Gurjinder Singh Sumal v. American Home Assurance Company, 2008 ONFSCDRS 101

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2008 ONFSCDRS 101

Appeal P07-00029

OFFICE OF THE DIRECTOR OF ARBITRATIONS

GURJINDER SINGH SUMAL

Appellant

and

AMERICAN HOME ASSURANCE COMPANY

Respondent

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Mr. Patrick Mazurek for Mr. Sumal

Mr. Brian G. Sunohara for American

HEARING DATE:

June 5, 2008

Additional written submissions were received by June 20, 2008

APPEAL ORDER

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

1. The September 5, 2007 order of Arbitrator Kominar is rescinded and replaced with:

2. The Appellant may proceed to arbitration for a determination of his entitlement to statutory accident benefits under the Schedule up to July 6, 2003, without prejudice to the Respondent raising any available defences other than the applicability of subsection 59(5) to subsection 59(2) of the Schedule.

3. If the parties are unable to agree on the legal expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

June 25, 2008

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL AND BACKGROUND

Mr. Sumal (the “Appellant”) was a passenger involved in a single-vehicle accident on October 23, 2002 in Texas. On November 5, 2002, the Appellant applied to American Home Assurance Company (the “Respondent”) for accident benefits payable under the Schedule.¹ A Workplace Safety & Insurance Board (“WSIB”) claim had been set up the prior day, following an employer’s Report of Injury Report filed on November 3, 2002.

On November 27, 2002 the Appellant swore a statement to the Respondent indicating his intention to advance a tort action against the owner and driver of the vehicle involved in this accident, and possibly others, for damages. On December 6, 2002, the Appellant signed a WSIB Assignment in which, amongst other things, he agreed to have any WSIBs he received sent to the Respondent. The Assignment was signed by AI Transport Insurance on January 11, 2003 and was approved by the WISB on January 13, 2003. The Appellant subsequently applied for mediation at the Financial Services Commission of Ontario (“FSCO”) regarding his entitlement to statutory accident benefits under the Schedule.

The WSIB file, however, includes a signed Election Form dated and approved January 13, 2003, wherein a Gurjinder Singh Sumal states, amongst other things, that, “I choose to receive benefits under the Workplace Safety and Insurance plan.” The parties dispute whether the Appellant signed this document.

The April 23, 2003 FSCO mediation failed to resolve the question of the Appellant’s entitlement to benefits under the Schedule. The Appellant’s Application for Arbitration was received by FSCO on May 15, 2003. On July 6, 2003 the Appellant elected to receive worker’s compensation benefits (“WSIBs”) in Ontario rather than the jurisdiction where the injury occurred. The Appellant began to receive WSIBs in August 2003.

A September 16, 2003 pre-hearing discussion was held before Arbitrator Kominar (the “Arbitrator”). A preliminary issue hearing was arranged to address issues arising from the interplay between the Schedule and the Workplace Safety and Insurance Act, S.O. 1997, c. 16 (the “WSIA”).

The Arbitrator’s September 5, 2007 decision held that the Appellant was precluded from receiving benefits under the Schedule as at all material times he was entitled to WSIBs and, contrary to subsection 59(2) of the Schedule, he did not elect to opt out of the WSIA scheme primarily to pursue a tort action but rather to claim statutory accident benefits. Answering the further, more, specific questions raised at the pre-hearing, the Arbitrator held that the Appellant could not proceed with claims for statutory accident benefits not covered by the WSIA and that his entitlement to benefits under the Schedule was not affected by the accident having occurred in Texas.

The Arbitrator determined that as the Appellant was never involved in a dispute over his entitlement to WSIBs themselves, the Respondent was not required to pay interim benefits pursuant to subsection 59(5) of the Schedule. The Arbitrator found that the latter provision pertained to threshold disputes regarding WSIB entitlement, not to whether an insured fell within the exception provision of subsection 59(2).

II. THE APPELLANT’S SUBMISSIONS

The Appellant submits that the Arbitrator erred as follows:

1. Interim payments under subsection 59(5) of the Schedule are not restricted to disputes between an insured and the WSIB regarding coverage, but also cover disputes as to the bona fides of an insured’s election to pursue a tort claim. The Respondent was statutorily obliged to pay accident benefits until WSIBs were received by the Appellant in August 2003.

A no-fault insurer is obliged to pay full benefits until the dispute as to which system should pay is resolved. Otherwise, an insured person who elects not to receive WSIBs is left without recourse to any benefits (including necessary medical and rehabilitation services) pending resolution of the dispute, notwithstanding the re-imbursement protection to the no-fault insurer under subsection 59(5). The Schedule should be interpreted in a sensible and fair way that avoids such inequity.

The onus is on an insurer to establish that an insured person is excluded from statutory accident benefits as section 59, in its entirety, is an exception to an insurer’s clear contractual obligation to pay benefits in the event of a motor vehicle accident. Such exclusions are to be strictly interpreted, especially as this is, as stated in Smith and Co-Operators (2002) 2002 SCC 30, 2 S.C.R. 129, consumer protection legislation.

Paying the Appellant accident benefits to the point WSIBs became available (subject to any applicable assignment), plus interest and a special award, will encourage other insurers to treat claimants fairly and equitably pending resolution of such disputes.

1. At all relevant times there was a dispute as to the Appellant’s WSIB entitlement. The Appellant felt he was self-employed. Neither he nor his putative employer had registered with the WSIB and it was not clear that the driver of the truck involved in this accident was covered by the WSIA. The Workplace Safety and Insurance Appeals Tribunal (“WSIAT”), not FSCO, has jurisdiction to determine whether an insured is entitled to receive WSIBs and it is for an insurer to start an application under subsection 31(1) of the WSIA to determine an insured’s rights to WSIBs.

2. The Appellant was unable to work following the accident and had a family to support. The Respondent’s denial of benefits led to extreme financial distress. A desperate need of funds compelled the Appellant to abandon his option of advancing a tort claim in Texas and contest his eligibility to WSIBs. The Appellant proposes to call evidence to that effect at the arbitration hearing.

3. The no-fault automobile insurer is not the insurer of last resort. Rather, subsection 30(6) of the WSIA makes it clear that unless a person formally notifies the WSIB that he or she intends to elect to receive WSIBs, the person is deemed not to have elected to receive same.

4. The relevant time for determining an insured’s primary intention under subsection 59(2) of the Schedule is when the election is made, as held in Gebru and Coseco Insurance Co//HB Group/Direct Protect, (FSCO A00-000709, September 11, 2001), confirmed on appeal, Coseco Insurance Co//HB Group/Direct Protect and Gebru, (FSCO P01-00043, January 7, 2002). The Arbitrator failed to consider the Appellant’s intention at the relevant point in time and gave excessive weight to the absence of evidence of a tort claim, especially as tort law in Texas may not be the same as in Ontario. The onus was on the Respondent to challenge the bona fides and there was no basis for such a challenge at the time the election was made. In any event, the issue of bona fides was not before the Arbitrator.

5. The Arbitrator failed to address the following facts showing the bona fides of the Appellant’s election:

(a) The Appellant’s injuries included a head injury. He was not able to determine what had caused the accident. He retained counsel in Texas and made inquiries of the local police;

(b) At all times until July 2003 the Appellant indicated his intention, including a signed statement to the Respondent, to pursue an action to recover damages against the owner and driver of the truck in which he was a passenger, and potentially other defendants such as the manufacturer and maintenance personnel who were responsible for the blown tire leading to the accident;

(c) The Appellant had good reason to believe he was not an employee of the owner of the truck or a co-worker of the driver, but that he was self-employed; and,

(d) The Appellant did not know and has still not determined whether he is precluded from commencing a tort action in Texas.

Accordingly, the Appellant submits that the Arbitrator’s September 5, 2007 decision should be set aside pursuant to both subsections 59(2) and (5) of the Schedule and that he be allowed to proceed to arbitration with respect to his claims for accident benefits up to the date his claim he received WSIBs, being August 3, 2003, in addition to being awarded the legal expenses of both the arbitration and the appeal.

III. THE RESPONDENT’S SUBMISSIONS

The alleged late filing of the Notice of Appeal was raised in the Response to Appeal, but was not pursued in either written or oral submissions. The Respondent submits that the Arbitrator did not err in law, that the Appellant was not entitled to receive accident benefits under the Schedule and that the appeal should be dismissed with costs, because:

1. The Schedule provides that where an insured person is injured in the course of his or her employment, the insured is obliged to recover from the WSIB, as held in Asiama and Commercial Union Assurance Company, (OIC A96-001263, March 31, 1998). The purpose of Section 59 is to avoid double payment of benefits and is reflective of the Schedule’s general intent that the no-fault insurer is the payer of last resort, as stated in Brasil and State Farm Mutual Automobile Insurance Company, (OIC A-013383, March 12, 1996), affirmed on appeal (OIC P96-00041, July 4, 1997) and in Sweet v. Aviva Canada Inc., [2007] O.J. 5168 (Sm.Cl.Ct).

2. As held in Sofantzidelis and AXA Insurance (Canada), (OIC P96-00086, April 30, 1998), the insured has the onus to prove that he or she fits within the subsection 59(2) exception. There are two pre-requisites, namely that (1) the insured must elect to bring “an action against a person in respect of the injury or disease” in accordance with section 30 of the WSIA and (2) the election must not have been made primarily for the purpose of claiming statutory accident benefits.

3. It is insufficient for an insured to simply tell an insurer that he or she intends to commence a tort action and then do nothing to prosecute the action. The Appellant failed to bring a tort action, contrary to the bona fides of his intent regarding his election. As stated by Delegate Makepeace in Mahadeo and Aviva Canada, (FSCO P06-00015, March 22, 2007), “[t]his cannot have been the intent of the legislature.”

4. The Arbitrator was correct in holding that subsection 59(5) of the Schedule is limited to threshold disputes between an insured person and the WSIB, that is, whether the insured person is also covered by the WSIA. Citing Lloyd’s London Non-Marine Underwriters v. Chu, 1976 CanLII 32 (SCC), [1977] 2 S.C.R. 400 as support, it is submitted that entitlement to receive WSIBs is not dependant upon a worker making a formal application and the application being approved by the WSIB.

The Arbitrator made a finding of fact that the Appellant was at all times entitled to WSIBs and that finding should not be disturbed. The WSIB set up a file on November 4, 2002 and wrote the Appellant that same day requesting additional information. The Appellant did not provide the requested information until July 2003, following which his WSIB claim was approved. The WSIB at no time denied the Appellant’s entitlement to WSIBs. The Appellant received WSIBs, including loss of earning benefits, retroactive to the date of the accident.

The “pay-pending” provisions of subsection 59(5) do not apply to subsection 59(2) disputes and specifically the bona fides of an election to commence a tort action, as stated in Sweet and in Basdeo and Citadel General Assurance Company, (FSCO A04-001585, March 7, 2005).

1. The Appellant was endeavouring to obtain both WSIBs and benefits under the Schedule at the same time.

2. For insurers who improperly refuse to pay statutory accident benefits, there are sanctions of compound interest and a special award. It does not usually take four years to get to a decision on this preliminary issue. Insured persons do not have to fall within the cracks between the systems as they can opt for WSIBs, or, in accordance with Davis and Pafco Insurance Company Limited, (FSCO P97-00010, July 22, 1997), initially seek WSIBs and then re-elect to commence an action.

IV. ANALYSIS

Filing of the Notice of Appeal

The Arbitrator’s decision was issued September 5, 2007. Rule 52.1 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the “Code”), following subsection 283(3) of the Insurance Act, R.S.O. 1990, c. I.8, states that the Notice of Appeal must be filed within thirty days of the date of the arbitration order.

The Notice of Appeal was filed October 5, 2007. I find that the Notice of Appeal was filed in time. Rule 8.1(a) of the Code states that one does not count the day on which the first event happens, but includes the day on which the second event occurs. However, even if the Appeal was late, it would be unjust not to exercise one’s discretion under Rule 81.1 of the Code and subsection 283(3) of the Insurance Act to extend the time for filing.

Notice of Appeal or Application for Variation/Revocation

The Appellant filed with FSCO both a Notice of Appeal and an Application for Variation/ Revocation. Director Draper wrote the parties November 2, 2007 acknowledging the Notice of Appeal. He indicated that if the matter proceeded as an application for variation/revocation and not as an appeal, the delegate would make the necessary procedural orders to ensure the matter proceeded fairly. My January 3, 2008 letter confirmed that the Application for Variation/Revocation had not yet been acknowledged.

Subsection 284(3) of the Insurance Act provides that the power to vary or revoke an order exists where the Director (or, by virtue of section 6 of the Insurance Act, his or her delegate) is satisfied there has been a material change in the insured’s circumstances, evidence that was unavailable has become available or there is an error in the order.

At the appeal hearing, the Appellant favoured proceeding pursuant to whichever route allowed him to succeed. I found this to be unfair to the Respondent. As the matter had been proceeding as an appeal, it should continue to proceed as such. In any event, the Appellant did not argue that prior unavailable evidence had become available or that there had been a material change in his circumstances.

This matter had proceeded before the Arbitrator based on documentary evidence and submissions. Unfortunately, a record of exhibits was not kept, nor was any document in the file stamped as an exhibit. It was thus not possible to discern what was in evidence. I thank counsel for their co-operation in agreeing that the following documentation was before the Arbitrator and constituted part of the appeal record, which I accept:

1. The WSIB claims file.
2. Three documents attached to the Appellant’s November 3, 2004 written arbitration submissions;
3. Four documents attached to the Respondent’s October 7, 2004 written arbitration submissions;
4. The Appellant’s letter of December 5, 2005 to the Arbitrator and an attached letter to the WSIB of the same date; and,
5. Eight documents from the Respondent’s accident benefits file.

The Subsection 59(1) Exemption

One concern of the Schedule is its interaction with other sources of potential compensation for an insured person, seeking to determine responsibility for payment of benefits while ensuring that an insured is not left without coverage pending that determination.

In Kingsway General Insurance Co. v. Her Majesty the Queen in Right of Ontario (Minister of Finance), (2007) 2007 ONCA 62, 84 O.R. (3d) 507, Laskin J. stated that “persons injured in car accidents should receive statutorily mandated benefits promptly; they should not be prejudiced by being caught in the middle of a dispute between insurers over who should pay.” Eberhard J., in Gill v. Zurich, 1999 CanLII 36826 (ON SC), [1999] O.J. No. 4333, stated:

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" …

In Ablett and Dominion of Canada General Insurance Co., (FSCO A07-001355, November 16, 2007), I commented that:

This system also has as a goal that first party insureds not be deprived of benefits where there are disputes as to which insurer or system of compensation has responsibility for payment.

Specific to the provisions at hand, Delegate Naylor, in Rocchetti and Royal Insurance Company of Canada, (OIC P96-00044, June 3, 1997), quoted Mr. Allan O’Donnell, Q.C. in Automobile Insurance in Ontario, (Toronto: Butterworths, 1991) that:

… the Government wanted to ensure that the workers’ compensation scheme remained responsible for the costs of the bulk of automobile accident cases, where there was no recovery in tort. However, workers suing for threshold injuries should have access to accident benefits to support them until their law suit ended, like anyone else injured in a non-work related accident.

The interface between the Schedule and workers compensation is addressed in section 59 of the Schedule. Subsection 59(1) provides the initial principle that an automobile insurer is not required to pay benefits under the Schedule in respect of any insured person who, as a result of the accident, is entitled to benefits under any worker’s compensation law or plan.

I agree with Arbitrator Sampliner in Brasil regarding the WSIB/no-fault interface that the general legislative intent is “that payments emanate from only one system, and that the no-fault insurer is the payer of last resort.” I also agree with Arbitrator Manji in Sofantzidelis and AXA Insurance (Canada), (OIC A95-000384, May 7, 1997) that the insurer, not the applicant, has the burden of proof of establishing that an insured person is entitled to benefits under any workers’ compensation law or plan.

The Subsection 59(2) Exception

Subsection 59(2) provides that subsection 59(1) does not apply where:

(a) the insured person elects to bring an action referred to in section 30 of the WSIA. Subsection 30(1) of the WSIA refers to “an action against a person in respect of the injury or disease,” and,

(b) the election is not made primarily for the purpose of claiming accident benefits under the Schedule.

I reject the Appellant’s argument, raised for the first time in reply submissions, that the issue of the bona fides of his election was not before the Arbitrator. The Appellant’s written submissions before the Arbitrator, under cover of letter dated November 3, 2004, specifically addressed subsection 59(2) of the Schedule, the Appellant’s intention to commence a tort action and numerous factors he submitted supported his contention that “there is no reason whatsoever to doubt the bona fides of [his] election.”

Arbitrator Leitch, in Lin and Liu and ING Insurance Company of Canada, (FSCO A06-001732 and A06-001689, May 2, 2008), stated that the implicit pre-requisites of subsection 59(2) of the Schedule include that the insured person is entitled to claim benefits under the WSIA and has the right to sue someone for his or her injuries. Subsection 59(2) can encompass a variety of disputes, including whether the alleged tortfeasor was a worker employed by a Schedule 1 employer, subsection 28(1) of the WSIA removing a worker’s right of action against such a person.

Subsection 31(2) of the WSIA gives WSIAT exclusive jurisdiction to determine whether this right of action has been taken away. Subsection 31(1) gives “an insurer from whom statutory accident benefits are claimed under section 268 of the Insurance Act” the right to apply to WSIAT for a determination of such questions.

FSCO, however, has jurisdiction to determine the intention for which an election was made. The crucial determination is not whether an intention exists to bring a tort action, but whether that is the primary purpose of an insured person electing not to proceed with a WSIB claim.

I agree with Arbitrator Renahan in Gebru that the point in time relevant to whether the election to bring an action was made primarily other than for the purpose of claiming accident benefits is when the insured person makes the election. I further agree that 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.” I also agree with Arbitrator Renahan that evidence of what took place after the election was made may shed light on the insured’s motives at the time of the election.

On appeal in Gebru, Director Draper held that:

Quite properly [the arbitrator] did not focus exclusively on the viability of Ms. Gebru’s court action. The regulation makes it clear that the issue is the insured person’s reason for making the election. 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.”

Succinctly put, while an insured’s motivation in proceeding with the non-accident benefits claim is subjective, its determination includes objective evidence.

Director Draper in Sofantzidelis and Delegate Makepeace in Mahadeo found that the onus was on the insured to establish, on a balance of probabilities, that he or she comes within the subsection 59(2) exception, or its predecessor provisions. One difficulty with this statement is that some of the potential disputes arising from subsection 59(2) pertain to issues solely within WSIAT’s jurisdiction, which the insurer has the right to bring before that tribunal and for which, presumably, the insurer would also have the onus of proof.

Questions of primary intention and bona fides are findings of fact. Subsection 283(1) of the Insurance Act restricts appeals to questions of law. In any event, in this case, regardless of which party may have the onus of proof regarding subsection 59(2) of the Schedule, there is a dearth of evidence, objective or otherwise, that when the Appellant made his election, or at any other point in time, that his election was made primarily for a purpose other than claiming benefits under the Schedule.

There is no evidence of any non-accident benefits court action having been commenced or

pursued. There is no evidence, but only submissions, that counsel was retained regarding a tort claim. Other than a police report having been obtained, there is no evidence of any concrete step being taken at any point in advancing a third party claim in the past five and half years, including determination of relevant limitation periods.

As stated by Delegate Makepeace in Mahadeo, a “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.”

As opposed to the absence of any evidence regarding a primary intention to pursue a tort

claim, the Appellant has, from almost immediately after the accident, vigourously pursued a claim for accident benefits, even once he was paid WSIBs retroactive to the accident date. The Appellant has not merely stated an intention to claim accident benefits, but has applied for such benefits, launched a mediation, followed by an arbitration proceeding leading to a preliminary issue hearing, followed by an appeal.

I am not persuaded that the Arbitrator erred in law regarding the Appellant’s primary intention under subsection 59(2) of the Schedule. Given the weight of evidence of an ongoing claim for accident benefits versus no steps having been taken regarding any non-accident benefits claim other than for WSIBs, it would be difficult to see how the Arbitrator made an error of fact, if that were indeed within my jurisdiction to determine.

The Subsection 59(5) Pay Pending Provision

Subsection 59(5) of the Schedule provides that:

(5) Despite subsection (1), if there is a dispute about whether subsection (1) applies to a person, the insurer shall pay full benefits to the person under this Regulation pending resolution of the dispute if,

(a) the person makes an assignment to the insurer of any benefits under any workers’ compensation law or plan to which he or she is or may become entitled as a result of the accident; and

(b) the administrator or board responsible for the administration of the workers’ compensation law or plan approves the assignment.

In this case, there is no dispute that the Appellant made the requisite assignment and that

the WSIB approved the assignment.

The Arbitrator found that the pay pending provisions of subsection 59(5) did not apply to disputes regarding the subsection 59(2) exception to subsection 59(1) of the Schedule. He held that:

… I do find that it is not warranted to conclude that there can be a meaningful "dispute" about entitlement when the WSIB has accepted a claim and has paid the benefits that they deem to be owing. To interpret "dispute" any other way would …allow applicants to bounce back and forth between the statutory accident benefit and workers' compensation schemes on each and every benefit category. That is clearly not consistent with the legislative purpose underlying these two distinct benefit schemes. The "dispute" which section 59(5) of the Schedule refers to, in my view, is a threshold dispute between an applicant and the WSIB about whether he or she is "entitled to receive benefits" – in other words, whether the applicant is covered by the WSIA scheme or not. That sort of dispute must be distinguished from one related to "which" specific benefits an applicant may be entitled to receive or their quantification after initial entitlement to WSIA benefits is determined.

I agree with the Arbitrator that once an insured person elects to proceed with WSIBs, the insured cannot then proceed to simultaneously seek ongoing alternative, additional or enhanced benefits under the Schedule should the WSIA itself not provide specific or equal compensation to that which may be available under the Schedule or if the WSIB or the WSIAT deny the insured’s entitlement to a particular benefit under the WSIA.

However, I am persuaded that the Arbitrator erred as to the scope of subsection 59(5). The word “dispute” noted in subsection 59(5) of the Schedule is not restricted to a dispute as to whether an insured is entitled to receive benefits under any worker’s compensation law or plan. Rather, the provision refers to “a dispute about whether subsection (1) applies to a person” [emphasis added]. Subsection 59(1) is the general exemption provision that where there is entitlement to receive benefits under any worker’s compensation or plan, an insurer is not required to pay accident benefits.

The words “whether subsection (1) applies” found in subsection 59(5) are echoed in subsection 59(2), namely that “[s]ubsection (1) does not apply” if an insured’s election to bring an action is not made primarily for the purpose of claiming benefits under the Schedule. If an insured claims under the subsection 59(2) exception to subsection 59(1) and the insurer disagrees, including regarding the insured’s primary intention, it is clear that there “is a dispute about whether subsection (1) applies to a person.”

I do not agree that Arbitrator Muir, in Basdeo, held that subsection 59(5) applied only to subsection 59(1) and not to subsection 59(2). Rather, Arbitrator Muir found that subsection 59(5) did not only apply to subsection 59(2) disputes. The Assignment signed December 6, 2007 by the Appellant itself notes that it applies not merely to threshold issues of WSIB coverage but to “a dispute with the automobile insurer over whether it has to pay benefits.”

Arbitrator Muir also found that one of the purposes of section 59 is that an insured person not receive benefits under both insurance schemes. The Assignment herein clearly states that “the Claimant can either claim benefits under the [WSIA] or sue to recover damages for personal injuries from a motor vehicle accident.” I am persuaded that it is a false premise that encompassing subsection 59(2) within subsection 59(5) will “allow applicants to bounce back and forth between the statutory accident benefit and workers' compensation schemes on each and every benefit category.”

Rather, the application of subsection 59(5) to subsection 59(2) accomplishes the further goal of the Schedule set out by Arbitrator Muir that “an insured person not be denied benefits merely because of a dispute about which insurance scheme ought to cover them.”

If there were any ambiguity in the meaning of subsection 59(5), a deciding factor would be that it is simply neither fair nor equitable in light of the wording of that provision that an insured person must wait potentially years for a resolution as to whether he or she falls within the subsection 59(2) exception without receiving any interim benefits. I am not persuaded that it was the intent of the legislation that an insured person obtain interim WSIBs during this period by re-electing repeatedly and at will. In any event, this would create the very dilemma the Arbitrator sought to avoid.

Nor could it be the intention of the Legislature that the choice of election be dictated by economic desperation (which in this case was merely argued as opposed to being factually supported by evidence), which would be no meaningful choice at all. The decision in Sweet, which is not binding on this Tribunal, does not address these considerations.

One question arising from subsection 59(2) concerns the insurer paying full benefits “pending resolution of the dispute.” If there is a dispute about WSIB coverage, an insurer has the right pursuant to clause 31(1)(c) of the WSIA to apply to WSIAT for determination of whether the insured is entitled to claim benefits under the WSIA. For subsection 59(2) disputes such as whether the right to commence a court action has been taken away from an insured person, the insurer also has a right to apply to WSIAT for a determination under clause 31(1)(a) of the WSIA.

However, what right of dispute resolution is available to an insurer, independent of any procedure or action initiated by the insured person, to determine whether an insured’s election was not made primarily for the purpose of claiming benefits under the Schedule? As enunciated by Arbitrator Wilson in Shaughnessy and Aviva Canada Inc., (FSCO A06-001546, November 6, 2007), does the Latin maxim ubi jus ibi remedium, that is, where there is a right there is a remedy, apply?

The Ontario Court of Appeal, in Liberty Mutual Insurance Company v. Fernandes (2006), 2006 CanLII 30212 (ON CA), 82 O.R. (3d) 524, held, in the context of a designated assessment centre finding of catastrophic impairment, that an insurer cannot initiate a court action regarding entitlement to or the quantum of statutory accident benefits, with the exception of the repayment of benefits obtained through fraud or error. It had long been determined that clause 281(1) (a) of the Insurance Act allowed only insured persons to commence Commission arbitrations.

The Court of Appeal held that insurers were still protected. The onus was on an insured to follow through with the dispute resolution process if mediation failed, both sides being able to access mediation. The Court determined that under subsections 281(3) and (4) of the Insurance Act “the insurer need only pay benefits in accordance with the last offer of settlement it made before the failed mediation until the parties agree or until a court, an arbitrator, or the Director on appeal from the arbitrator under the Act, orders otherwise.”

While acknowledging that it is unaware of any case law on point, the Respondent argues that subsection 281(4) of the Insurance Act does not apply to subsection 59(5) of the Schedule. Subsection 281(4) refers to pay-pending benefits under subsection 268(8) of the Insurance Act. Subsection 268(8) refers to “particular” statutory accident benefits being paid pending resolution. As the benefits payable under subsection 59(5) are not “particular” benefits, but rather encompass the entire Schedule, subsection 59(5) of the Schedule does not fall within subsection 268(8) of the Insurance Act. Thus, an insured would continue to receive benefits under the Schedule without any incentive to access dispute resolution for a hearing of the issues raised by the insurer, the latter, because of Fernandes, being unable to initiate a court action or an arbitration.

I do not agree. Subsection 281(4) of the Insurance Act states that:

If a dispute involves a statutory accident benefit that the insurer is required to pay under subsection 268(8) and no step authorized by subsection (1) [to litigate or arbitrate] has been taken within 45 days after the day mediation failed, the insurer shall pay the insured in accordance with the last offer made by the insurer before the failure until otherwise agreed by the parties or until otherwise ordered by a court, by an arbitrator acting under this Act or the Arbitrations Act, 1991, or by the Director.

Subsection 268(8) provides that:

Where the Statutory Accident Benefits Schedule provides that the insurer will pay a particular statutory accident benefit pending resolution of any dispute between the insurer and an insured, the insurer shall pay the benefit until the dispute is resolved.

Subsection 59(5) of the Schedule cannot exist as a pay-pending provision in isolation of the Insurance Act. I am persuaded that subsection 268(8) of the Insurance Act must encompass subsection 59(5) of the Schedule and that a “particular statutory accident benefit” in the context of subsection 59(5) means any particular benefit under the Schedule.

Thus, notwithstanding the general protection to insureds under subsection 268(8) of the

Insurance Act and subsection 59(5) of the Schedule, should a mediation brought by either party regarding subsection 59(2) fail and 45 days have passed without the insured accessing the next stage of dispute resolution, in these restricted circumstances the insurer is authorized to “pay the insured in accordance with the last offer made by the insurer” made before mediation failed, until otherwise agreed or ordered.

One notes, however, the Court’s warning in Fernandes that “insurers should not view ss.

281(3) and (4) as an invitation to make an unreasonably low offer to settle in order to pay only that amount until the dispute is resolved.” One also notes that clause 32(2)(c) of the Schedule requires insurers to promptly provide information to assist an insured person in applying for benefits. This would include information regarding elections under subsection 59, pay-pending benefits under subsection 59(5) and the consequences to the insured of not commencing an application within 45 days in the above-noted circumstances.

Subsection 282(3) of the Insurance Act provides that “[t]he arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer.” This “piggyback” provision allows insurers to add as a dispute resolution issue, if not specially raised by the insured person, amongst other things, a question under subsection 59(2) of the Schedule as to the insured’s primary intention. For certain other issues that may arise under subsection 59(2), the insurer has explicit recourse under the WSIA to WSIAT for dispute resolution.

In all disputes arising out of subsection 59(2), the insurer is still protected by an executed and approved subsection 59(5) assignment, should the subsection 59(2) exception to the subsection 59(1) exemption not apply. In this case, there is no dispute that the assignment was executed and approved. The Respondent should have paid benefits under subsection 59(5) “pending resolution of the dispute” whether subsection (1) applied.

It may be argued that the dispute is now moot, given that it is agreed that the Appellant has received WSIBs, including loss of earning benefits, retroactive to the date of the accident. However, here again, there is the maxim ubi jus ibi remedium. An insurer should not be allowed to ignore the pay-pending provisions of subsection 59(5) with impunity.

For the period of time the Appellant elected not to proceed under the WSIA, he should have received benefits solely under the Schedule, subject to reimbursement by the WSIB if his election was subsequently not allowed or was changed.

In the circumstances of this case, I remit this matter to arbitration for a determination of the Appellant’s entitlement to statutory accident benefits up to, at maximum, July 6, 2003, when the Appellant signed an election which it is undisputed put him in the WSIA stream for benefits and, implicitly, ended his subsection 59(2) election. The Appellant does not agree that he signed the January 13, 2003 Election Form, and that factual issue is to be determined. The Appellant’s claims for applicable pre-judgment interest and a special award are also referred to arbitration.

I agree with Arbitrator Leitch in Lin that subsection 59(5) of the Schedule “only requires the insurer to pay benefits under the Schedule if they are payable in accordance with the rules of eligibility established by the Schedule. The insurer can still dispute eligibility on that basis and the insured person can still dispute the insurer’s refusal to pay benefits.”

Accordingly, my order is without prejudice to the Respondent to raise any applicable defences regarding the Appellant’s eligibility for statutory accident benefits during this limited period, other than the applicability of subsection 59(5) to subsection 59(2) of the Schedule, including but not limited to:

1. the collateral benefits provision of section 60 of the Schedule;
2. the set-off provisions of subsection 59(5) of the Schedule;
3. subsection 59(3) of the Schedule, that no weekly benefits are payable to the insured person in respect of any period of time before the insured makes the election;
4. the January 13, 2003 Election Form contained in the WSIB file; and,
5. any causation, impairment or other pre-requisites set out in the specific provisions pursuant to which no-fault benefits are being sought.

It is left to a hearing arbitrator to determine whether, and if so the extent to which, these defences may be applicable.

V. EXPENSES

If the parties are unable to agree on the legal expenses of this appeal proceeding, an expense hearing may be arranged in accordance with Rule 79 of the Code.

June 25, 2008

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.