Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2013 ONFSCDRS 39

Appeal P12-00026

OFFICE OF THE DIRECTOR OF ARBITRATIONS

EDNA KLIMITZ Appellant

and

ALLSTATE INSURANCE COMPANY OF CANADA Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Ms. Jillian Van Allen for the Appellant, Mrs. Edna Klimitz Mr. Grant R. Dow for the Respondent, Allstate Insurance Company of Canada

HEARING DATE: January 14, 2013 oral hearing March 11 and 13, 2013: additional written submissions received

APPEAL ORDER

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

This appeal is allowed and the Arbitrator’s April 13, 2012 order is rescinded and substituted with a new order that the Appellant is not precluded from proceeding to arbitration.
If the parties are unable to agree on the legal expenses of this appeal, pursuant to Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – August, 2011), an expense hearing shall be requested within thirty days of the date of this decision, as set out below.

March 21, 2013

Lawrence Blackman Director’s Delegate Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL AND BACKGROUND

The Appellant, Mrs. Edna Klimitz, was injured in a November 7, 2003 motor vehicle accident. As a result, she applied to her first-party automobile insurer, the Respondent, Allstate Insurance Company of Canada, for statutory accident benefits available under the Schedule.¹

In her April 13, 2012 preliminary issue decision, Arbitrator Sapin (the “Arbitrator”) found that the Appellant was precluded from proceeding to arbitration on her claim for non-earner benefits (“NEBs”). The Arbitrator found that, contrary to section 281.1 of the Insurance Act and subsection 51(1) of the Schedule, the Appellant had applied for mediation on July 20, 2006, more than two years after the Respondent’s May 31, 2004 denial.

The Arbitrator found that the Appellant had applied for NEBs on December 13, 2003, when a disability certificate was submitted that the Appellant met the “complete inability to lead a normal life” test for NEB entitlement. On January 22, 2004, the Respondent informed the Appellant that NEBs were not payable during the first 26 weeks of disability, and only afterwards if she still met the complete inability test due to injuries sustained in the accident.

The Arbitrator held that given the unique nature of the 26-week NEB waiting period, the Appellant was deemed to have applied for NEBs upon the expiry of the 26 weeks, being May 7, 2004. Under clause 37(1)(a) of the Schedule, the Respondent was to have given its refusal within 14 days, or by May 21, 2004. As its denial was dated May 31, 2004, ten days late, the Arbitrator found that the Respondent had not complied with clause 37(1)(a).

However, the Arbitrator found that the Respondent had begun assessing the Appellant’s continuing NEB eligibility before the end of the waiting period by requesting IMEs in a timely manner. The Arbitrator further found that there was no evidence that the Respondent’s ten-day delay in providing its Explanation of Benefits Payable by Insurance Company (OCF-9) prejudiced the Appellant. Nor did the Arbitrator believe she had been given any compelling reason or case law to suggest that an appropriate or necessary consequence of the Respondent’s breach of clause 37(1)(a) was that it was not entitled to rely on the two-year limitation period.

The Arbitrator found that the Appellant’s claim was required to be established on its merits. In accordance with the binding decision in Stranges v. Allstate Insurance Company of Canada, 2010 ONCA 457, the Respondent’s procedural failure did not result in the Appellant’s deemed entitlement to NEBs. As the Respondent had never paid NEBs, subsections 37(2) (Notice of Stoppage) and 37(3) (entitlement to a DAC assessment) of the Schedule, both dependent on benefits having been paid, did not apply.

The Arbitrator further held that the Respondent had met the two-fold test in Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129, in setting out a clear and unequivocal refusal in its OCF-9 and in adequately explaining to the Appellant her right to dispute the refusal and the process for doing so.

The Arbitrator stated that the Respondent did not dispute that it bore the onus of establishing that it had provided to the Appellant copies of any insurer medical examination (“IME”) reports it received. The Arbitrator found that the Respondent had not established that it had provided a copy of Dr. G. Moddel’s May 5, 2004 IME report to the Appellant within five business days of receipt, as required by subsection 42(7).

However, the Arbitrator found that the Respondent’s failure to include its IME report with its OCF-9 Explanation of Benefits did not render its refusal any less clear or unequivocal, or prevent the two-year time limitation period from running.

The Arbitrator held that to find that the Respondent’s failure negated the limitation period by not providing reasons, as required under subsection 37(1) of the Schedule, was to hold the insurer to a standard of perfection, contrary to Turner and State Farm Mutual Automobile Insurance Company, (FSCO P00-00046, February 1, 2002), and the Arbitrator’s prior decision in Mangos and Aviva Canada Inc., (FSCO A06-000847, October 17, 2007).

The Appellant seeks an order that she is not precluded from proceeding to arbitration on her NEB claim. The basis of her appeal is that the Respondent cannot be said to have refused to have paid a benefit until it has complied with the termination provisions of the Schedule, including providing any IME assessments and advising the Appellant of her right to dispute the NEB termination and attend a DAC assessment.

The Respondent agreed that this appeal from what is termed a preliminary arbitration order should be accepted at this time as the order finally decided the issues in dispute. My June 7, 2012 letter accepted this appeal, exercising my discretion under Rule 50.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated - August 2011) (the “Code”).

On consent, to avoid the possibly unnecessary expenditure of time and expense, my July 9, 2012 letter exercised my discretion under subsection 283(6) of the Insurance Act to stay the Arbitrator’s order that expense submissions be provided within thirty days of her decision.

II. THE APPELLANT’S SUBMISSIONS

The Appellant submits that the Arbitrator erred in law in her decision in two respects.

First, she argues that the Respondent’s “procedural failure to comply with the 14-day time limit for refusing the benefits” under clause 37(1)(a) of the Schedule required it to pay NEBs from May 21, 2004 (fourteen days after the 26-week waiting period expired) until May 31, 2004 (when the Respondent determined that the Appellant was not disabled on the basis of its IMEs and terminated NEBs). The Respondent, she argues, could not terminate NEBs sooner because it did not have the medical clearance to determine the Appellant’s entitlement.

The Appellant submits that Stranges is distinguishable from the facts of this case. Stranges, she argues, pertained to whether an insured person was entitled to IRBs for an indefinite period until proper notice was given or a proper DAC assessment was completed. Here, the issue is whether the Appellant was entitled to NEBs for the very restricted period May 21 to 31, 2004.

The Appellant argues that the Arbitrator erred in finding her not entitled to NEBs from May 21 to 31, 2004. Because of such entitlement, the Appellant maintains that she came under clause 37(1)(b) of the Schedule. That provision entitled the Appellant to be sent an OCF-17 Notice of Stoppage of Weekly Benefits under subsection 37(2) and to be advised of her right to be assessed by a DAC under subsection 37(3), neither of which the Respondent did.

Accordingly, the Appellant submits that the Arbitrator erred in allowing the Respondent to rely on the limitation period notwithstanding its non-compliance with subsections 37(2) and (3).

Secondly, the Appellant argues that a plain and ordinary reading of subsection 42(7) of the Schedule is that it was mandatory that an insurer provide an IME report within five business days of receipt and include the report as part of its reasons for its subsection 37(1) denial. This allows an insured person to review the reports upon which the insurer is relying and evaluate the reasonableness of the insurer’s denial.

The Appellant states that while the Respondent provided her with Dr. E. English’s March 19, 2004 IME report on or about April 15, 2004, it did not provide her with Dr. Moddel’s May 5, 2004 IME report, or his June 4, 2004 addendum.

The Appellant submits that to require an insurer to comply with the Schedule is not holding it to a standard of perfection. To hold otherwise is to render subsection 42(7) meaningless. The Appellant thus argues that the Arbitrator erred in finding that the Respondent’s failure to provide Dr. Moddel’s IME reports neither detracted from the clarity and certainty of its refusal nor prevented it from relying on the two-year limitation period. The Appellant submits, relying on Smith v. Co-operators, that where there has been an invalid termination of benefits, such as IME reports not being provided as required, the limitation period does not begin to run.

III. THE RESPONDENT’S SUBMISSIONS

The Respondent requests that this appeal be dismissed, arguing that the Arbitrator did not err in law, the Appellant has mischaracterized findings of fact as errors of law and, in any event, the Arbitrator’s findings were supported by the evidence and her conclusion was reasonable.

The Respondent submits that the Arbitrator correctly concluded that its procedural failure to serve Dr. Moddel’s report in accordance with subsection 42(7) did not detract from the clarity and certainty of its refusal to pay benefits and that the Respondent should not be held to a standard of perfection.

IV. ANALYSIS

Subsection 281.1(1) of the Insurance Act 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.

The parties agree that an insurer’s notice of refusal to pay benefits must provide:

A clear and unequivocal refusal;
Reasons for the insurer’s determination; and,
An adequate explanation of the right of the insured person to dispute the refusal and the process for doing so.

The Respondent’s May 31, 2004 OCF-9 Explanation of Benefits Payable stated, in part:

A recent insurer’s neurological evaluation and a previous insurer’s orthopaedic evaluation have determined that you do not suffer from a complete inability to carry on a normal life due to any impairment sustained in the accident of November 7, 2003. Therefore you do not qualify for a Non-Earner Benefit.

I am not persuaded that this notice provided anything but a clear and unequivocal refusal by the Respondent of the Appellant’s NEB claim. There is no dispute that Part 6 (Applicant’s Rights to Dispute) of the May 31, 2004 OCF-9 provided the Appellant with a straightforward explanation of the mediation and arbitration, lawsuit or neutral evaluation processes in disputing the Respondent’s NEB denial.

The Appellant, however, first argues that the Arbitrator erred regarding her additional right to an OCF-17 Notice of Stoppage of Weekly Benefits under subsection 37(2) of the Schedule and to be advised of her right to be assessed by a DAC under subsection 37(3).

Subsection 37(1) of the Schedule provides:

(1) If the insurer determines that a person is not entitled or is no longer entitled to receive an income replacement, non-earner or caregiver benefit, the insurer shall give the person notice of its determination, with reasons,

(a) within 14 days after receiving an application for the benefit; or

(b) if the insurer has been paying the benefit to the person, no later than the date the next payment of the benefit is due. [emphasis added]

Arbitrator Feldman found, in Tam and Wawanesa Mutual Insurance Company, (FSCO A07-002163, May 20, 2010):

Where an insurer wished to terminate benefits that it had been paying, a different process existed under section 37. This process included the right of an insured person, before stoppage, to insist upon a DAC assessment. Those provisions do not apply in this case as Wawanesa never paid non-earner benefits to Mr. Tam.

Likewise, in this case the Arbitrator held:

I find it clear from a plain reading of clauses (1)(2) and (3) that the rules on which Ms. Klimitz would like to rely would only apply in the event Allstate had actually begun paying her the NEB, which was not the case. The distinction may seem arbitrary but it is not ambiguous. Nor is it absurd. I can only conclude that the legislature intended for different procedural rules to apply, depending on whether a benefit was being paid or had yet to be paid at the time of the insurer’s refusal. This is consistent with one of the objects of the Schedule, which is to provide for streamlined dispute resolution procedures.

The Appellant concedes that subsections 37(2) and (3) are both dependent on clause 37(1)(b) of the Schedule being applicable to her case. Clause 37(1)(b) of the Schedule clearly and unambiguously states that it applies “if the insurer has been paying the benefit to the person.” Clause 37(1)(b) does not say that it applies “if the insurer should have been paying the benefit to the person,” “if the insurer was obligated to pay the benefit to the person” or “if the insurer is deemed to have been paying the benefit to the person.”

The Appellant confirmed in oral submissions that the Respondent has never paid her any NEBs, as set out in paragraph 23 of her written submissions and paragraph 17 of her affidavit affirmed July 21, 2011. Accordingly, I am not persuaded that the Arbitrator erred in law in finding that:

…. Allstate never paid her an NEB and so s. 37(1)(b) does not apply, and neither do ss. 37(2) and (3) dealing with the right to a Notice of Stoppage and entitlement to a DAC assessment.

The Appellant’s second argument pertains to the Respondent’s obligation to give reasons with its subsection 37(1) denial. As noted above, the Respondent’s May 31, 2004 OCF-9 stated that the Appellant did not qualify for NEBs based on the recent neurological IME and the previous orthopaedic IME that determined that she did not suffer a complete inability to carry on a normal life due to any impairment sustained in the November 7, 2003 accident.

Turner v. State Farm Mutual Automobile Insurance Co., 2005 CanLII 2551 (ON CA), overturning Turner v. State Farm Mutual Automobile Insurance Co., 2004 CanLII 13402 (ON SCDC), held that the reasons given for the refusal need not be legally correct. If the reasons provided are legally wrong, the insured will succeed in challenging the insurer’s denial. However, that does not mean the content of the reasons are irrelevant. Rather, the Court of Appeal held:

The purpose of the requirement to give reasons is to permit the insured to decide whether or not to challenge the cancellation.

This echoed Delegate Makepeace in Turner:

The purpose of the notice requirement is to ensure that the insured person has enough information to decide whether to dispute or accept the refusal. The requirement also reinforces the insurer’s obligation to give full and fair consideration to every claim. However, while insurers are expected to take seriously their obligation to give written reasons for refusing benefits, the legislative objective of promoting early claims assessment and ongoing communications between the parties suggests they should not be held to a standard of perfection … [emphasis added]

The legal test is that the reasons given by an insurer for denying benefits must be sufficient to permit the insured person to decide whether or not to challenge the insurer’s denial. That insurers are not held to a standard of perfection is simply a refinement. Indeed, the Court of Appeal in Turner held:

On the two occasions where the Director’s Delegate does attach “substantially” to this test, she is referring to technical defects in the notice which, in the end, she finds do not compromise its clear and unequivocal nature. While adjectives like “substantially” ought to be avoided, to eliminate any possible inference that the test is being diluted, we conclude that read in its entirety the reasons of the Director’s Delegate leave no doubt that she applied the correct test.

The Arbitrator, herself, stated in Mangos:

The refusal must be in writing and must be clear and unequivocal. The onus is on the insurer to establish that an applicant has received the proper notice. The focus of the analysis is the refusal itself. The test is an objective one. One must look at the sufficiency of the notice itself, keeping in mind that insurers are not held to a standard of perfection. [emphasis added]

The Appellant concedes, at paragraph 11 of her affidavit, that she received Dr. English’s orthopaedic IME report around April 15, 2004. That report states, in part:

At the time of my assessment, March 17, 2004, this lady does not meet the definition of a complete inability. She is mobile and functional. She is personally independent and I feel that she does not suffer a complete inability to carry on normal life due to the impairments sustained in the motor vehicle accident November 7, 2003.

While Dr. English opined that the Appellant’s fractures had healed and that, based on his musculoskeletal assessment, the Appellant was capable of resuming all of her normal activities and all of her normal housekeeping activities, he could not “comment on her head injury as this is out of the realm of my expertise.”

The evidence before the Arbitrator was that the Respondent received Dr. English’s report on April 15, 2004. That same day it sent the report by overnight courier to the Appellant. Its covering letter stated that based on Dr. English’s report it was setting up a neurological IME.

The Respondent’s April 19, 2004 letter advised the Appellant of a May 5, 2004 IME with Dr. Moddel. The Respondent received Dr. Moddel’s report on Friday, May 28, 2004. The Respondent wrote the Appellant’s counsel Monday, May 31, 2004, copied to the Appellant, purporting to enclose a copy of Dr. Moddel’s report. The Arbitrator made a finding of fact that Dr. Moddel’s report was not enclosed. There is no dispute the Respondent’s OCF-9 was enclosed in the May 31, 2004 letter.

The question is thus whether the Respondent’s May 31, 2004 reasons were required to not merely refer to, but actually provide Dr. Moddel’s May 5, 2004 IME report. A number of decisions have addressed the issue of IME reports as being part of an insurer’s reasons for its denial. Unfortunately, this case law was not provided to the Arbitrator. The parties were given an opportunity, by advance notice, to address these decisions their oral appeal submissions.

Arbitrator Makepeace, in Grout and Pilot Insurance Company, (OIC A-004805, May 4, 1995), in the context of whether a special award was warranted, held:

Subsection 24(8) of the Schedule requires insurers to provide written reasons for denying or terminating an insured person’s benefits. In my view, when an insurer terminates benefits on the basis of a medical report, the report forms part of the insurer’s reasons for termination, and should generally be provided to the insured person. [emphasis added]

Grout pertained to motor vehicle accidents that took place in 1990 and 1991, thus coming under the Statutory Accident Benefits Schedule - Accidents before January 1, 1994, R.R.O. 1990, Reg. 672 (“OMPP”). Section 23 of the OMPP pertained to certificates and examinations. Regarding examinations, subsection 23(2) states:

In respect of claims under Part IV [weekly benefits], the insurer may, on reasonable notice, require an examination of the insured person by a qualified medical practitioner, psychological advisor or chiropractor as often as it reasonably requires, and require an autopsy of a deceased insured person in accordance with the law relating to autopsies.

Subsection 23(3) provides that the insurer will pay the reasonable cost of examinations under subsection 23(1) if the cost is not payable under any insurance plan or law or under any other plan or law. The provision is silent regarding service of the report. Regarding an insurer’s refusal to pay, subsection 24(8) states:

If the insurer refuses to pay an amount claimed in an application for statutory accident benefits, the insurer shall forthwith give written notice to the insured person giving the reasons for the refusal.

Arbitrator Makepeace followed Grout in Spencer and Dominion of Canada General Insurance Company, (OIC A-011124, December 20, 1996). Spencer arose out of a 1990 motor vehicle accident and also addressed the issue of a special award.

DiPietro and Allstate Insurance Company of Canada, (OIC A97-001522, June 8, 1998), pertained to a 1992 motor vehicle accident. In that case, Arbitrator Alves was “not prepared to take the serious step of barring the Applicant from an adjudication of her claims” for, amongst other reasons, the absence of clear evidence of which IME reports the insurer provided to the insured.

Garisto and Halifax Insurance Company, (FSCO A97-001481, September 17, 1998), dealt with a 1993 motor vehicle accident. Arbitrator Makepeace held that the insurer had given “clear and unequivocal” notice of benefit reduction, except that a report of a chartered accountant was referred to but was not provided. Arbitrator Makepeace held, following Grout:

In my view, where an insurer relies on an expert’s report in terminating or reducing benefits, the report will normally form part of the “written notice to the insured person giving the reasons for the refusal,” as required by subsection 24(8), because the insured person otherwise has no basis for deciding whether to commence mediation with respect to the insurer’s decision.

Arbitrator Makepeace found that the accounting report was finally sent to the applicant’s counsel on November 11, 1994 and “clear and unequivocal” notice was provided as of that date.

Spencer, DiPietro and Garisto all came under OMPP, as did the decisions in Turner.

Nguyen et al. and Pilot Insurance Company, (OIC A-010472 to A-010474, October 16, 1995), pertained to a 1994 motor vehicle accident. In the context of the insurer’s entitlement to its filing fee, Arbitrator Makepeace, following Grout, held that an insurer’s notice obligation was not satisfied by a bare statement that the claim was being denied because the evidence in support was insufficient. Rather, the insurer was obliged to disclose the evidence in its possession upon which it relied.

Kota and Motor Vehicle Accident Claims Fund, (FSCO A99-001006, March 6, 2001), arose out of an October 26, 1996 motor vehicle accident. Arbitrator Alves held that the insurer’s explanation of assessment was not a clear and unequivocal refusal. In part, it was unclear whether a medical report had been provided. However, she was not persuaded that even if the report had been provided that it would convey that the applicant was no longer disabled.

Nguyen and Kota came under the Statutory Accident Benefits Schedule - Accidents After December 31, 1993 and Before November 1, 1996, O. Reg. 776/93 (“Bill 164”). Bill 164 included a new provision, subsection 65(3), regarding IMEs that the “person or persons who conduct the examination shall prepare a report and provide a copy of the report to the insurer and to the insured person.” Subsection 39.1(6) provided, regarding insurers’ refusals:

If the insurer refuses to pay a benefit under this Part, it shall give the insured person notice of the reasons for the refusal within 14 days after the insurer receives the report of the examination under section 65.

Subsection 42(7) of the Schedule, applicable in this case, provides that “[a]n insurer that receives a report under subsection (6) shall provide the insured person with a copy of the report within five business days.” No consequences are detailed in the event of non-compliance.

The Respondent, in additional written submissions, states that “the plain and obvious clarification, correction or change was to have the preparer of the report forward it only to the insurer who would in turn provide it to the insured.”

Under the subsequent, current version of the Schedule, section 37 provides, in part:

(1) If an insurer wishes to determine if an insured person is still entitled to a specified benefit, the insurer,

(b) may notify the insured person that the insurer requires the insured person to be examined under section 42.

(2) An insurer shall not discontinue paying a specified benefit to an insured person unless,

(b) the insurer has received the report of the examination under section 42, if the insurer required the insured person to be examined under that section;

(4) If the insurer determines that the person is not entitled to receive any specified benefit by reason of clause (2) (a), (c), (d), (e) or (f), the insurer shall give to the insured person a copy of its determination.

(5) 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.

(6) The determination of the insurer shall specify,

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

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

(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.

[emphasis added]

Grout held that medical reports form part of an insurer’s reasons for termination and should generally be provided to the insured person, notwithstanding the absence of such an obligation under the OMPP. Accordingly, Grout and the other OMPP cases allow a flexibility regarding an insurer providing IMEs not permitted under the subsequent versions of the Schedule, including the version of the Schedule that was before the Arbitrator.

Under the Schedule currently in effect, subsection 37(5) is explicit that the IME report and the insurer’s determination shall be provided to the insured within a specified period. In the present case, the requirement to provide an IME report within five business days is not directly linked to the insurer providing its determination. I am not persuaded, upon review of the legislative history, that this allows for a meaningful difference regarding an insurer’s obligation to provide reasons permitting an insured to decide whether to dispute the denial.

In Turner, Delegate Makepeace reiterated that the “reasons requirement also reinforces the insurer’s obligation to adjust claims fairly based on all the available evidence.” She further held:

The balance of convenience also favours a strict notice requirement. The insurer has power to issue the notice, triggering the limitation period, and the requirement that the notice be clear and unequivocal is not onerous. On the other hand, an insured person who is statute-barred from proceeding with a claim is severely prejudiced: the claim is forever barred, no matter how meritorious.

I find that the same reasoning applies to an insurer’s obligation to give reasons for its denial of benefits. The Respondent argues that its handling of this file was meticulous other than not providing Dr. Moddel’s reports. The Respondent does not argue it is onerous for an insurer to provide an insured person with a copy of an IME report within five business days of receipt.

The Respondent questions whether the Appellant, in fact, did not receive Dr. Moddel’s report, when her Application for Mediation lists the document at Schedule B. However, the Arbitrator indicated that the Appellant’s counsel stated that he first received a copy of Dr. Moddel’s report with the accident benefits file by letter dated July 18, 2006 from the Respondent. The Application for Mediation, signed July 13, 2006, was sent out by letter dated July 20, 2006.

The Respondent acknowledges that this point was not raised before the Arbitrator. It further acknowledges that it chose not to cross-examine the Appellant on her affidavit. In that affidavit, the Appellant affirmed that she was not provided with a copy of Dr. Moddel’s report with the Respondent’s May 31, 2004 OCF-9 denial of benefits.

Mr. P. Langford, a claims manager for the Respondent, swore a March 6, 2008 affidavit that was before the Arbitrator. Mr. Langford attests that his predecessor handling this file, Ms. S. Storey, drafted and forwarded a May 31, 2004 letter that specifically included an Explanation of Benefits Payable by Insurance Company. Mr. Langford’s affidavit includes as an exhibit the May 31, 2004 letter purporting to enclose Dr. Moddel’s IME report. Mr. Langford does not, however, attest that the report was in fact sent.

Ms. Storey’s brief affidavit sworn March 6, 2006 was also before the Arbitrator. Her affidavit confirms reviewing and supporting the accuracy of Mr. Langford’s affidavit. Ms. Storey’s affidavit does not attest to having actually sent Dr. Moddel’s report.

The Respondent acknowledges that subsection 283(1) of the Insurance Act restricts appeals from an arbitrator’s order to errors of law. It further acknowledges Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01-00022, February 26, 2003), that “a finding of fact made in the complete absence of supporting evidence amounts to an error of law.”

Canada (Director of Investigation and Research, Competition Act) v. Southam Inc., 1997 CanLII 385 (SCC), [1997] 1 S.C.R. 748, held that “questions of law are questions about what the correct legal test is; questions of fact are questions about what actually took place between the parties; and questions of mixed law and fact are questions about whether the facts satisfy the legal tests.”

The Arbitrator accepted what she termed the Appellant’s “uncontradicted affidavit evidence” that she had not received Dr. Moddel’s report. I am not persuaded that there was a complete absence of supporting evidence for the Arbitrator’s key finding of fact as to what actually took place between the parties, that the Appellant did not receive Dr. Moddel’s May 5, 2004 IME report with the Respondent’s May 31, 2004 OCF-9 denial of benefits.

The Arbitrator found that the absence of Dr. Moddel’s report did not detract from the clarity and certainty of the refusal. I agree that it was clear and certain that the Respondent was denying the Appellant’s NEB claim. However, there was, as agreed by the parties, a further requirement under subsection 37(1) of the Schedule, as stated by the Court of Appeal in Turner, that the Respondent give reasons that permitted the Appellant to decide whether to challenge its denial. Respectfully, I am persuaded that the Arbitrator erred in law regarding the legal test in stating:

Although I suppose one could argue that the refusal, without Dr. Moddel's report, did not fully comply with the requirement for Allstate to provide ‘reasons’ under s. 37(1)(a), I find such an argument, in this case, amounts to holding the insurer to a standard of perfection which is contrary to the jurisprudence.

As Delegate Makepeace held, the balance of convenience favours a strict notice requirement, especially considering the severe prejudice to an insured being statute barred. Providing an actual copy of a medical report upon which an insurer is basing its refusal is hardly an onerous task. Finding that this puts an insurer to a standard of perfection is contrary to the Court of Appeal’s enunciation in Turner against the legal test being diluted by applying a substantial compliance test. Providing the medical report, regardless of a report’s merit or lack of any merit, as set in the same decision, permits the insured person to decide whether to challenge the insurer’s denial.

The Respondent’s supplementary submissions state that, in Smith v. Co-operators, the Supreme Court held that as section 94 of Bill 164 made no reference to the then section 71 insurer’s obligation to inform insureds of the procedure to resolve disputes, the applicability of section 94 was questionable. The Respondent argues that likewise, the requirements of subsection 42(7) ought not to interfere with the application of the limitation provision in subsection 51(1).

Section 94 of Bill 164 simply stated that certain documents shall be in a form approved by the Superintendent. The Supreme Court held that the “use by the insurer of a prescribed form does not detract from its obligations under s. 71.”

This case pertains not to an insurer’s obligation to provide an adequate explanation of the right of the insured person to dispute the refusal and the process for doing so but, rather, the insurer’s obligation to give reasons to permit the insured to decide whether or not to challenge the denial.

In Patricia Scott and Toronto Transit Commission (Markel Insurance), (OIC A-001116, September 4, 1992), Senior Arbitrator Naylor held that the regulations balanced an insurer’s right to an effective opportunity to fairly assess the applicant’s medical condition on an independent basis with the inherently intrusive invasion of an injured person’s right to privacy.

Sullivan and Driedger on the Construction of Statutes, Fourth Edition (Markham Ontario, Butterworths, Canada Ltd. 2002), states, at page 471, that it is well established that the legislative evolution of provisions may be relied upon to assist interpretation and, at page 472:

It is presumed that amendments to the wording of a legislative provision are made for some intelligible purpose: to clarify the meaning, to correct a mistake, to change the law … A legislature would not go to the trouble and expense of amending a provision without any reason.

Teva Canada Ltd. v. Pfizer Canada Inc., 2012 SCC 60, addressed “the quid pro quo [“what for what” or “something for something”] principle underpinning [the Patent Act, R.S.C. 1985, c. P‑4, s. 27(3)]. If there is no quid — proper disclosure — then there can be no quo — exclusive monopoly rights.”

The fine-tuning of the statutory scheme elucidates the quid pro quo that in exchange for an inherently intrusive invasion of an injured person’s right to privacy, the insurer accessing its IME rights is obliged to produce the IME report as part of its reasons for refusing benefits.

As stated by Delegate Makepeace in Turner, an insurer is required to give a full and fair consideration to an insured person’s claim. In this case, there was a neurological complaint by the Appellant outside the expertise of the IME orthopaedic surgeon. The Respondent, within its rights under the Schedule, and solely as a result of those rights, required the Appellant to attend a further inherently intrusive medical assessment to allow it to effectively and fairly assess the Appellant’s medical condition on an independent basis. The Respondent’s denial of the Appellant’s NEB claim included reliance on Dr. Moddel’s May 5, 2004 IME neurological opinion. That was the quid.

The quo was for the Respondent to provide a copy of the IME report to the Appellant as part of its refusal to permit the Appellant to decide whether there was a basis upon which to seek mediation with respect to the Respondent’s denial. The Respondent did not provide the report with its denial, as found by the Arbitrator. Nor, in what may be argued is a possible alternative, did the Respondent provide any synopsis, let alone an adequate and appropriate synopsis, of Dr. Moddel’s opinion in either its May 31, 2004 OCF-9 or in the covering letter. Accordingly, the Respondent was left with a bare denial of the neurological basis of the claim.

This is not a mere technical defect. Rather, it is an oversight, no matter how innocent, that denied the Appellant her right, statutorily provided under subsection 42(7), to receive from the Respondent the actual report, rather than mere reference to it, to permit her to decide from the substance of the report whether to challenge the Respondent’s denial.

I have no reason to question the Respondent’s assertion that this was not a case of “hiding in the weeds.” I have no reason to doubt that the Respondent was endeavouring to properly adjust this file. However, the onus is on the Respondent to establish that it may rely on the limitation period. The test is not what the Respondent intended to provide to the Appellant, but what the Arbitrator found was provided to the Appellant.

The Respondent argues that the Appellant had full knowledge of her attendance with Dr. Moddel, acknowledged receipt of the Respondent’s covering letter and made no subsequent request for a copy of the report. The Arbitrator found that the Appellant’s lack of follow up regarding the report was insufficient for the Arbitrator to infer that the Appellant had received the report and had simply chosen not to dispute the denial.

Further, Smith v. Co-operators noted the courts’ obligation to impose “bright-line boundaries between the permissible and the impermissible,” without undue solicitude for particular circumstances, such as whether the insured was informed of the limitation period in any event through the mediator’s report or whether the insured was represented by experienced counsel throughout. I am not persuaded that the onus was on the Appellant to follow up with the Respondent to provide sufficient reasons.

The evidence before the Arbitrator was that the Respondent first provided the Appellant with Dr. Moddel’s May 5, 2004 report, upon which it was relying in part in its May 31, 2004 OCF-9 denying the Appellant’s NEB claim, on or about July 18, 2006. The Arbitrator found that the Appellant applied for mediation on July 20, 2006.

Pursuant to Garisto, the two-year limitation period under subsection 281.1(1) of the Insurance Act would commence as of the date the report was finally provided to the Appellant. The Appellant thus commenced her mediation proceeding within the two-year limitation period. Accordingly, I allow this appeal and rescind the Arbitrator’s April 13, 2012 order with a new order that the Appellant is not precluded from proceeding to arbitration.

V. EXPENSES

Having determined this appeal, my July 9, 2012 stay is lifted. I refer the parties to the Arbitrator regarding the legal expenses of the arbitration proceeding.

If the parties are unable to agree on the legal expenses of this appeal, pursuant to Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – August, 2011), an expense hearing shall be requested within thirty days of the date of this decision, accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, and written submissions on entitlement to and/or the quantum of such legal expenses, as are in dispute.