Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 171

FSCO A07-000015

BETWEEN:

DAVID MURRAY

Applicant

and

AVIVA CANADA INC.

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: John Wilson

Heard: June 15, 2007, in London, Ontario.

Appearances: Lucy Lee for Mr. Murray

Chad Townsend for Aviva Canada Inc.

Issues:

The Applicant, David Murray, was injured in a motor vehicle accident on September 11, 2002. He applied for statutory accident benefits from Aviva Canada Inc. (“Aviva”), payable under the Schedule.¹ Mr. Murray continued to have long-term problems that he associated with the motor vehicle accident. Ultimately, he applied for catastrophic status and was examined by a DAC team headed by Dr. Lacerte. The DAC team concluded that Mr. Murray was not catastrophically impaired as defined by the Schedule. The DAC team was composed of a physiatrist, a registered nurse and an orthopaedic surgeon and dealt with the physical aspects of Mr. Murray’s impairments.

Although some relatively small benefit claims are included in the arbitration, the majority of the dispute turns on whether or not Mr. Murray meets the test for catastrophic impairment.

The parties were unable to resolve their disputes through mediation, and Mr. Murray applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

By the time of the pre-hearing in this dispute, it became evident that psychological impairment could play a larger role in the analysis of total impairment than had appeared to have been contemplated by the DAC assessment team.

At the time of the first pre-hearing, Ms. Leilah Edroos, ING’s counsel, submitted that any examination of catastrophic impairment at arbitration can only take place within the same narrow parameters as the examination by the DAC team. In other words, since the DAC team only analyzed the physical aspects of the impairment, so should the arbitration hearing which

Mr. Murray is using to challenge the findings of the DAC.

Aviva has now requested:

An order specifying the scope of the Applicant’s dispute on the issue of catastrophic impairment.
An order that the issue of catastrophic impairment be referred back to the original CAT DAC team so that they may consider new arguments as to catastrophic impairment being advanced.
In an alternative, an order that the Applicant submits to insurer examinations pursuant to section 42, including an assessment by a physiatrist, psychologist, psychiatrist and such other assessors as are required in order to respond to the new arguments on the issue of catastrophic impairment.

Result:

The general issue of “whether Mr. Murray is catastrophically impaired” in accordance with the Schedule has been referred to arbitration. In this context the arbitrator hearing this matter will have to consider all elements of the definition of catastrophic impairment, whether or not the referral to the CAT DAC specifically mentioned such elements or potential impairment.
It is inappropriate to refer the psychological sub-issue of the catastrophic impairment issue back to the original CAT DAC. The DAC has made its determination on catastrophic impairment and is now functus.
The request for a further section 42 examination appears to be hypothetical at this time. There is no evidence of compliance with any of the notice or other preconditions for a valid section 42 insurer’s examination, nor of any actual arrangement for an examination. Nor is there evidence to characterize any proposed examination as properly for the purposes of determining Mr. Murray’s entitlement to benefits at this point. A further examination at this time would likely jeopardize the current hearing dates.

EVIDENCE AND ANALYSIS:

The issues in this motion first arose formally during a pre-hearing in this arbitration. I made the following comments in the pre-hearing letter:

The CAT DAC in this matter was conducted principally by experts in physical medicine. Counsel for Mr. Murray took the position that a potentially important part of Mr. Murray’s disability was psychological in nature and that the issue of catastrophic impairment referred to arbitration should reflect the entire gamut of considerations, including psychological impairment, outlined in the Schedule. Aviva took the position that only those matters considered by Dr. Lacerte’s team were the proper subject of arbitration.

Rule 33.1(a) of the Dispute Resolution Practice Code defines one of the roles of the pre-hearing arbitrator as: “identifying and obtaining agreement as to the issues for arbitration.”

Consequently, I made the following order:

Given that the generic issue of catastrophic impairment was mediated and referred to arbitration by Mr. Murray, the Insurer shall have 30 days from the pre-hearing to serve and file a motion to narrow the issue as indicated, failing which it will be deemed to have abandoned its position on the nature of the catastrophic issue being mediated.

Aviva, in this motion, requested the following relief:

An order specifying the scope of the Applicant’s dispute on the issue of catastrophic impairment.
An order that the issue of catastrophic impairment be referred back to the original CAT DAC team so that they may consider new arguments as to catastrophic impairment being advanced
In an alternative, an order that the Applicant submits to insurer examinations pursuant to section 42, including an assessment by a physiatrist, psychologist, psychiatrist and such other assessors as are required in order to respond to the new arguments on the issue of catastrophic impairment.

Scope of Hearing:

As noted above, Rule 33.1(a) gives an arbitrator the mandate of identifying the issues in dispute in an arbitration. Although there is no disagreement that the generic issue of catastrophic impairment has been referred to arbitration, there is a substantial disagreement between the parties as to what that entails in this particular case.

The nature of the definition of issues in dispute in a matter can have several key consequences for a party. If an issue is not clearly referred to arbitration by one or more parties, the arbitrator may find that he or she has no jurisdiction to address it.

An arbitrator, appointed by the Director from the roster of arbitrators, has the mandate set out in section 20(2) of the Insurance Act. This includes “exclusive jurisdiction to exercise the powers conferred upon him or her under this Act and to determine all questions of fact or law that arise in any proceeding before him or her and, unless an appeal is provided under this Act, his or her decision thereon is final and conclusive for all purposes.” In this case, the specific question referred to arbitration by Mr. Murray is: “whether Mr. Murray is catastrophically impaired.”

In arbitration, the application for arbitration and the Insurer’s Response constitute the equivalent of pleadings in a court action. Swinton J. noted in Foodcor Services Corp. v. Seven-Up Canada Inc. [1998] O.J. No. 2576:

The function of pleadings is to define issues in controversy in the litigation, in order to give the opposing party fair notice of the case to be met and allow him or her to respond, and to assist the court in determining the issues of the case.

The defining issues for the arbitration then should be found in the Application for Arbitration and the Insurer’s Response.

As noted, this arbitration is about a designation of catastrophic impairment. The pertinent legislative provisions allowing for CAT DACs read at the time of application, as follows:

40(1) An insured person who sustains an impairment as a result of an accident may apply to the insurer for a determination of whether the impairment is a catastrophic impairment.

(2) The insurer shall, within 30 days after it receives the application,

(a) determine that the impairment is a catastrophic impairment and give the insured person notice of the determination;

(b) determine that the impairment is not a catastrophic impairment and give the insured person notice of the determination, including the reasons for the determination; or

(c) give the insured person notice that the insurer requires the insured person to be assessed by a designated assessment centre in accordance with section 43.

Section 43 sets out additional rules for the DAC assessments, including CAT DACs.

It is of note that the legislation provides merely for the right of an insured to apply for “a determination of whether the impairment is a catastrophic impairment.” Section 40(4) further provides that “the determination by the designated assessment centre is binding on the insured person and the insurer, subject to the determination of a dispute, in accordance with sections 279 to 283 of the Insurance Act.”

It is of some importance that a finding of catastrophic impairment, as the term is used in the Schedule, can be reached by a variety of routes, including an examination of “whole body impairment.” Consequently, a determination of catastrophic impairment should be based on an evaluation of all elements which could lead to a finding of catastrophic impairment, including the interaction of different elements where relevant. As Arbitrator Blackman remarked in Ms. G. and Pilot:

I also note that the Catastrophic Impairment Designated Assessment Centre Assessment Guidelines, October 2001, while not binding on me, also, as noted above, confirms the CAT DAC’s responsibility to ensure a comprehensive assessment of each claimant’s impairments. This corresponds with what I find is the general intent of paragraph 2(1)(f) and subsection 2(3) of the Schedule, as set out in Desbiens and McMichael, that the determination of WPI requires the inclusion of all impairments arising from the motor vehicle accident.²

A DAC does not merely make a recommendation which either side may accept or reject, but a “determination” of the specific issue referred to it, one that is binding on both parties, subject to any determination by a court or an arbitrator.

Whatever the nature of DACs when making a determination of a question before them, their role in arbitrations is quite clear. Arbitrators have long held that DACs, when considered in the context of the arbitration process, are little more than expert reports; no more, no less. At arbitration, it is not a question simply of reviewing the finding of a DAC by any standard of review but of reconsidering the questions treated by the DAC in light of the evidence presented to the DAC and any other relevant evidence the parties put before the arbitrator. If the arbitration hearing is to be construed as any sort of appeal of a DAC, it is a hearing de novo with the arbitrator substituting his or her decision for the DAC.

It is this faint resemblance to a statutory appeal that perhaps introduces much of the confusion about this arbitration. If the arbitration of the issue of catastrophic status is in essence an appeal of the determination of the DAC, then it would make sense that the issues as framed for the DAC would form the basis of the arbitration. The question for the arbitrator would be whether the DAC got it right, based on the materials submitted to it for examination, not simply whether an insured was catastrophically impaired.

In this case however, the mandate of the arbitrator is much wider. It is clear that the arbitration process is a hearing “de novo”, which is intended to hear all relevant and admissible evidence, including that of the DAC, and not just a review or an appeal of a DAC’s findings.

Taking the view that an arbitration is a new and different process from the DAC is consistent with the legislative scheme and the DAC procedures. After all, the decision of the CAT DAC is binding “subject to the determination of a dispute” by an arbitrator. There is no reference in the legislation to appeal or review by an arbitrator, only to a further “determination” which trumps that of a DAC.

In a case that analysed the function of DACs (albeit from the point of view of liability in tort for their actions), J.M. Simmons J.A. observed:³

In my view their legislatively created decision-making function distinguishes DACs from expert witnesses, court-appointed assessors, and types of investigators considered by the motion judge, and creates a close and direct relationship to the persons they assess.

She continued:

Further, the legislative directives relating to conflict of interest and the administrative guidelines relating to professional experience underline the importance the legislature ascribes to neutrality and competence in conducting DAC assessments.

While the DAC has its own responsibilities as a statutory decision-maker, as noted earlier an arbitration or court proceeding challenging the conclusion of a DAC is an entirely separate process.

Section 282(3) of the Insurance Act provides:

(3) The arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer. 1996, c. 21, s. 38 (2).

Consequently, the issue of catastrophic impairment referred to arbitration in this matter encompasses the question of whether Mr. Murray meets the definition of catastrophic impairment as defined by section 2(1) of the Schedule in effect at the time of the accident.

In this context, the arbitrator hearing this matter will have to consider all elements of the definition of catastrophic impairment, whether or not the referral to the CAT DAC specifically mentioned such elements or potential impairment, since such was the issue referred to arbitration by Mr. Murray.

Referral back to the Lacerte DAC

Aviva has requested an order that the issue of catastrophic impairment be referred back to the original CAT DAC team so that they may consider any new information being advanced as to catastrophic impairment.

As noted earlier, a DAC is a body that exercises a statutory power of decision and issues a decision that is binding on both parties, subject to any subsequent decision of a court or arbitrator. As such, it has elements of a decision-making body.

A basic principle of the common law is that every member of a body engaged in a judicial proceeding, or exercising a formal power of decision⁴must have had the opportunity to be present and to have personally heard all the evidence from the start to the finish, if he or she is to participate in the deliberations leading to a determination of the matter.

In 1929, Lord Hanworth M.R. observed:

…those justices who did hear the case must not be joined by other justices who had not heard the case for the purpose of reaching a decision…⁵

A DAC exercising a statutory power of decision is no different than any other tribunal or administrative decision-maker in this aspect of its decision-making.⁶

In this matter, at the time of the referral to the DAC, there was no specific psychological disorder claimed by Mr. Murray, with the possible exception of his pain disorder.⁷ Consequently, the DAC made the decision to proceed without engaging the assessors required for an evaluation of a catastrophic impairment involving psychiatric or psychological impairments.

It should be noted that catastrophic impairment includes “whole person impairment.”⁸

It goes without saying that the interaction of even a lesser psychological condition could be of significant importance in determining such a whole person impairment.

As mentioned, the referral to the CAT DAC included a reference of chronic pain. The DSM IV makes the following reference to pain disorders:

Pain Disorder is a somatoform disorder in which the predominant area of focus is painful bodily complaints in which psychological factors are determined to be central to the onset, severity, exacerbation or maintenance of the complaint.

DSM Code – 307.80

There can be no doubt thata reference to chronicpain or a pain disorder in a referral to a catastrophic impairment should at least raise the question of whether there is psychological involvement.In this case, however, the DAC was content to proceed to an evaluation without a psychiatric or psychological component.

Among the legislative directives and administrative guidelines applicable to DAC’s is the Catastrophic Impairment Designated Assessment Centre Assessment Guidelines (Guidelines) issued by the Financial Services Commission, and revised April 2002.

As its title indicates, this document sets out appropriate procedures for intake and performance of a catastrophic assessment. It also sets out the professional requirements for assessors. As a road map to the assessment process, it charts the flow of the procedure from start to finish and notes watersheds in the assessment process.

The Guidelines point out that as part of the intake process a DAC is mandated to ensure that “the appropriate assessment team and assessment process are selected.” DACs are also advised that “following file review, should the claimant require a full assessment, an assessment plan is sent to the insurer and the claimant.”⁹

Section 2.2.2 of the Guidelines, which deals with the Core Team of assessors, states that where there are “Mental and Behavioural Disorders”, the assessment team must be composed of a psychiatrist, a psychologist and either of an occupational therapist or a physiotherapist. Had the team seriously considered that a pain disorder involved a mental or behavioural disorder it should have involved the team members required under that rubric. It is clear that there was no such involvement notwithstanding comments in the DAC that reflect elements of psychological considerations (pain disorder).

While it is not known exactly why Dr. Lacerte’s team decided not to involve a psychologist in Mr. Murray’s assessment, it is clear that they made the decision in the light of complaints that may well have had a psychological perspective. According to the Guidelines Dr. Lacerte had to decide whether there were “Mental and Behavioural Disorders” present¹⁰, and if so, structure the panel of examiners in a certain way.

The reality is that Dr. Lacerte’s team was not structured appropriately for an assessment with a psychological component. Now the Insurer intends to cure that shortcoming by retroactively adding another assessor to the team to deal with the psychological aspects of the claim.

A multi-disciplinary DAC is more than a collection of individual reports by experts in various fields. It is a collective determination which owes its outcome to the opinions of all assessors working in concert.

A reference back to the DAC at this time to complete an addendum psychological report would, unless the DAC was redone from the beginning, result in a DAC process in which the psychological assessor would not have had the opportunity to sit in on any previous discussions or consultations between the DAC assessors.¹¹

Consequently, in accordance with the rule in the King v. Huntingdon (supra) it would be inappropriate to reach a decision in this manner without all the assessors having the opportunity to participate in all the collective deliberations.

While I accept that in another situation there might be the foundation for a finding that such a failure fundamentally tainted the DAC, in this matter neither party wishes the DAC to be redone completely from its inception – that is an issue that is beyond the scope of this motion.

In this context, I also draw from the failure of the DAC to compose itself appropriately, and to direct its enquiry towards a possible psychological issue, another reason not to refer the psychological issues back to the same DAC for reconsideration. The Lacerte DAC, having already misdirected itself in not recognizing a psychological component to Mr. Murray’s claim and in failing to have the necessary assessors as part of the team, does not inspire any confidence that they would be more proficient the second time around.

I decline to refer the matter back to the Lacerte DAC, with or without a further psychological component to the assessment.

Section 42 examinations

The Introduction to the Dispute Resolution Practice Code (4th Edition, Updated October 2003) (the “Code”), which governs arbitrations at the Commission, notes that our procedural rules aim to promote “timely, cost-effective and fair dispute resolution services.”

Aviva’s request for an order compelling a further section 42 examination in this matter, as noted earlier, arises from its perceived need for further medical assessments of Mr. Murray. It claims that it has been taken by surprise in this arbitration, having been advised only recently that there was a psychological component to Mr. Murray’s alleged catastrophic impairment.

Aviva notes that it had no psychological assessment, and that the issue was not addressed directly by a properly constituted DAC.

With the hearing in the early fall, it goes without saying that to hold further examinations at this stage would necessitate an adjournment of the arbitration hearing. If any reports are to be considered in the arbitration, the examinations must first be arranged, the reports written, and then served on the Applicant at least 30 days prior to a new hearing date. Given competing demands on counsel time, I suspect that a significant delay of the hearing process could result from any resulting adjournment.

In Glynn and General Accident Assurance Co. of Canada (OIC A96-000004, November 25, 1996), Arbitrator Makepeace summarized the normal requirements for insurer’s medical examinations.

I find that the Insurer’s right to require the Applicant to attend an Insurer Medical Examination is subject to the following requirements under sections 23(2) and 25:

(i) The examination must be required in respect of a claim for weekly benefits.

(ii) The Insurer may require an IME “as often as it reasonably requires.”

(iii) The Insurer must give the Applicant “reasonable notice” that it requires the examination.

(iv) The examination must be performed by a “qualified medical practitioner, psychological advisor or chiropractor.”

The second of Arbitrator Makepeace’s requirements has engendered significant problems, since each side views the reasonableness of any particular examination through very different lenses. In this matter, however, I have no direct evidence of the nature of the proposed examination, or by whom it is proposed Mr. Murray be examined.

While I can assume a psychological orientation to the proposed examination due to the reference to a psychologist and a psychiatrist, no practitioner is named. Nor is any sub-specialty named in the context of an assessor. It is difficult to come to any informed conclusion as to the

reasonableness of an examination without at least some sort of evidentiary framework. What we have is essentially a bare claim for an assessment without any surrounding context.

While I note the lack of supporting evidence in support of the reasonableness of the examination, I am also concerned by other aspects of the request.

Director’s Delegate Draper commented in Traders General Insurance Company and Levey (FSCO P98-00035, February 25, 1999):

Insurers do not have an absolute right to schedule examinations whenever they want. The examination must be reasonably necessary and scheduled at a time reasonably convenient for the insured person. As Director’s Delegate Naylor held in F.S. and Belair Insurance Company Inc., (OIC P96-00039, June 11, 1996), this involves a balancing of the interests of the parties, with the timing of the examination as an important consideration. Absent a clear explanation, examinations scheduled on the eve of the hearing suggest the kind of tactical brinkmanship that arbitrators have properly rejected as part of this system.

In this matter, counsel for Mr. Murray has pointed out that, in addition to being, in the context of a catastrophic claim, almost on the brink of the hearing, the formal request for a section 42 examination has not yet been made.

I note that Mr. Murray also contends that the Insurer has been aware of the pain disorder since early on in this claim.

The Insurer clearly had the benefit of the medical notes and records including the references to a pain syndrome, had received several treatment plans from the psychologist, which were the subject of DAC assessments and had, indeed, paid for psychological treatment when ordered by the DAC. It had ample opportunity to request an earlier psychological examination had it been so inclined without affecting the arbitration date. I cannot understand how it was not aware of a potential psychological component to Mr. Murray’s claim. Now is too late to claim surprise.

There is also a request for an examination by a physiatrist. Mr. Murray’s position on the suggestion of a physiatrist’s report is that the knee injury was front and centre in his claim from the inception. A prudent insurer would have addressed that issue early on in the process, with appropriate updates as required.

In the materials filed in support of this motion, there is no reasonable explanation offered for the Insurer’s delay in proceeding with the further investigation of the potential psychological problems, nor of the physiatrist’s examination in a time-frame that would not have affected the arbitration date itself.

It is accepted that the Insurer has the onus of proving that its proposed assessment is reasonable and necessary and is in compliance with the provisions of the Schedule. Given the relatively late timing of this request, it is also incumbent on the Insurer to displace the obvious inference that this is merely “tactical brinkmanship that arbitrators have properly rejected as part of this system.”

The Insurer has suggested that an examination is available at any time for the purposes of the Schedule. In this context, however, there is no assurance here of the intention to examine only for the purposes of adjusting the file and reconsidering benefits.

Given the timing of the argument in favour of further assessments, I am not convinced that the adjustment of the claim is the sole or even the predominate reason for the proposed assessments. Certainly, Aviva did not offer to undertake that no use would be made of any information obtained in the arbitration process. What Aviva appears to want is in fact a further defence medical, something that is not provided for either in the Schedule or the Code.

While I can accept that the proposed examinations may be useful to the Insurer, and may be a reasonable proposal from the point of view of a defence counsel whose interest is in bolstering a client’s case, I do not accept that they are necessarily reasonable in the context of this arbitration scheme.

Even if one were to take the position that, in the interest of having the most complete information before the hearing arbitrator, it would be appropriate to adjourn the hearing and permit the assessments to take place, I do not accept that it would be possible to easily address the prejudice to Mr. Murray of significant further delay, without losing sight of the goals of the arbitration process.

While I accept that, while there may well be some prejudice arising to the Insurer from the absence of further, more recent assessments, any such prejudice is largely traceable directly to the Insurer’s own decisions on file handling. It could have been more pro-active in adjusting and assessing Mr. Murray’s claim. To this extent at least, it is effectively the author of its own misfortune.

More fundamentally however, in this case, while there is provision in the Schedule for insurer’s examinations, “for the purposes of assisting an insurer to determine if an insured person is or continues to be entitled to a benefit…”, the question appears to be entirely hypothetical at this time. There is no evidence before me of compliance with any of the notice or other preconditions for a valid section 42 insurer’s examination by an Insurer. Nor is there evidence before me to characterize any proposed examination as properly for the purposes of determining Mr. Murray’s entitlement to benefits at this point. These are basic prerequisites of section 42 examinations.

Even were the prerequisites to a section 42 examination in place I am not convinced that I have any authority to issue “an order that the applicant submits to insurer examinations pursuant to section 42”, as requested by the Insurer. While I may rule on the consequences of a failure of an insured to make him or herself available for a section 42 examination, I am unaware of any authority granted to an arbitrator to compel attendance at such an examination.

For the above reasons the Insurer’s request that Mr. Murray be ordered to attend certain medical examinations is declined.

EXPENSES:

I exercise my discretion to award Mr. Murray his expenses incurred in this preliminary issue hearing. If the parties are unable to agree on the amount of expenses, I may be spoken to on that issue.

September 7, 2007

John Wilson

Arbitrator

Date