Economical Mutual Insurance Company v. Dhanraj Jaggernauth, 2011 ONFSCDRS 22

Financial Services Commission of Ontario

Neutral Citation: 2011 ONFSCDRS 22 Appeal: P11-00002

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ECONOMICAL MUTUAL INSURANCE COMPANY Appellant

and

DHANRAJ JAGGERNAUTH Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Ms. Helen D.K. Friedman for the Appellant, Economical Mutual Insurance Company Ms. Kelley Campbell for the Respondent, Dhanraj Jaggernauth

HEARING DATE: February 17, 2011.

PRELIMINARY APPEAL ORDER

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

1. The Notice of Appeal from the Arbitrator’s December 20, 2010 decision on a preliminary issue is accepted, exercising my discretion under Rule 50.2 of the Dispute Resolution Practice Code (Fourth Edition - Updated September 2010).

2. The Appellant’s request for a stay of the Arbitrator’s December 20, 2010 Order is denied.

3. The legal expenses of this interim appeal order are deferred to the conclusion of this appeal, subject to any other or further order of an appeals adjudicator.

March 4, 2011

Lawrence Blackman Director’s Delegate

REASONS FOR DECISION

I. NATURE OF THE APPEAL

The Respondent, Dhanraj Jaggernauth, was injured in an August 6, 2005 motor vehicle accident and sought statutory accident benefits under the Schedule¹ from his first-party automobile insurer, the Appellant, Economical Mutual Insurance Company. The parties came before Arbitrator Feldman (the “Arbitrator”) in an eight-day arbitration hearing to determine the preliminary issue of whether the Respondent’s impairments sustained as a result of his accident had resulted in a catastrophic impairment as defined in clauses 2(1.2)(f) or (g) of the Schedule.

The Arbitrator’s December 20, 2010 Order held that the Respondent had sustained a catastrophic impairment within the meaning of clause 2(1.2)(f) of the Schedule, but not clause 2(1.2)(g). The Respondent seeks leave to appeal this preliminary decision and requests a stay of the Arbitrator’s Order.

II. ANALYSIS

(a) Whether to accept this appeal from a preliminary arbitration order

Rule 50.2 of the Dispute Resolution Practice Code (Fourth Edition - Updated September 2010) (the “Code”) provides that a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute in the arbitration have been finally decided, unless the Director orders otherwise. Pursuant to subsection 6(4) of the Insurance Act, R.S.O. 1990, c. I.8, the Director has appointed me to hear this appeal and to exercise his related powers and duties.

Delegate Makepeace, in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), held that the purpose of what is now Rule 50.2 of the Code is 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. [emphasis added]

The Appellant submits that its Notice of Appeal from the Arbitrator’s December 20, 2010 preliminary order should be accepted at this time because:

(a) This appeal will finally determine the issue of catastrophic impairment.

(b) There is a strong case that the Arbitrator erred in law, including (a) his assessment of physical impairments contrary to the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th Edition, 1993 (the “AMA Guides”); (b) the Arbitrator including psychological impairments in determining clause 2(1.2)(f) of the Schedule; (c) the Arbitrator assessing psychological impairment contrary to the AMA Guides; and (d) his rounding up of the final whole person impairment rating.

(c) This appeal raises novel issues, including rounding up of whole person impairment, whether the Arbitrator was bound by the appeal decision in Pilot Insurance Company and Ms. G, (FSCO P06-00004, September 4, 2007), the applicability of Kusnierz v. The Economical Mutual Insurance Company, 2010 ONSC 5749 and the Arbitrator’s assessments of chronic pain, and range of motion and spinal impairment.

(d) The Respondent’s further entitlement to housekeeping and attendant care benefits is dependent on a finding of catastrophic impairment. If the Arbitrator is found to have erred in law and the Respondent should not be so designated, entitlement to further housekeeping and attendant care are moot issues.

Therefore, allowing this appeal to proceed at this time is the quickest, most just and least expensive means of resolving this dispute by relieving the parties of the burden of proceeding to a possibly unnecessary arbitration entitlement hearing.

The Respondent submits that accepting this appeal at this time is prejudicial to him as he has been precluded from receiving any housekeeping or attendant care benefits since August 6, 2007, the second anniversary of the accident. Subsections 18(2) and (3) of the Schedule provide that no attendant care benefit is payable for more than 104 weeks after the accident except if the insured person has sustained a catastrophic impairment. Subsections 22(3) and (4) of the Schedule state that no payment is required for housekeeping and home maintenance expenses incurred more than 104 weeks post-accident unless the insured person has sustained a catastrophic impairment.

The Respondent argues that the issues in appeal are not of such novelty or importance to supersede the prejudice to him. The Respondent further submits that this appeal may not finally determine the issue of catastrophic impairment as the appeal decision may be subject to judicial review. The Respondent argues that the Arbitrator weighed all of the evidence and considered the case law, including Kusnierz, and that the Appellant’s disagreement with the Arbitrator’s analysis and conclusions does not translate into any obvious error of law.

Upon considering the submissions of the parties, I am exercising my discretion under Rule 50.2 of the Code to accept this appeal of the Arbitrator’s December 20, 2010 preliminary decision on the issue of catastrophic impairment.

A decision designating an insured person as catastrophically impaired does not immediately entitle that person to payment of specific benefits. It does, however, entitle an insured person to a higher threshold of potential entitlement. Thus, if catastrophic impairment is deemed to be within the sphere of preliminary procedural or collateral matters, it is at the more substantive end of that range.

Similar to limitation questions of whether there was an accident as defined in the Schedule, catastrophic impairment is an all or nothing issue. If designated catastrophically impaired, an insured may proceed to have his or her entitlement to a higher threshold of benefits determined. If found not to be catastrophically impaired, that door is sealed shut.

Catastrophic impairment, specifically under clauses “f” and “g,” is an important and current issue. The catastrophic impairment decisions in Aviva Canada Inc. and Pastore, (FSCO Appeal P09-00008, December 22, 2009) and Economical Mutual Insurance Company and Augello, (FSCO Appeal P09-00002, November 17, 2009) are presently before the Divisional Court. Kusnierz is before the Court of Appeal.

It is doubtful that my decision in this case, regardless of the result, will be the final word on the catastrophic impairment issues raised in this appeal. Cognizant of the present debate regarding the broad ranging, important issue of catastrophic impairment and the value of moving the issues raised in this appeal forward expeditiously, I am persuaded that it is sensible that this appeal be heard at this time rather than waiting for the decision on housekeeping and attendant care entitlement following a final arbitration hearing, yet to be set.

A significant concern in accepting this appeal is the relative prejudice to the parties. That concern is addressed more specifically below.

(b) Whether to stay the arbitration order

Subsection 283(6) of the Insurance Act provides that an appeal does not stay an arbitrator’s order unless the Director or, under subsection 6(4), his delegate, decides otherwise. Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000) confirms that a stay “is the exception rather than the rule.” Canadian Home Assurance Company and Scavuzzo, (OIC P-000626, May 18, 1992) confirmed the following factors to be considered on an application for a stay:

1. the bona fides of the appeal;
2. the substance of the grounds for appeal; and,
3. the hardship to the respective parties if the stay is granted or refused.

The Appellant submits the Arbitrator’s December 20, 2010 Order should be stayed as:

(a) There are reasonable grounds to believe this appeal will be successful. A clause 2(1.2)(f) finding of catastrophic impairment requires an impairment or combination of impairments that, in accordance with the AMA Guides, results in 55 per cent or more whole person impairment (“WPI”). The Arbitrator found a 55 per cent WPI only by rounding up his initial assessment of 53% WPI. An error in law of even one per cent WPI would disqualify the Respondent from a finding of catastrophic impairment;

(b) The Respondent would not be prejudiced by a stay as he remains within his non-catastrophic medical/rehabilitation benefits and is receiving minimal treatment;

(c) The Respondent is not presently in need of attendant care, nor is he receiving same; and,

(d) There would be significant prejudice to the Appellant if a stay were not granted as it would have no means of obtaining repayment of any benefits paid in respect of a catastrophic impairment determination. Any prejudice to the Respondent could be compensated by an award of interest on any benefits found owing in the event of an unsuccessful appeal.

The Respondent argues that ordering a stay of the Arbitrator’s order is inappropriate as:

(a) There is, at present, no benefit entitlement or payment order to stay;

(b) The Respondent has had no access to housekeeping or attendant care benefits past the two-year anniversary of his accident; and,

(c) The prejudice to the Respondent will not be compensated by an interest payment.

The chronology in this matter, as noted in the file and as advised by the parties, is:

• August 6, 2005 the date of the Respondent’s motor vehicle accident
• August 6, 2007 the two-year anniversary, after which attendant care and housekeeping benefits are not payable in the absence of a finding of catastrophic impairment
• September 26, 2007 signed Application for Determination of Catastrophic Impairment (OCF-19) submitted to the Respondent
• October 1, 2007 Respondent refers the Appellant to a Catastrophic Impairment insurer’s medical examination (IME)
• October / November 2007 Catastrophic Impairment IME conducted
• December 14, 2007 Catastrophic Impairment IME report received by the Appellant
• December 17, 2007 the Appellant denies the Respondent’s CAT application
• April 22, 2008 Mediation commenced
• June 19, 2008 Report of Mediator issued, noting issues remaining in dispute to include entitlement to attendant care from August 6, 2007 and catastrophic impairment
• June 27, 2008 Respondent’s Application for Arbitration filed
• December 22, 2008 initial Pre-Hearing Discussion confirmed by Notice dated August 11, 2008 – adjourned at the Respondent’s request
• April 22, 2009 Pre-Hearing Conference held – 8-day March 2010 hearing set to determine attendant care and housekeeping entitlement (the latter added on consent following a failed January 6, 2009 mediation) from August 6, 2007, and catastrophic impairment
• August 6, 2009 8-day arbitration hearing re-scheduled to July 2010, at the Respondent’s request, due to double booking
• June 2010 at the Respondent’s request, on consent, the July 2010 arbitration hearing is limited to the issue of catastrophic impairment
• July 2010 7 days of evidence heard on the issue of catastrophic impairment
• September 3, 2010 oral arbitration submissions received
• December 20, 2010 arbitration decision on catastrophic impairment issued
• January 19, 2011 Notice of Appeal filed

The Arbitrator found that:

As a result of the accident, Mr. Jaggernauth suffers from chronic pain and has a reduced range of motion in his neck and shoulders. He has suffered some loss of sensation in his right forearm. He has a number of scars, both from the lacerations to his head and right calf and also from the surgeries to his shoulders and right forearm. He has been diagnosed with numerous psychological conditions and has been receiving psychological treatment for years since the accident. He is taking numerous medications for accident-related conditions, including narcotics for the pain and anti-depressants.

The Arbitrator further found that:

Pharmacological treatment and psychotherapy have helped Mr. Jaggernauth to reach a level of stability in recent years. Nevertheless, when it comes to adaptation, the level of impairment certainly borders on one that significantly impedes useful functioning.

It is now 43 months since the second anniversary of this accident, when a determination of catastrophic impairment could be sought under clause 2(2.1)(b) of the Schedule. The Appellant submits that this proceeding has not been within its control. Had it been, it would have proceeded faster with the matter.

Part of this delay is attributable to the Respondent, specifically four months due to his pre-hearing adjournment request and a further four months for his requested adjournment of the arbitration hearing.

On the other hand, the Respondent did move expeditiously after the second anniversary in submitting his Application for Determination of Catastrophic Impairment and in applying for arbitration after mediation failed (although there was a delay in applying for mediation). Although the arbitration hearing was ultimately bifurcated, the eight days allotted were fully devoted to the issue of catastrophic impairment alone. This present appeal process, even if it proceeds expeditiously, will take several more months. Judicial review would take a further year or more. Leave to appeal may then be sought to the Court of Appeal.

The Schedule is intrinsically time sensitive. Determinations regarding entitlement to and the quantum of out-of-pocket expenditures, weekly benefits and other potential entitlement are required on a timely basis, as they address current alleged losses and current alleged needs.

Early in the history of this legislation, Arbitrator Mackintosh stated in Aladejebi and State Farm Mutual Automobile Insurance Company (OIC A-005933, September 27, 1994) that:

As observed by Mr. Justice W.T. Stayshun, in the decision Hernandez v. Palmer, O.C.J. (Gen. Div.), the introduction of the new dispute resolution system under the Insurance Statute Law Amendment Act, 1990, S.O. 1990, c. 2, was the result of many years of deliberation over the most effective way to structure automobile accident victims’ compensation in Ontario. An important goal for the new insurance scheme was the prompt delivery of accident benefits to injured victims. It was recognized that the slow, expensive, and procedurally complex nature of the court system tended to impede the delivery of compensation to injured persons. Furthermore, injured persons, who are often unable to work, are not equipped to withstand the pressures of time and money inherent in court litigation. The arbitration process was set up in response to these concerns.

The detailed procedural time lines and the higher rate of interest under Rule 46 of the Schedule, as well as the options in the Insurance Act given only to insured persons in choosing the forum of dispute resolution, confirm a Legislature concerned with timeliness in determinations rather than litigation at leisure where the payment of interest heals any wounds.

The Appellant submits that this is a “close case,” where the Arbitrator found the Respondent catastrophically impaired on the lowest possible WPI rating and that an error in law of only 1% WPI will reverse the Arbitrator’s designation. The Appellant submits that it will have no way to retrieve any benefits it may have to pay under the catastrophic impairment designation.

On the other hand, the parties have gone through an eight-day arbitration hearing that found the Respondent catastrophically impaired. Eliminating delay directly attributable to the Respondent, it is still more than two and a half years that catastrophic impairment has been in issue. If a stay of the arbitration is granted, there will be further, extended delays during the appeal and possible higher levels of review.

I do not doubt the bona fides of this appeal. Regarding the grounds of appeal, this proceeding addresses, in significant measure, questions of interpretation of the AMA Guides within the context of the Schedule and the Insurance Act. While the Appellant submits that it has a strong case, rather than submitting that the Arbitrator has clearly and manifestly erred in failing to follow established case law, the Appellant submits that this appeal raises novel issues and that the Arbitrator erred in following an appellate decision. Further, the Appellant provides no case law establishing that there is no avenue for possible repayment of any monies that may be ordered paid in the interim under the catastrophic impairment designation.

There is presently a variation application before me from the decision in C.C. and Economical Mutual Insurance Company, (FSCO A09-000114, December 2, 2009) for repayment of an interim award of benefits, where the insured was ultimately found in the main arbitration hearing to have not established entitlement. Subsection 47(1)(a) of the Schedule provides that:

47. (1) A person shall repay to the insurer,

(a) any benefit under this Regulation that is paid to the person as a result of an error on the part of the insurer, the insured person or any other person, or as a result of wilful misrepresentation or fraud;

Questions arise as to the meaning of “any benefits … paid to the person as a result of an error on the part of … any other person” and of subsection 279(4.1) of the Insurance Act that gives the Director and every arbitrator appointed by the Director authority to make interim orders pending the final order in any matter before the Director or arbitrator.

In this case, I find the most significant criterion for whether to grant a stay of the Arbitrator’s order to be the relative hardship to the respective parties.

Balancing the prejudice of delay of the adjudication of attendant care and housekeeping entitlement from August 6, 2007, notwithstanding a presently determinative catastrophic impairment designation order after an eight-day hearing, with the prejudice of potential obstacles to possible repayment, I am not persuaded that the requested stay should presently be granted.

In this regard, I am persuaded that the relative monetary risk of proceeding to an entitlement hearing that ultimately may be moot is greater on the Respondent who wishes to proceed, than the Appellant who does not. Further, I am cognizant that should circumstances materially change, the request for a stay may be resubmitted. In any event, not granting a stay at this juncture provides an incentive to move this appeal forward as expeditiously as possible.

In this regard, I set the following immediate time lines:

1. Pursuant to Rule 53.1 of the Code, the Respondent has twenty days from the date of this decision to serve on the Appellant and file with the Commission (with a Statement of Service in Form F) his Response to Appeal in Form J.

2. Pursuant to Rule 54.1 of the Code, the Appellant has thirty days from the date the Response to Appeal is due, to serve on the Respondent and file with the Commission (with a Statement of Service in Form F) its written submissions.

3. The Respondent, pursuant to Rule 54.3 of the Code, will have twenty days from the date the Appellant’s written submissions are due, to serve on the Appellant and file with the Commission (with a Statement of Service in Form F) his written submissions.

In the interim, the Appeals Administrator will be contacting the parties to arrange an early appeal hearing date.

III. EXPENSES

The legal expenses of this preliminary appeal decision are deferred to the conclusion of this appeal, subject to any other or further order of an appeals adjudicator.

March 4, 2011

Lawrence Blackman Director’s Delegate

Footnotes

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