Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2013 ONFSCDRS 60

Appeals P12-00031A and P12-00031C

OFFICE OF THE DIRECTOR OF ARBITRATIONS

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Appellant/Cross-Respondent

and

THIRUVARUL PONNAMPALAM

Respondent/Cross-Appellant

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Mr. Todd J. McCarthy for the Appellant/Cross-Respondent, State Farm Mutual Automobile Insurance Company

Mr. Sugunaraj Kanaga for the Respondent/Cross-Appellant, Mr. Thiruvarul Ponnampalam

HEARING DATE:

February 19, 2013

Written submissions on the cross-appeal were to be filed by April 17, 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 August 22, 2012 appeal of the Arbitrator’s July 25, 2012 decision on a preliminary issue is allowed, subject to the final determination of the March 13, 2013 cross-appeal.

2. Pursuant to subsection 283(3) of the Insurance Act, the time for the Respondent to request a cross-appeal is extended solely on the issue of whether the Appellant gave a clear and unequivocal refusal to pay income replacement benefits.

3. The legal expenses of this appeal and cross-appeal are deferred to the determination of the cross-appeal, subject to any further or other order of an appellate officer.

May 13, 2013

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND AND NATURE OF THE APPEAL

The Respondent/Cross-Appellant, Mr. Thiruvarul Ponnampalam, was injured in a February 5, 2007 motor vehicle accident. On May 6, 2008, the Appellant/Cross-Respondent, State Farm Mutual Automobile Insurance Company, denied payment of the Respondent’s February 27, 2008 treatment plan. On September 12, 2008, the Appellant terminated payment of the Respondent’s weekly income replacement benefits (“IRBs”), effective September 19, 2008.

In her July 25, 2012 decision on a preliminary issue, Arbitrator Miller (the “Arbitrator”) found that the Respondent was precluded from proceeding to arbitration regarding his treatment plan claim due to the two-year limitation period under the Insurance Act, R.S.O. 1990, c. I.8, reiterated in the Schedule.¹

The Arbitrator did not preclude the Respondent from proceeding with his IRB claim, finding that his Application for Mediation, date-stamped by the Commission on September 14, 2010, was filed within the two-year limitation period. The Arbitrator gave two reasons for her finding.

First, the Arbitrator found that the statutory wording was clear that the limitation period started not on the date the insured person was notified of the insurer’s refusal to pay further benefits, but on the actual date the benefits ended. To decide otherwise, in the Arbitrator’s view, allowed an insurer to give early notice it was terminating benefits, thereby depriving its insured of the full two years to apply for mediation. The Arbitrator thus held that the limitation period ran from September 19, 2008, the date on which IRB payments were to end.

In the alternative, the Arbitrator found that the Appellant had not provided the Respondent with a clear and unequivocal termination date in advising him on September 12, 2008, the effective date of termination, that his benefits were terminated effective September 19, 2008.

II. ANALYSIS

The Appellant appeals the Arbitrator’s decision that the Respondent’s IRB claim is not statute barred. The Respondent does not dispute that his treatment plan claim is statute barred. My September 20, 2012 order exercised my discretion under Rules 50.2 and 51.2(c) of the Dispute Resolution Practice Code (Fourth Edition, Updated August 2011) in accepting the August 22, 2012 Notice of Appeal from the Arbitrator’s July 25, 2012 preliminary arbitration decision.

The Appellant argues that its September 12, 2008 OCF-9, Explanation of Benefits, stating, in part, “you may apply to mediate your dispute … within two years of your insurer’s refusal to pay, or reduction of a benefit,” complied with the requirements of Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129. The Appellant submits that the Respondent had until the close of business on Monday, September 13, 2010 to file his Application for Mediation, which he did not.

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. [Emphasis added]

The Appellant argues that the Arbitrator erred in law in finding that the limitation period started not on September 12, 2008, the date of its refusal, but on September 19, 2008, the last date covered by a further IRB payment. “Refusal,” the Appellant submits, is the operative word in the limitation provision. Accordingly, the Arbitrator’s finding is not justified by the plain meaning of subsection 281.1(1) and is without precedent.

The Appellant submits that the Arbitrator further erred in finding that its September 12, 2008 OCF-9 was not clear and unequivocal simply because an additional IRB payment covering September 11 to 19, 2008 was made. The Appellant maintains that the Respondent has not challenged the validity of its refusal to pay IRBs or that the OCF-9 was clear and unequivocal and properly informed the Respondent of his option to dispute the refusal.

The Appellant argues that the Respondent’s Application for Mediation for IRBs, filed September 14, 2010, was clearly outside the well-established and well understood two-year limitation period. The Appellant, therefore, asks that paragraph 1 of the Arbitrator’s July 25, 2012 order be set aside and substituted with an order that the Respondent is precluded from proceeding to arbitration on his IRB claim. The Appellant also seeks its legal costs on appeal and at arbitration.

The Respondent submits that the Arbitrator’s July 25, 2012 order is correct. He argues that as IRBs were paid up to September 19, 2008, there was no entitlement dispute for that period. The Respondent agrees that the Commission date-stamped his Application for Mediation as received on Tuesday, September 14, 2010, it having been sent Friday, September 10, 2010. Accordingly, the Respondent submits that his application was filed in time.

The Respondent further argues regarding the Appellant’s appeal:

1. The Appellant’s refusal to pay was indicated, on the right side of Part 2A (entitled “Eligible”) of the September 12, 2008, OCF-9, to be on September 19, 2008, as it states: “… no further income replacement benefits will be paid 5 business days past the date of this notice (Sept. 19, 2008). Final.” The Respondent concedes that the Arbitrator does not note this in reaching her decision.

2. As stated by MacKinnon J., at first instance in Smith v. Co-operators General Insurance Co., [1999] O.J. No. 2484, the two-year limitation period “begins to run when the benefits have been refused, not when the insurer advises the applicant of his or her rights to mediation and of the existence of the time limit.”

3. In State Farm Mutual Automobile Insurance Company and Kirkham, (FSCO P96-00069, January 27, 1997), at page 7, Delegate Draper stated that the “Court specifically relied on the fact that the time limit in Schedule “C” ran from the date on which the cause of action arose, not from the insurer’s refusal to pay further benefits.”

I find, for the following reasons, that the Arbitrator erred in law in finding that the limitation period was triggered on the date IRB payments ended rather than by the actual Appellant’s refusal to pay the benefit claimed:

1. Subsection 281.1(1) of the Insurance Act clearly mandates that the proceedings noted shall be commenced “within two years after the insurer’s refusal to pay the benefit claimed.” The provision does not state that the proceedings shall be commenced within two years after payment of the benefits in dispute ends. The Respondent, himself, cites MacKinnon J. to this effect.

2. In Kirkham, Delegate Draper was referring to Ontario Court of Appeal’s decision in Wilson’s Truck Lines Limited v. Pilot Insurance Company, 1996 CanLII 1012 (ON CA), [1996] O.J. No. 3735, that pertained to a 1982 motor vehicle accident. Delegate Draper notes that in 1990 the Insurance Act was substantially amended, including a differently worded limitation period for pursuing statutory accident benefits claims. The triggering event was no longer the date the insured’s cause of action arose but, rather, the “insurer’s refusal to pay the benefit claimed.” Accordingly, neither Wilson’s Truck Lines Limited nor Kirkham assist the Respondent.

3. As the Appellant submits, in Kalpakis and TD Home and Auto Insurance Company, (FSCO A08-002563, July 22, 2011), Arbitrator Sone held that an April 11, 2005 Explanation of Benefits constituted an insurer’s unequivocal refusal to pay benefits, although housekeeping benefits were to end later, on April 25, 2005. In Mohammed-Amin and RBC General Insurance Company, (FSCO A06-002188, June 25, 2007), Arbitrator Muzzi found that a December 10, 2003 Explanation of Benefits constituted an unequivocal refusal to pay benefits, although IRBs were to end December 29, 2003.

4. The Respondent is incorrect in saying that he could not apply for mediation before September 19, 2008 as benefits were being paid up to that date. As stated by Arbitrator Muzzi in Maguire-Card and RBC General Insurance Co., (FSCO A04-000852, August 19, 2005), it is a clear and unequivocal refusal that triggers the limitation period under the Schedule. This echoes the Supreme Court of Canada in Smith, “… the limitation period under s. 281(5) of the Insurance Act only begins to run upon a refusal.”

Thus, notwithstanding that benefits may continue for some period after an insurer’s clear and unequivocal refusal to pay further benefits, there is no prohibition on an insured applying for mediation immediately upon that refusal. Accordingly, an insured is not deprived of the full two years within which to dispute the refusal. In any event, the Respondent stated in oral argument that he did not start the dispute process before September 19, 2008 due to his dealing with an emergency situation out of the country.

For the following reasons I find that the Arbitrator further erred in law in holding that the limitation period was not triggered because the Appellant did not provide the Respondent “with a clear and unequivocal termination date” [emphasis added]:

1. The only explanation given by the Arbitrator for this conclusion was that the date of the OCF-9 and the end date of IRBs were different. I am not persuaded that there is confusion any time the date of the OCF-9 differs from the actual end date of payments.

2. The Respondent submits in support of the Arbitrator’s conclusion, Part 2A of the September 12, 2008 OCF-9, that states “no further IRBs will be paid 5 business days past the date of this notice (Sept. 19, 2008).” The Respondent, however, acknowledges that the Arbitrator does not refer to Part 2A of the OCF-9 in reaching her finding.

The OCF-9 is clearly dated, on page 2, as September 12, 2008. The Respondent, himself, confirms in his March 14, 2013 submissions on the cross-appeal that the OCF-9 is dated September 12, 2008. Consistent with that, the September 19, 2008 date noted in Part 2A references 5 business days past the date of the notice, not the notice date itself.

3. In any event, as stated by the Arbitrator in citing Mohammed-Amin, it is the refusal that must be clear and unequivocal. The Arbitrator does not make a finding whether there was a clear and unequivocal refusal by the Appellant, but only that the termination date was not clear and unequivocal.

At the February 19, 2013 Oral Hearing, the Respondent’s representative stated that he wished to obtain instructions whether to cross-appeal the Arbitrator’s decision. Those instructions were confirmed February 25, 2013. The Cross-Appeal was filed March 14, 2013.

Rule 55.1 of the Code states that if a respondent intends to appeal the arbitration order, a separate Notice of Appeal must be completed, and the time periods for an appeal apply. Rule 52.1 of the Code provides that, subject to Rule 52.2, an appellant must file a Notice of Appeal within 30 days of the date of the arbitration order. Rule 52.2 provides:

The Director may extend the time for requesting an appeal on such terms as he or she considers appropriate, either before or after the 30-day time limit, if he or she is satisfied there are reasonable grounds for granting the extension.

Rule 52.2 of the Code echoes subsection 283(3) of the Insurance Act. Director Sachs, in Sittler and Canadian General Insurance Company et al., (OIC P-000951 & V-000951, P-004495 & V-004495, August 11, 1995), sets out factors that might be considered in whether to extend the time for an appeal:

• The existence of a bona fide intention to appeal.

• The length of the delay in applying for the extension.

• The merits of the proposed appeal.

• Any prejudice to the other party and whether it is compensable or not.

The Respondent requests that the time to cross-appeal be extended for the following reasons:

(1) He did not initially cross-appeal because he was incapable of paying his representative and the appeal process fees, as he is on social assistance.

(2) The Arbitrator’s decision was in his favour. Therefore, there was no reason to appeal.

(3) The Appellant appealed two days before the end of the thirty-day time period, leaving little time within the requisite period for the Respondent decide whether to appeal.

(4) There were the following omissions by the Arbitrator in her reasons:

(i) The September 12, 2008 OCF-9 was not clear and unequivocal regarding a rebuttal medical report. The Respondent faxed to the Appellant on November 9, 2008 (confirmed by a Transmission Verification Report) a November 6, 2008 rebuttal report by Dr. Y. Tharmaratnam within the requisite 40 business days. The Appellant did not send a clear denial letter in response. Rather, the only reply was a November 3, 2009 letter advising the file had been reassigned to a different office.

The Respondent submits that this issue was set out in paragraphs 4 and 5 of his written submissions at arbitration and was argued by both parties at arbitration, but that the Arbitrator did not address this point.

(ii) Rules 7.4 and 8.1 of the Code must be applied in calculating the two-year limitation period under the Insurance Act and the Schedule. The Appellant’s OCF-9 was dated Friday, September 12, 2008. According to the Code, that date is excluded in calculating the limitation period. Rather, the limitation period runs from the next working day, being Monday, September 15, 2008. The Application for Mediation was received by the Commission on Tuesday, September 14, 2010, which is within the two year limitation period. The Respondent submits that this was addressed in paragraph 9 of his arbitration submissions.

(iii) The Respondent did not receive the complete September 12, 2008 OCF-9, he received different two versions of the OCF-9 and/or no copy of the OCF-9 was sent to the Respondent’s representative.

The Appellant concedes that there is no irreparable prejudice that could not be compensated by costs should the time for the Respondent to cross-appeal be extended. The Appellant, however, argues that the time should not be extended and the cross-appeal should be rejected because:

1. The Respondent seeks to raise issues “not apparently pressed even at the arbitral level,” but raised for the first time in response to the Appellant’s appeal submissions.

2. The Respondent is months late in filing his cross-appeal and the delay cannot be justified.

3. The Respondent has not yet received leave to appeal a preliminary arbitration order under Rule 50.2 of the Code.

4. The Respondent never had a bona fide intention to appeal. Rather, he indicated early on that he was content with the outcome and raised only the prospect of challenging aspects of the Arbitrator’s reasons.

5. The cross-appeal is entirely without merit:

(i) The Respondent’s Disability Certificate sent November 9, 2008 was not a rebuttal report contemplated by the Schedule. The Appellant accepts that 40 business days after its September 12, 2008 OCF-9 was November 10, 2008. However, the Disability Certificate could not and did not extend the time for the limitation period to be triggered. Rather, any subsequent act or event after a proper notice has been given has no impact on the limitation period in the absence of an express waiver. In this case, express waiver has not been established.

(ii) Rules 7.4 and 8.1 of the Code have nothing to do with calculating the two-year limitation period under the Insurance Act and the Schedule.

(iii) There was no evidence before the Arbitrator that the Respondent did not receive the entire September 12, 2008 OCF-9. Rather, the evidence was to the contrary. The Respondent cannot now challenge the evidentiary basis accepted by the Arbitrator that was not disputed at arbitration, namely, that the Appellant sent the entire OCF-9 to the Respondent on September 12, 2008.

Regarding the second and third grounds of the requested cross-appeal, I find:

1. Rule 8.1(a) of the Code provides that in calculating time “under these Rules” where there is reference to a number of days between two events, the day on which the first event happens shall be excluded. I am not persuaded as to the merit of the argument that the Code changes the limitation provisions under the Insurance Act or the Schedule such that the limitation period begins the next working day following the date of refusal.

2. There is no transcript available from the arbitration hearing. The Respondent does not reference any evidence that was before the Arbitrator that different versions of the September 12, 2008 OCF-9 were sent or that something was not sent. I am not persuaded as to the merit of this ground of the cross-appeal.

Accordingly, based on their merits, I am not persuaded there are reasonable grounds to exercise my discretion under subsection 283(3) of the Insurance Act and Rule 52.2 of the Code to extend the time for the Respondent to advance these two grounds of the proposed cross-appeal.

Regarding the first ground of the requested cross-appeal, both the Respondent and the Arbitrator cite Arbitrator Muzzi in Mohammed-Amin that “ongoing negotiations or requests for further information between an insured and the insurer do not extend the time limits for disputing an otherwise clear and unequivocal refusal.”

In Part 2B (entitled “Not Eligible/Stoppage of Benefit”) on page one of the September 12, 2008 OCF-9, the Appellant states:

Income replacement benefits has been enclosed from Sept 11-19, 2008 $400. You have the right to a rebuttal examination. You have 40 business days to provide a rebuttal examination. If this exam is provided within the 40 business day timeline, benefits will not be reinstated pending receipt of the rebuttal examination. Once the exam is received, if the results are contrary to the original Independent Medical Assessment report, we will have the original IE examiner review the report for consideration. If your rebuttal is not received within the 40 business day timeline, and you wish to further dispute this matter, you may apply for mediation within 2 years from the date of this notice.

As I understand the Appellant’s limited, preliminary submissions on February 19, 2013 to the Respondent’s nascent cross-appeal, it argues that a fair reading of page one of the OCF-9 is that regardless whether a rebuttal report is received or not, there was a clear and unequivocal refusal.

The Respondent’s written submissions at arbitration are extremely succinct, constituting little more than a page. Paragraphs 4 and 5 address the rebuttal medical disability certificate sent to the Appellant on or before November 9, 2008 and that there was “no denial letter for the Rebuttal medical examination reports.” As there is no transcript of the arbitration hearing, I have no record as to what was argued in oral submissions, and the parties disagree in this regard.

In his September 12, 2012 Response to Appeal, the Respondent submits, in part, that the Appellant “did not send a clear refusal of benefits in response to the rebuttal examination.” His January 10, 2013 written submissions on the main appeal argue, in part, that the requirement in Mohammed-Amin that there must be a clear and unequivocal notice of the insurer’s refusal to pay the benefits in issue was not met by the Appellant in response to the Respondent’s rebuttal.”

In Allstate Insurance Company of Canada et al. and Saliba, (FSCO P01-00031, July 24, 2001), Delegate McMahon, held that there is “a long standing principle that an appeal is taken from the order of the adjudicator, not from her reasons.” The Divisional Court, in Mamaca v. Coseco Insurance Company, 2008 CanLII 30312, stated that it “is important in the appeal process, and especially in dealing with interim orders, to recognize that appeals are taken against decisions rather than reasons, although wrong reasons often give rise to wrong decisions.”

Pursuant to subsection 283(3) of the Insurance Act and Rule 52.2, of the Code, I am persuaded, that there are reasonable grounds, as follow, to exercise my discretion to extend the time for requesting a cross-appeal, but on the condition that the cross-appeal is limited to the issue of whether the Appellant gave a clear and unequivocal refusal to pay IRBs:

(1) Arbitrator Alves, in Do and Guarantee Company of North America, (FSCO A11-00078, November 6, 2012) (appeal to be heard June 25, 2013), held:

When Guarantee determined in 2007 that based on its assessments Mr. Do did not sustain a catastrophic impairment, it invited Mr. Do to obtain his own assessment, to rebut that determination. Guarantee stated it would pay for that assessment, if certain criteria were met. Since it is called a rebuttal assessment, it is at least implicit that the insurer would consider the rebuttal assessment and defer its final determination if he chose to exercise that right … I agree with the submission of counsel for the Applicant that such a determination is equivocal, and it is only after the insurer provides its “final” determination that the limitation period could begin to run.

Without deciding the matter, there is an issue whether there was a clear and unequivocal refusal to pay IRBs.

(2) Having exercised my discretion under Rules 50.2 and 51.2(c) of the Code to accept the Appellant’s Notice of Appeal from an arbitration decision on a preliminary issue, it would be inconsistent to reject the cross-appeal simply on the basis that the cross-appeal arises from the same preliminary issue arbitration decision.

(3) The Appellant concedes that any prejudice to it in extending the time for the cross-appeal is compensable in costs.

(4) The Respondent raised the issue of the consequences of a rebuttal report in his September 12, 2012 Response, less than sixty days after the Arbitrator’s decision.

(5) There is an issue whether the Respondent could initiate an appeal not of the Arbitrator’s July 25, 2012 order, but of her reasons. The Appellant has now been successful regarding both reasons the Arbitrator gave for her IRB limitation decision. The Arbitrator did not address a key question whether there was a clear and unequivocal refusal of IRBs. I am persuaded that it is reasonable that discretion be exercised to allow this issue to now be addressed.

I defer the question of appeal and cross-appeal legal expenses to the determination of the cross-appeal, subject to any further or other order of an appellate officer. The Appeals Case Administrator will contact the parties to set a further oral hearing date. A time line for any further written submissions will then follow.

May 13, 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.