Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2011 ONFSCDRS 28 Appeal P10-00017

OFFICE OF THE DIRECTOR OF ARBITRATIONS

CERTAS DIRECT INSURANCE COMPANY Appellant

and

JULIA GORDYUKOVA and DOMINION OF CANADA GENERAL INSURANCE COMPANY Respondents

BEFORE: David Evans

REPRESENTATIVES: Todd J. McCarthy for Certas Direct Insurance Company J.A. Michael Wolfe for Ms. Gordyukova No one appearing for Dominion of Canada General Insurance Company

HEARING DATE: January 26, 2011, by teleconference

APPEAL ORDER

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

The appeal of the Arbitrator’s order dated October 22, 2010 is allowed. Paragraph 1 of the Arbitrator’s order is revoked, and the following substituted:
1. Ms. Gordyukova is precluded from proceeding to arbitration on her claims for income replacement benefits from June 17, 2005 and ongoing. She is not precluded from proceeding to arbitration on her claims for attendant care benefits from November 9, 2001 to November 9, 2003.
An appeal legal expense hearing shall be requested within thirty days of the date of this decision, accompanied by a Bill of Costs and written submissions, as set out below.

March 17, 2011

David Evans Director’s Delegate Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Certas Direct Insurance Company (Certas) appeals the Arbitrator’s order of October 22, 2010. He found that the limitation provisions of the SABS–1996¹ and the Insurance Act do not preclude Ms. Gordyukova from arbitrating her income replacement benefits (IRB) claim.

II. BACKGROUND

The facts and legal issues were comprehensively reviewed by the Arbitrator in his decisions of July 30, 2010 and October 22, 2010.

Ms. Gordyukova was injured in an accident of November 9, 2001. Her resulting accident benefit claims progressed against Dominion of Canada General Insurance Company, but Dominion successfully disputed with Certas its responsibility to pay them. Thus, as of May 27, 2009, Certas became the insurer responsible for paying accident benefits. However, that change led to disputes about the forum for determining the claims and the limitation period.

The forum issue begins in 2002, when Ms. Gordyukova started a court action against Dominion for various accident benefits. Her Statement of Claim sought “damages for accident benefits and aggravated damages” in the amount of $1,000,000,² punitive damages of $1,000,000, and a “declaration that the Plaintiff is and will remain entitled to continued Accident Benefits.” Dominion terminated IRBs on June 17, 2005, leading to a failed mediation on February 16, 2007. The IRB issue was added to the court action. Dominion then delivered notice to Ms. Gordyukova in October 2005 that her non-catastrophic medical and rehabilitation limits of $100,000 had been exhausted. Ms. Gordyukova claimed that she was catastrophically impaired, which Dominion disputed on July 3, 2008. The issue of catastrophic impairment failed at mediation conducted on November 26, 2008. However, instead of adding that issue to the court action like the IRB claim, Ms. Gordyukova commenced an arbitration proceeding on November 28, 2008. While Dominion had not raised any objection to the arbitration proceeding, once Certas was confirmed as the responsible insurer in 2009, it disputed this forum.

Due to these events, Ms. Gordyukova moved to have Certas added to the arbitration. Dominion asked to be removed or replaced as a party to the arbitration, and Certas asked for a stay of the arbitration with leave to add the issue of catastrophic impairment to the court action.

At the motion on July 9, 2010, Ms. Gordyukova took the position that the catastrophic impairment arbitration should be allowed to proceed independently of the court action. In the alternative, she asked for leave to withdraw the court action and add the court issues to the arbitration.

In his decision dated July 30, 2010, the Arbitrator extensively reviewed the leading appeal case of Non-Marine Underwriters and Mangat³ that examined “the considerations that inform the question of whether to permit an insured person to advance two concurrent proceedings,” as well as the subsequent revisiting of the “balancing of interests” approach in the appeal decision of CGU Insurance Company of Canada and Bolger.⁴ In the result, he added Certas as a party to the arbitration.⁵ However, while he allowed Ms. Gordyukova to continue with the arbitration proceeding, it was on condition that she gave notice that she was seeking leave to withdraw or discontinue the court action. Furthermore, Certas was allowed to raise any defence it felt appropriate, including a limitation defence. This decision is not under appeal. The Arbitrator’s second decision dealing with the limitation defence is under appeal.

The limitation defence regarding the IRBs arose in this manner: Subsection 281.1(1) of the Insurance Act and s. 51(1) of the SABS provide that a mediation proceeding or a court proceeding or arbitration shall be commenced within two years after the insurer’s refusal to pay the benefit [s. 281.1(1)] or amount [s. 51(1)] claimed. The IRB claim met these time limits in the court action because the issue of Ms. Gordyukova’s entitlement to IRBs was mediated within the two years, and the parties agreed that the issue was already covered by the existing court action.

However, Certas submitted that the IRB issue could not simply be added to the arbitration hearing because the arbitration proceeding did not commence until November 2008, more than three years after the denial of IRBs in June 2005. Therefore, the time limit for claiming IRBs in arbitration would be past. This led to a second motion on September 28, 2010.

The Arbitrator found in his decision of October 22, 2010 that,

in respect of a disputed benefit, the limitation provisions are fully satisfied when an insured person commences an arbitration or court proceeding within two years of an insurer’s refusal to pay the benefit or amount claimed. A limitation issue does not arise if the claim is subsequently added to another proceeding more than two years after the insurer’s refusal.⁶ [Emphasis in the original.]

III. ANALYSIS

To put s. 281.1(1) of the Insurance Act and s. 51(1) of the SABS in context, I note that s. 279(1) of the Act provides that

Disputes in respect of any insured person’s entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled shall be resolved in accordance with sections 280 to 283 and the Statutory Accident Benefits Schedule.

Furthermore, s. 281 of the Act, entitled “Litigation or arbitration,” provides that after mediation or neutral evaluation, as mandated by s. 281(2), an insured person “may bring a proceeding in a court of competent jurisdiction” [s. 281(1)(a)] or “may refer the issues in dispute to an arbitrator under section 282” [s. 281(1)(b)].⁷ I will now cite s. 281.1(1) of the Act and s. 51(1) of the SABS:

Limitation period 281.1 (1) A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed. 2002, c. 24, Sched. B, s. 39 (6).

Time Limit for Proceedings 51. (1) A mediation proceeding or evaluation under section 280 or 280.1 of the Insurance Act or a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Act in respect of a benefit under this Regulation shall be commenced within two years after the insurer’s refusal to pay the amount claimed.⁸ O. Reg. 403/96, s. 51 (1).

The subsections are identical regarding the points I wish to focus on – the use of the word “or” and the application of the phrase “shall be commenced.” I emphasize the word “or” because the Arbitrator relied on it in his analysis. However, he only focused on the “or” separating arbitration and court proceeding, whereas the word “or” separates all the options in s. 281.1(1): mediation, neutral evaluation, court proceedings, and arbitration at the Commission or privately.

Now, as briefly alluded to above, s. 281(2) mandates that mediation or neutral evaluation must be conducted before a court proceeding or arbitration, so a temporal element is imposed on s. 281.1(1) extrinsically. However, within s. 281.1(1) itself, all the options are governed by the word “or.” As noted by Professor Sullivan at pp. 66-69 of Sullivan and Driedger on the Construction of Statutes,⁹ in legislation “or” tends to be used inclusively and “and” tends to be used jointly and severally. The inclusive “or” means A or B or both, whereas the exclusive “or” means A or B but not both. As Prof. Sullivan notes, “when ‘or’ is used to join things that in reality are mutually exclusive, the ‘or’ is necessarily exclusive,” such as when a law states that a person may do something “on any terms that he or she thinks fit.” The inclusive “or” applies in s. 281.1(1), since the options listed in it are not mutually exclusive.

The use of the inclusive “or” is seen in an example such as “The Minister may (a) make regulations prescribing the conditions for logging or mining … ; or (b) issue licences for fishing…” Prof. Sullivan notes that the joint and several “and” could be substituted for the word “or,” because in either case “the Minister is authorized to make regulations, issue licences or both and to regulate logging alone, mining alone, or both.” While Prof. Sullivan provides no examples of the use of “or” with mandatory language such as “shall” or “must,” she does state the following:

The presumption favouring the inclusive “or” and the joint and several “and” is readily rebutted by linguistic considerations or by knowledge of the world. For example, when verb phrases joined by “and” follow “shall” or “must”, the “and” is necessarily joint:

A claimant must submit an application and pay the prescribed fee.

In this provision, the claimant must both submit and pay . . .

The principle I derive from this example is that mandatory language limits options. In the example given, the options for a claimant are limited by the use of the words “and” and “must.” The claimant cannot choose to submit or pay, but must do both. The options for an insured in our case are similarly limited by the use of the words “or” and “shall.” It means that each of the options in ss. 281.1(1) and 51(1) is governed by the phrase “shall be commenced within two years after the insurer’s refusal to pay the benefit/‌amount claimed.” By analogy to the example of the joint “and,” it follows that the time limit applies to every single one of the options, meaning that the insured must exercise any given option within the two years. That is not what the Arbitrator found, however, as he stated that as long as one option was exercised in time – the court action – it did not matter that the arbitration was not. If that were so, however, then exercising any of the other listed options within the time limit – such as commencing a mediation proceeding – would similarly satisfy the time limit. That is not the case because otherwise ss. 281.1(2) of the Act and 51(2) of the SABS would be superfluous.

Subsections 281.1(2) and 51(2) provide an extension of the two-year limit after a neutral evaluation or mediator’s report. Thus, for instance, s. 51(2) provides that, despite the two-year limit in s. 51(1), a court proceeding or arbitration at FSCO “may be commenced within 90 days after the mediator reports to the parties” or within 30 days after a neutral evaluator provides a report, “whichever is later.”¹⁰ If a mediation proceeding by itself were enough to satisfy the limitation provision, then it would not matter when the arbitration was commenced. If, say, a mediator’s report was only issued after the two years had passed, a court proceeding or arbitration could still be commenced at any point thereafter simply because the mediation was commenced in time. That this is not so is reflected in the extension of time provided where a report is issued just before or after the two-year mark. The legislature recognized that the use of the word “or” among those options and the application of the phrase “shall be commenced” to each of them means that any one of them, to be pursued, must be pursued within the two-year limit. It created the exceptions for those cases where an injustice would otherwise occur.

The net result is that ss. 281.1(1) and 51(1) require applicants to choose a forum to dispute a benefit claim within the time limit and prevent them from selecting a different forum for the same benefit claim afterwards. This interpretation of the provisions is also consistent with the general thrust of Mangat and Bolger that an applicant should select a forum and stick with it. It also means that an issue about a benefit that an insurer refused to pay cannot be added to an arbitration proceeding that was commenced outside the relevant time limit for that issue. In this case, the arbitration proceeding was commenced more than two years after the refusal of IRBs and outside of any possible extension of time. While it was not Ms. Gordyukova’s preferred option, she did ask that the IRB claim be added to the arbitration if the Arbitrator was inclined to find that all the issues should be heard together. However, since s. 281.1(1) provides that an “arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed,” the IRB claim could not be added to the arbitration proceeding commenced more than two years after the refusal, and the Arbitrator erred in so doing.

That is sufficient to deal with the matter, but I will touch on several other aspects of the Arbitrator’s decision. The Arbitrator noted that accepting the position of Certas would put Ms. Gordyukova in an impossible position, as more than two years had passed since Dominion had refused to accept her claim of catastrophic impairment, so presumably that claim would be out of time in the court action. He stated that “if Certas’s interpretation is accepted, Ms. Gordyukova would be prevented from adding claims from either forum to the other. In short, after successfully arguing that Ms. Gordyukova should not be permitted to pursue her claims in separate proceedings, Certas would now have me interpret the limitation provisions in such a manner as to preclude Ms. Gordyukova from pursuing her claims in one proceeding.”

This is a somewhat unfair characterization, since as the Arbitrator stated in his first decision, “Certas does not object to being made a party to the court proceeding nor does it object to the issue of catastrophic impairment being added to the court action.” Certas was not seeking to preclude Ms. Gordyukova from pursuing her claims in one proceeding, just from pursuing them at the Commission. Certas reiterates before me that the court option is still open to the Insured, with the court date set for October 2011.

Furthermore, the difficulty here only arises because the Arbitrator considered the limitation period issue after deciding the consolidation issue. The Arbitrator stated that “Even if Certas consents to the catastrophic issue being added to the court action in this case, its interpretation of the law, if accepted, would place insured persons in an impossible position in other cases.” However, this allegedly impossible situation only arises if the limitation period issue is not either considered first or as part of the criteria in Mangat or Bolger. Neither of those cases considered the possible effect of a limitation period issue. It did arise tangentially in Murphy and Certas Direct Insurance Company, (FSCO A07-000984, March 25, 2008), where it was stated in obiter that the arbitrator could not “understand the rationale why immediate transfer of [the insured’s] claims from Court to this action somehow negates her 2004 notice of legal action.” However, this is the first appeal case to deal directly with the issue, and I disagree with that statement in Murphy. Ms. Gordyukova’s IRB claim in the court action is not negated; it is simply unavailable for her to pursue here. To conclude, I find that where there is a motion to force claims in different forums to be heard together in one forum, any limitation issues that could arise should be considered at that time precisely to avoid forcing an insured into an impossible situation.

It is also uncertain that my finding puts Ms. Gordyukova in an impossible situation anyway, even in the absence of Certas’s consent to add the issue of catastrophic impairment to the court proceeding. To make my point, I will draw an analogy to a court case. In Dimartino v. Gacek, 2010 ONSC 2124 (SCJ), on what was to be the first day of trial, the plaintiffs brought a motion to amend their statement of claim to claim aggravated damages against the defendant RBC General Insurance Company. RBC submitted that, while the statement of claim had been issued well within the two year period, it was now too late to add the issue of aggravated damages. Madam Justice Horkins nonetheless allowed the amendment on the basis that the claim of aggravated damages was not a new or separate cause of action but flowed from the benefit claim. Similarly, in this case, the Statement of Claim was broadly drafted and was commenced within the limitation period. A determination of catastrophic impairment is not a “benefit,” but merely entitles the insured to claim further benefits. Ms. Gordyukova had already claimed entitlement “to continued Accident Benefits” in the Statement of Claim, so a claim for a declaration of catastrophic impairment would flow from the existing benefit claim.

Accordingly, I find that the Arbitrator erred in law in finding that the limitation period did not apply. The appeal is allowed.

IV. EXPENSES

If the parties are unable to agree about expenses of this appeal, an appeal legal expense hearing shall be requested within 30 days of the date of this decision in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition – Updated September 2010).

The request shall be accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, as well as submissions regarding entitlement to and/or the quantum of such expenses.