Financial Services Commission of Ontario
Neutral Citation: 2012 ONFSCDRS 137 FSCO A11-002004
BETWEEN:
LEROY PRIES Applicant
and
ECONOMICAL MUTUAL INSURANCE COMPANY Insurer
DECISION ON A PRELIMINARY ISSUE
Before: Arbitrator John Wilson Heard: August 10, 2012, in Hanover, Ontario.
Appearances: David Donnelly for Mr. Pries Helen D. K. Friedman for Economical Mutual Insurance Company
Issues:
The Applicant, Leroy Pries, was injured in a motor vehicle accident on September 3, 2007. He applied for and received statutory accident benefits from Economical Mutual Insurance Company (“Economical”), payable under the Schedule.1
Mr. Pries applied for a number of statutory accident benefits, including an income replacement benefit. For some time this benefit was stopped by Economical as it believed that he no longer met the criteria for its payment.
On the receipt of further information Economical reinstated payment of an income replacement benefit. In the meantime however, Mr. Pries had applied to the Canada Pension Plan for a disability benefit under that regime.
On March 3, 2010, Mr. Pries was informed that his application for CPP was accepted and received a lump sum payment from CPP retroactive to the date when CPP considered entitlement began. The payment reflected CPP benefits payable between November 23, 2008 to May 2, 2010.
Mr. Pries notified Economical of the benefit that he had received from CPP and on March 15, 2010 Economical formally provided notice to Mr. Pries of its intention to demand repayment of benefits by Mr. Pries as a result of what it qualified as an overpayment situation brought about by the receipt of the lump sum from CPP.
The parties were unable to resolve their disputes through mediation, and Mr. Pries 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 Economical entitled to the repayment of weekly income replacement benefits in the sum of $12,333.34 as set out in its letter of April 27, 2010 due to the retroactive payment Mr. Pries received for CPP benefits in the amount of $10,954.88 covering the period of November 1, 2008 to February 28, 2010?
Result:
- Economical may not claim repayment income replacement benefits prior to the notice of repayment given on April 27, 2010 and may only deduct CPP benefits on a going- forward basis from the date of notice.
EVIDENCE AND ANALYSIS:
As noted above, the background facts in this matter are not in dispute. Economical currently recognizes that Mr. Pries is entitled to an income replacement benefit on an ongoing basis. Both sides recognize that the ongoing payments Mr. Pries receives from CPP are properly deducted from his income replacement benefit payment. Where this dispute arises is Economical’s contention that the entire retroactive CPP payment is properly repayable in accordance with its notice under section 47 of the Schedule as it then read.
The right to deduct CPP payments from SABS IRB payments is a statutory provision that is incorporated into the insurance contract. Likewise, the right of an insurer to demand repayment under section 47(1)(c) (receipt of collateral deductible payments) does not arise outside of the statute.2
The nub of the dispute is section 47(3) which states that:
The obligation to repay a benefit does not apply unless the notice under subsection (2) is given within 12 months after the payment was made.
Economical chooses to interpret that section as meaning that notice must be given within 12 months after the collateral payment giving rise to the overpayment is received, while Mr. Pries has taken the position that a right to repayment is only generated when notice is given within 12 months of the date that payment of the benefit to be repaid has been paid.
Given that the Schedule in its various iterations wins no prizes for clarity and elegance in legislative drafting, it is not surprising that the parties have had some difficulty in agreeing on the meaning of “payment” in this section.
The word “payment” in the context of section 47 is not defined. Consequentially, both parties have looked to the grammatical sense of the phrase and the principles of legislative interpretation to assist them in divining some meaning.
Legislative interpretation in the words of Borins J.A. “resolves conflicts where the words of a provision are reasonably capable of more than one meaning.”3
Iacobucci J. reminds us, in Bell ExpressVu Limited, that:
The preferred approach recognizes the important role that context must inevitably play when a court construes the written words of a statute: as Professor John Willis incisively noted in his seminal article "Statute Interpretation in a Nutshell" (1938), 16 Can. Bar Rev. 1, at p. 6, "words, like [page581] people, take their colour from their surroundings". This being the case, where the provision under consideration is found in an Act that is itself a component of a larger statutory scheme, the surroundings that colour the words and the scheme of the Act are more expansive. In such an instance, the application of Driedger's principle gives rise to what was described in R. v. Ulybel Enterprises Ltd., [2001] 2 S.C.R. 867, 2001 SCC 56, at para. 52, as "the principle of interpretation that presumes a harmony, coherence, and consistency between statutes dealing with the same subject matter". (See also Stoddard v. Watson, 1993 CanLII 59 (SCC), [1993] 2 S.C.R. 1069, at p. 1079; Pointe-Claire (City) v. Quebec (Labour Court)4
The first analysis must be to determine whether the word “payment” as used in section 47 is reasonably capable of more than one meaning.
To start, the Concise Oxford Dictionary accords three varying definitions to the word:
Payment 1 The act or an instance of paying. 2 an amount paid. 3 reward, recompense.
In this dispute, the definition “an amount paid” could potentially encompass the differing interpretations put on the word by both parties. Does this then make the word ambiguous enough to engage further the principles of statutory interpretation?
Iacobucci J., in Bell ExpressVu, posed the same question:
What, then, in law is an ambiguity? To answer, an ambiguity must be "real" (Marcotte, 1974 CanLII 1 (SCC), [1976] 1 S.C.R. 108, supra, at p. 115). The words of the provision must be "reasonably capable of more than one meaning" (Westminster Bank Ltd. v. Zang, [1966] A.C. 182 (H.L.), at p. 222, per Lord Reid). By necessity, however, one must consider the "entire context" of a provision before one can determine if it is reasonably capable of multiple interpretations.5
Since examining the word by itself sheds little light on the section, it is necessary to divine the meaning of the word from its context. The immediate context reads as follows:
The obligation to repay a benefit does not apply unless the notice under subsection (2) is given within 12 months after the payment was made.
Counsel for Mr. Pries points to the use of the word ”repay” in the same provision as payment as a key to interpretation. For Mr. Donnelly the payment can only be the payment of the benefit under the SABS which the Insurer wishes to have clawed back or reimbursed.
Counsel for Economical instead drew my attention to the wider context of section 47. Section 47(1)(c) for example provides that an insured shall repay to the insurer:
Any income replacement, non-earner or caregiver benefit or any benefit under Part VI to the extent of any payments received by the person that are deductible from those benefits under this Regulation. [emphasis added]
It is clear in the latter referenced provision that the word payments refers to collateral payments received by an insured that would be deductible in the calculation of an income replacement benefit.
Adding to the confusion is the likely intention on the part of the drafters of the Regulation to have CPP and other income support benefits deducted from the amount payable by way of income replacement benefits.
Mr. Pries’ reading of the clause would, in the mind of the insurer, inhibit the intention of the Act by creating circumstances where it would be impossible to provide notice of repayment in a timely manner and so disentitle an insurer from repayment.
The Insurer states that it would have to engage in time travel to provide adequate notice and to engage the repayment provisions in Mr. Pries’ case
An alternative interpretation would be that the legislature did not intend that Mr. Pries’ lump sum CPP payment be clawed back at all.
The revised version of the 2010 Schedule makes it clear that it is not the intention of the legislature to permit a clawback of benefits under all situations:
(3) If the notice required under subsection (2) is not given within 12 months after the payment of the amount that is to be repaid, the person to whom the notice would have been given ceases to be liable to repay the amount unless it was originally paid to the person as a result of wilful misrepresentation or fraud. O. Reg. 34/10, s. 52 (3).
While still perhaps inelegant, the meaning of the section is clear. If, for example, Mr. Pries received a payment in January 2012 that the Insurer wants repaid, then notice must be given by January 2013 or “the person to whom the notice would have been given ceases to be liable to repay the amount.” This is precisely what the predecessor section 47 is said to express.
Counsel for Economical, however, points to this change in wording as evidence of a change in meaning of the section as it read in the 1996 Schedule. I note, however, that the Legislation Act, 2006 provides:
- (1) The repeal, revocation or amendment of an Act or regulation does not imply anything about the previous state of the law or that the Act or regulation was previously in force.
(2) The amendment of an Act or regulation does not imply that the previous state of the law was different.
In the end I find that nothing meaningful can be read into the changes between the 1996 and the 2010 Schedules. At best it would be a clarification and reassertion of what went before.
In such a case, it would make sense that “payment” takes its immediate context from the repayment of a benefit and that the appropriate time frame for the notice requirement relates to the original payment of the benefit being reclaimed.
In the context of the limited jurisprudence to date on this issue, this is not without precedent.
Mr. Pries relies principally on the Slater6 case, an arbitration decision by Arbitrator Ashby, dating from 2008. In that matter, Personal Insurance claimed a repayment of benefits due to an error in calculation. Although the reason for repayment was different, the provisions relating to notice of repayment by the Insurer are identical to those faced by Mr. Pries. Arbitrator Ashby held that “payment” in section 47(3) refers to the initial payment of the benefit to the insured by the insured. Accordingly, Mr. Pries’ interpretation is not without precedent.
In Trottier,7 Director’s Delegate Draper also dealt with the repayment provisions in section 47. In that matter, the Director’s Delegate found that “in my opinion that ‘the payment’ in s. 47(3) refers to the payment of the accident benefit, not the payment of collateral benefits.”
Economical’s principal argument against this interpretation is that it runs counter to the purpose of the repayment provisions and the collateral reduction. If the legislature has decided that certain collateral payments are deductible, then it makes no sense for an insured to be in a position to keep an overpayment just because of the manner in which the payment was made: a retrospective bulk payment in the case of Mr. Pries. Economical sees this as an interpretive absurdity conferring what can only be a windfall of double payment on Mr. Pries.
As Professor Ruth Sullivan has observed8:
In a perfect world the legislature would create flawless legislation. Each statute would be drafted so that the effects of interpreting and applying it to an unfolding reality would match the goals sought by the legislature.
The Schedule exists in a very imperfect universe. It has been subject to continual revision, tinkering and titivation in an attempt to balance its political sensitivity with the realities of the insurance marketplace.
Professor Sullivan concluded her observation as follows:
In an imperfect world there is often a divergence between the purpose of legislation on the one hand and the effects of applying it on the other. The language of particular provisions may turn out to be over or under inclusive: there may be a lacuna in the legislative scheme.9
If the sole purpose of the repayment provision is to prevent double payment, then there indeed is a logical dissonance if the provision of the payment by retroactive lump sum somehow succeeds in avoiding at least part of the effective deductibility of the collateral payment. Economical would have me change the meaning of “payment” in section 47(3) to facilitate the operation of the policy against double recovery. I am not convinced that it is either proper or appropriate to do so.
Lamer C.J., in McIntosh10, dealing with what he characterized as Criminal Code “provisions (that) overlap, and are internally inconsistent in certain respects”, stated:
In resolving the interpretive issue raised by the Crown, I take as my starting point the proposition that where no ambiguity arises on the face of a statutory provision, then its clear words should be given effect. This is another way of asserting what is sometimes referred to as the "golden rule" of literal construction: a statute should be interpreted in a manner consistent with the plain meaning of its terms. Where the language of the statute is plain and admits of only one meaning, the task of interpretation does not arise
Elsewhere in the decision he commented:
The fact that a provision gives rise to absurd results is not, in my opinion, sufficient to declare it ambiguous and then embark upon a broad-ranging interpretive analysis would match the goals sought by the legislature.
Professor Sullivan sums up the reasoning behind Lamer C.J.’s approach as follows:
While courts are willing to correct drafting errors, they are reluctant to fill gaps in legislation. This reluctance is grounded in two factors. First, unlike mistakes, which are always inadvertent, a gap in legislation may be deliberate. Gaps may result from faulty drafting but equally they may result from factual misconceptions, poor planning or even a considered policy choice. For this reason, gaps are taken to embody the actual intentions of the legislature, which courts are bound to respect. It is up to the legislature rather than the courts to effect any desired change. Second, whether inadvertent or not, gaps result from provisions or schemes that are under-inclusive, and correcting under-inclusiveness would require courts to legislate.
In this matter, it is plausible that the legislature was not as concerned about limited double recovery as it was about encouraging insureds to apply for potential collateral benefits, even in the face of initial refusals by the collateral carrier. In Mr. Pries’ case, he followed through with an application for CPP benefits, which in the long term greatly benefitted the Insurer in spite of initial roadblocks and refusals. Some incentive for insureds to persevere11 would not be contrary to the scheme of the Schedule since it would serve the purpose of encouraging parties to access collateral benefits notwithstanding refusals.
Even if such an intention cannot be read into the creation of the Schedule, the fact remains that changing the meaning of “payment” as urged by the Insurer would constitute judicial legislation.
While I believe that the use of “payment” in section 47(3), when analyzed in its immediate context, inescapably has the meaning attributed to it by Mr. Pries and Arbitrator Ashby, I would also accept that if it was found to be at all ambiguous, the principles of statutory interpretation outlined by Arbitrator Ashby in Slater would lead to the same conclusion.
Consequently, I find that, although Economical is entitled to deduct Mr. Pries’ CPP payments from his ongoing IRB payments, it must have acted within 12 months of the “payment (which) was made” in making its demand of repayment. As noted, the notice date was given on April 27, 2010.
Assuming that the first payment of an income replacement benefit was made to Mr. Pries on October 13, 2007, it is obvious that a notice of repayment given on April 27, 2010 is at the very least partially out of time, if Economical wishes to recover the equivalent in benefits of the entire CPP payment. At best, if one interpreted the repayment provisions widely, as targeting each individual payment, Economical could hope to be eligible to reclaim benefits paid after April 27, 2009.
Mr. Pries, however, would challenge even this interpretation of what is repayable, relying again on Slater, in which Arbitrator Ashby held that the date of first payment of the benefit was the watershed to be used to determine whether any benefits would be repayable.
Arbitrator Ashby noted the jurisprudence of the Commission specifically rejecting the notion of a rolling limitation in respect of time limits for contesting benefits and found that the corollary of no rolling time limits arising to the benefit of an insured was the principle that the same would apply to insurer’s time limits in reclaiming benefits.
Arbitrator Ashby’s reasoning makes sense. Her concerns regarding the burden of repayment falling on vulnerable people would seem congruent with an insurance scheme that incorporates elements of social policy.
The words in section 47(3) have at least one clear meaning. They provide for no repayment of a benefit “unless the notice under subsection (2) is given within 12 months after the payment was made.” We have already seen that the payment in question is the payment of the income replacement benefit and not the payment of the collateral benefit.
What the provision does not clearly address is the timing of the payment that was made. Economical would suggest that the section addresses each and every subsequent payment of a benefit, and that although payment of a benefit may have commenced beyond the 12 month period, later payments of the same benefit, if within a 12-month period, may be caught retrospectively by the provision.
Statutory accident benefits can be payable over a lifetime. Situations change. Collateral payment sources may change. Given that understanding, it might seem odd, indeed unworkable if, 12 months after the commencement of benefit payments, all benefits became immune from recapture except in cases of fraud, even those “within 12 months” of the repayment notice.
Arbitrator Ashby’s conclusions in Slater are difficult to reconcile with the popular interpretation of Trottier – that is, that the repayment claim may automatically go back 12 months from the date of notice.
The unique aspect of Slater is that Arbitrator Ashby treats section 47(3) as a limitation period rather than a period of retroactivity. As such, in the absence of a rolling limitation, the limitation period would be calculated from the initial IRB payment.
Section 51(1) of the Schedule, which contains the general limitation, reads 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 this Regulation shall be commenced within two years after the insurer’s refusal to pay the amount claimed.
In the case of the generalized limitation, the meaning of the “refusal” is clearly the first refusal, and not the ongoing refusal to pay each further benefit as it would have accrued to the insured (rolling time limit).
In Mr. Pries’ case, a rolling time limit would be necessary in any interpretation where it would be individual ongoing payments that trigger the repayment claim and not the commencement of payment of the benefit being reclaimed.
Earlier iterations of the Schedule dealt with repayment due to “error, wilful misrepresentation or fraud” as well as certain collateral benefits. CPP benefits12 however were not caught in this scheme until the Schedule was amended to specifically address that issue.
It would make sense that errors and misfeasance ought to be discoverable at an early point in the process and that insurers would be expected to raise such simple issues early in the process.13 That and the need to provide early warning to an insured if he or she is to bear the burden of repayment would justify the current wording.
In this context, I note Economical’s submission that the CPP claims process has built-in delays that make retroactive payments almost a routine of the process once a claimant is accepted.
The expansion of the reasons for repayment to include CPP payments did not see a commensurate revision of what became section 47(3) to recognize the institutional delays referred to by Economical. This may well have been an oversight that failed to reflect the changed conditions resulting from the potentially wider grounds for repayment.
There might have been good policy grounds for the legislature to have specifically included a rolling time limit to deal with the changed situation, but it did not. Consequently, it is hard to unilaterally import a rolling time limit into this section.
Jurisprudence at the Commission has long treated rolling limitations as a pariah. In Kirkham,14 the Director’s Delegate, Divisional Court and the Court of Appeal all agreed that certainty required that the limitation period commence with the refusal to pay a benefit and not with each individual payment as it became due. Essentially, Arbitrator Ashby contends that if the insured is held to an inflexible date for the initiation of proceedings against an insurer, then fairness dictates that, in actions against an insured for repayment, the insurer not have benefit of the same sort of rolling limitation denied to its insured.
Whatever the policy reasons for finding in favour of rolling limitations or not, it comes down to the question of whether the wording of the section can support Arbitrator Ashby’s interpretation.
Once again the section reads:
(3) The obligation to repay a benefit does not apply unless the notice under subsection (2) is given within 12 months after the payment was made.
The French version15 of the same enactment is perhaps equally enlightening:
(3) L’obligation de rembourser une indemnité ne s’applique que si l’avis prévu au paragraphe (2) est donné dans les 12 mois du versement
Any questions arising from the phrase « after the payment was made » are clarified by the use of « versement » without the verb « made ». There is no question of whether the phrase refers to the payment most recently made, or first made, or each payment. It refers instead simply to the payment of the benefit itself. As such, it is consistent with Arbitrator Ashby’s understanding.
This is not merely an academic discussion about meaning and grammatical sense.
In Mr. Pries’ case, as a result of the deduction of CPP, and the Insurer’s claim for repayment, an income replacement benefit of $264.48 per week was reduced to $87.56 per week. Mr. Pries fulfilled his obligation of promptly reporting his CPP benefit. One can infer that, even with the CPP payments available to Mr. Pries, he is not getting rich on the back of the Insurer. Indeed, persons living on the economic margins of society such as Mr. Pries must be seen as a highly vulnerable group.
Both Trottier and Kong16 stand for the proposition that an insured should “not be expected to receive his no-fault benefits with a mere hope that the quantum is correct and a fear that he will be asked to repay them at a later date.”
This is not a calculation error by Economical. It is however linked to the unjustified cessation and later reinstatement of benefits that prompted Mr. Pries to attempt to claim from CPP notwithstanding the long waiting period and initial discouragement.
It should be noted that Economical could at any time have put Mr. Pries on notice that he had to apply for CPP benefits to continue to receive IRB benefits. Economical was not shy about ceasing to pay IRB benefits for reasons that later turned out to be spurious, and could well have acted promptly to bring the CPP issue forward. It did not and Mr. Pries did not apply until much later, all of which could have been a factor in potentially delaying both the CPP payment and the notice of deductibility.
In the end, Economical benefitted from Mr. Pries’ action and continues to do so. If Mr. Pries gets to keep a little more of his past CPP benefit than Economical intended, then it is the result of an anomaly in the legislation, not the fault of Mr. Pries.
While Arbitrator Ashby’s reasoning in Slater is not binding on me, her discussion of the application of sections 47(2) and (3) of the Schedule is one of the few attempts to make sense of an often-contradictory provision and to account for the dilemma of insureds in Mr. Pries’ uncomfortable position.
Consequently, while I accept that the drafters of the Schedule may well have had the overall goal of making all collateral payments deductible, and consequently recoverable by way of repayment, that goal did not translate well into the legislation itself.
The answer to calls to reinterpret this legislation is to suggest that they direct their attention to the Legislature and ask that institution to clarify the law.
If I am wrong in my interpretation of the applicability of Slater to this matter, then I would find that the jurisprudence, including Trottier, would not support a recovery of benefits beyond the 12-month notice period.
Mr. Pries also alleged that Economical’s Notice of Repayment was insufficient and did not comply with section 47(2). Although the notice argument was not directly raised at the time the issue was set for hearing, it goes without saying that the statutory scheme requires a valid notice prior to any repayment taking place.
Having examined the notice, I am satisfied that it adequately communicated the extent of Economical’s claim for repayment, and importantly, that it was overreaching itself in its attempt to recapture the IRB payments which were at that time clearly out of its reach. It certainly put Mr. Pries on notice of both the repayment and the need to challenge its rationale. As such, it served its purpose.
Expenses:
If the parties are unable to agree on the issue of expenses I may be spoken to on that issue providing that the request is made in a timely manner.
September 21, 2012
John Wilson Arbitrator
Date
Financial Services Commission of Ontario
Neutral Citation: 2012 ONFSCDRS 137 FSCO A11-002004
BETWEEN:
LEROY PRIES Applicant
and
ECONOMICAL MUTUAL INSURANCE COMPANY Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
Economical may not claim repayment income replacement benefits prior to the notice of repayment given on April 27, 2010 and may only deduct CPP benefits on a going- forward basis from the date of notice.
If the parties are unable to agree on the issue of expenses, I may be spoken to on that issue providing that the request is made in a timely manner.
September 21, 2012
John Wilson Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
- “Moneys received by an injured party as a result of a private or public benevolence have never been taken into consideration in assessing damages for loss of income or earning capacity.” Boarelli v. Flannigan, 1973 CanLII 690 (ON CA), [1973] 3 O.R. 69 at p. 73, 36 D.L.R. (3d) 4
- Beattie v. National Frontier Insurance Co. 2003 CanLII 2715 (ON CA), 68 O.R. (3d) 60
- Bell ExpressVu Limited Partnership v. Rex 2002 SCC 42, [2002] 2 S.C.R. 559
- Bell ExpressVu Limited Partnership v. Rex, (supra)
- Slater and Personal Insurance Company of Canada, (FSCO A07-000592, March 27, 2008)
- Trottier and. Royal and SunAlliance Insurance Company of Canada (FSCO Appeal P03-00019, December 15, 2003)
- Sullivan and Driedger on the Construction of Statutes, 4th ed. (Markham: Butterworths, 2002) at 134,
- Sullivan and Driedger op cit.
- R. v. McIntosh, 1995 CanLII 124 (SCC), [1995] 1 S.C.R. 686:
- Collateral payments that have been refused after application by an insured are not “available” benefits subject to deduction by the AB insurer. See Vanderkop v. Personal 2009 ONCA 511, [2008] O.J. No. 1937, [2009] O.J. No. 2616 (court of appeal)
- See Cugliari v. White 1998 CanLII 5505 (ON CA), 38 O.R. (3d) 641 C.A.
- It is noteworthy that an exception in the time limit is specifically carved out when the repayment is triggered by fraud.
- Kirkham and State Farm Mutual Automobile Insurance Company (OIC A96-000141, August 15, 1996), appeal (OIC P96-00069, January 27, 1997) and [1998] O.J. No. 6459, (Div. Ct.) [1998] O.J. No. 2872 (Court of Appeal)
- Legislation Act 2006, S.O. 2006, c. 21 Sched. F − 65. The English and French versions of Acts and regulations that are enacted or made in both languages are equally authoritative.
- State Farm Mutual Automobile Insurance Co. v. Kong [1996] O.J. No. 2321, Kennedy J.