Neutral Citation: 2008 ONFSCDRS 26 FSCO A06-002663

BETWEEN:

DEAN JETTY Applicant

and

ING INSURANCE COMPANY OF CANADA Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Judith Killoran Heard: Written Submissions received on October 11, October 18 and November 30, 2007 Appearances: Guy A. Hurtubise for Mr. Jetty Chris T. J. Blom for ING Insurance Company of Canada

Issues:

The Applicant, Dean Jetty, was injured in a motor vehicle accident on July 31, 2003. He applied for and received statutory accident benefits from ING Insurance Company of Canada (“ING”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Jetty 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:

Has Mr. Jetty’s claim for income replacement benefits been settled with ING?

Result:

Mr. Jetty’s claim for income replacement benefits has not been settled with ING.

EVIDENCE AND ANALYSIS:

Mr. Jetty was involved in a motor vehicle accident on July 31, 2003. On August 5, 2003, a claims representative from ING met with Mr. Jetty at Sudbury Memorial Hospital, advised him of the available accident benefits and provided him with an Application for Accident Benefits.² On August 8, 2003, Mr. Jetty provided a written statement to ING. He also signed an initial visit form confirming he was advised of the accident benefits available to him under the Schedule and that he was provided with an accident benefits application package and relevant pamphlets.³

On August 11, 2003, the independent adjuster on the file confirmed his meeting with Mr. Jetty on August 8, 2003 and confirmed that he had been provided with the accident benefits application package and relevant pamphlets.⁴

On August 18, 2003, Mr. Jetty retained a lawyer to represent him. On August 19, 2003, ING retained PriceWaterhouseCoopers (“PWC”) to calculate Mr. Jetty’s weekly income replacement benefits as he was self-employed at the time of the accident.

On August 21, 2003, Mr. Jetty submitted an Application for Accident Benefits.⁵

Ms. Jennifer Wawak of PWC wrote to Mr. Jetty on August 28, 2003 confirming their discussion of August 22, 2003. Mr. Jetty had advised Ms. Wawak that he was a 50% owner of Jetty’s Contracting, that he was unable to return to work and as a result, Jetty’s Contracting lost two contracts with CN Rail and Aurora Platinum. Mr. Jetty also advised Ms. Wawak that by the spring of 2003, Jetty’s Contracting stopped employing individuals and no longer incurred payroll expenses. Ms. Wawak requested a number of financial documents from Mr. Jetty, including a summary of any additional costs incurred by Jetty’s Contracting as a result of the accident.⁶

On October 6, 2003, ING provided a copy of the PWC report to Mr. Jetty and his lawyers. In the October 2, 2003 report, PWC calculated Mr. Jetty’s income replacement benefit as $400 per week. On page 4 of the report, PWC indicates that their calculations include compensation for 80% of the losses incurred as a result of the accident up to September 13, 2003.⁷

On January 8, 2004, PWC completed an updated report on income replacement benefits to provide an updated calculation of Mr. Jetty’s income replacement benefits. On page 4 of their report, PWC indicates that their calculations include compensation for 80% of the losses incurred as a result of the accident up to November 3, 2003.⁸

On September 30, 2004, PWC completed a post-accident updated report on income replacement benefits, based on Mr. Jetty’s updated financial information.⁹

On January 10, 2005, PWC provided an updated calculation of Mr. Jetty’s income replacement benefits, based on the additional documentation provided by Mr. Jetty, including copies of Jetty’s Contracting’s profit and loss statements from July 29 to November 15, 2004.¹⁰

On February 15, 2005, Mr. Jetty’s counsel advised ING that he wished to have PWC’s income replacement benefit calculations reviewed as he was of the view that they were not in accordance with the Schedule.¹¹

Mr. Jetty never served ING or its counsel with an accountant’s report. Instead, Mr. Jetty filed for mediation for the payment of income replacement benefits. The Application for Mediation indicates that both quantum and entitlement to income replacement benefits was in dispute.¹²

A mediation at the Financial Services Commission was conducted between March 8, 2005 and July 25, 2005. The Mediator’s report dated July 28, 2005 states:

Mr. Jetty and ING agreed to resolve all claims for income replacement benefits as follows:

(1) ING to pay Mr. Jetty the sum of $10,000

(2) Mr. Jetty to provide ING with a final release under the SABSA as a result of the motor vehicle accident dated July 31, 2003.¹³

ING’s counsel sent to Mr. Jetty’s counsel a letter dated July 27, 2005 confirming a discussion with the mediator and acceptance on behalf of ING to conclude the matter for the sum of $10,000. A release and a Settlement Disclosure Notice were enclosed for Mr. Jetty’s signature.¹⁴

By letter dated August 3, 2005, Mr. Jetty’s counsel returned the full and final release and the Settlement Disclosure Notice forms signed by Mr. Jetty on July 29, 2005.¹⁵

By letter dated September 7, 2005, Mr. Jetty rescinded the settlement on the basis that ING had not complied with its obligation under subsection 32(2) of the Schedule and the Commissioner’s Guideline No.2/96 with respect to Mr. Jetty’s income replacement benefit calculation and entitlement.¹⁶

By letter dated October 4, 2005, ING rejected Mr. Jetty’s position and relied upon the full and final settlement.¹⁷

By letter dated October 25, 2005 to ING, Mr. Jetty confirmed his rescission of the settlement on the basis that ING had failed to inform him of his entitlement under subsection 6(5) of the Schedule as enunciated in Welsh and Economical ¹⁸ or to provide an explanation of his entitlement to 80% of his net losses from self-employment. Further, Mr. Jetty submitted that provision 9.1(2)1 of the settlement regulation (O.Reg. 780/93 s.7) had not been complied with due to ING’s failure to describe the subsection 6(5) benefit. He further argued in error that the insurer was required to provide an estimate of the commuted value of the benefit. This statutory requirement had been repealed and is not applicable.¹⁹

By letter dated October 28, 2005, ING’s counsel stated that the report of PWC dated January 8, 2004 at p. 4 of this report “indicates that ‘our calculation includes compensation for 80% of the losses incurred as a result of the accident …’”²⁰

The January 8, 2004 PWC report does state at p. 4 that it took into account the subsection 6(5) losses from September 14, 2003 to November 3, 2003. However, the calculation for the period of July 31, 2003 to September 14, 2003 are contained in a report dated October 2, 2003. This report reduces the income replacement benefit calculation of $1,004.45 to $400 because of the policy limit.²¹

By letters dated December 14, 2005 and January 13, 2006, Mr. Jetty continued to insist his entitlement to income replacement benefits had not been settled and sought ING’s agreement to this position to avoid further proceedings. ²²

By letter dated March 3, 2006, Mr. Jetty raised the issue that on his copy of the Settlement Disclosure Notice, ING’s representative had not signed the notice, in violation of the subsection 9.1(2) requirement of Ontario Regulation 664 which requires “a written disclosure notice signed by the insurer …” Mr. Jetty requested a copy of the notice signed by ING’s representative.²³

By letter dated March 8, 2006, ING confirmed that the income replacement benefit had been settled based on a full and final release.²⁴

By letter dated March 9, 2006, Mr. Jetty requested, for the second time, a copy of the settlement documents to confirm the presence of the insurer’s representative’s signature.²⁵

When ING failed to produce its copy of the settlement documents, Mr. Jetty wrote to the Financial Services Commission of Ontario, Licencing and Market Conduct Division, on March 20, 2005, seeking its intervention to require ING to produce a copy of the signed settlement documents. The documents were then sent by ING and contained no signature by the insurer’s representative.²⁶

Sometime after August 23, 2006, ING sent to Mr. Jetty’s counsel, in trust for Dean Jetty and Krysta Jetty, a cheque #6391830 dated August 23, 2006 in the sum of $12,887.21 with the reference “STALE”, without any further explanation. Krysta Jetty is the wife of Dean Jetty. She has no income replacement benefit claim.²⁷

By letter dated August 31, 2006, Mr. and Mrs. Jetty returned to ING cheque #6391830 and informed them that their position was that there was no settlement of the income replacement benefit claim.²⁸

ING’S SUBMISSIONS

ING submits that the release of a legal right, including the abandonment or compromise of a legal proceeding, is a contract and therefore subject to the laws of contract. In order to rescind the settlement agreement, Mr. Jetty must establish under the common law that the agreement is void or voidable by reason of mistake, misrepresentation or unconscionability or that the settlement agreement can be rescinded due to ING’s non-compliance with section 9.1 of the settlement regulation.

Under contract law, a party may be relieved from liability if the party enters into a contract under a mistaken assumption.²⁹

ING submits that Mr. Jetty has presented no evidence that he was unaware of his entitlement under subsection 6(5) and no evidence that ING failed to meet its obligations under section 32 of the Schedule.

ING explained to Mr. Jetty, in person, on two occasions, the accident benefits available to him. ING and its counsel also provided Mr. Jetty and his counsel three accountant’s reports of PWC which set out that Mr. Jetty’s income replacement benefit calculation was prepared having made any necessary adjustments for 80% of Mr. Jetty’s post-accident losses from self-employment as a result of the accident.

Mr. Jetty’s counsel reviewed the three PWC reports and he took issue with the way in which Mr. Jetty’s income replacement benefit was calculated. However, Mr. Jetty never provided ING with an accountant’s report and instead, settled the claim at mediation.

ING submits that there is no evidence by which to conclude that Mr. Jetty negotiated the agreement at mediation under an erroneous belief, other than his own assertion that he did.

ING submits that Mr. Jetty has failed to establish any grounds under the law of contract to support a finding that the settlement should not be enforced.

Mr. Jetty takes the position that the disclosure notice provided by ING was not in compliance with subsection 9.1(2) of Ontario Regulation 664. ING submits that the purpose of the disclosure notice is to provide Mr. Jetty with information which will assist him in making a considered and well-informed decision.

It has been held that subsection 9.1(2) does not mean that:

… there is any reason to interpret the provision in a manner that would discourage considered and well-informed settlements, or that a punctilious approach to the fulfillment of the requirements of s.9.1(2) should be demanded.³⁰

Mr. Jetty takes the position that the settlement disclosure notice is not in compliance with subsection 9.1(2) as it was not signed by the insurer’s representative.

ING submits that this alleged failure did not deprive Mr. Jetty of an important substantive right granted by the settlement regulation nor did it have any effect on Mr. Jetty’s ability to make a considered and well-informed decision on settlement.

ING denies that it failed to comply with subsection 9.1(2) of the settlement regulation. ING submits that the purpose of the signature of the insurer’s representative is to acknowledge that the disclosure notice is complete and correct. ING submits that by placing the name of insurer’s counsel and his phone number on the disclosure notice this is tantamount to an electronic signature and therefore it has complied with subsection 9.1(2).

Mr. Jetty alleges that the disclosure notice is defective as the paragraph entitled “Description of Benefits” wrongly states that the maximum income replacement benefit is $400 per week, when a self-employed insured is entitled to 80% of his business losses. Subsection 9.1(2) requires that the insurer provide a description of the benefits that may be available to the insured. There is no requirement that all provisions relating to all benefits in the Schedule be reproduced in the disclosure notice. ING submits that the short description of benefits provided is in compliance with subsection 9.1(2). The disclosure notice including the “Description of Benefits” provided to Mr. Jetty was in a form approved by the Superintendent.

According to ING, the “Description of Benefits” section is not incorrect in stating that the maximum income replacement benefit is $400 per week. Subsection 6(5) provides that if Mr. Jetty was self-employed at the time of the accident, ING shall add to the income replacement benefit payable, 80 per cent of the losses from self-employment incurred as a result of the accident. Business losses are not included in the calculation of the income replacement benefit payable. They are an addition paid after the benefit has been calculated.

SUBMISSIONS OF THE APPLICANT

Mr. Jetty admits he did sign the release dated July 28, 2005 and the settlement disclosure notice dated July 29, 2005. However, he submits that section 9.1 of R.R.O. 1990 Regulation 664 under part “Settlements – Statutory Accident Benefits” is a complete code prescribing the manner of settlement and the necessary type of settlement documents for the settlement of SABS benefits.

Subsection 9.1(2) states:

The insurer shall give the insured person a written disclosure notice, signed by the insurer, with respect to the settlement.

Further, subsection 9.1(3) requires:

The disclosure notice shall be in a form approved by the Superintendent and shall contain the following information:

A description of the benefits that may be available to the insured person under the Statutory Accident Benefits Schedule.

The Settlement Disclosure Notice signed by Mr. Jetty on July 29, 2005 states in its opening paragraph: “This Settlement Disclosure Notice must be completed and signed by your insurer.”

Both the text of the regulation and the approved form employ the word “shall.”

The Supreme Court of Canada in the case of Smith v. Co-Operators ³¹ indicated that the dispute resolution process is consumer protection legislation and must be strictly followed in these words: “There is no dispute that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance.”

By not signing the Settlement Disclosure Notice, Mr. Jetty submits that ING did not provide a proper Settlement Disclosure Notice. This is not just a technical or formal defect. The requirement of the insurer’s representative’s signature is to assign responsibility for the statements contained therein and to give credibility to the settlement process.

There is no exception for insureds who are represented by counsel as the provision is clearly mandated.³²

Mr. Jetty takes the position that the Settlement Disclosure Notice is defective in that at page 4 under “Description of Benefits – Income Replacement Benefits”, the notice clearly but incorrectly states: “This benefit is 80% of your net income before the accident. The maximum benefit is $400 per week.” This statement is false for self-employed persons who were involved in accidents before the October 2003 amendment. Since Mr. Jetty’s accident occurred on July 31, 2003, he is entitled to 80% of his losses under subsection 6(5) of the Schedule and the notice to him does not describe his benefits. Although the Settlement Disclosure Notice is in a standard form, ING is not relieved from its obligations to provide an honest explanation of the benefit.³³

Without a proper settlement disclosure notice, the settlement did not comply with the regulatory scheme and cannot be enforceable or binding up Mr. Jetty.

Mr. Jetty rescinded the “settlement” on September 7, 2005 and maintained his position throughout. ING did not pay the settlement amount. ING’s efforts to send an unreferenced cheque to Dean Jetty and Krysta Jetty 13 months after the alleged settlement of Mr. Jetty’s income replacement benefit cannot amount to an acknowledgement that the matter was settled. Rather, it is indicative that both the insured and the insurer had not settled the matter of past, present and future income replacement benefits.

CONCLUSION

Section 9.1 of the applicable settlement regulation³⁴ states the following:

(1) In this section,

“settlement means an agreement between an insurer and an insurer 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) The insurer shall give the insured person a written disclosure notice, signed by the insurer, with respect to the settlement.

(3) The disclosure notice shall be in a form approved by the Superintendent and shall contain the following information:

The insurer’s offer with respect to the settlement.

A description of the benefits that may be available to the insured person under the Statutory Accident Benefits Schedule.

A statement that the insured person may, within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release, rescind the settlement by delivering a written notice to the office of the insurer or its representative and returning any money received by the insured person as consideration for the settlement.

A description of the consequences of the settlement on the benefits described under paragraph 2 including,

i. 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 under sections 280 to 284 of the Act, and

ii. a statement that the tax implications of the settlement may be different from the tax implications of the benefits described under paragraph 2.

A statement advising the insured person to consider seeking independent legal, financial and medical advice before entering into the settlement.

A statement for signature by the insured person acknowledging that he or she has read the disclosure notice and considered seeking independent legal, financial and medical advice before entering into the settlement.

(4) The insured person may rescind the settlement within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release.

(5) The insured person may rescind the settlement after the period referred to n subsection (4) if the insurer has not complied with subsections (2) and (3).

The failure to have the insurer’s signature on the settlement disclosure notice is not some technical or inconsequential error. The insurer’s signature is required by the mandatory language of the settlement regulation. The insurer’s signature is required to both formalize and finalize the settlement process.

Also, it was not correct for ING to state in the Settlement Disclosure Notice that the maximum available income replacement benefit available to Mr. Jetty was $400 weekly. It is evident from the chronology of events and the accountant’s reports relied on by ING that ING knew that Mr. Jetty was self-employed and entitled to have 80% of his business losses added to his income replacement benefit. I do not agree with ING that this new amount did not meet the definition of an income replacement benefit. ING had an obligation to state in the Settlement Disclosure Notice that the calculation of an income replacement benefit for a self-employed person such as Mr. Jetty was to be determined by adding 80% of his business losses to the original income replacement benefit.

I agree with Mr. Jetty that the settlement regulation forms a complete statutory scheme dictating the requirements for a binding settlement between an insured and their insurer. I find that ING did not comply with subsections (2) and (3) of the Settlement Regulation as the Settlement Disclosure Notice is not signed by the insurer and there is not a proper explanation of the income replacement benefit that may be available to Mr. Jetty under the Schedule. Therefore, subsection 9.1(5) of the Settlement Regulation applies to allow Mr. Jetty to rescind the settlement after the two business day period specified in subsection (4). As a result, I find that there is no binding settlement between Mr. Jetty and ING.

Consequently, I find that Mr. Jetty’s claim for income replacement benefits has not been settled with ING.

EXPENSES:

I exercise my discretion to award Mr. Jetty his expenses incurred in this preliminary issue hearing.

February 22, 2008

Judith Killoran Arbitrator

ARBITRATION ORDER

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

Mr. Jetty’s claim for income replacement benefits has not been settled with ING.