Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2013 ONFSCDRS 18

FSCO A10-003724

BETWEEN:

NIRMALADEVI NADARAJAH

Applicant

and

RBC GENERAL INSURANCE COMPANY

Insurer

Before: Arbitrator John Wilson

Heard: May 11, 2012, at the offices of the Financial Services Commission of Ontario in Toronto, with written submissions received September 13, 2012.

Appearances: David S. Wilson for Ms. Nadarajah Pamela A. Brownlee for RBC General Insurance Company

Issues:

The Applicant, Nirmaladevi Nadarajah, was injured in a motor vehicle accident on August 24, 2005. She applied for and received statutory accident benefits from RBC General Insurance Company (“RBC”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Nadarajah applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issues are:

Is Ms. Nadarajah precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule?
If Ms. Nadarajah is not precluded from proceeding with this arbitration because of subsection 281(5), is she entitled to interim benefits as a result of the Insurer’s failure to follow an appropriate stoppage protocol?

Result:

Ms. Nadarajah is precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule.
There is consequently no order as to interim benefits.

EVIDENCE AND ANALYSIS:

This arbitration is about time limits and whether the Insurer’s actions in terminating benefits to Ms. Nadarajah were effective in starting the running of those time limits.

There is no dispute that Ms. Nadarajah was involved in a motor vehicle accident that may have qualified her to receive statutory accident benefits from RBC Insurance. This current dispute is not about whether she actually qualified or continued to qualify for housekeeping, income replacement and other benefits, but whether she took the timely steps necessary to bring her dispute with RBC to arbitration. RBC argues that she did not.

Secondarily, Ms. Nadarajah asks that she receive an interim award of income replacement benefits pending a final arbitration decision. This latter claim, however, is predicated on a positive outcome on the first issue.

Section 281(1)(a) of the Insurance Act requires that an applicant must commence an arbitration proceeding “within two years after the insurer’s refusal to pay the benefit claimed.”

It is Ms. Nadarajah’s position that if RBC did not fully comply with all required steps in the refusal process, then the refusal is of no effect and the limitation period does not begin to run. She points to a multitude of potential defects in the refusal process, principally the alleged failure to provide copies of the reports to Ms. Nadarajah’s health practitioners and the failure of RBC to offer a DAC assessment following a negative report. She also points to an apparent coincidence of timing in which the delivery of the insurer’s assessment reports might appear to have been delayed until the amendments to the Schedule, ending the right to a DAC assessment entered into effect.

The chronology of this dispute is that the accident happened on August 24, 2005, and mediation was conducted from October 18 to November 18, 2010 with a report of mediator issued on November 18, 2010. An Application for Arbitration was received on November 26, 2010.

In spite of the passage of time (the Application for Mediation would have first been made some five years after the accident) provided that the Insurer’s valid refusal to pay was within two years of the Application for Mediation, then Ms. Nadarajah’s Application for Arbitration would not be out of time.

The key to understanding this quirk of law is the principle that if an insurer can be found not to have made a proper refusal to pay the claimed benefits, then the time limits provided for in section 281(1)(a) never begin to run.

Once again, it is this latter principle that Ms. Nadarajah relies upon in bringing forth her Application at this relatively late date.

According to RBC, an OCF-9 relating to Ms. Nadarajah’s claim for housekeeping benefits was sent to her on November 4, 2005. This form is said to have clearly terminated Ms. Nadarajah’s benefits and referred her to her rights to dispute the claim within two years of the date of denial.

Likewise, on April 6, 2006, RBC provided a further OCF-9 terminating Ms. Nadarajah’s income replacement benefits, including the same references to Ms. Nadarajah’s right to dispute the Insurer’s determination.

As noted earlier, Ms. Nadarajah maintains that the Insurer’s termination notices were in effect tainted by a failure of the Insurer to offer Ms. Nadarajah the required DAC assessment as was then required by legislation. An examination by a designated assessment centre could have resulted in a mandatory resumption of benefits for Ms. Nadarajah had the assessors agreed with Ms. Nadarajah’s position on disability.

Some background on the role of the DAC assessments may be useful in understanding Ms. Nadarajah’s position on the importance of the failure to provide her with such an assessment. It would also explain to a degree why Ms. Nadarajah believes that an interim award of benefits would be an appropriate means of addressing the failure to provide an opportunity for a DAC assessment.

The nature of the DAC process itself was described by Lax J. as follows:

Since January 1994, Designated Assessment Centres (“DACs”) have been in place across Ontario for insurance companies and claimants to use to resolve disputes between an insured and an insurer about an insured's injuries and the accident benefits that apply to those injuries. Section 40 of the SABS outlines a process for determination of catastrophic impairment by the Catastrophic Impairment Designated Assessment Centres (“CAT DACs”). CAT DACs are multidisciplinary centres employing medical and health care specialists who assess the claimant using a team approach according to Guidelines that have been developed by the CAT DACs...²

The Court of Appeal in Lowe elaborated on the critical nature of a DAC report:

Section 43(4) of the SABS requires that the DAC assessor prepare a report and provide a copy of that report to each of the insurer, the insured person and the insured person's health practitioner. Section 43(6) of the SABS requires that the report include a statement of whether, in the assessor's opinion, an expense in relation to a medical or rehabilitation benefit “is reasonable and necessary for the insured person's treatment or rehabilitation”.

Importantly, s. 38(14) of the SABS requires an insurer to pay for any expense which a DAC assessor opines is reasonable and necessary, but provides that the insurer is not required to pay for the expense if that opinion is not given. Further, the preamble to s. 38(14) makes the DAC assessment of the payment obligation “[s]ubject to the determination of a dispute relating to the expense in accordance with sections 279 to 283 of the Insurance Act.” Those sections provide for mediation, arbitration and litigation. In effect therefore, s. 38(14) makes the DAC assessment final and binding unless one of the parties chooses to dispute it.³

It can be seen that a DAC assessment can be a powerful tool in getting necessary benefits to an injured insured person on a timely basis.

Unfortunately for Ms. Nadarajah, changes in the statutory accident benefit scheme which took effect on February 1, 2006 eliminated the provision for DAC assessments. Instead, insurers were to use regular examinations under section 42 to aid them in making a determination as to the right of an insured to benefits. Such reports did not have the binding effect on insurers, and indeed, the legislation specifically left it to the insurers themselves to make any determination of entitlement to benefits.

There is no doubt that the accident benefit claim giving rise to the requests for assessment arose while the DAC protocols remained in force. As well, there is no dispute that the delivery of the report of the insurer’s examination, an action that could have triggered entitlement to a DAC, took place after the new non-DAC protocols took place.

Counsel for Ms. Nadarajah would have me accept that the failure to offer a DAC assessment deprived Ms. Nadarajah of her right to an impartial assessment that would have been binding on the Insurer had it recognized an entitlement to benefits. Such a right was, and remained an essential part of the refusal process in situations where the refusal and reference to assessment came before the entry into force of the new assessment provisions.

RBC on the other hand, asserts that since it received the reports in question after the commencement of the new assessment regime, it was not obliged to offer Ms. Nadarajah the opportunity of a DAC assessment when it communicated its refusal to pay the benefits claimed.

The transition provisions of the relevant Schedule with regard to DAC assessments read as follows:

Transitional Rules – March 1, 2006

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. O. Reg. 546/05, s. 20.

(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. O. Reg. 546/05, s. 20.

(3) Subsections 37.2 (2) to (5), as they read on February 28, 2006, continue to apply in respect of a claim by an insured person for ancillary goods or services if, under subsection 37.1 (5) as it read on February 28, 2006, the insurer gave or was required to give the insured person, before March 1, 2006, a notice under section 37.1 as it read on February 28, 2006, stating that the insurer requires the insured person to be assessed by a designated assessment centre in respect of ancillary goods or services for which the insurer will not pay. O. Reg. 546/05, s. 20.

(4) Section 38, as it read on February 28, 2006, continues to apply in respect of a claim for medical and rehabilitation benefits by an insured person if, under subsection 38 (8.1) as it read on February 28, 2006, the insurer gave or was required to give the insured person, before March 1, 2006, a notice referred to in subclause 38 (12) (b) (ii) or (12.1) (b) (ii), as it read on February 28, 2006. O. Reg. 546/05, s. 20.

(5) If, before March 1, 2006, an insured person has submitted an application under subsection 38 (3.1), as it read on February 28, 2006, subsection 38 (18) as it read on that day continues to apply in respect of the application. O. Reg. 546/05, s. 20.

(6) Subsections 38.2 (8) and (13), as they read on February 28, 2006, and subsections 38.2 (9) to (12) and (14) to (16) apply in respect of an application for approval for an assessment or examination if, under subsection 38.2 (6), as it read on February 28, 2006, the insurer gave or was required to give the insured person, before March 1, 2006, a notice under subsection 38.2 (6), as it read on February 28, 2006, requiring the insured person to be assessed by a designated assessment centre. O. Reg. 546/05, s. 20.

The transition rules put in place with regard to DACs appear to say that if one was required to offer a DAC, that is the triggering circumstances for a DAC assessment, such as the delivery of a section 42 report occurring prior to March 1, 2006, then the Insurer was obliged to offer a DAC. If, however, it was not possible to assemble an appropriate DAC team, then an insurer could fulfill the DAC obligation by offering a further section 42 assessment.

It would seem odd for a section 42 examination to trigger what was in effect a further section 42 examination, but that was one of the possibilities outlined by this “Alice in Wonderland” scheme. In this matter, however, RBC has brought no evidence of the unavailability or the impracticality of convening a DAC assessment, so the key question in this matter reverts to whether “the insurer gave or was required to give the person, before March 1, 2006, a notice with respect to the claim.”

Notice of the scheduled examinations was sent out by letter dated February 1, 2006. The examinations were to take place February 8, 20 and 22, 2006. The report for the February 8 functional abilities evaluation (“FAE”) was dated February 17, 2006. The February 20 examination by Dr. Saplys is dated the same day, while the February 22 psychological assessment bears no date for the creation of the report. All three reports are date-stamped “March 20, 2006” on all their pages in circumstances that were not in evidence. On April 6, 2006, the orthopaedic and psychological assessments were forwarded to Ms. Nadarajah under cover of an Explanation of Benefits of that date.

On the face of it, the section 42 reports that could have triggered a DAC entitlement were not delivered until after the transition deadline, and so, no DAC entitlement should have crystallized.

Counsel for Ms. Nadarajah, however, would have me infer from the unfavourable timing of the examination and reports that RBC somehow conspired to exploit the transition period to deny Ms. Nadarajah access to the DAC process.

There is no evidence that this was the case. Indeed, there is no evidence that Ms. Nadarajah even sought the internal memoranda from RBC relating to the scheduling of the examinations and the reports, information that might have potentially substantiated this serious allegation. That is not to rule out, however, that through the timing of the report and the coincidental timing of the transition away from DACs that RBC may have inadvertently or otherwise infringed a substantive right to the DAC process.

Even if I were to accept that RBC somehow mishandled the timing of the assessments and the consequent reports, the question that must be asked is essentially why that should matter to Ms. Nadarajah.

The importance of the DAC option in the Applicant’s mind is not that one is required to take place now but that the absence of one being offered at the time of the refusal made the refusal itself incomplete, and hence invalid.

Following the principles enunciated in Smith v. Co-operators⁴, in the case of a defective refusal to pay benefits, the time limits would not start to run. It should be remembered that the Application for Arbitration in this matter was issued some five years after the date that RBC says it unequivocally refused to pay the claimed benefits.

If Ms. Nadarajah is wrong, then she would have no right to continue with this arbitration. If she is right then she is not out of time, and I, then, can consider her request for interim benefits and allow her to bring her arbitration forward.

Counsel for Ms. Nadarajah rightly identifies Smith v. Co-operators as a landmark decision in the field of accident benefits. In this case, the majority of the Supreme Court confirmed the consumer protection aspect of the Ontario accident benefit scheme. It also confirmed that insurers had an obligation to scrupulously comply with the legislative requirements when terminating benefits, failing which a denial of benefits would be found to be ineffective for the purposes of commencing the running of a time limit. In Smith, the particular requirement that was not met was to inform the insured of the full range of options available to contest the denial of benefits.

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. Moreover, as previously discussed, the insurer's obligation extends beyond mere communication of the limitation period.⁵

If RBC was required by the Schedule to offer Ms. Nadarajah a DAC examination once it received the negative reports and issued its final determination, then it would make some sense that the failure to offer a DAC could be just one of those “bright-line boundaries” identified by Gonthier J. in Smith and hence the stoppage invalid.

Of course, RBC says it was not required to offer a DAC. It did not receive the negative reports until after the time specified by the Schedule for the application of the new procedures.

The Court of Appeal in Peel (Police) v. Ontario has examined the interaction of legislative revision with accrued rights and whether a particular legislative provision should be interpreted as retroactively changing the playing field.

I begin with the procedural rights exception to the presumption against the retrospectivity of legislation. At common [page 556] law, procedural legislation is presumed to apply immediately, to both pending and future facts. As Sullivan, supra, discusses, at p. 696, this “presumption of immediate application” has been characterized, variously, in these terms: (1) there is no vested right in procedure; (2) the effect of a procedural change is deemed beneficial for all; (3) procedural provisions are an exception to the presumption against retrospectivity; and (4) procedural provisions are ordinarily intended to have an immediate effect. Sullivan also notes, at p. 696, the following early formulation of the rule in Wright v. Hale (1860), 6 H. & N. 227, at p. 232 H. & N.:

[W]here the enactment deals with procedure only, unless the contrary is expressed, the enactment applies to all actions, whether commenced before or after the passing of the Act.

Canadian courts have recognized that the determination of whether a legislative provision is “purely” procedural requires examination of the substance of the provision and its practical impact on the parties. In Martin v. Perrie, 1986 CanLII 73 (SCC), [1986] 1 S.C.R. 41, [1986] S.C.J. No. 1, at p. 48 S.C.R., the Supreme Court of Canada cited with approval Yew Bon Tew v. Kenderaan Bas Mara, [1983] A.C. 533, [1982] 3 All. E.R. 833 (P.C.), at p. 562 A.C., for the principle that the substance of a provision, rather than the label assigned to it, is controlling of whether it is procedural in nature. The central question is whether the provision, if applied retrospectively, would impair existing rights and obligations. If so, the provision is not purely procedural and cannot be given retrospective effect.⁶

Applying the same principles to the case at hand, while a DAC assessment might be described as a “procedure”, given the nature and importance of the DAC process, and its intended role in providing a fair and expeditious resolution to accident benefit entitlement disputes, I would not be inclined to view its abolition as merely procedural.

Taking away the DAC system with its ability to make interim determinations⁷ removed an important tool from consumers who would now have to wait until litigation was underway to attempt to force insurers to take their claims seriously. A right to a DAC was a substantive right, albeit one that now has been removed by legislation.

Changes in legislation, and transitions between different legal regimes have been the source of much controversy over the years. Law is essentially conservative and rule-based. There is an unease when parliaments appear to try to change the rules on the fly to the detriment of parties who may have ordered their affairs based on existing legal constraints. The Court of Appeal in Peel also observed:

Martin also confirms that the intention of the legislature to interfere with vested rights and obligations must be express. The Supreme Court explained, at pp. 49-50 S.C.R., citing Spooner Oils Ltd. v. Turner Valley Gas Conservation, 1933 CanLII 86 (SCC), [1933] S.C.R. 629, [1933] S.C.J. No. 54, at p. 638 S.C.R.:

A legislative enactment is not to be read as prejudicially affecting accrued rights, or “an existing status” . . . unless the language in which it is expressed requires such a construction . . . the underlying assumption being that, when Parliament intends prejudicially to affect such rights or such a status, it declares its intention expressly, unless, at all events, that intention is plainly manifested by unavoidable inference.⁸

That said, the one thing that is clear in the transition provisions is that the DAC examinations were abolished effective March 1, 2006. The provisions specifically limit further DAC assessments to those where the process was already underway, or an application had been made for such an examination prior to that date. The intention of the legislation, however regrettable, was clear.

In this matter, while the assessment process was underway, I see nothing that would have crystallized a right to a DAC under the transition provisions.

I would also allow that the legislative directives relating to the transition are clear enough to displace any latent right Ms. Nadarajah may have acquired to access the DAC process when she began the claims process.

That is not, however, the end of this story. In a consumer protection scheme such as the accident benefit system, unfair conduct by a corporate party that would deprive a consumer of rights should not be countenanced.

There are, of course, unanswered questions in the timing of the February 2006 examinations and reports. A cynic might say that it was in the interest of RBC to delay the delivery of the reports until after March 1, 2006, so that the consequent refusals did not generate the right to a DAC assessment. The Insurer, of course, would be required to fund these often expensive DAC procedures.

Even if such is the case, there is no “smoking gun” in evidence such as adjuster’s notes commenting on the timing process of the examinations or suggesting some improper course of action by RBC.

Nor should I make any conclusions based on the absence of such notes in evidence. While the information in RBC’s adjusting records would be peculiarly in their control and knowledge, and relevant, I have no reason to believe that its absence from the record signals anything other than the fact that either Ms. Nadarajah failed to request them or that simply they did not help her case.

Ms. Nadarajah, as noted before, wants me to draw an inference from the timing of the assessment and reporting process that some sort of conspiracy was afoot to deny her a DAC assessment that could potentially have supported her claim for benefits.

Drawing inferences should be approached with caution. A fair inference may depend on the characterization of the “facts” said to give rise to the inference. As LaForme J. observed in Munoz:

While the jurisprudence is replete with references to the drawing of “reasonable inferences,” there is comparatively little discussion about the process involved in drawing inferences from accepted facts. It must be emphasized that this does not involve deductive reasoning which, assuming the premises are accepted, necessarily results in a valid conclusion. This is because the conclusion is inherent in the relationship between the premises.⁹

The boundaries between inference and speculation become blurred when there is disagreement on both the accepted facts and the human experience to be applied to them. Only if one imputes a tainted motive on the part of the Insurer does the theory of purposive delay make any sense. It is clear that RBC does not accept this characterization as a starting point in any analysis.

Indeed, in the materials filed there is a hint as to what may have transpired, one that is equally plausible but runs counter to any conspiracy theory. The affidavit of Heidi Buchanan at paragraph 19, filed by Ms. Nadarajah, refers to earlier proposed assessments that were to have taken place commencing November 23, 2005. Ms. Buchanan’s affidavit merely notes:

The insurer assessments scheduled as per the contents of Exhibit M did not take place as scheduled, except for the job site analysis. The file contents do not make clear why the assessments did not take place.

If the assessments did not take place as scheduled, it would mean that they were either cancelled by either or both parties or either the insured or the assessors failed to show up.

A letter dated December 7, 2005 at least partly answers this question. Apparently Ms. Nadarajah did not attend the scheduled FAE examination or the orthopaedic evaluation. The letter indicates that a further psychological assessment was cancelled “as it appears that you will not be attending this assessment.”

Taken with the accepted fact that the same assessments were again undertaken by RBC some three months hence, it would be not unreasonable to conclude that RBC had been trying to schedule the IE’s since the first notice in August 2005 and made ongoing efforts to have the process completed well before the March 1, 2006 transition date.

At the very least there is some support for this proposition, while the evidence showing a conspiracy is lacking.

Consequently, I find that any delay in scheduling the February 2006 IE’s as well as their completion and delivery would have been more likely due to the normal challenges of the adjustment process, and not due to any intention to deprive Ms. Nadarajah of her right to a DAC assessment.

The reports and the termination having been given after the February 28, 2006 termination of the DAC system, before any right to a DAC had crystallized, RBC was not obliged to advise Ms. Nadarajah of the availability of a DAC, nor to refer her to one should she have indicated that such was her preference.

Had Ms. Nadarajah attended the originally scheduled examinations there would have been no issue of an intervening change in the assessment regime. A DAC assessment could have been held, and, perhaps the outcome would have been different.

Since RBC’s failure to reference the availability of a DAC as part of its termination notice is the principal complaint regarding the validity of that notice, RBC’s notice of termination of benefits must be found otherwise valid. I accept RBC’s claim that its termination meets the necessary criteria of clarity established by Smith and that there is no evidence of subsequent conduct or actions by RBC that would have led Ms. Nadarajah to believe that the notice was somehow equivocal. Consequently, the two-year limitation contained in the Insurance Act began with the delivery of that notice on April 6, 2006.

The affidavit of Heidi Buchanan filed on behalf of Ms. Nadarajah also includes a passing reference to a suggestion that “the medical reports do not appear to have been forwarded to any health assessors.” The reports she refers to would be those of the February I.E. assessors.

I note that Ms. Buchanan’s observation is conclusory and does not point to any evidence that led her to that conclusion. Elsewhere in the affidavit Ms. Buchanan notes that at the time of the examinations, Ms. Nadarajah was represented by another lawyer, Mr. Alexander Mazin. Ms. Buchanan works for Mr. Wilson, the current counsel of record, not Mr. Mazin.

In an affidavit clearly based on information and belief, rather than first-hand knowledge, the reference to non-delivery fits best under the rubric of belief. Such evidence that the reports were not provided to the unidentified practitioners is tenuous at best and has little probative value.

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.

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.

Consequently, her subsequent Application for Arbitration is statute barred and must be dismissed. Unfortunately, this leaves Ms. Nadarajah without a remedy should she continue to suffer from the consequences of the August 2005 motor vehicle accident. That is however, a consequence that should have been apparent to her and her former counsel, having read the information communicated to them in the OCF-9 dated April 6, 2006.

Given my findings as to the limitations issue there is no need to deal with the issue of interim benefits.

EXPENSES:

I leave the issue of expenses to the parties. Should no agreement be possible, I may be spoken to on that issue provided that it is done on a timely basis.

January 29, 2013

John Wilson Arbitrator

Date