Neutral Citation: 2008 ONFSCDRS 140 FSCO A07-002359

BETWEEN:

ANNA HELLINGER Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA Insurer

DECISION ON PRELIMINARY ISSUES

Before: Arbitrator Suesan Alves Heard: July 29, 2008, by teleconference call Appearances: Ryan Steiner for Ms. Hellinger Derek Greenside for Royal & SunAlliance Insurance Company of Canada

Issues:

Ms. Hellinger was injured in a motor vehicle accident on August 27, 2003. She applied for arbitration of her claims for statutory accident benefits and interest from Royal & SunAlliance Insurance Company of Canada (“Royal”), payable under the Schedule¹ and of her claims for expenses and a special award under the Insurance Act, R.S.O. 1990, c. I.8 as amended. Royal disputes Ms. Hellinger’s entitlement to the relief she claims and seeks its arbitration expenses.

Royal requested a preliminary issues hearing to determine whether Ms. Hellinger is precluded from arbitrating her claim for treatment expenses and her claim for a higher income replacement benefit, because they are out of time. Ms. Hellinger disagreed that her claim for a higher income replacement benefit is out of time. At the hearing, she agreed that Royal had paid her claim for treatment expenses and sought to withdraw that claim.

Is Ms. Hellinger precluded from arbitrating the amount of her income replacement benefits by section 281.1(1) of the Insurance Act, because she failed to apply for arbitration before March 9, 2007?
Should Ms. Hellinger be permitted to withdraw her claims for treatment expenses in the amount of $766.13? If not, is she precluded from arbitrating that claim, by section 281.1(1) of the Insurance Act, because she failed to apply for arbitration before January 31, 2007?
Which party is entitled to its expenses of this hearing?

Result:

Ms. Hellinger is not precluded from arbitrating her claim for a higher income replacement benefit.
Ms. Hellinger is permitted to withdraw her claim for treatment expenses in the amount of $776.73.
The expenses of this preliminary issues hearing are in the discretion of the hearing arbitrator.

EVIDENCE AND ANALYSIS:

Law

Section 281.1 (1) of the Insurance Act requires an insured person to commence an arbitration, mediation or neutral evaluation within two years of the insurer's refusal to pay the benefit claimed. Where a neutral evaluation or mediation has been commenced within the two-year period, section 281.1(2) provides that the limitation period for commencing an arbitration may be extended by 30 days from the date the neutral evaluator reports to the parties, or by 90 days from the date the mediator reports to the parties.

In order to determine whether the limitation period applies in the circumstances of a case, “First, it is necessary to ask whether, and when, there was a refusal to pay benefits; and second, whether the insurer may rely on a limitation period that runs from the date of the refusal.”²

The claim for an increased amount of IRBs:

Royal submits that Ms. Hellinger’s claim that she is entitled to be paid an income replacement benefit, (“IRB”), at a higher rate is time barred because on March 9, 2005, it provided her with a clear, unambiguous refusal of the amount of her benefit, along with information concerning her rights and remedies if she wished to dispute the refusal. Royal submits that Ms. Hellinger was obliged to apply for arbitration in relation to the quantum issue by March 9, 2007, but did not do so until October 30, 2007.

Ms. Hellinger disputes that there was a refusal to pay her a higher level of benefits on March 9, 2005 which would cause the limitation period to begin to run.

At the time of the accident, Ms. Hellinger was self-employed. She applied to Royal for income replacement benefits based on her inability to work due to injuries she sustained in the motor vehicle accident. Royal retained MG Forensic Accounting & Investigations Inc., an accounting firm, to calculate the amount of her IRB. Ms. Hellinger provided documentation at the request of the accountants. The accounting firm issued a report dated March 1, 2005 which set out the amount of Ms. Hellinger’s income replacement benefit as $120.82 per week, as well as her post-accident net income and a calculation of a weekly income replacement benefit payable of $84.80.

On March 9, 2005, Royal sent Ms. Hellinger a letter enclosing a copy of the accounting report. Royal also enclosed page 3 of an OCF-9, which sets out the Applicant’s Rights to Dispute a denial or reduction of a benefit by an Insurer. That page states in part “under the Insurance Act if your claim for statutory accident benefits under the Insurance Act has been reduced or denied by your insurer, you have a right to dispute your insurer’s assessment of your claim for statutory accident benefits.” Royal then paid Ms. Hellinger an income replacement benefit in a lump sum amount of $1,335.56 for the period between August 27, 2003 and December 21, 2005.

I find no evidence that Ms. Hellinger requested a particular level of income replacement benefit. Instead, Ms. Hellinger left it to Royal to perform the calculation. While Royal performed the calculation, I find no evidence that Royal reduced or denied Ms. Hellinger’s income replacement benefit at this point. For these reasons, I am not persuaded that Royal refused to pay Ms. Hellinger a higher level of benefits on March 9, 2005.

Arbitrators have also considered the conduct of the parties following a purported refusal in determining whether the limitation period was triggered. Even if I considered that evidence, I find Royal’s conduct and that of its agent (the accounting firm) inconsistent with a refusal of March 9, 2005.

At some point after March 9, 2005, Ms Hellinger recalled that she had earned an additional sum of money in the year before the accident. On July 13, 2005, counsel for the Applicant sent a copy of Ms. Hellinger’s income tax return together with Ms. Hellinger’s calculation of her income for the 52 week period before the accident, and requested that Royal recalculate the amount of her IRB based on these figures. On July 21, 2005, Royal’s adjuster faxed the additional documentation to MG Forensic Accounting & Investigations Inc. The accounting firm then wrote Ms. Hellinger asking her to provide source documentation regarding her monthly revenue calculations and a copy of the T4 slip in the amount of $8,372. Counsel for the Applicant forwarded the T4 to MG on September 29, 2005.

Royal terminated Ms. Hellinger’s income replacement benefits effective March 24, 2006. On June 5, 2007, Ms. Hellinger applied for mediation with respect to her ongoing entitlement to income replacement benefits and alleged that Royal had improperly calculated her IRB from the outset. At best if there was a refusal in relation to the amount of Ms. Hellinger’s IRB, that took place at the mediation in June 2007. As Ms. Hellinger’s arbitration application was filed in October 2007, it is timely.

I find Ms. Hellinger’s situation to be quite similar to that of the applicant in the case of Jakovljevic and Commercial Union Assurance Company, (FSCO A98-001163, July 26, 1999).

In that case, Arbitrator Bayefsky held that

…the mere payment of a particular quantum of benefits (which goes unchallenged) does not constitute a clear and unequivocal refusal to pay a certain level of benefits. The provisions creating a limitation period do not refer to time running from the date an undisputed payment is made; they focus on the insurer's conduct in denying a benefit claimed. In this case, the clock could not begin to run since there is no evidence that the Insurer ever refused to pay the benefit now being claimed by the Applicant. The most that can be said is that [the] Insurer refused these benefits at mediation, but the mediation was held in May 1998, in which case, the arbitration of the quantum issue would be well within the legislated time limits.

Arbitrator Bayefsky concluded that Mr. Jakovljevic applied for arbitration on the quantum of his benefits in a timely manner and that he was entitled to arbitrate this issue for the full duration of the claim. I agree with Arbitrator Bayefsky.

For these reasons, I find that the limitation period on the quantum issue has not been triggered by a proper refusal. I find that Royal failed to meet its onus of proving that the Applicant failed to apply for arbitration on the quantum issue within the prescribed limitation period. Ms. Hellinger may therefore proceed to arbitration on this issue.

The claim for treatment expenses:

Royal submits that Ms. Hellinger’s claim for treatment expenses in the amount of $766.13 is out of time, as it denied that benefit on January 31, 2005.

Counsel for the Applicant sought to withdraw this claim at the hearing. He submitted that it was not until the Insurer served its Supplementary Factum in July 2008, that he appreciated that Royal had paid all the treatment which the medical and rehabilitation DAC opined was reasonable and necessary. Counsel for the Insurer submitted that it was too late to withdraw and sought a dismissal of the claim for treatment expenses.

Generally, adjudicators at the Financial Services Commission of Ontario have allowed applicants a great deal of control in deciding whether to proceed with or withdraw claims which have been submitted for arbitration. The treatment expense claim in this case is a small portion of the arbitration. The request to withdraw was made relatively early in the arbitration process and approximately two weeks after the date of the Supplementary Factum. In the circumstances, I am prepared to exercise my discretion to allow the Applicant to withdraw this claim for treatment expenses.

Counsel should contact the case administrator to schedule a resumption of the pre-hearing.

Expenses:

I leave the expenses of this preliminary issues hearing in the discretion of the hearing arbitrator.

August 19, 2008

Suesan Alves Arbitrator

Date

Financial Services Commission of Ontario