Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2005 ONFSCDRS 121

FSCO A02-001646

BETWEEN:

KULAVEERASINGAM RAMALINGAM

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before: Jeffrey Rogers

Heard: July 26, 27, 28 and 29, 2004, June 28, 2005 and July 4, 2005, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

David S. Wilson, solicitor for Mr. Ramalingam

Todd McCarthy, solicitor for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Kulaveerasingam Ramalingam, was injured in a motor vehicle accident on January 9, 2002. He applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.¹ State Farm terminated weekly income replacement benefits on July 26, 2002. The parties were unable to resolve their disputes through mediation, and Mr. Ramalingam applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The hearing started on July 26, 2004 and was adjourned on July 29, 2004 for resumption on June 28, 2005. The only witness I heard was the applicant. Cross-examination was not completed. The issues in dispute when the hearing started were income replacement benefits (IRBs), housekeeping, medical/rehabilitation (med/rehab) benefits, interest, expenses and a special award.

When the hearing resumed on June 28, 2005, counsel for State Farm indicated that, although not consenting to an order, entitlement to income replacement benefits was no longer in dispute. Benefits were paid up to date and State Farm did not oppose an order for ongoing payment of IRB's. State Farm also conceded Mr. Ramalingam's entitlement to expenses of the hearing. Counsel for Mr. Ramalingam decided not to call further oral evidence upon my ruling that I had evidence upon which I would find entitlement to ongoing IRB's. The hearing was then adjourned to July 4, 2005 for oral submissions and to allow State Farm to file further material.

On July 4, 2005, Mr. Ramalingam conceded that all amounts claimed for housekeeping had been paid. State Farm indicated that it would now pay the last unpaid med/rehab account. State Farm also conceded that interest is owed on all benefits overdue from the date overdue to the date paid. Mr. Ramalingam raised the issue of outstanding payment for IRB's for the week of July 26, 2004 and State Farm agreed that I should decide that issue.

The remaining issues in this hearing are:

Is Mr. Ramalingam entitled to payment of an income replacement benefit of $388.42 for the week of July 26, 2004, pursuant to section 4 of the Schedule?
Is Mr. Ramalingam entitled to payment of interest pursuant to section 46(2) of the Schedule, for the period March 1, 2005 to March 22, 2005 upon the sum of $15,202.76 paid on March 22, 2005 for IRB's for the period July 26, 2002 to April 28, 2003?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mr. Ramalingam of interest for the period March 1, 2005 to March 22, 2005 upon the sum of $15,202.76 paid on March 22, 2005 for IRB's for the period July 26, 2002 to April 28, 2003?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mr. Ramalingam of IRB's for the period July 26, 2002 to April 28, 2003?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mr. Ramalingam of IRB's for 25 of 27 weeks of benefits ($9,710.50) paid on November 10, 2003?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on 27 weeks of IRB's paid on November 10, 2003?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of IRB's for 15 of 22 weeks of benefits ($5,826.30) paid on April 22, 2004?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on 22 weeks of IRB's paid on April 22, 2004?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of housekeeping benefits by paying 27 weeks on November 10, 2003, 11 weeks on December 9, 2003, 9 weeks on January 22, 2004, 11 weeks on April 23, 2004, 2 weeks on May 26, 2004 and 17 weeks on June 6, 2005?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on the above housekeeping benefits?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of $900 for the invoice of Dr. Miller dated October 15, 2003 and paid July 30, 2004?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on the above invoice?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of $3,700 for the treatment plan of Dr. Miller dated April 7, 2003 and agreed to be paid on July 4, 2005?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on the above amount?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of $2,232.17 for miscellaneous prescriptions and incontinence products submitted in February and March 2003 and paid on July 30, 2004?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on the above amount?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payment to Mr. Ramalingam of $2,574 plus interest, for the Treatment plan of Dr. Fuller dated July 11, 2003 and paid on June 21, 2005?

Result:

Mr. Ramalingam is not entitled to payment of an income replacement benefit of $388.42 for the week of July 26, 2004, pursuant to section 4 of the Schedule.
Mr. Ramalingam is not entitled to payment of interest pursuant to section 46(2) of the Schedule, for the period March 1, 2005 to March 22, 2005 upon the sum of $15,202.76 paid on March 22, 2005 for IRB's for the period July 26, 2002 to April 28, 2003.
State Farm is liable to pay a special award upon the sum of $15,202.76, plus interest of $10,959.96, paid on March 22, 2005 for IRB's for the period July 26, 2002 to April 28, 2003.
State Farm is not liable to pay a special award upon 25 of 27 weeks of IRBs ($9,710.50) paid on November 10, 2003.
State Farm is liable to pay a special award because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on 27 weeks of IRB's paid on November 10, 2003, from March 15, 2005 until the date of payment.
State Farm is not liable to pay a special award upon payment to Mr. Ramalingam of IRB's for 15 of 22 weeks of benefits ($5,826.30) paid on April 22, 2004.
State Farm is liable to pay a special award because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on 22 weeks of IRB's paid on April 22, 2004, from March 15, 2005 until the date of payment.
State Farm is liable to pay a special award because it unreasonably withheld or delayed payment to Mr. Ramalingam of housekeeping benefits, plus interest, by paying 9 weeks on January 22, 2004, 11 weeks on April 23, 2004, 2 weeks on May 26, 2004 and 17 weeks on June 6, 2005.
State Farm is not liable to pay a special award upon housekeeping benefits by paid on November 10, 2003 and December 9, 2003.
State Farm is not liable to pay a special award upon payment to Mr. Ramalingam of $900 for the invoice of Dr. Miller dated October 15, 2003 and paid July 30, 2004.
State Farm is liable to pay a special award because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on the above invoice from July 30, 2004 until the date of payment.
State Farm is liable to pay a special award because it unreasonably withheld or delayed payment to Mr. Ramalingam of $3,700 for the treatment plan of Dr. Miller dated April 7, 2003 from DAC approval of the plan in July 2003 to payment on July 4, 2005.
State Farm is liable to pay a special award because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on the above amount from DAC approval of the plan in July 2003 to the date of payment.
State Farm is liable to pay a special award because it unreasonably withheld or delayed payment to Mr. Ramalingam of $2,232.17 for miscellaneous prescriptions and incontinence products submitted in February and March 2003 from the date of receipt of the report of Dr. Baldwin, dated May 26, 2003 until payment on July 30, 2004.
State Farm is liable to pay a special award because it unreasonably withheld or delayed payment to Mr. Ramalingam of interest on the above amount from the date of receipt of the report of Dr. Baldwin, dated May 26, 2003 until payment.
State Farm is liable to pay a special award because it unreasonably withheld or delayed payment to Mr. Ramalingam of $2,574 plus interest, for the Treatment plan of Dr. Fuller dated July 11, 2003 from 31 days after it Dr. Fuller's treatment plan was submitted, until payment on June 21, 2005.

EVIDENCE AND ANALYSIS:

As indicated above, when the hearing started the issues in dispute included entitlement to IRBs, housekeeping and med/ rehab benefits. State Farm has now paid housekeeping benefits as claimed for the full period claimed and has either paid or agreed to pay all of the med/rehab amounts in dispute. State Farm has also conceded entitlement to expenses of the arbitration and interest on overdue benefits and State Farm does not oppose an order for ongoing IRBs. IRBs are paid in an amount totalling the weekly entitlement multiplied by the number of weeks of entitlement, but payment of $388.42 for one week of IRBs remains in issue because Mr. Ramalingam takes the position that he was never notified that any of the payments made was to be applied to that week. A small amount for interest for the period March 1, 2005 to March 22, 2005 upon the sum of $15,202.76 paid on March 22, 2005, is also in issue.

All of the other remaining issues have to do with whether State Farm is liable to pay a special award as a result of delay in payment of benefits and interest.

Week of IRBs

Mr. Ramalingam concedes that he has been paid an amount that totals his weekly IRB entitlement multiplied by the number of weeks of entitlement, but argues that he is entitled to payment for the week of July 26, 2004 because none of the cheques he received specifies payment for that week. He concedes that, when State Farm made its first payment after July 26, 2004, he had already received an amount for IRBs at least equal to his weekly IRB entitlement multiplied by his number of weeks of entitlement. His position is that State Farm is required to notify him of the period for which IRBs are being paid. Therefore, the earlier payment must be viewed as an overpayment and State Farm's only recourse is to pursue repayment under section 47 of the Schedule.

The Schedule imposes many technical requirements for the payment of benefits. For instance, time for payment, method of payment, written explanation of the amount first paid and written explanation upon a change, are specifically prescribed. The Schedule does not impose the notice requirement that Mr. Ramalingam proposes and there is nothing in the Schedule that prevents an advance payment. In fact, it is conceded that State Farm made other advance payments for IRBs in this case.

I find nothing in the scheme of the Schedule that requires imposing the added technical requirement that Mr. Ramalingam proposes and nothing that prohibits State Farm from credit for an earlier payment to the week now claimed.

I therefore find that Mr. Ramalingam is not entitled to further payment of an income replacement benefit of $388.42 for the week of July 26, 2004.

Interest from March 1, 2005 to March 22, 2005

By letter of March 11, 2005 State Farm paid Mr. Ramalingam $15,202.76 for IRB's for the period July 26, 2002 to April 28, 2003, plus $10,959.96 for interest. Mr. Ramalingam received the payment on March 22, 2005 and claims that interest for the period March 1, 2005 to March 22, 2005 was not paid. Mr. Ramalingam did not do his own calculation of interest. He argued that the only inference that can be drawn from the schedule of interest calculations² that State Farm supplied upon payment, is that interest was only paid to March 1, 2005.

I do not agree. The schedule shows that the payment probably included interest to March 30, 2005. Page 1 of the schedule sets the interest settlement date at March 30, 2005 and sets out the total paid as the amount owing as of that date. Mr. Ramalingam argued that, because Page 2 of the schedule shows the first monthly interest charge about a month after the first day of entitlement, interest is being added in arrears. However, that argument ignores the fact that the schedule shows a carry forward on an earlier date that includes interest.

I am not prepared to draw the inference that Mr. Ramalingam suggested and I find that he has not proven that the interest is unpaid as claimed.

Special Award Liability:

Facts

Section 282(10) of the Insurance Act requires an arbitrator to order payment of a special award, in addition to benefits and interest to which an insured person was entitled, upon finding that an insurer has unreasonably withheld or delayed payments. Mr. Ramalingam's position is that State Farm unreasonably withheld or delayed payments from the time that it terminated benefits on July 26, 2002 and that its unreasonable conduct deteriorated from that point and persisted at the time of the hearing.

State Farm terminated benefits upon receiving reports from 3 health practitioners who examined Mr. Ramalingam on its behalf in June 2002, ostensibly for the purpose of determining his entitlement to medical benefits in dispute. The reports were from Alexandra Smol, a kinesiologist, who conducted a Functional Abilities Evaluation, Dr. Weisleder, an orthopaedic surgeon and Dr. Koepfler, a psychologist. The FAE offers no opinion on Mr. Ramalingam's ability to return to work. It simply reports on Mr. Ramalingam's level of function with opinion that the results could not be considered accurate because of lack of consistent effort.

Dr. Weisleder and Dr. Koepfler opined that Mr. Ramalingam was able to return to pre-accident employment and housekeeping activities. At the time of termination, the only medical evidence that State Farm had received from Mr. Ramalingam was a disability certificate dated February 2, 2002.

Mr. Ramalingam applied for mediation on August 9, 2002. Mediation on the issue of IRBs failed in November 2002 and the application for arbitration was filed on November 19, 2002. A pre-hearing was held on March 24, 2003. At that time a claim for housekeeping benefits was added and an interim benefits hearing was scheduled for April 29, 2003. The arbitration hearing was scheduled to start on September 15, 2003.

The interim benefits hearing proceeded on April 29, 2003. Mr. Ramalingam sought interim IRBs from July 27, 2002 and interim housekeeping benefits from July 10, 2002. In May 2003, with the decision on the motion pending, State Farm served Mr. Ramalingam with notice to attend for further IEs. Mr. Ramalingam did not attend. On July 18, 2003 State Farm brought a motion for an order staying the arbitration and prohibiting Mr. Ramalingam from receiving IRBs until he had attended.

On September 5, 2003 State Farm was ordered to pay interim IRBs and housekeeping benefits pending the final order, from April 29, 2003, the date the motion was heard. At that time, the arbitration hearing was still set to proceed on September 15, 2003, but the decision on further IEs was not yet released. On September 11, 2003 the hearing was adjourned to July 2004, so as not to render moot the still pending decision on further IEs.

State Farm did not immediately comply with the interim order. On October 6, 2003 State Farm appealed the order and asked that it be stayed. The decision on the appeal was initially delayed in anticipation of the release of the decision on further IEs. On November 3, 2003, with the decision still pending the Director decided that he should not delay further and rejected the appeal for the reason that the appeal was from an interim order and leave should not be granted under Rule 50.2 of the Dispute Resolution Practice Code. After that decision, with Mr. Ramalingam threatening to have the sheriff enforce the order, State Farm complied.

The decision on further IEs was released on November 12, 2003. The Arbitrator ruled that Mr. Ramalingam was not required to attend the examinations because "the requirement that Mr. Ramalingam attend these examinations did not arise out of State Farm's processing any claim for benefits."³ State Farm paid interim benefits until January 2003 but ceased paying at that time. This was the 2-year anniversary of the accident. State Farm took the position that the interim order was made in anticipation of a hearing in September 2003 and therefore the arbitrator had not considered the stricter test for entitlement post-104 weeks.

On March 8, 2004 counsel for Mr. Ramalingam wrote to State Farm's counsel seeking payment of "considerable arrears". Counsel did not pursue payment of post-104 housekeeping benefits. The reason given was that he was "assuming for the moment that [his] client is not claiming that he is catastrophically impaired". In other words, counsel conceded that his client did not meet the stricter test for post-104 housekeeping benefits.

On March 11, 2004 State Farm requested a variation of the interim order so that interim benefits would be terminated on January 9, 2004. On March 16, 2004 the Director appointed the Arbitrator who had made the interim order to hear the variation application. Mr. Ramalingam countered with a motion for continuing interim IRBs.

Because State Farm had not complied with his demand of March 8, 2004, with the variation application pending, counsel instructed the sheriff to enforce the interim order. The sheriff did so on March 29, 2004.

The variation application and motion for continuing interim benefits were heard on April 29, 2004 and the decision was released on June 8, 2004. With Mr. Ramalingam taking the position that State Farm should not be heard because it was in breach of the interim order, State Farm paid the IRBs up to date on April 22, 2004.

The Arbitrator agreed with State Farm that her order had been made in the expectation that the hearing would take place shortly and therefore considered only the pre-104 week disability test. She ruled that the change in the test post-104 weeks was a material change in Mr. Ramalingam's circumstances. She varied her original order by terminating it as of January 9, 2004 and made a new order for payment of interim IRBs starting January 10, 2004. Subsequent payments under the order were made in a timely manner.

On March 22, 2005 State farm paid the IRBs, plus interest for the period between termination and the first order for interim IRBs. State Farm has not paid interest on the IRBs paid under the interim orders.

Payment for housekeeping followed a similar pattern. On November 10, 2003, 27 weeks of benefits were paid to comply with the first order for interim benefits, upon the rejection of the appeal from that order. A further 11 weeks was paid on December 9, 2003. There are 36 weeks between April 29, 2003 (the date of commencement of interim benefits) and the 2-year anniversary. Thus State Farm had paid everything claimed under the order by December 9, 2003. After that, State Farm made 4 further payments totalling 39 weeks. Those payments must be applied to the 39 weeks between termination on July 26, 2002 and April 28, 2003. The final payment of 17 weeks was made on June 6, 2005. No interest was paid.

The dispute about med/rehab benefits took a different course. There was no interim order for payment of these benefits and these issues were not added to the arbitration until March 2004. On April 12, 2002 State Farm approved a $3,600 plan for treatment by Dr. Miller, a psychologist. State Farm paid everything except $900. On October 15, 2003, Dr. Miller wrote counsel for Mr. Ramalingam indicating that the adjuster had claimed to have paid the full $3,600. Dr. Miller indicated that she had indeed received $3,600, but $900 had been applied to 2 invoices billed to counsel and that "State Farm should not have paid for them."⁴ Counsel had not paid the invoices but had forwarded them to State Farm and requested payment to Dr. Miller. State Farm did pay the $900. After the payment, a new adjuster took over the file. Apparently unaware of the duplication, the new adjuster told Dr. Miller that the full $3,600 had been paid.

State Farm was ordered to put its position in writing when the issue was added to the arbitration. It did so by letter of June 15, 2004. It now acknowledged that the $900 remained outstanding. The reason given for non-payment was that the treatment was provided outside the time frame of the approved treatment plan. In its letter of June 15, 2004, State Farm indicated that it would now pay the outstanding amount because the number of sessions was as approved. Payment was made on July 30, 2004.

In July 2003 a Med/Rehab DAC approved a $3,700 plan for treatment by Dr. Miller. State Farm did not pay for the treatment. In its letter of June 15, 2004 State Farm indicated that its refusal to pay was based on Mr. Ramalingam's failure to attend IEs it had requested in May and June 2003. On November 12, 2003 Arbitrator Kominar had ruled that Mr. Ramalingam was not required to attend these IEs. State Farm finally agreed to pay this account, with interest, on the last day of the hearing, giving the reason that its change of position was caused by receipt of proof on June 25, 2005, that Mr. Ramalingam had incurred the cost of the treatment.

In February and March 2003, Mr. Ramalingam submitted claims for payment of sundry prescriptions and incontinence products totalling $2,232.17. State Farm refused to pay, initially on the basis that they were not reasonable and necessary. In its letter of June 15, 2004, State Farm cited lack of evidence of a link between the accident and incontinence and failure to attend for the May and June IEs as reasons for denial. State Farm then conceded that the link was established by a "more recent medical report from Dr. Baldwin". State Farm therefore undertook to pay the outstanding amount and did so on July 30, 2004. No interest was paid.

In July 2003 Mr. Ramalingam submitted a $2,574 plan for treatment by Dr. Fuller, a chiropractor. State Farm refused to pay because Mr. Ramalingam had not attended the May and June examinations. State Farm did not offer the option of a Med/Rehab DAC. State Farm maintained its position in its letter of June 15, 2004. This account was paid, with interest, on June 21, 2005.

Liability Findings

(a) The termination

The touchstone definition of unreasonable conduct is found in the decision of Arbitrator Palmer in Plowright and Wellington Insurance Company⁵:

"Unreasonable" behaviour by an Insurer in withholding or delaying payments can be seen as behaviour which was excessive, imprudent, stubborn, unyielding or immoderate."

As stated by Director Draper in Singh and Commercial Union Assurance Company⁶.

"...whether a special award should be ordered and, if so, how much...must be considered in the full context of the case..."

The first question to be answered is whether State Farm acted unreasonably in terminating IRBs and housekeeping benefits on July 26, 2002. I find that it did. I find that the opinions of Dr. Weisleder and Dr. Koepfler that Mr. Ramalingam could return to pre-accident activities do not reasonably support that conclusion and it was unreasonable for State Farm to blindly rely on them.

Dr. Weisleder made significant findings of impairment and expressed no doubt that they were caused by the accident, but concluded that Mr. Ramalingam did not suffer an ongoing impairment and could return to pre-loss activity levels. His findings included "tenderness over the right paracervical muscles", tenderness in the mid-line and over the right parathoracic muscles", tenderness in the mid-line and over both paravertebral muscles" and restriction of up to 75% in range of motion. His diagnosis was cervical strain, right shoulder strain, thoracic strain and lumbar strain. Although his prognosis was for recovery, he found residual pain and stiffness. It is clear from his findings that Mr. Ramalingam continued to suffer from significant restriction of his physical abilities. Dr. Weisleder gave no explanation for his conclusion that nevertheless, "there was no evidence of an ongoing impairment" and Mr. Ramalingam could return to the physically demanding job he held before the accident.

"Impairment" is defined in section 2 of the Schedule as "a loss or abnormality of a psychological, physiological or anatomical structure or function". It is clear from his own findings that Dr. Weisleder did not use the term "impairment" as it is defined. State Farm should have noted that.

Dr. Koepfler's opinion is similarly flawed. She concluded that there were no psychological restrictions on Mr. Ramalingam's return to pre-accident activities, but she diagnosed him as suffering from a "Pain Disorder with Psychological Factors." She raised concerns about his pre-accident health that may be clarified by review of the records of his family doctor, but she concluded that his problems "may have been exacerbated by the January 9, 2002 accident". She opined that Mr. Ramalingam's history predisposed him to a lengthy disability following a minor accident and her prognosis for recovery was poor.

Therefore, at the time of terminating benefits, the only evidence that State Farm had was that Mr. Ramalingam continued to be disabled as a result of his injuries from the accident. Although State Farm is not to be held to a standard of perfection in assessing the reasonableness of its conduct, it was unreasonable for State Farm to rely on the bald conclusion of the reports, without assessing the content, with an informed eye on the threshold for entitlement to the benefits at issue. Instead, State Farm rashly terminated weekly benefits and, instead of re-assessing the basis of its termination upon receipt of further evidence of Mr. Ramalingam's ongoing impairment, State Farm focussed on obtaining rebuttal evidence.

State Farm is to be credited for payment of the benefits owed before the conclusion of the hearing, but the delay was nevertheless unreasonable.

I therefore find that State Farm is liable to pay a special award on IRB's paid, with interest, on March 22, 2005 for the period July 26, 2002 to April 28, 2003, unreasonably delayed from July 26, 2002.

For the above reasons, I also find that State Farm is liable to pay a special award because it unreasonably delayed payment to Mr. Ramalingam of housekeeping benefits for the same period by paying 9 weeks on January 22, 2004, 11 weeks on April 23, 2004, 2 weeks on May 26, 2004 and 17 weeks on June 6, 2005.

State Farm also did not pay interest on any of the payments applied to housekeeping benefits for the period July 26, 2002 to April 28, 2003, although it paid interest on IRBs for the same period. I do not accept the submission that interest was not payable because the benefits are not overdue until State Farm is ordered to pay them.

Section 46 of the Schedule provides for payment of interest on overdue benefits. Section 46 also provides that "a benefit is overdue if the insurer fails to pay the benefit within the time required under this Part." Section 41 of the Schedule provides for the payment of housekeeping benefits within 30 days after the insurer receives the application. There is no suggestion in the Schedule that interest is not payable until ordered.

The trigger for interest is entitlement to the benefit, not an order. I therefore find that State Farm is liable to pay a special award on the interest owing on $3,900 paid for housekeeping benefits for the period July 26, 2002 to April 28, 2003.

(b) Breaches of the Interim Order

State Farm issued a cheque to comply with the interim order of September 5, 2003 on November 6, 2003. Assuming that State Farm received the order 5 days after it was made, there was a delay of 56 days between receipt and payment. Given that the order was based in part upon Mr. Ramalingam's urgent need, that delay is arguably unreasonable.

However, I find that State Farm's conduct is explained by the particular circumstances of this case. When State Farm received the interim order it was awaiting a decision on whether the arbitration would be stayed and Mr. Ramalingam precluded from receiving benefits because of his non-attendance on IEs. Such an order would arguably have nullified the effect of the order for payment of interim benefits. It was reasonable to expect that decision before the scheduled hearing date of September 15, 2003. When the decision was not received, State Farm promptly appealed the interim order and requested a stay. This was just 26 days after receipt of the order. It was not unreasonable to expect a prompt decision on the stay, but that decision was also delayed in anticipation of imminent delivery of the outstanding decision. Once the appeal was rejected, State Farm promptly complied with the order.

While State Farm could have taken the course of complying with the order and later pursuing recovery, if necessary, I do not find in the circumstances that its conduct was excessive, imprudent, stubborn, unyielding or immoderate.

I make the same finding with regard to State Farm's delay in paying post-104 week IRBs under the interim order. It should have been patently clear to Mr. Ramalingam that the order was not intended to include payment post-104 weeks. Indeed, counsel conceded as much in not pursuing payment of post-104 week housekeeping benefits. In the circumstances, it was unreasonable for Mr. Ramalingam to place the onus on State Farm alone to take steps to clarify the meaning of the order. The Arbitrator approved State Farm's position regarding the intent of her order when she varied it retroactively.

For the above reasons, I find that State Farm is not liable to pay a special award on the benefits it paid under the interim order.

The parties agree that the Arbitrator making the interim order could have ordered payment of interest. She did not . The interim order did not resolve the issue of entitlement to benefits. I find that the interim order insulated State Farm from a finding that its conduct in not paying interest was unreasonable, while entitlement to the benefits continued to be in dispute. However, State Farm must have conceded entitlement when it paid all outstanding IRBs on March 15, 2005. Once State Farm conceded entitlement, there was no reasonable basis for continued refusal to pay interest.

I therefore find that State Farm is liable to pay a special award because it unreasonably delayed payment of the interest owed on benefits paid under the interim order from March 15, 2005 until the date of payment.

Med/Rehab

The initial delay in paying the $900 owed to Dr. Miller appears to have been caused by a mistake made by a new adjuster upon reviewing the file. There is no evidence to suggest otherwise. Upon further review of the file the adjuster determined that the outstanding bill was for treatment provided beyond the anticipated time period of the approved plan. Had the adjuster noted this on his initial review, it would not have been unreasonable to delay payment. Since there existed a reasonable basis for denial at the time the bill was submitted and the initial refusal was caused by an innocent error, I find that State Farm did not unreasonably delay payment of this account and is not liable to pay a special award. The delay from conceding entitlement on June 14 to payment of this small amount on July 30 is not long enough to warrant the imposition of the penalty of a special award.

However, once entitlement was conceded, there was no reasonable basis for refusing to pay interest. I find that State Farm unreasonably delayed payment of interest on this account and is liable to pay a special award on the interest owed, based on unreasonable delay from July 30, 2004 until the date of payment.

I find that State Farm unreasonably withheld payment for the $3,700 plan for treatment by Dr. Miller approved in July 2003 by a Med/Rehab DAC. Once approved by the Med/Rehab DAC, State Farm was bound by section 38(14.1) of the Schedule to pay the expense. State Farm could not be relieved from the consequences of section 38(14.1) by favourable IEs.⁷ Even if it is accepted that the ruling that Mr. Ramalingam was not required to attend did not encompass the Med/Rehab issues later added to the arbitration, any question of attendance on IEs was irrelevant to State Farm's obligation to pay.

It was also irrelevant that Mr. Ramalingam did not immediately undergo the recommended treatment. State Farm's obligation to pay is triggered by the DAC result and any refusal to pay beyond the date of DAC approval was unreasonable. State Farm is therefore liable to pay a special award on $3,700, plus interest, from July 2003 until the date of payment.

In any event, I do not accept the submission that the Arbitrator Kominar's ruling that Mr. Ramalingam was not required to attend proposed IEs did not encompass the Med/Rehab issues later added to the arbitration. Arbitrator Kominar ruled that "the requirement that Mr. Ramalingam attend at these examinations did not arise out of State Farm's processing any claim for benefits."⁸ Although State Farm only sought an order precluding receipt of IRBs, the notices it sent to Mr. Ramalingam indicated that his attendance was required to determine entitlement to medical benefits. The dispute about medical benefits was clearly engaged. Had State Farm reserved the right to argue that the validity of the notices regarding medical benefits would survive the motion, I am sure that Arbitrator Kominar would have noted it in his decision.

I therefore find that it was unreasonable for State Farm to continue to rely on Mr. Ramalingam's failure to attend IEs, after the ruling of November 12, 2003.

With regard to the sundry prescriptions and incontinence products totalling $2,232.17, submitted in February and March 2003, State Farm also cited lack of evidence of a link between the accident and incontinence. I find no evidence of a link until the second report of Dr. Baldwin, dated May 26, 2003. In its letter of June 15, 2004 State Farm conceded that the link was established by this report and undertook to pay. There is no explanation for the delay from receipt of the report to June 15, 2004 and a further delay of about 6 weeks between June 15, 2004 and payment of the principal amount on July 30, 2004. No interest was paid.

Once State Farm conceded entitlement, it should have paid promptly. I find that the delay between conceding entitlement and paying the benefit was unreasonable. State Farm is therefore liable to pay a special award on $2,232.17 because it unreasonably delayed payment from the date of receipt of Dr. Baldwin's report of May 26, 2003 until July 30, 2004 and on the interest owing on that amount from the date of receipt, until payment.

With regard to the treatment plan of Dr. Fuller in the amount of $2,574, submitted in July 2003 and paid, with interest, on June 21, 2005, State Farm also failed to offer the option of a DAC. This failure is likely explained by State Farm's position that Mr. Ramalingam's failure to attend rendered the DAC process irrelevant. Section 38(12) of the Schedule imposes a mandatory obligation upon State Farm to engage the DAC process.

I find that State Farm unreasonably withheld payment of Dr. Fuller's account from 31 days after it was submitted until it was paid. State Farm is therefore liable to pay a special award on $4,097.55, with interest compounded from 31 days after it Dr. Fuller's treatment plan was submitted, until June 21, 2005.

Special Award: Quantum

The parties agree that the principles to be applied in fixing the amount of a special award are to be found in the Appeal decision in Liberty Mutual Insurance Company and Persofsky⁹, but they disagree on how the principles are to be applied. They do agree that the maximum award is 50% x (benefits that were unreasonably withheld) + interest on those benefits + compound interest, calculated according to section 282(10) of the Insurance Act.

I find that I must have all of the above information with regard to all of the unreasonably withheld or delayed benefits in order to apply the principles of Persofsky with the required precision. The amounts awarded under the various heads of delay must be considered in relation to each other and the total amount awarded must accord with the principle of proportionality. I do not accept Mr. Ramalinagm's submission that Persofsky contemplates that I can establish a range, with the findings that I have made, with the final amount to be fixed, if the parties are unable to agree. Persofsky requires establishing the award with precision, based on the totality of the insurer's conduct.

Therefore, Mr. Ramalingam is directed to provide State Farm with a statement, showing the amounts upon which the special awards are to be calculated, within 30 days. In calculating the interest, payments of housekeeping benefits are to be applied to the oldest outstanding claim. State Farm may respond within 15 days of receipt of Mr. Ramalingam's statement. If the parties are unable to agree on the amounts upon which the awards are to be calculated, or the amounts of the awards, I remain seized of those issues.

EXPENSES:

State Farm concedes Mr. Ramalingam's entitlement to expenses of the hearing. I will make an order accordingly. Should the parties be unable to agree on the amount an appointment may be scheduled pursuant to Rule 79.1 of the Dispute Resolution Practice Code, once all issues are determined.

August 29, 2005

Jeffrey Rogers Arbitrator

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