Neutral Citation: 2010 ONFSCDRS 135 FSCO A09-000900

BETWEEN:

SIVAKUMARU SINNAPU Applicant

and

ECONOMICAL MUTUAL INSURANCE COMPANY Insurer

REASONS FOR SUPPLEMENTARY DECISION

Before: Arbitrator John Wilson Heard: By telephone conference call on November 26, 2010.

Appearances: Alexander Voudouris for Mr. Sinnapu Ian D. Kirby for Economical Mutual Insurance Company

Issues:

The Applicant, Sivakumaru Sinnapu, was injured in a motor vehicle accident on June 22, 2006. He applied for statutory accident benefits from Economical Mutual Insurance Company (“Economical”), payable under the Schedule.¹

The parties were unable to resolve their disputes through mediation, and Mr. Sinnapu applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Mr. Sinnapu requested interim benefits at a hearing held on September 11, 2009.

I granted an order for interim benefits on October 16, 2009.

The substantive hearing in this matter was scheduled to commence on January 25, 2010.

Prior to the hearing, the parties advised that they had resolved the substantive issues in the arbitration, but were unable to reach an agreement on the issue of Mr. Sinnapu’s claim for a special award.

The issue of a special award went to a full hearing on Januray 28, 2010. Subsequently, on July 30, 2010, I made the order for a special award as follows:

Economical shall pay Mr. Sinnapu a special award, in accordance with subsection 282(10) of the Insurance Act, at an amount to be determined by the parties, at the rate of 40 per cent of the income replacement benefits and interest that were outstanding at the time the issue of IRBs was finally resolved by the parties.²

As noted in the order, I left the exact amount payable to be agreed upon, or in the absence of agreement, to be determined by me. I did the same for the issue of expenses.

At the request of the parties, a date was set for a resumption of the hearing to deal with expenses: November 26, 2010, by teleconference.

At the outset of the telephone conference, Mr. Kirby, counsel for Economical, advised that the issue to be decided was not the payment of expenses, but whether, given the wording of my order, any amount was payable by Economical by way of special award. This change of issue was a surprise to counsel for Mr. Sinnapu. Certainly, no notice had been given to the Insured or to the Commission.

Mr. Voudouris, however, was content to let Mr. Kirby raise the issue. Consequently, Mr. Kirby elaborated that, following the interim award, Economical had paid up all arrears of benefits with interest. In Mr. Kirby’s view, there were no benefits and interest that were outstanding at the time the issue of IRBs was finally resolved by the parties.

Consequently since 40% of zero was zero, no special award was payable. The issues in this hearing are:

Were there benefits and/or interest outstanding at the time the issue of IRBs was finally resolved by the parties.

Result:

There were benefits and interest that were outstanding at the time the issue of IRBs was finally resolved by the parties.

EVIDENCE AND ANALYSIS:

Mr. Kirby, with the agreement of Mr. Voudouris, faxed a copy of the covering letter dated September 29, 2009, from Economical to Mr. Sinnapu, which accompanied the payment of the outstanding amounts. With the consent of both parties, I agreed to consider this faxed document as an exhibit in this resumed hearing.

Mr. Voudouris took the position that, although Economical may have paid up benefits prior to the resolution of the issue, that was irrelevant. Any amount paid to Mr. Sinnapu was by virtue of the interim benefit order, repayable, should Mr. Sinnapu not be successful in his substantive claim. As long as that hearing was pending, and the benefits potentially repayable, an amount was outstanding.

The interim benefit order referenced by Mr. Voudouris reads as follows:

Economical shall pay Mr. Sinnapu interim benefits of $398.68 per week retroactive to July 7, 2009 and ongoing until a final arbitration decision is rendered, or the matter is finally settled.
These benefits are repayable to Economical (my emphasis) in the event that he is unsuccessful in his claim.
The issue of expenses may now be spoken to, provided that the parties give notice of their intention within 30 days.

This issue turns on how one should interpret the words “income replacement benefits and interest that were outstanding at the time the issue of IRBs was finally resolved by the parties.”

There is no question that a payment was made to Mr. Sinnapu on September 29, 2009. The real question is just how that payment should be construed. Economical says that it is clear from the covering letter that the payment discharged any outstanding amounts then owing to Mr. Sinnapu. I disagree.

The September 29, 2009 letter opened with the following paragraph:

We have received the decision of Arbitrator John Wilson of the Financial Services Commission of Ontario, dated September 18, 2009. Arbitrator Wilson is satisfied that you have met the onus for an interim order, in your favour.

It would appear from the above that it was the author’s intention that the letter should be read in conjunction with my interim benefit decision, and the accompanying order. However, the following paragraph is slightly more equivocal:

At this time, Economical Insurance is prepared to reinstate your weekly benefit from the date of stoppage, to present date, inclusive of interest. Separately, payment will follow in the amount of $16345.86, representing the income replacement benefit owing from January 5 to October 4, 2009. A separate payment of $2989.67 will also follow, representing interest on the overdue amount.

Taking this second paragraph by itself, it could possibly be inferred that Economical is making two payments without conditions, payments upon which no right of repayment is claimed. That, however, would be to take the paragraph out of context, both the context of the entire letter and the context of the ongoing litigation between Mr. Sinnapu and Economical. At best one could say that the second paragraph is equivocal.

It is also important to point out that, in general, there is a presumption that payments which could be described as “ex gratia” payments, on account from insurers to insureds, are in the absence of specific releases and directions, repayable, should entitlement not be established. To this end Finlayson J.A. observed:

Insofar as an order to repay any overpayment is concerned, it appears to me that an obligation to make such a repayment is implicit in the nature of the application for what amounts to an interim payment on account. However, if such an order is necessary, it should be made by the panel hearing the appeal.³

Although the September 29, 2009 letter speaks to conditions for the ongoing payment of benefits, it is silent as to whether Economical specifically waives its right to repayment.

At the same time it should be remembered that the reference to repayment in the interim order was there at Economical’s own request. It is hardly clear that the right to repayment is waived by insisting on clear wording in an order, and then, subsequent to the order, merely making a payment without any accompanying reference to a waiver of the repayable condition.

As Killeen J. stated in another case involving the interpretation of the payment of funds to an insured in an insurance dispute:

Putting the best possible gloss on this letter for the insurer, it is an ambiguous document and, as it seems to me, no one should be able to act on it as an unequivocal final settlement offer on an all-in basis under the Rule.⁴

It is also important to note that there is no evidence that, as of September 29, 2009, the date of the payment, Economical took any steps to obtain an order foreclosing Mr. Sinnapu’s claim for income replacement benefits on the basis that its payment had removed the issue from the dispute. Rather the substantive hearing of all of the issues remained scheduled for four days commencing January 25, 2010, until January 21, 2010, when a revised Notice of Hearing was issued by the Commission.

Nor does the Insurer’s position explain why it undertook settlement discussions with regard to this supposedly unconditional resolution in January of 2010 when payments were apparently being made on a regular basis and all arrears had been paid.

If I understand Mr. Voudouris’ submissions correctly, he accepts that, but for the Insurer’s claim for repayment, there would be no income replacement benefit dispute to refer to arbitration. There was, of course, still a special award claim as well as a claim for expenses. I agree with this analysis. However, the existence of the repayment provision is not inconsequential.

Economical’s position on whether any amounts were “outstanding” flies in the face of the plain meaning of that word. The Canadian Oxford Dictionary defines “outstanding” as follows:

1 a conspicuous, eminent, esp. because of excellence. b (usu. Foll. by at, in)…. 2 (esp. of a debt) not yet settled ($200 still outstanding).

Patently, until the January settlement by which Economical renounced its right to claim back all monies paid to Mr. Sinnapu, the matter was “not yet settled.”

The Insurer cannot have it both ways. It can’t insist on a specific repayment provision in the interim order and then contend that a payment under that order, containing no reference to repayment, somehow waived that specific condition and made the payment unconditional. It strikes me that Economical’s position on this is little more than clever sophism expressed in the hope of subverting the intention of the arbitral order.

If the condition of repayment was still attached to the amount paid on September 29, 2009 (and in the absence of credible evidence to the contrary, I am inclined to believe that it did), I find it reasonable to conclude that the payments remained outstanding until the payment was made unconditional, either by agreement or by order. In other words, I find that the issue of income replacement benefits was not yet settled and that all monies owed under heading, remained “outstanding.”

To find otherwise would fly in the face of the spirit of the Special Award provisions of the Insurance Act. Subsection 282(10) of the Act mandates an award even when there is only a finding of unreasonable delay in paying a benefit. In this context, an award of zero dollars, as urged by Mr. Kirby, would be an absurdity.

It is important to understand this aspect of special awards and to use that understanding to inform any ambiguities surrounding the determination of this special award.

Essentially, since there is no dispute that arrears in benefits were paid up at some time before the scheduled substantive hearing, the special award claim in this particular matter is about delay.⁵ In my previous decision in this matter, there has already been a finding that “the decision to discontinue benefits, based on this opinion, was unreasonable, a conclusion that in accordance with subsection 282(10) of the Insurance Act mandates a special award.”

The finding that the funds conditionally transmitted to Mr. Sinnapu on September 29, 2009 remained “outstanding” as long as the obligation to repay remained live; that is until the final settlement of this issue in January 2010, is not only supportable on the facts, but is also in line with the purposes of section 282(10) of the Insurance Act as outlined in the jurisprudence.

I am advised that once the question of “outstanding benefits” has been resolved, the parties should be in a position to determine the exact amount payable under my order. Consequently, I leave this to the parties to deal with. However, should an agreement not be forthcoming, I may be spoken to on this issue.

EXPENSES:

Having found that Economical’s position on this issue is not sustainable, I would be inclined to order that Mr. Sinnapu is entitled to his costs in arguing this unforeseen issue. However, I leave the parties to deal with expenses between themselves. Should no agreement be forthcoming I may be spoken to on this issue provided that notice is given within 30 days of the delivery of this decision.

December 3, 2010

John Wilson Arbitrator

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

There were benefits and interest that were outstanding at the time the issue of IRBs was finally resolved by the parties.
Since the question of “outstanding benefits” has been resolved, the parties should be in a position to determine the exact amount payable under my order. Consequently, I leave this to the parties to deal with. However, should an agreement not be forthcoming, I may be spoken to on this issue.
I leave the parties to deal with expenses between themselves. Should no agreement be forthcoming I may be spoken to on this issue provided that notice is given within 30 days of the delivery of this decision.