Timothy J. Wry v. Aviva Canada Inc., 2009 ONFSCDRS 47

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2009 ONFSCDRS 47

FSCO A07-001774

BETWEEN:

TIMOTHY J. WRY

Applicant

and

AVIVA CANADA INC.

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Lloyd (J.R.) Richards

Heard: December 1, 2008, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Christopher Collins for Mr. Wry

Harry Brown for Aviva Canada Inc.

Issues:

The Applicant, Timothy J. Wry, was injured in a motor vehicle accident on December 16, 2000. He applied for and received statutory accident benefits from Aviva Canada Inc. (“Aviva”), payable under the Schedule.¹ Mr. Wry submitted applications to Aviva for a determination of whether he had sustained a catastrophic impairment. Aviva assessed Mr. Wry and determined that he had not sustained a catastrophic impairment. The parties were unable to resolve their disputes through mediation, and Mr. Wry 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. Wry 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 Insurance Act and subsection 51(1) of the Schedule?

Result:

Mr. Wry 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 Insurance Act and subsection 51(1) of the Schedule.

AGREED FACTS:

Timothy Wry was involved in a motor vehicle accident on December 16, 2000. He claimed accident benefits through his parents’ policy with Aviva. On or about June 19, 2003 Mr. Wry submitted to Aviva an Application for Determination of a Catastrophic Impairment (“CAT Application”). On or about March 17, 2004 Aviva sent notification to Mr. Wry denying that Mr. Wry had sustained a catastrophic impairment. Mr. Wry sent to Aviva subsequent CAT Applications dated July 21, 2006 and April 13, 2007. Aviva refused to consider both subsequent CAT Applications. By application dated February 13, 2007, Mr. Wry filed for mediation on the issues of catastrophic determination and entitlement to the enhanced benefits available to the catastrophically impaired. The Report of Mediator was issued on May 23, 2007. By application dated August 20, 2007 Mr. Wry filed for arbitration on the issues of catastrophic determination and entitlement to enhanced benefits.

SUBMISSIONS:

Mr. Wry’s Position:

Mr. Wry applied for determination of a catastrophic impairment on three separate occasions. Mr. Wry’s second application was over two years after Aviva had sent notification to Mr. Wry denying that he had sustained a catastrophic impairment. Subsection 281(5) of the Insurance Act provides that an insured person must challenge an insurer’s denial of a benefit within two years of the insurer’s denial.

Mr. Wry submits that he has a right to re-apply to Aviva for a determination of whether he has suffered a catastrophic impairment. In the alternative, if there is no right to re-apply, then the limitation provisions in subsections 281(5) of the Insurance Act and 51(1) of the Schedule do not apply to determinations of catastrophic impairment. Mr. Wry asserts that the limitation provisions in the Insurance Act and the Schedule indicate a two year limitation period in relation to the “insurer’s refusal to pay the benefit claimed.” Since the application for catastrophic determination is not for a “benefit claimed,” but rather, an entitlement test, the limitation provisions do not apply to this issue.

It is Mr. Wry’s position that if the limitation provisions apply to determinations of catastrophic impairment, then the two year limitation period under subsection 281(5) of the Insurance Act begins to run after Aviva issues a valid refusal. Further that Aviva, as the party relying on the limitation period, is required to identify the clear and unequivocal “refusal.” Since the word “refusal” is not found in Part VI of the Insurance Act, the application of the time limit provisions to Aviva’s refusal to find that Mr. Wry has been catastrophically impaired is problematic.

In addition, the onus is on Aviva to demonstrate that Mr. Wry is barred from proceeding.

Mr. Wry asserts that Aviva is also obligated to respond to an application for determination of catastrophic impairment in one of two ways: (1) notify Mr. Wry that he has been determined to be catastrophically impaired; (2) notify Mr. Wry that he must be examined under section 42 of the Schedule to determine if his impairment is catastrophic. Aviva did not respond to Mr. Wry’s second or third application for catastrophic determination. Since there was no valid refusal to pay benefits claimed for these applications, the limitation period never begins to run.

In addition, Mr. Wry asserts that changes in the way determinations of catastrophic impairment are conducted, as enunciated in Desbiens v. Mordini², permit him to re-apply for a determination of catastrophic impairment. Prior to Desbiens, determinations of catastrophic impairment considered either physical or psychological impairments, but not both. Mr. Wry’s first application for catastrophic impairment determination was on June 19, 2003, prior to the Desbiens decision. He made his second application on July 21, 2006. Mr. Wry asserts that he did not have a full appreciation of the psychological impact of the collision until after his initial application for catastrophic determination and Aviva’s assessment. He believes that he is entitled to re-apply for catastrophic determination for consideration of his combined physical and psychological impairments.

Mr. Wry contends that more than one application for determination of catastrophic impairment is permissible and contemplated by the Insurance Act and the Schedule. Specifically, where an insured person’s health continues to deteriorate over time, the insured person is entitled to

re-apply for a determination of catastrophic impairment, even though the insured person may have previously applied and was deemed not to be catastrophic. Further, because an insurer is permitted to rely on an insured’s improved health to cease paying benefits, then the insurer should also be liable to pay additional benefits should the insured’s health deteriorate.

Aviva’s Position:

Aviva submits that lawsuits should be brought within a reasonable period of time. The underlying policy for limitation periods is a recognition that it is not fair that an individual should be subject indefinitely to the threat of being sued over a particular matter. Disputes should not drag on interminably. Further, evidentiary problems arise as time passes.

Aviva submits that the Insurance Act and the Schedule protect the insurer from undue delay and form a complete code for dispute resolution which works effectively for the insurer and the insured. Aviva relies on subsection 40(4) of the Schedule, which provides that a designated assessment centre’s determination is binding subject to the determination of a dispute in accordance with subsections 279 to 283 of the Insurance Act relating to whether the impairment is catastrophic. Subsection 281(5) of the Insurance Act is therefore the limitation period for assessments to determine catastrophic impairment. This section states that a mediation, evaluation, court proceeding or arbitration shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.

Aviva does not dispute that the onus is on an insurer to prove the existence of a valid limitation defence on the basis of a “clear and unequivocal refusal.” Aviva states that Mr. Wry received a clear and unequivocal refusal to pay benefits by letter dated March 17, 2004. Furthermore, the March 17, 2004 letter sets out the benefits to which Mr. Wry would have been entitled on both the non-catastrophic and catastrophic bases. The March 17, 2004 letter also clearly indicates the two year time limit within which to dispute the refusal.

It is Aviva’s position that a cause of action accrues when the material facts on which it is based have been discovered by an applicant. Mr. Wry discovered this cause of action when he received the March 17, 2004 letter. Mr. Wry then took almost three years to commence an action or arbitration.

Aviva maintains that the Desbiens decision should not be the basis upon which a further determination of catastrophic impairment should be permitted. Mr. Wry had adequate time to consider the impact within the two year limitation period from the refusal to pay in March 2004. Furthermore, the CAT DAC indicated that Mr. Wry’s physical impairment was 14% and his psychological impairment was mild. Combining these two factors will not produce a 55% or more whole person impairment.

Aviva further asserts that Mr. Wry is requesting multiple determinations of catastrophic impairment on the same issue despite the comprehensive scheme for dispute resolution laid out in the Insurance Act and the Schedule. Section 2 of the Schedule provides for multiple applications based on certain circumstances, such as: (1) early applications for catastrophic determination based on a score of 9 or less on the Glasgow Coma Scale; (2) on the basis of paraplegic or quadriplegic impairment; (3) rejection of applications claiming 55% or more whole person impairment or a class 4 or 5 impairment if the applicant’s condition has not stabilized or three years have not elapsed since the accident. Therefore, there may be entitlement to more than one application for determination of catastrophic impairment, but not on the same issue.

ANALYSIS:

Does subsection 281(5) apply to applications for determination of catastrophic impairment?

The court in Bapoo v. Co-Operators General Insurance Co.³ set out the applicable approach to statutory interpretation as follows:

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 proposed interpretations, the presumptions and special rules of interpretation, 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) its 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.

This approach must be applied to this case, bearing in mind that insurance legislation is consumer protection legislation and must be given a fair, large and liberal construction and interpretation.⁴

While recognizing the consumer protection aims of insurance legislation, the legislation in this case also imposes certain limitation periods on when an applicant can exercise specific rights.

I agree with Aviva that it is accepted policy that lawsuits should be brought within a reasonable time. Limitation periods exist to prevent the unfairness of subjecting individuals to a never ending threat of being sued over a particular matter. The legislation in this case imposes limitation periods to spare insurers the unfairness of a dispute dragging on interminably.

Mr. Wry submits that the limitation period in subsection 281(5) of the Insurance Act does not apply to determinations of catastrophic impairment. The determination of an individual as catastrophically impaired entitles that individual to a higher level of benefits, but not to any specific benefits. Subsection 281(5) imposes a two year limitation period in relation to the “insurer’s refusal to pay the benefit claimed,” Mr. Wry argues that since the application for catastrophic determination is not for a “benefit claimed,” but rather, an entitlement test, the limitation provisions do not apply to this issue.

I do not agree with this characterization of the legislation. Sections 279 to 283 of the Insurance Act deal with the dispute resolution scheme concerning statutory accident benefits. Sections 279 to 280 state that insureds and insurers must resolve their disputes concerning an insured’s entitlement to benefits or to the amount of benefits to which an insured is entitled in accordance with sections 280 to 283 of the Insurance Act and the Schedule. On plain reading, the dispute resolution provisions, specifically sections 279 and 280 of the Insurance Act, contemplate disputes regarding entitlements.

Subsection 281(5) of the Insurance Act, the limitation provision, makes no mention of entitlement, but rather states that “a step authorized by subsection (1) must be taken within 2 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.” In addition, subsection 51(1) of the Schedule, which further delineates the time limits for disputes as set out in the Insurance Act, states that “[a] mediation proceeding or evaluation under subsection 280 or 280.1 of the Insurance Act or a court proceeding or arbitration under clause 281(1)(a) or (b) of the Insurance 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.” The specific limitation provisions in subsections 281(5) of the Insurance Act and 51(1) of the Schedule do not make reference to entitlement, but rather speak directly to an insurer’s refusal to pay a benefit.

However, to have any real meaning, the limitation provisions must be read in the total context of the Insurance Act and Schedule. Section 40 of the Schedule, the section dealing with determinations of catastrophic impairment, provides for an entitlement test. When an insured is deemed catastrophically impaired, the insured is then entitled to a greater level of benefits and submits claims to an insurer for the enhanced benefits. Subsection 4 states that “[T]he determination by the designated assessment centre is binding on the insured person and the insurer, subject to the determination of a dispute, in accordance with sections 279 to 283 of the Insurance Act, relating to whether the impairment is a catastrophic impairment.” These sections read together clearly indicate that the limitation provisions apply to assessments concerning the determination of catastrophic impairment. Even though the words “entitlement to benefits”

do not appear in the limitation provisions in the Insurance Act and the Schedule, sections 40 of the Schedule and 279 and 280 of the Insurance Act when read together make it clear that entitlement tests are to be subject to the dispute resolution process.

Was there a valid refusal?

Mr. Wry contends that if the two year limitation period under subsection 281(5) of the Insurance Act applies to determinations of catastrophic impairment, then the limitation period begins to run after Aviva issues a valid refusal. He further argues that since the word “refusal,” as stated in subsection 281(5), is not defined in Part VI of the Insurance Act then the application of the two year time limit becomes problematic.

Where the legislation in this case is silent on the specific definition of an insurer’s refusal, the court in Smith v. Co-Operators General Insurance Co.⁵ set out what a valid refusal, at minimum, should contain. The court stated that an insurer is obligated to communicate to an insured person what the Insurance Act dispute resolution process requires:

…[I]n straightforward and clear language, directed towards an unsophisticated person. At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails…and the relevant time limits that govern the entire process.

Since the limitation provisions in the Insurance Act and Schedule apply to disputes concerning an insurer’s refusal to allow entitlement to benefits as well as to an insurer’s refusal to pay amounts claimed to insureds, the word “refusal” applies to Mr. Wry’s application for determination of catastrophic impairment. Aviva communicated to Mr. Wry by letter dated March 17, 2004. Mr. Wry does not dispute receiving this letter and its attachments. The March 17, 2004 letter sets out the benefits to which Mr. Wry would have been entitled on both the non-catastrophic and catastrophic bases, and also clearly indicates a two year time limit within which to dispute the refusal. I find that Aviva complied with the requirements as laid out in

Smith v. Co-Operators General Insurance Co. Mr. Wry received a clear and unequivocal refusal of his request for entitlement to enhanced benefits.

Are multiple applications permitted?

Change in Law

The decision in Kirkham v. State Farm Mutual Automobile Insurance Co.⁶ establishes that subsection 281(5) is not a rolling limitation period. The time limit no longer runs from the date the insured’s cause of action arises but instead it runs from the insurer’s refusal to pay the benefit claimed. I agree with Aviva’s interpretation of Kirkham that time begins to run after an insurer’s refusal. Therefore, for Mr. Wry’s argument to be successful, an application for determination of catastrophic impairment must be found to be different from other applications.

In Kirkham, the issue concerned whether an insured could initiate the dispute resolution process once two years had elapsed from the insurer’s initial denial of a benefit. Director’s Delegate Draper decided that the insured could not do so. Mr. Wry’s argument suggests that an application for determination of catastrophic determination is sufficiently distinct from other types of applications that where there is a change in the law, an applicant would have an indefinite period of time to submit a new application. There is no jurisprudence to support this approach.

In asserting that a change in the law permits him to re-apply for determination for catastrophic impairment, Mr. Wry is not relying on a change in his condition. Rather, he is relying on a change in the legal landscape. The Desbiens⁷decision is dated November 17, 2004. Mr. Wry’s first application for catastrophic determination was on June 19, 2003, which was denied by Aviva by letter dated March 17, 2004. The two year limitation period in respect of this first application would have ended on March 16, 2006. Mr. Wry’s second application for determination of catastrophic impairment was on July 21, 2006. Mr. Wry had adequate time to consider the change in law within the two year limitation period from Aviva’s refusal to pay in March 2004.

It is sound social policy that claims should be adjudicated within the general legal and social context of the time the cause of action arose. In M.M. v. Roman Catholic Church of Canada⁸ the appellants argued that they had a vested right to immunity from suit which could not be retroactively affected by the provisions of a new piece of legislation. In that case the court reasoned that limitation periods represent a legislative attempt to create a proper balance between protecting an injured party’s right to file suit and a defendant’s right to have closure. The court was of the opinion that decision makers should be slow to depart from limitation periods that ensure that claims are judged within the general legal and social context of the time the alleged inequitable conduct arose.⁹

The limitation provisions in the Insurance Act and the Schedule strike a balance between allowing applicants to make claims while ensuring that insurers do not face claims indefinitely. A change in law, such as that evidenced by the holistic approach to assessing catastrophic impairments endorsed in Desbiens, can be a factor upon which an applicant can challenge an insurer’s determination that he is not catastrophically impaired. However, disputes concerning the insurer’s determination will be affected by the limitation provisions in the Insurance Act and Schedule. A change in the law will not retroactively affect the operation of a clear limitation period. This would lead to an unfair result.

Forms

Mr. Wry submits that that the three forms that he submitted to Aviva in his application for determination of catastrophic impairment are approved forms for the purposes of the Insurance Act. As such, the forms allow him to re-apply for determination of catastrophic impairment. Aviva does not dispute that the submitted forms are approved forms.

The application for a determination of whether an applicant’s impairment is catastrophic is made to an insurer on an OCF-19 form. Since the submitted forms are approved forms, I disagree with Aviva that the forms dated July 21, 2006 and April 13, 2007 are not forms applicable to

Mr. Wry’s motor vehicle accident on December 16, 2000.

Mr. Wry submitted to Aviva an OCF-19 form dated June 13, 2003. The form required Mr. Wry to record certain basic information and for Mr. Wry’s physician to report on Mr. Wry’s condition. The form does not give the option for Mr. Wry to indicate whether the application is a first application or subsequent application. Subsequent to his first OCF-19 submission, Mr. Wry submitted to Aviva OCF-19 forms dated July 21, 2006 and April 13, 2007. Both these subsequent forms gave Mr. Wry the option to indicate whether the applications were first or subsequent applications. In Gore Mutual Insurance Co. v. 1443249 Ontario Ltd.¹⁰ The court considered the operation of an Excluded Driver Endorsement form issued by an insurer.

The court determined that the Excluded Driver Endorsement form was the legally required form in Ontario. In addition, since the form required that both the insurer and the excluded driver sign the form, the requirement must be given some meaning. In this case as well, the option on the OCF-19s to indicate whether the application is a first or subsequent application must be given some meaning. I find that the approved forms contemplate that an insured person is permitted to make more than one application for determination of catastrophic impairment.

This however, is not determinative of Mr. Wry’s entitlement to submit to Aviva more than one application for determination of catastrophic impairment. In Smith v. Co-Operators General Insurance Company¹¹ the court stated that the practice of using forms prescribed by the Commissioner was no substitute for conformity with legislation. While the forms in this case rightly reflect the legislative intent to allow multiple applications, the forms, in and of themselves, do not grant the right to make multiple applications.

Change in Condition

The Schedule provides for multiple applications for determination of catastrophic impairment in specific cases. The Schedule defines catastrophic impairment as paraplegia, quadriplegia, and loss of one’s arms, legs or vision. The Schedule allows an early application on these grounds. The legislation also defines “catastrophic impairment” as a brain impairment that results in particular scores on the Glasgow Coma Scale or the Glasgow Outcome Scale, 55% or more whole person impairment as well as specific impairments leading to mental and behavioural disorders. The Schedule makes clear that the definitions of catastrophic impairment relating to 55% whole person impairment or a mental or behavioural disorder do not apply to an individual unless that individual’s health practitioner has stated that the individual has stabilized or until three years have elapsed since the accident.

According to this scheme, a person may apply for determination of catastrophic impairment immediately after an accident if that person suffers serious loss of mobility, limb or sight.

The scheme also clearly sets a three year benchmark in recognizing that certain catastrophic impairments will take some time to manifest before a proper assessment can take place.

Aviva asserts that it would be completely inconsistent with the legislative scheme to permit multiple assessments of catastrophic impairment on the same issue which has been previously assessed. Aviva’s position is that an individual is permitted to make more than one application, but under different criteria. For instance, an individual can apply under the 55% or more whole person impairment criterion and be determined not to be catastrophically impaired. The applicant would then have to engage the dispute resolution scheme provided by the legislation, but would not be permitted to re-apply under this category. Aviva asserts that the same individual is, however, permitted to re-apply under the class 4 or 5 behavioural or mental disorder category.

There appears to be a common thread in the specific provisions in the Schedule relating to catastrophic impairment. The legislation recognizes that degrees of impairment change over time. The legislation allows for a period of time to elapse before assessments should take place and also recognizes that there is a range of impairments that can lead to a catastrophic designation. There is nothing in the legislation precluding an insured from re-applying for benefits in situations where the insured’s circumstances change outside of the two year period subsequent to an insurer determining that the insured is not catastrophically impaired.

The legislation does not expressly forbid such applications and clearly contemplates

re-applications. I therefore find it reasonable to argue that an applicant can re-apply for determination of catastrophic impairment under the same criterion where his condition changes over time. This approach would be consistent with the broad and liberal interpretation mandated by the consumer protection nature of insurance legislation.

However, in this case Mr. Wry’s applications for determination of catastrophic impairment do not indicate that his condition changed. His three applications to Aviva are the same in substance and appear to be applications all under the same criterion. Mr. Wry’s first application, dated

June 19, 2003, reference fractures, 4 surgeries, social phobia and Mr. Wry’s physician’s opinion that Mr. Wry suffers a 55% or more whole person impairment. Aviva did not consider Mr. Wry’s second application, dated July 21, 2006. That application states that the reason for the

re-application is that Mr. Wry’s condition has stabilized and not improved and that Mr. Wry suffers a 55% or more whole person impairment. The application goes into no further detail.

Mr. Wry’s third application, dated April 13, 2007, goes into far greater detail than his second application. The third application alleges 55% or more whole person impairment as well as a mental or behavioural disorder, but seems to be a rebuttal of the assessment related to Mr. Wry’s first application for determination of catastrophic impairment. This is problematic because if

Mr. Wry’s third application is a direct challenge of the first determination, then this “rebuttal” should have been used in the dispute resolution process and not on a re-application.

Mr. Wry’s second and third applications to Aviva do not state that he is applying for a determination of catastrophic impairment on different grounds than the first application to Aviva. Nor do the applications show that Mr. Wry is applying based on a change in condition. In this case Mr. Wry has not demonstrated that his condition has changed. Where Mr. Wry disagreed with the determination that he is not catastrophically impaired, his remedy was to utilize the dispute resolution provisions in the Insurance Act and Schedule. To rule otherwise would render meaningless the limitation provisions in subsections 281(5) of the Insurance Act and 51(1) of the Schedule.

Therefore I find that Mr. Wry 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 Insurance Act and subsection 51(1) of the Schedule.

EXPENSES:

The parties made no submissions on expenses. They are encouraged to resolve the issue. If they are unable to do so, they may schedule an expense hearing before me according to the provisions of Rule 79 of the Dispute Resolution Practice Code.

April 17, 2009

Lloyd (J.R.) Richards

Arbitrator

Date