Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2005 ONFSCDRS 108

Appeal P04-00008

OFFICE OF THE DIRECTOR OF ARBITRATIONS

WAWANESA MUTUAL INSURANCE COMPANY

Appellant

and

VLADISLAV SOROKIN

Respondent

Before:

Nancy Makepeace

Representatives:

Darrell March for Wawanesa

Henry Goldentuler for Mr. Sorokin

Hearing Date:

December 22, 2004, with written submissions completed on March 1, 2005

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The appeal of the arbitration order, dated February 9, 2004, is dismissed with respect to paragraphs 1 (income replacement benefits), 2 (medical treatment), 3 (disability certificate) and 5 (interest). The appeal is allowed with respect to paragraph 4 (special award), which is revoked and replaced with the following:

Wawanesa shall pay a special award of $7,500, less any amounts already paid.

2. If the parties are unable to agree on appeal expenses, they may contact me in accordance with Rule 79 of the Dispute Resolution Practice Code.

August 9, 2005

Nancy Makepeace Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Wawanesa appeals from the arbitrator’s order, dated February 9, 2004, that it pay income replacement benefits, medical benefits, a disability certificate, interest on overdue benefits under the SABS–1996¹, and a special award under s. 282(10) of the Insurance Act, in respect of Mr. Sorokin’s accident on May 27, 2000. For the following reasons, I find that the arbitrator erred in law only with respect to the amount of the special award.

II. BACKGROUND

The main facts were recounted by the arbitrator as follows:

The Applicant, 24 years old at the time, was involved in a motor vehicle accident on Saturday, May 27, 2000. His vehicle was travelling eastbound proceeding through an intersection on a green light when a vehicle travelling southbound against a red light struck the Applicant’s vehicle on the passenger’s side causing both air bags to disengage. The Applicant stated that the front passenger side of his car was smashed in and that the car was a write-off. He testified that when the accident occurred, he was returning to a friend’s pizzeria after delivering a pizza as a favour to that friend. The Applicant stated that after impact he passed out for about 30 seconds to a minute and was shaky and dazed when he left his car.

The ambulance and police arrived at the scene of the accident, the ambulance attendants examined him and the Applicant indicated that he preferred to have his friends drive him home rather than for the ambulance to take him to the hospital. He testified that after he arrived home he had increasing pain in his mid chest, mid and lower back, both shoulders, both sides of his neck and his left leg. The Applicant testified that he feared hospitals and therefore, following the accident, he chose to wait to see his family physician, Dr. Andrei Tchernov, until the first available date on Tuesday, May 30, 2000.²

Mr. Sorokin claimed income replacement benefits (“IRBs”) for 104 weeks on the basis that he is disabled from doing the job he had accepted just before the accident because of shoulder, neck, and back impairments resulting from the accident. The job was delivering frozen dough for a small business called Mr. Gemini7 Inc. (“Gemini”), and involved loading and unloading cases of the dough as well as driving the company van.

Wawanesa refused to pay IRBs because it did not accept that Mr. Sorokin was about to begin a new job at the time of the accident. The insurer claimed that Mr. Sorokin had not provided enough information about the job and had made inconsistent statements about his prospective wages. The insurer also did not accept that Mr. Sorokin’s accident-related impairments disabled him from doing the job.

Mr. Sorokin began chiropractic, physiotherapy, massage and related treatment at Integrated Health Recovery within days of the accident. Wawanesa refused to pay for the treatment recommended in the first two treatment plans prepared by Dr. V.B. Levitin, Mr. Sorokin’s chiropractor at Integrated Health, on May 31, 2000 and July 26, 2000. The insurer arranged a Med-Rehab DAC. By the time the assessment was done in September, Dr. Levitin had filed a third treatment plan, dated September 6, 2000, which was also considered by the DAC assessors. They recommended that Mr. Sorokin “would benefit from completing” the second treatment plan, which was almost at an end, but did not support further passive therapy.

On receiving the DAC report, dated September 25, 2000, Wawanesa paid for the first two treatment plans, but refused further treatment. Mr. Sorokin continued at Integrated Health, and Dr. B. Grossman, another chiropractor at the clinic, filed a fourth treatment plan on May 6, 2002. The insurer refused to pay. The insurer also refused to pay $81.15 for Dr. Tchernov’s initial disability certificate, dated May 30, 2000.

The arbitrator heard testimony from Mr. Sorokin, Mr. Aizik Bercovitch (his putative employer), Dr. Tchernov, Dr. Levitin, Dr. Brian Alpert (the orthopaedic specialist who provided a medical-legal assessment through DEAHY), Ms. Marina Kricheva (the kinesiologist who assessed Mr. Sorokin at DEAHY), Dr. John Zeldin (the orthopaedic specialist who assessed Mr. Sorokin for the insurer), and Ms. Carmela Pontieri (the adjuster who handled Mr. Sorokin’s claim). The arbitrator accepted Mr. Sorokin’s claims in their entirety, and found that they were unreasonably denied by the insurer. She made the following order:

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

1. Wawanesa shall pay the Applicant income replacement benefits from June 3, 2000 until May 27, 2002 at the weekly rate of $321.22.

2. Wawanesa shall pay the cost of the medical treatment by Integrated Health in the amount of $7,226.08.

3. Wawanesa shall pay the cost of the disability certificate dated May 30, 2000 prepared by Dr. Tchernov in the amount of $81.18, plus GST.

4. Wawanesa shall pay a special award of $15,000.

5. Wawanesa shall pay interest on any overdue benefit payments to be calculated pursuant to section 46 of the Schedule.

Wawanesa submits that the arbitrator erred in law by accepting that Mr. Sorokin “was entitled at the time of the accident to start work within one year under a legitimate contract of employment that was made before the accident and that is evidenced in writing” under s. 4(1)3.i. of the SABS-1996, and accepting that Mr. Sorokin was entitled to income replacement benefits at the weekly rate of $321.22 based on that contract. The insurer argues that the arbitrator made unsupported findings or failed to properly consider the evidence in accepting Mr. Sorokin’s future contract claim.

Wawanesa also submits that the arbitrator erred in law by accepting that Mr. Sorokin was impaired as a result of the accident and that the treatment in question was reasonable and necessary. There is also a dispute about the amount awarded for treatment fees; Wawanesa submits that the arbitrator exceeded her jurisdiction by awarding more than the amount in dispute.

Finally, Wawanesa submits that the arbitrator erred in law by ordering a special award, and alternatively, erred by making an excessive award. The insurer claims that its refusal of IRBs resulted from Mr. Sorokin’s failure to provide information it asked for, and not from any unreasonable conduct on its part. It relies on the Med-Rehab DAC in arguing that its refusal of ongoing medical benefits after September 2000 was reasonable, even if ultimately not upheld by the arbitrator.

III. ANALYSIS

C. Income Replacement Benefits

(i) Contract of Employment

Mr. Sorokin was 24 years old at the time of the accident on May 27, 2000. There is no dispute that he was enrolled in an electronics engineering technician program at a community college and had started some summer-term evening classes at the beginning of May. The arbitrator described the effect of the accident on Mr. Sorokin’s schooling as follows:

At the time of the accident, the Applicant was a student taking evening classes in an electrical engineering programme in communications at a local community college. His classes started at the beginning of May 2000. He stated that he missed about two or three weeks of classes following the accident, after which time he resumed classes taking two three-hour courses, each of which he attended twice per week. The Applicant testified that during the summer of 2000 he spent about 10 to 15 hours attending classes and studying for the two courses. He completed the semester in August 2000. He started further night courses in the fall of 2000. He completed all of the professional courses towards his diploma except English literature.³

However, Mr. Sorokin did not claim weekly non-earner benefits as a student under Part III of the SABS-1996. He claimed weekly income replacement benefits under Part II of the SABS-1996. This was to his advantage. Non-earner benefits pay only $185 a week (unless the claimant continues to be entitled after 104 weeks, at which point the benefit increases to $320 a week), are not payable for the first 26 weeks of disability, and are payable after that only if the claimant suffers a complete inability to carry on a normal life; Mr. Sorokin’s return to school after the accident would have presented a challenge for a non-earner claim. In contrast, income replacement benefits are payable for the first 104 weeks if the claimant is substantially unable to perform the essential tasks of his or her pre-accident employment, and after that if the claimant is completely unable to engage in any employment for which he or she is reasonably suited by education, training or experience. They are paid at 80 percent of net income, subject to a minimum of $185 a week (after the first 104 weeks) and a maximum of $400 a week (unless optional benefits have been purchased). This was the context of Wawanesa’s challenge to Mr. Sorokin’s reliance on a pre-accident employment contract.

Moreover, the arbitrator noted Mr. Sorokin’s testimony “that when the accident occurred, he was returning to a friend’s pizzeria after delivering a pizza as a favour to that friend.”⁴ If Mr. Sorokin had claimed income replacement benefits based on a job delivering pizzas before the accident, he would very likely have been entitled to a much lower rate of benefits for a much shorter time than what he claimed pursuant to the Gemini contract. This underlines the significance of Mr. Sorokin’s evidence about the pre-accident contract with Gemini. In the circumstances, it is not surprising that the insurer questioned Mr. Sorokin’s claim.

Another reason for questioning Mr. Sorokin’s claim was that his relationship with Mr. Bercovitch was not at arm’s length: Mr. Sorokin’s brother was a friend of Mr. Bercovitch’s son.⁵ The arbitrator noted this without comment. People get hired every day based on non-arm’s-length relationships; this by itself does not undermine the legitimacy of the employment contract. However, where documentation is minimal and the existence and terms of the contract later come into question, greater scrutiny is called for.

The arbitrator did not address these issues, and in this respect, her reasons fell short of the ideal. However, I am not persuaded there was a failure to give sufficient reasons amounting to an error of law. Reading the decision as a whole, I am satisfied that the arbitrator considered the gaps and discrepancies the insurer relied on, but found they were not so significant as to undermine the general strength of the evidence given by Mr. Sorokin and Mr. Bercovitch.

As the contract of employment was a significant issue in Wawanesa’s appeal, a more detailed examination of the issues follows.

Eligibility for income replacement benefits is generally premised on the claimant’s having been employed at the time of the accident, or for 26 weeks of the previous 52 weeks. Until the passage of recent amendments that do not apply to this case, the SABS also recognized the income loss suffered by a claimant who was not employed at the time of the accident but expected to start a new job soon afterwards. Section 4(1)3 sets out the requirements:

The insured person,

i. was entitled at the time of the accident to start work within one year under a legitimate contract of employment that was made before the accident and that is evidenced in writing, and

ii. as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of the employment he or she was entitled to start under the contract.

Mr. Sorokin claimed that on May 23, 2000, four days before the accident, Mr. Aizik Bercovitch, owner of Gemini, hired him to work as a van driver/delivery man delivering frozen bagel dough to bakeries. He relied on the following letter from Mr. Bercovitch:

MR. GEMINI7 INC.

May 23, 2000

Further to a job interview, I would like to offer you a position as a van driver/delivery man. As agreed you will start work on June 1, 2000 at $12.50/hour from 7am to 5pm with lunch and breaks 1h 30min long. Your training will start on May 26, 2000 without pay for 3 hours a day from 9am to 12pm. I look forward to seeing you on May 26, 2000.

The letter concludes with Mr. Bercovitch’s name, title, phone number, and signature, beside which is the handwritten date.

Wawanesa questioned the legitimacy of the offer, and particularly questioned the details about the pay rate, job duties, and training days.

For one thing, Mr. Sorokin checked off the “unemployed” box on his application for accident benefits. The arbitrator did not find this significant. She accepted Mr. Sorokin’s testimony that he considered himself unemployed because he had not started the job at the time of the accident. In addition, I note that Mr. Sorokin also checked off the “written agreement to start work within one year” box, under Part 5 of the same application, and provided details about the Gemini job in Part 8 of the application. I find no error in the arbitrator’s dismissal of this factor.

Another issue was that the letter refers to an offer, but not an acceptance. Wawanesa submitted this meant there was no employment contract at the time of the acceptance. This was important because Mr. Sorokin could not take advantage of s. 4(1)3 if the contract was not formed until after the accident. The arbitrator preferred Mr. Sorokin’s testimony about the timing of the letter:

The Applicant testified that at the interview Mr. Bercovitch offered and he accepted the job. Wawanesa’s counsel attempted to challenge the credibility of the contract. He questioned why, if the Applicant had already accepted the job, the letter says: “I would like to offer you a position as a van driver”, suggesting there is a discrepancy between the Applicant’s evidence and the letter. The Applicant explained, and I accept as reasonable, that the letter which Mr. Bercovitch gave him immediately following the interview, served as confirmation of the offer and acceptance.⁶

I am not surprised Wawanesa finds this implausible, particularly considering Mr. Bercovitch’s evidence that he had not done any of the other paperwork involved in hiring by the time of the accident. Further, Mr. Sorokin did not attempt to take up the job after the accident, and Mr. Bercovitch did not hire anyone else to replace him.

The question of the training days was especially important because the accident occurred at about 9:45 p.m. on May 27, 2000. Mr. Sorokin and Mr. Bercovitch testified that Friday, May 26, 2000 and Saturday, May 27, 2000 were unpaid training days. If Mr. Sorokin had in fact started the job before the accident, he could not take advantage of the contract of employment provisions and his IRB would be much reduced. The arbitrator made the following comments about the training days:

On cross-examination, the Applicant was asked why the May 23, 2000 letter only mentioned May 26 and not May 27 as a training day. The Applicant explained that on May 26 he first went to Mr. Bercovitch’s home where he had his business office and the garage where a freezer stored frozen dough. On that day, the Applicant helped load the van with cases of frozen dough and made deliveries to two or three bakeries for a couple of hours. The Applicant testified he did not consider May 27 to be a training day because on that, the day of the accident, he only went to Mr. Bercovitch’s home office to learn about the business invoices and made no deliveries.⁷

There were also discrepancies about the pay. Mr. Sorokin’s application for accident benefits stated he would be paid a gross income of $500 for a 40-hour week, which works out to $8 an hour. The insurer’s adjuster, Carmela Pontieri, made a note that Mr. Sorokin said, in a telephone conversation on July 5, 2000, that he had agreed to $1,800 a month, which comes to $450 a week. However, Mr. Bercovitch’s letter offers $12.50 an hour for an 8½ hour day, totalling $531.25 per week. This was also the figure Mr. Sorokin and Mr. Bercovitch gave in their testimony, and the one the arbitrator accepted. Mr. Sorokin explained that he did not prepare the application form, Ms. Pontieri asked many questions quickly, and in any event these figures were approximations. He explained that he did not include any income amount on the statutory declaration form he signed on July 14, 2000, because he did not get paid for training and did not understand the question. The arbitrator did not accept the insurer’s argument that these discrepancies undermined the contract of employment:

I find the Applicant answered Wawanesa’s counsel’s questions about the income figures to the best of his ability and, on the whole, gave credible and honest evidence about the contract, which generally conformed with that of Mr. Bercovitch. I find that the Applicant was cooperative and reasonably explained any deficiencies in the information he furnished to Ms. Pontieri.⁸

Turning to the amount of the income replacement benefit, the arbitrator recognized that Mr. Sorokin “presented little evidence” from which to calculate the benefit. However, she ordered benefits of $321.22 per week based on gross income of $531.25 per week, the amount Mr. Sorokin testified he would have earned given the terms of Mr. Bercovitch’s offer letter.

Whether I would have come to the same conclusion as the arbitrator is not the test on appeal. The arbitrator had the opportunity to observe the witnesses – I did not – and clearly stated her acceptance of the evidence of Mr. Sorokin and Mr. Bercovitch. Her assessment of their evidence reflected her recognition of the economic realities of small business.⁹ Though ideally her reasons for dismissing the insurer’s challenges to that evidence would have been stated more clearly,

I am not persuaded these deficiencies amount to an error of law. The arbitrator’s conclusion was not speculative or perverse and it was supportable based on the job offer letter and the testimony of Mr. Sorokin and Mr. Bercovitch. I am not persuaded there is reason to interfere.

(ii) Disability

Given the arbitrator’s findings on the contract of employment, Mr. Sorokin’s entitlement to income replacement benefits was assessed with respect to the driver/delivery job.¹⁰ To succeed in his claim, he had to prove that he was substantially unable to perform the essential tasks of that job as a result of accident-related impairments. The arbitrator reached the following conclusion as to his job duties:

I find the Applicant and Mr. Bercovitch testified credibly about the essential tasks of the job. I therefore find that the Applicant would be required to take orders by phone and drive the van. He would also be required to pick up from the factory and load into the van and load off of the van and deliver to customers, from 250 to 260 cases of frozen dough per week, weighing from 11 to 14 kilograms each. I accept that this work would require continuous lifting, carrying, bending, stooping and reaching.¹¹

Wawanesa submitted there was insufficient evidence about Mr. Sorokin’s job duties. For example, the insurer points to Mr. Sorokin’s imprecise testimony about the weight of the boxes he would be delivering. Wawanesa submits Mr. Sorokin should have known the weights from his training. I am not convinced,¹² but more importantly, it was the arbitrator’s role to decide whether to accept Mr. Bercovitch’s evidence about the weights involved. I have no basis for interfering with her exercise of her discretion.

Mr. Sorokin testified he could not do the lifting part of the job because of his right shoulder problems. Wawanesa submitted that he could have done the job if it were modified to avoid loading and unloading the van. The arbitrator rejected the insurer’s position on accommodation:

On cross-examination, Wawanesa’s counsel asked Mr. Bercovitch why he did not use skids and a forklift to take the cases on and off the van. Mr. Bercovitch responded that the van is too small to carry a skid and too low to use a forklift. He explained that his van is not a cube van. I find Mr. Bercovitch’s answer to this question credible. Wawanesa’s counsel also queried why Mr. Bercovitch did not ask factory personnel to help load and customers to help unload the van. Mr. Bercovitch responded, and I find reasonably so, that he does this work himself. I find it would not be at all reasonable to expect Mr. Bercovitch to prevail on the factory workers and his customers to help with this work in order to accommodate the Applicant’s disability.¹³

The insurer reiterated its position on appeal. There is a great deal of authority for the proposition that a claimant who is not employable on a productive, competitive, remunerative basis remains disabled.¹⁴ Given marketplace realities, Gemini’s suppliers and its customers would likely be reluctant to take on the heaviest part of the job for which they were paying their distributor. Asking Mr. Bercovitch to accompany Mr. Sorokin on his deliveries makes equally little sense, given Mr. Bercovitch’s evidence that the whole point of hiring Mr. Sorokin was to free him up for other duties. I find no error in the arbitrator’s analysis.

Wawanesa’s submissions on appeal essentially reiterate its arbitration submissions. I am not persuaded the arbitrator erred in law. She gave ten pages of reasons for accepting Mr. Sorokin’s disability claim, and that conclusion was available to her on the evidence. Rather than reiterating the arbitrator’s analysis, I will deal briefly with the main points raised by the insurer.

Mr. Sorokin began seeing Dr. Tchernov as his family doctor about one year before the accident. Dr. Tchernov treated him for his accident-related injuries from May 30, 2000, three days post-accident, when he prepared a disability certificate, and thereafter on about a monthly basis. The disability certificate records Dr. Tchernov’s diagnosis of left chest wall contusion, soft tissue injury to the neck, tension headaches, and a probable mild cerebral concussion, and indicates that Mr. Sorokin was disabled: “difficulty with prolonged ambulation/sitting/standing, unable to bend/lift, problems with sleep and concentration.” His clinical notes also refer to low back pain and a diagnosis of Grade II whiplash, and later notes refer to right shoulder pain and anxiety as well. Dr. Tchernov referred Mr. Sorokin to Dr. Levitin and Dr. Felix Yaroshevsky, a psychiatrist.¹⁵

The arbitrator summarized Dr. Tchernov’s evidence in the following passage:

Dr. Tchernov testified that he last examined the Applicant on December 13, 2002 and that the Applicant continued to complain of pain and restricted range of motion in his right shoulder which had not improved since his last examination. He concluded from this examination that the Applicant’s condition was “chronic and protracted” and would be exacerbated by physical labour involving repetitive motion over the shoulder with his dominant extremity. He recommended employment involving mental labour. Regarding further treatment, Dr. Tchernov recommended treatment with a variety of modalities to promote maximum recovery. He testified that, in his opinion, the fact that the Applicant’s conditions are persistent and difficult, does not mean he should not be treated.¹⁶

I have already described the Med-Rehab DAC assessment in September 2000. In the same month, Wawanesa had Mr. Sorokin examined at Seiden Health Management (“Seiden”) by Dr. Zeldin, who accepted that Mr. Sorokin experienced residual pain from a Grade II whiplash associated disorder (neck and back strain), but concluded he was not physically disabled. Dr. Zeldin stated that Mr. Sorokin “has pretty well resumed his pre-accident activities of daily living and is attending school. He is physically able to return to work as a driver but I understand this was summer employment.” In his opinion, Mr. Sorokin did not need further treatment, though a self-directed exercise program would help him maintain his mobility and physical fitness. A Functional Abilities Evaluation (“FAE”) was conducted at Seiden in November 2000. The report concluded that Mr. Sorokin was not substantially disabled from performing the driver/delivery job.

Apparently in response to the DAC and IE reports, Dr. Tchernov referred Mr. Sorokin to Dr. Shahira Khoury, a physiatrist, and Dr. Alpert. Dr. Khoury reported on January 15, 2001 that Mr. Sorokin suffered from chronic right scapular and upper trapezius fibre sprain as a result of the accident. Since his progress had plateaued, Dr. Khoury recommended trigger point injections as well as ongoing manual physiotherapy and an active exercise program.

In his report dated March 6, 2001, Dr. Alpert stated that Mr. Sorokin remained disabled on a long-term basis as a result of residual accident-related impairments, diagnosed as right shoulder rotator cuff tendinitis, chronic soft tissue strains, facet joint pain in the cervical spine, trapezii, and lumbar spine, and post-traumatic cervicogenic headaches. His physical restrictions included above-shoulder work with the right arm, forceful pushing or pulling, prolonged forceful grasping, heavy lifting, prolonged spinal postures, repetitive bending, stooping, repetitive twisting, overhead work, and prolonged driving. Dr. Alpert recommended chronic pain management intervention, including analgesics, anti-inflammatories, muscle-relaxants and anti-depressants, and further chiropractic and physical therapy when indicated. He also felt Mr. Sorokin might need further investigation and perhaps right shoulder surgery in future. Ms. Kricheva, a kinesiologist at DEAHY, also concluded Mr. Sorokin could not do a driver/delivery job because of his physical restrictions. In June 2002, Dr. Alpert’s opinion was unchanged: he felt Mr. Sorokin would remain disabled from the driver/delivery job because of permanent impairments for which he would likely need more treatment.

The disagreement between Dr. Alpert and Dr. Zeldin was the main factual dispute at the arbitration hearing. The arbitrator did not accept Dr. Zeldin’s conclusions or the assessment of the Med-Rehab DAC, and preferred the evidence of Drs. Tchernov, Levitin, Khoury and Alpert. She explained her findings and conclusion at pp. 15-21 of her reasons. In addition to her implicit finding that Dr. Alpert had greater expertise than Dr. Zeldin,¹⁷ the arbitrator weighed their opinions this way:

I find, on the whole, that Dr. Zeldin’s reports were of little, if any, assistance. I found they reveal a lack of knowledge about the Applicant’s medical background and the particulars of his pre-accident employment offer. I also find the value of his September 11, 2000 assessment was affected by the lack of quantitative measurements for the movements he assessed. For these reasons, I find that neither Dr. Zeldin’s reports nor his oral evidence of much assistance to my decision on the Applicant’s medical status.¹⁸

Dr. Zeldin’s failure to quantify Mr. Sorokin’s range of motion was a particular point of dispute at measure because Mr. Sorokin had full range of motion. Though the arbitrator also noted the limited background medical information available to Dr. Alpert, she accepted his evidence that he had sufficient information to assess Mr. Sorokin’s ability to work.

The Med-Rehab DAC report also proved unpersuasive:

I also attribute less weight to the Med/Rehab DAC opinion than that of Dr. Alpert, Dr. Khoury and Dr. Tchernov. The Med/Rehab DAC assessment was completed three months after the accident in August 2000 and the latter assessments were done months later. I find limited value in an assessment that attempts to assess a person’s medical status into the future as the Med/Rehab DAC did when it concluded that the Applicant would require no further benefits after the July 2000 treatment plan was completed. I give more weight to the more recent assessments which were essentially consistent with each other and with the Applicant’s evidence.¹⁹

On appeal, Wawanesa submits that the arbitrator erred in law by failing to place the onus of proof on Mr. Sorokin, and by misinterpreting the evidence and making unsupported findings, findings based on irrelevant considerations, and findings not based on the evidence before her. For example, the insurer submits that there was no evidence the driver/delivery job required overhead work. The most serious factual issue was delayed reporting of the right shoulder problem, which was not mentioned in Dr. Tchernov’s early notes or his initial disability certificate. The arbitrator accepted Mr. Sorokin’s evidence that his right shoulder pain changed from general to specific some time in 2000.

Wawanesa’s appeal submissions raise legitimate questions about the decision, but I am not persuaded the insurer has identified an error of law. The appeal comes down to a restatement of the insurer’s position at the arbitration hearing. The arbitrator addressed the main points of the insurer’s case – the Med-Rehab DAC and Dr. Zeldin’s evidence – and explained why she preferred Mr. Sorokin’s evidence and that of his experts. She preferred Dr. Alpert’s evidence because she found his report more precise (as to range of motion) and complete (he had more information than Dr. Zeldin, though less than an optimal amount), and because it was more consistent (“essentially consistent”) with the reports of Dr. Tchernov, Dr. Levitin and Dr. Khoury. Perfect consistency is not required; that Ms. Kricheva recorded greater range of motion than Dr. Alpert does not detract from the fact that both experts concluded Mr. Sorokin could not do the driver/delivery job. Furthermore, the arbitrator was not bound to accept the opinion of the DAC assessors.²⁰ She was within her authority to prefer the evidence of the experts who supported Mr. Sorokin’s claim.

The insurer also submits that Mr. Sorokin failed to mitigate his damages. I have considered these submissions in respect of sections 55 and 56 of the SABS-1996, which describe the claimant’s responsibility to obtain treatment, participate in rehabilitation and seek employment. The insurer submits that the arbitrator erred in failing to consider Mr. Sorokin’s failure to attempt the driver/delivery job after the accident, his decision to stay in school rather than find suitable alternative work, and his decision to look for a job in his chosen field after completing the program, rather than finding another similar job. In response, Mr. Sorokin submits that he complied with his SABS obligations by continuing treatment (despite the insurer’s denying benefits), resuming his studies, trying to find a part-time pizza delivery job while a student, and taking a job delivering a small regional paper in the spring of 2002, a job he was forced to quit after three days because it aggravated his shoulder injury. I agree with Mr. Sorokin that the arbitrator’s failure to address this issue does not undermine her decision, considering the strength of the evidence supporting Mr. Sorokin’s disability claim.²¹

In summary, Wawanesa urged the arbitrator to conclude that Mr. Sorokin was not disabled from the driver/delivery job, but she accepted his claim, and gave adequate reasons for doing so. I am not persuaded she erred in law in concluding that Mr. Sorokin was entitled to income replacement benefits.

B. Medical Benefits

Mr. Sorokin claimed medical benefits under four treatment plans prepared by Dr. Levitin and Dr. Grossman, chiropractors at Integrated Health Recovery. As discussed, the first two treatment plans, dated May 31, 2000 ($4,390) and July 26, 2000 ($3,125), were denied by Wawanesa and the insurer arranged a Med-Rehab DAC, which was done in late August 2000 at York Active Rehab Centre. In their report dated September 25, 2000, the DAC assessors recommended that Mr. Sorokin complete the second treatment plan, but concluded that no further treatment was reasonable or necessary as a result of the accident.²² Instead, they recommended that Mr. Sorokin take on a self-directed exercise program. Nevertheless, Mr. Sorokin continued his treatment at Integrated Health.

Wawanesa paid the benefits claimed under the first two Integrated Health treatment plans, but refused the third, dated September 6, 2000, and the fourth, dated May 6, 2002. The arbitrator found in favour of Mr. Sorokin and ordered the insurer to pay all the outstanding Integrated Health claims, totalling $7,226.08.

(i) Reasonable and Necessary

On appeal, Wawanesa submits that the arbitrator erred in law by failing to give proper consideration to the September 25, 2000 Med-Rehab DAC report, which it views as “the only truly independent assessment of Mr. Sorokin,”²³ and by putting the onus on the insurer to lead evidence that Mr. Sorokin’s condition improved afterwards.²⁴ Apart from the DAC, Wawanesa relies on Dr. Zeldin’s assessment and the FAE conducted at Seiden in the fall of 2000.

I am not persuaded the arbitrator erred.

Wawanesa relies on M.D. and Halifax Insurance Company for the proposition that a DAC report “is not just another opinion” but is intended “to take the dispute out of the back-and-forth of competing partisan reports by providing an impartial assessment.”²⁵ However, while a DAC report changes the obligations of the parties pending resolution of the entitlement dispute, an arbitrator is not bound to accept its conclusions: “[l]ike all expert reports, the DAC report is assessed as to its accuracy, completeness, relevance, expertise and impartiality.”²⁶

The arbitrator gave clear reasons for allowing Mr. Sorokin’s claim for treatment after September 2000:

I find the Applicant’s oral evidence about the disabling nature ofthe pain in his left neck and right shoulder and arm to be trustworthy. The Applicant testified credibly about the effectiveness of the various treatments by Health Recovery in alleviating his pain. I accept his evidence that the massage relieved the pain in his neck, head, arms and back and gave him two to three days of relief in his mid and lower back and left shoulder, but offered no relief to his right shoulder and arm. I also accept the Applicant’s evidence about the helpfulness of chiropractic treatment and active therapy in minimizing his morning neck tightness and general muscle tightness.

The two orthopaedic assessments by Dr. Alpert on March 8, 2001 and June 6, 2002 and Dr. Khoury’s January 15, 2001 physical medicine assessment support the Applicant’s oral evidence about his disabilities and recommend multidisciplinary treatment modalities for relief of his pain.

The Applicant’s evidence was also consistent with the medical findings of his family doctor, Dr. Tchernov, who assessed and treated him over a period in excess of two years for these conditions, last examining him in December 2002. Dr. Tchernov, who also recommended multidisciplinary treatment modalities, opined, and I agree, thefact that the Applicant’s condition is chronic and difficult, should not be seen as a bar to treatment. Arbitration decisions have held that alleviation of pain and maintenance are worthwhile treatment goals.²⁷

I place more weight on the Applicant’s evidence and the findingsand conclusions of Dr. Alpert, Dr. Tchernov and Dr. Khoury and find less evidentiary value in the Med/Rehab DAC and the Insurer’s orthopaedic and kinesiologist assessments by Dr. Zeldin and Mr. Wagar, for reasons I discussed above.²⁸

In short, the arbitrator’s assessment of the DAC report in relation to Mr. Sorokin’s Integrated Health claims was consistent with her assessment of its value in relation to his claim for income replacement benefits. Her conclusion was supported by the evidence led by Mr. Sorokin, which she accepted. I am not persuaded there is any error of law in her reasoning that would justify my second-guessing her findings of fact.

Wawanesa also submits that the arbitrator improperly placed the onus on the insurer by stating, “I have no persuasive evidence before me that the Applicant’s conditions improved from August 25, 2000, the end of the last course of treatment approved by the Med/Rehab DAC.”²⁹ I agree that Mr. Sorokin bore the onus of proving, on a balance of probabilities, that he was entitled to all the treatment benefits he claimed; at no point did the onus of proof shift to the insurer. However, the arbitrator’s comment must be read in the context of Wawanesa’s position. The insurer took a general position that Mr. Sorokin was not entitled to any treatment after September 2000, based on the DAC report and Dr. Zeldin’s IE report, both of which were prepared that same month, and the Seiden FAE report, prepared two months later. As a practical matter, it is not surprising that the arbitrator first considered Dr. Levitin’s third treatment plan, also prepared in September 2000, and, having decided the treatment was reasonable and necessary as a result of the accident, went on to ask whether Mr. Sorokin’s condition improved afterwards so that he no longer required treatment. I am satisfied that the evidence supported her conclusion that the treatment claimed was reasonable. This was a generous decision, but I am not persuaded it reflects any error of law.

(ii) Amount of the Order

Wawanesa also challenges the amount of medical benefits ordered by the arbitrator for the Integrated Health treatment plans – $7,226.08. The insurer argues that the arbitrator only had authority to order payment of $6,305.72, the amount Ms. Cavrak, who represented Mr. Sorokin at the arbitration hearing, referred to in her closing argument. Mr. Consky, who represented Mr. Sorokin on the appeal, conceded that the lower amount was the one mentioned in closing, but argued that the arbitrator was within her authority to award the higher amount based on the parties’ agreement.

I agree the larger amount was properly in issue at the arbitration hearing. At the outset of the hearing, the arbitrator asked counsel to identify the issues in dispute. Mr. March, who represented Wawanesa at the arbitration hearing, stated that the remaining Integrated Health fee in dispute was about $2,000, which related to treatment after September 6, 2000. Ms. Cavrak then stated that the current amount claimed for Integrated Health fees was some $7,000, and that she had sent Mr. March the updated accounts. She explained that the hearing had been twice adjourned, and the additional claim related to expenses incurred in the interim. The arbitrator asked counsel to discuss the issue at the first break in an effort to reach an agreement.³⁰

When the discussion resumed after the lunch break, Mr. March agreed with Ms. Cavrak’s submission that claims for two treatment periods remained in dispute – from September 8, 2000 to February 9, 2001, for $4,670, and from May 2002 to July 18, 2002, for $2,556.08, for a total of $7,266.08 – and could be decided though incurred after the mediation in the fall of 2000. The arbitrator explained the discrepancy in a footnote to her order:

I obtained this figure [$7,226.08] from Exhibit 5, an Integrated Health account summary dated December 5, 2002, which covers the period from September 8, 2000 to July 18, 2002. It was provided by the Applicant’s counsel at the hearing as evidence of the amount of the Applicant’s outstanding claim. This figure represents the total cost of treatment for two periods: $4,670 from September 8, 2000 to February 9, 2001, which expense was mediated; and $2,556.08 from May 6, 2002 to July 18, 2002, which was not mediated. Wawanesa’s counsel consented to having the treatment costs for both periods dealt within this arbitration.

Though both counsel referred to the lower figure in their closing arguments at arbitration, this seems obviously to have been an oversight, since the written submissions were filed in July 2003, six months after their opening statements, and without the benefit of transcripts. Neither party suggests the change reflected a retreat from their earlier agreement. In any event, I am not persuaded Wawanesa was prejudiced by the order in this regard. There was no question the expense was incurred. Wawanesa denied all post-September 6, 2000 Integrated Health claims. This was the issue discussed at the mediation in late October 2000 and at the arbitration. In these circumstances, and given the agreement of counsel, the arbitrator’s decision to address all the outstanding Integrated Health fees was the fairest quickest, and most cost-effective way of resolving the dispute.³¹ She did not err.

At the appeal hearing, Wawanesa’s counsel conceded that the consent had been given, but only for limited purposes. Indeed, the transcript of the second day of the arbitration hearing includes a discussion between counsel about the issues in dispute. Mr. March again agreed to have the entitlement issues decided, but expressed concern that he had not had an opportunity to address any procedural compliance issues associated with the new claims. Ms. Cavrak stated she was not aware of any such issues,³² and none were raised in the two remaining days of the hearing that were transcribed³³ or in the parties’ written submissions. The special award will be reduced for this reason, amongst others.

C. Interest

The arbitrator ordered Wawanesa to pay “interest on any overdue benefit payments to be calculated pursuant to section 46 of the [SABS-1996].” On appeal, Wawanesa submits that no interest should be awarded on overdue income replacement benefits because the insurer’s refusal resulted from Mr. Sorokin’s failure to provide the required information. Alternatively, as the amount owing could not be determined until the arbitration decision was released, no interest should accrue until February 9, 2004.

The Commission’s approach to interest was reviewed most recently in Virk and Liberty Mutual Insurance Company of Canada, (FSCO P04-00027, July 5, 2005). In that decision, I reaffirmed that interest under the SABS:

is mandatory, compensatory, and flows from late payment of overdue benefits. There is no need for a finding of insurer misconduct. Accordingly, upon a finding of entitlement, interest flows even though the insurer had legitimate reasons for questioning the claim or requiring more information.³⁴

Though interest does not accrue until a payment becomes “overdue,” this does not require the claim to be established to an insurer’s or an arbitrator’s satisfaction. Only where “the insured person acts in a manner that effectively prevents the insurer from assessing his or her entitlement,” will interest accrual be delayed.³⁵

The evidence offered in support of Mr. Sorokin’s contract of employment claim was far from ideal, and Wawanesa had good reason to enquire further. However, there was no finding of misrepresentation in this case, and while the income information offered was not entirely consistent, the discrepancies did not prevent the insurer from making a reasonable estimate of Mr. Sorokin’s income loss. In failing to do so, the insurer took a calculated risk that materialized when the claim was upheld. I am not satisfied the arbitrator erred in awarding interest on the benefits found overdue.

D. Special Award

The arbitrator found that Wawanesa unreasonably refused income replacement and medical benefits and the cost of the disability certificate, and ordered a special award of $15,000. Wawanesa submits this was an error of law, or, alternatively, that the amount was too high.

After the appeal hearing, the parties were given an opportunity to file written submissions on the Persofsky appeal decision with respect to the analysis of special award disputes. Wawanesa submitted that the arbitrator failed to engage in the required analysis. In response, Mr. Sorokin provided an accountant’s calculation of the benefits and interest owing. The insurer objected to what it characterized as “reverse engineering” of the arbitrator’s order, but I ruled that Wawanesa’s challenge to the amount of the order required consideration of the appropriate calculations, and the insurer was allowed a final reply. These submissions were completed on March 1, 2005.

Wawanesa submits that the arbitrator failed to perform the seven-step analysis set out in Persofsky and Liberty Mutual Insurance Company, (FSCO P00-00041, January 31, 2003). In that leading case, Director Draper concluded that the proper approach to special awards is as follows:

1. Determine the benefits owing to the insured person, including interest calculated under the applicable version of the SABS;

2. Decide whether the insurer unreasonably withheld or delayed the payment of these benefits. If so, the insurer will be ordered to pay a lump sum amount in addition to the benefits and interest calculated in #1;

3. If the insurer did not act unreasonably in respect of all the benefits owing under #1, determine the amount of the benefits that were unreasonably withheld or delayed, and the interest payable on these benefits under the applicable version of the SABS.

4. Determine the maximum special award that can be awarded under s. 282(10), or at least a reasonable approximation. This is done by taking the amount in #1 or #3, whichever is applicable, and adding the additional interest component in s. 282(10) – two per cent per month, compounded monthly. To be clear, this calculation includes interest on the unpaid SABS interest. The maximum special award is 50 per cent of this total. Expressed as a formula, the calculation is as follows:

Maximum special award = 50% x (benefits that were unreasonably withheld or delayed + interest on these benefits calculated under the SABS + compound interest calculated according to s. 282(10))

5. Consider all relevant factors (discussed below) to determine an appropriate lump sum special award, not a percentage, that responds to the facts of the case and bears a reasonable relationship to other special awards, and does not exceed the maximum.

6. Provide reasons for concluding that the special award is payable, and for the amount of the award.

7. In the order, express the special award as a specific, lump sum amount. No interest is payable on this amount, except as part of the enforcement process.

He noted:

This approach is not new. Many decisions reflect a similar analysis, at least implicitly. In my view, the explicit and consistent use of these steps can only improve the transparency and predictability of special awards.³⁶

I agree with the Director’s seven-step approach, which, as he stated, reflects the prevailing consensus amongst FSCO adjudicators. I also agree that “explicit and consistent use of these steps can only improve the transparency and predictability of special awards,” though I would not find an award erroneous on the sole basis that the arbitrator’s analysis, or some part of it, was implicit, as long as the decision, as a whole, clearly answered the questions asked in each of the seven steps.

In this case, I find that the arbitrator gave clear reasons for deciding that Wawanesa unreasonably withheld Mr. Sorokin’s benefits, as required in step 2. Since the arbitrator concluded that the insurer’s refusal was unreasonable with respect to all the disputed benefits, there was no need for her to enter into step 3. She also complied with step 7 in awarding a lump sum amount. Though not explicitly stated, I find it implicit in her decision that the $15,000 was inclusive of interest. The decision does not set out the calculations required by step 1 and step 4, but the omission likely reflects the parties’ failure to make detailed submissions on the proper amount of any award, and for that reason I am unwilling to criticize the arbitrator’s approach. Similarly, I do not fault the arbitrator for failing to discuss the range of previous awards, pursuant to step 5, because the parties made no submissions on the point.

Turning to the substantive issues, I am not persuaded the arbitrator erred in ordering a special award based on Wawanesa’s failure to give notice of refusal of Mr. Sorokin’s income replacement benefits claim, as required by s. 37(1) of the SABS. Section 37(1) of the SABS-1996 requires an insurer to give written notice of refusal, with reasons, whether or not the insurer has begun to pay benefits, and whatever the reason for the refusal. I also agree with the arbitrator’s finding that s. 38(16) of the SABS-1996 required the insurer to pay for the first 15 sessions or first six weeks of treatment pending resolution of the dispute.

However, the award was excessive in several respects. First, the arbitrator’s finding that Wawanesa failed to properly investigate the future contract claim inappropriately disregards Mr. Sorokin’s duty to provide information under s. 33 of the SABS-1996. At the very least, Ms. Pontieri had reason to be skeptical because of the gaps and discrepancies in the employment and income documentation provided by Mr. Sorokin and Mr. Bercovitch.

Secondly, though Mr. Sorokin made some general statements about looking for work in the summer of 2002 because he needed money,³⁷ there appears to have been no evidence for the arbitrator’s finding that the insurer’s refusal to pay income replacement benefits was “very frustrating and emotionally burdensome” to him “as he fell into financial hardship.”³⁸ Financial hardship is not a requirement for a special award, though the impact of the insurer’s unreasonable refusal to pay benefits is an appropriate factor in determining the amount of the award. The arbitrator’s order was excessive to the extent it was increased based on an unsupported finding.

Thirdly, the arbitrator’s finding that Wawanesa failed to give adequate reasons for refusing Mr. Sorokin’s treatment plans disregarded the role of the DAC in the process. Wawanesa denied the first Integrated Health treatment plan, dated May 31, 2000, on the basis that it was “not necessary or reasonable and excessive in duration.” As required by the SABS-1996, a DAC was arranged. The second treatment plan, dated July 26, 2000, was denied on the basis of the first denial and the pending DAC. Contrary to the arbitrator’s finding that the insurer gave no notice of refusal with respect to the third treatment plan, an explanation of benefits was issued on September 21, 2000 with respect to that plan. The reason given for the denial was the pending DAC report with respect to the first two treatment plans.³⁹ The DAC report of September 25, 2000 supported the insurer’s refusal of treatment beyond the treatment described in the first two treatment plans.

In my view, there was no basis for the arbitrator’s criticism of the insurer with respect to the first three treatment plans. And once the DAC report was issued, the insurer was entitled to rely on it in refusing to pay the benefits claimed pending resolution of the dispute. I agree with Director Draper that an insurer “should generally be able to rely on a DAC assessment without risking criticism.”⁴⁰ This does not mean an insurer can ignore obvious deficiencies in the DAC report or disregard other evidence supportive of the claim, but the arbitrator makes no such finding in this case; she says only that she found the evidence supportive of the claim “stronger” and “more helpful” than the DAC report and the other evidence relied on by the insurer. This was in error.

Wawanesa denied the May 6, 2002 treatment plan on the basis that it was “not reasonable or necessary,” and arranged a second Med-Rehab DAC, which occurred in July 2002.⁴¹ The assessors did not support the treatment plan. The DAC report⁴² was not referenced in the decision, the parties’ arbitration submissions or appeal submissions, and I can find no reference to it in the transcripts. In any event, the arbitrator exceeded her jurisdiction in ordering an award on the basis of the fourth treatment plan because of Ms. Cavrak’s agreement that there were no issues of procedural compliance in relation to the new medical benefits claims.

Ms. Pontieri’s conduct in the hearing was another basis for the special award, giving rise to the fourth error in the arbitrator’s analysis. The arbitrator found that Ms. Pontieri was “most uncooperative in her responses to questions and . . . seemed to display a marked unfamiliarity with the file.”⁴³ This was “a further compounding factor” that justified a special award, despite the general rule that “a party is entitled to rely on the evidence they have generated to support their positions at a hearing without fear of a punitive outcome, beyond possible expense and interest implications, by reason only that their evidence is found to be weaker than that of the other party.”⁴⁴

Subsection 282(10) of the Insurance Act requires a special award where the arbitrator finds that the insurer “unreasonably withheld or delayed” the payment of benefits. This is an administrative penalty that is related to the legislative objective of ensuring prompt claims adjustment on a first-party basis. It is not a general penalty section for any and all insurer errors. Moreover, the poor performance of an adjuster as a witness may relate to factors that have nothing to do with unreasonable withholding or denial of benefits, the passage of time and a high volume of cases being the most obvious. In assessing the reliability of any witness, the focus should be on the inherent plausibility, consistency and internal coherence of testimony, and whether it accords with evidence from other sources (witnesses or documents) not on demeanour or performance competencies. The arbitrator erred in ordering a special award on this basis.

Finally, the arbitrator erred in failing to consider the insurer’s decisions in context, including the conduct of the claimant and the information then available, and not from the point of view of hindsight.⁴⁵ “The standard is not one of perfection.”⁴⁶ These well established principles were further developed in Persofsky in relation to punitive damages awards. Director Draper held that step 5 of the special award analysis requires consideration of rationality and proportionality.⁴⁷ In this case, there is no rationality issue, but Wawanesa submits that the arbitrator erred by failing to consider mitigating factors or the need for proportionality in fashioning a special award, and erred in the calculation of the amount. I agree with the insurer that the arbitrator’s reasons are deficient in these respects.

The arbitrator did not explain how she decided on a special award of $15,000, as opposed to any other figure.

Calculating the maximum available special award – the Beiler formula – is not easy because it requires calculating simple interest on periodic benefits, then calculating compound interest on that amount. As the Director stated in Persofsky, “The difficulty for arbitrators is that it is not always possible, at the close of the hearing, to quantify the amounts owing with precision.” The main reason for the difficulty is that the issue of a special award does not arise unless the claimant is entitled to benefits, and depends on the amount of benefits, but FSCO does not routinely bifurcate hearings into entitlement and special award stages. In very few cases do counsel present competing submissions on the amount of the special award at the close of the hearing or request an opportunity to do so on receiving the entitlement decision. This case appears to have been no exception, as counsel restricted their written submissions on the special award to the question whether an order should be made at all, and said nothing about the amount. In these circumstances, I cannot fault the arbitrator for basing her order on a ballpark estimate, though it would have been preferable if she had provided more detail.

In response to Wawanesa’s submission that the amount of the special award was unreasonable, Mr. Sorokin provided an accountant’s report to support his submission that the arbitrator’s award came to 18.6 percent of the income replacement and medical benefits awarded plus compound interest under s. 282(10) of the Act, without consideration of the amount awarded for the disability certificate or the simple interest awarded under s. 46 of the SABS-1996; the percentage basis for the award would be lower if these amounts were also included. Wawanesa submits the arbitrator’s award represents about 37 percent of the maximum available. The insurer challenges the calculations of Mr. Sorokin’s accountant on a number of grounds, including its payment of $47,813.24 on April 29, 2004, in full payment of the income replacement benefits and interest, disability certificate and medical benefit, plus half the special award, in compliance with my order on the insurer’s stay motion. No alternative calculation was provided. In these circumstances, I am in much the same position as the arbitrator with respect to calculation of the maximum award, and I am not persuaded she erred with respect to step 4.

A special award was warranted in this case because the insurer failed to comply with two important procedural protections in the SABS – the obligation to give written notice of refusal, with reasons, pursuant to s. 37(1) of the SABS, and the obligation to pay for the first 15 sessions or first six weeks of treatment pending resolution of the dispute, pursuant to s. 38(16) of the SABS-1996. However, the award must be significantly reduced because of the errors I have identified and the arbitrator’s failure to fashion a “proportional” award. The award will be reduced by 50 percent. As Wawanesa already paid $7,500 in April 2004 as a result of my partial stay order, no further amount remains to be paid.

IV. EXPENSES

If the parties are unable to agree on appeal expenses, I may be contacted in accordance with Rule 79 of the Dispute Resolution Practice Code.

August 9, 2005

Nancy Makepeace Director’s Delegate

Date

Rationality refers to the need to relate the particular facts of the case to the underlying purposes of the legislation. In other words, what amount is large enough to further the goals of punishment and deterrence, but no larger than is needed to serve that purpose?

Proportionality refers to the need to ensure that the consequences imposed on the insurer are rationally related to the misconduct at issue. The Supreme Court of Canada identified various dimensions of proportionality for punitive damages, which I find relevant to special awards. To paraphrase, the award should be proportionate to: (i) the blameworthiness of the insurer’s conduct; (ii) the vulnerability of the insured person; (iii) the harm or potential harm directed at the insured person; (iv) the need for deterrence; (iv) the advantage wrongfully gained by the insurer from the misconduct; and (vi) should take into account any other penalties or sanctions that have been or likely will be imposed on the insurer due to its misconduct. [at pp. 30-31]

Director Draper provided a non-exhaustive list of the relevant factors: the amount of benefits unreasonably withheld or delayed, the length of time the benefit was withheld or delayed, failure to respect important obligations under the SABS, evidence of bad faith or other factors that increase the gravity of the insurer’s conduct, mitigating factors, and other consequences of the insurer’s conduct, including interest. As Director Draper stated, the relevance of interest has been “a matter of some debate.” [at pp. 31-32]

Footnotes

1. 1The Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Arbitration decision, pp. 6-7.
3. 3Arbitration decision, p. 7.
4. 4Arbitration decision, p. 6.
5. 5Arbitration decision, p. 7.
6. 6Arbitration decision, p. 7.
7. 7Arbitration decision, p. 8.
8. 8Arbitration decision, p. 10.
9. 9FSCO appeal decisions have consistently recognized the realities of small business record-keeping. On the quality of financial evidence required of claimants, see Canadian General Insurance Company and Mills (FSCO P -005599, October 8, 1996), Agha and General Accident Assurance Company of Canada (FSCO P-009703, February 27, 1997), Price and Liberty Mutual Insurance Company, (FSCO P00-00018, February 19, 2001) and Morabito and Liberty Mutual Insurance Company, (FSCO P03-00008, October 8, 2004). I summarized the principles in Clipperton and Zurich Insurance Company, (FSCO P01-00008, August 24, 2001), at p. 9: “FSCO adjudicators have allowed flexibility in proof of income, but they have insisted that the insured person bears the burden of establishing, on a balance of probabilities, a reliable basis for calculating the benefits claimed. This is difficult without documentary evidence.”
10. 10Mr. Sorokin claimed benefits only for the first 104 weeks of disability, under the “own job” test set out in s. 5(1) of the SABS-1996. If he had claimed ongoing benefits past 104 weeks, his claim would fall to be decided under the stricter “any job” test under s. 5(2)(b).
11. 11Arbitration decision, p. 11.
12. 12Arbitration transcript, December 16, 2002, pp. 120-121. Asked how much the boxes weighed, Mr. Sorokin answered: “I didn’t measure myself the weight, I don’t really remember what was written, the weight on the boxes. But they were different, there were heavy one, there were medium and there were also light one. It was approximately . . . I know in kilograms, it’s like five to . . . it could be to 15 kilograms.”
13. 13Arbitration decision, p. 11.
14. 14FSCO’s decisions start with Flemming and Wawanesa Mutual Insurance Company, (OIC A-000406,
15. 15Dr. Yaroshevsky’s treatment plan, dated June 23, 2000, called for 12 weeks of psychotherapy. The DAC assessors supported the plan. Dr. Richard Finkel, the psychiatrist who did the assessment, described “clinically significant” symptoms of driving anxiety and free-floating general anxiety. Mr. Sorokin was not at that time interested in pursuing psychiatric treatment because of the inconvenience and his feeling that his symptoms would improve. There was no dispute at the arbitration or on appeal about Mr. Sorokin’s psychological impairment or treatment for it, and therefore it will not be considered further in this decision.
16. 16Arbitration decision, p. 20.
17. 17See her comments at p. 15 (Dr. Zeldin) and p. 17 (Dr. Alpert).
18. 18Arbitration decision, p. 19.
19. 19Arbitration decision, p. 19.
20. 20The leading case on the evaluation of DAC reports is Walker and State Farm Mutual Automobile Insurance Company, (FSCO P96-000036, December 3, 1996). More recently, see L.F. and State Farm Mutual Automobile Insurance Company, (FSCO P02-00026, June 3, 2004).
21. 21I note, in passing, that the insurer’s submissions on this point illustrate one of the difficulties of dealing with students under the SABS. The Gemini job was to be a full-time summer job for Mr. Sorokin. He testified that he intended to continue working full-time while attending evening classes in the fall, though a more typical case would see a student reduce to part-time hours when school begins. While the SABS allows an insurer to delay paying benefits based on the claimant’s prospective income under the contract until the day he would have been entitled to start work (sections 5(2)(c) and 8(7)), and allows a deduction for post-accident income (section 6(2)), it does not appear to allow an insurer to terminate or reduce benefits based on the ending of a fixed-term contract or a student’s reduction to part-time hours on returning to school (section 8(5), which requires income under the contract to be annualized). In this context, the insurer’s concerns are legitimate, but the SABS does not provide a remedy.
22. 22The DAC also supported Dr. Yaroshevsky’s treatment plan for psychotherapy costing $1,440. Wawanesa paid the fees, and there is no further dispute about Mr. Sorokin’s psychological treatment.
23. 23Appellant’s written submissions, paragraph 95.
24. 24At p. 25, the arbitrator stated, “I have no persuasive evidence before me that the Applicant’s conditions improved from August 25, 2000, the end of the last course of treatment approved by the Med/Rehab DAC.”
25. 25(FSCO P00-00049, May 16, 2001), p. 6.
26. 26Driver and Traders General Insurance Company, (FSCO P03-00006, November 18, 2003). The leading case is Walker and State Farm Mutual Automobile Insurance Company, (OIC A-009905, February 23, 1996), confirmed on appeal, though on narrower grounds (OIC P96-000036, December 3, 1996). See also, for example, Stelzer and Zurich North America Canada, (FSCO P02-00035, February 6, 2004), p. 27.
27. 27Walker and State Farm Mutual Automobile Insurance Company (OIC P96-000036, December 3, 1998); Violi and General Accident Assurance Company of Canada (FSCO A-98-000670, August 20, 1999), confirmed by appeal decision (FSCO P99-00047, September 27, 2000) and Palmer and State Farm Automobile Insurance Company (FSCO A00-00186, December 20, 2001). [footnote in original]
28. 28Arbitration decision, pp. 24-25.
29. 29Arbitration decision, p. 25.
30. 30Transcript of arbitration hearing, December 16, 2002, pp. 4-7.
31. 31See, for example, Welsh and Economical Mutual Insurance Company, (FSCO P02-00024, April 23, 2003).
32. 32Arbitration transcript, December 17, 2002, pp. 6-8.
33. 33Wawanesa relied on transcripts of the arbitration hearing on December 16, 17, 19 and 20, 2002. Ms. Pontieri testified on the final day of the hearing, July 4, 2003. A transcript of that day’s proceedings was prepared and submitted on appeal, but Mr. Sorokin objected that it was produced too late to allow him to prepare. Wawanesa withdrew the transcript and the appeal proceeded without further reference to it.
34. 34Cole and Allstate Insurance Company of Canada, (FSCO P01-00016, May 23, 2003), at p.16 [footnotes omitted], quoted at Virk, p. 13.
35. 35Bajic and Pafco Insurance Company and Zurich Insurance Company, (FSCO P00-00050, June 5, 2001).
36. 36At pp. 24-25, footnotes omitted.
37. 37Arbitration transcript, December 17, 2002, p. 51.
38. 38Arbitration decision, p. 30.
39. 39Arbitration exhibit 1, tab 13.
40. 40Hernandez and Zurich Insurance Company, (FSCO P98-00045, April 12, 1999), p. 17.
41. 41Arbitration exhibit 1, tabs 15 and 16.
42. 42Arbitration exhibit 1, Tab 31.
43. 43Arbitration decision, p. 27.
44. 44Arbitration decision, p. 32. The criteria for awarding expenses include each party’s degree of success in the outcome, conduct of a party or representative that tended to prolong, hinder or obstruct the proceeding, and whether any aspect of the proceeding was frivolous, vexatious or unnecessary: s. 12(2) of Ontario Regulation 664 as amended (the expenses regulation). The arbitrator’s reference to the interest implications of any particular position is presumably a reference to interest under s. 46 of the SABS-1996. As noted above, an interest award does not depend on insurer delay or misconduct.
45. 45Rocca and AXA Insurance Company, (FSCO P99-00020, August 1, 2000), p . 13.
46. 46McConachie and GAN Canada Insurance Company, (FSCO P97-00069, October 28, 1998).
47. 47In Persofsky, Director Draper described the rationality and proportionality requirements: