of persons, and reflected earlier times, where, for example, a 'dependant' was defined as an individual under the age of 21 who resided with and was principally financially dependent upon "the head of the household." Laws have evolved to reflect changing times, in particular more complicated family relationships, and such terms are rarely used today.

SPECIAL AWARD:

Subsection 282(10) of the [Insurance Act]¹¹ provides for financial penalties against insurers in the form of a "special award," which an arbitrator can impose if he or she finds that an insurer has unreasonably withheld or delayed payments. The Act states that the award shall be ". . . 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 with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule" A maximum award of 50 per cent is usually reserved for cases of particularly egregious conduct on the part of an insurer.

Mrs. Virk claims a special award because she believes Liberty Mutual's initial refusal and delay in ultimately paying her son's funeral expenses, and its continued refusal to pay a death benefit, were, and are, unreasonable.

Liberty argued that the Applicant bears some responsibility for the delay, at least with respect to the funeral expenses, which it ultimately paid, and that its refusal to pay a death benefit has at all times been reasonable in the unique circumstances of this case.

Mr. T. Zukauskas, currently a Team Manager with Liberty Mutual, testified on behalf of the company on the issue of special award.

Mr. Zukauskas was the initial claims handler on the Virk file, and was at that time a new and inexperienced adjuster who had just started with the company. The accident was a serious one in which a grandmother and another child in addition to Pushinder died. Mr. Zukauskas stated that he consulted colleagues and reviewed FSCO case law when he received the application for death and funeral benefits for Pushinder, but as he could find no cases on point, he decided that a baby was not an insured person or a dependant under the SABS-1994, and denied the claims by letter dated January 16, 1996.

In February 1996, he was contacted by Mrs. Virk's former legal representative who advised him that Mrs. Virk disputed the refusal, and that the issues would be mediated. A subsequent conversation occurred that July. No application for mediation was received and the file was closed 90 days later.

Mr. Zukauskas transferred the ongoing Virk file to Deborah Zimmerman, a Senior Claims Specialist, after which point he appeared to have no first-hand knowledge about how the ongoing claims were handled. As Ms. Zimmerman did not testify, it is not clear what steps, if any, she took to review entitlement to death and funeral benefits in the case of Pushinder. Apparently, the issue of death and funeral benefits came up again in 2001 in the context of Mrs. Virk's own claim file, at which time, according to a conversation Mr. Zukauskas had with Ms. Zimmerman a week before this arbitration hearing, Ms. Zimmerman’s concerns were about the limitation period and causation. Mr. Zukauskas testified that, after the release in 2002 of the Supreme Court of Canada's decision in Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] S.C.J. No. 34, these concerns were "resolved." Mr. Zukauskas testified that it was Liberty Mutual's position that the funeral expenses were a covered expense under the SABS-1994, but that the death benefit was not. When asked why that was, he said he did not know, and that he would need to review the regulation.

At no time did Mr. Zukauskas review his decision to deny death and funeral benefits arising from Pushinder’s death, nor did he seek a legal opinion about Mrs. Virk’s potential entitlement.

No evidence was presented about if or when Ms. Zimmerman or anyone else at Liberty Mutual reviewed entitlement to death or funeral benefits or sought a legal opinion.

I find the initial denial of funeral expenses was clearly an error on Liberty Mutual's part, attributable to a new, inexperienced and seemingly poorly supervised adjuster. The error was compounded when Liberty Mutual never reviewed its initial decision. No explanation was provided for why, if the time limits and causation issues were "resolved" in 2002, Liberty Mutual simply did not pay the funeral expenses at that time, especially as the expenses had been claimed in December 1995, and denied in January 1996. Instead, Liberty Mutual waited until October 31, 2003, less than two weeks before the start of this arbitration hearing, to pay funeral expenses of $705.50, plus accumulated interest of 534%, or $3,767.89.

Although this does not seem to be an issue of bad faith on Liberty Mutual's part, it certainly speaks of unreasonable delay due to incompetence and intransigence for which no acceptable explanation was given. I find a special award of $1,500, inclusive of interest, which represents a penalty in the middle range, adequately addresses Liberty Mutual's unreasonable withholding of payment for funeral expenses.

With respect to the death benefit, I find Liberty Mutual made a quick and superficial determination of entitlement in circumstances that merited closer attention and perhaps a legal opinion, or, at the very least, an opinion from a senior claims person familiar with issues of legal interpretation, none of which appears to have been undertaken until quite late in the claim. However, I find Liberty Mutual's continued refusal to pay the death benefit was a reasonable position to take in the circumstances, given the evolving and complex case law and legislation, and the Applicant's failure to pursue the dispute resolution process in a timely fashion. Liberty Mutual's refusal to pay the death benefit does not give rise to a special award.

RETURN OF ASSESSMENT FEE:

Liberty Mutual submits that I should order Mrs. Virk to repay the assessment fee of $3,000 it paid to respond to her Application for Arbitration, on the basis that her Application was frivolous, vexatious and an abuse of process, under subsection 282(11.2) of the Insurance Act. In my view, Mrs. Virk’s claim raised legitimate, difficult, and novel issues of statutory interpretation, and a repayment of the assessment fee is not justified.

EXPENSES:

If the parties are unable to agree on the payment of arbitration expenses, either party may make an appointment for me to determine the matter in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code (Fourth Edition, May 31, 2001).

August 4, 2004

Susan Sapin Arbitrator

Date

Arbitration Order