J. C. v. Progressive Casualty Insurance Company, 2005 ONFSCDRS 16

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2005 ONFSCDRS 16

Appeal P04-00036

OFFICE OF THE DIRECTOR OF ARBITRATIONS

J. C. Appellant

and

PROGRESSIVE CASUALTY INSURANCE COMPANY Respondent

Before: David Evans

Representatives: Stanley B. Pasternak for Mr. C. Pamela A. Brownlee for Progressive

Hearing Date: February 9, 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 is dismissed, and the arbitration order dated September 24, 2004, is confirmed.

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

February 15, 2005

David Evans Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Mr. C was injured in an accident on June 14, 1997. He received weekly income replacement benefits (IRBs) under the SABS-1996¹ until November 19, 1997. The Arbitrator found that Mr. C was and remains entitled to them, but interest runs only from June 6, 2001. Mr. C appeals the finding on interest.

II. BACKGROUND

Mr. C's mother drove her car, with him as a passenger, into a pickup truck. As a result of the accident, Mr. C suffered a fractured temporal bone and concussion, leading to cognitive problems involving short-term memory loss, headaches, fatigue and dizziness.

During the four months following the accident, Mr. C's physician and other examiners felt he would be able to return to work. On that basis, Progressive notified Mr. C that it was terminating his benefits effective November 19, 1997, and did so when he did not request a disability assessment by a Designated Assessment Centre (Disability DAC).

The Arbitrator heard that his ongoing symptoms led him to drop out of school and become unhappy, moody and cynical. Siblings supported him, while he only played video games and walked his dog. However, she noted that Mr. C "did not connect with the medical system for accident-related medical complaints until he attended at The Wellesley Central/St. Michael's Hospital ... in January 2000, some two years after benefit termination," suffering from depression. He then underwent a substantial number of medical assessments from 2000 to 2003.

III. ANALYSIS

If an insurer fails to remit outstanding IRBs at least once every two weeks, they become overdue, and interest is payable on them.²

On June 5, 2001, Mr. C's counsel first contacted Progressive about his outstanding IRB claim.

In considering the date from which the IRBs became overdue in this case, the Arbitrator held that the time lag before Mr. C approached Progressive again, "although understandable given the Applicant's medical conditions," was "not attributable to the conduct of Progressive" and the "situation was clearly out of Progressive's hands during that period" — between November 19, 1997 and June 5, 2001. Accordingly, she found "under these circumstances, that interest shall not be payable from November 20, 1997 to June 5, 2001."

Mr. C claims the Arbitrator erred in law³ by making these findings.

The law in this area has recently been examined by the Court of Appeal. It issued judgments on the effect of the essentially identical interest provisions of the SABS-1994⁴ in dealing with weekly benefits — loss of earning capacity benefits in Attavar,⁵ and weekly caregiver benefits in Mercier.⁶ As is the case with IRBs, these outstanding weekly benefits became overdue when they were not mailed or delivered at least once every second week. The court contrasted this simple rule with the explicit rules governing when medical benefits become overdue. The fundamental principle expressed by the court in Mercier was that "absent express language that a payment is not overdue," interest applies. As the Director's Delegate held in Cole,⁷ ". interest is mandatory, compensatory, and flows from late payment of overdue benefits. There is no need for a finding of insurer misconduct." However, Laskin J.A. in Attavar quoted with apparent approval the trial judge's comment that "unusual circumstances brought on by the complexity of the action and/or the applicant's own behaviour" may relieve the insurer from bearing the consequences of its decision not to pay benefits later found to be owing.

Indeed, previous decisions support the view that the insured person's conduct, including delay, can affect his or her right to interest. The Cole case is on point. In Cole, the insurer issued a termination notice for Mr. Cole's IRBs. He did not dispute it and did not request a DAC assessment. Instead, he returned to work through a plan arranged by Allstate. After he began working full-time hours, the insurer sent a second termination notice. Mr. Cole was laid off soon after returning to work. Several years passed before he presented his IRB claim. His claim was not time-barred because the second termination notice was defective. On appeal, the Director's Delegate held that, in the circumstances, the insurer

had good reason to believe he had accepted its decision to terminate benefits. He did not challenge that decision by requesting a DAC assessment, commencing mediation, or communicating his views in some other way for almost four years. . . . In the circumstances of this case, the Arbitrator erred in imposing the cost of the delay on the Insurer.

Similarly, in this case Mr. C's claim was not time-barred, as the Arbitrator noted that Progressive's counsel conceded it had not met the notice of benefit refusal requirements set out in the Supreme Court.⁸ However, Mr. C did not dispute the termination, or request a Disability DAC, and let almost four years pass before contacting Progressive. Implicitly, as in Cole, the Insurer had reason to believe Mr. C had accepted its decision to terminate his benefits. The court in Attavar has approved the discretion to relieve the insurer from paying interest due to the applicant's own behaviour. I find accordingly that the Arbitrator had the discretion and properly exercised it to relieve Progressive from paying interest from the date of termination.

The appeal is dismissed.

IV. EXPENSES

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

February 15, 2005

David Evans Director's Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Subsections 46(1), 46(2) and 35(4).
3. 3Appeals are limited to questions of law: Insurance Act, s. 283(1).
4. 4Statutory Accident Benefits Schedule —Accidents After December 31, 1993 and Before November 1, 1996, Ontario Regulation 776/93, as amended.
5. 5Attavar v. Allstate Insurance Co. of Canada (2003), 2003 CanLII 7430 (ON CA), 63 O.R. (3d) 199
6. 6Mercier v. Royal & SunAlliance Insurance Co. of Canada (2004), 2004 CanLII 5551 (ON CA), 72 O.R. (3d) 94
7. 7Cole and Allstate Insurance Company of Canada, (FSCO P03-00033, May 23, 2003).
8. 8Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129.