Neutral Citation: 2012 ONFSCDRS 65

FSCO A10-002509

BETWEEN:

AUDLEY BAKER

Applicant

and

AVIVA CANADA INC.

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Jeffrey Rogers

Heard: By telephone conference call on March 9, 2012.

Appearances: Mr. Robert A. Zigler, solicitor for Mr. Baker

Ms. Pamela Quesnel, solicitor for Aviva Canada Inc.

Issue:

The issue in this hearing is whether Mr. Baker is precluded from proceeding to arbitration of his claim for further income replacement benefits (IRBs) because his application for mediation was filed beyond the two-year limitation period set out in section 281.1(1) of the Insurance Act¹ and section 51(1) of the Schedule.² Those sections require an insured person to apply for mediation “within two years after the insurer’s refusal to pay the amount claimed.”

The facts are not in dispute. Mr. Baker was injured in a motor vehicle accident on August 22, 2006. He applied for and received IRBs from Aviva, payable under the Schedule. Aviva terminated weekly IRBs by giving Mr. Baker an Explanation of Benefits, dated January 10, 2007.³ There was no further contact between the parties on the issue of IRBs for more than two years. On January 22, 2009, counsel for Mr. Baker wrote to Aviva requesting that IRBs be reinstated.⁴

Upon receiving the request, Aviva did not raise the limitation period issue. Instead, it requested a new disability certificate and scheduled an insurer examination. On June 2, 2009, Aviva sent Mr. Baker another Explanation of Benefits, denying entitlement to further IRBs on the grounds that he did not meet the disability test. Mr. Baker applied for mediation on October 20, 2009. That was more than two years after the Explanation of Benefits of January 10, 2007, but less than two years after the further denial.

The parties did not resolve their dispute in mediation and Mr. Baker applied for arbitration on August 6, 2010. Aviva raised the limitation issue for the first time in an amended Response, filed on January 18, 2011. Aviva argues that Mr. Baker was required to apply for mediation within two years of the Explanation of Benefits of January 10, 2007.

Mr. Baker argues that the Explanation of Benefits of January 10, 2007 is not a valid termination of his IRBs. He also argues that he had a right to re-apply for IRBs, that Aviva was estopped from relying on the Explanation of Benefits of January 10, 2007, and that the “discoverability rule” suspended the accrual of the limitation period.

For the reasons that follow, I find that the Explanation of Benefits of January 10, 2007 is not a valid termination of Mr. Baker’s IRBs because it is not clear and unequivocal. I reject Mr. Baker’s other arguments.

Result:

Mr. Baker is not precluded from proceeding to arbitration of his entitlement to IRBs.

EVIDENCE AND ANALYSIS:

Termination not clear and unequivocal

At the time of the accident Mr. Baker worked as a janitor at The Hospital for Sick Children. On October 13, 2006 Aviva confirmed initial entitlement to IRBs. On December 28, 2006, Aviva wrote to The Hospital for Sick Children to find out the details of any income continuation plan that Mr. Baker could access through his employment. The Hospital informed Aviva that Mr. Baker had returned to full-time work on December 11, 2006. Based on this information, Aviva sent Mr. Baker the Explanation of Benefits dated January 10, 2007.

Mr. Baker had not told Aviva about his return to work. Consequently, Aviva had already paid him IRBs for the period December 10, 2006 to January 8, 2007 when it found out he had returned to work. Aviva sent Mr. Baker several documents dealing with the issue of overpayment of IRBs, together with the Explanation of Benefits of January 10, 2007. The additional documents were a covering letter demanding repayment, a copy of the letter from his employer confirming his return to work, a copy of section 47 of the Schedule which addresses an insurer’s right to repayment, a copy of the cheque for IRBs for the relevant period, and proof that Mr. Baker had cashed it.⁵

It is well established that the two-year limitation is not triggered unless the insurer has given a valid refusal. Mr. Baker argues that the refusal of January 10, 2007 is not valid because it is not clear and unequivocal. The requirement that a refusal must be clear and unequivocal is also well established. This requirement is generally traced back to the decision in Zeppieri and Royal Insurance Company of Canada.⁶ The principle has been followed in numerous cases at the Commission and in the Courts and was endorsed by the Supreme Court in Smith v. Co-operators General Insurance Co.⁷

Mr. Baker argues that the refusal was not clear and unequivocal for two reasons. First, he argues that the message was unclear because of the number of documents he received, along with the Explanation of Benefits. He submits that they show that Aviva’s real concern was repayment of IRBs, not termination. Second, he argues that the message is equivocal because Aviva checked two conflicting boxes on the Explanation of Benefits. One says: “We have reviewed your application for income replacement benefits and have determined you are: A. Eligible”. The other says: “B. Not Eligible/Stoppage of Benefit. Income Replacement Benefits terminated January 25, 2007. As per your employer, you returned to work at full hours and full duties December 11, 2006…”

I find that the refusal was not valid because it was equivocal. It told Mr. Baker that he was both eligible and not eligible for IRBs. The refusal contradicts itself. It is hard to imagine how that would not be equivocal. I do not accept Aviva’s submission that its earlier Explanations of Benefits clarify its intent. The earlier Explanations of Benefits included a calculation of the IRB payable, but the one on January 10, 2007 did not. However, Aviva did not refer Mr. Baker to the earlier documents on January 10, 2007. Mr. Baker cannot be expected to consult them in order to determine Aviva’s intention as of January 10, 2007. And even if he did, he would not clearly conclude that Aviva had decided not to pay IRBs, with any finality. He could reasonably have concluded that Aviva was keeping his options open, in case his circumstances changed.

I do not accept Mr. Baker’s submission that Aviva’s intentions were blurred by the totality of the documents he received with the Explanation of Benefits of January 10, 2007. Except for the Explanation of Benefits, all of the documents sent on January 10, 2007 deal with repayment only. They are short and straightforward. They prove that payment was made, they demand repayment, and they show the right to repayment. Mr. Baker could not reasonably have been confused by the content of these documents or the volume of documents. On the other hand, the Explanation of Benefits does not address repayment. Mr. Baker should have understood that Aviva intended to do two distinct things by its correspondence of January 10, 2007. Any confusion arises from the content of the Explanation of Benefits, not from the accompanying documents.

My finding that Aviva’s refusal was not clear and unequivocal allows Mr. Baker to proceed to arbitration of his claim for further IRBs. I will now provide brief reasons for rejecting Mr. Baker’s other arguments.

No right to re-apply for IRBs

Mr. Baker had returned to work when Aviva sent him the Explanation of Benefits of January 10, 2007. He again stopped working, allegedly as a result of accident related impairments, on October 5, 2008.⁸

Mr. Baker argued that the Schedule contemplates multiple applications for the same benefits and that section 11 specifically contemplates a further application for IRBs after a return to work. He provided no jurisprudence directly supporting his position.

Section 11 reads as follows:

A person receiving an income replacement benefit may return to or start an employment at any time during the 104 weeks following the onset of the disability in respect of which the benefit is paid without affecting his or her entitlement to resume receiving benefits under this Part if, as a result of the accident, he or she is unable to continue in the employment.

The section creates a right to “resume receiving benefits”, not a right to re-apply. The jurisprudence rejects the possibility of multiple applications for weekly benefits.

Mr. Baker’s argument must fail as a result of the decision of the Court of Appeal in Haldenby v. Dominion of Canada General Insurance Co.⁹ In that case, the Court rejected the multiple applications argument, made with regard to section 16 of the relevant Schedule. Section 16 contained a return-to-work provision similar to section 11. The Court noted that, despite the right to receive further IRBs, the triggering provision for the two-year limitation was the insurer’s refusal. The Court reasoned as follows:

The problem with this submission is that there is no provision in the Act or the SABS which allows a claimant to reapply for further benefits after an insured person’s benefits have been terminated by the insurer. The only remedy for the insured person is to appeal the termination of benefits within the two-year period.¹⁰

In rejecting the argument, the Court further noted that the suggested approach would extend entitlement to benefits for an indeterminate period of time and is “inconsistent with the Supreme Court of Canada’s rationale which underlined the common sense of, and the need for limitation periods.”¹¹

The decision in Wright and Allstate Insurance Company of Canada¹² does not support Mr. Baker’s position, as he submits. In Wright, the Director’s Delegate concluded that the return to work provision “… preserves the insured person’s right to assert a claim for IRBs based on an accident-related disability. If he or she returns to work at an early date…the insurer cannot assume that entitlement has ended or require a new application if faced with a subsequent claim. The insured person is entitled to go back to the insurer and ask that his or her IRBs be reinstated.”¹³ This case recognizes the right to request reinstatement, without a new application. The insurer had not given a refusal. The decision does not address the issue of whether an insured person has the right to make a new application, after an insurer refused to pay IRBs.

“Discoverability rule” does not apply

Mr. Baker submits that I should apply the “discoverability rule,” which holds that for the purposes of a limitation period, a cause of action arises when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence. Mr. Baker submits that the rule should be applied to his circumstances because he could not have been aware that he could claim further IRBs, until he ceased work in October 2008.

Arbitrators have reasoned that they lack jurisdiction to engage the rule because the power to do so is derived from the Court’s inherent jurisdiction.¹⁴ I agree.

Mr. Baker submits that the decision by the Supreme Court in Peixeiro v. Haberman¹⁵ means that the “discoverability rule” is a rule of construction. It is therefore of general application and it is not derived from inherent or equitable jurisdiction. I disagree. Although the Court in Peixeiro applies the rule to decide the meaning of the statute at issue, it makes no comment on the source of its jurisdiction.

In any event, Mr. Baker’s submission fails even if the rule is a rule of construction. In Kirkham v. State Farm Mutual Automobile Insurance Co.¹⁶, the Divisional Court specifically rejected the “cause of action” approach in interpreting the phrase “within two years after the insurer’s refusal to pay the benefit claimed”. I am bound by that determination. The “cause of action” approach is integral to applying the “discoverability rule”.

No estoppel

Mr. Baker submits that Aviva is estopped from relying on the limitation period because, when he contacted Aviva in January 2009, Aviva did not raise the issue of the limitation period. Instead, it invited him to apply for further IRBs, assessed his entitlement, and gave him a further Explanation of Benefits. Mr. Baker submits that Aviva acted as though the limitation period did not exist.

The Supreme Court addressed the issue of promissory estoppel, in the context of an expired limitation period, in Maracle v. Travellers Indemnity Co. of Canada.¹⁷ The Court summarized the principle as follows:

The principles of promissory estoppel are well settled. The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position.¹⁸

In addressing the question of whether settlement discussions and an admission of liability extend the limitation period, the Court stated:

In this type of situation, the admission of liability is simply an acknowledgement that, for the purpose of settlement discussions, the admitting party is taking no issue that he or she was negligent….etc. There must be something more for an admission of liability to extend to a limitation period. The principles of promissory estoppel require that the promissor, by words or conduct, intend to affect legal relations. Accordingly, an admission of liability which is to be taken as a promise not to rely on the limitation period must be such that the trier of fact can infer from it that it was so intended.¹⁹

Aviva did not go so far as to admit liability. It only investigated Mr. Baker’s claim. I see Aviva’s conduct as nothing more than fulfilling its obligation to investigate whether it might be liable to pay further IRBs. Aviva made no express or implied promise not to rely on the limitation period and Mr. Baker did not change his position as a result of Aviva’s conduct.

EXPENSES:

There was nothing unusual about the hearing that would put me in a unique position to determine this issue. Therefore, in order to avoid a multiplicity of interlocutory proceedings, I reserve the decision to the hearing Arbitrator.

However, should the parties resolve the matter without a hearing but are unable to resolve the issue of expenses, either party may make an appointment for me to determine the matter in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

April 20, 2012

Jeffrey Rogers

Arbitrator

Date

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario