Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2005 ONFSCDRS 32

Appeal P04-00019

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ALLSTATE INSURANCE COMPANY OF CANADA

Appellant

and

ESTATE OF BASIL MCINTOSH

Respondent

Before:

Nancy Makepeace

Representatives:

John Pavoni for Allstate

Mark S. Grossman for Mr. McIntosh

Hearing Date:

January 24, 2005 in Kitchener Ontario

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 from the Arbitrator's order, dated April 23, 2004, is dismissed.

2. I may be contacted within 30 days if the parties are unable to agree on appeal expenses.

March 15, 2005

Nancy Makepeace Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Allstate appeals from the Arbitrator's decision that Mr. McIntosh is not barred from proceeding to arbitration under s. 50(1)(a) of the SABS-1996.¹ It contends that he failed to submit an application for a benefit within 30 days of receiving the application forms from the Insurer, as required by s. 32(3), and therefore should not be allowed to proceed. Although the decision appealed from is a preliminary order that does not finally decide the entitlement issues, the parties agreed the appeal should be acknowledged. Mr. McIntosh passed away in the summer of 2004, but the appeal is continued by his estate, represented by his widow, Juliet McIntosh.

For the following reasons, the appeal is dismissed.

II. BACKGROUND

Section 50(1) of the SABS-1996 states:

An insured person shall not commence a mediation proceeding under section 280 of the Act unless,

(a) the insured person notified the insurer of the circumstances giving rise to a claim for a benefit and submitted an application for the benefit within the times prescribed by this Part;²

Section 32(3) prescribes the time for submitting an application for a benefit - within 30 days after the insured person receives the application forms from the insurer. Section 31(1) provides that failure to comply "does not disentitle the person to a benefit if the person has a reasonable explanation."

The Arbitrator carefully reviewed the evidence he heard about the parties' dealings, and there is no need to repeat his detailed findings here. Mr. McIntosh was involved in an automobile accident on April 21, 2000. He provided some information to Allstate, but "did not submit an Application for Benefits on the forms provided by Allstate until January 30, 2002,"³ much longer than 30 days after he received the forms in the early days of the claim.⁴

The Arbitrator concluded that s. 32(3) does not require completion of the approved forms supplied by the insurer, but requires only that the claimant provide sufficient information to allow the insurer to begin adjusting the claim. Considering "the totality of the parties' dealings with each other," including Mr. McIntosh's meetings and telephone conversations with Allstate's adjusters and the Disability Certificate and Treatment Plan submitted by his family doctor, the Arbitrator concluded: "Allstate had ample information to begin the process of adjusting Mr. McIntosh's claim . . . by July 6, 2000, within thirty days of Mr. McIntosh receiving the application forms."⁵ In any event, he found that Allstate had not satisfied its obligations under s. 32(2)(c) because it had not explained to Mr. McIntosh that failure to make a timely application could prevent him from proceeding.⁶

Therefore, the Arbitrator concluded that Mr. McIntosh was not barred from proceeding under s. 50(1)(a). He did not find it necessary to consider whether Mr. McIntosh could avail himself of s. 31(1), or whether Allstate waived s. 50(1)(a) by making a settlement offer.

For the purposes of the appeal, Allstate concedes that the focus of s. 32(3) is the sufficiency of information, not use of the approved forms. Allstate submits that the Arbitrator erred in finding that the applicant need only provide information sufficient to allow the insurer to begin adjusting the claim. It contends that the information provided must be sufficient to allow the insurer to act on it and meet its obligations for timely benefit payment. It submits that Mr. McIntosh did not satisfy this requirement until early 2002, when his counsel finally submitted completed application forms, including an Employer's Confirmation of Income, on his behalf.

III. ANALYSIS

The Arbitrator stated, "the jurisprudence is somewhat at odds as to what, precisely, an insured must submit to an insurer in order to comply with section 32(3). ⁷ He considered two arbitration decisions (H'ng et al. and Allstate Insurance Company of Canada⁸ and Lopez and Canadian General Insurance Group⁹) and a court decision (Liberty Mutual Insurance Company v. The Commerce Insurance Company)¹⁰ Allstate submits he erred in not considering the Hng and Allstate appeal decision,¹¹ which was upheld on judicial review,¹² or the Lopez and Canadian General appeal decision,¹³ and in preferring the approach taken in Liberty Mutual v. The Commerce, a decision of a Superior Court judge on appeal from a priority dispute arbitration under the Arbitration Act, 1991.

In my view, the Arbitrator's failure to refer to the two appeal decisions was not fatal to his decision and he did not err in considering the judicial decision. Though the decisions do vary somewhat in their approach, I find that the Commission and the courts have taken a relatively consistent approach to the issue, an approach that recognizes the remedial nature of automobile insurance legislation and emphasizes substantial rather than technical compliance with notice provisions.

H’ng and Allstate concerned s. 59(3) of the SABS-1994, which is similar to s. 32(3) of the SABS-1996 except that the time limit is 90 days rather than 30 days; s. 59(4) is identical to s. 31(1). The claimants were the parents of the deceased insured person. Their lawyer wrote Allstate to ask for the forms required to apply for payment of funeral expenses and "any death benefits” they were entitled to. The letter also included information suggesting a possible Family Law Act claim on the basis of the deceased's support of his parents. Allstate provided the Accident Benefits Application Package (OCF-1, -2 and -3), but not the Application for Death or Funeral Benefit (OCF-4), which is not part of the package. The parents' lawyer obtained and submitted an OCF-4, but did not submit an OCF-1. Allstate paid the funeral and travel expenses claimed in the OCF-4, but neither paid nor denied a death benefit. Its adjuster testified she adjusted the claim based on the application alone, without considering the covering letter or a subsequent letter in which the lawyer asked whether "anyone else” had made a claim for dependant's death benefits.

When the parents' new counsel submitted an application specifically claiming death benefits, the Insurer relied on s. 59(3). It argued that the timely OCF-4 submitted on behalf of the parents did not identify a claim for a death benefit, and that the subsequent OCF-1, submitted about a year later, was late without a reasonable explanation.

The arbitrator in H'ng accepted Allstate's position. He stated that a completed OCF-1 may not be required for a death benefit claim, given the approved use of the special form (the OCF-4), but the insurer could require the general application form. Since Allstate paid funeral and travel expenses based on the OCF-4, the arbitrator concluded the insurer had treated it as sufficient for application purposes. He also accepted that "an application is not limited to a particular form,” but "may include additional information contained in a covering letter, and documentation enclosed or appended”¹⁴ - the lawyer's covering letter in that case. The arbitrator rejected Allstate's position that it was entitled to rely on the application form alone, stating, "the correct approach is to look at the application as a whole."¹⁵ However, he was not persuaded a dependant's death benefit was claimed in the covering letter or subsequent correspondence.

The claimants' appeal in H'ng was dismissed. Director's Delegate Draper held that Allstate satisfied its obligations under the SABS by providing the OCF-1, and was not obliged to provide the OCF-4. However, he agreed with the arbitrator that the SABS requires an applicant to present a claim "in sufficient detail to permit the insurer to act upon it and meet its obligations for timely payment under the Schedule."¹⁶ He concluded that the evidence supported the Arbitrator's finding that the claimants did not submit an adequate application for death benefits within the 90 days required. Finally, he refused to consider the reasonable excuse argument because the claimants had not argued it before the arbitrator. The Divisional Court found that the Arbitrator and the Director came to the correct conclusion.

To the extent that the H hg and Allstate appeal suggests the claimants must submit a particular approved form, it does not assist the Insurer in Mr. McIntosh's case, given its concession on point. In any event, I am inclined to read the H'ng decision narrowly, given its unusual facts. For our purposes, the main finding of the appeal decision was that the SABS requires an applicant to present a claim "in sufficient detail to permit the insurer to act upon it and meet its obligations for timely payment under the Schedule." In that ruling, the Director's Delegate upheld the Arbitrator.

Nor am I persuaded the Lopez and Canadian General appeal decision would have had any effect on the outcome in Mr. McIntosh's case. In Lopez, the claimant submitted an OCF-1, but the insurer rejected it as incomplete. The claimant rectified the deficiencies in a second OCF-1, also submitted within the 90 day period set out in s. 59(3), and accompanied by T4 slips, pay stubs and employment insurance stubs. The insurer submitted that this application was also incomplete because it was not accompanied by an Employer's Confirmation of Income Form (OCF-2). The arbitrator found that Mr. Lopez had met his obligation of providing "sufficient particulars to reasonably assist the insurer to process the application and assess the claim fairly and expeditiously."¹⁷ However, he concluded Mr. Lopez was barred from proceeding, pursuant to s. 71.1 of the SABS-1996, because he failed to attend an insurer examination required under s. 65. This was affirmed on appeal on the insurer examination issue alone.

Liberty Mutual v. Commerce Insurance was an appeal from a decision of a "private" arbitrator under Ontario Regulation 283/95, as amended (Disputes Between Insurers). The insured person, a resident of Massachussetts and a named insured under a Massachussetts policy with Commerce, was injured in an automobile accident in Ontario. Two other insurers were potentially responsible - Liberty Mutual, the insurer of the car that struck the claimant, and Allstate, which insured another vehicle involved in the accident. The claimant's lawyers wrote to Commerce first, about a month after the accident, stating "please accept this letter as notice of a claim." There followed a long series of letters and telephone conversations involving all three insurance companies.

Though Liberty Mutual was the first insurer to receive a completed Application for Accident Benefits in the approved form, the Arbitrator found that Commerce was the first insurer to receive "a completed application for benefits," and therefore it was required to pay benefits pending resolution of the priority dispute. The ruling was affirmed on appeal. Justice Lissaman approved the arbitrator’s reliance on the Lopez and Canadian General arbitration decision for the proposition that an application must provide "sufficient particulars to reasonably assist the insurer with the processing of the application and the assessment of the claim," and the H'ng and Allstate arbitration decision for the proposition that an application "is not limited to a particular form. It may include additional information contained in a covering letter, and documentation enclosed or appended."¹⁸ This is an accurate statement of the law, in my view.

Reading s. 32(3) together with s. 32(2)(a), there seems little doubt the legislative intent was that claimants should complete the approved forms supplied by the insurer.¹⁹ Section 32 serves several remedial purposes. For one thing, it defines the information an insurer may request and a claimant must provide at the outset of a claim. This promotes early benefit payment by ensuring that the insurer has enough information to adjust the claim promptly, and preventing the insurer from demanding an open-ended enquiry before considering the claim. The SABS imposes continuing disclosure obligations on the parties, but recognizes the fundamental importance of the information required at the application stage.²⁰

Completing an application for benefits also has important procedural implications. As has been stated in a number of decisions, the three-step process prescribed in s. 32 (the claimant contacts the insurer, the insurer provides the appropriate application forms, the claimant submits the forms) places an obligation on the party best positioned to provide the information and documents required at each step, triggering the other party's obligation at the next step.²¹ In particular, a claimant’s compliance with the application and information provisions in s. 32 - and the other provisions in Part X, "Procedures for Claiming Benefits"- triggers the insurer’s obligation to pay benefits, request further information, or dispute the claim in accordance with the SABS. Strict time lines are set down for compliance, and remedies are provided for non-compliance. For example, an insurer must pay interest under s. 46(2) of the SABS-1996 if benefits are not paid on time,²² and may be ordered to pay a special award under s. 282(10) of the Act if an arbitrator finds the insurer unreasonably withheld or delayed benefits to which the claimant was entitled.

In summary, drawing a relatively firm boundary around the notion of an application for accident benefits provides for procedural clarity and tends to promote the remedial objectives of the SABS.

However, these considerations must be balanced by others that support a fluid and flexible interpretation of s. 32(3). The SABS is consumer protection legislation. The application process is intended to be accessible to unsophisticated claimants despite literacy, language, information and other barriers. The focus on prompt benefit payment also informs the interpretation of s. 32(3);²³some claimants may find it difficult to provide all the required information in time.

Beyond the application process, claimants have ongoing disclosure obligations under s. 33 and other provisions in Part X of the SABS. Insurers, for their part, have an ongoing obligation to adjust the claim in a fair and reasonable manner. This may involve asking for additional information not required on the application and reassessing the claim based on the new information. The implication is that the application is not expected to mark the end of the claims adjustment process. An application may be sufficiently complete that the insurer is bound to pay benefits or dispute the claim, though the insurer is not satisfied by the information provided, and continues its enquiries - by requesting an insurer examination, for example, or retaining an accountant to calculate self-employment income. Additional information may be requested throughout the claim, up to and including mediation and arbitration at the Commission. At each step, there are consequences for failure to co-operate. For example, if a claimant fails to comply with an insurer's request for additional information pursuant to s. 33, the insurer may suspend benefits during the period of non-compliance. This was the context of the Arbitrator's finding that the claimant must provide sufficient information to allow the insurer to begin the process of adjusting the claim.

Mr. McIntosh's failure to provide complete Application for Accident Benefits, Employers Confirmation of Income and Activities of Daily Living forms were serious omissions. This case is close to the line, and may sit more comfortably as a reasonable explanation case.²⁴ However, I am not persuaded the Arbitrator erred in considering the entirety of the parties communications in the early days of the claim. Mr. McIntosh gave an early statement to Allstate's independent adjuster that included details about the accident, his injuries and his need for housekeeping assistance. He told the adjuster about his wife's group policy. He gave the name, address and telephone number of his employer, how long he had worked there, his job duties, his hourly wage and his work history since the accident. Mr. McIntosh's family doctor provided a Disability Certificate and Treatment Plan within a couple weeks of the accident. Though Allstate raised the question of workplace safety insurance coverage, there is no real suggestion Mr. McIntosh was working at the time of the accident; he told the adjuster he was getting gas after taking his wife to church. I accept that Allstate needed more information - about the collateral benefits coverage under Mrs. McIntosh's group policy, for example - as well as confirmation of job details from the employer, but I am not persuaded the Arbitrator erred in finding that Mr. McIntosh's application provided sufficient information to allow Allstate to meet its obligations.

Allstate's claims diary records numerous attempts to follow up with Mr. McIntosh by telephone. Several application packages were sent, and Allstate conceded the duplication may have added to Mr. McIntosh's frustration. Allstate's response was appropriate, and it should not be penalized for continuing to adjust the claim after the expiry of the 30-day period while pursuing the required documentation from the claimant. However, like the Arbitrator, I find it significant that Allstate's Explanation of Benefits of June 22, 2000 - the only OCF-9 issued before the claim was closed in January 2001 - relied on s. 33, not s. 32. It stated that a completed Application for Accident Benefits and Employer's Confirmation of Income were required within 14 days, and income replacement benefits and other benefits would be denied for the period before compliance.

A week later, on June 30, 2000, the independent adjuster demanded a completed Application and stated, "If we do not hear from yourself within the next 30 days you will prejudice your right to make a claim." The same adjuster interviewed Mr. McIntosh again a week after that, and obtained a signed Permission to Disclose Health Information (OCF-5) at that time. The parties discussed settlement that summer, but did not reach agreement. In December 2001, in response to another Disability Certificate and Treatment Plan, Allstate wrote to Mr. McIntosh, relying on s. 32(3), and stating "your claim will be closed in 14 days."

Mr. McIntosh retained counsel, who wrote to Allstate in January 2002, requesting a copy of the file. Allstate provided the explanatory material and an Application package, asking that the forms be completed and returned within 30 days. The completed package, provided on January 30, 2002, appears to confirm and expand on the information Mr. McIntosh provided earlier. On February 14, 2002, Allstate denied the claim based on s. 32(3): "While leniency is often granted for breaches of this section of the SABS, Mr. McIntosh's application was received almost 2 years after the accident and after many requests." The letter left open the possibility that Mr. McIntosh's medical-rehabilitation benefits claims could be resolved, once medical records, requested under s. 33 of the SABS, were received.

Allstate was entitled to refuse benefits based on Mr. McIntosh's failure to provide the required information and documentation. However, considering the parties course of conduct as a whole, I find no error in the Arbitrator's finding that Mr. McIntosh provided sufficient information to enable Allstate to begin adjusting his claim. Given my conclusion, I need not consider the application of Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129.²⁵

I am not persuaded the Arbitrator erred by finding that Mr. McIntosh satisfied the requirements of s. 32(3) of the SABS-1996 and was therefore entitled to have his claim heard by an arbitrator. The hearing, now scheduled for April 11-14, 2005, may proceed.

IV. EXPENSES

I may be contacted if the parties are unable to agree on appeal expenses.

March 15, 2005

Nancy Makepeace Director's Delegate

Date

(a) the appropriate application forms;

(b) a written explanation of the benefits available under this Regulation;

(c) information to assist the person in applying for benefits; and

(d) information on any possible elections relating to income replacement, non-earner and caregiver benefits.

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Part X, "Procedures for Claiming Benefits"
3. 3Arbitration decision, p. 9.
4. 4There was conflicting evidence about when Mr. McIntosh first received an application package. The Arbitrator made no clear finding on point, but seems to have accepted Allstate's evidence that the application forms and explanatory material were provided in early May 2000.
5. 5Arbitration decision, p. 12.
6. 6Once the insured person gives notice of an intention to claim accident benefits, s. 32(2) requires the insurer to "promptly provide:"
7. 7Arbitration decision, p. 9.
8. 8(OIC A96-000988, March 7, 1997).
9. 9(FSCO A96-001035, June 20, 1997).
10. 10[2002] I.L.R. 7366 (Ont. S. C.).
11. 11(FSCO P97-00017, October 1, 1997).
12. 12[2000] O.J. No. 3589 (Ont. Div. Ct.).
13. 13(FSCO P97-00041, April 8, 1998).
14. 14At p. 9.
15. 15At p. 11.
16. 16At para. 17.
17. 17At p. 8.
18. 18At p. 9 of the H ng and Allstate arbitration decision, quoted at para. 42 of Liberty Mutual v. Commerce.
19. 19Section 32(2)(a) requires the insurer to promptly provide "the appropriate application forms." Section 32(3) requires the claimant to submit "an application for the benefit" within 30 days of "receiving the application forms." The "application package" used at the initial stage of a claim was approved by the Superintendent under s. 69 of the SABS-1996, which states that the application forms referred to in s. 32(2)(a) shall be in a form approved by the Superintendent. The SABS-1996 accident benefit application package was published in Bulletin A-10/96, dated October 23, 1996. The cover page indicates that the package includes: the Application for Accident Benefits (OCF-1/59), Activities of Normal Life form (OCF-12/59), Employer's Confirmation of Income (OCF-2/59), Permission to Disclose Health Information (OCF-5), Disability Certificate (OCF-3/59), and Treatment Plan (OCF-18/59). At the foot of the cover page is stated: "After the insurance company reviews your complete application package, you will be contacted about the benefits you are entitled to receive. If your insurance company needs any additional information in order to process your application, they will contact you. "
20. 20For example, see Cole and Allstate Insurance Company of Canada, (FSCO P01-00016, May 23, 2003), which reaffirmed that a fresh Application for Accident Benefits is not required when a claimant’s return to work fails, and Fisk and ING Insurance Company (FSCO P03-00028, April 21, 2004), which held that s. 48 of the SABS-1996 does not apply to post-application misrepresentations. In Kirkham and State Farm Mutual Automobile Insurance Company, (OIC P96-00069, January 27, 1997), which rejected the "rolling time limit" approachs to the two-year limitation period in s. 281(5), Director’s Delegate Draper also discussed the importance of the application for benefits in the claims adjustment process. An application for judicial review was dismissed (Divisional Court, March 31, 1998), and the Court of Appeal refused leave to appeal (July 9, 1998).
21. 21See, for example, L.F. and State Farm Mutual Automobile Insurance Company, (FSCO P02-00026, June 3, 2004), which concerned the attendant care benefits application process, at p. 22, and Antony and RBC Insurance Company, (FSCO P03-00023, July 22, 2004), which concerned the weekly benefits election, at pp. 7-9. Carruthers and Royal & SunAlliance Insurance Company of Canada, (FSCO P02-00015, April 10, 2003), discussed the remedial purposes underlying the application process in a priority dispute situation.
22. 22Conversely, a claimant who fails to pursue his claim or fails to provide sufficient information at the application stage may not be entitled to interest on benefits delayed, if the insurer can show they were not "overdue" under s. 46(2).
23. 23Carruthers and Royal & SunAlliance Insurance Company of Canada, (FSCO P02-00015, April 10, 2003), at p. 8: "Accident benefits are intended to meet the current needs of those injured in automobile accidents. They are payable on a first-party basis, regardless of fault. It follows, in my view, that the application process should not present undue obstacles."
24. 24Though the Arbitrator made no explicit finding on point, his reasons suggest he accepted that Mr. McIntosh’s difficulty dealing with the claims process, rather than unco-operativeness, may have contributed to the problem.
25. 25The Arbitrator noted Horvath and Allstate Insurance Company of Canada, (FSCO A02-000482, June 9, 2003) and C.R. and Lombard General Insurance Company of Canada, (FSCO A02-001057, December 22, 2003).