Neutral Citation: 2013 ONFSCDRS 79 FSCO A09-001163

BETWEEN:

NATHAN DANIEL Applicant

and

RBC GENERAL INSURANCE COMPANY Insurer

Before: Arbitrator Suesan Alves Heard: By written submission and telephone conference call on December 11, 2012.

Appearances: Robert W. Vitols for Mr. Daniel Aldo Picchetti for RBC General Insurance Company

Issues:

The Applicant, Nathan Daniel, was injured in a motor vehicle accident on December 14, 2004. RBC submits that Mr. Daniel is precluded from arbitrating his claims for income replacement benefits payable under the Schedule¹ because he did not apply for arbitration within two years of RBC’s refusal to pay income replacement benefits. Mr. Daniel disagrees.

The preliminary issue is:

Is Mr. Daniel prevented from arbitrating his claim for post-104 week income replacement benefits by section 281.1 of the *Insurance Act*, R.S.O. 1990, c. I.8 as amended?
Which party is liable to pay the other’s expenses?

Result:

Mr. Daniel may proceed with his claim for post-104 week income replacement benefits.
If the parties are unable to agree on entitlement to or the amount of expenses, those questions may now be addressed.

EVIDENCE AND ANALYSIS:

Background

Mr. Daniel was injured in a motor vehicle accident on December 14, 2004. His injuries included fractures to his left thigh, right fibula, right ankle, sternum, a rib, lacerations to his liver and spleen, an injury to his aortic valve requiring the insertion of a replacement mechanical heart valve and multiple soft tissue injuries. At the time of the accident Mr. Daniel was 19 years of age.

Mr. Daniel applied for arbitration with claims for post-104 week income replacement benefits, interest, expenses, the cost of an accounting report and a special award. RBC submits that his application for arbitration in relation to income replacement benefits is out of time. Mr. Daniel disagrees.

RBC relies on its Explanation of Benefits dated December 4, 2006 as having triggered the limitation period. The basis for that document was Mr. Daniel’s non-attendance at insurer examinations. Mr. Daniel then attended rescheduled insurer examinations, the last of which took place on November 12, 2008. RBC issued a further Explanation of Benefits dated December 10, 2008 in which it refused Mr. Daniel‘s entitlement to post-104 week income replacement benefits based on the opinions of the insurer examiners.

For the reasons which follow, I am not persuaded that the December 2006 stoppage triggered a limitation period. While I am persuaded that the refusal dated December 10, 2008 triggered the running of a limitation period, Mr. Daniel’s applications for mediation and arbitration were both timely. Mr. Daniel can therefore proceed to arbitration with all of his claims.

Limitation Defences

Section 281.1 of the *Insurance Act* provides that a mediation or arbitration proceeding must be commenced within two years after an insurer’s refusal to pay the benefit claimed. If the application for mediation is filed within the two-year period, the period for filing the arbitration application may be extended by a further 90 days from the date of the Report of Mediator.

The case law in relation to limitation periods is well settled.² Limitation defences are strictly construed because they bar a claim on procedural grounds and thus prevent the adjudication of a claim on its merits.

In determining whether a limitation period has run, “First, it is necessary to ask whether, and when, there was a refusal to pay benefits; and second, whether the insurer may rely on a limitation period that runs from the date of the refusal.”³ For a refusal to trigger the running of a limitation period, it must be clear, unequivocal and provide adequate information about the dispute resolution process.⁴

Did the December 6, 2006 refusal trigger a limitation period?

RBC required Mr. Daniel to attend four insurer examinations to determine whether he met the test for post-104 week income replacement benefits. According to the Explanation of Benefits, the examinations were scheduled to take place on December 4, 2006.

Mr. Daniel’s counsel informed RBC that Mr. Daniel would not attend the assessments, because RBC had not paid him income replacement benefits since April 2005. Mr. Daniel did not attend the examinations.

On December 6, 2006, RBC sent Mr. Daniel an Explanation of Benefits stopping his income replacement benefits as of December 4, 2006. That document stated:

To date you have may have been entitled [sic] to income replacement benefits; however you failed to attend the scheduled Insurer’s examination’s [sic] scheduled for December 4th, 2006. As these assessments were scheduled in accordance with section 42 and the current regulations no benefits are payable for any income replacement benefits post 104 weeks until such time as you attend the assessments.[sic] Please note that no benefits are payable for[sic] the original date of assessment until such time as you do attend. This is of course pending confirmation of you meeting the disability test at the 104-week juncture of your claim.

Please be advised that we are stopping the entitlement of your post 104-week income replacement benefits as of December 4, 2006. Should you wish to attend for the above noted assessments you can contact me and I will arrange for the same.

RBC submits that this triggered a limitation period. I am not persuaded that it did, having regard to the provisions of the Schedule, the equivocal nature of the refusal and the incomplete information provided to Mr. Daniel about the dispute resolution process.

During the time RBC scheduled the assessments and on the day that Mr. Daniel failed to attend the examinations, subsection 42(10)(b) of the Schedule obliged Mr. Daniel to attend and submit to all reasonable physical, psychological, mental and functional examinations requested by the insurer examiners. Provided the examinations were reasonably required and reasonably necessary and the notices met the content and timing requirements in the Schedule — questions which were not disputed at this hearing — Mr. Daniel was obliged to attend the assessments.

In Luther and Economical Mutual Insurance Company (FSCO A10-003773, May 23, 2012), Arbitrator Wilson held that this “penalty set by the Schedule is simply the suspension of benefits until such time as the person makes him or herself reasonably available for an examination.”

This is a temporary stoppage of entitlement to income replacement benefits for procedural reasons; it is not a permanent stoppage. Once the insured person complies with the obligation to attend the examination, the right to pursue entitlement to those benefits is revived. Further, once there is compliance, an insurer has a duty to reconsider the insured person’s entitlement to the benefit under subsection 37(8) of the Schedule, make a determination of that entitlement, and, subject to that determination, resume payment of the benefit and pay all amounts that were withheld during the period of non-compliance, if the insured person provides a reasonable explanation for non-compliance, not later than the 10th business day after the failure or refusal to comply, or as soon as practicable after that day.

At most, a person will forfeit benefits during the period of non-compliance where he does not provide a reasonable explanation for non-compliance. For these reasons, I reject RBC's submission that the December 2006 notice of stoppage is properly characterized as a refusal which triggered the commencement of the limitation period.

On July 9, 2008, counsel for Mr. Daniel and RBC agreed that RBC would reschedule the examinations. The examinations concluded on November 12, 2008. Mr. Daniel attended all of the examinations. Based on the materials before me, I find that Mr. Daniel’s period of non-compliance, and hence the duration of the suspension of benefits, extended from December 4, 2006 to November 12, 2008. I find that the procedural basis for suspending Mr. Daniel’s income replacement benefits was at an end by November 12, 2008 and that after that date, RBC could no longer refuse to pay Mr. Daniel income replacement benefits based on his non-attendance at the insurer examinations on December 4, 2006.

An equivocal refusal?

A refusal which triggers the running of a limitation period under section 281.1 of the *Insurance Act* must be clear and unequivocal.⁵ I find the Explanation of Benefits of December 4, 2006 was equivocal and conveys a certain sense of indeterminacy. This is because the duration of the suspension depends on whether and when Mr. Daniel agrees to comply, when RBC reschedules the examinations and whether Mr. Daniel attends the rescheduled examinations. Whether benefits are payable during the period of suspension depends on the opinion of the insurer examiners and whether Mr. Daniel provides a reasonable explanation for his non-compliance.

If the insured person is found to meet the test of entitlement and provides a reasonable explanation for non-attendance at the insurer examinations, while there will be a delay in payment of benefits he will not forfeit them altogether. Further, once the suspension of benefits ends, his right to continue to seek entitlement to income replacement benefits based on meeting the appropriate disability test is revived. Because I find the refusal equivocal, I conclude that it did not trigger the limitation period.

Missing information

Section 49 of the Schedule requires an insurer to communicate information about the dispute resolution process when it refuses or reduces the amount of a benefit. In Smith v. Co-operators General Insurance Co., the Supreme Court of Canada held that in the absence of compliance a valid refusal could not be said to have been given.⁶

In this case, the Schedule sets out the first step that Mr. Daniel would need to take for RBC to pay him the income replacement benefits which RBC withheld during his period of non-compliance, namely, that he provide RBC with the reasons for his non-attendance at the insurer examination and that he do so within 10 days, or as soon as practicable, failing which his benefits during the period of his non-compliance would be forfeited. Nothing in the materials before me indicates that RBC provided this information or that RBC requested a reasonable explanation. I find that without this information, a valid refusal was not given to Mr. Daniel in December 2006.

I was not asked to determine whether Mr. Daniel provided RBC with a reasonable explanation. The first Report of Mediator dealing with Mr. Daniel’s claims for income replacement benefits is dated July 9, 2008. As it predates the refusal based on the insurer examinations, I infer that he applied for mediation in relation to this procedural refusal, that the mediation application was commenced within the requisite two-year period. Mr. Daniel can therefore proceed to arbitration on the question of reasonable explanation in relation to the period of non-compliance, if this is in dispute.

The December 10, 2008 stoppage

On July 9, 2008, RBC agreed to reschedule the insurer examinations with respect to Mr. Daniel’s post-104 week entitlement “at the earliest possible moment.” RBC scheduled the examinations between October 9 and November 12, 2008. Mr. Daniel attended all of the examinations.

The insurer examiners opined that Mr. Daniel did not meet the test for entitlement to post-104 week benefits. RBC then issued an Explanation of Benefits dated December 10, 2008 stopping his income replacement benefits on a substantive basis. An Explanation of Benefits dated December 10, 2008 states “Please find a copy of the insurer examination reports enclosed for your review. As per the reports, you do not suffer a complete inability to engage in any employment for which you are suited by education, training or experience as a result of the accident.”

Although the Explanation of Benefits is dated December 10, 2008, the Applicant invited me to find that the refusal did not take place until March 5, 2009 when RBC provided counsel for Mr. Daniel with a complete copy of the reports of the examinations and with the Explanation of Benefits. I do not decide that question as it is not necessary for me to determine it in the context of this limitation dispute.

Mr. Daniel had until December 10, 2010 to apply for mediation. RBC submits that he did not do so until March 23, 2011 and that his application for mediation was out of time. I find Mr. Daniel applied for mediation on August 3, 2010, within the two-year period. I accept that he was then required by the mediation unit at the Financial Services Commission of Ontario to resubmit the mediation application on new forms and that he did so on March 23, 2011. I find the relief sought on both applications is identical. I find that any defect was therefore one of form, not of substance, and that Mr. Daniel’s mediation application was therefore timely.

The Mediator reported to the parties on September 27, 2011. Mr. Daniel had 90 days from that date to file his arbitration application, under section 281.1 of the *Insurance Act*. On December 19, 2011, Mr. Daniel filed an arbitration application seeking income replacement benefits in the amount of $279.70 from December 16, 2006 ongoing, interest, expenses and a special award. This was within 90 days of the date the Mediator reported to the parties and the arbitration application was therefore timely. For these reasons Mr. Daniel’s arbitration application may proceed in relation to all of the claims he advanced.

Expenses

If the parties are unable to agree on entitlement to or the amount of expenses, those questions may now be addressed.

June 24, 2013

Suesan Alves Arbitrator

ARBITRATION ORDER

Under section 282 of the *Insurance Act*, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Mr. Daniel may proceed with his claim for post-104 week income replacement benefits including the question of whether his explanation for his non-attendance at the insurer examinations was reasonable.
If the parties are unable to agree on entitlement to or the amount of expenses, those questions may now be addressed.