Neutral Citation: 2007 ONFSCDRS 147 FSCO A06-001065

BETWEEN:

EARLINE GOTTWALD Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Jeffrey Rogers Heard: By written submissions completed on July 16, 2007

Appearances: Ms. Ava M. Hillier, solicitor for Ms. Gottwald Mr. Robert S. Franklin, solicitor for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Earline Gottwald, was injured in a motor vehicle accident on April 12, 1991. She applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ Disputes arose regarding her entitlement to further benefits. The parties were unable to resolve their disputes through mediation, and Ms. Gottwald 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 issues are:

Is Ms. Gottwald precluded from entitlement to the claimed medical and rehabilitation benefits on the grounds that the expenses were not incurred within the benefit period set out in subsection 6(3) of the Schedule?
Is Ms. Gottwald precluded from entitlement to the claimed income replacement benefits because her application for mediation was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 26(1) of the Schedule?

Result:

Ms. Gottwald is precluded from entitlement to medical and rehabilitation benefits under section 6 of the Schedule for services or treatment that were supplied beyond April 11, 2001.
Ms. Gottwald is precluded from entitlement to the claimed income replacement benefits because her application for mediation was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 26(1) of the Schedule.

Background:

The above preliminary issues were identified at the pre-hearing before Arbitrator Bujold on December 16, 2006. The issues were to be determined on agreed facts and written submissions. Arbitrator Bujold established a timetable for filing an Agreed Statement of Facts, Joint Document Brief and written submissions.

The timetable was not adhered to and a new timetable was established at the resumed pre-hearing on March 27, 2007. An Agreed Statement of Facts, Joint Document Brief and State Farm’s written submissions were filed according to the new timetable. Ms. Gottwald did not file her submissions by June 1, 2007, as required. Arbitrator Bujold wrote to Ms. Gottwald on July 3, 2007, advising that the decision on the preliminary issues would be made without her submissions, unless a reasonable explanation for missing the deadline was received by July 6, 2007. No explanation was provided. I reviewed the history on July 16, 2006 and decided to proceed without Ms. Gottwald’s submissions.

EVIDENCE AND ANALYSIS:

1. Is Ms. Gottwald precluded from entitlement to the claimed medical and rehabilitation benefits on the grounds that the expenses were not incurred within the benefit period set out in subsection 6(3) of the Schedule?

Section 6(3) of the Schedule establishes the benefit period for the medical and rehabilitation benefits described in the section as the longer of 10 years, or 20 years less the age of the insured person on the date of the accident, calculated from the day of the accident. Section 6(1) requires the insurer to pay “all reasonable expenses resulting from the accident within the benefit period…” Ms. Gottwald was 28 years old at the time of the accident. The longer period is therefore 10 years from the date of the accident.

The Court of Appeal considered the meaning of section 6 in Hope v. Canadian General Insurance Company² and ruled as follows:

To determine the grammatical and ordinary meaning of s. 6(1), it is helpful to remove the language that is irrelevant for present purposes and insert the operative definition of “benefit period”. The section would then read as follows:

The insurer will pay all reasonable expenses resulting from the accident within ten years calculated from the day of the accident and ending on the tenth anniversary of the accident.

When the section is read as set out above, its grammatical and ordinary meaning is clear. The insurer’s obligation to pay reasonable expenses is triggered when those expenses result from an accident and that result occurs within ten years of the date of the accident. If an expense arises out of one of the services or treatments described in ss. 6(1)(a) to 6(1)(f), but that service or treatment is supplied beyond the tenth anniversary of the accident, then on a plain reading of the operative words it cannot be said that the expenses resulted within the benefit period.

The Court’s finding is clear. Section 6 limits recovery to service or treatment supplied before the tenth anniversary of the accident.

Although the parties appear to know when the services or treatment upon which the medical and rehabilitation benefits claimed in this arbitration were supplied, that information was not provided in the filed material. My ruling is therefore as follows:

Ms. Gottwald is precluded from entitlement to medical and rehabilitation benefits under section 6 of the Schedule for services or treatment that were supplied beyond April 11, 2001.

2. Is Ms. Gottwald precluded from entitlement to the claimed income replacement benefits because her application for mediation was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 26(1) of the Schedule?

Section 26(1) of the Schedule repeats the time limit set out in section 281 of the Insurance Act and provides as follows:

A mediation proceeding under section 280 of the Insurance Act or an arbitration or court proceeding under section 281 of the Act in respect of benefits under this Regulation must be commenced within two years from the insurer’s refusal to pay the amount claimed in the application for statutory accident benefits or, if the person has attended school or accepted, or returned to, an occupation or employment, as permitted by section 16, within two years of the insurer’s refusal to pay further benefits.

State Farm received the Application for Accident Benefits some time between April 12, 1991, when the accident happened, and April 30, 1991 when it issued an Assessment of Claim. State Farm accepted the claim for IRBs and paid benefits at the rate of $185 per week, from April 19, 1991. State Farm issued a further Assessment of Claim on April 13, 1992, terminating IRBs, effective April 17, 1992.³ In the section relating to weekly income benefits, State Farm ticked off the box marked “entire claim denied”. The reason given for termination is as follows: “medical documents indicate that you are no (sic) fit to return to the work force”.

Ms. Gottwald retained Barry Small, a solicitor, who wrote to State Farm on May 13, 1992, requesting that benefits continue, due to Ms. Gottwald’s continuing disability.⁴ Mr. Small’s letter indicated that Ms. Gottwald had received the Assessment and disagreed with the reason for termination, which he assumed to be that Ms. Gottwald was now fit to return to the workforce. Benefits were not continued.

On January 14, 1995, almost three years after State Farm delivered its refusal to pay, Ms. Gottwald or Mr. Small applied for mediation on the issues of IRBs and medical and rehabilitation benefits. State Farm filed a reply.⁵ The section relating to IRBs is marked “Not Applicable”. The section relating to medical and rehabilitation benefits contains an explanation for the denial that includes a statement that the applicant is employable.

At mediation on May 30, 1995, Ms. Gottwald agreed to a full and final settlement of her claims for accident benefits arising from the accident. At State Farm’s request, Ms. Gottwald’s solicitor prepared a release that she signed and forwarded to State Farm. Ms. Gottwald later retained her present solicitor who filed a fresh Application for Mediation on August 23, 2001. State Farm took the position that the mediation should not proceed because of the Full and Final Release that Ms. Gottwald had signed in 1995. The issue of the validity of the Release was at that time before the Courts.

On April 26, 2005, the Court ruled that the settlement was void because of complete non-compliance with the Settlement Regulation.⁶ Further to that decision, Ms. Gottwald’s new solicitor again requested that State Farm pay IRBs from April 18, 1992, on-going med/rehab benefits, other benefits, interest and expenses. State Farm refused, taking the position at issue in this decision.

Section 24(8) of the Schedule requires an insurer to give written notice to the insured person, giving the reasons for refusal, if the insurer refuses to pay an amount claimed in an application for accident benefits. The requirements for a valid refusal were neatly summarized in Veldhuizen and Coseco Insurance Company⁷ as follows:

(1) An arbitrator does not have a general discretion to extend the time limits prescribed in the Act and Schedule.

(2) To determine if the limitation period applies in a particular case, it must first be determined whether, and when, there was a refusal to pay benefits, and then whether the insurer is estopped from relying on the limitation period that runs from the date of the refusal.

(3) The insurer must show that the refusal was clear and unequivocal, and was communicated to the applicant in writing, with supporting reasons.

(4) An insurer may be estopped from relying on the limitation period if the applicant relied to his or her detriment on the insurer's conduct or if the Insurer unreasonably delayed the applicant in processing the claim.

(5) The limitation period runs continuously from the time of the refusal unless the applicant has been misled or deceived by the insurer in subsequent dealings on the claim or the applicant has returned to work or school within the meaning of sections 16 and 26 of the Schedule.

Applying the above criteria, I find that the refusal given in the Assessment of Claim on April 13, 1992, was a valid refusal. Therefore, the Application for Mediation, filed on January 14, 1995, was filed beyond the two-year period.

In Turner and State Farm Mutual Automobile Insurance Company⁸, Director’s Delegate Makepeace described the standard to which insurers will be held in giving reasons for termination of benefits as follows:

The purpose of the notice requirement is to ensure that the insured person has enough information to decide whether to dispute or accept the refusal. The requirement also reinforces the insurer’s obligation to give full and fair consideration to every claim. However, while insurers are expected to take seriously their obligation to give written reasons for refusing benefits, the legislative objective of promoting early claims assessment and ongoing communications between the parties suggests they should not be held to a standard of perfection. An insurer’s misstatement of the entitlement test does not invalidate an otherwise clear and unequivocal notice.⁹

In upholding the Director Delegate’s decision, the Court of Appeal rules as follows:

The respondent argues that the notice is defective because it wrongly addresses the benefit that was never claimed. We do not agree. The notice clearly terminates the weekly benefit that the insured was receiving. While it offers as a reason that the legal test for another benefit is not met, that error neither renders the notice of termination less than clear and unequivocal nor breaches the obligation to give reasons. It simply gives a reason which the insured could, in a timely way, contest.¹⁰

I find that the reason State Farm gave for terminating IRBs, although not perfectly stated, because of the missing “w” in “now”, was capable of only one interpretation in the circumstances. I find that the refusal was clear and unequivocal, and that the reason was provided.

I find nothing in the subsequent conduct of State Farm that raises the issue of estoppel. I conclude that Ms. Gottwald is precluded from entitlement to the claimed income replacement benefits because her Application for Mediation was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 26(1) of the Schedule.

EXPENSES:

The parties made no submissions on expenses. If the parties are unable to resolve the issue of expenses, either party may make an appointment for me to determine the matter in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

August 2, 2007

Jeffrey Rogers Arbitrator

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Ms. Gottwald is precluded from entitlement to medical and rehabilitation benefits under section 6 of the Schedule for services or treatment that were supplied beyond April 11, 2001.
Ms. Gottwald is precluded from entitlement to the claimed income replacement benefits because her application for mediation was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 26(1) of the Schedule.