Economical Mutual Insurance Company v. C.C., 2011 ONFSCDRS 58

Financial Services Commission of Ontario

Office of the Director of Arbitrations

Neutral Citation: 2011 ONFSCDRS 58 Variation: P11-00008V

Economical Mutual Insurance Company Appellant

and

C.C. Respondent

Before: Delegate Lawrence Blackman

Representatives: Mr. Ian D. Kirby for the Appellant, Economical Mutual Insurance Company Mr. David S. Wilson for the Respondent, C.C.

Hearing Date: June 22, 2011

VARIATION ORDER

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

1. The Arbitrator's May 10, 2010 decision is varied by adding the following paragraph:

   3. C.C. shall repay to Economical Mutual Insurance Company the sum of $15,840 in income replacement benefits paid in accordance with the interim benefits order of Arbitrator Alves dated December 2, 2009.

2. A legal expense hearing shall be requested within sixty days of the date of this decision, accompanied by a Bill of Costs and written submissions, as set out below.

July 12, 2011

Lawrence Blackman Director's Delegate

REASONS FOR DECISION

I. BACKGROUND AND NATURE OF THE VARIATION APPLICATION

The Respondent, C.C., was injured in a motor vehicle accident on December 5, 2005. As a result, the Respondent's first-party automobile insurer, the Appellant, Economical Mutual Insurance Company, paid the Respondent weekly income replacement benefits ("IRBs") pursuant to the Schedule¹ from December 12, 2005 to August 10, 2008, before terminating IRBs.

The Respondent applied for mediation, and subsequently for arbitration, to resolve her dispute regarding ongoing IRB entitlement. On the Respondent's motion for interim benefits, Arbitrator Alves' December 2, 2009 decision ordered the Appellant to pay the Respondent interim IRBs of $400 per week, commencing August 6, 2009, "until the final Order in this arbitration."

Arbitrator Alves found that the Respondent had established a prima facie case for entitlement by adducing evidence that her condition had deteriorated after her 2005 accident, as well as having demonstrated financial need. Arbitrator Alves held that if the Respondent's evidence was accepted at the final hearing, it was reasonable that the Respondent would be found to meet the post 104-week disability test of complete inability to engage in any employment for which she was reasonably suited by education, training or experience.

A determination of the Respondent's entitlement to weekly IRBs beyond August 10, 2008 and to a special award was held before Arbitrator Leitch (the "Arbitrator"). The Arbitrator's May 10, 2010 decision found that that the Respondent had not established a causal link between the December 5, 2005 accident and her alleged inability to work after August 10, 2008. Accordingly, the Arbitrator held that the Respondent was not entitled either to IRBs beyond the August 10, 2008 termination date, or to a special award.

The Arbitrator's Order and his decision are both silent on the issue of repayment of IRBs.

The Appellant wrote the Arbitration Case Administrator on September 29, 2010 that it was seeking repayment on the basis of the May 10, 2010 final decision. As the Arbitrator was on leave, the Appellant brought a motion before Arbitrator Sapin that it necessarily flowed from the final decision that (1) the Respondent was not entitled to the interim IRBs paid, and (2) the Appellant was entitled to repayment of the benefits it was obliged to pay only on the basis of prima facie entitlement having been established.

The Appellant relied on the decision in Decicco and State Farm Mutual Automobile Insurance Company, (OIC A-000277, December 18, 1991), that:

... the scope of the issues before the arbitrator should not be defined in a narrow and technical way. The authority of the arbitrator extends to anything that reasonably and consequentially flows from the issues that are before her ... this includes an applicant's liability to repay any benefits found to have been overpaid in light of the arbitrator's findings.

The Respondent argued in response that Arbitrator Alves' interim benefits order was not subject to or determinative upon the result of the final arbitration hearing, only that IRBs were to be paid "until the final Order in this arbitration." The Respondent argued that as the Arbitrator chose not to exercise his discretion to order repayment, the Appellant could only obtain a repayment order through a variation procedure. Having instead brought an arbitration motion for repayment, the arbitrator hearing the motion had no jurisdiction to vary the Arbitrator's order.

Rule 65.5 of the Dispute Resolution Practice Code (Fourth Edition, Updated – September 2010) (the "Code") provides that an adjudicator may at any time correct a typographical error, error of calculation, technical error or similar error made in his or her decision or order. Rule 65.6 provides that an adjudicator may at any time clarify a decision or order that contains a misstatement, ambiguity or other similar error.

Arbitrator Sapin's December 23, 2010 decision rejected the Appellant's submission that the Arbitrator's failure to specifically order repayment was a mere oversight and that a repayment order necessarily flowed from the finding that the Respondent was not entitled to IRBs beyond August 10, 2008. Arbitrator Sapin held that the appropriate remedy for an alleged error in the arbitration order was an application for variation or revocation under Rule 61.1(c) of the Code. As this procedure had not been followed, Arbitrator Sapin found that she had no jurisdiction to determine the issue of overpayment.

The Appellant thus filed a February 7, 2011 Application for Variation/Revocation. The Appellant requests that the Arbitrator's May 10, 2010 Order be varied by adding a further term to the Order that the Respondent repay the Appellant IRBs in the sum of $17,200, together with interest thereon from May 10, 2010 to the date of payment at the rate of 0.5% per annum.

The Appellant submits that the Arbitrator made an error in his order in not including the requested term. It submits that the Arbitrator's final decision entitles it to a repayment order of the IRBs paid solely in accordance with Arbitrator Alves' interim benefits order, benefits the Arbitrator ultimately found not owing.

The Appellant relies on subsection 284(3) of the Insurance Act, R.S.O. 1990, c. I.8 (the "Act") and Rule 61.1(c) of the Code that on the basis of an error in an arbitration order, the order may be revoked or varied and a new order made if it is considered advisable to do so. Citing section 2 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S. 22 (the "SPPA"), the Appellant seeks a liberal construction of the Arbitrator's ruling that will secure the just, most expeditious and cost-effective determination of this proceeding on its merits.

The Respondent denies any obligation to repay the interim IRBs she received. She submits that there is no authority in this case to vary the Arbitrator's decision as the Appellant has not delineated the specific error made by the Arbitrator or, if there was an error, how that error is not properly challenged by an appeal rather than a variation application. The Respondent further argues that this matter cannot be referred back to arbitration as such a remedy has not been sought and, in any event, such a remedy cannot be granted in a variation proceeding.

The Respondent also argues that it is far from overwhelmingly clear that had the Arbitrator addressed the question of repayment, he would have made a repayment order. Further, it is reiterated that the interim decision does not include a provision for repayment in the event the Respondent was ultimately unsuccessful at arbitration. In addition, the Respondent submits that repayment is sought for the period up to June 11, 2010, more than a month after the Arbitrator's Order, without any evidence as to why such further payments were made.

II. ANALYSIS

Subsection 284(1) of the Act provides that an insured or an insurer may apply to the Director of Arbitrations to vary or revoke an order made by the Director or by an arbitrator appointed by the Director. Subsection 284(2) states that the Director may decide the matter or may appoint the same or some other arbitrator to determine the application.

Subsection 6(4) of the Act allows the Director to appoint a person to hold hearings on his behalf and to exercise his powers and perform the duties relating to such hearings. Under subsection 6(4), the undersigned was appointed to hear this variation application.

Subsection 284(3) sets out the following grounds upon which an arbitrator's order may be revoked or varied and a new order made, if it is considered advisable to do so:

(a) there has been a material change in the circumstances of the insured;

(b) evidence not available on the arbitration or appeal has become available; or,

(c) there is an error in the order.

These grounds are reiterated in Rule 61.1 of the Code. This variation application rests on the submission that there is an error in the Arbitrator's May 10, 2010 Order.

Delegate Naylor, in Hart and Allstate Insurance Company of Canada, (FSCO P99-00045, November 7, 2000), held that the scope of the term "error in the order" must be construed in context. The variation/revocation process under section 284 of the Act was not intended to duplicate the appeals process under section 283, although there may be some overlap. As held in Sittler and Canadian General Insurance Company and Pilot Insurance Company, (OIC P-000951 and V-000951, August 11, 1995), errors of law were precisely those caught by the appeal provisions of the Act.

"An error in an order" in the variation process, it was held, did not encompass an erroneous interpretation of the law, but rather included mistakes in the order needing correction such as mathematical or calculation-type errors, or discrepancies between the form of the order and the reasons provided. "An error in an order" also included, but was not limited to, accidental slips or mistakes through oversight or inadvertence, where the form of the order deviated from that intended. "An error in the order" was not limited to an error on the face of the formal order.

Delegate Naylor also held that "an error in the order may arise where an arbitrator has overlooked or has not dealt with a matter which, explicitly or implicitly, should have been addressed, or where the adjudicator has misunderstood the submissions made in a material respect."

Citing Decicco, Arbitrator Sapin found that the Respondent had correctly conceded that the Arbitrator had jurisdiction to order repayment. She further held that:

There is no dispute that the issue of repayment of interim IRBs was articulated on behalf of Economical at the full arbitration hearing before Arbitrator Leitch, or that Arbitrator Leitch's final decision dated May 10, 2010 is silent on the issue.

In oral submissions, the Respondent agreed that the repayment issue was canvassed and argued before the Arbitrator. This differs from Girao and Allstate Insurance Company of Canada, (FSCO P11-00006, April 12, 2011), where there was a question of whether an issue, properly or otherwise, had been before the hearing arbitrator.

This case also differs from Girao in that the latter was an appeal under section 283 of the Act, not a variation proceeding. As noted, the basis of a section 283 appeal is an alleged error of law. I am not persuaded that the Appellant's remedy was to have appealed the Arbitrator's May 10, 2010 decision. The Appellant does not argue that the Arbitrator erred in law in his conclusions on entitlement; rather, it agrees with those rulings. What the Appellant argues is that the Arbitrator made an error in the order in not applying those rulings to the repayment question before him.

In Girao, I found that if the arbitrator had erred in not addressing an issue whether to grant interim benefits, the appropriate remedy was not for an appellate officer to determine the issue but, rather, to refer the issue back to arbitration for determination. Here, however, I sit not as an appellate officer restricted to errors of law, but as a variation adjudicator. Under subsection 284(1) of the Act, the Director could have referred this variation application to an arbitrator. Having been granted the same authority, there is no need to refer this matter to arbitration.

Arbitrator Sapin found that the correct remedy in this case was a variation application under section 284 of the Act. The Respondent's December 2, 2010 letter submitted that "the only possible way" the Appellant could obtain an order to repay the interim benefits was through a variation of the Arbitrator's order. I agree that variation is the appropriate procedure in this case.

To quote Hart, in issue in this variation proceeding is whether the repayment issue was "a matter which, explicitly or implicitly, should have been addressed." Based on the agreement of the parties as to what transpired at the full arbitration hearing, I am persuaded that the repayment issue was a matter that not only implicitly, but explicitly should have been addressed. I find that I have jurisdiction to consider this variation application under subsection 284(3) of the Act. Further, I respectfully find under subsection 284(3) of the Act that there is an error in the May 10, 2010 Order in not addressing the repayment issue.

I do note the appeal decision in Ms. Z and Dominion of Canada General Insurance Company, (FSCO P00-00023, February 14, 2003). On cross-appeal, the insurer sought repayment of benefits paid pursuant to an interim order. Repayment had not been requested at the full arbitration hearing. Delegate Makepeace questioned whether the insurer had lost its opportunity to obtain a repayment order. Her first concern was that the insured have reasonable notice of the repayment request and an opportunity to respond. This concern was met by allowing the insured to make submissions on appeal in response to the insurer's cross-appeal submissions.

In this variation proceeding, there is no issue that the Respondent has been given notice of the repayment issue, or that she has been given an opportunity to respond. Unlike Ms. Z, the repayment issue was raised and argued at arbitration.

Delegate Makepeace's further concern in Ms. Z related to the limits of her appellate role, noting that the repayment issue should have proceeded as a variation application under section 284 of the Act. However, determining that any further delay in resolving the parties' disputes would be unjust, she varied the arbitration order by adding a paragraph ordering repayment of the interim benefits. Again, this present proceeding is properly brought as a variation, not as an appeal.

Having determined that there is an error in the May 10, 2010 Order, the next question raised by subsection 284(3) of the Act is if it is advisable to vary the Arbitrator's Order and make a new order.

In Ms. Z, Delegate Makepeace, citing her decision in Allstate Insurance Company of Canada and Sellathamby, (FSCO P02-00009, December 17, 2002), stated, that "[i]nterim orders are, by their very nature, subject to an arbitrator's further or final order." She further stated that:

The purpose of interim benefits orders is to protect the flow of benefits where the insured person can show she is likely to succeed in proving entitlement. They are appropriate, in these cases, because litigation delays might otherwise impose financial hardship on applicants with meritorious claims. They are subject to the final order of the arbitrator, who may, after hearing all the evidence, order repayment of interim benefits paid.² It is because of the risk of a substantial repayment order that interim benefits are awarded only in a few cases.

The Appellant argues that in the cases upon which Delegate Makepeace relied (noted in the footnote below), the decision granting interim benefits specifically stated that the insured may be required to repay the benefits (Dhaliwal) or that the benefits would be subject to repayment (Bertsouklis) in the event the insured was found not entitled to same at the conclusion of the hearing.

The Respondent argues that a prerequisite for repayment is the explicit statement in the interim benefits order that the benefits may or shall be subject to repayment. Otherwise, the insured person has no notice of potential repayment. The Respondent further argues that where the words "may be subject to repayment" are used in the interim benefits order, there is discretion for the final hearing arbitrator not to order repayment.

The Respondent argues that in the absence of such explicit language in the interim benefits order, the prerequisite to repayment is compliance by the insurer with the section 47 repayment provision of the Schedule. The Respondent argues that as there was no error attributable to her and, in any event, the Appellant has not provided the requisite notice under the Schedule of the amount to be repaid, there is no basis for repayment.

Arbitrator Alves' interim benefits decision was based on a less rigourous entitlement test than the final determination that followed a full hearing. Arbitrator Alves states, at page four:

My findings with respect to the question of whether the Applicant has made out a prima facie case are for the purposes of this motion and are not binding on the hearing arbitrator.

She later states, at page eight:

... I find that the Applicant has established a prima facie case of entitlement to post-104 week income replacement benefits. I find that if the evidence she adduced is accepted and believed it is reasonable that she will succeed at the arbitration hearing.

The Arbitrator's decision, however, was based on the entitlement being established according to the civil standard of a balance of probabilities. Entitlement included causation being established. Need was not a consideration for granting a final award. The Arbitrator held that:

In order to be entitled to IRBs ...after August 10, 2008, Ms. C must establish on the balance of probabilities that she has, as a result of the accident, suffered from a complete inability to engage in any employment for which she is reasonably suited by education, training or experience ... If she cannot establish a causal connection between the accident and her alleged inability to work, then she is not entitled to IRBs even if she can, or could, establish that she was unable to work after August 2008. [Emphasis in the original]

The Arbitrator concluded that the Respondent had not established a causal connection on any of the theories she advanced and that her claim must fail. That decision is not appealed.

It is certainly implicit, if not explicit, that Arbitrator Alves' interim benefits decision was contingent on the Respondent being successful at the final hearing. Arbitrator Alves does not presume to take jurisdiction away from the final hearing arbitrator for any portion of the disputed entitlement period. Rather, at page three of her decision she cites subsection 279(4.1) of the Act (that provides authority to make interim orders) that she is exercising her discretionary authority to make an interim order, using the words of the section, "pending the final order in any matter."

While the Respondent argues that the final hearing arbitrator has discretion not to order repayment of interim benefits paid, without providing any case law in support, she provides no basis in this case for such exercise of discretion other than that need was established before Arbitrator Alves. The Appellant, however, argues that if need, a prerequisite for the interim benefits award, were the sole criterion, interim benefits would never be repayable.

The Respondent also provides no case law for the proposition that it must be overwhelmingly clear that the Arbitrator would have ordered repayment. Under subsection 284(3) of the Act, "overwhelmingly clear" is not the requisite standard to vary an order. Rather, the test is that it must be advisable to do so, upon being satisfied that there is an error in the order.

In this case, the Arbitrator, unlike the interim order adjudicator, had the benefit of a full hearing of the oral and documentary evidence. The Arbitrator rejected each of the Respondent's causation arguments for the entire period of disputed entitlement, including the period of the interim benefits award. It is difficult to discern how a different result than repayment would have ensued, had the Arbitrator's Order addressed that issue.

Given the Arbitrator's definitive finding on causation following August 10, 2008, and the silence in the Arbitrator's decision and his order regarding the issue of repayment of IRBs paid within that period up to the date of his Order, an issue explicitly argued before the Arbitrator, I am persuaded that it is advisable to vary the Arbitrator's order by adding a repayment order.

It is not disputed that subsequent to Arbitrator Alves' interim order, the Appellant paid the Respondent $17,200 in IRBs, at the rate of $400 a week. This constitutes 43 weeks of IRBs. Arbitrator Alves' interim benefits order was specific as covering August 6, 2009 to the final order in this arbitration. The final order is dated May 10, 2010. This constitutes 39.6 weeks.

The Appellant submits that the IRBs were paid solely in accordance with Arbitrator Alves' Order. I accept that 39.6 weeks, or $15,840 in IRBs, was paid in accordance with that order. Arbitrator Alves' interim order did not require further payment of IRBs. Whether the remaining $1,360 was paid in error, was paid because of late receipt of the Arbitrator's decision or for some other reason, or whether the payment was made before or after the final decision, I do not know.

The basis of this variation application is an error in the Arbitrator's Order under subsection 283(3) of the Act. This application is not based on repayment under section 47 of the Schedule of a benefit paid as a result of an error on the part of an insurer. I am not persuaded, on the limited evidence put before me, that the Arbitrator's Order, had it addressed the issue of repayment argued before the Arbitrator, would have encompassed a period subsequent to the end date of the interim order. I am not persuaded that under subsection 284(3) of the Act the balance of $1,360 should be included in this present order that is limited to correcting the Arbitrator's Order.

Turning to the question of interest, in Ms. Z, the insurer sought interest on the interim benefits paid pursuant to the Statutory Accident Benefits Schedule - Accidents Before January 1, 1994, Ontario Regulation 672/90 ("1990 SABS"). Delegate Makepeace held that the legislation authorized insurers to charge interest only where benefits were repayable under the 1990 SABS.

Delegate Makepeace held that she was not ordering repayment pursuant to the 1990 SABS but under the subsection 279(4.1), interim order provision of the Act. The latter does not provide for an interest order. The Delegate found that omission consistent with the remedial purpose of the provision.

Subsections 47(6) and (7) of the Schedule state that interest is payable at the established rate starting on the 15th day after the notice is given. The Appellant's interest claim, however, is not pursuant to the Schedule, nor is the Appellant seeking pre-judgment interest. Rather, the Appellant is seeking post-judgment interest under the Courts of Justice Act, R.S.O. 1990, Chap. C. 43. Subsection 129(1) of the Courts of Justice Act provides that money owing under an order bears interest at the post-judgment interest rate calculated from "the date of the order."

Rule 66.2 of the Code provides that a party may file a certified copy of an order in the Ontario Superior Court of Justice and the order can be enforced by the Court in the same manner as an order of that Court. At 0.5% per annum, for the approximately fourteen months between the Arbitrator's May 10, 2010 decision and the date of this decision, the interest would be somewhat less than $100 on the $15,840 ordered repaid.

Subsection 284(4) of the Act provides that an order made, varied or revoked pursuant to the variation powers of subsection 283(3) may be prospective or retroactive. I agree with Delegate Makepeace that the omission in the legislation regarding interest on the interim benefits ordered repaid up to the date of the repayment order is consistent with the remedial purpose of the legislation. Different considerations, however, may apply to post-judgment interest.

In Roberts v. Morana (1998), 1997 CanLII 16227 (ON CTGD), 37 O.R. (3d) 333, an issue in question was what was "the date of the order" pursuant to which post-judgment interest would be calculated under subsection 129(1) of the Courts of Justice Act. Following Erco Industries Ltd. v. Allendale Mutual Insurance Co. (No. 2) (1984), 48 O.R. (2d) and Placentite v. Fabris (1993), 14 C.P.C. (3d) 210 (Ont. Gen. Div.), Roberts held that the applicable test was when could the liable party determine the amount of money that was properly payable. In this case, the Respondent could determine the amount of money that was properly payable as of the date of this decision.

Applying this test within the context of what order is advisable set out in subsection 284(3) of the Act, I am persuaded that it is advisable that pursuant to subsection 284(4) of the Act the repayment order be prospective from the date of this Order.

During arbitration, the Respondent's name was made anonymous in decisions that were posted on the Commission website. Her name remains anonymous in posted variation decisions. However, my May 20, 2011 letter, following the preliminary conference, confirmed the Appellant's request for an order with the Respondent's name in full. Accordingly, a separate order identifying the full name of the Respondent is being forwarded with this decision to the parties and their respective counsel.

III. EXPENSES

If the parties are unable to agree on the legal expenses of this variation application, as requested by counsel, Rule 79.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated – September 2010) is varied, and a legal expense hearing shall be requested within sixty days of the date of this decision. 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.

July 12, 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.
2. 2See, for example, Dhaliwal and Gore Mutual Insurance Company, (OIC A-011188, June 22, 1995) and Bertsouklis and Liberty Mutual Fire Insurance Company, (OIC P-006499, May 28, 1996), confirming (OIC A-006499, June 28, 1995) [footnote in the original].