Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2012 ONFSCDRS 113

Appeal P11-00022

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ARNAND MURTTY Appellant

and

SECURITY NATIONAL INSURANCE CO./MONNEX INSURANCE MGMT. INC. Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Arnand Murtty, representing himself Mr. Patrick C. Ho for the Respondent, Security National Insurance Co./Monnex Insurance Mgmt. Inc.

HEARING DATES: March 1 and 30, 2012

APPEAL ORDER

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

1. The first paragraph of the Arbitrator’s July 22, 2011 order is rescinded and replaced by the following:

Mr. Murtty is not precluded from proceeding to arbitration because he entered into an enforceable agreement which releases Security National from any action to claim statutory accident benefits.

2. The Arbitrator’s July 22, 2011 decision is otherwise upheld.

3. If the parties are unable to agree on appeal legal expenses, pursuant to Rule 79.1 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.

July 19, 2012

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL AND BACKGROUND

The Appellant, Mr. Arnand Murtty, was injured in a motor vehicle accident on November 17, 1995. As a result, he applied to his first-party automobile insurer, the Respondent, Security National Insurance Co./Monnex Insurance Mgmt. Inc., for statutory accident benefits payable under the Schedule.¹

On May 11, 1997, the Respondent terminated payment of the Appellant’s income replacement benefits (“IRBs”). Mediation was unsuccessful in resolving this dispute. Subsequently, while in arbitration, the parties entered into an August 1998 settlement for $140,500.

In 1999, the Appellant applied for mediation at the Commission for what he termed a disability pension. Following unsuccessful mediation, the Appellant applied for arbitration in October 2000. In March 2001, the Appellant advised the Commission that he was not proceeding with the arbitration and that the file should be closed. The Appellant’s letter stated that this “cancellation is done without prejudice.” The Commission file was subsequently, on consent, closed.

In July 2010, the Appellant filed an Application for Arbitration for weekly benefits after age 65, attaching the September 20, 2000 Report of Mediator. The matter was set down for a preliminary issue hearing to determine the following:

1. Is the Appellant precluded from proceeding to arbitration because he entered into an enforceable agreement releasing the Respondent from any action for statutory accident benefits?

2. Is the Appellant precluded from proceeding to arbitration because he withdrew an earlier Application for Arbitration concerning the November 17, 1995 motor vehicle accident?

In her July 22, 2011 decision, Arbitrator Muzzi (the “Arbitrator”) held that, notwithstanding that neither party had a copy of the Settlement Disclosure Notice (that the Appellant stated he never received), the following was sufficient to establish that the Respondent had provided the proper disclosure under subsection 9.1(2) of R.R.O. 1990, Reg. 664, as amended, for settlements made before March 1, 2002, (the “Settlement Regulation”):

1. The Settlement Agreement and Release (the “Release”) was signed by the Appellant after consultation with counsel. In paragraph 12 of the document, the Appellant acknowledged receiving proper notice. The Arbitrator did not accept that the lawyer did not explain anything to the Appellant given the Appellant’s prior letter to the Respondent noting specific concerns and that he would seek legal advice before signing the agreement.

2. The Appellant had failed to raise the issue of deficient disclosure in his 1999 effort to rescind the settlement agreement. The Arbitrator found the Appellant was “not a completely unsophisticated applicant,” who “throughout these proceedings … has shown an ability to assert his claims with detailed correspondence, completed forms and able oral representations.”

The Arbitrator found no evidence of financial duress causing the Appellant to withdraw from arbitration in 2001. The claim that the Respondent had improperly demanded repayment of the settlement funds was not credible as the Appellant had never brought this to the Commission’s attention. In any event, the Respondent may have been within its rights to demand repayment.

Accordingly, the Arbitrator held that the Appellant was precluded from proceeding to arbitration on the basis of the settlement. The Arbitrator further found that even if the Respondent had not complied with the Settlement Regulation, the Appellant was still precluded from proceeding to arbitration on the basis that his refilling at this late date was an abuse of the Commission’s process, for the following reasons:

1. There was more prejudice to the Respondent in having to defend this claim, when there was no longer a complete insurer’s file or a legal file to consult, than there was to the Appellant in not having a hearing on the merits.
2. The Arbitrator found that there was no reasonable explanation for the Appellant’s lengthy delay of almost a decade in renewing the arbitration. There was no evidence of special circumstances or of any inadvertence or mistake by the Appellant. The Arbitrator did not find credible the Appellant’s assertions that he had not received the settlement agreement and that he waited eight years after his withdrawal to make inquiries with the Commission, especially when he had challenged the validity of the agreement in 2000.

The Arbitrator’s January 13, 2012 letter decision awarded the Respondent its legal expenses at arbitration, reduced to $2,000 from the $13,151.36 sought.

II. THE APPELLANT’S SUBMISSIONS

The Appellant appeals the Arbitrator’s orders on the following grounds:

1. The Respondent failed to provide the Appellant with a mandatory Disclosure Notice, that the Respondent says it has not retained. The Appellant’s acknowledgement in the Release of having received the mandatory disclosure is insufficient to constitute a binding settlement.

2. The Arbitrator erred in “not detecting the cursive signature on the signature page of the Settlement and Release document.” This is not an inconsequential or technical error. Rather, it ignores the mandatory language of the Settlement Regulation.

The Appellant cites ING Insurance Company of Canada and Jetty, (FSCO P08-00012, October 10, 2008). However, the Ontario Divisional Court, in ING Insurance Company of Canada v. Jetty, 2010 ONSC 1091 (Can LII), held that the intent of the legislation will not be affected or undermined if the signature of the insurer is typed or hand-written. Further, a lawyer is assumed to have authority to act on the client's behalf and to effect a compromise of the client's claims. The Settlement Regulation does not change this presumption.

3. The commuted lump sum in any disclosure regarding IRBs was without full details, life expectancy, discount rate and the weekly IRB rate, contrary to Von Steun and Canadian General Insurance Group, (OIC A96-001516, March 18, 1998). The Arbitrator erred in accepting the Respondent’s submission that because the Appellant saw a lawyer, it was relieved from any omissions or errors in the Settlement Disclosure Notice.

4. The Respondent did not provide reports within the requisite fourteen-day period under the Schedule of its own medical expert, Dr. Koppert, and the Appellant’s surgeon, Dr. Ferguson, that the Appellant would not return to his pre-accident employment, and subsequently destroyed the reports. Further, the Respondent’s accountant confirmed that the Appellant did not earn any self-employment income after the accident.

5. The Respondent applied financial duress in forcing the Appellant to withdraw his earlier Application for Arbitration by requiring repayment of the settlement monies as a prerequisite to his rescinding the settlement. In this regard, the Arbitrator overlooked paragraph 14 of the November 15, 2000 Response to the Application for Arbitration.

6. The Appellant was unaware of all of the other available benefits. It is unclear from the settlement whether benefits after age sixty-five were included in the $140,500 settlement or whether they could later be reconsidered because of subsequent financial difficulties.

7. Only in October or November 2010 did the Appellant become aware that he could rescind the settlement other than within the two-day cooling off period.

8. The Arbitrator erred in not adjourning the hearing until the Disclosure Notice was found.

9. The Arbitrator erred in combining the dispute from 2000 with the present dispute “when they are technically the same but legally different.”

10. The onus of proof of compliance with the Settlement Regulation rests with the insurer, as set out in Davenport and Lombard General Insurance Company of Canada, (FSCO A07-002350, November 14, 2008).

In respect of the Arbitrator’s January 13, 2012 expense decision, the Appellant reiterates his argument that the Respondent did not comply with the mandatory language of the Settlement Regulation.

III. THE RESPONDENT’S SUBMISSIONS

The Respondent objected to the Appellant’s late filing of his appeal, the Appellant not being an unsophisticated litigant. The Respondent further submitted that the Notice of Appeal lacked sufficient detail and did not raise any question of law, and that the Appellant was simply rearguing virtually the identical submissions given at arbitration.

The Respondent more specifically argued:

1. The Arbitrator reached important findings regarding the Appellant that are not subject to appellate review, including that a complete settlement package was provided to him and that there was no evidence the Appellant was under financial duress.

2. The Appellant’s argument at arbitration was solely that he was not provided with a Settlement Disclosure Notice and that “[n]o further arguments were made by the appellant that the settlement regulations were not followed.”

3. The argument regarding the cursive signature was raised for the first time on appeal. Citing Budd and Personal Insurance Company of Canada, (FSCO P99-00032, January 8, 2000) and Blake and Jevco Insurance Company, (FSCO P00-00026, May 31, 2001), the Respondent submits that an appellant may not raise a point that was not pleaded or argued at the arbitration level unless all relevant evidence is on the record.

In any event, it is argued that Jetty is distinguishable on the facts. In Jetty, the insured was misled by the representation that he was entitled to $400 a week for IRBs, when he was self-employed and entitled to a potentially different amount. The onus is on the insured person, as prerequisite to setting aside a settlement, to show that he or she was misled or, at the very least, that the information provided was incorrect. In this case, there is no evidence as to the content of the Settlement Disclosure Notice. Accordingly, there is no evidence that the Appellant was misled.

4. The Arbitrator found that the Respondent had provided the Settlement Disclosure Notice and further, by carefully analyzing the Release that was in evidence, found that the Settlement Disclosure Notice complied with the Settlement Regulation. The Release specifically speaks to the commuted value at paragraphs 9 and 12(e).

5. The Appellant has not raised an error of law in respect of the second question before the Arbitrator. That portion of the decision can stand alone, that the 2010 Application for Arbitration is the same as the one filed in 2000, that the Appellant’s withdrawal of arbitration was not under duress, the Respondent is prejudiced in having to defend this claim and there are no special circumstances or any inadvertence by the Appellant.

6. The Respondent never required repayment of settlement funds as a prerequisite for setting aside the settlement. The letter the Appellant submits he received soon after filing for arbitration in 2000 demanding repayment in full has not been produced and may never have existed. Hence, there is no direct, reliable evidence supporting the Appellant’s allegation of duress that influenced his decision to withdraw.

Further, Stephan v. Insurance Corporation of British Columbia, 2000 CanLII 3798 (ON CA), held that the issues of repayment and rescission are severable. The content of the Respondent’s pleading in its November 15, 2000 Response to the Application to Arbitration was proper and followed the principles set out in Stephan.

Accordingly, the Respondent asks that the Arbitrator’s decisions be upheld.

IV. ANALYSIS

Preliminary Appeal Issues

1. Should the Notice of Appeal be rejected under Rule 51.2(a) of the Code as being out of time?

Rule 51.2(a) of the Dispute Resolution Practice Code (Fourth Edition, Updated – August 2011)

(the “Code”) provides that an appeal may be rejected if out of time. Subsection 283(2) of the

Insurance Act, R.S.O. 1990, c. I.8, states that a notice of appeal shall be delivered within thirty

days after the date of the arbitrator’s order. The Arbitrator’s order is dated July 22, 2011. The Notice of Appeal was delivered September 13, 2011, or 22 days late.

Subsection 283(3) of the Insurance Act allows the time for requesting the Appeal to be extended, either before or after the time period has expired, if there are reasonable grounds for doing so. Directions may be given as are considered proper as a condition of granting the extension.

The Appellant wrote the Arbitrator, subsequent to her decision, on July 23 and August 4, 2011, both well within the appeal time-limit. The Arbitrator’s August 22, 2011 letter states that she would not consider any further submissions or evidence and that if the Appellant wished to appeal her decision, the necessary provisions were set out in the Code.

In the interim, the Appellant wrote the Appeals Administrator on August 19, 2011 inquiring whether he needed a separate application for the appeal, having learnt that morning that he should file for an appeal within thirty days of the date of the Arbitrator’s decision. The Appeals Administrator sent the Appellant the Notice of Appeal form on August 24, 2011. The Appellant’s Statement of Service of his Notice of Appeal is dated September 6, 2011.

Given the Appellant’s correspondence within the thirty-day period and the relatively short delay after the time limit expired, I was satisfied, as set out in my November 4, 2011 letter decision, that there were reasonable grounds for extending the time to appeal, without conditions.

2. Should the Notice of Appeal be rejected under Rules 51.2(b) and (d) of the Code for failing to raise a question of law and lacking sufficient detail?

Rule 54 of the Code provides both parties the opportunity for written submissions to clarify and expand upon the Notice of Appeal and the Response to Appeal, those initial pleadings being intended to be more succinct regarding the substance of the appeal.

As was implicit in Hussaini and Halifax Insurance Company, (FSCO P99-00046, December 17,

1999), and in L.C. and Pafco Insurance Company Limited, (FSCO P02-00019, June 18, 2003),

I was persuaded that it was fairer that the merits of the appeal be determined after both parties

had the opportunity to put forward their complete argument. Accordingly, I was not persuaded to reject the Notice of Appeal under Rule 51.2(b) or (d) of the Code.

3. Ordering the Arbitration Transcript

The Appellant argued that it was up to the Respondent to provide the transcript of the recorded arbitration hearing. My November 4, 2011 letter decision held, following McAngus and Guardian Insurance Company of Canada, (FSCO P98-00049, January 10, 2000), that it was not incumbent upon a party to order the arbitration transcript. In any event, it was unclear, especially given that appeals are restricted to questions of law under subsection 283(1) of the Insurance Act, how the transcript would be of assistance in this appeal.

4. Allowing Fresh Evidence

The Appellant requested that the following fresh evidence be received in this appeal:

1. The Respondent’s letter of August 27, 1998, marked draft, addressed to the Appellant.

2. The Full and Final Release of Ms. R. Murtty, the Appellant’s wife, dated June 9, 1999.

3. The August 11, 1998 letter from the Respondent’s counsel to the Respondent referencing, in part, medical documentation of Drs. Ferguson and Koppert that is noted as not being favourable to the Respondent.

4. Arbitrator Leitch’s decision in Davenport, noted above.

5. Schedule “A” to the November 15, 2000 Response to the Appellant’s Application for Arbitration (FSCO A00-001078).

Budd, noted above, adopted the following criteria on whether to admit fresh evidence on appeal:

• The evidence should generally not be admitted if, by due diligence, it could have been adduced at trial;

• The evidence must be credible, in the sense that it is reasonably capable of belief;

• The evidence must be relevant in the sense that it bears upon a decisive or potentially decisive issue in the trial; and,

• The evidence must be such that, if believed, it could reasonably, when taken with the other evidence adduced at trial, be expected to have affected the result.

The issued decision in Davenport is not evidence and leave to admit as fresh evidence is, therefore, not required. Neither was the 2000 Response to the Application for Arbitration, with the attached “Schedule A,” fresh evidence, both parties agreeing that it was included in the affidavit of Troy Asselin, sworn March 25, 2011, that was before the Arbitrator.

I was not persuaded that Ms. Murtty’s June 9, 1999 Full and Final Release could not, with due diligence, have been adduced at arbitration. Accordingly, leave to introduce this document as fresh evidence on appeal was denied.

The Respondent submitted that its draft letter of August 27, 1998 and its August 11, 1998 letter were provided to the Appellant in or around December 2009, and were contained in the Appellant’s April 7, 2011 factum. The Respondent stated that these documents had been seen and were considered by the Arbitrator, as reflected on the first page of her decision.

The draft letter of August 27, 1998 was entered as part of Arbitration Exhibit “2.” Therefore, this is not fresh evidence. As the August 11, 1998 letter was included in the Appellant’s April 7, 2011 submissions considered by the Arbitrator, although not apparently marked as an exhibit, this document will be considered as part of the appeal record under Rule 56.4 of the Code.

The Appellant further sought leave to enter as fresh evidence a five-page document he created, based on his wife’s disclosure notice, as to what would have been in his disclosure notice. The first page is entitled “Notice before Settlement under section 9.1 of Ontario Regulation 664, R.R.O. 1990.” There follows a two-page Schedule “A” describing benefits and a two-page Schedule “B” setting out, in part, a commuted value of weekly benefits of $140,500.

I did not allow this document as fresh evidence. Being simply speculation by the Appellant as to what may have been contained in any disclosure notice, I was not persuaded as to its credibility.

5. Amending the Notice of Appeal

On the consent of both parties, my February 16, 2012 letter decision held that the Appellant’s

initial appeal from the Arbitrator’s July 22, 2011 decision would include the Appellant’s

February 1, 2012 appeal of the Arbitrator’s January 13, 2012 expense decision.

Main Appeal Issues

1. Did the Arbitrator err in law regarding the settlement agreement being enforceable?

The purported settlement in this case was entered into on August 28, 1998. Therefore, the applicable Settlement Regulation is that for settlements made before March 1, 2002, that states, at section 9.1, with emphasis added:

(1) In this section, “settlement” means an agreement between an insurer and an insured person that finally disposes of a claim or dispute in respect of the insured person's entitlement to one or more benefits under the Statutory Accident Benefits Schedule.

(2) Before a settlement is entered into between an insurer and an insured person, the insurer shall give the insured person a written notice that contains the following:

1. A description of the benefits that may be available to the insured person under the Statutory Accident Benefits Schedule and any other benefits that may be available to the insured person under a contract of automobile insurance.

2. A description of the impact of the settlement on the benefits described under paragraph 1, including a statement of the restrictions contained in the settlement on the insured person’s right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act.

3. A statement that the insured person may rescind the settlement within two business days after the settlement is entered into by delivering a written notice to the insurer.

4. A statement that the tax implications of the settlement may be different from the tax implications of the benefits described under paragraph 1.

5. If the settlement provides for the payment of a lump sum in an amount offered by the insurer and, with respect to a benefit under the Statutory Accident Benefits Schedule that is not a lump sum benefit, the settlement contains a restriction on the insured person’s right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act, a statement of the insurer’s estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value.

6. A statement advising the insured person to consider seeking independent legal, financial and medical advice before entering into the settlement.

The Settlement Regulation further states:

(3) A settlement may be rescinded by the insured person, within two business days after the settlement is entered into, by delivering a written notice to the insurer.

(4) If the insurer did not comply with subsection (2), the insured person may rescind the settlement after the period mentioned in subsection (3) by delivering a written notice to the insurer.

(5) A restriction on an insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act is not void under subsection 279(2) of the Act if, (a) the restriction is contained in a settlement; and

(b) the insurer complied with subsection (2).

At page three of her decision, the Arbitrator states that the Appellant did argue at arbitration that the Respondent did not comply with the Settlement Regulation as he was not provided with a Settlement Disclosure Notice that included the commuted value of his IRBs.

Arbitrator Makepeace, in Von Steun, addressed whether a disclosure notice under the Settlement Regulation in question was deficient. Her comments were dicta, that is, they did not determine the appeal. Nonetheless, she stated that “one purpose of the settlement regulation is to provide insureds with the information they need to assess the settlement during the cooling off period.”

She further held that “[f]ew insureds would be able to assess the value of a lump sum offer in the absence of the ‘explanation of how the insurer determined the commuted value’ … This was not just a technical or formal defect but one that could undermine the insured person’s ability to assess the value of the settlement.” Arbitrator Makepeace found the subsection 9.1(2) notice “consistent with the underlying legislative objective that the accident benefit and dispute resolution scheme should be relatively informal and ‘user-friendly’ for unrepresented insured persons.”

Arbitrator Leitch, in Davenport, also addressing the Settlement Regulation in question, found

that the insurer bore the onus of proving that the settlement documents complied with the Settlement Regulation. He did so for three reasons:

1. The Supreme Court of Canada, in Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, established that consumer protection is one of the main objectives of automobile insurance law. The realization of this objective is especially important and best promoted by placing on insurers the onus of proving compliance with their obligations to provide complete and correct information to insured persons.

2. Placing on insurers the onus to prove compliance with the Settlement Regulation is consistent with Snell v. Farrell, 1990 CanLII 70 (SCC), [1990] 2 S.C.R. 311, that “where the subject matter of the allegation lies particularly within the knowledge of one party, that party may be required to prove it.” Catania v. Scottish & York Insurance Co. Ltd., (2001) 2001 CanLII 24147 (ON CA), 53 O.R. (3d) 383, found that “it is entirely within the hands of the insurance companies to see that there is compliance with s. 9.1(2).”

3. In Opoku v. Pal., (1999) 1999 CanLII 19913 (ON CTGD), 49 O.R. (3d) 100, upheld on appeal 2000 CanLII 1539 (ON CA), Justice Spiegel held:

… under the Settlement Regulation any restrictions on the insured’s right to take further proceedings by way of mediation, litigation etc. are presumed to be void unless the insurer establishes that it has complied with subsection (2). If this interpretation is correct, then as a practical matter, an insurer who moves to enforce a SABs settlement will always have the onus of establishing compliance with subsection (2). The defendants argue that on this motion, not only does Mr. Opoku have the onus of establishing that Coseco did not comply with s. 9.1(2), but also that its non-compliance was material to Mr. Opoku's decision to settle. In my view, neither the text nor the purpose of the Settlement Regulation supports this interpretation.

I agree with Arbitrator Leitch’s analysis.

Arbitrator Leitch further found that Catania reaffirmed that “commuted value” “means the present value of a stream of future payments and that, in order to estimate the commuted value of a benefit, the insurer is required to make assumptions about the insured person’s life expectancy and the appropriate discount rate in respect of each of the periodic payments.”

Following a thorough analysis of Catania, Arbitrator Leitch concluded that as IRBs are paid periodically and not in lump sums, the insurer was required, pursuant to paragraph 9.1(2)(5) of the Settlement Regulation, to provide the insured person with the commuted value of that benefit together with the insurer’s assumption regarding the insured’s life expectancy and appropriate discount rates, but without assuming that the insured had no future entitlement.

Arbitrator Leitch found that the insurer had not provided this information and, accordingly, the settlement documents did not comply with the Settlement Regulation. Therefore, the insured was entitled to rescind the purported settlement and pursue her claim for additional statutory accident benefits.

In Catania, referring to its prior comments in Opoku, the Court of Appeal held that paragraph 9.1(2)(5) of the Settlement Regulation provides the insured person with information that will assist the insured in determining whether the settlement should be accepted. The Court of Appeal referenced Justice Spiegel in Opoku, who stated:

The main purpose of the CVR [commuted value requirement] was to require the insurer to provide the insured with relevant information to assist the insured in making a meaningful comparison between the proposed lump sum payment and the real value of the periodic benefits or to put it colloquially, to make a comparison on an “apples to apples basis”.

The Court of Appeal in Catania further cited, with favour, King and Wawanesa Mutual Insurance Company, (FSCO A96-00060, January 31, 2000). In King, Arbitrator Vanderbent held that he was unable to find a convincing rationale to support the proposition that the Settlement Regulation contemplated different methods of calculating and presenting the commuted value of a benefit depending on an insurer’s view whether there was no future entitlement, entitlement for a limited period only, or for the rest of the insured’s life.

Rather, in each case the insured person required the same actuarial calculation inherent in the definition of the term “commuted value” respecting the potential value of the benefit to meaningfully assess the sufficiency of the proposed lump sum settlement.

Catania held that “[a]ccepting that there may be gradations in the statements of information that will comply with the requirements of s. 9.1(2),” it could not “reasonably be said that the facts of this case show even minimal compliance.” Non-compliance with paragraph 9.1(2)(5) of the Settlement Regulation was held to be more serious than non-compliance with paragraph 9.1(2)(1) (that a description of available benefits be given) as it clearly frustrated any attempt to compare the proposed settlement with the commuted lump sum value of what was available under the Schedule. Accordingly, there was no bar to the insured withdrawing from the settlement.

The Court of Appeal further stated:

On the particular facts of this case, it may well be that the defendant’s failure to comply with s. 9.1(2) had no bearing on the plaintiff’s acceptance of the settlement offer. This, however, is not the test in a case such as this where there has not been even minimal compliance with the regulation. (It could be a factor to take into account in a case where there is some degree of compliance.) If it were the test it would, in many cases, be very difficult to apply with any degree of confidence or predictability. The test in s. 9.1(4) and (5), although its application may give rise to some unreasonable or unfair results, in some cases, has the virtue of relative ease of application. Furthermore, it is entirely within the hands of the insurance companies to see that there is compliance with s. 9.1(2).

In this case, the Respondent submitted, in its written submissions:

With respect to the case at bar, there is no evidence with respect to the commuted values contained in the subject Settlement Disclosure Notice and therefore the principle set out in Jetty cannot be applied. [emphasis in the original]

The Respondent further submitted:

On the facts before her, Arbitrator Muzzi could not have made any decision with respect to the content of the Settlement Disclosure Notice. At most, she could have found that a Settlement Disclosure Notice had been, or had not been, provided to the appellant.

At the oral appeal hearing, the Respondent reiterated that it cannot prove the content of a document that no longer exists.

IRBs are not a lump sum benefit. The settlement provided for a lump sum payment. Paragraph 8 of the Release contained a restriction on the insured’s right to arbitrate or otherwise further pursue statutory accident benefits. Accordingly, paragraph 9.1(2)(5) of the Settlement Regulation applied, that before a settlement is entered into the insurer shall give the insured person written notice of the insurer’s estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value.

I agree with the Respondent that there is certainly no evidence of any explanation having been provided to the Appellant as to how the Respondent determined any IRB commuted value, as mandated by paragraph 9.1(2)(5) of the Settlement Regulation.

The Release signed by the Appellant does contain an acknowledgement, at paragraph 12(e), that he received written notice from the Respondent that included a statement advising that “there is a commutable value of the settlement and the value of any commutable value.” Paragraph 9 of the Release, however, states that the “insurer agrees that the amount paid do not have any tax implications nor do they have any commuted value.”

In any event, the Respondent’s obligation under paragraph 9.1(2)(5) of the Settlement Regulation was to provide its estimate of the commuted value of the benefit, not, as stated in the Release, “the value of any commutable value.” The meaning of the latter may have been clear to the drafter, but was hardly “straightforward and clear language, directed towards an unsophisticated person,” as set out by the Supreme Court of Canada in Smith. The further difficulty here is that there is no evidence as to what amount was actually set out in the mandatory disclosure notice and whether that amount was indeed the present value of a stream of future IRB payments.

Subsection 283(1) of the Insurance Act restricts appeals from the order of an arbitrator to errors of law. Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01-00022, February 26, 2003), held that a finding of fact made in the complete absence of supporting evidence is mere conjecture and amounts to an error of law.

Following Catania, I find, at the very least, that there was no evidence in the present case of even minimal compliance by the Respondent with the paragraph 9.1(2)(5) of the Settlement Regulation that it provide an explanation to the Appellant of how it determined the IRB commuted value. Respectfully, the Arbitrator’s finding otherwise amounts to an error of law.

In accordance with Opoku, the lack of compliance with the Settlement Regulation was not a mere technical deficiency, but rather went to the heart of an insurer’s obligation to provide “a meaningful comparison between the proposed lump sum payment and the real value of the periodic benefits.” In accordance with Catania, where there is not even minimal compliance, the test is not whether the absence of compliance had a bearing on the insured’s acceptance of the settlement offer.

I, therefore, find that there is no bar to the Appellant rescinding the settlement and, in this respect, pursuing additional statutory accident benefits and, accordingly, the Arbitrator’s decision in this regard is rescinded.

2. Did the Arbitrator err in law regarding the further application being an abuse of process?

The Divisional Court, in Kanareitsev and TTC Insurance Company Limited et al., (Court File

No.: DC-060081917-00, February 6, 2008), held:

Particularly when results turn on the first instance decision maker’s view of the credibility of witnesses and involves a fact-driven analysis, appellate review must take “proper account of the distinct advantage” of the first-instance decision maker's assessments. The appeal judge must not try the case de novo or simply substitute his or her views for those of the trial judge: R. v. G.W. 1996 CanLII 427 (ON CA), [1996] O.J. 3075 (C.A.) at paras.18 and 57.

The Appellant does not argue that the Arbitrator erred in law in following Girao and Allstate Insurance Company of Canada, (FSCO A07-000288, January 14, 2011), and Bilusack and Co-Operators General Insurance Company, (OIC A-006369, February 13, 1996) in determining whether resubmitting his Application for Arbitration was an abuse of the Commission’s process.

Nor does the Appellant question the applicability of section 23 of the Statutory Powers

Procedure Act, R.S.O. 1990, c. S.22, that allows a tribunal to make such orders or give such directions in proceedings before it as it considers proper to prevent abuse of its processes.

The Appellant does submit that the 2000 and 2010 Applications for Arbitration were technically the same but legally different. However, the July 5, 2010 Application for Arbitration relies on the September 20, 2000 Report of Mediator. Further, the present Application seeks the same relief as the initial Application for Arbitration received by the Commission on October 24, 2000, a post-age 65 disability pension.

What the Appellant seeks, in significant measure, is that I substitute my exercise of discretion for that of the Arbitrator. As set out in Certas Direct Insurance Company v. Gonsalves, 2011 ONSC 3986, that is not the task of an appellate officer. In terms of any error by the Arbitrator, the Appellant challenges the Arbitrator’s finding that there was no evidence that the Respondent required the repayment of the settlement monies or that if it did so, that did not amount to duress.

The Ontario Court of Appeal, in Stephan, held that the phrase “rescind the settlement” in subsection 9.1(4) of the Settlement Regulation does not require as a prior obligation repayment of any funds received by an insured under a purported settlement. However, the insurer is still entitled to the money paid under the settlement. This is because when the insured delivers the written notice under subsection 9.1(4), the settlement is rescinded and the insured at that moment becomes indebted to the insurer for any money received under that settlement.

Thus “there is no duty of contemporaneity imposed on [the insured] and the repayment of the settlement money is not a condition precedent to an insured’s entitlement to pursue claims for statutory accident benefits under the Insurance Act.” The Court of Appeal noted that it may be that after a determination by an arbitrator of his rights, the insurer will owe the insured more than it had previously paid; on the other hand, the insured may be found to be entitled to less.

The Court of Appeal held that those eventualities have nothing to do with whether the insured is entitled to exercise his right to set aside the settlement in circumstances where, in violation of the statutory duty, his rights were not explained to him. Nor do they have anything to do with the insurer's right immediately to enforce the debt the insured person now owes.

The November 15, 2000 Response to an Application for Arbitration states, at paragraph 14, that “in the event that the insured is not found to be bound by the Settlement and Release, the insurer will require all funds previously paid to the insured pursuant to the settlement be immediately returned to the insurer.”

I am not persuaded that this is a misstatement of Stephan. I am not persuaded that the Respondent setting out its rights to repayment, if the Appellant was found not to be bound by the settlement, amounted to duress. Although the Appellant argued there was other documentation from the Respondent requiring repayment as a prerequisite to rescission, such evidence was not produced. The Arbitrator was not persuaded that the Appellant was credible. I am not persuaded that the Appellant has set out a basis upon which to set aside the Arbitrator’s decision that the Appellant was precluded, on the basis of his prior withdrawal from arbitration in 2001, from proceeding to arbitration approximately a decade later.

As noted, Stephan provides that if a settlement is rescinded, the insurer can seek repayment of settlement funds. If the Respondent pursued such action, it could be argued that would materially change the respective prejudice to the parties, as the Appellant has been precluded from proceeding to arbitration. Rule 61 of the Code provides that either party may apply to vary or revoke an arbitration or appeal order if there has been a material change in the insured’s circumstances.

Turning to the Arbitrator’s January 12, 2012 legal expense award, the parties did not specifically address this aspect of the appeal in oral submissions. I think that it is appropriate to allow brief further submissions in this regard, to be arranged by the Appeals Administrator.

V. EXPENSES

If the parties are unable to agree on the legal expenses of this appeal, pursuant to Rule 79.1 of the Code, an expense hearing shall be requested within thirty days of the date of this decision.

July 19, 2012

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended.