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

Neutral Citation: 2008 ONFSCDRS 156

FSCO A07-002490

BETWEEN:

KALATHEVI NADARAJAH Applicant

and

TD GENERAL INSURANCE COMPANY Insurer

Before: Richard Feldman

Heard: July 7, 2008, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Robert Zigler, counsel for Ms. Nadarajah Donald Harvey, counsel for TD General Insurance Company Milroy Anandraj, Tamil interpreter

Issues:

The Applicant, Kalathevi Nadarajah, was injured in a motor vehicle accident on November 9, 2006. She applied for and received statutory accident benefits from TD General Insurance Company (“TD General”), payable under the Schedule.¹ Disputes arose between the parties concerning the Applicant’s entitlement to certain accident benefits. The parties were unable to resolve their disputes through mediation and Ms. Nadarajah applied for arbitration at the Financial Services Commission of Ontario (“FSCO”) under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

On July 7, 2008, after identifying the issues, the parties, through their respective counsel, advised me that they had reached a settlement on all issues, save one. They filed Minutes of Settlement (executed by the parties on July 7, 2008), which I marked as Exhibit #1.

With respect to all issues other than the Applicant’s claim to income replacement benefits, the parties acknowledge that they are content with the terms set out in the Minutes of Settlement and do not require an order from FSCO.

With respect to the Applicant’s claim to income replacement benefits, the parties reached the following agreement (as set out in paragraph 1 of the Minutes of Settlement):

The Insurer and the Insured agree that the applicant is entitled to income replacement benefits in the amount of $278.07 per week from June 8, 2007 to date and ongoing, together with interest, pursuant to section 4 of the Schedule, and to an order in accordance with this agreement.

The parties agree to a consent order to be issued on terms that the Commission finds acceptable after hearing submissions from counsel.

The issue in this hearing is:

What additional terms, if any, ought to be added to the order the parties have requested be issued in accordance with their agreement (set out above)?

Result:

No terms shall be included in the consent order other than the terms upon which the parties have agreed.

EVIDENCE AND ANALYSIS:

The Applicant submits that the wording typically used in FSCO orders provides that an insurer shall pay a weekly benefit of "$[amount] from [start date] to present and ongoing" (or words to this effect). The Applicant further submits that this is "established arbitral practice"² and urges that I adopt a similar approach in this case.

The reason the Insurer objects to this proposal is because TD General only agrees in the present case that the Applicant meets the pre-104 week threshold for income replacement benefits set out in section 4 of the Schedule. Prior to the hearing, the Applicant, through her counsel, sought to add to this arbitration the issue of the Applicant's entitlement to post-104 week income replacement benefits under section 5 of the Schedule but that request was denied by an arbitrator. Since the hearing was scheduled to take place in July 2008 (approximately 80 weeks after the accident), it was determined that it was premature to adjudicate the Applicant's entitlement to post-104 week income replacment benefits.

Counsel for the Applicant has been forthright in advising that, if my order is worded as the Applicant requests, any subsequent attempt by TD General to terminate her income replacement benefits may be met with resistance on the basis that, as provided in section 287 of the Insurance Act, an insurer cannot reduce (or terminate) benefits that have been ordered without first obtaining the consent of the applicant or an order from the Director or an arbitrator varying or revoking the original order. Effectively, this will place the burden upon TD General to prove that there has been a material change in the circumstances of the Applicant and, until TD General obtains an order to the contrary, TD General will be required to continue paying income replacement benefits in the amount originally ordered.³

In the Hutchinson decisions,⁴ I found that since the consent order did not contain an explicit time limit, the provisions of section 287 of the Insurance Act applied. In the present case, TD General wishes to avoid such a result by having me insert into the order, over the objection of the Applicant, a term to the effect that, "This order will cease to have any effect as of November 9, 2008."⁵

Since the parties could not agree on the wording of this order, they requested that I issue the order on the same terms as if I had heard the whole case (i.e., as if I had heard evidence) and had found that the Applicant was entitled to income replacement benefits from June 8, 2007 onwards.

The parties did not want to argue about how section 287 of the Insurance Act would apply in a case such as this. Clearly, however, the potential impact of that provision lies at the heart of the inability of the parties to reach a full agreement in this case.

I take notice of the fact that FSCO does issue many decisions that provide for payment of periodic benefits on an ongoing basis. As stated by Director's Delegate Makepeace in McMichael and Belair Insurance Co., "Any other approach would produce endless disputes in a periodic benefits system."⁶ Obviously, the Insurance Act anticipates that orders for ongoing payments will be made routinely or there would be no need for the provisions of sections 284 and 287 of the Insurance Act.

Where an order for ongoing payments has been issued, section 284 of the Insurance Act provides the mechanism (i.e., the procedure) whereby either party can seek to have that order varied or revoked. Section 287 provides that, where it is the insurer who is seeking to have the original order varied or revoked, the insurer must continue paying the disputed benefits as required by the original order until the insurer obtains either the consent of the insured person or an order from FSCO (through an application under s. 284) permitting the insurer to reduce or discontinue the payments.

In the Hutchinson cases, counsel for Mr. Hutchinson argued convincingly that, in the realm of accident benefits, which the Supreme Court of Canada has found to constitute a consumer protection scheme,⁷ once an insured person has been put to the time, effort and expense of first mediating and then arbitrating a dispute with an insurer and is found by FSCO to be entitled to ongoing periodic benefits, it is the intent of the Legislature (as inferred from the presence of section 287 of the Insurance Act) that the onus then fall upon the insurer to initiate an application to vary or revoke the order if the insurer wishes to reduce or terminate those benefits. Where an insurer believes that there has been a material change in the circumstances of the insured person, the insurer must follow the procedures set out in sections 287 and 284 of the Insurance Act.

In Hutchinson and Security National,⁸ I held that a change in the test for entitlement to a benefit may constitute a material change in the circumstances of the insured person but that this depends upon all of the circumstances of the person – a change in the test does not automatically constitute a material change in every case⁹. It is also not an issue that can be decided in advance but must be considered in the light of the circumstances as they exist at the time of the change in the test.

TD General is urging that I use my power (under Rule 65.1 of the Dispute Resolution Practice Code to make this order subject to such terms as I consider just) to add to this order a timelimit on the Insurer’s obligation to pay income replacement benefits in order to avoid the ramifications of sections 287 and 284 of the Insurance Act. The Insurer argues that a change in the test for entitlement to the benefits in question ought to be presumed to constitute a material change in circumstances and that it would be unfair to place the burden upon the Insurer to have to bring an application to vary or revoke this order when the test changes (i.e., after 104 weeks of disability).

I agree that an arbitrator has the authority to limit the effective duration of an order. The power to impose such a condition, however, must be exercised carefully, with due consideration being given to the relevant facts of the case. The condition of the applicant, the nature of the benefit in question, the proximity in time to the change in the test for eligibility and the likelihood that a change in the test will constitute a material change in the circumstances of the applicant are just some of the factors that would have to be considered. There may be cases where it is appropriate to impose such a time limitation (assuming that such a time limit can be specified with any degree of certainty). I do not think it is prudent or necessary in this case for me to try to create any general rules as to when the inclusion of such a time limitation would be appropriate.

It should be noted, however, that the inclusion of a time limitation in an order for ongoing payments may have the effect of depriving an applicant of the procedural benefits contained in sections 287 and 284 of the Insurance Act.

To exercise my discretion under Rule 65.1 by including a term that effectively deprives the Applicant of the potential procedural benefits contained in sections 287 and 284 of the Insurance Act, I would have to be convinced that it would be unjust to do otherwise in all of the circumstances of this case. In the absence of an agreement between the parties on this point and in the absence of any evidence, I am not prepared to impose such a term in this case.

An order shall be issued on the terms agreed upon by the parties.

September 25, 2008

Richard Feldman Arbitrator

Date