Neutral Citation: 2004 ONFSCDRS 93

FSCO A03-000156

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

ESTATE OF SHIRAZ JIWA as represented by MUMTAZ JIWA

Applicant

and

ROYAL & SunAlliance INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before: David Leitch

Heard: March 10, 2004, at the offices of the Financial Services Commission of Ontario in Toronto. Written submissions received on March 12, 19 and 24, 2004.

Appearances:

Paul A. Gemmink for Mr. Jiwa

Stanley C. Tessis for Royal & SunAlliance Insurance Company of Canada

Issues:

The Applicant, Mr. Shiraz Jiwa, was injured in a motor vehicle accident on May 15, 1998. He applied for statutory accident benefits from Royal & SunAlliance Insurance Company of Canada ("Royal"), payable under the Schedule.¹ In December 1999, Royal issued a cheque for $15,000 payable to Mr. Jiwa in full and final satisfaction of his claims but he maintained in this proceeding that "he never received the money he was entitled to."² The parties were unable to resolve their disputes through mediation and Mr. Jiwa applied for arbitration at the Financial Services Commission of Ontario ("the Commission") under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

As directed by the pre-hearing Arbitrator, certain "preliminary" issues were set for hearing on August 26, 2003, while the "main" issues were set for hearing on December 18, 2003. As the Arbitrator presiding at the preliminary issue hearing on August 26, 2003, I decided that all issues should be heard together so that Mr. Jiwa, who did not testify on that date, would have the opportunity to testify with respect to all issues.³ Unfortunately, Mr. Jiwa died in November 2003. His widow, Mrs. Mumtaz Jiwa, has continued the proceeding in her capacity as the representative of Mr. Jiwa's estate.

Based on the arguments made at the hearing on March 10, 2004 and subsequent written submissions, the issues may be defined as follows:

Do I have jurisdiction to decide a dispute arising from the fact that Royal did not mail or deliver the settlement cheque to Mr. Jiwa's residential address?
Was Royal required by section 44(1)(a) of the Schedule to mail or deliver the settlement cheque to Mr. Jiwa's residential address?
Is Royal liable to Mr. Jiwa's estate because it did not mail or deliver the settlement cheque to Mr. Jiwa's residential address?

Result:

I have jurisdiction to decide the dispute arising from the fact that Royal did not mail or deliver mail or deliver the settlement cheque to Mr. Jiwa's residential address.
Royal was required by section 44(1)(a) of the Schedule to mail or deliver the settlement cheque to Mr. Jiwa's residential address.
Unless the parties are able to resolve the remaining issues - Royal's liability for non-compliance with section 44(1)(a) of the Schedule, interest and expenses - within 30 days of the date of this decision, I will resume the hearing for the purpose of receiving further evidence and argument regarding the existence and effect of any restitution order issued against Mr. Jiwa's agent, Mr. Sergio Mendez.

The Evidence

In his signed Application for Accident Benefits to Royal, dated July 12, 1998, Mr. Jiwa stated that he had been injured in a "head to head collision" on May 15, 1998 when "the other driver came on the wrong lane." He described his injuries as "muscular strain, neck, back, elbow, hips, shoulder - kidney renal failure due to muscle overload." His Application indicated that he had obtained treatment for these injuries from two hospitals and one health professional, all named. When asked by the Application form to describe his "employment situation at the time of the accident", Mr. Jiwa checked the box "have a written agreement to start work within" but crossed out the words "1 year" and wrote in the words: "on disability - due to leg amputation." He answered "yes" to the question: "Do your injuries prevent you from working" and when asked "from what date?" entered the date of the accident followed by the words "as soon was going to start work if doctor approved." He also listed employment as a car jockey in 1996 but it is not clear why; this employment had not been completed in the "past 52 weeks" as required by the question on the Application form he was purporting to answer.⁴

Mrs. Mumtaz Jiwa, Mr. Jiwa's widow, testified that Royal initially paid her husband benefits for physiotherapy treatment and "chores at home." By letter dated January 5, 1999, Royal informed Mr. Jiwa that "[s]ince you are no longer receiving treatment for injuries resulting from your automobile accident, we will be closing your file...[i]f we do not hear from you within the next 14 days."⁵ Mrs. Jiwa testified that in order to "take it further", her husband decided to hire S M Insurance Claims. She identified her husband's signature on the following "Agreement" with S M Insurance Claims dated January 12, 1999:

AGREEMENT

RE: MOTOR VEHICLE ACCIDENT Dated: May 15 /98

BETWEEN: SM INSURANCE CLAIMS and Shiraz K. Jiwa

The undersigned Shiraz K. Jiwa hereby retains SM INSURANCE CLAIMS to represent it [sic] in respect of collection of no fault benefits arising from the motor vehicle accident dated May 15 /98 .

The undersigned hereby acknowledges that SM INSURANCE CLAIMS is its [sic] lawful agent in respect of such matters.

The undersigned authorizes SM INSURANCE CLAIMS to take whatever measures it thinks appropriate in any circumstance including employment counsel, medical and other experts as it deems expedient.

The undersigned furthermore irrevocably appoints SM INSURANCE CLAIMS as its [sic] attorney for purposes of endorsing, negotiation of any cheques payable to the udersigned [sic] received from the insurer making payments as a result of said accident.

The undersigned assigns to SM INSURANCE CLAIMS monies which it, or anyone on its behalf, receives from Royal & Sun Alliance.

This agreement shall not be construed so as to require SM INSURANCE CLAIMS to incur any expenses on the undersigned's behalf.

Should any part of the agreement be constructed [sic] by a court as unenforceable for any reason, the balance of this agreement shall not be invalidated but the agreement shall be construed as if it did not contain the unenforceable provision.⁶

The person at S M Insurance Claims who took on the handling of Mr. Jiwa's claim was a Mr. Sergio Mendez. By fax dated January 14, 1999, Mr. Mendez forwarded to Royal a copy of "our Retainer Agreement", being the aforementioned Agreement between Mr. Jiwa and S M Insurance Claims; by letter dated January 19, 1999, Mr. Mendez requested a copy of Royal's file; by letter dated November 15, 1999, Mr. Mendez submitted a housekeeping claim on Mr. Jiwa's behalf, together with receipts, in the amount of $6,470.⁷ Settlement negotiations ensued. On December 4, 1999, Mr. Jiwa signed a "Full and Final Release" discharging Royal from any "PAST, PRESENT AND FUTURE CLAIMS" arising out of the accident of May 15, 1998 "in consideration of the payment of $15,000.00" which was "to be paid to Shiraz Jiwa." On the same day, Mr. Jiwa also signed an Acknowledgement of receipt of a Written Notice as required by section 9.1(2) of Ontario Regulation 664, R.R.O. 1990, as amended, hereinafter referred to as the Settlement Regulation. There was no suggestion that the Written Notice failed to comply with the Settlement Regulation.⁸

There is no evidence or explanation as to how the parties arrived at the $15,000 settlement figure. For its part, Royal submitted no evidence about why it agreed to pay Mr. Jiwa $15,000 or about how that figure may have been broken down under possible headings such as type of benefit or expenses. Mr. Jiwa obviously did not testify and neither did Mr. Mendez. Mrs. Jiwa acknowledged during cross-examination that her husband had agreed to pay Mr. Mendez a fee of 20% plus 7% GST as reflected on the stubs of all the cheques he received from S M Insurance Claims.⁹ However, this is not evidence that Royal included this or any other amount in the settlement figure to cover Mr. Jiwa's expenses.

S M Insurance Claims forwarded the Release and Acknowledgement to Royal by fax and mail on December 6, 1999. The fax cover sheet contained the following request: "Kindly advise when the draft is ready for pick-up and we will arrange for a courier to drop-off the originals and pick-up the cheque."¹⁰ A copy of Royal's settlement cheque for $15,000, dated December 10, 1999, was entered into evidence. The front of the cheque confirms that it was made payable to Shiraz Jiwa in respect of his accident of May 15, 1998. The back of the cheque indicates that it was endorsed by "S. Jiwa" and deposited into a bank account held by S M Insurance Claims.¹¹

Mrs. Jiwa testified that the endorsement was not written by her husband, that her husband never received the settlement cheque and that by March 2000 her husband had still not received any money from the settlement. In April 2000, Mrs. Jiwa testified, her husband received a series of cheques from S M Insurance Claims and gave her the first two, dated March 30 and April 15, 2000, to deposit.¹² Mrs. Jiwa testified that these two cheques, each for $2,947.50, were returned "NSF" .¹³ It was at that point, Mrs. Jiwa testified, that her husband turned to his brother, Mr. Ali Jiwa, for help.

Mr. Ali Jiwa testified that he was aware that his brother had been involved in a motor vehicle accident in May 1998 and that his claim had been settled with Royal for $15,000. He testified that when his brother told him about receiving NSF cheques from S M Insurance Claims, he decided to go and speak to Mr. Mendez personally. Mr. Jiwa testified that Mr. Mendez told him that "he [Mr. Mendez] was running into financial difficulties." Nevertheless, Mr. Jiwa stated that his intervention resulted in S M Insurance Claims honouring its third cheque to his brother, dated May 15, 2000, also in the amount of $2,947.50,¹⁴ and in Mr. Mendez making two additional $1,000 cash payments. He testified that he deposited the cheque and the cash payments into his brother's bank account, testimony which is corroborated by bank records showing deposits of corresponding amounts into Shiraz Jiwa's account on June 12, July 10 and July 29, 2000.¹⁵

Prior to making these recoveries, Mr. Ali Jiwa went to the Toronto Police Service to file a criminal complaint in respect of the two NSF cheques his brother had received from S M Insurance Claims.¹⁶ This complaint was investigated by Sergeant Paul Stewart and Constable John Mitchell. According to Constable Mitchell's testimony at the hearing, Mr. Ali Jiwa was not the only person to complain to the police about Mr. Mendez. Constable Mitchell testified that during an interview with himself and Sergeant Stewart on July 7, 2000, Mr. Mendez acknowledged receiving the $15,000 settlement cheque for Mr. Jiwa from Royal and depositing it in S M Insurance Claims' general bank account. Mr. Mendez also admitted to the police that some of the settlement funds were still owing to Mr. Jiwa but that he, Mr. Mendez, was experiencing "business problems." Constable Mitchell testified that based on this interview, Mr. Mendez was arrested and charged with "theft over." According to Constable Mitchell, when Mr. Mendez eventually appeared in criminal court on April 24, 2001, he pleaded guilty to 19 counts of theft over and was ordered to pay restitution to his many victims in the amount of $135,000. Constable Mitchell thought that Mr. Shiraz Jiwa was probably one of the beneficiaries of this restitution order.

Under vigorous cross-examination, Mrs. Jiwa denied that her husband received any further payments in respect of the settlement after the last July 2000 deposit made by her brother-in-law, Ali Jiwa. She did, however, acknowledge that her husband did not initially contact Royal about his problems recovering the settlement funds and that, had such problems not arisen, he would not have brought this proceeding.

Finally, a fourth cheque to Mr. Jiwa from S M Insurance Claims, dated May 30, 2000, was also entered into evidence.¹⁷ The stubs attached to all four cheques issued by S M Insurance Claims indicated that Mr. Jiwa was to receive four cheques each in the amount of $2,947.50, i.e., $11,790, that being the balance of the settlement funds after deducting Mr. Mendez's fee, plus an additional $471.60 for interest. Since this fourth cheque was to have included the interest payment, it was in the amount of $3,419.10, i.e., $2,947.50 plus $471.60. However, this cheque was not signed.

The Applicant's Arguments

For the Applicant, Mr. Gemmink argued that Royal failed to comply with its obligations under section 44(1)(a) of the Schedule governing the "method of payment." He submitted that while Royal made the settlement cheque payable to Mr. Jiwa, as required by that section, it failed to mail or deliver the settlement cheque to Mr. Jiwa's residential address, as also required by that section. He maintained that Royal's failure to comply with section 44(1)(a) led to Mr. Jiwa's losing a significant portion of the settlement funds to which he was entitled.

Section 44, in its entirety, reads as follows:

METHOD OF PAYMENT

(1) An insurer shall pay a benefit under this Regulation,

(a) by mailing or delivering a cheque payable to the person entitled to the benefit to the address where the person ordinarily resides; or

(b) with the consent of the person entitled to the benefit, by electronic funds transfer to an account in the name of the person.

(2) Despite subsection (1),

(a) an insurer may arrange to be invoiced directly and to pay directly for goods or services provided in respect of an insured person; or

(b) an insurer may pay a benefit into court under section 271 of the Insurance Act. O. Reg. 403/96, s. 44.

In support of his position that I have jurisdiction to grant the relief claimed by his client, Mr. Gemmink cited the Divisional Court's decision in the case of Wood v. Ontario (Insurance Commission)¹⁸ Borrowing the language of that decision, he argued that Royal's failure to comply with section 44(1)(a) "has everything to do with [Mr. Jiwa's] entitlement to SABS and as such falls within the plain common sense meaning of the words 'any issue in dispute in respect of the insured person's entitlement to statutory accident benefits' in ss. 280(1)" of the Insurance Act.

Mr. Gemmink further contended that the Director's Delegate's decision in Haripersaud and State Farm Mutual Automobile Insurance Company¹⁹ confirms that I have jurisdiction to order Royal to pay Mr. Jiwa those settlement funds which he did not receive. In his submission, as I understood it, Royal's non-compliance with section 44(1)(a) constituted "non-performance of the settlement agreement", the phrase used in the Haripersaud decision to establish the arbitrator's jurisdiction to order the insurer to pay for items included in the settlement agreement.

Of course, since these submissions assumed that section 44(1)(a) applies to settlement cheques as much as it applies to cheques for ongoing benefits, Mr. Gemmink contended that section 44(1) applies to settlement cheques. He advanced three arguments in support of this submission.

First, he cited several court decisions (none involving statutory accident benefits) in support of the proposition that the method of making a payment does not alter the legal character of the payment.²⁰ He reasoned that, likewise, the legal character of statutory accident benefits does not change merely because they are paid by way of settlement cheque.

Second, Mr. Gemmink noted that if cheques issued in settlement of statutory accident benefits' claims were not "payments made in respect of...statutory accident benefits", then the amounts so paid would not be deductible from court-awarded damages under section 267.8 of the Insurance Act.²¹ This result, he submitted, could not be right.

Third, Mr. Gemmink denied the existence of any conflict between section 44(1)(a) and the Settlement Regulation which says nothing about where settlement cheques are to be sent. He urged me to read section 44(1)(a) and the Settlement Regulation as legislation in pari materia, "presumed to operate together harmoniously and to reflect a consistent view of the subject in question."²² He pointed to section 47 on repayments and section 65 on assignments as examples of other provisions of the Schedule which, in his submission, operate post settlement, in conjunction with the Settlement Regulation.

Finally, Mr. Gemmink drew my attention to the decision of Madam Justice Greer of the Ontario Court (General Division) in the 1994 case of Dineff v. Progressive Casualty Insurance Co. of America.²³

In that case, Ms. Dineff signed documents prepared by her solicitors purporting to direct Progressive to stop sending benefit cheques, notices and correspondence to her and to start sending them instead to her solicitors. Ms. Dineff's benefit cheques continued to be made payable to her but her solicitors were given a power of attorney to endorse them. While this power of attorney disclaimed that it was an assignment of benefits, Progressive alleged that it was used to deposit Ms. Dineff’s benefit cheques in the solicitors' trust account "for the purpose of deducting their legal fees", an allegation which was not denied. Instead, Ms. Dineff’s solicitors argued that if Progressive were allowed to ignore their client's written instructions, it would, in effect, be permitted to interfere with her right to instruct counsel.

Progressive responded that it was precluded from following Ms. Dineff’s instructions by sections 89 and 90(1) of the 1994 Schedule.²⁴ These sections read as follows:

Subject to clause 69 (1) (b) [allowing for direct billing by service providers] and to section 271 of the Insurance Act [allowing for payment into court], payment of a benefit under this Regulation shall be made by cheque payable to the person entitled to the benefit, despite any direction to the contrary.

90.- (1) The assignment of a benefit under this Regulation is void.

Madam Justice Greer did not agree that the application of these sections interfered with Ms. Dineff’s right to instruct counsel. She wrote:

I cannot see how the issuing of the cheque by the insurer to the insured and mailing it to her at her residential postal address, rather than to her solicitor's postal address, is in any way interfering with her right to instruct counsel. This is in no way preventing her solicitor from having direct contact with the insurer on the insured's behalf with all other aspects of the lawsuit.

Madam Justice Greer then described the purpose which, in her opinion, sections 89 and 90 were intended to serve and the result which the achievement of that purpose required. She wrote:

I am satisfied that the new legislation, and in particular, ss. 89 and 90 of the Schedule were intended to ensure that the insured directly received her or his benefits and that they not be diverted to someone else or some entity other than the insured. The legislation was intended to be remedial.

The cheque, according to the legislation, must be made payable to the person entitled to the benefit, and sent to his or her residential address, despite any direction to the contrary.²⁵

In arriving at this conclusion, Madam Justice Greer acknowledged that, unlike section 44(1)(a) of the Schedule applicable in this case, no provision of the 1994 Schedule specifically required that benefit cheques be sent to the insured person's residential address. She was nevertheless prepared to infer that requirement from the fact that Part 1 of the Application for Accident Benefits form required the insured person to provide his/her street address and to do so even if represented by a lawyer.

In the course of her reasons, Madam Justice Greer also drew a distinction between benefit cheques and the written notices an insurer might send an insured person "at the insured's latest post office address as notified to the insurer" in accordance with section 12 of Ontario Regulation 777/93, as amended by Ontario Regulation 277/03.²⁶ She wrote:

Notice, however, is a legal concept. The insurer would have no problem using a solicitor's address for such notice if the solicitor was prepared to accept notice on behalf of the insured. On the other hand, the delivery of a cheque is the payment to which only the insured is entitled. If the insured, after receipt of the cheque, wishes to take it to her solicitor and then endorse it over to the law firm, that is her choice. Finally, a person's "post office address" can surely only be his or her normal address for the receipt of mail. It cannot, in my view, be extended to include the insured's solicitors' address.²⁷

Mr. Gemmink submitted that Madam Justice Greer's interpretation of section 89 of the 1994 Schedule promoted the objective of consumer protection and that it was, therefore, consistent with the Supreme Court of Canada's subsequent decision in Smith v. Co-operators General Insurance Co.²⁸ He advocated an interpretation of section 44(1)(a) which would promote the same objective.

The Insurer’s Arguments

For the Insurer, Mr. Tessis characterized this proceeding as an attempt by the Applicant to collect a debt owed to Mr. Jiwa’s estate by S M Insurance Claims. He pointed to the proposed interest payment as proof that Mr. Jiwa had agreed to lend back the amount owed to him by S M Insurance Claims. He submitted that I did not have jurisdiction because this claim did not involve either a dispute with Royal or a "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", as contemplated by section 280(1) and other sections of the Insurance Act. Any dispute fitting that description, Mr. Tessis maintained, was settled by Royal in full compliance with the Settlement Regulation.

Mr. Tessis further contended that in the absence of any attempt to rescind or attack the settlement agreement, the Applicant was really seeking to enforce it. He maintained that I have no jurisdiction to order the enforcement of a settlement agreement. In support of this submission, he relied upon the Director's Delegate's decision in Branchaud and Co-operators General Insurance Company²⁹ holding that arbitrators have no jurisdiction to order specific performance of settlement agreements. He noted that this ruling was referred to and followed in the case of Rose and CGU Insurance Company of Canada where the Arbitrator stated: "...I have no jurisdiction to grant the remedy requested by the Applicant - an order for CGU to specifically perform its obligation under the [settlement] agreement to pay the Applicant...."³⁰

Mr. Tessis took the position that the Settlement Regulation constitutes "a complete code" governing the settlement of statutory accident benefits' claims. He maintained that if the Settlement Regulation is silent on the question of where settlement cheques are to be sent, it is not because section 44(1)(a) applies or because arbitrators have jurisdiction to apply it. It is rather because the law of contracts applies and because contracts can be enforced in court. In his written submission, Mr. Tessis wrote: "[i]f the insurer refuses to deliver the settlement funds, an insured person has a right to apply to a Court of law to obtain a Judgment against the insurer in accordance with the terms of the settlement."³¹

Just as Mr. Gemmink advanced three arguments to support his position that section 44(1)(a) applies to settlement cheques, Mr. Tessis advanced three arguments to support his position that it does not.

First, he submitted that once a claim for statutory accident benefits is settled, the amounts paid cease to be benefits governed by the Schedule and become instead settlement funds governed by the Settlement Regulation and the law of contracts. He pointed to the Court of Appeal decisions in Igbokwe v. HB Group Insurance Management Ltd.³² (leave to appeal to the Supreme Court denied) as an example of how even the Settlement Regulation does not apply to a claim for statutory accident benefits if it is pursued by way of court action and settled in accordance with Rule 49 of the Rules of Civil Procedure. Mr. Tessis further noted that settlement cheques are not necessarily even issued in satisfaction of claims for statutory accident benefits; they might, in fact, be issued exclusively in satisfaction of claims for expenses which are not benefits and hence not covered by section 44(1)(a).

Second, he noted that while section 9.1(2) of the Settlement Regulation states that "the insurer shall give the insured person a written notice" specifying certain information, this language has not been interpreted as preventing insurers from sending the written notice to the insured person's representative, whether a lawyer or an agent. The acceptability of sending the written notice to an insured person's lawyer was, Mr. Tessis argued, established by the decision of Mr. Justice Nordheimer of the Ontario Superior Court in the case of Birjasingh v. Coseco Insurance Co.³³; the acceptability of sending the written notice to an insured person's agent was, he continued, established by the decision of the Arbitrator in the case of Rose and CGU Insurance Company of Canada, referred to earlier.³⁴ In Mr. Tessis's written submission, "there is no reason why the settlement funds payable by the insurance company... cannot also be sent to the insured person's legal representative."³⁵

Third, Mr. Tessis argued that applying section 44(1)(a) to settlement cheques would disrupt a well-established practice in that it would prohibit insured persons or their representatives from picking up settlement cheques from insurers offices.

Finally, Mr. Tessis did not doubt that consumer protection is one of the main objectives of automobile insurance law or that section 44(1) and the Settlement Regulation are in pari materia. However, he did not agree that these principles of statutory interpretation allow me to "import" section 44(1)(a) from the Schedule into the Settlement Regulation. That, he submitted, would amount to "reading in" or inventing words not contained in the Settlement Regulation, something I am not entitled to do. The Settlement Regulation, he noted, has its own methods for achieving consumer protection, namely, it gives the insured person rights of disclosure and rescission.

Analysis and Conclusions

Issue 1: Do I have jurisdiction?

In my view, arbitrators appointed under the Insurance Act do retain jurisdiction over certain issues related to valid and binding settlements. They cannot perhaps issue orders for specific performance of such settlements but, as Mr. Gemmink argued, the Haripersaud decision³⁶ confirms that arbitrators can issue orders requiring insurers to pay amounts included in settlement agreements. In other decisions (not cited by the parties), arbitrators have also granted interest and special awards against insurers who failed to issue settlement cheques in a timely fashion.³⁷

I also accept Mr. Gemmink's submission based on the Wood³⁸ decision, at least in part. I find that, if section 44(1)(a) applies to settlement cheques, Royal's non-compliance with that section had something "to do with [Mr. Jiwa's] entitlement to SABS and as such falls within the plain common sense meaning of the words 'any issue in dispute in respect of the insured person's entitlement to statutory accident benefits' in ss. 280(1)" of the Insurance Act.

I have substituted the word "something" for the word "everything" in the original quote because, based on the evidence, I find the following facts and recognize the following possibilities: it was Mr. Jiwa who gave Mr. Mendez the power to endorse his settlement cheque; even if Mr. Jiwa had received the cheque, he might have given it to Mr. Mendez; Mr. Jiwa appears to have agreed to accept interest for late payment by Mr. Mendez; Mr. Jiwa's brother was able to recover $4,947.50 from Mr. Mendez; Mr. Jiwa made no additional recoveries beyond that amount. Nevertheless, Royal's willingness to release the cheque to Mr. Mendez gave him possession of the cheque, one of the things he needed in order to carry out the criminal act which resulted in Mr. Jiwa's losses. In my view, if section 44(1)(a) applies to settlement cheques, that fact is sufficient to found my jurisdiction.

I reject Mr. Tessis's submission that Mr. Jiwa's estate's only remedy is to commence a court action based on the law of contracts. Any Statement of Claim based on the Release would certainly be met by a Statement of Defence based on the Agreement appointing S M Insurance Claims as Mr. Jiwa's agent. Mr. Jiwa's estate's claim, if it has one, is based on section 44(1)(a) of the Schedule. A court would, of course, be competent to determine the applicability of section 44(1)(a). However, Mr. Jiwa did not choose to go to court; he chose to come before an arbitrator appointed under the Insurance Act. I agree with the Director's Delegate in the Haripersaud decision when she stated that such choices should, where legally possible, be respected. She wrote:

...where mediation fails, subsection 281(1) gives the insured person the unfettered right to choose whether to proceed through arbitration or the courts. I can think of no policy reason consistent with the purpose of the Act for permitting an insurer, through non-performance of a settlement agreement, to force an insured person into the courts despite her wish to proceed with arbitration.³⁹

In my view, non-compliance with section 44(1)(a) has the potential to raise issues concerning the "non-performance of a settlement agreement."

Mr. Tessis was no doubt right to suggest that had no dispute arisen between Mr. Jiwa and Mr. Mendez, no dispute would have arisen between Mr. Jiwa’s estate and Royal. However, my lack of jurisdiction over the dispute with Mr. Mendez (who was not a party to this proceeding) is not a ground for questioning my jurisdiction over the dispute with Royal, even though some facts are common to both disputes. For example, the fact that a portion of the settlement funds were recovered from Mr. Mendez obviously must be reflected in any relief granted to Mr. Jiwa’s estate. However, the prior question is whether Mr. Jiwa’s estate has any right to recover from Royal, i.e., whether Royal was required by section 44(1)(a) to mail or deliver its settlement cheque to Mr. Jiwa’s residential address and whether its failure to do so renders it liable to Mr. Jiwa’s estate. These questions deal with Royal’s legal obligations to Mr. Jiwa. In my view, Royal cannot challenge my jurisdiction to examine its obligations to Mr. Jiwa by pointing to Mr. Mendez’s obligations to Mr. Jiwa.

Issue 2: Does section 44(1)(a) apply to settlement cheques?

In my view, Mr. Tessis’s arguments in support of his submission that section 44(1)(a) cannot apply to settlement cheques must be rejected for the following reasons:

This case demonstrates that the Settlement Regulation is not "a complete code" governing the settlement of statutory accident benefits claims: if it were complete, it would address and resolve the issue of where settlement cheques are to be sent. Mr. Tessis implicitly recognized this by submitting that I should resolve the issue not addressed by the Settlement Regulation by reference to the law of contracts.
Mr. Tessis supplied no authority for the proposition that once a claim for statutory accident benefits is settled, the amounts paid cease to be benefits governed by the Schedule. Nor did he respond to Mr. Gemmink's argument that if that proposition were accepted, it would dramatically alter the deductibility rules established under section 267.8 of the Insurance Act. The belief that benefits remain benefits when paid by way of settlement cheques was not questioned in the previously-mentioned decisions granting interest and special awards against insurers who failed to issue settlement cheques in a timely fashion.⁴⁰
While he had every opportunity to do so, Mr. Tessis called no evidence to prove that the settlement cheque in this case was issued exclusively in satisfaction of claims for expenses. That could, of course, happen in some rare cases but there is no evidentiary basis to suggest that this was such a case. Given the fact that Mr. Jiwa claimed both housekeeping and income replacement benefits and in view of fact that this settlement was reached with an agent prior to litigation, I find it extremely likely that Royal's settlement cheque was issued in respect of benefits, not in respect of potential claims for expenses.
Since this settlement cheque was paid in respect of benefits, I find that section 44(1)(a) has the legal potential to apply to it without any reference to the Settlement Regulation, without any importing or reading of section 44(1)(a) into the Settlement Regulation and without any conflict with the Settlement Regulation which is simply silent on the issue.
The Birjasingh and Rose decisions may establish the acceptability of sending notices to an insured person's lawyer or agent, but the present case does not involve a notice; it involves a settlement cheque. I agree with the Dineff decision that different considerations apply to benefit cheques and I see no reason to distinguish between ongoing benefit cheques and settlement cheques paid in respect of claims for benefits. In my view, the following observations of Madam Justice Greer apply to both types of cheques:

...the delivery of a cheque is the payment to which only the insured person is entitled. If the insured, after receipt of the cheque, wishes to take it to her solicitor and then endorse it over to the law firm, that is her choice.⁴¹

Still, these reasons only support the conclusion that section 44(1)(a) has the legal potential to apply to the settlement cheques issued in respect of statutory accident benefits claims. Whether it does apply to the settlement cheque at issue here depends on the answer to a question not raised by the parties: was Royal entitled to read the "Retainer Agreement" between Mr. Jiwa and S M Insurance Claims as confirmation that Mr. Jiwa had "contracted out" of section 44(1)(a)?

This Agreement was not between Mr. Jiwa and Royal but one of its purposes was clearly to inform Royal that S M Insurance Claims had become Mr. Jiwa’s "lawful agent in respect of such matters", such matters being Mr. Jiwa’s claim for "no fault benefits arising from the motor vehicle accident dated May 15, 1998." In keeping with that purpose, a copy of the Agreement was the first document S M Insurance Claims sent to Royal. Absent any concern about section 44(1)(a), I think Royal would have been entitled to read this Agreement as Mr. Jiwa’s written authority to send or give the settlement cheque to S M Insurance Claims.

But should it be legally possible for an insured person to contract out of section 44(1)(a)?

The Dineff decision does not provide a ready answer to this question. Section 89 of the 1994 Schedule contains the words "despite any direction to the contrary", words which were specifically relied upon by Madam Justice Greer in reaching her conclusion. Section 44(1)(a) does not contain this kind of explicit prohibition against contracting out. On the other hand, section 65(1) of the same Schedule does contain an explicit prohibition against contracting out. At all relevant times, section 65(1) read as follows: "The assignment of a benefit under this Regulation is void."⁴² These differences can, of course, give rise to arguments based on the maxim of statutory interpretation expressio unius est exclusio alterius: the legislature's failure to mention something which is mentioned elsewhere becomes grounds for inferring that it was deliberately left out or excluded.

Nevertheless, in my view, the absence of a prohibition against contracting out is not a reason to interpret section 44(1)(a) in a way which would undermine the objective of consumer protection. In Smith, the Supreme Court of Canada noted that section 279(2) of the Insurance Act "provides that any restriction on a party's right to mediate, arbitrate, litigate, or appeal is void." But the Court did not then immediately turn to the operative section of the Schedule, section 71, to see whether it too contained a prohibition against contracting out. On the contrary, despite the absence of such a prohibition, the next sentence of the Court's judgment reads as follows: "True to that purpose of consumer protection, no refusal under s. 71 of the SABS can be said to have been given by an insurer if there has not been adequate compliance with that section."⁴³

In my opinion, the facts of this case demonstrate that it would be contrary to the objective of consumer protection to allow insured persons to contract out of section 44(1)(a). That reading of section 44(1)(a) would allow insurers to mail or deliver benefit cheques, including settlement cheques payable in respect of benefits, to persons about whom they were required to know only one thing: that their insureds had signed agreements appointing those persons as their agents.⁴⁴

The Smith decision calls for "bright-line boundaries between the permissible and the impermissible without undue solicitude for particular circumstances that might operate against claimants in certain cases." In my view, section 44(1)(a) is capable of providing such a boundary but only if it is interpreted as imposing a mandatory standard, one which cannot be waived through contracting out.

That said, it is not clear to me that the imposition of this standard will necessarily disrupt existing practices, as alleged by Mr. Tessis. When settling statutory accident benefits claims with agents they know and trust, or with lawyers, insurers may accurately perceive little risk in continuing to observe practices which do not comply with section 44(1)(a). The reality is that insured persons who receive the settlement funds to which they are entitled will have no reason to complain about non-compliance with section 44(1)(a) and, if the transfer of funds is properly documented, no losses to point to. However, if, as in the present case, an insured person does not receive the settlement funds to which he/she is entitled, the insurer must, in my view, remain potentially liable for any non-compliance with section 44(1)(a).

Issue 3: Is Royal liable for non-compliance with section 44(1)(a)?

As previously mentioned, Royal’s liability for non-compliance with section 44(1)(a) obviously cannot include the portion of the settlement funds which Mr. Jiwa did recover from Mr. Mendez. That would amount to double recovery.

The more difficult question is whether Royal can be liable for any shortfall in Mr. Jiwa’s recovery when, according to Constable Mitchell’s testimony, he was probably one of the beneficiaries of the restitution order issued against Mr. Mendez by the criminal court.

On the one hand, Mr. Jiwa’s estate is not entitled to recover the same shortfall from two sources; that too would amount to double recovery. Nor, in my view, is Mr. Jiwa’s estate entitled to simply abandon its rights under any restitution order against Mr. Mendez, without at least some enquiry into its exigibility; that would amount to allowing Mr. Mendez to keep the proceeds of his crime at Royal’s expense.

On the other hand, the evidence does not conclusively establish either the existence or the amount of the restitution order. Even if it did, requiring Mr. Jiwa’s estate to undertake time-consuming, costly and potentially unsuccessful execution proceedings against Mr. Mendez would, in my opinion, defeat the consumer protection objective of section 44(1)(a).

The best resolution of this dilemma would involve an assignment of the restitution order to Royal, thereby shifting to Royal the burden and risk of the execution proceedings against Mr. Mendez. However, as previously noted, assignments of benefits are prohibited by section 65(1) of the Schedule. Just as I have found that the legal character of statutory accident benefits does not change when they are paid by way of settlement cheque, so may their legal character remain unchanged when paid under a restitution order.⁴⁵ If so (and I am not deciding the point), the restitution order cannot be assigned, though it can, perhaps, be amended by the issuing court.

In my view, the parties have not submitted sufficient evidence to permit me to decide this difficult question. I could, perhaps, deal with the lack of evidence by drawing an adverse inference against either Royal, which did not prove the existence or the amount of the restitution order, or against Mr. Jiwa's estate, which did not prove that this order is worthless or only capable of execution through further legal proceedings. However, in my opinion, it would be unfair to the parties to determine the effect of the restitution order on the basis of adverse inferences.

Therefore, unless the parties are able to resolve the remaining issues - Royal's liability for non-compliance with section 44(1)(a) of the Schedule, interest and expenses - within 30 days of the date of this decision, I will resume the hearing for the purpose of receiving further evidence and argument regarding the existence and effect of any restitution order issued against Mr. Jiwa's agent, Mr. Sergio Mendez.

June 14, 2004

David Leitch Arbitrator

Date

APPENDIX[^46]

Interest

Counsel reached agreement to settle the issues raised in the arbitration hearing on February 9, 1994, after completing one full day of evidence. The settlement funds were not advanced until March 22, 1994, some six weeks after settlement. No order in respect to the arbitration had [been] issued. Mr. Duffy claimed interest at 2 per cent per month on the settlement funds, under s. 24 of Ontario Regulation 672, R.R.O. 1990.

Some explanation was advanced for why the settlement was not implemented immediately. Mr. Mazurek pointed out that, after agreement was reached, Mr. Duffy requested an apportionment of the settlement funds as between s. 7 and s. 6 of the regulations, which required further instructions. These additional terms were agreed to on February 11, 1994. Mr. Mazurek also stated that working through the new formalities associated with settlement under s. 9.1 of Ontario Regulation 780/93 also caused additional delay, as did some ongoing questions about the form of the release. However, while these factors may have caused some delay in implementation, I heard nothing that would excuse the length of the delay in this case.

Mr. Mazurek submitted that an arbitrator has no authority to award interest in regards to a lump sum settlement. He submitted that it was up to the parties to address interest in the terms of their settlement. He submitted that, even if interest was not available, insurers would be deterred from delaying tactics by the threat of an investigation into their business practices under s. 288 of the Insurance Act. However, it must be said that this provides no monetary recompense to the individual claimant who has been improperly denied payment.

It can be assumed that, in settlement situations, the sum agreed to is intended by the parties to satisfy the applicant's claim, including interest, up to the date of the settlement. It is preferable that the parties put their minds to the question of interest for any period after that date. However, even if they have not directly addressed the issue, it is reasonable to infer that they contemplated prompt payment, in order to provide the value of the compensation that they agreed to. Where there has been undue delay in implementing the settlement, the applicant has been unfairly kept out of the value of those settlement funds and is prima facie entitled to interest intended to reflect the value of that money.

S. 24(4) provides for interest at 2 per cent per month "on overdue payments from the date they become overdue". Other subsections expand on when payments are overdue, so as to attract interest. S. 24(1) states that some payments, including benefits under Part II, (the subject of this arbitration) are overdue "if not mailed or otherwise delivered by the insurer with[in] thirty days after it has received a completed application for no-fault benefits". Other periodic benefits under Part IV are deemed to be overdue if not mailed or delivered within ten days of the application, and thereafter at least once every second week.

These provisions do not preclude the payment of interest on delayed funds after the parties have settled their dispute. S. 24(4) imposes liability to pay interest on overdue payments. However, the provisions do not address when the payments become "overdue" in all circumstances. It is open to the arbitrator to determine, in the circumstances, when the funds become "overdue". In this case, the arbitrator retains jurisdiction, because the arbitration has not been concluded.

Taking into account that the settlement terms were not finalised until February 11, 1994, and allowing the insurer some time to deal with the form of the release and process the funds, it would be reasonable to expect payment to be mailed or delivered within five working days after the date the agreement was finalised, (ten days from the end of the hearing).

Having regard to the above, I find that the funds became overdue as of Sunday, February 20, 1994, and attract interest at 2 per cent per month under s. 24(4) of the regulations as of that date until March 22, 1994.