Financial Services Commission des Commission services financiers of Ontario de l’Ontario

Neutral Citation: 2010 ONFSCDRS 15

FSCO A09-000450

BETWEEN:

HAN YONG SHEN Applicant

and

SECURITY NATIONAL INSURANCE CO./ MONNEX INSURANCE MGMT. INC. Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Rosemary Muzzi

Heard: November 12, 2009 at FSCO

Written submissions were received from Security National on September 17, 2009 and November 3, 2009. Written submissions were received from the Applicant on October 20, 2009

Appearances: Anthony Ngai for Mr. Shen Donata Di Iorio for Security National Insurance Co./Monnex Insurance Mgmt. Inc.

Issue:

Is Han Yong Shen, the applicant, precluded from proceeding to arbitration because his application for mediation was filed beyond the two-year limitation period set out in the Insurance Act and subsection 51(1) of the Schedule?

BACKGROUND:

The applicant was injured in a motor vehicle accident on September 4, 2003. He applied for and received statutory accident benefits from Security National Insurance Co./Monnex Insurance Mgmt. Inc. (“Security National”), payable under the Schedule.¹ In August 2005, the applicant submitted an application for approval for a neuropsychological assessment. By Explanation of Benefits Payable dated September 1, 2005, Security National informed the applicant that it did not approve the assessment determining that it was unreasonable and unnecessary. An assessment by a Designated Assessment Centre (“DAC”) never took place. In early 2006, the applicant underwent a neuropsychological assessment conducted by Dr. Gilman. In September 2006, Security National received a copy of Dr. Gilman’s neuropsychological assessment report and an invoice that it refused to pay. The applicant filed an application for mediation of Security National’s refusal to approve the assessment that was received by the Commission on January 31, 2008.

The parties were unable to resolve their dispute through mediation. Security National raised a preliminary issue pursuant to section 51(1) of the Schedule arguing that the applicant failed to apply for mediation within the two-year limitation period, the approval of the neuropsychological assessment having been denied in September 2005. The applicant then applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Result:

The applicant is precluded from proceeding to arbitration because his application for mediation was filed beyond the two-year limitation period set out in the Insurance Act and section 51(1) of the Schedule.

FACTS:

I heard no oral evidence in respect of this issue. Instead the applicant relied on the facts as set out by Security National in its Preliminary Issue Record by way of affidavit and its accompanying exhibits, with a few exceptions. I set out the most relevant undisputed facts and some of the applicant’s exceptions below.

In August 2005, the applicant submitted an application for approval for a neuropsychological assessment (OCF-22) to be conducted by Dr. Gilman. By Explanation of Benefits Payable (OCF-9) dated September 1, 2005, Security National informed the applicant that it did not approve the assessment determining that it was unreasonable and unnecessary. Security National advised that it was prepared to arrange an assessment by a DAC. The applicant advised Security National of its choice of DAC on September 6, 2005. Two weeks later, Security National advised the applicant that no neuropsychologist was available at the chosen DAC and that another choice was necessary. The applicant responded with an alternative DAC choice that same day. The DAC assessment never took place.

There is some disagreement between the parties about subsequent events. Security National submits that its adjuster sent a fax to the applicant on October 12, 2005 confirming their telephone conversation in which the applicant requested that the DAC assessment not proceed as he wished to settle the matter. The applicant admits that perhaps there had been a conversation between the applicant and Security National wherein the parties agreed to attempt to settle the file well in advance. The applicant does not agree that he requested that the DAC assessment be cancelled.

The applicant submits that it made an offer of settlement to Security National’s adjuster on or about January 4, 2006 and that Security National never responded with a counter offer. Security National provides no responding submission in respect of this assertion by the applicant.

It appears from the materials before me that the next exchange of information between the parties occurred on January 26, 2006 when Security National was advised of the applicant’s two appointment dates for a neuropsychological assessment by Dr. Gilman. On February 7, 2006, Security National informed the applicant and Dr. Gilman that it did not approve the assessment and therefore would not pay the associated costs. On February 22, 2006, Security National also received notification of another or re-scheduled assessment date with Dr. Gilman.

There appears to have been no further contact between the parties until September 2006, when Security National received a copy of Dr. Gilman’s neuropsychological assessment report and an invoice for that assessment. Dr. Gilman’s office delivered a further, corrected, invoice for services to Security National on November 14, 2006. By OCF-9 dated March 5, 2007, Security National sent a notice that Dr. Gilman’s invoice was not payable as the assessment had not been approved.

The applicant filed an application for mediation of Security National’s refusal to approve the assessment. The Commission received the application on January 31, 2008.

Submissions

Security National argues that it clearly denied approval for the neuropsychological assessment in September 2005 and that the applicant failed to apply for mediation of that denial within the two years following. Given that its denial is valid and clear, the applicant’s limitation period for filing an application for mediation expired two years after the denial, by September 2007. Moreover, Security National’s failure to finally schedule a DAC assessment was due to the applicant’s request to cancel it, and, in any event, the lack of a DAC assessment does not impact in these circumstances on the calculation of the limitation period.

The applicant submits that mediation proceedings were commenced in a timely fashion in accordance with the Insurance Act and Schedule, by virtue of having filed its application for mediation within two years of Security National’s March 2007 OCF-9 indicating that it refused to pay Dr. Gilman’s invoice.

The applicant further submits that Security National had no jurisdiction to deny approval for the assessment and refuse to pay the invoice for the assessment because of the absence of a DAC assessment and an opinion from a DAC about the reasonableness and necessity of the neuropsychological assessment: Security National failed to “revert to the mechanism of proper protocol to be followed in order to be in position (sic) to either approve and or deny such a requested assessment” even though it had two separate opportunities to do so with the two notifications from Dr. Gilman’s office about the upcoming assessment appointments.

The applicant also submits that Security National failed in its obligations under the Schedule to arrange the required DAC assessment which failure forms the basis for a bad faith claim.

ANALYSIS AND CONCLUSIONS

Section 51 of the Schedule requires that a mediation or arbitration proceeding be commenced within two years after the insurer’s refusal to pay the amount claimed.

It is well established law that arbitrators do not have the discretion to extend the time limits for the commencement of mediation and arbitration proceedings that are prescribed in the Insurance Act. Arbitrators have also recognized that the limitation period defence must be strictly construed so as not to deprive an applicant of the opportunity to have his or her claim adjudicated. As the Schedule requires that a proceeding be commenced within two years after the insurer’s refusal to pay, generally, these cases are decided on a determination about the validity of the insurer’s refusal. To be valid, an insurer’s refusal must be clear and unequivocal, provide reasons for denying the claim and must inform the insured person about the various steps in the dispute resolution process and the applicable limitation period.² Furthermore, prior and subsequent events do not extend the time limits for disputing an otherwise clear and unequivocal refusal.³

Section 24 of the Schedule provides for the cost and payment of examination fees. In particular, section 24(1)3.ii sets out that the insurer shall pay reasonable fees, that are charged by a member of a health profession for conducting as assessment or examination and preparing a report, if the assessment or examination and the report are reasonably required in connection with a benefit claimed and the insured person, submits an application for approval of an assessment or examination under section 38.2.

The applicant’s assessor submitted an application for approval of an assessment or examination under section 38.2 of the Schedule by application dated August 15, 2005. The evidence shows that Security National responded to this application for approval of an assessment by OCF-9 dated September 1, 2005. Attached to the OCF-9 is information about the applicant’s rights to dispute the assessment of the claim. Within the OCF-9, Security National informed the applicant that it did not approve the assessment as it was unreasonable and unnecessary and that it was prepared to arrange an assessment by a DAC.

Section 38.2 of the Schedule applies to an application for approval of an assessment or examination such as the one in this case. Section 38.2(7) states that if the insurer determines that it is not required to pay for any assessment or examination to which the application relates, the insurer shall require the insured person to be assessed in respect of the requirement for the assessment or examination by a DAC in accordance with section 43. In this regard, it appears that generally both the applicant and Security National worked together to ensure the choice of a DAC suitable to the applicant. That is to say, when it became clear to Security National that the applicant’s DAC of first choice would be unable to perform the requested assessment, it was quick to have the applicant make an alternative choice. The evidence does indicate, however, that no firm date was ever set for the applicant to attend at the DAC, in part because some settlement discussions commenced. Security National asserts that the applicant asked that the DAC be cancelled in anticipation of settlement. The applicant’s evidence is that it forwarded a settlement proposal to which Security National did not respond.

Regardless of which assertion I believe, the facts are undisputed that no settlement of the matter was reached and no DAC assessment was ever undertaken either. Rather, when Security National received word in January 2006 that the applicant was to undergo a neuropsychological assessment, it wrote to the applicant and the assessor on February 7, 2006 reiterating that the assessment had not been approved and would not be paid for. The applicant nonetheless attended the assessment and an invoice was later delivered to Security National. Security National again declined to pay for the assessment.

The applicant does not argue that Security National’s refusal was not technically valid. There is no other evidence before me suggesting that Security National ever waivered from its position that it had not approved the assessment and would not pay for the assessment. I was referred to no evidence indicating that there had been subsequent correspondence or behaviour from Security National that could have led the applicant to believe that Security National had rescinded their denial, though it did not follow through with scheduling the DAC assessment. There is no evidence before me that Security National had further settlement discussions with the applicant or that it was otherwise prepared to settle the applicant’s claim. Therefore I find that Security National’s refusal of September 1, 2005 was a clear and unequivocal refusal to pay for the disputed assessment.

The applicant asserts that Security National’s failure to schedule and confirm a DAC assessment nullifies its ability to rely on its refusal of the approval dated September 1, 2005. I do not accept that proposition for the following reasons. First, the evidence before me is that Security National commenced in a timely way the process for the applicant’s assessment by a DAC. While it is not clear to me why Security National failed to follow up with scheduling the DAC once settlement discussions had proved unsuccessful, it is also not clear to me why, in light of his admission that Security National failed to respond to his settlement offer, the applicant chose to schedule and attend an assessment for which he had no approval rather than confirm that a DAC was to proceed.

Second, the DAC assessment process existed for the purpose of resolving a dispute between an applicant and an insurer about the requirement for a disputed examination. Section 38.2(13) sets out two rules that apply in respect of an assessment or examination that the insurer has not agreed to pay for, subject to the determination of a dispute relating to the expense in accordance with the Act. Rule 1 states:

If the report from the DAC states that the assessment or examination is reasonably required then the insurer shall pay whereas if the report states that the assessment or examination is not reasonably required, the insurer is not required to pay.

The applicant submits that the adjuster:

... had no jurisdiction to not approve the requested assessment as there was no DAC assessment completed as it would seem that [the adjuster] had made a unilateral decision on her own, not to proceed with a DAC assessment, and as a result there were no reports generated to render an opinion as to the fact whether the (OCF-22) requested was reasonable and necessary. Therefore [the adjuster] was in no position and or did not have the necessary tool to base her decision to justify a refusal to approve the requested assessment, and thus refuse payment of the costs associated with the said assessment.

Again, the dispute between the applicant and Security National had not been resolved by settlement or otherwise. In cases where a DAC assessment is required, it is the report of the DAC that determines whether the disputed examination is reasonably required or not. The adjuster’s refusal to approve was clear and unequivocal and otherwise valid. The DAC assessment was to have resolved the issue of the requirement for the neuropsychological assessment. The applicant referred me to no legislation or jurisprudence indicating that the absence of a DAC assessment in a case where one was to have been conducted somehow invalidates an otherwise valid insurer refusal or entitles the applicant to reimbursement of the cost of the disputed assessment.

I find that Security National’s refusal to approve the application for a neuropsychological assessment is a valid refusal provided to the applicant in September 2005. Given that the applicant did not file an application for mediation of the issue within two years of the date of the refusal, the applicant is precluded from proceeding to arbitration.

EXPENSES:

The parties made no submissions with respect to expenses. I recommend that the parties resolve the issue of expenses of this motion between themselves. In the event that they are unable to do so, they may bring the matter before me in accordance with Rule 75 of the Dispute Resolution Practice Code within 30 days of the date of this decision.

January 28, 2010

Rosemary Muzzi Arbitrator

Date

Financial Services Commission des Commission services financiers of Ontario de l’Ontario

Neutral Citation: 2010 ONFSCDRS 15

FSCO A09-000450

BETWEEN:

HAN YONG SHEN Applicant

and

SECURITY NATIONAL INSURANCE CO./ MONNEX INSURANCE MGMT. INC. Insurer

ARBITRATION ORDER

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

1. Mr. Shen did not file an application for mediation of Security National’s refusal to approve the application for a neuropsychological assessment within two years of the date of the refusal, and is therefore precluded from proceeding to arbitration.

January 28, 2010

Rosemary Muzzi Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2See Smith v. Co-operators General Insurance Company 2002 SCC 30, [2002] 2 SCR 129 and Zeppieri and Royal Insurance Company of Canada (OIC A-005237, February 17, 1994), confirmed on Appeal (OIC P-005237, December 22, 1994)
3. 3Mohammed-Amin v. RBC General Insurance Company (FSCO A06-002188, June 25, 2007)