Financial Services Commission des Commission services financiers of Ontario de l’Ontario

Neutral Citation: 2012 ONFSCDRS 118

FSCO A11-004759

BETWEEN:

THIRUVARUL PONNAMPALAM

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

Before: Joyce Miller

Heard: July 4, 2012, at the offices of the Financial Services Commission of Ontario in Toronto

Appearances: Sugunaraj Kanaga for Mr. Ponnampalam Todd J. McCarthy for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Thiruvarul Ponnampalam, was injured in a motor vehicle accident on February 5, 2007. He applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ State Farm terminated weekly income replacement benefits effective September 19, 2008. The parties were unable to resolve their disputes through mediation, and Mr. Ponnampalam 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 Mr. Ponnampalam precluded from proceeding to arbitration because his application for arbitration for an income replacement benefit and a treatment plan dated February 27, 2008, was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule?

Result:

Mr. Ponnampalam is not precluded from proceeding to arbitration in respect of his income replacement benefit.
Mr. Ponnampalam is precluded from proceeding to arbitration because his application for arbitration for treatment plan dated February 27, 2008 was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule.
If the parties cannot agree on expenses, I may be spoken to within 30 days of this decision.

THE LAW

Section 51 of the Schedule provides:

A mediation proceeding or evaluation under section 280 of 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 this Regulation shall be commenced within two years after the insurer’s refusal to pay the amount claimed.

Arbitrator Muzzi, in the case of Mohammed-Amin and RBC General Insurance Co.², set out the well-established rules relevant to determining the validity of the insurer’s refusal to pay.

It is well established that arbitrators do not have the discretion to extend the time limits for commencing mediation and arbitration proceedings that are prescribed in the Insurance Act. However, it is also recognized that the limitation period defence must be strictly construed because the result is to deny an applicant the opportunity to have his or her claim adjudicated. 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. As an arbitrator does not have the discretion to extend the time limits, cases like this one are generally decided on the basis of the validity of the refusal. If the insurer’s refusal is not valid, the limitation period does not begin to run. The following are the well-established principles relevant to determining the validity of the insurer’s refusal to pay in this case:

˙ 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.

SUBISSIONS, ANALYSIS AND FINDINGS:

(1) Income replacement benefits

State Farm submits that pursuant to an OCF-9 it properly, within the guidelines of Smith and Cooperators General Insurance Company,³ terminated Mr. Ponnampalam’s income replacement benefit on September 12, 2008. Since Mr. Ponnampalam’s application for mediation is date-stamped by the Commission on September 14, 2010, accordingly, State Farm submits his claim for income replacement benefit is out of time.

Mr. Ponnampalam submits that State Farm terminated his income replacement benefit effective September 19, 2008 and accordingly, the application for mediation is not out of time.

For the following reasons, I find of Mr. Ponnampalam’s application for mediation for income replacement benefit is not out of time.

In its OCF 9 State Farm stated “income replacement benefits has been enclosed from Sept 11-19, 2008.” It also stated “you may apply for mediation within 2 years from the date of this notice.”

In its written submissions State Farm stated at paragraph 8, “State Farm advised the Applicant on an Explanation of Benefits dated September 12, 2008, that he no longer qualified for income replacement benefits and payments would be terminated effective September 19, 2008.”

The question that arises from this is should one consider the effective date of termination, September 19, 2008 when Mr. Ponnampalam will no longer receive income replacement benefits or September 12, 2008, the date in State Farm’s OCF 9 to Mr. Ponnampalam.

Section 281.1(1) of the Insurance Act states a mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.

In my view, it is clear from Section 281.1(1) that the commencement of the limitation period is not from the date when an applicant is notified of the refusal to pay benefits but from the date of “the insurer’s refusal to pay the benefit claimed.” If notice of termination is the effective date for the commencement of the limitation period, the statute could have stated that the limitation period commences when the termination notice is given and not from the time of “the insurer’ refusal to pay the benefit claimed.”

I am reinforced in my view by the fact that if the date of notice of termination is the effective date to commence the limitation period, as opposed to the actual date of termination, then an insurer could, for example, give 6 months’ notice of termination of benefits and rely on the date of the notice to deprive an applicant, after de facto termination, of the full two years to apply for mediation. Succinctly, I find that the date of termination of the benefit, with proper notice of termination, is the date from when the limitation period commences.

It is clear both from the OCF 9 and the insurer’s submission that Mr. Ponnampalam’s income replacement benefit was terminated effective September 19, 2008.

Accordingly, in my view, the commencement of the limitation period should be effective September 19, 2008. However, if my interpretation of Section 281.1(1) is incorrect, in the alternative, I find the fact that State Farm chose to advise Mr. Ponnampalam on September 12, 2008 that his benefits are terminated effective on September 19, 2008 and that the date of the OCF-9 is the effective date of the termination did not provide Mr. Ponnampalam with a clear and unequivocal termination date.

Accordingly, for these reasons I find that Mr. Ponnampalam applied for mediation in respect of his income replacement benefit claim with the two year limitation.

(2) Treatment Plan

State Farm submits that a treatment plan dated February 27, 2008, was denied by an OCF 9 on May 6, 2008. State Farm submits that Mr. Ponnampalam did not apply for mediation until September 14, 2008. Accordingly, State Farm submits that Mr. Ponnampalam’s application for mediation is out of time and he cannot proceed to Arbitration.

Mr. Ponnampalam submits that he never received the notice of termination for the treatment plan. Mr. Ponnampalam did not testify to this fact. The submission was provided by his representative. I give very little weight to this submission. No probative, credible evidence was presented to support this submission. In my view, it is more likely than not that Mr. Ponnampalam did receive the May 6, 2008 OCF-9 refusing his treatment plan.

Accordingly, I find that Mr. Ponnampalam’s application for mediation on September 12, 2010 for the denial of the February 27, 2008 treatment plan was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule.

EXPENSES:

If parties cannot agree on expenses, I may be spoken to within 30 days of this decision.

July 25, 2012

Joyce Miller Arbitrator

Date