Neutral Citation: 2008 ONFSCDRS 42

FSCO A06-002625

BETWEEN:

LUIS GARCIA Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Eban Bayefsky

Heard: By written submissions and a telephone conference call on October 31, 2007.

Appearances: William A. McMaster for Mr. Garcia Robert A. Robinson for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Luis Garcia, was injured in a motor vehicle accident on July 7, 2004. Mr. Garcia initially applied for income replacement benefits (“IRBs”) from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ On the basis of certain medical information, State Farm initially denied Mr. Garcia’s claim for IRBs, effective September 29, 2005. State Farm later determined (on the basis of certain financial information) that Mr. Garcia was entitled to IRBs of “nil” for the period July 14, 2004 to September 29, 2005. Mr. Garcia disputed these determinations and applied for mediation. The parties were unable to resolve their disputes through mediation, and Mr. Garcia applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. Mr. Garcia applied for arbitration in respect of IRBs and housekeeping benefits. At the pre-hearing conference, Mr. Garcia withdrew his claim for IRBs and sought to pursue the issue of his entitlement to non-earner benefits.

The preliminary issue is:

Is Mr. Garcia entitled to elect a non-earner benefit under Parts II, III and X of the Schedule?

Result:

Mr. Garcia is not entitled to elect a non-earner benefit.

EVIDENCE AND ANALYSIS:

Background

Mr. Garcia was injured in a motor vehicle accident on July 7, 2004. On July 16, 2004, State Farm wrote to Mr. Garcia, advising him of the general process for claiming benefits and enclosing the “necessary forms to be completed and returned…in order to consider your claim for accident benefits”, including a “written description of the benefits to which you may be entitled.”

On the same day, Mr. Garcia’s family physician, Dr. P. Sauret, completed a Disability Certificate in which he filled out the section on income replacement benefits (where the form states “Employed: working at the time of the accident”) and reported that, as a result of the accident, Mr. Garcia was substantially unable to perform the essential tasks of his employment at the time of the accident. Dr. Sauret checked the “N/A” [Not Applicable] box in the Non-Earner Benefits section of the Disability Certificate.

On July 19, 2004, Mr. Garcia submitted an Application for Accident Benefits. Mr. Garcia was represented at the time by Claims Advocates Inc., a paralegal firm. In the Application for Accident Benefits, Mr. Garcia noted that he had been both employed and self-employed as a drywaller prior to the accident in 2004. Mr. Garcia noted that, as of the day of the accident, his injuries prevented him from working. In the “Applicant Status” section of the form (in which it asks “Which of the following describes your status at the time of the accident?”), Mr. Garcia checked the “Employed - Employed and working” box.

On July 30, 2004, State Farm sent Mr. Garcia an Explanation of Benefits Payable By Insurance Company, an “OCF-9” form, stating that they required an Employer’s Confirmation of Income form and that, since Mr. Garcia’s Application for Accident Benefits stated that he was “self-employed from 2002 to July 5, 2004,” State Farm would be retaining the services of a chartered accountant “to determine income replacement benefits for self employed….” The OCF-9 also noted that Mr. Garcia was “not eligible” for non-earner benefits, stating that “as you were employed on the date of the accident you do not qualify for Non-Earner Benefit.”

On August 11, 2004, Mr. Garcia underwent an in-home assessment at which Mr. Garcia stated that he was “employed as a Self-Employed Contractor” prior to the accident.

On August 26 and September 7, 2004, Mr. Garcia’s representatives at Claims Advocates Inc. provided State Farm with information and documentation concerning Mr. Garcia’s pre-accident employment.

On September 24, 2004, LBC International Investigative Accounting Inc. (“LBC International”), an accounting firm retained by State Farm to gather information and prepare a report for use in the calculation of Mr. Garcia’s IRBs, wrote Claims Advocates Inc. confirming the receipt of certain information on Mr. Garcia’s employment status and requesting tax and business information relevant to the determination of Mr. Garcia’s pre-accident income. From October 29, 2004 to April 29, 2005, LBC International sent Claims Advocates Inc. six follow-up letters requesting the information sought in the initial letter. LBC International did not receive a response to any of this correspondence. However, on December 8, 2004, Claims Advocates Inc. wrote State Farm to advise that they had been “trying to reach [Mr. Garcia] to discuss the documents that are still needed to determine his income replacement” and that “once [they] received a response from Mr. Garcia [they would] contact [State Farm]….”

On March 30, 2005, Mr. Garcia underwent a psychological assessment at which he stated that “before the accident he had worked for three days with a friend doing construction-related work” and that “before this he was self-employed in the same business.”

On August 28, 2005, at the request of State Farm, Mr. Garcia underwent a functional capacity evaluation “to determine if he suffers a substantial inability to performing the essential tasks of his pre-accident occupation.” During the assessment, Mr. Garcia stated that “prior to the subject motor vehicle accident, he was employed on a full-time basis as a Dry Waller.” Mr. Garcia also stated that “prior to the accident, he was deemed to be self-employed, and not as a full-time employee” and that “he would work approximately 45 hours per week, and in the capacity as a sub-contractor.”

On August 31, 2005, at the request of State Farm, Mr. Garcia underwent an insurer medical examination to determine, in part, if he “sustained a substantial inability to perform the essential tasks of his employment as a drywaller.” On September 15, 2005, State Farm sent Mr. Garcia a second OCF-9 form, indicating that based on the insurer medical examination, “you do not suffer a substantial inability to perform the essential tasks of your employment” and that “your benefits will be discontinued effective September 29, 2005 pursuant to Section 37 of the Statutory Accident Benefits Schedule.” The form also noted that Mr. Garcia was not eligible for non-earner benefits.

On September 28, 2005, Mr. Garcia underwent a medical and rehabilitation Designated Assessment Centre (“DAC”) assessment. The DAC report noted the following concerning Mr. Garcia’s pre-accident employment status:

Mr. Garcia reported that he found it difficult to work outdoors in the winter time and changed jobs to work with a friend applying drywall. He noted that he then became self-employed as a subcontractor for dry walling. Mr. Garcia relayed that initially the work was steady, but that over time he became less busy. He decided to look for steady work with a company. Mr. Garcia noted that three days prior to the subject MVA, he began working full-time for a company installing drywall.

The DAC concluded, in part, that “Mr. Garcia does present with some symptoms associated with Pain Disorder, in that headaches interfere with his ability to resume full-time work and sports activities.”

On October 17, 2005, Dr. I.B. Schacter, a neurosurgeon, examined Mr. Garcia and noted that he had undergone “physiotherapy for 3 months following the motor vehicle accident and then returned to work.”

On November 23, 2005, Dr. Sauret submitted a second Disability Certificate, again filling out the income replacement section and noting that the non-earner section did not apply to Mr. Garcia.

On March 21, 2006, Mr. Garcia (who was now represented by Murray Tkatch, legal counsel) filed an Application for Mediation in which he claimed entitlement to income replacement benefits (“IRBs”) from July 14, 2004, onward, at a rate of $400 per week. The mediation was unsuccessful and, on December 8, 2006, Mr. Garcia (who was now represented by his current lawyer, Mr. McMaster of Singer, Kwinter) filed an Application for Arbitration, again claiming entitlement to IRBs from July 14, 2004, onward, at a rate of $400 per week.

On November 24, 2006, Rick Liu of Singer Kwinter sent LBC International Mr. Garcia’s 2003, 2004 and 2005 tax documentation and asked that he be provided with a “copy of [Mr. Garcia’s] Income Replacement Benefits (IRB) calculation upon completion.”

On November 29, 2006, LBC International wrote State Farm to advise that, based on the income documentation received, Mr. Garcia’s gross pre- and post-accident income was deemed to be nil. Specifically, LBC International reported as follows:

Even though the insured may have earned some level of income before the accident, it does not appear that any of this income was reported for tax purposes. We reviewed the insured’s Personal Income Tax Returns for 2003, 2004 and 2005 and the insured did not report any employment or self-employment income (save for reporting $1 nominal employment income in 2003).

As the insured’s accident occurred after April 14, 2004, the section 64.1(1) of the SABS stipulates that the person’s income “shall be determined for the purposes of this Regulation without reference to any income the person has failed to report contrary to that Act or legislation.”

Therefore, in the absence of the reported income, the insured’s gross income before and after the accident is deemed to be $nil.

On December 5, 2006, State Farm sent Mr. Garcia a third OCF-9 stating that, based on the report from LBC International, “you[r] quantum for Income Replacement Benefits is $0.00” and that “there are no Income Replacement Benefits payable to you for the period of July 14, 2004 to September 29, 2005.”

At the request of his legal representatives, Mr. Garcia underwent a neurological assessment on March 15, 2007, as well as a Functional Abilities Evaluation, a psychological assessment and an orthopaedic assessment at Promed Evaluation on March 29, April 4 and April 18, 2007, respectively. Each of the assessors noted that Mr. Garcia had worked as a drywaller prior to and at the time of the accident, and were asked whether Mr. Garcia suffered a “substantial inability to perform the essential tasks of his pre-accident employment activities or…a complete inability to engage in any employment for which he is reasonably suited by education, training or experience.”

On June 6, 2007, the Financial Services Commission conducted a pre-hearing conference in Mr. Garcia’s arbitration. The pre-hearing Arbitrator reported, in part, as follows:

At the pre-hearing, Mr. Liu advised that his instructions from his principle, Mr. McMaster, were to “withdraw Mr. Garcia’s IRB claim without prejudice to his right to submit a claim for a non-earner benefit.” State Farm objected on the basis that Mr. Garcia does not qualify for a non-earner benefit, is not entitled to submit such an election, and in any event is out of time for submitting either a claim or election for a non-earner benefit.

Ultimately the parties agreed that Mr. Garcia would withdraw his IRB claim. Mr. Garcia agreed to submit an election for a non-earner benefit to State Farm no later than July 6, 2007.

The IRB claim is withdrawn.

A PRELIMINARY ISSUE HEARING will be scheduled for October 31, 2007….

THE PRELIMINARY ISSUE IS: Is Mr. Garcia entitled to elect a non-earner benefit under Parts II, III and X of the Schedule?

Issues at the Arbitration Hearing:

The issues in dispute were identified and agreed to as follows:

Is Mr. Garcia entitled to payments for housekeeping and home maintenance services in the amount of $3,800 from October 18, 2005 up to 104 weeks after the accident, pursuant to section 22 of the Schedule?

On July 3, 2007, Mr. Garcia submitted to State Farm an Election of Income Replacement, Non-Earner or Caregiver Benefit form (an “OCF-10”), noting that he was choosing to receive a non-earner benefit. On July 23, 2007, State Farm sent Mr. Garcia an OCF-9 in response to the OCF-10 and stated: “As you informed us you were employed as a Dry-Waller at the time of the accident you do not qualify for Non-Earner Benefits. If you have any other information regarding this determination please submit it for our review.”

Legislation

The following provisions of the Schedule are relevant to the determination of Mr. Garcia’s right to elect non-earner benefits at this time:

PART II – INCOME REPLACEMENT BENEFITS

Eligibility Criteria

s. 4(1) The insurer shall pay an insured person who sustains an impairment as a result of an accident an income replacement benefit if the insured person meets any of the following qualifications:

The insured person was employed at the time of the accident and, as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of that employment.

PART III – NON-EARNER BENEFITS

s.12(1) The insurer shall pay an insured person who sustains an impairment as a result of an accident a non-earner benefit if the insured person meets any of the following qualifications:

The insured person suffers a complete inability to carry on a normal life as a result of and within 104 weeks after the accident and does not qualify for an income replacement benefit.

PART X – PROCEDURES FOR CLAIMING BENEFITS

Failure to Comply with the Time Limits

s.31(1) A person’s failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation.

Notice and Application for Benefits

s.32(1) A person shall notify the insurer of his or her intention to apply for a benefit under this Regulation.

(1.1) A person shall notify the insurer under subsection (1) no later than,

(b) the seventh day after the circumstances arose that give rise to the entitlement to the benefit, or as soon as practicable after that day, if those circumstances arose as a result of an accident that occurred on or after October 1, 2003.

(2) The insurer shall promptly provide the person with,

(a) the appropriate application forms;

(b) a written explanation of the benefits available under this Regulation;

(d) information on any possible elections relating to income replacement, non-earner and caregiver benefits.

(3) The person shall submit a signed application for the benefit to the insurer within 30 days after receiving the application forms.

Election of Income Replacement, Non-Earner or Caregiver Benefit

s.36(1) Only one of the following benefits may be paid to a person in respect of a period of time:

An income replacement benefit.
A non-earner benefit.
A caregiver benefit.

(2) If a person’s application indicates that he or she may qualify for more than one of the benefits referred to in subsection (1), the insurer shall notify the person that he or she must elect within 30 days after receiving the notice which benefit he or she wishes to receive.

(3) The insurer shall deliver the notice under subsection (2) within 10 business days after receiving the person’s application.

PART XIV – INCOME CALCULATION

Unreported Income

64.1(1) If, under the Income Tax Act (Canada) or legislation of another jurisdiction that imposes a tax calculated by reference to income, a person is required to report the amount of his or her income, the person’s income before an accident that occurs after April 14, 2004 shall be determined for the purposes of this Regulation without reference to any income the person has failed to report contrary to that Act or legislation.

Mr. Garcia’s Submissions

At the preliminary issue hearing, Mr. Garcia stated that there was no dispute that he was employed at the time of the accident. Nor did he attempt to suggest that the numerous reports in the documentary evidence concerning his pre-accident employment were inaccurate. However, he maintained that the mere fact that he was employed at the time of the accident did not affect his right to elect non-earner benefits at this time. He submitted that, given State Farm’s determination that he was entitled to an income replacement benefit of nil (based on the income documentation he submitted and the operation of section 64.1(1) of the Schedule), he, in fact, did “not qualify” for IRBs (within the meaning of section 12(1) of the Schedule) and was, therefore, entitled to elect non-earner benefits.

Mr. Garcia submitted, further, that State Farm ought to have notified him of his right to elect between IRBs and non-earner benefits at the time they were attempting to determine the quantum of his IRBs (and, therefore, his “qualification” for IRBs), but at the very latest, once they had determined that he was not entitled to (and, therefore, did “not qualify” for) any IRBs. Mr. Garcia also maintained that, pursuant to sections 32(2)(d) and 36(2) of the Schedule, State Farm ought to have advised him of his right to elect a non-earner benefit on the basis of his initial Application for Accident Benefits, given that he might qualify for a non-earner benefit, as well as an IRB.

Mr. Garcia cited the appeal decision of Antony and RBC General Insurance Company (FSCO Appeal P03-00023, July 22, 2004) - a case concerning an insured’s right to elect IRBs or caregiver benefits under section 36 of the Schedule - for the proposition that the process of claiming statutory accident benefits is a continuing and flexible one, that an insured person can choose a new category of benefits after the initial process has run its course, and that an insurer is obligated to inform its insured of all of the implications of choosing one benefit over another. Mr. Garcia maintained that these principles suggest that State Farm failed to properly advise him of the nature of the election process and that he is at liberty to elect non-earner benefits at this stage of his claim.

Mr. Garcia initially submitted that State Farm had committed an unfair and deceptive practice by denying him non-earner benefits without first having obtained a section 42 report, contrary to section 439 of the Insurance Act and section 5.2.i of Ontario Regulation 7/00, as amended, but at the preliminary issue hearing, maintained that this issue was more appropriately raised with the Superintendent of the Financial Services Commission.

Mr. Garcia maintained that State Farm had, in fact, accepted his election of non-earner benefits when it issued its most recent OCF-9, because it simply stated that Mr. Garcia was not entitled to non-earner benefits, despite its earlier position that Mr. Garcia did not have the right to elect non-earner benefits. Mr. Garcia submitted that this constituted a “fresh step” in the process and that State Farm was, thereby, estopped from challenging his right to elect non-earner benefits.

On the basis of these submissions, Mr. Garcia sought an order requiring State Farm to pay him non-earner benefits and interest in accordance with the Schedule, as well as a special award.

State Farm’s Submissions

State Farm maintained that it fully advised Mr. Garcia of his right to benefits under the Schedule in its initial letter to him of July 16, 2004 and that none of the information he subsequently submitted suggested that he would be entitled to any benefit other than IRBs, particularly given his consistent statements regarding his pre-accident employment and the position of his various representatives (until only recently) that he was entitled to income replacement benefits.

State Farm submitted that the fact that Mr. Garcia was determined to be entitled to an IRB of nil pursuant to section 64.1(1) of the Schedule was an issue of the quantum of IRBs, and did not mean that Mr. Garcia was not otherwise qualified for IRBs within the meaning of section 4(1) of the Schedule. Similarly, given that Mr. Garcia met the general qualifications of section 4(1), he was precluded from receiving non-earner benefits by virtue of section 12(1) of the Schedule.

State Farm submitted that it had not accepted Mr. Garcia’s right to elect non-earner benefits by issuing its most recent OCF-9 since it had denied his claim for non-earner benefits on the same basis that it had previously denied his entitlement to such benefits, namely, that he was employed at the time of the accident.

State Farm argued that the case of Antony and RBC, in fact, confirmed that an insured cannot elect a benefit for which he or she does not qualify. State Farm also noted the case of Prosser and Progressive Casualty Insurance Company (OIC A96-000358, May 28, 1997) which permitted an insured to re-elect from caregiver benefits to IRBs, but indicated that this could not be applied to the present case since, unlike caregiver benefits, non-earner benefits specifically exclude insureds who qualify for IRBs.

State Farm maintained that Mr. Garcia failed to submit an application for non-earner benefits within 30 days, contrary to section 32(3) of the Schedule, and that he did not have a reasonable excuse for doing so. State Farm stated that it did not bear the responsibility of discerning that Mr. Garcia might be eligible for a non-earner benefit, given that he did not qualify for such a benefit, given the numerous representations by both Mr. Garcia and his representatives that he was employed at the time of the accident and given that he sought, until only very recently, to obtain income replacement benefits. State Farm submitted that Mr. Garcia’s unwarranted delay had prevented it from conducting the appropriate medical assessments in a timely manner, and that it had, therefore, been prejudiced.

State Farm submitted that it had not committed an unfair or deceptive practice because, as acknowledged by Mr. Garcia, it denied non-earner benefits on the basis that he was employed at the time of the accident, not on the basis that he did not suffer a complete inability to carry on a normal life (which would be the only reason for State Farm to request a section 42 assessment).

Finally, State Farm maintained that the only issue in this preliminary hearing is Mr. Garcia’s right to elect non-earner benefits, not his entitlement to those benefits.

Findings

I find that Mr. Garcia is not entitled to elect non-earner benefits at this stage of his claim since he never qualified for such benefits and, in any event, since he had been provided with sufficient information to claim non-earner benefits, but failed, without reasonable explanation, to claim them in a timely fashion (resulting in prejudice to the Insurer’s ability to properly assess any entitlement he might otherwise have).

The election process under section 36 of the Schedule does not operate in a vacuum; it depends, at the very least, on a determination of an insured person’s potential eligibility to more than one of the three types of benefits (income replacement, non-earner or caregiver benefits). Section 36(2) states that an insurer is only required to notify an insured of an election if the person’s application for benefits indicates that he or she “may qualify” for more than one of the three benefits. The case of Antony and RBC also suggests that the purpose of the section 36 election process involves a consideration of an insured’s entitlement to the enumerated benefits:

RBC submits that elections are different from other parts of the claims process. It argues that without s. 36, there would be no election available to insured persons in Ms. Antony’s situation. I disagree. Without s. 36, Ms. Antony would be eligible for CGBs because she meets the eligibility criteria under s. 13(1), and she would qualify for IRBs under s. 4.2. She is entitled to apply for benefits for which she qualifies, and she does not require express statutory approval to apply for the more advantageous benefit. On the contrary, express language is required to deprive her of benefits for which she qualifies. The point of s. 36, then, is to prescribe the election process, including time lines, and to prevent double recovery.

In my view, therefore, the question of whether an insured person is entitled to elect one of the three benefits depends initially on a determination as to whether the person meets, or potentially meets, the “eligibility criteria” of more than one of the benefits.

In the present case, Mr. Garcia was employed at the time of the accident, asserted that fact throughout the claims and assessment process, and continues to acknowledge that fact. Pursuant to section 12(1) of the Schedule, State Farm would only be required to pay Mr. Garcia non-earner benefits if, in part, he did “not qualify” for an income replacement benefit. Pursuant to section 4(1) of the Schedule, State Farm would be required to pay Mr. Garcia income replacement benefits if, in part, he met the qualification of being “employed at the time of the accident.” In my view, the fact that Mr. Garcia was employed at the time of the accident establishes that he met one of the basic eligibility criteria of section 4(1), that, to this extent, he would be qualified for income replacement benefits, and that, pursuant to section 12(1), State Farm would not be required to pay him non-earner benefits. Therefore, pursuant to section 36(2), State Farm would not be required to notify Mr. Garcia of an election between income replacement and non-earner benefits, since Mr. Garcia would not potentially qualify for the latter.

The only basis upon which Mr. Garcia maintained that he did “not qualify” for income replacement benefits within the meaning of section 12(1) of the Schedule was State Farm’s determination that he was entitled to an IRB of nil pursuant to section 64.1(1). However, I agree with State Farm that this was an issue of quantum, not entitlement to IRBs. It is entirely possible for a person to meet the substantive eligibility criteria for IRBs (for example, being employed at the time of the accident and suffering a substantial inability to perform the essential tasks of the pre-accident employment) without being entitled to a “positive quantum” of IRBs (due, for example, to the deduction of post-accident income or collateral benefits). I, therefore, find that State Farm’s determination under section 64.1(1) only went to the issue of the quantum of IRBs (pursuant to sections 6 and 61 of the Schedule, concerning the “Amount of Benefit” and the “Net Weekly Income Formula”, respectively), not to whether Mr. Garcia was substantively qualified for IRBs. Consequently, State Farm’s determination of “nil IRBs” did not entitle Mr. Garcia to non-earner benefits pursuant to section 12(1) or to an election for such benefits pursuant to section 36(2) of the Schedule.

Mr. Garcia’s ineligibility for non-earner benefits also undermines his position that State Farm failed to properly advise him of his right to elect such benefits. As noted, section 36(2) only requires an insurer to notify an insured of an election if the person’s application for benefits indicates that he or she “may qualify” for more than one of the enumerated benefits. Given Mr. Garcia’s initial statement that he was employed at the time of the accident (as well as his continuing acknowledgment of that fact), there was no possibility that he could qualify for non-earner benefits (particularly in light of his current position that the only fact that might have qualified him for such benefits was State Farm’s determination that he was not entitled to a “positive quantum” of IRBs). Similarly, section 32(2)(d) only requires an insurer to provide a person with information on “any possible” elections relating to income replacement, non-earner or caregiver benefits. Since, based on his own evidence (at the commencement of his claim, throughout its adjustment and in the context of the current proceeding), Mr. Garcia could not have qualified for non-earner benefits, there was no possible election as between IRBs and non-earner benefits, and State Farm was, therefore, not required to advise him of any such election. I, therefore, find that State Farm did not fail to properly advise Mr. Garcia of his rights. I note, as well, that, until only recently, Mr. Garcia sought IRBs rather than non-earner benefits, and that this was while he was represented, initially by a paralegal firm but then (in applying for mediation and then arbitration) by legal counsel.

I do not accept Mr. Garcia’s interpretation of the case of Antony and RBC. While the decision clarifies that an insured person can change their election (and so, in that sense, renders the process flexible), it does not establish that the election process is indefinite or that it begins again once a person’s entitlement to one of the benefits has come to an end. As noted, the election process still depends on a person’s basic entitlement, or potential entitlement, to the different benefits. It also depends on the particular facts of the case, and whether, for example, the insurer provided the insured with sufficient information on which to make a valid election in the first instance. As stated in Antony and RBC:

…an insurer cannot hold an insured person to the 30-day time limit for an election or re-election [under section 32(3) of the Schedule] if the required information has not been provided. For the same reason, an insured person cannot be held to an election that is based on inaccurate or incomplete information provided by an insurer in contravention of s. 32(2)(d). A valid election is an informed election.

…the generality of s. 32(2)(d)…reflects legislative intent that insurers provide information that is appropriate and reasonable based on the particular circumstances of each insured person….insurers are not required to recommend an election based on a full enquiry into the claimant’s impairments and financial and personal situation. Their role is to explain the rules well enough to allow an unsophisticated insured person (and her representative, if she has one) to decide which benefit is best for her.

I see no evidence to the effect that Mr. Garcia’s decision to pursue IRBs throughout virtually all of this process was based on inaccurate or incomplete information. I also see no basis upon which to conclude that State Farm ought to have notified Mr. Garcia of his right to elect non-earner benefits either during their attempt to determine the quantum of his IRBs or once they had determined that his IRBs would be nil. I find that State Farm provided Mr. Garcia with sufficient information upon which to choose the desired (and appropriate) benefits, and that he made an informed decision to pursue IRBs until well after State Farm had issued its third OCF-9 concerning the quantum of IRBs. Throughout virtually all of the process, Mr. Garcia sought IRBs, and throughout the entire process, State Farm maintained its denial of IRBs on the basis of Mr. Garcia’s pre-accident employment. Mr. Garcia provided no evidence to the effect that he had mistakenly chosen to pursue IRBs, that he was not fully aware of the requirements or implications of seeking IRBs rather than non-earner benefits, or that in determining that the quantum of IRBs would be nil, he understood State Farm to be re-opening the issue of his entitlement to either IRBs or non-earner benefits. State Farm’s determination that the quantum of IRBs would be nil did not end one process and start another, in the sense of disqualifying him from IRBs and then entitling him to elect (and to be informed of his right to elect) non-earner benefits.

I do not accept Mr. Garcia’s submissions with respect to State Farm having taken a “fresh step” in its most recent OCF-9 (by not adding that it denied non-earner benefits on the basis that Mr. Garcia did not have the right to elect such benefits at this point in his claim), and that this estopped State Farm from disputing his right to make such an election. I find that State Farm’s fourth OCF-9 was consistent both with the position it took throughout the adjustment of Mr. Garcia’s claim (namely, that he was not entitled to non-earner benefits because he was employed at the time of the accident) and with its position at the pre-hearing conference, namely, that Mr. Garcia did not qualify for non-earner benefits. I do not find that the OCF-9 altered State Farm’s essential position in respect of Mr. Garcia’s claim for non-earner benefits or that it signalled that State Farm was relinquishing its position that Mr. Garcia was not entitled to elect non-earner benefits at this stage of the process. I note, as well, that State Farm offered Mr. Garcia the opportunity to provide new information concerning his employment status at the time of the accident, that he did not provide any new information on this issue and that, in the current hearing, he continued to acknowledge that he was employed at the time of the accident. I, therefore, find that the most recent OCF-9 does not estop State Farm from asserting what it asserted at the pre-hearing conference.

Finally, in addition to the foregoing reasons, I find that Mr. Garcia is not entitled to elect non-earner benefits at this time because he failed, without reasonable explanation, to submit an application for the benefits within 30 days of receiving the application forms, contrary to section 32(3) of the Schedule. As noted above, there was no basis on which State Farm ought to have believed that Mr. Garcia might be entitled to non-earner benefits, and there is no evidence that Mr. Garcia’s long-standing pursuit of income replacement benefits was based on insufficient information or a misunderstanding of the requirements or implications of seeking IRBs over non-earner benefits. I, therefore, find that Mr. Garcia did not have a reasonable excuse for claiming non-earner benefits three years after the accident and three years after the time he received the application forms from State Farm. I agree with State Farm that, by virtue of his delay, the insurer has been prevented from properly assessing Mr. Garcia’s entitlement to non-earner benefits. I note that the tests of disability for IRBs and non-earner benefits would involve significantly different medical and functional assessments. I, therefore, find both that Mr. Garcia failed, without reasonable explanation, to claim non-earner benefits in a timely fashion and that this delay resulted in significant prejudice to State Farm’s ability to assess and respond to Mr. Garcia’s claim.

I note, in this regard, the recent decision in Gadacz and ING Insurance Company of Canada (FSCO A07-000276, September 21, 2007) summarizing the “guiding factors in late elections set out in the Anthony [sic] decision” as follows: “time passed since the election, reasons for delay, reasons for seeking re-election, the effect of the re-election and prejudice to the insurer.” A significant amount of time has passed since Mr. Garcia’s initial application for benefits, he provided no explanation of the reason he was claiming, or for the delay in claiming, non-earner benefits (although it might be related to State Farm’s denial of IRBs pursuant to section 64.1(1) of the Schedule) and the effect of the election would be to prejudice the insurer’s ability to properly investigate Mr. Garcia’s entitlement to non-earner benefits.

While not raised by State Farm, I find that Mr. Garcia’s attempt to elect non-earner benefits at this point is, in fact, an attempt to dispute State Farm’s initial denial of non-earner benefits (in the July 30, 2004 OCF-9). However, while Mr. Garcia has not specifically attempted to mediate or arbitrate his entitlement to non-earner benefits, if he were permitted to claim such benefits at this point, and State Farm maintained its denial, Mr. Garcia would be able to proceed to mediation or arbitration beyond two years from the date of the initial refusal, contrary to the limitation periods set out in section 51 of the Schedule. I, therefore, find that allowing Mr. Garcia to elect non-earner benefits at this point (in the absence of a reasonable explanation for not doing so earlier) would be to unfairly permit him to circumvent the mandated limitation period.

I, therefore, conclude that Mr. Garcia is not entitled to elect non-earner benefits at this stage of the process. I further deny Mr. Garcia’s request for an order requiring State Farm to pay him non-earner benefits, interest and a special award. I see no basis to allow Mr. Garcia to claim non-earner benefits at this point, and I see no basis upon which to find that State Farm unreasonably withheld or delayed payments.

EXPENSES:

The parties did not address the issue of expenses. If required, the parties may make submissions on this issue in accordance with the procedure set out in Rule 79 of the Dispute Resolution Practice Code.

March 7, 2008

Eban Bayefsky Arbitrator

Date

Financial Services Commission of Ontario