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

Neutral Citation: 2007 ONFSCDRS 215

FSCO A06-001546

BETWEEN:

DOROTHY SHAUGHNESSY

Applicant

and

AVIVA CANADA INC.

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: John Wilson

Heard: June 22, 2007, at the offices of the Financial Services Commission of Ontario in Toronto. Written submissions were received on August 31, 2007

Appearances: John McCarthy and Joyce Chun for Ms. Shaughnessy Susan Bromley and James Brown for Aviva Canada Inc.

Issues:

The Applicant, Dorothy Shaughnessy, was injured in a motor vehicle accident on June 25, 1998. She applied for and received statutory accident benefits from Aviva Canada Inc. (“Aviva”), payable under the Schedule.¹

Ms. Shaugnessy applied for an assessment by a CAT DAC and was determined to have suffered a catastrophic impairment. Aviva initially challenged the decision of the CAT DAC by way of a court action, which was discontinued following the decision of the Court of Appeal in Fernandes.²

Ms. Shaughnessy subsequently applied for supplemental benefits under her insurance policy, in addition to those currently being paid. Aviva refused payment of these benefits. The parties were unable to resolve their disputes through mediation, and Ms. Shaughnessy applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. As a defence, Aviva then alleged that the CAT DAC had erred in determining that Ms. Shaughnessy met the criteria for a catastrophic impairment.

Ms. Shaughnessy challenged the right of Aviva to raise the CAT DAC as a defence, and characterized it essentially as a collateral attack on the determination of the CAT DAC.

The preliminary issue is:

Is Aviva precluded from challenging the determination of the CAT DAC?

Result:

Aviva is precluded from challenging the catastrophic determination made by the CAT DAC. It may, however, challenge the appropriateness of any benefits claimed as a result of the catastrophic designation in the manner outlined in the Fernandes decision.

EVIDENCE AND ANALYSIS:

Since the first creation of Designated Assessment Centres (DACs) as part of the Statutory Accident Benefits scheme, there has been a lively legal discussion about the manner in which the determination of a catastrophic DAC can be challenged by an insurer.

A variety of positions have been taken, both in the courts and the arbitration forum over the years. Now, even with ultimate abolition of the DAC, challenges to the determinations of DACs especially catastrophic DACs (CAT DACs) remain important.

While there is no longer a right to new DAC assessments, the findings and determination of issues by DACs continue to have an effect on entitlement to accident benefits. The positive determination of a catastrophic DAC, in particular, has the effect of significantly extending policy coverage in areas such as housekeeping and attendant care. Because of the importance of the issues at stake, it is not surprising that the procedure surrounding a catastrophic assessment can be a difficult and hotly contested matter.

Ms. Shaughnessy was determined to be catastrophically impaired by the North Toronto Assessment Centre DAC on May 24, 2004. In this arbitration, Ms. Shaughnessy has claimed for certain benefits, including attendant care and housekeeping expenses, that are unavailable without a finding of catastrophic impairment. Aviva, in response, has challenged not only the reasonableness and the necessity of the benefits claimed but has attempted to challenge the catastrophic impairment determination, and consequent extended coverage that permits such a claim.

A normal DAC assessment has been summarized by J.M. Simmons J.A. as follows:

Section 43(6) of the SABS requires that the report include a statement of whether, in the assessor’s opinion, an expense in relation to a medical or rehabilitation benefit “is reasonable and necessary for the insured person’s treatment or rehabilitation.”

Simmons J.A. continued:

[para.15] Importantly, s. 38(14) of the SABS requires an insurer to pay for any expense which a DAC assessor opines is reasonable and necessary, but provides that the insurer is not required to pay for the expense if that opinion is not given. Further, the preamble to s. 38(14) makes the DAC assessment of the payment obligation “[s]ubject to the determination of a dispute relating to the expense in accordance with sections 279 to 283 of the Insurance Act.” Those sections provide for mediation, arbitration and litigation. In effect therefore, s. 38(14) makes the DAC assessment final and binding unless one of the parties chooses to dispute it.³

The determination of catastrophic impairment by a DAC is potentially different from other findings made by designated assessment centres. Firstly, a finding of catastrophic impairment does not necessarily entail an obligation to pay any benefit. Rather, the finding has the effect of extending coverage under the accident benefit scheme to provide extended coverage.

Secondly, the determination of a catastrophic DAC is binding on both parties. Section 40 of the relevant Schedule, which deals with catastrophic DAC assessments, provides that the determination of a catastrophic DAC is binding on both parties subject to the dispute resolution scheme contained in sections 279-283 of the Insurance Act.

It is the precise effect of section 40 that is the subject of this arbitration, and that was at issue in the case of Liberty Mutual Insurance Co. v. Fernandes ⁴, issued by the Court of Appeal on September 6, 2006. In Fernandes, the insurer attempted to challenge the finding of a CAT DAC through a court action.

The issue in Fernandes was characterized by the court as follows:

The issue on the motion and on this appeal was whether the dispute resolution scheme in ss. 279‑283 of the Act for the determination of entitlement to and the quantum of statutory accident benefits constitutes a complete code and, if so, how it operates, or whether beyond the express provisions of the Act, an insurer has the right to bring an action in the Superior Court to challenge a catastrophic impairment designation.

Feldman J.A., who wrote for the court, found:

I conclude that there is no need or basis for the court to read into the Act a right for insurers to initiate court action or to find that the language of s. 281 is not sufficient to remove any common law right that an insurer may have had to bring such an action. It is clear that the provisions of ss. 279 to 283 of the Act were intended to and do form a complete code for dispute resolution, which can work effectively and fairly for all parties.

Feldman J.A. was obviously troubled by the apparent injustice of a finding that an insurer could not challenge the finding of a CAT DAC through a court action.

In outlining her reasons for the court’s decision Feldman J.A. also examined prior jurisprudence and dealt with several other matters not directly at issue in the matter before her. Foremost among these supplementary issues is the question of what procedure an insurer can take if it disputes a finding of a CAT DAC.

Whether or not the maxim Ubi jus ibi remedium (there is no wrong without a remedy) was in her mind, Madame Justice Feldman, having decided that the dispute resolution sections of the Insurance Act comprised a complete Code for dealing with disputes, felt obliged to dig further to ferret out a potential remedy for an aggrieved insurer.

The result is that when s. 281 is read in its entirety, it is evident that the insurer is not left without a remedy when it wishes to dispute the finding of the CAT DAC. It is given a remedy by the operation of the provisions: if an insurer wishes to dispute a CAT DAC finding, it can commence mediation. If mediation has been tried and failed, the insurer can revert to paying only what it was willing to settle for, until there is an agreement or an order directing a different amount. As a result, an insured cannot, in effect, allow the mediation to fail, then claim that the CAT DAC finding is binding on the insurer and take no further action. Rather, the insured would be obliged to use its right in s. 281 to initiate court or arbitration proceedings or to agree to private arbitration in order to seek to obtain the higher benefits that are available to a person with a catastrophic impairment.⁵

Implicit in this analysis is the right of an insured to raise the validity of the CAT DAC as a defence to an action by the insured for further benefits; essentially the issue before me in this arbitration.

A decision of a court contains many things. It usually contains an identification of the issues before the court, their disposition, and the reasons for the disposition. The principle of stare decisis does not set out clearly just what part of a decision is binding on lower courts. The definition contained in Black’s Law Dictionary (8th ed.) reads as follows:

Stare decisis n. [Latin “to stand by things decided”] The doctrine of precedent, under which it is necessary for a court to follow earlier judicial decisions when the same points arise again in litigation.

It is important to note that Black’s definition contains a reference to “points decided.”

Traditionally the courts have parsed decisions and differentiated between the “ratio decidendi” (points decided) and obiter dicta.

There may be reasons for an arbitrator or other adjudicator to disagree fundamentally with the Court of Appeal on any one matter, but the principal of stare decisis clearly binds all inferior courts and tribunals, unless, of course, the judicial commentary is clearly obiter, and not essential to the decision itself.

In this matter, I am urged by counsel for Ms. Shaughnessy to not take the obvious route of accepting all the comments made in the full decision of the court of appeal, and to reject the Insurer’s attempt to litigate the CAT DAC in the arbitration forum.

Aviva, it goes without saying, submits that I am bound to follow Madame Justice Feldman’s approach and interpretation of the dispute resolution provisions of the Insurance Act as they apply to catastrophic assessments (CAT DACs).

There is no question that, as an arbitrator working in an alternative, legislatively derived, system, I am bound by the decisions of the superior courts which have a supervisory function over all administrative tribunals in Ontario.⁶ A decision of the Court of Appeal is even more worthy of respect and deference since it is binding on all the disparate judges and arbitrators who also have jurisdiction to decide accident benefit issues.

While I accept being bound by the decision of the Court of Appeal in Fernandes, I am faced with two opposing interpretations of the direct effect of that decision on the issues before me in this arbitration.

The traditional view of the principal of stare decisis in common law jurisprudence has been that a case is only authority for what it actually decides. Anglin J. in Harvey v. Dominion Textile⁷ stated:

In applying the doctrine of stare decisis it must always be borne in mind that only that part of a judicial decision is binding as authority which enunciates the principle on which the question before the court has actually been determined ...and that mere dicta, even in speeches of individual members of the House of Lords, while no doubt entitled to the greatest respect, do not bind even the lowest courts.

The theory has long been that the ratio decidendi or ratio is the only part of a decision that is binding on lower courts and tribunals. Black’s defines ratio as follows:

[Latin “The reason for deciding”] 1. the principle or rule of law on which a court’s decision is founded 2. The rule of law on which a later court thinks that a previous court founded its decision; a general rule without which a case must have been decided otherwise.

Of course, there are certain risks that a lower court or tribunal undertakes if it totally ignores an opinion expressed by a superior court which indeed may ultimately have to review that very decision.

The Supreme Court has dealt with precisely this issue in Henry.⁸ I will quote extensively from the decision of Binnie J. since it provides the framework for my interpretation of the principles at issue in this matter. The court first framed the concerns of some of the parties:

The Attorney General worries that this sort of obiter will be seen as binding on trial courts. I do not think this "concern" is plausible. The comment was neither part of the legal analysis nor a direction to trial courts. It was simply an observation by an experienced judge.

Binnie J. continued, before deciding the issue:

From time to time there have been statements of some members of this Court that have been taken to suggest that other courts are bound by this Court's considered ruling on a point of law, even a point not strictly necessary to the conclusion. ... this is the interpretation that must prevail.

As it does from time to time, the Court has thus ruled on the point, although it was not absolutely necessary to do so in order to dispose of the appeal. This statement was perfectly understandable in context. So far as Chouinard J. was concerned, the Court of which he was a member had ruled on the point, and he proposed to be consistent and follow it. However, the “Sellars principle”, as it came to be known, was thought by some observers to stand for the proposition that whatever was said in a majority judgment of the Supreme Court of Canada was binding, no matter how incidental to the main point of the case or how far it was removed from the dispositive facts and principles of law; for varying views, see e.g.,…Some of these comments simply reflect the practical consideration that disregarding the majority view of this Court on a point of law, even if it was not strictly necessary for the disposition of the case in which it was expressed, may just precipitate a successful appeal. Other comments suggested that the “Sellars principle" had ripened into a new doctrine of law.⁹

Binnie J. noted that the “binding effect” as a matter of law was disavowed by the Court in Reference re Remuneration of Judges of the Provincial Court of Prince Edward Island [1997] 3 S.C.R. citing the decision of Lamer J. that “the remarks of Le Dain J. Valente v. The Queen, 1985 CanLII 25 (SCC), [1985] 2 S.C.R. 673] were strictly obiter dicta, and do not bind the courts below".

Binnie J. then outlined his own analysis of what is binding:

The issue in each case, to return to the Halsbury question, is what did the case decide? Beyond the ratio decidendi which, as the Earl of Halsbury L.C. pointed out, is generally rooted in the facts, the legal point decided by this Court may be as narrow as the jury instruction at issue in Sellars or as broad as the Oakes test. All obiter do not have, and are not intended to have, the same weight. The weight decreases as one moves from the dispositive ratio decidendi to a wider circle of analysis which is obviously intended for guidance and which should be accepted as authoritative. Beyond that, there will be commentary, examples or exposition that are intended to be helpful and may be found to be persuasive, but are certainly not "binding" in the sense the Sellars principle in its most exaggerated form would have it.

The notion that each phrase in a judgement of this Court should be treated as if enacted in a statute is not supported by the cases and is inconsistent with the basic fundamental principle that the common law develops by experience. ¹⁰

What I take to be the nub of the Fernandes decision is the finding that the dispute resolution system created by sections 279 to 283 is a complete procedural code and that, consequently, an insurer may not launch an action in a court or commence an arbitration for the purposes of challenging a catastrophic DAC assessment.

The further comments concerning the alternatives available to an insurer who challenges a DAC, while illuminating, are not necessary to the court’s central findings. Consequently, they are obiter dicta and while they should be given consideration and respect, they remain non-binding on courts and arbitrators.

Having heard the submissions of both parties on the meaning I should draw from Fernandes, I have come to the conclusion that I should accept Ms. Shaughnessy’s contention that Aviva is barred from challenging the findings of the CAT DAC in the context of this arbitration. While such a conclusion might sound to be contrary to the full reasons of Feldman J.A. in Fernandes, I believe that there is no fundamental inconsistency between this conclusion and the court’s decision in Fernandes.

I reach this conclusion as a result, primarily, of the nature of catastrophic DAC determinations themselves, and their place in the context of the dispute resolution provisions of the Insurance Act.

A dispute over a catastrophic impairment determination is something very different from most

accident benefit disputes. A determination of a catastrophic impairment, indeed, is not

necessarily the determination of a benefit owed¹¹, but rather a determination of the nature of the coverage available to an accident benefit claimant. Indeed, a person may be catastrophically impaired and yet not entitled to any particular benefits arising from that finding.

The notion of benefit is not defined in either the Insurance Act or the Schedule. The Canadian Oxford Dictionary, however, defines it as:

Favourable or helpful factor or circumstance; advantage, profit; 2 (often in pl.) allowance of money etc. to which a person is entitled from a pension plan, government support programs, etc. (unemployment insurance benefits). 3 (often in pl.) An advantage other than salary associated with a job, e.g. dental coverage, life insurance, etc.

The French version of the Schedule¹² uses the word “indemnité” for the word “benefit.” The French word is much more explicit in its meaning than the English. Harrap’s New Shorter French and English Dictionary¹³ translates “indemnité” as:

(a) Indemnity, indemnification, compensation (for loss sustained)

(b) penalty (for delay, non-delivery) (c) allowance, grant.

While there is an obvious linkage to potential benefits, it is hard to find a determination of catastrophic impairment alone as being a “benefit” of Ms. Shaughnessy’s insurance policy in the sense that it directly compensates or indemnifies her for a specific loss or expenditure arising out of an accident.¹⁴ Rather, it is a decision that is related to the extent of coverage available to Ms. Shaughnessy.

It must be remembered that the principle of catastrophic impairment, although set out in the Schedule, a regulation under the Insurance Act, also forms part of Ms. Shaughnessy’s insurance contract. It is a defined event, a threshold perhaps, that extends the potential statutory accident benefits available under that policy.

When approaching the interpretation of the statutory accident benefit provisions, including those related to catastrophic impairment, it is important to recognize the dual nature of the Schedule. It is at the same time, subordinate legislation and an integral part of each and every automobile insurance contract in Ontario.¹⁵ LaForme J.A. in reference to other statutory provisions in an insurance policy observed:

The answer to this appeal does not lie in statutory interpretation alone. The statutory conditions are only a part of the policy evidenced by an insurance contract, and contracts should be interpreted as a whole. In my view, it must first be determined whether the contract treats the rights of co-insured as joint or several. It is within this context that the statutorily provided notice requirements under the policy can be understood.¹⁶

One of the consequences of this dual nature is that different aids to interpretation are available. Goudge J.A. in Taggart made the following comments:

Where a policy is clear and unambiguous, the rights of the parties are determined by its express terms. Where it is ambiguous or capable of more than one interpretation, generally, a construction will be adopted which favours the insured. Moreover, it is to be remembered that we are dealing with an endorsement that extends coverage. Such a provision is to be interpreted liberally or broadly in favour of the insured. ¹⁷

The catastrophic benefits provisions of the statutory accident benefits section of the insurance contract are in essence mandatory endorsements that extend coverage upon the happening of certain defined circumstances.

In July v. Neal ¹⁸, the Court of Appeal said:

...if there is doubt in the legislation establishing and governing the cover, and there are two possible interpretations of any aspect of the cover, the one more favourable to the insured should govern.

Essentially every policy of automobile insurance includes coverage for up to the limits shown for catastrophic impairment subject to attaining certain access thresholds. A determination of catastrophic impairment determines whether access to the upper levels of coverage is available to a claimant. ¹⁹

Consequently, if a determination of the threshold to allow a higher level of coverage in catastrophic cases is a coverage issue, then given competing interpretations of the provisions, any confusion or discrepancy in the legislative scheme should be interpreted in a manner that favours the insured.

That there is some confusion or discrepancy in the provisions dealing with challenges to catastrophic impairment can be inferred from the various approaches taken to the provisions by the courts and arbitrators over the years.²⁰

For reasons I will discuss later, I am not convinced that the decision of the Court of Appeal in Fernandes has successfully removed all of the dynamic tensions in the legislation and put to rest all potential confusion. If there is uncertainty in the legislation and consequently in the policy, and there are competing plausible interpretations, then the one most favourable to Ms. Shaughnessy should prevail. In this case, that would be a finding that Aviva is not entitled to collaterally attack the determination of the DAC concerning catastrophic impairment, and the consequentially higher coverage.

An important aspect of the peculiar nature of a determination of catastrophic impairment is that there is no means provided in the legislation for specifically reversing a finding, should a person’s condition improve. This is particularly evident in the case of someone who, following the accident is rendered unconscious and meets the criteria of a reading of 9 or less on the Glasgow Coma scale. Nothing more need happen to such a person. They are and remain catastrophically impaired, whatever their current needs, and potentially able to claim enhanced benefits in areas such as attendant care.

Most importantly, unlike other DACs, a catastrophic DAC does not necessarily determine entitlement to benefits. I do not accept that the legislature somehow overlooked a necessary part of the scheme in failing to provide some sort of “decertification” procedure. There is a simple reason for this. Catastrophic designation has to do with the extent of coverage, not entitlement to benefits. If there is no need for benefits, whether or not the person is designated catastrophic, there will be no entitlement. Entitlement remains governed by the test of “reasonable and necessary.”²¹

The provision of services and other benefits are covered by a comprehensive dispute resolution process, including access to both courts and arbitration. To add a means of reversing a catastrophic finding or, in the case of an insurer, challenging a catastrophic finding, would be to add an extra layer of complexity to an already difficult process. Indeed, a brief review of some of the cases where the findings of CAT DACs have been challenged points to a substantial risk of longer and more complex hearings if the catastrophic impairment issue is added into the issue of the appropriateness of the actual benefits claimed.²²

As noted earlier in Fernandes, Feldman J.A. had suggested an appropriate procedure to deal with an insurer’s objections to a determination of catastrophic impairment by a DAC. The outline of her approach is as follows:

if an insurer wishes to dispute a CAT DAC finding, it can commence mediation. If mediation has been tried and failed, the insurer can revert to paying only what it was willing to settle for, until there is an agreement or an order directing a different amount. As a result, an insured cannot, in effect, allow the mediation to fail, then claim that the CAT DAC finding is binding on the insurer and take no further action. Rather, the insured would be obliged to use its right in s. 281 to initiate court or arbitration proceedings or to agree to private arbitration in order to seek to obtain the higher benefits that are available to a person with a catastrophic impairment.

Thus, after specifically finding that the legislation is clear that an insurer may not challenge the catastrophic DAC process in either a court or arbitration, Feldman J.A. outlines a strategy for doing just that. Putting aside for a moment the question of what course an insurer should take when there are no actual benefits in dispute, only the issue of catastrophic entitlement, there is another problem raised by an acceptance of this approach.

Traditionally, the law has frowned on collateral attacks on judgements and orders. In this matter, the legislation has provided that an insurer may not directly challenge a catastrophic determination in a court or arbitration. Collateral attack has been described as:

an attack on a judgement in a proceeding by other than a direct appeal esp., an attempt to undermine a judgement through a judicial proceeding (or a defence in the proceeding) is that the judgement is ineffective. ²³

The Supreme Court has considered the question of collateral attack in a pair of decisions heard in 1998. These are R. v. Al Klippert Ltd²⁴ and Consolidated Maybrun.²⁵ The Klippert case involved a question of municipal approval for a gravel extraction operation, in which the company pleaded as a defence the invalidity of an earlier order under the Alberta Planning Act, ordering the company to stop the gravel extraction process. L’Heureux-Dubé J. summarized the considerations involved in determining whether a collateral attack was permissible:

In Consolidated Maybrun, supra, this Court reviewed the applicable principles for determining whether a person charged with failing to comply with an administrative order can collaterally attack the order by way of defence. I do not intend here to repeat all the matters discussed in that decision. In summary, whether a collateral attack is possible must be determined by reviewing the legislature's intention as to the appropriate forum. For that purpose, I stated that it might be helpful to consider, in particular, the following factors: (1) the wording of the statute under the authority of which the order was issued; (2) the purpose of the legislation; (3) the existence of a right of appeal; (4) the kind of collateral attack in light of the expertise or raison d'être of the administrative appeal tribunal; and (5) the penalty on a conviction for failing to comply with the order.

In this matter, it is the determination of the catastrophic DAC that is being collaterally attacked by the Insurer. To determine whether such an attack is permissible it is necessary to examine the statute – in this case the Insurance Act and the appropriate accident benefits Schedule, the purpose of the legislation, the existence of a right of appeal, and the nature of the collateral attack. This not being a criminal or quasi-criminal matter, the question of penalty is irrelevant. The balance of the criteria are somewhat more challenging to deal with.

The purpose of the legislation is multi-fold. As has often been stated, the statutory accident benefits system or no-fault benefits system itself serves a particular societal purpose.

Eberhard J., in Gill v. Zurich, 1999 CanLII 36826 (ON SC), [1999] O.J. No. 4333 at p.14, made the following comments on the purposes of the statutory accident benefit scheme:

I adopt the statement of purpose articulated by Arbitrator Mackintosh at page 12 in Edgar v. Wellington Insurance Co. [1994] O.I.C.D. No. 34 File A-005441 that SABS is remedial, that is to be interpreted in a broad and liberal way, and that its principal object is to provide a “fair and adequate income stream to those who are injured and disabled from work”. The victim is to receive an approximation of wages, and not be compensated more or less.

Modifying this statement somewhat for the circumstances, it would seem that in a case involving attendant care and rehabilitation issues, the purpose would be to provide such benefits fairly adequately and in a timely manner. This would be even more critical in a situation where an insured is catastrophically impaired and in need of significant care and treatment.

Indeed, recently, G.D. Lane J. in Belair Insurance Co. v. McMichael citing Kennelly v. Wawanesa Mutual Insurance, noted “the statutory goal of prompt payment for necessary services.”

In Smith v. Co-operators General Insurance Co.²⁶, one of the few accident benefit cases to have made its way to the Supreme Court, Gonthier J. made the following comment:

There is no dispute that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance.

It is clear that any analysis of the process of catastrophic determination, and any challenge thereto must also be done in the context of such “consumer protection.”

From a practical point of view, the prompt provision of services is not enhanced if, once a need is shown, an insurer can also challenge the existence of extended policy limits. Where there is a dispute over the payment of extended benefits where a catastrophic determination has been made, a challenge to the catastrophic designation itself will necessitate a much longer hearing process and much more complex litigation than an arbitration or court action focussing on the reasonability or necessity of a particular service or treatment.

Allowing such an approach turns the provision of services to the most at risk group of claimants, into a two-step process of determining whether extended coverage is applicable before venturing into the area of the provision of services itself. Such is hardly a recipe for “prompt payment for necessary services.”

The other aspect of the statutory framework to look at is the decision of the draughters of this legislation to not make specific provision for the removal of catastrophic impairment, or for the direct appeal of a determination of catastrophic impairment by an insurer. It would appear that this is no accident and that the legislature intended it as part of both the consumer protection mandate referred to in Smith and the prompt provision of necessary services where needed.

As mentioned earlier, there is patently no direct appeal of a determination of catastrophic impairment, at least for an insurer. While there might appear to be some imbalance or injustice in the notion that an insured may challenge an unfavourable determination but an insured may not, there is both a justification and a balance for such unequal treatment elsewhere in this and other relevant legislation.²⁷ Indeed, if legislation is specifically and unquestionably draughted so as to create a situation that challenges our sense of fairness or reasonableness, then we must accept and apply those legislative provisions.

As Professor Sullivan points out, at p. 129, legislation is presumed to be accurate and well-drafted consequent to the presumption that the legislature does not make mistakes. Thus, if the words of an Act are clear, they must be followed even though they lead to a manifest absurdity.²⁸

There may be little obvious prejudice to an insurer from a simple finding of catastrophic impairment not accompanied by a claim for benefits. Admittedly, the length of the potential exposure to medical, attendant care and other related claims is significantly greater than in a non-catastrophic case. Nonetheless, one can see that insurers might wish to challenge a determination of a CAT DAC, if only to reduce future risk and provide some certainty as to the nature of claims they are expected to meet. ²⁹

In such a context, the absence of a direct appeal process would be an argument in favour of permitting a collateral attack on the catastrophic impairment through the claims dispute process. Indeed, this appears to be what Feldman J.A. in Fernandes suggests as a reasonable way of approaching this problem.

Indeed, the provisions of section 37(5) of the Schedule as it then was in effect provide only that “the insurer may dispute the obligation to pay the benefit…” While it is possible to consider that the use of the word “obligation” could include a dispute concerning the insurance coverage that frames the obligation, the balance of the section, referring to a mandatory payment of the benefit pending resolution together with the thrust of the balance of the Schedule, suggests that it is the substantive entitlement – the reasonableness of the benefit itself claimed that may be brought into issue. In such an analysis the determination of the catastrophic impairment itself (exclusive of benefit issues) would not be open to dispute by the Insurer.

In any analysis touching on prejudice arising from such an interpretation, it should be remembered that there is no question that an insurer is able to dispute a benefit claimed. It is also important to remember that, because of the nature of the extended coverage afforded by a determination of catastrophic impairment, a resulting dispute may only arise some ten years after the accident when the temporal limits on medical and attendant care benefits are reached.

It would be strange if the legislation provided for an insurer to routinely challenge a finding of catastrophic impairment a decade after the circumstances giving rise to it. From a practical point of view, the relevant evidence may no longer be available or would be less than reliable. It would be a significant prejudice if an insured were suddenly called upon to defend the finding of catastrophic impairment at such a late date, something that is conceivable if the insurer is allowed to launch a collateral attack on a DAC’s determination at any time in the context of a benefit dispute.

On the other hand, if the issues in dispute are related to benefits as envisaged by section 37(5) of the Schedule, the emphasis is on contemporary status and needs rather than past and often stale-dated evidence as to whether an insured met the threshold at the time of the determination.

Although an insurer has no direct appeal from the decision of a CAT DAC, an insurer does have some recourse. In Ontario, any exercise of a statutory power of decision is by virtue of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 (JRPA), reviewable by the courts. Section 1 of the JRPA defines a statutory power of decision as follows:

“statutory power of decision” means a power or right conferred by or under a statute to make a decision deciding or prescribing,

(a) the legal rights, powers, privileges, immunities, duties or liabilities of any person or party, or

(b) the eligibility of any person or party to receive, or to the continuation of, a benefit or licence, whether the person or party is legally entitled thereto or not,

and includes the powers of an inferior court. (“compétence légale de décision”)

The JRPA further provides:

(2) The power of the court to set aside a decision for error of law on the face of the record on an application for an order in the nature of certiorari is extended so as to apply on an application for judicial review in relation to any decision made in the exercise of any statutory power of decision to the extent it is not limited or precluded by the Act conferring such power of decision.

In Lowe, J.M. Simmons J.A. characterized DACs as “Non-judicial dispute resolution decision-makers.” Despite the proviso that a DAC is “non-judicial”, as a decision-maker exercising a power arising from a statute (the Insurance Act and its regulations) affecting the eligibility of a person to obtain a benefit or a licence, any decision of a DAC is properly subject to review by the courts.

Although a review under the JRPA may be technically discretionary and may only address an error in law, or jurisdiction, this limited “appeal” may be sufficient in the context of the function and purpose of the catastrophic determination to prevent a collateral attack. As well, as is pointed out in Fernandes, there is an option open to an insured who is obliged to pay a benefit arising from a catastrophic determination to challenge the reasonableness and the necessity of that benefit.

The nature of the collateral attack referred to in Maybrun may be difficult to determine in general, but for the purposes of this arbitration must be seen as an attack on a finding on a coverage issue, as a means of removing jurisdiction to deal with the primary, substantive issues.

In other words, at least in the eyes of the Applicant a dispute over entitlement to certain benefits is used as the means of attacking the determination of the DAC, otherwise protected from direct appeal by the statutory scheme. There is then some dynamic tension between the purposes of the specific legislative and the unspoken presumption expressed by the maxim Ubi jus ibi remedium.³⁰ However, it is useful in this regard to refer back to the fundamental approach in dealing with legislative interpretation in Canadian common law jurisdictions:

In attempting to reconcile competing interpretations of legislation Elmer Driedger’s often-cited description of the modern principle remains the starting point and bears repeating: Today there is only one principle or approach, namely the words of an Act are to be read in their entire context, in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament.³¹

In deciding the issues before me, I must attempt to reconcile not only the provisions of the statutes but the interpretation put on those statutory words by the Court of Appeal in Fernandes and other decisions.

I must also be cognisant that, if the legislature was clear in its intentions, even if an absurdity or an anomaly results, I should let the intention of the legislature prevail.³²

While elements of the Statutory Accident Benefits Schedule and the Insurance Act, taken individually, could lead to interpretations that would support a contention that fairness would allow an insurer to either directly or collaterally challenge a determination of catastrophic impairment, I believe that in the context of the overall scheme there is justification for what might be termed as an asymmetrical approach to a challenge to a catastrophic determination.

There is an imbalance. An insured may commence an arbitration to challenge the finding of a CAT DAC that bars his or her access to benefits. An insurer may not. Both, however, are free to litigate or arbitrate any substantive claim relating to benefits and entitlement. An insurer may, however, apply for review of a DAC’s determination, if it was manifestly unreasonable, lacking in jurisdiction or an error in law.

Although judicial review is only a limited “appeal”, this is as it should be. An insurer after all retains the power to dispute the substantive grounds for entitlement to any benefit claimed. I accept that such a slightly asymmetric dispute resolution scheme is consistent with “the statutory goal of prompt payment for necessary services” which dictates that barriers to access to necessary treatment should not be needlessly erected, and is exactly what the legislature intended in sections 279 to 281 of the Insurance Act.

I find that the decision of the Court of Appeal in Fernandes that “279 to 283 of the Act were intended to and do form a complete code for dispute resolution” necessarily implies that an insurer is barred from collaterally attacking a decision on catastrophic impairment. As outlined in Fernandes, an insurer has the right to attack the appropriateness of a particular benefit claimed under catastrophic coverage through the last offer payment provisions, and through resort to mediation. I do not accept that the simple finding of catastrophic impairment coverage itself is susceptible to this mechanism.

While, obviously, much of the information that is relevant to substantive impairment and a resulting benefit claim may also be relevant to issues relating to the catastrophic impairment, it is only the benefit issue itself that can be placed into dispute by an insurer. I find that, for the considerations outlined above, the catastrophic determination itself may not be attacked by an insurer either directly or collaterally, through an arbitration.

EXPENSES:

Given her success in this matter it would seem that I should exercise my discretion to award Ms. Shaughnessy her expenses incurred in this preliminary issue hearing. However, since this was not directly addressed in submissions, the parties may provide brief written submissions as to costs, provided that they are unable to come to an agreement as to the issue of expenses within the next 30 days.

I exercise my discretion to award Ms. Shaughnessy her expenses incurred in this preliminary issue hearing.

John Wilson

November 6, 2007

Arbitrator

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