Merg Kong v. Personal Insurance Company of Canada, 2008 ONFSCDRS 106

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

Neutral Citation: 2008 ONFSCDRS 106

Appeal P06-00007

OFFICE OF THE DIRECTOR OF ARBITRATIONS

MERG KONG Appellant/Respondent

and

PERSONAL INSURANCE COMPANY OF CANADA Respondent/Appellant

BEFORE: David Evans

REPRESENTATIVES: Adam Wagman for Ms. Kong Michael P. Taylor for Personal Insurance Company of Canada

HEARING DATE: September 27, 2007

APPEAL ORDER

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

1. Ms. Kong’s appeal of the arbitration decision dated December 21, 2005 is dismissed.
2. Personal Insurance Company of Canada’s appeal of the arbitration decision dated February 27, 2006 is dismissed.
3. Neither party is entitled to their expenses of the appeal hearing.

July 2, 2008

David Evans Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Arbitrator Renahan issued several decisions in this matter. Ms. Kong appeals the arbitrator’s decision that she is not entitled to further benefits pursuant to the SABS–1996.¹ Personal Insurance Company of Canada (Personal) appeals the arbitrator’s decision that Ms. Kong is not required to repay any of the benefits she received from Personal.

II. BACKGROUND

Ms. Merg Kong was injured in a motor vehicle accident on February 13, 2003. Personal paid Ms. Kong income replacement benefits (IRBs) up to June 24, 2003. The dispute between her and Personal following the termination of the IRBs came before the arbitrator. Arbitrator Renahan, in his first decision of July 21, 2005, found that Personal had improperly terminated IRBs by not following the requirements of s. 37 of the SABS as it then read. In particular, he found that Personal failed to specify a date for stopping the benefit at least 14 days after Ms. Kong received the notice of stoppage contrary to ss. 37(2) and 37(3)(a), by giving notice of stoppage a month after it had already stopped paying benefits. He also found that Personal failed to inform Ms. Kong that she had the right to require an assessment by a designated assessment centre (DAC) in accordance with s.37(3)(b). Due to these failings, he found that Personal was required to pay Ms. Kong IRBs from June 24, 2003 until it complied with s. 37.

However, noting Henry and Allstate Insurance Company of Canada,² the arbitrator stated “This does not mean that Ms. Kong may not ultimately have to repay some or all of these benefits.” He did not at that point deal with the substantial issue of whether Ms. Kong was disabled from performing the essential tasks of her employment, allowing her the option of electing an assessment at a DAC. He concluded this portion of the decision as follows:

If, after Personal complies with section 37, the parties are unable to resolve this issue, I will determine if Ms. Kong is entitled to income replacement benefits after June 24, 2003 and whether she has to repay any benefits. If Ms. Kong does not elect an assessment at a DAC, I will decide the issue without further evidence or submissions. If Ms. Kong elects an assessment at a DAC, I will consider that new evidence and submissions.

Arbitrator Renahan issued his second decision on December 21, 2005. Personal had complied with the arbitrator’s order and had then terminated Ms. Kong’s IRBs in accordance with s. 37. Ms. Kong had not requested a DAC assessment and asked for a decision on continuing IRB entitlement. The arbitrator considered the evidence received earlier and found that Ms. Kong did not meet the substantive test for entitlement to IRBs and dismissed the arbitration. However, the arbitrator, in discussing the first decision, noted that he had ordered Personal to pay Ms. Kong income replacement benefits, “subject to Personal’s right to claim a repayment once it had complied with the stoppage provisions,” and that he had invited the parties to contact him “if they could not resolve the outstanding issue of entitlement and repayment of income replacement benefits once Personal had complied with section 37.” The arbitrator added, “If the parties cannot agree on the amount of repayment or the form of any order, they may make written submissions to me within 30 days.”

Ms. Kong appeals this decision on both jurisdictional and substantive grounds, namely that the arbitrator was functus, he failed to properly consider the evidence in Ms. Kong’s favour regarding her entitlement to benefits and had no basis to order repayment.

After Ms. Kong’s appeal was filed, Arbitrator Renahan issued his third decision on February 27, 2006. He found that Henry did not apply, as that case concerned repayment of benefits paid after a proper termination, whereas the arbitrator was concerned with repayment of benefits paid before a proper termination. He found that requiring an insured to repay benefits before the insurer gives a notice of stoppage that complies with s. 37 of the SABS would render the stoppage provisions irrelevant. Accordingly, he found that Ms. Kong was not required to pay those benefits Personal paid from June 24, 2003 until proper termination.

Personal appeals the third decision on the basis that the arbitrator was functus, having already decided in his second decision that Ms. Kong had to repay the benefits. It also submits that the decision is wrong in law with respect to the effect of an improper notice of termination.

Finally, in a letter decision of December 1, 2006, Arbitrator Renahan considered the issue of a special award. While he found that Personal acted unreasonably in not complying with the stoppage provisions, Ms. Kong benefited from the non-compliance by receiving benefits for two years to which she was not otherwise entitled. Accordingly, he found that a nominal special award of $1.00 was appropriate. That decision was not appealed.

III. ANALYSIS

I will start with Ms. Kong’s submissions regarding the second decision. To do so, I will briefly discuss the arbitrator’s first decision, since it provides a framework for considering the later decisions. Arbitrator Renahan did not refer either to his power to issue such an interim decision – in particular, the power to order interim benefits – nor to Commission case law regarding such decisions.

Section 279(4.1) of the Insurance Act provides “The Director and every arbitrator appointed by the Director may make interim orders pending the final order in any matter before the Director or arbitrator.” There has been a considerable amount of case law related to this provision. Generally, the applicant moves for interim benefits before the hearing, and so the motion proceeds on a summary basis and decisions are rendered based on considerations such as the strength of the case and financial need. A good summary of the relevant case law is Ananthamoorthy and TD Home and Auto Insurance Company, (FSCO A06–001533, January 17, 2007).

The only factor the arbitrator considered was Personal’s failure to follow the SABS. One can usefully contrast two cases regarding the weight given to that factor. Arbitrator Baltman held in Singh and Allstate Insurance Company of Canada, (OIC A96–001403, December 31, 1996), that mere technical breaches in a stoppage of weekly benefits notice under s. 64 of the SABS-1994³ did not automatically entitle the applicant to interim benefits where the notice substantially complied with the statutory requirements. On the other hand, she found in Fortney and Lombard General Insurance Company of Canada, (OIC A97–000553, December 24, 1997) that where the insurer had egregiously and utterly failed to comply with s. 64, it was appropriate to make an award of interim benefits on that basis alone. Thus, as stated in Ananthamoorthy, a blatant disregard of the Insurance Act or the SABS by the insurer may give rise to an order for interim benefits. That is essentially what the arbitrator found happened in this case.⁴

Turning to Ms. Kong’s submissions, she submits that since the arbitrator found that she was entitled to benefits, he was functus and had no jurisdiction to make the second decision. However, that is not what he said. Arbitrator Renahan only determined Ms. Kong’s interim entitlement, so he was not functus to make a ruling on her ultimate entitlement based on the evidence set out in the second decision.

As set out in s. 279(4.1), any interim order is made “pending” the final decision, so it is difficult to see how the functus principle could apply in a case like this in any event. The situation here is similar to that in Bertsouklis and Liberty Mutual Fire Insurance Company, (OIC A–006499, June 28, 1995), upheld on appeal (P-006499, May 28, 1996). The matter came up for a hearing but was adjourned for six weeks to give the applicant time to review new insurer medical reports. The same arbitrator then rendered the final decision.⁵ I see little difference from the circumstances here.

Ms. Kong submits that the arbitrator breached the rules of natural justice in suggesting or ordering the insurer to terminate the payment of IRBs, ordering a reopening of the hearing, and pre-determining what evidence he would consider. I am not persuaded by these arguments. The arbitrator simply set out what he was prepared to do in a certain eventuality. He did not reopen the hearing but simply concluded his decision at the request of Ms. Kong’s counsel. Rather than pre-judging what evidence he would hear, the arbitrator relied on the evidence that Ms. Kong had presented, and the issue of whether she had been unfairly restricted in presenting further evidence never arose because she never requested a DAC.

Ms. Kong submits that the arbitrator erred in law in ignoring or failing to consider cogent and material medical evidence. However, as reiterated by the Divisional Court in Kanareitsev v. TTC Insurance Co., 2008 CanLII 26262 (ON SCDC), [2008] O.J. No. 2132, my role is not to try the case de novo or substitute my own views, particularly in a fact-driven case. In addition, as long as the reasons refer to the principal evidence relied upon and provide a justification for the conclusions, the arbitrator’s decision is entitled to deference even if there is not a detailed analysis of each and every aspect of the major points in issue.

Arbitrator Renahan noted that in the four years before the accident Ms. Kong had held three jobs, leaving them because of difficulties at work, and had been unemployed for six months at the time of the accident. The arbitrator found it was difficult to understand Ms. Kong’s work history and any other marketable skills or knowledge she had. He found that her positive interpretation of unemployment and employment terminations prior to the accident amounted to a misrepresentation of her career. He concluded that the essential tasks of her employment were selling computer hardware and software and telecommunication products. Ms. Kong had attempted to return to work after the accident, about which the arbitrator stated that her failure to keep those jobs was not evidence of her inability to do them but rather indicative of the downturn in the computer market.

Ms. Kong submits that the arbitrator erred in rejecting the evidence of her experts without referring to issues raised in cross-examination of Personal’s experts. She also submits that the arbitrator failed to mention some experts and only briefly referred to others, making his conclusion that any complaint Ms. Kong suffers is not physical but likely psychological an error of law for being unfounded.

However, the arbitrator did refer to the principal evidence he relied upon to justify his conclusions. For instance, he considered the evidence of Dr. Doxey, psychologist, who had found Ms. Kong disabled from work due to an adjustment disorder. He rejected Dr. Doxey’s opinion because it relied on factual findings that he did not accept, namely Dr. Doxey’s unrealistically positive interpretation of Ms. Kong’s pre-accident employment history and overly negative interpretation of her post-accident work history. He also considered the evidence of Dr. David Saul, a general practitioner treating Ms. Kong since December 2003 for fibromyalgia and chronic pain. The arbitrator found that, while Dr. Saul was convinced that Ms. Kong was suffering, he provided no reliable explanation for this belief nor gave any reasonable explanation for his conclusion that Ms. Kong was not receiving any psychogenic gain.

Accordingly, I am not persuaded that the arbitrator’s conclusion that Ms. Kong was neither physically nor psychologically disabled as defined by the SABS was unfounded.

I will now turn to Personal’s appeal of the third decision, which found Ms. Kong did not have to make any repayments.

Personal submits that the arbitrator was functus in deciding whether or not to order repayment because he had already made that order in the second decision. However, appeals lie from orders and not from reasons. The suggestion that the arbitrator had already ordered repayment arises from some of his statements in the reasons, as set out above. The actual order simply provided that the arbitration was dismissed. Therefore, the arbitrator had not made an order with respect to repayment, was not restricted to determining only the amount of repayment, and therefore was not functus with respect to that issue.

With respect to the repayment issue, the arbitrator was correct that Henry dealt with the period between the notice of termination and any disability DAC and not the pre-termination period at issue here.⁶ The arbitrator’s decision not to order repayment of benefits for that period is not unprecedented. In Singh and Gore Mutual Insurance Company, (OIC A95–000257, July 3, 1998), the insurer terminated benefits on the ground that the applicant failed to attend an insurer medical examination. The arbitrator disagreed, and found that the insurer had contravened the procedural requirements of the SABS–1994 in the way it terminated benefits. He concluded that Mr. Singh should have received benefits until the disability DAC report was delivered in January 1996, and ordered benefits paid on that basis. That aspect of the order was not appealed.⁷

Significantly, the issue in Singh went beyond a merely defective notice. As discussed by the arbitrator in Singh, the insurer had failed to follow the procedures of the SABS.⁸ He added:

It would be incongruous if an insurer who improperly terminated benefits, thereby forcing the insured person to arbitration, before a DAC report was secured, could gain an advantage by arguing that the insured person not only had an obligation to prove that the termination was improper, but then in addition had to demonstrate that he remained disabled.

The principle set out in Singh is equally applicable to the SABS–1996 and to the decision of the arbitrator in this case. Furthermore, there is no specific right of repayment for benefits made before a notice, unless they meet the criteria of s. 47.⁹ The arbitrator dealt with s. 47 as follows:

Under section 47(1)(a) of the Schedule I have authority to order an insured to repay to the insurer a benefit that was paid to the insured as a result of an error on the part of the insurer. As well, I have authority to award repayment of benefits paid as a result of an interim order I made. However, the termination provisions in section 37 of the Schedule give the insured certain rights to challenge an insurer’s decision to terminate benefits and are in the nature of consumer protection. In this case of conflict between the consumer’s rights and the insurer’s rights, I do not believe that I should rely on section 47(1)(a) or my authority to revisit an interim order to negate or make meaningless the insurer’s obligation to comply with the termination provisions set out in section 37 of the Schedule.

I am not persuaded that s. 47(1)(a) would apply in any event, since I find it difficult to conceive that payments made pursuant to an arbitrator’s order would be payments made “as a result of an error on the part of the insurer.” However, I do not have to decide that point, as I believe the arbitrator made no error of law in refusing to order the repayment, based on the existing case law at the Commission.

I therefore dismiss the appeals by both parties.

IV. EXPENSES

Both parties agreed that Ms. Kong is entitled to her expenses of the preliminary issue decision by Arbitrator Muzzi in this proceeding (FSCO A04–001188, March 15, 2005). Although the parties made submissions regarding the expenses of the other arbitration hearings, since the expenses of the preliminary issue hearing will have to be determined as well, I will leave it to Arbitrator Renahan to make the determination of all the hearing expenses.

As for the appeals, both sides lost their respective appeals, so I find neither should be entitled to expenses.

July 2, 2008

David Evans 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. 2(OIC P96-00064, July 23, 1997).
3. 3The Statutory Accident Benefits Schedule – Accidents After December 31, 1993 and Before November 1, 1996, O. Reg. 776/93.
4. 4I note that in Falco and The Continental Insurance Company and Pafco Insurance Company Limited, (FSCO A95–000485 & A97–000207, June 29, 1999), upheld on appeal (FSCO P00-00038, May 15, 2002), the arbitrator denied the applicant’s request that Continental arrange a disability DAC pursuant to s. 64 of the SABS–1994 and pay interim benefits pending the DAC’s assessment. However, one of the grounds for her denial was the lack of proof that Continental failed to follow the s. 64 requirements.
5. 5I note in passing that the arbitrator also ordered interim benefits to be paid subject to repayment, so when she finally determined that the applicant did not meet the entitlement test, he was required to repay those benefits.
6. 6Since no DAC was requested, the only issue was repayment of benefits paid before the notice of termination.
7. 7Singh and Gore Mutual Insurance Company, (FSCO P98-00036, October 18, 2002).
8. 8In the context of the SABS, the arbitrator also held that an insurer could not seek repayment of any benefits paid up to the time the DAC report was received.
9. 9I note that s. 47 of the SABS–1996 was amended in 2003 by adding s. 47(1)(d), which specifically gave the insurer the right to claim repayment, on notice, of benefits paid during the period after the notice and before the date of the disability DAC [O. Reg. 281/03, s. 22]. That provision is not at issue here as no disability DAC was requested.```