Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2012 ONFSCDRS 54

FSCO A10-003289

BETWEEN:

JOSHUA FREDRIC

Applicant

and

AVIVA CANADA INC.

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Suesan Alves

Heard: By telephone conference call on November 24, 2011.

Appearances: Alexander Voudouris and Amit Gogna for Mr. Fredric Sean Giovannetti for Aviva Canada Inc.

Issues:

Aviva alleges that Mr. Fredric settled all his claims for statutory accident benefits payable under the Schedule¹ as a result of a November 7, 2008 motor vehicle accident. Aviva submits that he failed to rescind the settlement within the two-day cooling off period permitted in the Settlement Regulation,² is bound by the settlement, and is precluded from proceeding to arbitration.

Mr. Fredric submits that the disclosure notice Aviva gave him failed to comply with the requirements of the Settlement Regulation, and he was entitled to rescind the agreement after the two-day period, in accordance with ss. 9.1(5) of the Settlement Regulation. In the alternative, Mr. Fredric submits that his rescission was timely under ss. 9.1(4) of the Settlement Regulation.

He submits he is entitled to proceed to arbitration for a determination of his entitlement to statutory accident benefits.

The issues in this hearing are:

1. Did Mr. Fredric rescind the settlement of his claims for statutory accident benefits arising from the motor vehicle accident of November 7, 2008? If not, is he precluded from proceeding to arbitrate his entitlement to statutory accident benefits arising from that accident?

2. Which party is entitled to its expenses of the hearing?

Result:

1. Mr. Fredric rescinded the settlement agreement under ss 9.1(5) of the Settlement Regulation. He may proceed to arbitrate his entitlement to further statutory accident benefits arising from the motor vehicle accident of November 7, 2008.

2. If the parties are unable to agree on expenses, they should follow the procedure set out in Rule 79 of Dispute Resolution Practice Code—Fourth Edition, Updated August 2011.

EVIDENCE AND ANALYSIS:

Background

On May 30, 2011, Mr. Fredric agreed to resolve his claims for statutory accident benefits from a November 2008 accident on a full and final basis at a pre-hearing held at the Financial Services Commission of Ontario. He attended with counsel, Mr. Gogna. The Insurer’s representative, Ms. Mantha attended with counsel, Mr. Giovannetti. Ms. Mantha signed the Settlement Disclosure Notice that day, as did Mr. Fredric.

The pre-hearing arbitrator reported that the parties advised him that they settled the matter, subject to compliance with the Settlement Regulation.

On June 1, 2011, counsel for the Insurer sent counsel for the Applicant a release for his client’s signature by fax.

On June 10, 2011, counsel for the Applicant sent counsel for the Insurer an e-mail in which he stated that his client “will not execute the release provided ”and asked: “Please advise if settlement will be in effect without it.” Counsel for the Insurer replied that “As he signed the Settlement Disclosure Notice and the cooling off period has expired, the settlement is in effect. We require however that the Release is signed …”

On July 4, 2011, Mr. Fredric signed a release after 5:00 p.m.

On July 5, 2011, counsel for the Applicant sent a letter to counsel for Aviva by courier advising that his client was rescinding the settlement. He enclosed the original executed release and a copy of a letter to the Financial Services Commission of Ontario in which he asked for a hearing to be scheduled to determine Mr. Fredric’s entitlement to his claims for statutory accident benefits, interest and expenses.

On July 8, 2011, counsel for Aviva received the letter rescinding the settlement.

On July 13, 2011, counsel for Aviva sent the settlement funds to counsel for the Applicant.

On July 18, 2011, counsel for Mr. Fredric returned the settlement funds to counsel for Aviva.

Law

The Settlement Regulation is set out in Appendix A. That Regulation applies whenever an insurer and an insured person reach an agreement that finally disposes of a claim or dispute in respect of one or more statutory accident benefits.³

In those circumstances, the Settlement Regulation requires an insurer to give an insured person a written disclosure notice signed by the insurer,⁴ in a form approved by the Superintendent, which contains information prescribed by the Regulation.⁵

In summary, the insurer is required to give the insured a disclosure notice which states the insurer’s settlement offer; describes the benefits that may be available under the Schedule, the consequences of the settlement on those benefits; provides information on the right to rescind the settlement; advises the insured person to consider seeking independent legal, financial and medical advice before entering into the settlement; and provides a statement for the insured person to sign to acknowledge that s/he has read the disclosure notice and considered seeking such advice before entering into the settlement.

Where an insurer complies with the requirements of subsections 9.1(2) and 9.1(3) of the Settlement Regulation, an insured person may rescind the settlement within two business days after the later of signing the disclosure notice or the release.⁶ Where an insurer has not complied with those requirements, an insured person may rescind the settlement even after that period.⁷

The language in ss. 9.1(5) permits an insured person to rescind “if the insurer has not complied with subsections (2) and (3).” In ordinary speech, the word ‘and’ is used conjunctively. However it can also be used disjunctively.⁸ In my view, the legislature intended a disjunctive use for the following reasons.

Subsection 9.1(2) requires an insurer to give a written disclosure notice with respect to the settlement. Subsection 9.1(3) particularizes what the disclosure notice must contain. Construing the word ‘and’ conjunctively would lead to an absurd result in that in order for an insured person to have the right to rescind under ss. 9.1(5), an insurer would have to both fail to give the disclosure notice and give a disclosure notice that failed to provide specific information required by the Regulation.

I find that the public policy articulated in the Settlement Regulation is that insurers must provide adequate information to insured persons in written form so that an informed settlement can be achieved. I find that in this subsection the word ‘and’ is used disjunctively, as this is more consonant with the object of the Regulation. Thus in my view the failure to comply with subsection 9.1(2) or with any of the paragraphs in subsection 9.1(3) of the Settlement Regulation may give rise to the right to rescind under ss. 9.1(5).

Whether the insured person relies on the right to rescind in ss. 9.1(4) or ss.9.1(5), the insured person rescinds by delivering a written notice to the office of the insurer or its representative and returning any money s/he received in consideration for the settlement.⁹

The case law establishes that the Settlement Regulation is remedial, geared to protect the consumer, and that bright-line boundaries are to be imposed between the permissible and the impermissible when interpreting the Settlement Regulation. Insurers must provide information in a clear and straight-forward manner directed towards an unsophisticated person. The focus is on the insurer’s compliance; the fact that the insured person was represented at the time of the settlement does not relieve the insurer from compliance with the informational requirements of the Settlement Regulation. Further, the defect in the disclosure notice need not be the cause of the rescission.¹⁰

The Settlement Regulation applies in this case because Mr. Fredric settled all of his claims for statutory accident benefits with Aviva as a result of the November 2008 accident. The issue is whether the disclosure notice provided him with information in relation to his right to rescind the settlement, as required by the Settlement Regulation.

Did the disclosure notice comply with the Regulation?

Paragraph 3 of subsection 9.1(3) of the Settlement Regulation sets out the information that must be included in the disclosure notice with respect to the right to rescind a settlement. It requires:

A statement that the insured person may, within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release, rescind the settlement by delivering a written notice to the office of the insurer or its representative and returning any money received by the insured person as consideration for the settlement.

The Settlement Regulation contemplates the possibility that the signing of the disclosure notice and the signing of the release may take place on separate occasions. Logically, there appear to be three circumstances that will need to be addressed in the disclosure notice if both documents are signed:

1. The disclosure notice and the release may be signed on the same day.
2. The release will be signed first and the disclosure notice later, or,
3. The disclosure notice will be signed first and the release later, as happened in this case.

The form of disclosure notice used in this case is set out as Appendix B. For ease of reference, the statements in the disclosure notice which refer to Mr. Fredric’s right to rescind are set out below.

At page one: “…Your insurer will probably also give you a release to sign. … If you sign this settlement disclosure notice and a release, you will be giving up rights you may have now or in future, even if your condition changes. If you do sign this notice and a release you have 2 business days to change your mind.”

At page six, in a text box immediately below the line for the signature of the insured:

“IF YOU CHANGE YOUR MIND

If you change your mind after agreeing to settle your claim by signing a release, you must:

Notify the insurer in writing and return any settlement funds you received within 2 business days after you signed the release.

If you signed a release and later signed this disclosure notice, you have two business days from when you signed the disclosure notice in which to notify the insurer and return any settlement funds you received. ”

I find that the disclosure notice does not contain a statement that the insured person may,” within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release, rescind the settlement.” [Italics added] The provision of this information is required by paragraph 3 of subsection 9.1(3) of the Settlement Regulation.

Mr. Fredric signed the disclosure notice on May 30, 2011. Several weeks later, on July 4, 2011, he signed the release. While the text box information contains a statement which tells the insured person what to do if s/he signed a release first and a disclosure notice second, the disclosure notice does not contain a similar statement telling the insured in a straight-forward manner what to do if s/he signed the disclosure notice first and later the release.

An insured person who signed the disclosure notice first and the release several weeks later is not provided with adequate information to determine if the two business days were to be counted after s/he signed the disclosure notice or after he signed the release or when the two-day period commences, so that he would know if s/he could rescind the settlement.

I find that a key requirement of the Regulation is that the disclosure notice provide information about the right to rescind the settlement. In this case, the disclosure notice failed to provide information in a clear and straightforward manner, about one of the key requirements of the Regulation, namely the right to rescind.

Questions that could reasonably be raised by an insured person in Mr. Fredric’s circumstances would include: does the disclosure notice mean that he has two business days to rescind only if he signs both the release and the disclosure notice at the same time; can he rescind if he only signs the disclosure notice, but not the release; can he rescind at all if he signs the release but not the disclosure notice.

Counsel for Aviva submitted that on page six of the disclosure notice, the first three lines of text in the text box immediately below the space provided for the insured’s signature, clarify the statement on page one, “If you sign this notice and a release you have 2 business days to change your mind” and provide an insured with clear direction with respect to the right to rescind where the disclosure notice is signed first and the release signed later. I disagree.

The statement “If you change your mind after agreeing to settle your claim by signing a release” suggests that an insured person could settle a claim or dispute which finally disposes of his or her entitlement to one or more benefits under the Schedule, by means of a release alone, without a disclosure notice. This is contrary to the Settlement Regulation, which requires the insurer to give a disclosure notice to the insured person where there is such a settlement. In my view, in the absence of a disclosure notice, ss. 9.1(5) gives the insured person a right to rescind the settlement at his or her option even after the two-day cooling off period.

I find that important information in the Settlement Regulation was not conveyed by the text of the disclosure notice. For these reasons I conclude that the Applicant was entitled to rescind the settlement even beyond the two-day cooling off period as provided by subsection 9.1(5) of the Settlement Regulation. I find Mr. Fredric rescinded the settlement by the letter from his counsel to counsel for Aviva which was delivered on July 8, 2011.

Is Aviva responsible for the defects in the disclosure notice?

Mr. Fredric complains of defects in the disclosure form approved by the Superintendent. Aviva submits that it was required to use the form by ss.9.1 (3) of the Settlement Regulation, which states “the disclosure notice shall be in a form approved by the Superintendent and shall contain the following information:”

A similar argument was advanced with respect to similar language contained in a Regulation in the case of Smith v. Co-operators, before the Supreme Court of Canada. In that case, the argument was rejected, and the court held that insurers could not shelter behind the Superintendent’s approval of a form as a way of discharging an obligation imposed on insurers by a regulation.¹¹

Co-operators argued that it refused the benefit using a standard form approved by the Commissioner of Insurance for the purpose of advising a claimant of the right to dispute a refusal of a benefit. It submitted that by virtue of sections 94, 62(7) and 62(8) of the Schedule it was required to use that very form, because that regulation required that the document used to refuse the benefit “shall be in a form approved by the Commissioner.”

The Court held that there was nothing in the provision that requires the documents be in a form issued by the Commissioner. The industry practice of using the form prescribed by the Commissioner cannot be a substitute for conformity with an insurer’s obligations under section 71 of the Schedule. The court reasoned that “it is entirely within the power of the insurance company to see that there is compliance…”¹²

In my view, a similar result follows in this case. I conclude that the obligation to provide the information required by the Settlement Regulation is that of the insurer. I agree with the submission of counsel for the Applicant that there is nothing to prevent an insurer from amending the content of the form and seeking the Superintendent’s approval. As Delegate Blackman has stated: “The burden of an incorrect form should not fall on the insured”¹³ For these reasons, I conclude that the obligation to comply with the Regulation was that of Aviva.

Is the Wachmenko decision binding?

Counsel for the Insurer submitted that the wording used in the disclosure notice at issue in this case was considered and approved by Director’s Delegate Makepeace in the case of Wachmenko and Primmum Insurance Co.¹⁴ He submitted that decision is binding on me. I disagree.

I find Wachmenko distinguishable on its facts. The Delegate’s comments with respect to the adequacy of the disclosure notice, were made in the absence of any issue having been taken by the parties as to its adequacy, were not essential to her reasoning or conclusion, were obiter and therefore not binding on me in this case.

In Wachmenko the insured and the insurer reached an agreement and Mrs. Wachmenko signed the disclosure notice and the release on the same day. The insurer received notice rescinding the settlement about a month later when the Financial Services Commission of Ontario copied Primmum with Mrs. Wachmenko’s letter rescinding the agreement. In determining whether the insured rescinded the settlement, the Arbitrator stated “Mrs. Wachmenko raised no issue of non-compliance with the required form or content of the material and admitted signing and initialling the forms. ...On examination, the forms appear to be in compliance with the requirements set out in section 9 of the Settlement Regulation.”

The Delegate’s reasons on this issue state “On appeal Mrs. Wachmenko has not identified any deficiency in the forms and concedes that she signed and initialled them. Like the arbitrator, I can find no basis for allowing Mrs. Wachmenko to rescind the settlement based on any non-compliance with the regulation on the part of Primmum.”

The Delegate held: “In this case, Primmum did its part by following the regulation’s rules in reaching the settlement, but Mrs. Wachmenko did not follow the rules when she attempted to withdraw from that agreement. “I agree with the submission of counsel for the Applicant that this is the ratio of Wachmenko with respect to whether the settlement was binding on the insured.

While the Delegate went on to state: “The Settlement Disclosure Notice appears to be in the appropriate form, including the required explanations and notices as to the consequences of settlement”, these comments were made in the absence of any issue having been raised by or argued by the parties that the disclosure notice failed to comply with the requirements of the Settlement Regulation.

In this case, the insured identified specific defects in the disclosure notice. That issue is distinct from that decided by the Delegate. For these reasons I conclude that Wachmenko is not binding authority in the circumstances of this case.

The Applicant’s alternative argument

In the event that I am wrong, I will briefly address the alternative argument raised by the Applicant that Mr. Fredric rescinded the agreement within the two-day cooling off period provided under ss. 9.1(4) of the Regulation. I reject the argument.

Mr. Fredric had two business days after he signed the release on July 4, 2011 to deliver the letter rescinding the settlement, or until July 6, 2011.

I am not persuaded that I should find that because Mr. Fredric signed the disclosure notice after 4:45 p.m. on July 4, 2011, that it was signed the following day on July 5, 2011. I also reject the argument that I should extend the mailbox doctrine to create a courier doctrine where delivery is effective upon giving the document to the courier.

There is a specific provision in the Dispute Resolution Practice Code which deals with service or the delivery of documents by courier. Rule 7.3(c) of the Code provides that “if a document is served by courier service, including Priority Courier, service takes place on the earlier of receipt, or on the second day after the document is given to the courier.” Although the letter rescinding the agreement was received by counsel for Aviva on July 8, 2011, it would be considered delivered on July 7, 2011 under the Code.

Can the Applicant proceed to arbitration?

I find that Mr. Fredric can proceed to arbitration. Since I have concluded that he rescinded the settlement, the restriction in the settlement on his right to arbitrate his entitlement to statutory accident benefits as a result of the November 2008 accident is void.

Expenses

If the parties are unable to agree on expenses, they should follow the procedure set out in Rule 79 of Dispute Resolution Practice Code—Fourth Edition, Updated August 2011.

March 29, 2012

Suesan Alves Arbitrator

Date

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2012 ONFSCDRS 54

FSCO A10-003289

BETWEEN:

JOSHUA FREDRIC

Applicant

and

AVIVA CANADA INC.

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Mr. Fredric rescinded the settlement with Aviva pursuant to ss 9.1(5) of the Settlement Regulation.

2. Mr. Fredric may proceed to an arbitration hearing for a determination of his entitlement to statutory accident benefits arising from the motor vehicle accident on November 7, 2008.

3. If the parties are unable to agree on expenses, they should follow the procedure set out in Rule 79 of Dispute Resolution Practice Code—Fourth Edition, Updated August 2011

March 29, 2012

Suesan Alves Arbitrator

Date

APPENDIX A

Settlements — Statutory Accident Benefits

9.1 (1) In this section,

“settlement” means an agreement between an insurer and an insured person that finally disposes of a claim or dispute in respect of the insured person’s entitlement to one or more benefits under the Statutory Accident Benefits Schedule. O. Reg. 780/93, s. 7.

(2) The insurer shall give the insured person a written disclosure notice, signed by the insurer, with respect to the settlement. O. Reg. 483/01, s. 1.

(3) The disclosure notice shall be in a form approved by the Superintendent and shall contain the following information:

1. The insurer’s offer with respect to the settlement.

2. A description of the benefits that may be available to the insured person under the Statutory Accident Benefits Schedule.

3. A statement that the insured person may, within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release, rescind the settlement by delivering a written notice to the office of the insurer or its representative and returning any money received by the insured person as consideration for the settlement.

4. A description of the consequences of the settlement on the benefits described under paragraph 2 including,

i. a statement of the restrictions contained in the settlement on the insured person’s right to mediate, litigate, arbitrate, appeal or apply to vary an order under sections 280 to 284 of the Act, and

ii. a statement that the tax implications of the settlement may be different from the tax implications of the benefits described under paragraph 2.

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

6. A statement for signature by the insured person acknowledging that he or she has read the disclosure notice and considered seeking independent legal, financial and medical advice before entering into the settlement. O. Reg. 483/01, s. 1.

(4) The insured person may rescind the settlement within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release. O. Reg. 483/01, s. 1.

(5) The insured person may rescind the settlement after the period referred to in subsection (4) if the insurer has not complied with subsections (2) and (3). O. Reg. 483/01, s. 1.

(6) Subsections (4) and (5) do not apply with respect to a settlement that has been approved by a court under Rule 7 of the Rules of Civil Procedure (Parties under Disability). O. Reg. 483/01, s. 1.

(7) The insured person shall rescind a settlement under subsection (4) or (5) by delivering a written notice to the office of the insurer or its representative and returning any money received by the insured person as consideration for the settlement. O. Reg. 483/01, s. 1.

(8) No person may commence a mediation proceeding under section 280 of the Act with respect to benefits that were the subject of a settlement or a purported settlement unless the person has returned the money received as consideration for the settlement. O. Reg. 483/01, s. 1.

(9) If the insured person returns money to the insurer under subsection (7) or (8) and a dispute arises between the insurer and the insured person with respect to the validity of the purported settlement or the right of the insured person to rescind the settlement, the insurer shall hold the money in trust until the matter is determined, at which time the amount and any income on the amount,

(a) shall be paid to the insured, if it is determined or agreed that there was a valid settlement that was not rescinded; and

(b) shall be returned to the insurer, if it is determined or agreed that there was no settlement, or that the settlement was invalid or was rescinded. O. Reg. 483/01, s. 1.

(10) A restriction on an insured person’s right to mediate, litigate, arbitrate, appeal or apply to vary an order under sections 280 to 284 of the Act is not void under subsection 279 (2) of the Act if,

(a) the restriction is contained in a settlement;

(b) the settlement is entered into on or after the first anniversary of the day of the accident that gave rise to the claim; and

(c) the insurer complied with subsections (2) and (3). O. Reg. 483/01, s. 1; O. Reg. 275/03, s. 3 (1).

(11) Despite clause (10) (b), a restriction contained in a settlement entered into before the first anniversary of the day of the accident that gave rise to the claim is not void under subsection 279 (2) of the Act if, in respect of the claim,

(a) the insured person brought a proceeding in a court ;of competent jurisdiction under clause 281 (1) (a) of the Act and examinations for discovery have commenced;

(b) the insured person referred the issues in dispute to an arbitrator under clause 281 (1) (b) of the Act and a pre-hearing conference has been completed; or

(c) the insurer and the insured agreed under clause 281 (1) (c) of the Act to submit the issues in dispute for arbitration in accordance with the Arbitration Act, 1991 and an arbitration agreement under that Act has been entered into. O. Reg. 275/03, s. 3 (2).

(12) Clause (10) (b) and subsection (11) apply to claims that have not settled before October 1, 2003, unless a disclosure notice under subsection (2) in respect of the settlement or purported settlement was given to the insured person before that date. O. Reg. 275/03, s. 3 (2).

9.2 (1) Subsections 9.1 (2) to (8) apply only with respect to settlements made on or after March 1, 2002. O. Reg. 483/01, s. 2.

(2) Subsections 9.1 (2) to (5), as they read on February 28, 2002, continue to apply with respect to settlements for which written notice under subsection 9.1 (2) was given before March 1, 2002. O. Reg. sixty days after the date on which the application for the appointment of a mediator is filed. R.R.O. 1990, Reg. 664, s. 10.

APPENDIX B

SETTLEMENT DISCLOSURE
NOTICE

Final Settlement
of a Statutory Accident Benefits Claim (For accidents on or after November 1, 1996)

NOTICE AND CAUTION

Your insurer is required to give you this SETTLEMENT DISCLOSURE NOTICE if you have both agreed on a cash settlement that will permanently end your entitlement to one or more accident benefits. This SETTLEMENT DISCLOSURE NOTICE must be completed and signed by your insurer. Your insurer will probably also give you a Release to sign.

• YOU CANNOT ENTER INTO A CASH SETTLEMENT WITHIN A YEAR FROM THE DATE OF THE ACCIDENT, WITH SOME EXCEPTIONS.

• YOU SHOULD CONSIDER SEEKING LEGAL, FINANCIAL AND MEDICAL ADVICE BEFORE YOU SIGN A RELEASE.

• IF YOU SIGN THIS SETTLEMENT DISCLOSURE NOTICE AND A RELEASE, YOU WILL BE GIVING UP RIGHTS YOU MAY HAVE NOW OR IN FUTURE, EVEN IF YOUR CONDITION CHANGES.

• IF YOU CHOOSE NOT TO SIGN, YOUR BENEFITS WILL NOT BE AFFECTED OR REDUCED.

• IF YOU DO SIGN THIS NOTICE AND A RELEASE YOU HAVE 2 BUSINESS DAYS TO CHANGE YOUR MIND.

• YOU HAVE THE RIGHT TO SEEK ANY MEDICAL INFORMATION RELATING TO YOUR CLAIM IN YOUR INSURER’S FILE AND TO OBTAIN A COPY AT THE INSURER’S EXPENSE. IF YOU WANT TO SEE THIS INFORMATION, ASK YOUR INSURER FOR A COPY.

PLEASE READ THIS ENTIRE DOCUMENT CAREFULLY

*You may enter into a cash settlement within a year from the date of the accident if within the same period you brought a lawsuit and commenced discovery; or you referred the dispute to an arbitrator at the Financial Services Commission of Ontario and completed a pre-hearing conference; or you and your insurer agreed to a private arbitration and entered into an arbitration agreement.

Effective (2010-09-01) SDN FSCO (1222E) Page 1 of 6

INSURER’S OFFER TO SETTLE BENEFITS

OFFER TO SETTLE INCOME REPLACEMENT BENEFITS

You have been offered $ for all past and future income replacement benefits.

OFFER TO SETTLE NON-EARNER BENEFITS

You have been offered $ for all past and future non-earner benefits.

OFFER TO SETTLE CAREGIVER BENEFITS

You have been offered $ for all past and future caregiver benefits.

OFFER TO SETTLE MEDICAL BENEFITS

You have been offered $ for all past and future medical benefits.

OFFER TO SETTLE REHABILITATION BENEFITS

You have been offered $ for all past and future rehabilitation benefits.

OFFER TO SETTLE ATTENDANT CARE BENEFITS

You have been offered $ for all past and future attendant care benefits.

OFFER TO SETTLE DEATH AND FUNERAL BENEFITS

You have been offered $ for all past and future death benefits and funeral benefits.

OFFER TO SETTLE BENEFITS FOR PAYMENT OF OTHER EXPENSES (specify)

You have been offered $ for all past and future benefits for other expenses.

OFFER TO SETTLE ANY OTHER ITEMS (specify)

You have been offered $ for other items.

TOTAL OFFER $

Provide any other details: This offer includes all expenses incurred for goods and services as previously approved. ‰This offer does not include all expenses incurred for goods and services as previously approved.

Effective (2010-09-01) SDN-198 FSCO (1222E) Page 2 of 6

WHAT DOES IT MEAN IF YOU SETTLE YOUR CLAIM?

THERE ARE A NUMBER OF CONSEQUENCES OF THIS SETTLEMENT IF YOU SIGN THIS NOTICE AND A RELEASE:

• You are finally and permanently settling your claim for the benefits specified. You are forever giving up the right to claim such benefits in the future, even if your medical problems get worse.

• You are permanently giving up your right under the Insurance Act to mediate, litigate, arbitrate, appeal, apply to vary, or to proceed to judicial review by a court, concerning the benefits which are the subject of the settlement.

• The tax implications of the settlement may be different than the tax implications of the benefits described. In general, any investment income earned on the cash amount of the settlement may be subject to tax.

Example

If you are entitled to receive weekly income benefits, and agree to settle your claim for $20,000.00 which you then invest, any interest income you receive will likely be taxable. If you choose to receive weekly income benefits instead of a settlement, your weekly benefits will probably not be taxable.

YOU ARE ADVISED TO CONSIDER SEEKING LEGAL, FINANCIAL AND MEDICAL ADVICE BEFORE ENTERING INTO ANY SETTLEMENT. IT IS ESPECIALLY IMPORTANT TO SEEK ADVICE IF YOUR IMPAIRMENT IS “CATASTROPHIC”.*

*What is a “catastrophic impairment”?

The exact definition of “catastrophic impairment” depends on the date of your accident. “catastrophic impairment” includes: paraplegia or quadriplegia, certain amputation or other impairments causing total and permanent loss of use of one or more arm(s) or leg(s), total loss of vision, certain brain injuries, significant or extreme mental and behavioural disorders, and certain other combinations of impairments that result in 55% or more impairment of the whole person. A determination must be made by medical experts.

If you feel your injuries may be catastrophic, you should contact your medical and legal advisors. If your impairment is catastrophic, the amount of benefits available to you changes significantly (see “Description of Benefits”).

DESCRIPTION OF BENEFITS

‰ This policy includes optional benefits. For further details, please speak with your agent/broker.

THE DETAILS OF THE BENEFITS AND YOUR RIGHTS AND RESPONSIBILITIES ARE IN THE STATUTORY ACCIDENT BENEFITS SCHEDULE OF THE INSURANCE ACT (ONTARIO). YOUR INSURER IS OBLIGATED TO GIVE YOU INFORMATION ABOUT THE BENEFITS AVAILABLE.

The benefits provided under the Statutory Accident Benefits Schedule are complex and extensive. A short
description of these benefits is provided below.

Income Replacement Benefit

This benefit compensates for lost income if you are unable to perform the essential tasks of the job you did before the accident. For accidents that occur before September 1, 2010, the benefit is 80% of your net income before the accident. If you were self-employed, 80% of your weekly loss from self-employment that you incur as a result of the accident will also be added.

For accidents on or after September 1, 2010, the benefit is 70% of your gross income before the accident. If you were self-employed, 70%of your weekly loss from self-employment that you incur as a result of the accident will also be added.

The maximum benefit is $400 per week. If you have purchased optional income replacement benefits this amount will be increased.

Non-Earner Benefit

This benefit compensates you if you are completely unable to carry on a normal life, and do not qualify for an Income Replacement Benefit or Caregiver Benefit. The benefit is $185 per week, but may be $320 per week if you were a student or recent graduate. The benefit begins twenty-six weeks after you become completely unable to carry on a normal life.

Caregiver Benefits

This benefit compensates you for expenses incurred if you cannot continue as the main caregiver for a person in your household such as child under age 16 or other person who needs care. If your accident occurred before September 1, 2010, the benefit pays expenses up to $250 per week, but if you provide care for more than one person, the limit is increased by $50 for each additional person. If your accident occurred on or after September 1, 2010, this benefit is available only if you have suffered catastrophic injuries as a result of your accident or if you have purchased optional caregiver benefits.

Medical Benefit

This benefit pays for medical expenses incurred as a result of your injuries. These are expenses that are not covered by any other medical plan, such as the Ontario Health Plan, or any medical plans at the workplace.

Rehabilitation Benefit

This benefit pays for some rehabilitation expenses incurred as a result of your injuries. These are expenses that are not covered by any other plan.

Attendant Care Benefit

This benefit compensates for the expense of an aide or attendant or services provided by a long-term care facility.

DESCRIPTION OF BENEFITS (continued)

Medical, Rehabilitation and Attendant Care Benefits

For accidents that occur before September 1, 2010, the maximum amount paid for medical and rehabilitation expenses combined is $100,000, with a 10 year time limit, and $72,000 for attendant care benefits with a two year time limit. If your impairment is catastrophic, the maximum amount is $1,000,000 for medical and rehabilitation expenses, and $1,000,000 for attendant care expenses, with no time limits. For accidents that occur on or after September 1, 2010, the maximum amount paid for medical and rehabilitation expenses combined for non-catastrophic claims is $50,000, with a 10 year time limit, and $36,000 for attendant care benefits with a two year time limit. If your impairment is catastrophic, the maximum amount is $1,000,000 for medical, rehabilitation expenses and $1,000,000 for attendant care expenses, with no time limits.

If you have purchased optional benefits these amounts may be increased.

Case Manager Services

This benefit compensates for expenses for services provided by a case manager in catastrophic injury claims or, for accidents that occurred on or after October 1, 2003,if you have purchased the optional medical, rehabilitation and attendant care benefit.

Payment of Other Expenses

This benefit pays for some other expenses such as the expenses of family members in visiting you during treatment or recovery. It also pays for some housekeeping and home maintenance expenses; the repair or replacement of items lost or damaged in the accident such as clothing, prescription eyewear, dentures, hearing aids, prostheses and medical or dental devices; and lost educational expenses. For accidents that occur on or after September 1, 2010, this benefit is only available for catastrophic injury claims or if you have purchased the optional benefit

Death Benefits

This benefit pays family members of a person killed in an automobile accident. $25,000 is paid to a surviving spouse, $10,000 to each surviving dependant, and a total of $10,000 to a person in respect of whom the deceased was a dependant. If you have purchased optional benefits this amount may be increased.

Funeral Expenses

This benefit pays up to $6,000 to cover funeral expenses. If you have purchased optional benefits this amount may be increased.

Optional Benefits

Optional benefits increase the amount of standard benefits or provide benefits that may not otherwise be payable. They must be purchased before the accident. For accidents that occur before September 1, 2010, the optional benefits are: increased Income Replacement; increased Caregiver and Dependent care benefits; increased Medical, Rehabilitation and Attendant Care; increased Death and Funeral benefits, and an Indexation Benefit.

For accidents that occur on or after September 1, 2010, the optional benefits are: increased Income Replacement; Caregiver, Housekeeping and Home Maintenance benefits for non-catastrophic claims; increased Medical and Rehabilitation benefits; increased Attendant Care; increased Medical, Rehabilitation and Attendant Care benefit; increased Death and Funeral benefits, a Dependant Care benefit and an Indexation Benefit. You should consult your insurer and your advisors to determine if you are covered by Optional Benefits.

INSURER’S DISCLOSURE AND ACKNOWLEDGMENT

The insurer acknowledges that it has made available for review by the insured person or the insured person’s representative all medical reports, medical records and other information of a medical nature in the insurer’s file relating to the insured person.

I certify the information provided in this Notice is complete and correct.

Signature of Insurer or Authorized Representative of Insurer Date

Representative of Insurer Telephone number (print name)

Name of Insurer’s Complaint Officer*

Telephone number

• If you have a complaint about your claim, you may contact your insurer’s Complaint Officer who will review and attempt to resolve it with you.

INSURED’S ACKNOWLEDGMENT

I acknowledge that I have received and read the above Settlement Disclosure Notice provided to me by an insurer, and have considered whether or not to obtain legal, financial and medical advice.

Signature of Insured Date

IF YOU CHANGE YOUR MIND

IF YOU CHANGE YOUR MIND AFTER AGREEING TO SETTLE YOUR CLAIM BY SIGNING A RELEASE, YOU MUST:

NOTIFY THE INSURER IN WRITING AND RETURN ANY SETTLEMENT FUNDS YOU RECEIVED WITHIN 2 BUSINESS DAYS AFTER YOU SIGNED THE RELEASE

IF YOU SIGNED A RELEASE AND LATER SIGNED THIS DISCLOSURE NOTICE, YOU HAVE 2 BUSINESS DAYS FROM WHEN YOU SIGNED THE DISCLOSURE NOTICE IN WHICH TO NOTIFY THE INSURER AND RETURN ANY SETTLEMENT FUNDS YOU RECEIVED.

The court held that merely informing the insured of the right to mediation, the first step in the dispute resolution process, was insufficient. At a minimum, information would have to be included which described the most important points of the process, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process. Without this basic information, it cannot be said that a valid refusal had been given.

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2O. Reg. 664/90, s.9.1 as amended
3. 3ss.9.1(1)
4. 4ss.9.1(2)
5. 5ss. 9.1 (3) paragraphs 1-6
6. 6ss.9.1(4)
7. 7ss. 9.1(5)
8. 8See for example Ahluwalia v. College of Physicians and Surgeons of Manitoba, 1999 CanLII 18760 MBCA “ citing with approval Maxwell on the Interpretation of Statutes (12th Ed. 1969) by P. St. J. Langan “In ordinary usage, ‘and’is conjunctive and ‘or’disjunctive. But to carry out the intention of the legislature it may be necessary to read ‘and ‘ in place of the conjuction ’or’and vice versa.” ;Mercier v. Canada, [1977] T.C.J. No 613(QL where Dussault J. quoted Bowman J.“ counsel for the Minister,… suggested that feeding and dressing both had to be activities that were restricted. … Here I am adopting a purposive… approach, to the interpretation of the statute, that is an interpretation that appears to be consonant with the scheme of the Act and the objective that the statute is endeavouring to achieve. I think it is more consonant with the scheme of the Act and with the object of this section that “and” be construed as disjunctive and therefore either feeding or dressing is sufficient. It need not be the two together.”; Marathon Realty Co. v. Regina (City) (1989), 1989 CanLII 5130 (SK CA), 80 Sask. R. 53 (C.A.) per Tallis, J.A.
9. 9ss. 9.1(4)
10. 10Smith v. Co-operators, 2002 SCC 30; Catania v. Scottish & York Insurance Co. Ltd., 2001 CanLII 24147 (ON CA); Igbokwe v. HB Group Insurance Management Ltd., 2001 CanLII 3804 (ON CA); Navage v. Pilot Insurance Co., 2004 CanLII 15034 (ON SC);Opoku v. Pal, 1999 CanLII 19913 (ON CTGD), 49 O.R. (3d) 100, S.C.J.; Ing and Jetty (FSCO P08-00012, October 10, 2008)
11. 11In Smith, the court considered the obligation imposed on insurers to explain the dispute resolution process in clear and straightforward language when a benefit was refused. The obligation, imposed by section 71 of the Statutory Accident Benefits Schedule-Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93, was to inform the insured person of the procedure for resolving disputes set out in sections 279-283 of the Insurance Act.
12. 12Gonthier J., in Smith v. Co-operators General Insurance Co.,2002 SCC 30, [2002] 2 S.C.R. 129
13. 13Ing and Jetty (FSCO P08-00012, October 10, 2008)
14. 14(FSCO P05-00018 January 30, 2007).