Neutral Citation: 2009 ONFSCDRS 42 FSCO A08-001332

BETWEEN:

ANDREW J. PUNWASIE Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator John Wilson Heard: February 20, 2009, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Rameshwer Sangha for Mr. Punwasie Darrell March for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Andrew J. Punwasie, was injured in a motor vehicle accident on October 10, 2003. He applied for statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹

The parties were unable to resolve their disputes through mediation, and Mr. Punwasie 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. Punwasie 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. Punwasie is 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.

EVIDENCE AND ANALYSIS:

Mr. Punwasie was struck by a vehicle on October 10, 2003, while riding a bicycle on a street in Brampton, Ontario. He claimed to have suffered a disability arising from the accident, and approximately a month later, submitted an application for accident benefits.

The Insurer first denied Mr. Punwasie’s claim for benefits on December 10, 2003.

In this arbitration, Mr. Punwasie has claimed a non-earner benefit, a housekeeping benefit as well as interest on the above claim.

Although the motor vehicle accident giving rise to those claims took place on October 10, 2003, Mr. Punwasie did not pursue his claim with any haste.

In April and July of 2004, the Insurer issued further denials, and as well, requested further information, including both a disability certificate and the name of his housekeeper as well as particulars of the services provided.

Finally on January 28, 2008 Mr. Punwasie filed for mediation of his dispute with State Farm. Although the Insurer objected to mediation of the dispute due to what it believed to be delay beyond the statutory limitation period of two years, the mediation took place between April 1, 2008 and June 3, 2008.

Mr. Punwasie ultimately filed for arbitration on June 17, 2008, some five years after the accident, and four and a half years after State Farm’s first refusal of benefits.

Mr. Punwasie, through his counsel, readily acknowledged that “Application for Mediation was filed 4 years after denial of the non-earner benefit and more than 3 years post denial of the housekeeping and home maintenance expense.” I understood this concession was meant to be subject to any submissions concerning the validity of the notices, and any relief that might be available to address the issue of solicitor negligence by Mr. Punwasie’s former solicitor.

Mr. Aaron Lang, a lawyer in private practice represented Mr. Punwasie during the initial period of the claim. According to information filed by Mr. Punwasie, he was informed by letter from Mr. Lang that his law practice was being closed and that Mr. Lang would no longer represent Mr. Punwasie in this matter.

Subsequently, on March 13, 2007, Mr. Punwasie retained Mr. Rameshwer Sangha, who proceeded with the claim against State Farm.

Both the Insurance Act and the Statutory Accident Benefits Schedule provide a time-limit for accident benefit claims.

Section 51 of the Schedule provides as follows:

(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. O. Reg. 403/96, s. 51 (1).

(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. O. Reg. 403/96, s. 51 (2).

Unlike some other time-limits contained in the Schedule, section 51 is a “hard” limit. While section 31 provides that 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” the section goes on to state specifically that “Subsection (1) does not apply to the time limits set out in section 51.”

While the section 51 time-limits cannot be “explained away” by an insured, a jurisprudence has developed which provides some protection for insureds where, on the face of the matter, a time-limit may have been missed. As M.G.J. Quigley J. summarized in Golic²:

Where an insurer refuses to pay a benefit that a person has applied for, or reduces the amount of a benefit that a person receives, the insurer is required to inform the person in writing of the procedure for resolving disputes relating to statutory accident benefits, as set out in section 279 to 83 of the Insurance Act. The limitation period contained in section 281(5) of the Insurance Act begins to run once the insurer has complied with the requirement to provide clear and unequivocal notice of refusal and has complied with section 72(1) of the Schedule: Zeppieri and Royal Insurance Company of Canada (OIC A-005237, February 17, 1994); aff’d (OIC P-005237, December 22, 1994). That provision is critical because it places an obligation on the insurer to inform the claimant of the dispute resolution process under sections 279 to 283. Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129 at para. 14 confirms that to meet that obligation, the insurer must provide a description of the most important parts of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, and that mediation must be attempted before resorting to arbitration or litigation. The explanation must also include a description of the relevant time limits that govern the entire process.

Unless an insurer provides a clear and unequivocal written refusal that is compliant with the requirements post-Smith it may find itself in a situation where it has made no valid refusal and the limitations contained in section 51 may not be engaged.

In this matter State Farm submitted a documentary record, including correspondence that demonstrates that, on the face of it, State Farm provided Mr. Punwasie with proper notice of its refusal to pay benefits, including the information required post-Smith v. Co-operators.

Mr. Punwasie, however, submits that there were minor defects in the documentation noted above. Among these were a lack of signature by an insurance representative on an OCF 9 dated July 22, 2004. As well, the same document contained no effective date. Mr. Punwasie also relies on the failure of the Insurer to recognize on its March 21, 2005 OCF 9 that “the Insurer had received the OCF 3 dated December 29, 2004.”

Mr. Punwasie also alleged that there were faults in the OCF 17, namely in part 3 which dealt with an explanation of the Insurer’s decision. Specifically, Mr. Punwasie claims that “In this explanation insurance has failed to provide specific reference to the medical documentation relied by the insurance and reasons mentioned on the alleged medical documentation is not explained.”

Mr. Punwasie also submits that “natural justice and fair play” would dictate that the time-limits not be found to apply to him. Counsel for Mr. Punwasie stated:

The client Mr. Andrew Punwasie’s belief is that Mr. Lang has failed to adequately represent his interests and as a result of that he may have incurred financial losses. Mr. Punwasie was unaware about the time barred for his accident claim as Mr. Lang did not advice or inform Mr. Punwasie regarding this matter.

Dealing first with the issue of whether Mr. Punwasie should be relieved of the burden of the limitation period by reason of his solicitor’s apparent failure to act in a timely manner and to keep him informed of the progress or otherwise of his case, there is no question that a reasonably diligent solicitor would have been expected to do so.

Rule 2.01 of the Rules of Professional Conduct of the Law Society of Upper Canada imposes inter alia the following obligations on a solicitor:

(d) communicating at all stages of a matter in a timely and effective manner that is appropriate to the age and abilities of the client,

(e) performing all functions conscientiously, diligently, and in a timely and cost-effective manner

Consequently, Mr. Punwasie would have had a reasonable expectation that he would be kept up to date with the progress of his claims, and that the pursuit of his claim would be pursued in a timely basis. Missing a legislated time-limit would clearly be a breach of a solicitor’s obligation to his client, if such were the case.

Such a breach, if so found, would not likely affect the application of a statutory limitation, unless, perhaps, Mr. Punwasie was legally incapable at the time that the limitation was reached, or that, in some way, he was not aware that he had a potential claim against the Insurer, and he could not have discovered the existence of the potential claim at that point.

Although Mr. Lang’s retainer is not before the tribunal, it is clear from Mr. Punwasie’s submissions that Mr. Lang was delegated considerable authority to deal with the claim and to speak to others, including State Farm, on behalf of Mr. Punwasie.

A lawyer’s retainer, unless it contains specific limitations to the knowledge of a third party, can bind the client with regard to that third party. Indeed communication with a lawyer representing that party can be deemed to be communication to the client himself.

The Court of Appeal in Scherer v. Paletta³ outlined the relationship of solicitor and client and its relationship to third parties as follows:

In general, the solicitor is the client’s authorized agent in all matters that may reasonably be expected to arise for decision in the particular proceedings for which he has been retained. Where a principal gives an agent general authority to conduct any business on his behalf, he is bound as regards third persons by every act done by the agent which is incidental to the ordinary course of such business or which falls within the apparent scope of the agent’s authority.

Hence, if State Farm communicated any required notices to Mr. Punwasie by way of his solicitor, Mr. Lang, knowledge of the content of those notices can be imputed to Mr. Punwasie.

Although the time-lines in the Limitations Act⁴ do not directly apply to Insurance Act matters, the Act provides some guidance in interpreting the application of a limitations period. At section 12(2) the Act sets out the proposition that effective notice to an agent for a principal can constitute notice to the principal as well:

Principals and agents

(2) For the purpose of clause 5 (1) (a), in the case of a proceeding commenced by a principal, if the agent had a duty to communicate knowledge of the matters referred to in that clause to the principal, the principal shall be deemed to have knowledge of the matters referred to in that clause on the earlier of the following:

The day the agent first knew or ought to have known of those matters.

The day the principal first knew or ought to have known of them.

While it is perfectly understandable that a person might leave the conduct of a claim to his solicitor, whom he trusts, a principal still has an obligation to keep informed of his claim, or to face the consequences.

As Master Albert noted in Pitts⁵:

The chronology shows that the plaintiff’s previous solicitor caused serious delay in the action. Then, the plaintiff took no steps to move the action along after discovering that his lawyer had been disbarred. It is surprising that a plaintiff, who’s responsibility it is to move his action forward, took so little interest in the litigation that he did nothing after the file was delivered by the Law Society to his daughter, until provoked to do so almost a year later under threat of this motion.

When faced with the question of who should bear the consequences when the solicitor-client relationship goes awry, it will rarely be a third party to the relationship – in this case the Insurer.

Certainly, if there is negligence in the handling of a file, the solicitor ought to take primary responsibility. If the Insured was also negligent in not supervising his agent, then he, as well, may share responsibility. As Lord Diplock has said:

As regards the position of the plaintiff, it is of course unfortunate that he, though personally blameless, should suffer for the default of his agent; but if he does, he is not without a remedy, for unless he himself has caused or contributed to the delay which has resulted in his action being dismissed for want of prosecution, he will have a right of action against his solicitor for negligence.⁶

Mr. Punwasie filed correspondence with the Law Society, including a complaint form dated December 14, 2008, and a letter from intake counsel at the Law Society advising that “it does not have the authority to determine allegations which raise the issue of a lawyer’s potential negligence.”

I note that the date of the letter from the former lawyer Mr. Lang to Mr. Punwasie is February 13, 2007. Since the letter refers to arranging a date prior to February 28, 2007 for the pickup of his file, it should have been clear to Mr. Punwasie by that date, at the latest, that no action had been taken on his accident benefit claim.

It would also be incumbent upon Mr. Punwasie to launch any action against his former lawyer within the appropriate time-limits.

While in this matter, Mr. Punwasie may well also have missed out on the window of opportunity for an action against his own former solicitor, this does not serve to transfer this particular risk back into the hands of the Insurer.

We are now some five and a half years after the motor vehicle accident. Mr. Punwasie, in bringing this action against State Farm so tardily it has created a potentially prejudicial situation that may not easily be remedied.

Given the passage of time, necessary documentary evidence may no longer be available. Nor has State Farm had the full opportunity to investigate the benefits claimed in a timely manner. This is especially true in the case of time-limited benefits such as housekeeping.

Even if there were a discretion to relieve against the time-limit in this forum, which there is not, Mr. Punwasie would still have an uphill battle.

With regard to Mr. Punwasie’s claim that the forms sent to him as stoppage notices were inherently faulty, and hence of no effect, I find little strength in this argument. As noted earlier, the notices appear to be in conformity with the post-Smith rules regarding disclosure of the dispute resolution process. All of the examples filed in evidence contained an addendum explaining the options available to Mr. Punwasie, and the necessary steps to be taken should he wish to challenge the Insurer’s determination. I note that this advice also included a specific warning about the two year limitation on actions.

With regard to the apparent absence of a signature on certain OCF 9 notices, I was advised by Mr. March that the documents submitted in evidence were file copies from State Farm’s records and consequently not executed. In this context I find the evidence of Mr. Matthew Bryson an adjuster with State Farm, that the originals sent to Mr. Punwasie would have been signed, to be both credible and persuasive.

Although notice requirements that can affect an insured’s entitlement to benefits should be strictly construed, I am aware of no specific requirement that stoppage notices be personally signed by an insurer’s representative (unlike the settlement regulation which specifically requires at section 9.1 “a written disclosure notice, signed by the insurer, with respect to the settlement”).

Although I accept that the Insurer’s stoppage notices were likely signed in the original, they also contained a typewritten name of the person making the determination.

The Schedule at section 69 provides for various mandatory forms, including the OCF 17.

As a legislatively mandated form under the Insurance Act, recourse may be had to the Legislation Act in considering and interpreting the forms in question. Section 84 of the Legislation Act provides:

Deviations from required form⁷

Deviations from a form whose use is required under an Act do not invalidate the form if,

(a) they do not affect the substance and are unlikely to mislead; and

(b) the form is organized in the same or substantially the same way as the form whose use is required.

I accept that the substance of the OCF 17 would not likely be changed by the absence of an original signature, if such was the case, and that even an unsigned form would have been unlikely to mislead. Consequently, given the absence of a mandatory provision regarding a signature, and the clear communication of the intention of the Insurer to deny benefits, I find that in this case, the absence of a signature is not material, and does not invalidate the form.

It was common ground between the parties that in the event that the stoppage forms, with or without signature were found to be valid, and that the actions (or inactions) of the former lawyer did not form the basis for some sort of relief from the limitation period, that the time provided in section 51(1) of the Schedule will have lapsed, and Mr. Punwasie will be barred from proceeding with his claim against State Farm for accident benefits arising from the October 10, 2003 motor vehicle accident.

Given my findings and the above comments, whoever may have misled Mr. Punwasie in the past as to the status of his accident benefit claim, it is Mr. Punwasie who must suffer the consequences of the delay, and find himself barred from proceeding against State Farm.

Unfortunately, in this forum there is no jurisdiction to provide relief from forfeiture or to mitigate the effect of the limitation provisions. I find, therefore that Mr. Punwasie is barred from proceeding with this arbitration, and the arbitration is dismissed.

EXPENSES:

I commend the parties for proceeding in an expeditious manner with this preliminary matter. If State Farm is not prepared to waive its expense claim, or if the parties are unable to agree on appropriate expenses, I may be spoken to on that issue. Any party wishing an expense hearing should file a formal request within the 30 days following the issuance of this decision.

April 14, 2009

Arbitrator

Date

Financial Services Commission of Ontario