Financial Services Commission des Commission services financiers of Ontario de l’Ontario

Neutral Citation: 2013 ONFSCDRS 94

FSCO A11-003595

BETWEEN:

ROMANA BIRKA

Applicant

and

TD HOME AND AUTO INSURANCE COMPANY

Insurer

Before: Arbitrator Jeffrey Rogers

Heard: June 11, 2013, at the offices of the Financial Services Commission of Ontario in Toronto

Appearances: Mr. Leonard Kunka, solicitor for Ms. Birka

Mr. Daniel Himelfarb, solicitor for TD Home and Auto Insurance Company

Issue:

The Applicant, Romana Birka, was injured in a motor vehicle accident on July 6, 2006. She applied for and received statutory accident benefits from TD Home and Auto Insurance Company (“TD Home”), payable under the Schedule.¹ TD Home purports to have terminated Non-Earner benefits (NEBs) on December 11, 2006. Ms. Birka applied for mediation of the issue more than 2 years after this purported termination.

The preliminary issue is:

Is Ms. Birka precluded from proceeding to arbitration because her application for mediation was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule?

Result:

Ms. Birka is not precluded from proceeding to arbitration.

EVIDENCE AND ANALYSIS:

Ms. Birka had not applied for NEBs on December 11, 2006

The principal question in this hearing is whether the denial of NEBs that TD Home gave on December 11, 2006 triggered the two-year limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule. I conclude that the denial did not trigger the limitation period because Ms. Birka had not made an application for NEBs when TD Home denied her entitlement.

The facts are not in dispute. Ms. Birka was seriously injured in the accident of July 6, 2006.

On August 1, 2006, Ms. Birka submitted a Disability Certificate dated July 27, 2006.² Part 5 of the Disability Certificate describes Ms. Birka’s serious injuries. Part 7 of the Disability Certificate is marked “N/A” in the box regarding NEBs. On August 10, 2006 Ms. Birka submitted an Application for Accident Benefits and an Activities of Normal Life.³ Part 3 of the Application indicates that Ms. Birka was not able to return to her normal activities following the accident.

TD Home responded with an Explanation of Benefits, dated August 24, 2006.⁴ The Explanation of Benefits states in Part 2 “You are eligible for non earner benefit…”

In the fall of 2006, Ms. Birka returned to complete her last year of high school. The next relevant correspondence between the parties is the Explanation of Benefits at the heart of this dispute. It is dated December 11, 2006 and states in Part 2: “You have returned to school, THEREFORE YOU DO NOT SUFFER A COMPLETE INABILITY TO CARRY ON WITH YOUR NORMAL LIFE OR RETURN TO YOUR STUDIES…”.⁵ The box for “Not Eligible/ Stoppage of Benefit” is checked off.

Ms. Birka filed an application for mediation of the issue of attendant care benefits, dated May 14, 2010. By letter of March 10, 2011, she requested that the issue of NEBs be added to the mediation. That is the earliest date of her application for mediation of NEBs. It is more than 2 years after the denial of December 2006. TD Home later raised the limitation issue and the parties agreed to resolve that dispute in this preliminary issue hearing.

Ms. Birka’s position is that the Explanation of Benefits of December 11, 2006 did not operate to start the running of the limitation period because she had not made an application for NEBs at that time. TD Home argues that she had. Resolution of the dispute turns on what constitutes a completed application for NEBs. I find that Ms. Birka’s Application for Accident Benefits, together with the information contained in the Disability Certificate and the Activities of Normal Life she submitted before December 11, 2006, did not constitute a completed application for NEBs.

The Schedule does not require that an application for NEBs be made in a specific form. It allows an insured person to make a number of applications for various benefits throughout the claims period. The jurisprudence confirms that the focus of the application process is the sufficiency of information, not the form in which it is provided. The test is objective. The completeness of the application is assessed in light of information available at the time. The subsequent conduct of the parties is not relevant. These principles are traced to the decision in McIntosh and Allstate Insurance Company of Canada.⁶ The critical question was whether the insurer had provided enough information to allow the insurer to begin to adjust the claim.

The test for entitlement for NEBs and the structure of the application process also influence the determination of whether Ms. Birka had triggered the duty for TD Home to begin to adjust her claim for NEBs.

The Director’s Delegate described the structure of the application process in L.F. and State Farm Mutual Automobile Insurance Company.⁷ First, a person seeking statutory benefits “shall notify the insurer of his or her intention to apply for a benefit” (s. 32(1)). Second, the insurer must provide the person with, among other things, information to assist the person in applying for benefits (s. 32(2)(c)). Third, the applicant “shall submit an application for the benefit to the insurer within 30 days after receiving the application forms” (s. 32(3)).

At the first stage, the insured person is required to give the insurer sufficient particulars of the claim or potential claim to allow it to commence its claims handling procedures. In response, the insurer is obliged to provide sufficient information, explanation and forms to enable the claimant to apply for benefits. The third stage requires the claimant to complete and submit the pertinent forms within 30 days of receiving them.

TD Home argues that Ms. Birka provided information in her Application for Accident Benefits that showed she was eligible for NEBs. It was therefore in a position to meet its obligation to begin to adjust the claim. It relies on the seriousness of the injuries described, and Ms. Birka’s stating in the Application for Accident Benefits that she was unable to return to her normal activities following the accident.

But that was not the only information that TD Home had. It also had the Disability Certificate and the Activities of Normal Life. The McIntosh approach requires considering all of the information. That approach flows from the determination that the focus of the application process is the sufficiency of information, not the form in which it is provided.

Bearing in mind the structure of the application process, and considering the substance rather than the form of communication, I find that Ms. Birka’s Application for Accident Benefits, Disability Certificate and Activities of Normal Life provided TD Home with information on NEBs that fits into the first stage of the application process. The documents provided enough information to notify TD Home of a potential claim, but did not indicate that a claim was being made.

A Disability Certificate is critical to an application for NEBs. Section 35(2) of the Schedule requires an insured person to submit a Disability Certificate with an application for NEBs. Section 35 (13) provides that no payment is required, without a completed Disability Certificate. Those provisions in the Schedule make it perverse to interpret the information Ms. Birka provided as an application for NEBs. Since the Disability Certificate said “N/A” with regard to the test for entitlement to NEBs, the only response available to TD Home was disentitlement.

Other provisions in the Schedule further confound TD Home’s suggested interpretation of the dealings between the parties. First, Section 12(1)(1) sets an onerous test for entitlement to NEBs. To be entitled, the insured person must suffer a “complete inability to carry on a normal life”. The information Ms. Birka supplied in the Activities of Normal Life showed significant continuing function, three weeks after the accident. Second, pursuant to section 12(8), no NEB is payable “for the first 26 weeks after the onset of the complete inability…” An insured person qualifies if the onset of complete inability occurred within 104 weeks of the accident. Therefore, there was no pressing need for Ms. Birka to apply for NEBs when TD Home claims that she did.

TD Home’s initial response to the information Ms. Birka provided appears consistent with its obligation to provide information about available benefits, in the second stage of the application process. The first Explanation of Benefits it gave informed Ms. Birka of her eligibility for NEBs. This only told Ms. Birka that she qualified to apply for NEBs. TD Home did not indicate that it would pay NEBs. TD Home did not request a completed Disability Certificate. TD Home did not concede that Ms. Birka met the test for entitlement to NEBs. Similarly, the same Explanation of Benefits also told Ms. Birka that she was not eligible for income replacement benefits (IRBs). Ms. Birka had undoubtedly not applied for IRBs.

Accepting TD Home’s approach would turn the application process on its head. It would remove the control of the process from the applicant. Instead, it would convert the insurer’s obligation to provide information about benefits in good faith, into an opportunity to limit potential claims before they crystallize.

TD Home does not argue that Ms. Birka’s application for mediation is otherwise out of time. My finding on the validity of the Explanation of Benefits of December 11, 2006 therefore resolves the dispute before me. Ms. Birka’s made several alternate submissions which I do not accept. I will briefly address them.

Limitation starts at age of majority

At the time of the accident, Ms. Birka was 17 years old. She was born on May 1, 1989, and therefore attained the age of majority on May 1, 2007. Ms. Birka applied for mediation more than 2 years after she attained the age of majority.

TD Home concedes that the limitation periods in subsection 281(5) of the Act and subsection 51(1) of the Schedule do not run while a claimant is a minor and is not represented by a litigation guardian. Citing no authority, Ms. Birka argued that she had two years from attaining the age of majority to apply for any benefits. Thus, any applications for accident benefits she made before attaining the age of majority were effectively suspended or nullified by her age. I reject that submission. It is contrary to the established jurisprudence on the commencement of limitation periods. It is also contrary to the provision in section 12(7)(b) of the Schedule requiring payment of an NEB to a qualifying insured person upon attaining 16 years of age. Mr. Birka’s submission would nullify those payments at the age of majority and the many provisions in the Schedule that require prompt applications for benefits.

Notice not invalid because of prior procedural breach

Section 35(3) of the Schedule gives an insurer three options upon receiving an application for NEBs and a completed disability certificate. The insurer is instructed to pay the benefit, request more information, or require the applicant to be examined. Ms. Birka argues that the termination of December 11, 2002 is invalid because TD Home did not exercise any of these options. She cited no authority in support. I reject this submission. Cases such as Turner v. State Farm Mutual Insurance Company⁸, and Bisnath and State Farm Mutual Automobile Insurance Company⁹, establish that a clear and unequivocal denial is not invalid by reason of a prior procedural breach by the insurer.

Denial given within 26 weeks of accident not premature

Pursuant to section 12(7)(a) of the Schedule, an insurer is not required to pay an NEB for the first 26 weeks after the onset of a complete inability to carry on a normal life. Citing no precedent, Ms. Birka argued that this section means that the denial TD Home gave her in December 2006 was invalid, because it was given within 26 weeks of the accident. I reject this submission.

Although payment is delayed, the Schedule places no barrier on applying for an NEB immediately after an accident. Entitlement can be established, if there is an onset of a complete inability to carry on a normal life immediately after the accident. The insurer must promptly respond, upon receiving the application. It must exercise one of its options under section 35(3) within 10 business days. The prompt adjusting requirements could lead to a legitimate determination of entitlement, within 26 weeks of the accident. For instance, an examination might show that the insured person does not meet the test, or information might be provided to indicate that the insured person is entitled to an IRB, but not an NEB. In either case the Schedule requires further prompt action by the insurer. In the latter, the delay in denial of the NEB that Ms. Birka suggests could prejudice the insured person who is entitled to an IRB.

No Election Required

Only one of an IRB, NEB or a caregiver benefit may be paid in respect of a period of time. Section 36 of the Schedule requires an insurer to notify an insured person whose application indicates that he or she may qualify for more than one of these benefits that he or she must elect which to receive. Ms. Birka argues that the denial of December 2006 is invalid because TD Home failed to notify her of her right to elect. I reject this submission because she did not provide TD Home with information that showed potential entitlement to any of these benefits, except NEBs.

Citing no precedent, Ms. Birka argued that she potentially met the test for entitlement to IRBs because TD Home knew that she was a student on summer holidays. I find this information does not trigger inquiry into whether Ms. Birka met the IRB qualifying requirement of being “excused from attendance at school under the Education Act…¹⁰”. Even if it did, she provided no information to indicate that could satisfy the additional employment qualifiers. The information she gave was that she had not worked within 52 weeks of the accident.

No multiple applications for weekly benefits

Citing no precedent, Ms. Birka argued that the denial of December 2006 was of no consequence, because TD Home later conceded that she suffered a catastrophic impairment as a result of the accident, and that meant she could then could re-apply for NEBs. The decision of the Court of Appeal in Haldenby v. Dominion of Canada General Insurance Co.¹¹, and the many cases that have followed it, leave no doubt that an insured person does not have the right to make multiple applications for the same weekly benefit. The remedy upon a valid denial is to dispute within the time prescribed by subsection 281(5) of the Act and subsection 51(1) of the Schedule.

No Estoppel

Ms. Birka successfully completed high school after the accident. She claims that she began to experience deterioration in her condition around the fall of 2007. Under cover of letter dated March 2, 2009, she submitted an Election of Benefits, dated February 21, 2009¹². The letter asked TD Home to pay NEBs “to the present date”¹³. TD Home responded with an Explanation of Benefits dated March 16, 2009¹⁴. It states “[y]ou did not suffer a complete inability to carry on a normal like (sic) as a result of and within 104 weeks after the accident.” The box for “Not Eligible/Stoppage of Benefit” is checked off.

Citing no precedent, Ms. Birka argued that TD Home is estopped from relying on the denial of December 2006, because it did not immediately state that it was relying on that denial, when she later demanded payment of NEBs.

To establish estoppel Ms. Birka must satisfy the following three elements: TD Home made a representation that created a mutual assumption; she changed her legal position as a result of the shared assumption, and; it would be unfair to allow TD Home to resile from the assumption. Nothing in the agreed facts suggests that any element of the test is satisfied.

Denial clear and unequivocal

Counsel for Ms. Birka initially indicated that he conceded that the denial was clear and unequivocal. He then argued that, although the notice was clear on its own, the overall conduct of TD Home rendered it unclear. I reject this submission. I see no lack of clarity caused by TD Home telling Ms. Birka that she was eligible for NEBs in the first Explanation of Benefits and later denying entitlement. Providing information in that sequence is typical of any claim that is first paid, then denied.

I see no lack of clarity or equivocation in failing to mention the denial of December 2006, in the denial of March 2009. There was nothing in the subsequent denial to lead Ms. Birka to believe that TD Home was waiving its right to rely on the denial of December 2006.

EXPENSES:

I reserve the issue of expenses to the hearing arbitrator. If the parties resolve the dispute without a further hearing, but are unable to agree on the issue of expenses, either party may request that I reconvene this hearing to resolve the issue, no later than 30 days after all other issues have been resolved.

July 23, 2013

Jeffrey Rogers Arbitrator

Date