Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2012 ONFSCDRS 7

Appeal P11-00018

Appellant

and

Respondent

Before:

Delegate Lawrence Blackman

Representatives:

Mr. Robert S. Franklin for the Appellant, State Farm Mutual Automobile Insurance Company

Mr. James A. Scarfone, Ms. Lauren Grimaldi and Ms. Alex Weaver for the Respondent, S.R.

Hearing Date:

November 15, 2011

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The appeal is dismissed and the Arbitrator’s June 24, 2011 order is confirmed.
If the parties are unable to agree on the legal expenses of this appeal, an expense hearing shall be requested as set out within.

February 8, 2012

Lawrence Blackman Director’s Delegate

Date

The Respondent, S.R., was injured in a July 17, 2005 motor vehicle accident. Paragraph 32(1.1)(b) of the Schedule,¹ that is applicable in this case, states that a person shall notify their first-party automobile insurer of their intention to apply for a statutory benefit under the Schedule no later than “the seventh day after the circumstances arose that give rise to the entitlement to the benefit, or as soon as practicable after that day.”

The parties agree that the Appellant, State Farm Mutual Automobile Insurance Company, first received notice of the Respondent’s claim for statutory accident benefits on December 17, 2007. The Appellant denied the Respondent’s claim based on her 29-month delay in giving notice.

The June 24, 2011 decision of Arbitrator Alves (the “Arbitrator”) held that the Respondent did not give notice as soon as was practicable. Subsection 31(1) of the Schedule, however, states that a “person’s failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation.” The Arbitrator held that the Respondent had a reasonable explanation for her delay, noting the “ongoing nature of her psychological difficulties and the daily demands of caring for her husband” following his 2001 accident-related permanent brain injury. The Respondent’s accident benefits claim could, therefore, continue.

The Appellant submits that there was no evidence supporting the Arbitrator’s finding that the Respondent did not have the time or the psychological wherewithal to provide notice. In the alternative, the Appellant argues that the Arbitrator erred in finding that the Respondent had a reasonable excuse for her delay. The Appellant asks that the Arbitrator’s Order be set aside with costs, with a finding that the Respondent did not have a reasonable explanation for providing late notice and, accordingly, the Respondent is precluded from proceeding with this matter.

By letter decision dated September 13, 2012, I exercised my discretion under Rule 50.2 of the now Dispute Resolution Practice Code (Fourth Edition, Updated August 2011) (the “Code”) to accept this appeal from a preliminary arbitration decision, in significant measure because the issue of notice had the potential of determining the entire arbitration.

(A) Error in a Finding of Fact

Subsection 283(1) of the Insurance Act, R.S.O. 1990, c. I.8, restricts appeals from the order of an arbitrator to errors of law. Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01-00022, February 26, 2003), held that a finding of fact made in the complete absence of supporting evidence is mere conjecture and amounts to an error of law.

In the present decision, the Arbitrator held that:

A part of [the Respondent’s] explanation is that she did not have time to give State Farm notice. When she says this, I do not understand this in its literal sense. Rather, in the context of the above issues and demands upon her, I understand her to mean that there were so many difficult and complicated issues that were thrust upon her that she did not have the psychological time and space to deal with anything more than the immediately pressing circumstances of life.

The Appellant submits that the Arbitrator drew improper or unreasonable inferences of fact from the evidence, made findings of fact based on conjecture and gave insufficient reasons for concluding that the Respondent did not have the psychological time to provide notice. The Appellant argues that the Respondent never gave evidence she did not have the time to give notice. Nor was there was any evidence the Respondent did not have the psychological wherewithal to provide notice, or any evidence to support that inference. In the alternative, the Respondent submits that the totality of the evidence does not support that inference.

The Appellant submits that the only possible inference from the evidence is that the Respondent had the time to give notice, as she had the time, amongst other things, to work, visit Italy and, most importantly, tell her lawyer not to give notice to the Appellant. Each of these activities, it is submitted, was more psychologically taxing than the “mere act of putting her insurer on notice.”

It is further submitted that the evidence shows there were many periods when the Respondent’s husband was not in her immediate care, freeing the Respondent for a simple, quick telephone call to her lawyer to “give a little notice letter.”

The Appellant relies on Kingsway General Insurance Company and Pereira, (FSCO P05-00031, December 20, 2006), where the Director’s Delegate found that the arbitrator erred in finding an insured psychologically impaired when psychological impairment played no role at the hearing and the insured provided no such testimony. As the arbitrator found the insured not to be credible, the arbitrator was found to have erred in law in granting benefits based on psychological reports that presumed the insured’s truthfulness.

However, Pereira is manifestly distinguishable from this present case. Here, the Arbitrator found the Respondent credible. The Respondent’s psychological condition was at the heart of the preliminary issue hearing. The Arbitrator made the following findings of facts that form a basis for her decision:

The Respondent’s husband, as a result of his accident in 2001, suffered a traumatic brain injury, becoming childlike, with concentration and memory impairments, a severe anxiety disorder and significant impairment in performing activities of daily living. Changes in environment or routine cause extremely uncontrolled emotional reactions with acts of verbal aggression and, at times, physical aggression.

The Respondent’s husband is argumentative, verbally abusive, controlling, violent and harassing. He is highly focused on his own needs and wants the Respondent to stay at home with him 24 hours a day. Arguments occur daily. He has insulted and threatened to kill the Respondent. He has punched their son in the face.

Because her husband needed to be supervised, the Respondent’s life was restricted, her friends no longer visited and she became increasingly isolated. The Respondent was diagnosed with a major depressive disorder in 2004 as a direct result of becoming a caregiver for her husband. Continuing inertia was present with the Respondent’s depression. The Respondent was devoted her family and put the well-being of her son and her husband ahead of her own interests, damaging her mental health in the process.
An episode of severe back pain prompted the Respondent to see her family physician and pursue treatment in November 2007. A resulting November 2007 treatment plan provided the Appellant with the first notice of the Respondent’s claim.

In oral submissions, the Appellant conceded that the Respondent was in a difficult situation. It does not challenge that she was abused.

The Respondent’s evidence-in-chief, at page 30 of the transcript, states:

Q. Did you make an application to your insurance company, State Farm, to pay for any of the benefits, any benefits under the accident benefits provisions?

A. Not right away.

Q. Why not?

A. Because I had my husband to worry about it. Like I say, I put myself second just because of him. Whatever was dealing with him.

The Respondent was then questioned on her delay in seeking accident-related treatment until 2007. The following exchange is then found at page 32 of the transcript:

Q: During that whole period of time up until November of 2007, why didn’t you apply to State Farm for benefits?

A. Because, I figure I had no way I can leave my house, you know, my husband by himself and go look after myself because every time I went somewhere he was so angry. Like, I even was afraid to leave the house. For this reason, you know, I never apply for those benefit.

The Arbitrator had before her an August 16, 2005 clinical note of the Respondent’s treating psychologist. The notation is less than a month after her accident and is contemporaneous with the requisite notice period. The psychologist writes that the Respondent “continues to present as overwhelmed by her circumstances and her husband’s behaviour, particularly his aggression towards her when she returns after being away from the house...”

The psychologist continues: “[t]he constant verbal/emotional abuse to which she is subjected is also wearing away at her self-esteem causes her to feel stuck in a state of helplessness and blinds her to taking action.” The Arbitrator notes the Respondent testified that as a result of her husband’s injuries, “I lost my life. I have no life.”

The evidence is that the Respondent’s trip to Italy, where she had family, was not a carefree adventure. Rather, the Respondent testified that “I have to run to Italy, I have to stay over a month to get away from him.”

Regarding employment, this was not a situation as in Deol and Liberty Mutual Insurance Company, (FSCO A99-000292, July 28, 2000). In that case, the insured’s successful return to high school and then completion of two years of a George Brown College business program was found to be inconsistent with the insured’s alleged inability to pursue his claim for benefits in a timely fashion due to his mental state.

In this case, an August 2, 2005 entry of the Respondent’s treating psychotherapist states that although her financial situation may require her to find a job, the Respondent could not work if there was no one to supervise her husband. Eighteen months later, a February 14, 2007 Progress and Extended Treatment Plan Report states that the Respondent:

… has not been able to return to working outside of her home due to the need to care for her husband as a result of the injuries and impairments he has suffered as a result of a motor vehicle accident. His demands on her to be with him on an almost constant basis have caused her to have little time to herself …

Unlike Deol, the Respondent’s employment was prior to her accident, before the notice period began to run and for less than two weeks. The Respondent testified she was going “insane” in the house and needed to get away from her husband. That brief return to work ended with the Respondent’s accident.

The Appellant argues that the Respondent’s instruction to her counsel not to provide notice was an act of concealment, prejudicing its rights under the Schedule. These rights included psychological and physical examinations by medical practitioners of the Appellant’s choice, the completion of requisite forms, examinations under oath and statutory declarations, as well as surveillance and other forms of iation the Appellant submits might be required.

As submitted by the Appellant, the Respondent was well acquainted with the no-fault process as a result of her husband’s own claim. The Appellant accepts that the Respondent did not want the “hassle” of dealing with an insurance company. The August 2, 2005 entry from her psychologist, less than three weeks after her own accident, states that the Respondent:

… reported having a particularly difficult few days with her husband following the mediation meeting last Friday … She reported that her husband will likely be sent to a CAT DAC for evaluation. She reported that he has not been able to sleep since the meeting and was upset that the other side questioned his impairments. [The Respondent] was observed to have tears in her eyes as she talked about the meeting and her husband’s reaction to it …

There was clearly evidence before the Arbitrator of the Respondent’s impaired psychological wherewithal to pursue her own claim with the same first-party insurer. The Appellant, however, argues that the Arbitrator was restricted to determining only whether the Respondent had the psychological wherewithal for the simple, brief task of phoning her counsel to send notice.

I am not persuaded that, in the context of a reasonable explanation, the act of giving notice of one’s intention to apply for benefits under the Schedule is to be strictly segregated from the psychological wherewithal to decide to apply for benefits, a decision that includes consideration of the consequences in time and effort that may follow. Further, it is difficult to discern how avoiding a no-fault claim would involve the same psychological wherewithal and strength as a decision to take positive action.

Mr. M and Wawanesa Mutual Insurance Company, (FSCO Appeal P08-00032 and P08-00032C, May 19, 2009), held that:

Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01 00022, February 26, 2003) distinguished between finding of facts made in the complete absence of supporting evidence and findings of fact made with insufficient evidence. Lombardi held that while in “the first case, the error is properly characterized as an error of law, and hence reviewable . . . [in] the second, it is no more than an error of fact, that is not reviewable.” I agree with the Respondent that it is not the purpose of an appeal to second guess an arbitrator’s assessment of the evidence, especially determinations of credibility.

Lombard cited Caswell v. Powel Duffrny Associated Collieries Ltd., [1940] A.C. 152 (H.L.), that:

Inferences must be carefully distinguished from conjecture or speculation. There can be no inference unless there are objective facts from which to infer the other facts which it is sought to establish....But if there are no positive proved facts from which the inference can be made, the method of inference fails and what is left is mere speculation or conjecture.

I am not persuaded that the Arbitrator’s finding that the Appellant lacked the psychological time and space following her accident to give notice was mere conjecture or speculation, that is, it was made in the absence of any evidence. Nor am I persuaded that there was an error in the inference making process, the finding was unreasonable or insufficient reasons were given in the thirteen-page arbitration decision that details the consequences of the Respondent’s husband’s accident and its psychological impact upon the Respondent. Rather, there were positive, objective and, in significant measure, uncontested facts supporting the Arbitrator’s finding.

Regarding the Appellant’s submission as to weighing the totality of the evidence, it is difficult to see this as other than an endeavor to have this matter reheard and to second-guess the Arbitrator. That is not the role of an appellate adjudicator.

(B) Error in Finding the Respondent had a Reasonable Explanation

The Appellant submits that the Arbitrator erred in finding that the Respondent had a reasonable explanation within the meaning of subsection 31(1) of the Schedule for her delay in notifying the Appellant of her claim for statutory accident benefits. The Appellant cites the criteria listed in Horvath and Allstate Insurance Company of Canada, (FSCO A02-000482, June 9, 2003), as to whether an explanation is reasonable:

An explanation must be determined to be credible or worthy of belief before its reasonableness can be assessed.
The onus is on the insured person to establish a “reasonable explanation.”
Ignorance of the law alone is not a “reasonable explanation.”
The test of “reasonable explanation” is both a subjective and objective test that should take account of both personal characteristics and a “reasonable person” standard.
The lack of prejudice to the insurer does not make an explanation automatically reasonable.
An assessment of reasonableness includes a balancing of prejudice to the insurer, hardship to the claimant and whether it is equitable to relieve against the consequences of the failure to comply with the time limit.

The Appellant submits that the Respondent’s explanation for her late notice was not credible, worthy of belief, reasonable, supported by the evidence or sufficient to meet her onus. The Appellant argues that the Arbitrator failed to consider the inherent contradictions in her finding as to the Respondent’s psychological wherewithal when the Respondent was able to work for two weeks, spend a month in Italy and instruct her counsel to not notify the Appellant of her claim. These are discussed above.

The Appellant further argues, regarding her psychological wherewithal, that the Respondent was able to go shopping out of town. However, the December 5, 2005 entry of the Respondent’s treating psychologist indicates that this was on one occasion, over her husband’s protests, when the Respondent’s vehicle ran out of gas and was then involved in a further accident. The Appellant also notes a July 6, 2006 entry that the Respondent had been going out Friday nights with her friends. The entry, however, further notes that the Respondent had stopped going out and was “overwhelmed and fatigued.”

It is uncertain how the Respondent seeking chiropractic care prior to the accident, in 2004, or seeking psychological support in the period in question is evidence, as argued by the Appellant, of the Respondent’s psychological wherewithal to provide notice of her intention to apply for benefits. The Appellant does note that the Respondent commenced a tort claim within two years of the subject accident that settled. The details of what that entailed, however, are unclear.

In any event, regarding findings of credibility, the Divisional Court of Ontario, in Kanareitsev v. TTC Insurance Co., 2008 CanLII 26262 (ON SCDC), [2008] O.J. No. 2132, stated that:

Particularly when results turn on the first instance decision maker’s view of the credibility of witnesses and involves a fact-driven analysis, appellate review must take “proper account of the distinct advantage” of the first-instance decision maker’s assessments. The appeal judge must not try the case de novo or simply substitute his or her views for those of the trial judge.

I agree with the Respondent’s submission that the Arbitrator found the Respondent credible, not in the complete absence of evidence, but based on her testimony and the documentary evidence, including her treating psychologist. I agree that the Appellant’s dispute lies not with the absence of evidence but with the Arbitrator’s interpretation of the evidence before her. The Arbitrator had the distinct advantage of hearing the Respondent. Again, I am not persuaded that it is my role to try the case de novo or substitute my views for those of the Arbitrator.

Regarding the adjudicator not addressing all of the evidence, I follow the Divisional Court in State Farm Mutual Automobile Insurance Co. v. Movahedi, [2001] O.J. No. 5099, that:

The Delegate criticized the arbitrator’s findings of credibility on the basis that some of the findings were based on factual errors or failed to consider all the evidence. Not reciting all the evidence does not mean the arbitrator failed to consider it. We find there was ample evidence before the arbitrator to support his findings of credibility as described in his decision.

The Appellant argues that the Arbitrator’s finding the Respondent “did not have the psychological time and space to deal with anything more than the immediately pressing circumstances of life” did not meet the subjective test for a reasonable explanation, again, having been made in the absence of any supporting evidence. This is addressed above.

The Appellant further submits that the Arbitrator erred in finding that the objective element of the reasonable explanation was established. It argues that a reasonable person, aware of the extent of their own injuries, and who thought it prudent to instruct legal counsel to pursue and settle a related tort claim, would concurrently instruct her counsel to notify her insurer of the circumstances giving rise to her claim for statutory accident benefits. The Appellant cites Barr and Canadian Surety Company, (FSCO A97-001567, July 16, 1998), that:

… It is unreasonable for an insured person to become the arbiter of when it is (finally) appropriate or worthwhile to notify the insurer. The time limits … exist for many good reasons. Without reasonable excuse, they should be observed.

The Appellant submits that the Respondent determined “her own timeline of convenience.”

The Appellant further argues that the Arbitrator failed to properly balance the presumptive prejudice of the Respondent’s 29-month delay with the ease with which the Respondent could have instructed her counsel to notify the Appellant of her claim. The Appellant cites Moore v. Canadian Lawyers Ins. Assoc., 1992 CanLII 4522 (NS SC):

The rationale for the notice requirement is to permit the insurance company … to investigate the loss, and possibly eliminate or reduce its financial exposure. The investigation in a timely fashion may permit a determination of no liability, partial liability or full liability and flowing from such early determination, the insurance company may then consider a number of strategies, including repair and/or settlement.

The Appellant notes the Ontario Court of Appeal decision in Clairmonte v. Canadian Imperial Bank of Commerce, 1970 CanLII 470 (ON CA), [1970] O.J. No. 1506, to the effect that, regarding limitation periods, the presumption of prejudice “may command with increasing imperativeness on the passage of a substantial time, depending on the cause of action.” The Appellant argues that in this case it was denied the opportunity to assess the Respondent’s functional status as soon as practicable following the date of loss and, accordingly, it has been severely prejudiced.

I find applicable the reasoning in Gratton and Economical Mutual Insurance Company, (FSCO A10-001970, September 16, 2011), where the arbitrator held that:

… Ms. Gratton’s failure to submit a Disability Certificate until February 10, 2009 is reasonably explained by Dr. Suddaby’s description of her impairment. Ms. Gratton’s ability to pursue other aspects of her claim for accident benefits does not undercut the reasonableness of her explanation. The issue is not whether Ms. Gratton had the capacity to submit a Disability Certificate, but whether there is a reasonable explanation for her failure to do so. Given Ms. Gratton’s history, her generally compromised level of function, and specifically her lack of motivation, it is not surprising that her claim for accident benefits was not diligently pursued.

The question before the Arbitrator was whether the Respondent met the onus that she had a reasonable explanation for her failure to comply with the notice provision. The Respondent was not required to establish that she was unable to do anything more than the immediately pressing circumstances of life. Nor was the threshold for a reasonable explanation, as argued by the Appellant, that the Respondent establish that she was absolutely prevented from engaging in any attempt to address her own functional status.

The essence of determining whether to extend the notice period is set out by Arbitrator Renahan, in Kuronen and Allstate Insurance Company of Canada, (OIC A-951897, December 29, 1995), confirmed on appeal (OIC P96-000026, January 31, 1997):

… the reasonable excuse advanced by the claimant must be examined with regard to all the circumstances connected to the delay, including prejudice to the insurer, hardship to the claimant and whether it is equitable to relieve against the consequences of the failure to comply with the time limit.

Arbitrator Renahan found that although the applicable provision did not use the words “relief from forfeiture,” the effect was “to give the arbitrator the power to relieve against the forfeiture of the insureds’ rights where the arbitrator finds that the claimant has a reasonable excuse for failing to comply with the notice requirements.” He cited Director Sachs, in Oliveira and Zurich Insurance Company et al., (OIC P-002691, March 21, 1994), that the provision “must be interpreted within the entire scheme of statutory accident benefits which is flexible and remedial.”

Carruthers and Royal & SunAlliance Insurance Company of Canada, (FSCO A99-000923, May 30, 2002), confirmed on appeal (FSCO P02-00015, April 10, 2003), held that:

In this case, Royal did not lead any evidence of prejudice. Or, to be precise, it claimed a great deal of prejudice in its submissions, to which Mr. Carruthers properly objected as essentially evidence being led in the submissions. For that reason, I have ignored most of Royal’s submissions on its alleged prejudice.

Likewise, in this case, the Appellant chose not to lead any evidence of prejudice. It is thus unclear the extent of actual prejudice it experienced, especially when the Appellant was already assessing the Respondent in the context of its concurrent role as first-party insurer regarding her husband’s 2001 accident.

Nonetheless, the Arbitrator did weigh the prejudice to the Appellant, as follows:

Counsel for the Applicant submitted that State Farm had not adduced any evidence of actual prejudice or made submissions with respect to prejudice. However, I accept that prejudice is presumptive in cases of significant delay. I find the delay in this case of some two years and five months is significant. As counsel for the Applicant noted, causation issues will be raised.

In Makrikostas and Allianz Insurance Company of Canada, (FSCO A98-001300, May 13, 1999), Arbitrator McMahon held that: “The passage of time will virtually always lead to some prejudice, hence the notice requirement. At the same time, the inclusion of a relief provision indicates that the drafters did not intend to automatically preclude all late claims merely on the basis of the prejudice inherent in the late notice.”

In balancing the general prejudice caused by delay against Mrs. R’s claims for entitlement to benefits, I find that she has given a reasonable explanation within the meaning of section 31 of the Schedule. For these reasons I conclude that Mrs. R. is allowed to proceed with her claims for statutory accident benefits …

The Appellant notes that in Makrikostas, where the insured person was found to have a reasonable excuse for the delay in notifying the insurer, the delay was only eleven months. Carruthers, however, held the passage of a year and a half prejudiced the insurer and the insured was precluded from proceeding to arbitration. Nonetheless, in Kaur and Liberty Mutual Insurance Company, (FSCO A98-001322, October 20, 1999), confirmed on appeal, (FSCO P99 00060, June 7, 2000), a three and a half year delay in a fatal accident claim was found not to have prejudiced the insurer.

In determining the subjective and objective elements of the test of a reasonable explanation, I agree with the Appellant that one must compare her actions to other people who might be in her situation or, as put by the Respondent, one is not looking at a reasonable person in a vacuum, but with personal characteristics in specific circumstances, against a “reasonable person” standard.

In the present case, it is difficult to see how the presumptive prejudice alleged by the Appellant outweighs the countervailing considerations.

First, there are the Respondent’s extraordinary, unfortunate circumstances beyond her control. Second, there is the contemporaneous, independently documented effect of these circumstances on the Respondent, including being overwhelmed, stuck in a state of helplessness and being blinded to taking action, that cannot be simply reframed as the Respondent proceeding at “her own timeline of convenience.” Third, there is the consequence to the Respondent of being denied the opportunity to have her claims determined on their merits, if this proceeding is dismissed.

Looking at whether it is equitable, in the circumstances of this case, to relieve against the consequences of the Respondent’s failure to comply with the notice period, I am not persuaded that the Arbitrator erred in law in finding under subsection 31(1) of the Schedule that the Respondent had a reasonable explanation for providing late notice and could, therefore, proceed with her claim. Accordingly, pursuant to section 283 of the Insurance Act, this appeal is dismissed and the Arbitrator’s June 24, 2011 order is confirmed.

III. EXPENSES

If the parties are unable to agree on the legal expenses of this appeal, varying Rule 79.2 of the Code, an expense hearing shall be requested within sixty days of the date of this decision. The request shall be accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, as well as written submissions regarding entitlement to and/or the quantum of legal expenses, as are in dispute.

There having been no decision regarding the legal expenses of the arbitration proceeding, the parties are referred to the Arbitrator if there is a dispute in that regard.