Neutral Citation: 2011 ONFSCDRS 61 FSCO A08-002563

BETWEEN:

ANGELA KALPAKIS Applicant

and

TD HOME AND AUTO INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Anne Sone Heard: Final written submissions were received on April 18, 2011.

Appearances: Karen Power for Mrs. Kalpakis Nicole Keating for TD Home and Auto Insurance Company

Issues:

The Applicant, Angela Kalpakis, was injured in a motor vehicle accident on February 10, 2005. She applied for statutory accident benefits from TD Home and Auto Insurance Company (“TD Home”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mrs. Kalpakis applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

Is Mrs. Kalpakis precluded from proceeding to arbitration on the issue of payment of a benefit for housekeeping and home maintenance services for failure to comply with paragraph 281.1 (2) (b) of the Insurance Act and subsection 51(2) of the Schedule?

Result:

Mrs. Kalpakis is precluded from proceeding to arbitration on the issue of payment of a benefit for housekeeping and home maintenance services.

EVIDENCE AND ANALYSIS:

Background

Mrs. Kalpakis lost control of her car on a snow covered bend in the street where she lived on February 10, 2005. As a result, she hit the wall and garage door of a house and suffered pain in her neck, shoulders, upper back, lower back, ribs and right hip.²

Mrs. Kalapakis submitted an Application for Accident Benefits dated March 3, 2005 to TD Home. She also submitted a Disability Certificate dated February 25, 2005, completed by Dr. Rahimpour. Dr. Rahimpour indicated that she would be disabled from activities of housekeeping for one to four weeks.

On March 3, 2005, TD Home took a statement from Mrs. Kalpakis. At page 2, Mrs. Kalpakis states:

Since the accident my middle daughter has been doing the vacuuming for me. I haven’t needed to hire help. It was offered but I refused.

TD Home’s adjuster arranged for Ms. Judy Chung, a registered occupational therapist, to conduct an Occupational Therapy Home Assessment in order to determine Mrs. Kalpakis’ functional status with respect to her housekeeping duties.

In her Occupational Therapy Home Assessment dated March 3, 2005, Ms. Chung recommended various assistive devices for Mrs. Kalpakis and concluded that she did not require housekeeping assistance at this time.

Based on the conclusions made in Ms. Chung’s report, TD Home’s adjuster issued an Explanation of Benefits dated April 11, 2005 indicating the following at page 2:

Enclosed copy of your In Home Assessment for your perusal.

The insurer will not fund any further Housekeeping Benefits, effective April 25, 2005.

Any further questions, please contact the writer.

The Explanation of Benefits also included “Part 6: Applicant’s Right to Dispute”, which clearly outlined Mrs. Kalpakis’ right to dispute the assessment of the claim, including procedural steps and the applicable time limits.

On March 31, 2006, counsel for Mrs. Kalpakis submitted an Application for Expenses in the amount of $5,600 for housekeeping services performed by Ms. Xanthe Kalpakis.

Counsel for the Applicant submitted an Application for Mediation at the Commission dated February 9, 2007. One of the issues in dispute was $5,600 in housekeeping benefits.

At a mediation conducted between March 13 and May 7, 2007, the issue of housekeeping was partially resolved, with TD Home agreeing to pay Mrs. Kalpakis $1,100 for the period from February 10 to April 25, 2005.

The Mediator’s Report was released on May 7, 2007. It confirmed that further housekeeping benefits remained an issue in dispute.

Counsel for the Applicant filed an Application for Arbitration dated October 24, 2008. The Commission’s date stamp indicates that it was received on November 6, 2008. The Application for Arbitration identified the housekeeping and home maintenance benefit, (from April 26, 2005 to February 10, 2007), as the issue in dispute. This Application was filed more than one year and five months after the Report of Mediator, dated May 7, 2007.

TD Home filed a Response dated February 23, 2009, and raised the limitation period defence by operation of subsection 51(1) and 51(2) of the Schedule.

Statutory Framework and Case Law regarding Limitation Periods

Subsection 51(1) of the Schedule requires that a mediation or arbitration proceeding be commenced within two years after the insurer refused to pay benefits. It states as follows:

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 Regulation shall be commenced within two years after the insurer’s refusal to pay the amount claimed.

Under subsection 51(2) of the Schedule, arbitration may be commenced within 90 days after the mediator reports to the parties. It states as follows:

Despite subsection (1), a court proceeding or arbitration under clause 281(1)(a) or (b) of the Insurance Act may be commence within 90 days after the mediator reports to the parties under subsection 280 (8) of the Act …

The relevant approach to determining whether a limitation period defence is applicable is laid out in Zeppieri and Royal Insurance Company of Canada.³ Zeppieri sets out a two-step approach: first, it is necessary to ask whether, and when, there was a refusal to pay benefits and second, whether an insurer may rely on a limitation period that runs from the date of refusal.

The first step involves determining whether the Applicant received a valid notice of the refusal of a benefit. The refusal must be clear and unequivocal and communicated to the applicant in writing, with supporting reasons.⁴

In Turner and State Farm Mutual Automobile Insurance Company,⁵ Director's Delegate Makepeace stated that:

The purpose of the notice requirement is to ensure that the insured person has enough information to decide whether to dispute or accept the refusal. The requirement also reinforces the insurer's obligation to give full and fair consideration to every claim. However, while insurers are expected to take seriously their obligation to give written reasons for refusing benefits, the legislative objective of promoting early claims assessment and ongoing communications between the parties suggests they should not be held to a standard of perfection.

A valid notice of refusal must also comply with the requirements of section 49 of the Schedule by providing the insured with a written notice concerning their right to dispute the insurer's decision. In Smith v. Co-operators General Insurance Company,⁶ the Supreme Court of Canada clarified the requirements for compliance with section 49 (then section 71): a person must be informed of the dispute resolution procedure in clear and straightforward language, including a description of the most important points of the process as well as the relevant time limits that govern the entire process.

The second step in the Zeppieri approach involves determining whether an insurer has engaged in actions subsequent to the refusal which may have led the applicant to believe that the limitation period had not yet begun to run. Ongoing communication, negotiations or requests for further information between an insured and the insurer do not extend the time limits for disputing an otherwise clear and unequivocal refusal.

Arguments

Insurer’s Submissions

TD Home submits that it issued a valid notice of refusal to pay Mrs. Kalpakis’ housekeeping benefits by way of an Explanation of Benefits dated April 11, 2005. Further, TD Home did not engage in any activities that would lead Mrs. Kalpakis to believe that it was not relying on the refusal. Therefore, the time limitation period started running on April 11, 2005.

Applicant’s Submissions

Mrs. Kalpakis submits that as of April 11, 2005, she had not submitted any housekeeping and home maintenance expenses, and thus, she had not applied for that benefit. She also notes that the Explanation of Benefits dated April 11, 2005 alleged that it was a denial of “further” housekeeping benefits, which suggested that past housekeeping and home maintenance benefits had been paid to her. As of that date, she had not been reimbursed for that sort of benefit. As a result, Mrs. Kalpakis submits that the Explanation of Benefits dated April 11, 2005 is misleading and unclear. Since it was not a clear and unequivocal denial of a specified benefit, it does not trigger the limitation period.

In addition, Mrs. Kalpakis refers to her statement that “since the accident her middle daughter was doing the vacuuming for her,” and that she “hasn’t needed to hire help.” In her opinion, this statement proves that she had not “incurred” additional expenses as required by section 22 of the Schedule.

Analysis and Conclusions

Section 51 of the Schedule requires that a mediation proceeding be commenced within two years after the insurer’s refusal to pay the amount claimed. In addition, an arbitration may be commenced within 90 days after the mediator reports to the parties under subsection 280 (8) of the Insurance Act.⁷

In this case, the mediation proceedings were commenced within the two-year limitation period. However, Mrs. Kalpakis did not commence her arbitration proceeding within 90 days after the mediator reported to the parties on May 7, 2007.

As an arbitrator does not have the discretion to extend these time limits, cases like this one are often decided on the basis of the validity of the insurer’s refusal. If the insurer’s refusal is not valid, the limitation period does not begin to run. As Arbitrator Muzzi set out in Mohammed-Amin and RBC General Insurance Company,⁸ the following are the well-established principles relevant to determining the validity of the insurer’s refusal to pay:

the insurer’s refusal itself must be in writing and must be clear and unequivocal notice of the insurer’s refusal to pay the benefits in issue;
the refusal must provide sufficient or complete reasons for the refusal to pay;
a proper refusal must also inform the insured of the dispute resolution process; and
ongoing negotiations or requests for further information between an insured and the insurer do not extend the time limits for disputing an otherwise clear and unequivocal refusal.

I find that TD Home delivered a clear and unequivocal refusal to pay benefits to Mrs. Kalpakis.

I find that the Explanation of Benefits dated April 11, 2005 constitutes TD Home’s refusal to pay benefits to Mrs. Kalpakis. TD Home refused to pay benefits to her on the basis of an Occupational Therapy Home Assessment Report (the “Report”) that found Mrs. Kalpakis’ accident-related injuries did not prevent her from performing her pre-accident housekeeping and home maintenance activities. The Explanation of Benefits also clearly indicates on which date her entitlement to housekeeping and home maintenance benefits ends. The Report is attached to the Explanation of Benefits. The Explanation of Benefits also sets out Mrs. Kalpakis’ right to dispute the insurer’s assessment of her claim for statutory accident benefits.

Moreover, I find that TD Home’s refusal was unequivocal. I find nothing in the subsequent actions of TD Home to satisfy me that it contemplated revoking or did revoke the refusal of April 11, 2005. The evidence is that TD Home did not communicate with Mrs. Kalpakis at all regarding housekeeping and home maintenance benefits following the Explanation of Benefits.

In addition, I find that Mrs. Kalpakis had incurred expenses for housekeeping and home maintenance as of April 11, 2005, the date of the Explanation of Benefits.

Mrs. Kalpakis argued that her statement on March 3, 2005 that she hadn’t needed to hire help (because her middle daughter was doing the vacuuming for her), was proof that these expenses had not been incurred at the time of the Explanation of Benefits. However, in S.D. and TTC Insurance Company Limited,⁹ Arbitrator Sapin stated that:

The very fact of the insured person’s need for assistance, and the provision of that assistance by the family member, creates the incurred obligation.

This reasoning was adopted by Director’s Delegate Makepeace in Stargratt and Zurich North America Canada.¹⁰

Mrs. Kalpakis submitted an Application for Accident Benefits dated March 3, 2005 and a Disability Certificate dated February 25, 2005 to TD Home. The Disability Certificate stated that Mrs. Kalpakis suffered from a substantial inability to perform the housekeeping and home maintenance services that she normally performed before the accident for three to four weeks, thereby raising the issue of this benefit.

Mrs. Kalpakis subsequently submitted an Application for Expenses dated March 31, 2006, which clearly lists “shopping, meals, cleaning,¹¹ laundry, garbage, making the beds” as expenses incurred beginning February 11, 2005. After the mediation, she accepted payment for these expenses, (up to April 25, 2005), which she is now alleging were not incurred. Under these circumstances, I do not find the argument that Mrs. Kalpakis had not incurred housekeeping and home maintenance expenses at the time of the Explanation of Benefits persuasive.

TD Home’s refusal of April 11, 2005 to pay benefits to Mrs. Kalpakis is clear and unequivocal. Mrs. Kalpakis had incurred expenses for housekeeping and home maintenance at that point. Mrs. Kalpakis is precluded from proceeding to arbitration because her application for arbitration in respect of this refusal was filed beyond the 90-day limitation period set out in subsection 281(8) of the Insurance Act and subsection 51(2) of the Schedule.

EXPENSES:

The parties made no submissions with regard to expenses. If they are unable to resolve the issue of expenses on this preliminary issue hearing, either party may make an appointment for me to determine the matter in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

July 22, 2011

Anne Sone Arbitrator

Date

Financial Services Commission of Ontario