Economical Mutual Insurance Company v. Maria Augello, 2009 ONFSCDRS 25

Financial Services Commission of Ontario

Neutral Citation: 2009 ONFSCDRS 25

Appeal P09-00002

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ECONOMICAL MUTUAL INSURANCE COMPANY Appellant

and

MARIA AUGELLO Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Lee Samis for Economical Mutual Insurance Company Mr. Jamie R. Pollack for Ms. Maria Augello

HEARING DATE: By written submissions received by February 12, 2009

APPEAL ORDER

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

1. The Appellant’s request for a stay of the Arbitrator’s December 18, 2008 decision is denied, pursuant to subsection 283(6) of the Insurance Act, R.S.O. 1990, c. I.8.

February 18, 2009

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE PRELIMINARY ISSUE AND THE PARTIES’ SUBMISSIONS

The Respondent, Ms. Maria Augello, was injured in a motor vehicle accident on September 7, 2002. In his December 18, 2008 decision, Arbitrator Wilson (the “Arbitrator”) found the Respondent catastrophically impaired, as defined in clause 2(1.1)(f) of the the Schedule.¹ The Arbitrator found that the Respondent’s combined impairments resulted in 55 per cent or more impairment of the whole person in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th Edition, 1993 (the “AMA Guides”). The Arbitrator held that such impairments included psychological impairments.

The Arbitrator noted that Economical Mutual Insurance Company (the “Appellant”) acknowledged that the Respondent met the clause 2(1.1)(f) determination of catastrophic impairment if one included an assigned percentage value to her psychological impairment.

The Arbitrator held that he was bound by stare decisis to accept the reasoning of Spiegel J. in Desbiens v. Mordini, 2004 CanLII 41166 (ON SC), [2004] O.J. No 4735. He also noted the earlier decision herein of Director Draper (FSCO A07-001204, December 4, 2007). The Appellant had requested that the Director, pursuant to section 285 of the Insurance Act, R.S.O. 1990, c. I.8, state the following case to the Divisional Court:

When determining whether a person has sustained a catastrophic impairment pursuant to section 2(1.1)(f) or (g) of the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, is it correct to assign a percentage value to psychological impairments under clause (g) and to combine that percentage value with the physical impairment ratings under clause (f)?

Director Draper declined this request, in part because he did not accept the Appellant’s submission that there were “serious and substantial reasons to question the correctness” of prior decisions or because the "publishers of the AMA Guides have indicated that the Desbiens approach to this issue is incorrect." Director Draper continued:

This is not a situation where FSCO jurisprudence is either internally inconsistent or out of step with judicial decisions. The recent court and FSCO decisions have carefully considered the definition of catastrophic impairment and have consistently concluded that mental and behavioral impairments can be considered under clause (g). As a result, insurers are not facing inconsistent decisions that make it impossible to determine how to adjust claims involving both physical and psychological impairments. The real issue is that Economical disagrees with the analysis in these cases. Its remedy is to pursue its arguments at arbitration and, if it chooses, through appeal and perhaps judicial review.

Director Draper concluded that:

… it is my view that the complexities of the definition of "catastrophic impairment," particularly the references to the AMA Guides, make it preferable that the issue proceed with a full evidentiary record to inform the decision.

The Arbitrator found that there were grounds for issue estoppel regarding whether mental and behavioural disorders could be assigned a percentage and included in clause 2(1.1)(f), based on his view that Director Draper had already decided the issue between these same parties.

In any event, for reasons enumerated in his decision, the Arbitrator found that the approach taken in Desbiens “allowing for the ‘stacking’ of impairments, whereby mental and behavioural disorders can be assigned a percentage and included in the determination of whole person impairment in clause (f) is correct” and should be applied to the Respondent’s assessment.

The Notice of Appeal was received by the Commission on January 15, 2009. The Appellant submits that the Arbitrator erred in (1) concluding that percentage values must be assigned to mental and behavioural impairments under the AMA Guides and (2) determining that mental and behavioural impairments may be combined with physical impairments in addressing the clause 2(1.1)(f) definition of catastrophic impairment.

The Appellant also submits that the Arbitrator erred in finding that he was bound by the principle of stare decisis and in concluding that the principle of estoppel applied. Included in its redress being sought, the Appellant sought a stay of the Arbitrator’s December 18, 2008 order.

My January 21, 2009 acknowledgement of the Notice of Appeal requested that the Respondent address the Appellant’s request for a stay. The Appellant would then have a further opportunity to reply and this preliminary issue would be determined on the basis of the written submissions.

The Appellant seeks a stay of the Arbitrator’s December 18, 2008 order for the following reasons:

1. It brings this appeal in good faith on the basis that there are errors in law in the Arbitrator’s decision. The Respondent does not dispute the bona fides of this appeal.
2. The decision raises significant legal issues that have far-reaching consequences not only for the parties herein, but for the insurance industry and the legal system itself. No appellate court has ruled on this question.
3. There are serious reasons to question the correctness of the present law on this issue, including that it contradicts both the AMA Guides and the express wording of the legislation, and that cases prior to Desbiens, which are not named, adhered to the wording of the legislation.
4. The Arbitrator was not bound to follow Desbiens. The question of issue estoppel was not argued or raised by either party at arbitration and, in any event, “a Reference to the Divisional Court on the issue is not the same as a full evaluation of the issues presented before the Arbitrator on a full evidentiary record.”
5. Significant hardship will result to the Appellant if a stay is not granted. The decision “significantly broadens the level of benefit coverage available” to the Respondent. As a result, the Appellant may be compelled to pay monies to the Respondent and to third parties that the Respondent will likely not be able to repay if she is unsuccessful on appeal.

The Respondent’s submissions, using the framework set out by Delegate McMahon in Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), included:

1. The reasoning in Desbiens has been consistently applied with approval by the Court and by the adjudicators at the Financial Services Commission of Ontario.
2. The hardship weighs more heavily on the Respondent, who relies on statutory accident benefits for income replacement, rehabilitation from accident-related injuries, attendant care and housekeeping assistance.

II. ANALYSIS

Armstrong confirmed that an appellate officer’s discretion under subsection 283(6) of the Insurance Act to stay an order of an arbitrator at the Financial Services Commission of Ontario is the exception, rather than the rule. I adopt, as did Delegate McMahon, Delegate Richardson's criteria in Canadian Home Assurance Company and Scavuzzo (OIC P-000626, May 18, 1992) as to whether a stay should be granted, namely:

1. the bona fides of the appeal;
2. the substance of the grounds for appeal; and,
3. the hardship to the respective parties if the stay is granted or refused.

For the following reasons, I decline to stay the Arbitrator’s December 18, 2008 decision:

1. The Appellant argues that the Arbitrator erred in considering himself bound by stare decisis. Accordingly, it is difficult to see why the Arbitrator’s decision is any more binding than the decisions which the Arbitrator followed.
2. Director Draper stated in his December 4, 2007 decision that the real issue here is that the Appellant disagrees with the analysis in the existing case law, not that the Commission jurisprudence is either internally inconsistent or out of step with judicial decisions. The Appellant does meaningfully dispute theses comments. That no appellate court has overruled Desbiens diminishes, not increases, the strength of the stay request.
3. The Appellant provides no evidence in support of its submission that the Respondent will likely not be able to repay these monies if the Respondent is successful on appeal.
4. The Appellant does not provide any submission as to why the alleged hardship to itself should take precedence over the hardship to the Respondent in having payments delayed. This is of special concern when, as the Appellant states, there has been a “full evaluation of the issues presented before the Arbitrator on a full evidentiary record.”
5. I agree with the statement in Armstrong that “[t]he fact that a stay is the exception rather than the rule, suggests to me that the drafters of the legislation recognized that the insurer is in a much better position than the insured person to bear the risks inherent in not staying the arbitrator’s order”
6. I further agree with the view expressed in Digiammatteo v. Leblanc (1989), 1989 CanLII 4076 (ON CA), 71 O.R. (2d) 130 (C.A.), quoted in Scavuzzo. In the former, a monetary judgment was appealed. In response to the respondent’s application for an order under Rule 63.03 of the Rules of Civil Procedure lifting the automatic stay pending appeal, Finlayson J.A. stated that “there is always a risk of non-recovery in any litigation, even when successful, and I can see no reason why all of that risk should fall on the respondent in this case.”
7. In this specific case, the Arbitrator’s decision broadens the level of benefit coverage which is potentially available; there is no actual order for payment of benefits. Accordingly, the requisite criteria, such as reasonableness and necessity for rehabilitation claims, must still be established for any further claims.

III. EXPENSES

The legal expenses of this preliminary issue decision are deferred to the final determination of this appeal, subject to any further or other order of an adjudicative officer.

February 18, 2009

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.