Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2009 ONFSCDRS 155

Appeal P08-00034

OFFICE OF THE DIRECTOR OF ARBITRATIONS

FARHAT ABBAS Appellant

and

SECURITY NATIONAL INSURANCE CO./MONNEX INSURANCE MGMT. INC. Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Alon Rooz for Mr. Farhat Abbas Mr. Alexander Lempp for Security National Insurance Co./Monnex Insurance Mgmt. Inc.

HEARING DATE: September 23, 2009. Additional written submissions were received by October 27, 2009

APPEAL ORDER

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

The October 28, 2008 Notice of Appeal is dismissed and the Arbitrator’s October 1, 2008 decision is confirmed.
If the parties are unable to agree on the legal expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003).

November 10, 2009

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

The Appellant, Mr. Farhat Abbas, was injured in an October 15, 2005 motor vehicle accident and sought accident benefits under the Schedule¹ from his first-party automobile insurer, the Respondent, Security National Insurance Co./Monnex Insurance Mgmt. Inc.

In June 2008 the parties came before Arbitrator Lee (“the Arbitrator”) for a determination of the Appellant’s entitlement to certain benefits under the Schedule. The Arbitrator’s October 1, 2008 decision dismissed the Appellant’s claims and awarded the Respondent its reasonable legal expenses of the arbitration proceeding.

The Appellant seeks the following relief in this appeal:

Payment of two treatment plans, with interest in accordance with the Schedule;
Payment of housekeeping benefits beyond January 8, 2006 in the amount of $1,200, with interest in accordance with the Schedule;
A declaration that he is entitled to a special award under subsection 282(10) of the Insurance Act, R.S.O. 1990, c. I.8;
The remaining issues in arbitration be referred back to the hearing arbitrator for a re-hearing; and,
His costs of the arbitration and of this appeal.

II. SUBMISSIONS OF THE PARTIES

The Appellant submits that the Arbitrator erred in not ordering payment of a January 25, 2006 treatment plan of Dr. D. Huang, of Focus Rehabilitation Group, in the amount of $1,702 covering at six week period, for the following reasons:

Even if the treatment plan was found by the Arbitrator neither reasonable nor necessary, the Respondent was required to pay for same under paragraph 38(8.2)(2) of the Schedule as it failed to give its reasons for its denial, as required by subclause 38(12)(b)(i).
The purpose of such notice is to allow an insured person to make an informed decision whether to seek the treatment set out in the plan. To allow an insurer that does not provide such notice to subsequently argue that the treatment was not reasonable or necessary denies an insured the opportunity to make an early, informed decision whether to proceed with the treatment.
The Respondent’s first notice that complied with section 38 regarding this treatment plan was its April 4, 2006 Explanation of Benefits that denied entitlement based on a March 30, 2006 report from a Designated Assessment Centre (“DAC”).

Regarding a treatment plan dated May 18, 2006, also from Dr. Huang, the Appellant submitted that the Respondent denied same on June 8, 2006 without providing adequate reasons for its denial. Only on July 4, 2006 did the Respondent provide its reasons for refusing payment.

Regarding the denied housekeeping benefits, the Appellant submits that:

The Arbitrator denied payment of such benefits solely on his finding that counsel for the Appellant had failed to fulfill his undertaking to produce the Appellant and the service providers at the arbitration hearing. There was no evidential basis for finding such an undertaking. The pre-hearing arbitrator had written that counsel intended to call up to three witnesses. This was not an undertaking that three witnesses would, in fact, be called. In any event, an undertaking to produce the Appellant was not possible as counsel for the Appellant had not been in contact with his client since November 2006.
The Respondent failed to provide thirty days notice of its request that the Appellant attend the arbitration hearing, giving notice only on June 13, 2008, days before the start of the arbitration hearing. Accordingly, the Arbitrator’s adverse inference regarding the Appellant’s failure to testify at the arbitration cannot stand.

The Appellant submits that he is entitled to a special award as the Respondent “consistently failed to provide adequate and/or timely reasons for its denials throughout the adjustment process, while it knew or ought to have known of its responsibility to do so.”

The Respondent submits that:

The Arbitrator found the Respondent’s evidence (three medical practitioners who testified and a fourth who provided a report, all of whom had examined the Appellant) more convincing than the Appellant’s sole witness, a medical practitioner who had never examined the Appellant. The Appellant failed to call as a witness the author of the treatment plans or anyone from his clinic, notwithstanding that during the hearing issues arose as to the veracity and accuracy of the invoices submitted by the clinic as well as its fees exceeding the maximums permitted by the Commission’s Fees Guidelines.
The Arbitrator found that the Respondent did provide a basis for the denials and did not merely state that the treatment plans were neither reasonable nor necessary.
Subsection 38(8) of the Schedule cannot apply in this case as the Appellant failed to “present any credible, reliable evidence at the hearing to substantiate the treatment was actually incurred during the relevant time periods when the Applicant suggests proper notice was not given.”
The Appellant did not attend the arbitration hearing and failed to testify that he actually received the treatment and what, if any, benefit the treatment provided. To require the Respondent to pay for unreasonable, unnecessary, unsubstantiated and uncorroborated invoices would be an absurd result, contrary to the spirit and purpose of the Schedule.
The undertaking (the pre-hearing letter confirming that the Respondent expected the Appellant to be made available for cross-examination) was relevant only to the Respondent’s motion to dismiss the arbitration, which was unsuccessful. The Arbitrator found that the Appellant was not entitled to the housekeeping benefits sought due to the lack of evidence as to the authors of the invoices, the Appellant not testifying whether he required such assistance and neither housekeeper testifying whether they actually performed the services alleged. The Arbitrator was entitled to draw an adverse inference in the absence of such critical witnesses.
As no benefits were found owing, there was no basis for a special award.
The Arbitrator did not err in law and this appeal is without merit. The appeal should be dismissed and the Arbitrator’s order confirmed, with costs payable by counsel for the Appellant and his firm pursuant to subsection 282(11.2) of the Insurance Act.

III. ANALYSIS

My February 18, 2009 interim decision, in part, allowed the Appellant to proceed with the additional relief sought in his written submissions of December 19, 2008, the Respondent having until March 10, 2009 to provide its further responding written submissions. For the reasons provided, I did not allow the Appellant to file fresh evidence in this appeal.

Regarding the issue of the May 18, 2006 Treatment Plan, on March 1, 2006 subsection 38(12) of the Schedule was revoked pursuant to O. Reg. 546/05. The Appellant agreed in oral submissions that its section 38 argument set out above is not applicable to the May 18, 2006 Treatment Plan. Rather, the Appellant cited a number of decisions as supporting its submission that if an insurer fails to give adequate reasons for denying payment of medical or rehabilitation benefits, it is obligated to pay for same even in the absence of specific statutory language and regardless of whether the treatment is reasonable or necessary.

The cases cited, however, were not directly on point. Sorokin and Wawanesa Mutual Insurance Company, (FSCO A00-001163, February 9, 2004), for example, addressed non-compliance with notice requirements in the context of a special award, not, as conceded by the Appellant, in the context of automatic payment of benefits in the absence of reasons for refusal being given by an insurer.

The Appellant cited Delegate McMahon in Glinka and Dufferin Mutual Insurance Company, (FSCO P01-00002, July 17, 2003) that “[i]n appropriate circumstances significant consequences should attach to a failure to comply with the statutory duty to give reasons for denying a claim.”

The Schedule provided under paragraph 38(8)(1) that in the absence of a conflict of interest being disclosed, the insurer was to give the insured person notice within 14 days (under clause 38(8.1)(a) of the Schedule) after receipt of the application as to what goods and services were being paid. The parties agree that this is not a Pre-approved Framework Guideline case under paragraph 38(8)(2) of the Schedule, for which different time lines would apply under clause 38(8.1)(b).

Subclause 38(12)(b)(i) of the Schedule provided the statutory obligation that if an insurer was not paying for all of the goods and services contemplated by the plan, the insurer was required to include in its notice a statement of its reasons for not agreeing to pay for all goods and services contemplated by the plan.

Paragraph 38(8.2)(2) of the Schedule provided that if the insurer failed to give notice under subsection 38(8)(1), which would include, under subclause 38(12)(b)(i), a statement of its reasons, then:

… the insurer shall pay for all goods and services provided under the treatment plan that relate to the period starting the day after the day the insurer was required to give the notice and ending on the day the insurer gives the notice.

With the repealing of subsection 38(12), I am not persuaded that the legislative intent remains that the consequence of an insurer failing to give reasons for denying a claim is the mandatory payment of benefits regardless of reasonableness or necessity. Accordingly, I am not persuaded that the Arbitrator erred in law in denying payment of the May 18, 2006 treatment plan.

An insurer, however, that unreasonably withholds or delays payment of benefits to which an insured person is ultimately found or is conceded to be entitled is still subject to the special award provision under subsection 282(10) of the Insurance Act.

The January 25, 2006 Treatment Plan was received by the Respondent on January 31, 2006, as per the latter’s February 15, 2006 e-mail. The Arbitrator did not comment, in his discussion of entitlement to payment of the treatment plans, on the relevant provisions of section 38 (subsection 38(12) being in effect at the time of the January 25, 2006 Treatment Plan). Rather, in his review of the claim for a special award, the Arbitrator found that the notices herein were more explicit than the notice criticized in Sorokin, did provide a basis for the denial and did not merely state that the treatment plans were neither reasonable or necessary. The Arbitrator did not, however, specify which precise notices were indeed adequate.

I do not agree with the Respondent’s submissions that the February 15, 2006 denial letter provided adequate reasons for not agreeing to pay for the January 25, 2006 Treatment Plan. Rather, the letter provides no reasons whatsoever.

There is, however, a subsequent letter from the Respondent to Dr. Huang and to the Appellant’s counsel, incorrectly dated February 15, 2005, but noted on the Exhibit copy as having been sent on February 24, 2006, at 4:37 p.m. The letter states:

Reference to: 6 week Treatment Plan (OCF-18) dated January 25, 2006, and received in our office on January 31, 2006.

I have enclosed the FAX Back signed as denied, as the fees and treatment are considered excessive.

Please be advised that we acknowledge that our response is 2 days late and we are, therefore, obligated to pay for services rendered during that time as per SABS section 38(8.2)2.

I am not persuaded in the specific circumstances of this case that the Arbitrator would have erred in finding that this denial did give reasons for not agreeing to payment of the January 25, 2006 treatment plan, the Respondent having argued throughout that the hourly rate charged and the amount of treatment provided were both excessive.

It is agreed that the Respondent received the January 25, 2006 Treatment Plan on January 31, 2006. Pursuant to clause 38(8.1)(a) of the Schedule, the Respondent had 14 days to give notice under paragraph 38(8)(1), including the obligation under subclause 38(12)(b)(i) to provide its reasons for not agreeing to pay for all goods and services contemplated under the plan.

Under paragraph 38(8.2)(2) of the Schedule, the Respondent was liable to pay for all goods and services provided under the January 26, 2006 Treatment Plan relating to the period starting February 14, 2006 (as argued by the Appellant) until February 24, 2006 when the Respondent gave notice with reasons for its denial in compliance with subclause 38(12)(b)(i) of the Schedule.

The onus was on the Appellant, pursuant to paragraph 38(8.2)(2) of the Schedule, to establish on a balance of probabilities what treatment under the January 25, 2006 Treatment Plan related to this ten-day period. The February 28, 2006 OCF-21 documents $350 in treatment provided in this period. The Arbitrator, however, made a finding of fact on page 11 of his decision that based on the evidence he was “convinced that the amount of treatment billed by the treatment facility did not correspond to the treatment [the Appellant] actually received.”

The Appellant argued, in the alternative, that rather than look at what was billed during the ten-day period, one should look at what was contemplated under the January 25, 2006 Treatment Plan as intended to relate to this interval. The difficulty is that while the Treatment Plan provides the number of proposed treatments per modality, one can only speculate in the absence of reliable supporting evidence how the treatments were to be spaced and what treatment would specifically relate to the ten-day time frame.

Appeals from a decision of an arbitrator are limited to questions of law under subsection 283(1) of the Insurance Act. Given the Arbitrator’s finding of fact as to the unreliability of what was alleged to have been provided for the period in question and the gaps in the evidence as to what was contemplated by the Treatment Plan for the same duration, I am not persuaded that the Arbitrator erred in law in denying payment of the January 25, 2006 Treatment Plan.

Regarding the housekeeping expenses in dispute, subsection 22(1) of the Schedule sets out several pre-requisites for payment, including that the expenses must be reasonable, necessary and additional outlays. Further, the expenses must be incurred by or on behalf of an insured person as a result of an accident and the insured person, as a result of the accident, must have sustained an impairment that resulted in his or her substantial inability to perform the housekeeping and home maintenance services the insured normally performed before the accident.

The Arbitrator found that the housekeeping claim was not addressed during the evidentiary portion of the hearing, being raised in submissions at the conclusion of the hearing by reference to invoices. The Arbitrator drew an adverse inference to the Appellant’s failure to provide oral evidence at the hearing of the persons who prepared the invoices or did the housekeeping.

The invoices by themselves would only, at best, provide evidence that the expenses were incurred, not that they were reasonable, necessary, additional expenses incurred as a result of the accident by the Appellant who had sustained an impairment that resulted in his substantial inability to perform the services he normally performed before the accident. I am not persuaded that the Arbitrator erred in law in dismissing the Appellant’s claim for housekeeping expenses.

Subsection 282(10) of the Insurance Act provides that a special award is dependent on an arbitrator finding that an insurer has unreasonably withheld or delayed payments. In this case, the arbitrator dismissed the Appellant’s claim. The Appellant has not established that the Arbitrator erred in law. There being no initial necessary finding or concession of actual entitlement to any of the benefits claimed, there can be no basis for a special award.

Accordingly, the October 28, 2008 Notice of Appeal is dismissed and the Arbitrator’s October 1, 2008 decision is confirmed.

IV. EXPENSES

At the request of and on the consent of both parties, the issues of entitlement to and the quantum of the legal expenses of this appeal proceeding were separated from this main appeal decision.

If the parties are unable to agree on the legal expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003).