State Farm Mutual Automobile Insurance Company v. Subashini Yogesvaran, 2011 ONFSCDRS 105

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2011 ONFSCDRS 105

Variation P11-00024V

Applicant

and

Respondent

BEFORE:

Delegate Lawrence Blackman

Mr. Robert S. Franklin for the Applicant, State Farm Mutual Automobile Insurance Company

Mr. David S. Wilson for the Respondent, Subashini Yogesvaran

HEARING DATE:

By written submissions due November 14, 2011. Letter decision issued November 17, 2011, with reasons to follow.

PRELIMINARY VARIATION ORDER

Under section 284 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

This Application for Variation from a preliminary or interim appeal order that does not finally decide the issues in dispute is rejected pursuant to Rule 61.4(a) of the Dispute Resolution Practice Code (Fourth Edition, Updated – August 2011).
If the parties are unable to agree on the legal expenses of this application for variation, pursuant to Rule 79 of the Code, an expense hearing shall be requested within thirty days of the date of this decision, accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs and submissions on entitlement to and/or the quantum of such legal expenses, as are in dispute.

November 22, 2011

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE VARIATION APPLICATION AND SUBMISSIONS

Subsection 284(1) of the Insurance Act, R.S.O. 1990, c. I.8, provides, in part, that either the insured or the insurer may apply to the Director of Arbitrations to vary an order made by the Director. Under subsection 284(3), if the Director is satisfied that (a) there has been a material change in the circumstances of the insured, (b) evidence not available on the appeal has become available, or (c) there is an error in the order, the Director may vary or revoke the order and make a new order if he or she considers it advisable to do so.

Rule 61.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated – August 2011) (the “Code”) provides that a party may not apply to vary or revoke an adjudicator’s preliminary or interim order until all of the issues in dispute in the proceeding have been finally decided, unless the Director orders otherwise. Under Rule 61.4(a), a Variation/Revocation Application from a preliminary or interim order not finally deciding the issues in dispute may be rejected.

This preliminary decision addresses the Applicant’s request that it be permitted to proceed with its Application for Variation from an October 28, 2010 preliminary or interim appeal order.

The genesis of this proceeding is the Respondent, Ms. Subashini Yogesvaran, being injured in a May 13, 2007 motor vehicle accident. As a result, she applied to the Applicant, her first-party automobile insurer, for statutory accident benefits under the Schedule.¹

The Applicant paid the Respondent housekeeping benefits until January 2, 2008 and weekly income replacement benefits (“IRBs”) until January 16, 2008. A May 8, 2008 mediation did not resolve the parties’ dispute regarding entitlement to ongoing benefits. The Respondent thus applied that month for arbitration.

A preliminary issue arose whether the Applicant had failed to comply with section 37 of the Schedule when terminating benefits and, if so, the consequences of that failure. Arbitrator Miller’s November 26, 2009 decision held that the Applicant had failed to properly terminate benefits. As a consequence, she ordered the Applicant to pay the Respondent IRBs from January 17, 2008 with interest, and ongoing until the IRBs were terminated in accordance with section 37. Housekeeping benefits were payable from January 3, 2008 to May 13, 2009, with interest.

The Applicant appealed this decision. My January 19, 2010 letter decision, exercising the power delegated to me by the Director under section 6 of the Insurance Act and the discretion allowed under Rules 50.2 and 51.2(c) of the Code, accepted this appeal from a preliminary arbitration decision on the basis, in part, that the issue in dispute was both novel and important.

Following submissions on the substance of the appeal, my October 28, 2010 decision allowed the appeal to the extent that the Arbitrator’s entitlement orders, based on the Applicant’s procedural non-compliance with the Schedule, were made interim, with the matter to proceed to an arbitration hearing to determine the Respondent’s final benefit entitlement based on the substantive entitlement tests.

By Notice of Hearing dated November 30, 2010, the arbitration unit set a four-day arbitration hearing to start December 19, 2011. On October 19, 2011, this office received this Application for Variation of the October 28, 2010 appeal decision. The Application noted that a variation was being sought of a preliminary or interim order.

The Application for Variation submitted that there was an error in the October 28, 2010 appeal order in that the IRB entitlement test changes after 104 weeks of disability from substantial inability to perform the essential tasks of one’s employment to a complete inability to engage in any employment for which the insured is reasonably suited by education, training or experience.

The Application for Variation sought an order that IRB entitlement be determined at an arbitration hearing, with the Respondent’s IRB entitlement in the interim being suspended under subsection 37(7) of the Schedule due to the Respondent’s April 8, 2011 refusal to attend insurer medical examinations (“IMEs”) the Applicant had requested on April 1, 2011 for April 29th with a psychiatrist, May 18th with a physiatrist and May 30th with a vocational specialist.

The Applicant wrote the Respondent by OCF-9, Explanation of Benefits, dated May 9, 2011, that it had:

… determined that you are not entitled to Income Replacement Benefits, and subject only to the Interim Order of Director Delegate Blackman dated October 28, 2010 ordering ongoing payment of IRBs, refuses to pay IRBs pursuant to section 37(7) of the SABS until such time as you comply with your obligation to attend at the said assessments pursuant to section 44(9) of the SABS. State Farm will be seeking a variation of the said Interim Order to confirm that State Farm has no obligation to pay interim benefits.

Pursuant to section 6 of the Insurance Act, the Director delegated this variation proceeding to me. As the Application for Variation only briefly addressed Rules 61.2 and 61.4(a) of the Code, both parties were given an opportunity to provide written submissions on whether this variation application from a preliminary or interim order should be presently accepted or rejected.

The Applicant’s submissions expanded the relief sought in this variation application, asking that the December 2011 arbitration hearing be adjourned “and upon its resumption, the issues of the insurer’s right to a post-104 week entitlement and the insurer’s right to repayment from the Respondent, shall be added,” the Applicant submitting that it properly suspended IRBs on May 9, 2011. The Applicant, however, cited Economical Mutual Insurance Company and C.C., (FSCO P11-00008V, July 12, 2011), for the proposition that “the correct procedure through which to seek repayment from the insured” is a variation application.

The Applicant also expanded the grounds for the requested variation. First, the Applicant argues that 104 weeks having elapsed since the accident represents not only an error in the October 28, 2010 appeal order but also a material change in the Respondent’s circumstances. Second, it argues that submissions were not allowed earlier on whether an interim order was appropriate and should now be received as evidence not available at the time of the appeal hearing.

Last, the Applicant argues that an error in the appeal order is that the test for an interim order was not argued or considered. Citing Malabanan and Canadian General Insurance Company,

(OIC A96-000084, July 26, 1996) and Ioannidis and Canadian General Insurance Group, (OIC A97-001551, December 21, 1997), the Applicant submits that an interim benefits order requires a prima facie case being established, the insured producing evidence that, if unanswered and believed, is sufficient to render reasonable a conclusion in favour of entitlement.

The Applicant submits that the strong basis for its variation application is that without post 104-week IMEs it cannot properly assess the Respondent’s ongoing IRB entitlement. Failure to accept this application, the Applicant argues, would prejudice its right to IMEs as often as is reasonably necessary.

In this regard, the Applicant cites Kostynyk and State Farm Mutual Automobile Insurance Company, (FSCO A09-003158, September 28, 2011), where Arbitrator Rogers stayed an arbitration pending an insured’s IME attendance. Arbitrator Rogers held that fairness is fundamental to any administrative process, an IME may be required in order to have a fair hearing and a change in the post 104-week entitlement test is a change in circumstances giving an insurer a prima facie right to require an insured person to be assessed.

Citing the criteria in State Farm Mutual Automobile Insurance Company and Ramalingam, (FSCO P05-00026, August 13, 2007) on whether an arbitration should be adjourned pending an insured’s IME attendance, the Applicant asks that the arbitration hearing herein be adjourned as its IME requests were made well before the scheduled December 2011 hearing and its requests were reasonable given that 104 weeks have elapsed since the accident.

The Respondent submits that the scheduled arbitration hearing includes the issue of post 104-week IRB entitlement. She also argues that the Applicant’s prior IMEs have addressed her post 104-week IRB entitlement. The Respondent notes Dr. K. Walsh’s April 29, 2009 IME report that the Respondent does not, from a psychiatric perspective, suffer a complete inability to engage in any employment for which she is reasonably suited by education, training or experience. Mr. D. Cohen’s June 1, 2009 vocational review opines that it would be assumed that the Respondent would be able to participate or return to some form of employment based upon her education, training or experience.

II. ANALYSIS

Contrary to the Applicant’s May 9, 2011 OCF-9, the October 28, 2010 interim appeal order did not order ongoing payment of IRBs. It was the Arbitrator who ordered ongoing IRBs “until the benefits are terminated in accordance with section 37 of the Schedule.” I allowed the Applicant’s appeal to the extent of varying the Arbitrator’s decision that the entitlement orders were no longer final but rather subject to determination on their substantive merits.

The Applicant now seeks in this variation proceeding a broad range of substantive and procedural orders as follow:

(a) Maintaining the appeal order that the Arbitrator’s order is not final but interim, the Arbitrator’s award being subject to possible repayment upon an arbitrator’s determination of the substantive merits of the Respondent’s claim.

(b) In the interim, an adjudicative finding that its requested IMEs are reasonably required.

(c) The finding that the requested IMEs are reasonably required leading first to an order that the scheduled arbitration hearing should not be permitted to proceed without the Respondent submitting to the requested IMEs.

(d) The finding that the Applicant’s requested IMEs are reasonably required leading secondly to a finding that the Applicant has terminated IRBs in accordance with section 37 of the Schedule, with the consequent order that the Applicant is no longer required to pay ongoing IRBs pursuant to the Arbitrator’s November 26, 2009 decision.

(e) An order adding post 104-week IRB entitlement to the issues to be determined at the arbitration hearing, if not already included.

(f) IRBs now being subject to final substantive determination, an order that the issue of repayment of IRBs be added to the issues to be determined at arbitration.

(g) An order that the Applicant is entitled to repayment of IRBs, at least from May 1, 2011, the Applicant having now properly terminated IRBs in accordance with the Schedule.

The arbitration unit should have control over its own process. The above issues are properly put before an arbitrator. Adjournment requests of an arbitration hearing should be made to an arbitrator under Rule 72 of the Code. A stay of an arbitration on the basis of IME non-attendance should be made before an arbitrator under Rule 67 of the Code. Adding or clarifying the issues to be determined at an arbitration hearing should be done by resuming the arbitration pre-hearing. By referring this matter back to arbitration for a hearing on the substantive merits of the claim, I did not presume to assume carriage of the arbitration proceeding.

As to repayment, C.C. was a variation application from an arbitration decision that found that causation had not been established. The arbitration decision, however, was silent on the issue of IRB repayment explicitly raised and argued before the arbitrator. A subsequent arbitrator held that the appropriate remedy for an alleged error in the arbitration order was an application for variation or revocation. In those narrow circumstances, I was persuaded that there was an error in the arbitrator’s order and that it was advisable under subsection 284(3) of the Insurance Act to vary the arbitration order by adding a repayment order. Those circumstances do not apply in this case.

Regarding the requested suspension of IRBs, given that it is the Arbitrator’s November 26, 2009 order that is being addressed, there is no impediment to an arbitrator addressing this issue. As the adjudicative finding of the reasonableness of the requested IMEs is central both to an adjournment or stay of the arbitration hearing (that is properly within the purview of arbitration) and whether IRB benefits should be suspended, to address the latter in this variation proceeding would simply lead to a multiplicity of proceedings with the risk of inconsistent results.

In any event, Delegate Makepeace, in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), held that the purpose of the provisions of Part 4 of the Code (pertaining to appeals) on whether to accept an appeal from a preliminary or interim arbitration order (equivalent to Rules 61.2 and 61.4(a) pertaining to variation applications), was to:

… facilitate the most cost-effective resolution of disputes by minimizing the time and money spent on procedural or collateral matters. The decision whether to hear an appeal of a preliminary order is discretionary … the over-arching principle guiding the exercise of the discretion is that the rule “should be broadly interpreted to produce the quickest, most just and least expensive resolution of the dispute.” The criteria to be considered include the apparent strength of the appeal, the importance or novelty of the issue raised, and whether rejecting the appeal or hearing it will prejudice either party.

I am not persuaded as to the apparent strength of this variation application. The first ground for a variation order is that there has been a material change in the Respondent’s circumstances in that the IRB entitlement test has changed. The accident took place May 13, 2007. The entitlement test for IRBs changes at 104 weeks of disability. The 104-week mark would be on or about May 13, 2009. The October 28, 2010 appeal decision sought to be varied postdates the change in the IRB entitlement test. It is unclear how a change in the IRB test preceding the October 28, 2010 appellate order by more than a year would constitute “a material change in the circumstances of the insured” to warrant a variation order under subsection 284(3) of the Insurance Act.

In the alternative, the Applicant submits that the change in the 104-week test constitutes an error in the October 28, 2010 order. However, substantial entitlement is to be determined at an arbitration hearing. As the appeal decision did not address substantive entitlement but only the consequences of the Applicant’s procedural non-compliance with the Schedule, it is difficult to see how the 104-week test constitutes an error in the order.

The third ground of the variation application pertains not to evidence unavailable on the appeal now becoming available, but whether the parties had an opportunity to address whether the Arbitrator’s final determination of entitlement should be solely on an interim basis. Whatever the merits of that argument, submissions are not evidence and do not come under subsection 284(3) of the Insurance Act as a ground to vary an order.

Finally, the Applicant argues that there is an error in the appeal order in that the wrong test for interim benefits was applied. The October 28, 2010 appeal order followed Sweete and Jevco Insurance Company, (OIC A96-000614, October 24, 1996), that an insurer’s violation of its obligations under the Schedule may be a basis for an interim benefits order. As the Applicant does not address this case or its reasoning, it is difficult to discern the strength of its argument.

Regarding the question of prejudice to either party, the Applicant’s request for a stay of the arbitration is not being refused; rather, it is referred without prejudice to arbitration. On the other hand, there is a prejudice to both parties in having a multiplicity of proceedings with the risk of inconsistent findings.

I am further not persuaded that the issues raised in this variation application are of such general import or novelty to warrant accepting this application. Rather, the present issues, while significant to the parties, are particular to the facts of this case.

I am thus not persuaded that accepting this variation application will produce “the quickest, most just and least expensive resolution of the dispute.” Accordingly, pursuant to Rule 61.4(a) of the Code, I exercise my discretion to reject this present Application for Variation as being from a preliminary or interim appeal order that does not finally decide the issues in dispute.

III. EXPENSES

If the parties are unable to agree on the legal expenses of this variation application, pursuant to Rule 79.2 of the Code, an expense hearing shall be requested within thirty days of the date of this decision, accompanied by (1) a Bill of Costs describing the expenses claimed, the services received and the costs, and (2) submissions on entitlement to and/or the quantum of such legal expenses, as are in dispute.

November 22, 2011

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.