Huzefa Rajbhai v. State Farm Mutual Automobile Insurance Company, 2014 ONFSCDRS 172

Financial Services Commission of Ontario

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

Neutral Citation: 2014 ONFSCDRS 172

FSCO A13-003578

BETWEEN:

HUZEFA RAJBHAI

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before: Stuart J. Mutch

Heard: By written submissions

Appearances: Dr. Majid Yazdani for Mr. Rajbhai Sarah F. Reisler for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Huzefa Rajbhai, was injured in a motor vehicle accident which took place on September 25, 2010. Disputes arose between Mr. Rajbhai and his insurer, State Farm Mutual Automobile Insurance Company (“State Farm”), concerning his entitlement to accident benefits payable under the Statutory Accident Benefits Schedule — Effective September 1, 2010 (the “2010 Schedule”)¹. Mr. Rajbhai applied for arbitration at the Financial Services Commission of Ontario (“FSCO”) under the Insurance Act.²

A pre-hearing discussion was held on June 26, 2014. At that time, counsel for State Farm requested production of documents that would demonstrate that Mr. Rajbhai’s mother sustained an economic loss as a result of providing attendant care to Mr. Rajbhai. Mr. Rajbhai refused to produce such documention arguing that subsection 3(7)(e) of the 2010 Schedule does not apply to his policy, which is a transitional one. Counsel for State Farm advised that she would bring a motion for a ruling on this issue below. The parties subsequently served and filed written submissions.

The issue in this motion is:

1. Is proof of economic loss, as per subsection 3(7)(e) of the 2010 Schedule, required in order to claim an Attendant Care Benefit under a transitional policy?

Result:

1. Proof of economic loss as per subsection 3(7)(e) of the 2010 Schedule is required in order to claim an Attendant Care Benefit under a transitional policy.

Legislative Background

Section 268(1) the Insurance Act provides for changes to a policy, or contract of insurance, midway through the term of that contract, by way of regulatory change.

In commenting on this subsection Director’s Delegate Draper in GAN Canada Insurance Company and Lehman³ stated: “This provision clearly contemplates amendments to the SABS that will affect the coverage provided in existing policies. In other words, the terms of an automobile policy are not fixed for its entire duration.”

Both the 1996 Schedule and the 2010 Schedule contain transitional provisions. Subsection 2(1) of the 2010 Schedule provides that, with the exception of section 68, “the benefits set out in this Regulation shall be provided under every contract evidenced by a motor vehicle liability policy in respect of accidents occurring on or after September 1, 2010”. Section 68 is specifically limited to the continuation of monetary limits set out in the 1996 Schedule for the duration of transitional policies. To my mind, this provision anticipates the argument that the Legislature should not retroactively alter substantive rights under a motor vehicle liability policy. At the same time, it circumvents the counter argument that those rights do not vest until the insured has been involved in a motor vehicle accident. It provides for continuation of a few select rights under the 1996 Schedule until a policy expires. It does not identify the requirements for claiming Attendant Care Benefits as a protected, or preserved provision.

Positions of the Parties

Mr. Rajbhai’s Position

Mr. Rajbhai’s counsel takes the position that subsection 3(7)(e) does not apply to his claim because Mr. Rajbhai’s policy at the time of the accident was a “transitional” policy (one that was in place on September 1, 2010, the date the Schedule came into force and had not expired by the time the accident occurred). Therefore, he argues, Mr. Rajbhai’s rights with regard to the claiming of Attendant Care Benefits under the 1996 Schedule⁴ had vested at the commencement of the policy period and should not be subject to subsection 3(7)(e) of the 2010 Schedule. He relies on the principle that new legislation should not have a retroactive effect on substantive, vested rights.

State Farm’s Position

The Respondent takes the position that Mr. Rajbhai’s claim for Attendant Care Benefits is subject to the incurred expense requirement set out in section 3(7)(e) of the 2010 Schedule. Section 19(1) of the 2010 Schedule provides that Attendant Care Benefits shall pay for all reasonable and necessary expenses that are incurred by or on behalf of the insured person as a result of the accident for services provided by an aide or attendant. Section 3(7)(e) provides as follows:

(e) subject to subsection (8), an expense in respect of goods or services referred to in this Regulation is not incurred by an insured person unless,

(i) the insured person has received the goods or services to which the expense relates,

(ii) the insured person has paid the expense, has promised to pay the expense or is otherwise legally obligated to pay the expense, and

(iii) the person who provided the goods or services,

(A) did so in the course of the employment, occupation or profession in which he or she would ordinarily have been engaged, but for the accident, or

(B) sustained an economic loss as a result of providing the goods or services to the insured person;

State Farm states that subsection 3(7)(e) merely sets out a procedural framework that an eligible claimant must follow to claim benefits and that it does not affect a substantive, vested right.

As Mr. Rajbhai’s mother was not ordinarily engaged in providing attendant care as part of her employment, occupation or profession, State Farm argues that she must provide proof of an economic loss as the result of providing this service to Mr. Rajbhai.

Analysis

Retroactivity

Mr. Rajbhai’s position rests on the well-established principle that it is generally undesirable for legislation to have a retroactive impact on substantive vested rights. Mr. Rajbhai has cited several cases in support of this proposition.

In R. v. Dineley⁵ the majority of the Supreme Court of Canada stated the following:

Courts have long recognized that the cases in which legislation has retrospective effect must be exceptional. More specifically, where new legislative provisions affect either vested or substantive rights, retrospectivity has been found to be undesirable. The key task in determining the temporal application of new legislative provisions lies not in labelling the provisions “procedural” or “substantive” but in discerning whether they affect substantive rights.

In Dikranian v. Quebec (Attorney General)⁶, the issue was whether subsequent legislation could unilaterally alter the terms of a contract between the appellant and a financial institution for repayment of student loans. The Supreme Court found that it could not, reversing two lower court rulings. The Court observed that the principle against interference with vested rights has long been accepted in Canadian law. It then adopted Professor Cote’s view that an individual must meet two criteria to have a vested right: (1) the individual’s legal (juridical) situation must be tangible and concrete rather than general and abstract; and (2) this legal situation must have been sufficiently constituted at the time of the new statute’s commencement.

The Court then asked the question, when does the right become sufficiently concrete in order to be considered vested? It noted that the rights and obligations resulting from a contract are usually created at the time of the contract itself.

Substantive v. Procedural

In Henry v. Gore Mutual Insurance Company⁷, the Court of Appeal indicated that the “incurred” provision was “a threshold” to be passed through, on the way to Attendant Care Benefits. Attendant Care Benefits were payable in accordance with a Form 1 and subject to the requirement that the care be reasonable and necessary. Economic loss on the part of a non-professional caregiver was the prerequisite, or threshold one must pass through to obtain such a benefit. It would appear that the Court is saying that the “incurred” requirement is a procedural matter.

Shortly after the release of Henry, the Legislature added a subsection to section 19, closing the “loophole” left by Henry and restricting the quantum of the attendant care benefit to the actual economic loss sustained by the attendant care provider “during the period while, and as a result of, providing the attendant care”.

In my view, the requirement that an attendant care provider sustain an economic loss and that, more recently, Attendant Care Benefits be restricted to the quantum of that loss are provisions that have a substantive impact on an insured’s right to attendant care benefits, whether those requirements are considered to be procedural or not. According to the reasoning in Dineley⁸ provisions that affect substantive rights should not be of retrospective application. By this reasoning, the provisions of subsection 3(7)(e) should not apply to Mr. Rajbhai’s policy.

Vested Rights

I now turn to the question of whether those rights had vested at the time of the Regulations were amended. Black’s Law Dictionary defines “vested” as “Accrued; fixed; settled; absolute; having the character or giving the rights of absolute ownership; not contingent; not subject to be defeated by a condition precedent.”

A motor vehicle accident is, by its very nature, uncertain and unplanned. In R.J. and Dominion of Canada General Insurance Company,⁹ Arbitrator Wilson referred to Lord Mansfield’s observation from Carter v. Boehm:

Insurance is a contract based on speculation. All potential benefits under policy of insurance are speculative at the time the contract is formed; that is until the happening of the incident which crystallizes those rights to indemnity.

In my view, the rights to benefits as set out in any Schedule, and incorporated into a policy of insurance, are contingent rights. That is, they are contingent upon the involvement of an insured person in a motor vehicle accident. They do not meet the test set out in Dikranian, that of a “sufficiently constituted” legal situation. There is no right to benefits in the absence of involvement in a motor vehicle accident. The motor vehicle accident can be said to be a condition precedent to the right to benefits.

In my view, the rights of Mr. Rajbhai, whether they be procedural or substantive, only vested on September 25, 2010, the date of the accident, some three weeks after the 2010 Schedule came into force, subject only to the exceptions set out in s. 68. He is therefore subject to the requirements of subsection 3(7)(e) of the 2010 Schedule.

For the above reasons, I find that the definition of “incurred” as set out in subsection 3(7) (e) applies to Mr. Rajbhai’s claim for Attendant Care Benefits.

EXPENSES:

Both parties have asked for their expenses in this motion. While the outcome favours the position taken by State Farm, the motion raised a somewhat complex question, the answer to which was not immediately clear. I do not believe this is an appropriate case for an award of expenses. Each party shall bear its own costs.

October 27, 2014

Stuart Mutch Arbitrator

Date

Footnotes

1. 1Statutory Accident Benefits Schedule — Effective September 1, 2010, Ontario Regulation 34/10.
2. 2R.S.O. 1990, c.I.8, as amended.
3. 3(FSCO A97-000064, August 10, 1998), Appeal
4. 4The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/93, as amended.
5. 52012 SCC 58 [2012] 3 S.C.R.272
6. 62005 SCC 73, 2005 S.C.C. 73, [2005] S.C.J. No. 75
7. 72013 ONCA 480
8. 8Dineley, supra
9. 9(FSCO A12-001233, page 11), September 17, 2013