Narine Persaud v. State Farm Mutual Automobile Insurance Company, 2007 ONFSCDRS 227

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

Neutral Citation: 2007 ONFSCDRS 227

FSCO A07-000237

BETWEEN:

NARINE PERSAUD Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Robert A. Kominar

Heard: Written submissions were received on August 17 and 24, 2007.

Appearances: David Carranza for Mr. Persaud Angela S. James for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Narine Persaud, was injured in a motor vehicle accident on December 10, 2003. He applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ The parties entered into an agreement to resolve certain issues in dispute and Mr. Persaud subsequently disputed the scope of the settlement. They were unable to resolve their disputes through mediation, and Mr. Persaud applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

Is Mr. Persaud precluded from proceeding to arbitration because he has settled the issues identified in this arbitration on a full and final basis?

Result:

Mr. Persaud is precluded from proceeding to arbitration on the issues identified in this arbitration because he settled these claims with State Farm on a full and final basis by executing a Release and a Settlement Disclosure Notice on August 2, 2006, which settlement was not rescinded in writing within 2 business days thereafter.

EVIDENCE AND ANALYSIS

Mr. Persaud applied for arbitration on the following issues: medical treatment provided by Physical Therapy One pursuant to a treatment plan dated November 24, 2004, in the outstanding amount of $1,102.00; medical treatment provided by Accident Injury Rehab pursuant to a treatment plan dated September 27, 2004, in the outstanding amount of $1,045.00; the cost of a Functional Abilities Evaluation prepared by Back to Health on September 27, 2005, in the outstanding amount of $1,112.00; interest and expenses of the arbitration.

State Farm refused to pay these benefits based on its view that Mr. Persaud had previously executed a final release along with the required Settlement Disclosure Notice related to them.

The relevant documentary evidence before me reflects that Mr. Persaud asserted various claims for accident benefits through his paralegal representative, David Carranza. Originally, Mr. Persaud applied for arbitration of certain accident benefit disputes in December 2004. In correspondence dated June 6, 2006, State Farm’s solicitor, Jonathan Schrieder, communicated to Mr. Carranza an Offer to Settle the issues in dispute for $3,500.00 “all in.” On July 13, 2006, Mr. Carranza replied that Mr. Persaud agreed to settle all issues in dispute for that same amount and asked that partial releases be sent to his office for execution by his client.

On July 24, 2006, Mr. Schrieder sent correspondence to Mr. Carranza which states that the parties have settled “this matter” for $3,500.00. However, Mr. Schrieder’s correspondence is notable in that it goes on to specify the breakdown of the settlement as:

$1,166.67 in respect of past and future income replacement benefits
$1,166.67 in respect of past and future housekeeping benefits
$583.33 in respect of past medical benefits
$583.33 in respect of past rehabilitation benefits

In addition, Mr. Schrieder enclosed a Final Release and Settlement Disclosure Notice which he required Mr. Persaud to execute and return prior to releasing the funds.

The Settlement Disclosure Notice exactly reprised the above noted amounts and clearly states that Mr. Persaud was releasing “all” claims for past and future income replacement and housekeeping benefits. It also unequivocally states that Mr. Persaud was releasing “all” claims for “past” medical and rehabilitation benefits in this settlement. The document explicitly excludes from the settlement “future” medical and rehabilitation benefits, as these words are stroked out in it. The Settlement Disclosure Notice was signed, witnessed, and initialled on each page by Mr. Persaud on August 2, 2006 and subsequently returned to State Farm.

Mr. Persaud’s current application for arbitration relates to medical benefit claims which unarguably pre-date the settlement on August 2, 2006. On the face of it arbitration of these claims appears to be barred by Mr. Persaud’s having executed the Settlement Disclosure Notice and Release described above. There is no allegation that Mr. Persaud ever resiled from the settlement on August 2, 2006. Nor has Mr. Persaud argued that the Settlement Disclosure Notice is defective in any manner.

Notwithstanding appearances however, Mr. Carranza argues that there was a mistake made in executing these documents, in that he personally never believed that Mr. Persaud intended to enter into a final settlement of all past medical and rehabilitation claims. Rather, Mr. Carranza states that he believed that Mr. Persaud was only settling the specific issues which were raised in the arbitration which he had commenced in December 2004.

There is a rather glaring problem with the position asserted by Mr. Carranza, in that the arbitration which Mr. Persaud commenced in 2004 does not actually claim any medical, rehabilitation or housekeeping benefits. Notwithstanding this fact, the parties clearly were communicating about a settlement of accident benefit claims which included all of these benefit categories, as well as income replacement benefits and some section 24 examination costs.

Having reviewed the Settlement Disclosure Notice, which is the document required by statute for a valid final settlement of accident benefit claims, as well as the release which Mr. Persaud executed, I have absolutely no doubt as to which benefits were included and which were excluded in this settlement. Mr. Carranza’s arguments are not that the documents are vague or ambiguous, but rather that Mr. Persaud meant to do something other than that which the documentation quite clearly says that he was doing.

Although Mr. Persaud and Mr. Carranza may now regret not having read the documentation more carefully before it was signed, the question before me is whether State Farm is entitled to rely on the executed documentation. I find, in all of the circumstances, that they are fully warranted in doing so.

A primary reason that auto insurance legislation requires execution of a Settlement Disclosure Notice in a prescribed form is to focus the attention of claimants on the consequences of what they are doing and to thus encourage informed decision-making. Although settlement agreements are, at one level, simple contracts between the parties, they also carry a consumer protection aspect which is mandated by legislation and the importance of which has been confirmed by the Supreme Court of Canada in Smith v. Co-operators.² The terms of the Settlement Disclosure Notice state that:

Your insurer is required to give you this SETTLEMENT DISCLOSURE NOTICE if you have agreed on a cash settlement that will permanently end your entitlement to one or more accident benefits (emphasis added)

The Settlement Disclosure Notice also articulates that it is used for “Final Settlement” of accident benefit claims.

I take notice of the fact that Mr. Carranza is a very experienced accident benefit representative who clearly knows, or ought to know, what the implications of executing a Settlement Disclosure Notice and final release are. I find that there could not have been any real confusion as to what the parties understood the settlement terms to have been in this situation. Had Mr. Persaud been simply settling the discrete issues in the arbitration, as Mr. Carranza alleges, there would have been no need to execute a release or a Settlement Disclosure Notice. Had there been any confusion about this Mr. Carranza could easily have communicated with Mr. Schrieder to inquire why the insurer was mistaken about the intentions of Mr. Persaud. There were, according to the evidence before me, no such communications. Once again, I draw the inference that Mr. Carranza has enough experience in this field to have known that there was a problem before Mr. Persaud executed the documents and returned them to State Farm, and yet his firm facilitated Mr. Persaud’s signing them. Based on these facts, my view is that any “mistake” as to the consequences of executing these documents is more of an issue between Mr. Persaud and his legal representatives than it is between Mr. Persaud and State Farm.³

Mr. Carranza has provided me with a file notation which he ostensibly made on July 13, 2006, indicating that “all issues are resolved” but also that Mr. Persaud was expected to sign a new Application for Mediation contemporaneously with executing the “releases.” I note that the mediator involved records that the mediation process commenced on October 25, 2006, some three months after Mr. Carranza’s file notation. No explanation was offered as to what occurred during this time gap. I also note that Mr. Persaud had the statutory option of recanting from this settlement and chose not to do so. In my view, this is more persuasive evidence than Mr. Carranza’s file memorandum, which by its nature is self-serving presented in isolation.

Effectively Mr. Carranza’s argument is that he thought he was negotiating only the issues in the then pending arbitration. As noted above, this simply cannot be true, as there were no medical issues raised in that proceeding. Consequently, I find that Mr. Schrieder’s narrative of events is the more plausible one, as it is much more consistent with the documentation I have been provided to review.

Mr. Carranza does not appear to have been the person who actually witnessed Mr. Persaud’s signature on the settlement documents. I draw this conclusion from my observation that the signature of the witness does not in any way look like it reads “David Carranza,” and also from Mr. Carranza’s file memorandum which instructs someone else in his office to take certain action when Mr. Persaud came in to sign the release documentation. I have no direct evidence of this, but I reasonably assume that Mr. Carranza, or someone to whom he delegated responsibility, reviewed these documents with Mr. Persaud when he signed them and rendered legal advice as to what they meant.

Legally, Mr. Persaud is relying on the contractual doctrine of mistake as the key to unlock the door for this arbitration to proceed. I reject, having considered the history of events, Mr. Carranza’s argument that Mr. Persaud was induced by State Farm to make a mistake as to the scope of what he was settling. The evidence which I rely upon to support this conclusion is that there is no absolutely no ambiguity in the language of the settlement documentation; Mr. Carranza has significant experience in dealing with this form of documentation; and there were no issues pending in arbitration at the time that could have rationally accounted for the manner in which the release, the disclosure notice and Mr. Schrieder’s covering correspondence were drafted. I have absolutely no evidence that Mr. Schrieder did anything to induce Mr. Persaud to execute this settlement documentation and this complete lack of evidence causes me to draw the inference that there was nothing questionable in Mr. Schrieder’s actions.

I also reject Mr. Carranza’s generic submission that Mr. Schrieder made an “important amendment” to the documentation and then concealed it thereby causing Mr. Persaud to overlook the change; rendering the contract voidable. I find that there was no amendment to the agreement between the parties, let alone an “important” amendment made by the insurer. It is inappropriate, in my view, to project responsibility for Mr. Persaud’s and Mr. Carranza’s failure to carefully read and consider the consequences of the documentation that they were signing back onto State Farm when they, at some later date, recognized that they may have forgotten to take certain expenses into account at the time of settlement.

Although the doctrine of mistake in contract is complex, its application to settlements at the Commission was explored by Arbitrator Sapin in Falconer and York Fire & Casualty Insurance Company.⁴ The arbitrator’s analysis of the criteria relevant to mistake which are applicable here are to be found in her articulation of the distinction between the consequences of unilateral mistake and those of mutual mistake. Citing doctrine rooted in Halsbury’s Laws of England, 4th ed. (1974), Vol 9 she states:

“The law, however, distinguishes between mutual mistake, where both parties are honestly mistaken as to the obligations they are undertaking, and unilateral mistake, where only one party is mistaken, In the former, neither party may enforce the agreement. If only one party is mistaken, the contract , may be enforceable by the other.”

Based on my findings of fact there was either no mistake made here, and that is my actual view; or if there was, it was a unilateral mistake made by Mr. Persaud and his representatives and not the kind of mistake that the insurer had any reason to know about at the time of the agreement. As such, the settlement is enforceable by State Farm, as there is no evidence that they in any way attempted to take unfair advantage of Mr. Persaud, or that they were even aware that Mr. Persaud may have believed that he was not settling these past medical and past rehabilitation claims on a final basis.

This finding in no way discounts the necessity for there to be a consensus ad idem for a settlement to constitute a valid and enforceable contract. However, it is not open to Mr. Persaud to shroud what I find to be regret about the choice he made to settle his claims in the fabric of mistake about a fundamental aspect of the contract, or in allegations of unfair tactics used by the insurer to induce him to agree to something which he did not choose to do. Although it is a challenge to reconstruct the actual subjective intentions of the parties after the fact, the documentation involved here is standard form, and in the case of the Settlement Disclosure Notice, prescribed material. This documentation refers to the importance of reading the material carefully, seeking legal advice before signing, and that it is used when accident benefits are being settled on a final basis.

The case that Mr. Persaud puts forward here is that the documentation he signed was intended to settle all past and future income replacement and housekeeping claims, but not “all” past medical and rehabilitation claims. However, as I observed above, this view is implausible because there were no medical or rehabilitation claims in arbitration at the time and the settlement documentation explicitly allocates specific amounts of money for each of these categories of benefit. In addition, it is very difficult to believe that Mr. Persaud understood what “all” meant in the case of income replacement and housekeeping benefits, but not in the case of medical or rehabilitation benefits. That simply makes no sense. The disclosure notice was also amended to reflect the parties’ agreement that “future” medical and rehabilitation claims were NOT being settled at that time, indicating that the parties addressed their minds to the specific scope of the settlement.

In conclusion, I find that the claims asserted by Mr. Persaud in this arbitration are past medical or past rehabilitation claims arising out of this accident with respect to the settlement he entered into with State Farm on August 2, 2006. As a result, Mr. Persaud is precluded from arbitrating these claims.

EXPENSES:

The parties made no submissions regarding expenses. If they cannot resolve the issue between themselves, I remain seized of the matter.

November 20, 2007

Robert A. Kominar Arbitrator

Date