Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2013 ONFSCDRS 17 Appeal: P12-00037

OFFICE OF THE DIRECTOR OF ARBITRATIONS

GUARANTEE COMPANY OF NORTH AMERICA Appellant

and

DONG DO Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Alexander W. Neaves for the Appellant, Guarantee Company of North America Ms. Samia M. Alam for the Respondent, Mr. Dong Do

HEARING DATE: January 25, 2013 (written submissions were received by January 14, 2013) Oral decision delivered January 25, 2013

PRELIMINARY APPEAL ORDER

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

Pursuant to Rule 50.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated – August 2011), this appeal from a preliminary order is accepted at this time.
Pursuant to subsection 283(6) of the Insurance Act, R.S.O. 1990, c. I.8, the Appellant's request for a stay is denied.
This appeal will proceed as follows:

(a) The Appellant shall, by Friday, March 15, 2013, serve and file its written submissions.

(b) The Respondent shall, by Tuesday, April 30, 2013, serve and file his written submissions.

Financial Services Commission of Ontario Guarantee and Do Appeal Order P12-00037

(d) Oral submissions will be heard in Hamilton, Ontario on Tuesday, June 25, 2013.

The legal expenses of this preliminary appeal decision are deferred to the conclusion of this appeal proceeding, subject to any further or other order of an appellate officer.

January 29, 2013

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL AND BACKGROUND

The Respondent, Mr. Dong Do, was injured in an October 9, 2005 motor vehicle accident. In December 2006 he submitted to his first-party automobile insurer, the Appellant, Guarantee Company of North America, an application for a determination that he had sustained a catastrophic impairment (“CAT”), as defined under the Schedule.¹

The parties came before Arbitrator Alves (the “Arbitrator”) on the issue of whether the Appellant’s May 2007 or April 2008 Explanation of Benefits denying the Respondent’s requested CAT designation triggered the two-year limitation period under subsection 281.1(1) of the Insurance Act and subsection 51(1) of the Schedule.

If the limitation period ran from May 2007, the Respondent’s February 19, 2010 Application for Mediation and his Application for Arbitration filed March 7, 2011 would be out of time and he would be barred from proceeding to arbitration. The Arbitrator’s November 6, 2012 decision held that neither Explanation of Benefits had triggered the start of the limitation period.

In Wry and Aviva Canada Inc., (FSCO A07-001774, April 17, 2009), Mr. Wry had noted the limitation period ran from the date of the “insurer’s refusal to pay the benefit claimed.” As an application for a CAT designation was not for a “benefit claimed” but for entitlement to a higher level of benefits, Mr. Wry argued that the limitation provisions did not apply to an insurer’s CAT denial.

Arbitrator Richards rejected this submission, holding that a plain reading of the pertinent provisions of the Insurance Act, R.S.O. 1990, c. I.8, contemplated disputes regarding CAT entitlement.

On appeal, Wry and Aviva Canada Inc., (FSCO P09-00016 and P09-00016C, March 12, 2010), while addressing other issues, noted that “Mr. Wry now accepts that the limitation period does apply to CAT designations and withdraws this ground of appeal.”

In her November 6, 2012 decision, the Arbitrator disagreed with Arbitrator Richards’ finding:

… in the absence of the refusal of a benefit, the limitation period under the Insurance Act is not triggered. For these reasons, I conclude that neither the 2007 nor the 2008 Explanation of Benefit form and the accompanying documents which were filed triggered a limitation period.

The Arbitrator held that, in any event, neither Explanation of Benefits clearly communicated to the Respondent that the two-year limitation period ran from the date the CAT designation was denied.

In the alternative, the Arbitrator found that the Appellant’s May 2007 Explanation of Benefits was equivocal. Accordingly, if the limitation period had been triggered, it was by the April 2008 Explanation of Benefits. Therefore, the Application for Mediation filed within two years of that refusal, on February 19, 2010, was timely. The Application for Arbitration, received on March 7, 2011 by the Commission, was also timely, being within the 90-day period after the December 10, 2008 Report of Mediator.

The Arbitrator thus concluded that the Appellant could proceed to the six-day arbitration hearing scheduled to start December 3, 2012.

The Appellant requests that the Arbitrator’s November 6, 2012 order be set aside and substituted with an order that the issue of whether the Respondent sustained a catastrophic impairment is statute barred and his application is dismissed with legal expenses at both arbitration and appeal payable to the Appellant.

The Appellant submits, in part, that the Arbitrator erred in finding that an insurer’s refusal to accept an insured person as catastrophically impaired does not trigger the two-year limitation period. The Appellant also argues the Arbitrator erred in implicitly finding that if an insurer re-evaluates and then maintains its refusal, this renders null or equivocal its original refusal.

This preliminary appeal decision addresses whether this appeal from a preliminary order should be accepted at this time and, if so, whether a stay should be granted pending the appeal.

II. APPEAL FROM A PRELIMINARY ARBITRATION DECISON

Rule 50.2 of the Dispute Resolution Practice Code (Fourth Edition - Updated August 2011) (the “Code”) provides that a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute in the arbitration have been finally decided, unless ordered otherwise.

Rule 51.2(c) states that an appeal may be rejected if it is from a preliminary or interim order that does not finally decide the issues in dispute.

Delegate Makepeace, in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), held that the purpose of Rule 50.2 of the Code is to:

… facilitate the most cost-effective resolution of disputes by minimizing the time and money spent on procedural or collateral matters. The decision whether to hear an appeal of a preliminary order is discretionary … the over-arching principle guiding the exercise of the discretion is that the rule “should be broadly interpreted to produce the quickest, most just and least expensive resolution of the dispute.” The criteria to be considered include the apparent strength of the appeal, the importance or novelty of the issue raised, and whether rejecting the appeal or hearing it will prejudice either party.

Allstate Insurance Company of Canada and Al-Obaidi, (FSCO P99-00009, May 2, 2000), notes the Code’s general intent of deferring appeals from preliminary or interim orders until the arbitration is over. Appeals have been allowed to proceed where it made sense to do so before the parties incurred the expense and time of a full arbitration hearing. Further considerations were the parties’ preference, whether the arbitration decision departed from prior case law and whether hearing the appeal would streamline the process.

The Appellant argues that it has raised substantive and bona fides issues of law of broad and significant importance. It further argues that as this appeal has the potential to determine the entire arbitration, it is more efficient to first proceed with the appeal. It further argues that the parties’ consent sine die adjournment of the December 2012 arbitration hearing pending the appeal infers that neither party would suffer any undue hardship if the appeal is accepted.

The Respondent argues that this appeal should not be accepted as the issues raised are mixed fact and law and the Arbitrator gave lengthy and detailed reasons in a case that turned on it facts. In oral submissions, the Respondent conceded that the substantive issues in dispute in arbitration are post 104-week housekeeping benefits and attendant care, both of which are dependent on a CAT finding. The Respondent conceded that if the appeal were successful, all of the substantive issues in dispute in this present arbitration would be decided.

The Respondent submits that McLinden v. Payne, 2011 ONCA 439, affirmed that an insured person can reapply for catastrophic determination based on a material change of circumstances. However, the Respondent concedes that there has been only one application on his behalf for a CAT determination.

Exercising my discretion under Rules 50.2 and Rule 51.2(c) of the Code, I am persuaded to accept this appeal from the Arbitrator’s preliminary decision, for the following reasons:

I agree with the Appellant that this appeal raises a substantive, broadly important issue of law whether an insurer’s determination that an insured person is not catastrophically impaired triggers the limitation period under subsection 281.1(1) of the Insurance Act and subsection 51(1) of the Schedule.
There are contradictory decisions on this issue at arbitration. At the appellate level, this is a novel issue.
There is a further question whether the Arbitrator’s decision departs from prior case law such as Zeppieri and Royal Insurance Company of Canada, (OIC P-005237, December 22, 1994) that held although a denial may be reconsidered, this did not change the earlier termination date being maintained by the insurer.
If the Appellant is successful on appeal, all of the issues in dispute in arbitration will have been determined.
The Arbitrator issued her order initially by letter dated September 21, 2012. Full reasons were released November 6, 2012. Prior to reasons being released or the Notice of Appeal being served, the Respondent, on being advised an appeal was contemplated and the Appellant was not in a position to discuss settlement, wrote the Respondent October 1, 2012 that it would only seem reasonable that the December 2012 arbitration hearing be adjourned. The Arbitrator’s October 31, 2012 letter, on consent, adjourned the hearing of the substantive arbitration issues without fixing a new hearing date.

The Respondent, in oral submissions, stated that given the Appellant’s intention not to discuss settlement pending this appeal it made little sense to postpone the appeal. I agree that accepting this appeal at this time may ultimately save time and expense and streamline the process.

III. STAY OF THE ARBITRATOR’S ORDER

[S]ubsection 283(6) of the Insurance Act provides that an appeal does not stay the order of an arbitrator, unless decided otherwise. Rule 50.3 of the Code provides that an appeal does not stop an arbitration order from taking effect, unless ordered otherwise.

In Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), Delegate McMahon, noting that granting a stay is the exception rather than the rule, adopted the following criteria in determining whether a stay should be granted:

The bona fides of the appeal;
The substance of the grounds for appeal; and,
The hardship to the respective parties if the stay is granted or refused

The Appellant submits that it has met these criteria and seeks a stay pending this appeal of the Arbitrator’s order allowing the arbitration to proceed. The Respondent states that should the appeal be accepted, he takes no position whether a stay should be granted, leaving it to the adjudicator’s discretion.

The Arbitrator’s November 6, 2012 decision ordered that the arbitration application may proceed to the scheduled December 2012 hearing. The parties agreed to adjourn that hearing. The Arbitrator issued an order to that effect. At this point, given the consent adjournment, there is little practical effect to a stay of the Arbitrator’s earlier order allowing the matter to proceed.

Counsel have now agreed to a reasonable and expeditious time line for moving this appeal forward. I leave it to the parties’ co-operative good sense to take any reasonable, cost effective and expeditious steps in the interim regarding the arbitration such as setting tentative hearing dates to avoid subsequent delay in the event the appeal should ultimately be denied.

IV. FURTHER PROCEDURAL STEPS ON APPEAL

I set the following time lines for this appeal, as requested and agreed to by the parties:

(1) Amending Rule 54.1 of the Code, as allowed by Rule 81, the Appellant shall, by Friday, March 15, 2013, serve on the Respondent and file with the Commission (with a Statement of Service), its written submissions.

(2) Amending Rule 54.3, the Respondent shall, by Tuesday, April 30, 2013, serve on the Appellant and file with the Commission (with a Statement of Service) his written submissions.

(3) The Appellant shall, by Friday, May 17, 2013, serve on the Respondent and file with the Commission (with a Statement of Service) any reply written submissions

(4) Oral submissions are to be heard on Tuesday, June 25, 2013 in Hamilton, Ontario, at a location to be confirmed.

V. EXPENSES

The legal expenses of this preliminary appeal decision are deferred to the conclusion of this appeal proceeding, subject to any further or other order of an appellate officer.