Economical Mutual Insurance Company v. Sivakumaru Sinnapu, 2011 ONFSCDRS 99

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2011 ONFSCDRS 99

Appeal P11-00012

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ECONOMICAL MUTUAL INSURANCE COMPANY

Appellant

and

SIVAKUMARU SINNAPU

Respondent

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Mr. Ian D. Kirby for the Appellant, Economical Mutual Insurance Company

Mr. Robert Zigler for the Respondent, Sivakumaru Sinnapu

HEARING DATE:

October 12, 2011

APPEAL ORDER

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

1. The Arbitrator’s July 30, 2010 and December 3, 2010 decisions are confirmed and this appeal is dismissed.

2. If the parties are unable to agree on the legal expenses of this appeal, pursuant to Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – August, 2011), an expense hearing shall be requested within thirty days of this decision.

November 1, 2011

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL AND BACKGROUND

The Respondent, Sivakumaru Sinnapu, was injured in a June 22, 2006 motor vehicle accident and sought statutory automobile accident benefits under the Schedule¹ from his first-party insurer, the Appellant, Economical Mutual Insurance Company. The Appellant paid the Respondent weekly income replacement benefits (“IRBs”) until it terminated payment effective January 11, 2009 based on its view that the Respondent did not meet the post 104-week IRB disability test of complete inability to engage in any employment for which he was reasonably suited by education, training or experience.

On the Respondent’s motion for interim benefits, Arbitrator Wilson (the “Arbitrator’), in his decision dated October 16, 2009, ordered the Appellant to pay the Respondent weekly IRBs of $398.68 ongoing from July 7, 2009 until a final arbitration decision was rendered or the matter was finally settled.

The Appellant subsequently paid the Respondent $16,345.88 in IRB arrears for the period January 5 to October 4, 2009, and $2,989.67 in interest, and consented to an order for payment of ongoing IRBs. This settled all issues in dispute other than a special award claim under subsection 282(10) of the Insurance Act, R.S.O. 1990, c. I.8, as amended, and legal expenses.

An arbitration hearing regarding entitlement to and the quantum of a special award was then held. The Arbitrator’s July 30, 2010 decision found that the Appellant had unreasonably withheld statutory accident benefits and that the Respondent was entitled to a special award “at the rate of 40 per cent of the income replacement benefits and interest that were outstanding at the time the issue of IRBs was finally resolved by the parties.” The Arbitrator left the calculation of the special award to the parties, but could be spoken to if there was any disagreement.

The Appellant questioned whether any benefits or interest were outstanding at the time of the settlement. The Arbitrator’s December 3, 2010 decision held that as his interim IRB award was subject to possible repayment, benefits and interest were still outstanding at the time the IRB issue was finally resolved by the parties. The Arbitrator again stated that he could be spoken to if there was any disagreement about the exact amount payable under his order.

The Appellant submits that the Arbitrator erred in his July 30, 2010 decision in (1) determining that the Appellant had unreasonably withheld benefits and that a special award was warranted, and (2) granting a special award in terms of a percentage, rather than a lump sum that, in any event, was so unjustifiably at the higher end of the scale so as to constitute an error in law.

The Appellant thus asks that the Arbitrator’s July 30, 2010 decision be set aside with a finding that it is not liable to pay a special award. The Appellant further seeks a repayment order. In the alternative, the Appellant requests that the Arbitrator’s July 30 and December 3, 2010 orders be vacated and a new hearing held to determine entitlement to a special award.

In the further alternative, in the event an error of law is not established regarding entitlement to a special award, the Appellant asks that either a minimum special award be set or that the matter be referred to an arbitrator for a proper determination of the quantum of the special award in accordance with the analysis and procedure set out in Liberty Mutual Insurance Company and Persofsky et al., (FSCO P00-00041, January 31, 2003).

II. ANALYSIS

1. Entitlement to a Special Award

Subsection 282(10) of the Insurance Act provides that if the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which the insured is entitled under the Schedule, “shall” award a lump sum as a special award. Thus, if the finding of unreasonableness is made, a special award is mandatory. The maximum allowed for a special award and the applicable criteria for setting the lump sum amount are discussed below under the heading “Amount of the Special Award.”

Plowright and Wellington Insurance Company, (OIC A-003985, October 29, 1993) addressed the question as to what is “unreasonable” withholding or delay of payments. Arbitrator Palmer held that unreasonable behaviour by an insurer “can be seen as behaviour which was excessive, imprudent, stubborn, inflexible, unyielding or immoderate.”

The Appellant submits that the Arbitrator erred in misapprehending the evidence and concluding that prior to terminating benefits the Appellant did not try to resolve the conflicting medical information in its possession. The Appellant submits that the evidence shows that it forwarded new information, as it was received, to its medical assessors while continuing to pay IRBs and that even after review of the Respondent’s additional expert reports, the Appellant’s psychological and orthopaedic experts both maintained their view that the Respondent did not meet the post 104-week IRB test.

The Appellant submits that the basis for a special award is not whether the insurer is ultimately found to have been incorrect in terminating benefits. If that were so, a special award would be ordered in every case entitlement was established. Rather, a special award is an extraordinary remedy that is taken extremely seriously. The Appellant argues that its actions were not inflexible, it was not wearing “blinkers” in its adjusting of this matter and that its conduct cannot be characterized as unreasonable, as defined in Plowright, the Appellant having repeatedly corresponded with its medical experts, seeking their assistance in determining IRB entitlement.

The Arbitrator’s July 30, 2010 special award decision noted the conflicting medical evidence before the Appellant prior to it terminating IRBs. On the one hand, Ms. B. Mair, a vocational rehabilitation expert, opined that there was no employment suitable for the Respondent in which he could engage. Conversely, Dr. R. Lexier, an orthopaedic surgeon, was of the view that the Respondent was employable in all of the positions identified by Ms. Mair. Both of these experts were retained by the Appellant as part of a concurrent multidisciplinary post 104-week review.

The Arbitrator found that the Appellant had correctly obtained further expert evidence in the face of this contradictory evidence. The Arbitrator determined that the Appellant’s unreasonable conduct was not in failing to follow-up with its experts but rather in failing to determine the Respondent’s entitlement by weighing the entire available evidence, a duty of utmost good faith it could not simply delegate to its insurer medical examiner, Dr. Lexier, who, in any event, claimed no expertise as a vocational expert.

I am not persuaded that such a basis for a special award is an error of law. Rather, as stated by Delegate Draper, as he then was, in Maas and State Farm Mutual Automobile Insurance Company, (OIC P96-00080, December 8, 1997) in upholding a $5,000 special award: while “the insurer is entitled to reevaluate its position based on new information, it should do so based on a consideration of all of the available information.” In Maas, Delegate Draper noted that rather than working with the applicant’s medical practitioners, the insurer sent the applicant to two new doctors and acted on their reports “without much apparent regard for the views of her treating physicians and therapists.”

The Appellant cites Lesniak and Pembridge Insurance Company, (FSCO A04-000274, June 2, 2006), Carr and TD General Insurance Company, (FSCO A09-003154, July 23, 2010), Krusto and General Accident Assurance Co. of Canada, (FSCO A99-000392, February 20, 2001) and L.E. and Allstate Insurance Company of Canada, (FSCO A07-002058, October 27, 2009) for the proposition that an insurer’s reliance even on flawed medical reports does not constitute an unreasonable withholding of benefits warranting a special award. The Appellant argues that this case is similar to Lesniak, where no special award was ordered.

I do not find that these cases set out as a general proposition that an insurer’s deference to the opinions of its own assessors, or any endeavor whatsoever by an insurer to resolve conflicting medical information, is a full answer to any submission that the insurer unreasonably withheld benefits. Nor am I persuaded that these cases stand for the proposition that an insurer can simply rely on selected reports, ignoring the totality of the evidence. Rather, I find that these cases underline the “rationality” principle discussed in Persofsky, “the need to relate the particular facts of the case to the underlying purposes of the legislation” [emphasis added].

Thus, Arbitrator Lee found in Lesniak that, on the specific written and oral evidence before him, including evidence from a designated assessment centre (“DAC”) report (different from the situation here), that the insurer in that case was not unreasonable in relying on its own medical reports. Arbitrator Killoran, in Carr, denied a special award notwithstanding that the medical reports upon which the insurer relied had the specific flaws of the lack of a workplace assessment and a chiropractor relying on an erroneous definition of impairment.

In Krusto, while Arbitrator Novick found fault with some of the findings in the DAC report and did not accept some of the opinions in the insurer’s medical reports, she held that it was not unreasonable for that insurer to have relied on those specific reports in terminating benefits. In L.E., Arbitrator Nastasi found that although best practices would be to provide assessors with the most up-to-date medical records, in that case their absence did not result in the DAC report being defective or fundamentally flawed or result in an unreasonable withholding or delay of benefits.

The Appellant submits that Pembridge Insurance Company (Pafco Ins. Co.) and Howden, (FSCO P02-00031, November 20, 2003) holds that it is insufficient that an insurer’s main failure was not reconsidering its decision as more information became available. Rather, the question is at what point the insurer should have known that its position was untenable. The Appellant argues that in this case the Arbitrator erred in failing to determine when its position became untenable. Further, the Arbitrator held that there was no evidence of malice by the Appellant or intent to harm the Respondent and that adjusting the file simply “went off the rails” for some unknown reason, the adjuster having an honest belief that she dealt appropriately with the claim.

In Howden, Director Draper revoked a special award expressed in terms of a percentage of benefits owing and accrued interest, finding that the question was “whether, and at what point, [the insurer] should have known that its position was untenable.” The Director found that the insurer’s case was substantially undermined on the seventh day of the hearing during a devastating cross-examination of an expert witness.

Accepting that the special award of 50% amounted to approximately $25,000, the Director concluded that a $5,000 special award was appropriate, considering “particularly the relatively short period that the withholding of benefits can be viewed as unreasonable.”

Howden did not change the criterion for a special award from “unreasonable” to “untenable.” Rather, the Director highlighted that the insurer’s unreasonableness in Howden was maintaining its position throughout the hearing notwithstanding the oral evidence received. In this case, the Arbitrator’s finding of unreasonable withholding of benefits rested on the Appellant’s review of the medical documentation some eight months prior to the motion date for interim benefits, a considerably longer period than in Howden.

As to whether evidence of malice or intent to harm the insured person is a prerequisite to a special award being ordered, Senior Arbitrator Rotter held in Erickson and The Guarantee Company of North America, (OIC A-000560, July 16, 1992), that “the criteria for punitive damages, that is wilful and deliberate misconduct or bad faith, goes considerably beyond the Insurance Act standard of simple unreasonableness.” I agree with Arbitrator Rotter that:

It is clear that conduct may be unreasonable, but still not deliberately or wilfully injurious, or motivated by bad faith. I find that wilful or deliberate misconduct or bad faith are additional factors in the conduct of the Insurer, beyond unreasonableness, which should be taken into consideration when assessing the quantum of a special award.

Persofsky does state that there are certain common principles between punitive damages and special awards, specifically that the amount of the special award should be determined according to the principles of rationality and proportionality.

However, Director Draper further stated that he would “not suggest that punitive damages [a common law remedy] and special awards [defined by legislation] are directly comparable.” The insurer in Persofsky itself argued that “special awards only require unreasonable conduct, while an insurer is not liable for punitive damages unless it commits an independent, actionable wrong by conduct that is sufficiently harsh, vindictive, reprehensible and malicious that it offends the court’s sense of decency.”

Under subsection 283(1) of the Insurance Act, since 1996, appeals from the order of an arbitrator have been restricted to questions of law. In Maas, Delegate Draper held that:

The awarding of a special award is not strictly discretionary. According to section 282(10), the arbitrator “shall” order a special award if he or she finds that the insurer unreasonably withheld or delayed the payment of benefits. A finding of unreasonableness, however, is highly dependent on the arbitrator’s view of the evidence. Since the arbitrator had the opportunity to observe the witnesses … I am not prepared to interfere with his assessment unless he erred in some significant way.

Delegate Draper further held that:

Once an arbitrator decides that a special award is warranted, the amount is left to his or her discretion. Previous appeal decisions have taken a narrow approach to reviewing discretionary decisions.For example, see Allison and Markel Insurance Company of Canada, (August 21, 1996, OIC P-001231) and Rambally and Markel Insurance Company of Canada, (February 6, 1997, OIC P96-00047).

Likewise, in GAN Canada Insurance Company and McConachie, (FSCO P97-00069, October 28, 1998), Delegate Naylor held that regarding a special award, “on appeal, considerable leeway will be given to the arbitrator’s findings.” As stated by Delegate Makepeace in McAngus and Guardian Insurance Company of Canada, (FSCO P98-00049, January 10, 2000), the reason for this is that “a finding that an insurer has ‘unreasonably withheld or delayed benefits’ depends on the arbitrator’s assessment of the facts. The decision as to the amount of the award is even more deserving of deference.”

In Liberty Mutual Insurance Company and Young, (FSCO P03-00043, June 20, 2005), application for judicial review dismissed, 2006 CanLII 7286 (ON S.C.D.C.), Delegate Evans cited Delegate McMahon in Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01-00022, February 26, 2003) that errors of law include, in part, findings of fact made in the complete absence of supporting evidence: “The vital distinction is between a conclusion that there was ‘no evidence’ to support a finding and a mere ‘insufficiency of evidence.’”

In this case, the Arbitrator found that the Appellant’s withholding of IRBs was unreasonable based on its failure to consider all of the available information. I find that there was evidence before the Arbitrator to support such a finding. In his October 16, 2009 interim benefits decision, the Arbitrator determined that:

Despite a serious accident in Montreal in January 1993 that involved a fall from a balcony and a lengthy hospitalization, some thirteen years later, immediately prior to this accident [the Appellant] was fully functional, and employed in a physically challenging work. The evidence lists his work as that of a “fishmonger”- not selling fish but receiving shipments, sorting, stacking, cleaning and shifting fish prior to being prepared for sale.

Mr. Sinnapu was unable to keep up this work following the motor vehicle accident, notwithstanding an attempt to return to work. According to his evidence he remained unable to work, a condition that was recognized by the Insurer in the payment of benefits up to and including the two-year mark.

The interim benefits decision is not appealed.

The Arbitrator’s subsequent July 30, 2010 decision found that there was persuasive evidence that the Respondent’s work was both heavy and challenging, that he was neither skilled nor particularly well prepared for other occupations and that neither his education nor his linguistic skills were such as to make him easily employable.

Notwithstanding (1) the contradictory contemporaneous insurer medical examination (“IME”) report of Ms. Mair (who, after further correspondence from the Appellant, maintained her view that there were “no viable potential occupations that [the Respondent] could engage in at present”) and (2) the contradictory reports of the Respondent’s treatment providers and assessors, including Dr. G. Lloyd, orthopaedic surgeon (such reports, by themselves, having formed the basis of the special award in Maas), the Appellant terminated IRBs and maintained that termination, because as stated by the claims adjuster at page 29 of the transcript:

We had a psychological and an orthopedic opinion that Mr. Sinnapu no longer met the disability test for ongoing benefits.

Dr. K. Zakzanis’ psychological IME report states that the Respondent denied the presence of any psychological barriers to resuming gainful employment, reporting that the only remaining barrier was “his physical health and related precautions.” Regarding Dr. Lexier’s orthopaedic assessment, the Arbitrator, in his July 30, 2010 decision, found that:

The record, as furnished in this arbitration, suggests that, at the time that Economical accepted Dr. Lexier’s opinion (that Mr. Sinnapu had suffered only soft tissue injuries that did not appreciably alter Mr. Sinnapu’s ability to work), Economical already had access to over a dozen reports and letters confirming disability and suggesting that there were serious physical and psychological sequelae, including pain and depression that arose after the accident, all of which affected Mr. Sinnapu’s ability to return to the workforce.

Notwithstanding that, with the benefit of its own prior IME reports, the Appellant had paid the Respondent IRBs for over two years, Dr. Lexier’s May 11, 2009 letter states that the Respondent’s:

… soft tissue injuries resolved completely by a minimum of one week and maximum eight weeks from the time of collision.

The Arbitrator found that the Appellant’s reliance “on the sweeping opinion given by Dr. Lexier as to suitable employment” in the “face of contradictory evidence from experts in that field,” was undermined, in part, by the Appellant’s August 25, 2008 letter to Dr. Lexier that “was such as to virtually solicit the opinion it actually received.” Dr. Lexier’s report was also undermined, in the Arbitrator’s view, by Dr. Lexier’s “reference to unread reports and clear hearsay as a foundation for his opinion.”

Notwithstanding Ms. Mair’s statement at the end of her July 14, 2008 report that the post 104-week IRB legal entitlement test under the Schedule was outside the scope of her expertise, her May 13, 2009 reply to the Appellant states that there “are no viable potential occupations that [the Respondent] could engage in at present,” confirming her opinion in the body of her July 14, 2008 report respecting specific potential occupations.

The Appellant submits that it allowed the Respondent eight extra weeks of benefits for English as a Second Language (ESL) training, the period thought to be sufficient as the Respondent did not always require an interpreter at medical assessments. It is unclear, however, from Ms. Mair’s report how this realistically was going to change the Respondent’s ability to meet the post 104- week IRB test. Of the twelve potential occupations considered by Ms. Mair, most were eliminated due to the physical demands of the position or the Respondent’s lack of general education. Of the two potential occupations where facility in English was a factor, one was also eliminated on the basis of physical demands, the other due to lack of educational skills.

Nonetheless, the ESL consideration underlines the tenuousness of Dr. Lexier’s opinion that the Respondent was employable in all of the positions identified by Ms. Mair. As set out in Quattrocchi and State Farm Mutual Automobile Insurance Company, (OIC A-006854, September 29, 1997), IRB entitlement is a question of function. The paragraph 5(2)(b) post 104-week IRB disability test looks at a person’s ability to engage in any employment for which that specific person is “reasonably suited by education, training or experience.” The Arbitrator had the opportunity to hear the oral evidence. He correctly addressed the Respondent’s actual vocational ability. The Arbitrator found that the Appellant, in its adherence to Dr. Lexier’s opinion, failed to reasonably do so. That finding, consistent with the test of imprudent, unyielding or immoderate behaviour set out in Plowright, is entitled to deference.

I am thus not persuaded that the Arbitrator erred in improperly exercising his discretion in finding that the Appellant unreasonably withheld payment of IRBs. I am not persuaded that the Arbitrator granted a special award simply on the basis that the Appellant was incorrect in terminating benefits. Accordingly, I am not persuaded that the Arbitrator erred in law in his finding that the Respondent was entitled to a special award.

1. Amount of the Special Award

Subsection 282(10) of the Insurance Act provides that the maximum special award is:

… a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

Subsection 282(10) clearly speaks in terms of a lump sum being awarded. The maximum lump sum amount is constrained by a percentage calculation against three combined amounts, namely, (1) the benefit amount to which the insured person was entitled at the time of the award,² (2) the unpaid interest amount under the Schedule to which the insured person was entitled at the time of the award, and (3) further interest at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule (the subsection 282(10) interest).

The Appellant submits that the Arbitrator erred in granting a special award near the maximum 50%. The 40% special award of outstanding benefits and interest, it argues, does not correspond to the facts of the case and bears no reasonable relationship to similar special awards granted such as Henderson and Lombard General Insurance Company of Canada, (FSCO A97-001019, March 31, 2000), where there were a long series of breaches with intentional and arguably malicious acts by the insurer, and a roughly 40% special award was granted.

The Appellant initially argued that the Arbitrator disregarded or failed to properly apply Persofsky by not determining what benefits were owing, the maximum special award that could be awarded and the lump sum amount that responded to the facts of the case. The Appellant submitted that based alone on the vagueness and uncertainty of the percentage order provided, the Arbitrator’s special award order could not stand.

However, Persofsky holds that “a lump sum” requires “a fixed amount or, at a minimum, an order that can be readily converted into a fixed amount.” In oral submissions, the parties confirmed that they agreed on the amount of the special award and that amount was paid in January 2011. Thus, the Appellant stated that the vagueness issue no longer existed.

The Respondent argues that while a special award of 40% of the outstanding benefits is undoubtedly toward the top of the scale, even if the Appellant’s conduct was not so egregious to warrant a near maximum special award one must look at the actual quantum, which is neither excessive nor improper. A special award, it submits, cannot simply be a “modest licensing fee for improper conduct.”

In Wawanesa Mutual Insurance Company and Michalski, (FSCO P06-00003, December 5, 2007), Delegate Evans followed Persofsky that the principles of rationality and proportionality should be considered within the context of the Insurance Act in determining the amount of a special award:

… Rationality refers to the need to relate the particular facts of the case to the underlying purposes of the legislation. In other words, what amount is large enough to further the goals of punishment and deterrence, but no larger than is needed to serve that purpose? Proportionality refers to the need to ensure that the consequences imposed on the insurer are rationally related to the misconduct at issue.

Persofsky held that the purpose of the special award “is to punish insurers that unreasonably fail to pay accident benefits promptly, as required by the SABS, and to deter that company and others from acting similarly in the future.” The Arbitrator cited Persofsky that:

… the award should be proportionate to: (i) the blameworthiness of the insurer’s conduct; (ii) the vulnerability of the insured person; (iii) the harm or potential harm directed at the insured person; (iv) the need for deterrence; (iv) the advantage wrongfully gained by the insurer from the misconduct; and (v) should take into account any other penalties or sanctions that have been or likely will be imposed on the insurer due to its misconduct.

Ms. B and Non-Marine Underwriters, Members of Lloyds, London, England, (OIC A-013947, June 24, 1996) held that the maximum special award of 50% should be reserved for cases of flagrant misconduct or bad faith. In light of Persofsky, respectfully, a percentage focus rather than a lump sum focus is no longer good law. As stated in Persofsky:

… In cases where the amount in issue is small, a modest percentage simply may not result in a meaningful order, even for modest misconduct … At the other end of the spectrum, there will be situations where the insurer’s misconduct is serious, but other factors may make it inappropriate to award the maximum … Therefore, the arbitrator should focus on the dollar amount of the special award. That is the penalty visited on the insurer - not the percentage. The task, which is not an easy one, is to determine an appropriate amount.

Thus in Michalski, Delegate Evans noted that the “high end of the scale” is the “actual dollar amounts of the special awards,” not the percentage of the maximum that was awarded. I agree. Therefore, while the Arbitrator and both parties may have been of the view the special award granted was “on the higher side of the spectrum,” in actuality, it was not.

In this case, the Arbitrator fixed a special award of “40 per cent of the income replacement benefits and interest that were outstanding at the time that the issue of IRB was finally resolved by the parties,” noting that the Respondent’s personal situation made him more vulnerable to his insurer’s arbitrary actions and that he suffered a “hand to mouth existence” as a result of the stoppage of benefits. Nonetheless, the Arbitrator did not include in his percentage award the third component of subsection 282(10) interest (that is in addition to interest under the Schedule).

In Henderson, the actual lump sum special award was $65,000. The parties agree that the benefits and interest that were outstanding when the IRB issue was finally resolved was the $19,335.55 paid following the Arbitrator’s interim award decision. At the appeal hearing, the Appellant readily converted the 40% special award ordered to a lump sum of less than $8,000. The specific amount is $7,734.22, or approximately 12% of the award in Henderson.

The special award is also considerably smaller than the $30,000 ordered in Fimiani and Liberty Mutual Insurance Company, (FSCO A97-001518, January 11, 2000) by Arbitrator Muir based on the insurer’s refusal to accept the applicant’s condition of ongoing pain and its reliance on a DAC chiropractic assessor who could not assess the insured’s pain condition. Arbitrator Muir found that once the insurer “received an opinion supporting a termination of benefits it chose to remain indifferent to whatever further evidence it received.”

The award is also much smaller than in Michalski, where Delegate Evans, in reducing the special award from $150,000 to $50,000, the maximum he found that could be justified, held that:

Generally, the arbitrator found that a special award was payable because Wawanesa failed to fully advise Mrs. Michalski of the benefits she was entitled to, improperly reduced them, and delayed arranging assessments to determine her attendant care needs and whether she was “catastrophically impaired.”

Accordingly, I am not persuaded that the Arbitrator’s special award was at the “top of the scale.” Further, the actual lump sum award is comparable to the $5,000 special award upheld in Maas based on the insurer relying on its two new doctors “without much apparent regard for the views of her treating physicians and therapists.” In this case, the Arbitrator further held that the Appellant, in withholding benefits, disregarded its own expert reports that varied from Dr. Lexier’s view.

The special award is also comparable to the reduced $5,000 special award in Howden, where, unlike here, the Director found a much shorter period (starting at the arbitration hearing) that the withholding of benefits could be viewed as unreasonable.

The award is also less than the $10,000 special award granted in Kanareitsev and TTC Insurance Company Limited, (FSCO A02-001225, July 7, 2005), overturned (FSCO P05-00021, September 18, 2006), reversed in Kanareitsev v. TTC Insurance Co., 2008 CanLII 26262 (ON SCDC), [2008] O.J. No. 2132, based on the insurer’s “refusal to consider the preponderance of the medical evidence and act accordingly.” Arbitrator Killoran, finding the applicant to be extremely vulnerable and the harm done to him in withholding benefits extremely grave, held that there was “a need for deterrence so that greater care is extended to considering the issue of entitlement to benefits for other vulnerable persons.”

It is not for the Appeal officer to second guess the arbitrator or to fine-tune the special award as the Appellate officer may view the evidence. Given the comparable lump sum awards noted, I am not persuaded that the special award was so excessive in furthering the goals of punishment and deterrence or so disproportionate to the facts of this case so as to constitute an error of law.

At the end of oral submissions, the Appellant’s letter of January 5, 2011 was produced and, on consent, entered as an exhibit as fresh evidence as having come into existence after the decisions under appeal. The letter states that the Respondent was paying $16,345.88 as the amount of the special award and $2,270.26 “as to interest on such award.”

The Appellant does not argue that the Arbitrator erred in ordering interest paid on the special award, nor is it argued that the Arbitrator ordered interest on the special award. Persofsky states that interest is not payable on the lump sum special award except as part of the enforcement process. I am not aware of any enforcement process in this case. If there is an error in this interest payment, I do not see that it arises from an error of law by the Arbitrator.

The parties were unable to advise how the principal amount of $16,345.88 for the special award was calculated. This amount is 85% of the $19,335.55 in benefits and interest outstanding at the time of settlement. Even if one, contrary to the Arbitrator’s decision, adds in the third component of subsection 282(10) interest, I calculate that the special award would be approximately $12,000. Whether or not by coincidence, $16,345.88 is also the precise principal amount the Appellant previously paid solely for IRB arrears following the interim benefits decision.

The Appellant does not dispute the Arbitrator’s December 3, 2010 decision that there were outstanding benefits and interest at the time of the IRB settlement. The parties agree that the Arbitrator’s special award of 40% of that amount can be readily converted into a lump sum of $7,734.22. My jurisdiction in this proceeding is restricted to addressing alleged errors of law in the Arbitrator’s orders. My authority does not extend to speculating why incorrect amounts may have been paid. Nor am I asked to correct possible errors made by the parties themselves. Accordingly, the Arbitrator’s July 30, 2010 and December 3, 2010 decisions are confirmed and this appeal is dismissed.

IV. EXPENSES

If the parties are unable to agree on the legal expenses of this appeal, pursuant to Rule 79.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated – August, 2011), an expense hearing shall be requested within thirty days of the date of this decision, accompanied by (1) a Bill of Costs describing the expenses claimed, the services received and the costs and (2) written submissions on entitlement to and/or the quantum of such legal expenses, as are in dispute.

November 1, 2011

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Persofsky limited this component to the amount that was unreasonably withheld or delayed. In this case, there was no difference in the result and the point was, accordingly, not argued.