Norbert J. Boyer v. Allstate Insurance Company of Canada, 2009 ONFSCDRS 65

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2009 ONFSCDRS 65

FSCO A03-001739

BETWEEN:

NORBERT J. BOYER

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A MOTION

Before: Eban Bayefsky

Heard: By telephone conference call on January 9, 2009.Written submissions were received by January 23, 2009.

Appearances: Rehan Khalil for Mr. Boyer

Mark L.J. Edwards for Allstate Insurance Company of Canada

Issues:

The Applicant, Norbert J. Boyer, was injured in a motor vehicle accident on July 24, 2001. He applied for and received statutory accident benefits from Allstate Insurance Company of Canada (“Allstate”), payable under the Schedule.¹ Allstate terminated weekly income replacement benefits on July 23, 2003. The parties were unable to resolve their disputes through mediation, and Mr. Boyer applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The arbitration took place on January 16-19, and June 9, 12, 13, 15 and 22, 2006, with written submissions being received by July 7, 2006. On May 30, 2007, I issued the following orders in the arbitration:

Mr. Boyer is entitled to weekly income replacement benefits from July 24, 2003.
The deduction of Mr. Boyer’s post-accident income should not be calculated on the basis of his 2004 business expenses or the assistance he received from his wife in 2003 and 2004.
Mr. Boyer is entitled to receive a medical benefit for services provided by Dr. Hoff, in the amount of $13,080.
Allstate is liable to pay a special award in the amount of $5,000.
Mr. Boyer is entitled to interest on the income replacement benefits that were reduced to 50% (to the extent that interest has not already been paid on this amount), on Dr. Hoff’s outstanding account of $13,080 and on the income replacement benefits owing as of July 24, 2003.
If required, the parties may make submissions on the issue of expenses in accordance with the procedure set out in Rule 79 of the Dispute Resolution Practice Code.

I subsequently issued decisions on January 17, 2008 and June 25, 2008 on the matter of arbitration expenses.

An issue then arose between the parties concerning my May 30, 2007 award of interest on Dr. Hoff’s outstanding account (which was for six treatment plans dated September 14 and November 23, 2001, May 3 and September 13, 2002, and January 7 and March 7, 2003). I responded to the parties’ concerns on July 24, 2008 as follows:

Mr. Kazdan’s initial correspondence of July 3, 2008 indicated that the parties were jointly requesting further direction on my May 30, 2007 award of interest on Dr. Hoff’s outstanding account. I subsequently asked whether the parties wished to make written submissions on this issue. Mr. Edwards sought a brief hearing on the matter. Mr. Kazdan responded that Allstate was not entitled to “reargue” or “reopen” this issue, but continued to seek further direction on my May 30, 2007 order.

I do not understand Mr. Edwards to be seeking to reopen the question of Allstate’s obligation to pay interest on Dr. Hoff’s outstanding account. The parties seem to be at odds over the date from which interest on Dr. Hoff’s account ought to be paid, and they have both sought further direction on this matter. I am prepared to convene a brief hearing to canvass this issue.

I heard the motion on January 9, 2009. I was concerned that the parties had not addressed a particular appeal decision in their submissions and wrote to counsel the same day, as follows:

Further to the motion heard this morning, I note that neither party referred to the arbitration appeal decision of Coachman Insurance Company and Hejnowicz (FSCO P05-00024, August 3, 2006), which appears to be directly relevant to the issue in dispute. I wish to receive written submissions from the parties on this case in accordance with the following schedule:

Allstate’s submissions by January 16, 2009

Mr. Boyer’s response by January 23, 2009

Allstate’s reply, if any, by January 30, 2009

I received Allstate’s submissions on January 16, 2009 and Mr. Boyer’s response on January 23, 2009. Allstate did not provide reply submissions.

The issues in this hearing are:

Is Allstate required to pay interest on Dr. Hoff’s outstanding account from the date it received the relevant treatment plans or from the date of my order (May 30, 2007), pursuant to section 46(2) of the Schedule?

Result:

Allstate shall pay interest to Mr. Boyer on Dr. Hoff’s outstanding account of $13,800 (less the cost of the final treatment plan, if paid in accordance with the Schedule) from the date it received the applications or invoices for the relevant services, whichever is earlier.

EVIDENCE AND ANALYSIS:

Background

Section 46(1) of the Schedule states that an amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under Part X of the Schedule (“Procedures for Claiming Benefits”). Section 46(2) states that if payment of a benefit under the Schedule is “overdue,” the insurer shall pay interest on the overdue amount for each day the amount is overdue “from the date the amount became overdue” at the rate of 2 per cent per month compounded monthly. Section 38 of the Schedule (as it stood at the time the relevant treatment plans were submitted to the Insurer) states, in part, as follows:

(1) Before expenses in respect of which a medical or rehabilitation benefit may be payable are incurred, the insured person shall submit an application for the benefit to the insurer.

(2) The application must include a treatment plan.

(7) On receiving the application, the insurer shall promptly determine whether the insurer is required to pay for the goods and services contemplated by the treatment plan.

(8) If no notice is given under subsection (5), the insurer shall, within 14 days after receiving the application, give the insured person a notice,

(a) stating that,

(i) the insurer will pay for all goods and services contemplated by the treatment plan,

(ii) the insurer will pay for such goods and services contemplated by the treatment plan as are specified in the notice, or

(iii) the insurer will not pay for any goods and services contemplated by the treatment plan…

(11) If the application is not withdrawn under subsection (9), the insurer shall pay for goods and services described in the notice under subclause (8)(a)(i) or (ii) within 30 days after receiving an invoice for them.

(14) Subject to the determination of a dispute relating to the expense in accordance with sections 279 to 283 of the Insurance Act,

(b) if a report from the designated assessment centre does not state that, in the opinion of the person or persons who conducted the assessment, an expense is reasonable and necessary for the insured person’s treatment or rehabilitation, the insurer is not required to pay for the expense.

(17) If an insured person incurs expenses in respect of which a medical or rehabilation benefit may be payable without complying with subsection (1), (2) or (3), the insured person shall submit to the insurer an application for payment of the expenses that complies with subsections (2) and (3) within 30 days after incurring the expenses.

(18) Despite subsection (1), if the insurer receives an application under subsection (17) the insurer shall, within 30 days after receiving the application,

(a) pay the expenses; or

(b) give the insured person notice of its reasons for not paying the expenses.

As a preliminary matter, Mr. Khalil argued that my initial order concerning interest on Dr. Hoff’s account was clear, that Allstate was, in effect, seeking a variation of that order and that this ought to have been done much earlier. Rule 61 of the Dispute Resolution Practice Code (the “Code”) states, in part, that a party may apply to the Director to vary an arbitration order if there has been a material change in the insured’s circumstances, evidence not available on the arbitration has become available or there has been an error in the order. As indicated in my July 24, 2008 correspondence to the parties, the parties “jointly requested” further direction on my order on interest on Dr. Hoff’s account. I did not see Mr. Edwards as seeking to reopen the question of Allstate’s obligation to pay interest on this item. Rule 65.6 of the Code states, in part, that an arbitrator may “at any time clarify a decision or order that contains a[n]…ambiguity….” At the motion, Mr. Edwards indicated that the issue concerning interest on Dr. Hoff’s account had, in fact, been raised with Mr. Kazdan well before it was brought to my attention. In all of the circumstances, I find that the parties have jointly requested a clarification of the date from which interest accrues and that this request was made in a timely manner. I find that I have the jurisdiction to address this matter.

Mr. Edwards noted that Dr. Hoff’s treatment plans had been denied as a result of Dr. Prendergast’s February 13, 2002 medical-rehabilitation DAC which (as set out in my initial decision) found that Dr. Hoff’s recommended treatment was not reasonable and necessary. Mr. Edwards submitted that, pursuant to section 38 of the Schedule, given the “negative” DAC report, Allstate had no obligation to pay for the disputed treatment plans, and the treatment plans did not become “overdue,” until I ordered otherwise on May 30, 2007. Mr. Edwards relied essentially on the following passages from the appeal decision of Pafco Insurance Company Limited and Langdon (FSCO P02-00017, July 17, 2003), Appeal:

At the risk of seeming to over-simplify an issue that has engendered a lot of debate, s. 46(1) of the SABS-1996, defines overdue. It states “[a]n amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this Part”…. Part X, which is entitled “Procedures for Claiming Benefits,” contains the rules governing payment of the various benefits contained in the SABS. The specific rules relating to medical and rehabilitation benefits are found in s. 38. Therefore, for our purposes, s. 46(1) can be read as follows:

An amount payable in respect of a medical benefit is overdue if the insurer fails to pay the benefit within the time required by s. 38.

In light of this, the first step in establishing a claim for interest pursuant to s. 46(2) is identifying the applicable payment obligation imposed by s. 38. The second step is to ascertain if the insurer has fulfilled that obligation within the stipulated time. I have highlighted the words “within the time required,” because they suggest to me that careful attention must be paid to the point at which the insurer is obliged to make a payment. This temporal connection is reinforced by the wording of s. 46(2), which states that interest is payable “from the date the amount became overdue.”

With one exception, I discuss below, if a disputed expense is submitted to a DAC assessment, and the report does not state the expense is reasonable and necessary, s. 38 does not impose any payment obligations, short of a finding by an adjudicator that a benefit is owing. [footnote omitted] In the absence of an obligation to pay in advance of the order, there is no foundation for a finding that the amount was payable prior to the order.

…I am satisfied that if the insurer refers a dispute over medical benefits to a DAC, which delivers a negative report, but a judge or arbitrator later finds that the treatment is reasonable and necessary, the insurer will be responsible for payment of the treatment, but will not be responsible for the payment of interest pursuant to s. 46(2), prior to adjudication because the amount awarded was not overdue before that time.

Mr. Edwards also noted the following comments of the Ontario Court of Appeal in Mercier v. Royal & SunAlliance Insurance Company of Canada (2004), 2004 CanLII 5551 (ON CA), 72 O.R. (3d) 94:

Unlike the situation in Pafco…, in the present case there was an ongoing requirement to pay. The ongoing obligation was established by operation of s. 62(2)….Unlike Pafco, where the medical benefits in question were a disputed expense, weekly benefits are benefits that an insurer is required to pay.

It is significant also that Director’s Delegate McMahon expressly distinguished Pafco from Attavar [Attavar v. Allstate Insurance Company of Canada (2003), 2003 CanLII 7430 (ON CA), 63 O.R. (3d) 199 (Ont. C.A.)] on the basis that the provisions governing medical benefits contain explicit rules concerning whether such payments are overdue. This accords with Laskin J.A.’s comments [in Attavar]…that absent express language that a payment is not overdue, s. 68 applies.

In response, Mr. Khalil relied essentially on the following passages from the arbitration decision of Abulibdeh and RBC General Insurance Company (FSCO A05-001249, August 1, 2007):

I am thus persuaded, on a balance of probabilities, that the treatment plans, enumerated above, were reasonable and necessary.

Interest

Section 46 of the Schedule provides that an amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under Part X. Subsection 38(18) of the Schedule which was in place at the time of the accident provides that within thirty days of receiving the application, the insurer shall pay the expenses or give the insured person notice of its reasons for not paying the expense. Subsection 238(1) falls within Part X.

Amendments effective March 1, 2006 state, pursuant to subsection 38(17.2) that an insurer shall pay an expense in respect of medical or rehabilitation benefits it has agreed to pay or that it is required under this section to pay within thirty days after receiving an invoice for the expense. I find that this provision simply clarifies its predecessor.

Subsection 46(2) provides that if payment of a benefit is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of two per cent per month, compounded monthly.

Accordingly, I find that RBC shall pay the Applicant interest on the amount set out in each treatment plan at the rate of two per cent per month, compounded monthly, from thirty days after the receipt of each treatment plan, to the date of payment.

As noted above, I asked the parties to address the appeal decision of Coachman Insurance Company and Hejnowicz (FSCO P05-00024, August 3, 2006). In that case, the Director’s Delegate considered the noted passages from Mercier and stated, in part, as follows:

These comments fall short of an endorsement. As the issue in Mercier was interest on weekly benefits payable under s. 62 of the SABS-1994, the court was not required to engage in a close reading of s. 38 of the SABS-1996. In any event, the distinction is valid if “the provisions governing medical benefits contain explicit rules concerning whether such payments are overdue.” I will turn to that task now.

In summary, I do not accept that the requirement to pay medical benefits depends on a positive DAC report or a favourable decision by a judge or an arbitrator. Despite the differences between weekly benefits and medical benefits, s. 38 imposes a requirement to pay within 30 days of receiving the invoice or application for benefits to which the claimant is entitled. This obligation is not displaced by a DAC referral or the commencement of dispute resolution proceedings.

Mr. Edwards submitted that the appeal decisions in Hejnowicz and Langdon are in direct conflict with each other and that I am not bound by Hejnowicz despite the fact that it was decided more recently than Langdon. Mr. Edwards noted that the Court of Appeal in Mercier “specifically opined” on the issue in the instant case, and that the Director’s Delegate in Hejnowicz failed to follow the Court’s “obiter determination.” Mr. Edwards, therefore, submitted that I should follow Langdon and Mercier. Mr. Khalil submitted that Hejnowicz was correctly decided and that the Director’s Delegate in that case was not bound to follow the comments in Mercier, which were only obiter.

Findings

In my view, I am bound by the appeal decision in Hejnowicz. That case dealt directly with the issue in the present case. Hejnowicz was decided after both the appeal decision in Langdon and the Court of Appeal decision in Mercier. To the extent that appeal decisions conflict, I do not consider arbitrators at liberty to choose between them.² In my view, a later appeal decision that deals directly with the issue and reasoning of a previous appeal decision and that reaches a contrary conclusion amounts to an overturning of the previous decision. This is particularly the case where, as here, the later appeal decision directly addresses judicial commentary on the earlier appeal decision.

If, however, I am wrong in this view, I prefer the more recent appeal decision, Hejnowicz. I agree with the observation in Hejnowicz that the Court of Appeal’s comments in Mercier on the reasoning in Langdon “fall short of an endorsement” and that the Court was “not required to engage in a close reading of s. 38 of the SABS-1996.” For this reason, I do not accept Mr. Edwards’ submission that the Court of Appeal in Mercier “specifically opined” on the issue in the instant case. I also do not accept Mr. Edwards’ suggestion that the Director’s Delegate in Hejnowicz was bound to follow the Court of Appeal’s reasoning in Mercier given his acknowledgement that the Court’s determination was “obiter.” I note as well that Hejnowicz is somewhat closer to the situation in the present case in that (as observed by the Director’s Delegate in Hejnowicz) the Langdon appeal did “not consider the validity or persuasiveness of any particular DAC report because this was irrelevant to [the] reasoning [there].” As noted in my initial decision in this matter, I specifically considered the “validity or persuasiveness” of Dr. Prendergast’s DAC assessment of the reasonableness of Dr. Hoff’s proposed treatment and, contrary to Dr. Prendergast, concluded that that treatment was reasonably required as a result of the accident.

Regarding the specific reasoning of Hejnowicz, I agree with the observation there that the issue of an insurer’s obligation to pay for the costs of a treatment plan arises initially from sections 14 (medical benefits), 15 (rehabilitation benefits) and 38(7) (an insurer’s determination of its requirement to pay), not a positive DAC or an arbitrator’s decision. Similarly, the Director’s Delegate in Hejnowicz notes that there is nothing in section 46 that the requirement to pay interest is “restricted to benefits that are payable pending dispute resolution.” It is noted that there is no authority for the view that a “negative DAC prevents interest accruing on weekly benefits found owing by an arbitrator” and that this suggests that interest also flows from a finding of entitlement to medical and rehabilitation benefits, “despite a negative DAC.” Finally, it is stated that sections 38(2) to (6) set out the requirements for the initial application for medical and rehabilitation benefits and that “nowhere does s. 38 state that payment is not overdue.” In my view, these points are important in relation to the finding in Langdon that a “plain reading of the [relevant] provisions” supports the view that interest does not accrue following a negative DAC.

They are also relevant to the comment in Langdon that the “rationale for the interest provisions in the SABS…supports [the] conclusion that interest should not be payable in the event of a negative DAC report.” This was based on the view that interest under the SABS is punitive in nature. However, as indicated in Hejnowicz (and as more recently enunciated in Sorokin v. Wawanesa Mutual Insurance Company³), interest under the SABS is “mandatory, compensatory, and flows from a finding that benefits were payable and were not paid on receipt of the required application documents.” In my view, therefore, both the language of section 38 and the basic purpose of interest under the SABS supports a finding that interest is payable on treatment plans despite a negative DAC report.

Given, therefore, that Allstate’s obligation to pay interest on Dr. Hoff’s outstanding account did not arise as of the date of my initial order of May 30, 2007, and that the appropriate time frame for the accrual of interest was Allstate’s receipt of the relevant treatment plans, the question is the precise date from which interest should be paid. Hejnowicz and Langdon, as well as Abulibdeh, are consistent in indicating that, pursuant to sections 38 and 46, interest is payable from 30 days of the insurer’s receipt of the invoice or application for benefits. I did not receive evidence (either at the initial hearing or during the present motion) about the dates on which Allstate received the invoices or applications for Dr. Hoff’s treatment. In the circumstances, I find it reasonable to order Allstate to pay interest on the treatment plans from the date it received either the applications or invoices for them, whichever is earlier. One caveat on this is that Mr. Edwards indicated during the motion that the last of Dr. Hoff’s treatment plans (dated March 7, 2003) had, in fact, been paid. I, therefore, order Allstate to pay interest on Dr. Hoff’s outstanding account of $13,800 (less the cost of the final treatment plan, if paid, in accordance with the Schedule) from the date it received the applications or invoices, whichever is earlier.

EXPENSES:

The parties did not address the issue of expenses. I urge them to attempt to resolve this matter. If required, they make submissions on this issue in accordance with the procedure set out in Rule 79 of the Dispute Resolution Practice Code.

May 29, 2009

Eban Bayefsky

Arbitrator

Date