Financial Services Commission of Ontario

Commission des services financiers de l'Ontario

Neutral Citation: 2008 ONFSCDRS 78

Appeal P07-00007

OFFICE OF THE DIRECTOR OF ARBITRATIONS

PATRICK LAWRENCE

Appellant

and

ACE INA INSURANCE

Respondent

BEFORE:

David Evans

REPRESENTATIVES:

Angela Currie and Vadim Malyshev for Mr. Lawrence

Christopher J. Schnarr for ACE INA Insurance

HEARING DATE:

September 10, 2007

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The appeal is dismissed and the arbitration order, dated February 9, 2007, is confirmed.
If the parties are unable to agree on appeal expenses, a hearing may be requested in accordance with Rule 79 of the Dispute Resolution Practice Code.

May 16, 2008

David Evans Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Mr. Lawrence appeals the arbitrator's finding that, because he was in the course of his employment when he was in an automobile accident, he is precluded from claiming statutory accident benefits under the SABS–1996.¹

II. BACKGROUND

Mr. Lawrence was near the intersection of Townsend Road and Steeles Avenue in Toronto when, while stopped at a red light, the Laidlaw Transit Ltd. school bus he was driving was rear-ended by a vehicle operated by Mr. Kevin Li. Since at the time of this accident on July 10, 2003, Mr. Lawrence was in the course of his employment, he was therefore entitled to claim workers' compensation benefits from the Workplace Safety and Insurance Board (WSIB) under the Workplace Safety and Insurance Act, 1997² (WSIA). On July 11, 2003, Dr. Jack Sussman, who was Mr. Lawrence's physician at the time, completed a "Physician's First Report," Form 8 under the WSIA. The arbitrator commented: "In that form Dr. Sussman notes that he ordered no follow up testing on Mr. Lawrence and that he expected him to fully recover from the neck pain he presented within a few weeks." Mr. Lawrence testified that he continued to work after the accident and only lost a little time from his two part-time jobs.

Shortly after the accident, Mr. Lawrence retained a paralegal firm that, as found by the arbitrator, specializes in claims for automobile accident benefits. Subsection 59(1) of the SABS precludes Mr. Lawrence from claiming accident benefits from the school bus's insurer unless he elected to bring a court action, as provided in s. 30 of the WSIA,³ and so long as the election was not made "primarily for the purpose of claiming benefits" under the SABS [s. 59(2): emphasis added]. Mr. Lawrence gave a statement to an adjuster at his paralegal's office on September 8, 2003 as follows: "Mr. Gary [Petrov] my paralegal has told me that we are not going with WSIB but I have to take legal action against the other party." In a letter dated August 14, 2003, the paralegal firm wrote to Mr. Li of Mr. Lawrence's intention to pursue a court claim. The tort statement of claim against Mr. Li was issued by a separate law firm on July 8, 2005. The arbitrator noted: "The first evidence I have of the involvement of tort counsel is the Statement of Claim, which was issued just before the two year anniversary of the accident." At the time of the arbitration hearing, the parties to the tort action were exchanging affidavits of documents and arranging discoveries. The matter ultimately settled after the arbitrator's decision for $2,500. I allowed the filing of the minutes of settlement as fresh evidence because I was satisfied that this evidence potentially met the fourth criterion in R. v. Palmer, 1979 CanLII 8 (SCC), [1980] 1 S.C.R. 759, namely that the evidence could reasonably be expected to have affected the result.

ACE INA Insurance (ACE) was the insurer of the school bus, and it denied Mr. Lawrence's claim for accident benefits. Six failed mediations relating to the payment of various treatments and services were held. The issues – $2,640 for treatments provided by Universal Injury Rehabilitation Centre and $7,578 for assessments performed by it, Assessment Direct Inc. and Progressive Digital Diagnostic Centre – were combined in one application for arbitration. ACE raised s. 59 in its response to arbitration and at the pre-hearing held on April 12, 2005.

As part of making his claim against ACE, Mr. Lawrence provided ACE with a WSIB assignment⁴ and executed an election in November 2003. The arbitrator placed great weight on the circumstances surrounding the election:

Mr. Malyshev [Mr. Lawrence's paralegal representative] asked Mr. Lawrence in direct examination, and I quote verbatim from my notes, why he "chose to claim accident benefits rather than compensation benefits." Mr. Lawrence answered "I thought it would be beneficial to me in the long run so I decided to go through that channel." Mr. Malyshev then asked Mr. Lawrence whether his firm had advised him of his right to sue a third party, and Mr. Lawrence answered that, on their advice, he "decided to do that."

Mr. Lawrence testified that he understood that he had to choose between the WSIB and no fault benefits and that if he wanted no fault benefits he had to sue the third party. The arbitrator emphasized that Mr. Lawrence was asked three times if he believed that the election was that between worker's compensation and no fault accident benefits, and he answered yes each time. The arbitrator found that "[t]he questions which Mr. Lawrence was asked were clear and straightforward and so were his answers."

The arbitrator noted that there is no "election" provided for in the SABS between statutory accident benefits and worker's compensation, but Mr. Lawrence's evidence indicated that he believed this was his real election. The arbitrator concluded: "[T]his belief does not satisfy the essential criterion for a valid election, i.e. that it be made not primarily for the purpose of claiming statutory accident benefits."

The arbitrator also considered the nature of Mr. Lawrence's representation, finding that representation by a firm that only deals with statutory accident benefits suggests that Mr. Lawrence's primary interest when he made the election was statutory accident benefits. In addition, the arbitrator found that the fact the paralegal was negotiating with the tort insurer for interim benefits because of the ongoing dispute with the accident benefits insurer at least to April 2005 was another indicator of Mr. Lawrence's primary interest. The arbitrator concluded that the substance of the matter prevailed over the procedural formalities observed by Mr. Lawrence: "I find it completely implausible to believe that Mr. Lawrence's primary intention was to pursue a tort action, when he retained legal representatives who assert that they explicitly advised him that they only do accident benefit work, not tort." [Emphasis in the original.]

Finally, the arbitrator considered the effect of Mr. Lawrence continuing to work after the accident also suggestive: "It is reasonable to assume that Mr. Lawrence meant exactly what he said in his evidence when he testified that 'over the long run' he thought that an auto accident benefits claim would be 'to his advantage.'"

The arbitrator concluded that Mr. Lawrence's election out of the WSIA "was not made bona fides, in that it was made primarily for the purpose of collecting accident benefits and not primarily for the purpose of pursuing a claim against a third party in tort." Therefore, the arbitrator found that ACE properly denied Mr. Lawrence's accident benefits claim and that the arbitration proceeding should be dismissed.

III. ANALYSIS

On appeal, Mr. Lawrence submits that the arbitrator erred by focusing on his testimony about the reason he made the election to pursue accident benefits rather than the objective factors supporting his intention to pursue the third party action. One of the objective factors he now relies on is the post-hearing settlement of the tort action. He also objects to the arbitrator's consideration of the role of the paralegal. However, I am not persuaded the arbitrator erred.

The arbitrator correctly stated that the validity of Mr. Lawrence's purported election to opt out of WSIA benefits and into the auto insurance system must be assessed as of the time he made that election, as made clear in the appeal decision Coseco Insurance Company/HB Group/Direct Protect and Gebru, (FSCO P01–00043, January 7, 2002). The arbitrator also referred to his own decision in Mahadeo and Aviva Canada Inc., (FSCO A04–001435, April 27, 2006), where he held that an arbitrator can consider the actions subsequent to any election to aid in determining whether or not it was in fact made bona fides. The arbitrator's approach was specifically approved on appeal in Mahadeo and Aviva Canada Inc., (FSCO P06–00015, March 22, 2007), where the delegate noted: "Delay in bringing an action or failure to prosecute it are likely to undermine a claimant's accident benefits claim."

Furthermore, although the Director in Gebru noted that while there are "objective factors" that may be considered in evaluating the insured person's motivation – including the strength of the court action, the steps taken to pursue the claim, and any advantages that might have led the insured person to prefer accident benefits over workers' compensation – the regulation makes it clear that the issue is the insured person's reason for making the election. That is the essence of the arbitrator's reasons. As he noted, Mr. Lawrence's argument was that by executing an election and undertaking form as well as an assignment of workplace safety and insurance benefits on November 17, 2003, and by putting the third party on notice followed up by issuing a statement of claim, he had met the requirement of making a valid election out of the WSIA. The arbitrator preferred the testimony given by Mr. Lawrence regarding his reason for making the election. In light of Mr. Lawrence's repeated assertions that he was electing accident benefits over workers' compensation – and, as reiterated by the delegate in the Mahadeo appeal, "there is no election between accident benefits and workers' compensation" – it is not surprising that the arbitrator preferred this evidence over whatever objective evidence was in Mr. Lawrence's favour. Appeals are only on questions of law: Insurance Act, s. 283(1). The arbitrator had Mr. Lawrence before him and had the opportunity to judge the fairness and accuracy of the questions and answers. He specifically found that, subjectively, Mr. Lawrence was making an election he was not entitled to make. I have no basis on which to substitute any other view, since the arbitrator had evidence upon which to reach his conclusion.

I am accordingly not persuaded that the arbitrator erred in his consideration of the objective and subjective factors. As noted in the Mahadeo appeal, the weight given the various objective factors will differ from case to case; so I am not persuaded that the arbitrator erred in failing to discuss the strength of the tort case in light of Mr. Lawrence's testimony and in light of the other objective factors. I am also not persuaded that the fact the tort claim ultimately settled would have changed the arbitrator's finding, since the settlement would be just one more factor to consider and represents only 25 percent of the value of the accident benefit claim in dispute.

With respect to the steps taken to pursue the claim, the arbitrator recognized that Mr. Lawrence had taken more than the applicant in Mahadeo. However, other than some formalities such as making the election and putting the third party on notice, little else was done until after the statement of claim was issued. On the other hand, the accident benefit claim was very active, for as noted above there were six mediations that were combined into the application for arbitration. While the timing of a court action is not determinative, it is a legitimate factor in assessing the insured person's motivation: Sofantzidelis and AXA Insurance (Canada), (OIC P96-00086, January 26, 1998), upholding (OIC A95-000384, May 7, 1997) on this point. The arbitrator accordingly did not err in discounting the initial formalities or the last-minute issuing of the statement of claim, especially in light of the many steps taken by his paralegal representatives in the accident benefit claim.

Mr. Lawrence submits that the arbitrator should not have relied upon the comment made by Mr. Malyshev in closing submissions that his paralegal firm mainly does accident benefit work, since it was not subject to cross-examination. However, it is not asserted that the information was in any way inaccurate. I am not persuaded that the arbitrator's reliance on this point constituted an error of law.

Finally, it was within the arbitrator's jurisdiction to consider the fact that Mr. Lawrence continued working as a reason he would have an advantage in pursuing accident benefits, providing another motivation for Mr. Lawrence to have made the election primarily to obtain accident benefits.

The issue was whether Mr. Lawrence made the election primarily to pursue accident benefits. The arbitrator recognized this at the beginning of his decision, and it informed his entire decision. As he noted, "this factual determination has to be made within the context of the legislator's decision to make worker's compensation the primary recourse after a work-related accident, except when the primary reason for opting out is to sue a third party." This was at most an issue of combined fact and law. The arbitrator had Mr. Lawrence's viva voce evidence on the reason he made the election, and I have no basis to disturb the arbitrator's findings based on that evidence. I am not persuaded that the arbitrator erred in law, which is the requisite standard on appeal. Accordingly, the appeal is dismissed.

IV. EXPENSES

If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.