Diane Brazier v. RBC General Insurance Company, 2009 ONFSCDRS 131

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2009 ONFSCDRS 131

FSCO A07-001290

BETWEEN:

DIANE BRAZIER

Applicant

and

RBC GENERAL INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before: Robert Bujold

Heard: By written submissions dated June 26, 2009.

Appearances: P. Michael Rotondo for Ms. Brazier

Aldo Picchetti for RBC General Insurance Company did not deliver any submissions

Issues:

By decision dated May 28, 2009, I found that Ms. Brazier was entitled to income replacement benefits (“IRBs”) from April 4, 2006 and ongoing at the rate of $385.56 per week, with interest. I also found that Ms. Brazier was entitled to a special award on the basis that RBC General Insurance Company (“RBC”) had unreasonably withheld payment of IRBs.

As the parties had not made submissions at the hearing on the appropriate quantum of the special award, I gave the parties the opportunity to make written submissions. Ms. Brazier’s written submissions were due July 27, 2009. RBC was given until 15 days thereafter to respond. Ms. Brazier was permitted a further 7 days to reply.

The only submissions received by either party were contained in a letter from Ms. Brazier’s counsel dated June 26, 2009, received June 29, 2009. This letter also provided Ms. Brazier’s submissions on the issue of expenses of the hearing and, in that regard, enclosed Mr. Rotondo’s Bill of Costs.¹ The only reference specific to the special award was the following:

Special Award claim, calculated as follows:

50% x ($ 94645.24 (benefits that were unreasonably withheld or delayed + interest on these benefits calculated under the SABS) + compound interest calculated according to s. 282(10))

Apart from this submission, which appears to be nothing more than a bald claim for the maximum permissible amount that could be awarded pursuant to subsection 282(10) of the Insurance Act, R.S.O. 1990, c.I.8, as amended (the “Insurance Act”), neither party has provided me with reasoned submissions, based on a review of the facts and prior case law, that would assist me in determining the appropriate quantum of the special award that should be awarded in this case.

The issue in this hearing is:

What is the appropriate amount of the special award in this case?

Result:

The appropriate amount of the special award in this case is $20,000.00.

THE LAW:

Section 282(10) of the Insurance Act provides as follows:

Special Award

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

Liberty Mutual Insurance Company and Persofsky² is the leading case on the proper approach to special awards. Persofsky sets out the following steps to be followed:

Determine the benefits owing to the insured person, including interest calculated under the applicable version of the SABS;
Decide whether the insurer unreasonably withheld or delayed the payment of these benefits. If so, the insurer will be ordered to pay a lump sum amount in addition to the benefits and interest calculated in #1;
If the insurer did not act unreasonably in respect of all the benefits owing under #1, determine the amount of the benefits that were unreasonably withheld or delayed, and the interest payable on these benefits under the applicable version of the SABS.
Determine the maximum special award that can be awarded under s. 282(10), or at least a reasonable approximation. This is done by taking the amount in #1 or #3, whichever is applicable, and adding the additional interest component in s. 282(10) - two per cent per month, compounded monthly. To be clear, this calculation includes interest on the unpaid SABS interest. The maximum special award is 50 per cent of this total. Expressed as a formula, the calculation is as follows:

Maximum special award = 50% x (benefits that were unreasonably withheld or delayed + interest on these benefits calculated under the SABS + compound interest calculated according to s. 282(10))

Consider all relevant factors (discussed below) to determine an appropriate lump sum special award, not a percentage, that responds to the facts of the case and bears a reasonable relationship to other special awards, and does not exceed the maximum.
Provide reasons for concluding that the special award is payable, and for the amount of the award.
In the order, express the special award as a specific, lump sum amount. No interest is payable on this amount, except as part of the enforcement process.

[footnotes omitted]

The issue at this stage of the proceeding is the appropriate amount that should be awarded in this case (step 5 above). I have no reason to doubt (and have no submissions from RBC to counter) Ms. Brazier’s submission that the maximum permissible amount that could be awarded under section 282(10) (step 4 above) is 50% of $94,645.24, or $47,322.62.

Persofsky offers considerable guidance in determining the appropriate quantum of a special award. In Johnston and AXA Insurance (Canada)³, I summarized those guiding principles as follows:

Persofsky recognizes that the purposes of a special award are punishment and deterrence. In furthering these purposes, the amount of a special award should have regard to two overarching principles: rationality and proportionality.

Rationality refers to an amount that is just large enough to meet the purposes of a special award.

Proportionality refers to an amount that is proportional to the misconduct in issue. Specifically, it must be proportional to (i) the blameworthiness of the insurer’s conduct; (ii) the vulnerability of the insured person; (iii) the harm or potential harm directed at the insured person; (iv) the need for deterrence; (v) the advantage wrongfully gained by the insurer from the misconduct; and (vi) should take into account any other penalties or sanctions that have been or likely will be imposed on the insurer due to its misconduct. Of course, as set out in step 4, the amount must also bear a reasonable relationship to other special awards, and it must not exceed the maximum.

Persofsky notes that Commission decisions have applied many of the relevant considerations which include: the amount of the benefits unreasonably withheld or delayed; the time the benefit is withheld or delayed; failing to respect important obligations under the SABS; other factors that increase the gravity of the insurer’s conduct such as bad faith or the vulnerability of the insured; mitigating factors; and other penalties that may be imposed upon the insurer.

EVIDENCE AND ANALYSIS:

Factors affecting the amount of the Special Award in this case

At the hearing in this matter, Ms. Brazier advanced her claim to a special award on the following grounds:

that RBC failed to adequately address Ms. Brazier’s complaints regarding Dr. Zarnett’s assessments;
that RBC ignored the medical evidence relevant to entitlement to IRBs, i.e. that RBC ignored the psychological assessments of Dr. Perlmutter and Dr. Young, as well as the assessments of Dr. Wong, physiatrist;
that RBC failed to provide critical information to its own examiners, i.e. it failed to forward the Perlmutter report to any section 42 assessors; and,
that RBC failed to comply with section 37 of the Schedule in stopping payment of her IRBs, i.e. that Ms. Brazier was provided with neither the opportunity to be examined by a DAC (as required pre-March 1, 2006) nor was she given the opportunity to provide an updated Disability Certificate before being assessed by Dr. Zarnett (as required post-March 1, 2006).

With respect to the last point, I found that RBC’s conduct did not warrant a special award, as RBC appeared to have complied with the requirements of the Schedule which, itself, appeared to create the gap in procedural protections through which Ms. Brazier’s circumstances fell. Further, I was not convinced, on the evidence before me, that the provision of a Disability Certificate prior to the assessment by Dr. Zarnett would have affected RBC’s determination that Ms. Brazier was no longer entitled to IRBs.

With respect to the first-listed point upon which Ms. Brazier based her claim to a special award, I also found that, while RBC had failed to adequately address Ms. Brazier’s complaints, it was unlikely that better handling and follow-up by RBC would have altered Dr. Zarnett’s opinion. As I noted, “Dr. Zarnett maintained the accuracy of the information contained in his reports and minimized the importance of subjective pain complaints where they do not co-relate with physical findings.”

I did, however, find that IRBs had been unreasonably withheld by RBC as a result of the following conduct:

RBC had misfiled the psychological report of Dr. Perlmutter with the result that the report did not get included in RBC’s medical file for Ms. Brazier and did not get forwarded to any subsequent assessors who examined Ms. Brazier at RBC’s request; and,
RBC maintained its reliance on the report of Dr. Rashid over the report of Dr. Young when it was unreasonable to do so.

With respect to the misfiling of the Perlmutter report, I found that “Ms. Brazier was entitled to have RBC either accept Dr. Perlmutter’s findings or conduct its own timely assessment of her psychological condition and any impairments affecting her ability to work. As a result of RBC’s negligence, neither occurrence took place.”

At the same time, however, I also found “no attempt by Ms. Ferreira to keep the Perlmutter report or any relevant medical evidence from RBC’s section 42 assessors.” I also accepted “that the report was misfiled and forgotten, as opposed to intentionally ignored.”

With respect to RBC’s continued reliance on Dr. Rashid’s opinion, I noted that Dr. Rashid’s report of April 23, 2008 had failed to respond to a pivotal proposition put forward by Dr. Young in his report of March 17, 2008, i.e. that Ms. Brazier’s exaggerated presentation was itself a symptom of her psychological condition and represented a “cry for help.” Dr. Young had arrived at that opinion after an extensive assessment of Ms. Brazier taken over several days.

Dr. Rashid, on the other hand, did not arrive at any conclusion, other than the conclusion that he could not make a diagnosis on the basis of Ms. Brazier’s unreliable test results. When faced with the proposition that those test results showed signs of exaggeration because Ms. Brazier was displaying a “cry for help,” Dr. Rashid responded that he read Dr. Young’s report “with interest” and, without further comment on that issue, simply repeated his finding that there was “a lack of psychological impairment” because he could not make a diagnosis.

I found it unreasonable for RBC to rely on an opinion that failed to adequately address this central issue.

Proportionality and the Relationship to other Cases

As set out in Persofky, the amount of a special award must be rationally related to the purposes of a special award, proportional to the conduct of the insurer and bear a reasonable relationship to the amounts awarded in others cases. It must also not exceed the maximum permissible amount.

While the parties did not provide me any case law, I note that special awards have been made in over a hundred cases and range from as little as $40 to as much as $65,000 with the vast majority of awards being under $10,000.⁴

In the high water mark case to date, Henderson and Lombard Insurance Company of Canada⁵, Arbitrator Sampliner awarded $65,000 in recognition that “[Lombard] committed serious breaches over a long period of time. Lombard failed to send Mr. Henderson claim forms and information about accident benefits, neglected its duty to evaluate and respond to his claims, delayed answering his queries, misstated the limitation period, and refused to honour his entitlement rights under established precedents.”

While RBC’s conduct in this case denied a vulnerable insured of much needed IRBs over a significant period of time, I also recognize that the most significant delay resulted from RBC’s negligent misfiling of the Perlmutter report. This, in my view, does not come close to approaching the high-handed and intransigent conduct seen in cases like Henderson. Further, I am not persuaded that an award at the highest end of the scale would prove to be an effective deterrent against similar mistakes from happening in the future. RBC’s continued reliance on Dr. Rashid’s opinion is more “blameworthy,” but still falls well short of the intentional and egregious conduct that has warranted special awards at the top end of the range.

Having regard to the factors set out in Persofky, and keeping in mind that the absolute dollar amount of any special award must be proportionate to previous awards (but without the benefit of case law from either party), I find $20,000.00 to be the appropriate amount of the special award in this case.

EXPENSES:

Given the very limited submissions on the appropriate quantum of the special award, I exercise my discretion to deny both parties their expenses of the proceeding on this issue.

September 30, 2009

Robert Bujold Arbitrator

Date