Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2006 ONFSCDRS 173
FSCO A04-002133
BETWEEN:
SHERRY FINLAYSON
Applicant
and
ALLSTATE INSURANCE COMPANY OF CANADA
Insurer
DECISION ON A PRELIMINARY ISSUE
Before:
Elizabeth Nastasi
Heard:
August 18, 2006, at the offices of the Financial Services Commission of Ontario in Toronto.
Appearances:
Rhona L. Waxman for Ms. Finlayson
Ian D. Kirby for Allstate Insurance Company of Canada
Issues:
The Applicant, Sherry Finlayson, was injured in a motor vehicle accident on December 18, 2000. She applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("Allstate"), payable under the Schedule.1 The parties were unable to resolve their disputes through mediation, and Ms. Finlayson applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
The preliminary issue, as identified in the Notice of Hearing of Preliminary Issue is:
- Are the issues raised by Ms. Finlayson in these proceedings statute-barred, pursuant to section 281.1 of the Insurance Act, on the basis that Ms. Finlayson did not commence the proceeding within 2 years of Allstate's refusal to pay the benefits claimed?
Result:
- The issues raised by Ms. Finlayson in these proceedings are not statute-barred, pursuant to section 281.1 of the Insurance Act. Ms. Finlayson may proceed to have her application arbitrated upon its merits.
EVIDENCE AND ANALYSIS:
In an Agreed Statement of Facts, the parties submit that Allstate paid Ms. Finlayson income replacement benefits at the rate of $92.06 per week from December 29, 2000 to March 14, 2002. Ms. Finlayson is claiming income replacement benefits from March 14, 2002 and ongoing.
Allstate submits that on March 14, 2002 they sent Mr. Marini, Ms. Finlayson's solicitor at the time, written notice of stoppage of payment of her income replacement benefits by way of an Explanation of Benefits Payable form and cover letter. Allstate denied further income replacement benefits based on a disability DAC assessment dated February 27, 2002. The disability DAC assessment indicated that Ms. Finlayson does not suffer a substantial inability to perform the essential tasks of her pre-accident employment.
Ms. Finlayson's Application for Mediation is dated March 19, 2004 and was received by FSCO on March 25, 2004. The parties agreed that these dates were not in issue.
Allstate submits that Ms. Finlayson is prevented from proceeding with her application because she allowed the relevant limitation period to expire before filing her Application for Mediation and Application for Arbitration.
Allstate submits that Ms. Finlayson filed her Application for Mediation on March 25, 2004, more than 2 years after March 14, 2002, the date of the Insurer's notice of refusal to pay the income replacement benefit was given to her. As such, Allstate argues the application is out of time and should be dismissed. In support of this argument, Allstate filed a copy of the Explanation of Benefits Payable form and cover letter from Ms. Helen Thompson, Senior Staff Claim Representative sent to Mr. Marini. Both documents were dated March 14, 2002. The form contained the following notation: "Based on the finding of the DAC assessment, you do not qualify for income replacement benefits beyond March 14/02. Please see attached letter re details."2
In her accompanying cover letter, Ms. Thompson wrote:
"We are in receipt of the report from the Designated Assessment Centre, it is the opinion of the assessors that Ms. Finlayson does not suffer a substantial inability from performing the essential tasks of her pre-accident employment. Income replacement benefits have been paid up to March 14, 2002, no further cheques will be issued beyond that date.
If you wish to dispute this decision, you have the right to proceed to mediation."3
Allstate submits that the Explanation of Benefits Payable form and cover letter dated March 14, 2002 constituted sufficient notice to start the limitation clock running. In further support of their argument, Allstate submits that by correspondence dated April 25, 2003, Ms. Tracey MacLean, CIP at Allstate wrote to Mr. Marini and indicated that he could obtain the mediation paperwork by calling the FSCO mediation hotline or downloading it from the website.
She included the FSCO phone number and website address in her letter.4 In response, on May 8, 2003 Mr. Marini wrote: "I will be proceeding with a mediation application with respect to the income replacement benefits."5
Allstate's position is that this affirmative acknowledgement of the dispute resolution process on the part of Ms. Finlayson's former counsel was a clear indication that they understood the process. Allstate submits that Ms. Finlayson's Application for Mediation was received on March 25, 2004 - almost 1 year after Mr. Marini's letter - and that there was no explanation provided by counsel for the delay.
Section 281.1 of the Insurance Act provides that the mediation proceeding or arbitration "... shall be commenced within two years after the insurer's refusal to pay the benefit claimed." In order for Allstate to rely on the defence of the expiration of a limitation period, Allstate must prove, on a balance of probabilities, that it has complied with all relevant notice provisions and delivered to Ms. Finlayson all the requisite documents and information.
The limitation period is triggered with an insurer's refusal to pay or continue to pay a benefit.
Section 49 of the Schedule states that:
If an insurer refuses to pay a benefit under this Regulation or reduces the amount of a benefit that a person is receiving under this Regulation, the insurer shall provide the person with a written notice concerning the person's right to dispute.
Ms. Finlayson submits that Allstate did not provide her with the information required by section 49 of the Schedule and as such, she is not barred from proceeding with her application.
As noted by Director's Delegate McMahon in Nahsari and Belair, the caselaw is clear that a "... refusal must be in writing, must be clear and unequivocal and must contain reasons for the refusal."6 In this case, I find that Allstate's refusal to continue to pay income replacement benefits to Ms. Finlayson was clear and unequivocal and contained reasons. However, the analysis does not end here. The Supreme Court of Canada in Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] S.C.J. No. 34 deals with the interaction of limitation periods and the information that an insurer is required to provide at the time it refuses benefits. The Smith decision makes it clear that if an insurer's refusal does not contain all of the essential elements, then the limitation period has not been triggered.
Although, Smith was decided under the previous version of the Schedule (Bill 164), the wording of the relevant sections (section 71 in Bill 164 and section 49 in the current Schedule, Bill 59) is almost identical. Furthermore, the guiding principles have not changed. The Supreme Court of Canada held in Smith that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile insurance.
The Court wrote:
... the insurer is required under s. 71 to inform the person of the dispute resolution process ... in straightforward and clear language, directed towards an unsophisticated person. At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process. Without this basic information, it cannot be said that a valid refusal has been given.
At paragraph 15 of Smith, the Court concluded as follows:
Given that s. 71 of the SABS imposes a requirement to inform the claimant of the dispute resolution process as discussed above, and given that the respondent only informed the appellant of the first step of this process, a proper refusal cannot be said to have been given. Since a proper refusal was not given, and since the limitation period under s. 281(5) [now s. 281.1]of the Insurance Act only begins to run upon a refusal, that limitation period was not triggered by the notice sent on May 8, 1996.
Ms. Finlayson's position is that in light of the Smith decision, a valid refusal has not been given by Allstate. In support of this position, Ms. Finlayson argues that the actual wording of the March 14, 2002 letter from Allstate is very important. The only information Allstate provided with respect to the dispute resolution process was with respect to mediation. The March 14, 2002 letter makes no reference to litigation or arbitration nor does it refer to a limitation period or give the relevant time periods for the process.
In Smith, similar to this case, the insurer only makes mention of the next step and does not provide full details of the entire dispute resolution process. Mr. Justice Gonthier, speaking for the majority, agreed with Mr. Justice Borins J.A. in that it is not sufficient for the insurer to identify only the next step in the process. Whenever an insurer refuses to pay a claim or terminates payments, the insured is entitled to be advised about his or her right to dispute the decision of the insurer and about all of the important steps involved in the dispute resolution process. Counsel for Allstate attempted to distinguish this case from Smith on the basis that in Smith there was no disability DAC assessment, only a letter advising the applicant of his rights. In this case, Ms. Finlayson was offered and attended a disability DAC assessment. A similar argument was proposed by the insurer's counsel in the case of Galati and Aviva7 I agree with Arbitrator Feldman in that case who stated that "[n]othing in the Schedule indicates that referring an insured to a DAC relieves an insurer from the obligations imposed by section 49 (as interpreted by the Supreme Court of Canada)."
Counsel for Allstate also argued, that the facts in this case can be distinguished from Smith because of the affirmative response by Ms. Finlayson's counsel with respect to mediation. It is clear from Mr. Marini's letter dated May 8, 2003, that he was at least somewhat aware that the next step in the dispute resolution process was mediation and further he indicated that he would be proceeding with mediation and did - however, too late.
I do not agree with Allstate's position that the fact that Ms. Finlayson's counsel had indicated that he would be proceeding with mediation amounts to the insurer having met their obligation with respect to section 49 of the Schedule. In the Galati and Aviva decision, it is clear that Mr. Galati was represented by counsel at the time he received the notice of stoppage. This was not considered a factor in finding the notice of stoppage deficient.8
The Supreme Court in Smith does not specifically speak to whether an applicant who was represented by counsel at the time of receiving notice would relieve an insurer of their responsibility to provide an applicant with full details of the dispute resolution process.
Mr. Justice Borins J.A. in dissent, upheld by the Supreme Court of Canada, noted that Mr. Smith had actual knowledge of the limitation period but concluded that "this should not detract from the insurer's statutory obligation to comply with s. 71 [now s. 49]."
The respondent in Smith argued that Mr. Smith had been informed of the limitation period through the mediator's report. Mr. Justice Gonthier notes that:
... to take this fact into account against the appellant would be to ignore the particular nature of the matter ... insurance law is ... geared towards protection of the consumer. This approach obliges the courts to impose bright-line boundaries between the permissible and the impermissible without undue solicitude for particular circumstances that might operate against claimants in certain cases.
The issue in Smith is not what the applicant knew about the process but about the positive obligation placed on an insurer to advise applicants of the process. I do not accept that the particular understanding of an applicant is relevant as it would lead to the conclusion that an insurer's obligation to provide information would vary depending on their assessment of the applicant's level of understanding of the dispute resolution process.
Upon the evidence presented, I find that Allstate has failed to comply with section 49 of the Schedule by failing to advise Ms. Finlayson about the entire dispute resolution process and that, as a consequence, the 2 year limitation period did not begin to run on March 14, 2002. Ms. Finlayson is not barred from filing her Application for Mediation or subsequently filing this Application for Arbitration and she may therefore proceed to have this application arbitrated upon its merits.
EXPENSES:
I exercise my discretion to award Ms. Finlayson her expenses incurred in this Preliminary Issue hearing. The parties shall have 30 days from the date of this decision to agree on the amount of those expenses. If they cannot agree, an expense hearing may be arranged with the case administrator and I shall assess them.
November 8, 2006
Elizabeth Nastasi
Arbitrator
Date
Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2006 ONFSCDRS 173
FSCO A04-002133
BETWEEN:
SHERRY FINLAYSON
Applicant
and
ALLSTATE 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:
The issues raised by Ms. Finlayson in these proceedings are not statute-barred, pursuant to section 281.1 of the Insurance Act. Ms. Finlayson may proceed to have her application arbitrated upon its merits.
Ms. Finlayson is entitled to her expenses on the preliminary hearing. If the parties cannot reach an agreement on the amount of those expenses within 30 days of the date of this decision, either party may request that the case administrator arrange an expense hearing and I shall assess expenses.
November 8, 2006
Elizabeth Nastasi
Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
- Exhibit 1, Tab 3
- Exhibit 1, Tab 3
- Exhibit 1, Tab 5
- Exhibit 1, Tab 6
- Nahsari and Belair Insurance Company Inc., (FSCO P02-00002, September 9, 2002 appeal). See also Zeppieri and Royal Insurance Company of Canada, (OIC A-005237, February 17, 1994)
- Galati and Aviva Canada Inc., (FSCO A04-001256, August 19, 2005)
- Galati and Aviva at page 4, paragraph 10