Aviva Canada Inc. v. Wry, 2010 ONFSCDRS 29

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2010 ONFSCDRS 29

Appeals P09-00016 and P09-00016C

Appellant

and

Respondent

AND

Cross-Appellant

and

Cross-Respondent

BEFORE:

Delegate Lawrence Blackman

Mr. Harry P. Brown for Aviva Canada Inc.

Mr. Christopher S. Collins and Ms. Rasha El-Tawil for Mr. Timothy J. Wry

February 23, 2010

Under subsection 283(5) of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The Arbitrator’s April 17, 2009 arbitration order is confirmed.

Financial Services Commission of Ontario

Aviva and Wry et al.

Appeal Orders P09-00016 and P09-00016C

If the parties are unable to agree on the legal expenses of these appeals, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code, (Fourth Edition, Updated – October 2003).

March 12, 2010

Lawrence Blackman Director’s Delegate

Date

I. BACKGROUND AND NATURE OF THE APPEALS

In his April 17, 2009 decision, Arbitrator Richards (the “Arbitrator”) found that Mr. Wry was 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, R.S.O. 1990, c. I.8, as amended, and in subsection 51(1) of the Schedule.¹ Both Mr. Wry and his first-party insurer, Aviva Canada Inc. (“Aviva”), appeal the Arbitrator’s decision.

Aviva’s May 11, 2009 Notice of Appeal seeks an order that as Mr. Wry is bound by the said limitation provisions, he is not permitted any further application for a catastrophic impairment (“CAT”) designation on the same subsection 2(1.1) of the Schedule criteria already determined by a catastrophic impairment designated assessment centre (“CAT DAC”).

Mr. Wry’s May 13, 2009 Notice of Appeal seeks an order that (1) the limitation provisions do not apply to CAT applications, and (2) he is not barred from proceeding to arbitration on the CAT designation issue.

Mr. Wry was injured in a horrible motor vehicle accident on December 16, 2000. He was then seventeen years. The July 3, 2006 report of Dr. M.L. Zwiers, a psychologist, states that Mr. Wry was struck by two vehicles while helping direct a third vehicle onto the road. The second vehicle ran over and crushed Mr. Wry’s legs. Mr. Wry remained in a wheelchair for two years and was on and off crutches for another two to three years, undergoing ten surgeries in that period. Mr. Wry advises that he has undergone a further eight procedures.

As a result of his accident, Mr. Wry applied to Aviva for statutory first party accident benefits payable under the Schedule.

By letter dated June 19, 2003, Mr. Wry’s previous counsel submitted to the insurer a May 15, 2003 Application for Determination of Catastrophic Impairment (OCF-19) prepared by Mr. Wry’s family physician, Dr. T.H. Chan. Dr. Chan indicated, very succinctly and without any analysis, that he considered Mr. Wry “55% to 60% impairment of the whole person.”

Aviva did not agree that Mr. Wry was catastrophically impaired and sent him an OCF-20 CAT DAC assessment request form that Mr. Wry returned dated July 31, 2003.

A CAT DAC assessment was subsequently performed by Kaplan and Kaplan. Their January 21, 2004 report provided a 14% whole person impairment (“WPI”) rating under clause 2(1.1)(f) of the Schedule, which they indicated was well below the requisite 55% WPI threshold. Regarding clause 2(1.1)(g) of the Schedule, the CAT DAC report opined that Mr. Wry did not meet the necessary threshold of marked or extreme impairment.

On the basis of the CAT DAC report, Aviva’s March 17, 2004 Explanation of Benefits Payable informed Mr. Wry that he had not suffered a catastrophic impairment as defined in the Schedule. Aviva indicated that, accordingly, the non-catastrophic provisions in the Schedule applied. In a separate letter of March 17, 2004, Aviva provided details of the medical and rehabilitation benefits available to Mr. Wry. The letter concluded:

If you disagree with our assessment of your file and wish to dispute it, you have the right to ask for mediation through the Financial Services Commission of Ontario.

The parties’ Agreed Statement of Facts indicates that Mr. Wry submitted to Aviva a second OCF-19 CAT Application signed by Dr. Chan, dated July 21, 2006. This OCF-19 Application was solely pursuant to clause 2(1.1)(f) of the Schedule (the 55% WPI). A box on the form is ticked that this was “a reapplication for catastrophic impairment.” Adjacent to the typed words on the form “Reason for Reapplication,” is written: “condition stabilized and not improved.”

By letter dated September 1, 2006, Aviva returned the second OCF-19 stating that they had already followed the provisions in the Schedule regarding the CAT determination. In a separate letter to Mr. Wry’s former counsel, Aviva advised that the CAT application appeared to be statute barred by the limitation period. The former counsel’s September 8, 2006 letter responded that the first CAT DAC was not disputed; rather, a new CAT application was being submitted on the basis that it was obvious that Dr. Chan was of the opinion that Mr. Wry’s condition had deteriorated and the legislation envisioned subsequent CAT DACs.

In February of the following year, Mr. Wry applied for mediation at the Financial Services Commission of Ontario (“FSCO”) of the CAT dispute. Following the May 23, 2007 Report of Mediator regarding the failed mediation, Mr. Wry filed his Application for Arbitration on August 22, 2007, noting therein the issue in dispute as being CAT designation.

In the interim, Mr. Wry provided Aviva a third OCF-19 application for CAT determination, dated April 13, 2007 and prepared by Dr. H. Becker. Dr. Becker, in an accompanying report to Mr. Wry’s present counsel, opined that Mr. Wry had sustained a 54% WPI, rounded in accordance with the American Medical Association's Guides to the Evaluation of Permanent Impairment, 4th Edition (the "Guides"), to the requisite 55% threshold. Aviva’s letter of May 1, 2007 advised that it was of the view that pursuant to transitional subsection 41.1(9) of the Schedule, the former section 40 of the Schedule applied and there was no entitlement to multiple applications for a CAT determination.

The Arbitrator’s April 17, 2009 decision found that the limitation provisions in the Insurance Act and the Schedule apply to CAT determinations.

Mr. Wry now accepts that the limitation period does apply to CAT designations and withdraws this ground of appeal. Mr. Wry maintains, however, his alternative ground of appeal that he is not barred from proceeding to arbitration on a CAT reapplication based on a change in his condition, as established in the medical documentation. He submits that the Arbitrator erred in finding that Mr. Wry was relying on a “change in the legal landscape,” namely the decision in Desbiens v. Mordini, 2004 CanLII 41166 (ON SC), [2004] O.J. No 4735, as the basis for his CAT reapplication.

As the Arbitrator found that a change in an insured’s condition permits a CAT reapplication, Mr. Wry submits that the Arbitrator erred in barring him from proceeding with his August 2007 Application for Arbitration based on the limitation period ending March 16, 2006.

II. ANALYSIS

Both Notices of Appeal state that they are from a preliminary or interim order. Rule 50.2 of the Dispute Resolution Practice Code, (Fourth Edition, Updated – October 2003) (the “Code”), provides that a party may not appeal an arbitrator’s preliminary or interim order until all of the issues in dispute have been finally decided, unless ordered otherwise.

My July 3, 2009 letter decision accepted both appeals. The Arbitrator’s April 17, 2009 decision was a final disposition of Mr. Wry’s right to proceed to arbitration for a CAT determination. Further, applying the criteria in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), I was persuaded as to the importance and apparent novelty of the limitation issues raised in the context of CAT determinations.

I turn first to Mr. Wry’s appeal. Mr. Wry argues that the threshold for a change in an insured’s condition is very low and that a minimum of medical support is required. Mr. Wry submits that the medical documentation shows him worrying increasingly about his condition and not being able to stand for as long a period of time.

Mr. Wry also submits that a change in condition exists where the initial prognosis is overly optimistic, the insured did not have full insight into or was unable to fully enunciate the accurate extent of his or her disability and/or the assessing doctors did not fully or adequately assess the full scope of the impairments. Mr. Wry argues that an insured person should not be prejudiced by the actions of his medical assessors and/or legal representatives who may have poorly timed the CAT application.

The September 25, 2006 letter of Mr. Wry’s prior counsel stated that reapplications are especially warranted for a young person with significant orthopaedic injuries where arthritis may not set in until many years after an accident. Such reapplications are consistent with the consumer protection nature of this legislation. Accordingly, as now argued, while changes in circumstances allow an insured’s CAT reapplication, they would not justify CAT reassessments by insurers.

Subsection 283(1) of the Insurance Act provides that a party to an arbitration may appeal the order of an arbitrator on a question of law. Delegate McMahon, in Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01-00022, February 26, 2003), stated that a finding of fact made in the complete absence of supporting evidence “is properly characterized as an error of law, and hence reviewable.” A finding of fact made with insufficient evidence, however, is no more than an error of fact. Such a finding is not reviewable.

The Arbitrator made a specific finding of fact that “Mr. Wry has not demonstrated that his condition has changed.” In reaching this conclusion, the Arbitrator reviewed the three CAT applications, finding that the latter two did not indicate that Mr. Wry was applying on different grounds than the first application or that Mr. Wry was applying based on a change in his condition. The Arbitrator found that the third CAT application seemed to be a rebuttal of the assessment relating to Mr. Wry’s first CAT application and should have been used in the dispute resolution process and not on a reapplication

I am not persuaded that there was a complete absence of supporting evidence for the Arbitrator’s finding of fact regarding an asserted change in condition. Accordingly, I find that this is no basis for setting aside the Arbitrator’s decision. Therefore, Mr. Wry’s Notice of Appeal is dismissed.

Turning to Aviva’s appeal, the Arbitrator found that the “legislation recognizes that degrees of impairment change over time.” The Arbitrator further found that:

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.

The Arbitrator found “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.”

In this specific analysis, the Arbitrator does not directly refer to subsection 40(4) of the Schedule.

Subsection 40(4) provided that:

The 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.

Aviva, referencing the Court of Appeal for Ontario decision in Liberty Mutual Insurance Co. v. Fernandes, 2006 CanLII 30212 (ON CA), [2006] O.J. No. 3514, submits that once a CAT DAC has determined a specific

criterion or criteria for a CAT designation (that is, one or more of the clauses of subsection 2(1.1) of the Schedule), that determination is binding on both sides, subject only to a dispute in accordance with sections 279 to 283 of the Insurance Act. Changes in an insured’s condition, whether they are deterioration or improvement, do not eliminate the limitation period, nor do they allow CAT redeterminations by either party.

Aviva submits that there is no time limit when a CAT application can be brought. The insured person chooses when to claim a CAT designation, if at all. The claim can be brought at the time most appropriate for the insured. Once the insured makes a CAT application, the insured has sole discretion over the forum in which to litigate any dispute over such designation. An insurer cannot access FSCO arbitration to determine a CAT dispute, nor can it access the court system.

Aviva argues that what an insurer must do if it wishes to dispute a CAT DAC determination is to access mediation on this issue within the time limits mandated by subsection 40(4) of the Schedule. Only then can an insurer maintain its right to deny benefits on the basis of disputing the CAT DAC determination. The insured person still retains the timing and forum of further dispute resolution. It would be the insured’s decision whether or not to leave hanging the mediated dispute regarding a CAT DAC determination.

Aviva submits that multiple reapplications or challenges to a CAT DAC determination are contrary to the legislation. Further, it would create chaos. Both sides would indefinitely have over their heads the spectre of successive lengthy and expensive reassessments of the same criterion or criteria for a CAT designation. It is also contrary to the purpose of limitation periods, the subsection 281(5) limitation period herein being specifically located within sections 279 to 283 of the Insurance Act referenced by subsection 40(4) of the Schedule.

In this regard, Aviva cites the Court of Appeal for Ontario, in Haldenby v. Dominion of Canada General Insurance Co., 2001 CanLII 16603 (ON CA), 55 O.R. (3d) 470, that “limitation periods encourage the timely resolution of legal controversies and reconcile the competing interests of potential claimants, potential defendants and society at large.” The Court of Appeal further states that:

… the appellant’s approach would extend a claimant’s entitlement to benefits for an indeterminate period of time and is “inconsistent with the Supreme Court of Canada’s rationale which underlined the common sense of, and the need for limitation periods.” Indeed, as discussed above, such an interpretation of ss. 26(1) and 16 would unreasonably controvert the systemic need for finality, certainty and the principle of diligence.

Aviva further notes, as stated by the Report of the Ontario Law Reform Commission on Limitations of Actions, 1969, that a “statute of limitation is sometimes referred to as an ‘Act of Peace.’” Rather than being able to revisit a CAT DAC determination over and over, if a party objects to a CAT DAC determination it must do so within the legislatively defined time period.

Aviva also relies on Director Draper’s decision in Kirkham and State Farm Mutual Automobile Insurance Company, (OIC P96-00069, January 27, 1997), application for judicial review dismissed (March 31, 1998), Court File No. 510/97 (Div.Ct.), leave to Appeal to the Court of Appeal refused (Docket CA M22347, July 9, 1998). Director Draper held that a claim for weekly benefits is an ongoing claim. Once an insurer refuses to pay or to continue paying, an insured person has two years to dispute that decision through the courts or the dispute resolution process.

Aviva also cites Arbitrator Bujold, in West and Aviva Canada Inc., (FSCO A08-000170, December 18, 2008), a decision that also addressed weekly benefits. Arbitrator Bujold held that an insurer has an ongoing obligation to adjust its insured’s claims and consider new information as it becomes available. However, where an insurer has issued a proper denial for which a limitation period has expired, neither a reconsideration by an insurer nor a relapse or deterioration in the insured’s condition revives a claim that is otherwise already statute barred.

The parties advise that there is little case law directly on point regarding CAT reapplications. Arbitrator Rogers, in Baptiste and Pilot Insurance Company, (FSCO A04-000446, January 25, 2005), addressed an insurer’s motion for its insured to attend a further CAT DAC. Looking at subsection 40(4) of the Schedule, Arbitrator Rogers found that there was no provision for an insurer or an insured to require more than one CAT DAC, nor could counsel point to any case law to that effect.

Arbitrator Wilson, in the subsequent decision in Fisher and Allstate Insurance Company of Canada, (FSCO A04-002455, July 19, 2006), accepted that there may be some internal tension between the binding nature of a CAT DAC and the lack of specific restriction on the number of CAT DACs that may be requested. However, Arbitrator Wilson did not accept that the legislation, read as a whole, created a barrier to a second assessment where “the assessment process itself was so flawed in its conception as to amount to no assessment at all.” The insured in that case had also pointed to changed circumstances and new information.

Here Aviva’s appeal issue is whether the Arbitrator erred in finding that an insured person can reapply for a CAT determination under the same criterion or criteria where his or her condition changes over time as being consistent with the broad and liberal interpretation mandated by the consumer protection nature of this insurance legislation. Mr. Wry argues that such a finding is also consistent with the OCF-19 form that provides for reapplications.

In Kirkham, the Divisional Court held that:

The first principle of statutory interpretation is, “if the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense” (Chief Justice Tindal in the Sussex Peerage Case 1844 11 cl and F. 85).

Both parties agree that notwithstanding changes to the Schedule, the former subsection 40(4) still applies to this case. The subsection 41.1(9) transitional rule provides that section 40, as it read on February 28, 2006 (and as reproduced above), continues to apply to a CAT application where an insurer, as here, gave notice before March 1, 2006 under subsection 40(2) requiring its insured to be assessed by a CAT DAC.

Regarding reapplications or challenges to a CAT DAC determination, subsection 40(4) is precise and unambiguous. Where there is a CAT DAC determination, that determination is binding on both the insured and the insurer. The only stated exception is the determination of a dispute in accordance with sections 279 to 283 of the Insurance Act. In their natural and ordinary sense, consistent with the legislation, a CAT DAC determination means a determination on the specific criterion or criteria under subsection 2(1.1) of the Schedule advanced by the insured person.

Mr. Wry concedes that nowhere in the legislation is there is an additional exception regarding a change in circumstances. Respectfully, I find that the Arbitrator erred in law in finding such an additional exception.

I agree that the legislation provides consumer protection by giving only the insured any choice of when to apply for a CAT designation. The legislation provides further consumer protection in having the insured choose the forum to determine any dispute over a CAT DAC determination. Mr. Wry is correct that an insured person does not have a crystal ball in determining the most appropriate time to make a CAT application. It is also correct that the insurer has no input in determining, from its perspective, the most opportune time for a CAT DAC assessment. Neither of these concerns, however, override the clear and unambiguous wording of subsection 40(4).

To allow reapplications as argued herein would be inconsistent with a societal and systemic need for the finality of disputes. It would be inconsistent with a legislative framework that envisages a balanced, efficient and cost-effective means of determining first-party benefits. Further, it would be incongruous to read in the argued additional exception of changed conditions as applying only to insured persons when subsection 40(4) is specifically binding both on insured persons and on insurers. Most fundamentally, it would leave subsection 40(4) with little, if any, meaning.

As a safeguard to both sides, subsection 2(2) of the Schedule provided that an insured cannot apply for CAT designation regarding the present clauses 2(1.1)(f) and (g) until the insured’s own health practitioner states in writing that the insured’s condition has stabilized and is not likely to improve with treatment, or three years have passed since the accident. In part, this provision appears to seek to avoid premature or unnecessary CAT applications.

I am not persuaded that the OCF-19 form overrides, assists in the interpretation of or is even necessarily inconsistent with section 40 of the Schedule. Nonetheless, as the form must comply with the legislation, any discrepancy with the legislation must be determined in favour of the Schedule. However, Aviva concedes that there can be a reapplication for CAT determination if the reapplication is on a separate criterion not yet determined by a CAT DAC.

Aviva does not dispute the CAT DAC determination. The parties agree that on or about March 17, 2004 Aviva sent an OCF-9 denying both the CAT application and Mr. Wry’s entitlement to CAT benefits. The Arbitrator found that the limitation period expired March 16, 2006. The second CAT application is dated four months later. I am not persuaded that if an insured person “errs” in the timing of his or her CAT application, that reapplying for a CAT determination on the same criterion or criteria already determined by a CAT DAC is an alternative to accessing the dispute resolution system within the statutory time lines.

Nor am I persuaded that the statutory time limits for disputing a CAT DAC determination on the criterion or criteria advanced by an insured are extended, waived or rendered irrelevant for either side if there is a change in the insured person’s condition, for the worse or for the better.

The Arbitrator ultimately found that there was no change in Mr. Wry’s condition and that Mr. Wry was precluded from proceeding to arbitration. Accordingly, I confirm the Arbitrator’s order pursuant to my statutory authority under subsection 283(5) of the Insurance Act.

Aviva seeks a declaration barring Mr. Wry from submitting any further section 40, OCF-19 CAT applications on the same criteria. However, as Aviva asserts, citing Branchaud and Co-operators General Insurance Company, (OIC P96-00048, May 2, 1997), Commission adjudicators have no inherent powers of jurisdiction. Aviva provides no statutory or case law authority for me to issue the declaration sought and, ultimately, concedes that I do not have such authority.

III. EXPENSES

If the parties are unable to agree on the legal expenses of these appeals, an expense hearing may be arranged in accordance with Rule 79 of the Code.

March 12, 2010

Lawrence Blackman Director’s Delegate

Date

Footnotes

The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.