Economical Mutual Insurance Company v. Leroy Pries, 2013 ONFSCDRS 88

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2013 ONFSCDRS 88

Appeal P12-00036

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ECONOMICAL MUTUAL INSURANCE COMPANY

Appellant

and

LEROY PRIES

Respondent

BEFORE:

David Evans

REPRESENTATIVES:

Helen D. K. Friedman for Economical Mutual Insurance Company

David Donnelly for Mr. Pries

HEARING DATE:

May 15, 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 appeal of the Arbitrator’s order dated September 21, 2012 is allowed. Paragraph 1 of the Arbitrator’s order is revoked, and the following substituted:

2. Mr. Pries is required to repay Economical Mutual Insurance Company income replacement benefits for the 12-month period ending May 2, 2010, to the extent of the CPP disability payments Mr. Pries received that are deductible from those benefits.

3. If the parties are unable to agree on the legal expenses of this appeal, an expense hearing shall be requested pursuant to the Dispute Resolution Practice Code (Fourth Edition, Updated - August 2011), but as set out below and within sixty days of the date of this decision.

July 8, 2013

David Evans Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Economical Mutual Insurance Company appeals the September 21, 2012 Preliminary Issue Decision of Arbitrator Wilson. The Arbitrator found that, under s. 47 of the SABS‑1996,¹ Economical was not entitled to repayment of income replacement benefits (IRBs) it had paid its insured, Mr. Pries, to the extent of Canada Pension Plan disability benefits he had received.

II. BACKGROUND

Mr. Pries was injured in an accident on September 3, 2007, and received IRBs from Economical. After they were temporarily suspended, he applied for CPP disability pension benefits. The application was accepted in March 2010, after the IRBs were reinstated. Mr. Pries received a retroactive lump sum from CPP and receives ongoing CPP disability pension benefits.

CPP disability pension benefits are deductible as collateral benefits from IRBs for accidents that occur on or after January 2, 2002: ss. 7(1)1.i, 2(9)1 and 2(10) of the SABS. While the ongoing CPP benefits are deducted from the IRBs Mr. Pries continues to receive, the retroactive lump sum payment for past CPP disability pension benefits for the period November 2, 2008 to May 2, 2010 was not deducted. Accordingly, Economical submitted he was overpaid under the SABS.

Section 47 of the SABS, set out below, governs repayment of overpayments. Clause 47(1)(c) provides that a person shall repay to the insurer benefits like IRBs to the extent of any payments received by the person that are deductible from them like CPP benefits. However, s. 47(2) requires the insurer to give notice of the amount to be repaid and, unless the benefit was paid as a result of willful misrepresentation or fraud [s. 47(4)], s. 47(3) provides that “The obligation to repay a benefit does not apply unless the notice under subsection (2) is given within 12 months after the payment was made.” Economical issued its s. 47(2) Notice of Repayment to Mr. Pries on April 27, 2010 for benefit payments made from November 3, 2008 to May 2, 2010.

The dispute is about the meaning in s. 47(3) of “the payment” in the phrase “within 12 months after the payment was made,” namely whether it is the collateral or the statutory accident benefit. If “the payment” means, in the context of collateral benefits governed by s. 47(1)(c), the collateral benefit, then the notice was given within 12 months of the payment of the collateral benefit – in this case, the retroactive lump sum payment of CPP disability pension benefits. However, in Trottier and Royal & SunAlliance Insurance Company of Canada, (FSCO P03‑00019, December 15, 2003), the Director of Arbitrations found that “the payment” in s. 47(3) is the statutory accident benefit – in this case, the IRBs. In the latter case, Economical would only be entitled to recover IRBs going back 12 months from the notice.

However, Arbitrator Wilson did not follow Trottier. Instead, he relied on Slater and The Personal Insurance Company of Canada, (FSCO A07‑000592, March 27, 2008), to bar Economical from recovering any overpayment of the lump sum benefit because it did not request repayment within 12 months of its first IRB payment to Mr. Pries, which was made about 30 months before Mr. Pries was found entitled to CPP benefits.

Economical submits that, regarding Slater, the Arbitrator incorrectly applied an irrelevant decision that itself is incorrect. It also submits that Trottier was incorrect, so it claims repayment of the entire lump sum.

III. ANALYSIS

I will first set out relevant portions of s. 47, including clauses 47(1)(a) and (b) – payments due to error or fraud, or where the insured was disqualified – because they were discussed in Trottier:

47.(1) A person shall repay to the insurer,

(a) any benefit under this Regulation that is paid to the person as a result of an error on the part of the insurer, the insured person or any other person, or as a result of wilful misrepresentation or fraud;

(b) any income replacement or non-earner benefit that is paid to the person if he or she, or a person in respect of whom the payment was made, was disqualified from payment under Part IX;

(c) any income replacement, non-earner or caregiver benefit or any benefit under Part VI, to the extent of any payments received by the person that are deductible from those benefits under this Regulation;

(2) If a person is required to repay an amount to an insurer under this section,

(a) the insurer shall give the person notice of the amount that is required to be repaid; and

(b) if the person is receiving an income replacement or caregiver benefit, the insurer may give the person notice that the insurer intends to collect the repayment by deducting up to 20 per cent of the amount of the benefit from each payment of the benefit.

(3) The obligation to repay a benefit does not apply unless the notice under subsection (2) is given within 12 months after the payment was made.

(4) Subsection (3) does not apply if the benefit was paid as a result of wilful misrepresentation or fraud.

(5) An insurer that has given the notice referred to in clause (2) (b) may collect the repayment by deducting up to 20 per cent of the amount of the benefit from each payment of the benefit.²

The parties agree that the Arbitrator incorrectly applied Slater in finding that Economical had to request repayment within 12 months of the first IRB payment. To start with, Slater did not even deal with the repayment of collateral benefits governed by s. 47(1)(c) but rather with payments made in error or through fraud under s. 47(1)(a). In Slater, Arbitrator Ashby held that the notice had to be given within 12 months of the first payment made in error – not the first payment, which is what Arbitrator Wilson found. Arbitrator Ashby treated s. 47(1)(a) as a limitation period, so that if notice was not given within 12 months of that first payment made in error, then no repayment could be sought at all.

Nonetheless, if Slater is relevant and correct, Economical still cannot claim any repayment, as it gave notice more than 12 months after November 3, 2008, the first benefit payment from which the CPP benefit could be deducted.

However, I agree with Economical’s submission that Slater is neither relevant nor correct.

First, Slater deals with payments made in error. I see no analogy between a payment made in error and a payment from which a deduction may now be made pursuant to a determination made by the CPP. There was no “error” by Economical in any sense. Clauses (a) and (c) are different provisions that deal with different contexts.

Second, Arbitrator Ashby engaged in judicial drafting to reach her conclusion. She redrafted s. 47(3) to provide that “The obligation to repay a benefit does not apply unless the notice under subsection (2) is given within 12 months after the first payment was made.” She found the meaning of “the payment” ambiguous in circumstances where an insured is receiving serial payments. She found that an insured entitled to successive benefits would be subject to a renewed notice period with each payment of the benefit, creating a “rolling limitation period.” Arbitrator Wilson summarized her conclusion as follows: “Essentially, Arbitrator Ashby contends that if the insured is held to an inflexible date for the initiation of proceedings against an insurer, then fairness dictates that, in actions against an insured for repayment, the insurer not have benefit of the same sort of rolling limitation denied to its insured.”

However, the legislation simply refers to “the payment.” There was no necessity to read into it “the first payment.” Therefore, as the legislation provides, the insurer can recover up to 12 months’ worth of payments made in error.

That leads us to Trottier, which is the heart of this appeal. Arbitrator Wilson stated that “Arbitrator Ashby’s conclusions in Slater are difficult to reconcile with the popular interpretation of Trottier – that is, that the repayment claim may automatically go back 12 months from the date of notice.” However, that was not a “popular interpretation” but a binding decision by the Director. Vo and Maplex General Insurance Company et al., (OIC P-002777, December 12, 1997) established that appeal decisions are binding on arbitrators not on the basis of stare decisis, but simply on the structural basis of this tribunal because “the Legislature intended there to be certainty on issues of law going beyond the specific dispute of the parties.” Otherwise, as the Director in Vo noted, if an appeal decision is simply “giving a second opinion which would have no impact on other arbitration cases with the same interpretive dispute … the process merely duplicates itself, and the goal of expeditious resolution of disputes is compromised.”

Had the Arbitrator applied Trottier, then Mr. Pries would have been ordered to repay to Economical the IRBs he received for the 12-month period ending May 2, 2010, to the extent of the disability pension benefits he had received from the CPP that are deductible from those benefits. However, Economical submits that Trottier was incorrectly decided regarding the meaning of “the payment” in s. 47(3).

As was also stated in Vo and Maplex, just as arbitrators are not bound by each other’s decisions, I am not bound by my own, another delegate’s, or a Director’s decision on the same issue. However, as was also stated in Vo, given that appeal decisions are binding on arbitrators, “it is patent that departure at the appeal level from a previous interpretation of a statutory or regulatory provision should only occur in clear and cogent circumstances.” I note that in Trottier, the Director undertook a careful and lengthy analysis of the repayment provisions in the various SABS up to then, and it was decided over 10 years ago and has been well-established law since.

The Director in Vo also stated that cases may be distinguishable because of their factual basis or a new interpretive argument not previously made or change in the environment in which the Act or SABS operates. Economical’s main argument in this regard is that the Director not only failed to take account of the different meanings “the payment” can have but also failed to take account of the notice provision itself, s. 47(2).

By way of background, Arbitrator Bayefsky, who wrote the Trottier arbitration decision,³ agreed that the reference in s. 47(3) to “the payment” refers to the payment of the collateral benefit (a long-term disability benefit in that case), and rejected the Applicant’s suggestion that he should only be required to repay his benefits 12 months back from the date of the notice. Arbitrator Bayefsky noted that, even though the collateral benefits were paid in relation to a period longer than 12 months, “the Applicant only received the [collateral] benefits as of June 2002 and the Insurer gave notice of the repayment within 12 months of this time.”

However, in the Trottier appeal, which overturned the arbitration decision, the Director reviewed not only clause 47(1)(c) but also clauses 47(1)(a) and (b), the provisions dealing with payments paid (a) due to error or fraud or (b) where the insured was disqualified. He wrote that “The interaction between [clauses (a) and (b)] and the 12-month notice requirement is straightforward. Reference to ‘the payment’ in s. 47(3) can only mean the payment of accident benefits.” He found that, although the wording in s. 47(1)(c) is slightly different as it does not include the phrase “that is paid to the person,” this was not significant. He also found that, in context and within s. 47(3), the “obligation to repay a benefit” and “the payment” must refer to the same thing, namely the statutory accident benefit. He continued:

In contrast, [the insurer’s] position would give “the payment” in s. 47(3) different meanings depending on the type of repayment. For clauses (a) and (b), it would mean the payment of accident benefits, but for clause (c), it would mean the payment of collateral benefits. This is an odd construction that offends the principle of consistent expression discussed in Driedger on the Construction of Statutes.⁴

Economical submits that Driedger explicitly contemplates that the same word may have different meanings depending on its context – that is, depending on the type of repayment in this case. As Prof. Sullivan states in Driedger’s fourth edition⁵ on p. 167, the presumption of consistent expression conflicts to some extent with the contextual principle in interpretation, which emphasizes that meaning is dependent on context. Identical words may not have identical meanings once they are placed in different contexts and used for different purposes. Prof. Sullivan notes that this is particularly true of general or abstract words. Economical submits that “payment” is such a general word not limited to the payment of benefits. For instance, aside from meaning collateral payments, “payment” in the SABS can also refer to severance, social assistance, and alimony and maintenance payments.⁶ Prof. Sullivan states that these factors tend to weaken the force of the presumption so that in many cases the courts assign it little weight.

Economical submits that this occurred in Bapoo v. Co-Operators General Insurance Co. (1997), 1997 CanLII 6320 (ON CA), 36 O.R. (3d) 616 (CA). Laskin J.A. held that while giving the same words the same meaning throughout a statute is a recognized principle of statutory interpretation, the principle of textual consistency is not an inflexible rule or an infallible guide to interpretation. Laskin J.A. held that the meaning of the words “received or available” should be interpreted differently in two different sections because of the different context.

However, in this case, Economical seeks to have “the payment” interpreted differently within the exact same section, depending on the context. I was not cited any other case of such a shape-shifting term.

I can understand the attraction of Economical’s interpretation, which seems simple and logical. The insured receives a lump sum collateral benefit payment, and then the insurer has 12 months from then to give notice of repayment of the lump sum. Furthermore, the insured has the funds in hand and could simply sign the cheque over to the insurer. That is why Economical submits that the Director erred because he did not consider s. 47(2). To reiterate, s. 47(2)(a) provides that “the insurer shall give the person notice of the amount that is required to be repaid.” In Economical’s view, this means it cannot give notice until the lump sum is paid, so in context, “the payment” in s. 47(3) has to refer to the lump sum. However, even though s. 47(2) was not discussed in Trottier, I am not persuaded that this makes a significant difference because “the amount that is required to be repaid” is, strictly speaking, not the lump sum but the benefit.

That is, what is being repaid not only in clauses 47(1)(a) and (b) but also (c) is a benefit. While s. 47(1)(c) does refer to the payment of a collateral benefit, what it actually requires is the repayment of the IRBs to the extent of the deductible collateral payments. The amount that is required to be repaid that is referenced in s. 47(2), then, is the portion of the accident benefit represented by the collateral benefit – but it is still the accident benefit that is being repaid. So the reference in s. 47(3) to “the payment” logically refers to the accident benefit payment and not the collateral payment, as the Director in Trottier stated. Although this interpretation ends up giving two different meanings to “payment” if you compare s. 47(1(c) and s. 47(3), it gives a consistent meaning to payment within s. 47(3) itself across the different contexts of clauses 47(1)(a), (b) and (c). More importantly, it does not require the term to change meanings inside the same section, which I agree is an odd construction. I find this distinguishes Bapoo, where the court was looking at the same words in two entirely different sections.

Economical submits that tying the notice to the accident benefit and not the collateral benefit means that often an insurer will not be able to recover the entire collateral benefit. However, Mr. Pries submits that treating “the payment” as the IRB, as found in the Trottier appeal, would not necessarily create notice problems for an insurer. He submits that s. 7 of the SABS would have allowed Economical to reduce Mr. Pries’s IRB payments by the amount of the CPP disability benefits available to him had he refused to apply for CPP. He submits that he would have immediately applied for CPP at that point and been accepted (subject to the 4-month waiting period). Economical submits that, aside from being purely speculative, this submission does not take account of the strict and narrow construction as to whether collateral benefits are “available” under s. 7.⁷

Nonetheless, this is an approach available to the insurer. Insurers can either be more proactive in encouraging their insureds to seek collateral benefits, or else live with the fact that they may not necessarily get repaid all the IRBs to the extent of the deductible collateral benefits received.

In this case, Arbitrator Wilson wrote:

One can infer that, even with the CPP payments available to Mr. Pries, he is not getting rich on the back of the Insurer. Indeed, persons living on the economic margins of society such as Mr. Pries must be seen as a highly vulnerable group… This is not a calculation error by Economical. It is however linked to the unjustified cessation and later reinstatement of benefits that prompted Mr. Pries to attempt to claim from CPP notwithstanding the long waiting period and initial discouragement. It should be noted that Economical could at any time have put Mr. Pries on notice that he had to apply for CPP benefits to continue to receive IRB benefits. Economical was not shy about ceasing to pay IRB benefits for reasons that later turned out to be spurious, and could well have acted promptly to bring the CPP issue forward. It did not and Mr. Pries did not apply until much later, all of which could have been a factor in potentially delaying both the CPP payment and the notice of deductibility.

With respect to these statements, Economical submits that “There was no evidence to support these findings and by making such findings unsupported by the evidence, Arbitrator Wilson erred in law. Economical states that such erroneous findings, based on facts not before him, unjustifiably colour the Arbitrator’s decision, and are used to sustain Arbitrator Wilson’s conclusions on the interpretation of Section 47(3), thereby constituting an error of law.”

To the extent that the issues representing those findings were not before the Arbitrator, particularly whether the cessation of benefits was “unjustified” based on “reasons that later turned out to be spurious,” I agree. Arbitrator Wilson seems to be taking the insurer to task for reconsidering its position on terminating benefits, yet insurers have seen special awards imposed on them for failing to reconsider their positions – a classic lose-lose proposition. However, the basic point in the passage cited is valid, namely that the insurer could have acted sooner regarding the CPP pension, considering that Trottier has been the law for a long time. In any event, Economical will still recover 12 out of 16 months’ worth of benefits to the extent of the collateral payment, or 75 percent.

Accordingly, the appeal is allowed, to the extent as set out in Trottier. Economical is only entitled to repayment of the IRBs for the 12-month period ending May 2, 2010, to the extent of the CPP disability pension payments Mr. Pries received that are deductible from those benefits.

IV. EXPENSES

If the parties are unable to agree on the legal expenses of this appeal, an expense hearing shall be requested within sixty days of this decision. The request shall be accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, as well as written submissions regarding entitlement to or the quantum of these expenses, or both, as are in dispute.

July 8, 2013

David Evans Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Subsections (6) and (7) deal with interest payable after the notice is issued.
3. 3Trottier and Royal & SunAlliance Insurance Company of Canada, (FSCO A02-000845, April 29, 2003).
4. 4Sullivan, Ruth (ed.), 3rd Edition (Toronto: Butterworths 1994), pp. 163-165. [Footnote in the original.]
5. 5Sullivan, Ruth (ed.), 4th Edition (Toronto: Butterworths 2004).
6. 6Subsection 2(8), s. 58, s. 64.
7. 7Vanderkop v. Personal Insurance Co. of Canada, 2008 CanLII 22926 (ON SC), [2008] O.J. No. 1937 (OSCJ), upheld in Vanderkop v. Personal Insurance Co. of Canada, 2009 ONCA 511; Massa and Allstate Insurance Company of Canada, (FSCO A07-002264, May 26, 2009); Mariona and Canadian General Insurance Company, (FSCO A96-000717, February 22, 1999).