Yougie Mahadeo v. Aviva Canada Inc., 2007 ONFSCDRS 58

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 58

Appeal P06-00015

OFFICE OF THE DIRECTOR OF ARBITRATIONS

YOUGIE MAHADEO

Appellant

and

AVIVA CANADA INC.

Respondent

Before: Nancy Makepeace

Representatives: Naresh Misir for Mr. Mahadeo Cara Boddy for Aviva

Hearing Date: March 6, 2007

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The appeal is dismissed and the arbitration order, dated April 27, 2006, is confirmed.

2. If the parties are unable to agree on appeal expenses, a hearing may be requested in accordance with Rule 79 of the Dispute Resolution Practice Code.

March 22, 2007

Nancy Makepeace Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This appeal is about the interaction between accident benefits and workers' compensation when an insured person is injured in an automobile accident in the course of employment. The SABS-1996¹ does not allow an accident benefits claim where workers' compensation benefits are payable unless the Workplace Safety and Insurance Act, 1997 (WSIA) allows the insured person to bring a tort action and he elects to do so. In that case, workers' compensation benefits may be payable before the election and accident benefits afterwards. However, the exception applies and accident benefits are payable only if the election was not made primarily for the purpose of claiming accident benefits.

The validity of Mr. Mahadeo's election is the issue in this appeal. In a decision dated April 27, 2006, the arbitrator ruled that Mr. Mahadeo elected to sue primarily for the purpose of claiming accident benefits, and therefore he could not take advantage of the exception under subsection 59(2) of the SABS-1996. As a result, subsection 59(1) relieves Aviva from the obligation to pay benefits and Mr. Mahadeo is not entitled to proceed to an arbitration hearing about his claims.

I am not persuaded the arbitrator erred.

II. BACKGROUND

Mr. Mahadeo was involved in an automobile accident on August 28, 2002. According to the arbitrator, the parties agreed that he was in the course of his employment at Nella Cutlery at the time of the accident.² It appears there was no dispute that in the circumstances Mr. Mahadeo was entitled to claim workers' compensation benefits in relation to the accident.

The most important facts in this case were undisputed. Mr. Mahadeo claimed and received accident benefits, including income replacement benefits, medical expenses and housekeeping expenses. He did not claim workers' compensation benefits. Because he did not make an election by November 28, 2002, three months after the accident, he was deemed to have elected to bring an action instead of claiming workers' compensation benefits.³

The insurer terminated Mr. Mahadeo's accident benefits in March 2003 on the basis that he no longer met the qualification tests under the SABS-1996. Mr. Mahadeo applied for mediation of the dispute. The Report of Mediator, dated June 1, 2003, indicated that mediation had failed.⁴ Mr. Mahadeo applied for arbitration on June 30, 2004. The insurer filed its response on August 3, 2004, disputing Mr. Mahadeo's entitlement to the benefits claimed.

On December 3, 2004, the insurer filed an amended response, seeking reimbursement of the benefits paid on the basis that Mr. Mahadeo had not brought an action by the time the two-year limitation period expired on August 28, 2004. One month later, on January 6, 2005, Mr. Mahadeo started a tort action by filing a Statement of Claim. The timing is significant. The action was started only two business days before the scheduled arbitration pre-hearing, a little more than two years and four months after the accident. By that time, the insurer had paid almost $25,000 of accident benefits.⁵

On January 7, 2005, Mr. Misir gave notice to FSCO and insurer's counsel that he had been retained on the file, replacing Justin Mariani, a SABS representative. The defendant filed a Notice of Intent to Defend on March 4, 2005. No further steps have been taken in the lawsuit since then.

At the arbitration hearing, Mr. Mahadeo testified that he always intended to sue the driver of the car that rear-ended him. He explained that Mr. Mariani did not believe he had a threshold claim⁶ until Dr. Lawrence S. Chizen, a physiatrist, diagnosed chronic pain in his report of July 30, 2003. He submitted that the discoverability principle extended the limitation period by giving him two years after Dr. Chizen's report to begin an action.

The arbitrator did not accept Mr. Mahadeo's evidence because of numerous inconsistencies, which he described at pp. 13-17 of his decision. To summarize the most important points, the arbitrator found that Mr. Mahadeo's testimony was inconsistent with: (i) his failure to take any steps in bringing an action for over two years, (ii) "in stark contrast," his numerous accident benefits claims brought within the same period, (iii) his failure to bring the action for seventeen months after receiving Dr. Chizen's report, (iv) his failure to respond to the insurer's enquiries about the status of the action, and (v) his failure to follow up on the demand letters Mr. Mariani claimed he sent to the alleged tortfeasors. The arbitrator concluded that the "overwhelming weight of the evidence" supported the inference that Mr. Mahadeo issued the claim to resist Aviva and not to bring a tort action. He concluded that the election was made primarily for the purpose of claiming accident benefits and therefore Mr. Mahadeo could not take advantage of the subsection 59(2) exception.

III. ANALYSIS

On appeal, Mr. Mahadeo submits that the arbitrator erred by focusing on the action, rather than the election. He also objects to the arbitrator's consideration of the limitation period and failure to apply the discoverability principle.

I am not persuaded the arbitrator erred.

There is little, if any, dispute about the applicable principles. The claimant has the burden of bringing himself within the exception provided in subsection 59(2). The test is whether the election was made primarily for the purpose of claiming accident benefits. The reference to "purpose" indicates there is a subjective element to the enquiry, and the parties agree that the purpose for the election must be assessed as at the time of the election. However, I reject the submission that the apparent strength of any action and the steps taken to pursue it are beyond the scope of the enquiry. The link is plainly set out in subsection 59(2), which states:

Subsection 59(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. [emphasis added]

The exception is available if the election to bring an action was not made primarily for the purpose of claiming accident benefits. Assessing the purpose for the election requires consideration of subjective and objective factors.

The leading statement of the law is in Gebru and Coseco Insurance Co., (FSCO P01-00043, January 7, 2002), confg (FSCO A00-000709, September 11, 2001). In that case, the insurer submitted that the claimant's action had no chance of success based on new evidence that she had run a red light. The arbitrator concluded that the claimant's purpose in making the election must be assessed with respect to the circumstances at the time of the election, because, amongst other things, "the strength and weakness of a case change over time. What might look like a promising case when a lawyer first interviews a client, may appear to have no merit after productions or discovery."⁷ It was only at the arbitration hearing that the liability evidence was led. The arbitrator conceded that subsequent events can be relevant in determining the claimant's purpose at the time.

On appeal, Director Draper rejected the insurer's argument that the arbitrator had made section 59 meaningless by applying a subjective standard:

While arbitrators must consider "objective" factors in evaluating the insured person's motivation, including the strength of the court action, the steps taken to pursue the claim, and any advantages that might have led the insured person to prefer accident benefits over workers' compensation, it is difficult to see how the test itself can be "objective." (p. 4)

After considering several other decisions on point, Director Draper returned to the point, stating:

The strength of the action is a legitimate consideration, but only as it relates to the insured person's purpose in bringing it. (p. 6)

The claimant's action or inaction, before and after making the election, provides important evidence of his purpose in making the election. Delay in bringing an action or failure to prosecute it are likely to undermine a claimant's accident benefits claim. For example, in Sofantzidelis and AXA Insurance (Canada), (OIC A95-000384, May 7, 1997), the claimant applied for accident benefits one month after the accident, but did not file a Notice of Action until shortly after the arbitration pre-hearing, one day before the expiry of the two-year limitation period. The arbitrator held that the timing of the notice and his failure to pursue it by filing a Statement of Claim indicated its purpose - to respond to the insurer's position that the claim was barred by section 76 of the SABS-1994. On appeal, Director's Delegate Draper approved the arbitrator's analysis, stating:

while I accept that the timing of a court action is not determinative, it is a legitimate factor in assessing the insured person's motivation.⁸

Mr. Mahadeo submits that the arbitrator erred in considering - or giving too much weight to - events after November 28, 2002, the date of the deemed election. However, Mr. Mahadeo also notes that in many cases it takes some time after an accident before it can be determined whether there is any basis for a lawsuit, including whether there is "permanent serious impairment of an important physical, mental or psychological function," so as to satisfy the verbal threshold under section 267.5(5) of the Insurance Act. Mr. Mahadeo submits that it was Dr. Chizen's report, prepared in July 2003, seven months after the deemed election and almost a year after the accident, that prepared the way for a threshold action. I note that Dr. Chizen gave no opinion as to whether Mr. Mahadeo's injuries met the threshold. With respect to the apparent strength of the tort claim, the best that can be said of Dr. Chizen's report is that it diagnosed chronic pain and gave a guarded prognosis on the basis that Mr. Mahadeo had not yet reached full work capacity one year post-accident. Mr. Mahadeo also relied on the June 26, 2003 report of Dr. Michael E. Kliman, an orthopaedic surgeon. It was Dr. Kliman's opinion that Mr. Mahadeo suffered myofascial injuries to his neck and back, leaving "some residual activity-related difficulties along both his neck and back, which should gradually taper over time. Modified activity levels, at his usual workplace, are recommended for the time being." There is no reference to the threshold.

In any event, the main point is that Mr. Mahadeo took no steps, either before or after the election, to bring his tort claim before a judge. He did not begin the action until January 2005, some seventeen months after receiving Dr. Chizen's report.⁹ Whether the discoverability principle might avail Mr. Mahadeo in resisting a limitations defence in the tort action is a matter for a judge. The issue before the arbitrator was whether Mr. Mahadeo's election was made primarily for the purpose of claiming accident benefits. The arbitrator did not err in finding there was no evidence Mr. Mahadeo was concerned about the timeliness of the action. He drew the appropriate inference about the purpose for the election.

In contrast to his failure to pursue the tort claim, Mr. Mahadeo submitted the doctors' reports to the insurer in December 2003, claiming their fees under section 24 of the SABS-1996. He applied for mediation of that dispute in June 2004. The insurer paid the claims with interest in August 2004. Moreover, the insurer's independent adjuster had written to Mr. Mahadeo and Mr. Mariani three times during the same period seeking confirmation as to the status of the lawsuit (letters dated February 27, 2004, June 9, 2004 and July 13, 2004), and received no reply; the last of the letters warned that the insurer would seek repayment of the benefits paid if the action was not commenced by the expiry of the limitation period. Only when the insurer, in its amended response to the arbitration application, asked for reimbursement of benefits paid, did Mr. Mahadeo bring an action. The timing speaks volumes. I agree with the arbitrator: Mr. Mahadeo's conduct subsequent to the election provides "a high level of evidence" for the inference that the election was made primarily for the purpose of claiming statutory accident benefits and was inconsistent with any bona fide election to bring an action.

Turning to the third objective factor mentioned in Gebru, Mr. Mahadeo submits that claiming accident benefits was to his disadvantage because of different income calculation and housekeeping benefits rules in the workers' compensation scheme. There may be cases where the differences in the benefits provided under the two schemes are obvious, though caution is appropriate because workers' compensation is outside FSCO's jurisdiction. The weight given the various factors will differ from case to case. In this case, the arbitrator did not err in giving scant regard to this argument given the compelling evidence of Mr. Mahadeo's failure to pursue his tort claim.

Mr. Mahadeo submits that it is enough for him to show that he made the election to keep his tort options open. I reject this. Though the subjective element of the test in subsection 59(2) likely reflects the legislature's recognition that evolving prospects are a litigation reality, this must be understood in the context of the clear intent of subsection 59(1): there is no election between accident benefits and workers' compensation. Mr. Mahadeo's interpretation of subsection 59(2) is so weak that it would effectively allow an injured person to receive accident benefits, though workers' compensation benefits are available, by the mere expedient of making an election, without taking any further serious steps towards bringing an action. This cannot have been the intent of the legislature.

This was not a close case. I am not persuaded the arbitrator made any errors of law in his decision. Even if appeals were not restricted to questions of law,¹⁰ I would have no basis for second-guessing his conclusion.

IV. EXPENSES

If the parties are unable to agree about expenses of this appeal, a hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

March 22, 2007

Nancy Makepeace Director's Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Arbitration decision, p. 2.
3. 3WSIA, subsection 30(6).
4. 4A second Report of Mediator, dated September 16, 2004, dealt with unrelated issues.
5. 5Income replacement benefits of $9,400, medical benefits of $12,703 and housekeeping benefits of $2,800.
6. 6An action that would satisfy the verbal threshold described in subsection 267.5(5) of the Insurance Act. In addition, subsection 267.5(7) imposes deductibles on damages for non-pecuniary loss.
7. 7At p. 5 of the arbitration decision.
8. 8(OIC P96-00086, January 26, 1998), at para. 62.
9. 9Neither party made submissions on the 120-day notice requirement set out in section 258.3(1)(b) of the Insurance Act.
10. 10Subsection 283(1) of the Insurance Act.