Neutral Citation: 2009 ONFSCDRS 125 FSCO A08-001242

BETWEEN:

JASWINDER SINGH Applicant

and

DOMINION OF CANADA GENERAL INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Killoran Heard: Written submissions were received on June 26, July 24 and August 7, 2009. Appearances: Andrew Kerr for Mr. Singh Lisa Armstrong for Dominion of Canada General Insurance Company

Issues:

The Applicant, Jaswinder Singh, was injured in a motor vehicle accident on May 23, 2006. He applied for and received statutory accident benefits from Dominion of Canada General Insurance Company (“Dominion”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Singh applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

On December 5, 2008, an arbitrator, who had acted as the settlement officer, forwarded correspondence to the parties and their counsel confirming that the parties had reached a settlement, subject to compliance with sections 9.1 and 9.2 of Ontario Regulation 664, as amended. She advised that: “Pursuant to Rule 69.2(b), we intend to close the file in 20 days on the basis of the reported settlement.”

The preliminary issue is:

Is Mr. Singh entitled to an order enforcing a settlement made on December 5, 2008 requiring the Insurer to pay to him the sum of $3,250, together with a special award of $1,625, with interest on both amounts from January 21, 2009 to date?

Result:

Dominion of Canada shall pay to Mr. Singh the sum of $3,250 together with a special award of $1,625, with interest on both amounts from January 21, 2009 to date.

BACKGROUND:

Mr. Singh was involved in a motor vehicle accident on May 23, 2006 in Barrie, Ontario. He claimed statutory accident benefits from Dominion as a result of the accident. On May 29, 2008, he filed an Application for Arbitration claiming income replacement benefits after August 9, 2007 and medical expenses under a treatment plan for chiropractic and massage therapy dated November 1, 2006.

A settlement conference with the parties was conducted by an arbitrator on December 5, 2008. In a letter of the same date, the arbitrator confirmed a settlement of the matter.

On December 30, 2008, Dominion sent a settlement disclosure notice and release to Mr. Singh’s counsel. The release contained a certificate following the body of the release and Mr. Singh’s signature. The certificate was to be signed by Mr. Singh’s counsel confirming his signature and certifying that he had fully explained the release to him.

Dominion also asked that Mr. Singh’s counsel execute a consent to a dismissal of the action and approval of the dismissal order. Dominion indicated that settlement funds would be paid after the executed documents were received and the two-day waiting period had elapsed. Matters were delayed somewhat as this package of documents was sent by Dominion to the former address of Mr. Singh’s counsel.

By letter dated January 21, 2009, Mr. Singh’s counsel forwarded to Dominion the settlement disclosure notice and the release, both executed by Mr. Singh. The lawyer’s certificate portion of the release was not executed. Also included were the signed consent and an order approved as to form and content. On January 22, 2009, Mr. Singh’s counsel responded with a brief letter in response to an inquiry from Dominion about the unsigned lawyer’s certificate. He indicated that he would not sign the certificate as it would breach solicitor-client privilege. A number of letters were exchanged in which counsel set out their respective positions. By letter dated February 3, 2009, Dominion wrote to Mr. Singh’s counsel enclosing a revised release which removed the lawyer’s certificate and provided for counsel to witness Mr. Singh’s signature.

Mr. Singh’s counsel responded on February 11, 2009 refusing to witness his client’s signature. By letter dated February 24, 2009, Dominion suggested that Mr. Singh attend at the office of the Insurer’s counsel to sign the revised release and pick up the settlement funds. On March 9, 2009, Mr. Singh’s counsel wrote to the Commission requesting that this issue be heard by an arbitrator.

RELEVANT LAW:

The relevant parts of sections 9.1 and 9.2 of the Settlement Regulation² state:

(1) “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) 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 in subsection (4) if the insurer has not complied with subsections (2) and (3).

9.2 (1) Subsections 9.1 (2) to (8) apply only with respect to settlements made on or after March 1, 2002.

(2) Subsections 9.1 (2) to (5), as they read on February 28, 2002, continue to apply with respect to settlements for which written notice under subsection 9.1 (2) was given before March 1, 2002.

(3) Despite subsections (1) and (2), subsection 9.1 (8) applies with respect to an application for a mediation proceeding under section 280 of the Act if the application is filed on or after March 1, 2002.

SUBMISSIONS FROM THE PARTIES

Mr. Singh relies on the executed documents to assert that there was a settlement reached by the parties at the settlement discussion on December 5, 2008. The terms of the settlement were that Dominion would pay $3,250 to settle his claims for income replacement benefits and all past medical and rehabilitation treatment. Dominion claims that the release forwarded to Mr. Singh is a standard release which was executed by Mr. Singh but neither confirmed by his lawyer’s execution of the lawyer’s certificate nor by witnessing his signature. Dominion refuses to release the settlement funds as the release does not document Mr. Singh’s informed agreement to surrender the claims in question nor does it provide any evidence that it was signed personally by him, as required by the governing regulation.

Dominion submits that as the release is the consideration that flows to the insurer for the settlement funds paid to an applicant to settle an accident benefits claim, the risk of inadequate settlement documentation falls to the insurer. Dominion’s position is that it is entitled to settlement documentation that protects its risk to the extent possible. While Mr. Singh acknowledges that a release is a reasonable requirement for a settlement, this does not allow Dominion to add any terms it desires to the release. Nor can the Insurer include additional documents of its choice. Mr. Singh claims that it is not a normal or standard part of a release to have it certified by the applicant’s lawyer.

Dominion opposes the notion that the certificate constitutes a separate and additional document and insists that it is an integral part of its standard release, in the same way the lawyer’s certificate is considered part of an Affidavit of Documents or a witness’ signature is part of any witnessed document. Mr. Singh distinguishes the examples relied on by Dominion as being mandated by the Rules of Civil Procedure. There is no concomitant regulation requiring a client to partially waive solicitor-client privilege or to have the client’s signature witnessed in order to finalize an accident benefits settlement.

Dominion submits that the lawyer’s certificate has been unfailingly accepted by insurers and insured, giving both parties the satisfaction of a valid settlement. As a result, the contents of the release were not specifically considered or discussed during the settlement discussions on December 5, 2008. Dominion relies on the argument that in the ordinary course of a civil action, settlement is reached when the parties have reached an agreement on all essential terms. If an agreement cannot be reached with regard to settlement documentation, it is a strong indication that there was never a meeting of the minds on the essential terms of the settlement.

Mr. Singh relies on ss. 9.1 and 9.2 of Regulation 664 which govern settlements under the accident benefits regime. Indeed, these sections and the requirement that the parties comply with them, are noted in the arbitrator’s letter of December 5, 2008 in order to complete the settlement. No other requirements or limitations are mentioned. Dominion agrees that sections 9.1 and 9.2 of Regulation 664 set out specific requirements with respect to settlements on a final basis for claims. The provisions must be strictly adhered to by the Insurer, as non-compliance with subsections 9.1(2) and (3) renders the settlement documentation voidable by the Applicant.

Mr. Singh’s counsel objects to disclosing part of his confidential communications with his client; that is, whether he adequately explained to his client the terms and consequences of the settlement and whether the client understood. He is concerned that this would be a breach of solicitor-client confidentiality. He suggests that the principle behind the rule is that it would not be acceptable to demand or allow a lawyer to give evidence in court against his client. The purpose of the certificate is to create a situation where, if the client challenged the release, the certificate would be used to block the claim and the lawyer could be called as a witness. He is not persuaded by the argument that a client can authorize disclosure as in his view, a consent required as a condition for receiving settlement funds renders it meaningless.

Dominion does not dispute that the certification signed by an applicant’s lawyer is a discrete waiver of solicitor-client privilege and an applicant must supply the waiver. However, Dominion does not agree that this creates a situation of duress as settlement is not a requirement and the purpose of the waiver is to protect the integrity of the agreement. According to Dominion, the lawyer’s certificate has been found to add reliability to a contract as the parties can rely on the certificate to enhance the enforceability of the contract. Mr. Singh submits that many accident benefit settlements are made with unrepresented insured persons. In these cases, no certificate from a lawyer is required. Many settlements are done by phone and confirmed with documents exchanged in the mail. If this method is acceptable for unrepresented claimants, it should not be necessary for a lawyer representing an applicant to execute a certificate. Contrary to the Applicant’s submission, it is Dominion’s policy when settling accident benefits claims to require all releases be witnessed, whether an applicant is represented or not.

Dominion expressed its concern that allowing an applicant’s signature not to be witnessed opens the insurer up to claims in the future that someone other than the insured signed the release and the settlement is therefore not valid as was found in the appeal decision of Rahman and TD General Insurance Company.³ Dominion relies on Rahman for the principle that one of the purposes of the Settlement Regulation is to protect both parties against uncertainty and possible future litigation. Therefore, Dominion submits that as the signing of the release by an applicant is essential to the completion of a binding final settlement under the regulation, it is vital for an insurer to satisfy itself that the insured did personally sign the release. Mr. Singh counters this by insisting that the Rahman case was decided on the basis of the requirements of the settlement regulation.

CONCLUSION

An agreement to settle a claim is a contract. To establish the existence of a contract, the parties’ expression of agreement must demonstrate a mutual intention to create a legally binding relationship and contain agreement on all its essential terms.⁴ Although there is a superficial attractiveness to the argument that, since the exact terms of the release had not been agreed upon, there was no settlement, it would result in an unwieldy system for resolving claims. The parties would have to agree on the exact terms of the release at the time of the settlement discussion or the settlement would be uncertain. It would give the Insurer the right to rescind any settlement made by insisting on unreasonable terms in the release. While the Settlement Regulation has given the Applicant a right to rescind, no right to rescind was extended to the Insurer.

In Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc.⁵, Justice Chapnik ruled that although the parties had not reached agreement on the details of the settlement documentation, they had concluded an agreement on all essential terms. She stated:

It is well established that settlement implies a promise to furnish a release unless there is agreement to the contrary. On the other hand, no party is bound to execute a complex or unusual form of release: although implicit in the settlement, the terms of the release must reflect the agreement reached by the parties. The principle accords with common sense and normal business practice.

Section 9.1 of the Settlement Regulation contemplates the insurer sending a settlement disclosure notice and release to the applicant for execution. Although the settlement disclosure notice has to be in a form approved by the Superintendent, there is no such requirement for the release. Pursuant to section 9.1 (4), the insured may rescind the settlement within two business days after the later of the day the insured signs the settlement disclosure notice and the day the insured signs the release.

In Rahman, the Director’s Delegate ruled that if the settlement disclosure notice and the release are not signed by the insured personally, there is no settlement. I agree with Mr. Singh’s submissions that Rahman stands for the principle that a binding settlement is contingent on strict compliance with the requirements of the Settlement Regulation.

I find that in the case before me the Settlement Regulation governs the requirements for any settlement between the parties. It is noteworthy that the parties to such a settlement are always an insurer and its first-party insured. It is not surprising in these circumstances the regulation does not specify that a lawyer’s certification or witnessing of the applicant’s signature by an applicant’s lawyer is required on the release. In the case before me, I find that all requirements for a valid and binding settlement under the Settlement Regulation were met on January 21, 2009. Consequently, Dominion shall pay to Mr. Singh the settlement funds of $3,250 plus interest from January 21, 2009 to date.

SPECIAL AWARD

The Settlement Regulation is not ambiguous about its requirements. Mr. Singh met all of the requirements as outlined and was denied payment by Dominion of his settlement funds which represented a compromise of his accident benefits claim. It is not acceptable for Dominion to have arbitrarily added an additional requirement which was not statutorily mandated. I find that Dominion was unreasonable, to a flagrant degree, when it withheld payment of Mr. Singh’s settlement funds. Consequently, I find that Mr. Singh is entitled to a special award of $1,625, with interest from January 21, 2009, which is at the highest end of the scale for a special award.

EXPENSES:

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

September 15, 2009

Judith Killoran Arbitrator

Date

Financial Services Commission of Ontario