Adrian Wilson v. Lombard General Insurance Company of Canada, 2006 ONFSCDRS 157

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 157

FSCO A05-000286

BETWEEN:

ADRIAN WILSON

Applicant

and

LOMBARD GENERAL INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Rosemary Muzzi

Heard:

March 29, 2006, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Neil Sacks for Mr. Wilson

Pamela M. Stevens for Lombard General Insurance Company of Canada

Agreed Facts¹:

Adrian Wilson, the applicant, suffered a severe brain injury when hit by a van while he was a pedestrian on November 24, 1994. At the time, Mr. Wilson was aged 7 years and 4 months and attending Grade 2. He applied for and, since early 1995, has been continuously receiving statutory accident benefits² from Lombard General Insurance Company of Canada ("Lombard"), payable under the Schedule applicable at that time.³

Adrian turned 16 years of age on July 18, 2003. His counsel wrote to Lombard on September 26, 2003 demanding payment of weekly education disability benefits (EDBs), pursuant to section 15 of the Schedule, and a Loss of Earning Capacity Benefits (LECBs) offer, pursuant to section 21. By way of an Explanation of Assessment by Insurance Company, dated October 2, 2003, Lombard commenced paying EDBs, retroactive to July 18, 2003. However, Lombard did not make Mr. Wilson a LECBs offer. Mr. Wilson's entitlement to a LECBs offer and the quantum of the LECBs were not resolved through mediation. Mr. Wilson applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. In its Amended Response by Insurer to an Application for Arbitration⁴, dated September 13, 2005, Lombard, for the first time, also disputed Mr. Wilson's entitlement to EDBs.

Issues:

The preliminary issues for my determination are:

1. Is Lombard precluded at this time from disputing Mr. Wilson's entitlement to receive a LECBs offer pursuant to section 21(1)4 of the Schedule?

2. If Lombard is entitled to dispute Mr. Wilson's entitlement to EDBs (and, consequently, its obligation to provide a LECBs offer) at this time, is the test of partial inability to carry on a normal life available to Mr. Wilson?

Result:

1. Lombard is precluded at this time from disputing Mr. Wilson's qualification for EDBs and must deliver a LECBs offer to him forthwith, pursuant to section 21(1)4 of the Schedule.

2. Had Lombard been entitled to dispute Mr. Wilson's entitlement to EDBs (and, consequently, a LECBs offer) at this time, the test of partial inability to carry on a normal life would not have been available to Mr. Wilson.

ANALYSIS:

Issue1: Is Lombard precluded at this time from disputing Mr. Wilson's entitlement to receive a LECBs offer pursuant to section 21(1)4 of the Schedule?

The LECBs provisions

The LECBs provisions in the Schedule⁵ were to provide lifetime benefits to persons injured in motor vehicle accidents where those persons remain disabled on a long term basis. In the case of Williams⁶, Director's Delegate Naylor explained the purpose and scheme of the LECBs provisions. LECBs are paid instead of weekly benefits, such as income replacement benefits (IRBs) or EDBs, and weekly benefit requirements dictate where LECBs come into play, generally the injured person's situation at 104 weeks (2 years) post-accident. At the two-year point, the Schedule treats the disability as permanent, affording access to lifetime benefits to compensate for the diminution in earning capacity resulting from the accident.

LECBs are paid if payment is authorized by section 20(1) of the Schedule. Subsequent provisions outline the process for ascertaining what must be paid in LECBs to those who qualify for them. The process commences with the insurer's obligation to make a LECBs offer. Section 21(1) lists the seven situations where an insurer is required to make an offer.

Sections 21(1)4 and 21(1)5 describe situations relating to an insured person who, like Mr. Wilson, was a student at the time of the accident. Both situations require that the person qualified for EDBs under section 15 of the Schedule. Section 21(1)4 requires that the insured person qualified for EDBs 104 weeks after the onset of the disability. Section 21(1)5 allows for the situation where the insured person initially qualified for EDBs under section 15, does not qualify for EDBs 104 weeks after the onset of the disability, but subsequently becomes entitled to resume receiving EDBs.⁷

Law

The question of whether an insurer can dispute its obligation to make a LECBs offer if it does not challenge the insured person's entitlement to receive weekly benefits prior to the expiration of the 104-week period has been considered in several cases at FSCO. This question has been answered consistently in the negative. The jurisprudence⁸ indicates that a dispute about the qualification for weekly benefits must be done within the context of the weekly benefits provisions, prior to the time the insurer is obliged to make a LECBs offer. Moreover, arbitrators have said that the act of paying weekly benefits without protest up to the 104-week mark implies that the insurer has accepted the insured person's qualification for the benefit. For example, in the case of Kilby⁹, the arbitrator said that in ordinary circumstances, if the insurer pays IRBs to the end of the 104-week period, without invoking the stoppage provisions of section 64, it is too late to subsequently challenge the insured person's qualification for the weekly benefit.

Arguments

Mr. Wilson asserts that Lombard is precluded from disputing his entitlement to receive a LECBs offer because Lombard has paid him EDBs past the 104-week mark and has therefore passed the portal into the LECBs process. As such, given the provisions of the Schedule, Lombard has conceded both that he qualified for EDBs and that he continued to qualify for them at the 104-week mark so that he is eligible to receive the LECBs offer at his sixteenth birthday. Furthermore, he argues that fairness dictates that Lombard deliver him a LECBs offer given that Lombard did not contest his qualification for EDBs until September 13, 2005, in an Amended Response by Insurer to an Application for Arbitration, where this issue had not specifically been mediated and, ultimately, after having paid EDBs past the 104-week mark.

Lombard states that it has paid Mr. Wilson EDBs only in response to his demand for EDBs and not because it conceded his qualification for them. In fact, says Lombard, it does dispute (and has always disputed) both Mr. Wilson’s qualification for EDBs and his entitlement to a LECBs offer and wants these issues to be decided by an arbitrator. Lombard has paid EDBs only out of the legal obligation to pay weekly benefits pending a dispute about them.

Lombard argues that the dispute to be arbitrated here arises from the legitimate confusion about the appropriate time to make a determination respecting entitlement to EDBs (and hence the need to make a LECBs offer) because while Mr. Wilson's accident occurred when he was 7, the Schedule does not require paying him EDBs until the age of 16. Furthermore, because of the particular complexity of the EDBs provisions, Lombard is to be forgiven for having failed to assess Mr. Wilson’s qualification for EDBs and clearly state its position on Mr. Wilson’s qualification. Lombard appears to argue that, looking at all of the Schedule’s provisions related to EDBs, the real issue in this case is when the 104 weeks begins and then when the 104 weeks ends. Because that issue is still unclear, Lombard should not be penalized because it fulfilled an obligation to pay EDBs pending determination of the issue.

Furthermore, Lombard asserts that much of the developed jurisprudence, while helpful in a broad sense, does not, in fact, illuminate the correct approach in Mr. Wilson’s case because the cases, for the most part, deal with IRBs rather than EDBs and EDBs are profoundly different in two ways: the test for qualification itself is much more complex; and, the calculation of the 104-week period is not necessarily chronological as it is for IRBs. There can be a temporal shift with EDBs, from the point when one qualifies for EDBs to when the benefits actually become payable which also renders the task of determining qualification more complex.

Findings

I agree with Lombard that the scheme pertaining to EDBs is somewhat less straightforward than that for IRBs. As a result, determining the relevant 104-week period, the end of which marks the "portal" to the LECBs scheme, may be more difficult. However, in Mr. Wilson's case, I see no reason to depart from the general propositions already articulated in the law. I am inevitably led to conclude in this case that Lombard is obliged to make Mr. Wilson a LECBs offer.

Generally, it is accepted, that a dispute over qualification, that is, over weekly benefits, must be resolved before the LECBs process gets underway.¹⁰ While Lombard asserts that it has disputed Mr. Wilson's qualification for EDBs all along, the evidence before me does not support that assertion. Indeed, I find that the evidence indicates that Lombard did not dispute Mr. Wilson's qualification for EDBs until September 13, 2005, almost two months after having paid EDBs continuously for 104 weeks. By its own actions, and then by having failed to raise the issue of qualification before the expiry of the 104-week period, Lombard has conceded that Mr. Wilson qualified for EDBs. I come to this conclusion based on the following evidence.

First, I find that the evidence shows that Lombard did assess whether Mr. Wilson qualified for the benefit and concluded that he did. In response to Mr. Wilson's demand for payment of EDBs, Lombard provided an Explanation of Assessment by Insurance Company¹¹ dated October 2, 2003 that clearly indicates that Mr. Wilson is eligible for education benefits commenced from July 18, 2003. The assessment form also allows for a conclusion that he is not eligible or that the benefit is refused, but neither of those choices was selected. Furthermore, in January 2004, Mr. Wilson’s education benefit was indexed and he was sent another Explanation of Assessment by Insurance Company¹² indicating his weekly benefit had been increased as per the regulation.

Even if I find that it is not clear whether Lombard actually assessed Mr. Wilson’s qualification for EDBs, I agree with Mr. Wilson that the Schedule provides a very clear and binding process for disputing qualification for weekly benefits and that Lombard’s failure to avail itself of that process in a timely way precludes it from doing so now for two reasons.

Technically, the procedure for both the payment of weekly benefits¹³ and the stoppage of weekly benefits¹⁴ is clearly enunciated in Part XV of the Schedule and must be adhered to. Had it relied on the provisions in the Schedule, Lombard could have refused to pay EDBs as demanded. Further, whatever Lombard’s position might be about which 104-week period is appropriate for assessing Mr. Wilson’s qualification, it was always open to Lombard to stop payment of the benefits any time during the 104-week period it did, in fact, pay EDBs to Mr. Wilson. The case law¹⁵ clearly states that qualification disputes are governed by the rules relating to the relevant weekly benefit and must occur during the 104-week period.

From a fairness perspective, as I have already noted, arbitrators have ruled that, in ordinary circumstances, if an insurer pays weekly benefits to the end of the 104-week period without invoking the stoppage provisions, it is too late to challenge qualification. For example, in Gauthier¹⁶, the arbitrator noted that section 64 contains detailed rules for the resolution of disputes about the individual’s entitlement to weekly benefits, including important procedural safeguards involving advanced notice of the insurer’s intention to terminate benefits, and the right to have the disability issue examined by a DAC.

Moreover, I do not accept that Lombard should be excused for any confusion about the application of the various provisions as they relate to Mr. Wilson’s particular circumstances. Lombard has had a long history with this case. Lombard has been paying Mr. Wilson benefits of some kind or other since 1995; by the time Mr. Wilson made his demand for EDBs, it would have been dealing with his case for eight years. Mr. Wilson’s pre-existing condition and his injuries as a result of the accident were known to Lombard from the beginning. In fact, in 1998, Lombard disputed Mr. Wilson’s eligibility for the attendant care benefit on the basis that his need for attendant care was as a result of his pre-existing developmental disorder and not as a result of the accident. Lombard pursued this dispute utilizing the Schedule's provisions.¹⁷ While it is true that the relevant 104-week period might be at issue, I see no acceptable reason why Lombard would not have turned its mind to the very issue of whether Mr. Wilson actually qualified for the benefits he sought at that time he sought payment of them - his sixteenth birthday. To borrow reasoning, again, from Gauthier:

Mrs. Gauthier did not hide anything from the Insurer. It was aware of the fall and could have investigated the significance of that event sooner if it had seen fit. It may seem harsh to foreclose the insurer from challenging Mrs. Gauthier’s qualification at this juncture, when it would have been well within its rights to have done so if it had acted even a couple of weeks earlier, but some finality is necessary, and in the absence of some wrong doing on Mrs. Gauthier's part, it would be just as inappropriate to allow the Insurer to re-open the matter after the fact.

Finally, I disagree with Lombard that the LECBs process is commenced by the delivery of the formal instrument that is the LECBs offer. Lombard argues that as it has not yet delivered such an offer, the qualification dispute can proceed. I find that the jurisprudence is clear on this point, and that its application in these circumstances is appropriate; the LECBs process is commenced by the payment of EDBs and qualification for EDBs at the 104-week mark. That Lombard paid Mr. Wilson EDBs for 104 weeks and beyond indicates Lombard's acceptance that he qualified for them. As he qualified for EDBs at the 104-week mark, Lombard is obliged to deliver him a LECBs offer in accordance with section 21(1).

Issue 2: If Lombard is entitled to dispute Mr. Wilson's entitlement to EDBs (and, consequently, its obligation to provide a LECBs offer) at this time, is the test of partial inability to carry on a normal life available to Mr. Wilson?

The parties asked that I answer Issue 2, regardless of my finding regarding Issue 1. For the sake of clarity, let it be understood that I am answering Issue 2 in the abstract only. I have found that Lombard cannot now challenge Mr. Wilson’s qualification for EDBs (and, consequently, a LECBs offer) because they paid him EDBs without protest well beyond the 104-week mark. The answer to Issue 2, therefore, has no specific bearing on Mr. Wilson’s case.

In answering this question, I found the analysis in the cases of Gray¹⁸ and Zehr¹⁹ particularly helpful.

In order to answer the question, one must examine structure of the provisions dealing with weekly benefits. In this regard, I rely on the observations made by the Director’s Delegate in Gray. The sections dealing with EDBs (and IRBs and caregiver benefits, for that matter) all have a similar structure, raising three separate questions: who is entitled to claim the benefit; for what period are benefits payable; and, what is the amount of the benefit?

The EDBs qualification provisions in section 15(1) set out the test for determining who is entitled to claim the benefit. The test is comprised of two distinct parts. Paragraph 1 of 15(1) sets out the first part of the test - the personal characteristics of the insured. Paragraph 2 sets out the second part - the nature and level of disability.

15. (1) An insured person who sustains an impairment as a result of an accident is entitled to a weekly education disability benefit if the insured person meets the following qualifications:

16. The insured person,

i. was less than sixteen years of age at the time of the accident,

ii. was enrolled on a full-time basis in elementary, secondary or post-secondary education at time of the accident, or

iii. completed his or her education less than one year before the accident and was not employed, after completing his or her education and before the accident, in an employment that reflected his or her education and training.

2. The insured person, as a result of and within two years of the accident,

i. suffers a substantial inability to continue his or her education, in the case of an insured person who qualifies under subparagraph i or ii of paragraph 1,

ii. suffers a substantial inability to engage in employment that reflects his or her education and training, in the case of an insured person who qualifies under subparagraph iii of paragraph 1, or

iii. suffers a partial or complete inability to carry on a normal life, in the case of an insured person who qualifies under subparagraph i, ii or iii of paragraph 1.

Entitlement to make a claim for the benefits then is determined by looking at the circumstances at the time of and within two years of the accident. In order to be entitled to receive the benefits, and to continue receiving them, however, an insured person must meet the requirements set out in sections 15(2), (3) and (4). In the case of EDBs, by virtue of the operation of section 15(3)(a), no benefit is payable for any period before the insured person attains sixteen years of age.

15. (2) Subject to subsections (3) and (4), the weekly education disability benefit is payable during the period that the insured person suffers,

(a) a substantial inability to continue his or her education, in the case of an insured person who qualifies under subparagraph i of paragraph 2 of subsection (1);

(b) a substantial inability to engage in employment that reflects his or her education and training, in the case of an insured person who qualifies under subparagraph ii of paragraph 2 of subsection (1); or

(c) a partial or complete inability to carry on a normal life, in the case of an insured person who qualifies under subparagraph iii of paragraph 2 of subsection (1).

15. (3) No weekly education disability benefit is payable under this section,

(a) for any period before the insured person attains sixteen years of age; or

(b) for the first week of the disability.

15. (4) If an insured person qualifies for weekly education disability benefits under subparagraph iii of paragraph 2 of subsection (1) and does not qualify under subparagraph i or ii of paragraph 2 of subsection (1), no weekly education disability benefit is payable under this section more than 104 weeks after the insured person first qualified for weekly education disability benefits unless the insured person is suffering a complete inability to carry on a normal life as a result of the accident.

In my view, the provisions operate together to mean that an insured can only be paid EDBs if he first qualifies to claim the benefit because he meets at least one of the tests set out at section 15(1), and then at age 16 [because of the operation of section 15(3)] suffers the same kind of disability, as required by section 15(2).²⁰

With respect to the application of the "partial inability to carry on a normal life" test, it seems clear to me that an insured who first qualified under the "partial inability to carry on a normal life" test could receive EDBs at age 16 if he suffers a "partial inability to carry on a normal life". However, Section 15(4) clearly limits the class of insured persons who will be paid EDBs in the long term, i.e., for more than 104 weeks. What section 15(4) indicates is that an insured who first qualified for EDBs having met only the "partial or complete inability to carry on a normal life" test at section 15(1)2iii must actually meet the more onerous test of "complete inability to carry on a normal life" in order to receive EDBs for longer than 104 weeks.²¹ On the other hand, an insured who first qualified for EDBs under the "substantial inability to continue his education" disability test and is substantially unable to continue his education at age 16 would continue to qualify for EDBs beyond the 104-week mark.

September 29, 2006

Rosemary Muzzi Arbitrator

Date

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 157

FSCO A05-000286

BETWEEN:

ADRIAN WILSON

Applicant

and

LOMBARD GENERAL INSURANCE COMPANY OF CANADA

Insurer

ARBITRATION ORDER

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

1. Lombard is precluded from disputing Mr. Wilson’s qualification for EDBs at this time and must deliver a LECBs offer to him forthwith, pursuant to section 21(1)4 of the Schedule.

September 29, 2006

Rosemary Muzzi Arbitrator

Date

Footnotes

1. 1Submitted in writing by the parties along with four other documents within a bound volume and marked as Exhibit 1 post-hearing.
2. 2Lombard has continuously provided various supplementary medical and rehabilitation benefits in respect of Mr. Wilson's comprehensive rehabilitative program, which has included case management services, physiotherapy, occupational therapy, speech-language therapy, psychological therapy, neuropsychological assessments, child and youth worker services and attendant care.
3. 3The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended.
4. 4The original Response by Insurer to an Application for Arbitration was dated March 15, 2005. In it, Lombard disputes only the quantum of the LECBs, which it says would not be different than the quantum being paid in EDBs.
5. 5Part VI of the Schedule.
6. 6Williams and General Accident Assurance Company of Canada (FSCO P00-00004, December 29, 2000).
7. 7Pursuant to section 17 of the Schedule which permits a temporary return to education without such return affecting entitlement to resume receiving EDBs. Within the 104-week period, that return can be for any period of time whereas after 104 weeks the return to education can only be for periods up to 90 days.
8. 8Gauthier and Allstate Insurance Company of Canada (FSCO A98-000805, June 21, 2000) and Smith and Allstate Insurance Company of Canada (FSCO A97-001789, July 4, 2001).
9. 9Kilby and Dominion of Canada General Insurance Company (FSCO A99-000608, September 29, 2000).
10. 10For example in Williams (see footnote 6) the applicant was terminated one week before the 104-week mark therefore her entitlement to (qualification for) weekly benefits was at issue because qualification for weekly benefits to the 104-week mark would then see the LECBs process kick in.
11. 11Exhibit 1
12. 12Exhibit 1
13. 13Section 62
14. 14Section 64
15. 15See Mercier v. Royal & Sun Alliance Insurance, 2003 CanLII 21638 (ON SC), [2003] O.J. No. 1233 (Ontario Superior Court) appeal dismissed at 2004 CanLII 5551 (ON CA), 72 O.R. (3d) 94 (C.A.) and Gauthier (footnote 8).
16. 16Gauthier (see footnote 8).
17. 17Exhibit 1
18. 18Gray and Zurich Insurance Company (FSCO P98-00047, June 11, 1999).
19. 19Canadian General Insurance Group and Zehr (FSCO P99-00010, June 11, 1999).
20. 20The disability tests enumerated at section 15(2) for the payment of benefits mirror exactly the disability tests listed in section 15(1)2 for qualification.
21. 21See Zehr (footnote 19) where the Director's Delegate reached the same conclusion.