Iudita Brumaru v. Lombard General Insurance Company of Canada, 2010 ONFSCDRS 48

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2010 ONFSCDRS 48

FSCO A09-000245

BETWEEN:

IUDITA BRUMARU

Applicant

and

LOMBARD GENERAL INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Judith Killoran

Heard: January 25, 2010 at the Financial Services Commission of Ontario

Appearances: Kyle Smith for Mrs. Brumaru

Marlett Dobson for Lombard General Insurance Company of Canada

Issues:

The Applicant, Iudita Brumaru, was involved in a motor vehicle accident on September 1, 2004. She applied for statutory accident benefits from Lombard General Insurance Company of Canada (“Lombard”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Brumaru applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

1. Is Ms. Brumaru precluded from proceeding to arbitration because her application for arbitration was filed beyond the limitation period set out in the Insurance Act and the Schedule?

Result:

1. Ms. Brumaru is not precluded from proceeding to arbitration.

EVIDENCE AND ANALYSIS:

Ms. Brumaru claims statutory accident benefits as a result of injuries she alleges she sustained when the vehicle in which she was a passenger was involved in an accident on September 1, 2004. She filed an Application for Arbitration dated January 23, 2009, which was received by FSCO on January 29, 2009.

Ms. Mary Tucci, an accident benefits representative with Lombard, provided an affidavit and a supplementary affidavit dated January 20, 2010 and January 22, 2010 respectively.² She confirmed that she was the adjuster on the file since December 2008 and therefore, had no direct knowledge of correspondence and documents Lombard claimed to have sent to Ms. Brumaru between 2005 and 2008.

In the affidavit of Judit Denesi, a law clerk with Strype Barristers (“Strype”), she stated that the law firm was retained on April 27, 2007. Prior to this, Ms. Brumaru was represented by Boddy Ryerson LLP. Strype requested Ms. Brumaru’s file from Boddy Ryerson.

Lombard claims to have provided to Ms. Brumaru an Explanation of Benefits Payable (OCF-9) dated February 22, 2005 advising her that based on the Disability Certificate, she sustained a Whiplash Associated Disorder (“WAD”) Grade II and she was entitled to a maximum of 16 weeks of income replacement benefits.³

Lombard also claims to have provided Ms. Brumaru with a further Explanation of Benefits Payable (OCF-9) dated August 4, 2005 stating that as she sustained a WAD II injury, income replacement benefits were payable for sixteen weeks only. Additionally, Lombard advised her that no income replacement benefits were payable as of December 21, 2004. Lombard claims to have attached an accountant’s report indicating that no income replacement benefits were payable.⁴

Ms. Denesi stated that she was advised by Ms. Brumaru that she has never received the February 22, 2005 OCF-9, the August 4, 2005 OCF-9 or the accounting report from Lombard. She also stated in her affidavit that when she received the Boddy Ryerson file, the file materials did not contain the February 22, 2005 OCF-9, the August 4, 2005 OCF-9 or the accounting report.⁵

By correspondence dated May 17, 2007, Judit Denesi requested a complete copy of the insurer’s accident benefit file. On November 13, 2007, February 11, 2008, February 19, 2008, May 13, 2008, and June 4, 2008, further requests were forwarded to the insurer for the accident benefits file.⁶

An Application for Mediation dated August 18, 2008 was filed on behalf of Ms. Brumaru when her law firm received no answer from the insurer to its numerous requests for her accident benefits file. By correspondence to FSCO dated October 6, 2008, the law firm explained there had been no formal denial of benefits. At that point, the firm had still not received a copy of the February 22, 2005 OCF-9 or the August 4, 2005 OCF-9.⁷ It was not until January 28, 2009 that the law firm received a copy of the accident benefit file from a new adjuster, Ms. Tucci. However, the file did not include any correspondence.⁸

Lombard also claims to have provided Ms. Brumaru with an Explanation of Benefits Payable dated January 11, 2005 advising her that she was not entitled to housekeeping expenses after January 25, 2005.⁹ A second Explanation of Benefits Payable dated April 13, 2005 confirmed that Lombard would not pay housekeeping expenses after January 25, 2005.¹⁰ Ms. Brumaru advised Ms. Denesi that she has never received the January 11, 2005 OCF-9 or the April 13, 2005 OCF‑9 with respect to housekeeping benefits.

Lombard’s Submissions

Subsection 281.1(1) of the Insurance Act requires an insured person to commence an arbitration proceeding “within two years after the insurer’s refusal to pay the benefit claimed.” Subsection 51(1) of the Schedule extends the two-year period by 90 days after the Mediator’s Report if the insured person applies for mediation within two years of the refusal.

In order for an insurer to rely on the limitation period to defeat an applicant’s claim, it must establish on a balance of probabilities that it provided a clear, unequivocal and valid refusal of the benefit claimed, in which case the time limit begins to run as of the date of the refusal.

The refusal must be in writing, must be clear and unequivocal and must contain supporting reasons for the refusal. Lombard submits that the Explanation of Benefits Payable by Insurance Company forms (OCF-9s), dated February 22, 2005 and August 4, 2005 respectively, constitute clear and unequivocal refusals, together with supporting reasons, to pay income replacement benefits.

Lombard also submits that the Explanation of Benefits Payable by Insurance Company forms dated January 11, 2005 and April 13, 2005, constitute a clear and unequivocal refusal to pay housekeeping expenses. All the Explanation of Benefits Payable by Insurance Company forms (OCF-9s) advise Ms. Brumaru of her right to dispute, the particulars of the dispute resolution process and the two-year limitation period.

Lombard claims that Ms. Brumaru did not commence mediation within two years of Lombard’s denial of her income replacement benefits and housekeeping and home maintenance expenses. The Application for Mediation is dated August 18, 2008 and was received by the Financial Services Commission on August 19, 2008.

Lombard also relies on subsection 5(2) of the Schedule which provides that the insurer is not required to pay an income replacement benefit for a period longer than 16 weeks after the accident, in the case of an insured who fits within the Grade II Whiplash Associated Disorder Guideline, if the accident occurred after April 14, 2004.

Section 49 of the Schedule requires an insurer that refuses to pay or reduces the amount of a benefit to give the insured written notice of the procedure for resolving disputes under the Insurance Act. Lombard submits that it has provided Ms. Brumaru with the information required by section 49 of the Schedule. Lombard submits that, on a balance of probabilities, it has met the onus of proof and has provided clear and unequivocal refusals to pay the benefits claimed.

Lombard points to Ms. Brumaru’s election form¹¹ dated January 10, 2005, where she elected to receive income replacement benefits rather than non-earner or caregiver benefits, as proof that Ms. Brumaru was receiving correspondence from Lombard at her address which remained unchanged. Lombard also relies on the disability certificates as evidence that Ms. Brumaru received Lombard’s requests for information and responded. Lombard asserts that Ms. Brumaru made no claims for income replacement benefits or housekeeping benefits and ought to have known that Lombard had refused to pay these benefits.

Lombard also submitted that the correspondence from Strype requested an updated accident benefits file and referenced the date when the firm was retained. A reasonable assumption on Lombard’s part was that the OCF-9s and the accountant’s report had been received by the firm.

Applicant’s Submissions

Ms. Brumaru swore in her affidavit dated January 7, 2010 that Lombard never provided any written denial of benefits to her for income replacement benefits or housekeeping and home maintenance benefits. Lombard did not ask to cross-examine Ms. Brumaru on her affidavit at the hearing.

All OCF-9s provided in evidence by Lombard are unsigned. No supporting documents, transmittal letters or proof of delivery have been provided. Ms. Brumaru argued that any forms completed by her were provided by the clinic where she received treatment and forwarded to Lombard by the clinic.¹²

The law firm was not aware of a denial of Ms. Brumaru’s benefits when it was retained. An assistant at the firm contacted Lombard on May 18, 2007 and was advised that Ms. Brumaru never received income replacement benefits because no accounting report had been received to calculate the amount of income replacement benefits payable.

Ms. Brumaru relies on the decision in Veldhuizen and Coseco Insurance Company¹³ for the proposition that when deciding if the limitation period applies, it must first be determined whether, and when, there was a refusal to pay benefits, and whether the insurer is estopped from relying on the limitation period that runs from the date of the refusal. An insurer may be estopped from relying on the limitation period if the applicant relied to his or her detriment on the insurer’s conduct, or if the insurer unreasonably delayed the processing of the claim, or misled or deceived the applicant.

According to Ms. Brumaru, her affidavit evidence and that of Ms. Denesi confirms that

Lombard never communicated a denial to her or her counsel with respect to the income replacement or housekeeping benefits. Further, all of the relevant documents in the insurer’s document brief are unsigned, incomplete “file copies” that are not accompanied by any supporting documentation or proof of delivery. Additionally, the unsigned “file copies” are not accompanied by covering letters.

As stated in Veldhuizen, the insurer is estopped from relying on a limitation period if the insurer misleads the applicant or unreasonably delays the applicant. In this case, Ms. Brumaru claims that the insurer has done both.

The affidavit of Judit Denesi and the supporting memorandum of Melissa Roach state that Lombard told Ms. Brumaru’s lawyer on May 18, 2007 that: “Ms. Brumaru never received income replacement benefits because no accountant report was received from Lombard Canada to calculate the amount of income replacement benefits payable.” In the hearing, Lombard stated that it had the accounting report of MD&D since the summer of 2005.

The nature of Lombard’s representation would lead Ms. Brumaru’s counsel to believe there was no denial of benefits. Ms. Denesi’s affidavit states that Ms. Brumaru’s counsel was not aware of any denial and accordingly, was not aware of any limitation issue, and this misrepresentation by the insurer reinforced this belief. If Lombard had advised Strype that benefits had been denied in 2005, the applicant would have filed for mediation as soon as possible to protect against a limitation defence.

Ms. Brumaru submits that Lombard’s actions unreasonably delayed her in filing for mediation. This is a breach of the insurer’s obligation to act in good faith towards its insured and means that the insurer is not permitted to rely on a limitation defence in the circumstances.

According to Ms. Brumaru, the OCF-9 dated February 22, 2005, which Ms. Brumaru denies receiving, does not constitute a clear and unequivocal denial to income replacement benefits as it states that Ms. Brumaru sustained a WAD II injury and entitled to 16 weeks of income replacement benefits from the date of loss which has been reduced to 15 weeks because her first week of disability was not covered under subsection 5(2). It fails to note that it is only WAD II injuries that fall within the pre-approved framework that are restricted to 16 weeks.

Ms. Brumaru asserts that the August 4, 2005 OCF-9 was also not provided to her and if it was, it does not constitute a clear and unequivocal denial of income replacement benefits. The form states as follows:

As per the new automobile insurance regulation, all accidents that occur on or after April 15, 2004 with an impairment considered to be WAD II is entitled to a 16 weeks [sic] of income replacement benefit from the date of your loss. However, as per the Statutory Accident Benefits Schedule (SABS) section 5(2)(a), we do not pay for the first week of disability. Therefore we will cover your income replacement benefit for 15 weeks.

As per your disability certificate, you have continued to work on a modified hours [sic]. Since you are self- employed, we have assigned MD&D Accountants to calculate any entitlement you may have.

According to Ms. Brumaru, this cannot be considered a clear and unequivocal denial and, in fact, cannot be considered a denial of any sort. This document is an approval and states that benefits will be paid. It states that there is an entitlement and that an accountant will be retained to determine the amount thereof. There is no wording on this document that denies benefits.¹⁴

In the section of the form marked Part 2 – Income Replacement Benefits, there are “Eligible” and “Not Eligible” boxes, neither of which is marked. It is submitted that failing to check the box marked “Not Eligible” renders the document unclear. The document also purports to attach an accounting report which determines the applicant’s entitlement to be nil. Together with the failure to check the “Not Eligible” box, this could be interpreted as an indication that further accounting information is required to make a determination.

According to Ms. Brumaru, the August 4, 2005 OCF-9 misrepresents the facts when it states the following:

As per your Disability Certificate you have sustained a WAD II injury, which entitles you to only 16 weeks of Income Replacement Benefits.

This sentence sounds as though the Disability Certificate, which was filled out by Ms. Brumaru’s chiropractor, is the document that indicates that Ms. Brumaru’s entitlement is for 16 weeks of benefits. However, that determination is made by the insurer, not the chiropractor. Ms. Brumaru could have been confused into thinking that her chiropractor’s opinion was that she was not entitled to further benefits. As a result, she may have been predisposed to accept this opinion.

The August 4, 2005 OCF-9 also fails to note that it is only WAD II injuries that fall within the pre-approved framework that are limited to 16 weeks of benefits. The wording sounds as though any WAD II injury limits an applicant to 16 weeks of benefits.

The January 11, 2005 OCF-9 has no amount included in the “Amount Claimed” or “Amount Payable” sections under Part 4 – Other Benefits. The explanation section states as follows:

And prior to our consideration of your housekeeping submission in the amount of $1700 for the period of September 2, 2004 to October 31, 2004, we require your OCF-3 Disability Certificate.

Ms. Brumaru submits that this wording indicates that no decision has been made on the benefits in question and therefore, does not constitute a clear and unequivocal denial of benefits.

The April 13, 2005 OCF-9 confirms an amount payable of $356 and then denies the remainder of the benefits referring Ms. Brumaru to the January 11, 2005 form. In doing so, it is incorporating the same wording as above and once again could lead an applicant to believe that the decision has not yet been made as more information is required (in this case, a further OCF-3).¹⁵

CONCLUSION

I find that no evidence was provided that the documents relied on by Lombard were sent to, or received by Ms. Brumaru. All OCF-9s tendered in evidence were unsigned, with no covering letters and no proof of delivery. Ms. Brumaru stated in her sworn affidavit dated January 7, 2010 that she did not receive the documents. Lombard did not request an opportunity to cross-examine Ms. Brumaru on her affidavit.

I also find that even if Lombard had provided evidence that Ms. Brumaru had received the documents in question, Lombard would not have been successful in its limitation defence. I find that the OCF‑9s relating to income replacement and housekeeping benefits did not provide clear and unequivocal denials to benefits. The OCF-9s relied on by Lombard were vague, confusing, and asked for further information. Consequently, I find that Lombard fails in its limitation defence to Ms. Brumaru’s claims.

EXPENSES:

I exercise my discretion to award Ms. Brumaru her expenses incurred in this preliminary issue hearing. I encourage the parties to resolve the issue of quantum of expenses. If they are unsuccessful, they may apply under the Dispute Resolution Practice Code for an assessment hearing before me.

April 19, 2010

Judith Killoran

Arbitrator

Date