Kalachandran Kanapathipillai v. Personal Insurance Company of Canada, 2009 ONFSCDRS 39

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2009 ONFSCDRS 39

FSCO A07-002597

BETWEEN:

KALACHANDRAN KANAPATHIPILLAI

Applicant

and

PERSONAL INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Denise Ashby

Heard: Written submissions were completed on February 13, 2009.The hearing was reopened to permit further written submissions and was concluded on March 30, 2009.

Appearances: Robert Lepore for Mr. Kanapathipillai

Sophia Chaudri for Personal Insurance Company of Canada

Issues:

The Applicant, Kalachandran Kanapathipillai, was injured in a motor vehicle accident on July 21, 2003. He applied for and was denied income replacement benefits and housekeeping and home maintenance benefits by Personal Insurance Company of Canada (“Personal”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Kanapathipillai 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. Kanapathipillai precluded from proceeding to arbitration in respect of his claims for an income replacement benefit and a housekeeping and home maintenance benefit because his application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and section 51 of the Schedule?
Is Personal liable to pay Mr. Kanapathipillai’s expenses in respect of this preliminary issue hearing pursuant to subsection 282(11) of the Schedule?
Is Mr. Kanapathipillai liable to pay Personal’s expenses in respect of this preliminary issue hearing pursuant to subsection 282(11) of the Schedule?

Result:

Mr. Kanapathipillai is not precluded from proceeding to arbitration in respect of his claims for an income replacement benefit and a housekeeping and home maintenance benefit.
The issue of expenses is deferred to the discretion of the hearing arbitrator. In the event the matter does not go to hearing and the parties are unable to resolve the issue, they may request an expense hearing before me pursuant to Rule 79 of the Dispute Resolution Practice Code.

EVIDENCE AND ANALYSIS:

Personal submits, and Mr. Kanapathipillai disputes, that he failed to apply for arbitration within the two-year period set out in the Insurance Act and Schedule and is therefore statute barred from proceeding to arbitration in respect of his claims for income replacement benefits and housekeeping and home maintenance benefits.

Chronology:

Personal filed an affidavit, which was relied upon in its factum. Mr. Kanapathipillai adopted certain paragraphs of Personal’s factum as facts for the purpose of this preliminary issue hearing. Based on the materials filed by the parties, I accept the following as a factual chronology of Mr. Kanapathipillai’s claim:

On August 20, 2003, Mr. Kanapathipillai submitted an Application for Accident Benefits to Personal claiming entitlement to benefits arising from a motor vehicle accident on July 21, 2003.
On September 23, 2003, Personal received Mr. Kanapathipillai’s Application for Benefits. Mr. Kanapathipillai did not submit either a Disability Certificate or an Employer’s Confirmation of Income with his Application.
Mr. Kanapathipillai was represented by counsel at all times material to this proceeding.²
On October 3, 2003, Personal issued an Explanation of Benefits Payable advising Mr. Kanapathipillai that it had not received an Employer’s Confirmation of Income and a Disability Certificate stating: “You are not eligible for an income replacement benefit as we have not received the Employer’s Confirmation of Income OCF-2/59. Submit this for further consideration of this benefit. We also require a completed Disability Certificate OCF-3.”³
On October 23, 2003, Personal sent another Explanation of Benefits Payable to advise Mr. Kanapathipillai that he was not eligible for Income Replacement Benefits because an Employer’s Confirmation of Income had not been received. Personal invited him to submit one for further consideration of his entitlement.⁴
On November 5, 2003, Personal sent a further Explanation of Benefits Payable to Mr. Kanapathipillai, advising that the Employer’s Confirmation of Income received on October 27, 2003 was incomplete. Personal provided Mr. Kanapathipillai with another form.⁵
On October 16, 2004, Personal issued a Notice of Stoppage of Weekly Benefits and Request for Assessment purporting to stop payment of Mr. Kanapathipillai’s income replacement benefit. Personal relied on an assessment conducted by Health Recovery Clinic on its behalf. The assessors concluded that Mr. Kanapathipillai was no longer substantially disabled from performing the essential tasks of his pre-accident employment. Personal advised that the termination was effective November 3, 2004. It provided information on requesting a DAC assessment and information regarding the dispute resolution process set out in the Insurance Act.⁶
The Applicant underwent a DAC assessment at the Sheppard East Assessment Centre between November 23, 2004 and January 31, 2005. The assessors concluded that Mr. Kanapathipillai was able to perform the essential tasks of his pre-accident employment.⁷
On December 15, 2004, Personal issued an Explanation of Benefits Payable to Mr. Kanapathipillai purporting to deny Mr. Kanapathipillai’s claim for Housekeeping and Home Maintenance benefits, for the period from November 1, 2003 to November 30, 2004, on the basis that the claim was not received within 30 days pursuant to section 32 of the Schedule. Mr. Kanapathipillai was also advised that if he were to provide a reasonable explanation for the delay he might be eligible for the benefit pursuant to sections 31 and 33.⁸
On January 20, 2005, Personal received a Declaration of Post-Accident Income and Benefits (OCF 13) dated December 10, 2004 from Mr. Kanapathipillai. It indicated that Mr. Kanapathipillai was employed after the accident and had access to Long Term Disability Group Benefits through Canada Life. He started to receive those benefits on February 27, 2004 and had received a total of $14,205.60.⁹
On February 5, 2005, Personal issued an Explanation of Benefits Payable advising that the completed Employer’s Confirmation of Income (OCF 2) and the Declaration of Post Accident Income (OCF 13) had been received. Based on the information Mr. Kanapathipillai provided, his weekly income replacement benefit was calculated to be $0.00. Personal asked Mr. Kanapathipillai, pursuant to section 33 of the Schedule, to provide documentation indicating whether he was continuing to receive the Group Benefits and whether they were taxable or non taxable.¹⁰
On February 25, 2005, Personal issued an Explanation of Benefits Payable advising Mr. Kanapathipillai that pursuant to the DAC report he was not substantially disabled from performing the essential tasks of his pre-accident employment and consequently the stoppage date of November 3, 2004 “remains in effect.”¹¹
On October 28, 2005, Personal issued an Explanation of Benefits Payable purporting to deny Mr. Kanapathipillai’s claim for Housekeeping and Home Maintenance benefits for the period from April 1, 2005 to September 30, 2005, on the basis that he was not substantially disabled from performing his pre-accident housekeeping and home maintenance tasks. He was also advised that he could not claim benefits after July 19, 2005, pursuant to subsection 22(3) of the Schedule.¹²
On February 15, 2007, Mr. Kanapathipillai applied for mediation. The Application was received by the Commission on February 20, 2007. The Application for Mediation identified the issues in dispute as a weekly Income Replacement Benefit and Housekeeping and Home maintenance Benefits.¹³
On September 7, 2007, the Report of Mediator was released. The Mediator reported that a Weekly Income Replacement Benefit, claimed at the rate of $332.80 from July 28, 2003 to July 21, 2005, and Housekeeping and Home Maintenance Expenses in the amount of $2,870.00, for the period from April 1, 2005 to September 30, 2005, remained in dispute. The Report also noted that Personal raised a preliminary issue pursuant to subsection 51(1) of the Schedule in respect of the Income Replacement Benefit.¹⁴
On December 4, 2007, Mr. Kanapathipillai applied for arbitration. The application was received by the Commission on December 5, 2007. Mr. Kanapathipillai disputed Personal’s denial of his claim for Income Replacement Benefits from the date of loss to July 21, 2005 and Housekeeping and Home Maintenance Benefits from April 1, 2005 to September 9, 2005.¹⁵
On January 18, 2008, Personal submitted an Insurer’s Response to an Application for Arbitration.¹⁶
On December 1, 2008, a pre-hearing discussion was held. An order was made joining Arbitration File Number A07-002597, in respect of the motor vehicle accident of July 21, 2003, and A07-002598, in respect of the motor vehicle accident of December 14, 2004, provided that Mr. Kanapathipillai was entitled to proceed to arbitration in respect of the motor vehicle accident of July 21, 2003. The pre-hearing was confined to procedural issues with a settlement discussion being scheduled to proceed on April 17, 2009 at the Commission’s offices.¹⁷

The Law:

Subsection 281(5), now 281.1(1), of the Insurance Act provides:

A step authorized by subsection (1) must be taken within two years after the insurer’s refusal to pay the benefit claimed or within such longer period as may be provided in the Statutory Accident Benefits Schedule.

Section 51 of the Schedule provides:

(1) 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.

(2) 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.

The limitation is triggered by the insurer’s “refusal” of a benefit. Arbitrators at the Commission have determined that a valid refusal requires that the denial be clear and unequivocal.¹⁸ As well, a refusal is not valid unless the denial complies with section 71 (now section 49) of the Schedule.¹⁹ Section 49 requires insurers to inform applicants of the dispute resolution process under sections 279 to 283 of the Insurance Act. This information must be provided in straightforward and clear language that can be understood by an unsophisticated person. At a minimum, the information must include a description of the most important elements of the dispute resolution process, such as the right to seek mediation, that a mediation must be conducted before resorting to arbitration or litigation, the right to arbitrate or litigate if mediation fails, and the relevant time limits that govern the entire process.

Income Replacement Benefits:

Personal submits that it properly terminated Mr. Kanapathipillai’s income replacement benefits on October 16, 2004 effective November 3, 2004. Therefore, Mr. Kanapathipillai would have had to commence the arbitration by October 16, 2006. Personal submits that as Mr. Kanapathipillai filed his Application for Arbitration on December 5, 2007 he is statute barred from proceeding to arbitration in respect of his income replacement benefit.

Mr. Kanapathipillai filed for Mediation on February15, 2007. The Report of Mediator was issued on September 7, 2007 and 90 days from that date is December 6, 2007. Personal submits that as all of those dates are beyond the expiry of the limitation period on October 16, 2006, Mr. Kanapathipillai is not assisted by the provisions of subsection 51(2).

I find that the notice provided to Mr. Kanapathipillai on October 16, 2004²⁰ complied with the requirements of section 49 of the Schedule as it was in writing, and provided clear information about the dispute resolution process. As well, it provided Mr. Kanapathipillai with Personal’s reasons for denying the benefit.

However, Mr. Kanapathipillai chose to attend a Disability DAC assessment pursuant to section 43 of the Schedule and thereby triggered operation of subsection 37(3)(c) which provides:

despite subsection (2), the insurer shall not stop payment of the benefit, if within 14 days after receiving the notice under clause (1)(b), the person gives the insurer written notice that he or she requires an assessment in accordance with section 43.

In Trewin and Wawanesa Mutual Insurance Company, the Arbitrator discussed the trilogy of FSCO cases which deal with the commencement of the limitation period in circumstances where there has been a Disability DAC assessment of the insured. Those cases are: Francis and Allstate Insurance Company of Canada, Sandhu and CAA Insurance Company and Murugappa and Aviva Canada Inc.²¹ The Arbitrator adopted the Director’s Delegate’s reasoning in Murugappa in finding that the two-year limitation period cannot commence to run while the insured is prohibited from mediating the dispute as provided in subsection 50(c). The Director’s Delegate had found that those provisions had the same effect as subsection 71.1(b) of the earlier Schedule considered in both Francis and Sandhu. He ruled that the limitation period does not begin to run until the insurer confirms that it is refusing to pay the benefit on the basis of the DAC report. In reaching this conclusion the Director’s Delegate distinguished the Murugappa matter from the decisions in Haldenby v. Dominion of Canada General Insurance Company and Kirkham v. State Farm Mutual Automobile Insurance Company et al. ²²as having been decided prior to the DAC system coming into force.

Personal distinguishes this matter from Murugappa on the basis that it did not pay an income replacement benefit to Mr. Kanapathipillai. It calculated the quantum of benefit to which he was entitled as $0.00 by operation of Mr. Kanapathipillai’s entitlement to collateral benefits.

I agree that the notice period did not commence to run until Personal confirmed its refusal to pay Mr. Kanapathipillai’s income replacement benefit because the Disability DAC assessors had concluded that Mr. Kanapathipillai was not substantially disabled.

I do not accept Personal’s reasoning that this matter is distinguishable from Murugappa. Mr. Kanapathipillai disputes Personal’s calculation of his benefit claiming that he was entitled to benefits at the weekly rate of $332.80. It would be incongruous if Mr. Kanapathipillai was entitled to a Disability DAC assessment, could not proceed to mediation until after the completion of the assessment and could not rely on the commencement of the two-year limitation period resulting from that process because Personal had assessed his benefit as $0.00, an assessment which Mr. Kanapathipillai disputes.

I find that the Explanation of Benefits Payable issued by Personal on February 25, 2005, was sufficient confirmation of its refusal of October 16, 2004.²³ Therefore I find that the two-year limitation period commenced to run on February 25, 2005 and ended on February 25, 2007. Mr. Kanapathipillai applied for mediation on February 15, 2007. The report of mediator was released on September 7, 2007. Ninety days from its release was December 5, 2007, the date upon which Mr. Kanapathipillai’s Application for Arbitration was received by the Commission. Therefore, I find that Mr. Kanapathipillai is not precluded from proceeding to arbitration in respect of his claim for an income replacement benefit.

Housekeeping and Home Maintenance:

Personal issued two Explanation of Benefits Payable in which it purported to deny Mr. Kanapathipillai’s claims for housekeeping and home maintenance benefits. On December 15, 2004, Personal denied payment of the benefit for the period from November 1, 2003 to November 30, 2004, because Mr. Kanapathipillai had not applied for the benefits within 30 days pursuant to section 32 of the Schedule. Personal advised Mr. Kanapathipillai that were he to provide a reasonable explanation for the delay, within 14 days, he might be eligible for the benefit pursuant to sections 31 and 33.²⁴ On October 28, 2005, Personal purported to refuse to pay Housekeeping and Home Maintenance expenses for the period from April 1, 2005 to September 30, 2005 on the basis that Mr. Kanapathipillai was not substantially disabled from performing his pre-accident housekeeping and home maintenance tasks.²⁵

Personal submits that the effective date for termination of Housekeeping and Home Maintenance benefits is December 15, 2004 because its denial of that date was a valid refusal, Mr. Kanapathipillai failed to provide a reasonable explanation and his subsequent application for the benefit was invalid because there is no “rolling limitation period.”

Mr. Kanapathipillai submits that he does not seek to arbitrate a housekeeping and home maintenance benefit for the period from November 1, 2003 to November 30, 2004. Therefore Personal’s denial of December 15, 2004 is not relevant to these proceedings. As a consequence, the only relevant refusal is that dated October 28, 2005 in respect of the period from April 1, 2005 to September 30, 2005. Therefore, the earliest the limitation could expire was October 28, 2007. As the report of mediator was released on September 7, 2007 and Mr. Kanapathipillai applied for arbitration on December 5, 2007, he applied within 90 days of the Mediator’s report. Therefore he is entitled to proceed to arbitration.

Subsection 32(1) provides:

A person who wants to apply for a benefit under this Regulation shall notify the insurer within 30 days after the circumstances arose that gave rise to the entitlement to the benefit, or as soon as practicable thereafter.

Subsection 31(1) provides:

A person’s failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation.

Subsection 31(2) excludes the two-year limitation period in section 51 of the Schedule from the foregoing provisions. Subsection 33(1)1. requires that a person applying for a benefit under the Regulation to provide, within 14 days of receiving a request from an insurer, “any information reasonably required to assist the insurer in determining the person’s entitlement to a benefit.”

Subsection 33(2) provides:

The benefit is not payable for any period before the person complies with subsection (1).

Personal’s denial dated December 15, 2004, relies on Mr. Kanapathipillai’s delay in presenting his claim.²⁶ Personal advised him if he provided a reasonable explanation for the delay within 14 days he may “still be eligible to claim” the benefit. I find that this is not a proper denial. It is inaccurate. Failure to provide the explanation, assuming it was reasonably required information, merely provides for the benefit not to be paid for the period that the insured fails to provide the information. Such a denial is thereby equivocal and is not a “refusal” within the meaning of subsection 281(5) or section 51 of the Schedule. Had Personal written to Mr. Kanapathipillai confirming its denial of his claim for housekeeping and home maintenance benefits in respect of the accident on July 21, 2003 on December 15, 2004 and included the requisite information about the dispute resolution process I would have determined that there had been a proper refusal.

I find the denial of October 28, 2005 is not a valid refusal because the Claims Advisor failed to provide a basis for her conclusion that Mr. Kanapathipillai did not meet the substantial inability test. Therefore, Mr. Kanapathipillai is not precluded from proceeding to arbitration by operation of subsection 281(5) and section 51 of the Schedule.

CONCLUSION:

Mr. Kanapathipillai is not precluded from proceeding to arbitration in respect of his claims for an income replacement benefit and a housekeeping and home maintenance benefit.

EXPENSES:

The parties made no submissions with respect to expenses. I defer this issue to the discretion of the hearing arbitrator. In the event the matter does not go to hearing and the parties are unable to resolve the issue, they may request an expense hearing before me in accordance with the Dispute Resolution Practice Code.

April 6, 2009

Denise Ashby Arbitrator

Date