Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2009 ONFSCDRS 96

Appeal P09-00001

OFFICE OF THE DIRECTOR OF ARBITRATIONS

CERTAS DIRECT INSURANCE COMPANY Appellant

and

CHARANJIT GREWAL Respondent

BEFORE: David Evans

REPRESENTATIVES: Kimberley Tye for Certas Direct Insurance Company David Hayward for Mrs. Grewal

HEARING DATE: June 5, 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 arbitrator’s decision dated December 23, 2008 is confirmed and the appeal is dismissed.

2. If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

July 10, 2009

David Evans Director’s Delegate Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Certas Direct Insurance Company appeals the arbitrator’s order that, despite delays in applying for arbitration and in providing notification and information about her income replacement benefit (IRB) claim, Mrs. Charanjit Grewal is not precluded from (a) proceeding to arbitration or (b) receiving IRBs (other than a few months).

II. BACKGROUND

Due to an accident that destroyed her car on April 19, 2004, Mrs. Grewal suffered fractures to her left ankle and right femur, injuries to her back and shoulder, and brain damage and memory loss. She was comatose for three weeks and hospitalized for almost four months.

Mrs. Grewal submitted her Application for Accident Benefits (OCF-1) under the SABS–1996¹ on June 8, 2004. She indicated that she was working full-time as a tax associate with H & R Block and that she was the primary caregiver for her 14‑year-old son Nicholas.

Certas’s adjuster, Mr. Angelo Capano, replied on June 12, 2004 that Mrs. Grewal was ineligible for caregiver benefits because as a full-time worker she could not be a primary caregiver. He also required an Employer’s Confirmation of Income form (OCF‑2).

Significantly, Mr. Capano did not provide information on any possible elections relating to income replacement, non-earner and caregiver benefits ­– the foundation upon which this decision stands.

H & R Block sent Mr. Capano an OCF-2 indicating that Mrs. Grewal had been employed for only 10 of the 52 weeks preceding the accident. As the arbitrator noted, “On that basis, Mr. Capano determined, correctly, that Mrs. Grewal was not eligible for an IRB²” and on August 13, 2004 sent the refusal of IRBs on which Certas relies. (He continued adjusting a possible caregiver benefit claim.) Mrs. Grewal filed her Application for Arbitration regarding IRBs on November 29, 2007, well after the two-year limit for commencing arbitration following a refusal of benefits set out in s. 281.1(1) of the Insurance Act and s. 51(1) of the SABS–1996.

Although the arbitrator noted the refusal was technically correct, she found it invalid because Mr. Capano had not informed Mrs. Grewal that s. 36(2) required her to elect between two possible benefits. The arbitrator found that “Mrs. Grewal was a primary caregiver at the time of the accident and at the time she submitted her OCF-1 to Certas, and that her application for accident benefits contained sufficient information on its face to indicate that, at that time, (June, 2004) she could potentially qualify for either an IRB or a caregiver benefit, as contemplated by subsection 36(2).³” [Emphasis in the original.]

As a result, the arbitrator held as follows:

In conclusion, a refusal of a weekly benefit claim is invalid, even if technically correct at the time, where the refusal is made before the insured person has fulfilled her obligation under subsection 36(2) of the Schedule to elect the weekly benefit “he or she wishes to receive.” There can be no valid refusal where there has not first been a valid election. As a valid election is an informed election, there can be no valid election where an insurer has not met its consumer protection obligations by providing to the insured person information required by the legislation for an informed election. No time limit based on an invalid refusal, including the two-year time limit under section 51 of the Schedule and 281.1(1) of the Insurance Act, can begin to run.

Thus, the refusal was invalid because, even though Mrs. Grewal did ultimately claim IRBs, Mr. Capano had initially denied her the opportunity to elect them over caregiver benefits, and in so doing deprived her of necessary information “including the eligibility requirements of caregiver benefits as compared to IRBs, and including the differing ability tests, the short and long-term consequences of choosing one over the other, and the type of employment income that could be claimed….”

This leads to the second issue: Mrs. Grewal’s delay in providing the additional information, as set out in the arbitration decision, that “she looked after a child after school, for which she was paid $50 per week, and that she worked as a bookkeeper for her stepdaughter, for which she received $7,000, which she claimed as income on her 2004 tax return. Although Certas may not have been aware of it, Mrs. Grewal qualified for an IRB on that basis.”

Mrs. Grewal’s former counsel, Robert Gabor, did not forward an accountant’s letter of November 2005 setting out details of the bookkeeping services until April 2006. However, Mrs. Grewal was required to notify Certas of her intention to claim the benefit within 7 days of the accident or as soon as practicable thereafter [s. 32(1.1)(b)] and, absent a reasonable explanation, Certas could delay determining – and paying – benefits [s. 31(1) and s. 32(6)].

Nonetheless, the arbitrator found that Mrs. Grewal had a reasonable explanation for her failure to provide the information because, according to the arbitrator, “she did not appreciate its importance to her entitlement to an IRB over a caregiver benefit, because Certas never provided her with information to make an informed decision in her own best interest.”

The arbitrator noted that Mr. Gabor had no explanation for his delay in forwarding the information he had received in November 2005 until April 2006, so she determined “the fair thing to do would be for Certas to calculate the amount of Mrs. Grewal’s IRB taking into account all of her pre-accident income from H & R Block, babysitting and bookkeeping, and for Certas to be entitled to suspend benefits from November 16, 2005 [to] April 21, 2006.”

Mrs. Grewal did not appeal that suspension.

III. ANALYSIS

Certas submits that Mrs. Grewal should be (a) either entirely precluded from claiming IRBs due to the late filing for arbitration, or at least (b) precluded from claiming any IRBs between the date of the accident and April 21, 2006, when it finally received the complete information regarding her employment.

Regarding the limitation period, Certas submits that the election and the two-year limitation period are separate issues and that, as stated by the arbitrator, its refusal was substantively and technically correct in that, based on the information it had in August 2004, Mrs. Grewal did not qualify for IRBs. Accordingly, it submits, the arbitrator erred in finding its refusal invalid.

However, the arbitrator carefully drew the links in the chain between Certas’s failure to advise Mrs. Grewal of the election and the law regarding refusals. The starting point, of course, is Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, which held that an invalid refusal – even if the applicant is represented and the insurer relied on an approved form – does not start the two-year time limit running. As discussed in RBC General Insurance and Antony, (FSCO P03-00023, July 22, 2004), the requirements of s. 32 to provide an applicant with “a written explanation of the benefits available” [s. 32(2)(b)] and especially “information to assist the person in applying for benefits” [s. 32(2)(c)] have been held to mean that the insurer must provide information on the 30-day time limit for applying for benefits. Antony then considered the requirement to provide “information on any possible elections relating to income replacement, non-earner and caregiver benefits” [s. 32(2)(d)]. Antony held that, if the information required by s. 32(2)(d) was not provided, then the insured person could not be held to any election between benefits made under s. 36. The logical extension, as stated by the arbitrator, is that if the insured person is not even provided with an election when it was required, then she cannot be held to a refusal of the benefit she had no choice in seeking.

Certas relies on the steps in the application process, as set out in Antony, to submit that due to the incompleteness of the forms submitted by Mrs. Grewal it was not required to provide the election form until 2006, which it did after Mr. Gabor provided the additional information. However, as noted in Antony, the steps in the process are often compressed where the initial information provided by the insured person suggests there is an election to be made. Mrs. Grewal did more than simply give notice under s. 32(1) but provided an OCF‑1, albeit without the certificate of employment. The key fact found by the arbitrator was that in June 2004 Mrs. Grewal was indeed the primary caregiver of her son. Accordingly, s. 32(2)(d) required Certas to provide her with information regarding the possible election between caregiver and income replacement benefits, which it failed to do. The focus of the arbitrator was on June 2004 and what should have been done then, not on the incompleteness of the information provided in August 2004. As a practical matter, the steps were compressed, as noted in Antony, so I see no error when the arbitrator stated that in June 2004 the obligation on Certas included providing Mrs. Grewal with the OCF‑10 Election Form as well as the information to assist her in applying for and electing a benefit under ss. 32(c) and (d).

The insurer submits that

If Certas had provided Ms. Grewal with an election upon receiving her OCF‑1, and had Ms. Grewal elected to receive income replacement benefits based on her H&R Block earnings only, she would have not been entitled to such benefits due to the information that she subsequently provided, which indicated she had not worked 26 out of the previous 52 weeks. The Arbitrator’s decision on this issue would have required Certas to have proposed a misleading election between weekly benefits to Ms. Grewal, one of which she was not even eligible for.

However, this submission is beside the point. By mistakenly deeming that Mrs. Grewal was not entitled to caregiver benefits, Certas failed to provide her with information about the eligibility requirements for the different benefits, in particular the types of income that could be considered for an IRB. The important thing in June 2004 was to provide the required information.

Accordingly, I am not persuaded that the arbitrator erred in finding that the limitation period did not preclude Mrs. Grewal from proceeding to arbitration.

I will deal briefly with the issue of reasonable explanation. Subsection 31(1) provides that a failure to comply with a time limit set out in Part X, the Procedures for Claiming Benefits, “does not disentitle the person to a benefit if the person has a reasonable explanation.”

Certas submits that Mrs. Grewal had the information regarding the bookkeeping and babysitting from the date of the accident onwards, so she should not be entitled to IRBs between that date and April 21, 2006. However, as noted above, the arbitrator specifically found that there was a reasonable explanation for the delay, in that Certas failed to provide her with the information to make an informed decision in her own best interest. She referred to cases dealing with this issue, such as Horvath and Allstate Insurance Company of Canada, (FSCO A02-000482, June 9, 2003). She considered the believability of the explanation, the balance between prejudice to the insurer and hardship to the claimant, and the equity of relieving against the consequences of missing the time limit. The arbitrator directed herself to the law and applied it to the facts in this case, and accordingly I have no reason to interfere.

The appeal is therefore dismissed.

IV. EXPENSES

If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

July 10, 2009

David Evans Director’s Delegate Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Under s. 4 of the SABS, an insured person must work at least 26 of 52 pre-accident weeks to qualify for IRBs. Eventually, as discussed below, Mrs. Grewal informed Certas that she had performed other work during the 52 weeks before the accident.
3. 3In her final submissions, counsel for Certas stated that Nicholas had moved out of his mother’s home to Toronto as of September 4, 2004. However, this is not evidence and in any event the relevant time period for purposes of this preliminary issue is the period leading up to the August 13, 2004 refusal on which Certas relies. [Footnote in the original.]