Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2014 ONFSCDRS 182
Appeal P14-00007
OFFICE OF THE DIRECTOR OF ARBITRATIONS
WESTERN ASSURANCE COMPANY
Appellant
and
SUADA CEJVAN
Respondent
BEFORE:
David Evans
REPRESENTATIVES:
Eric Grossman for Western Assurance Company
Christos Nicolis for Mrs. Cejvan
HEARING DATE:
October 16, 2014, in London, Ontario
Further written submissions received October 21 and 24, 2014
APPEAL ORDER
Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
The appeal of the Arbitrator’s order dated February 6, 2014 is allowed. Paragraph 1 of the Arbitrator’s order is revoked, and the following substituted:
Mrs. Cejvan is precluded from proceeding to arbitration of her claim for income replacement benefits by operation of the two-year limitation period set out in s. 281(5) of the Insurance Act and s. 51(1) of The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996.
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 – January 2014).
December 4, 2014
David Evans
Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL
Mrs. Suada Cejvan was in an accident in 2008. Although she was only recently retired, she did not set out her work history in the Application for Accident Benefits she submitted to her insurer, Western Assurance Company. Accordingly, Western refused her a weekly income replacement benefit (IRB) under the SABS–1996.1 Mrs. Cejvan filed for mediation on her IRB claim over two years after the refusal and thus outside the limitation period.
Western appeals the order of Arbitrator Rogers dated February 6, 2014 that the limitation period did not apply because the Application did not contain a claim for IRBs.
This appeal decision holds that an Application for Statutory Accident Benefits contains all claims for weekly accident benefits. Therefore, since Mrs. Cejvan’s Application necessarily contained a claim for IRBs, the time limit does apply.
II. BACKGROUND
Mrs. Suada Cejvan was injured in a motor vehicle accident on February 26, 2008. She filed an Application for Accident Benefits (OCF-1) dated March 7, 2008. In Part 5 of the OCF-1, which deals with employment status, she ticked the box marked “Retired” under the “Not Employed” heading but filled in nothing in Part 8, which deals with Income Replacement Determination. On March 20, 2008, Mrs. Cejvan completed a second OCF-1. She marked “Retired” under Part 5 of the Application and crossed out Part 8. A Disability Certificate marked “N/A, retired” for IRBs and “No” for non-earner benefits (NEBs) was completed as well.
On April 16, 2008 Western sent Mrs. Cejvan an Explanation of Benefits (EOB) refusing both NEBs and IRBs. It stated that based on the disability certificate she did not qualify for an NEB. It also stated that she did not qualify for an IRB, as neither the OCF-1 nor the disability certificate indicated that she had worked 26 out of the last 52 weeks before the accident, a requirement for those who are unemployed (like retirees) at the time of an accident.2
On July 20, 2010, Mrs. Cejvan gave notice of a claim for IRBs to Western. Her counsel wrote that as the medical documents filed with the insurer after the refusal indicated Mrs. Cejvan had only recently retired, she would be entitled to an IRB. On August 5, 2010, Mrs. Cejvan filed for mediation, about 28 months after the refusal. The Report of Mediator was issued August 4, 2011, and an application for arbitration was filed on September 1, 2011.
As s. 281(5) of the Insurance Act and s. 51(1) of the SABS require an insured person to commence mediation “within two years after the insurer’s refusal to pay the amount claimed,” Western took the position that the claim was four months out of time. It moved to bar Mrs. Cevjan’s arbitration claim from proceeding, relying on Sietzema v. Economical Mutual Insurance Company, 2013 ONSC 4299 and Katanic v. State Farm Mutual Automobile Insurance Company, 2013 ONSC 5103.
The Arbitrator rejected the reasoning of these Superior Court decisions, focusing on Sietzema. In that case, the plaintiff had been working, was in an accident, and received an EOB indicating that she was entitled to an IRB and, therefore, not to an NEB. She eventually returned to work and the IRBs were terminated. Years later, she applied for an NEB, claiming that the Insurer had misled her in its reason for denying the NEB. The motions court dismissed the claim. The court stated that the question was when the plaintiff knew or should have known of her right to mediation of her denial of NEBs and/or her cause of action. The court found that the insurer in its EOB had “clearly and unequivocally” refused to pay NEBs.
The Arbitrator stated that the court asked itself the wrong question, which should have been whether the denial was a “refusal to pay the amount claimed,” as described in s. 281(5) of the Act and s. 51(1) of the SABS. He found it was not, citing arbitration cases that found a denial of a benefit that the insured person had not claimed does not trigger the limitation period. He found that “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.”
Five days after the Arbitrator’s decision was released, Sietzema was upheld by the Court of Appeal in Sietzema v. Economical Mutual Insurance Company, 2014 ONCA 111. Subsequently, the appeal in Katanic was withdrawn: Katanic v. State Farm Mutual Automobile Insurance Company, 2014 ONCA 298.
After the appeal hearing in this matter, the Court of Appeal issued another decision dealing with limitation periods, Sagan v. Dominion of Canada General Insurance Company, 2014 ONCA 720. The parties provided additional submissions after the hearing related to Sagan.
III. ANALYSIS
The Arbitrator erred when he stated that Mrs. Cejvan had not claimed IRBs when Western denied her entitlement. The OCF-1, a form mandated by the Superintendent of Insurance under s. 227(1) of the Insurance Act,3 is the application for weekly benefits, and an insurer is entitled to accept or reject all types of weekly benefits based on it.
In that regard, I note that the OCF-1 does not have any boxes where insureds are supposed to specifically indicate whether they are applying for IRBs or NEBs. Instead, insureds set out their status at the time of the accident in Part 5, such as whether they were employed or not, and “details of [their] employment for the past 52 weeks” in Part 8. Insurers are therefore entitled to accept or reject more than one type of weekly benefit based on the OCF-1. That is what happened in the cases considered by the Court of Appeal, and that is what happened here.
The main issue discussed by the Court of Appeal in Sietzema arose because of a change in the law regarding entitlement to NEBs. As a result of Galdamez v. Allstate Insurance Company of Canada, 2012 ONCA 508, insureds tried to revive NEB claims on the basis that the reason for denial was legally wrong, so the denials were invalid. Thus, in Sietzema, the Court stated that “The appellant’s real complaint is that she was given an incorrect reason for her ineligibility for Non-Earner Benefits,” but found that this argument was answered by its decision in Turner v. State Farm Mutual Automobile Insurance Co. (2005), 2005 CanLII 2551 (ON CA), 195 O.A.C. 61, which held that “clear and unequivocal notice given by the insurer, cancelling the insured’s benefits, was sufficient to trigger the limitation period, notwithstanding the insurer gave legally incorrect reasons for cancelling the benefit.” The court also referred with approval to the Katanic decision, as well as the lower court decision in Sagan v. Dominion of Canada General Insurance Co., 2013 ONSC 7886, [2013] O.J. No. 6022. (The appeal decision of Sagan is discussed below.)
Similarly, Western’s denial on factually incorrect reasons is just as sufficient to trigger the limitation period.
However, what is relevant to the issue before me is that in all these court cases the insurers had considered and accepted or rejected more than one type of weekly benefit based on the OCF-1s they had received. Thus, in Sietzema, Ms. Sietzema provided information in her OCF-1 that she was entitled to IRBs because she was unable to continue working but not to NEBs because she did not meet the disability test. Nonetheless, the Court of Appeal found that this OCF-1 constituted not only an application for IRBs but also for NEBs, despite the fact that the disability certificate filed with the application indicated that Ms. Sietzema did not meet the test for NEBs. The denial of the NEBs was therefore valid.
Similarly, in Katanic, the insurer denied Mr. Katanic NEBs based on the OCF-1 because he was employed on the day of the accident. Again, the denial of NEBs was found to be valid.
Finally, in Sagan, Mr. Sagan’s OCF-1 indicated that he was employed and working at the time of the accident and that he had returned to work on modified duties. The insurer sent an EOB stating he was not entitled to NEBs because he was employed at the time of the accident, and he was not entitled to IRBs because he had returned to work within 7 days of the accident. Nearly three years after the denials, counsel wrote to the insurer stating that it had prematurely denied the NEB claim. That argument was likewise dismissed by the lower court.
Accordingly, where multiple types of weekly benefit claims are denied based on information in an OCF‑1, those denials will not be premature and will be sufficient to start the limitation period running. There are no separate OCF-1 forms for the different possible weekly benefits, nor are there any check boxes on the form to indicate that one is applying for any particular weekly benefit. An OCF-1 therefore constitutes a claim for all possible weekly benefits, whether IRBs or NEBS. The insurer then assesses the possible claims based on the information provided, and thereafter accepts or denies them. A completed OCF-1 is, therefore, a basis upon which an insurer can refuse to pay an amount claimed as described in s. 281(5) of the Act and s. 51(1) of the SABS. A denial based upon such an OCF-1 will not be premature and will constitute a “refusal to pay the amount claimed.”
This point – that the OCF-1 represents the application for weekly benefits – was brought home in the Sagan appeal. The appellant in Sagan raised a new argument, namely that his application for accident benefits was not complete until both the OCF-1 and a disability certificate were filed with the insurer. Since he never filed a disability certificate, he argued the insurer could never have properly denied the benefit. The Court of Appeal rejected that argument, noting that “the disability certificate is to be filed with the application for benefits. It is not the application.”
As for any possible confusion about the OCF-1, nothing in it indicates that the status of being retired, as Mrs. Cejvan was, and having worked 26 of the previous 52 weeks, as she had, are mutually exclusive. Therefore, she could have indicated both that she was retired and that she had worked enough weeks in the past year to be entitled to IRBs.
Finally, having issued a valid denial of benefits, Western was entitled to rely on it, despite new information in the medical reports it received indicating that Mrs. Cejvan had been working up until shortly before the accident. It was up to Mrs. Cejvan to take the next step and file for mediation within the time limit, which she failed to do.
The appeal is therefore allowed.
IV. EXPENSES
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 – January 2014).
December 4, 2014
David Evans
Director’s Delegate
Date
Footnotes
- The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
- Western later paid NEBs from August 25 to September 21, 2008.
- As is noted on the FSCO web page with links to the various OCFs, “pursuant to Regulation 7/00 (Unfair or Deceptive Acts or Practices), the use of a document in place of a form approved by the Superintendent constitutes an unfair or deceptive act or practice unless none of the deviations in the document affects the substance or is calculated to mislead.”