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

Neutral Citation: 2008 ONFSCDRS 182

FSCO A07-001852

BETWEEN:

LEIA LYNN TREWIN Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY Insurer

Before: Judith Killoran

Heard: August 19 and 20, 2008 in Thunder Bay, Ontario

Appearances: Christopher D. J. Hacio for Ms. Trewin Chantal Brochu for Wawanesa Mutual Insurance Company

Issues:

The Applicant, Leia Lynn Trewin, was injured in a motor vehicle accident on March 18, 2002. She applied for and received statutory accident benefits from Wawanesa Mutual Insurance Company (“Wawanesa”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Trewin 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 Ms. Trewin precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule?

Result:

Ms. Trewin is not precluded from proceeding to arbitration.

EVIDENCE AND ANALYSIS:

First Procedural Issue:

At the outset of the hearing, the insurer sought an order that no viva voce evidence should be allowed, as the issue before me was a legal question. Wawanesa submitted that my determination was restricted to whether there was a clear and unequivocal denial of benefits by the insurer for ruling on the expiration date of the limitation period. Therefore, no evidence should be presented relating to the applicant’s ability to attend a DAC assessment.

The Applicant submitted that there had been two pre-hearing discussions which documented that the Applicant would present viva voce evidence at the hearing.

I found that viva voce evidence could be introduced at the hearing. The issue of the limitation period was more complex than the simple question of whether there had been a clear and unequivocal termination of benefits by Wawanesa.

Second Procedural Issue:

There were two notices of termination of benefits sent to Ms. Trewin by Wawanesa. One notice was dated June 11, 2004.² The second was on September 22, 2004.³ Wawanesa disagreed with the Applicant’s submission that Wawanesa was restricted to relying on its June 11, 2004 notice. Ms. Trewin submitted that it was not until the day of the hearing that Wawanesa raised the possibility that the 2-year limitation period should begin to run as of September 22, 2004, rather than June 11, 2004. I ruled that as Wawanesa had consistently maintained a 2-year limitation defence, it was entitled to rely on alternate dates when presenting its defence.

EVIDENCE AND FINDINGS:

Ms. Trewin and her family doctor, Dr. Norman Krupa, testified at the hearing. I have made my findings of fact based on their oral evidence together with the documentary evidence.⁴ I found Ms. Trewin and Dr. Krupa’s evidence to be both credible and compelling. My findings are outlined below.

Ms. Trewin is a 27-year old mother of three children born on the following dates respectively: August 8, 2001, December 20, 2004 and October 20, 2006.

On March 18, 2002, Ms. Trewin was involved in a motor vehicle accident. She attended at her family doctor’s office the following day and was given prescriptions for pain and referred to massage therapy and physiotherapy.

On May 6, 2002, Ms. Trewin applied to Wawanesa for accident benefits. Wawanesa paid weekly income replacement benefits to Ms. Trewin for more than 2 years following the accident.

On June 11, 2004, two letters were sent by Wawanesa to Ms. Trewin. The first letter specified that it was notice under section 37, which was enclosed, that Wawanesa intended to discontinue benefits as of July 7, 2004. Ms. Trewin was informed of her right to an “assessment” in accordance with section 43 of the Schedule and the required forms were enclosed.⁵ The second letter dated June 11, 2004 provided an explanation of sections 279 to 283 of the Insurance Act, which were enclosed, and the limitation period under subsection 281(5) and 280.1 of the Act.

Although Ms. Trewin was informed by Wawanesa that her income replacement benefits would cease as of July 7, 2004, the benefits did not cease until September 22, 2004.

On June 25, 2004, Ms. Trewin requested a DAC assessment under section 43 of the Schedule. On August 12, 2004, Ms. Trewin received a letter from CBI Physiotherapy and Rehabilitation Centre (“CBI”) in Sudbury notifying her that a DAC assessment had been scheduled as follows:

Psychological Evaluation: September 14, 2004 at 9:00 a.m. (keep day clear)
Medical Evaluation: September 15, 2004 at 11:00 a.m. (approximately 3 hours)
Functional Abilities Evaluation Day 1: September 16 at 8:00 a.m. (approximately 4 hours)
Functional Abilities Evaluation Day 2: September 17, 2004 at 8:00 a.m. (approximately 4 hours)

The DAC assessment required Ms. Trewin to travel to Sudbury on September 13, 2004 with a return date to Thunder Bay of September 18, 2004. At this time, Ms. Trewin had a number of concerns about attending a DAC assessment in a location which was so distant. Ms. Trewin was 7 months pregnant with a young son, her husband was often absent, working out of town, and she was concerned that the assessment would increase her pain and stress. On September 2, 2004 Ms. Trewin visited her family doctor, Dr. Norman Krupa.

Dr. Krupa’s medical opinion, as expressed in his note and report, together with his testimony was that it was not appropriate for Ms. Trewin to attend the DAC assessment.⁶ Dr. Krupa’s testimony about Ms. Trewin’s condition was that it would be “silly to do a DAC assessment during her pregnancy” when her body mechanics were so different. Her neck and back pain could be aggravated. In his report of October 5, 2004, he was of the same opinion.⁷

On September 22, 2004, Wawanesa forwarded a letter to Ms. Trewin, enclosing an OCF-9, terminating her income replacement benefits due to her failure to attend the DAC assessment.

Wawanesa’s letter relied on subsection 43(2) of the Schedule which states that the insurer may stop benefits until the insured person attends a DAC assessment. As well, Ms. Trewin was informed that she was required to repay both the income replacement benefits made after the 104 week period and the DAC cancellation fee.

On September 27, 2004, Ms. Trewin forwarded a letter to Wawanesa explaining why she did not attend the DAC assessment with an offer to obtain “something more comprehensive” from Dr. Krupa.⁸ In a letter dated September 28, 2004, Wawanesa stated that it required a detailed letter from Dr. Krupa outlining the reasons Ms. Trewin was unable to attend the DAC. On September 30, 2004, Ms. Trewin sent a letter to Dr. Krupa requesting a more detailed letter.⁹

In response, Dr. Krupa’s October 5, 2004 report was based on consultations on August 24, 2004 and September 2, 2004 and his observations of Ms. Trewin’s pregnancy, ongoing pain and resistance to treatment. Dr. Krupa was also concerned about the effect of the DAC assessment on Ms. Trewin due to his knowledge that she was still symptomatic and had a decreased range of motion in her neck.

There was some confusion about whether Dr. Krupa’s October 5, 2004 report was sent to Wawanesa. Ms. Trewin expected that it was sent by her lawyer.

On September 30, 2004, Ms. Trewin filed for mediation.¹⁰ In her Application for Mediation, Ms. Trewin specified that she was unable to attend a DAC assessment due to a medical condition set out in her physician’s note. She stated that she was 7 months pregnant and could not travel for at least 6 months.

FSCO declined to process Ms. Trewin’s Application for Mediation. In its letter of November 1, 2004, FSCO stated that failing clarification of the issue, it would proceed only with the remaining issues or close the file.¹¹ FSCO relied on procedural requirements regarding assessments arranged through DACs which it claimed had changed effective October 1, 2003. There were no remaining issues, other than income replacement benefits, so the only option remaining would be to close the file. On November 10, 2004, correspondence was sent by Ms. Trewin to FSCO which offered a more detailed explanation as to why Ms. Trewin did not attend the DAC assessment.¹²

Ms. Trewin’s counsel’s letter of February 1, 2005 refers to telephone conversations between FSCO and her counsel’s office and complies with FSCO’s request that the Application for Mediation be withdrawn until Ms. Trewin was able to attend a post 104 week DAC.¹³

After Ms. Trewin’s second son was born on December 20, 2004, Ms. Trewin advised Wawanesa on January 6, 2005 that she was willing to attend a DAC assessment at St. Joseph’s Behavioural Science Centre in Thunder Bay as it was the DAC closest to her residence.¹⁴ Wawanesa insisted that a DAC assessment should occur in Sudbury or Sault Ste. Marie, as St. Joseph’s was not a post 104 week disability DAC.¹⁵

Ms. Trewin was unable to travel outside Thunder Bay in 2005 as she was breastfeeding, her husband was working out of town, she had childcare problems and she was still recovering from the birth of her second child.

Issues remained in dispute and there was a denial of treatment plans for massage therapy. Ms. Trewin attended a medical/rehabilitation DAC assessment in Thunder Bay.¹⁶ Correspondence from Wawanesa dated November 14, 2005 noted that the issue of income replacement benefits remained in dispute.¹⁷ From September 2, 2004, Dr. Krupa did not see Ms. Trewin until March 18, 2005. At that time, he gave Ms. Trewin a prescription for massage therapy and a narcotic to decrease her back pain.

During 2005-2006, Ms. Trewin could not attend the DAC assessment in Sudbury due to her parents’ involvement in a serious motor vehicle accident, breastfeeding, and her husband working out of town. By 2006, she began to feel recovered but was soon pregnant again. She was unable to attend a DAC assessment until the end of June 2006 because her husband continued to work out of town, childcare was a problem and her mother was in hospital for 6 months due to the motor vehicle accident.

On February 8, 2007, Ms. Trewin could attend a post-104 week DAC assessment with the assistance of her husband although she was breastfeeding her 3 month old son and had 2 year old and 51/2 year old sons as well.¹⁸ Ms. Trewin asked that arrangements be made for her to attend a DAC assessment in Toronto with her entire family. On February 14, 2007, Wawanesa forwarded correspondence to Ms. Trewin that outlined the chronology of events and advised that Ms. Trewin was statute barred from claiming benefits.¹⁹

On February 14, 2007, an OCF-9 was sent on behalf of Wawanesa which set out its position that it was not prepared to send Ms. Trewin for a DAC assessment as the 2-year limitation period had expired due to its initial refusal on June 11, 2004. It was the second OCF-9 form from the earlier one dated June 2004.²⁰

On April 2, 2007, Ms. Trewin filed a second Application for Mediation with FSCO for post 104 week income replacement benefits.

ANALYSIS AND CONCLUSIONS:

On June 11, 2004, two letters were sent by Wawanesa to Ms. Trewin. The first letter specified that it was notice under section 37, which was enclosed, that Wawanesa intended to discontinue benefits as of July 7, 2004. Ms. Trewin was informed of her right to an “assessment” in accordance with section 43 of the Schedule and the required forms were enclosed.²¹ The second letter dated June 11, 2004, provided an explanation of sections 279 to 283 of the Insurance Act, which were enclosed and the limitation period under subsection 281(5) and 280.1 of the Act.

In response, Ms. Trewin requested a DAC assessment under section 43 of the Schedule. Consequently, her income replacement benefits continued to be paid by Wawanesa. On August 12, 2004, CBI informed Ms. Trewin that a DAC assessment had been scheduled in Sudbury. Ms. Trewin was expected to arrive in Sudbury on September 13, 2004 and return to Thunder Bay on September 18, 2004. On September 7, 2004, Ms. Trewin’s representative sent a letter to Wawanesa enclosing a note from Dr. Krupa stating that Ms. Trewin could not attend the DAC assessment.

On September 22, 2004, Wawanesa forwarded a letter to Ms. Trewin, enclosing an OCF-9, terminating her income replacement benefits due to her failure to attend the DAC assessment.

The letter relied on subsection 43(2) of the Schedule which states that the insurer may stop benefits until the insured person attends a DAC assessment. As well, Ms. Trewin was informed that she was required to repay income replacement benefits made after the 104 week period and the DAC cancellation fee.

I find that Wawanesa did not comply with the requirements for proper notice to Ms. Trewin. Smith v. Co-operators General Insurance Company²² ruled that the two-year limitation period under subsection 281(5) of the Insurance Act only begins to run upon the issuance by the insurer of a valid refusal. No such refusal is given if there has not been adequate compliance with section 71 (now section 49) of the Schedule.

Section 49 requires insurers to inform applicants of the dispute resolution process under sections 279 to 283 of the Insurance Act. This information must be provided in straightforward and clear language that can be understood by an unsophisticated person. At a minimum, the information must include a description of the most important elements of the dispute resolution process, such as the right to seek mediation, that a mediation must be conducted before resorting to arbitration or litigation, the right to arbitrate or litigate if mediation fails, and the relevant time limits that govern the entire process.

Wawanesa submitted that it provided a valid refusal to Ms. Trewin if one reviewed the documents forwarded to her with its June 11, 2004 letter together with its letter of termination dated September 22, 2004. I do not agree.

In Yee and Lambton Mutual Insurance Company²³, the arbitrator ruled that requiring an applicant to piece together information from scattered documents opposes the principle in Smith that the insurer is required to inform the applicant of the dispute resolution process “in straightforward and clear language directed towards an unsophisticated person.”

If Wawanesa’s notice of termination on June 11, 2004 was valid, it could not be extended to September 22, 2004. Income replacement benefits continued to be paid to Ms. Trewin until that date when Wawanesa was required to comply with section 49 of the Schedule and the standards outlined in Smith. It failed to do so. Therefore, there was not a valid termination.

There is a trilogy of cases at FSCO which deal with many of the issues before me. The three cases are the following: Francis and Allstate Insurance Company of Canada²⁴, Sandhu and CAA Insurance Company²⁵ and Murugappa and Aviva Canada Inc.²⁶

The issue in the case before me is what is the refusal date and what triggers the running of the limitation period? The Director’s Delegate in Murugappa agreed with earlier caselaw that the requirement for the insurer to continue paying income replacement benefits until it receives a negative DAC assessment report means that a “refusal to pay” does not take place until the insurer notifies the insured that it is relying on the DAC report to stop paying benefits. He rejected the findings in both Haldenby v. Dominion of Canada General Insurance Company²⁷, and Kirkham v. State Farm Mutual Automobile Insurance Company et al.²⁸, which were cases decided before the implementation of the DAC process. In those cases, there was no potential requirement to continue paying benefits after the initial notice. The question of the insurer’s entitlement to stop paying benefits was not separate from the question of the insurer’s refusal to pay the benefits. It is a separate question in the case before me as the entire process changed with the introduction of the DAC assessment process.

Wawanesa relied on the cases of Mangos and Aviva Canada Inc.²⁹ and Walia and Certas Direct Insurance Company³⁰ to argue that it provided sufficient notice to Ms. Trewin. Both cases can be distinguished from the case before me as neither applicant requested a DAC assessment.

The Director’s Delegate in Murugappa reviewed the two appeal decisions, Francis and Sandhu, which considered the effect on the limitation period of the requirement for the insurer to continue paying benefits after the initial notice where a DAC assessment was requested. In Francis, the Director’s Delegate found that the initial notice to terminate benefits did not constitute a “refusal to pay”, but instead, was contingent on the response of the insured. There is only a refusal when the insurer is authorized to stop paying benefits and confirms its intention to do so. Therefore, the initial notice did not start the running of the limitation period.

In Sandhu, the Director’s Delegate noted that the question of the insurer’s entitlement to stop paying benefits is separate from the question of the insurer’s refusal to pay the benefits. She noted that the release of the DAC report in itself does not end benefits as subsection 64(11) states that the insurer may stop payments but it is not required to do so.

In Murugappa, the Director’s Delegate found the following:

The similarities between ss. 62 and 64 of the SABS-1994 and s. 37 of the SABS-1996 are far more striking than the differences. In both cases, a separate procedure is set up where, with respect to an insured receiving weekly benefits, the insurer determines that the insured is not longer entitled because he or she is no longer disabled. I agree with the delegate in Francis that it strains the meaning of the language to say that there can be a “refusal to pay” where the insurer is required to keep paying between the request for the DAC and the release of the DAC report.

The Director’s Delegate in Murugappa agreed with the two earlier appeal decisions and found that the principles set out in Francis and Sandhu also applied to the Schedule as it was when Aviva sought to terminate Mr. Murugappa’s income replacement benefits. He concluded that the limitation period did not begin to run until the insurer provided its notice to Mr. Murugappa after the negative DAC report.

In the case before me, the trilogy supports my finding that Wawanesa cannot combine its July 11, 2004 and September 22, 2004 notices to argue that it properly terminated Ms. Trewin’s benefits. In September 2004, section 43 of the Schedule was relied on by Wawanesa, while in June 2004, section 37 was relied on. Neither notice individually meets the requirements for a valid refusal. There were a number of years and a number of opportunities for Wawanesa to send the documentation required by the standard set in Smith. As there was no valid refusal given to Ms. Trewin, the limitation period did not begin to run.

If effective notice had been given to Ms. Trewin, the other complicating factor in this case is that Ms. Trewin did not attend a DAC assessment. There was very little sympathy extended by the insurer to Ms. Trewin when she was 7 months pregnant and supplied a doctor’s note. Instead, she was asked to pay the cancellation fee for the DAC assessment.

In Onno and Wawanesa Mutual Insurance Company³¹, the arbitrator discussed FSCO’s caselaw with respect to an insured being “reasonably available” for an insurer examination. I agree with the approach taken in an early decision where the arbitrator stated that being “reasonably available”:

does not speak to unconditional availability. This wording suggests that an insurer must schedule medical appointments with due regard to the insured person’s convenience and particular circumstances. Also, the wording suggests that the Insurer must fairly consider a reasonable excuse for failing to attend the scheduled examination.³²

The arbitrator in Onno noted that it was in the context of FSCO’s caselaw concerning insurer examinations that the DAC system was put in place with the same requirement that the insured person be “reasonably available” for assessment.

Ms. Trewin made herself reasonably available in January 2005 for a DAC assessment in Thunder Bay. Wawanesa did not comply with the Schedule, first suggesting Sudbury as the location for the assessment, when the closer location was Sault Ste. Marie.

Finally, Ms. Trewin did not submit her second Application for Mediation within the 2-year period as the DAC issue needed to be resolved before FSCO would accept her application. That is the reason that Ms. Trewin withdrew her Application for Mediation as it was impossible to mediate until the DAC assessment had taken place.

In Wood v. Ontario Insurance Commission³³, the court held that FSCO erred in law when it refused to accept the Applicant’s claim on the ground that a settlement agreement precluded any further claims for benefits. Kudla and Coachman Insurance Company³⁴ established that section 50 of the Schedule did not create an absolute barrier to the mediation and arbitration process. According to the arbitrator, FSCO’s practice provides procedural protections and substantive guarantees. Following the Wood decision, the arbitrator stated:

…when an insurer raises a preliminary objection to an insured person accessing the mediation process, the Commission’s practice is to allow the insured person to proceed with the mediation. The issue of the insured person’s non-attendance at a DAC or at an insurer’s examination is mediated as one of the issues in dispute.

This was not Ms. Trewin’s experience. In her Application for Mediation, Ms. Trewin specified that she was unable to attend a DAC assessment due to a medical condition set out in her physician’s note. She stated that she was 7 months pregnant and could not travel for at least 6 months. FSCO declined to process Ms. Trewin’s Application for Mediation. In its letter of November 1, 2004, FSCO stated that failing clarification of the issue, it would proceed only with the remaining issues or close the file.³⁵

FSCO relied on procedural requirements regarding assessments arranged through DACs which it claimed had changed effective October 1, 2003. There were no remaining issues other than income replacement benefits so the only option remaining would be to close the file. Ms. Trewin’s counsel’s letter of February 1, 2005 references telephone conversations between FSCO and counsel’s office and complies with FSCO’s request that the Application for Mediation be withdrawn until Ms. Trewin was able to attend a post 104 week DAC.³⁶ I find that was a reasonable step taken by Ms. Trewin at the time. While FSCO’s response to the application was problematic, I find that Ms. Trewin believed that she was unable to proceed to mediation.

I find that the limitation period under subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule has not begun to run in the case before me. Wawanesa did not provide proper notice of termination of benefits to Ms. Trewin, as required by section 49 of the Schedule. Also, I find that Ms. Trewin made herself reasonably available for a DAC assessment and Wawanesa did not make reasonable efforts to accommodate her. Finally, Ms. Trewin was prevented initially from proceeding to mediation by FSCO due to her non-attendance at a DAC assessment. Consequently, I find that Ms. Trewin is not precluded from proceeding to arbitration.

EXPENSES:

I exercise my discretion to award Ms. Trewin her expenses incurred in this preliminary issue hearing. If the parties are unable to agree on the quantum of expenses, they may apply for an expense hearing before me under Rule 79 of the Dispute Resolution Practice Code.

November 10, 2008

Judith Killoran Arbitrator

Date