Nadarajah v. RBC General Insurance Company, 2013 ONFSCDRS 159

The Financial Services Commission of Ontario Commission des services financiers de l’Ontario

Neutral Citation: 2013 ONFSCDRS 159

Appeal P13-00010

OFFICE OF THE DIRECTOR OF ARBITRATIONS

NIRMALADEVI NADARAJAH Appellant

and

RBC GENERAL INSURANCE COMPANY Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. David S. Wilson for the Appellant, Ms. Nirmaladevi Nadarajah Ms. Pamela A. Brownlee for the Respondent, RBC General Insurance Company

HEARING DATE: October 24, 2013 Additional written submissions were received by November 26, 2013

APPEAL ORDER

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

1. The Arbitrator’s January 29, 2013 decision is rescinded.
2. The Appellant is not barred from claiming income replacement benefits by reason of the limitation period under subsection 281.1(1) of the Insurance Act, R.S.O. 1990, c. I.8.
3. The issues of the housekeeping limitation defence and interim benefits are returned to arbitration for a new hearing.
4. If the parties are unable to agree on the legal expenses of this appeal, an expense hearing shall be requested within sixty days of the date of this decision, as set out within.

December 11, 2013

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL AND BACKGROUND

The Appellant, Ms. Nirmaladevi Nadarajah, was injured in an August 24, 2005 motor vehicle accident. As a result, she applied to her first-party automobile insurer, the Respondent, RBC General Insurance Company, for statutory accident benefits available under the Schedule.¹

The Respondent submits that it terminated the Appellant’s housekeeping benefits by an OCF-9 (Explanation of Benefits by Insurance Company) dated November 9, 2005, and income replacement benefits (“IRBs”) by an OCF-9 dated April 6, 2006. The Appellant’s present counsel filed for mediation regarding housekeeping benefits on February 17, 2010. The Report of Mediator was issued November 18, 2010. On November 26, 2010, the Appellant filed for arbitration in respect of housekeeping benefits, interest, legal expenses and a special award.

On January 11, 2012, a Report of Mediator was issued regarding mediation of the Appellant’s IRB claim that was commenced October 31, 2011. I was not referred to a separate Application for Arbitration regarding the Appellant’s IRB claim.

On May 11, 2012, the parties came before Arbitrator Wilson (the “Arbitrator”) on the issue of whether the Appellant was entitled to an interim benefits award based on the submission that her benefits had been improperly terminated. There was an initial issue whether the Appellant was statute barred from claiming IRBs and housekeeping benefits based on the limitation period having expired.

The Arbitrator’s January 29, 2013 decision held that the Appellant was precluded from proceeding to arbitration on both housekeeping benefits and IRBs. The Arbitrator found that the Respondent’s termination notices had not been successfully challenged and that the Appellant’s Application for Mediation had been filed far beyond the allowed two years. Accordingly, he found that there was no need for him to determine whether interim benefits should be awarded.

The Appellant submits that the Arbitrator erred in not taking into account all of the evidence and submissions. She seeks an order that she is not precluded from proceeding to arbitration and that she is entitled to an interim benefits award. In the alternative, the Appellant asks that these issues be referred back to arbitration for a new hearing.

The parties agree this appeal should be accepted at this time. I concur. Although the Arbitrator’s decision was on a preliminary issue, the effect of his order is a dismissal of the proceeding.

II. HOUSEKEEPING BENEFITS LIMITATION ISSUE

The Appellant argues that the Arbitrator erroneously presumed that the Respondent terminated both housekeeping benefits and IRBs on April 6, 2006, when the former were stopped November 9, 2005. She submits that the Arbitrator made no finding regarding the housekeeping limitation defence. Rather, the Arbitrator failed to address the Appellant’s submission that the November 9, 2005 OCF-9 was not a clear and unequivocal refusal to pay any further housekeeping benefits.

The Respondent argues that the Arbitrator, at page four of his decision, clearly distinguished between its November 9, 2005 OCF-9 relating to the Appellant’s housekeeping claim and its April 6, 2006 OCF-9 terminating IRBs. Further, at page 15 of his decision, the Arbitrator held:

The termination notices not having been successfully challenged, there is no doubt that Ms. Nadarajah’s Application for Mediation was far beyond the two years allowed for that step. [Emphasis added]

The Respondent submits that as the Arbitrator used the plural “notices,” it is sufficiently clear that he contemplated the limitation period issue regarding both claims. The Respondent argues that, in any event, the Arbitrator was not required to give reasons for his decision.

The Supreme Court of Canada, however, in Baker v. Canada (Minister of Citizenship and Immigration), 1999 CanLII 699 (SCC), held, as set out in the headnote:

It is now appropriate to recognize that, in certain circumstances, including when the decision has important significance for the individual, or when there is a statutory right of appeal, the duty of procedural fairness will require a written explanation for a decision.

There is a statutory right of appeal under section 283 of the Insurance Act. Weekly IRBs and/or housekeeping benefits would seem to be of important significance to a victim of a motor vehicle accident. Consistent with Baker, Rule 65.3 of the Dispute Resolution Practice Code (Fourth Edition, Updated August 2011) (the “Code”), provides that an order that finally decides the issues in dispute will be supported by written reasons.

R. v. Walker, 2008 SCC 34, citing R. v. Sheppard, 2002 SCC 26, held:

Sheppard holds that “[t]he appellate court is not given the power to intervene simply because it thinks the trial court did a poor job of expressing itself” … Reasons are sufficient if they are responsive to the case’s live issues and the parties’ key arguments. Their sufficiency should be measured not in the abstract, but as they respond to the substance of what was in issue. The “trial judge’s duty is satisfied by reasons which are sufficient to serve the purpose for which the duty is imposed, i.e., a decision which, having regard to the particular circumstances of the case, is reasonably intelligible to the parties and provides the basis for meaningful appellate review of the correctness of the trial judge's decision” … The duty to give reasons “should be given a functional and purposeful interpretation” and the failure to live up to the duty does not provide “a free-standing right of appeal” or “in itself confe[r] entitlement to appellate intervention” …

Consistent with Walker, F.H. and McDougall, 2008 SCC 53, stated: “Nor are reasons inadequate because in hindsight, it may be possible to say that the reasons were not as clear and comprehensive as they might have been.”

The initial issues before the Arbitrator were limitation defences under subsection 281.1(1) of the Insurance Act. That provision provides:

A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years

after the insurer’s refusal to pay the benefit claimed.

Subsection 51(1) of the Schedule reiterates:

A mediation proceeding or evaluation under section 280 or 280.1 of the Insurance Act or a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Act in respect of a benefit under this Regulation shall be commenced within two years after the insurer’s refusal to pay the amount claimed

Zeppieri and Royal Insurance Company of Canada, (OIC A-005237, February 17, 1994), confirmed on appeal (OIC P-005237, December 22, 1994), held that there is a two-step process in determining whether the limitation period applies in the circumstances of the case. First, one asks whether, and when, there was a refusal to pay benefits. Secondly, one determines whether the insurer can rely on a limitation period running from the refusal date.

Regarding the housekeeping benefits limitation period, the Appellant states:

With respect to the issue of housekeeping, it is submitted that the contents of the OCF-9 dated November 9, 2005 were insufficient so as to create an unequivocal refusal to pay further housekeeping benefits.

In response, the Respondent references page two of its November 9, 2005 OCF-9, Part 4:

HH: Based on the report prepared by Laurie Taylor, O.T. from Functional Rehabilitation (see enclosed) following her examination, which was conducted on October 26/05 it was determined that you do not require assistance for the housekeeping activities that you performed prior to the accident.

At the top of page two of the OCF-9, a chart identifies “HH” as housekeeping and home maintenance expenses. The Appellant argues that the words “you do not require assistance” are not a clear and unequivocal refusal to pay housekeeping benefits.

That the Arbitrator may have been cognizant, at page four of his decision, that there were two different termination notices is not, by itself, sufficient. The Arbitrator simply concluded, at page 15 of his decision (after an extensive analysis pertaining to the Respondent’s IRB limitation defence), that the Appellant had not successfully challenged the termination notices, without any analysis or mention of the November 9, 2005 OCF-9, and while reversing the onus.

This is not a case of the Arbitrator’s reasons for his housekeeping limitation period defence finding failing to being as clear and comprehensive as they might have been. Rather, this is a case of reasons not being given regarding the specific housekeeping limitation defence, that the Arbitrator’s decision was not responsive, as required by Walker, to the live and key issue whether the Respondent’s November 9, 2005 OCF-9 was a clear and unequivocal refusal to pay housekeeping benefits, the onus being on the Respondent which had brought the cross motion for an order that the Appellant’s claims were statute barred. The basis of the Arbitrator’s housekeeping limitation period decision is not reasonably intelligible. Nor does it provide a basis for meaningful appellate review of the correctness of the decision.

Respectfully, I am persuaded that the Arbitrator erred in law in failing to give reasons for his housekeeping limitation order.

The parties were initially of the view that, if the housekeeping limitation issue was to be reheard, as the arbitration record was restricted to affidavit and documentary evidence, an appellate officer was in as good a position as an arbitrator to determine whether the November 9, 2005 OCF-9 constituted a clear and unequivocal refusal to pay housekeeping benefits and trigger the limitation period.

On further reflection, the parties agreed that if an appellate officer determined this issue, it would deprive both parties of an internal Commission appeal from a first-instance decision. Following the joint submission of the parties, the housekeeping benefits limitation defence issue is returned to arbitration for a new hearing.

III. INCOME REPLACEMENT BENEFITS LIMITATION ISSUE

Effective March 1, 2006, the IRB termination procedure under the Schedule changed.

The Appellant concedes that as of March 1, 2006 the Respondent had not yet received its insurer medical examination (“IME”) reports. The Appellant further concedes, citing the subsection 41.1(1) transitional provision of the Schedule, that as of March 1, 2006 the Respondent had not yet given, nor was it required to have given, notice of termination respecting her IRB claim.

The Appellant, therefore, concedes that she no longer had the right, as previously provided under the Schedule, to require a Designated Assessment Centre (“DAC”) assessment before her IRBs could be properly terminated.

The Respondent states that the Appellant failed to attend three IMEs it had scheduled for November and December 2005 regarding her claimed entitlement to IRBs or caregiver benefits. It did not receive the Appellant’s election to receive IRBs until December 15, 2005. The Respondent rescheduled its IMEs for February 2006, received the IME reports in March and terminated the Appellant’s IRB entitlement on April 6, 2006 based on two of the three IMEs.

The Respondent agrees that by the time of its April 6, 2006 IRB refusal, based on the transitional rules, the new section 37 applied. The Respondent submits that the Arbitrator, therefore, correctly concluded that on “the face of it, the section 42 [IME] reports that could have triggered a DAC entitlement were not delivered until after the transition deadline, and so, no DAC entitlement should have crystallized.”

The Appellant argues that under the subsection 41.1(2) transitional rule, if the Respondent wished after February 28, 2006 to determine whether the Appellant continued to be entitled to IRBs, it was obliged to comply with the new section 37 of the Schedule. This meant, in part:

(a) Pursuant to clause 37(1)(a), the Respondent was required, within 15 business days of it wishing to determine entitlement, to request from the Appellant a new disability certificate completed as of a date on or after the date of its request.

(b) Pursuant to subsection 37(5), within five business days of receiving the IME report, the Respondent was to provide a copy of the report and its IRB determination to both the Appellant and the health practitioner who completed the disability certificate.

The Appellant submits that the Respondent failed to provide the health practitioner with copies of its IME reports. Citing Klimitz and Allstate Insurance Company of Canada, (FSCO P12-00026, March 21, 2013) (under Judicial Review), the Appellant argues that this denied her an opportunity to know whether to challenge the IRB termination.

The Appellant submits that the Arbitrator erred in placing the onus on her to establish that the Respondent’s failure in this regard was an obstacle to her accessing the dispute resolution process for five years. The Appellant argues that an insured’s right to rely on an insurer’s breach of the Schedule requires no such proof. Rather, Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, has set mandatory and “bright-line” boundaries.

The Appellant further submits that the Respondent’s April 6, 2006 OCF-9 does not mention the Respondent’s functional capacity assessment (“FCA”) IME report. Nor is there any evidence the Respondent gave the FCA report to the Appellant. The Appellant queries how she could fully understand the reasons for her IRB termination when she was not given a copy of this report.

(c) Pursuant to subsection 37(9), the Respondent could not stop paying IRBs where the Appellant was required to undergo an IME unless the Respondent had provided a copy of its IME reports and its determination under this section.

The Appellant argues that the Respondent should have started the termination process earlier and completed it under the prior legislation, or have restarted the process after February 28, 2006 under the new legislation, including arranging a new set of IMEs concurrent with requesting a new disability certificate.

The Appellant submits that, instead, the Respondent denied her both the DAC consumer protection under the earlier version of the Schedule and the consumer protection of a further disability report under the amended Schedule. Therefore, the April 6, 2006 OCF-9 should not be allowed to trigger the IRB limitation period. The Appellant argues that the Arbitrator erred in failing to consider her argument regarding this legislative consumer protection gap. She maintains that, based on the Respondent’s improper termination, she is entitled to an interim award of IRBs and interest from the termination date to the date of any further arbitral order.

The Respondent argues that the Appellant is simply revisiting the Arbitrator’s factual findings, when subsection 283(1) of the Insurance Act restricts appeals from the order of an arbitrator to questions of law. I am persuaded that the Appellant has raised an issue of law, that is, whether, and to what extent section 37 of the new version of the Schedule applies in this case and what is the effect of any non-compliance by the Respondent with that new provision.

The transitional provisions of the Schedule, as they relate to IRBs, state:

41.1 (1) Subject to subsection (2), sections 34, 35 and 37, as they read on February 28, 2006, continue to apply in respect of a claim by a person for income replacement, non-earner or caregiver benefits if, under subsection 37 (1), as it read on February 28, 2006, the insurer gave or was required to give the person, before March 1, 2006, a notice with respect to the claim.

(2) If, after February 28, 2006, an insurer wishes to determine if a person continues to be entitled to receive income replacement, non-earner or caregiver benefits, section 37, as it reads after February 28, 2006 applies.

Subsections 52(3) and (4) of the Legislation Act, 2006, S.O. 2006, c. 21, Sch. F, provide:

(3) Proceedings commenced under the former Act or regulation shall be continued under the new or amended one, in conformity with the new or amended one as much as possible.

(4) The procedure established by the new or amended Act or regulation shall be followed, with necessary modifications, in proceedings in relation to matters that happened before the replacement or amendment.

In this case, the Respondent’s wish to determine if the Appellant continued to be entitled to IRBs commenced prior to March 1, 2006 and continued after that date until its April 6, 2006 OCF-9 termination of benefits. I am not persuaded that the legislation required the Respondent to begin the entire process anew. If that had been the legislative intent, it would have said so.

Rather, I am persuaded that the legislative intent was that where an insurer had begun its entitlement determination on or before February 28, 2006 under the prior version of the Schedule, it was to continue its determination as much as possible, and with necessary modifications, under the new version.

By March 1, 2006, the Respondent had rearranged its IMEs due to the Appellant’s earlier non-attendance. The Appellant had attended all three rearranged IMEs. All three IME reports had, based on their February 2006 dates, been prepared. I am not persuaded that the IME process was now to be restarted in order for the Respondent to request a further disability certificate under clause 37(1)(a) of the Schedule.

In any event, the Respondent had received a further disability certificate on January 10, 2006, contemporaneous with its February 1, 2006 IME rescheduling. The Respondent had received an earlier, November 9, 2005, Disability Certificate following its September 29, 2005 request.

As proffered by the Respondent, it is difficult to contemplate that the Appellant would have responded favourably to a request, based on an argument of consumer protection, that she re-attend after February 28, 2006 all three IMEs she had just attended.

The Respondent’s sworn affidavit states that it received the IME reports on March 6 and 20, 2006. It communicated its IRB refusal on April 6, 2006. All of that is after the transition date of February 28, 2006. Pursuant to the transitional Rule 41.1(1), as the Respondent had not given nor was it required to have given the Appellant notice with respect to her IRB claim prior to March 1, 2006, the old section 37 did not apply. Rather, the new section 37 applied. The new subsection 37(5) states:

Within five business days after receiving the report of an examination under section 42, the insurer shall give a copy of the report and the insurer’s determination with respect to the specified benefit to the insured person and to the health practitioner who completed the disability certificate.

Subsection 37(6) states that the insurer’s determination shall specify:

(a) the specified benefits and expenses the insurer agrees to pay;

(b) the specified benefits and expenses the insurer refuses to pay;

(c) the reasons for the insurer’s decision; and

(d) if the insurer determines that the insured person is not entitled to a specified benefit, the date that payment of the benefit will be stopped.

As noted, there is a two-step process in determining whether the limitation period applies. The first step is to determine whether and when there was a refusal to pay benefits. The second is to determine whether the insurer may rely on a limitation period running from the date of refusal.

It is not disputed that the Respondent clearly and unequivocally refused to pay IRBs. The Appellant uses the Respondent’s April 6, 2006 IRB refusal as the standard against which the Respondent’s housekeeping November 9, 2005 OCF-9 should be found wanting.

Clause 37(6)(c) of the Schedule requires, in part, that the insurer specify the reasons for its decision to terminate. I am not persuaded that the reasons the Respondent gave for its denial were, as the Appellant argues, so “grossly or markedly insufficient” as being equivalent to no reasons at all. Part 2(B) of the OCF-9 has two parts, “Eligible” and “Not Eligible/Stoppage of Benefit.” Only the latter is checked off. In it the Respondent clearly states its position, in part:

As per the enclosed reports, you do not have a substantial inability to return to your pre-accident employment; therefore, you do not meet the medical requirements to continue claiming the Income Replacement Benefit.

The Appellant argues, in the alternative, that the Respondent cannot rely on the limitation period running from its April 6, 2006 IRB refusal because, contrary to subsection 37(5) of the Schedule, it failed to (1) send its IME reports to the health practitioner who completed the disability certificate; and (2) send its FCA IME report to the Respondent.

The Respondent received the February 17, 2006 FCA IME on March 6, 2006, and the February 20, 2006 orthopaedic and February 22, 2006 psychological IMEs on March 20, 2006. The Respondent concedes there was no evidence provided that it gave a copy of the FCA IME report to the Appellant. There is no evidence that the three IME reports were sent to the health practitioner who completed the disability certificate.

The Respondent argues that Stranges v. Allstate Insurance Company of Canada, 2010 ONCA 457, holds that a technical breach by an insurer does not result in an award of entitlement. Rather, an insured must still establish entitlement to the benefit in accordance with the test enunciated in the Schedule. Likewise, Bisnath and State Farm Mutual Automobile Insurance Company, (FSCO A08-000007, October 27, 2010), upheld by Delegate Evans by letter decision dated January 6, 2011, application for judicial review rejected, O.J. No. 4895, held that a procedural flaw does not entitle an insured to benefits until entitlement is established.

However, the Respondent conceded in oral submissions that there is no case law to the effect that the limitation period runs regardless of whether the insurer has followed the mandated termination process. It consequently argues that Smith stands for the proposition that an insurer’s only requirement is to advise insured persons about the dispute resolution process. I disagree.

It is true that, in Smith, the Supreme Court required that when refusing to pay a benefit, insurers inform insured persons of the dispute resolution process. The Supreme Court held that this was the “clear and unambiguous” requirement of section 71 of the Schedule then in effect. It is also true that the Supreme Court did not address the requirements of section 37 of the Schedule that are before us. That section, which came into effect March 1, 2006, was not an issue in the Court’s 2002 decision addressing a May 8, 1996 termination of benefits.

However, the question raised by Gonthier J. at the outset of Smith does apply here: “whether there was a proper refusal by the respondent to continue payment of the benefits so as to trigger the limitation period of two years to launch a civil action” [emphasis added].

That question is separate from the merits of the claim that a trial judge would subsequently have to assess. That question is also separate from the Court’s more basic inquiry, at paragraph 20, “whether the notice given by the respondent in this case would even be considered a refusal in a non-technical sense,” based on the “equivocal sense of indeterminacy” of the insurer’s decision. I am of the view that the two-question approach in Zeppieri remains good law.

The Respondent argues, in the further alternative, that while perhaps an insurer cannot ignore the entire termination process, it substantially complied with the new section 37 process. Its failure to provide the IME reports to the medical practitioner who completed the disability certificate was simply a technical violation, similar to the failure to request a disability certificate addressed in Shanmuganathan and State Farm Mutual Automobile Insurance Company, (A11-000658, December 13, 2011). Or, as with the failure to give correct reasons in Turner and State Farm Mutual Automobile Insurance Company, (FSCO P00-00046, February 1, 2002),² its failing was insufficient to invalidate the entire termination. Succinctly, the Respondent argues that not all of the section 37 requirements need to be followed for the limitation period to be triggered.

Shanmuganathan, however, was not a limitation case. Rather, it pertained to whether a breach of section 37 entitled an insured person to an interim award of benefits. In Turner, the Court of Appeal held that “adjectives like ‘substantially’ ought to be avoided, to eliminate any possible inference that the test is being diluted.” The Court, concluding that when read in its entirety the reasons of the Director’s Delegate left no doubt she applied the correct test that the notice be clear and unequivocal, further held:

We also conclude that the Divisional Court erred in requiring that the reasons for cancelling the benefit must be legally correct. Section 24(8) of the [then] Statutory Accident Benefits Scheme obliges the insurer to give the insured “the reasons for the refusal”. It does not provide that the reasons must be legally correct. The purpose of the requirement to give reasons is to permit the insured to decide whether or not to challenge the cancellation. If the reasons given are legally wrong the insured will succeed in that challenge. Requiring that the reasons be legally correct goes beyond both the requirement in the relevant regulation, and the purpose of such a notice.

The Respondent argues there is no evidence that the FCA IME report it failed to provide to the Appellant was the basis for its termination of IRBs. It submits that its April 6, 2009 OCF-9 clearly referred to the orthopaedic and psychological IME reports that were provided as the basis for its termination.

I am not persuaded by this argument. Notwithstanding that an insurer’s reasons need not be legally correct, clause 37(6)(c) of the Schedule clearly and unambiguously requires that the insurer must still give reasons for terminating the benefit. Subsection 37(5), again using the words of the Supreme Court in Smith, clearly and unambiguously requires that the insurer shall give a copy of the IME report and the insurer’s determination with respect to the specified benefit to both the insured and the health practitioner who completed the disability certificate.

Consistent with the Court of Appeal in Turner, while any alleged incorrectness of an IME report does not prevent the limitation period from running, the insurer must still provide a copy of the IME report “to permit the insured to decide whether or not to challenge the cancellation.”

Thus, as an example, if an insurer receives three IME reports, two of which opine the insured person does not meet the entitlement test and one that the insured does, the insurer cannot serve only the two negative reports upon which it relies, with the limitation period running from the date of refusal. I am not persuaded that inadvertence, not relying on an IME report or some variation of a claim of privilege allows the limitation period to be triggered in the absence of the clear and unambiguous requirement that the insurer provided the IME reports, as specified.

The Respondent’s argument that some section 37 requirements are more important than others, that some require compliance and some evidently do not, at least not to prevent the limitation period from starting, has an additional difficulty, the Respondent’s struggle in advising where the dividing line is to be drawn. The Respondent distinguished, without categorizing, section 37 requirements it termed substantive and those section 37 requirements it termed procedural.

Section 37 comes under Part X of the Schedule. Part X is entitled “Procedures for Claiming Benefits.” It was not clear why all of the section 37 requirements should not be considered to be procedural.

Further, there is a purpose behind the requirement that the IME reports and the insurer’s determination be sent to the health practitioner who completed the disability certificate, as well as the insured person. Under the Schedule, there is greater involvement by the insured’s health practitioner in the dispute resolution process. As noted, clause 37(1)(a) requires an insurer who wishes to determine whether an insured is still entitled to a specified benefit to request a new disability certificate. I stated in State Farm Mutual Automobile Insurance Company and Yogesvaran, (FSCO P09-00042, October 28, 2010):

I do not agree that disability certificates are of minor consequence, the provisions pertaining to which can be ignored. Rather, the legislative importance of a disability certificate is confirmed in that an insurer may discontinue payment of benefits simply based on an insured’s failure to submit same. Further, I find that the request for, and the contents of, a disability certificate are considerations as to whether an IME is “reasonably necessary” under section 42 of the Schedule.

The importance of an insurer sending the IME reports and its determination to the health practitioner who completed the disability certificate is also linked to section 42.1 “rebuttal reports.” In brief, as is applicable to this case, where an insurer conducted an IME and its determination is that the insured person is not entitled to benefits, the insurer shall pay, as provided, for an assessment or examination of the insured “by the original provider.” “Original provider” is defined as including the health profession who completed the disability certificate.

Subsection 42.1(10) of the Schedule provides, in part, that “an assessment or examination under this section shall be used only for the purposes of assisting in the resolution of a dispute in accordance with sections 280 to 283 of the Act.” The insurer is not required, as a result of receiving the report of the assessment or examination, to allow any application or pay any benefit that it otherwise would not have allowed or paid.

Following the question raised by Gonthier J. in Smith: “whether there was a proper refusal,” and the question in Zeppieri whether the insurer can rely on a limitation period running from the refusal date, I am persuaded that the limitation period only begins to run when the insurer has properly terminated benefits which includes, as set out in subsection 37(5) of the Schedule, providing both the insured person and the health practitioner who completed the disability certificate with its determination and a copy of the IME reports.

The onus of establishing a limitation defence is on the insurer. Further, as stated in Do:

Both Simcoe & Erie Insurance Company and Wiggan, (OIC P-004204, June 12, 1996) and Francis and Allstate Insurance Company of Canada, (FSCO A97-001109, January 26, 1999), upheld on appeal (FSCO P99-00014, June 11, 1999), hold that limitation periods must be strictly construed as the result is to deny an applicant the opportunity to have their claim adjudicated.

The Respondent concedes there is no evidence it served its FCA IME report on the Appellant herself. There is no evidence the IME reports were forwarded to the health practitioner who completed the disability certificate. The Arbitrator dealt with this issue by putting the onus on the Appellant to establish that the IMEs were not provided.

The Arbitrator further held:

Even assuming that RBC failed to provide the reports, I do not accept that such failure to deliver the assessment reports to Ms. Nadarajah’s physicians vitiates an otherwise correct termination. Certainly there was no evidence as to how the failure to deliver the reports to the health practitioners might have been an obstacle to Ms. Nadarajah accessing the dispute resolution process, or linking the five year delay in applying for arbitration to the Insurer’s alleged default.

While there are clear “bright lines” that must be observed in the aim of consumer protection, I do not accept that Ms. Nadarajah’s ability to challenge an insurer’s determination is impaired by such an oversight. Rather, drawing from Smith, the critical information that cannot be dispensed with appears to be knowledge of how to engage the dispute resolution process either in court, or in arbitration, in a timely manner, a process that does not generally directly involve a physician or health professional.

Respectfully, I find that the Arbitrator erred in two respects. First, his analysis addressed only the “how” to engage the dispute resolution system addressed in Smith. His analysis ignored the “whether” to engage the dispute resolution system imperative set by the Court of Appeal in Turner. He erred in finding that the Respondent properly terminated IRBs notwithstanding it failed to establish it provided the Appellant and the health practitioner who completed the disability certificate with all three IME reports, as clearly and unambiguously mandated by the Legislature in subsection 37(5).

Second, the Arbitrator erred in reversing the onus regarding this limitation defence, putting the onus on the Appellant to establish that the Respondent’s failure to comply with a mandatory requirement of the statutory termination process affected her engaging the dispute resolution process. Such an approach was rejected by the Supreme Court in Smith, where, notwithstanding the insured was represented by counsel throughout, the Court held:

The respondent argued that the appellant was informed of the limitation period in any event through the mediator’s report. Sharpe J.A. also took note of this, although not for the purpose of invoking it against the appellant as the respondent wishes to do. However, to take this fact into account against the appellant would be to ignore the particular nature of the matter. As I have mentioned above, insurance law is, in many respects, geared towards protection of the consumer. This approach obliges the courts to impose bright-line boundaries between the permissible and the impermissible without undue solicitude for particular circumstances that might operate against claimants in certain cases.

Following the two-part test in Zeppieri, I find that although there was a refusal by the Respondent to pay IRBs, the Respondent cannot rely on a limitation period running from its April 6, 2006 refusal date because it did not comply with mandatory requirements of the legislatively directed termination process. Accordingly, the Arbitrator’s January 29, 2013 decision is rescinded with a new order that the Appellant is not barred from claiming income replacement benefits by reason of the limitation period under subsection 281.1(1) of the Insurance Act.

In light of his limitation decision, the Arbitrator did not determine whether the Appellant was

entitled to an award of interim benefits. Given that the Arbitrator’s IRB decision has been rescinded, the issue of interim benefits is returned to arbitration for a new hearing along with the issue of the housekeeping limitation defence.

IV. EXPENSES

If the parties are unable to agree on the legal expenses of this appeal, applying Rule 79 of the

Code, an expense hearing shall be requested, as counsel asked, within sixty days of the date of this decision.

The request for an expense hearing 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.

December 11, 2013

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Overturned on judicial review in Turner v. State Farm Mutual Automobile Insurance Co., 731 (QL), 2004 CanLII 13402. The Divisional Court decision was overturned in 2005 CanLII 2551 (ON C.A.).