Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2011 ONFSCDRS 56

FSCO A09-002171

BETWEEN:

S. R.

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

Before: Suesan Alves

Heard: August 30, 2010, in Hamilton, Ontario. Written submissions were received by December 13, 2010

Appearances: James Scarfone for Mrs. S. R.

Robert S. Franklin for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Mrs. R., was injured in a motor vehicle accident in Hamilton on July 17, 2005. She was obliged to notify State Farm of the circumstances which gave rise to her claim for statutory accident benefits within seven days or as soon as practicable thereafter, under section 32 of the Schedule.¹ The parties agree that State Farm first received notice of her claim on December 17, 2007.

State Farm alleges that her claim is out of time. Mrs. R. alleges that she has a reasonable explanation for her delay within the meaning of section 31 of the Schedule, and that her claim should be allowed to proceed. State Farm disagrees.

The issues are:

Does Mrs. R. have a reasonable explanation within the meaning of section 31 of the Schedule for her delay in notifying State Farm of her intention to apply for a benefit?
Which party is entitled to its expenses of this hearing?

Result:

Mrs. R. has a reasonable explanation for failing to notify State Farm of the circumstances which gave rise to her claim. She may proceed with her claims for statutory accident benefits.
If the parties are unable to agree on expenses, that issue may now be addressed.

EVIDENCE AND ANALYSIS:

I have used initials instead of the Applicant’s name due to the sensitive nature of some information which pertains to her and members of her family.

Background and positions of the parties

Mrs. R. was injured in a motor vehicle accident on July 17, 2005. She visited her family physician the following day. He examined her, sent her for x-rays and prescribed painkillers and physiotherapy. Mrs. R. went for the x-rays, took the painkillers but did not attend physiotherapy. She had sporadic chiropractic treatments over the next two years. Some episodes of back pain are noted in the clinical notes and records of her psychologist.

In November 2007, following a severe episode of low back pain, she again saw her family physician. He sent her for x-rays and prescribed painkillers and physiotherapy. The physiotherapist completed a treatment plan and submitted it to State Farm, noting that this was the first occasion on which Mrs. R. was seeking treatment for her injuries, as she had been busy taking care of her husband and had been unable to seek treatment.

The parties agree that State Farm’s first notice of Mrs. R’s claim came from that treatment plan completed in November 2007, which State Farm received in December 2007.

Section 32 of the Schedule requires a person who intends to claim statutory accident benefits to notify the insurer within seven days of the circumstances which give rise to the claim for statutory accident benefits, or as soon as practicable afterwards. State Farm submits that Mrs. R’s claim is out of time and that the claims she asserts in this arbitration – for income replacement, housekeeping and medical benefits – should not be allowed to proceed.

Mrs. R. disagrees. She relies on section 31 of the Schedule which provides that, despite late notice, a person is not disentitled from proceeding with a claim if the claimant has a reasonable explanation. She submits that she has a reasonable explanation for the delay in notifying State Farm of the circumstances which gave rise to her claim for benefits. In a nutshell, that explanation is that she developed mental health impairments of depression and anxiety as a direct result of caring for her husband who sustained a brain injury and a personality change in December 2001 in a motor vehicle accident. While she retained counsel, she instructed him to take no steps in the matter. It was only after her husband’s tort and accident benefits claims were settled that she could focus on herself, obtain medical treatment and avail herself of accident benefits.

Counsel advised that the sole issue in this hearing was whether Mrs. R’s explanation for her delay was reasonable.

Sections 31 and 32 of the Schedule

The relevant portions of sections 31 and 32 of the Schedule are set out below.

Failure to Comply with Time Limits

(1) A person’s failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation.

(2) Subsection (1) does not apply to the time limits set out in section 51.

Notice and Application for Benefits

(1) A person shall notify the insurer of his or her intention to apply for a benefit under this Regulation.

(1.1) A person shall notify the insurer under subsection (1) no later than,

(a) the 30th day after the circumstances arose that gave rise to the entitlement to the benefit, or as soon as practicable after that day, if those circumstances arose as a result of an accident that occurred before October 1, 2003; or

(b) the seventh day after the circumstances arose that give rise to the entitlement to the benefit, or as soon as practicable after that day, if those circumstances arose as a result of an accident that occurred on or after October 1, 2003.

As soon as practicable?

I find the Applicant did not give notice as soon as practicable. The pleadings in her Application for Mediation, filed as part of her arbitration brief, state that she retained counsel and instructed him to take no steps. Mrs. R. was asked in cross-examination whether this was true. She stated that it was. She agreed in cross-examination that she could easily have asked her lawyer to send a letter to State Farm to put them on notice as required by the Schedule. I find that Mrs. R. did not provide notice “as soon as practicable” and hence did not comply with the notice time limit in section 32 of the Schedule.

In C.R. and Lombard, (FSCO A02-001057, December 22, 2003), Arbitrator Blackman, as he then was, held that the question of “as soon as practicable,” which addresses the obligation to give notice under section 32(1) of the Schedule and the question of “reasonable explanation” for failure to comply with the time limits under section 31 of the Schedule, are two distinct questions, and should not be conflated. I agree.

In C.R and Lombard, Arbitrator Blackman queried why the law firm for the applicant in that case did not notify the insurer directly, why it was not the law firm’s responsibility to give notice to protect their client, and why specific prior instructions would be required from the client with respect to notice. As in that case, the evidence and submissions in this case did not address these questions. There was no evidence that this was a missed limitation by her lawyer. The date of the retainer is unclear from the evidence. I agree with Arbitrator Blackman’s reasons that the purposes of the no-fault accident benefit system would be frustrated if an applicant’s only recourse was to sue her former lawyer for negligence.

I will now consider Mrs. R.’s explanation for her delay in notifying State Farm of her claim.

Reasonable explanation

Arbitral caselaw dealing with reasonable explanation is well settled. In Horvath and Allstate Insurance Company of Canada, (FSCO A02-000482, June 9, 2003), Arbitrator Leitch considered arbitral jurisprudence and identified the following principles concerning the interpretation of “reasonable explanation”:

An explanation must be determined to be credible or worthy of belief before its reasonableness can be assessed.
The onus is on the insured person to establish a “reasonable explanation.”
Ignorance of the law alone is not a “reasonable explanation.”
The test of “reasonable explanation” is both a subjective and objective test that should take account of both personal characteristics and a “reasonable person” standard.
The lack of prejudice to the insurer does not make an explanation automatically reasonable.
An assessment of reasonableness includes a balancing of prejudice to the insurer, hardship to the claimant and whether it is equitable to relieve against the consequences of the failure to comply with the time limit.

In Novakovic and Coseco Insurance Co./HB Group/Direct Protect, (FSCO P05-00016, June 22, 2006), Delegate Makepeace concluded that the legislative intent of section 31 of the Schedule was “to authorize a broad assessment of a claimant’s explanation for a delay, including objective and subjective factors pertaining to the reasons for the delay.” Section 31 is “intended to provide some degree of relief from a missed time limit that might preclude an otherwise meritorious claim, despite the potential prejudice to the insurer. It should be interpreted remedially in accordance with its purpose.” Delegate Makepeace noted the absence of any absolute time limit, such as existed in the SABS-1990, or any other specific criterion restricting the adjective “reasonable.”

Arbitrators have allowed claims where notice has been given as late as four years following the accident. For example, in Kuronen and Allstate Insurance Company of Canada, (OIC A-951897, December 29, 1995), the applicant’s stay in jail or on the street, his addiction to alcohol and drugs in addition to his suffering the effects of his accident injuries and the break-up of his marriage, were found to reasonably excuse a delay of almost four years from the accident to the date of notice.

Similarly, in Deol and Liberty Mutual Insurance Company, (FSCO A99-000292, July 28, 2000), the age of the 18-year old applicant, his lengthy hospital stay, his unfamiliarity with the scheme of accident benefits available together with reliance on incorrect advice of an insurance agent were found to reasonably excuse for a delay of almost four years from the accident to the date of notice.

Arbitrators have held that the time limit for notice is intended to allow the insurer to investigate and adjust the claim promptly based on contemporaneous information. Factors which have been held to provide a reasonable excuse or reasonable explanation for delay include severe accident related injuries, latent injuries, or other personal or family illness.

For the following reasons, I find Mrs. R.’s explanation reasonable and that she is not disentitled from proceeding with her claims for statutory accident benefits.

Mrs. R’s Explanation

By way of background, in December 2001, some four years before the accident which gave rise to this arbitration, Mrs. R’s husband was injured in a motor vehicle accident while driving home from work. Mr. R’s diagnoses as a result of that accident include a traumatic brain injury, with a depressed affect; concentration and memory impairments; diabetes as a result of the damage to his brain; post-traumatic stress disorder; a severe anxiety disorder; right ear deafness and continued tinnitus and unsteadiness on his feet due to the damage of an auditory nerve; chronic pain syndrome; post traumatic headaches; right foot plantar fasciitis, leading to an antalgic gait and the need to use a cane; significant impairments in his ability to perform his activities of daily living and to monitor his medication; sleep disturbances; intermittent disorientation and loss of memory. His impairments significantly impede his social activities. Changes in his environment or routine make him become extremely uncontrolled in his emotional reactions with acts of verbal aggression and at times physical aggression.

Mrs. R. has the equivalent of a Grade 8 education. At the time of Mr. R’s accident, Mr. and Mrs. R. had been married for about twenty years. He was self-employed as a tile setter, while she worked in a gift shop. They have one son.

Prior to the December 2001 accident, Mr. and Mrs. R. enjoyed a life which was active and social – they attended dinner dances and had lots of friends. Friends and family would come to visit. Mrs. R. described her husband before his accident as a nice, hard-working guy, a kind person who was her main source of support. He used to be an outgoing happy man. She enjoyed spending time with him. He had no issues with her leaving the house or with her going to work before his accident.

Following his accident all of that changed. Mr. R. became like a child. Her husband’s injuries and impairments caused significant changes in her lifestyle and are a source of substantial stress.

Mr. R. needs to be supervised. She is unable to work outside the home because of this. He needs to be cued; she has to say everything to him slowly. He does not always understand. His memory and other cognitive difficulties cause him to ask her about things repeatedly, to misunderstand her at times, fuelling arguments.

He has become argumentative, verbally abusive, controlling, violent and harassing. Arguments occur daily, he insults and threatens her, is frequently angry, often sad and crying, complains about his pain and is not interested in socializing with others. Noise bothers him. He listens in on her phone calls and constantly questions and criticizes what she does. He is highly anxious about the possibility that she would be injured if she left the home. Mr. R. is highly focused on his own needs and wants her to stay at home with him 24 hours a day. He is highly anxious about his ability to cope by himself.

He becomes very angry when she returns home or when she plans to go out. On one occasion, he punched a wall in their house and on another the door after she returned home. On another occasion, he threatened to kill her, then grabbed her by the hair, and forced her head down while overlooking the bannister. He has also punched their son in the face.

His anger at her leaving the home led her to give up her activities outside the house. Her friends no longer came to her home to visit. She became increasingly isolated and depressed. Her life seems to revolve around taking him for appointments. Mrs. R. was diagnosed with a major depressive disorder in or about May 2004 as a direct result of becoming a caregiver for her husband.

State Farm was responsible for payment of Mr. R’s statutory accident benefits as a result of the December 2001 accident. Although Mrs. R. did not sustain a physical injury in that accident, she qualified as an insured person within the meaning of subsection 2(1)(a)(ii) of the Schedule, because she suffered a psychological or mental injury as a result of an accident which resulted in a physical injury to her spouse. Her treating psychologist and the psychologist who conducted the medical and rehabilitation DAC are clear that Mrs. R’s impairments are the direct result of her role as Mr. R.’s caregiver.

State Farm paid for Mrs. R’s individual psychological treatment between 2004 and 2007. State Farm is also the statutory accident benefits insurer in relation to Mrs. R’s claims for statutory accident benefits in this arbitration as a result of the July 2005 accident.

The clinical notes and records made by Mrs. R’s psychologist between May 2004 and February 2007 were filed. I find based on those notes and records, her testimony and the psychological reports that were filed, that Mrs. R was struggling with difficult and complex issues.

These included the decision to stay with or leave her husband; coming to terms with the fact that the changes in her husband were permanent; grieving the loss of her husband as she had known him; becoming able to assert her needs to leave the house and dealing with the daily verbal abuse and the threat of physical violence from her husband. These are chronic and recurring themes.

The family also experienced significant financial stress. Mrs. R. was not able to work because she had to take care of her husband. He was unable to work as a result of his injuries. Thus, the family lost both breadwinners. State Farm paid them about $10,000 in the year following her husband’s accident but did not pay Mrs. R. for providing attendant care or pay her husband income replacement benefits on an ongoing basis.

By 2006, they had spent their savings and were down to the last $5,000 of their line of credit. Mr. R. became critical of Mrs. R. spending money even for food and his medication. This became still another stressor for Mrs. R.

In February 2006, Mrs. R.’s psychologist reassessed her and recommended further treatment. She had improved with treatment: her depression was now moderate instead of severe; however, her anxiety levels were still moderately severe. State Farm agreed to fund further treatment and her treatment continued. In February 2007, on reassessment, she continued to be moderately depressed, however she had slightly increased symptoms of anxiety from the previous year. She continued to have issues with obtaining restorative sleep.

In the opinion of her psychologist, she still needed significant psychological support to follow through with the plan to increase the amount of time she spent way from the home and her husband, which was essential for her mental health. She had managed to reach out to her friends and family. Additional issues she needed to work on were the acceptance of the chronic and permanent nature of her husband’s severe cognitive and psychological impairments, and recognition that neither he nor she can change his behaviour.

In January 2007, Mrs. R. was planning to increase the time spent away from the home. She expressed worries about the escalation of Mr. R.’s behaviour, noting that he had been making threatening gestures towards her when angry. She continues to struggle with speaking to others on the phone and with leaving the house. As late as February 2007, her psychologist noted Mrs. R.’s unrealistic expectations that she is going to be able to do anything to change her husband.

A part of Mrs. R’s explanation is that she did not have time to give State Farm notice. When she says this, I do not understand this in its literal sense. Rather, in the context of the above issues and demands upon her, I understand her to mean that there were so many difficult and complicated issues that were thrust upon her that she did not have the psychological time and space to deal with anything more than the immediately pressing circumstances of life.

The clinical notes and records end in February 2007. As a complete copy of Mrs. R’s clinical notes and records were requested of her psychologist in June 2010, I infer that she did not receive further treatment.

Counsel for the Applicant submitted that once her husband’s case was settled and the funds received in July 2007, Mrs. R. was then able to move forward and look after her own interests. Mrs. R. testified that she had been “booked” with her husband and that once her husband’s financial interests were looked after, then she could do something for herself.

I find Mrs. R’s explanation credible and reasonable up to July 2007. However, State Farm was not notified of her claim until December 2007. It took an episode of severe back pain, during which she could barely walk, to prompt her to see her family physician and pursue treatment in November 2007. The November 2007 treatment plan provided State Farm with notice of her claim.

In considering whether the further delay until December 2007 is reasonable or continues to provide Mrs. R. with a reasonable explanation, I have considered the permanent nature of her husband’s impairments, the ongoing nature of her psychological difficulties and the daily demands of caring for her husband.

When Mrs. R was assessed by the medical and rehabilitation DAC in 2004, the psychologist noted that her depressive symptomatology was characterized by pessimism and diminished self-esteem and that her endorsements suggested that she might be easily insulted or slighted. Daily verbal onslaughts and criticism are difficult for most persons. This would be even more so for someone who suffers with diminished self-esteem, who is easily insulted or slighted and who no longer has therapeutic support.

Mrs. R. testified that every day with her husband is a challenge. She wanted to start a job to get out of the house because she was “going insane.” By the summer of 2007, she found a job; their son had developed a serious heart condition, was unable to work and he could therefore supervise her husband while she was at work. Two weeks later she was injured in the July 2007 accident.

The impact of Mrs. R’s low mood on her motivation is noted in her clinical notes and records. I accept that inertia was present with her depression, and that this continued in light of her continuing diagnosis of moderate depression and moderately severe anxiety.

Mrs. R. testified that she did not know that she would become like her husband. By this I understand her to mean someone who is depressed and anxious. She went on to state “after the accident you just want to run away from him… That’s how bad it is.” Her reason for remaining with her husband is because of their son, otherwise she would have left him a long time ago. She stated: “I lost my life. I have no life…” She finds it difficult to get out of bed in the morning.

I find Mrs. R. credible. I accept that as part of her personal characteristics she was devoted to her family and the well-being of her son and her husband. I accept that Mrs. R. puts their interests ahead of her own. She has demonstrated this by her actions over time and frankly has damaged her mental health in doing so.

For these reasons I find her explanation is both credible and reasonable in relation to this further period of time and accept it.

The injuries Mrs. R sustained in the July 2005 accident are stated in the arbitration pleadings as a closed head injury, severe and permanent injury to her right leg, right shoulder, low back, injury to her neck, back, sinuses, arm and emotional trauma. Mrs. R. testified that she has problems with her neck, shoulder, left leg and back which she attributes to the motor vehicle accident.

Counsel for the Applicant submitted that State Farm had not adduced any evidence of actual prejudice or made submissions with respect to prejudice. However, I accept that prejudice is presumptive in cases of significant delay. I find the delay in this case of some two years and five months is significant. As counsel for the Applicant noted, causation issues will be raised.

In Makrikostas and Allianz Insurance Company of Canada, (FSCO A98-001300, May 13, 1999), Arbitrator McMahon held that: “The passage of time will virtually always lead to some prejudice, hence the notice requirement. At the same time, the inclusion of a relief provision indicates that the drafters did not intend to automatically preclude all late claims merely on the basis of the prejudice inherent in the late notice.”

In balancing the general prejudice caused by delay against Mrs. R’s claims for entitlement to benefits, I find that she has given a reasonable explanation within the meaning of section 31 of the Schedule. For these reasons I conclude that Mrs. R. is allowed to proceed with her claims for statutory accident benefits. The parties should contact the case administrator within 30 days of the date of this decision to schedule a date for the hearing on the substantive issues.

EXPENSES:

If the parties are unable to agree on the expenses of this preliminary issue hearing, that issue may now be addressed.

June 24, 2011

Suesan Alves

Arbitrator

Date