Financial Services Commission of Ontario
Neutral Citation: 2008 ONFSCDRS 145 FSCO A06-002340
BETWEEN:
TODOR MARKOVSKI Applicant
and
PILOT INSURANCE COMPANY Insurer
DECISION ON A PRELIMINARY ISSUE
Before: Robert A. Kominar Heard: By written submissions only, completed on July 16, 2007 Appearances: James Daris for Mr. Markovski James M. Brown for Pilot Insurance Company
Issues:
The Applicant, Todor Markovski, was injured in a motor vehicle accident on July 18, 2002. He applied for and received statutory accident benefits from Pilot Insurance Company ("Pilot"), payable under the Schedule.1 Pilot terminated weekly income replacement benefits on September 11, 2003. The parties were unable to resolve their disputes through mediation, and Mr. Markovski applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
The preliminary issue is:
- Is Mr. Markovski precluded from proceeding to arbitration because his Application for Arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule?
Result:
- Mr. Markovski is precluded from proceeding to arbitration because his Application for Arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule.
EVIDENCE AND ANALYSIS:
This case raises an issue which, although not common, is certainly not unknown to arbitrators at the Commission. It relates to the manner in which use of forensic accounting firms in performing income replacement benefit calculations for self-employed individuals affects the adjusting and dispute resolution processes.
The basic facts underlying the dispute are straightforward. The motor vehicle accident occurred on July 18, 2002. Mr. Markovski was self-employed as a denturist at that time. He applied for income replacement and various other benefits and Pilot retained an accounting firm to do a calculation of the quantum of an income replacement benefit for Mr. Markovski. As accountants commonly do, they asked for various forms of financial documentation from the applicant, including information related to his post-accident income. On May 27, 2003 the accountants issued a report, based on the information the applicant had provided to them, concluding that Mr. Markovski's income replacement benefit should be set at $207.28; however taking into account that 80 per cent of his net post-accident income was $387.86, there was no income replacement benefit actually owing.
The accountants wrote to Mr. Markovski on the same date that they issued their report noting that if he had any further information which might change their opinion he should forward the same to them. Mr. Markovski had not provided all of the information which the accountant's originally had requested.
Mr. Markovski did not respond to the invitation to provide further documentation and on September 11, 2003 Pilot denied income replacement benefits through an OCF-9. The 5th and last page of the OCF-9 contained information about Mr. Markovski's right to access the dispute resolution process for accident benefits. It is well accepted since the Supreme Court of Canada's decision in Smith v. Co-operators General Insurance Co.2 that this information is critical for any insurer to provide if it wants to rely on limitation periods for disputes.
Mr. Markovski's application to mediate the denial of income replacement and other accident benefits was executed by him on October 26, 2005. The mediation was actually conducted on February 27, 2006 and the income replacement benefit and interest issues failed. The mediator issued his Report on the same date. Mr. Markovski ultimately executed an Application for Arbitration on October 24, 2006. The Application for Arbitration was therefore filed more than 3 years after the Insurer's OCF-9 of September 11, 2003 and more than 90 days after the mediator issued his Report on February 27, 2006.
There is no dispute that the limitation periods under section 281 of the Insurance Act and section 51 of the Schedule provide for an Application for Mediation to be made within 2 years after the Insurer's refusal to pay a benefit. This limitation is extended by the Schedule by way of allowing a further period of 90 days after a Report of Mediator indicates that the issues were unresolved to commence an arbitration at the Commission or an action in court.
On the face of it, the above facts prima facie indicate that Mr. Markovski is out of time to commence an arbitration and therefore his claims must be dismissed. However, his argument is that the OCF-9 of September 11, 2003 does not constitute a firm and clear refusal to pay benefits and thus the limitation clock does not start running from that date.
In support of this proposition Mr. Markovski's materials include a series of letters between the adjuster, Ms Lowry, and Mr. Daris, his solicitor. The tenor of the correspondence is basically that Mr. Daris noted that he disagreed with the accountant's report and that he was trying to get updated information to provide to support Mr. Markovski's claims. Ms Lowry, at various points in the correspondence, notes that Pilot has been requesting financial information for a significant period of time but also that if the information is provided to the accountants they would review it. She also notes, in a letter of October 25, 2006, that unless the information requested is provided within 60 days of the letter's date that the insurer would be closing its file on the assumption that the applicant was not proceeding with disputing the insurer's position on income replacement benefit entitlement. Specifically, she states "If you and your client intend on proceeding further with this, please provide these documents as soon as possible to McCully & Associates in order that this calculation can be completed." This letter was followed up with another one from Ms Lowry dated November 6, 2006 to the accountants enclosing information she had just received from Mr. Daris and also alluding to information that she believed was sent directly to them by Mr. Daris. That letter closes by asking the accountants to calculate the income replacement benefit based on the new information. As noted above, the Application for Arbitration was completed on October 24, 2006.
Pilot argues that this continuing communication between Mr. Daris and the adjuster has no effect on stopping the limitation period from running. Further, the issuing of an OCF-9 denial is not really the end of the process, but rather the beginning of the dispute resolution process for accident benefits. As is well known, the process includes mediation as well options for arbitration, litigation and neutral evaluation. As I understand Pilot's submissions, once a clear refusal to pay has been communicated to an insured person, and, when that insured person has been properly informed about the dispute resolution process options available, the limitation periods in the limitation start running.
As I understand Mr. Markovski's position, it is that continuing discussion about benefits after a refusal to pay in effect estopps the insurer from relying on a limitation period defence. The basis for this is that continuing discussion of entitlement to benefits makes the refusal unclear and ambiguous. In inference from this is that, if the insurer intends to clearly refuse to pay, they must also stop communicating about the issue with the applicant and his counsel, otherwise their words may come back to haunt them. I decline to draw this inference as it is completely inconsistent with the spirit and intention of the dispute resolution process for accident benefits.
Notwithstanding the above, if an insurer in some way actually waives a limitation period, or encourages an insured person not to be concerned about time limits then there may well be an estoppel situation created. However, from reviewing the correspondence between Mr. Daris and the adjuster, I find that there were no intimations that the limitation defence was off the table. In fact there is no discussion of it at all. The closest any of the correspondence comes to dealing with the issue is in Ms Lowry's prompting Mr. Daris to provide the information, otherwise they would assume that he would not be taking further dispute resolution action. In my view this should have raised a red flag to counsel to commence the arbitration within the time limit, or else seek a specific undertaking from the Insurer that the limitation issue would be extended in some way.
Mr. Daris submits in his material that he, and thus Mr. Markovski as well, was entitled to rely on his "understandings and subjective impressions" of how the insurer was dealing with the dispute. I agree with Mr. Brown's submissions in this regard that there is no affidavit evidence before me as to what these understandings and impressions were, or what basis there was for them to be formed. Mr. Daris' submissions that there were such understandings are not evidence. Further, I agree that the test for a limitation defence must be objective and not subjective. If Mr. Markovski and Mr. Daris were unilaterally mistaken about Pilot's legal position on the dispute, that is not something that can be transferred to Pilot's responsibility. The Director's Delegate in Turner and State Farm Mutual Automobile Insurance Company3 has dealt with this issue and I agree with her analysis concluding that the test here is objective and that there are sound policy reasons for this approach. Limitation periods are intended to bring closure to disputes which become increasingly difficult to deal with as time wears on. Even more importantly an objective standard "encourages" use of the dispute resolution process, rather than endless adversarial haggling and arguing between parties.
Mr. Daris also submitted that the placing of the dispute resolution options at the back of the OCF-9, basically page 5 of 5, does not adequately point out to an insured person the importance of this. I disagree, and find it hard to understand why page "5" of a 5-page document can be freely ignored by an applicant, but not the other pages. The dispute resolution information provided is the type that is now routinely seen since Smith, and I decline to find that Mr. Markovski was prejudiced in any way because Pilot did not somehow highlight and point out the fundamental importance of reading that page of the OCF-9 as well as the rest of the document. There is no regulatory requirement that this information be highlighted in this way. Pilot has an obligation to be clear about what it is refusing to pay and why and the insured person has an obligation to read what is sent to him or her and decide whether to take up one of the options available for going forward or not.
In conclusion I find that there are no reasonable grounds to conclude anything here other than that Mr. Markovski did not apply for arbitration within the statutory timeframe. I further find that the communication between Mr. Daris and Ms Lowry was best understood as the kind of discussion that typically happens within the dispute resolution process and that there was nothing particularly unusual about it at all. However, nothing in it can reasonably be construed as having encouraged Mr. Markovski to believe that Pilot waived or extended any applicable limitation period.
Therefore Mr. Markovski's application for income replacement benefits, interest and expenses are dismissed as there are no grounds for proceeding to arbitration on them.
EXPENSES:
If the parties cannot agree on expenses an expense hearing may be arranged pursuant to the Dispute Resolution Practice Code.
August 28, 2008
Robert A. Kominar Arbitrator
Financial Services Commission of Ontario
Neutral Citation: 2008 ONFSCDRS 145 FSCO A06-002340
BETWEEN:
TODOR MARKOVSKI Applicant
and
PILOT INSURANCE COMPANY Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- Mr. Markovski is precluded from proceeding to arbitration because his Application for Arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule.
August 28, 2008
Robert A. Kominar Arbitrator
Footnotes
- The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
- 2002 SCC 30, [2002] 2 S.C.R. 129
- (FSCO P00-00046, February 2, 2002) Appeal