Neutral Citation: 2014 ONFSCDRS 18

FSCO A11-002986

BETWEEN:

SUADA CEJVAN Applicant

and

WESTERN ASSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Jeffrey Rogers

Heard: November 26, 2013, in London, Ontario.

Appearances: Mr. Chris Nicolis, solicitor for Mrs. Cejvan Mr. Brian Yung, solicitor for Western Assurance Company

Issues:

The Applicant, Suada Cejvan, was injured in a motor vehicle accident on February 26, 2008. She applied for and received statutory accident benefits from Western Assurance Company (“Western Assurance”), payable under the Schedule.¹ Western Assurance gave her notice that it was terminating weekly income replacement benefits (IRBs) on April 16, 2008. Mrs. Cejvan applied for mediation of this issue more than 2 years later.

The preliminary issues are:

Is Mrs. Cejvan precluded from proceeding to arbitration of her claim for IRBs 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?
If not, is Mrs. Cejvan precluded from entitlement to IRBs because she failed, without reasonable excuse, to notify Western of her intention to apply for the benefit within the time limits set out in section 32 of the Schedule?

Result:

Mrs. Cejvan is not precluded from proceeding to arbitration of her claim for IRBs by operation of the two-year limitation period set out in subsection 281(5) of the Act and subsection 51(1) of the Schedule.
Mrs. Cejvan is not precluded from entitlement to IRBs for breach of the time limits set out in section 32 of the Schedule.

EVIDENCE AND ANALYSIS:

Mrs. Cejvan had not claimed IRBs when Western “terminated” them

Subsection 281(5) of the Act and subsection 51(1) of the Schedule require an insured person to commence mediation in respect of a benefit “within two years after the insurer’s refusal to pay the amount claimed”.

The first question in this hearing is whether the denial of IRBs that Western gave Mrs. Cejvan on April 16, 2008, triggered the two-year limitation period. I conclude that it did not, because Mrs. Cejvan had not claimed IRBs when Western refused to pay them. I reject Western’s submission that a denial triggers the limitation period, whether or not the insured person has claimed the denied benefit.

The relevant facts are not in dispute. Mrs. Cejvan contacted an adjuster and reported the accident the day after it happened. The adjuster sent out an Accident Benefits package that included an Application for Accident Benefits. Mrs. Cejvan completed and returned the Application dated March 7, 2008. Mrs. Cejvan did not get legal advice. She marked “retired” in Part 5 of the Application, which describes her status at the time of the accident. She did not complete Part 8 of the Application which is entitled “income replacement” and requests details of employment for the past 52 weeks.

Mrs. Cejvan then sent Western a second Application for Accident Benefits dated March 20, 2008, which she completed with legal advice. In this Application she again marked “retired” in Part 5. She crossed out Part 8.

On April 16, 2008 Western sent Mrs. Cejvan an Explanation of Benefits denying entitlement to IRBs. The Explanation of Benefits also stated that Mrs. Cejvan did not qualify for a Non-Earner Benefit (NEB). Western later received new information and paid an NEB for a short period before terminating this benefit, based on an insurer examination. Mrs. Cejvan applied for mediation of her claim for IRBs more than two years after the denial of April 16, 2008.

Mrs. Cejvan relies on several Commission decisions which hold that a denial given before an insured person has claimed a benefit is void and therefore does not trigger the two-year limitation.

Western does not argue that Mrs. Cejvan had claimed IRBs when it denied her entitlement. Clearly she had not, because when Western denied her entitlement, she had not given Western any information that indicated she could be entitled to IRBs.

Western relies on two decisions of the Superior Court in support of its position that a denial of a benefit triggers the limitation period, regardless of whether the insured person had claimed the denied benefit.

In Seitzma v. Economical Insurance Company of Canada² the insurer was granted summary judgment on the grounds that the plaintiff did not issue a Statement of Claim within 2 years of the denial of NEBs. In my view, in granting the insurer’s motion the Court focussed on the wrong question which it stated as follows: “The question is when the plaintiff knew or should have known of her right to mediation of her denial of Non-Earner Benefits and/or her cause of action.”³ In my view, the question is whether the denial was a “refusal to pay the amount claimed”, as described in subsection 281(5) of the Act and subsection 51(1) of the Schedule.

The plaintiff was employed at the time of the accident. She applied for and was paid IRBs. The insurer sent an Explanation of Benefits approving the claim for IRBs but denying eligibility for NEBs for the reason that the plaintiff was employed at the time of the accident. IRBs were terminated when the plaintiff returned to work. The plaintiff claimed NEBs four years later.

The Court noted that the plaintiff retained a lawyer shortly after getting the denial. It concluded that once the plaintiff retained a lawyer “she can no longer plead ignorance or that Part 3 of the Form was misleading to her personally…”.⁴ The Court stated that the lawyer should have known that the limitation period was running yet “no explanation was given to this court to explain why the lawyer did not file anything until he filed for mediation in April 2010.”⁵

In Katanic v. State Farm Mutual Automobile Insurance Co.⁶ the Court reached the same conclusion as in Seitzma, for similar reasons.

The Court states the issue as one of subjective knowledge of the particular insured person, informed by whether or not a lawyer has been retained. The Court then appears to require an explanation of any perceived delay.

The Court’s approach is inconsistent with the consumer protection approach the Supreme Court of Canada established in its decision in Smith v. Co-operators General Insurance Co.⁷ That case dealt with the requirement for a clear and unambiguous denial, but it also gave guidance on the correct way to interpret the limitation period. The Court directed that the language should be narrowly and strictly construed. Faced with the argument that the mediator’s report provided information to supplement what the insurer provided, the Court stated as follows:

However, to take this fact into account against the appellant would be to ignore the particular nature of the matter. As I have mentioned above, insurance law is, in many respects, geared towards protection of the consumer. This approach obliges the courts to impose bright-line boundaries between the permissible and the impermissible without undue solicitude for particular circumstances that might operate against claimants in certain cases. ⁸

The plaintiff in Smith was represented by a lawyer throughout the process. The Court did not ask whether the lawyer must have known that the limitation period was running, or take that fact into consideration in applying its “bright-line” approach. Taking legal representation into account would impose differing rules that operate against represented claimants.

In Turner and State Farm Mutual Automobile Insurance Company⁹ the Director’s Delegate made it clear that an objective approach is required in assessing the validity of a denial.

Arbitrators have ruled in many cases that a denial of a benefit that the insured person has not claimed does not trigger the limitation period.¹⁰ That approach is consistent with the clear and ordinary meaning of the statutory language. It correctly required an insured person to apply for mediation only after the insurer’s “refusal to pay the amount claimed” as described in subsection 281(5) of the Act and subsection 51(1) of the Schedule. It discourages pre-emptive denials, as occurred here.

Since Mrs. Cejvan had not claimed IRBs when Western denied her entitlement, the denial of April 16, 2008 is void and did not trigger the limitation period.

Alleged failure to notify of intention to apply for IRBs

Section 32 of the Schedule requires that an insurer be informed of the intention to apply for a benefit no later than the 30th day after the circumstances arose that gave rise to the entitlement to the benefit. Western argues that Mrs. Cejvan did not comply with her obligations under this section and is therefore not entitled to the IRBs she now claims.¹¹ I reject that argument. I find that, very early in the process, Western was provided with the information required to begin to adjust a claim for IRBs, but it took no steps to do so.

The additional relevant facts are as follows: Mrs. Cejvan reported the accident the day after it happened but she did not explicitly make a claim for IRBs until about 30 months later. On July 20, 2010, new to the file, her lawyer Ryan Steiner wrote to Western making the claim. He stated that upon his review of the file, he concluded that Mrs. Cejvan was entitled to IRBs since the date of the accident. He expressed surprise that Western had taken no steps to adjust that claim.

Mr. Steiner’s conclusion was based on the fact that, although she was retired at the time of the accident, Mrs. Cejvan had retired just 26 days before the accident. She therefore met the qualification for IRBs set out in section 4(2) of the Schedule. She was not employed at the time of the accident, but she was employed at least 26 weeks during the 52 weeks before the accident.

Western was aware of Mrs. Cejvan’s date of retirement as early as May 2008. That was only about 3 months after the accident. Jennifer Krieger, an occupational therapist who conducted an insurer examination, noted in her report dated May 2, 2008 that Mrs. Cejvan retired on January 31, 2008.¹² On May 30, 2008, Dr. Judith Pilowsky, in providing her report after an approved psychological assessment, indicated that Mrs. Cejvan was recently retired, after 27 years of employment.¹³ This information was repeated in several subsequent reports, including those by Dr. Lance Majl, Dr. Howard Waiser and Isobel Ramsay, who conducted insurer examinations and reported to Western on October 10, 2008, December 16, 2008 and June 15, 2009.¹⁴ Western did not act on the information.

Mrs. Cejvan was not required to provide the information in the form of an Application for Accident Benefits. She complied with her obligations under section 32 by providing Western with enough information to begin adjusting her claim.¹⁵ Western had enough information when it was informed of Mrs. Cejvan’s recent retirement. Section 32(2)(c) and (d) of the Schedule required Western to then give Mrs. Cejvan information to assist in applying for IRBs, and information on possible election between NEBs and IRBs. Western’s failure to act means that it cannot now rely on Mrs. Cejvan’s alleged breach of section 32.¹⁶

Further, section 32 does not penalize by disentitlement to benefits as Western argued. Section 32(6) provides that delay by the insured person simply allows the insurer additional time to determine entitlement to the benefit.¹⁷

Finally, any penalty imposed by section 32(6) is only available “if a person fails without a reasonable explanation to notify an insurer…” I find that Mrs. Cejvan’s failure to notify Western of her recent retirement when she completed her Application for Accident Benefits is reasonably explained by the layout of the form itself. Part 5 of the form which describes the applicant’s status at the time of the accident does not give the option of “retired and have worked 26 weeks in the past 52 weeks”. The option of selecting a status that includes past employment is only available if the applicant choses “unemployed”. Mrs. Cejvan accurately and reasonably described her status as “retired”.

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.

February 6, 2014

Jeffrey Rogers Arbitrator

Date

Financial Services Commission of Ontario