Neutral Citation: 2004 ONFSCDRS 173

FSCO A03-001654 and A03-001655

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

NAJIBA SALIHI and SHAH-MAHMOOD SALIHI

Applicants

and

ING INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Joyce Miller

Heard:

August 10, 2004, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Manoucher Baradaran for Mr. and Mrs. Salihi

Jennifer Griffiths for ING Insurance Company of Canada

Issues:

The Applicants, Najiba and Shah-Mahmood Salihi, were injured in a motor vehicle accident on July 20, 2003. They applied for statutory accident benefits from ING Insurance Company of Canada ("ING"). ING denied a number of claims for benefits. These claims included caregiver, medical rehabilitation, housekeeping and section 24 assessment expenses payable under the Schedule.¹ The parties were unable to resolve these disputes. ING submits that these claims only arose after mediation was sought. Mr. and Mrs. Salihi applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. ING submits that the FSCO Arbitration Unit has no jurisdiction to hear these matters.

The preliminary issue is:

1. Are Mr. and Mrs. Salihi precluded from proceeding to arbitration pursuant to section 50 of the Schedule?

Result:

1. Mr. Salihi and Mrs. Salihi are not precluded from proceeding to arbitration.

2. The issue of the legal expenses of this preliminary issue hearing is deferred to the hearing arbitrator.

BACKGROUND

On August 10, 2004, a preliminary issue raised by ING was argued before me. By letter decision dated August 12, 2004, I rejected ING's request that the arbitration hearing be dismissed and advised that full reasons would be issued in a decision format. The following are my full reasons for dismissing ING's motion.

SUBMISSIONS

ING's Submissions

ING submits that the mediator exceeded her jurisdiction when she issued the Report of Mediator on November 19, 2003 and accordingly, Mr. and Mrs. Salihi are barred from proceeding to arbitration.

ING submits that at the time Mr. and Mrs. Salihi applied for mediation on September 3, 2003 neither Mr. nor Mrs. Salihi had submitted any claims for benefits that had been refused by ING, or in respect of which the prescribed time period for ING to respond to the claims in question had expired. ING submits that a dispute cannot be said to exist where the insurer has not denied the claim in question, and where the prescribed time period for the insurer to respond has not yet elapsed. Accordingly, ING submits Mr. and Mrs. Salihi had failed to satisfy the preconditions mandated by the Insurance Act, the Schedule the Dispute Resolution Practice Code, and the relevant guidelines and practice notes.

Specifically ING relies on sections 49 and 50 of the Schedule, sections 279, 280(1) 282(2) of the Insurance Act, Rule12.1 of the Dispute Resolution Practice Code, FSCO guidelines for the Mediation Process² and Practice Note 11.

ING submits that the heading above section 49 of the Schedule, "Right to Dispute", makes it clear that a right to dispute only exists where an insurer has refused to pay a benefit or reduced the amount of the benefit payable. ING submits that in accordance with Driedger on the Construction of Statutes, Third Edition, p. 268, "headings are a valid indicator of legislative meaning and should be taken into account in interpretation."

ING further submits that subsection 50(a) of the Schedule provides that an insured person shall not commence a mediation proceeding under section 280 of the Insurance Act unless he or she notified the insurer of the circumstances giving rise to a claim for a benefit and submitted an application for the benefit within the times prescribed by this Part. ING submits that subsection 50(a) was only gradually complied with between August 29 and September 29, 2003 in respect of the claims included in the application for mediation filed on September 3, 2003. ING submits that it was never given the opportunity to respond to any of the claims prior to the application for mediation.

ING submits that at the time Mr. and Mrs. Salihi applied for mediation they were in breach of Rule 12.1 of the Dispute Resolution Practice Code which states that an insured person or an insurer may apply for mediation of any dispute about an insured person's entitlement to accident benefits or the amount of those benefits where a claim has been denied or the prescribed time period for the insurer to respond to the claim has elapsed.

ING submits that FSCO guidelines for the Mediation Process³ state that "... Above all else there is an obligation on both insurers and insured persons (referred to as 'claimants' in this guideline) to act fairly with each other in making an application for benefits and in processing claims. The full and timely exchange of information by both insurers and claimants is critical..."

ING points out that these guidelines provide "Principles for the Mediation Process." One of the principles being that the responsibility of an insured wishing to apply for mediation services to "have previously completed an application for benefits and all forms in full and submitted them to your insurer."

ING also relies on FSCO's Practice Note 11 which states in part:

Claimants may use the services of mediation when an accident benefit has been claimed from an automobile insurer and denied. Claimants are entitled to receive written notice from the insurer of a refusal to pay a claim along with an explanation of the refusal. Mediation services does not accept an Application for Mediation where the claimant has not first submitted his or her claim to the insurer. Where a claim has been submitted to an insurer and the time specified in the regulation for reviewing the claim by the insurer has expired, Mediation Services will accept the Application for Mediation on the basis of the insurer's deemed denial.

[emphasis in original]

In addition, ING relies on the case of Talsky v. Federation Insurance Co⁴. which it submits stands for the proposition that a mediation held contrary to the provisions of the Schedule or outside the jurisdiction of the mediator is not a properly held mediation pursuant to subsection 281(2) of the Insurance Act to justify the commencement of an arbitration by the insured.

Accordingly, for these reasons ING seeks an order dismissing Mr. and Mrs. Salihi's applications for arbitration without prejudice to the Applicants reapplying for mediation. ING also seeks its legal costs for this preliminary issue hearing. In the alternative, ING requests a stay of the arbitration to allow Mr. and Mrs. Salihi to re-mediate the issues in dispute and an order that costs be payable before they are permitted to proceed to arbitration.

Mr. and Mrs. Salihi's Submissions

Mr. and Mrs. Salihi submit that they have breached neither the Insurance Act nor the Schedule so as to invalidate the mediator's jurisdiction. They submit that the preconditions set out in the Schedule and the Insurance Act had been met and that a valid mediation occurred prior to their respective applications for arbitration.

Mr. and Mrs. Salihi argue that the preconditions to commencing a mediation proceeding are set out in section 50 of the Schedule and say that ING has not alleged that they had failed to meet the preconditions set out in that provision.

Mr. and Mrs. Salihi submit that the preconditions in subsection 50(a) were met by the time the mediation was held on November 14, 2003, namely, notification to ING of the circumstances of the accident and submission of an application for benefits within the time limits set out in Part X of the Schedule.

Mr. and Mrs. Salihi also submit that prior to applying for arbitration pursuant to subsections 280(1) and 281(2), they had participated in a valid mediation.

However, Mr. and Mrs. Salihi concede that various claims for benefits had not been denied by ING prior to their application for mediation in contravention of Rule 12.1 of the Dispute Resolution Practice Code. Nevertheless, they submit the fact that they did not comply with Rule 12.1 does not render the mediation of November 14, 2003 void, nor does it prevent them from proceeding to arbitration.

Mr. and Mrs. Salihi submit that the Dispute Resolution Practice Code rules are the Commission's internal rules of procedure created in accordance with section 25.1 of the Statutory Powers Procedure Act⁵ (the "SPPA"). They submit that such rules are to be distinguished from provisions found in legislation such as subsection 282(2) of the Insurance Act or section 50 of the Schedule.

Mr. and Mrs. Salihi submit that unless expressly provided in the relevant statute or regulations, the Commission, as a creature of statute, cannot fail to observe the requirements of the legislation without exceeding its jurisdiction. However, they point out that this principle does not apply to the internal rules made by the Commission to control its own processes pursuant to section 25.1 of the SPPA. Subsection 4(2) of the SPPA provides that Any provision of a tribunal's rules made under section 25.1 may be waived in accordance with the rules.

Mr. and Mrs. Salihi point out that the Commission has expressed this intention in Rule 1.3 of the Dispute Resolution Practice Code which states that "a defect in form or other technical breach will not make a proceeding invalid."

Mr. and Mrs. Salihi therefore submit that, unlike a breach of the Insurance Act or Schedule from which the Commission does not have the jurisdiction to deviate, the procedural requirements of the Dispute Resolution Practice Code can be waived or ignored by the Commission in order to bring about a just result.

Mr. and Mrs. Salihi submit that Talsky is not relevant to the present fact situation. Talsky dealt with a situation where a claimant had failed to make himself reasonably available at a DAC assessment prior to applying for mediation in contravention of section 50(c) fo the Schedule. The ratio of Talsky is that where the requirements of section 50 are not met, a claimant is not entitled to proceed to mediation.

Mr. and Mrs. Salihi submit that in the present case, there is no allegation by ING that the Applicants had failed to comply with section 50 of the Schedule by the time the mediation was held. Mr. and Mrs. Salihi submit that while ING did not deny any of the issues of dispute in the mediation prior to the filing of the application of mediation, ING subsequently denied or refused to deal with all of the matters in dispute prior to the mediation on November 14, 2003, which occurred ten weeks later.

Mr. and Mrs. Salihi submit that allowing a matter to proceed to arbitration despite non-compliance with the rules of the Dispute Resolution Practice Code is not unprecedented. They point out that in Hunt and Co-operators General Insurance Company⁶ Arbitrator Wacyk allowed the applicant to proceed to arbitration despite the fact that the specific benefits in dispute had not been claimed or denied prior to mediation.

Similarly, in Kaur and CIBC Insurance⁷, Arbitrator Killoran allowed issues that had not been mediated until after the filing of the application for arbitration to proceed to arbitration, since the mediation did occur and the insurer had received notice of all benefits in dispute from the time the application for arbitration was filed.

In conclusion, Mr. and Mrs. Salihi submit that ING has not alleged any breach of either the Insurance Act or the Schedule so as to place the mediation of November 14, 2003 beyond the Commission's jurisdiction. They submit the fact that ING has alleged a breach of the Dispute Resolution Practice Code Rule 12.1 which does not render a proceeding invalid.

Accordingly, Mr. and Mrs. Salihi submit that a restaging of the mediation of November 14, 2003 will not achieve any just end, but will merely protract these proceedings and create needless expense for both the parties and the resources of the Commission.

Accordingly, Mr. and Mrs. Salihi request an order allowing them to proceed to arbitration and an order for their costs in this preliminary issue hearing.

THE LAW

The following is the relevant law to be considered for the issue in dispute. Sections 49 and 50 of the Schedule provide:

Right to Dispute

49. If an insurer refuses to pay a benefit under this Regulation or reduces the amount of a benefit that a person is receiving under this Regulation, the insurer shall inform the person in writing of the procedure for resolving disputes relating to benefits under sections 279 to 283 of the Insurance Act.

Assessment before Mediation

50. An insured person shall not commence a mediation proceeding under section 280 of the Insurance Act unless,

(a) he or she notified the insurer of the circumstances giving rise to a claim for a benefit and submitted an application for the benefit within the times prescribed by this Part;

(b) he or she made himself or herself reasonably available for any examination required by the insurer under section 42; and

(c) he or she made himself or herself reasonably available for any assessment under section 43 and he or she complied with subsection 43 (2) in respect of the assessment.

Sections 279, 280(1) and 282(2) of the Insurance Act provide:

279.—(1) Disputes in respect of any insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled shall be resolved in accordance with sections 280 to 283 and the Statutory Accident Benefits Schedule.

Mediation

280 (1) Either the insured person or the insurer may refer to a mediator any issue in dispute in respect of the insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which the insured person is entitled.

Limitation

281 (2) No person may bring a proceeding in any court, refer the issues in dispute to an arbitrator under section 282 or agree to submit an issue for arbitration in accordance with the Arbitration Act, 1991 unless mediation was sought, mediation failed and, if the issues in dispute were referred for an evaluation under section 280.1, the report of the person who performed the evaluation has been given to the parties.

Rule 12.1 of the Dispute Resolution Practice Code provides:

Application for Mediation

An insured person or an insurer may apply for mediation of any dispute about an insured person's entitlement to accident benefits or the amount of those benefits where a claim has been denied or the prescribed time period for the insurer to respond to the claim has elapsed.

ANALYSIS AND FINDINGS

The burden of proof rests with ING to show that Mr. and Mrs. Salihi have not satisfied the preconditions that would allow them to proceed to arbitration. Specifically, that the mediation Mr. and Mrs. Salihi and ING participated on November 14, 2003 was void, because the mediator lacked jurisdiction to conduct the mediation.

For the following reasons I find that ING has not satisfied its burden.

In order for an arbitrator to have jurisdiction to hear a case, pursuant to subsection 281(2) of the Insurance Act a mediation must first have been sought and failed. The question then is whether in this case a valid mediation has been held and the mediation failed.

As stated above, section 50 of the Schedule provides that an insured person shall not commence a mediation proceeding under section 280 of the Insurance Act unless any one of three preconditions have not been fulfilled. These are:

(a) he or she notified the insurer of the circumstances giving rise to a claim for a benefit and submitted an application for the benefit within the times prescribed by this Part;

(b) he or she made himself or herself reasonably available for any examination required by the insurer under section 42; and

(c) he or she made himself or herself reasonably available for any assessment under section 43 and he or she complied with subsection 43 (2) in respect of the assessment.

ING did not present any evidence that any of the three preconditions set out in section 50 were not met at the time that the mediation on November 14, 2003 was held. I give little weight to ING's submission that the heading "Right to Dispute" in Section 49 of the Schedule limits an insured's right to proceed to mediation if the conditions in section 49 are not met. It is very clear from a plain reading of section 49 that the purpose of this provision is to outline the insurer's duties when denying a claim for benefits.

What ING presented, and is conceded by Mr. and Mrs. Salihi, is the fact that the Applicants had breached Rule 12.1 of the Dispute Resolution Practice Code, namely, that when Mr. and Mrs. Salihi applied for mediation on September 3, 2003, no claim had yet been denied by ING nor had the prescribed time period for the insurer to respond to any claim elapsed.

The issue then is whether the mediation held on November 14, 2003 is void on the basis that the mediator did not have jurisdiction to conduct the mediation because of a breach of Rule 12.1.

For the following reasons I find that a breach of Rule 12.1 does not void the mediation held on November 14, 2003.

It is clear that the jurisdiction to proceed to mediation and then to arbitration is derived from the Insurance Act and the Schedule, and not from the Dispute Resolution Practice Code. The purpose of the Dispute Resolution Practice Code is to guide the parties through the Commission's dispute resolution process in a timely and orderly fashion. The Dispute Resolution Practice Code does this by setting out rules for such matters as the filing of documents, time limits and payment of fees and expenses. As well, it outlines the rights and responsibilities of insureds and insurers when dealing with statutory accident benefits claims.

As Mr. and Mrs. Salihi pointed out in their submissions, unlike the Insurance Act or the Schedule, the procedural requirements of the Dispute Resolution Practice Code can be waived in order to bring about a just result.

Rule 1.1 of the Dispute Resolution Practice Code states that "These Rules will be broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute." Rule 1.3 of the Dispute Resolution Practice Code states that "A defect in form or other technical breach will not make a proceeding invalid."

What ING is asking for in this preliminary issue hearing is not to completely bar Mr. and Mrs. Salihi from arbitration but to order them to go back and re-mediate the issues that were mediated on November 14, 2003 because at the time Mr. and Mrs. Salihi applied for mediation they had not complied with Rule 12.1.

While I am sympathetic to ING's submission that Mr. and Mrs. Salihi did not make any effort to discuss and exchange relevant information in order to resolve any disputes before applying for mediation, I, nevertheless, find that when Mr. and Mrs. Salihi and ING attended at mediation on November 14, 2003 the preconditions of section 50(a) had been met. All claims in dispute made to ING had been denied by the time the mediation was held. The mediation failed to resolve the issues in dispute. Accordingly, the conditions pursuant to subsection 281(2) of the Insurance Act had been met to permit the Applicants to proceed to arbitration.

Since the prerequisites of access to arbitration have been met, I have no statutory basis upon which to bar or to stop these proceedings. I find that at this late date to send Mr. and Mrs. Salihi back to re-mediate their claim because they breached Rule 12.1 serves no constructive purpose. While the conduct of the Applicants did not conform to the Rules, I do not find the remedies sought by ING to be appropriate in the factual situation of this case. Succinctly, it would be a waste of time and money and not an efficient way to proceed in this case.

Accordingly, I find that Mr. and Mrs. Salihi can proceed to arbitration on September 27, 2004.

EXPENSES:

The issue of the legal expenses of this preliminary issue hearing is deferred to the hearing arbitrator.

November 22, 2004

Joyce Miller Arbitrator

Date

Neutral Citation: 2004 ONFSCDRS 173

FSCO A03-001654 and A03-001655

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

NAJIBA SALIHI and SHAH-MAHMOOD SALIHI

Applicants

and

ING INSURANCE COMPANY OF CANADA

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Mr. and Mrs. Salihi may proceed to arbitration.

2. The issue of the legal expenses of this preliminary issue hearing is deferred to the hearing arbitrator.

November 22, 2004

Joyce Miller Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96, 303/98, 114/00 and 482/01.
2. 2Guideline for Statutory Accident Benefits Applications, the Claims Process and the Mediation Process (Bill59) - Guideline No. 2/96, October 19, 1996
3. 3Ibid
4. 4[2002] O.J. No. 2678
5. 5R.S.O. 1990, c. S-22
6. 6(FSCO A00-001308, May 17, 2002)
7. 7(FSCO A99-000269, May 11, 2000)