Neutral Citation: 2009 ONFSCDRS 143 FSCO A08-002155

BETWEEN:

Harmesh Ladhar, Applicant and Economical Mutual Insurance Company, Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Denise Ashby Heard: By telephone conference call on September 11, 2009.

Appearances: Douglas O'Toole for Mr. Ladhar Helen D. K. Friedman for Economical Mutual Insurance Company

Issues:

The Applicant, Harmesh Ladhar, was injured in a motor vehicle accident on January 15, 2002. He applied for and received statutory accident benefits from Economical Mutual Insurance Company (“Economical”), payable under the Schedule.¹ Economical declined to reinstate weekly income replacement benefits. The parties were unable to resolve their disputes through mediation, and Mr. Ladhar 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:

Is Mr. Ladhar precluded from proceeding to arbitration because his application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule?

Result:

Mr. Ladhar is precluded from proceeding to arbitration because his application for arbitration was filed beyond the two-year limitation period.

FACTS:

The following are the agreed facts relevant to this preliminary issue hearing which I accept:

Mr. Ladhar was employed as a rope machine operator when he was involved in a motor vehicle accident on January 15, 2002.
As a result of injuries sustained in the accident, Mr. Ladhar was initially unable to return to his pre-accident employment.
Economical received Mr. Ladhar’s Application for Accident Benefits on January 31, 2002.
On January 31, 2002, Economical received a Disability Certificate from Conestoga Physiotherapy Clinic which was the basis for its acceptance of Mr. Ladhar’s claim for income replacement benefits.
Economical paid Mr. Ladhar income replacement benefits subject to deductions for collateral benefits he received from Great-West Life.
Mr. Ladhar participated in several graduated return to work programs facilitated by Great-West Life. Mr. Ladhar continued to receive benefits during these periods subject to deductions for post accident income.
On February 16, 2004, Economical wrote to Mr. Ladhar advising him that his entitlement to Income Replacement Benefits was being terminated effective March 5, 2004 based on a multidisciplinary insurer’s assessment, conducted pursuant to section 42 of the Schedule, which concluded that Mr. Ladhar did not meet the post 104 week disability test.
Enclosed with the February 16th letter were:

(i) an OCF-17 (Notice of Stoppage of Weekly Benefits and Request for Assessment) which confirmed the Income Replacement Benefit would be stopped March 5, 2004;

(ii) an OCF-9 (Explanation of Benefits Payable) which confirmed no ongoing eligibility for Income Replacement Benefits, based on the post-104 week test. The OCF-9 contained the prescribed termination and timing provisions which included the following language:

WARNING: TWO YEAR TIME LIMIT

You have TWO YEARS from the date of your insurer’s refusal to pay, or reduction of a benefit, to arbitrate or commence a lawsuit in court.

(iii) Mr. Ladhar’s final Income Replacement Benefit cheque.

Mr. Ladhar exercised his right to a Disability DAC. Income Replacement Benefits continued to be paid subject to post accident income and Economical’s right of repayment.
Mr. Ladhar attempted to return to work March 23, 2004. Accordingly, no further benefits were actually paid beyond March 31, 2004 due to receipt of post accident income which exceeded the benefit payable.
The “Post-104” Disability DAC took place at St. Joseph’s Health Care Centre in London, Ontario in April 2004. The assessors formed a consensus opinion that Mr. Ladhar had the education, training and experience to work at a variety of jobs that were identified. The assessors also provided a consensus opinion that Mr. Ladhar was not suffering from a complete inability to engage in any job for which he was reasonably suited by education, training or experience.
The DAC report, dated May 10, 2004, was received by Economical on May 17, 2004.
On May 18, 2004, Economical corresponded with Mr. Ladhar advising that further benefits would not be forthcoming. Mr. Ladhar was advised that he did not qualify for Income Replacement Benefits beyond March 5, 2004 as outlined in Economical’s previous correspondence of February 16, 2004. Mr. Ladhar was also asked to repay the benefits paid pending the DAC assessment pursuant to section 47(1) of the Schedule in the amount of $728.13.
Mr. Ladhar continued to work for his pre-accident employer on modified duties until August 2005.
On August 15, 2005, Mr. Ladhar underwent shoulder surgery (said to arise out of accident related impairments) and did not return to work thereafter.
Mr. Ladhar applied for and received short term disability (STD) and long term disability benefits (LTD) following the shoulder surgery.
Following expiry of Mr. Ladhar’s LTD benefits in November 2007, he requested reinstatement of his Income Replacement Benefits. The request was on the basis that the DAC had been completed pre-surgery and post-surgery he was unable to return to work. Economical declined to reinstate Income Replacement Benefits on this basis.
Mr. Ladhar has had no access to collateral LTD benefits since November 27, 2007.
On April 17, 2008, Mr. Ladhar applied for Mediation at the Commission.
On August 27, 2008, a mediation was convened by the Commission. The issues in dispute were not resolved. The Report of Mediator sets out a Preliminary Issue that Mr. Ladhar is precluded from proceeding to mediation by operation of subsection 51(1) of the Schedule.
On October 7, 2008, Mr. Ladhar submitted an Application for Arbitration.
Economical filed its Response to the Application for Arbitration and disputed the Commission’s jurisdiction to conduct an arbitration proceeding by operation of subsection 281.1(1) of the Insurance Act and subsection 51(1) of the Schedule.

ANALYSIS:

Economical submits that Mr. Ladhar is precluded from proceeding to arbitration because he failed to dispute its termination of his Income Replacement Benefit within the two-year limitation period prescribed by both the Insurance Act and the Schedule. In its submission, Mr. Ladhar was required to dispute the termination by February 16, 2006 or alternatively May 18, 2006 which were the two-year anniversaries of Economical’s letters terminating the benefit.

Mr. Ladhar submits that as there is no explicit prohibition against subsequent applications for an income replacement benefit he is entitled to proceed to arbitration because he applied for arbitration within two years of Economical’s November 2007 refusal to reinstate his Income Replacement Benefit.

The following sections of the Schedule are relevant to this proceeding.

Subsection 51(1) provides:

A mediation proceeding or evaluation under section 280 or 280.1 of the Insurance Act or a court proceeding or arbitration under clause 281(1)(a) or (b) of the Act in respect of a benefit under this Regulation shall be commenced within two years after the insurer’s refusal to pay the amount claimed.

Subsection 51(2) provides:

Despite subsection (1), a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Insurance Act may be commenced within 90 days after the mediator reports to the parties under subsection 280 (8) of the Act or within 30 days after the person performing the evaluation provides a report to the parties under section 280.1 of the Act, whichever is later.

Subsection 4(1) of the Schedule provides:

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.

Subsections 5(1) and (2) provide:

(1) Subject to subsection (2), an income replacement benefit is payable during the period that the insured person suffers a substantial inability to perform the essential tasks of the employment in respect of which he or she qualifies for the benefit under section 4.

(2) The insurer is not required to pay an income replacement benefit,

(a) for the first week of the disability;

(b) for any period longer than 104 weeks of disability, unless, as a result of the accident, the insured person is suffering a complete inability to engage in any employment for which he or she is reasonably suited by education, training or experience;

Subsection 32(1.1)(a) provides:

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,

(a) The 30th day after the circumstances arose that gave rise to the entitlement to the benefit, or as soon a practicable after that day, if those circumstances arose as a result of an accident that occurred on or before October 1, 2003.

The parties agree that the Insurance Act and its Schedules are remedial legislation which must be interpreted in its total context and the interpretation should comply with the legislative text, promote the legislative purpose and produce a reasonable and just meaning. They also agree that the Schedule does not explicitly prohibit an insured person from submitting more than one application for an income replacement benefit.

Mr. Ladhar does not dispute either the validity or sufficiency of Economical’s termination of his Income Replacement Benefits. He does not dispute that the limitation period, in respect of benefits prior to November 28, 2007, began to run on or before May 17, 2004. Mr. Ladhar agrees that in May 2004 he did not meet the post-104 week test. However, he submits that between May 17, 2004 and November 28, 2007 he experienced a material change in his condition such that he met the criteria for a post-104 income replacement benefit. Therefore, he was entitled to submit a further application for the benefit, which he did in November 2007 when he sought reinstatement of the benefit which Economical denied. Therefore, Mr. Ladhar accepts that if I find that he does not have the right to submit a further application for an income replacement benefit, then he is precluded from proceeding to arbitration.

Mr. Ladhar submits that pursuant to subsection 32(1.1)(a) he is entitled to apply for a benefit 30 days after the circumstances giving rise to his entitlement to the benefit arose. This is to be interpreted broadly and contemplates a compensable impairment arising sometime after the motor vehicle accident. He suggests that most commonly, multiple applications for benefits are made in respect of vocational rehabilitation, which may occur after the insured has healed sufficiently to participate, or in the case of medical benefits, where different benefits might be required at different times.

Mr. Ladhar relies on obiter in Carruthers and Royal & SunAlliance Insurance Company of Canada ² in which the Director noted that he found considerable merit in the submission that giving notice under section 32 and “applying for benefits” are distinct steps. Mr. Ladhar submits that the circumstances giving rise to his entitlement are an alleged change in circumstances. Whether the change in circumstances created eligibility for an Income Replacement Benefit is an issue of fact to be determined at an arbitration hearing. He also relies on the decision in Shubrook and Lombard General Insurance Co. of Canada, in which the Arbitrator held that Mr. Shubrook, who was injured in an accident on November 27, 1997, could proceed to arbitration notwithstanding he did not apply for statutory accident benefits until October 5, 1999 as he had a reasonable explanation for the delay.³

Mr. Ladhar further submits that while limitation periods are important to the administration of justice, a period of ineligibility to an income replacement benefit should not prohibit an insured from applying for the benefit again should he or she become eligible. Denying claimants the right to apply for benefits after they have been terminated by an insurer provides only the insurer the advantage of finality, certainty and diligence.

Economical relies on the Court of Appeal decision in Haldenby v. Dominion of Canada General Insurance Company, a decision which related to a claim pursuant to the Statutory Accident Benefits Schedule – Accidents before January 1, 1994 (OMPP), which has been applied to disputes under the current Schedule in Grosicki and Non-Marine Underwriters and West and Aviva Canada Inc.⁴

The Court of Appeal held that because Mrs. Haldenby was not “continuously prevented” from working, she was not entitled to benefits beyond the 156 weeks provided for in the OMPP.

However, the Court also based its decision on the absence of any right to reapply for benefits once terminated by the insurer and the impact of Mrs. Haldenby’s interpretation on the limitation period. It held that Mrs. Haldenby’s interpretation would essentially “extend a claimant’s entitlement to benefits for an indeterminate period of time.”⁵ In the Court’s opinion, this would be inconsistent with the Supreme Court of Canada’s approval of limitation periods as being essential to finality, certainty and the principle of diligence.

Economical submits that the clear reading of section 4 and section 5 of the Schedule leads to the conclusion that there is one Income Replacement Benefit. To qualify, the circumstances giving rise to the claim for the benefit must occur within 104 weeks after the accident. In order to continue to receive a benefit beyond the 104-week period, the insured must meet the more onerous test of “suffering a complete inability to engage in any employment for which he or she is reasonably suited by education, training or experience” set out in subsection 5(2)(b). Economical suggests that this test is a more restrictive test than the “continuously prevented” test in Haldenby, therefore the analysis applied by the Court of Appeal in Haldenby is applicable to disputes arising from the present legislation. As a consequence, Haldenby was properly applied in both Grosicki and West.

In Shubrook, the Claimant had not applied for benefits because he elected Workers’ Compensation believing he did not meet the tort threshold. After his injuries matured, he believed his injuries were compensable in tort and he commenced a tort action. As well, Mr. Shubrook gave notice to the SABS insurer. A further delay in submitting the application for SABS benefits resulted when the insurer failed to provide the necessary forms. Lombard did not seek to rely on the delay between the accident and the submission of the application but rather the further delay. Essentially, the arbitrator determined that the insurer should not benefit from its own omission in finding that Mr. Shubrook had a reasonable excuse for not applying sooner.

Shubrook supports Mr. Ladhar's submission that the limitation in subsection 32(1.1)(a) should be interpreted broadly. However, there was no denial or termination of benefits. Therefore, Shubrook does not assist Mr. Ladhar with respect to the central issue of whether he can reapply for an income replacement benefit or seek reinstatement of a previously paid benefit.

In Haldenby the Court held:

In any event, the appellant’s interpretation is contrary to the scheme of the SABS. Section 12(5)(b) provides that the insurer is not required to pay a weekly benefit under subsection (1) for any period in excess of 156 weeks, unless it has been established that “the injury continuously prevents the insure[d] from engaging in any occupation or employment for which he or she is reasonably suited by education, training or experience.” The appellant’s argument is that an insured person can receive benefits for 156 weeks, continue to work at a job after the 156 weeks, and then reapply for further benefits. That would contradict the scheme of the Act which only allows payments in excess of 156 weeks if the person is continuously prevented from engaging in his or her employment as a result of the injury. Clearly, if a person was working after the 156 weeks, the person was not continuously prevented beyond that period from working. As a result, it would be inconsistent with s. 12(5)(b) to allow a person to reapply for benefits after that time. The person would never be entitled to such benefits. There can be no extended limitation period based on such a reapplication.⁶

The provisions of subsection 5(2)(b) of the present Schedule can be inserted into the foregoing quote as follows:

In any event, the appellant’s interpretation is contrary to the scheme of the SABS. Subsection 5(2)(b) provides that the insurer is not required to pay a weekly benefit under subsection 4(1) for any period in excess of 104 weeks, unless it has been established that “as a result of the accident, the insured person is suffering a complete inability to engage in any employment for which he or she is reasonably suited by education, training or experience.” The appellant’s argument is that an insured person can receive benefits for 104 weeks, continue to work at a job after the 104 weeks, and then reapply for further benefits. That would contradict the scheme of the Act which only allows payments in excess of 104 weeks if the person is, as a result of the accident, suffering a complete inability to engage in any employment for which he or she is reasonably suited by education, training or experience. Clearly, if a person was working after the 104 weeks, the person was not suffering a complete inability to engage in any employment for which he or she is reasonably suited by education, training or experience beyond that period. As a result, it would be inconsistent with subsection 5(2)(b) to allow a person to reapply for benefits after that time. The person would never be entitled to such benefits. There can be no extended limitation period based on such a reapplication.

As a consequence, I find that the distinction urged upon me by Mr. Ladhar is without substance.

I find that the provisions of subsections 32(1) and (1.1)(a) of the Schedule relate to the 104 week period referred to in subsection 4(1)1. Mr. Ladhar complied with section 32 in January 2002 when he applied for benefits which resulted in Economical paying him an income replacement benefit until March 31, 2004. The provisions of subsections 32(1) and (1.1)(a) do not assist Mr. Ladhar in avoiding the limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule.

Mr. Ladhar’s surgery occurred in August 2005. Had he advised Economical that he had surgery, relating to an impairment caused by the accident, which prevented him from returning to work prior to May 18, 2006 and had Economical refused to reinstate, he would have been able to dispute the termination within the two-year limitation period. Mr. Ladhar chose to wait until after his disability benefits were terminated by Great-West Life. One of the reasons for a limitation period, approved by the Supreme Court, is to encourage litigants to be diligent. Mr. Ladhar’s conduct exemplifies what a limitation period seeks to discourage.

On the basis of the foregoing, I find that Mr. Ladhar is precluded from proceeding to arbitration because his application for arbitration was filed beyond the two-year limitation period period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule.

EXPENSES:

The parties made no submissions with respect to expenses. I encourage them to resolve the issue, failing which they may request an expense hearing before me in accordance with the Dispute Resolution Practice Code.

October 19, 2009

Denise Ashby Arbitrator

Financial Services Commission of Ontario