Neutral Citation: 2005 ONFSCDRS 22

FSCO A04-000733

BETWEEN:

BLASKO NOVAKOVIC

Applicant

and

COSECO INSURANCE CO./HB GROUP/DIRECT PROTECT

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Denise Ashby

Heard:

December 13, 14, 15 and 16, 2004, in Hamilton, Ontario.

Appearances:

H. Wayne Gardner for Mr. Novakovic

Pradeep B. Pachai for Coseco Insurance Co./HB Group/Direct Protect

The Applicant, Blasko Novakovic, was injured in a motor vehicle accident on March 24, 1998. He applied for and was denied statutory accident benefits from Coseco Insurance Co./HB Group/Direct Protect ("Coseco"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Novakovic applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Coseco seeks an order, pursuant to section 32 of the Schedule, precluding Mr. Novakovic from proceeding to arbitration on the issues of medical benefits. Coseco claims that Mr. Novakovic did not make a claim for medical benefits for over four years following the events which gave rise to the claim.

The preliminary issue is:

Is Mr. Novakovic precluded from proceeding to arbitration by operation of section 31 and subsection 32(1) of the Schedule?
Is Coseco liable to pay Mr. Novakovic's expenses in respect of this preliminary issue hearing pursuant to subsection 282(11) of the Insurance Act?
Is Mr. Novakovic liable to pay Coseco's expenses pursuant to subsection 282(11) of the Insurance Act?

Mr. Novakovic is not precluded from proceeding to arbitration by operation of section 31 and subsection 32(1) of the Schedule.
Coseco is liable to pay Mr. Novakovic's expenses in respect of this preliminary issue hearing pursuant to subsection 282(11) of the Insurance Act.
Mr. Novakovic is not liable to pay Coseco's expenses pursuant to subsection 282(11) of the Insurance Act.

The hearing of both the preliminary issue and the substantive matters were heard together. The parties agreed that the decision with respect to the preliminary issue would be issued first and separately from the claim for benefits.

EVIDENCE:

On March 24, 1998, Mr. Novakovic, age 14 years, was a pedestrian when he was struck by a car. He was taken to hospital by ambulance and discharged after a few hours.

Mr. Novakovic and his mother, Ms. Novakovic, testified at the hearing. Ms. Novakovic testified with the assistance of an interpreter. Mr. Novakovic was born in Bosnia on June 14, 1983. He immigrated with his family from Bosnia to Croatia, then to Quebec, Canada in 1995 and in 1996 the family relocated to Ontario. While in Quebec he attended a French language school. Mr. Novakovic came to Canada with limited English and no French language proficiency. His parents spoke neither English nor French.

Mr. Novakovic and his mother both testified that from the day of the accident onward Mr. Novakovic had recurring pain in his back, severe headaches and leg pain. He presently identifies knee pain as being the most significant physical problem. As well, he continues to have frequent headaches. He has little energy. Both Mr. Novakovic and his mother testified that since the accident Ms. Novakovic has regularly purchased Tylenol, cold packs and other non-prescription pain medication to assist him in dealing with the pain.

Mr. Novakovic was examined by his pediatrician, Dr. Katarina Rovis, two days following the accident on March 26, 1998. She testified at the hearing. Dr. Rovis diagnosed soft tissue injuries to shoulder and back, together with headaches and abrasions to his back caused by the motor vehicle accident. She applied a dressing to the abrasions on his back. Mr. Novakovic did not return to see her until September 10, 1998 when he consulted her about severe leg pain. She conducted blood tests, the results of which were within normal limits. Mr. Novakovic returned for a follow-up visit on September 15, 1998. Dr. Rovis' notes relating to the two September visits do not refer to the motor vehicle accident. Both Mr. Novakovic and his mother testified that they believed it was Dr. Rovis' opinion that the symptoms suffered by Mr. Novakovic following the accident related to puberty, not the accident. Dr. Rovis indicated she might have made such a statement when he returned on September 15, 1998. There was no record of such a comment and Dr. Rovis has no recollection of having made the statement. I accept the evidence of both Mr. Novakovic and his mother that Dr. Rovis commented that the pain was attributable to growing pains associated with puberty.

Mr. Novakovic and his mother gave similar evidence regarding the reasons for the delay in giving Coseco notice of the accident as follows:

the parents were unaware that benefits might be available to them through the father's automobile insurance in circumstances where their son was struck by a vehicle driven by someone else;
the parents thought that Mr. Novakovic might have been at fault and, as they were suspicious of authority, they kept silent and did not discuss the accident with friends;
due to their fear of authority and potential consequences of pursuing the matter they did not consult with either their insurance broker or a lawyer; and
Mr. Novakovic testified his parents believed they might be deported if they did anything.

Mr. Novakovic testified the accident and its consequences created tension within his family. Although his mother was more sympathetic, both parents believed he should ignore the pain and get on with his life. Mr. Novakovic was unable to do this. Presently, Mr. Novakovic is 21 and a grade 12 graduate. He was unable to successfully complete a grade 13 "up-grade." Mr. Novakovic lives with his parents. Since the accident, Mr. Novakovic has been marginally and irregularly employed. He described a series of part-time jobs, obtained through family or friends.

He had several while he was still a student. Mr. Novakovic testified he would quit because they required lifting and physical activity that he could not do because of pain.

Dr. R. Kaplan, a psychologist, who was qualified as both an expert in psychology and neuropsychology, testified at the hearing. Dr. Kaplan described Mr. Novakovic as a young man with a variable attention span. The results of the neuropsychological testing indicated that Mr. Novakovic is within the low average range. Dr. Kaplan and his staff also saw him as having depressive features. Dr. Kaplan's evidence was undisputed.²

Mr. Novakovic testified that he was told by school friends of his brother that he could sue at 18. Ms. Novakovic testified that she discussed the accident and her son's medical complaints with a friend in or about 2000. The friend urged her to consult a lawyer. She did not. Mr. Novakovic also discussed the accident with this friend. The friend advised Mr. Novakovic to consult a lawyer. Mr. Novakovic could not state specifically when this conversation took place. However, while he followed her advice he did not do so immediately. I infer from his testimony that he retained counsel in October 2002, which was within months of his discussion with the family friend. Shortly before he consulted a lawyer he became exasperated with his inability to work because of the pain and disturbed by his perception that no one believed him. As a consequence, he followed the friend's advice and consult a lawyer.

Mr. Novakovic's evidence was vague regarding when he became aware that he might have remedies available to him arising from the motor vehicle accident. It is clear that he had a better understanding of his rights after consulting his lawyer and instructed his lawyer to give Coseco notice of the accident and his potential claim in October 2002.

The Insurer's Note Pad record ³ indicates that Coseco was notified of the accident on October 17, 2002. The then adjuster took a statement from Mr. Novakovic at his lawyer's office on October 30, 2002.⁴ The statement remains unsigned.

On December 23, 2002, the adjuster wrote to Mr. Novakovic and asked him to provide an explanation for the delay in notifying Coseco about the accident and his potential claim.⁵ Mr. Novakovic's lawyer responded in a letter dated January 8, 2003, setting out language, cultural differences and a belief that their son had adequate medical care at the time of the accident as the reason for notice not being given at the time of the accident. Subsequently, the parents believed their son should ignore the pain and get on with his life.⁶

The Insurer's records indicate that the file was transferred to Ms. Gillian Colucci, a witness at the hearing, on January 20, 2003.⁷ Ms. Colucci testified that it is important that the insurer receive notice of a claim quickly because it allows the insurer to speak to the claimant soon after the events giving rise to the claim; provide the claimant with an application and explain the benefits which are available; obtain medical documentation in order to determine whether an impairment had been caused by the accident and to consider issues relating to treatment. I found Ms. Colucci to be a credible witness. The previous adjuster and Ms. Colucci both denied Mr. Novakovic's claim for benefits on the basis that his claim was out of time and he did not present a reasonable explanation. Ms. Colucci testified that from her perspective ignorance of the law and cultural differences were not enough to overcome the four year lapse between the accident and Mr. Novakovic's notice to the company.

On the basis of the foregoing I make the following findings of fact:

Mr. Novakovic was in a motor vehicle accident on March 24, 1998.
Mr. Novakovic was a minor of the age of 14 years on March 24, 1998.
Mr. Novakovic immigrated with his family from Bosnia to Croatia, to Quebec, Canada in 1995 and then to Ontario in 1996.
On March 24, 1998, Mr. Novakovic's parents had limited English language skills and were ignorant that accident benefits might be available to their son through the father's contract of insurance with Coseco.
Mr. Novakovic turned 18 on June 14, 2001.⁸
Coseco was advised of Mr. Novakovic's potential claim on October 17, 2002.
Mr. Novakovic was a credible but a poor witness, because his evidence was vague and subject to lapses in memory. However, both are consistent with Dr. Kaplan's evidence respecting his intellectual and psychological limitations. He is immature and unsophisticated. Since graduation from high school to present Mr. Novakovic has been sporadically and marginally employed and therefore remains dependent on his parents for the necessities of life.
I found Ms. Novakovic to be a credible witness who was embarrassed that she failed to seek legal advice at the time of the accident and regretted that she had not informed herself about what was available to her son at the time or prior to Mr. Novakovic consulting with a lawyer.
I found both Dr. Kaplan and Dr. Rovis to be credible witnesses.
Dr. Rovis made a comment to Mr. Novakovic and his mother that the pain Mr. Novakovic was experiencing might be attributable to growth and puberty.
Mr. Novakovic and Ms. Novakovic both believed that Mr. Novakovic's medical symptoms and complaints, specifically headaches, back pain, shoulder pain, leg pain and poor memory, were caused by the motor vehicle accident on March 24, 1998.
Ms. Novakovic was aware in or about 2000 that benefits might be available to her son, the Applicant, Mr. Novakovic and she ignored advice to seek legal advice.
Mr. Novakovic graduated high school in June 2001.
Mr. Novakovic was aware on his 18^th birthday, June 14, 2001, that he might have a right to sue the person whose car struck him on March 24, 1998 and that he believed he had the right to commence such an action within two years of his 18^thbirthday.
Mr. Novakovic was advised by a family friend, in or about the summer of 2002, to consult a lawyer about his potential remedies relating to the motor vehicle accident in March 1998. Further, Mr. Novakovic did not heed this advice until October 2002.
Mr. Novakovic was ignorant that he might have a claim for accident benefits through his father's contract of insurance with Coseco until he consulted with counsel in October 2002.
In the month immediately prior to consulting a lawyer, Mr. Novakovic became so exasperated with the fact that he was so limited by pain he decided to follow the family friend's advice and consult a lawyer.
Mr. Novakovic was slow to investigate his rights because of his economic dependence on his parents and his desire not to increase the tension between he and his parents.

ANALYSIS:

The Law

The issue to be determined is whether or not Mr. Novakovic is precluded from proceeding to arbitration because he gave notice to Coseco beyond the notice period set out in subsection 32(1) of the Schedule as follows:

32(1) A person who wants to apply for a benefit under this Regulation shall notify the insurer within 30 days after the circumstances arose that give rise to the entitlement to the benefit, or as soon as practicable thereafter.

In the event Mr. Novakovic is found not to have either given notice within 30 days or as soon as practicable, then I must consider whether he has provided a reasonable explanation pursuant to subsection 31(1) as follows:

31(1) A person's failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation.

Does the Limitations Act Apply

Mr. Novakovic submitted that section 32 sets out a limitation period and therefore section 47 of the Limitations Act, R.S.O. 1990, Chapter L.15, the act in force at the time of the accident, applies. It provides:

47 In case of disability of plaintiff

Where a person entitled to bring an action mentioned in section 45 or 46 is at the time the cause of action accrues a minor, mental defective, mental incompetent or of unsound mind, the period within which the action may be brought shall be reckoned from the date when such person became of full age or of sound mind.

I reviewed other related provisions as follows:

45 (1) within six years after the cause of action arose,

(h) an action for a penalty, damages, or a sum of money given by any statute to the Crown or the party aggrieved, within two years after the cause of action arose;

45 (2) Nothing in this section extends to any action where the time for bringing the action is by any statute specially limited.

Coseco submitted that I should find that the parents had a positive obligation to assert any claim their son, the Applicant, Mr. Novakovic might have. According to Coseco, their failure to do so barred Mr. Novakovic from asserting a claim now.

(a) Does the Limitations Act Apply to a Notice Period

The provisions of subsection 32(1) of the Schedule set a notice period of 30 days and provides that in the alternative notice may be given outside of that period "as soon as practicable." The notice requirement is also qualified by operation of subsection 31(1) which provides an opportunity for an insured to avoid being barred from claiming a benefit if able to provide a "reasonable explanation." Does the Limitations Act apply to such a notice period? If the insured person fails to apply within the 30 days or as soon as practicable and is without a reasonable explanation then the person is barred from making a claim. Therefore, I find that the language in subsection 45(2) of the Limitations Act is sufficiently general to encompass a notice period as "specially limiting" the time in which an action may be brought.

(b) Does the Limitations Act Apply to the Notice Period in subsection 32(1) of the Schedule?

The Ontario Court of Appeal considered the issue of the application of the Limitations Act to Section 11 of the Public Authorities Protection Act, R.S.O. 1980, C. 406, which sets a limitation period of six months. The Plaintiff was 16 when she was injured while participating in a school activity. Justice Brooke found:

It would take clear wording in the Limitations Act or the Public Authorities Protection Act to restrict the application of s. 47 of the Limitations Act.⁹

More recently, the Supreme Court in Murphy v. Welsh; Stoddard v. Watson, 1993 CanLII 59 (SCC), [1993] 2 S.C.R. 1069, considered the application of section 47 of the Limitations Act to subsection 180(1) of the Highway Traffic Act, R.S.O. 1980, c. 198. Justice Major, writing for the Court, commented:

In determining the legislator's intention there is a presumption of coherence between related statutes. Provisions are only deemed inconsistent where they cannot stand together. Sections 180(1) and 47 are not prima facie inconsistent. Section 180(1) sets the length of the limitation period. Section 47 states when the limitation period begins to run. Their co-existence does not lead to absurd results. Merely because s. 180(1) sets a short limitation period does not bar postponement for disability. Sections 45(1)(h) and (i) of the Limitations Act set two-year limitation periods, and s. 45(1)(m) sets a 1-year limitation period, all of which are subject to s. 47. The co-existence of a short limitation period and a rule for its postponement is not an absurd result.

He then went on to analyse the need to balance the interests of the parties as follows:

Whatever interest a defendant may have in the universal application of the two year motor vehicle limitation period must be balanced against the concerns of fairness to the plaintiff under legal disability. If s. 180(1) excludes s. 47, an individual under legal disability would be deprived of any remedy unless the disability ends within two years of the accident. Only infants over the age of 16 and individuals suffering from short term mental incompetence would be able to pursue their remedies. The prejudice to plaintiffs under legal disability outweighs the benefits of providing a procedural defence to liability.

Justice Major concluded that Lorna Stoddard and Jamie Murphy commenced their actions within the time prescribed by the Highway Traffic Act and the Limitations Act together and were therefore not statute barred. The derivative claim advanced by Jamie Murphy failed because the claim from which it derived was statute barred.

There is no explicit provision in the Insurance Act, excluding it from the operation of the Limitations Act. However, the issue of the capacity of minors to enter binding agreements is dealt with in both Part V, section 202 and Part VII, section 307 of the Insurance Act. Notwithstanding these provisions, the legislature did not see fit to either make a specific exclusion of the Limitations Act or to set a positive obligation on parents or guardians to assert potential claims on behalf of minors.

The provisions of subsection 32(1) of the Schedule sets a time period within which notice must be given to the insurer, while the provisions of section 47 of the Limitations Act set the date upon which the notice period starts for the then minor applicant, Mr. Novakovic. I find this to be analogous to the circumstances in Murphy v. Welsh; Stoddard v. Watson, supra. There is no obvious inconsistency between the two statutes. In not enacting either an exemption to section 47 of the Limitations Act or using clear wording to restrict its application, I find that it was intended that section 47 postpones the rights of a minor, pursuant to the Schedule, until he reaches the age of majority. To conclude otherwise would be contrary to the finding of the Supreme Court in Smith v. Co-operators General Insurance Co.¹⁰ that a purpose of the Insurance Act was consumer protection. Gonthier J., writing for the majority, commented as follows:

There is no dispute that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance. The Court of Appeal was unanimous on this point and the respondent does not contest it.

These considerations outweigh any prejudice to the insurer. Therefore, I find that the Limitations Act operates to postpone the notice period set out in subsection 32(1) of the Schedule to the date upon which a minor reaches his or her 18^th birthday. In the case of Mr. Novakovic, the notice period commenced on June 14, 2001.

Impact of Limitations Act on Interpretation of section 31 and subsection 32(1) of the Insurance Act

Coseco argued that if it was found that section 47 of the Limitations Act applied, then the provisions of subsection 32(1) of the Schedule should be strictly interpreted to require Mr. Novakovic to strictly meet the 30-day notice period. By extension, Coseco took the position that neither the subsection 32(1) phrase "as soon as practicable" nor subsection 31(1) "reasonable explanation" provisions should be considered. I disagree. In the absence of clear language within the Schedule to that effect, I find that Mr. Novakovic's rights to pursue his remedy are only limited by an application of the facts of his case to the provisions of the Schedule consistent with existing case law.

Did Mr. Novakovic notify Coseco within time limits established by subsection 32(1)?

(a) Did Mr. Novakovic notify Coseco within 30 days of the day upon which he reached the age of 18?

Having found that Mr. Novakovic, through his counsel, first notified Coseco of his potential claim on October 17, 2002, I find that he did not notify Coseco within 30 days of his 18^thbirthday, June 14, 2001.

(b) Did Mr. No vako vic notify Coseco as soon as practicable thereafter?

Counsel for Mr. Novakovic argued that his client discovered the direct causal connection between his symptoms and the accident on March 24, 1998, on October 29, 2002, when he received an opinion from Dr. Timarac, his family physician, which was confirmed in a Disability Certificate dated November 16, 2002.¹¹ Therefore, pursuant to the discoverability principle, Mr. Novakovic's application was submitted "as soon as practicable" pursuant to subsection 32(1). Mr. Novakovic relied on Justice Major's decision in Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, [1997] S.J.C. No. 31, File No.: 24981, that the discoverability principle applied. Coseco's counsel conceded that while the discoverability principle might apply, it is subsumed in the reasonable explanation provisions of section 31.

I agree with Coseco. Therefore, I find that the common law discoverability principle is subsumed by the reasonable explanation provisions of section 31.

I have found that Mr. Novakovic and his mother had been advised by several sources to consult a lawyer. Mr. Novakovic did not heed this advice until October 2002. I find that he could have done so earlier. Therefore, he failed to notify Coseco as soon as practicable following his 18^thbirthday.

Did the Applicant have a reasonable explanation, pursuant to subsection 31(1)?

There are a significant number of cases which give direction regarding the interpretation of the time limits set out in Part X. I agree with Arbitrator Leitch's summary of the principles to be used in interpreting subsection 31(1) of the Schedule set out in Horvath and Allstate Insurance Company of Canada.¹² The principles distilled by Arbitrator Leitch are:

An explanation must be determined to be credible or worthy of belief before its reasonableness can be assessed;
Ignorance of the law alone is not a "reasonable explanation";
The onus is on the insured person to establish a "reasonable explanation;"
The test of "reasonable explanation" is both a subjective and objective test that should take account of both personal characteristics and a "reasonable person" standard;
The lack of prejudice to the insurer does not make an explanation automatically reasonable;
An assessment of reasonableness included balancing of prejudice to the insurer, hardship to the claimant and whether it is equitable to relieve against the consequences of the failure to comply within the time limit.

Mr. Novakovic's explanation is similar to his mother's: they were ignorant of the law; his parents were suspicious of authority and unable to risk pursuing the matter; his parents believed that to the extent possible his injuries had been treated at the time of the accident and his pediatrician was of the opinion his symptoms were related to puberty not the accident. For his part Mr. Novakovic was reluctant to exacerbate the tension his medical complaints caused in his home. Further, the culture of his family required him to be tough and carry on. Ultimately he took action because of his inability to work and his perception that his health was deteriorating.

The issue of prejudice to the Insurer is somewhat unusual in this matter. By statute, the limitation period set out in subsection 32(1) was postponed from March 24, 1998 to June 14, 2001. There is no evidence that any prejudice caused by that postponement was exacerbated by the further delay from July 14, 2001 to October 17, 2002. Coseco obtained Mr. Novakovic's medical records, but it chose not to refer him for medical assessments and dealt with the claim by denying it. Therefore, I find that the delay following the postponement did not prejudice the Insurer.

In C.R. and Lombard General Insurance Company of Canada,¹³ the arbitrator found the applicant's youth to be one of several factors which led him to conclude the applicant had a reasonable explanation. In the case of Mr. Novakovic, it would have been extremely difficult for him to take steps to investigate his remedies and then assert a claim. He continues to live at home, is marginally and irregularly employed and is essentially dependent on his parents for the essentials of life. Dr. Kaplan has testified that Mr. Novakovic has limited abilities and suffers from depression. I found him to be an immature and unsophisticated 21 year old whose parents had not applied for benefits on his behalf between March 1998 and his 18^th birthday on June 14, 2001. The subject of the accident created stress in the family. I find that the totality of Mr. Novakovic's circumstances, together with the hardship caused by denying him access to claims under the Schedule when balanced with the lack of prejudice to Coseco, meets the reasonableness test set out in subsection 31(1) of the Schedule. Therefore, I find that Mr. Novakovic is not precluded from proceeding to arbitration pursuant to the operation of subsections 31(1) and subsection 32(1) of the Schedule.

EXPENSES:

I exercise my discretion to award Mr. Novakovic his expenses incurred in this preliminary issue hearing. If the parties are unable to agree on the quantum of his expenses, they may make an application pursuant to the Dispute Resolution Practice Code following the release of my decision with respect to the issue of benefits.

February 22, 2005

Denise Ashby Arbitrator

Date