Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2012 ONFSCDRS 24
Appeal P11-00005
OFFICE OF THE DIRECTOR OF ARBITRATIONS
TD HOME AND AUTO INSURANCE COMPANY
Appellant
and
JEYANATHAN ANTHONYPILLAI
Respondent
BEFORE:
David Evans
REPRESENTATIVES:
Janet S. Young for TD Home and Auto Insurance Company
David S. Wilson for Mr. Anthonypillai
HEARING DATE:
By written submissions received by September 29, 2011
PRELIMINARY APPEAL ORDER
Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
The appeal of the arbitration order, set out in the letter decision dated January 6, 2011, is hereby dismissed.
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, as set out below, within sixty days of the date of this decision.
March 5, 2012
David Evans Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL AND BACKGROUND
TD Home and Auto Insurance Company (TD) appeals a January 6, 2011, letter decision of the pre-hearing arbitrator in this matter, Arbitrator Kominar, in which he refused TD’s request for an order compelling Mr. Anthonypillai to attend further insurer examinations (IEs), precluded TD from attempting to file at the pending arbitration hearing the IE reports that had already been produced, and declared his preference that no reports of surveillance conducted after July 24, 2010 should be filed at the arbitration hearing either.
As this was a preliminary or interim matter, I had to decide whether or not to acknowledge the appeal. The background to the acknowledgment letter will also serve as background for this decision. In that regard, Mr. Anthonypillai alleges that he suffered an impairment in a motor vehicle accident on August 10, 2008. He made various claims under the SABS–1996,1 including income replacement benefits (IRBs).
A motion was brought on April 23, 2010, for interim benefits for Mr. Anthonypillai and Ms. Anne Arulappu, who was injured in the same accident. The matter was settled on consent, with Arbitrator Kominar issuing a letter decision regarding both applicants dated April 26, 2010 setting out its terms. These terms included that if expenses could not be agreed upon, they could be assessed before him. Mr. Anthonypillai was to receive IRBs “until such time as the parties otherwise agree in writing, or an arbitrator varies this interim order, or a hearing arbitrator makes a final order in the arbitration regarding income replacement benefits.” The order further provided that the interim benefits were without prejudice to TD defending and arguing any issues of entitlement, including those relating to short- or long-term disability benefits (Mr. Anthonypillai later started receiving long-term disability benefits), quantum and repayment. The arbitration hearing was originally scheduled to commence September 22, 2010, but was adjourned to January 10, 2011, due to the death of the father of Ms. Young, counsel for TD.
At around the time of the adjournment, just over two years after the accident, and after September 1, 2010, a point I will return to at the end of this decision, TD also served notice that it wished to conduct IEs under s. 42 of the SABS‑1996 relating to Mr. Anthonypillai’s entitlement to IRBs more than 104 weeks after the accident. Since Mr. Anthonypillai declined to attend, TD moved for an order compelling Mr. Anthonypillai to attend, rather than moving for a stay of the hearing until he attended. The Arbitrator saw the issues as whether the IEs were being sought to merely bolster TD’s case and “whether it was fair for TD to take advantage of the unfortunate death in Ms. Young’s family to correct a mistake they made in not arranging the examinations earlier.”
The Arbitrator stated that “[t]he general consensus is that the sole right an insurer has to conduct such examinations is related to adjusting their file.” He noted that as far back as the pre-hearing on February 10, 2010, TD knew the applicants were seeking IRBs beyond the 104-week mark, yet made no effort to arrange for examinations prior to the September 2010 hearing dates and “would have had to arrange such examinations, had they addressed their mind to the matter, early enough to serve them in accordance with the Dispute Resolution Practice Code.” He also noted the evidence of Ms. Linda Watson, who had been TD’s representative on the file during the arbitration process, that TD would have conducted the arbitration in September 2010 without those IEs had the hearing proceeded then, adding that “[t]hus it was only the adjournment of the hearing due to Ms. Young’s personal circumstances that gave them the opportunity to, in effect, correct their mistake, and request further examinations. There was no evidence that any further need based on ‘adjusting the file’ was involved in the request…” The Arbitrator therefore found the IEs were not reasonably necessary and denied the motion.
The Arbitrator then noted that while the motion was pending, Mr. Anthonypillai nonetheless attended some IEs as, after receiving the notices, he misunderstood when his counsel, Mr. Wilson, told him not to attend. Reports were prepared as well. The Arbitrator found that
TD would be acting in bad faith and contributing to an abuse of the arbitration process to attempt to circumvent my ruling that the examinations were not necessary by seeking to introduce the resulting reports as evidence in the hearing. As such I order that TD not seek to introduce the reports from these examinations at the upcoming arbitration hearing without the consent of the Applicants. I make this order pursuant to section 65.7 of the Dispute Resolution Practice Code.2
The Arbitrator did not conduct any analysis or make any findings about the relative merits of the various IEs that had been sought or had taken place.
The Arbitrator also commented on his surveillance order. His intention was that TD not be allowed to introduce any surveillance made after July 24, 2010, 60 days before the original hearing date.
Finally, in his letter decision of January 6, 2011, the Arbitrator ordered that, regarding the motion for interim benefits referred to above, Mr. Anthonypillai was entitled to his expenses, to be fixed in a formal order.
On January 11, 2011, after a day of settlement discussions, the matter came up for a hearing before Arbitrator Murray, who adjourned the hearing to the end of March and beginning of April 2012. In her letter of March 8, 2011, she noted that “TD learned through the Applicant’s counsel on January 4, 2011 that the Applicant returned to work and was employed through a temporary agency” but that TD had no information about where or when he worked or what he did. She found the adjournment necessary “due to the Applicant’s late disclosure of both his income information and the fact that he was working.” She ordered costs payable by the Applicant to TD in the amount of $1,000 in any event of the cause. She was also prepared to deal with the expenses issues to date if Arbitrator Kominar was not.
In this appeal, TD asks that Mr. Anthonypillai be ordered to submit to further IEs, rather than asking that the arbitration hearing be adjourned until he attends, that it be allowed to introduce the reports of all IEs as well as any surveillance conducted up to 60 days prior to the new arbitration hearing dates, and that costs of the interim benefits motion be assessed following the hearing.
In a letter decision dated March 16, 2011, I acknowledged the appeal, finding that
the appeal has apparent strength and raises important issues regarding the determination of when IEs are reasonable, the factors to consider, and whether or not the arbitrator in his use of Rule 65.7 of the Code fettered the hearing arbitrator’s discretion.
I also ordered that the hearing would proceed by written submissions and set out time lines, which ended up being extended over a number of months for various reasons, including allowing submissions on the Divisional Court decision in Certas Direct Insurance Company v. Gonsalves, 2011 ONSC 3986.
In the interim, in a decision dated April 19, 2011, Arbitrator Kominar ordered expenses for the interim benefit motion jointly to Mr. Anthonypillai and Ms. Arulappu in the amount of $19,846.22. TD sought a stay of that order, as it claimed the expense order was premature. I denied the stay request in a letter decision dated June 1, 2011, for the following reasons: the expense order could not be premature, given that under s. 282(11.1) of the Act arbitrators can make interim awards of expenses at any time; there was nothing unusual in a decision on expenses following a consent order; and, as the order also applied to Ms. Arulappu, I had no basis for staying her expenses.
Finally, I have advised the parties that I will be referring to the Court of Appeal’s denial of leave to appeal the Gonsalves case on November 18, 2011, Court File #M40259, as well as to Ouellette and Intact Insurance Company, (FSCO A11-001987, December 15, 2011), and Albanese and State Farm Mutual Automobile Insurance Company, (FSCO P11-00023, December 20, 2011), discussed below.
II. ANALYSIS
Arbitrator Kominar stated as a general principle of law that the sole right an insurer has to conduct IEs is to adjust the file. That is wrong. As was stated in State Farm Mutual Automobile Insurance Company and Ramalingam, (FSCO P05-00026, August 13, 2007), “[t]he Commission’s decisions, starting with F.S. and Belair, [(OIC P96-00039, June 11, 1996)] have created an arbitral rule that allows an arbitrator to adjourn a hearing to allow for an insurer examination in the case of an ongoing claim where, considering all the circumstances, fairness requires it and the section 42 [notice] requirements are otherwise met.” This decision was upheld in State Farm Mutual Automobile Insurance Company v. Ramalingam, 2009 CanLII 44115 (ON S.C.D.C.).
The Gonsalves case also has an important bearing on when IEs are available. Thirty-one days before a hearing on whether Ms. Gonsalves was completely unable to live a normal life, she delivered two updated orthopaedic opinions suggesting that she met the test. The arbitrator granted an order for adjournment until the applicant attended an IE, finding that the reports provided new evidence supporting a new position. The arbitration decision was overturned on appeal, with the Director’s Delegate relying on Practice Note 9: Adjournments and Rules 39 and 72 of the Dispute Resolution Practice Code. He was “persuaded that the Arbitrator erred in law in not applying the appropriate criteria to the Respondent’s adjournment request. There is no consideration or finding of extraordinary circumstances or of unavoidable delay.”
On judicial review, the arbitration decision was restored. The court stated that the administrative process requires fairness, and especially the opportunity for the insurer to be heard and to respond to any position taken against it. The court found that, without an orthopaedic IE, the insurer had no practical ability to respond. It was not enough to say that the reports were provided in the time frame, as “This is trial by ambush.” The court accepted this judicial review of a preliminary issue decision as otherwise the insurer would be back before the court in a year. The court stated that neither the Dispute Resolution Practice Code nor Practice Note 9 could interfere with the overarching responsibility for a fair hearing, and further that “the finding of fact by the arbitrator was sufficient to explain why these provisions were not germane to the issue she was deciding.” It found the Delegate unreasonably fettered the arbitrator’s discretion by requiring “extraordinary circumstances” or “unavoidable delay” as conditions precedent to the adjournment. The court concluded that the Delegate in essence heard the matter de novo and substituted his decision for that of the arbitrator.
However, this is not a case of trial by ambush, since Arbitrator Kominar found that TD had been prepared to defend itself at the original hearing date without the IEs. On the other hand, since the Arbitrator focused on TD’s motives, he did not deal with most of the other criteria discussed in Ramalingam. Thus, in essence TD is asking me to consider and apply those criteria. In other words, I am being asked to do exactly what the Director’s Delegate in Gonsalves was criticized for doing: hear the matter de novo and substitute my decision for that of the Arbitrator.3
Despite the Arbitrator’s error in stating the law noted above, he did make the key factual finding that “[t]here was no evidence that any further need based on ‘adjusting the file’ was involved in the request…” The issue is whether this is still an element that is required in determining the reasonableness of an IE request. The arbitration decisions in Ouellette and Albanese took different positions on this point.
In Ouellette, the issue was in part conduct because the insured refused to attend IEs due to the alleged improprieties in the insurer’s handling of the case. Ms. Ouellette conceded that, provided the assessments are not for the dominant purpose of arbitration, an insurer in the ordinary case may very well be entitled to conduct in-person examinations to assist in determining whether, for instance, the insured person sustained a catastrophic impairment as a result of the accident, which was the substantive issue there. However, Ms. Ouellette contended that the insurer’s conduct should bar it from conducting any such IEs. Arbitrator Bujold disagreed, stating that
[w]hile an insurer’s conduct is not irrelevant, I agree with Director’s Delegate Makepeace in Ramalingam that the focus should not be on “the insurer’s motivations or other subjective factors.” Instead, the focus should be on objective factors aimed at ensuring a full and fair hearing. Provided the insurer is not seeking to conduct assessments for the dominant purpose of litigation or arbitration (which I do not find to be the case here), and provided further that the criteria in Ramalingam generally favour conducting the assessments (which I find to be the case here), I am not persuaded that my discretion should be exercised to “punish” an insurer’s conduct, especially when to do so would compromise a full and fair hearing on the substantive issues.
Arbitrator Bujold went on to note that he was not in a position to make a final pronouncement on the insurer conduct. He was also not persuaded that the insurer had already determined that the applicant was not catastrophic. Finally, the insurer was not required to first establish a paper review was insufficient. In this case, Arbitrator Kominar found that the only purpose for the requested IEs was for litigation, with no adjusting purpose to them at all.
The question of the adjusting purpose also came up in the Albanese case. In the original motion decision, Albanese and State Farm Mutual Automobile Insurance Company, (FSCO A10‑000464, October 25, 2011), the insurer sought assessments related to the post-104 week condition of the applicant. Mr. Albanese refused, saying that the IEs were only to bolster the insurer’s case because 1) it presented no evidence that it was continuing to adjust his claim, 2) it first mentioned post-104 assessments almost a year after the entitlement test had changed and not until after he had applied for arbitration, 3) the assessments were initiated by counsel for State Farm, not its adjuster, and 4) there has been no change in Mr. Albanese’s circumstances since IRBs were terminated. Arbitrator Rogers drew three principles from Ramalingam and Gonsalves, namely that fairness is fundamental, an assessment may be required for a fair hearing, and the post-104 week test is a change in circumstances giving an insurer a prima facie right to an IE. He then applied the principles as follows:
Mr. Albanese relies on post-104 orthopaedic and psychological assessments in this arbitration. State Farm has no post-104 assessments. State Farm is therefore not in a position to respond. State Farm has a prima facie right to the post-104 assessments it seeks. No evidence is needed to support that right. Ramalingam and Gonsalves focus the analysis on whether fairness requires that the assessments take place, and not on whether the insurer is adjusting its file. The fact that counsel initiated the assessments is of no consequence in this analysis. Although State Farm could have requested the assessments earlier, the delay will have no impact on the hearing… The balance of procedural fairness weighs heavily in favour of State Farm.
An appeal from this order was rejected in Albanese and State Farm Mutual Automobile Insurance Company, (FSCO P11-00023, December 20, 2011). Director’s Delegate Blackman found that the arbitrator applied Ramalingam and Gonsalves, and the applicant’s submissions regarding motivation ran counter to those decisions. He found that the arbitrator gave reasons for finding the IEs necessary, and he did not automatically accept that merely reaching the 104 weeks sufficed. The Delegate added that, while the arbitrator’s third extrapolated general principle of a prima facie right to an IE at 104 weeks was not set out by the Divisional Court, his reasons for supporting it were consistent with Gonsalves. In addition, the insurer ultimately sent valid notices. Finally, the Delegate found that the choice of the IE examiner is not irrelevant but is part of the determination of whether an IE is reasonable and necessary.
Similarly to the Delegate’s comment about any prima facie right to an IE after 104 weeks, it is also not clear to me that Gonsalves stands for the proposition that the question of whether an insurer is adjusting its file is irrelevant. Going back to the original arbitration decision in Gonsalves by Arbitrator Muzzi, (FSCO A08-001248, October 9, 2009), she considered the objective factors for determining whether an IE request is reasonable, and concluded that the insurer’s “ongoing right and obligation to assess the claim [outweighed] the applicant’s right to privacy and to be spared a further intrusive examination.” The obligation to assess a claim is another way of saying the obligation to adjust a claim, so Gonsalves was not determined at the arbitral level strictly on the duty to be fair to the insurer in the litigation process.
Certainly, TD’s request for an IE could be seen as meeting many of the criteria listed in Ramalingam. These include whether the claimant disclosed relevant materials as soon as reasonably possible, what other information is available to the insurer, whether information provided by the claimant since the insurer’s last insurer examination suggests a change in the claimant’s condition, whether the insurer accepts the claim and continues to pay benefits, and generally whether the request is reasonable considering the balance between the insured person’s right to privacy and the insurer’s ongoing right and obligation to assess the claim. All these factors come into play where a claimant returns to work, even if only temporarily, especially where the claimant is receiving benefits and withholds the information about the return to work from the insurer. Mr. Anthonypillai did not advise the insurer of his return to work and that information was not available to the insurer, and the return to work suggested a change in the insured’s condition.
However, with respect to those principles, Mr. Anthonypillai submits that for the purpose of this appeal I should only consider the information that was available to Arbitrator Kominar, meaning the information about the return to work. As for any change in condition suggested by his return to work, which according to him was only temporary, Mr. Anthonypillai submits that the insurer could always initiate another motion to have him attend for an IE.
The first problem I have in reversing the Arbitrator’s order is the Divisional Court’s admonition that my role is not to hear the matter de novo or to simply substitute my opinion for that of the Arbitrator. Even if I could, the answer is not necessarily obvious, considering the problems in the way TD has proceeded, as pointed out by Mr. Anthonypillai. For instance, the action requested in its Notice of Appeal is that “the Applicant be ordered to submit to further medical examinations as arranged by the Insurer,” which is what it also sought in its Notice of Motion. Of course, it has long been settled that arbitrators and delegates have no such power, as there is no authority for an arbitrator to order a claimant to attend a medical examination: Granic and Allstate Insurance Company of Canada, (OIC A-006615, January 30, 1995).
Mr. Anthonypillai has also pointed out problems with the notices for the IEs. As already noted above regarding Ramalingam, an arbitrator may adjourn a hearing to allow for an IE in the case of an ongoing claim where, considering all the circumstances, fairness requires it and the notice requirements are otherwise met. However, the notices in this case were sent out after September 1, 2010, and as Mr. Anthonypillai points out, the “New Regulation” had come into force by then. The same applied in Ouellette, where the first footnote states:
At the time of this accident, accident benefits were available pursuant to the Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996 (the “Old Regulation”). Effective September 1, 2010, the Statutory Accident Benefits Schedule – Effective September 1, 2010 (the “New Regulation”) came into force. The transition rules in the New Regulation provide that, subject to certain exceptions, benefits that would have been paid under the Old Regulation are to be paid under the New Regulation, but in amounts determined under the Old Regulation. The procedures for claiming benefits after August 31, 2010 are governed by Part VIII of the New Regulation.
The procedures for seeking IEs are also governed by the New Regulation. Section 42 of the Old Regulation is in Part X, which according to s. 3(1.2) of that regulation does not apply after August 31, 2010. Furthermore, s. 3(1.5) provides that no s. 42 notices can be delivered on or after September 1, 2010, and s. 3(1.6) provides that any such step must be taken under the corresponding section in the New Regulation, namely s. 44. Thus, in Ouellette, the discussion focused on notices given under s. 44. Subsection 44(5) in turn mandates what the notice must set out, including (a) “the medical and any other reasons for the examination” and (c) “the name of the person or persons who will conduct the examination, any regulated health profession to which they belong and their titles and designations indicating their specialization, if any, in their professions.”
With respect to these requirements, Mr. Anthonypillai submits that the first notices sent out September 27, 2010, were not even included in the materials, so TD cannot establish that the notices were properly drawn. As for the further notices sent on October 4, 2010, Mr. Anthonypillai submits that these provide no medical reason for the examinations nor the information required in s. 44(5)(c). He also submits that there were references to other notices in Ms. Watson’s affidavit that, he submits, were equally deficient. TD has no response to these submissions other than that “its request for further medical examinations [was] in full compliance with the criteria set forth in section 42 of the SABS.” At least in Albanese, the insurer eventually sent correct notices. That does not appear to be the case here.
To conclude with my first problem in acceding to TD’s request, then, even if I had the power to consider the matter de novo, it is not at all clear that my findings would be favourable to the insurer, given the deficiencies in procedure identified by Mr. Anthonypillai: TD sent notices following the procedures in the wrong regulation and then asked for the wrong remedy when Mr. Anthonypillai objected to those notices.
My second problem is, of course, the Arbitrator’s clear finding that there was no evidence that the request reflected any further need based on adjusting the file. The Arbitrator had evidence on that point, having heard evidence from Ms. Watson. Furthermore, for the reasons set out above, an IE is not a pure defence medical and there has to be an aspect of adjusting a file in requesting one. The situation I face is thus the converse of that in Albanese: while Arbitrator Kominar made an overly broad statement of the law restricting insurers’ rights to IEs, he nonetheless made findings on a fundamental criterion in considering the reasonableness of an IE request, and I have no basis on which to overturn them.
TD’s request that I adjourn the hearing pending Mr. Anthonypillai’s attendance at further IEs is therefore denied.
TD has also appealed the Arbitrator’s order that it cannot seek to introduce the IE reports that were produced at the hearing. However, I stated in Arunasalam and State Farm Mutual Automobile Insurance Company, (FSCO P09‑00025 and P09-00025C, March 2, 2011), that the hearing arbitrator is not bound by the decision of the pre-hearing arbitrator. In that regard, Mr. Anthonypillai submits that “said comment does not detract from the propriety of the arbitral order made in the within matter. Rather, if a correct statement of law, it may be properly relied upon by the hearing Arbitrator in a determination as to whether he or she will choose to follow the said order of Arbitrator Kominar.”
Finally, TD seeks for me to overturn the Arbitrator’s order regarding surveillance. However, Arbitrator Kominar merely provided information regarding the reasons why he found surveillance should not be filed that was taken after July 24, 2010, as he saw that as another attempt by TD to take advantage of the death in Ms. Young’s family. Arbitrator Kominar specifically stated that he was “not making any order about the admissibility of the surveillance.” There is no need for me to intervene in this area, as the hearing arbitrator is free to make whatever ruling is appropriate, considering that the second and longer adjournment was caused by Mr. Anthonypillai’s own actions.
For all these reasons, the 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 sixty days of this decision.
The request shall be accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, as well as written submissions regarding entitlement to or the quantum of these expenses, or both, as are in dispute.
March 5, 2012
David Evans Director’s Delegate
Date
Footnotes
- The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
- Rule 65.7 provides that “An adjudicator may make such orders or give such directions as he or she considers proper to prevent an abuse of process.”
- Despite the Divisional Court’s criticism, I note that s. 283(5) of the Insurance Act provides that a Director’s Delegate may, inter alia, “substitute his or her order for that of the arbitrator.”