Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2005 ONFSCDRS 93

Appeal P04-00034

OFFICE OF THE DIRECTOR OF ARBITRATIONS

LIBERTY INSURANCE COMPANY OF CANADA

Appellant

and

CHANTAL AREAL

Respondent

Before:

Nancy Makepeace

Representatives:

Pamela A. Brownlee for Liberty Insurance

Rebecca Nelson for Mrs. Areal

Hearing Date:

March 10, 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 allowed. The arbitrator's order, dated September 24, 2004, is revoked and replaced with the following:

Ms. Areal is not an "insured person," as defined in s. 2(1)(a)(ii) of the SABS-1996, for purposes of claiming benefits in relation to a physical injury sustained in caring for her son.

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

July 5, 2005

Nancy Makepeace

Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This appeal is about the scope of benefits available to the mother of a child who suffered catastrophic impairment in an automobile accident. Ms. Areal was not involved in the accident or present at the scene. Liberty concedes she is entitled to benefits in relation to her psychological problems resulting from her son's injuries. This appeal arises from physical injuries Ms. Areal suffered while providing attendant care for her son. Her claim for medical benefits under s. 14 of the SABS-1996 turns on the definition of "insured person" in s. 2(1)(a) of the SABS-1996.¹

The arbitrator did not accept Ms. Areal's submission that she is an "insured person" under s. 2(1)(a)(i) – "the named insured . . . is involved in an accident" – but did accept that she was eligible for benefits in relation to physical injuries under s. 2(1)(a)(ii) – "the named insured . . . is not involved in an accident but suffers psychological or mental injury as a result of an accident . . . that results in a physical injury to . . . her . . . child" – subject to satisfying the entitlement criteria under s. 14 of the SABS-1996. Both parties appealed, but Ms. Areal later withdrew her appeal.

For the following reasons, I find that the arbitrator erred in law. Liberty's appeal is allowed.

II. BACKGROUND

The arbitration proceeded on the basis of agreed facts. Jeffry Areal, then eight years old, suffered catastrophic impairment in an automobile accident on September 17, 2000. Since leaving hospital, he has been cared for by his mother, Ms. Areal, who is a named insured, along with her spouse, under a Liberty policy. In addition to the other benefits paid on Jeffry's behalf, Liberty has paid attendant care benefits for the care provided by his mother. The parties agree that "[a]s a result of the attendant care she provided to Jeffry, [Ms. Areal] sustained physical injuries to her low back, pain in her right buttock and leg, upper back, neck, shoulders and right wrist."²

Liberty accepts that Ms. Areal is an "insured person" under s. 2(1)(a)(ii) of the definition and has paid for psychological treatment she received as a result of the accident. However, Liberty refused Ms. Areal's claims for treatment of her physical injuries on the basis that her coverage was limited to "psychological or mental injury as a result of the accident which had resulted in a physical injury to her child."³

The arbitrator rejected the insurer's position, stating that if it had been the intent of the legislature to limit the benefits available to claimants who rely on the s. 2(1)(a)(ii) definition, "it would have been a very simple thing to have added such a restriction . . .". In the absence of an explicit restriction, he concluded,

. . . "an insured person, is an insured person, is an insured person." Once one is found to be an insured person, one has the same potential entitlement to all benefits, as long as one meets the further specific requirements of the particular provision in question, in this case, for example section 14.⁴

The arbitrator then reviewed the requirements of section 14, noting the issues that were agreed or disputed:

(i) the Applicant is an insured person (which is agreed);

(ii) that she sustained an impairment as a result of the accident (which is also agreed, i.e. that she sustained psychological and/or mental injuries);

(iii) that the expenses are reasonable and necessary (the parties specifically indicated that this question was not before me);

(iv) that the expenses fall within one of the enumerated categories (this was not disputed);

(v) that the expenses were incurred by or on behalf of the insured person (this was not argued); and,

(vi) that the expenses were incurred as a result of the accident.⁵

On the latter point, the arbitrator relied on Correia and TTC Insurance Company, (FSCO P00-00061, July 16, 2001), which held that benefit claims with respect to secondary or downstream injuries are not excluded from coverage under the "directly causes" definition of "accident" in the SABS-1996 if they were sustained "as a result of the accident," as required in s. 14 and the other entitlement provisions of the SABS.

Though the arbitration decision is styled "Decision on a Preliminary Issue," the parties agreed that the appeal should proceed because the arbitration decision disposed of their only dispute.

III. ANALYSIS

Ms. Areal gives three reasons for her reading of the SABS. First, she argues that neither s. 2(1)(a)(ii) nor s. 14 includes any restriction on the benefits available to someone in her position. Therefore, in her submission, once Liberty conceded she is an "insured person" under s. 2(1)(a)(ii), she enjoys this status for all accident benefit purposes. Ms. Areal's second argument is based on the Correia decision. She submits that she suffered physical injuries "as a result of an accident in respect of which she was an insured person, just like Ms. Correia. Finally, Ms. Areal submits that her attendant care activities provide an additional link between her physical injuries and her son's accident.

I will address each of these arguments in order.

Ms. Areal treats the definition of "insured person" as a threshold "status" issue distinct from the question of entitlement to any particular accident benefit. This approach has some intuitive appeal. Ms. Areal relies on the analysis in Correia, which depended in part on the legislature's retention of the broader "as a result of causation language in the entitlement (or eligibility) provisions of the SABS-1996 despite amending the "accident" definition to require a direct causal connection between an impairment and use or operation of an automobile.⁶ However, Director's Delegate Naylor cautioned that the two parts of the SABS could not be considered in isolation:

"Accident" is a defined term. It is not expressed as a stand-alone provision. The definition of "accident" "insured person" and "impairment" are embedded in the eligibility provisions. (p. 8)

The definition of "insured person" requires a similar approach. For convenience, here is the definition in its entirety:

"insured person", in respect of a particular motor vehicle liability policy, means,

(a) the named insured, any person specified in the policy as a driver of the insured automobile, the spouse or same-sex partner of the named insured, and any dependant of the named insured, spouse or same-sex partner, if the named insured, specified driver, spouse, same-sex partner or dependant,

(i) is involved in an accident in or outside of Ontario that involves the insured automobile or another automobile, or

(ii) is not involved in an accident but suffers psychological or mental injury as a result of an accident in or outside of Ontario that results in a physical injury to his or her spouse, same-sex partner, child, grandchild, parent, grandparent, brother, sister, dependant, spouse's dependant or same-sex partner's dependant,

(b) in respect of accidents in Ontario, a person who is involved in an accident involving the insured automobile, and

(c) in respect of accidents outside Ontario, a person who is an occupant of the insured automobile and who is a resident of Ontario or was a resident of Ontario at some point during the 60 days before the accident;

In my view, the key operative words of the definition are "in respect of a particular motor vehicle liability policy." These words reflect the contractual basis of automobile insurance. Moreover, auto insurance is not a single-payer scheme in Ontario. A determination that a person is an insured person in respect of a particular policy means not only that the person can claim accident benefits but that a particular insurer must pay them. Section 268 of the Insurance Act describes the rules for deciding which insurer is responsible for paying any accident benefits to which a particular claimant is entitled, and Ontario Regulation 283/95 describes the procedure for resolving these "priority disputes" between insurers.⁷

Further, not all claimants are entitled to the same accident benefits in respect of a particular accident. I will give three examples:

(i) Section 27 of the SABS-1996 requires insurers to offer certain optional benefits that can be purchased at any time before an accident in respect of which a claim is made. The benefits are applicable only to the named insured, defined family members and specified drivers; they are not available to strangers to the contract, including those who claim under the priority rules.

(ii) One of the criteria for determining whether a claimant is an "insured person" in respect of a particular contract is whether there is a sufficient connection with Ontario. This was the issue in Cruz and Royal & SunAlliance Insurance Company of Canada, (FSCO P01-00032, October 29, 2003). Ms. Cruz was involved in an accident in Quebec and was not a named insured (or spouse, same-sex partner or dependant of a named insured) or specified driver under the Ontario policy that insured the rental car in which she was an occupant. This meant she had to prove that she was an Ontario resident and therefore an "insured person" under paragraph (c) of the definition in order to receive accident benefits under the Ontario policy. I confirmed the arbitrator's conclusion that she was not a resident, with the result that Ms. Cruz was eligible to claim accident benefits in Quebec, though at a lower amount than would have been available to her under the SABS-1996.⁸

(iii) Another situation where the benefits available are limited is where the insured person dies in the accident, and a family member claims death and funeral benefits. While accident benefits are generally payable to or on behalf of the insured person who was injured in an accident, this is obviously not the case when the insured person dies. In that event, funeral benefits are payable "in respect of" the deceased under s. 26 of the SABS-1996, and death benefits are payable to defined family members under s. 25. The claimant need not be an insured person under the policy; s. 279(3) of the Insurance Act states, "'insured person' includes a claimant for death or funeral benefits" for purposes of dispute resolution.⁹ This does not mean the death or funeral benefits claimant becomes an "insured person" for all accident benefits purposes. For example, in K.M. (Minor) and General Accident Assurance Co. of Canada, (FSCO A98-001030, November 28, 2000), it was held that a four-year-old child could not claim benefits in respect of her mother's death in the accident beyond the dependant's death benefits already paid, absent an impairment,¹⁰ and in DiGiovanni (Estate of) and AXA Insurance (Canada), (FSCO P03-00034, December 1, 2004), confirming (FSCO A01-001605, August 28, 2003), it was held that caregiver benefits under s. 13 of the SABS-1996 were not payable to the estate, though the insured person would have been eligible to claim them had she survived the accident.

Liberty relies on an earlier decision about paragraph 2(1)(a)(ii) of the "insured person" definition by the same arbitrator who decided Ms. Areal's case. In Acosta and Motor Vehicle Accident Claims Fund, (FSCO A02-001618, July 22, 2003), the issue was whether the wife of a pedestrian struck by a cement truck could claim in respect of psychological impairment resulting from her husband's physical injuries. She was not present at the accident, and she and her husband were not insured under an automobile insurance policy. They claimed benefits from the Motor Vehicle Accident Claims Fund because the cement truck was initially unidentified. The Fund responded to the application in accordance with the priority dispute regulation, though eventually the cement truck and its insurer were identified.

The Fund agreed that Mr. Acosta was an "insured person" under paragraph (b) of the definition because he was "involved in an accident involving the insured automobile" in Ontario. Since Ms. Acosta was not involved in the accident, she could only claim under paragraph 2(1)(a)(ii). The arbitrator held that she did not satisfy that definition because she was not the named insured, a specified driver of the insured automobile, the spouse or same-sex partner of the named insured, or a dependant of the named insured, spouse or same-sex partner. He found the definition "clear and unambiguous" though arguably unfair to a number of people excluded from its coverage, including, for example, a named insured whose relative suffered not physical but psychological injury.

The arbitrator also rejected Ms. Acosta's submission that the SABS provides equal benefits regardless of whether the claimant owns an automobile or has automobile insurance. She did not rely on the equality protections given in the Canadian Charter of Rights and Freedoms but argued that the SABS-1996 definition should be interpreted consistently with s. 224(1) of the Insurance Act, which defines "insured" to mean "a person insured by a contract whether named or not and includes every person who is entitled to statutory accident benefits under the contract whether or not described therein as an insured person." The arbitrator was not persuaded there was any inconsistency between the two definitions because the definition of "insured" in s. 224(1) does not specify which unnamed insured persons are "insured by a contract." Rather, the purpose of that definition is to allow accident benefits claims by persons who are not parties to a contract with the responsible insurer, a rule necessitated by the priority rules in s. 268 of the Act.

Liberty raises a different issue in this appeal – there is no question Ms. Areal is an "insured person" under s. 2(1)(a)(ii) – but relies on the same interpretive approach to defend the claim. I agree that Acosta adopts the correct approach. I find that the definition of "insured person" in s. 2(1)(a)(ii) is narrow and specific in its scope. Apart from the requirement that the claimant who was not involved in the accident must have suffered psychological or mental injury, there is another, logically prior requirement: the defined family member who was involved in the accident must have suffered physical injury. No such restriction is found in s. 2(1)(a)(i), which provides the core sense of "insured person": the named insured, specified driver, spouse, same-sex partner or dependant "is involved in an accident in or outside of Ontario that involves the insured automobile or another automobile." An insured person, so defined, may qualify for benefits based on physical or psychological impairment.¹¹ Why must the person who was involved in the accident suffer a physical injury for paragraph 2(1)(a)(ii) to apply? I expect the intent was to limit the scope of coverage and ensure against unlimited liability. I find that the purpose of s. 2(1)(a)(ii) is specifically to recognize the psychological problems family members may have when someone is physically injured in an accident. It is the accident benefit analog to tort damages that may be available for "mental shock" when a family member observes an accident, comes upon the scene or hears the news.¹²

It follows, and Liberty concedes, that an insured person in Ms. Areal's situation is eligible for medical and other benefits in respect of the psychological injury that gave rise to her insured status. However, Ms. Areal claims medical benefits in respect of a physical injury that is unrelated to her psychological injuries but has, she says, an independent causal connection to the accident – by way of her provision of attendant care for her son.

This brings me to Ms. Areal's second argument, the one based on Correia. The obvious distinction is that Ms. Correia was herself involved in an accident, and there was no dispute she was an insured person within the definition in s. 2(1)(a)(i). The only issue was whether the new injuries she suffered in rehabilitation were so remote from the accident as to fall outside the "directly causes" requirement of the "accident" definition. The answer to this question turned in part on the "as a result of" language of the benefit entitlement provisions, language on which Ms. Areal also relies, but also on treatment of secondary injuries in tort law and workers' compensation law, and on policy considerations. Director's Delegate Naylor summarized the policy considerations in response to the insurer's submission that Ms. Correia must find her remedy elsewhere:

The Insurance Act does not bar Ms. Correia's remedy against negligent health care professionals. However, those injured should not be deterred from attending rehabilitation programs or submitting to assessments for fear that if there are complications or problems, their benefits might be jeopardised. It is for an insurer to establish that intervening error on the part of a health professional is of a nature and degree that relieves it from further liability to pay benefits. It is well established, in the tort context, that the kinds of risks mentioned in Papp v. Leclerk, where they do not amount to negligence, do not constitute an intervening cause, and there is support for the view that this may be so even where there is some negligence, if the character and degree of the substandard treatment is within the realm of a reasonably forseeable [sic] risk. [footnote omitted] Given that the accident benefits scheme contemplates fast-track payment, a focus on rehabilitation, and an orientation towards co-operative rather than contrary practices, it lends itself to an approach that allows for some flexibility. (At pp. 14-15).

Ms. Areal submits that similar policy considerations favour her claim, in that her injury occurred in the course of providing attendant care for her son. This is an option provided by s. 16 of the SABS-1996, which allows families to arrange for care by a facility, a professional attendant, or "a family member or friend who acts as the person's aide or attendant, even if the family member or friend does not possess any special qualifications."¹³ Liberty is paying attendant care benefits on Jeffry's behalf on this basis, and I have no doubt this is a socially desirable arrangement that allows Jeffry to receive his mother's loving care in his home. Is this sufficient to bring Ms. Areal's physical impairment, sustained while providing attendant care, within the scope of accident benefits coverage?

If a professional attendant is injured while lifting a patient, she is not eligible for accident benefits from the patient's auto insurer, whether the care was provided in the claimant's home or in a facility, because she is not an "insured person" under the policy. (She may, however, be able to claim workplace insurance benefits or sue a tortfeasor.) Nor does Ms. Areal suggest that a non-professional who is not a person described in s. 2(1)(a)(ii) would be eligible for accident benefits in respect of a physical injury suffered while providing attendant care.

The strength of Ms. Areal's argument is that she is the mother of the insured person who was involved in the accident. That is the basis for her "insured person" status under s. 2(1)(a)(ii) of the SABS-1996, as well as any claim she may have under s. 61 of the Family Law Act. This is the critical point, in my view. Ms. Areal does not claim benefits in relation to her son's injury, but rather on her own behalf in respect of a new injury not involving an automobile. I am not persuaded that it was within the contemplation of the legislature that persons described in s. 2(1)(a)(ii) would be eligible for benefits beyond those related to the basis of coverage – psychological or mental injury as a result of an accident that results in physical injury to a family member. Paragraph 2(1)(a)(ii) is itself an extended coverage provision. I am not persuaded it was intended to allow for the further extension argued by Ms. Areal.

IV. EXPENSES

Given the outcome of the appeal, the arbitrator's expenses order is revoked. If the parties are unable to agree on the disposition of arbitration and appeal expenses, they may contact me in accordance with the process set out in Rule 79 of the Dispute Resolution Practice Code.

July 5, 2005

Nancy Makepeace

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. 2Arbitration decision, p. 5, paragraph 11 of Agreed Statement of Facts.
3. 3Paragraph 15, Agreed Statement of Facts.
4. 4Arbitration decision, p. 10.
5. 5Arbitration decision, p. 11.
6. 6"Accident" is defined in s. 2(1) of SABS-1996: "'accident' means an incident in which the use or operation of an automobile directly causes an impairment or directly causes damage to any prescription eyewear, denture, hearing aid, prosthesis or other medical or dental device." [emphasis added] Section 14(1) states: "The insurer shall pay an insured person who sustains an impairment as a result of an accident a medical benefit." [emphasis added] Similar language is used in the other benefit entitlement provisions of the SABS-1996. The SABS-1990 and SABS-1994 used similar "as a result of" language in their entitlement provisions, but "accident" was defined to require a direct or indirect causal connection between use or operation of an automobile and an impairment.
7. 7The rules are described in the Commission's Practice Note 10, "Process for Settling Disputes between Auto Insurance Companies."
8. 8See also Griffiths and State Farm Mutual Automobile Insurance Company (FSCO P01-00018, March 25, 2002).
9. 9See the discussion in Virk and Liberty Mutual Insurance Company, (FSCO P04-00027, July 5, 2005), released concurrently with this decision.
10. 10At the time of the accident, the child lived with her mother, who was employed and separated from her husband, the child's father, who was unemployed. The father assumed care of the child after the accident. Had the mother lived, she would have been eligible for dependant care expenses under s. 54 of the SABS-1994, but s. 54(3) states explicitly that no benefit is payable after the insured person dies. The effect of the arbitrator's decision was that the child and her father received death benefits only. Though the arbitrator discussed the possibility that the child could claim a psychological impairment due to the loss of her mother, this was not essential to her decision. The child was involved in the accident and suffered a skull fracture, but her claim was not based on her own impairment.
11. 11"Impairment" is defined in s. 2(1) of the SABS-1996 to mean "a loss or abnormality of a psychological, physiological or anatomical structure or function," and there is no question benefits are available for psychological impairment as well as physical impairment. For example, s. 14(2)(b) of the SABS-1996 specifically provides medical benefits for psychological treatment, amongst other forms of treatment. The same broad definition of "impairment" is found in the Insurance Act provisions with respect to claims arising from accidents on or after November 1, 1996.
12. 12See, for example, Canadian Tort Law (Seventh Edition), Allen M. Linden (Butterworths: 2001), chapter 11, "Negligent Infliction of Psychiatric Damage." Linden discusses the various methods courts have used to limit liability for mental shock damages.
13. 13Section 2(7).