Patrick Lawrence v. ACE INA Insurance, 2007 ONFSCDRS 24

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 24

FSCO A04-002465

BETWEEN:

PATRICK LAWRENCE

Applicant

and

ACE INA INSURANCE

Insurer

REASONS FOR DECISION

Before:

Robert A. Kominar

Heard:

March 13 and 14, 2006, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Vadim Malyshev for Mr. Lawrence

Christopher J. Schnarr for ACE INA Insurance

Issues:

The Applicant, Patrick Lawrence, was injured in a motor vehicle accident on July 10, 2003. He applied for statutory accident benefits from ACE INA Insurance ("ACE"), payable under the Schedule.¹ ACE denied entitlement to statutory accident benefits based on Mr. Lawrence's entitlement to worker's compensation benefits. The parties were unable to resolve their disputes through mediation, and Mr. Lawrence applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. The issues in this hearing are:

Is Mr. Lawrence entitled to receive a medical benefit for treatment at Universal Injury Rehab Centre ($2,640), claimed pursuant to section 14 of the Schedule?
Is Mr. Lawrence entitled to payments for housekeeping and home maintenance services, from July 11 to December 27, 2003, in the amount of $2,400, pursuant to section 22 of the Schedule?
Is Mr. Lawrence entitled to payments for the cost of examinations (Universal Injury Rehab Centre - $800; Assessment Direct - $5,109.75; and Progressive Digital Diagnostic Centre -$1,668.25), pursuant to section 24 of the Schedule?
Is Mr. Lawrence precluded from receiving statutory accident benefits on the basis that he is entitled to workers' compensation benefits and has elected to bring an action primarily for the purpose of claiming statutory accident benefits, pursuant to section 59(1) and 59(2) of the Schedule?
Is ACE liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mr. Lawrence?
Is ACE liable to pay Mr. Lawrence's expenses in respect of the arbitration under section 282(11) of the Insurance Act, R.S.O. 1990, c. I.8?
Is Mr. Lawrence liable to pay ACE's expenses in respect of the arbitration under section 282(11) of the Insurance Act, R.S.O. 1990, c. I.8?
Is Mr. Lawrence entitled to interest for the overdue payment of benefits pursuant to section 46(2) of the Schedule?

Result:

Mr. Lawrence is precluded from receiving statutory accident benefits because he did not elect out of worker's compensation benefits primarily to bring an action against a third party. As a result all of Mr. Lawrence's claims in this arbitration are dismissed.

EVIDENCE AND ANALYSIS:

Patrick Lawrence claims that he was injured in an automobile accident on July 10, 2003.

ACE denied Mr. Lawrence's accident benefit claims in their entirety, based on their conclusion that he was entitled to claim Worker's Compensation Benefits under the Workplace Safety and Insurance Act² (WSIA) due to the fact that he was in the course of his employment as a school bus operator when this accident occurred. Arbitrator Bayefsky noted in his pre-hearing letter dated April 14, 2005 that there is no dispute that Mr. Lawrence was entitled to claim WSIA benefits. The dispute relates to whether he made a valid election to pursue an action against a third party, pursuant to section 59 of the Schedule.

Section 59 of the Schedule reads in its relevant parts:

59(1) The insurer is not required to pay benefits under this Regulation in respect of any insured person who, as a result of an accident, is entitled to receive benefits under any workers' compensation law or plan.

(2) Subsection (1) does not apply in respect of an insured person who elects to bring an action referred to in section 30 of the Workplace Safety and Insurance Act, 1997 so long as the election is not made primarily for the purpose of claiming benefits under this Regulation.

This section of the Schedule means that any valid election out of the WSIA scheme must be "primarily" to pursue a third party tort claim because it cannot be "primarily" made for the purpose of claiming statutory accident benefits. Since there are only two options for legal recovery provided for under the Insurance Act, it follows that one must either be primarily intending to commence a tort claim or be primarily intending to claim accident benefits. The balance has to be tipped one way or the other. There is often a fine balance in assessing what the "primary" intention of a person is but this factual determination has to be made within the context of the legislator's decision to make worker's compensation the primary recourse after a work-related accident, except when the primary reason for opting out is to sue a third party. There is no "election" provided for in the Schedule between statutory accident benefits and worker's compensation.

The validity of Mr. Lawrence's purported election to opt out of WSIA benefits and into the auto insurance system must be assessed as of the time he made that election. The decision of the Director of Arbitrations in Coseco Insurance Company/HB Group/Direct Protect and Gebrhu³ makes this perfectly clear. I have recently held in Mahadeo and Aviva Canada Inc.,⁴ that an arbitrator can consider the actions subsequent to any election to aid in determining whether or not it was in fact made bona fides.

In Mahadeo, I found that the applicant had done nothing to press forward with a tort claim for over two years after the accident, despite numerous written reminders from the accident benefit insurer that a limitation period was approaching and that they wanted some confirmation of the steps that were being taken related to a third party action. The only evidence Mr. Mahadeo was able to offer to support his primary intention to pursue a tort claim was the evidence of his paralegal that a third party notice was sent out. However, I found that the facts in evidence in that case gave me reason to doubt whether such a letter was ever sent, and even if it was, that it was ever followed up on by Mr. Mahadeo's paralegal representative.

The situation in this case is slightly different. Mr. Lawrence's paralegal firm notified the third party of his intention to pursue a claim in a letter dated August 14, 2003, shortly after the accident. A Statement of Claim against the identified third party was issued by another law firm on July 8, 2005. At the time of the arbitration I was advised by Mr. Malyshev that the parties to the tort action were exchanging affidavits of documents and arranging discovery.

Mr. Lawrence's argument is that by executing an election and undertaking form as well as an assignment of workplace safety and insurance benefits on November 17, 2003, and by putting the third party on notice followed up with a Statement of Claim, he has met the requirement of making a valid election out of WSIA.

ACE's position is that, notwithstanding these actions taken by Mr. Lawrence's representatives, his claim is not bona fides, in that he clearly stated in his evidence that he made the election for the purpose of claiming automobile benefits. In ACE's view that intention on Mr. Lawrence's part invalidates any election he purported to make out of WSIA. Mr. Lawrence must go back to the WSIA system if he wants to assert claims, or perhaps get them from the tort defendant if he still can after going back to worker's compensation. In this regard it needs to be remembered that Mr. Lawrence concedes that he is entitled to WSIA benefits if he claims them.

Mr. Malyshev asked Mr. Lawrence in direct examination, and I quote verbatim from my notes, why he "chose to claim accident benefits rather than compensation benefits." Mr. Lawrence answered "I thought it would be beneficial to me in the long run so I decided to go through that channel." Mr. Malyshev then asked Mr. Lawrence whether his firm had advised him of his right to sue a third party, and Mr. Lawrence answered that, on their advice, he "decided to do that."

During cross examination Mr. Lawrence confirmed that he gave a statement, while at his paralegal's office, to the independent adjuster on the file on September 8, 2003 where he said, "Mr. Gary, my paralegal, has hold me that we are not going with Workplace Safety and Insurance Board (WSIB), but I have to take legal action against the other party." Mr. Lawrence was then asked by Mr. Schnarr, "Was it your understanding that you had to choose between WSIB and no fault benefits and that if you wanted no fault benefits you had to sue the third party?" Mr. Lawrence answered, "Yes, sir."

Mr. Lawrence was then asked if he had ever intended to claim WSIA benefits after the accident. His initial answer was "No." Mr. Schnarr then showed Mr. Lawrence a document headed "Physician's First Report," which is Form 8 under the WSIA. It was completed on July 11, 2003 by Dr. Sussman, who was Mr. Lawrence's physician at the time. Mr. Lawrence was asked why this form was filled out if he never intended to apply for WSIA benefits. Mr. Lawrence responded that the doctor "just pulled out the form and filled it out. I don't know why he did that." In that form Dr. Sussman notes that he ordered no follow up testing on Mr. Lawrence and that he expected him to fully recover from the neck pain he presented within a few weeks. Mr. Lawrence testified that he "probably" discussed this prognosis with the doctor at the time.

Mr. Schnarr asked Mr. Lawrence three separate times during cross-examination if he believed that the election which he had to make was between worker's compensation benefits and no fault accident benefits. Mr. Lawrence answered each time that he understood that to be the choice he was making. Mr. Schnarr also specifically asked Mr. Lawrence to be certain that he understood the questions before answering them and to ask for them to be restated in a different way if he did not understand. Mr. Lawrence did not ask Mr. Schnarr to repeat or to rephrase any question. I am fully satisfied that Mr. Lawrence understood what he was being asked in cross-examination and that his answers are his true responses to the questions put to him. I note that Mr. Schnarr's cross-examination was conducted in a calm and professional manner and I am fully satisfied that Mr. Lawrence was not caught in a web of sophistical questioning woven by an experienced trial lawyer. The questions which Mr. Lawrence was asked were clear and straightforward and so were his answers.

I asked Mr. Malyshev during his closing submissions what inference he thought that I should draw from Mr. Lawrence's answers to questions about the real intentions behind the election. Mr. Malyshev submitted that Mr. Lawrence was just, "a simple guy who does not speak the language of the law." Mr. Malyshev's argument is that, rather counter intuitively it seems to me, I should discount Mr. Lawrence's evidence on the election because it doesn't really support his case. However, I have noted above that Mr. Lawrence was asked multiple times about this election and given the opportunity to clarify his answers, and yet his evidence was that he understood that his real election was between accident benefits and worker's compensation benefits. He, for whatever reason, wanted statutory accident benefits. Based on the evidence I heard, my conclusion from all of this is that Mr. Lawrence believed that the third party tort claim was the yellow brick road to collecting accident benefits. He may have just personally believed this to be the case, or he may have been led to believe it by his representatives, especially "Mr. Gary," but in either case this belief does not satisfy the essential criterion for a valid election, i.e. that it be made not primarily for the purpose of claiming statutory accident benefits.

Mr. Malyshev also advised me during his submissions that his paralegal firm, which includes "Mr. Gary" [Petrov], only deals with accident benefit claims and so they were not really in a position to give tort advice to Mr. Lawrence. As I concluded in Mahadeo, this sort of conduct by the paralegal firm strongly supports an inference that, unless Mr. Lawrence had other legal representation on the tort claim at the time, it is more probable than not that his interests were primarily focused on collecting statutory accident benefits.

I find it completely implausible to believe that Mr. Lawrence's primary intention was to pursue a tort action, when he retained legal representatives who assert that they explicitly advised him that they only do accident benefit work, not tort. I make this finding of fact notwithstanding that Mr. Malyshev's firm did put the third party insurer on notice of a tort claim. My view is that the notice was likely sent in an effort to pump some new life into the accident benefit claims which ACE had denied in their entirety.

Mr. Lawrence did not testify as to when he retained counsel on the tort claim or what prompted him to do so when he did, but I note that in a letter dated April 5, 2005, Mr. Malyshev was still ostensibly acting as Mr. Lawrence's primary legal representative. The first evidence I have of the involvement of tort counsel is the Statement of Claim, which was issued just before the two year anniversary of the accident.

I must say that I find it puzzling that Mr. Malyshev maintains that his firm only does accident benefit work, yet he was clearly negotiating with the tort insurer over interim payments of "out of pocket housekeeping expenses" on the basis that Mr. Lawrence had an on-going dispute with the accident benefits insurer. It is apparent from this correspondence that the disputes over accident benefit claims were the only real matter of interest to Mr. Lawrence and his legal representatives up until at least April, 2005. No evidence of any sort was provided to me of any other interaction with the tort defendant or insurer other than an acknowledgment of receipt of the notice of claim, dated September 16, 2003, and a responding letter from Mr. Malyshev on June 23, 2004, some nine months later.

The other salient aspect of the election issue is that Mr. Lawrence testified that he continued to work after the accident. He testified that he only lost a little time from the two jobs he was working. It is reasonable to assume that Mr. Lawrence meant exactly what he said in his evidence when he testified that "over the long run" he thought that an auto accident benefits claim would be "to his advantage." Notwithstanding Mr. Malyshev's recommendation that I find Mr. Lawrence not to be a credible witness on his own behalf on this point, I prefer to take his evidence at its face value.

Mr. Lawrence has claimed a number of specific benefits under the Schedule in this arbitration. I find that his election out of WSIA was not made bona fides, in that it was made primarily for the purpose of collecting accident benefits and not primarily for the purpose of pursuing a claim against a third party in tort. I find therefore that it was proper for ACE to deny Mr. Lawrence's accident benefit claims in their entirety and to direct him back to the worker's compensation system. Therefore, I dismiss Mr. Lawrence's claims for medical benefits, housekeeping, the costs of assessment, interest, expenses and a special award.

EXPENSES:

The parties did not make submissions regarding expenses. If they cannot agree between themselves on the issues of entitlement and quantum of expenses within 30 days of the date of this decision, an expense hearing may be arranged through the case administrator, pursuant to the Dispute Resolution Practice Code.

February 9, 2007

Robert Kominar

Arbitrator

Date

Financial Services Commission of Ontario