Burden v. Western Assurance Company, 2013 ONFSCDRS 71

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2013 ONFSCDRS 71

FSCO A11-001883

BETWEEN:

CLIFF BURDEN

Applicant

and

WESTERN ASSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Jessica Kowalski

Heard: May 23, 2012 by telephone conference call

Appearances: Nicola Romano for Mr. Burden

Peter Durant for Western Assurance Company

This issue in this hearing concerns a notice of stoppage of weekly benefits form that is no longer in use.

Issue:

Was the Notice of Stoppage of Weekly Benefits and Request for Assessment (OCF-17) dated July 29, 2004 a valid termination that triggered the running of the limitation period? If so, is Mr. Burden barred under section 51 (now 56) of the Schedule from proceeding with his claim?

Result:

No. The Notice did not constitute a valid termination of weekly benefits. Mr. Burden is therefore not precluded from proceeding to arbitration with his claim.

Background

Mr. Burden was on his way to Parry Sound on August 17, 2001 when his car was rear-ended by a dump truck.

Mr. Burden received income replacement benefits to August 13, 2004.

By OCF-17 dated July 29, 2004, Western gave Mr. Burden notice that, effective August 13, 2004, the income replacement benefits would be terminated. Western explained that the reason for stoppage was a report that had been sent to Mr. Burden some three weeks before. A copy of the report was included with the OCF-17.

The issue is whether the July 29, 2004 OCF-17 was sufficient to start the running of the two-year limitation period, and if so, whether Mr. Burden is barred by operation of s.51 of the Old Regulation from proceeding with his claim for income replacement benefits.¹

The Law

Subsection 51(1) of the Old Regulation provides that a mediation proceeding or a court proceeding or arbitration shall be commenced within two years after the insurer’s refusal to pay the amount claimed.

The Insurance Act, at section 281.1(1), states that:

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 procedure for stopping payment of income replacement benefits is set out in s.37 of the Old Regulation.² At section 49, the Old Regulation requires the insurer, if it refuses to pay a benefit, to provide the insured person with notice of the reasons for terminating payment.

The leading case with respect to the obligation on insurers to inform insured parties of their rights upon termination of benefits is the decision of the Supreme Court of Canada in Smith v. Co-operators General Insurance Co.³

In Smith, the Supreme Court ruled that no refusal can be said to have been valid unless there was compliance with the duty to advise the insured person, in writing, of the procedure to resolve disputes. The obligation, placed on insurers, was to inform insured persons of the dispute resolution process in straightforward and clear language directed towards an unsophisticated person.

The crucial passage from Smith is as follows:

In my opinion, the insurer is required under s. 71 to inform the person of the dispute resolution process contained in ss. 279 to 283 of the Insurance Act in straight forward and clear language, directed towards an unsophisticated person. At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, the mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process. Without this basis information, it cannot be said that a valid refusal has been given.

Western submits that the OCF-17 was a valid stoppage and triggered the running of the two-year limitation period and that, therefore, Mr. Burden is barred by statute from proceeding with his claim for income replacement benefits because it is outside the two-year limitation period.

Western also submits that the Financial Services Commission of Ontario approved the OCF-17 form Western used to advise Mr. Burden of the termination, and that it was a prescribed form drafted in the wake of the Smith decision.

ANALYSIS

Parts 1 through 4 of the OCF-17 are clear and uncontroversial: they told Mr. Burden in straightforward and clear language that his income replacement benefits were going to be stopped, and the reason for the stoppage.

At Part 4, the form set out Mr. Burden’s rights to dispute Western’s assessment of his claim for benefits and identified required steps. Steps 2 and 3 (in Part 4) set out the requirement to mediate, and the right to arbitrate or litigate if mediation failed.

Notice regarding the two-year time limit was preceded by the words “WARNING: TWO YEAR TIME LIMIT”.

OCF-17 void at Part 5

Problems arise, however, at Part 5. For the reasons that follow, I find that the instructions immediately preceding Part 5, and Part 5 itself, are confusing. They are not compliant with Smith v. Co-operators General Insurance Company or with section 37 of the Old Regulation, and the form is therefore void. I find that the language used in the form confusing because it made a DAC assessment mandatory when there was no requirement that an insured person request a DAC in order to disagree with a stoppage of weekly benefits.

Part 5 is the last part of the OCF-17. It is titled “Applicant Request and Signature”. Part 5 is immediately preceded by instructions in bold letters that say:

The rest of this form must be completed by the applicant and returned to the insurance company if the applicant disagrees with the stoppage of benefits. [bold in original. Italics mine.]

Next, before the applicant is asked to sign the form, are the following three paragraphs:

I disagree with the stoppage of benefits as described. I request an assessment at a Designated Assessment Centre to determine whether I continue to have a disability that entitles me to receive the benefits. I understand that in order for the insurance company to comply with my request to be assessed, I authorize my insurance company and treating health professionals to give the Designated Assessment Centre any information relating to my health condition, treatment and rehabilitation received as a result of the automobile accident, for the purpose of determining my eligibility for benefits.

I authorize the Designated Assessment Centre to consult with my treating health professionals if necessary. I understand that this information will be used to determine my eligibility for benefits.

I also authorize the Designated Assessment Centre to give my insurance company and treating health professionals a copy of its report. [emphasis mine]

Together with the instructions that precede it (that Part 5 must be completed if an applicant disagrees with the stoppage of benefits), Part 5 contains information that is contrary to s.37 of the Schedule and therefore misleading. Rather than describing the DAC as an option available to the insured person it tells an insured person that, if he or she does not sign the portion of the form requesting an assessment by a DAC, then he or she cannot continue on to mediation or more if she or he disagrees with the stoppage of benefits.

By this time, Mr. Burden had undergone numerous assessments, and might not reasonably have wanted another, albeit at a DAC.

I find that Western’s stoppage was also deficient in failing to include information about the DAC process. Arbitral decisions have clearly established that a DAC assessment was an important part of the process of resolving disputes and that the failure to advise of the DAC assessment process laid out in section 37 was a significant departure from the mandatory code for stopping benefits.⁴

Finally, in Knezevic and State Farm Automobile Insurance Company,⁵ Arbitrator Rogers found that the duty to inform of the dispute resolution process does include information about the DAC assessment process:

I find that State Farm did not comply with its duty to inform the Applicant of the dispute resolution process in straightforward and clear language. That duty includes providing clear information about electing to undergo a DAC assessment which is an important part of the dispute resolution process.

Smith: prescribed form not a substitute for conformity with Schedule

Following the Smith decision, it is irrelevant that the OCF-17 was a prescribed form. In Smith, the Supreme Court clearly indicated that the use of a prescribed form does not alleviate the insurer from its obligations to properly advise an insured person in writing of the procedure to resolve disputes. The Court wrote that the use of prescribed forms could not be a substitute for conformity with the Schedule and that “[t]here is no indication that insurers are legally prevented from adding to the prescribed form so that it is in conformity with the legal requirements.”⁶

Conclusion

Section 37 did not require Mr. Burden to request or attend a DAC before he could apply for mediation. While he had the right to request a DAC, it was not a pre-requisite to disagreeing with the insurer’s decision to stop benefits.

By using language that suggested that the DAC was a mandatory step, I find that the OCF-17 was confusing and unclear, and that it therefore did not comply with section 37 or Smith. To paraphrase Smith, the goal cannot be to confuse people about their rights when it comes to limitation periods.

In my view there can be no doubt that Part 5 imposed a requirement on an insured person that was not required by the Schedule. For the reasons set out above, I find that the OCF-17 did not constitute a proper refusal, and that the limitation period did not therefore begin to run.

June 5, 2013

Jessica Kowalski

Arbitrator

Date