Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 14

Appeal P05-00018

OFFICE OF THE DIRECTOR OF ARBITRATIONS

GRETA WACHMENKO

Appellant

and

PRIMMUM INSURANCE CO.

Respondent

Before:

Nancy Makepeace

Representatives:

Michael D. Smitiuch for Mrs. Wachmenko

Stanley C. Tessis for Primmum

Hearing Date:

July 19, 2006

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The appeal is dismissed and the arbitration order dated May 24, 2005 is confirmed.

2. If the parties are unable to agree on appeal expenses, a hearing may be requested in accordance with Rule 79 of the Dispute Resolution Practice Code.

January 30, 2007

Nancy Makepeace Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Mrs. Wachmenko appeals from the arbitrator's order that her claims for accident benefits under the SABS-1994¹ cannot be heard because the parties settled their disputes on February 10, 2005. I am not persuaded the arbitrator erred.

II. BACKGROUND

A. Introduction

This appeal arises out of an automobile accident that occurred twelve years ago, on September 12, 1994. The insurer paid income replacement benefits of $185 per week until December 25, 1994, but benefits were ultimately continued until September 17, 1996, when they were terminated. Mrs. Wachmenko claims ongoing weekly and other benefits.

Primmum submits that Mrs. Wachmenko cannot have an arbitrator hear her benefit claims because the parties settled all their disputes, including the appeals from two arbitration decisions on preliminary issues, on February 10, 2005.

B. The First Arbitration Decision and Appeal

Mrs. Wachmenko filed an Application for Arbitration on May 1, 2000. In response, the insurer claimed the application was out of time because it was filed more than two years after the insurer's refusal to pay the benefits claimed. The two-year time limit is set out in subsection 281(5) of the Insurance Act and s. 72 of the SABS-1994.

The insurer's time limits motion led to the first of the three arbitration decisions in this matter, dated July 20, 2001.² Arbitrator Wilson concluded that Mrs. Wachmenko was time-barred from proceeding to arbitration because she did not commence her arbitration within two years of the insurer's most recent explanation of assessment, dated November 29, 1996.³ Since the most recent Report of Mediator was dated March 25, 1997,⁴ Mrs. Wachmenko could not benefit from s. 72(2) of the SABS-1994, which allows an arbitration to be commenced within ninety days of the mediator's report, even if that date is beyond the two-year mark.

Mrs. Wachmenko appealed the arbitration decision, but not until August 2003, a little more than two years later, well after the 30-day appeal time limit established by s. 283(2) of the Insurance Act. I invited the parties' submissions on whether I should extend the time for commencing the appeal, as allowed under Rule 52.2 of the Dispute Resolution Practice Code. Ultimately, I acknowledged the appeal, by letter dated April 22, 2004, to allow for consideration of Mrs. Wachmenko's submissions on Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129 (S.C.C.). My excerpted reasons are Appendix A to this decision.

The following month, Primmum requested a stay of the appeal pending the outcome of the application for judicial review of my decision to acknowledge the appeal in Toteda, a decision I had referred to in acknowledging Mrs. Wachmenko's appeal. After considering the parties' written submissions, I granted the stay. Ultimately, the Divisional Court dismissed the application for judicial review in Toteda,⁵ but by then, the parties had reached the purported settlement that is disputed in this appeal.

C. The Second Arbitration Decision and Appeal

In February 2004, Mrs. Wachmenko participated in a third mediation about a broad range of benefits. Again, the insurer argued that the mediation was statute-barred because it was commenced long after the two year time limit. Mediation failed.

Mrs. Wachmenko filed an Application for Arbitration in May 2004. The insurer responded, giving its reasons for denying the specific benefits claimed and raising several preliminary issues. According to the insurer, some of the benefits claimed could not be heard because they had not been mediated, while the claims for income replacement benefits and loss of earning capacity benefits could not be arbitrated because they had been dismissed in the first arbitration decision.

A pre-hearing conference was held before Arbitrator Wilson on October 20, 2004. His pre-hearing letter indicated that Mrs. Wachmenko agreed that her IRB and LECB claims had been dismissed in the first arbitration decision, her appeal of which was pending. The arbitrator identified a number of preliminary issues. Apart from the issue about claims not mediated, the insurer argued that Mrs. Wachmenko was precluded from proceeding because of a refusal to attend an insurer examination. Mrs. Wachmenko argued that the insurer was required to offer her a med-rehab DAC and attendant care DAC and had failed to do so. She sought an interim order for payment of attendant care benefits, case manager services, transportation expenses and medication expenses. A January 2005 motion date to hear the preliminary issues was later rescheduled to April 2005.

Mrs. Wachmenko also requested production of the insurer's complete accident benefits file to the date of the arbitration. With the insurer's consent, the arbitrator ordered the insurer to produce the file to the date of Mrs. Wachmenko's first application for mediation in 1995, and a document in the nature of an affidavit of documents describing the documents it objected to producing and its reasons for claiming privilege on them. The pre-hearing was resumed by teleconference in November 2004 to hear the parties' submissions on the disputed documents.

Arbitrator Wilson released his decision on December 16, 2004 (the second arbitration decision in this matter). He found that the insurer could not claim litigation privilege before May 2000, when Mrs. Wachmenko commenced the second arbitration, and accordingly documents prepared before that date were producible, subject to solicitor-client privilege. He found that the insurer had not complied with his earlier orders for particulars of its privilege claims, and accordingly ordered it to provide him with sealed copies of the rest of the disputed documents for his further examination and deliberation with respect to both litigation and solicitor-client privilege. Because of his finding that the insurer had delayed the process by not complying with his earlier orders, he ruled that Mrs. Wachmenko was entitled to her expenses of the motion in the amount of $900, payable forthwith.

The insurer appealed on the basis that the arbitrator erred in law and fact in his treatment of both heads of privilege, erred in ordering it to pay Mrs. Wachmenko's expenses, and erred in making an expenses award without inviting and hearing submissions. I invited the partes to file written submissions on whether the appeal was premature and also with respect to the insurer's request for a stay of the arbitrator's production order. On February 3, 2005, after considering the parties' submissions, I acknowledged the appeal and stayed the arbitrator's production order pending the appeal decision.

D. The Third Arbitration Decision

On February 10, 2005, the parties participated in a private (non-FSCO) mediation. Mrs. Wachmenko was represented by Mr. Guy Hurtubise. Shortly thereafter, Mr. Hurtubise advised the Commission that the parties had settled all their disputes. Mr. Tessis confirmed this by letter dated February 16, 2005 enclosing an original executed consent plus three copies of a draft order to dismiss the two appeals. A similar letter was sent to the arbitrator. On February 22, 2005, I signed the appeal consent order and closed the appeal files.

By that time, Mrs. Wachmenko had already reconsidered the settlement. She wrote a letter to the Commission dated February 11, 2005, but it was not received by the Commission until February 24, 2005. The letter was not copied to Mr. Hurtubise, Mr. Tessis or the insurer. Its full text is as follows:

As you are aware, Canada Life has not treated me properly or correctly since September 12, 1994.

Yesterday, I had the worst day of all. I had to be at the lawyer's office for nine o'clock and then the meeting started at ten o'clock.

We broke for lunch around one o'clock. We did not stop until after five o'clock.

I was exhausted and stressed out by all the things that I was told and trying to decide what to do. The second to last figure that I was quoted was four hundred and something with costs. Then the arbitrator came in and said that we had reached an agreement which was four hundred and something excluding costs. I was sobbing and so upset that I thing [sic] it was the arbitrator that told my facilitator to comfort me. I was absolutely intimidated and railroaded.

We started the negotiations at 3.3 million plus costs and ended up with four hundred and something. How did this happen?

Today I cannot believe that I allowed them to railroad me the way they did. I was told that FSCO would not help me to get any more money and all sorts of things.

I signed the document relieving them of all responsibility plus no costs.

I believe that I was put under undue stress for a number of reasons. And as everyone is aware, I have brain damage.

I need twenty-four hour care and transportation and many other expenses that I will not be able to afford.

I believe that I should have been given at least a day to think it over. If I had not been so stressed out, I would not have signed. I would have had to be crazy and I am NOT.

I am going to ask council [sic] to represent me in this matter but because you are involved with my case, I wanted to advise you of my plans.

I was also told that Canada Life now Primus [sic] has Appealed my Appeal and that they will just drag it out for years the way that they have for the last ten and half years.

Canada Life has not been fair with me from day one and still is not.

I would very much like to hear from you on this matter.

Arbitrator Wilson responded to Mrs. Wachmenko in his letter of March 8, 2005 which was copied to Mr. Hurtubise, Primmum and Daniel Himelfarb, a lawyer with Mr. Tessis' firm. After noting that the arbitration file had been closed based on Mr. Hurtubise's advice that the matter had settled, the arbitrator stated:

While I note your difficulties with the settlement process, it is not clear from your letter whether you intend to repudiate the settlement agreement and proceed to a hearing of your claims. As you are aware, at the time of settlement there were appeals pending on at least two elements of your claim against Primmum (Canada Life) and your substantive claim could not move forward pending their resolution.

The arbitrator asked Mrs. Wachmenko to have her lawyer contact the case administrator if she wished to proceed, and concluded: "It goes without saying, as well, that you must also advise Primmum if you intend to attempt to withdraw from any settlement agreement."

By letter dated March 19, 2005, and received by FSCO on March 30, 2005, Mrs. Wachmenko stated: "It is definitely my intention to proceed to a hearing of my claims. . . ."

On March 30, 2005, Mr. Hurtubise wrote to the Commission to confirm that he no longer acted for Mrs. Wachmenko.

At the time of the purported settlement, a hearing of the preliminary issues identified at the October 2004 pre-hearing had been scheduled for April 21 and 22, 2005. On April 5, 2005, Arbitrator Wilson wrote to Mrs. Wachmenko, Primmum and Mr. Tessis, stating that another pre-hearing would be required to clarify the issues to be heard and set new hearing dates.

In response, Mr. Tessis sent FSCO a copy of "the Full and Final Release and Settlement Disclosure Notice executed by the insured in respect of all her claims to past, present and future accident benefits arising from the accident that occurred on September 12, 1994." He repeated his request for an order dismissing the arbitration.

Given the parties' "diametrically opposed positions" on the purported settlement, Arbitrator Wilson declined to issue the order without a hearing on whether there was a binding settlement that barred Mrs. Wachmenko from proceeding. He scheduled a motion hearing for May 16, 2005. Mrs. Wachmenko consulted another lawyer, Joseph Marcuccio, the week before the hearing, but did not retain him. She represented herself at the hearing, though Mr. Hurtubise participated by telephone conference. The resulting decision, dated May 24, 2005, is the subject of this appeal.

The arbitrator first considered whether the insurer had complied with the disclosure notice requirements of the settlement regulation.⁶ He noted that "Mrs. Wachmenko raised no issue of non-compliance with the required form or content of the material and admitted signing and initialing the forms." Examining the consent, release, and settlement disclosure notice, he found "the forms appear to be in compliance" with the regulation.⁷

The next part of the arbitrator's decision addressed Mrs. Wachmenko's capacity to enter into a settlement agreement: "[b]oth the common law and statutes make it clear that a contract with an incapable person may be unenforceable."⁸ The arbitrator raised this issue, though Mrs. Wachmenko had not specifically claimed incapacity, because of the references to brain injury in her letters and submissions. However, the arbitrator concluded there was no evidence of any "incapacity" with regard to property within the meaning of the Substitute Decisions Act, 1992 (SDA):

Other than the broad assertion by Mrs. Wachmenko that she is brain-damaged, there is no evidence that she is "not able to understand information that is relevant to making a decision in the management of his or her property, or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision."

Indeed, there is the certification by Mr. Hurtubise contained in the settlement documents that Mrs. Wachmenko "understood the significance of the Full and Final Release and was under no incapacity of any nature when it was executed and explained to her."

I also note that Mrs. Wachmenko's conduct of the motion hearing was consistent with Mr. Hurtubise's observations at the time of the settlement.⁹

The arbitrator reinforced this conclusion by reference to the general presumption of capacity in s. 2 of the SDA, "which may be relied upon by a third party '. . . unless he or she has reasonable grounds to believe that the other person is incapable.' "Compelling evidence would be required to rebut this presumption, and the arbitrator found no compelling evidence of incapacity that would vitiate the settlement agreement, even though he accepted "that Mrs. Wachmenko may well have suffered a brain injury, and may even be handicapped in some way due to ongoing problems."¹⁰

Next, the arbitrator turned to the question of duress. He accepted that Mrs. Wachmenko was under pressure during the mediation, but he noted this is the nature of settlement discussions, which often require that important decisions be made in a short time. The arbitrator found nothing illegitimate in the insurer's approach in this case. He also noted that Mrs. Wachmenko was represented by counsel throughout. Finally, he did not accept that the settlement was improvident just because it fell short of the starting amount of her claim.

Since the settlement documents complied with regulatory requirements and there was no evidence of incapacity or of duress or other vitiating circumstances, it followed that a valid settlement agreement had been reached.

The remaining issue was whether Mrs. Wachmenko had rescinded the agreement in accordance with the settlement regulation, which gives an insured two days to rescind an agreement by giving written notice to the insurer. Instead, Mrs. Wachmenko gave notice to the Commission by a letter that was dated February 11, 2005, but received much later. Therefore, the arbitrator concluded there were no grounds for setting aside the settlement agreement. The arbitration was dismissed and Mrs. Wachmenko was ordered to pay the insurer's expenses fixed at $500.

E. The Appeal

Mrs. Wachmenko commenced this appeal in June 2005, representing herself. An appeal hearing was scheduled for December 2, 2005, to be held in Sudbury. However, a few days before the scheduled hearing, we received an adjournment request on behalf of Mrs. Wachmenko from Douglas Los, a lawyer she had consulted but not retained. I convened a teleconference on December 1, 2005 at which Mrs. Wachmenko and Mr. Tessis participated. As a result, I adjourned the hearing on terms as confirmed in my letter of December 6, 2005, the relevant part of which is Appendix B to this decision.

On January 6, 2006, we received a letter from Michael Smitiuch stating he had been retained by Mrs. Wachmenko and confirming she had paid the insurer the $500 ordered by the arbitrator in accordance with the terms of my adjournment order. Time lines for written submissions were set by telephone conference on March 1, 2006, and it was agreed the appeal hearing would be held at the Commission's offices in Toronto.

III. ANALYSIS

On appeal, Mrs. Wachmenko submits that the settlement agreement did not reflect a meeting of the minds between the parties and that she has rescinded it in accordance with the common law of rescission. The insurer submits that Mrs. Wachmenko has not identified any errors of law in the arbitrator's decision, and has provided no evidence to support her position.

A. The Settlement Regulation

The first question is whether the arbitrator erred in finding that the insurer complied with the settlement regulation. The arbitrator explained the rules at the outset of his reasons, as follows:

Settlements of accident benefit matters are governed by the Settlement Regulation, which provides a framework for agreements that finally dispose of a claim or a dispute in respect of a person's entitlement to Statutory Accident Benefits.¹¹

The Regulation sets out requirements for an insurer to issue certain documents including a "disclosure notice" containing, inter alia, a description of the available benefits and the offer to settle made by the insurer, a statement recommending independent legal advice, and an acknowledgement by the insured that he or she read the disclosure notice and considered seeking independent legal, medical or financial advice before signing.

The insurer must also give written advice as to certain consequences of settlement and the availability of a right to rescind the settlement within two business days of the execution of the disclosure notice.¹²

If the requirements of section (3) of the Regulation are not complied with, an insured person may rescind the settlement at any time.

Pursuant to section 9.1(3) rescission of the settlement is communicated by "delivering a written notice to the office of the insurer or its representative."¹³

There is no error in this statement of the law.

The arbitrator continued:

Primmum's motion materials contained copies of the settlement materials and the disclosure notices duly signed by Mrs. Wachmenko. Mrs. Wachmenko raised no issue of non-compliance with the required form or content of the material and admitted signing and initialing the forms.

On examination, the forms appear to be in compliance with the requirements set out in section 9 of the Settlement Regulation.¹⁴

Accordingly, the arbitrator found "no reason to set aside the settlement based on non-compliance with the regulation."

On appeal, Mrs. Wachmenko has not identified any deficiency in the forms and concedes that she signed and initialled them. Like the arbitrator, I can find no basis for allowing Mrs. Wachmenko to rescind the settlement based on any non-compliance with the regulation on the part of Primmum.

The "Settlement Disclosure Notice" appears to be in the appropriate form, including the required explanations and notices as to the consequences of settlement. The offer for $485,000 is broken down into the various heads of benefits, and, under "other details," is handwritten:

This is a full & final settlement of all claims for Statutory Accident Benefits arising from accident of Sept. 12, 1994. All arbitration proceedings and appeals are to be dismissed without costs.

Insured agrees to sign full & final release in form acceptable to insurer.

On the final page, signed by Mrs. Wachmenko, is the insured's acknowledgment that she has "received and read the above Settlement Disclosure Notice" and has "considered whether or not to obtain legal, final and medical advice." Directly under her signature is found the following notice:

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended.
2. 2(FSCO A00-000446, July 20, 2001).
3. 3There were numerous benefit claims, and the insurer stopped weekly benefits, then reinstated them, then stopped them again, leading to several refusals.
4. 4An earlier mediation in August 1995 resulted in a procedural agreement.
5. 5Toteda v. Zurich Insurance Company, 2005 CanLII 36174 (ON S.C.D.C.), released October 6, 2005. On February 7, 2005, a week before the purported settlement, the Court of Appeal reversed the decision of the Divisional Court and restored my decision in Turner and State Farm Mutual Automobile Insurance Company, (FSCO P00-00046, February 1, 2002): 2005 CanLII 2551 (ON C.A.). Both decisions concerned the implications of Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129 (S.C.C.) for various time limits in the Insurance Act and the SABS.
6. 6The settlement regulation is sections 9.1 and 9.2 of Ontario Regulation 664 made under the Insurance Act.
7. 7Arbitration decision, p. 5.
8. 8Arbitration decision, p. 5.
9. 9Arbitration decision, p. 7.
10. 10Arbitration decision, p. 8.
11. 11The Court of Appeal in Igbokwe v. H.B. Group Insurance Management Ltd. (2001), 2001 CanLII 3804 (ON CA), 55 O.R. (3rd) 313 held that the settlement regulation did not apply once litigation was commenced in the courts. The Regulation, however, continues to apply during arbitration hearings. [footnote in original]
12. 12Section 9.1(3) includes the condition: of "returning any money received by the insured person as consideration for the settlement." [footnote in original]
13. 13Arbitration decision, pp. 4-5 [footnotes omitted].
14. 14Arbitration decision, p. 5.