Allstate Insurance Company of Canada v. Norbert J. Boyer, 2010 ONFSCDRS 53

Financial Services Commission of Ontario

Neutral Citation: 2010 ONFSCDRS 53 Appeal: P09-00022

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ALLSTATE INSURANCE COMPANY OF CANADA Appellant

and

NORBERT J. BOYER Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Mark L.J. Edwards and Ms. Diana Shligold for the Appellant Mr. Jordan Cutler for the Respondent

HEARING DATE: April 1, 2010

APPEAL ORDER

Pursuant to section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The Arbitrator's May 29, 2009 order is slightly varied to read as follows:

Allstate shall pay interest to Mr. Boyer on Dr. Hoff's outstanding account of $13,800 (less the cost of the final treatment plan, if paid in accordance with the Schedule) from thirty days from the date it received the applications or invoices for the relevant services, whichever is earlier.

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

May 5, 2010

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND AND NATURE OF THE APPEAL

As a result of his injuries sustained in a July 24, 2001 motor vehicle accident, the Respondent, Mr. Norbert J. Boyer, applied to the Appellant, Allstate Insurance Company of Canada, for statutory accident benefits payable under the Schedule.¹

The Appellant disputed the Respondent’s entitlement to certain statutory benefits. The May 30, 2007 decision of Arbitrator Bayefsky (the “Arbitrator”) found the Respondent entitled to, amongst other benefits, $13,080 in medical services set out by a psychologist, Dr. T. Hoff, in six treatment plans dated from September 14, 2001 to March 7, 2003. The Arbitrator also held that the Respondent was entitled to interest on Dr. Hoff’s outstanding $13,080 account.

In his decision, the Arbitrator noted that Dr. D. Prendergast conducted a February 13, 2002 medical/rehabilitation Designated Assessment Centre (“DAC”) assessment regarding Dr. Hoff’s November 23, 2001 treatment plan. Dr. Prendergast found this plan neither reasonable nor necessary. The Arbitrator found that the Appellant had approved Dr. Hoff’s first treatment plan, but had denied the other plans essentially on the basis of Dr. Prendergast’s DAC report.

The Arbitrator held that the Appellant, following the receipt of additional medical information, “ought to have arranged a further DAC, pursuant to section 38(12) of the Schedule … Even if this was not strictly required, [the Appellant] ought to have sought a further medical opinion on the nature and extent of [the Respondent’s] condition and on whether Dr. Hoff’s treatments were, in fact, reasonably necessary.” The Arbitrator held that the Respondent was entitled to a $5,000 special award, in part, due to the Appellant’s unreasonable delay in paying Dr. Hoff’s accounts.

The special award is not appealed. The parties did, however, return to the Arbitrator for his determination of the date from which interest was payable on Dr. Hoff’s accounts.

The Appellant relied on Pafco Insurance Company Limited and Langdon, (FSCO P02-00017, July 17, 2003). In Langdon, an insurer referred a dispute over medical benefits to a DAC. The DAC subsequently delivered a negative report. Delegate McMahon held that if an adjudicator later found the treatment to be reasonable and necessary, the insurer was not responsible for paying interest under subsection 46(2) of the Schedule prior to adjudication as the medical benefit awarded only became overdue at that time.

The Appellant argued that the Ontario Court of Appeal, in Mercier v. Royal & SunAlliance Insurance Company of Canada (2004), 2004 CanLII 5551 (ON CA), 72 O.R. (3d) 94, adopted the reasoning in Langdon. The Respondent submitted that the comments in Mercier were only obiter. The Respondent relied on the decision in Coachman Insurance Company and Hejnowicz, (FSCO P05-00024, August 3, 2006), in which Delegate Makepeace held that section 38 of the Schedule required medical benefits to be paid within 30 days of the insurer receiving the claim and that interest ran from that time. This obligation was not displaced by a DAC referral or by the start of litigation.

The Arbitrator’s May 29, 2009 decision essentially followed Hejnowicz. The Arbitrator found that interest was payable on Dr. Hoff's outstanding accounts from the date the Appellant received the applications or invoices for the relevant services, whichever was earlier.

The Arbitrator held that he was bound by Hejnowicz as it was directly on point and was decided with the benefit of both Langdon and Mercier. He also preferred the reasoning in Hejnowicz, finding that an insurer’s obligation to pay medical benefits arose not from a positive DAC opinion or from an arbitrator’s order but from sections 14, 15 and 38(7) of the Schedule. In addition, section 38 did not provide that payment was not overdue if there was a negative DAC.

Further, the Arbitrator considered Langdon as viewing interest under the Schedule as punitive in nature. However, as more recently enunciated in Sorokin v. Wawanesa Mutual Insurance Company, (2008), 2008 CanLII 26265 (ON SC), 92 O.R. (3d) 314 (Ont. S.C.J.), upheld on appeal, 2009 ONCA 152, “[it] is now well settled that the interest provisions of the [Schedule] are compensatory in nature and not punitive.” Thus, as stated in Hejnowicz, interest under the Schedule was “mandatory, compensatory, and flows from a finding that benefits were payable and were not paid on receipt of the required application documents.”

II. THE PARTIES’ SUBMISSIONS

The Appellant argues that the Arbitrator erred in law in failing to properly consider and defer to the binding Court of Appeal decision in Mercier that, in its submissions, specifically adopted the Langdon approach to pre-judgment interest and distinguished overdue medical/rehabilitation benefits from overdue weekly benefits. In the alternative, the Appellant submits that if the Court of Appeal’s comments in Mercier are obiter they are, at the very least, strongly persuasive and should determine the conflicting Commission cases.

The Appellant submits that if an insurer agrees to pay for part of a treatment plan, “then the obligation to pay is triggered and it may then become overdue.” If a DAC opines that the expense is reasonable and necessary, then the insurer is required to pay the expense. Clause 38(14)(b) of the Schedule, however, provides that if a DAC opines that an expense is not reasonable or necessary the insurer, subject to an adjudicative order, is not required to pay the submitted expense. Thus, the medical expense herein only became overdue when the Arbitrator found it owing. In the words of Langdon, “[i]n the absence of an obligation to pay in advance of the order, there is no foundation for a finding that the amount was payable prior to the order.”

Accordingly, the Appellant requests that the Arbitrator’s May 29, 2009 decision be set aside and that interest on Dr. Hoff’s six treatment plans be calculated from the Arbitrator’s May 30, 2007 order, not from the date the Appellant received the applications or invoices.

The Respondent submits that Langdon was not specifically adopted by Mercier and the Arbitrator correctly stated that “there is no authority for the view that a ‘negative DAC prevents interest accruing on weekly benefits found owing by an arbitrator.’”

The Respondent submits that, in any event, only the second of the six treatment plans was rejected by the DAC as being neither reasonable nor necessary. The Appellant approved Dr. Hoff’s first treatment plan, the third was denied but was never sent to a DAC and the Appellant did not respond to the last three treatment plans. The Respondent thus submits, in the alternative, that since only one of the treatment plans was denied on the basis of a negative DAC, interest on the other five treatment plans begins to run from the date the plans were submitted or the invoices were received by the Appellant.

III. PRELIMINARY MATTERS

My June 23, 2009 acknowledgement letter noted, in part, that an appeal received from the arbitration decision in State Farm Mutual Automobile Insurance Company and Pedisic, (FSCO P09-00013, June 4, 2009) also involved the conflicting Langdon and Hejnowicz decisions. The parties in both appeals were to provide written submissions on whether these two appeals should be combined. The parties in this appeal were also to provide submissions regarding the Appellant’s request for a stay of the Arbitrator’s May 29, 2009 Order.

My August 7, 2009 preliminary issue decision, for the reasons given therein, denied the stay request. My August 18, 2009 letter confirmed that as the appeal in Pedisic had settled, there was no longer an issue whether to combine these two appeals.

IV. ANALYSIS

The starting point of an analysis of pre-judgment interest is section 46 of the Schedule. This provision provides that:

Overdue Payments

46. (1) An amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this Part.

(2) If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly. [emphasis added]

The question in this appeal, simply put, is when did payment of the $13,080 in medical benefits set out in Dr. Hoff’s treatment plans become overdue? Or, put another way, what was the time “under this Part” within which the Appellant was required to pay the $13,080 in benefits?

The Appellant’s written submissions concede that “what is considered ‘overdue’ remains unclear.” Delegate Makepeace, in Hejnowicz, states that the payment rules in the Schedule are ambiguous.

As indicated by Lalonde J., in Monks v. ING Insurance Co. of Canada [2005] O.J. No. 3753, the words “this Part” in subsection 46(1) of the Schedule refer to “Part X” of the Schedule. Part X of the Schedule is entitled “Procedures for Claiming Benefits” and encompasses sections 31 to 51. Within Part X is found section 38. Section 38 is entitled “Medical and Rehabilitation Benefits.”

In Langdon, Delegate McMahon stated that pre-judgment interest under section 128 of the Courts of Justice Act is payable, with some exceptions, whenever a party is entitled to an order for the payment of money. Under subsection 46 of the Schedule, however, pre-judgment interest is triggered not merely by a determination that a benefit is owed. There is the additional requirement that the insurer failed to pay the benefit within the time required by Part X.

Delegate McMahon did an exhaustive review of section 38 and of the preceding versions of the Schedule, endeavouring to identify “the applicable payment obligation imposed by s. 38.”

Delegate McMahon noted that clause 38(14)(b) of the Schedule provides that where a DAC assessor does not opine that an expense is reasonable and necessary for the insured’s treatment or rehabilitation, “the insurer is not required to pay for the expense.” The Delegate found that the insurer’s obligation to pay a medical or rehabilitation in such circumstances only comes from a subsequent order of an adjudicator that the treatment was indeed reasonable and necessary.

Delegate McMahon noted that the lower court in Mercier v. Royal and SunAlliance Company of Canada, 2003 CanLII 21638 (ON SC), [2003] O.J. No. 1233, (the Court of Appeal decision not forthcoming until after Langdon) did not inquire as to the effect, if any, of the DAC provisions in determining whether a payment is overdue. Delegate McMahon accepted that Attavar v. Allstate Insurance Co. of Company (2003), 63 O.R. (3d) at 199 (Ont. C.A.), “took the matter one step further in the context of LECBs [loss of earning capacity benefits] when it determined that a reading of s. 62 [now section 46] did not support the contention that the DAC rules were intended to supplant the obligation to pay the full amount of the benefit on receipt of the application.”

Delegate McMahon noted that in Attavar, Laskin J. “rejected the insurer’s argument that the shortfall in the LECBs was not overdue because it had followed the DAC’s recommendations.” The Delegate also cited Laskin J.’s statement that if the legislature had intended interest to not run in the face of a negative DAC, there would have been a statement to that effect.

Langdon distinguished medical/rehabilitation benefits from weekly benefits, finding that under the Schedule, there was “no initial obligation to pay” the former, unlike weekly benefits. There being no initial obligation to pay, if the DAC was negative (the insurer being required under clause 38(14)(a) to pay if there was a positive DAC opinion), there was no basis for finding that the insurer had failed to pay the disputed expense within the time required under Part X of the Schedule until a positive adjudicative order.

This analysis was supported by the Delegate’s finding that the the 2% per month, compounded monthly, section 46 pre-judgment interest did more than compensate the insured for delay or deprive an insurer of any benefit gained from using the money pending judgment. He found that section 46 interest “represents a penalty that is imposed in the event of an overdue payment ... This penalty component is the incentive designed to encourage the insurer to pay within the time-frames set out in the parts of the [Schedule] that define the insurer’s payment obligations. Imposing interest in the event of non-compliance encourages the insurer to meet its obligations.”

Court pre-judgment interest for causes of action arising after October 23, 1989 is based on the bank rate.² The rate for actions commenced the second quarter of 2010 is 0.5% per annum. The first year of compound pre-judgment interest under subsection 46(2) of the Schedule is 26.8%.

Four years of subsection 46(2) pre-judgment interest just from the March 7, 2003 date of Dr. Hoff’s last treatment plan to approximately the Arbitrator’s May 30, 2007 order, on the principal amount of $13,080, is some $21,000. Two further years of interest to the Arbitrator’s May 29, 2009 order is another $20,000. If the Appellant’s requested stay of the interest order had been granted, that further one year would have cost the Appellant an additional $15,000 in interest payable on the principal $13,080 amount.

The Court of Appeal for Ontario, nonetheless, states in Attavar that:

Although the amount of interest provided for in s. 68 [now section 46] is above the bank rate, I, like several arbitrators, regard s. 68 as compensatory, not punitive. The provision is designed to compensate insureds for the time value of money and to encourage insurers to pay accident benefits promptly. Without a provision like s. 68, insurers would have an incentive to delay paying benefits properly owing, thus forcing insureds to litigate their claims.

Similarly, the Court of Appeal in Sorokin stated that “[t]he clear policy intent of s. 46 of the SABS is compensatory as described in Attavar … Section 46(2) is a part of that compensatory scheme.”

The court decision in Sorokin arose from a February 9, 2004 arbitration decision awarding as a result of a May 27, 2000 accident, in part, $7,226.08 in medical benefits under section 14 of the Schedule. On May 4, 2004, the insurer paid the principal sum of $47,813.24. On December 13, 2005, the insurer paid $40,942.02 towards interest.

The lower court found, in accordance with the remedial and consumer protection nature of insurance law and “to avoid results that create absurdity, injustice and/or hardship,” that interest was not a penalty but rather a benefit under the Schedule that accrued to the insured. The non-payment of interest allowed the insurer to hold for nineteen months a significant sum owing to the insured. The insurer had the use of the insured’s funds and should compensate him for the time value of that money. To find otherwise would allow the insurer to delay payments without consequence and was commercially unreasonable and inconsistent with Attavar.

The Superior Court of Justice held that interest on the interest benefit was payable at the rate provided by subsection 46(2) of the Schedule from the May 4, 2004 date the parties agreed the interest benefit was due. The Court of Appeal dismissed the appeal. Unfortunately, neither Court identified the specific time provision under Part X itself (as set out in section 46) that payment of interest as a benefit is required and, thus, becomes overdue.

The Appellant submits that the heart of this appeal is whether what it submits is the Mercier endorsement of Langdon was binding on the Arbitrator and should have been followed. In Mercier, the Court of Appeal for Ontario specifically cites, with apparent approval, the Court of Appeal statement in Attavar that the compound interest provisions of what is now section 46 are compensatory, not punitive. One of the two pillars for the Langdon decision was the rationale that pre-judgment interest under the Schedule is punitive (the other pillar of the decision being the absence of an initial obligation by the insurer to pay medical benefits). This chasm between Langdon and the several binding Court of Appeal determinations that interest under the Schedule is not punitive makes it difficult to see Mercier as an endorsement of Langdon.

The ratio decidendi, as stated in Black’s Law Dictionary, Revised 4th ed. (West Publishing Company, 1968, St. Paul, Minn.), is the “ground of decision. The point in a case which determines the judgment.” Obiter dictum are “words of a prior opinion entirely unnecessary for the decision of the case.”

In Mercier, the Court of Appeal addressed a different, earlier (1994) version of the Schedule,³ to that of Langdon (and this case). Mercier also addressed a different category of benefit than in Langdon (and in this case), namely weekly caregiver benefits, and a different section of the different Schedule. This makes it further difficult to see any purported endorsement of Langdon as the binding ratio decidendi of Mercier.

In discussing the role of precedent, the Supreme Court held in R. v. Henry, 2005 SCC 76, [2005] 3 S.C.R. 609, that “the submissions of the attorneys general presuppose a strict and tidy demarcation between the narrow ratio decidendi of a case, which is binding, and obiter, which they say may safely be ignored.” The Court, however, stated at paragraph 57 that:

All obiter do not have, and are not intended to have, the same weight. The weight decreases as one moves from the dispositive ratio decidendi to a wider circle of analysis which is obviously intended for guidance and which should be accepted as authoritative. Beyond that, there will be commentary, examples or exposition that are intended to be helpful and may be found to be persuasive, but are certainly not “binding” in the sense the Sellars principle in its most exaggerated form would have it. The objective of the exercise is to promote certainty in the law, not to stifle its growth and creativity. The notion that each phrase in a judgment of this Court should be treated as if enacted in a statute is not supported by the cases and is inconsistent with the basic fundamental principle that the common law develops by experience.

The Court of Appeal in Mercier distinguished the case before them from that in Langdon. This commentary may have guided the losing party in Mercier in understanding why the Court did not find Langdon persuasive regarding the specific factual situation before them.

I agree with the Arbitrator, consistent with the view expressed in Hejnowicz, that:

…the Court of Appeal’s comments in Mercier on the reasoning in Langdon “fall short of an endorsement” and that the Court was “not required to engage in a close reading of s. 38 of the SABS-1996.” For this reason, I do not accept [the] submission that the Court of Appeal in Mercier “specifically opined” on the issue in the instant case. I also do not accept [the] suggestion that the Director’s Delegate in Hejnowicz was bound to follow the Court of Appeal’s reasoning in Mercier given his acknowledgement that the Court’s determination was “obiter.”

In both Attavar and in Mercier the Court of Appeal for Ontario held that regarding weekly benefits the existence of a negative DAC opinion does not delay the running of interest on the judicial finding of entitlement.

Subsection 37(4) of the Schedule specifically states that an insurer may stop paying weekly benefits on the basis of a negative DAC. The Appellant agreed that it was difficult to discern in the legislation a distinction between interest on weekly benefits and interest on medical and rehabilitation benefits. One explanation, however, might be that it is third-party treatment providers who benefit from the latter interest while interest on weekly benefits protects insureds.

There is, however, no such distinction under section 46 and it is clear that as the medical benefit itself is payable under section 14 directly to the insured, so is the interest thereon. Further, it is difficult to see how timely payment of goods and services providing pain relief or reintegrating victims of motor vehicle accidents into society, the workplace and their family is less laudable, without some specific guidance from the Legislature, than providing a reliable income stream.

Rigitano Estate v. Western Assurance Co., [2007] O.J. No. 3857, addressed, in part, the question of what interest was payable on a delayed full and final settlement of all past, present and future statutory accident benefits, including all future medical benefits. The Divisional Court held that the lower court judge erred in not awarding the plaintiff the subsection 46(2) 2% compound monthly interest from the December 8, 2003 date the defendant insurer had rescinded its offer to settle. The insurer had rescinded its offer to settle on discovering the insured person had died.

The Divisional Court held that the prompt payment of benefits is one of the fundamental goals of this statutory benefits system. The Court, citing the Court of Appeal in Mercier, stated that “even if an insurer was empowered to stop paying benefits pursuant to the SABS, if it is later determined by a judge that the insured was indeed entitled to the benefits, the insurer is liable to pay the benefits owed plus interest under the SABS from the date the benefits were first terminated.”

The Divisional Court, unfortunately, did not indicate the specific time provision under Part X of the Schedule within which payment of a settlement is required and, thus, becomes overdue. In Rigitano, as noted, the settlement included future medical benefits that had not been submitted under subsection 38(1) of the Schedule nor incurred under subsection 38(17) of the Schedule.

In Monks, noted above, interest on home renovations was in issue. Home renovations are a rehabilitation expense, not a weekly benefit. Nonetheless, the Superior Court of Justice found the reasoning in Attavar equally applicable. It held that the insurer, by acknowledging a need for home modifications on May 31, 2002, was liable under subsection 38(22) for 2% compound interest from June 30, 2002 on the full principal amount of $225,000, notwithstanding that the insurer was only informed of the full amount of the home renovation claim in December 2004, the insured’s prior report having assessed home renovations at $148,000.

Subsection 38(22) of the Schedule provides that subsections 38(1) to (21) do not apply if the insurer agrees to pay for expenses without the submission of an application or treatment plan. The Court in Monks, unfortunately, did not indicate the specific time provision under Part X of the Schedule pursuant to which the insurer had been required to pay in June 2002 rehabilitation claims that were two and a half years overdue when they were first fully advanced in December 2004. Rather, the trial judge relied on the inequity of the insurer relying on its own termination of benefits that prevented a timely full costing of reasonable and necessary home renovations.

In addition to the rejected punitive rationale, the second pillar of Langdon was that there must be a preliminary obligation to pay under the Schedule. Delegate McMahon, at page eleven of his decision, states that there is no initial obligation in this Schedule to pay medical benefits prior to a referral to a DAC and that “[i]n the absence of an obligation to pay, there is no statutory basis for saying that the insurer failed to pay the disputed expense ‘within the time required by s. 38.’”

At page four of his decision, however, Delegate McMahon notes that subsection 38(14) is silent on when medical/rehabilitation benefits should be paid if there is a positive DAC. Subsection 38(14) specifically does not state that the benefits are now overdue from the time they were submitted. The Delegate found that “the most apparent time is within 30 days of receipt of an invoice.” This references subsection 38(11) of the Schedule that provides that if the application for a medical/ rehabilitation benefit is not withdrawn under a subsection 38(9) conflict of interest:

… the insurer shall pay for goods and services described in the notice under subclause (8) (a) (i) or (ii) within 30 days after receiving an invoice for them.

Subclauses 8(a)(i) and (ii) refer to those goods and services the insurer has agreed to pay. If the insurer states in its notice that it will not pay for any goods and services contemplated by the treatment plan, it must provide a notice to the insured person and arrange a DAC assessment.

Why is (a) interest payable retroactively on a positive DAC opinion 30 days from receipt of an invoice pursuant to subsection 38(11) as an initial obligation to pay notwithstanding the insurer did not agree to pay same under clause 38(8)(a), but (b) interest is not payable retroactively on an adjudicator’s decision, notwithstanding a negative DAC opinion, back to the same thirty day period and pursuant to the same subsection 38(11)?

The Appellant was unable to assist me in understanding this distinction between the consequences of a positive DAC opinion and a negative DAC opinion. Respectfully, it is especially difficult to reconcile this differentiation when the rationale of interest under section 46 of the Schedule as being punitive has been specifically rejected by the Court of Appeal for Ontario.

Subsections 38(17) and (18) provide a further initial obligation for an insurer to pay where an insured person incurs medical or rehabilitation expenses. Notwithstanding the subsection 38(1) obligation on an insured to submit a claim before it is incurred, the insurer shall, within 30 days of receiving the application for incurred expenses, pay those expenses or give the insured person notice of its reasons for not paying.

Laskin J., in Bapoo v. Co-operators General Insurance Co. 1997 CanLII 6320 (ON CA), 36 O.R. (3d) 616 (ON C.A.), stated that “[a]voiding unjust or unacceptable results is an essential part of the court’s task in interpreting statutory language.” A challenge facing adjudicators in these cases, in grasping the legislative intent of these complicated and, as found in Hejnowicz, ambiguous provisions, is avoiding unjust or unacceptable results.

On the one hand, an insurer may follow the rules of the Schedule in properly referring a disputed medical/rehabilitation expense to a DAC. The DAC may, with significant justification being provided, opine that the submitted expense is neither reasonable nor necessary. After a litigation process, prolonged through no fault of either party, the expense is found to be reasonable and necessary. One may hesitate in thinking that the Legislature intended the consequences of compound interest set out above, from thirty days after the application or invoice was submitted.

On the other hand, an insured person may have unreasonably been denied benefits, the insurer relying on a negative DAC opinion the adjudicator found unpersuasive and insufficient. The insured person is without the benefits, presumably of some urgency, while the insurer has the benefit of the monies for an extended period of time, a period of time perhaps made longer by certain actions of the insurer. One may hesitate in thinking that the Legislature did not intend there to be any interest consequences in such circumstances prior to the adjudicative decision.

Section 46 of the Schedule, however, does not distinguish the payment or non-payment of pre-judgment interest on the basis of such factual differences, or on the adjudicator’s personal view of fault or rectitude independent of the wording and requirements of the Schedule.

The ratio decidendi of the Court of Appeal for Ontario and of the Divisional Court are binding on this Tribunal. These Courts have spoken clearly, and repeatedly, that the object of section 46 interest is compensatory. The Courts, pursuant to section 64 of the Legislation Act, 2006, c. 21, have interpreted the Schedule “as being remedial and shall be given such fair, large and liberal interpretation as best ensures the attainment of its objects.”

The Court of Appeal in Mercier noted the statement in Attavar that absent express language that a payment is not overdue, the interest provision applies. There is no express language in section 38, or elsewhere, that if there is a negative medical/rehabilitation DAC and a subsequent positive adjudicative order, the payment is not overdue back to the initial obligation to pay.

I am persuaded that the insurer’s initial time obligation under Part X of the Schedule to pay medical/rehabilitation benefits is subsection 38(11) or (18), whether there is a positive DAC or a negative DAC. I am further persuaded, adapting (as in Hejnowicz) the decision in Iankilevitch and CGU Insurance Company of Canada, (FSCO P03-00013, August 31, 2004) that addressed subsection 33(2) of the Schedule, that a negative DAC report does not result in a forfeiture of interest prior to a positive adjudicative decision, it merely delays payment of interest.

Further, in the specifics of this case, Dr. Prendergast’s February 13, 2002 DAC report only addressed the reasonableness and necessity of Dr. Hoff’s $2,600, November 23, 2001 treatment plan, not Dr. Hoff’s other five treatment plans.

To set aside the Arbitrator’s order on an interpretation that there is no initial insurer’s obligation to pay medical or rehabilitation benefits under Part X of the Schedule prior to an adjudicative order would mean that an insurer could, without any interest consequence for the prior period:

(a) deny payment of a treatment plan application without sending it for a DAC assessment, contrary to subsection 38(12);

(b) give the insured person any reason, no matter how unreasonable, for not paying an incurred expense application under clause 38(18)(b) and do no more; and/or,

(c) totally ignore a submitted treatment plan application, contrary to subsection 38(8).

I am not persuaded that this is the legislative intent of sections 38 and 46 of the Schedule.

I am, therefore, not persuaded that the Arbitrator erred in law in failing to find Mercier a binding, authoritative or persuasive endorsement of Langdon. Nor am I persuaded that the Arbitrator erred in law in preferring the approach towards pre-judgment interest taken in Hejnowicz over that of Langdon. Simply put, I find that under subsection 46(1) of the Schedule, the time under Part X of the Schedule within which the Appellant was required to pay the medical benefits in question was, pursuant to subsection 38(11), thirty days after receiving an invoice or, under subsection 38(18), thirty days after receiving an application.

This is what the Arbitrator stated on page ten of his decision. However, the Arbitrator noted that he did not receive any evidence as to the specific dates on which the Appellant received the invoices or applications. He, therefore, found it reasonable to order interest payable from the date of receipt of either the applications or the invoices, whichever was earlier.

The Arbitrator noted in his May 29, 2009 decision subsection 38(7) of the Schedule. Subsection 38(7) provides that on receiving the application, the insurer shall promptly determine whether it is required to pay for the goods and services contemplated by the plan.

Subsection 38(7) does not provide a specific numerical time period within which payment of the benefit is required. Further, one may question whether determining whether to pay is the same as actually paying. Respectfully, I therefore slightly amend the Arbitrator’s May 29, 2009 order to accord both with the thirty day period from receipt set out in subsections 38(11) and (18) of the Schedule and with the Arbitrator’s initial finding and endorsement of Hejnowicz.

V. EXPENSES

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

May 5, 2010

Lawrence Blackman 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. 2As defined in section 127 of the Courts of Justice Act, R.S.O. 1990, Chap. C.43, “the bank rate established by the Bank of Canada, as the minimum rate at which the Bank of Canada makes short-term advances to banks listed in Schedule 1 to the Bank Act (Canada).
3. 3Statutory Accident Benefits Schedule – Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended.