Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 53

FSCO A05-000136

BETWEEN:

LINDA KARN

Applicant

and

WESTERN ASSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Joyce Miller

Heard: By telephone conference call on March 24, 2006. Written submissions were received by February 21, 2006.

Appearances: Robert W. Garcia for Mrs. Karn Christina Polano for Western Assurance Company

Issues:

The Applicant, Linda Karn, was injured in a motor vehicle accident on February 18, 1998. She applied for and received statutory accident benefits from Western Assurance Company ("Western"), payable under the Schedule.¹ Western terminated weekly income replacement benefits on April 13, 2004. The parties were unable to resolve their disputes through mediation, and Mrs. Karn applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. An arbitration has been set for May 8, 9, 10 and 11, in Hanover, Ontario. Western, however, has requested a Preliminary Issue Hearing on the following Issue:

The preliminary issue is:

Is Mrs. Karn precluded from proceeding to arbitration until she complies with a request by Western to attend an insurer examination, pursuant to sections 42 and 50(1)(b) of the Schedule?

Result:

Mrs. Karn is not precluded from proceeding to arbitration. The arbitration shall proceed on May 8, 9, 10 and 11, 2006.
If needed, the parties can speak to me on the issue of expenses within 30 days of this decision.

BACKGROUND

At the time of her motor vehicle accident on February 18, 1998, Mrs. Karn was 29 years old. She was five months pregnant and was working full-time as a Customer Representative for the Bank of Montreal in Hanover. Her injuries as a result of the accident included: head injury, chest wall contusion, whiplash injury to neck and back, left knee contusion, lumbar disc herniation, and emotional and psychological trauma. A CT scan taken shortly after the accident confirmed that Mrs. Karn suffered a central disc herniation at the L5-S1 level.

Mrs. Karn was paid an income replacement benefit, less the amount of her collateral benefits, until April 13, 2004. Her income replacement benefit was terminated based on an Insurer's Multi-Disciplinary Assessment by Dr. Devlin, physiatrist, Ms. Westbrook, physiotherapist and Dr. Silverman, psychologist, in December 2002.

In response to the termination of her income replacement benefit, Mrs. Karn requested a Disability DAC Assessment which was conducted in March 2004 by Dr. J. Somerville, physiatrist, Dr. K. Lawson, psychologist, Ms. K. Hunter, physiotherapist, and Mr. M. Rodriguez, kinesiologist. The DAC opined that Mrs. Karn did not meet the post 104-week disability test.

Mrs. Karn did not return to work after her benefits were terminated. On March 3, 2004, Mrs. Karn saw her treating physiatrist, Dr. R.W. Teasell, who had been seeing her on a regular basis since March 1999 for pain management. Dr. Teasell's clinical note for that date states that Mrs. Karn "continues to struggle with ongoing chronic pain" and that "she was experiencing pain down the buttock into her left leg." He stated that the goal was to get Mrs. Karn back to part-time work.

In his report of July 28, 2004, Dr. Teasell states "[Mrs. Karn] would dearly love to return back to work" and notes that she continued to struggle with ongoing pain and in his opinion this would not likely change. On October 26, 2004 in his clinical note, Dr. Teasell states that in his opinion Mrs. Karn was not ready to go back to work.

In another report dated December 16, 2004, Dr. Teasell stated that Mrs. Karn "because of injuries suffered in a motor vehicle accident is not ready to return to work until her son returns to school. At that time Linda will only be able to manage part-time (20 hrs/wk) employment."

On December 31, 2004, while helping her three year old son out of his bath, Mrs. Karn experienced extreme pain. She attended the hospital the next day and was given a Demerol injection and immediately sought chiropractic treatment.

On January 13, 2005, Mrs. Karn's counsel, Mr. Robert Garcia, wrote to Western advising them of the December 31 incident and that despite chiropractic treatment she "continues to experience constant extreme pain and as a result is unable to sit, stand or lie down with any comfort." In addition, Mr. Garcia advised that he was in the process of applying for arbitration regarding the termination of Mrs. Karn's income replacement benefit and "in the interim are asking you to reinstate Mrs. Karn's benefits based on the recent events."

On February 8, 2005, Mr. Garcia wrote to Western enclosing a copy of the CT Scan dated January 22, 2005 which showed a large posterior disc herniation at the L5-S1 levels and advised that Mrs. Karn was being referred to a surgeon. As well, he asked for Western's response to his request that Mrs. Karn's income replacement benefit be reinstated.

On March 2, 2005, Mrs. Karn had an MRI. The report of the MRI in its conclusion stated that: "A large central disc protrusion/herniation is demonstrated at the L5-S1 level with a small annular tear associated. Flattening and posterolateral deviation is seen at the SI nerve sheaths bilaterally. No sequestered fragment is associated at this time."

On May 31, 2005, Mr. Garcia sent Western a copy of the MRI and advised that the neurosurgeon, Dr. David Steven, had recommended surgery. Again in this letter Mr. Garcia requested that Western should reinstate Mrs. Karn's income replacement benefit.

On September 15, 2005, Mr. Garcia wrote to Western advising that Mrs. Karn was going to have surgery in the near future and again requested that her income replacement benefit be reinstated.

On September 30, 2005, Mr. Garcia wrote to Western advising it that Mrs. Karn underwent surgery on September 23, 2005 and was discharged on September 26, 2005 with specific instructions to do nothing for at least six weeks. As well, he advised that Mrs. Karn's mother-in-law was providing attendant care, childcare, housekeeping and home maintenance services. He enclosed a "schedule of expenses incurred by or on behalf of Ms. Karn as a result of attending for her surgery and asked to hear from Western regarding payment for these services. Again, he asked Western to reinstate Mrs. Karn's income replacement benefit.

On November 14, 2005, Mrs. Karn was re-assessed by Dr. Steven, at which time he recommended that she undergo physiotherapy treatment. A treatment plan was submitted and approved by Western in December 2005.

On January 17, 2006, Western's counsel, Christina Polano, wrote to Mr. Garcia that a "physiatry IME has been scheduled with Dr. Michael Devlin for Thursday, February 9, 2006." [emphasis in original] In addition, the letter states:

Dr. Devlin initially assessed Ms. Karn in December of 2002. As it has now been over three years since Mr. (sic) Karn participated in an physiatry examination at the request of the insurer, this assessment is reasonably required in the circumstances.

On January 20, 2006, Mr. Garcia wrote to Ms. Polano advising her that Mrs. Karn's benefits were denied based on a March 15, 2004 DAC report which contained an opinion from a physiatrist. Mr. Garcia advised that Mrs. Karn had continued to seek medical treatment since the date of termination and that the insurer had been provided with copies of all reports for its consideration. Accordingly, in his view the requested IME was aimed at bolstering the insurer's evidence and that Mrs. Karn would not be attending the insure's medical examination.

On January 25, 2006, Ms. Polano wrote to Mr. Garcia wherein she stated that "we maintain our position that Mrs. Karn has the obligation to attend a physiatry assessment with Dr. Devlin, in accordance with section 42 of the SABS." In her letter, Ms. Polano states: "We are therefore attaching a copy of the section 42 notice that Western Assurance proposes to send to your client (with date to be determined), should you reconsider your position."

On February 9, 2006, Western wrote to FSCO that it was seeking an order that Mrs. Karn’s arbitration be stayed pending her attendance at an Insurer’s Examination pursuant to section 42 and section 50 of the Schedule.

SUBMISSIONS

Western’s Submissions

Western submits that its request for an Insurer's Examination pursuant to section 42 of the Schedule was reasonable and timely. Western submits that after the December 2004 incident it was important for it to investigate Mrs. Karn’s ongoing claim for her income replacement benefits as her condition had changed since her examination with Dr. Devlin in December 2002.

Western submits that it was reasonable for it to wait until Mrs. Karn had recovered from her surgery before asking for an Insurer’s Examination so that Dr. Devlin could do a proper assessment. Western submits it would be important to know what symptoms had resolved and what symptoms remained following surgery and what the impact of any resolved or remaining symptoms had on Mrs. Karn’s ability to return to work. Western submits that waiting to have an Insurer’s Examination after Mrs. Karn recovered from her surgery would provide a better opportunity to adjust the file based on the full information available.

Western submits that its request for an Insurer’s Examination for February 9, 2006 would not have delayed the hearing on May 8, 2006 as Mrs. Karn would have had ample opportunity to respond to Dr. Devlin’s report. Accordingly, Western submits that pursuant to sections 42 and 50 of the Schedule, Mrs. Karn should be precluded from proceeding to arbitration

Mrs. Karn's Submissions

Mrs. Karn submits that she never received a proper section 42 notice. A letter was sent to her counsel, Mr. Garcia, stating that she was to attend an Insurer’s Examination with Dr. Devlin on February 9, 2006. The section 42 notice was sent to her counsel as an attachment to a letter by Western's counsel on January 25, 2006. There was no date or time recorded in this notice. Accordingly, Mrs. Karn submits that Western did not give her proper notice for the Insurer's Examination with Dr. Devlin.

Mrs. Karn submits that even if this lack of proper notice was a technical breach, she submits that the request by Western for an Insurer's Examination with Dr. Devlin was not reasonable.

Mrs. Karn submits the request for the assessment never came from Western but from Western's counsel. Mrs. Karn submits that if Western wished to have an Insurer's Examination for the purposes of section 42, then it should have initiated the request for an Insurer's Examination when she asked that her benefits be reinstated in January 2005 and the numerous other occasions that she had requested for a reinstatement.

Mrs. Karn submits that Western's request for an Insurer's Examination was not consistent with the purpose of section 42, namely, to adjust the file and determine entitlement to a benefit, but that the purpose for the requested assessment was to bolster its position at the upcoming arbitration hearing.

THE LAW:

Subsection 42(1) of the Schedule provides the following:

For the purpose of determining whether an insured person is entitled to a benefit for which an application is made, an insurer may give the insured person notice requiring the insured person to be examined by one or more persons specified by the insurer, each of whom is a member of a health profession or a person with expertise in vocational rehabilitation.

Section 50(1) provides the following:

An insured person shall not commence a mediation proceeding under section 280 of the Insurance Act unless,

(b) the insured person made himself or herself reasonably available for any examination required by the insurer under section 42, other then in relation to a medical or rehabilitation benefit under section 14 or 15; ...

ANALYSIS AND FINDINGS

Western requests that Mrs. Karn be precluded from proceeding to arbitration on May 8, 2006 because she did not attend an Insurer’s Examination on February 9, 2006. However, at the time that Western made the request for a section 42 examination, the parties were already in arbitration.

Section 50 provides that an insured person shall not commence a mediation proceeding under section 280 of the Insurance Act unless, he or she made himself or herself reasonably available for any examination required by the insurer under section 42.

As Western did not request a section 42 examination before Mrs. Karn applied for mediation or even before she applied for arbitration, I find that Western's request for a stay of the arbitration pursuant to sections 42 and 50(1)(b) of the Schedule is not applicable in this case. However, for the sake of completeness, if I am wrong in my conclusion, I am providing my decision on the issue in dispute.

In the case of Eidt and Pilot Insurance Company,² Arbitrator Killoran stated: "It is well established that the onus is on the insurer to prove that insurer’s medical examinations are reasonably necessary." For the following reasons I find that Western has not met this onus and that Western’s request for a section 42 Insurer’s Examination with Dr. Devlin is not reasonably necessary. I find that it is more likely than not that Western’s purpose in requesting a section 42 Insurer's Examination with Dr. Devlin was not to adjust its file in respect of Mrs. Karn's numerous requests for reinstatement of her benefits, but rather to bolster its case for the upcoming arbitration.

I agree with the principle set out in Bogic and AXXA Insurance (Canada)³ which states that:

Where there is a claim for ongoing benefits, and a lengthy period of time has transpired since the most recent examination, it is fair, and hence reasonable for an insurer to request further examinations in order to evaluate an applicant's claim. Further examinations are also reasonable where there have been changes in the nature of the insured person's medical or psychological condition which are relevant to his or her disability claim. However, it is unreasonable to request an examination where circumstances indicate that its only apparent purpose is to acquire medical evidence to bolster the insurer's case at a hearing.⁴[emphasis added]

While a significant change in an insured’s medical condition may be a reasonable basis for requesting an Insurer’s Examination, on the facts of this case, I do not find that Western’s request is reasonable.

Mrs. Karn has been without benefits since April 2004. She had a serious set back in her ongoing symptoms in December 2004. Western had ample opportunity to have Mrs. Karn assessed following each of her five requests for reinstatement. Based on the medical evidence that Mrs. Karn provided to Western on a regular basis from January to September 2005, the reasonable and appropriate thing for Western to have done was to request an Insurer’s Examination pursuant to section 42 of the Schedule to determine whether or not Mrs. Karn's benefits should be reinstated. It not only did not respond to Mrs. Karn’s five requests for reinstatement, but it chose to wait until three months before the arbitration hearing to request an Insurer’s Examination. In fact, Western did not make the request. The request was made by Western’s counsel to Mrs. Karn’s counsel.

The evidence is very clear. Mrs. Karn's counsel had kept Western regularly apprised of her condition and in support of her numerous requests for reinstatement had provided Western with medical documentation which included a CT Scan and an MRI which showed that she had a large herniated disc at levels L5-S1 of her spine and that she needed surgery.

In addition to Mrs. Karn providing Western with cogent medical evidence in support of her five requests for reinstatement, on September 30, 2005, after Mrs. Karn had surgery, her counsel wrote requesting benefits for attendant care and housekeeping based on the recommendation by Mrs. Karn’s surgeon that she do nothing for at least six weeks after the surgery. Western never responded to any of Mr. Garcia's letters requesting reinstatement or additional benefits.

In my view, based on the facts of this case, I find that Western's request for an Insurer's Examination on February 9, 2006 is not reasonable.

Western had ample opportunity in 2005 to request an Insurer’s Examination to adjust its file. It chose not to do so. Western has not provided any evidence to support its submission that it was waiting for Mrs. Karn to recover from surgery before it requested an Insurer’s Examination.

I therefore give no weight to this latter submission. As well, Western has not provided any other cogent evidence as to why an Insurer’s Examination is reasonably necessary three months before the arbitration hearing.

Accordingly, for these reasons, I find that it is more likely than not that the purpose to schedule the Insurer’s Examination with Dr. Devlin on February 9, 2006 was to acquire medical evidence to bolster Western’s case as opposed to adjusting its file to determine whether Mrs. Karn was entitled to any further benefits pursuant to section 42 of the Schedule.

Accordingly, I find that Western’s request for an Insurer’s Examination pursuant to section 42 of the Schedule with Dr. Devlin is not reasonably necessary. The arbitration shall proceed on May 8, 9, 10 and 11, 2006.

EXPENSES:

If needed, the parties may request an expense hearing within 30 days of this decision in accordance with Rule 79 of the Dispute Resolution Practice Code.

April 10, 2006

Joyce Miller Arbitrator

Date

Financial Services Commission of Ontario