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

Neutral Citation: 2011 ONFSCDRS 106

FSCO A09-001861

BETWEEN:

THERESA KEHOE

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

Before: Edward Lee

Heard: By written submissions and telephone conference call on October 3, 2011

Appearances: Karen Power for Ms. Kehoe Ian D. Kirby for Allstate Insurance Company of Canada

The Applicant, Theresa Kehoe, was injured in a motor vehicle accident on October 19, 2002. She applied for and received statutory accident benefits from Allstate Insurance Company of Canada (“Allstate”), payable under the Schedule.¹ Allstate terminated benefits on various dates. The parties were unable to resolve their disputes through mediation, and Ms. Kehoe applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

This preliminary issue arbitration involves four claims for benefits. In each case, Allstate argues that Ms. Kehoe is barred from proceeding to arbitration because she applied for mediation more than two years after the benefit was denied by Allstate.

The four claims are for: (i) physiotherapy treatments, (ii) back cream, (iii) caregiving benefits, and (iv) housekeeping and home maintenance benefits.

Issues:

The preliminary issues are:

Is Ms. Kehoe’s claim for treatment at Upper Ottawa Physiotherapy in the form of exercise, cardiovascular conditioning and functional training precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule?
Is Ms. Kehoe’s claim for caregiving benefits precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule?
Is Ms. Kehoe’s claim for housekeeping and home maintenance benefits precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule?
Is Ms. Kehoe’s claim for back cream precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule?

Result:

Ms. Kehoe’s claim for treatment at Upper Ottawa Physiotherapy in the form of exercise, cardiovascular conditioning and functional training is precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule.
Ms. Kehoe’s claim for caregiving benefits is precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule.
Ms. Kehoe’s claim for housekeeping and home maintenance benefits is precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule.
Ms. Kehoe’s claim for back cream is not precluded from proceeding to arbitration.

ARGUMENT:

According to Allstate, all four claims were denied and Explanation of Benefits forms (OCF-9’s) were sent to Ms. Kehoe, accompanied by Right to Dispute forms. The Right to Dispute form informed the applicant of her rights and possible recourses following a denial of benefits.

Ms. Kehoe did not apply for mediation in regard to these benefits (and in the case of the back cream, never applied for mediation at all), until some five years after those denials. As section 51 of the Schedule requires a mediation to be commenced within two years of an insurer’s refusal, all these claims are statute-barred and cannot proceed to arbitration.

In response, Ms. Kehoe argues that proper denials were never issued in regard to these claims. Therefore, the limitation periods were never triggered. She admits receiving an Explanation of Benefits form (OCF-9) for each of the claims, but argues that the Right to Dispute form was received only with the denials for the housekeeping and back cream claims.

Furthermore, even though Ms. Kehoe admits receiving a Right to Dispute form along with the denials for the physiotherapy and caregiving claims, she argues that these claims were not properly denied because the Right to Dispute form did not meet the requirements enunciated in Smith v. Co-operators General Insurance Co.²

Therefore, all four claims have never been properly denied, and the limitation periods have never been triggered.

ANALYSIS:

This case turns on whether Allstate provided Ms. Kehoe with the Right to Dispute form and whether the Right to Dispute form conformed with the requirements of Smith v. Co-operators.

This matter can thus be broken down into two subsidiary questions:

(i) Was a Right to Dispute form included with the denials for the back cream and the caregiving claims (Ms. Kehoe having conceded that the form was included in the denials for housekeeping and physiotherapy)?

(ii) Did the Right to Dispute form meet the requirements of the Smith v. Co-operators decision, and if so, what is its impact on the benefits claimed?

(i) Was a Right to Dispute form included with the denials for the back cream and Caregiving benefits?

The parties had agreed to proceed entirely by way of written submission, documentation and legal argument. On review of their pleadings, it was clear that there were factual disputes as to whether certain documents (most importantly, the Right to Dispute form) had been sent and received by the parties. I convened the parties to address these discrepancies. I suggested they might wish to call evidence in regard to the factual disputes, but they declined this opportunity. Given the lengthy time interval since the relevant events in question (most occurred in 2003), neither party believed that any other evidence could be adduced to aid my determination. Ms. Power stated that Ms. Kehoe would only testify she did not receive the Right to Dispute form for the caregiving or back cream benefits. Allstate could only call a witness who would testify that in the normal course of events, certain documents would have been sent to Ms. Kehoe, including the Right to Dispute form. Neither side wished to cross-examine any potential witnesses. Both parties were content to have me resolve these discrepancies based upon their submissions and the documentation they had already provided.

(a) Was a Right to Dispute form included with the denial for the back cream?

Ms. Kehoe’s position was that she received the Explanation of Benefits (OCF-9) of July 18, 2003 for the back cream, but received no other documentation.

Allstate directed me to Tab 10 in the Insurer’s Brief Concerning Limitation Defence. That document is a simple 4-page Explanation of Benefits form (OCF-9) dated July 18, 2003. At Part 5 of that form is the following notation concerning a back prescription in the box entitled “Reason why expenses are not payable”:

Please have invoice for this submitted for consideration. Unable to determine if we will fund same without an invoice to determine what the actual medication is for.

No attachment, cover letter, schedule, or Right to Dispute form is included with this document.

I find that the notation in the OCF-9 itself is equivocal. It does not specifically deny the claim; it only states that a determination cannot be made without an invoice. Given the unclear wording in the OCF-9 and the absence of accompanying documentation, I find it more likely than not that the Right to Dispute form was not included with the OCF-9 sent to Ms. Kehoe concerning the back cream.

(b) Was a Right to Dispute form included with the denial for the Caregiving benefit?

Ms. Kehoe admitted she received the Explanation of Benefits form (OCF-9) in relation to the caregiving benefit. Nevertheless, her submission was that she received neither the right to dispute form nor an accompanying cover letter with the OCF-9.

Allstate directed me to Tabs 6 and 8 of the Insurer’s Brief Concerning Limitation Defence. Tab 6 is the Explanation of Benefits (OCF-9) dated June 16, 2003, which has the following notation under Part 4, Caregiver Benefits:

“Your caregiver benefits will cease as of July 1, 2003. Please see attached letter.”

A Right to Dispute form is attached to this OCF-9.

Tab 8 is a copy of a letter addressed to Ms. Kehoe dated June 16, 2003. This letter contains the following paragraphs:

Please be advised that your Caregiver Benefits cease as of July 1, 2003. This is as a result of your Insurer’s Examination which indicated that you are no longer disabled for the purposes of qualifying for benefits. You may still be eligible for medical or other expenses. Please continue to send any such claims to me.

I have enclosed for your information:

An Explanation of Assessment Form – OCF 9/59
Your Right to Dispute (Sect 49 of the Statutory Accidents Benefits Schedule)

[emphasis mine]

In the absence of other evidence, the reference to the Right to Dispute form in the cover letter of June 16, 2003 leads me to conclude that it is more likely than not that the Right to Dispute form and the cover letter of June 16, 2003 were, indeed, sent to Ms. Kehoe.

(ii) Did the Right to Dispute form meet the requirements of Smith and Co-operators, and if so, what is its impact on the benefits claimed?

If the Right to Dispute forms sent to Ms. Kehoe complied with the requirements set out in Smith v. Co-operators, then the benefit was properly denied and validly refused. The respective limitation periods would have been triggered. If so, the applications for mediation would have been filed outside the two-year time limit, and the arbitrations of these claims would be barred from proceeding.

Ms. Kehoe argued that the elements of a valid refusal were set out in the decision of Smith v. Co‑Operators: the insurer must (i) inform the person of the dispute resolution process in straightforward and clear language, (ii) describe the most important points of the process, (iii) inform the person of the rights to mediation, and that arbitration or litigation can be sought if mediation fails, (iii) that mediation must be attempted before arbitration or litigation, and (iv) the relevant time periods that govern these processes.³

Counsel for Ms. Kehoe also relied on the decisions of Yifru v. Certas Direct Insurance Company⁴ and Galati v. Aviva Canada Inc.⁵

The Right to Dispute form sent to Ms. Kehoe read as follows:

Your Right to Dispute (Sect. 49 SABS)

It is very important that you recognize your right to dispute our decision to refuse or reduce a benefit payable under your automobile insurance policy.

Should you wish to dispute our decision, the first thing you must do is contact the Financial Services Commission of Ontario and file an application for mediation. The Financial Services Commission of Ontario Dispute Resolution Group can be contacted at 416-590-7090 or toll free at 1-800-668-0128 extension 7090.

Should mediation fail to resolve the dispute then your next step is to either apply to the Financial Services Commission of Ontario for arbitration or commence litigation (file a law suit).

You must first attempt mediation before commencing arbitration or litigation.

It is very important that you recognize you have only two (2) years from the date of this notice to commence arbitration or litigation. If you do not commence the arbitration or litigation process with two (2) years from the date of this notice then you will be barred form bringing your dispute forward.

Should your mediation hearing occur within 90 days of the two year limitation date, you must commence arbitration or litigation within 90 days after the mediator’s report, otherwise you will lose your right to bring your dispute forward.

I find this Right to Dispute form fulfills the requirements set out in Smith v. Co-operators. First, it is written in clear and straightforward language directed toward an unsophisticated person (it even defines the word “litigation”). Second, it informs the person of the dispute resolution process. Third, it provides a description of the important points of the process, including the right to mediate, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before arbitration or litigation, and the relevant limitation periods, as well as the consequences of failing to meet those time periods.

I also reject Ms. Kehoe’s argument that the Yifru decision is applicable to the present case. The present right to dispute form is distinguishable from the Yifru notice because it meets the Smith requirements and it also sets out the steps in the dispute resolution process in a sequential manner (informing the reader of the “next step”). The refusal, the report of the mediator, and the bringing of an action or arbitration are mentioned sequentially, as are the rights, obligations and consequences that might attach to each particular step.

Finally, I am also unconvinced that the Galati decision is of help to Ms. Kehoe. In Galati, the arbitrator found that although a refusal letter had been sent, the refusal letter did not comply with section 49 of the Schedule (requiring the insurer to inform the insured of the dispute resolution process). Instead, counsel there tried to argue that compliance with section 49 had been obviated by the DAC refusal, since the DAC itself was part of the dispute resolution process (an argument rejected by the arbitrator). This is clearly not the situation in the present case, where the Right to Dispute forms were sent. Thus Galati is clearly distinguishable from the case at bar.

Therefore, I find that the denials of the claims for caregiving, physiotherapy, and housekeeping and home maintenance were accompanied by a Right to Dispute form which conformed to the requirements of Smith v. Co-operators. The denials were thus valid and the limitation periods were accordingly triggered in 2003. As the applications for the mediations of these claims were not submitted until some five years later, these three claims are barred by statute. The claim for back cream is not statute-barred.

One further issue was raised during argument in regard to the housekeeping claim. At some point, Allstate argued that no application for the mediation of the housekeeping claim had ever been made. Given the decision I have reached in regard to the sufficiency of the Right to Dispute form, it is not necessary for me to address this argument.

EXPENSES:

The parties made no submissions as to the expenses incurred in this preliminary issue hearing. I defer that discussion to the arbitrator at the completion of the full arbitration.

November 22, 2011

Edward Lee Arbitrator

Date