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

Neutral Citation: 2008 ONFSCDRS 184

FSCO A07-002350

BETWEEN:

TARA DAVENPORT

Applicant

and

LOMBARD GENERAL INSURANCE COMPANY OF CANADA

Insurer

Before: David Leitch

Heard: July 2 and 29, 2008, at the offices of the Financial Services Commission of Ontario in Toronto. Written submissions were also received between July 2 and July 29, 2008.

Appearances: David S. Wilson for Ms. Davenport

Leilah Edroos for Lombard General Insurance Company of Canada

Issues:

The Applicant, Tara Davenport, was injured in a motor vehicle accident on April 12, 1996. She applied for and received statutory accident benefits from Lombard General Insurance Company of Canada (“Lombard”).¹ On December 4, 1997, the parties purported to settle Ms. Davenport’s claim for additional statutory accident benefits (beyond those already paid) through the payment to her by Lombard of an additional $6,500. The preliminary issue is:

Did the settlement documents comply with the requirements of the Settlement Regulation in force at the time of the purported settlement?²

I communicated my decision to the parties by Order dated August 20, 2008, with reasons to follow. These are my reasons.

Result:

No, the settlement documents did not comply with the requirements of the Settlement Regulation. Ms. Davenport was, therefore, entitled to rescind the purported settlement and is now entitled to pursue her claim for additional statutory accident benefits.

The Facts

The undisputed facts are as follows. As a result of the injuries she sustained in the accident of April 12, 1996, Ms. Davenport was off work until October 1997, returning first to part-time work on or about October 21 and to full-time work on or about October 28. Soon after, sometime in November 1996, she switched to a new job but she does not allege that this change was caused by, or related to, the injuries she sustained in the accident. Still, her accident-related impairments continued to bother her and, at the time of the settlement in December 1997, they continued to affect her ability to complete both her employment and housekeeping tasks. When she executed the settlement documents, Ms. Davenport was unaware that she could, at least potentially, claim both additional Income Replacement Benefits if she was unable to work in the future and Loss of Earning Capacity Benefits. She was also unaware of how long she could claim Housekeeping Benefits. Ms. Davenport was never provided with the present value of any of the benefits mentioned in the settlement documents or with information about her life expectancy. At the time of the settlement, Ms. Davenport was under no financial pressure to accept the settlement offer of $6,500 and, had she known about her potential claims for additional benefits, she would not have signed the settlement documents.

The Settlement Regulation

I set out below the Settlement Regulation governing settlements entered into before March 1, 2002. It is important to note at the outset that section 9.1(2), paragraph 3, and section 9.1(4) give the insured person two different rights of rescission. The first can be exercised for any reason within two business days after the settlement is entered into, the so-called “cooling off” period. The second can be exercised after the cooling off period has ended but only if there has been lack of compliance with any of the paragraphs of section 9.1(2).

Section 9.1

(1) In this section, “settlement” means an agreement between an insurer and an insured person that finally disposes of a claim or dispute in respect of the insured person’s entitlement to one or more benefits under the Statutory Accident Benefits Schedule.

(2) Before a settlement is entered into between an insurer and an insured person, the insurer shall give the insured person a written notice that contains the following:

A description of the benefits that may be available to the insured person under the Statutory Accident Benefits Schedule and any other benefits that may be available to the insured person under a contract of automobile insurance.
A description of the impact of the settlement on the benefits described under paragraph 1, including a statement of the restrictions contained in the settlement on the insured person’s right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act.
A statement that the insured person may rescind the settlement within two business days after the settlement is entered into by delivering a written notice to the insurer.
A statement that the tax implication of the settlement may be different from the tax implications of the benefits described under paragraph 1.
If the settlement provides for the payment of a lump sum in an amount offered by the insurer and, with respect to a benefit under the Statutory Accident Benefits Schedule that is not a lump sum benefit, the settlement contains a restriction on the insured person’s right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act, a statement of the insurer’s, estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value.
A statement advising the insured person to consider seeking independent legal, financial and medical advice before entering into the settlement.

(3) A settlement may be rescinded by the insured person, within two business days after the settlement is entered into, by delivering a written notice to the insurer.

(4) If the insurer did not comply with subsection (2), the insured person may rescind the settlement after the period mentioned in subsection (3) by delivering written notice to the insurer.

(5) A restriction on an insured person’s right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in ss. 280-284 of the Act is not void under s. 279(2) of the Act if,

(a) The restriction is contained in a settlement; and

(b) The insurer complied with subsection (2).

The Settlement Documents

The settlement documents signed by the parties contained four sections: a Release, specifying the parties, the date of the accident and the amount of the settlement; a Written Notice, explaining to Ms. Davenport that she was giving up her right to claim any further benefits, subject to her right to rescind the agreement within two business days; Schedule A, summarizing the various categories of statutory accident benefits; and, finally, Schedule B.³ Since the dispute focuses entirely on the information contained in Schedule B, only that section needs to be described in greater detail.

The first three paragraphs of Schedule B read as follows:

This is the insurer’s estimate of the commuted value of accident benefits that are not lump sum benefits, but that the insured person will be precluded from claiming for as a result of the SETTLEMENT described in the attached RELEASE, together with an explanation as to how these estimated values have been determined.

This is not the opinion of CONTINENTAL [the insurer’s previous name] about the value of the accident benefits that would actually be, or likely be, payable to you. Rather, the amounts outlined are estimates of the maximum potential value of the benefits that might possibly be available to you - assuming the information supplied by you to date is entirely accurate; and making the most generous assumptions as to the possible amount of your claim.

The estimated commuted value of these benefits as of November 28, 1997, is as follows:

(1)

Weekly Benefits: (inclusive of education lump sum benefit)

(2)

Loss of Earning Capacity Benefit:

(3)

Supplementary Medical Benefits & Rehabilitation Benefits (portion of maximum benefits not yet paid):

$6500.00

(4)

Attendant Care Benefits:

(5)

Other Pecuniary Losses:

$6500.00

An explanation of how the insurer determined these commuted values is as set out below.

The rest of Schedule B was a series of five numbered sections corresponding to the five categories of benefits set out above. I will summarize the text of the first two sections dealing with Weekly Benefits and Loss of Earning Capacity Benefits. Where Supplementary Medical Benefits & Rehabilitation Benefits, Attendant Care Benefits and Other Pecuniary Losses are concerned, I will quote them in bolded script.

(1) Weekly Benefits: The first entry under this heading is “N/A”, written by hand, which I take to mean “not applicable.” The text which followed left spaces to indicate the type of weekly benefit claimed,⁴ the weekly rate at which benefits were claimed, the period during which weekly benefits were paid, the period for which additional benefits were claimed and the resulting difference between the amount claimed and the amount paid. This difference was referred to as figure A. The text then provided additional blank spaces to indicate “the potential amount payable to you for these sorts of benefits” had they been paid up to the 104 week mark,⁵ the number of weeks remaining until the 104 week mark, if any, and the weekly rate at which benefits would be paid for this further period. This amount was referred to as figure B. Next, the text observed that “the commuted value of these potential benefits” (from the date they were no longer claimed up to the 104 week mark) would be less than the “aggregate amount” (obtained by multiplying the number of weeks remaining prior to the 104 week mark times the weekly rate). However, the text concluded that the “estimated commuted value of weekly available to you has been calculated by adding figure A to figure B”, even though neither of these figures would have constituted a commuted value, as explained further below. In any event, none of the calculations called for was made as lines were drawn through all the blank spaces.

(2) Loss of Earning Capacity Benefits: The text under this heading indicates that Ms. Davenport’s Pre-accident Earning Capacity is zero, that her Residual Earning Capacity is zero, that 90% of the difference between the two is zero and that “the commuted value of potential benefits payable to you” is also zero. It further states that this commuted value is “based on your current age of”, followed by a blank space with a line through it, “assumes a further life expectancy of”, followed by a second blank space with a line through it, and “assumes a discount rate of 2.5%.” The balance of the text sets out the Insurer’s assumptions in arriving at the commuted value, including a 50% reduction in the potential amount payable after age 65, the relationship between future indexing of benefits and the “modest” discount rate of 2.5%, the potential availability of other benefits and the potentially negative “contingencies or factors unique to your personal circumstances, such as your current state of health.”

(3) Supplementary Medical Benefits & Rehabilitation Benefits: The combined policy limits with respect to these sorts of benefits is $1,000,000.00. As of November 28, 1997, the combined unpaid portion of the available policy limit is $982,092.27. It is not possible to provide a commuted value of the potential amounts of such benefits that might be claimed in the future. Even if maximum amounts were eventually payable, the commuted value of those benefits as of this date would be less than the figure shown above.

(4) Attendant Care Benefits: Where attendant care is being provided on an ongoing basis, it will be necessary to calculate a maximum potential figure using the appropriate maximum monthly rate, taking into consideration the life expectancy of the claimant.

(5) Compensation for Other Pecuniary Losses:⁶ Most benefits under these sections are lump sum (i.e. reimbursement for actual expenses incurred) payments for unique expenses, so no “commuted value” can or need be indicated. Where there are ongoing Dependant Care Expenses being paid under s. 54 of the SABS, it will be necessary to calculate a maximum potential figure using the applicable maximum rates, factored over a duration to be determined by the age of the dependants (if children) and (in some cases) the life expectancy of the individuals involved.

Arguments and Analysis

First Question: Which Party bore the Onus of Proof?

A question arose at the start of the hearing on July 2, 2008 as to which party bore the onus of proof. Each party had apparently simply assumed that the other party bore the onus of proof: the Applicant assumed that the Insurer bore the onus of proving that the settlement complied with the Settlement Regulation while the Insurer assumed that since the Applicant was challenging the validity of the settlement, she bore the onus of proving that the settlement was invalid. I initially granted a brief recess to do some quick research but later decided to adjourn the hearing to the second scheduled day, July 29, 2008, in order to permit the parties to exchange written submissions on this point prior to July 29, 2008.

In her initial written submission, Ms. Edroos relied upon the Supreme Court of Canada’s statement in Snell v. Farrell⁷ that the “onus is on the party who asserts a proposition.” She maintained that since the Applicant first asserted that the settlement was invalid, the Applicant bore the onus of proving that proposition. At the same time, Ms. Edroos acknowledged that “had the Applicant merely brought her application for mediation without making the contention that the Agreement [to settle] was null and void, the Respondent [Lombard] ... would have had to rely upon the Agreement in its Response to the application. Under those circumstances, the Respondent would have been the first to allege that there was in fact a valid settlement agreement in place. In those circumstances, the Respondent agrees that it would have had the onus to prove that the settlement agreement signed by the Applicant was indeed a valid one.”⁸

I do not accept that the placing of the onus of proof should depend on whether it was the Applicant who first claimed that there was no valid settlement or whether it was the Insurer who first claimed that there was a valid settlement. This is not, and should not become, a tribunal of strict pleading. The placing of the onus of proof must be decided on something more substantial than how the parties happened to draft their pleadings, whether strategically or inattentively. In Snell v. Farrell, the Supreme Court confirmed that questions of onus must be decided on substantive grounds and it rejected a one-size-fits-all approach. Speaking for the Court, Justice Sopinka said:

16… it has long been recognized that the allocation of the burden of proof is not immutable. The legal or ultimate burden of proof is determined by the substantive law “upon broad reasons of experience and fairness”: 9 Wigmore on Evidence, paragraph 2486, at p. 292. In a civil case, the two broad principles are:

that the onus is on the party who asserts a proposition, usually the plaintiff;
that where the subject matter of the allegation lies particularly within the knowledge of one party, that party may be required to prove it.

17This Court has not hesitated to alter the incidence of the ultimate burden of proof when the underlying rationale for its allocation is absent in a particular case …

In my view, Ms. Edroos’s first argument fails to identify a substantive ground for placing on the insured person the onus of proving the insurer’s non-compliance with the Settlement Regulation.

By way of reply argument (when she should not really have been making any new arguments), Ms. Edroos made a second argument, this one based on the decision of Arbitrator Wilson in Ogbuke and Kingsway General Insurance Company. Like this case, the Ogbuke case involved an attempt by the insured person to rescind the settlement after the cooling off period. Arbitrator Wilson observed:

Once the “cooling off period” has expired there is a presumption of regularity (omnia praesumuntur rite et solemniter esse acta donec probetur in contrarium - all things are presumed to have been rightly and duly performed until it is proved to the contrary), which must be displaced by some positive evidence if an insured wishes to re-open a settlement. In such a case Mr. Ogbuke must do more than merely allege something is wrong with the settlement. He has an onus to prove that an irregularity occurred, and to bring the settlement documents into question.⁹

With respect, I do not agree that insurers benefit from any presumption that they complied with the Settlement Regulation, whether during the cooling off period or afterwards.

The presumption invoked by Arbitrator Wilson normally operates in very different contexts and only under certain conditions. This was recently confirmed by the Ontario Court of Appeal in its decision in R. v. Molina¹⁰ where Justice Blair wrote:

11The presumption of regularity is a reflection of the Latin maxim: omnia praesumuntur rite et solemniter esse acta donec probetur in contrarium (everything is presumed to be rightly and duly performed until the contrary is shown). As Watt J. noted in R. v. Kapoor, 1989 CanLII 7250 (ON HCJ), [1989] O.J. No. 1887, 52 C.C.C. (3d) 41 (H.C.J.), at p. 68 C.C.C., it “has especial application in the case of persons who discharge a public or statutory duty.”

12Various authorities have drawn on the treatise of the great American authority on evidence, Professor John Henry Wigmore, in dealing with the underpinnings of the doctrine. For example, Prowse J.A., speaking for the Alberta Court of Appeal in the context of a breach of probation case in R. v. Scott, 1980 ABCA 299, [1980] A.J. No. 645, 56 C.C.C. (2d) 111 (C.A.), at pp. 113-14 C.C.C., said:

In [Wigmore A Treatise on the Anglo-American System of Evidence in Trials at Common Law on Evidence, 3rd ed. (1940), vol. IX, p. 488,] that learned author proposes several conditions for the application of the omnia praesumuntur rule:

. . . first, that the matter is more or less in the past, and incapable of easily procured evidence; secondly, that it involves a mere formality, or detail of required procedure, in the routine of a litigation or of a public officer’s action; next, that it involves to some extent the security of apparently vested rights, so that the presumption will serve to prevent an unwholesome uncertainty; and finally, that the circumstances of the particular case add some element of probability.

[Emphasis added by the Court]

13This court approved that statement in R. v. McNamara (1982), 1982 CanLII 2157 (ON CA), 36 O.R. (2d) 308, [1982] O.J. No. 3217, 66 C.C.C. (2d) 24 (C.A.), at pp. 28-29 C.C.C., leave to appeal to S.C.C. refused (1982), 36 O.R. (2d) 308n, [1982] S.C.C.A. No. 271, 66 C.C.C. (2d) 24n

14Generally, the presumption of regularity has been resorted to in circumstances where there has been an irregularity in the creation of an official court document. For example, it has been used where an information or summons is regular on its face but is attacked on the basis of some irregularity pertaining to the way in which it was signed or sworn: [citations omitted]. The presumption has also been used to regularize an information by presuming that a justice of the peace -- in the absence of evidence to the contrary -- had held the necessary hearing prior to issuing process: [citations omitted].

In my view, insurers cannot be described as “public officers” and settlement documents cannot be described as “official court documents.” The relations between insurers and insured persons may be heavily regulated but they remain private parties. Settlement documents may have to meet the requirements of the Settlement Regulation but they remain private contracts. This is not a context in which the presumption of regularity is generally invoked.

Moreover, in the present context, in my opinion none of Wigmore’s conditions for the application of the presumption is satisfied. First, evidence of non-compliance with the Settlement Regulation is easily procured by examining the settlement documents. Second, compliance with the Settlement Regulation is more than a “mere formality, or detail of required procedure.” Third, I will acknowledge that presuming insurer compliance with the Settlement Regulation after the cooling off period would probably reduce what some might regard as the “unwholesome uncertainty” created by the insured person’s right to rescind after the cooling off period. However, the exercise of that right would then become conditional on the insured person’s being able to adduce evidence to rebut the presumption. This would overshoot Ms. Edroos’s mark which is only to place on the insured person the onus of proving the insurer non-compliance with the Settlement Regulation. It would also fetter the right in a way which is supported by neither the language of the Settlement Regulation nor the other case law interpreting it. Fourth, it is most unlikely that an insurer who provided defective settlement documents to an insured person would nevertheless provide the missing or correct information in some other way. As Justice Blair reasoned in Molina case:

21I agree with the result reached by the summary conviction appeal judge and with the reasons he articulates, namely (a) that the orders were defective or deficient in that they did not advise the appellants that they could be charged with an indictable offence and receive up to five years in jail if they drove while disqualified, and (b) that there is no reason to presume that the court clerk, in explaining the orders to the appellants, went beyond the terms prescribed in the orders in doing so. As the summary conviction judge noted at para. 25 of his reasons:

… There is no basis upon which to utilize the presumption of regularity to assume, as proof, that the officer who witnessed the signature of Mr. Molina went beyond the form of the order that the accused signed, and either read from a correct version of an order, or advised the accused orally out of his own knowledge. …

22In short, the fourth Wigmore requirement for the application of the presumption -- “that the circumstances of the particular case add some element of probability” -- did not exist in this case.

As a result, I reject Ms. Edroos’s second argument that the placing of the onus of proof should be decided on the basis of the presumption of regularity. But on what substantive ground should it be decided?

As I have noted in several other cases,¹¹ the Supreme Court of Canada’s decision in Smith v. Co‑operators General Insurance Co.¹² establishes that consumer protection is one of the main objectives of automobile insurance law. This objective is of particular importance in cases involving an insurer’s obligation to provide the insured person with information. The realization of this objective requires the insurer to provide the insured person with complete and correct information. In my view, the goal of consumer protection is best promoted by placing on insurers the onus of proving compliance with their obligations to provide information to insured persons. Indeed, while Smith and the cases applying Smith may not be explicit on the point, they all appear to assume that insurers bear this onus.

In addition, placing on insurers the onus to prove compliance with the Settlement Regulation is consistent with one of the observations made by the Supreme Court in Snell v. Farrell, quoted earlier: “where the subject matter of the allegation lies particularly within the knowledge of one party, that party may be required to prove it.” As observed by Justice Morden of the Ontario Court of Appeal in the case of Catania v. Scottish & York Insurance Co. Ltd.: “it is entirely within the hands of the insurance companies to see that there is compliance with s. 9.1(2).”¹³

Finally, I adopt the analysis of Justice Spiegel on this point in the case of Opoku v. Pal.¹⁴ While he did not find it necessary to decide the question, Justice Spiegel wrote:

120… under the Settlement Regulation any restrictions on the insured’s right to take further proceedings by way of mediation, litigation etc. are presumed to be void unless the insurer establishes that it has complied with subsection (2). If this interpretation is correct [as it must be, since that is what section 9.1(5) of the Settlement Regulation says], then as a practical matter, an insurer who moves to enforce a SABs settlement will always have the onus of establishing compliance with subsection (2). The defendants argue that on this motion, not only does Mr. Opoku have the onus of establishing that Coseco did not comply with s. 9.1(2), but also that its non-compliance was material to Mr. Opoku’s decision to settle. In my view, neither the text nor the purpose of the Settlement Regulation supports this interpretation.

Accordingly, I conclude that Lombard bears the onus of proving that the settlement documents comply with the Settlement Regulation.

Second Question: Do the Settlement Documents Comply with the Settlement Regulation?

Ms. Edroos submitted that when Lombard prepared the settlement documents in late November 1997, it had no evidence that Ms. Davenport might, at some later point, become unable to work and claim additional Income Replacement Benefits (IRBs). Likewise, she maintained, Lombard had no evidence to suggest that Ms. Davenport might remain entitled to IRBs for 104 weeks after the accident and thus become eligible to claim Loss of Earning Capacity Benefits (LECBs). While Ms. Edroos acknowledged that Ms. Davenport claimed Attendant Care Benefits (ACBs), she stated that an Attendant Care DAC (Designated Assessment Centre) evaluation never took place and that this claim “never went ahead.”

I accept Ms. Edroos’s submission that this is the factual explanation as to why, in completing Schedule B, Lombard showed the estimated commuted value of the IRBs, LECBs and ACBs as zero. However, I do not accept that Lombard actually estimated the commuted value of the Supplementary Medical and Rehabilitation benefits (SMRBs) at $6,500. That finding would be contrary to the statement Lombard made later in Schedule B, which for convenience I set out again below:

Supplementary Medical and Rehabilitation Benefits: The combined policy limits with respect to these sorts of benefits is $1,000,000.00. As of November 28, 1997, the combined unpaid portion of the available policy limit is $982,092.27. It is not possible to provide a commuted value of the potential amounts of such benefits that might be claimed in the future. Even if maximum amounts were eventually payable, the commuted value of those benefits as of this date would be less than the figure shown above.

Moreover, I find that $6,500 was really just the settlement figure the parties agreed on. There is no evidence to explain why that amount was entered in paragraph 3 or why only in relation to SMRBs. I am satisfied it had nothing to do with Lombard’s estimate of the commuted value of that benefit.

As to the legal issue of whether Lombard’s conduct achieved compliance with the Settlement Regulation, Ms. Edroos argued that perfect compliance was not required and that there was sufficient compliance on the facts of this case. In support of this argument, she relied upon certain comments made by Justice Morden in the Catania case, mentioned earlier.¹⁵ However, before quoting those comments, it is important to situate them in the context of the case in which they were made.

The Catania case involved facts similar to the facts of the present case and also involved the same Settlement Regulation. After receiving certain benefits, the claimant agreed to settle her claim for additional income replacement benefits for $6,000 and her claim for additional medical benefits for $2,000, for a total settlement of $8,000, plus disbursements. The settlement documents prepared by the Insurer purported to provide the claimant with its estimates of “the commuted values of the benefits available to you.” In fact, the documents only set out how the settlement figure of $8,000 was arrived at: “Income Replacement Benefits … Allowance for 26.08 weeks at $230.00/week = $6,000” and “Medical Benefits … Allowance of $2,000 …” The claimant signed the settlement documents but later brought an action for additional benefits. The Insurer brought a motion for summary dismissal relying upon the settlement documents. The claimant responded that those documents did not comply with the Settlement Regulation. The motion came on before Justice Dambrot who rejected the claimant’s position on the following grounds.

27… The insurer here was not making a lump sum payment as of a specific date that was equal in value to one or more payments or a stream of payments that would be made at one or more specific times or during specific periods in the future. Rather, it was agreeing to pay the insured person $6,000 to cover income replacement benefits for a six month period in the past (May 17, 1997 to November 18, 1997), and $2,000 to cover very limited psychological treatment which it denied was required. In the circumstances, any reference to the insurer’s estimate of Ms. Catania’s life expectancy, and an appropriate discount rate in respect of periodic benefits would be quite irrelevant. I cannot conclude that in circumstances such as those prevailing here, the regulation requires that such information be provided, or that failing to provide the information makes the settlement void or voidable. In my view, the information included in the written notice provided in this case pursuant to s. 9.1 of the SABS adequately complies with s. 9.1(2).¹⁶

This decision was reversed by the Court of Appeal. Writing for the Court, Justice Morden’s analysis was as follows. First, he confirmed that since income replacement benefits are paid periodically, and not as a lump sum, the lump sum settlement of that claim for $6,000 triggered the Insurer’s obligation to provide its “estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value”, in accordance with section 9.1(2), paragraph 5. Next, following the analysis of Justice Spiegel in Opoku,¹⁷ later affirmed by the Court of Appeal,¹⁸ Justice Morden re-affirmed that “commuted value” means the present value of a stream of future payments and that, in order to estimate the commuted value of a benefit, the Insurer is required to make assumptions about the insured person’s life expectancy and the appropriate discount rate in respect of each of the periodic payments. Finally, following the analysis of Arbitrator Vanderbent in King v. Wawanesa Mutual Insurance Company,¹⁹ Justice Morden clarified that in providing its estimate of commuted value, the Insurer is not to assume that the claimant has no future entitlement to the benefit in question. The Court endorsed the following statement by Arbitrator Vanderbent:

I am unable to find a convincing rationale to support the proposition that the settlement regulation contemplates different methods of calculating and presenting the commuted value of a benefit, depending on the insurer’s view of the insured person’s entitlement. An insured person who is executing a final release of weekly income benefits, for example, is entitled to receive the same type of information respecting the potential value of the benefit, irrespective of whether the insurer believes there is no future entitlement, entitlement for a limited period only, or for the rest of the insured person’s life. In each case, the insured person requires the same information respecting potential value, in order to meaningfully assess the sufficiency of the proposed lump sum settlement. In my view, if a benefit is subject to the commuted value requirement, then only the actuarial calculation inherent in the definition of the term “commuted value” can apply when disclosing the value of the benefit. Nothing in the regulation suggests that “commuted value” has more than one meaning, depending on the insurer’s views on the merits of the insured person’s claim.

Accordingly, Justice Morden quoted and then rejected the reasoning set out in paragraph 27 of Justice Dambrot’s decision. Justice Morden wrote:

13With respect, I do not think that the statement in the notice deals at all with what paragraph 5 requires. What it does do is set forth an “explanation” of how the proposed settlement amount itself was calculated. It does not set forth the defendant’s “estimate” of the commuted value of the periodic income replacement payments under the Statutory Accident Benefit Schedule. Accordingly, it does not give the insured the opportunity to compare the proposed settlement amount with “the real value of the periodic benefits or ... to make a comparison on ‘an apples to apples basis’”: Opoku v. Pal, supra, at p. 116 per Spiegel J. [Emphasis in original]

Justice Morden then turned to an argument that had apparently not been made before Justice Dambrot dealing with the requirements of paragraph 1 of section 9.1(2). He wrote:

16On the appeal before us, the appellant also submitted that the information in the notice did not comply with paragraph 1 of s. 9.1(2), at least as far as the income replacement benefits were concerned. It will be recalled, with respect to these, that the notice said:

(i) Income Replacement Benefits - This benefit compensates an insured person for lost income due to an impairment sustained as a result of an accident.

17In Opoku v. Pal …, this court said in paragraphs 2 and 3:

Our agreement with Spiegel J. that a description of the maximum statutory accident benefits available to the insured does not constitute a commuted value of those benefits should not be taken as an indication that a statement of the maximum benefits available to the insured need not be included in the notice provided by the insurer pursuant to s. 9.1(2) of the “settlement regulation” (R.R.O. 1990, Reg. 664, as amended O. Reg. 780/93, s. 7). Paragraph 1 of the settlement regulation requires:

A description of the benefits that may be available to the insured person under the statutory accident benefits schedule and any other benefits that may be available to the insured person under a contract of automobile insurance.

In our view, a description of the benefits available requires a statement of any monetary limits which apply to any particular benefit: King v. Wawanesa Mutual Insurance Co., F.S.C.O. A96000601 at p. 10 (Arbitrator Vanderbent). The information provided by the appellant as a commuted value was in reality a description of the benefits available under the policy and not a commuted value. The description of the maximum benefits provided by the appellant complied with the requirement of para. 1 of the settlement regulation and not para. 5.

18Clearly, the statement of benefits in this case does not state “the maximum benefits available to the insured” or “any monetary limits which apply to any particular benefit.”

It was only at the end of his decision, after explaining how the settlement documents failed to comply with the Settlement Regulation, that Justice Morden made the comments relied upon by Ms. Edroos. I have bolded the comments relied upon from Justice Morden’s concluding paragraphs.

[20] Accepting that there may be gradations in the statements of information that will comply with the requirements of s. 9.1(2), I do not think it can reasonably be said that the facts of this case show even minimal compliance. I should say that the non-compliance with paragraph 5 is more serious than the non-compliance with paragraph 1 because it clearly frustrates any attempt to compare the proposed settlement with the commuted lump sum value of what was available under the Statutory Accident Benefits Schedule. Accordingly, there was no bar to the plaintiff withdrawing from the settlement.

[21] On the particular facts of this case, it may well be that the defendant’s failure to comply with s. 9.1(2) had no bearing on the plaintiff's acceptance of the settlement offer. This, however, is not the test in a case such as this where there has not been even minimal compliance with the regulation. (It could be a factor to take into account in a case where there is some degree of compliance.) If it were the test it would, in many cases, be very difficult to apply with any degree of confidence or predictability. The test in s. 9.1(4) and (5), although its application may give rise to some unreasonable or unfair results, in some cases, has the virtue of relative ease of application. Furthermore, it is entirely within the hands of the insurance companies to see that there is compliance with s. 9.1(2).

In my view, the bolded comments do not justify a ruling in the Insurer’s favour in the present case anymore than they justified a ruling in the Insurer’s favour in the Catania case. I do not accept Ms. Edroos’s submission that the present case can be distinguished from the Catania case on the ground that whereas Ms. Davenport had returned to work before the time of the settlement, Ms. Catania had not. First, it is not clear from Justice Dambrot’s decision whether or not Ms. Catania had returned to work before the time of the settlement. Second, the fact that Ms. Davenport had returned to work did not necessarily preclude her from making additional claims for statutory accident benefits. Lombard acknowledged this when it agreed that she was unaware that she was entitled to claim IRBs if she was unable to work in the future. Third, as we have seen, Lombard was not entitled to assume that Ms. Davenport had no future entitlement when calculating the commuted value of statutory accident benefits not paid in lump sums.

Adopting the language of Justice Morden in Catania, I am of the opinion that Schedule B of the settlement documents failed to establish “even minimal compliance” with the Settlement Regulation. Limiting the analysis to IRBs, LECBs, ACBs and SMRBs, I make the following findings:

Lombard did not provide Ms. Davenport with the maximum monetary limits of the IRBs, in accordance with section 9.1(2), paragraph 1, of the Settlement Regulation.
Since IRBs are paid periodically, not in lump sums, Lombard was required to, but did not, provide Ms. Davenport with the commuted value of that benefit together with its assumptions regarding Ms. Davenport’s life expectancy and appropriate discount rates but without assuming that she had no future entitlement, in accordance with section 9.1(2), paragraph 5, of the Settlement Regulation.
Lombard did not provide Ms. Davenport with the maximum monetary limits of the LECBs, in accordance with section 9.1(2), paragraph 1, of the Settlement Regulation.
Since LECBs are also paid periodically, not in lump sums, Lombard was required to, but did not, provide Ms. Davenport with the commuted value of that benefit together with its assumptions regarding Ms. Davenport’s life expectancy but without assuming that she had no future entitlement, in accordance with section 9.1(2), paragraph 5, of the Settlement Regulation. Lombard did provide an assumed discount rate in relation to this benefit but did not apply that rate to any future periodic payments.
Lombard did not provide Ms. Davenport with the maximum monetary limits of the ACBs, in accordance with section 9.1(2), paragraph 1, of the Settlement Regulation.
Since ACBs are also paid periodically, not in lump sums,²⁰ Lombard was required to, but did not, provide Ms. Davenport with the commuted value of that benefit together with its assumptions regarding Ms. Davenport’s life expectancy and appropriate discount rates but without assuming that she had no future entitlement, in accordance with section 9.1(2), paragraph 5, of the Settlement Regulation.
Lombard purported to provide Ms. Davenport with the commuted value of the SMRBs but provided instead the total amount of the settlement. Lombard later indicated in Schedule B that that no commuted value could be provided for this benefit and purported to provide its maximum monetary limit. However, even if this benefit could not be properly characterized as “not a lump sum settlement” requiring a commuted value,²¹ the information provided, taken as a whole, was inaccurate and confusing and cannot be reasonably said to have complied with the Settlement Regulation.
At most, Schedule B confirmed that the total amount of the settlement was $6,500 but it failed to provide Ms. Davenport with the additional information she would need “to compare the proposed settlement amount with the real value of the periodic benefit or ... to make a comparison on ‘an apples to apples basis.’”

For these reasons, I conclude that the settlement documents did not comply with the Settlement Regulation. Ms. Davenport was, therefore, entitled to rescind the purported settlement and is now entitled to pursue her claim for additional statutory accident benefits.

EXPENSES:

I exercise my discretion to award Ms. Davenport her expenses incurred in this preliminary issue hearing. The parties will advise within 30 days of this decision if they cannot agree on the amount payable.

November 14, 2008

David Leitch Arbitrator

Date