Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2009 ONFSCDRS 164
FSCO A08-001142
BETWEEN:
SUBASHINI YOGESVARAN
Applicant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Insurer
DECISION ON A PRELIMINARY ISSUE
Before: Joyce Miller
Heard: Written submissions were received on July 31, 2009.
Appearances: Alexander Voudouris for Ms. Yogesvaran
Robert S. Franklin for State Farm Mutual Automobile Insurance Company
Issues:
The Applicant, Subashini Yogesvaran, was injured in a motor vehicle accident on May 13, 2007. She applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.1 State Farm terminated weekly income replacement benefits on January 16, 2008 and housekeeping benefits on January 2, 2008. The parties were unable to resolve their disputes through mediation, and Ms. Yogesvaran 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:
Has State Farm failed to comply with section 37 when terminating Mrs. Yogesvaran’s income replacement benefit and housekeeping benefits? If so, what is the consequence?
Is Mrs. Yogesvaran entitled to interest for overdue payment of benefits pursuant to subsection 46(2) of the Schedule?
Result:
- State Farm failed to properly terminate Ms. Yogesvaran’s income replacement benefit on January 16, 2008 and housekeeping benefits on January 2, 2008. Consequently, State Farm is required to pay an income replacement benefit from January 17, 2008 to date with interest and ongoing until the benefits are terminated in accordance with section 37 of the Schedule. In addition, State Farm shall pay housekeeping benefits with interest from January 3, 2008 to May 13, 2009.
BACKGROUND
The following facts are relevant to the issues in this hearing:
On May 18, 2007, as part of the accident benefit application forms, Mrs. Yogesvaran provided a disability certificate from Dr. Chad Hefford who worked at Midland Rehabilitation Centre. The disability certificate stated that Mrs. Yogesvaran was substantially unable to perform her essential tasks of employment and housekeeping. The anticipated duration of disability was 9 to 12 weeks.
On August 14, 2007, approximately 12 weeks after receiving the disability certificate, State Farm wrote to Mrs. Yogesvaran requesting a new disability certificate pursuant to section 37(1)(a) of the Schedule.
On August 30, 2007, Mrs. Yogesvaran provided the requested disability certificate prepared by Dr. Hefford. The disability certificate stated that Mrs. Yogesvaran was substantially unable to perform her essential tasks of employment and housekeeping. It stated “aggravating factors include – prolonged standing/walking/sitting/bend/lifting.” The anticipated duration of disability was 9 to 12 weeks.
On November 21, 2007, State Farm faxed to Mrs. Yogesvaran’s solicitor, Mr. David Wilson, an OCF-25 scheduling an in-home occupational therapy assessment to be performed by Janet Hay in relation to both income replacement benefits and housekeeping expenses. The reason given for the assessment was “Based on the disability period is inconsistent with the diagnosis or mechanism of injury.” The scheduled date for the assessment was December 5, 2007.
On November 29, 2007, State Farm faxed to Mr. Wilson an OCF-25 scheduling a physiatry examination with Dr. Oshidari in relation to both income replacement benefits and housekeeping expenses was “Based on the disability period is inconsistent with the diagnosis or mechanism of injury.” The scheduled date for the assessment was December 13, 2007.
On December 5, 2007, Mrs. Yogesvaran was assessed not by Janet Hay but by Janet Njelesani. Ms. Njelesani’s report of December 10, 2007 was faxed to State Farm on December 12, 2007.
On December 21, 2007, State Farm faxed to Mr. Wilson Ms. Njelesani’s report and an OCF-9 denying housekeeping expenses after January 2, 2008. The fax cover sheet and the OCF-9 suggest these two documents were copied to Midland Rehabilitation Centre.
On December 13, 2007, Mrs. Yogesvaran attended a section 42 insurer’s examination with Dr. Oshidari. Dr. Oshidari’s report dated January 2, 2008 was faxed to State Farm on January 7, 2008
On January 9, 2008, State Farm faxed to Mr. Wilson Ms.Njelesani’s report and an OCF-9 denying income replacement benefit as of January 16, 2008. The fax cover sheet and the OCF-9 suggest these two documents were copied to Midland Rehabilitation Centre.
SUBMISSIONS
Submissions from Mrs. Yogesvaran
Mrs. Yogesvaran submits that:
Pursuant to subsections 37(1) and (2) of the Schedule, State Farm failed to properly terminate her housekeeping and income replacement benefits.
In order to determine if an insured person is still entitled to a specified benefit, the insurer must comply with the provisions of sections 37 and 42 of the Schedule.
Pursuant to subsection 37(1), an insurer must first request production of a disability certificate if an insurer wishes to conduct a section 42 insurer’s examination. Moreover, there must be a temporal relationship between the delivery of the disability certificate and the conducting of the section 42 insurer’s examination. If there is no temporal relationship between the obtaining of the disability certificate and the scheduling of a section 42 insurer’s examination, then the insurer would be at liberty to obtain an initial disability certificate and forever more rely on it to obtain a section 42 insurer’s examination, even years later.
The Legislature knew that injuries arising from motor vehicle accidents and their effects were fluid and that timeliness was essential.
The elapse of more than three months between Dr. Hefford’s disability certificate and the respective occupational therapy and physiatrist examinations of Janet Njelesani and Dr. Oshidari is far too long a time period and cannot be considered temporally related to each other.
State Farm has failed to comply with paragraph 37(1)(a) of the Schedule by not requesting a timely disability certificate before requiring Mrs. Yogesvaran to attend a section 42 insurer’s examination.
Were an insurer free to ignore the requirements of section 37 and still effect a proper termination of benefits, no insurer would comply with section 37 and specific procedural and substantive rights of an insured could be disregarded without consequence. It would also render the section meaningless.
In the alternative, Mrs. Yogesvaran submits that:
State Farm failed to comply with subsection 37(5) of the Schedule. Specifically, State Farm failed to provide a copy of Janet Njelesani’s occupational therapy report, or the OCF-9 or covering letter within 5 business days from when State Farm received the report.2
There is no proof that Midland Rehabilitation Centre, let alone Dr. Hefford, were ever faxed the reports and documents.
The fact that a rebuttal assessment to Dr. Oshidari’s report was authored by Dr. Kunashko at Rheuma Rehab, the successor company to Midland, does not, as State Farm implies, that Midland and somehow Dr. Hefford were in fact served with Dr. Oshidari’s report by State Farm.
Section 68 of the Schedule does not allow service by fax of any documents on a member of a health profession if the insured is, inter alia, represented by a solicitor as Mrs. Yogesvaran was at all material times.
Accordingly, Mrs. Yogesvaran submits that State Farm failed to comply with subsection 37(5) of the Schedule by failing to give a copy of Janet Njelesani and Dr. Oshidari’s reports and its determination of income replacement benefits and housekeeping expenses to Dr. Hefford in accordance with section 68, or at all.
Mrs. Yogesvaran submits that if it is found that the August 30, 2007 disability certificate was not sufficient for State Farm to proceed to a section 42 insurer’s examination, “then any other breaches of section 37 by State Farm become moot, as it cannot be said that any other actions of State Farm were done pursuant to section 37 as State Farm never even got out of the starting gate.”
In summary, Mrs. Yogesvaran takes the position that State Farm has failed to comply with both subsection 37(1) and (5) of the Schedule. Specifically, State Farm failed to request a timely disability certificate and failed to give Ms. Njelesani’s report and its determination of entitlement to benefits to Mrs. Yogesvaran within 5 business days.
State Farm also failed to give both Ms. Njelesani and Dr. Oshidari’s reports and its determination to Dr. Hefford, in accordance with section 68, or at all, thus also beaching section 37(5) of the Schedule.
Mrs. Yogesvaran submits that “in the spirit of proper statutory interpretation not to mention the Smith v. Co-operators decision ... that non-compliance with Section 37 means just that: the section has not been complied with and therefore, a proper determination of entitlement to benefits cannot have been made by State Farm and as a result, income replacement benefits and housekeeping expenses have never been terminated. A benefit that has not been terminated remains due and owing.”
Accordingly, Mrs. Yogesvaran submits that there can be no termination of accident benefits pursuant to paragraph 37(2)(b) of the Schedule. The consequence of not properly terminating the benefits means that the benefits remain payable until terminated.
Consequently, Mrs. Yogesvaran “seeks an order requiring State Farm to pay to date and ongoing income replacement benefit and housekeeping expenses plus interest, until the said benefits are terminated or State Farm is otherwise ordered.”
Submissions from State Farm
State Farm submits that:
Subsection 37(2) makes it clear that an insurer cannot discontinue a benefit unless it falls within the “listed actions” in the subsection. State Farm submits it met the condition under paragraph 37(2)(b) having carried out a section 42 examination before terminating Mrs. Yogesvaran’s benefits.
The Schedule does not specifically state that you cannot do a section 42 termination under subsection 37(2) without having complied with subsection 37(1).
It “makes no sense” to have a disability certificate as a mandatory pre-condition for a proper termination of benefits when the contents of the disability certificate cannot be relied upon to discontinue a benefit under subsection 37(2).
It “makes no sense” to tie subsection 37(2) to 37(1) if one considers paragraphs 37(2)(d), (e) and (f). It is “absurd” in the context of those pre-conditions to terminate benefits that the insurer requests a disability certificate.
Subsection 37(1) is more for the benefit of the insurer, in that it gives the insurer the opportunity to determine if the person is still disabled without having to go to the expense of setting up a section 42 examination.
There is no conceivable prejudice to the insured by not requesting another disability certificate prior to scheduling the section 42 examinations. State Farm submits that the August 30, 2007 disability certificate gave duration of disability of nine or twelve weeks. The section 42 examinations were set up during the prognosticated period of disability. Accordingly, State Farm submits there was a temporal relationship on the facts of this case between the last disability certificate received and the setting up of the section 42 examinations.
State Farm further submits:
The purpose of subsection 37(5) is to ensure that the health practitioner who signed the disability certificate has an opportunity to understand the insurer’s position and to respond to it by way of a rebuttal report pursuant to section 42.1.
The fax documentation of December 21, 2007 and January 9, 2008 confirms that the correspondence sent to Mrs. Yogesvaran and Mr. Wilson, along with the section 42 reports from Janet Njelesani and Dr. Oshidari and OCF-9 Explanation of Benefits, were faxed to Midland Rehabilitation Centre.
The section 42 reports faxed to Midland Rehabilitation Centre would have come to the attention of Dr. Chad Hefford as he was the only person treating the applicant at this facility or location. Accordingly, State Farm submits that it was sufficient that the documents were sent to Midland Rehabilitation Centre.
...“[I]n light of section 37(5), which requires an insurer to forward a copy of the report of an examination under s.42 along with the insurer’s determination with respect to the specified benefit to the insured person and to the health practitioner who completed the Disability Certificate within 5 days of receiving the s. 42 report, State Farm submits that it was not precluded from faxing the documents to Dr. Hefford/Midland Rehabilitation as suggested by the Applicant.”
Contrary to Mrs. Yogesvaran’s submission that “repeated requests” were made to produce confirming documentation that Dr. Hefford was sent the section 42 reports, there was only one request made in a letter from Mr. Voudouris in June 2009.
There has been no failure to produce any further documentation as Mrs. Yogesvaran never raised the procedural issue as to whether documents were actually faxed to Midland Rehabilitation Centre. This issue was not raised until receipt of written submissions. This clearly was not an issue reasonably contemplated by the Insurer until this point in time. Accordingly, the fact that this issue was never raised until June 2009 would suggest that there is no prejudice to the claimant.
Relevant cases cited by Mrs. Yogesvaran and State Farm in their written submission will be discussed in my analysis below.
THE LAW
Subsections 37(1), (2) and 5 of the Schedule provides that:
Determination of Continuing Entitlement to Specified Benefits
- (1) If an insurer wishes to determine if an insured person is still entitled to a specified benefit, the insurer,
(a) shall request that the insured person submit within 15 business days a new disability certificate completed as of a date on or after the date of the request; and
(b) may notify the insured person that the insurer requires the insured person to be examined under section 42.
(2) An insurer shall not discontinue paying a specified benefit to an insured person unless,
(a) the insured person fails or refuses to submit a completed disability certificate as required under clause (1) (a);
(b) the insurer has received the report of the examination under section 42, if the insurer required the insured person to be examined under that section;
(c) the insurer is entitled under subsection (7) to refuse to pay the specified benefit;
(d) the insured person has resumed his or her pre-accident employment duties;
(e) the insurer is no longer required to pay the specified benefit by reason of clause 5 (2) (d) or (e), subsection 22 (3) or 33 (2) or section 55 or 56; or
(f) the insured person is not entitled to the specified benefit for a reason unrelated to whether he or she has an impairment that entitles the insured person to receive the specified benefit.
(5) Within five business days after receiving the report of an examination under section 42, the insurer shall give a copy of the report and the insurer’s determination with respect to the specified benefit to the insured person and to the health practitioner who completed the disability certificate.
ANALYSIS AND FINDINGS
(1) Were Mrs. Yogesvaran’s Benefits Properly Terminated?
For the following reasons I find that State Farm failed to properly terminate Mrs. Yogesvaran’s income replacement benefits and housekeeping expenses.
I give little weight to State Farm’s submission that a disability certificate is for the insurer’s benefit and is not required in order for an insurer to request an insurer’s examination pursuant to section 42.
I find that subsection 37(1) is clear and unambiguous. The section states, if an insurer wishes to determine if an insured person is still entitled to a specified benefit, the insurer (a) “shall” request the insured person to submit a “new” disability certificate; “and” (b) “may” request a section 42, insurer’s examination.
Succinctly, subsection 37(1) states that an insurer cannot proceed to a section 42 insurer’s examination without first requesting a “new disability certificate.” This interpretation is clearly supported by paragraph 37(2)(a).
Paragraph 37(2)(a) provides:
An insurer shall not discontinue paying a specified benefit to an insured person unless,
(a) the insured person fails or refuses to submit a completed disability certificate as required under [subsection] (1) (a);
Succinctly, an insured will not be paid any benefits, even if entitled to benefits, if the insured fails to comply with paragraph 37(1)(a).
Paragraph 37(2)(a) is a logical extension of the mandatory requirement imposed on the insurer in paragraph 37(1)(a) to request a “new disability certificate” before choosing to ask an insured to attend a section 42 insurer’s examination. It clearly works in tandem with the mandatory requirement in paragraph 37(1)(a). It is there for the benefit of the insurer so that an insured will not thwart an insurer’s right to section 42 examinations by failing or refusing to provide a disability certificate.
I agree with State Farm’s submission that paragraphs (d), (e) and (f) of subsection 37(2) do not require a “new disability certificate” before benefits can be terminated. But neither do these paragraphs require a section 42 examination before the insurer can discontinue specified benefits. In any event, the facts in the present case do not fall under paragraphs (d), (e) and (f) and therefore these paragraphs are not applicable.
On the facts of this case, I find that pursuant to paragraph 37(1)(a) State Farm was required to request a “new disability certificate” from Mrs. Yogesvaran before requesting that she attend a section 42 insurer’s examination, and that State Farm failed in its statutory obligation.
As noted above, Mrs. Yogesvaran provided a disability certificate as part of her application for accident benefits. In this disability certificate dated May 18, 2007, Dr. Hefford stated that Mrs. Yogesvaran was substantially disabled from performing the essential tasks of her employment and performing her housekeeping duties. He estimated the length of disability to be 9 to 12 weeks.
On August 30, 2007, at the request of State Farm, Mrs. Yogesvaran provided State Farm with a second disability certificate. This disability certificate stated because of “aggravating factors” there was now an “anticipated duration” of disability of 9 to 12 weeks.
The question that arises is whether State Farm should have requested a further third disability certificate before scheduling the section 42 insurer’s examinations on December 5 and 13, 2007?
The timing of when an insurer can ask for a section 42 insurer’s examination in my view is dependent on the facts of each case. I find it is significant that the legislation in paragraph 37(1)(a) uses the term “new” in describing the disability certificate. In my view, the word “new” means an up to date disability certificate.
I believe the word “new” is in the legislation specifically to prevent an insurer from sitting on a disability certificate for however long it wishes before requesting an insurer’s examination. If there has been a material change in the insured’s medical condition since the last disability certificate and if the insurer does not request an up to date disability certificate, the insured is clearly put at a disadvantage in that the section 42 assessment would be arranged without regard to the material change and consideration as to whether the assessment was reasonable and necessary given the material change.
I find it significant that on August 14, 2007, when State Farm requested that Mrs. Yogesvaran provide a disability certificate pursuant to subsection 37(1)(a), it did so at the end of the period that Dr. Hefford had anticipated Mrs. Yogesvaran would remain substantially disabled. In my view, this is consistent with the legislation’s requirement in subsection 37(1), that an insurer request a new (up to date) disability certificate if it wished to assess entitlement and/or if it intended to request a section 42 insurer’s examination.
Once State Farm received the August 30, 2007 disability certificate, it could have chosen, pursuant to paragraph 37(1)(b), to get its own medical evaluation by scheduling a section 42 insurer’s examination. State Farm did not do this. Instead, it waited until the period of anticipated disability noted in the August 30, 2007 disability certificate had expired and then, without requesting an up to date disability certificate, it proceeded to request the section 42 insurer’s examinations scheduled for December 5 and 13, 2007.
On the facts of the present case, I find that the August 30, 2007 disability certificate sent to the section 42 examiner did not present an up to date evaluation of Mrs. Yogesvaran’s medical condition. I find that the section 42 insurer’s examinations were arranged as the anticipated duration of disability was about to elapse and it had, in fact, elapsed by the time the assessments were conducted
I find that by requiring Mrs. Yogesvaran to attend a section 42 insurer’s examination with an out dated disability certificate, it placed her in a clear disadvantage. Not only would the section 42 examiner not have the most up to date information from her medical practitioner,
but had Mrs. Yogesvaran refused to attend the section 42 insurer’s examination on the basis that a new disability certificate had not been requested, State Farm pursuant to subsections 37(7) and (8)3 could refuse to pay the specified benefits until she attended the section 42 insurer’s examination. Moreover, an up to date disability certificate may have resulted in State Farm not requiring a section 42 insurer’s examination and Mrs. Yogesvaran would have avoided being subjected to an unnecessary invasive medical examination.
Accordingly, I find that since the time period of anticipated duration of disability in the August 30, 2007 disability certificate had elapsed when the section 42 insurer’s examinations were scheduled to be conducted, State Farm, in my view, was obligated by subsection 37(1) of the Schedule to request a new disability certificate which would provide up to date information on Mrs. Yogesvaran’s medical condition. I, therefore, find that by not requesting a new disability certificate before scheduling the section 42 insurer’s examinations, State Farm failed to properly terminate Mrs. Yogesvaran’s income replacement benefits and housekeeping expenses.
SUMMARY OF FINDINGS
In summary, section 37 provides a set of rules whereby an insurer can discontinue paying a specified benefit. Where an insurer wishes to determine whether or not an insured person is still entitled to a specified benefit, I find that paragraph 37(1)(a) of the Schedule requires a “new” (up to date) disability certificate to be requested by the insurer. This is a mandatory requirement.
After receiving the disability certificate, the insurer can choose to maintain the status quo, or may choose to send the insured for a section 42 insurer’s examination pursuant to paragraph 37(1)(b) provided it acts in a timely manner such that the disability certificate may still be fairly regarded as “new” and reflecting the insured’s up to date condition. If the insurer waits until the disability certificate is at, or approaching the end of the currency, then the insurer cannot request a section 42 examination without first obtaining a new, up to date disability certificate.
I find that the time, between when an insurer requests a disability certificate and when it chooses to request a section 42 insurer’s examination, is dependent on the facts of each case.
On the facts of this case, I find by waiting until after the anticipated duration of disability had expired before the two section 42 insurer’s examinations were conducted, the information in the August 30, 2007 disability certificate provided to the assessors was not up to date. By not requesting a new disability certificate before requesting the section 42 insurer’s examination, I find that pursuant to subsections 37(1) and (2) of the Schedule State Farm failed to properly terminate Mrs. Yogesvaran’s income replacement benefits and housekeeping expenses.
(2) The Consequence of Failing to Properly Terminate Benefits
The next question to be answered is what is the consequence of State Farm having failed to properly terminate Mrs. Yogesvaran’s income replacement benefits and housekeeping expenses?
Mrs. Yogesvaran submits that State Farm’s failure to properly terminate her benefits means that her benefits have not been terminated and are still owing until State Farm properly terminates her benefits.
For the following reasons, I agree with this position.
The issue for this arbitration is a novel issue. There are no cases on this specific issue. The parties have provided me with cases4 to apply in an analogous manner. Except for the cases of Smith v. Co-operators General Insurance Co.5, Bapoo v. Co-operators General Insurance Co.6 and Kong and Personal Insurance Company of Canada7, I did not find the cited cases helpful in coming to my decision.
The issue in the case of Smith v. Co-operators was whether the insurer was entitled to assert a limitation defence in respect of an insured’s claim for statutory accident benefits. The insurer’s position was upheld by a Superior Court decision and a majority decision of the Ontario Court of Appeal. However, a majority of the Supreme Court of Canada overturned these decisions and held that there had not been a “proper refusal” of benefits, as the insurer had not provided a proper notice to the insured of the steps to be taken when a termination of benefits has been made.
In support of its conclusion in Smith, the Supreme Court stated:
... insurance law is, in many respects, geared towards protection of the consumer. This approach obliges the courts to impose bright-line boundaries between the permissible and the impermissible without undue solicitude for particular circumstances that might operate against claimants in certain cases.
Succinctly, the Court is saying that certain bright-line boundaries must be drawn, regardless of any potential prejudice when it comes to legislative requirements imposed on an insurer.
In the Court of Appeal case of Bapoo v. Co-operators General Insurance Co., Justice Laskin, speaking for the Court stated:
The modern approach to statutory interpretation calls on courts to interpret a legislative provision in its total context. The court’s interpretation should comply with the legislative text, promote the legislative purpose and produce a reasonable and just meaning. Professor Sullivan described the modern approach in the following passage in Driedger on the Construction of Statutes, 3rd ed. (Toronto: Butterworths, 1994) at 131, which was cited by Kiteley J.:
There is only one rule in modern interpretation, namely, courts are obliged to determine the meaning of legislation in its total context, having regard to the purpose of the legislation, the consequences of the proposed interpretations, the presumptions and special rules of interpretations, as well as admissible external aids. In other words, the courts must consider and take into account all relevant and admissible indicators of legislative meaning. After taking these into account, the court must then adopt an interpretation that is appropriate. An appropriate interpretation is one that can be justified in terms of (a) plausibility, that is, its compliance with legislative text; (b) its efficacy, that is its promotion of the legislative purpose; and (c) its acceptability, that is, the outcome is reasonable and just.
The Kong case, although decided in a different context, nevertheless articulates the underlying principles that informs the decision in this case.
In Kong, the insurer had failed to comply with the termination provisions in section 37 as it read at that time. Arbitrator Renahan found as follows:
Personal did not comply with section 37, and the section is clear that it must follow the procedures when it wishes to stop paying benefits. Accordingly, I find that Ms. Kong is entitled to income replacement benefits from June 24, 2003 until Personal complies with section 37.
Ms. Kong was ultimately found not to have met the disability test for income replacement benefits and her arbitration was dismissed. With regard to whether the insurer was entitled to repayment of the interim benefits ordered as a result of its non-compliance with section 37, Arbitrator Renahan noted:
...the termination provisions in section 37 of the Schedule give the insured certain rights to challenge an insurer’s decision to terminate benefits and are in the nature of consumer protection. In this case of conflict between the consumer’s rights and the insurer’s rights, I do not believe that I should rely on section 47(1)(a) or my authority to revisit an interim order to negate or make meaningless the insurer’s obligation to comply with the termination provisions set out in section 37 of the Schedule.
Taking into consideration the reasoning in the Smith and Kong cases and the principles of statutory interpretation as outlined in Bapoo, for the following reasons I find that State Farm’s failure to properly terminate Mrs. Yogesvaran’s benefits means that her benefits have not been terminated and are still owing until State Farm properly terminates her benefits pursuant to section 37 of the Schedule.
In section 37 of the Schedule, the legislator has created clear and unambiguous rules for the refusal and stoppage of benefits. Therefore, where an insurer wishes to discontinue an insured’s benefits, it is essential that the insurer properly complies with the legislation for it to be a valid termination.
As I have stated above, to begin the process of discontinuing a specified benefit, subsection 37(1) of the Schedule mandates that an insurer “shall” request a “new” disability certificate, that is, an up to date disability certificate. Where an insurer fails to obtain an up to date disability certificate and proceeds to a section 42 insurer’s examination, it cannot be said that the benefits were properly terminated in accordance with the legislation.
The logical consequence that flows from this failure on the part of the insurer is that the benefits continue to be owing until such time as the benefits are properly terminated in accordance with the legislation. This consequence, in my view, is not only logical but fair.
The legislation is clear, where an insured fails or refuses to provide a disability certificate, the insurer can discontinue paying the specified benefit irrelevant of the fact as to whether the insured in fact may be entitled to the benefits.8 Given the power of the insurer to discontinue benefits where an insured fails to comply with the legislative rules and where the insured may never recover the lost benefits, then it is both logical and fair that where an insurer fails to comply with the legislation and does not follow the rules to discontinue benefits, the benefits remain owing until the insurer complies with the legislation.
The question that arises is why the legislation does not specify this consequence? The answer, in my view, is that this consequence is self evident. Clearly, it is not necessary for the legislation to state the obvious, namely, that if an insurer does not comply with the rules for terminating benefits, benefits have not been terminated and, consequently, are still owing.9 To find otherwise, namely, that an insurer can ignore the mandatory requirement of subsection 37(1) without any consequences would be to render the subsection meaningless.
I am reinforced in my view by the findings in the Smith case, which found that an insurer could not rely on a limitation period defence because the insurer had not provided proper notice to the insured of the steps to be taken when a termination of benefits has been made. In that case, there were no specific guidelines in the legislation. In the present case, the statute provides clear procedures that an insurer must follow to stop paying benefits. In applying the reasoning in Smith, the logical and fair consequence for not properly terminating benefits is that the benefits are not terminated and are still owing.
SUMMARY OF FINDINGS
In summary, I find that the consequence that benefits not properly terminated are still owing, is not only clearly in keeping with the Schedule’s rules for terminating benefits but it is in keeping with the reasoning in the Smith case that bright-line boundaries must be drawn regardless of any potential prejudice when it comes to legislative requirements imposed on an insurer. It also accords with the reasoning in the Kong case. Moreover, it is an appropriate interpretation consistent with the principles of modern statutory interpretation, in that it is in compliance with the legislative text, it promotes the legislative purpose, and the outcome is reasonable and just.
Given my findings, I agree with Mrs. Yogesvaran’s submissions that this renders her submissions in respect of subsection 37(5) and section 68 moot.
Accordingly, I find that State Farm’s failure to properly terminate Mrs. Yogesvaran’s income replacement benefits on January 16, 2008 and housekeeping benefits on January 2, 2008 means that these benefits are still owing. Consequently, State Farm is required to pay an income replacement benefit from January 17, 2008 to date with interest and ongoing until the benefits are terminated in accordance with section 37 of the Schedule. In addition, State Farm shall pay housekeeping benefits with interest from January 3, 2008 to May 13, 2009.
EXPENSES:
I did not receive any submissions on the issue of expenses. If the parties are in agreement, they may raise this issue within 30 days of the date of this decision, otherwise this issue is deferred to be dealt with at the hearing.
November 26, 2009
Joyce Miller Arbitrator
Date
Financial Services Commission of Ontario Commission des services financiers de l’Ontario
Neutral Citation: 2009 ONFSCDRS 164
FSCO A08-001142
BETWEEN:
SUBASHINI YOGESVARAN
Applicant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
State Farm shall pay Mrs. Yogesvaran an income replacement benefit from January 17, 2008 and ongoing until the benefits are terminated in accordance with section 37 of the Schedule. In addition, State Farm shall pay housekeeping benefits from January 3, 2008 to May 13, 2009.
State Farm shall pay Mrs. Yogesvaran interest for the overdue payment of benefits pursuant to subsection 46(2) of the Schedule.
November 26, 2009
Joyce Miller Arbitrator
Date
(7) If the insured person fails or refuses to comply with subsection 42 (10), the insurer may,
(a) make a determination that the insured person is no longer entitled to the specified benefit; and
(b) despite subsection (9), refuse to pay specified benefits relating to the period after the insured person failed or refused to comply with subsection 42 (10) and before the insured person submits to the examination or provides the material required under that subsection. O. Reg. 546/05, s. 11.
(8) If the insured person subsequently complies with subsection 42 (10), the insurer shall,
(a) reconsider the insured person’s entitlement to the specified benefit and make a determination;
(b) subject to the insurer’s determination, resume payment of the specified benefit; and
(c) pay all amounts, if any, that were withheld during the period of non-compliance if the insured person provides not later than the 10th business day after the failure or refusal to comply, or as soon as practicable after that day, a reasonable explanation for not complying with subsection 42 (10).
Succinctly, pursuant to subsection 37(8), where an insured has refused to attend a section 42 insurer's examination and benefits have been discontinued, an insured can only recover the discontinued benefits after he or she has attended a section 42 insurer's examination and provided a reasonable excuse as to why he or she originally refused to attend.
Gray v. Pilot Insurance Co. 2006 CanLII 22118 (ON SC), [2006] O.J. No. 2638
Henry and Allstate Insurance Company of Canada (OIC P96-00064, July 23, 1997)
Mileevsky and General Accident Assurance Co. of Canada (FSCO A99-000740, June 15, 2000)
Pintucci and Jevco Insurance Company (FSCO A97-000755, January 7, 1999)
Poulos and Zurich Insurance Company (FSCO A00-000193, June 6, 2001)
Sellathamby and Allstate Insurance Company of Canada (FSCO A01-000313, March 21, 2002)
Footnotes
- The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
- The evidence shows that the report was received by State Farm on December 12, 2007 and was faxed to Mrs. Yogesvaran’s solicitor on December 21, 2007.
- The reasonableness of Mrs. Yogesvaran’s excuse for not attending a section 42 insurer's examination can only be dealt with after she has agreed to attend a section 42 insurer's examination. Subsections 37(7) and (8) provide:
- Brazier and RBC General Insurance Company (FSCO A07-001290, May 28, 2009)
- 2002 SCC 30, [2002] 2 S.C.R. 129
- 1997 CanLII 6320 (ON CA), [1997] O.J. No. 5055
- (FSCO A04-001188, July 21, 2005), upheld on appeal (FSCO P96-00007, July 2, 2008)
- See paragraph 37(2)(b) and subsection 37(7)
- If the legislator had wished to provide another consequence, other than what is the obvious one, namely, benefits not properly terminated are still owing, it could have stated this other consequence. However, it did not do so.