Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 134

FSCO A03-001363

BETWEEN:

MARIA MICHALSKI by her guardian KRZYSZTOF MICHALSKI Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY Insurer

REASONS FOR DECISION

Before: Suesan Alves

Heard: By written submissions received by June 14, 2006, and by teleconference call on July 31, 2006.

Appearances: Scott M. Merrifield for Mrs. Michalski Elizabeth Scott for Wawanesa Mutual Insurance Company

Issues:

In a decision dated December 13, 2005, I awarded Mrs. Michalski attendant care benefits, less a credit in Wawanesa's favour. I also awarded interest and a special award in an amount to be determined. I now determine these amounts.

The issues in this hearing are:

1. What is the amount of the attendant care credit in Wawanesa's favour?
2. What is the amount of interest on attendant care benefits pursuant to section 46(2) of the Schedule?
3. What is the amount of interest on housekeeping benefits pursuant to section 46(2) of the Schedule?
4. What amount is Wawanesa liable to pay as a special award pursuant to section 282(10) of the Insurance Act because it unreasonably withheld or delayed benefit payments to Maria Michalski?
5. Which party is liable to pay the other's expenses in respect of the arbitration under section 282(11) of the Insurance Act?

Result:

1. Wawanesa Mutual Insurance Company is entitled to a credit for attendant care benefits in the amount of $78,140.68. The net amount attendant care benefit owing is $100,787.65.
2. Maria Michalski is entitled to interest on attendant care benefits in the amount of $106,902.35 as of December 13, 2005.
3. Maria Michalski is entitled to interest on housekeeping benefits in the amount of $13,972.83 as of December 13, 2005.
4. Wawanesa Mutual Insurance Company is liable to pay a special award on attendant care benefits and on housekeeping benefits in the amount of $150,000.00 pursuant to section 282(10) of the Insurance Act.
5. If the parties are unable to agree on expenses, that issue may now be addressed.

Background

Maria Michalski suffered serious injuries in a motor vehicle accident on October 24, 2001. In a decision dated December 13, 2005, I concluded that Mrs. Michalski was catastrophically impaired within the meaning of section 2(1)(e)(i) of the Schedule¹

I found that Mrs. Michalski was entitled to attendant care benefits between October 31, 2001 and September 2, 2004, less a credit in Wawanesa's favour in an amount to be agreed upon or determined. I also awarded interest on attendant care benefits and housekeeping benefits. Counsel advised that they were able to agree on these amounts, and I determine these amounts based on the parties' agreement.

Wawanesa's attendant care credit

In my December 13, 2005 decision, I ordered Wawanesa to pay Mrs. Michalski $178,928.33, for attendant care benefits, less a credit in an amount to be determined. Counsel advised that they agreed that the attendant care benefits net of the credit as set out in my decision are $100,787.65. The amount of the credit is therefore $78,140.68.

Interest

Based on the agreement of the parties, I find the amount of interest owed on attendant care benefits up to December 13, 2005 is $106,902.35.

In my December 13, 2005 decision, I awarded interest on housekeeping benefits of $7,062.18 on the express assumption that the agreed upon housekeeping benefits had been paid on October 29, 2004. Following the decision, counsel advised that the benefits were paid on or about February 24, 2006. Counsel agreed that further interest of $6,730.65 was payable. The total amount of interest on housekeeping benefits to December 13, 2005 is $13,972.83.

SPECIAL AWARD

Section 282(10) of the Insurance Act requires an arbitrator to make a special award where he or she concludes that an insurer unreasonably withheld or delayed payment of benefits. That section gives an arbitrator the discretion with respect to the amount.

Mrs. Michalski claimed the maximum special award, which is "a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule'"² In Liberty Mutual Insurance Company and Persofsky (FSCO P00-00041, January 31, 2003), the Director of Arbitrations held that the calculation, expressed as a formula is :

Maximum special award = 50% x (benefits that were unreasonably withheld or delayed + interest on these benefits calculated under the SABS + compound interest calculated according to s. 282(10))

I ordered a special award on the attendant care and housekeeping benefits. To paraphrase the decision, the special award was based on Wawanesa's non-compliance with sections 32(b) and (c), 39 and 40 of the Schedule; Wawanesa's failure to act with sound and moderate judgment in reassessing evidence from its assessors; and the overlapping and compounding effect of Wawanesa's actions and defaults. Mitigating factors were Wawanesa's prompt response to Mrs. Michalski's claim, that it hired a case manager, provided some assistance by way of paid attendant care, and increased the amount of her attendant care benefit pending an agreed upon DAC assessment. Aggravating factors were the degree of Mrs. Michalski's vulnerability; the impact on her children; the number and persistence of Wawanesa's breaches; their compounding effect; and Wawanesa's attempts to shift the blame to Mr. Michalski for the unfortunate manner in which the claim unfolded.

I concluded that having regard to the arbitral case law, and the requirement that the award be both rational and proportionate, an award at the high end of the scale was appropriate. I relied on two cases which appeared to be most apt. In Henderson and Lombard General Insurance Company of Canada (FSCO A97-001019, March 31, 2000), Arbitrator Sampliner made an award of $65,000, which on a percentage basis was approximately 40%. This award was upheld on appeal. In Singh and Commercial Union (FSCO A99-001160, September 11, 2001), Arbitrator Miller made a special award of 50%.

In Persofsky, the Director of Arbitrations held that it is inappropriate to order a special award expressed as a percentage of benefits owing, plus interest, without also considering whether the amount when quantified was appropriate. I now quantify the amount.

Counsel agreed that based on my decision the amount of attendant care benefits was $100,787.65; and attendant care interest to December 13, 2005 was $106,902.35. As the special award was also made on the housekeeping benefits, I include the agreed upon amount of the housekeeping benefits, $15,742.91, in the special award calculation, together with interest on housekeeping benefits up to December 13, 2005, of $13,972.83. The approximate amount of special award interest, calculated at 2% per month, compounded monthly, from the date the benefits became payable, namely December 18, 2001 until the date of the special award, namely December 13, 2005 is $120,875.18. The total of these figures is $358,280.92. The maximum special award is 50% of this figure, or $179,140.46.

Attendant care benefits $ 100,787.65

Attendant care interest 106,902.35

Housekeeping benefits 15,742.91 Housekeeping interest 13,972.83

Approximate special award interest 120,875.18

Subtotal $358,280.92

Maximum special award $179,140.46

In all the circumstances of this case, I find that the appropriate amount of the special award is $150,000.

EXPENSES:

If the parties are unable to agree on expenses, that issue may now be addressed.

August 10, 2006

Suesan Alves Arbitrator

Date

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 134

FSCO A03-001363

BETWEEN:

MARIA MICHALSKI by her guardian KRZYSZTOF MICHALSKI Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Wawanesa Mutual Insurance Company shall pay Maria Michalski attendant care benefits in the amount of $100,787.65.
2. Wawanesa Mutual Insurance Company shall pay Maria Michalski interest on attendant care benefits as of December 13, 2005 in the amount of $106,902.35.
3. Wawanesa Mutual Insurance Company shall pay Maria Michalski interest on housekeeping benefits as of December 13, 2005, in the amount of $13,972.83 pursuant to section 46(2) of the Schedule.
4. Wawanesa Mutual Insurance Company shall pay Maria Michalski a special award in relation to attendant care benefits and housekeeping benefits in the amount of $150,000.
5. If the parties are unable to agree on expenses, that issue may now be addressed.

August 10, 2006

Suesan Alves Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Section 282(10)