Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 88

FSCO A04-001797 and A04-001522

BETWEEN:

NASSIR HASSAN YUSUF and ISAMIL I. AHMED Applicants

and

TD HOME AND AUTO INSURANCE COMPANY Insurer

REASONS FOR DECISION

Before: Beth Allen Heard: March 27, 2006, at the offices of the Financial Services Commission of Ontario in Toronto. Appearances: Warren Milne for Mr. Yusuf and Mr. Ahmed Elizabeth Wilson for TD Home and Auto Insurance Company

Issues:

The Applicants, Mr. Nassir Hassan Yusuf and Mr. Isamil I. Ahmed, claim they were injured in a motor vehicle accident on January 2, 2003. They applied for and received statutory accident benefits from TD Home and Auto Insurance Company ("TD"), payable under the Schedule.¹ TD terminated the Applicants' weekly income replacement benefits on October 15, 2003. The parties were unable to resolve their disputes through mediation, and Mr. Yusuf and Mr. Ahmed applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this further sitting are:

1. Is Mr. Yusuf liable, pursuant to section 47 of the Schedule, to repay benefits paid by TD?
2. Is Mr. Ahmed liable, pursuant to section 47 of the Schedule, to repay benefits paid by TD?
3. Is Mr. Yusuf entitled to his arbitration expenses pursuant to subsection 282(11) of the Insurance Act?
4. Is Mr. Ahmed entitled to his arbitration expenses pursuant to subsection 282(11) of the Insurance Act?
5. Is TD entitled to its arbitration expenses pursuant to subsection 282(11) of the Insurance Act?

Result:

1. Mr. Yusuf is liable to repay benefits in the amount of $14,536.12, plus interest at the rate of 2.5 percent per annum from March 12, 2004.
2. Mr. Ahmed is liable to repay benefits in the amount of $16,973.63, plus interest at the rate of 2.5 percent from March 12, 2004.
3. Mr. Yusuf is liable to pay TD's expenses fixed at $9,430.77 inclusive of GST.
4. Mr. Ahmed is liable to pay TD's expenses at $9,430.77 inclusive of GST.
5. The claims of both Mr. Yusuf and Mr. Ahmed for their arbitration expenses are hereby withdrawn.

EVIDENCE AND ANALYSIS:

Background:

Procedure

I rendered a previous decision in this matter on January 26, 2006 in which I determined that Mr. Yusuf and Mr. Ahmed were precluded from proceeding to arbitration on the basis that they did not establish that they were injured in an accident as defined under the Schedule. Counsel indicated in the November 14 and 15, 2005 hearing that they were not prepared to deal with the repayment and expenses issues. A new hearing was therefore scheduled for March 27, 2006 to deal with those issues.

Mr. Ahmed did not attend this hearing. Similar to the circumstances of the first hearing, Mr. Ahmed provided no notice to his counsel, Mr. Milne, nor to the Commission or TD of his intention not to attend. Mr. Milne stated that Mr. Ahmed had not communicated with him since before the November 2005 hearing. A Notice dated February 13, 2006 was sent to Mr. Ahmed at his last known address, as required by Rule 5.7 (b) of the Dispute Resolution Practice Code (Fourth Edition, updated October 2003) (the "Code") to inform him of this hearing. I have no information that he did not receive the Notice. The Notice was not sent back to the Commission by return mail and I therefore infer that Mr. Ahmed received it. Nor did my previous decision in this matter, sent to Mr. Ahmed's last known address on January 26, 2006, return to the Commission. The further hearing, therefore, also proceeded without Mr. Ahmed. Mr. Yusuf attended, represented by Mr. Milne.

Termination of Benefits:

Documents filed by TD reveal that it paid Mr. Ahmed income replacement benefits of $283.55 per week from January 9, 2003 to October 15, 2003, as well as medical, housekeeping and home maintenance benefits and the cost of various assessments by third-party providers from February 10, 2003 to October 22, 2003. In his Application for Arbitration, Mr. Ahmed sought ongoing income replacement benefits, housekeeping expenses, the cost of medical assessments, a special award, arbitration expenses and interest.

By letter dated February 26, 2004, TD notified Mr. Ahmed that it had completed its investigation into the accident and the information Mr. Ahmed provided in support of his claim, and had concluded that Mr. Ahmed had misrepresented the circumstances of the accident. In that letter, TD relied on subsection 48(1) of the Schedule to terminate Mr. Ahmed's benefits based on a wilful misrepresentation of material facts. That provision states as follows:

48. (1) If an insured person has wilfully misrepresented material facts with respect to an application for a benefit, the insurer may terminate payment of the benefit.

Documents filed by TD reveal that it paid income replacement benefits at the rate of $136.50 per week to Mr. Yusuf from about January 13, 2003 to October 15, 2003, as well as benefits for housekeeping and home maintenance and medical treatment. TD also funded the cost of assessments performed by various third-party providers on behalf of Mr. Yusuf over the period from January 8, 2003 to December 4, 2003. In his Application for Arbitration, Mr. Yusuf sought ongoing income replacement and medical and rehabilitation benefits, as well as a special award, arbitration expenses and interest.

TD dealt with Mr. Yusuf's benefit termination in a similar manner to Mr. Ahmed. By letter dated February 26, 2004, TD notified Mr. Yusuf that it had completed its investigation into the accident and the information Mr. Yusuf provided in support of his claim, and had concluded that Mr. Yusuf had misrepresented the circumstances of the accident. In that letter, TD relied on subsection 48(1) of the Schedule to terminate Mr. Yusuf's benefits based on a wilful misrepresentation of material facts.

Repayment:

The Insurer's Position

In the February 26, 2004 letters, TD further stated that it was seeking a repayment of benefits paid to the Applicants based on subsection 47(1)(a) of the Schedule. This provision states:

47. (1) A person shall repay to the insurer,

(a) any benefit under this Regulation that is paid to the person as a result of an error on the part of the insurer, the insured person or any other person, or as a result of wilful misrepresentation or fraud;

TD founded its allegation of wilful misrepresentation on the contents of the Applicants' written statements to the Insurer and on some of the conclusions of the accident reconstructionist it retained, Mr. Scott Walters. TD submits, and I found in my earlier decision, that the facts alleged in Mr. Ahmed's statement of February 13, 2003 and in that of Mr. Yusuf dated February 19, 2003, about the source and type of damage and the point of impact on their vehicle, a Dodge van, were inconsistent with the findings of TD's accident reconstruction expert.

Mr. Walters, in his forensic report dated May 26, 2003, concluded, with the assistance of colour photographs of both vehicles, that the damage to the front of the Dodge was more consistent with a scraping type of contact with an abrasive, concrete-like surface than a collision with another vehicle. Mr. Walters' forensic report also concluded that if, at the time of impact, the Dodge, the Applicants' vehicle, had been making a right turn and the other vehicle was travelling westward, as the Applicants' statements indicate, then it would be expected that the left front corner of the Dodge would have contacted the right front and side of the other vehicle. Both Mr. Ahmed and Mr. Yusuf indicated in their statements that the right front passenger side of the Dodge impacted with the other vehicle. Mr. Walters also found paint transfers in the damaged areas of the Dodge and the other vehicle that were inconsistent with the damage being the result of a collision between the two vehicles. There was yellow paint on the Dodge in the damaged areas when neither vehicle was yellow and Mr. Walters found no yellow object at the scene of the accident that might have accounted for those transfers. There were also black transfers in the damaged areas of both vehicles at heights where no implement or component existed on either vehicle that might explain those transfers. Mr. Walters concluded, based on forensic evidence he gathered, that the accident could not have occurred as described by the Applicants.

Regarding the amount of the repayment claimed, in Mr. Ahmed's February 26, 2004 notice, TD sought a repayment of $16,973.63 and in Mr. Yusuf's February 26, 2004 notice, TD claimed a repayment of $14,536.12. By subsequent notices, TD sought greater repayments from both Applicants. Ms. Wilson argued that TD was seeking a repayment of $33,614.98 from Mr. Ahmed. She pointed to a letter dated February 15, 2005 wherein TD notified Mr. Ahmed of the latter repayment amount. The latter figure is broken down in benefit payment printouts filed by TD and summarized as follows:

• Income replacement benefits
• Housekeeping benefits
• Medical/rehabilitation
• Assessments and Reports TOTAL

Similarly, Ms. Wilson referred to a letter dated February 15, 2005, wherein it notified Mr. Yusuf that TD was seeking a repayment of $27,420.02. That figure was also broken down in benefit payment printouts filed by TD and summarized as follows:

• Income replacement benefits
• Housekeeping benefits
• Medical/rehabilitation
• Assessments and Reports TOTAL

The Applicants' Position

Mr. Yusuf agreed that the amount of income replacement benefits being claimed back by TD was the amount paid to him. He also agreed with the amounts for housekeeping, medical and rehabilitation benefits, and section 24 assessments, except he raised a question about an occupational therapy assessment conducted by St. Clair Assessment Centre Inc. ("St. Clair"). Mr. Yusuf stated that he did not recall such an assessment being conducted at his home on January 9, 2003. TD filed an in-home assessment report by St. Clair dated January 9, 2003 in which the assessor provides a detailed account of her visit to and assessment of Mr. Yusuf's home, and her communications with him on that day. I am therefore satisfied the assessment was conducted by St. Clair on January 9, 2003.

At the close of Ms. Wilson's submissions on repayment, Mr. Milne requested a recess to consult with Mr. Yusuf. Upon their return to the hearing, Mr. Milne indicated that he would be calling no further evidence and making no submissions on behalf of either Mr. Yusuf or Mr. Ahmed to dispute TD's position on the repayment issue.

Expenses:

Mr. Milne indicated, on behalf of Mr. Yusuf and Mr. Ahmed, he was withdrawing their claims for arbitration expenses. Mr. Milne also stated that he reviewed the items on Ms. Wilson's Bill of Costs and agreed that costs claimed are reasonable.

TD claimed its expenses of the arbitration pursuant to subsection 282(11) of the Insurance Act.

Subsection 282(11) of the Insurance Act gives arbitrators the discretion to award expenses to parties to an arbitration hearing. The parties bring their claims for expenses under Regulation 664² of the Insurance Act (the "Expense Regulation"), which is repeated in Rules 75 and 76 of the amended Dispute Resolution Practice Code.³

Regulation 664 requires an arbitrator to apply the following criteria: (a) each party's degree of success in the outcome of the proceeding; (b) any written offers to settle made in accordance with Rule 76; (c) whether novel issues are raised in the proceeding; (d) the conduct of a party or a party's representative that tended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings and orders; and (e) whether any aspect of the proceeding was improper, vexatious or unnecessary.

TD filed a Bill of Costs claiming costs totalling $18,861.53 inclusive of G.S.T., which amount TD requests be borne equally by the Applicants.

Ms. Wilson submitted that the Applicants should be ordered to pay TD's expenses pursuant to the criteria set out in the Expense Regulation.

Ms. Wilson relied on criterion (a) under the Expense Regulation submitting that this criterion operates in TD's favour since TD was successful in the outcome of the previous hearing into the preliminary issue.

Ms. Wilson also relied on criterion (d), "the conduct of a party or a party's representative that tended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings and orders." Ms. Wilson submitted that much of the delay in this matter is attributable to the conduct of the Applicants due to theirs and their previous counsel's requests for adjournments of the pre-hearing discussion and the preliminary issue hearing in this matter.

Ms. Wilson pointed out regarding criterion (b) that no settlement offers were filed with the Commission. In regard to criterion (c), she argued that while the issues in dispute may not be novel, it is only in exceptional cases of false or wilful misrepresentation that TD seeks a repayment. Concerning criterion (e), Ms. Wilson submitted that at no point did TD take a position in relation to these claims that was manifestly unfair, frivolous, vexatious or an abuse of process.

REASONS FOR DECISION:

Repayment:

Entitlement

TD seeks repayments of benefits from the Applicants on the basis of the Applicants' misrepresentation of material facts with respect to their applications for accident benefits. TD submitted that the Applicants misrepresented the particulars of the accident. It is not controversial that for the purposes of subsection 47(1)(a) of the Schedule, the particulars of an alleged accident constitute "material facts" with respect to an application for accident benefits. Without the factual components of an incident meeting the definition of an accident, as defined in subsection 2(1) of the Schedule, an insured person is not qualified to receive accident benefits. Turning to the meaning of the words "wilful misrepresentation", a dictionary definition is of some assistance. The words "wilful misrepresentation are not defined either together as a phrase, or separately, in the Insurance Act or the Schedule. Black's Law Dictionary⁴ defines the words separately. "Wi(l)lful" is defined as "voluntary, intentional, but not necessarily malicious. "Misrepresentation is defined as "the act of making a false or misleading assertion about something, usu. with intent to deceive.

Since TD made the assertion of wilful misrepresentation, it therefore has the burden to prove that Mr. Yusuf and Mr. Ahmed intentionally made false or misleading statements with the intent to mislead the Insurer about the accident. TD submitted that it has met its burden in this regard.

Given the subjective considerations involved in determining whether a person’s conduct was "intentional" or "voluntary", I would have found it helpful to have heard evidence from the Applicants in this regard about their statements. The fact that the Applicants' counsel brought no evidence and made no submissions to refute TD's assertions is critical to my determination. I find it reasonable to infer in these circumstances that the Applicants had no evidence to call that would be of any assistance in challenging the Insurer's claims. I also infer from Mr. Ahmed's non-attendance at both hearings that he had no evidence that would be helpful to his case. I therefore find, in absence of evidence to the contrary, that Mr. Yusuf and Mr. Ahmed gave their written statements intentionally and voluntarily.

I accept the uncontroverted opinion of TD’s forensic expert that the accident could not have occurred as the Applicants described in their written statements. I conclude that TD met its burden of establishing that Mr. Yusuf and Mr. Ahmed wilfully misrepresented material facts in respect of their applications for accident benefits. I therefore find that TD paid accident benefits to Mr. Yusuf and Mr. Ahmed as a result of wilful misrepresentation and TD is therefore entitled to repayments of benefits paid to the Applicants.

Amount

Section 47 of the Schedule contains notice requirements with which an insurer must comply to succeed in a claim for a repayment of benefits. The notice provisions are as follows:

47. (2) If a person is required to repay an amount to an insurer under this section,

(a) the insurer shall give the person notice of the amount that is required to be repaid; and

(b) if the person is receiving an income replacement or caregiver benefit, the insurer may give the person notice that the insurer intends to collect the repayment by deducting up to 20 per cent of the amount of the benefit from each payment of the benefit.

(3) The obligation to repay a benefit does not apply unless the notice under subsection (2) is given within 12 months after the payment was made.

(4) Subsection (3) does not apply if the benefit was paid as a result of wilful misrepresentation or fraud.

(5) An insurer that has given the notice referred to in clause (2) (b) may collect the repayment by deducting up to 20 per cent of the amount of the benefit from each payment of the benefit.

(6) The insurer may charge interest on an amount repayable under this section from the fifteenth day after notice is given under subsection (2) at the bank rate in effect on that day.

(7) In subsection (6),

"bank rate" means the bank rate established by the Bank of Canada as the minimum rate at which the Bank of Canada makes short term advances to the banks listed in Schedule I to the Bank Act (Canada).

[emphasis added]

As noted earlier, TD provided two notices to each of the Applicants, claiming higher amounts in each of the second notices. In Mr. Yusufs February 26, 2004 notice, TD claimed $14,536.12 and in Mr. Ahmed's February 26, 2004 notice, TD claimed $16,973.63. In Mr. Yusufs February 15, 2005 notice, TD claimed $27,420.02 and in Mr. Ahmed's February 15, 2005 notice, it claimed $33,614.98. TD therefore met the requirement under subsection 47(2)(a) of giving notice of the amount required to be paid.

However, there is a question as to whether the Applicants should be required to pay the higher amounts stated in their second notices. The additional amounts added to the two notices represent amounts paid by TD to third-party treatment providers. The additional amount for the cost of third-party assessors in Mr. Yusufs February 15, 2005 notice is $12,883.90 and in Mr. Ahmed’s February 15, 2005 notice is $16,641.35. The question is whether the Applicants should repay the amounts paid to third-party providers since these payments were not made to the Applicants themselves.

The wording of subsection 47(1)(a) is instructive on this point.

A person shall repay to the insurer,

(a) any benefit under this Regulation that is paid to the person as a result of an error on the part of the insurer, the insured person or any other person, or as a result of wilful misrepresentation or fraud; [emphasis added].

It seems clear from the language in this provision that the insured person must repay any benefit "paid to them" where it is found that an insurer is entitled to a repayment. I take this to refer to benefit payments paid by TD directly to Mr. Yusuf and Mr. Ahmed. The provision does not refer to payments made on behalf of an insured person. I received no submissions that presented an interpretation other than the one I have adopted. This would mean that the Applicants would only be required to repay TD the amounts paid directly to them. The interpretation I have offered is in keeping with the rule of statutory interpretation which states that provisions which have punitive consequences should be interpreted strictly.

Under subsections 47(3) and (4), the notice must be given to the insured person within 12 months after the payment was made, except if the payment was made as a result of wilful misrepresentation or fraud. There is no time limit prescribed for notices given under the latter circumstances. I found that the notice requirement covers only benefits paid to the Applicants. Since I found wilful misrepresentation, the February 26, 2004 notices are not affected by a time limit. TD is therefore not time restricted in its claims for repayments of income replacement, housekeeping and home maintenance and medical benefits paid to the Applicants.

I therefore find, pursuant to subsection 47(4) of the Schedule, that TD is entitled to a repayment of $16,973.63 from Mr. Ahmed as stated in his February 26, 2004 notice. TD is entitled to a repayment of $14,536.12 from Mr. Yusuf as stated in his February 26, 2004 notice.

Interest

Subsection 47(6) of the Schedule provides that the insurer may charge interest on a repayable amount from the fifteenth day after the notice is given, at the bank rate in effect on that day. The date of the relevant notices for both Applicants is February 26, 2004. The fifteenth day after the notice date was March 12, 2004, the year 2004 being a leap year. According to the Bank of Canada, the "bank rate", as defined in subsection 47, on March 12, 2004 was 2.5 percent.

Therefore, Mr. Ahmed shall repay $16,973.63, calculated from March 12, 2004 at 2.5 percent per annum. Mr. Yusuf shall repay $14,536.12, calculated from March 12, 2004 at 2.5 percent per annum.

Expenses

Mr. Yusuf and Mr. Ahmed withdrew their claims for expenses. I permitted them to withdraw these claims.

In arriving at my decision to impose expenses against Mr. Yusuf and Mr. Ahmed, I took into account that the Applicants did not dispute TD’s expense claim and found the amounts claimed by TD reasonable.

I also considered the criteria set out in the Expense Regulation and agree that criteria (a) and (d) should be applied in TD's favour. Mr. Yusuf and Mr. Ahmed were unsuccessful in both the previous preliminary issue hearing and the present hearing. I find that the conduct of Mr. Yusuf and Mr. Ahmed, and their previous counsel prolonged the proceedings. The pre-hearing discussion was adjourned on two occasions, once at the request of their previous counsel, and on the other occasion at the request of the Applicants in order to seek new counsel. The preliminary issue hearing was also adjourned on two occasions, in the first instance, to allow the Applicants to retain new counsel and, in the second instance, to allow the new counsel an opportunity to prepare for the hearing. There is no evidence that TD is responsible for any of the delay.

I also find, in accordance with criteria (e), that both proceedings were unnecessary in that the Applicants filed for arbitration under circumstances where they were intentionally advancing false claims.

I find the legal fees claimed by Ms. Wilson's firm reasonable, particularly given that the bill for these items covers services for both Mr. Yusuf and Mr. Ahmed, and that Ms. Wilson's firm prepared for two hearings. The largest part of the bill constitutes disbursements. For the most part, the amounts for the disbursement items on the bill are confirmed in the background printouts filed by TD. I find the amounts for the disbursement items not recorded in printouts are also reasonable.

I accept TD's submission that the Applicants should be required to bear TD's expenses equally. Mr. Yusuf is therefore liable to pay $9,430.77 of TD's expenses, inclusive of G.S.T. Mr. Ahmed is also liable to pay $9,430.77 of TD's expenses, inclusive of G.S.T.

May 31, 2006

Beth Allen Arbitrator

Date

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 88

FSCO A04-001797 and A04-001522

BETWEEN:

NASSIR HASSAN YUSUF and ISAMIL I. AHMED Applicants

and

TD HOME AND AUTO 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. Mr. Yusuf shall repay TD the amount of $14,536.12, plus interest at the rate of 2.5 percent per annum from March 12, 2004.
2. Mr. Ahmed shall repay TD the amount of $16,973.63, plus interest at the rate of 2.5 percent per annum from March 12, 2004.
3. Mr. Yusuf shall pay TD's arbitration expenses in the amount of $9,430.77 inclusive of G.S.T.
4. Mr. Ahmed shall pay TD's arbitration expenses in the amount of $9,430.77 inclusive of G.S.T.

May 31, 2006

Beth Allen Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2R.R.O. 1990, as amended, to O. Reg. 275/03.
3. 3Updated fourth edition - October 2003.
4. 48th edition (West 2004) pp 1022 and 1630, respectively.