Lou Mangos v. Aviva Canada Inc., 2007 ONFSCDRS 201

Financial Services Commission of Ontario Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 201

FSCO A06-000847

BETWEEN:

LOU MANGOS Applicant

and

AVIVA CANADA INC. Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Susan Sapin

Heard: By written submissions received July 6, and August 3 and 10, 2007

Appearances: James Daris for Mr. Mangos Joseph Griffiths for Aviva Canada Inc.

Issues:

The Applicant, Lou Mangos, was injured in a motor vehicle accident on June 11, 2003. He applied for and received statutory accident benefits from Aviva Canada Inc. (“Aviva”), payable under the Schedule¹, including, among others, $3,200 in income replacement benefits (“IRB’s”). Aviva wrote to Mr. Mangos on November 11 and December 17, 2003, requesting that he repay the IRBs paid because he had received paid sick leave from his employer for the same period he received IRBs. Mr. Mangos continued to claim IRB’s amounting to $12,778.86, which Aviva refused to pay. The parties were unable to resolve their disputes, and Mr. Mangos applied for mediation at the Financial Services Commission of Ontario under the Insurance Act² on November 23, 2005. Mediation was unsuccessful and Mr. Mangos applied for arbitration.

Aviva takes the position that Mr. Mangos is barred from proceeding to arbitration because his application for mediation is out of time.

The preliminary issue in dispute at this arbitration is:

1. Is Mr. Mangos precluded from proceeding to arbitration because he failed to apply for mediation within two years after Aviva’s refusal to pay the amount claimed, as required by ss. 51(1) of the Schedule and ss. 281.1(1) of the Insurance Act?

Result:

1. Mr. Mangos is precluded from proceeding to arbitration because he failed to apply for mediation within two years after Aviva’s refusal to pay.

The substantive issue at arbitration as stated in Mr. Mangos’ Application for Arbitration, and the issue that was mediated, is a claim for the recovery of paid sick days in the amount of $12,778.86.

The issue before me is whether Aviva’s OCF-9 form (“Explanation of Benefits Payable by Insurance Company”) and letter to Mr. Mangos, both dated November 11, 2003, or, alternatively, an OCF-9 dated December 17, 2003, were valid refusals which triggered the two-year time limit for applying for mediation. The preliminary issue proceeded by way of written submissions and documentary evidence.³

Mr. Mangos received Aviva’s November 11, 2003 letter and OCF-9 on November 14, 2003⁴ and his Application for Mediation was received by the Commission on November 23, 2005, 9 days after the expiry of the two-year time limit.

Mr. Mangos advanced a number of arguments in support of his position that Aviva should not be allowed to rely on the two-year time limit, which, if I understand them correctly, are: the refusals contained in the letter and OCF-9 of November 11, 2003 were not clear and unequivocal but, rather, were “an invitation to clarify and provide further information as regards the scope and nature of his claim”; Aviva’s subsequent conduct and communications with Mr. Mangos misled him into believing the scope of the dispute had changed “involving making different and further issues that were not covered in the November 11, 2003 communication”; and Aviva’s failure to advise Mr. Mangos that it was taking the position he was statutorily barred from proceeding to arbitration at mediation and afterwards indicates that either Aviva was unaware the time limit was tolling, or it did not consider the time limit to be relevant, because Aviva itself did not believe its refusals were clear and unequivocal.

Having reviewed the evidence before me, I find that it does not support Mr. Mangos’ position.

EVIDENCE

The following facts are not in dispute. At the time of his motor vehicle accident, Mr. Mangos had been employed as a Collection Contact Officer with the Canada Revenue Agency for over six years. As such, paid sick leave was available to him from his employer, and he did in fact receive paid sick leave from the date of the accident, June 12, 2003, up until August 7, 2003. In addition, Mr. Mangos received an IRB from Aviva in the amount of $3,200 for that same period.

On November 11, 2003, Aviva sent Mr. Mangos a letter and an OCF-9 in response to expense claims submitted by him. The relevant portions of the letter read as follows:

You have also submitted lost sick time through your employer that you would like Aviva to compensate you for. This is not recoverable under your Auto Policy. If you elect to collect sick benefits your auto insurer does not have to compensate you for same. It is further noted in your file that from the mva up to August 5, 2003 you collected 100% sick benefits through your employer while collecting Income Replacement Benefits from Aviva. This information was confirmed through Patricia Gauvieau of your office. In essence you received an overpayment in the amount of $3,200.00.

This letter is to advise you that in accordance with section 47(1)(c), we are requesting that you repay the overpayment made. Please forward a check totalling $3,200.00 made payable to Aviva Canada Inc. to this office within 21 days from the date of this letter. If you are unable to repay this amount all at one time please contact the writer to devise a repayment plan.

You may dispute this overpayment and/or reduction of your weekly income replacement benefit in accordance with section 49 of the Statutory Accident Benefits Schedule and apply for mediation in accordance with Sections 279 to 283 of the Ontario Insurance Act. Please advise the writer should you require an application for Mediation.

The OCF-9 reiterates that Mr. Mangos is not eligible for an IRB while he was receiving sick pay: “The lost sick days you are claiming are not recoverable. We do not compensate for sick days. You are entitled to an IRB or sick days not both. See attached letter for further info.”

Page 3 of the OCF-9 is devoted to “Applicant’s Right to Dispute” and sets out the dispute resolution process step-by-step and includes detailed information about how to apply for mediation, the two-year time limit for doing so (with WARNING: TWO YEAR TIME LIMIT bolded in capital letters at the bottom of the page), and the consequences of a failure to mediate: “. . .you CANNOT arbitrate, commence a lawsuit or request a neutral evaluation UNLESS: (i) you proceeded with mediation, AND (ii) the mediation failed.”

The last paragraph of the OCF-9, under the bolded two-year time limit heading noted above, further states: “You have TWO YEARS from the date of your insurer’s refusal to pay, or reduction of a benefit, to arbitrate or commence a lawsuit in court. You may have longer than two years if the arbitration or lawsuit is commenced 90 days from the date the mediator provides his or her mediation report . . .”

Mr. Mangos does not dispute that he received both of these documents.

THE LAW

Subsection 281.1(1) of the Insurance Act states that a mediation proceeding “shall be commenced within two years after the insurer’s refusal to pay the benefit claimed;” subsection 51(1) of the Schedule provides that a mediation proceeding “shall be commenced within two years after the insurer’s refusal to pay the amount claimed.”

Where an insurer refuses to pay a benefit, s. 49 of the Schedule requires that it provide the insured person with a written notice concerning the person’s right to dispute. Numerous decisions of the Commission and the courts have dealt with these and previous similar provisions and the jurisprudence regarding the two-year time limit for applying for mediation is well-established.⁵

Briefly, the two-year time limit is triggered by the insurer’s refusal to pay the benefit claimed. In determining whether a limitation period applies, the arbitrator must ask first, whether, and when, there was a refusal to pay benefits; and second, whether the insurer may rely on a limitation period that runs from the date of the refusal.⁶

The refusal must be in writing and must be clear and unequivocal. The onus is on the insurer to establish that an applicant has received the proper notice. The focus of the analysis is the refusal itself. The test is an objective one. One must look at the sufficiency of the notice itself, keeping in mind that insurers are not held to a standard of perfection.⁷

In addition, the Supreme Court of Canada in Smith v. Co-operators General Insurance Co. 2002 SCC 30, [2002] 2 S.C.R. 129, held that notification is incomplete, and the two-year time limit does not being to run, until the insured person is informed of his or her right to dispute the insurer’s refusal to pay benefits. In setting out what was required for a notice to be sufficient under the equivalent of the present s. 49 of the Schedule, Gonthier J. stated at paragraph 14 of the judgment:

In my opinion, the insurer is required under s. 71 to inform the person of the dispute resolution process contained in ss. 279 to 283 of the Insurance Act in straightforward and clear language, directed towards an unsophisticated person. At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process. Without this basic information, it cannot be said that a valid refusal has been given.

This test of sufficiency has been adopted and applied in several FSCO decisions⁸ and arbitrators have held that it continues to apply despite the difference in wording between s. 71 and s. 49 of the Schedule. I agree with my colleagues on this point, and was presented with no argument to persuade me otherwise.

If an insurer’s notice of refusal to pay benefits fails to meet either test, i.e. the refusal is not clear and unequivocal, or the insurer failed to explain the insured’s right to dispute as set out in Smith, then it is not a valid refusal, and the two-year time limit does not begin to run. Either ground alone is sufficient to invalidate the refusal.

Having reviewed the evidence before me, I find that Aviva’s November 11, 2003 letter and OCF-9, taken together, constitute a clear, unequivocal and valid refusal in accordance with both the tests, for the reasons set out below.

ANALYSIS

a) Was the notice clear and unequivocal?

I find the OCF-9 and letter of November 11, 2003 letter to be clear and unequivocal notice that Aviva refused to pay IRBs to Mr. Mangos because he had received paid sick leave from his employer. Both documents clearly characterize the payment of $3,200 in IRBs as an overpayment, and the letter requests Mr. Mangos to pay that amount back in accordance with paragraph 47(1)(c) of the Schedule, which requires insureds to repay IRBs where collateral benefits for loss of income are available to them.⁹ In the last paragraph of the letter quoted above, Aviva advises Mr. Mangos of his right to dispute the “overpayment and/or reduction” of his IRBs.

Mr. Mangos, however, takes the position in this proceeding that the letter and OCF-9 are not a clear and unequivocal refusal to pay him an IRB, but rather an “invitation to clarify and provide further information as regards the scope and nature of his claim.” He further submits that he was “invited to make ‘a proper election’ or to clarify whether he was asking for both sick benefits along with IRBs from the Insurer.”

Mr. Mangos submits that by further conduct and correspondence, in particular a letter from Aviva dated February 12, 2004,¹⁰ he was given to understand that the Insurer was revising the “exact content of its concerns . . . as a result of further correspondence and negotiation with the Applicant.” ¹¹ In that letter Aviva agreed to deduct, from the $3,200 overpayment, an amount of IRBs for the period August 7 to 29, 2003, when Mr. Mangos had taken unpaid sick leave.

Having reviewed the course of correspondence between the parties provided to me in this application, I fail to see how Mr. Mangos could have misunderstood Aviva’s position that he was not entitled to an IRB for any period in which he received paid sick leave from his employer.

Mr. Mangos’ December 5, 2003 letter to his lawyer, Mr. Daris, makes it clear that he understood Aviva’s November 11, 2003 letter: “The letter is basically requesting that I am to return the overpayment of $3,200. They are stating that I am not entitled to weekly income benefits if I am using my sick days from my employer.” Mr. Mangos acknowledges he used his paid sick days to meet financial obligations, and that he lost wages when he took “sick time without pay” (emphasis added) from August 7 to 29, 2003. It is this lost sick time without pay for which he was asking Aviva for compensation.¹²

Mr. Daris forwarded Mr. Mangos’ letter to Aviva reiterating that Mr. Mangos would like to be compensated for wages lost in the period between August 7 and 29, 2003, and wrote again on January 26, 2004 repeating the request.

Aviva responded on January 29, 2004 agreeing to calculate the time loss for sick leave without pay as per the regulations and deduct that amount from the $3,200 overpayment. Mr. Daris wrote back on February 4 advising that his client agreed with this proposal, and Aviva’s February 12 response advised that the correct amount of Mr. Mangos’ IRB entitlement was 80 per cent of the net amount of the ‘owed sick time,’ or $843.82.

Mr. Mangos did not dispute the calculation, and Mr. Daris sent Aviva a cheque for $2,356.18 on behalf of Mr. Mangos on March 9, 2004.

There is nothing in this exchange of correspondence to indicate that Aviva ever wavered from its position that Mr. Mangos was not entitled to an IRB if he received paid sick leave from his employer. I find Mr. Mangos’ own correspondence and the fact that he agreed to repay the IRB he had received, and that he did in fact repay it in March 2004, clearly indicate that he understood Aviva’s position from the day he received Aviva’s November 11 , 2003 letter and OCF-9, and afterwards.

As submitted by Aviva, arbitrators have repeatedly accepted that an insurer does not alter its position merely by engaging in ongoing discussions with its insured. As stated by Arbitrator Naylor in Zeppieri:

Insurance companies are responsible for investigating new information provided after benefits are terminated and must fairly re-evaluate an applicant’s claim in light of the new information provided. The re-evaluation of claims on an ongoing basis is integral to a system of periodic benefits, and is a continuing obligation owed to an applicant.

The fact that an insurance company reconsiders a prior decision to terminate benefits (as it must do) does not mean that a refusal of benefits only can take place at the completion of that process.

In Mr. Mangos’ case, the situation is even clearer, because the only “negotiation” evident from the ongoing correspondence between the parties between November 11, 2003 and March 2004, was about how Mr. Mangos was going to repay the overpayment, and how to calculate the correct amount to be repaid. None of the evidence before me suggests that Aviva ever altered, or considered altering, its position that Mr. Mangos was not entitled to an IRB if he received paid sick leave from his employer.

The issue in dispute at arbitration, as framed by the parties, is whether or not Mr. Mangos is entitled to be compensated for time taken off work, by way of a weekly IRB payable by Aviva, even though he received paid sick leave from his employer.¹³ The answer is that he is not entitled to receive both paid sick leave and an IRB, which is the answer Aviva gave him, clearly and unequivocally, on November 11, 2003 in its letter and OCF-9, and from which position I find it never wavered.

b) Did Mr. Mangos receive proper notice about the two-year time limit?

Although Aviva’s November 11 letter on its own does not conform to the minimum notice standards as regards the two-year limitation period and the right to dispute, as set out in Smith, the accompanying OCF-9 most certainly does “include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process,” as set out by the Supreme Court of Canada. Unlike the situation in Smith, where the insurer had relied on a standard form that stopped short of providing information about the arbitration process, the OCF-9 sent to Mr. Mangos by Aviva clearly explains in unmistakable terms the next steps required to dispute the refusal, including not only the need to apply for mediation within two years of the insurer’s refusal to pay, but the need to commence an arbitration either within two years of the refusal, or within 90 days of the mediator’s report.

The form also sets out the consequences of not applying for mediation on time: the insured person cannot arbitrate unless they proceeded with mediation and it failed.

I find that the OCF-9 used by Aviva meets the minimum requirements set out in Smith and that Aviva has met its obligations to Mr. Mangos with respect to providing him with sufficient information about the dispute resolution process in its entirety and proper notice about the two-year time limit.

I do not accept Mr. Mangos’ argument that Aviva should not be allowed to rely on the time limit because it did not assert this time limit defence at mediation and only raised it as part of its Response to Mr. Mangos’ Application for Arbitration. As confirmed by Arbitrator Miller in Nahsari and Belair Insurance Company Inc., (FSCO A00-001283, December 5, 2001) an insurer who seeks to rely on the expiry of a time limit to prevent an insured person from proceeding to arbitration is asserting a substantive legal defence that is within an arbitrator’s jurisdiction to determine and that does not need to be mediated. Nor is there any obligation on Aviva to continually “remind” Mr. Mangos of the limitation period; he had proper notice of it, and it was open for Aviva to raise this legal defence in its formal Response to Mr. Mangos’ Application for Arbitration.

EXPENSES:

In the event the parties are unable to agree on who should pay expenses incurred in this preliminary hearing, either party may make an appointment to have the matter determined by me.

October 17, 2007

Susan Sapin Arbitrator

Financial Services Commission of Ontario Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 201

FSCO A06-000847

BETWEEN:

LOU MANGOS Applicant

and

AVIVA CANADA INC. 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. Mangos is precluded from proceeding to arbitration because he failed to apply for mediation within two years after Aviva’s refusal to pay the amount claimed, as required by ss. 51(1) of the Schedule and ss. 281.1(1) of the Insurance Act, and on that basis, his Application for Arbitration is dismissed.

October 17, 2007

Susan Sapin Arbitrator

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2R.S.O. 1990, c.I.8, as amended.
3. 3Exhibit 1, Document Brief of the Insurer, and Exhibit 2, Applicant’s documents consisting of letters from Canada Customs and Revenue Agency dated June 3, 2005, July 12, 2005, and two letters dated March 1, 2006.
4. 4Exhibit 1, Tab 3.
5. 5For a succinct and comprehensive statement of general principles and jurisprudence, please see the appeal decision of Director’s Delegate Makepeace in Turner and State Farm Mutual Automobile Insurance Company, (FSCO P00-00046, February 1, 2002); and footnotes therein.
6. 6These principles, as set out in Zeppieri and Royal Insurance Company of Canada, (OIC A-005237, February 17, 1994), confirmed on appeal (OIC P-005237), have been consistently approved and followed in numerous, as stated in Turner.
7. 7Turner and State Farm Mutual Automobile Insurance Company, (FSCO P00-00046, February 1, 2002), pg. 10.
8. 8See, for example, Finlayson and Allstate Insurance Company of Canada (FSCO A04-002133, November 8, 2006), Galati and Aviva Canada Inc. (FSCO A04-001256, August 19, 2005), Berger and Gore Mutual Insurance Company (FSCO A03-000529, March 26, 2006), Nahsari and Belair Insurance Company (FSCO A00-001283, December 5, 2001), El-Zein and Wawanesa Mutual Insurance Company (FSCO A05-002530, March 2, 2007), Ross and TTC Insurance Company Limited (FSCO A01-000064, May 3, 2002) and Turner and State Farm Mutual Automobile Insurance Company, (FSCO P00-00046, February 1, 2002)
9. 9ss. 7(1)1, stipulates that the weekly amount of an IRB payable to a person “shall be reduced by net weekly payments for loss of income . . .received by the person as a result of the accident under . . . any income continuation benefit plan” or, if not being received, are available under such plan.
10. 10Exhibit 1, tab 7
11. 11Applicant’s submissions, paragraph 8
12. 12Letter from Mr. Mangos to Mr Daris, Exhibit 1, tab 3
13. 13I note in passing that two letters dated June 3, 2005 and March 1, 2006 authored by Mr. Mangos’ employer indicate, and I find, that for the periods June 12, 2003 to February 28, 2006, Mr. Mangos “used” 444.5 hours of “Sick Leave” and 102.5 hours of sick/medical appointments leave credits” at a total combined cost of $12,778.86, the amount Mr. Mangos claims from Aviva in the arbitration proceeding.