Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 175

FSCO A05-000209

BETWEEN:

PARAMSOTHY MURUGAPPA

Applicant

and

AVIVA CANADA INC.

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

John Wilson

Heard:

Heard by written submissions only. Written submissions were received on July 10 and September 5, 2006.

Appearances:

Dimple Verma for Mr. Murugappa Grant R. Dow for Aviva Canada Inc.

Issues:

The Applicant, Paramsothy Murugappa, was injured in a motor vehicle accident on February 7, 2003. He applied for and received statutory accident benefits from Aviva Canada Inc. ("Aviva"), payable under the Schedule.¹

The parties were unable to resolve their disputes through mediation, and Mr. Murugappa 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 is:

Is Mr. Murugappa precluded from proceeding to arbitration because his application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule?

Result:

Mr. Murugappa is precluded from proceeding to arbitration because his application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule.

EVIDENCE AND ANALYSIS:

This matter turns on the question of just when an application for mediation and, subsequently for arbitration, can be filed. Section 51 of the Schedule, which deals with time limits for proceedings, reads as follows:

(1) A mediation proceeding or evaluation under section 280 or 280.1 of the Insurance Act or a court proceeding or arbitratio under clause 281 (1) (a) or (b) of the Act in respect of a benefit under this Regulation shall be commenced within two years after the insurer's refusal to pay the amount claimed. O. Reg. 403/96, s. 51 (1).

(2) Despite subsection (1), a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Insurance Act may be commenced within 90 days after the mediator reports to the parties under subsection 280 (8) of the Act or within 30 days after the person performing the evaluation provides a report to the parties under section 280.1 of the Act, whichever is later. O. Reg. 403/96, s. 51 (2).

Essentially, the Insurer takes the position that the time under section 51 should be measured from the delivery of the original stoppage notice to Mr. Murugappa which notified him of the Insurer's intention to stop paying benefits.

Mr. Murugappa, on the other hand, believes that the stoppage date for time-limit purposes should be the date when benefits actually stopped. In Mr. Murugappa's case, the final payments followed the DAC's negative conclusion on entitlement.

This question is not novel. It has been addressed by both arbitrators and the courts since the introduction of the accident benefit system. The Court of Appeal in Haldenby² summarized the accepted approach to such limitations:

As properly noted by the application judge, the relevant statutory language is not free of ambiguity. However, in our view, s. 26(1) contemplates one limitation period. It is the insurer's refusal which triggers the limitation period that can arise out of two types of situations. Indeed, the two parts of s. 26(1) apply respectively to the situations where (1) the insurer refuses to pay the amount claimed by the insured; or in the alternative where (2) the insurer refuses to pay further benefits if the claimant went to school or returned to work as permitted by s. 16.

While there are some differences between the section 26(1) of the Schedule in Haldenby and the present provisions, I see nothing significant that would necessitate a change to the approach enunciated above.

As noted earlier, the Insurer's position that the time under section 51 should be measured from the delivery of the original stoppage notice to Mr. Murugappa which notified him of the Insurer's intention to stop paying benefits is not novel. It is one that is backed both by the clear wording of the legislation and the jurisprudence interpreting it.

In Kirkham v. State Farm, the Divisional Court, reviewing a decision of the Director's Delegate³, on the issue of limitations, commented:

The first principle of statutory interpretation is; "if the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense" (Chief Justice Tindal in the Sussex Peerage Case 1844 11 cl and F. 85).

In our view the words in Section 281(5) are precise and unambiguous. An injured insured must commence his proceeding within two years after the insurer's refusal to pay, or his claim is statute barred. ⁴

Mr. Murugappa still believes that the stoppage date for time-limit purposes should be the date when benefits actually stopped. In Mr. Murugappa's case the notice was given well before the final payment of benefits.

I note that there is no allegation that this notice of stoppage was lacking in form or substance, only that the intervention of the DAC and the consequent resumption of benefits pending the DAC somehow suspended the notice.

As O'Leary J. noted in Kirkham, the phrase "within two years after the insurer's refusal to pay the amount claimed" is the key to understanding just when the time-limit began to run and when it expired. The phrase itself is unambiguous. It means just what it says. Even reading the words in conjunction with the balance of the termination provisions of the Schedule, I can find nothing that would modify the plain meaning of the section.

In this matter, there is no question that a refusal was given and received. I find no evidence that Aviva waived its right to rely on that refusal, by reason of a DAC assessment, and the continuation of payment until such time as the DAC confirmed Aviva's determination on the IRB issue.

The continuation of payments pending a DAC is required under section 43(6) of the Schedule. It is hard to see any such ongoing payment as a voluntary waiver of an insurer's right to rely on a stoppage notice, and the resulting limitation under section 51(1) of the Schedule.

Rolling Limitations

Early on in the history of statutory accident benefits⁵, it was decided that, unlike some insurance products of an ongoing nature, the limitations on actions to enforce the contract, and order the payment of ongoing benefits, were calculated from the refusal, and not from each, ongoing, default in the obligation to pay benefits (rolling limitations).

As mentioned earlier, the Divisonal Court in Kirkham⁶ clarified the law on limitations in accident benefit matters. It also put to rest the notion that "rolling limitations" might apply in accident benefit matters. As O'Leary J. stated in the endorsement:

Even if the insured can be said to have a separate claim for benefits for each weekly period, all such claims are barred beyond the two-year limitation period by the insurer's notice of refusal to pay any further benefits. Such a notice was given by the insurer in this case. We agree with, and adopt the reasons given by the Director's Delegate, David R. Draper in concluding that the claim of Mr. Kirkham is out-of-time.

Until recently, the decision in Kirkham has remained unchallenged. However, the recent decision of the Court of Appeal in State Farm Mutual Automobile Insurance Co. v. Dominion of Canada General Insurance Co. (2005 CanLII 47587 (ON CA), 79 O.R. (3d) 78), (State Farm), which deals with the application of limitations in the context of section 275 disputes, has raised questions in many minds about the earlier decision. It has been suggested that the Court of Appeal, in deciding State Farm v. Dominion, implicitly resurrected the pre-Kirkham concept of rolling limitations in accident benefits cases.

Consequently, I asked for submissions as to the effect, if any, of that decision, since a resurrection of rolling limitations would likely have the effect of reviving Mr. Murugappa's claim for accident benefits.⁷

In State Farm, the original judge had determined that the limitation period for arbitrating a dispute between insurers over indemnification under section 275 of the Insurance Act commenced with the first benefit (similar to the Kirkham appeal and Divisional Court decision). The Court of Appeal held, however, that section 275(1) left the clear implication that a cause of action arose with every payment for which indemnification could be claimed.

Mr. Dow, on behalf of Aviva, provided an analysis of the case which suggests that the court restricted its analysis to the issue before it: the limitation of the claim by one insurer against another and that nothing can be drawn from that decision to extend limitations under section 51 of the Schedule.

Ms. Verma, on behalf of Mr. Murugappa, submitted simply "The decision of State Farm Mutual Insurance Co. v. Dominion of Canada General Insurance Co. lends further support to the applicant's argument that his action is not statute barred."

Having reviewed both submissions, I do not accept that counsel for the Applicant has made out any case for extending the principles of State Farm to the accident benefit arbitration forum.

While I accept that the reasoning in State Farm may be murky, any comments relative to this issue and forum would be, at best, obiter dicta. Given the long-standing nature of the rejection of rolling limitations in the accident benefit context, any decision changing such an approach should be explicit and deal directly with the issue rather than, at best, tangentially. Consequently I find that Mr. Murugappa cannot avail himself of any "rolling limitation" to justify his delayed application for mediation.

The facts of the stoppage notice and the date of the actual application for arbitration not being in dispute, I find that Mr. Murugappa is barred from proceeding with the arbitration of his income replacement benefit claim by reason of his failure to proceed to mediation within the two years following the Insurer's notice of stoppage.

EXPENSES:

While the passage of the time-limit must have been within the knowledge of Mr. Murugappa and his solicitors at the time that the application for arbitration was filed, I will make no order as to expenses at this time. Rather, the parties shall have 30 days to settle the question of the expenses of this motion, failing which I may be spoken to on that issue.

November 10, 2006

John Wilson Arbitrator

Date