Neutral Citation: 2012 ONFSCDRS 52 FSCO A08-001138

BETWEEN:

NICOLA FEDERICO Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

REASONS FOR DECISION

Before: Maggy Murray Heard: November 23, 24, 25 and 26, 2009; December 13, 15 and 16, 2010, and July 25 and 29, 2011, at the offices of the Financial Services Commission of Ontario in Toronto. Written submissions completed December 29, 2011 Appearances: David S. Wilson for Mr. Federico Ian D. Kirby for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Mr. Nicola Federico, was injured in a motor vehicle accident on December 20, 2006. He applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the 1996 Schedule.¹ State Farm terminated weekly income replacement and housekeeping benefits in early 2008. It also refused to pay for various medical benefits and the cost of an examination. The parties were unable to resolve their disputes through mediation, and Mr. Federico applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Is Mr. Federico entitled to income replacement benefits in the amount of $400 per week from February 16, 2008 and ongoing, pursuant to section 4 and paragraph 5(2)(b) of the 1996 Schedule?
Is Mr. Federico entitled to receive $1,953.58 for a Treatment Plan dated January 14, 2008 by Paramount Rehabilitation for psychological services claimed pursuant to paragraph 14(2)(b) of the 1996 Schedule?
Is Mr. Federico entitled to receive $1,373.58 as proposed in the Treatment Plan dated December 21, 2007 as outlined by Paramount Rehabilitation for physiotherapy claimed pursuant to paragraph 14(2)(b) of the 1996 Schedule?
Is Mr. Federico entitled to payments for housekeeping and home maintenance services for the period January 13, 2008 to December 19, 2008 and if so, in what amount, pursuant to section 22 of the 1996 Schedule?
Is Mr. Federico entitled to $995 for an MRI as outlined in an OCF-22 by MedCentra dated January 30, 2007 pursuant to section 24 of the 1996 Schedule?
Is Mr. Federico entitled to interest for the overdue payment of benefits pursuant to subsection 46(2) of the 1996 Schedule?
Is State Farm liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mr. Federico?
Is either party entitled to expenses in respect of the arbitration under subsection 282(11) of the Insurance Act?

Result:

The parties agreed that if Mr. Federico is entitled to an income replacement benefit, it is payable at $400 per week. State Farm shall pay Mr. Federico a weekly income replacement benefit of $400 per week from February 16, 2008 and ongoing, pursuant to section 4 and paragraph 5(2)(b) of the 1996 Schedule.
State Farm shall pay Mr. Federico a medical benefit of $1,953.58 for psychological services pursuant to paragraph 14(2)(b) of the 1996 Schedule.
State Farm shall pay Mr. Federico a medical benefit of $1,373.58 for physiotherapy pursuant to paragraph 14(2)(b) of the 1996 Schedule.
State Farm shall pay Mr. Federico housekeeping and home maintenance services in the amount of $100 per week from January 13, 2008 to December 19, 2008 pursuant to section 22 of the 1996 Schedule.
State Farm shall pay Mr. Federico $995 for an MRI as outlined in an OCF-22 by MedCentra dated January 30, 2007 pursuant to section 24 of the 1996 Schedule.
State Farm shall pay Mr. Federico interest for the overdue payment of benefits pursuant to subsection 46(2) of the 1996 Schedule.
State Farm is liable to pay a special award to Mr. Federico. I shall determine the amount of the special award following submissions by the parties.
If the parties cannot agree on the issue of entitlement to or amount of the expenses of this Arbitration proceeding, they may make written submissions in accordance with Rule 79 of the Dispute Resolution Practice Code - Fourth Edition, after the parties have received my decision on the special award.

EVIDENCE AND ANALYSIS:

Applicable Law

On September 1, 2010 the 1996 Schedule was amended. The relevant changes to the 1996 Schedule are as follows:²

(1) In this section,

"New Regulation" means Ontario Regulation 34/10 (Statutory Accident Benefits Schedule — Effective September 1, 2010), made under the Act. O. Reg. 35/10, s. 1.

(1.1) Subject to subsection (1.3), the benefits set out in this Regulation shall be provided under every contract evidenced by a motor vehicle liability policy in respect of accidents that occur on or after November 1, 1996 and before September 1, 2010. O. Reg. 35/10, s. 1.

(1.2) Section 24 and Parts X, XI, XII, XIII and XV do not apply after August 31, 2010. O. Reg. 35/10, s. 1.

(1.3) No amount referred to in this Regulation shall be paid after August 31, 2010. O. Reg. 35/10, s. 1.

(1.4) An amount that would, but for subsection (1.3), be paid under this Regulation after August 31, 2010 shall be paid under the New Regulation, but in the amount determined,

(a) under this Regulation, other than section 24; or

(b) under subsections 25 (1), (3), (4) and (5) of the New Regulation. O. Reg. 35/10, s. 1.

Also relevant to the interpretation of the changes is subsection 2(2) of the New Regulation: ³

(2) Subsections 25 (1), (3), (4) and (5), Parts VIII and IX, other than subsections 50 (2) to (5), and Parts X, XI and XII apply with such modifications as are necessary in respect of benefits provided under the Old Regulation⁴ with respect to accidents that occurred on or after November 1, 1996 and before September 1, 2010 and, for that purpose, the following rules apply:

References in paragraph 2 of subsection 25 (1), subsections 38 (1), (5), (7), (9), (10), (11), (12) and (14), sections 40 and 41 and subsection 44 (3) to the Minor Injury Guideline shall be read as references to the Pre-approved Framework Guideline referred to in the Old Regulation that would apply.
An amount that would, but for subsection 3 (1.3) of the Old Regulation, be paid under the Old Regulation after August 31, 2010 shall be paid under this Regulation in the amount determined,

i. under the Old Regulation, other than under section 24 of that Regulation, or

ii. under subsections 25 (1), (3), (4) and (5).

An amount described in paragraph 2 that is paid under this Regulation shall not include any amount previously paid under the Old Regulation. O.Reg. 34/10, s. 2 (2).

The section numbers applicable to Mr. Federico’s claims under the 1996 Schedule are as follows:

sections 4 and 5: income replacement benefits;

section 14: medical and rehabilitation benefits;

section 22: housekeeping and home maintenance expenses;

section 24: cost of examinations;

subsection 46(2): interest.

Under subsection 3(1.3) of O.Reg. 35/10, these amounts are not paid after August 31, 2010.

However, under subsection 3(1.4) of O.Reg. 35/10, amounts that would otherwise be payable under the 1996 Schedule are paid under the New Regulation in amounts determined under the New Regulation. Costs of examinations are payable under the New Regulation in amounts determined under subsections 25(1), (3), (4) and (5) of the New Regulation.

The September 1, 2010 amendments to the 1996 Schedule contained in subsections 3(1)(1.3) and (1.4) of O.Reg. 35/10, set out a three-part test for the medical benefits and housekeeping benefits at issue in this case. First, if it were not for subsection 3(1)(1.3) of O.Reg. 35/10, would medical benefits and housekeeping benefits be payable under the 1996 Schedule? If so, are the benefits payable under the New Regulation? If so, what is the amount that is payable as determined under the 1996 Schedule?

This interpretation is as cumbersome as subsection 3(1) of O.Reg. 35/10 and results in a retroactive application of the substantive provisions of the New Regulation to fact situations that existed before the regulation came into force. In the case of Mr. Federico, the test for entitlement to housekeeping benefits changed under the New Regulation by adding the requirement that the claimant prove he sustained a catastrophic impairment.

“It is obvious that reaching into the past and declaring the law to be different from what it was is a serious violation of rule of law.”⁵ However, the presumption against the retroactive application of law does not apply to procedural legislation. Therefore, the retroactive application of the law in subsection 3(1) must refer to procedure and the meaning of the word “paid” in “shall be paid under the New Regulation” in paragraph 3(1)(1.4) of O.Reg. 35/10 must be limited to mean “shall be paid according to the procedures set out in the New Regulation.” This interpretation is consistent with subsection 2(2) of the New Regulation, which, except for costs of examinations, deals with changes to the procedure for claiming benefits and the payment of benefits, not with changes to substantive rights. It is also consistent with FSCO Superintendent’s Bulletin No. A-04/10 which provides that “Income replacement benefits will continue to be calculated at 80 per cent of net income” and “Entitlement to caregiver, housekeeping and home maintenance benefits will continue to be governed by the Old SABS.”⁶

In Dikranian v. Quebec (Attorney General), 2005 SCC 73, [2005] 3 S.C.R. 530, the Supreme Court of Canada stated:

In the case at bar, a contract was signed and entered into before the new provisions came into force. The contract continued to produce its effects notwithstanding those provisions. The rights and obligations resulting from the contract were fixed and crystallized as soon as the contract was entered into.

There is a presumption against interference with vested rights. In Gustavson Drilling (1964) v. Canada (Minister of National Revenue – M.N.R.,⁷ the Supreme Court of Canada concluded that “the presumption that vested rights are not affected unless the intention of the legislature is clear applies whether the legislation is retrospective or prospective in operation.”

I find that the New Regulation does not affect benefit entitlements because it does not apply retroactively so as to interfere with vested rights.

Witnesses:

I heard testimony on behalf of Mr. Federico from himself, his wife Lynda Federico and Andy Webb, a general contractor who hired the Applicant periodically. On behalf of State Farm, I heard testimony by Dr. Ismail, a physiatrist, Dr. Ranalli, a neurologist, and Michelle Dubeau, a team manager at State Farm.

State Farm, in its closing submissions, acknowledged that this case resolves upon credibility. I found that Mr. and Mrs. Federico and Mr. Webb were all credible witnesses.

Background:

Mr. Federico’s van was rear-ended while he was stopped at a red light on the day of the accident. There was approximately $1,000 of damage to his van as a result of the accident. The day after the accident, Mr. Federico went to Dr. Lake, his family doctor for more than 20 years. Dr. Lake referred Mr. Federico to physiotherapy.⁸

At the time of the accident, Mr. Federico was 53 years old and worked as a self-employed plumber for the business he and his wife owned called Federico Plumbing and Heating. Mrs. Federico did the bookkeeping for the business. Although some of the work was done by sub-tradespeople, in the two-three years before the accident, most plumbing work was performed by Mr. Federico with the assistance of an apprentice who worked on both a part-time and full-time basis. Towards the end of October 2006, the apprentice stopped working for Mr. Federico because he returned to school for additional training. The apprentice was scheduled to return to Federico Plumbing in January 2007.

A substantial amount of work Mr. Federico did as a plumber prior to the accident was heavy and it required lifting, bending and squatting.

Position of the parties:

Amongst other things, Mr. Federico argued that: (a) although he returned to work a few months after the accident, he did so on a modified basis; (b) following this accident the revenues of his business fell; (c) he remains unable to do the housekeeping and home maintenance chores he did before the accident.

State Farm argued that: (a) Mr. Federico was involved in a minor rear-end collision which did approximately $1,000 of damage to his van; (b) Mr. Federico returned to work within four weeks of the accident; (c) Mr. Federico had significant medical problems prior to this accident that were compromising his ability to work as a plumber, such as four previous motor vehicle accidents more than 10 years prior to this accident,⁹ a slip and fall in March 2006, and a left foot drop since 2003.¹⁰

Impairments:

Following this accident, Mr. Federico complained of, amongst other things, back pain, neck pain and his right leg giving way.¹¹ Additional injuries as a result of this accident included worsening of his pre-existing left leg problem, problems with his shoulder and headaches.

In a Disability Certificate dated January 3, 2007, Dr. Lake certified that Mr. Federico sustained the following injuries: Class II whiplash associated disorder (“WAD”), low back strain which extended down his right leg and aggravation of his left foot drop.¹²

In a subsequent Disability Certificate dated September 19, 2007,¹³ Dr. Lake certified that Mr. Federico’s WAD II and low back strain continued and he also suffered from right radiculopathy.¹⁴ In this Disability Certificate, Dr. Lake also certified that Mr. Federico was unable to work as a plumber bending and twisting and unable to perform his housekeeping duties. Dr. Lake anticipated that Mr. Federico’s condition would last more than 12 weeks.

Mr. Federico also has problems with his right hand and difficulty holding things such that sometimes they fall out of his hand and his hand is weaker than it was prior to this accident. Mr. Federico also falls when he tries to walk on uneven surfaces, he can only walk short distances and he’s unsteady on his feet.

According to Dr. Lake, prior to this accident, Mr. Federico was able to perform his plumbing duties full-time and had this accident not occurred, he would have continued to work as a plumber full-time.¹⁵ Dr. Lake was not aware of, nor did he recommend, Mr. Federico’s use of a cane before this accident. However, a few months after this accident, he recommended that Mr. Federico use a cane.¹⁶ Mr. and Mrs. Federico, as well as Mr. Webb, also testified that Mr. Federico did not use a cane before this accident.

Following this accident, according to Mrs. Federico, her husband worked approximately three days per week, generally supervising, because he is not physically capable of managing more than that. Even when he works three days a week he returns home doubled up in pain. When he’s not working, he generally rests and watches TV.

Dr. Meloff, a neurologist who saw Mr. Federico at his counsel’s request, reported that Mr. Federico experienced the “double crush syndrome”, which means that once a nerve is damaged, it is susceptible to further injury.¹⁷ Mr. Federico had peripheral neuropathy in his left leg prior to this accident and this accident added an additional compression (i.e., a “double crush”) to previously damaged nerves. This caused further deterioration in Mr. Federico’s neurological function. Dr. Meloff concluded that as a result of this accident, Mr. Federico’s condition worsened, he was permanently disabled and not suited for any occupation that requires repetitive crouching, kneeling, bending or lifting more than five pounds.¹⁸

Income Replacement Benefits:

Law

The test for eligibility for income replacement benefits for the first 104 weeks after the accident is whether the insured suffers a substantial inability to perform the essential tasks of his employment at the time of the accident. After 104 weeks, the test changes and is more difficult to satisfy. It is whether the insured suffers a complete inability to engage in suitable employment based on one’s education, training and experience.¹⁹

Essential tasks of employment; education, training, experience and suitable employment

At the time of the accident Mr. Federico was a self-employed plumber. He claims that he is only suited for that type of work and that he is unable to engage in that employment because of overall body pain.

Mr. Federico has a grade 10 education. He became a plumber in 1978. In 1981, he opened Federico Plumbing, which he has worked for since then. He worked as a plumber for 28 years prior to this accident and generally worked full-time, 40-50 hours per week.

Federico Plumbing was involved in various types of plumbing work, such as:

(a) High-rise maintenance: It involved locating and repairing leaks. Sometimes this work involved breaking concrete and drywall, fixing overhead leaks which required that Mr. Federico climb a ladder and work with his hands overhead holding a heavy machine called a “sawzall” for 3-5 minutes at a time;

(b) Fire restoration work: It required that Mr. Federico walk on an uneven surfaces;

(c) Pump repairs: It involved disconnecting a pump that required lifting and weighed approximately 125 lbs. Mr. Federico had someone help him with this because it was so heavy;

(d) Drain cleaning: It involved using a machine that weighed approximately 60 lbs. Mr. Federico would carry this machine if the building did not have an elevator. He would also have to carry wires as well;

(e) Renovations: Involved carrying bathtubs, toilets and sinks. Sometimes Mr. Federico used one or two helpers because these items are heavy; a one piece toilet can weigh up to 150 lbs;

(f) Re-piping: It required overhead work. Mr. Federico would walk on joists. It was necessary for him to balance himself so he wouldn’t fall through the joists.

According to Mr. Federico, it was not possible to do very much of his work while seated, and it was necessary that he have strong legs so that when he worked with a wrench, he didn’t fall. Mr. Federico also testified that the overhead work could not be done with a sore back.

Mr. Federico kept a ladder which weighed 40-50 lbs in the back of his truck. He carried the ladder to job sites. He also had to bring his “carryall” which contained his tools. The carryall weighed approximately 40 lbs. If his apprentice was with him, the apprentice would carry something and Mr. Federico would carry something else. Sometimes Mr. Federico would have to do emergency plumbing work in the middle of the night. There were also times he would have to be on a ladder for 5-6 hours intermittently throughout a job.

Plumbing work required the use of copper piping which weighed 10-40 lbs. Mr. Federico cut bad sections of the pipe and removed them. He then walked up a ladder with up to a 12-16 foot copper pipe then soldered the pipes. If he was replacing a riser, which is a vertical pipe, he used a ladder to do the overhead work. Plumbing required medium to heavy strength.²⁰

Because most leaks are under a counter, Mr. Federico would have to crouch, bend, kneel and lie on his back to fix them.

On December 17, 2007, the Insurer’s Functional Abilities examiner, Lisa Hanna, a kinesiologist, concluded that Mr. Federico could do some light industrial work²¹ but he could not meet the demands of occasional climbing, frequent bending, heavy lifting and carrying.²² According to Ms. Hanna, Mr. Federico’s abilities “did not come close to approximating all essential demands … (and that he has) a substantial inability to perform … many of his previous tasks of employment.”²³

Dr. Ismail conducted a physiatry examination of Mr. Federico on December 17, 2007²⁴ to assist the insurer with determining whether further income replacement and housekeeping benefits were payable. Dr. Ismail’s clinical notes and records state: “walking with cane in right hand”. Dr. Ismail stated in his report, and testified, that Mr. Federico used a cane before the accident. According to Dr. Ismail’s testimony, his notes were “self-evident” and “implicitly” meant that Mr. Federico used a cane prior to this accident. Dr. Ismail then retracted that he used the phrase “self-evident” but confirmed that it was “implicit” in his notes that Mr. Federico used a cane prior to the accident.

Dr. Ismail stated in his report:²⁵

“… Mr. Federico continues to have right hand weakness and left foot drop which may impair his ability to return to work as a plumber.

A Functional Abilities Evaluation dated May 2, 2007 suggested that Mr. Federico was able to complete medium strength jobs. At this time, I am not qualified to determine Mr. Federico’s ability to work a heavy, medium, light or sedentary job and would defer any such comment to the Functional Abilities Evaluator.

Mr. Federico does not appear to have any impairments as a result of the subject motor vehicle accident of December 20, 2006, however, his prognosis with respect to a return to work is guarded, given his pre-MVA right hand weakness and left foot drop.”

I find that Dr. Ismail was not credible and give little weight to his evidence which was contradictory. He concluded that Mr. Federico’s prognosis to return to work was guarded given Mr. Federico’s pre-accident medical condition, although Mr. Federico worked full-time before the accident despite his medical problems. In his report, he deferred to the FAE assessor regarding the strength of job that Mr. Federico was capable of. However, he concluded that Mr. Federico had no impairments from his accident that prevented him from working. But the FAE assessor concluded that Mr. Federico “did not come close to approximating all essential (job) demands”²⁶ as a result of this accident.

Dr. Ranalli, a neurologist who conducted an examination of Mr. Federico pursuant to section 42 of the 1996 Schedule, determined that Mr. Federico was not entitled to further income replacement or housekeeping benefits because his peripheral neuropathy pre-existed this accident.²⁷ Although Dr. Ranalli had no record of asking Mr. Federico if his left foot drop worsened after this accident, he concluded in his report that it had not worsened.²⁸

When cross-examined: (a) Dr. Ranalli did not disagree with the statement: “Neuropathy in the left leg was aggravated by the accident.”²⁹ He also agreed that Dr. Meloff’s analysis of Mr. Federico’s condition could be accurate.

I place little weight on Dr. Ranalli’s opinion because although he had no record of asking Mr. Federico if his left foot drop worsened after the accident, he concluded in his report that Mr. Federico’s left foot drop did not worsen after the accident. I therefore find that his opinion regarding Mr. Federico’s ability to work is not based on accurate facts and is unreliable.

Below is a chart summarizing Federico Plumbing’s sales between 2000-2008.³⁰

YEAR SALES

2000

$157,157

2001

$235,775

2002

$180,185

2003

$199,310

2004

$236,277

2005

$167,891

2006

$174,086

2007

$99,442

2008

$115,923

Federico Plumbing’s average yearly sales between 2000-2006 were $225,113. Sales decreased substantially in 2007 and 2008 and were an average of $107,682.

Below is a chart summarizing Mr. Federico’s income between 2003-2008.³¹

YEAR INCOME

2003

$34,652

2004

$43,378

2005

$30,863

2006

$36,573

2007

$11,514

2008

$10,880

Mr. Federico’s average yearly income between 2003-2006 was $36,366. His income decreased substantially in 2007 and 2008 and was an average of $11,197.

According to State Farm, following this accident, Mr. Federico could work either as a plumbing supervisor or plumbing estimator. I find that neither of State Farm’s suggested alternative jobs suitable for Mr. Federico. As a plumbing supervisor, he would need to train new workers and inspect work in progress and completed work, and to use various body positions. Supervising requires up to medium strength. As a plumbing estimator, he would have to attend job-sites and walk on uneven terrain, use a ladder and scaffolds. He would also need to bend, twist and crouch, all of which he has difficulty doing.³²

State Farm submitted that various doctors noted that Mr. Federico had difficulties with walking and weakness in his legs prior to this accident.³³ One doctor³⁴ recommended that Mr. Federico retrain for another job that was less physically demanding and more sedentary. However, Mr. Federico had little to no experience working as anything other than a plumber and did not follow his doctor’s advice. I accept that Mr. Federico had some medical difficulties prior to this accident. However, despite these difficulties, he was motivated to work full-time as a plumber and get ahead.

Conclusion on employment

I find that Mr. Federico has met his burden of proof to establish, on the balance of probabilities, that he sustained an impairment as a result of the accident such that he suffered a substantial inability to perform the essential tasks of his employment.

With respect to the post-104 week test, State Farm had no information that Mr. Federico was able to perform any full-time work for which he was suited and failed to appreciate that the job he did was medium to heavy in nature. In fact, according to the Insurer’s Examination of December 17, 2007, Mr. Federico is unable to perform many of his previous employment tasks.³⁵

Mr. Federico testified that he remained able to fix faucets following the accident. However, I accept his evidence that there is no market for a plumber who is only able to do faucet repairs.

I find that the decrease in Mr. Federico's business following this accident is due to his inability to do the heavy labour that plumbing requires because he has weakness in his legs and difficulty with tasks such as standing on a ladder and doing overhead work, crouching, kneeling and walking on uneven surfaces which are tasks he had to do while working.

Having regard to Mr. Federico’s education, training and experience, I find that working as a plumber is suitable employment for him³⁶ because it is what he was educated, trained and worked as for the past 28 years.

I accept Mr. Federico's testimony, which was supported by Mrs. Federico, that because of his pain and physical restrictions, he has difficulty working full-time as a plumber. In conclusion, Mr. Federico cannot engage in his former employment. He therefore suffers a complete inability to engage in suitable employment based on his education, training and experience

Medical Benefits:

Law

Under section 14 of the 1996 Schedule, an insurer is required to pay certain medical benefits. Pursuant to subsection 38(2) of the 1996 Schedule, the insured must submit to the insurer an application for the benefit and a treatment plan. If the insurer refuses to pay for the medical benefit, pursuant to section 42 of the 1996 Schedule, the insurer may require the insured to be assessed in respect of the services at an insurer’s examination. Under subsection 42(11) of the 1996 Schedule, the insurer’s examiners are to report their findings to the insurer.

Psychological Services

The parties identified the account of Dr. Hill, a psychologist, in the amount of $1,953.58³⁷ as an issue. Mr. Federico was referred to Dr. Hill by his physiotherapist at Paramount Rehabilitation. The Treatment Plan dated January 14, 2008 states that Dr. Hill’s hourly rate is $132.34. He recommends 12 one hour sessions plus $63.72 for preparing the Treatment Plan, plus two hours for preparing his report. The total cost of this Treatment Plan is $1,953.58.

Mr. Federico testified that he was depressed because he was losing his business and because of the condition he was in. Mr. Federico found that meeting with Dr. Hill gave him the opportunity to talk about his problems. He felt that his sessions with Dr. Hill were beneficial and he was hoping he could continue seeing him. Mr. Federico noticed an increase in his anxiety and sleep difficulties when State Farm denied the Treatment Plan of Dr. Hill. He also worried a lot and got into more disagreements with his wife. Mrs. Federico also found that it was beneficial for her husband to talk to Dr. Hill because it gave him an opportunity to express his concerns about his business.

Dr. Marton conducted a psychological Insurer’s Examination of Mr. Federico to determine whether the Treatment Plan by Dr. Hill dated January 14, 2008 for psychological treatment was reasonable and necessary. He concluded that it was not.³⁸ Dr. Marton opined that the source of Mr. Federico’s complaints of pain and worry were accident related but that he had reached maximum medical recovery from a psychological perspective.

I prefer the evidence of Mr. and Mrs. Federico over that of Dr. Marton because they would be in a better position to know about Mr. Federico’s difficulty sleeping, the disagreements with his wife and his concern about losing his business. Although Dr. Marton concluded that Mr. Federico’s condition was accident related and that he’d reached maximum medical recovery, I find that it would benefit Mr. Federico to discuss his concerns about his business losses, for a business he’d built and worked at for 28 years before the accident, with a psychologist.

Based on the evidence of Mr. and Mrs. Federico, I find that it was reasonable for Mr. Federico to undergo psychological treatment. I therefore allow the account in the amount of $1,953.58 which is the cost on the Treatment Plan dated January 14, 2008.

Physiotherapy

Following this accident, Mr. Federico attended for treatment at Paramount Rehabilitation. In a Treatment Plan dated December 21, 2007,³⁹ a physiotherapist at Paramount Rehabilitation recommended physiotherapy to reduce Mr. Federico’s pain, increase his strength and range of motion, and return to his activities of normal living and pre-accident work activities. The cost of this Treatment Plan was $1,373.80.

As late as December 3, 5, 10, 12 and 17, 2007, the records of Paramount Rehabilitation state that Mr. Federico continues to have back pain.⁴⁰ Mr. Federico testified that he went for physiotherapy between January 2007 - April 2008 two to three times a week because of back, neck, neck and leg pain. He found that the physiotherapy helped decrease the pain in his back and neck and he felt better with the physiotherapy for 1-2 days after the session. It gave him a good night’s sleep. He stopped going for physiotherapy because State Farm stopped paying for it and he can’t afford it as he has a family to take care of. He wanted more physiotherapy because it helped him relax and get a full night’s sleep. Mrs. Federico testified that her husband’s physiotherapy alleviated his pain for approximately 1.5 days after a treatment.

The Insurer’s Examination by Ms. Rosalie Ip⁴¹ notes that Mr. Federico had tenderness in his lower back.⁴² Ms. Ip concludes that Mr. Federico’s treatment plateaued with respect to the soft-tissue injuries to his lumbar spine. She notes that his pre-existing left foot drop is affecting his recovery from injuries arising from this accident. She concludes that because his left foot drop pre-dates this accident, stimulation to it would not prove beneficial. State Farm relied upon her report and concluded that the Treatment Plan for physiotherapy was not reasonable or necessary.

In a rebuttal report from Paramount Rehabilitation,⁴³ Mr. Federico’s treating physiotherapist corrects Ms. Ip’s conclusions that Mr. Federico’s condition had “plateaued”, that Mr. Federico participates in an independent exercise program at Paramount Rehabilitation, and that the physiotherapist is providing Mr. Federico with hot-rock stimulation.

According to Paramount’s rebuttal report: (a) Mr. Federico’s treatment had not “plateaued”. Moreover, the physiotherapist felt that Mr. Federico would benefit from progressive core strengthening and lower back stability exercises; (b) although Mr. Federico’s routine involves a warm-up and stretching, that is not the only part of his treatment, which is dynamic in nature and varied over time; (c) the hot rock stimulation is part of Mr. Federico’s acupuncture, not physiotherapy.

I prefer the evidence of Mr. and Mrs. Federico, as well as that of Paramount Rehabilitation. Mr. and Mrs. Federico were both credible. Ms. Ip made a number of incorrect assumptions. In addition, if the treatment Mr. Federico was receiving provided him with a good night’s sleep and relieved his pain temporarily,⁴⁴ it was effective.

I therefore allow the account in the amount of $1,373.80, which is the cost on the Treatment Plan dated December 21, 2007.

Housekeeping:

Mr. Federico claims housekeeping expenses in the amount of $100 per week from January 13, 2008 to December 19, 2008.

Law

The test for entitlement to housekeeping expenses is set out in section 22 of the 1996 Schedule as follows:

(1) The insurer shall pay for reasonable and necessary additional expenses incurred by or on behalf of an insured person as a result of an accident for housekeeping and home maintenance services if, as a result of the accident, the insured person sustains an impairment that results in a substantial inability to perform the housekeeping and home maintenance services that he or she normally performed before the accident.

(2) The amount payable under this section shall not exceed $100 per week.

The test under section 22 involves a consideration of the housekeeping and home maintenance services the insured normally performed before the accident and then a consideration of whether the insured suffered a substantial inability to perform those services as a result of an impairment suffered in the motor vehicle accident. If it amounts to a substantial inability, the next question is whether the expenses the insured incurred as a result of that inability are reasonable and necessary.⁴⁵

In a Disability Certificate dated January 3, 2007, a physiotherapist from Paramount Rehabilitation certified that Mr. Federico was substantially unable to perform his pre-accident housekeeping and home maintenance activities. On January 4, 2007, Dr. Lake also certified that Mr. Federico was substantially unable to perform his pre-accident housekeeping and home maintenance activities.⁴⁶

In another Disability Certificate dated September 19, 2007, Dr. Lake, family doctor, certified that Mr. Federico was substantially unable to perform his pre-accident housekeeping and home maintenance activities. Dr. Lake anticipated that Mr. Federico’s inability to perform housekeeping and home maintenance tasks would last for more than 12 weeks.

Dr. Wong, physiatrist, concludes in his report of February 25, 2008, that “Mr. Federico continues to suffer a substantial inability to perform his pre-accident housekeeping and home maintenance activities as a result of his injuries.”⁴⁷ In his subsequent report of January 15, 2009, Dr. Wong states that “Mr. Federico continues to require assistance with heavier housekeeping and home maintenance activities as a result of his injuries.”⁴⁸

In August 2009, it was noted that heavier and longer duration household and yard maintenance tasks were still beyond Mr. Federico’s capability.⁴⁹ Dr. Wong also opined in August 2009 that Mr. Federico’s substantial inability to perform housekeeping tasks continued.

Mr. and Mrs. Federico testified that before the accident, Mr. Federico did a substantial amount of housework. Inside the house, he would vacuum once or twice a week, prepare meals approximately once a week or every other week, help put dishes away, wash the inside windows about twice a year, take down the horizontal blinds to wash them once a year. He retiled the floors in the laundry room, put in a new ceiling in the laundry room; he also built a new vanity and a new storage unit and a cedar armoire. He cleared the blocked drains, he did painting and drywalling; his passion after work was doing carpentry; he did all the repairs in the house.

Mr. and Mrs. Federico testified that Mr. Federico also did a substantial amount of work outside the house prior to the accident. He did lawn care, snow shovelling, tree trimming, power washing his windows, sealing eaves troughs yearly. The Federicos have a fish pond in the backyard which required that a tarp be put on it which needed to be cleaned and required about 1-1.5 hours per week to maintain; he shared the lawn mowing with his wife; he power cleaned his driveway once a year; the flower beds were maintained together with his wife.

Following the accident, Mr. Federico’s son-in-law Vince, his daughter’s boyfriend Roberto and his brother-in-law Joe helped with exterior tasks. After the accident, in terms of outdoor tasks, Mr. Federico only trims the edge of the grass and blows the grass trimmings with a blower off the walkway and driveway.

On December 17, 2007, the Functional Abilities examiner, Ms. Hanna, concluded that Mr. Federico had a substantial inability to complete “some” ⁵⁰ of his housekeeping activities, but that he could perform tasks that do not require prolonged weight bearing, sustained stooping or carrying more than 10 lbs. ⁵¹ Ms. Hanna further concluded that Mr. Federico continued to require housekeeping and home maintenance assistance for heavier tasks involving bilateral grip, vacuuming, carrying a laundry basket or groceries, snow shovelling, climbing ladders and garbage removal.⁵² The examining physiatrist, Dr. Ismail, signed this report and testified that he reviewed it.

However, on December 17, 2007, Dr. Ismail concluded that Mr. Federico did not suffer a substantial inability to perform the housekeeping and home maintenance tasks he normally performed prior to the accident.⁵³ I find that Dr. Ismail was not credible because he did not explain why he came to a contrary conclusion regarding housekeeping and home maintenance benefits, having reviewed and signed the report of the Functional Abilities Evaluator.

Mr. Federico’s evidence, which I accept as accurate, is that when State Farm terminated his housekeeping benefits in January 2008, he still was not able to do the housekeeping tasks he did before the accident. The difference between what Mr. Federico did before the accident and what he could do after the accident amounts to a substantial inability to perform his normal housekeeping tasks.

I heard no evidence or argument on a reasonable hourly rate. I find that the expenses Mr. Federico incurred as a result of his inability are reasonable and necessary. Mr. Federico is entitled to housekeeping for services at the rate of $100 per week for the period January 13, 2008 to December 19, 2008 pursuant to section 22 of the 1996 Schedule.

Section 24:

Law

Section 24 of the 1996 Schedule defines what examinations and assessments an insurer must pay for. The Applicant’s right to claim section 24 benefits crystalized, and this hearing was commenced, prior to the New Regulation taking effect.

At the time the assessment was requested, the relevant part of section 24 read as follows:

The insurer shall pay the following expenses incurred by or on behalf of an insured person:

(11) Reasonable fees, other than fees referred to in any of paragraphs 1 to 10, that are charged by a member of a health profession or a social worker for conducting an assessment or examination and preparing a report if the assessment or examination is reasonably required in connection with a benefit that is claimed or in connection with the preparation of a treatment plan, disability certificate, assessment of attendant care needs or application for the determination of a catastrophic impairment, and

iii. the insured person applied for approval of the assessment or examination either in a treatment plan submitted under section 38 or by way of a separate application submitted under section 38.2 ...

The test for entitlement to the cost of an examination involves a determination of whether the assessment was reasonably required in connection with a benefit that is claimed.

An MRI for $995 of the lumbar spine was recommended by MedCentra pursuant to section 24 of the 1996 Schedule. On February 2, 2007, State Farm denied this expense.⁵⁴ Mr. Federico’s treating neurologist, Dr. Bril, referred him for an MRI of the lumbar spine and it was conducted on March 7, 2007 and paid for by OHIP. ⁵⁵ State Farm submitted at the hearing that because OHIP paid for the MRI, Mr. Federico is not entitled to claim the cost because it would amount to a windfall for him. I disagree.

I find that the MRI of the lumbar spine was reasonable and necessary pursuant to section 24 at the time it was requested by Mr. Federico because his treating neurologist in fact referred him for it. If State Farm’s argument succeeded, it would undermine the statutory goal of prompt and timely payment of expenses.⁵⁶ For example, an insurer could reject a claim of an insured in the hope that OHIP will pay for it.

I heard no evidence that the cost of the assessment was not reasonable. I therefore allow the account in the amount of $995, which is the cost of the assessment.

Interest:

Mr. Federico claimed interest under section 46(2) of the 1996 Schedule which obliges an insurer to pay interest on overdue amounts at the rate of 2% per month, compounded monthly. Section 46 is contained in Part X of the 1996 Schedule.

The New Regulation prescribes interest at the rate of 1% per month, compounded monthly.⁵⁷

The question is whether State Farm is obliged to pay Mr. Federico interest on overdue amounts at the rate of 2% per month compounded monthly, 1% per month compounded monthly, or some combination of the two rates. Both parties provided written submissions on the issue. Both parties agree that up to August 31, 2010 the rate of interest is 2% per month compounded monthly. They disagree on whether the rate of interest after September 1, 2010 is 1% per month compounded monthly or 2% per month compounded monthly.

Mr. Federico submitted that interest is payable at the rate of 2% compounded monthly both before and after September 1, 2010. According to the Applicant, his right to interest under subsection 46(2) of the 1996 Schedule is a substantive right which vested on the date of the accident or in the alternative, prior to September 1, 2010 because he disputed the denial of his benefits and interest before September 1, 2010 and that only clear legislative intent can interfere with such rights.

State Farm submitted that based on subsection 51(2) of the New Regulation and the Superintendent’s Bulletin 04/10,⁵⁸ interest that is payable from September 1, 2010 and ongoing is payable at a rate of 1% per month compounded monthly.

To reiterate, the relevant changes to the 1996 Schedule are as follows:⁵⁹

(1) In this section,

“New Regulation” means Ontario Regulation 34/10 (Statutory Accident Benefits Schedule — Effective September 1, 2010), made under the Act.

(1.2) Section 24 and Parts X, XI, XII, XIII and XV do not apply after August 31, 2010.

(1.3) No amount referred to in this Regulation shall be paid after August 31, 2010.

(1.4) An amount that would, but for subsection (1.3), be paid under this Regulation after August 31, 2010 shall be paid under the New Regulation, but in the amount determined,

(a) under this Regulation, other than section 24; or

(b) under subsections 25 (1), (3), (4) and (5) of the New Regulation.

Because Mr. Federico’s accident occurred on December 20, 2006, the accident is governed by the transitional rules set out in subsection 2(2) of the New Regulation:⁶⁰

(2) … Parts X … apply with such modifications as are necessary in respect of benefits provided under the Old Regulation with respect to accidents that occurred on or after November 1, 1996 and before September 1, 2010 and, for that purpose, the following rules apply:

An amount that would, but for subsection 3(1.3) of the Old Regulation, be paid under the Old Regulation after August 31, 2010 shall be paid under this Regulation in the amount determined,

i. under the Old Regulation, other than under section 24 of that Regulation, or

ii. under subsections 25 (1), (3), (4) and (5).

According to the Superintendent’s Bulletin No A-04/10, Transition to the New Statutory Accidents Benefits Schedule - Effective September 1, 2010:

“Interest on amounts that become overdue on or after September 1, 2010, in respect to old accidents will accrue at the New SABS rate of one percent per month and be compounded monthly (Old Sabs s.3(1.2), New SABS s.2(2) (emphasis added).”⁶¹

“Interest on amounts that become overdue before September 1, 2010, in respect to old accidents, will accrue at the Old SABS rate of two per cent per month and be compounded monthly both before and after September 1, 2010 (Old SABS s.3(1.4); New SABS s.2(2) 2) (emphasis added).”⁶²

The above excerpts on interest are confusing. Bulletins by the Superintendent are not law. Interest is a matter of substantive law and is compensatory. ⁶³

The applicable transition rule is subparagraph 2(2)2.i. of the New Regulation.⁶⁴ The rule is that the amount is determined under the Old Regulation, or as stated “an amount that would, but for subsection 3(1.3) of the New Regulation, be paid under the Old Regulation after August 31, 2010 shall be paid under this Regulation in the amount determined (i) under the Old Regulation …”⁶⁵

Firstly, the New Regulation does not state that the insured’s substantive right under subsection 46(2) of the Old Regulation is altered. Although subsections 1.2 and 1.3 of O.Reg. 35/10 provide that Part X of the 1996 Schedule, in which subsection 46(2) of the Old Regulation is contained, does not apply after August 31, 2010, it does not authorize an interference with a vested right under subsection 46(2) of the Old Regulation. I find that the New Regulation contains no clear legislative intent to rebut the presumption against interference with vested rights.

Secondly, paragraph 3(1.4)(a) of O.Reg. 35/10 supports the interpretation that after August 31, 2010, interest is payable under the New Regulation but in the amount determined under the Old Regulation. This paragraph does not state that a vested right under subsection 46(2) is altered.

Thirdly, the reference in subparagraph 2(2)2.i. of the New Regulation does not authorize an interference with a vested right under subsection 46(2). Rather, this paragraph is consistent with the interpretation that the Applicant’s vested right under the earlier interest section is not to be interfered with.

Because the Old Regulation prescribed the rate of 2%, I find that the applicable rate of interest both before after September 1, 2010 is 2% per month compounded monthly.

Special Award:

Under subsection 282(10) of the Insurance Act, an arbitrator “shall award a lump sum of up to 50% of the amount to which the person was entitled at the time of the award” plus interest if the arbitrator finds that an insurer has unreasonably withheld or delayed payments. It is inappropriate to order a special award expressed as a percentage of benefits owing, plus interest, without also considering whether the amount when quantified is appropriate. ⁶⁶

The Applicant relies upon State Farm inappropriately assessing its own reports and its refusal to keep an open mind with respect to the insured’s reports. More particularly, State Farm terminated income replacement benefits and housekeeping benefits despite its own assessors opining that Mr. Federico was unable to work and would have difficulty with various tasks.

I am unable to quantify the amount of the special award without the income replacement housekeeping benefit and interest calculations. For that reason, I make a special award in relation to the income replacement and housekeeping benefits, in favour of Mr. Federico in an amount I will determine, once I am provided with the income replacement benefit, housekeeping and interest calculations.

The parties shall provide their written submissions on the amount of the special award in accordance with the following timetable: The Applicant shall have 30 days from receipt of this decision to provide his submissions. The Insurer shall have 30 days from the day following receipt of the Applicant’s submissions to provide its responding written submissions. The Applicant shall have 20 days from the day following receipt of the Insurer’s submissions to provide his reply submissions, if any. If the parties are unable to comply with the aforementioned timetable, they shall speak amongst themselves and arrange a mutually convenient timetable and notify me of the revised timetable.

The written submissions are limited to 20 pages, double spaced, single sided, 12 point font, exclusive of calculations. The parties shall provide calculations ranging between 5% to 50% in 5% increments.

EXPENSES:

Expenses were not addressed at the hearing. If the parties are unable to agree on the issue of entitlement to or amount of the expenses, they may make submissions on both issues in accordance with Rule 79 of the Dispute Resolution Practice Code - Fourth Edition after the parties have received my decision on the special award.

March 23, 2012

Maggy Murray Arbitrator

Date

Financial Services Commission of Ontario