Neutral Citation: 2004 ONFSCDRS 60

FSCO A03-000584

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

RANDY S. TURNER

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Jeffrey Rogers

Heard:

By telephone conference call on April 8, 2004.

Appearances:

Robert H. Littlejohn, solicitor for Mr. Turner

Sandra Zilli, solicitor for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Randy S. Turner, was injured in a motor vehicle accident on August 2, 1997. He applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.¹ State Farm terminated weekly income replacement benefits on July 9, 2002. The parties were unable to resolve their disputes through mediation. On April 25, 2003, Mr. Turner applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

On July 11, 2003 State Farm requested that Mr. Turner attend an insurer medical examination of the Applicant with Dr. Aras Balsys, respirologist. Mr. Turner refused to attend.

The only benefit at issue in the arbitration hearing is an income replacement benefit, pursuant to section 4 of the Schedule.

The preliminary issues are:

Is an insurer medical examination of the Applicant with Dr. Balsys, a respirologist, reasonably necessary pursuant to section 42 of the Schedule?
If this examination is reasonably necessary, what are the consequences of the Applicant's failure to attend?

Result:

An insurer medical examination of the Applicant with Dr. Balsys, a respirologist, is not reasonably necessary pursuant to section 42 of the Schedule.

BACKGROUND:

The "facts" relevant to the decision on the preliminary issue are not in dispute. The parties did not file an agreed statement of facts. They were content to rely on the summary filed by counsel for State Farm in the brief titled Insurer's Position and the documents in the two volumes of the Pre-Hearing Document Brief. These three volumes are the record for the hearing on the preliminary issues.

Counsel for Mr. Turner could not locate his copy of the Insurer's Position for the hearing, but he did not doubt that he had received it. He agreed to proceed on the basis that he would object if he disagreed with any of the alleged "facts". He did not object to anything in this section of my reasons.

Although I refer to Mr. Turner's injuries, treatment and medical condition in this section, I make no findings of fact in this regard. These "facts" are simply the information that was available to State Farm as it made ongoing adjusting decisions and are set out in order to provide the context in which the Insurer made the request for the current examination.

Mr. Turner was riding a motorcycle at the time of the accident. A car pulled out in front of him and he hit the fender. He was thrown from the motorcycle onto his left side. He was diagnosed with a fracture of the left clavicle, a non-displaced fracture of the left third rib and a small left pneumothorax (punctured lung). At first the pneumothorax was missed. Mr. Turner was sent home. Overnight, he could hardly breathe. He returned to Orillia Soldiers Memorial Hospital where the pneumothorax was treated. He did quite well and was discharged after a few days to be followed by his family doctor. There was a secondary diagnosis of atelectasis and pleural effusion (imperfect lung expansion and liquid in the rib cage). It was noted under past history that he smokes a pack a day and drinks a few .

Dr. Tibor A. Harmathy, Mr. Turner's family doctor, completed a disability certificate on August 10, 1997. The certificate mentions the pneumothorax and the fracture to the left clavicle. It does not mention any difficulty with breathing. The prognosis is for a return to full duties of work as of October 11, 1997 .

Dr. Harmathy continued to treat Mr. Turner and next provided a medical report dated October 14, 1997 in which he notes that Mr. Turner's prognosis was excellent after the accident but the fracture to the clavicle was not healing as well as was expected. He now recommends a return to work with limited physical duties on October 20, 1997. There is again no mention of shortness of breath or difficulty breathing.

The first reference to difficulty with breathing is in Dr. Harmathy's report to State Farm on January 13, 1998. That report indicates that pulmonary function testing and chest x-rays revealed normal functioning. The doctor was therefore at a loss to explain why Mr. Turner was having so much difficulty breathing. He had never noticed any difficulty at his office. He indicates that in early October 1998, he had asked the Insurer to permit a consultation with a respirologist but, to date, the Insurer had not granted the request. By letter of February 5, 1998 State Farm granted the request and Dr. Harmathy arranged for Mr. Turner to see Dr. Emad Amer, a respirologist, on March 2, 1998.

Dr. Amer reported to Dr. Harmathy after examining Mr. Turner and sent a copy to State Farm. He described Mr. Turner's complaint as a "rather unusual description of shortness of breath." Mr. Turner reported shortness of breath on exercise all the time, after his release from the hospital. Any mild exertion had this effect. He could not lie flat at night in any position because of shortness of breath. He preferred to sleep sitting in a chair.

The pulmonary function test done that day was normal. Dr. Amer was unable to explain the cause of the shortness of breath in a "healthy gentleman with a normal Pulmonary Function Test. He recommended further testing .

Further testing was done by Dr. Jae W. Yang at the respiratory division of the Toronto Western Hospital. He reported to Dr. Amer on October 15, 1998. Although Dr. Yang believed that Mr. Turner's injury had distorted his previous normal physiology, he was at a loss to explain his degree of significant dyspnea (shortness of breath) in the face of the fact that he had demonstrated good exercise capacity.

Dr. Amer next wrote to State Farm on February 22, 1999. He had not seen Mr. Turner since his visit on March 2, 1998 and he had nothing new to report. He confirmed that the only positive finding was a partial denervation of the left hemidiaphragm. He could not say whether this condition resulted from the accident and, despite extensive testing, he could not say what the problem was.

This is the last word on Mr. Turner's condition from a respirologist. It is after that letter that the medical records and reports start to mention the condition of Mr. Turner's liver and his intake of alcohol. On March 17, 1999 Dr. Paul P. Kortan, a gastroenterologist, reported to Dr. Harmathy. Mr. Turner had been referred because of increasing ascites (accumulation of fluid in the abdominal cavity). Dr. Kortan diagnosed massive ascites and jaundice. He also believed that Mr. Turner almost certainly had liver cirrhosis and portal hypertension. Mr. Turner admitted that he had been drinking beer for many years but he admitted only moderate consumption. Dr. Kortan, therefore, considered it necessary to conduct tests to rule out other causes. On October 12, 1999 the diagnosis of liver cirrhosis resulting from consumption of alcohol was confirmed by a biopsy performed at the Princes Margaret Hospital.

On October 19, 1999 Dr. Harmathy reported to Mr. Robert H. Littlejohn, Mr. Turner's counsel, that Mr. Turner's respiratory difficulty was related to both severe alcoholic cirrhosis and the accident. It was difficult to distinguish the degree of participation of the two factors in his overall problem as undoubtedly it would not exist except for the original accident.

At that time, Mr. Turner had undergone one medical examination under section 42 of the Schedule. That was done by Dr. David Goldstein on April 22, 1999. In his report of that date, he added little to what was already known. He noted that the current primary problem was shortness of breath and that the diagnosis of Mr. Turner's abdominal problem was "as yet uncertain." He concluded that, whatever the cause, Mr. Turner may not recover to the point where he could return to his pre-accident occupation as a lineman for Bell Canada, because his condition appeared chronic and he continued to drink.

Mr. Turner had also undergone two vocational examinations: a Vocational Transferable Skills Analysis on July 30, 1999 and an Occupational Therapy Home Assessment on August 10. 1999.

Mr. Turner underwent a further medical examination at the Insurer's request on April 15, 2002. This examination was done by Dr. Robert Fielden, an orthopaedist. After the diagnosis of liver cirrhosis resulting from consumption of alcohol in October of 1999, Mr. Turner had continued to drink and he was not prepared to admit that he was an alcoholic, the first step to recovery. State Farm knew of the diagnosis and of Mr. Turner's history of treatment in this regard, when it chose to have Dr. Fielden examine him in 2002.

Dr. Fielden reported to State Farm that difficulty with breathing continued to be Mr. Turner's major complaint. He noted that Mr. Turner has cirrhosis of the liver and developed ascites. He concluded that Mr. Turner "does not suffer a complete inability to engage in any employment." A Functional Abilities Evaluation done by Jodi Levstein on the same day resulted in the same conclusion. Based on the conclusions of Dr. Fielden and Jodi Levstein, State Farm terminated weekly income replacement benefits on July 9, 2002 .

Mr. Turner requested an assessment at a Designated Assessment Centre ("DAC"). That was done on September 3, 2002 and October 4, 2002. The assessors did not include a respirologist. The DAC concluded that Mr. Turner did not suffer a complete inability to engage in any employment.

On October 30, 2002 Mr. Turner applied for mediation. Mediation failed and the Mediator issued a report on January 27, 2003. Mr. Turner applied for arbitration on April 25, 2003. State Farm responded on May 25, 2003. On July 11, 2003 State Farm made the request for the examination that is the subject of this hearing. State Farm admits that it was not aware of any change in Mr. Turner's medical condition between the time that he was last examined and the most recent request.

SCHEDULE PROVISIONS and SUBMISSIONS

The Insurer's right to require Mr. Turner to be examined is derived from section 42 of the Schedule. The section also provides for the consequences of failing to attend an examination.

The relevant provisions are as follows:

42.(1) For the purpose of determining whether an insured person is entitled to a benefit for which an application is made, an insurer may give the insured person notice requiring the insured person to be examined by one or more persons specified by the insurer, each of whom is a member of a health profession or a person with expertise in vocational rehabilitation.

(3) The insurer may require examinations as often as is reasonably necessary.

(8) If an insured person fails or refuses to submit to an examination required by the insurer under this section or fails to comply with subsection (5)...,

(b) no benefit is payable for the period after the person has failed to attend the examination or failed to comply with subsection (5) and before the insured person submits to an examination under subsection (1) and complies with subsection (5).

(9) If a person subsequently submits to an examination under subsection (1) or complies with subsection (5), the insurer,

(a) shall resume payment of the benefit; and

(b) shall pay all amounts that were withheld during the period of non-compliance, if the insured person provides a reasonable explanation for not attending the examination or not complying with subsection (5).

Mr. Turner's position is that the proposed examination is not reasonably necessary for the purpose of determining his entitlement to the income replacement benefit claimed. He takes no other issue with the notice he received. State Farm says that the examination is reasonably necessary. State Farm submits that, although Mr. Turner was assessed by a respirologist in 1998, Dr. Amer was not aware of the condition of Mr. Turners liver at that time. That diagnosis was made later and it is clear that the liver condition plays a role in the respiratory problem which is Mr. Turner's main complaint. No respirologist has assessed Mr. Turner with knowledge of his liver condition. This might explain why Dr. Amer was not able to identify the cause of his shortness of breath. A further examination by a respirologist is therefore reasonably necessary.

State Farm submits that this assessment is required "in the interest of fairness between the parties in litigation" and that it is "the insurer's ongoing obligation to assess the insured's claim whether benefits are currently being paid or not...."²

State Farm sees support for its position in the decision of Arbitrator Naylor in Scott and Toronto Transit Commission³ and the decision of Director's Delegate Naylor in F.S. and Belai'r Insurance Company.⁴ State Farm submits that those decisions make it clear that the right of an insurer to require an insured to attend a medical examination provides the insurer with an effective opportunity to fairly assess the medical condition of the insured on an independent basis. Further, reasonableness is an objective standard with no fixed parameters. It is not for an arbitrator to "second-guess" the actions or the motives of the insurer requiring the examination and the choice of the specialist is that of the insurer, provided that a reasonable nexus exists between the choice of specialist and the injuries claimed.

Mr. Turner argues that he has undergone every examination reasonably required by State Farm. Those examinations along with the DAC report have provided State Farm with ample evidence of his condition. State Farm used that information to make its adjusting decision when it ceased paying benefits. His condition has not changed since they made that decision. It is therefore unreasonable for State Farm to require a further examination.

He relies on the principle set out on page 12 of the F.S. decision that the timing of a request is a factor in considering its reasonableness. According to that decision, timing becomes very important when it would delay the dispute resolution process and trial brinkmanship is not a feature of the dispute resolution process.

Counsel for Mr. Turner submitted that the request has had the effect of delaying the process because it has been necessary to have a hearing on the preliminary issue before proceeding to the arbitration hearing.

State Farm responded that there has been no delay and there is no prospect of delay because, if Mr. Turner had submitted to the examination, it would already have been conducted and, in the event that Mr. Turner now submits to the examination, it will be conducted well in advance of the date now set for the arbitration hearing.

ANALYSIS and RULING

Before starting the hearing I asked the parties for submissions on the issue of who bore the onus of proof. Counsel agreed that the onus was on the insurer. Although that agreement did not bind me, I would have ruled in the same way, if required. I am guided in this regard by the decision of Director's Delegate Draper in Chafe-Moote and Prudential of America.⁵

The substantive issue in this hearing has been dealt with in many FSCO decisions. The approach to deciding reasonableness may be distilled from the decisions in Scott, F.S. and State Farm, and Chafe - Moote (cited above) along with Sellathamby and Allstate Insurance⁶ The questions to be answered are:

Is the examination for the purpose of determining entitlement to a benefit?
Is it reasonably required for this purpose? and
If 1 and 2 are positively answered, what is the appropriate consequence of failure to attend?

The standard is an objective one with each case decided on its particular facts and not by applying some mathematical formula. The nature of the claim, the number and nature of previous examinations, the stage of the dispute resolution process, any change in the claim or the applicant's condition and the passage of time since the last examination are all factors to be considered. Director's Delegate Makepeace sets out the starting point on page 10 of the decision in Sellathamby as follows:

Subsection 42(1) of the SABS-1996 permits an insurer to have the insured person examined by an expert of the insurer's choosing, "[f]or the purpose of determining whether an insured person is entitled to a benefit." An insurer examination may be required "as often as is reasonably necessary," pursuant to s. 42(3). Although insurers often treat s. 42 examinations like "defence medicals" under s. 105 of the Courts of Justice Act, Commission adjudicators have stated that the purpose of an insurer examination under s. 42 and its predecessors is for claims adjustment. However, an insurer may require an insurer examination after benefits are terminated and the insured person applies for mediation in the case of a "continuing and evolving claim for ongoing benefits" or if the request is otherwise reasonable.

Although there was a statement in Scott to the effect that it is not for an arbitrator to "second-guess" the motives of a company in requiring a medical examination, that statement was later clarified by Director's Delegate Makepeace on page 15 of Sedathamby as follows:

As I read this passage, the Arbitrator was saying only that she was prepared to allow an insurer some leeway and discretion in deciding how to exercise its right to require an insurer examination. Arbitrator Naylor did not say an insurer's request was beyond arbitral review. Indeed, such a position would be inconsistent with her statement that reasonableness is an objective standard. In Scott and TTC, she considered the circumstances of the insurer's requests in detail before concluding they were reasonable. That has been the consistent approach of Commission adjudicators.

Also of note is the statement on page 10 of Chafe-Moote to the effect that "second-guessing" is only unfair if it is based on information not available to the insurer when the decision was made.

With these factors in mind, I am not satisfied that State Farm reasonably requires a further examination of Mr. Turner by a respirologist for the purpose of making an adjustment decision regarding his entitlement to the benefit claimed. I agree that such an examination may well provide information relevant to the resolution of the dispute currently in litigation. That may be fair, from the point of view of the Insurer. But that is not the legislated purpose of the examination.

State Farm knew everything that it now seeks to clarify, including the diagnosis of liver cirrhosis resulting from consumption of alcohol, as far back as 1999, long before Mr. Turner was examined by Dr. Fielden in April 2002. It made its adjusting decision on the basis of the opinion it obtained from Dr. Fielden's report. Nothing has changed. There is no ongoing adjusting of a changing or evolving claim. State Farm has maintained its position.

Indeed, when I asked counsel for State Farm how the requested examination would contribute to an adjusting decision, she could offer no insight at all in this regard. Her reply was that the decision was up to the adjuster. She submitted that the Insurer had stated the purpose of the examination in the notice sent to Mr. Turner, and it was not open to an arbitrator to "second-guess" that decision. As I pointed out above, the cases do not support this approach.

In the circumstances of this case, where some six months after mediation failed and four months after Mr. Turner applied for arbitration, the Insurer seeks to clarify information it has been aware of for years, the Insurer must provide a better explanation lest the inference be drawn that what the Insurer really seeks is ammunition for the arbitration proceeding. I conclude that this is the likely reason for the request.

I am therefore not satisfied that State Farm reasonably requires a further examination of Mr. Turner by a respirologist for the purpose of making an adjustment decision regarding his entitlement to the benefit claimed.

Having made this conclusion, it is not necessary to determine the consequences of his failure to attend. The arbitration hearing will proceed as scheduled.

EXPENSES:

The parties made no submissions with regard to expenses. If the parties are unable to resolve this issue, they may request an appointment on the issue within 30 days.

April 28, 2004

Jeffrey Rogers Arbitrator

Date