Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2012 ONFSCDRS 71

Appeal P10-00012

OFFICE OF THE DIRECTOR OF ARBITRATIONS

R.P. by his Appointed Representative, T.N.

Appellant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Respondent

BEFORE:

David Evans

REPRESENTATIVES:

Allan S. Blott for RP

Eric K. Grossman for Allstate Insurance Company of Canada

HEARING DATE:

June 8, 2011

APPEAL ORDER

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

On consent, the parties agree that Paragraph 2 of the arbitration order, dated July 23, 2010, should be revoked and replaced with the following:
RP is not entitled to a special award.
The appeal of the arbitration order, dated July 23, 2010, is otherwise dismissed.
If the parties are unable to agree on the legal expenses of this appeal, pursuant to Rule 79.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated - August 2011), an expense hearing shall be requested, as set out below, within sixty days of the date of this decision.

May 3, 2012

David Evans Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

RP appeals Arbitrator Susan Sapin’s decision dated July 23, 2010 that an accident that injured him on May 7, 2003 neither caused him a catastrophic impairment, as defined in the SABS‑1996,¹ nor entitled him to further statutory accident benefits.

II. BACKGROUND

RP’s largest claim arising from the accident was for income replacement benefits (IRBs). He was a bagel baker. In 1984 at age 17, RP arrived in Montreal, where he met his future business partner and brother-in-law Tony. They moved to Toronto in 1988 and founded Royal Bakery to make bagels. In 1992 RP married Tony’s sister TN; the couple have several children. In 1994, RP bought out Tony and carried on the business alone.

The accident occurred on May 7, 2003, with RP’s children as passengers. The Arbitrator found that “the accident, from a physical injury point of view, was not particularly serious for RP or his children, despite the fact that their vehicle was ‘written off.’” RP did not seek treatment until March 31, 2004, when he saw Dr. Bui for soft tissue therapies, and he only claimed IRBs and treatment expenses about a year after the accident. These were denied on the basis that he was not disabled from baking bagels.

The Arbitrator found that while RP suffered soft tissue injuries in the accident, these were not sufficiently disabling after August 2004 to qualify him for the benefits he claimed. As for the period up to then, although the Arbitrator found it likely RP would have qualified for IRBs based on his physical injuries, no IRBs were payable because RP was not able to prove he earned any income from his business in the applicable period prior to the accident. The Arbitrator found that RP’s wife TN, and to a lesser extent RP himself, deliberately attempted to conceal or downplay the reality that “the bakery had ceased operating in any truly remunerative sense by April 2003.”

With respect to RP’s proving loss of income, the Arbitrator refused to allow into evidence a worksheet prepared by a tax lawyer, Mr. J. D. Buote.² The Arbitrator also found that RP was disentitled to IRBs under ss. 33(1) and (2) of the SABS because he had no reasonable explanation for failing to provide Allstate with information reasonably required to determine his entitlement to the benefit.

RP claims the accident caused him a marked impairment due to a mental or behavioural disorder. In that regard, the Arbitrator found that RP did not suffer a traumatic brain injury in the accident and that his family found nothing unusual in his behaviour in the first several months after the accident. The Arbitrator’s decision focused on RP’s psychological problems. Assessors at an insurer’s examination in August 2004 found RP needed immediate psychological and psychiatric evaluations. A psychological assessor, in October 2004, concluded RP’s presentation suggested significant psychopathology and emotional distress warranting psychiatric and neurological assessments. Furthermore, the pre-hearing arbitrator determined that RP did not appear to have the mental capacity to proceed, pursuant to Rule 10 of the Dispute Resolution Practice Code. RP’s wife TN was appointed to act for him in the arbitration. At the hearing, Arbitrator Sapin found RP “was able to provide rational, coherent and responsive, although not always necessarily reliable, helpful or truthful answers to a great many questions.” Nonetheless, she found that he was still not mentally capable of proceeding on his own behalf, so TN continued in that role.

Some four and half years after the accident, RP applied to Allstate for a determination that the accident had caused a catastrophic impairment due to a mental or behavioural disorder under s. 2(1.1)(g) of the SABS. The Arbitrator rejected RP’s claim of catastrophic impairment because, she said, under s. 2(1.1)(g) there must be a diagnosable mental or behavioural disorder, and she found there was none: “Without a diagnosable mental or behavioural disorder, therefore, there can be no finding of catastrophic impairment in this case.” In doing so, the Arbitrator rejected the opinion of Dr. Mortimer Mamelak, neuropsychiatrist, who opined that RP met the criteria for catastrophic impairment, and accepted those of Allstate’s experts, Dr. Richard Hershberg and Dr. Lawrie Reznek, who saw no diagnosable mental or behavioural disorder in this case.

The Arbitrator then considered whether RP’s psychological problems nonetheless met the definition of impairment, since impairments need not be diagnosed. Despite RP’s signs of malingering, she did “not agree with Allstate’s suggestion, however, that a propensity to lie and mental difficulties are necessarily mutually exclusive.” While she found that RP was a genuinely psychologically troubled and dysfunctional individual, she concluded that his problems originated well before the accident and stressors other than the accident contributed to them afterwards. Therefore, the accident did not cause his psychological problems.

With respect to the pre-accident period, the Arbitrator referred not only to RP’s failure to file tax returns beginning in 1999 but also his difficulties dealing with a wholesale client as well as with his landlord and a city health inspector. He also repeatedly shoplifted from a single retailer and lied about his address to his insurer. The Arbitrator also did not find it reasonable that a successful businessman would “allege he was separated from his wife and essentially lived at the bagel shop, if in fact he was living the normal, productive, and successful business (and family) life he claimed.” The Arbitrator found it unbelievable that none of these factors could have possibly caused RP stress or contributed to his psychological symptoms.

With respect to the post-accident period, the Canada Revenue Agency (CRA) wrote RP in September 2003 – a few months after the accident – that it was imputing a high tax liability due to his failure to file tax returns. Considering the delay after the accident before the onset of RP’s symptoms, the Arbitrator found it much more likely that these developed in reaction to this post-accident CRA audit rather than to the accident itself. Other non-accident stressors included RP’s “speeding violations, sometimes with the children in the car; a break and enter charge in August 2008, and being discovered by a police officer in a parking lot, asleep in his father-in-law’s vehicle containing 400 marijuana plants on March 18, 2008, an incident for which he faces serious criminal charges.”

Accordingly, the Arbitrator denied RP’s IRB claims based on psychiatric impairment, due to lack of causation.

As to RP’s other claims, the Arbitrator found that he was not entitled to an attendant care benefit for care supposedly provided by HN, his sister-in-law. His 24-hour-a-day care claim was based on a report by a chiropractor who, the Arbitrator found, was completely unqualified to offer that opinion. Furthermore, she found HN’s evidence vague, unconvincing and rehearsed, and concluded that she looked after RP’s children rather than RP.

As to RP’s claim for housekeeping expenses, the Arbitrator found that there was no evidence of what activities RP did before the accident or that he was disabled from doing any of them.

Finally, the Arbitrator ordered a special award for Allstate’s failure to pay certain treatment expenses. However, at the appeal hearing, Allstate submitted that it had determined that no funds were outstanding for this treatment, and RP agreed. Accordingly, both parties have consented to my revoking the special award.

III. ANALYSIS

RP appeals on essentially two points. First, he submits that the Arbitrator erred in finding that s. 2(1.1)(g) requires that the mental or behavioural disorder be diagnosable and that Dr. Mamelak did not diagnose a disorder. On a related note, he submits that the Arbitrator had no basis to find RP had a pre-existing mental condition. Second, he submits she erred in refusing to admit Mr. Buote’s worksheet, referred to above.

However, RP in large measure seeks me to reweigh the evidence and come to my own conclusions regarding the evidence. As s. 283(1) of the Insurance Act provides that a party to an arbitration may appeal the order of the arbitrator to the Director or a delegate only on a question of law, that is not my role. Rather, it was the Arbitrator’s role to make findings of fact, which she did in a comprehensive manner in her decision. Overall, there is no basis on which to challenge the Arbitrator’s findings.

With respect to the first ground of appeal, the need for a diagnosis of a disorder, the Arbitrator analyzed the definition of catastrophic impairment. She noted that s. 2(1.1)(g) defines catastrophic impairment as “an impairment that, in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993, [‘the Guides’] results in a class 4 impairment (marked impairment) or class 5 impairment (extreme impairment) due to mental or behavioural disorder.” Diagnoses of mental disorders under this edition of the Guides are made in accordance with the Diagnostic and Statistical Manual of Mental Disorders, Revised Third Edition, commonly known as DSM-III-R. The Arbitrator noted that RP’s assessors used its successor, DSM-IV-TR, but that nothing turned on that. She concluded that the disorder had to be diagnosed in order to meet the test.

The Arbitrator noted that “Dr. Mamelak, the neuropsychiatrist who saw RP more often than any other health practitioner in his attempts to diagnose and treat RP, did not provide a formal DSM diagnosis in his reports of June 21, 2006 and September 16, 2008.” He did amplify his opinion at the hearing to include motor vehicle injury syndrome, mild chronic pain syndrome, elements of Post-Traumatic Stress Syndrome as described in the DSM-IV-TR, and fear of authority, including doctors. Elsewhere, the Arbitrator found chronic pain “unlikely in this case, given RP’s lengthy delay in seeking treatment and his unwillingness to continue with it once begun.” As for the “motor vehicle injury syndrome,” she noted that this syndrome is not a recognised disorder or diagnostic category in either the DSM-III or IV but rather one developed by Dr. Mamelak himself. As Allstate’s experts had concluded there was no diagnosable disorder, the Arbitrator found no catastrophic impairment. The Arbitrator set out in sufficient detail why she found that Dr. Mamelak made no diagnosis of a recognized disorder, and she was under no compunction to accept his diagnosis of a disorder that he had defined himself.

RP submits that the Arbitrator erred in her analysis of s. 2(1.1)(g). However, RP has provided me with little in the way of case law to support this argument. He refers to Brait and Allstate Insurance Company of Canada, (OIC A96‑000786, July 23, 1997), for the proposition that arbitrators are not charged with formulating an accurate medical diagnosis, as they are less concerned with what a condition is called than with its symptoms and how they relate to eligibility for benefits. However, that case did not deal with the specific definition in question here, but rather impairment in general. RP also refers to the appeal decision in Ms. G and Pilot Insurance Company, (FSCO P06-00004, September 4, 2007). That case dealt with s. 2(1.1)(f), the whole body impairment provision, which speaks of impairment, unlike s. 2(1.1)(g), which speaks of disorders. The Arbitrator comprehensively addressed why it was impossible to determine any specific mental or behavioural disorder for RP:

One, the significant nineteen-month gap between the motor vehicle accident and the first assessment by a mental health professional, psychologist Dr. D. Prendergast, on October 8, 2004, a period during which no objective reliable information about onset or development of symptoms was available. Two, RP either would not or could not cooperate with attempts at clinical evaluations or objective psychometric testing, or gave non-responsive, irrelevant, even nonsensical answers to queries, thus limiting the information required for a firm diagnosis. Three, RP’s bizarre behaviour and symptoms during assessments did not conform to any known DSM-IV diagnosis. Four, RP’s presentation during assessments and his behaviour under surveillance were not consistent. Finally, the various family members who brought him to different appointments – his wife TN, his daughter H, his sister-in-law HN, his in-laws – were not a source of consistent, reliable or, at times, truthful information.

The Arbitrator found that s. 2(1.1)(g) requires that there be a diagnosable disorder. This represents a considerable change from the general view, as seen in Brait, that arbitrators are less concerned with what an impairment is called than with its affect on function. On the other hand, s. 2(1.1)(g) does refer to a “mental or behavioural disorder,” which implies that the disorder has to be identified – that is, diagnosed. Furthermore, undiagnosed mental or behavioural problems can still be considered an impairment, as the Arbitrator correctly pointed out. They can also be included in determining catastrophic impairment, now that the Court of Appeal in Kusnierz v. Economical Mutual Insurance Company, 2011 ONCA 823, has held the combination of physical and psychological impairments is appropriate under s. 2(1.1)(f). However, in light of the paucity of submissions I received on this point, I am not prepared to make a determination in this regard because it is not necessary to do so, due to the causation issue.

This brings me to the related point noted above. RP submits that the Arbitrator erred in finding his mental or behavioural problems pre-dated the accident. In so doing, he makes the reverse argument to that just referred to. That is, while he submits that the lack of a diagnosis of a mental or behavioural disorder after the accident should not prevent him from being found catastrophically impaired, the lack of any such diagnosis before the accident should prevent the Arbitrator from finding that his impairment pre-dated the accident. That does not follow. Indeed, as discussed in Ms. G., an important source of information for determining impairment is information provided by non-experts. The Arbitrator spent several pages going over that kind of evidence in great detail, the essence of which I have referred to above. This is another area where RP simply asks me to reweigh the evidence.

For instance, CC, owner of a specialty food shop and a wholesale customer of RP since the bagel bakery opened in 1988, testified on behalf of Allstate that RP had consistently supplied him with excellent bagels over the years, but the supply was erratic after 2000. The Arbitrator accepted his testimony about the desultory state of RP’s business before the accident as credible. She did not agree that, after so many years, CC’s evidence should be discounted because of his adverse interest as a competitor. I have no basis on which to assess the evidence differently. The same applies to the other areas the Arbitrator looked at, such as the testimony of MR, the municipal health inspector, who also dealt with RP on a professional level before the accident. MR attended at the bakery a number of times to issue a ticket for health infractions, but found it closed.

The Arbitrator found that RP suffered from other pre-accident stressors, including marital problems with his wife TN. The Arbitrator found TN’s portrayal of a happy, normal pre-accident life with her husband to be deliberately untrue. She found the best evidence in favour of RP as “normal” or untroubled before the accident was that of his daughter H, who described her relationship with her father before the accident as “very tight.” However, the Arbitrator did not find her testimony helpful regarding the changes in her father’s behaviour, “not because she was untruthful, but because I was not persuaded her recollection of events six or seven years ago when she was only ten years old, was particularly accurate or reliable.” I have already referred to RP’s post-accident stressors above.

The Arbitrator reached her conclusion on causation based on the evidence before her, and I have no reason to intervene.

This leads me to the second major area of the appeal, which is related to RP’s failure to prove any loss of income on which to base IRBs. As noted above, the Arbitrator did not admit into evidence a worksheet prepared by Mr. Buote. By way of background, RP had refused to provide income-related documentation to Allstate on the basis that it was inaccessible to him. Furthermore, he had problems with the CRA. This led to Mr. Buote’s involvement. The Arbitrator stated that

[n]ot until late 2005 did RP and TN retain a tax lawyer, Mr. J. D. Buote, to assist them in resolving these matters with the CRA. Mr. Buote, a forthright individual, testified that RP was evasive, contradictory, and generally very difficult to deal with, and had “the attention span of a gnat.” He testified RP brought him a box of business documents which were later taken away by the CRA. He stated RP told him he did not have an accountant. From Mr. Buote’s description, I find these were the same business documents Allstate has been requesting from the beginning of RP’s claim for IRBs, and which RP told Allstate he was unable to provide because he was unable to get them out of the bakery after his landlord locked him out in July 2003. TN stated the same at the hearing. I find they both lied about the existence of these business documents. I further find RP lied to Mr. Buote about not having an accountant – TN testified that RP had always had an accountant for his business. Mr. Buote testified that he had to turn to TN for coherent instructions, and the couple’s tax situation was eventually resolved in January 2009.

Regarding the box of documents, the Arbitrator accepted Mr. Buote’s testimony and found the documents had been available at least since 2006. She further found that, in the absence of any other explanation for why RP and TN did not disclose these business records to Allstate or this tribunal, they simply chose not to, and TN lied about their existence.

The Arbitrator then found that “Allstate was entitled to original source business documents from Royal Bagel before it was required to retain an accountant to calculate an IRB, and this essential information was, as we have seen, available and never provided.” She also found that none of the evidence put forth at the hearing established that RP earned income from Royal Bagel as its owner and sole employee in the 52 weeks before the accident, or the amount of income earned.

The Arbitrator did not find the tax returns helpful. She noted that, assuming the information in them was accurate, there appeared to be no income loss after the accident, at least not in 2003 and 2005, and since no return was provided for 2004, RP could not have expected Allstate to be able to calculate, or pay, an IRB, as of September 2007. Eventually, after the start of the hearing, the CRA produced a letter dated March 6, 2009, and two schedules, A and B, explaining how it had eventually reassessed income for TN and RP for the taxation years 2000 to 2005.

RP and TN had retained Mr. Buote to object to the CRA’s initial assessments. However, when Mr. Buote was called to testify he “brought with him a ‘worksheet’ purportedly containing specific and detailed numbers attributing self-employment income from Royal Bagel to RP and his wife, based on business records – a worksheet apparently not previously disclosed to counsel during their interview with him.”

The Arbitrator ruled that Mr. Buote could testify to explain CRA’s tax auditing process, its March 6, 2009 letter, and the process by which RP’s “income” was determined for the purpose of Schedule B, but that the worksheet itself should not be admitted nor could Mr. Buote’s testimony be used to prove a precise pre-accident self-employment income amount from Royal Bagel. She found it would be unfair to allow RP to rely on the worksheet for the purpose of establishing his claim to an IRB, when the source business documents used to prepare the worksheet were available well before the start of the hearing, and neither RP nor TN, his appointed representative, chose to advise their counsel of this information until after the hearing had commenced.

This ruling was within the Arbitrator’s discretion. I reject RP’s submission that, since he could not handle his affairs, the failure to provide documentation should not be held against him since TN had conduct of the arbitration on his behalf and could have produced the documentation, but did not do so.

Finally, RP submits that the Arbitrator erred in saying he was “disentitled” to IRBs due to his unreasonable delay in providing information, as the provision only delays payment. However, the Arbitrator clearly recognized this in her finding on that point:

Subsection 33(2) of the Schedule relieves insurers from paying a benefit for any period in which the insured person fails to provide timely information reasonably required, unless the insured person has a reasonable explanation. I have found that the information required by Allstate was reasonable, and the explanation proffered by TN and RP, that the business documents required were not available, to be untrue. To date, no IRB would be payable under these circumstances, even if other eligibility requirements were met. [Emphasis added.]

This finding simply confirms that RP failed to prove any loss of income arising from the accident.

The appeal is therefore dismissed.

IV. EXPENSES

If the parties are unable to agree on the legal expenses of this appeal, pursuant to Rule 79.2 of the Dispute Resolution Practice Code, Fourth Edition (Updated August 2011), an expense hearing shall be requested within sixty days of this decision. The request shall be accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, as well as written submissions regarding entitlement to or the quantum of these expenses, or both, as are in dispute.