Maria Augello v. Economical Mutual Insurance Company, 2007 ONFSCDRS 240

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

Neutral Citation: 2007 ONFSCDRS 240

FSCO A07-001204

BETWEEN:

MARIA AUGELLO

Applicant

and

ECONOMICAL MUTUAL INSURANCE COMPANY

Insurer

PRELIMINARY ISSUE – STATED CASE

Before: David R. Draper Director of Arbitrations

Representatives: Jamie Pollack and Gregory Neinstein for Ms. Augello Lee Samis and Christine Mazza for Economical

Heard: November 5, 2007, with written submissions filed by November 22, 2007

I. ISSUE

Subsection 285(1) of the Insurance Act allows the Director of Arbitrations to state a case in writing to the Divisional Court on a question of law. Economical Mutual Insurance Company (“Economical”) asks that I state a case on the following question:

When determining whether a person has sustained a catastrophic impairment pursuant to section 2(1.1)(f) or (g) of the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, is it correct to assign a percentage value to psychological impairments under clause (g) and to combine that percentage value with the physical impairment ratings under clause (f)?

For reasons that follow, I am not persuaded that I should exercise my discretion to state a case.

II. ANALYSIS

Maria Augello was injured in an automobile accident on September 7, 2002. She applied for and received statutory accident benefits from Economical under the SABS–1996.¹ Approximately four years after the accident, Ms. Augello applied for a determination that she was catastrophically impaired, a determination that would substantially increase the range and level of benefits available to her.

The definition of “catastrophic impairment” is found in subsection 2(1.1). The focus in this case is on clauses (f) and (g), which provide:

2(1.1) (f) subject to subsections (2) and (3), an impairment or combination of impairments that, in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993, results in 55 per cent or more impairment of the whole person; or

(g) subject to subsections (2) and (3), an impairment that, in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993, results in a class 4 impairment (marked impairment) or class 5 impairment (extreme impairment) due to mental or behavioural disorder.

The issue in dispute is whether mental and behavioural disorders can be assigned a percentage and included in the determination of whole person impairment in clause (f). This “combining” approach was accepted by Justice Spiegel in Desbiens v. Mordini, 2004 CanLII 41166 (ON SC), [2004] O.J. No 4735 and has found support in a number of subsequent decisions from the Financial Services Commission of Ontario (“FSCO”), most directly in Ms. G and Pilot Insurance Company and B.P. and Primmum Insurance Company.²

For purposes of the issue before me, I accept that Ms. Augello’s claim depends on her ability to combine physical and psychological impairments to reach a 55% whole person impairment under clause (f). She submitted a report to Economical that concluded she had a combination of impairments (physical, mental and behavioural) that resulted in a whole body impairment of 53%, rounded to 55%. Economical arranged for a catastrophic impairment assessment that found that neither Ms. Augello’s physical or mental impairments alone would result in a finding that she was catastrophically impaired, but that:

If one were to combine the physical impairments with the identified psychological impairments (44% with 20%) in keeping with the recent Superior Court decision [Desbiens], Ms. Augello’s Whole Person Impairment rating would be 55%.

Economical did not accept the combining approach and rejected Ms. Augello’s claim that she is catastrophically impaired. Ms. Augello pursued the matter by applying for mediation and, when mediation was unsuccessful, by applying for arbitration at FSCO.

Before the arbitration pre-hearing took place, Economical asked me to state a case to the Divisional Court. I heard oral submissions on November 5, 2007, and at the request of Ms. Augello and on the consent of Economical, I established a schedule for Ms. Augello to make written submissions and for Economical to provide brief responding submissions.

Just after I heard oral submissions on the stated case issue, Ms. Augello made a claim for an in-home assessment by an occupational therapist. Economical refused this benefit on the basis that it was not payable unless Ms. Augello was catastrophically impaired, which was the issue already proceeding in arbitration.

The gist of Economical’s position is that the correctness of the “combining” interpretation is doubtful and has made it difficult for insurers to adjust catastrophic claims involving both physical and psychological impairments. The problem, it argues, is that this interpretation arises from one decision – the decision of Justice Spiegel in Desbiens. Economical submits that even if it is successful in persuading the arbitrator in this case that the “combining” analysis in Desbiens is wrong, this would result in inconsistent decisions that would complicate the situation even further. In its submission, stating a case to the Divisional Court will resolve the main dispute in this case and is the most efficient and effective way to obtain a clear answer on a contentious legal issue of broad significance. Finally, Economical submits that, as a practical matter, a stated case would not disrupt the arbitration process because this kind of reference can be heard in as little as four months from the filing of material. The source of this information was not provided, but Ms. Augello did not challenge Economical’s assertion.

Ms. Augello objects to proceeding by way of a stated case. She submits that she decided to apply to arbitration, not court, and there is no reason her claim cannot be decided in the normal course. On the contrary, it should be decided by a FSCO arbitrator, who has the specialized knowledge necessary to interpret the relevant provisions in the SABS-1996.

The insured person’s choice of forum is an unusual and important feature of the approach to resolving accident benefits enacted by the Legislature in Part VI of the Insurance Act. Following mandatory mediation at FSCO, the insured person can choose to go to court or FSCO arbitration, or with the consent of the insurer, to private arbitration. The recent Court of Appeal decision in Fernandes and Baron v. Kingsway General Insurance Company (2006), 2006 CanLII 8463 (ON SC), 35 C.C.L.I. (4^th) 180, makes it clear that the choice of forum is up to the insured person, not the insurer. However, the inclusion of the stated case provision in s. 285(1) opens the possibility that a FSCO arbitration or appeal could be the subject of a stated case to the Divisional Court if there are compelling reasons to do so.

Although Economical’s desire to put the issue before a higher court is understandable, I am not persuaded the circumstances are sufficiently compelling to justify a departure from the dispute resolution process chosen by Ms. Augello. FSCO arbitrators and appeals adjudicators are specialized experts in accident benefits and clearly are competent to interpret the SABS, which they do every day. Economical did not suggest otherwise. The issue in this case – the interpretation of a definition in the SABS-1996 – is similar to other cases in which a request for a stated case has been denied because it is within the core responsibility of FSCO adjudicators.³

Nor do I accept Economical’s submission that “there are serious and substantial reasons to question the correctness of the Desbiens ruling” because “[o]n its face, the decision contradicts the regulation” and because “[t]he publishers of the AMA Guides have indicated that the Desbiens approach to this issue is incorrect.”

This is not a situation where FSCO jurisprudence is either internally inconsistent or out of step with judicial decisions. The recent court and FSCO decisions have carefully considered the definition of catastrophic impairment and have consistently concluded that mental and behavioral impairments can be considered under clause (g). As a result, insurers are not facing inconsistent decisions that make it impossible to determine how to adjust claims involving both physical and psychological impairments. The real issue is that Economical disagrees with the analysis in these cases. Its remedy is to pursue its arguments at arbitration and, if it chooses, through appeal and perhaps judicial review.

I note that, for reasons not before me, the insurers that have been subject to decisions allowing “combining” have not pursued the issue to the higher courts: there is no appeal decision in Desbiens; Pilot Insurance appealed the arbitration decision in Ms. G, but has not applied for judicial review; Primmum Insurance did not appeal the arbitration decision in B.P. There are many reasons not to pursue an appeal or judicial review and, therefore, I would not suggest this indicates insurer acceptance of the combining approach. However, it does not support Economical’s assertion that insurers are desperate for a definitive ruling from a higher court.

The reference to the AMA Guides Newsletter is not persuasive. The article is co-authored by Dr. Arthur Ameis, whose approach was rejected in Desbiens and some of the FSCO cases. The fact that he has written an article criticizing the decisions is not surprising and does not raise a substantial basis for doubting the correctness of the decisions.

Finally, it is my view that the complexities of the definition of “catastrophic impairment,” particularly the references to the AMA Guides, make it preferable that the issue proceed with a full evidentiary record to inform the decision. There is some indication that the parties agree with the need for a full examination of the issue, as they have scheduled four hearing days in September 2008. It is unfortunate that the date set is so far in the future. The reasons are not before me, but I expect that it has more to do with counsels’ calendars than available arbitration dates. While I am not persuaded that I should state a case to the Divisional Court, the issue is important and I would encourage the parties to explore earlier dates.

III. EXPENSES:

I do not find any authority to award expenses specifically for this request that I state a case to the Divisional Court. In my view, however, fairness suggests that it be treated as part of the arbitration process and that any related expenses be considered as part of arbitration expenses.

December 4, 2007

David R. Draper Date

Director of Arbitrations