Neutral Citation: 2008 ONFSCDRS 181 FSCO A07-000775

BETWEEN:

ANTONETTA MACERA Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Edward Lee Heard: July 14, 2008, at the offices of the Financial Services Commission of Ontario in Toronto Appearances: Anna Mondano for Mrs. Macera Derek Greenside for Royal & SunAlliance Insurance Company of Canada

The Applicant, Antonetta Macera, was injured in a motor vehicle accident on October 15, 2003. She applied for and received statutory accident benefits from Royal & SunAlliance Insurance Company of Canada (“Royal”), payable under the Schedule.¹ Royal alleged that Mrs. Macera was prevented from arbitrating her dispute in regard to the Non-earner and Attendant Care benefits because she commenced her arbitration proceeding outside of the statutory time limits.

The preliminary issue is:

Is Mrs. Macera precluded from arbitrating her dispute with respect to her entitlement to receive a Non-earner benefit because she failed to apply for arbitration within the two-year limitation period set out in the Insurance Act?
Is Mrs. Macera precluded from arbitrating her dispute with respect to her entitlement to receive an Attendant Care benefit because she failed to apply for arbitration within the two-year limitation period set out in the Insurance Act?

Result:

Mrs. Macera is precluded from arbitrating her dispute with respect to her entitlement to receive a Non-earner benefit because she failed to apply for arbitration within the two-year limitation period set out in the Insurance Act.
Mrs. Macera is precluded from arbitrating her dispute with respect to her entitlement to receive an Attendant Care benefit because she failed to apply for arbitration within the two-year limitation period set out in the Insurance Act.

FACTS:

The main facts of this case were not disputed and can be set out succinctly as follows:

Mrs. Macera was involved in an automobile accident on October 15, 2003.
Mrs. Macera completed and submitted an Application for Accident Benefits to Royal in November 2003.
Mrs. Macera was the subject of an Independent Occupational Therapy In-home assessment on November 24, 2003. The assessment was arranged by Royal.
Royal sent an Explanation of Benefits Payable to Mrs. Macera dated January 6, 2004 advising her that no Attendant Care benefits were payable.
Mrs. Macera was then the subject of a Follow-up Independent Occupational Therapy In-Home Assessment on March 22, 2004. This assessment was also arranged by Royal.
Royal sent Mrs. Macera an Explanation of Benefits Payable dated April 14, 2004 advising her that she was not qualified for the Non-earner benefit.
Mrs. Macera submitted her Application for Mediation to the Financial Services Commission of Ontario on July 14, 2006. A further Application for Mediation was submitted on August 18, 2006. Entitlement to the Non-earner and Attendant Care benefits was disputed.
The report of the mediator was issued on January 9, 2007, and the application for arbitration was received by the Financial Services Commission of Ontario on April 16, 2007. Mrs. Macera sought to dispute her entitlement to the Non-earner benefit and Attendant Care in her arbitration proceeding.

Arguments of Royal:

Royal argued that it was clear that Mrs. Macera failed to commence her mediation proceeding within the time requirements prescribed under the Insurance Act² and the Schedule. Royal informed Mrs. Macera by Explanation of Benefits Payable dated January 6, 2004 that she did not qualify for the Attendant Care benefit. Royal informed Mrs. Macera by Explanation of Benefits Payable dated April 14, 2004 that she did not qualify for the Non-earner benefit. The Application for Mediation of these two issues was filed on July 14, 2006, some two years and three months after the latest of the refusals. As the Insurance Act requires a mediation to be commenced within the two-year period following an insurer’s refusal to pay the benefit claimed, Royal argues that Mrs. Macera’s arbitration proceeding is barred and cannot proceed.

Arguments of Mrs. Macera:

Mrs. Macera did not dispute any of the facts relied upon by Royal. She did not dispute receiving the refusals during the time periods suggested. She also did not dispute the adequacy or quality of the information she received from Royal explaining the reasons for the refusals or the dispute resolution processes or the relevant limitation periods related to those processes. There was no dispute that if the refusals were valid, then her application for mediation was outside of the two-year limit.

Instead, Mrs. Macera argued that she was not even aware that she might have qualified for these benefits because she was self-represented at the time, and she did not have a full understanding of the English language. Because the documentation she received from Royal was in English, and she lacked a full understanding of written English, the Explanations of Benefits Payable could not be valid refusals and could not start the limitation period running. In the words of her representative, she had a “practically total lock [sic] of comprehension of the written English language.”

ANALYSIS:

This matter turns on the question of what constitutes a valid refusal on the part of an insurance company to pay a benefit claimed, and the time limit allowed to an insured to commence a proceeding following such a refusal. Section 281.1(1) of the Insurance Act deals with time limits for proceedings and reads as follows:

A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.

Section 281.1(2) allows for an extension to the two-year period if the insured applied for mediation before the expiry of the two-year limit. That extension does not apply in the present case because Mrs. Macera did not apply for mediation within two years of Royal’s refusal.

The Supreme Court of Canada in the decision of Smith and Co-operators General Insurance Company examined the obligation placed on an insurer when communicating a refusal to pay a benefit a person has applied for under the Schedule. The Court held as follows:

In my opinion the insurer is required under section 71 to inform the person of the dispute resolution process contained in ss. 279 to 283 of the Insurance Act in straightforward and clear language, directed towards an unsophisticated person. At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate of mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process. Without this basic information, it cannot be said that a valid refusal has been given. [emphasis mine]³

Arbitrators have also consistently held that to be valid, a refusal notice must be clear and unequivocal.⁴

In the present case, Mrs. Macera made no argument that the refusals sent by Royal failed the tests set out above. Nevertheless, Mrs. Macera argued that they could not be binding on her because she did not have a full understanding of the written English language.

Mrs. Macera’s representative provided me with no jurisprudence to support her argument, although some arbitrators have indeed suggested that one must also look at the entire series of events leading up to and after the giving of the refusal notice to properly determine if the necessary notice was given.⁵

Nevertheless, in the appeal decision of Turner and State Farm Automobile Insurance Company, the Director’s Delegate found that the arbitrator at first instance erred in law when he considered prior and subsequent events in concluding that the Insurer provided a clear and unequivocal refusal of the benefits. In that case the applicant’s understanding of a refusal was also at issue.

The Director’s Delegate held the following:

However, the prevailing weight of FSCO decisions hold that the insurer’s written notice must be clear and unequivocal [footnote omitted]. In my view, this result follows from the words of the limitation provisions, which clearly state that the limitation period runs from the insurer’s refusal to pay the benefits claimed, not the insured’s response to the refusal. Nor is the insurer’s failure to pay the triggering event. The focus of the analysis is the refusal [footnote omitted].

There are also sound policy reasons for applying an objective test. It promotes certainty in ascertaining the date when time began to run, avoiding a factual enquiry into the parties’ dealings over an extended period of time. [Emphasis mine] ⁶

I am not convinced that Mrs. Macera’s argument can withstand the decisions of Smith and Turner. These decisions lead me to conclude that the test is an objective one and the time limitation period commences to run once a clear and unequivocal refusal is communicated, accompanied by information regarding the dispute resolution process in straightforward and clear language, directed to an unsophisticated person.

Even if language comprehension could, in the appropriate case, vitiate an otherwise valid refusal, I was not convinced that Mrs. Macera’s self-professed inability to understand written English was as great an impediment as she suggested. In testimony, she revealed that she had a good understanding of spoken English and some written English. She knew she was receiving important insurance forms from her insurance company in relation to her automobile accident. She had previously handled a worker’s compensation claim on her own, dealing in written and oral English to claim medical benefits and income replacement benefits. She could and did avail herself of her English-speaking doctor and English-speaking adult children who lived with her to translate, review and explain the insurance company’s letters, forms, and notices of assessments. These children were also available to translate at those assessments. Further, Mrs. Macera had even informed the insurance company in her Application for Accident Benefits that she spoke English; she never informed them of any language problems.

In the present case, I find that the Explanation of Benefits Payable⁷ dated January 6, 2004 constituted Royal’s refusal to pay Attendant Care benefits to Mrs. Macera. Royal based its refusal upon an In-home assessment⁸ carried out by an occupational therapist on November 24, 2003. I also find that the Explanation of Benefits Payable⁹ dated April 14, 2004 constituted Royal’s refusal to pay the Non-earner benefit to Mrs. Macera. This refusal was based upon another In-home assessment¹⁰ carried out by an occupational therapist on March 22, 2004.

I find that both refusals were clear and unequivocal. They were also sent with accompanying information describing the dispute resolution process in straightforward and clear language, directed toward an unsophisticated person. Included was a description of the most important points of the process, including information regarding the rights to mediation and arbitration, and the relevant time limitation periods governing the entire process.

Additional Arguments:

Mrs. Macera’s representative raised several subsidiary arguments. She argued that Mrs. Macera had never actually applied for the Non-earner or Attendant Care benefits at the time she was assessed. As she had not applied for the benefits, the refusals could not have been valid.

Royal’s response was that it initially provided Mrs. Macera with a letter and information package dated on November 7, 2003.¹¹ These documents informed Mrs. Macera that she might be eligible for Non-earner, Attendant care, and other benefits. It also described these benefits and the manner in which they are determined. When Mrs. Macera’s Application for Accident Benefits was completed and submitted to Royal, she answered “No” to the question: “Were you able to return to your normal activities following the accident?” She also informed Royal that she was “unemployed” at the time of the accident, and that she was not the main caregiver to people living with her at the time of the accident.

According to Royal, those responses set off the adjusting process requiring them to commence assessing her for the Non-earner and Attendant Care benefits, which Royal did by first informing her of upcoming assessments and then conducting those assessments at Mrs. Macera’s home.

I agree with Royal. Many arbitrators have described the application process as one where the information the applicant is obliged to provide triggers the insurer’s obligation to respond.¹² In this case, it is clear that Mrs. Macera’s information in her Application for Accident Benefits triggered the response from Royal to proceed with the assessments of the Non-earner and Attendant Care benefits.

Mrs. Macera raised a final argument where she argued that Royal should have reassessed her for the Non-earner and Attendant Care benefits after Royal approved a hearing aid and a gel-shell splint for her in April and May 2005 respectively, notwithstanding that Mrs. Macera never requested that such a reassessment take place.

Arbitrators have held that insurers are required to keep an open mind even after denying a claim, although a valid refusal is not voided because an insurer continues discussions after giving the refusal.¹³ They have also held that the duty to act in a reasonable and fair manner in responding to a claim for accident benefits places a responsibility upon an insurer to (amongst other things) reassess the validity of the claim as new information is received.¹⁴

Nevertheless, in the present case, I did not find that the new information provided (about medical and rehabilitation benefits, i.e. a hearing aid and a splint) would necessarily have been relevant to the previous denials of completely different accident benefits. No evidence was led that might have allowed me to conclude that Royal’s approval of these items somehow necessitated on their part, a unilateral reassessment of her Non-earner and Attendant Care benefits.

CONCLUSIONS:

I find that Royal provided Mrs. Macera with clear and unequivocal refusals in regard to her Non-earner and Attendant Care benefits. Royal also provided Mrs. Macera with information describing the dispute resolution process in straightforward and clear language, directed toward an unsophisticated person. Included was a description of the most important points of the process, including information regarding the rights to mediation and arbitration, and the relevant time limitation periods governing the entire process.

Mrs. Macera did not commence her arbitration within the two-year limitation period following these refusals. Therefore, Mrs. Macera is precluded from proceeding to arbitration for the Non-earner benefit and the Attendant Care benefit.

EXPENSES:

The parties did not address themselves to the question of expenses and I leave this issue to the arbitrator who determines this matter on a final basis.

November 7, 2008

Edward Lee Arbitrator

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Mrs. Macera is precluded from arbitrating her dispute with respect to her entitlement to receive a Non-earner benefit because she failed to apply for arbitration within the two-year limitation period set out in the Insurance Act.
Mrs. Macera is precluded from arbitrating her dispute with respect to her entitlement to receive an Attendant Care benefit because she failed to apply for arbitration within the two-year limitation period set out in the Insurance Act.