Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2014 ONFSCDRS 189

FSCO A11-001148

BETWEEN:

J. C.

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Alan Mervin

Heard: July 26, 2012, in St. Catharines, Ontario;

January 18, 2013, July 9, 2013, and July 26, 2013 at the offices of the Financial Services Commission of Ontario

Applicant's written submissions received on September 19, 2013;

Insurer's written submisions received on November 1, 2013.

Appearances: Maurice Benzaquen for J. C.

Sonia Fabiani for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, J. C., was injured in a motor vehicle accident on November 15, 2004. She applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ State Farm terminated weekly income replacement benefits on June 27, 2007. The parties were unable to resolve their disputes through mediation, and J. C. applied for arbitration at the Financial Services Commission of Ontario (“FSCO”) under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

1. Is J. C. precluded from proceeding to arbitration to claim entitlement to income replacement benefits and housekeeping and home maintenance benefits because her Application for Arbitration was filed beyond the two-year limitation period set out in section 281 of the Insurance Act and subsection 51 of the Schedule?

Result:

1. J. C. is not precluded from proceeding to arbitration with respect to income replacement benefits.

2. J. C. is precluded from proceeding to arbitration with respect to housekeeping and home maintenance benefits.

EVIDENCE AND ANALYSIS:

Background

The Applicant, J. C., was injured as a result of a motor vehicle accident on November 15, 2004, in which she was a passenger in a stationary vehicle that was rear ended by another vehicle. She sustained multiple injuries, including soft tissue injuries to her neck, back, and left knee, as well as a possible closed head injury.

On November 24, 2004, an Application for Accident Benefits was submitted on her behalf, noting the law firm of Graves and Associates as her representative. The Applicant has been continuously represented by this firm (now Graves Richard Harris, LLP) since submitting her application to State Farm.

The Applicant began receiving housekeeping and home maintenance benefits of $100.00 per week from the date of the accident, and weekly income replacement benefits in the amount of $207.86 from one week following the accident.

On November 22, 2005 (approximately one year post-accident), the Insurer terminated housekeeping and home maintenance benefits, and sent the Applicant an OCF-9 Form (Explanation of Benefits to the Applicant) advising that the benefit was being terminated as of November 22, 2005.

The Insurer sent the Applicant a letter and OCF-9 Explanation of Benefits dated June 13, 2007, advising the Applicant that she was no longer entitled to receive income replacement benefits (“IRBs”), and enclosed a final payment for the period June 14, 2007 to June 27, 2007. The Insurer then sent a further letter and Explanation of Benefits dated June 20, 2007, to the Applicant advising that the Insurer’s position remained unchanged despite the receipt of addendum reports.

No further steps were taken until November 12, 2009, when the Applicant filed an Application for Mediation disputing the termination of both benefits. The mediation took place on November 2, 2010. As these issues were not resolved, the Applicant filed an undated Application for Arbitration, which was received by FSCO on April 8, 2011.

At the mediation, and in its response to the Application for Arbitration, State Farm took the position that the dispute was statute barred as a result of the expiration of the limitation period.

At the pre-hearing, which took place on November 17, 2011, State Farm again raised this issue and requested a preliminary issue hearing be held to determine the limitation issue. It was at that time that the Applicant first raised the issue of capacity to instruct counsel.

The Issue at this preliminary issue hearing is to determine whether the Applicant can proceed to arbitration with respect to her claims for IRBs and housekeeping and home maintenance benefits; it is undisputed that the mediation took place more than two years after the termination of both benefits, which is the limitation defined by statute.

The Applicant submits that all applicable limitation periods under the SABS or Dispute Resolution Practice Code to mediate and/or arbitrate be tolled, or suspended, from late 2006 until 2010, as the Applicant was under a legal disability during this period.

The Applicant argues that her capacity to instruct counsel was significantly compromised from late 2006 until 2010, due to significant physical and psychological impairments resulting from injuries sustained in the accident, and/or long-term drug abuse, and during this period, the “clock ought not to run.”

The Applicant submits that the running of time established by limitation periods are postponed if the party in under a legal disability.

Alternatively, the Applicant seeks a finding that the Explanations of Benefits (OCF-9) and cover letters, with respect to the IRBs issue, were not clear and unequivocal, and therefore, the terminations issued did not act to commence the running of the limitation period.

For the reasons that follow, I reject the Applicant’s argument that the limitation period with respect to all claimed benefits should be tolled as a result of the Applicant’s alleged significantly compromised capacity resulting in her inability to instruct counsel during the relevant time period. Since, however, I find that the Explanation of Benefits dated June 27, 2017, that purported to terminate J. C.’s IRBs was not clear and unequivocal, she is not barred from proceeding with her claim for IRBs.

HOUSEKEEPING AND HOME MAINTENANCE

State Farm’s Denial

The Applicant applied for and received payment of her housekeeping and home maintenance benefits from the date of filing the Application for Accident Benefits, which was dated November 24, 2004, until November, 22, 2005, when State Farm sent an OCF-9 Explanation of Benefits terminating that benefit as of that date. The reasons given why expenses are not payable read as follows:

Based on Dr. Mahan’s addendum report dated 11/02/05, Dr. Stoltz’s addendum letter dated 11/1/05 and Dr. MacCon’s addendum report dated 11/04/05 and Wendy Dookie’s occupational therapist report of 10/11/05 you do not suffer a substantial inability from performing your pre-accident housekeeping and home maintenance activities. Therefore, State Farm will not consider these expenses beyond the date of this notice.

The Applicant filed her Application for Mediation of this benefit on November 12, 2009, and the mediation took place between the parties on November 2, 2010, at FSCO, conducted by FSCO mediator Ruth Cameron, who issued her Report of Mediator dated November 2, 2010, and which was received by State Farm on November 9, 2010.

At the mediation, State Farm took the position that the dispute was statute barred as a result of the expiration of the limitation period. Section 51 of the Schedule requires mediation commence within two years after the Insurer’s refusal to pay the amount claimed.

The Applicant did not take issue with the form of the denial and did not dispute that the termination of housekeeping and home maintenance benefits was clear and unequivocal.

As this mediation took place well beyond the expiration period of the two-year limitation period, and it is not disputed that the denial was clear and unequivocal, the only issue is whether the limitation should be tolled or suspended due to the Applicant’s lack of capacity to instruct Counsel from late 2006 to 2010.

Tolling of Limitation due to Legal Disability

The Applicant has requested that all limitation periods be tolled or suspended from late 2006 to 2010 as she lacked capacity to instruct Counsel as a result of her daily, prolonged, and severe substance abuse. The Applicant submits that limitation periods do not run during periods of incapacity, and cites several authorities in support of this argument.

In Guiliani v. Halton,² the Court adopted the reasoning in Bisoukis v. Brampton,³ which stood for the proposition that the purpose of section 47 of the Limitations Act is to allow the running of time established by limitation periods to be postponed if the plaintiff is under a legal disability at the time the cause of action accrues.

The Insurer does not, in its written submissions, directly address whether or not the combination of physical and mental impairments combined with drug abuse amounts to a legal disability.

The position of the Insurer is that the Applicant did not prove on a balance of probabilities that she lacked capacity to instruct counsel.

Should I therefore find that the Applicant has proved that she lacked the capacity to instruct counsel during the period 2006 to 2010, I am prepared to accept the statement of the law that the running of the limitation period be suspended during this time.

Applicant’s Capacity to Instruct Counsel from 2006 to 2010 as it pertains to Housekeeping and Home Maintenance Limitation

Evidence

The Applicant, J. C., testified at the preliminary issue hearing. It was her evidence that prior to the accident, she was active in sports, had smoked marijuana in the past but never bought it, and used cocaine a small number of times and infrequently before the accident.⁴

After the accident, she testified that she was prescribed medications, including Percocet, morphine, OxyContin amitriptyline ("OxyContin") and anti-inflammatory drugs for relief of back and neck pain, and to reduce headaches, until her family doctor stopped the prescriptions about one and a half months post-accident. She said her doctor recommended physiotherapy, Percocet and Tylenol 3s.⁵

She stated that the physiotherapy and Tylenols were not working, and that she still required medication for the pain.

Approximately three to four months post-accident, while at physiotherapy, she testified she came into contact with people who sold her OxyContin and morphine which she stated she used on a daily basis from 2004 to 2008, as well as crack cocaine ("crack").⁶ She stated she used these drugs and crack continually on a daily basis until sometime in 2007, when she was introduced to heroin by a gentleman she met at physiotherapy. She stated she used heroin daily from 2007 until 2011,⁷ as the crack was no longer working to reduce the pain and that she ceased using crack cocaine, OxyContin and morphine once she started daily heroin use.

She stated that she never used crack, heroin or bought prescription drugs on the street before her accident.

She stopped using heroin in 2011, after her family doctor referred her to a methadone program under Dr. McKay.⁸

She started methadone use in April 2011 until June 25, 2011, when, according to the Applicant, she stopped the methadone and has been clean since.

J. C. testified that her first son, Mitchell, was born in 1998, and died on November 23, 1999.⁹ She stated that he died of Leukemia.¹⁰

The evidence of J. C. is crucial to the issues in this case. Her credibility is most important, as the opinions and findings of the doctors who have assessed, examined, and treated J. C., and/or submitted reports, are largely based on her self-reporting of her history and drug use.

Contradictory Evidence of Applicant

The Applicant’s evidence was contradicted both by her own testimony, and that of various reports of doctors who had dealt with her over the years, both pre and post-accident, and recorded histories based on her accounts.

(i) Pre-Accident Drug Use

J. C. described her use of cocaine prior to her accident as infrequent. Her testimony in chief with respect to her use of cocaine prior to her accident, was that she had used it “maybe five times, a handful of times, once a month, once in a blue moon, it was nothing of an addiction.” ¹¹

However, on cross-examination, she admitted to attending a cocaine addiction programme as she was addicted to cocaine prior to the accident.¹²

Her assessor’s records of her pre-accident cocaine use also differ greatly from what she initially testified.

These contradictory reports include the following.

• Greater Niagara Emergency Department Record – February 4, 2004.¹³ This report, written pre-accident, notes on page 3 under the heading: substance abuse/dependence assessment, that she reported her last use of cocaine was two months ago, and that she had treatment at the Newport Centre.¹⁴

• The handwritten notes of Dr. Santher, her treating psychiatrist, dated February 6, 2004, contain the notation, “addict cocaine – last used December 20.”¹⁵

• Her family doctor, Dr. Dobbin, in his handwritten notes dated March 12, 2004, notes “cocaine – drug of choice.”¹⁶

• Dr. Kaplan, a psychologist who has seen J. C., notes in his report dated August 21, 2006, at page 14, that she reported that she had been a very heavy cocaine user for about three to four years but she stopped using in 2001. ¹⁷

• Dr. Gerber, a psychiatrist who first saw J. C. in 2011, notes in his report dated October 27, 2011, at page 10, that J. C. advised him that she had a cocaine addiction from just after her son died on December 31, 2000, until 2002; this was contradicted by her oral testimony at the hearing regarding minimal cocaine use pre-accident [emphasis mine]. ¹⁸

(ii) Contradictory Evidence regarding her son’s death

J. C.’s oral testimony at the hearing was that she had two sons; Mitchel, born in 1998, who died of leukemia on November 23, 1999;¹⁹ and another son, also named Mitchell, born in 2000, who was 12 years old at the time of the hearing.²⁰

However, her accounts with respect to her son’s death to various assessors and treating professionals differ greatly from her oral testimony.

• Dr. Jaroszynski, orthopedic surgeon, assessed her on December 2006. In his report dated January 8, 2007, he reported that J. C. advised him that her four year old son died in a motor vehicle accident in September 2003.²¹

• Dr. Hines, the Insurer’s psychiatrist who examined her on two occasions, reported that she told him her son died in a motor vehicle accident in September 2003. ²²

• In Ms. Goodfield’s psycho-vocational assessment, she stated that the Applicant insisted that her son died from crib death in 2002 at the age of three months. ²³

• Dr. Chew, a neurologist who assessed the Applicant, reported that she told him that her son died in 2001.²⁴

• Dr. Gerber, in his report dated October 27, 2011, reported that she told him her son died of a cancerous tumour in his head at the age of three.²⁵

• Dr. Hines found her to be an unreliable historian; he stated that, “with an unreliable historian such as the Applicant, her veracity is always in doubt and one never really knows the truth. [emphasis mine]²⁶

(iii) Applicant’s Post-Accident Drug Use

The Applicant’s testimony at the hearing, (after initially stating that she only used cocaine a few times pre-accident) in summary was that of daily use of OxyContin, morphine and crack from 2004 to 2007, and thereafter daily heroin use to 2011.

The Insurer submits that none of the assessors who examined the Applicant post-accident and during the relevant period of time raised any issue with their inability to proceed due to intoxication of drugs.

In psychologist Dr. Kaplan’s report dated August 21, 2006, there was no mention of her being in a state of withdrawal or in an acute state of intoxication. According to this report, J. C. reported that she was clean from 2001 to 2004, at which time she relapsed for a two-month period after the accident, but has remained clean since.²⁷

Her treating psychiatrist, Dr. Santher, noted in a handwritten record dated March 24, 2008, “clean x 2½ years.”²⁸

In reviewing the report of Kaplan and Kaplan, by Dr. Ronald Kaplan, psychologist, dated August 21, 2006, and based on meetings with Dr. Kaplan on January 24, 2006, and Dr. Rhonda Feldman at the clinic on March 13, 2006, Dr. Kaplan reported the following on page 14 of his report:

She had been a heavy cocaine user for about three or four years. She stopped using in 2001. She went to Newport Rehab and then to Hope Place. She was clean after that until about 2004 when she relapsed for about two months after the accident. She said that she took drugs as an escape; they took her to a place where she did not feel anything. She said it was an excuse for not having to take responsibility for things. When she had the relapse, she went to the Drug & Alcohol Assessment Centre. She did a course for a month and a half and has been clean since.

These two reports were consistent and would suggest that she reported she was clean since 2005.

This would be in accord with Dr. Kaplan’s report, but contradictory to her testimony of daily OxyContin, morphine and crack use from 2004 to 2007, and thereafter daily heroin use to 2011.

Dr. Gerber, in his testimony, agreed that there were apparent inconsistencies between what she told different assessors about her drug use.²⁹

Analysis

Capacity to Instruct Counsel

The Applicant’s submission is that, from late 2006 to 2010, she did not have capacity to instruct counsel. This position is based primarily on: (1) the opinion evidence of Dr. Gerber, a psychiatrist retained to prepare a catastrophic determination report, and to opine on the issue of the Applicant’s capacity; (2) the evidence of the Applicant herself, and her testimony; and (3) collateral confirmatory reports obtained by Dr. Gerber from interviewing the Applicant’s boyfriend, Kurt.

The difficulty with the Applicant’s case is that the issue of capacity or the ability to instruct counsel was never raised until several years after the accident, and years after the limitation period had expired. Dr. Gerber, who assessed the Applicant at the request of her counsel, initially for a catastrophic impairment assessment, and later for an opinion on her capacity, authored two reports upon which the Applicant is reliant. Dr. Gerber first met her in 2011, and did not meet the Applicant during the period in which it is alleged she was incapable of instructing counsel.

Consequently, no assessments were done with respect to this issue on behalf of the Applicant until 2011, after the period during which incapacity is claimed.

Although the Applicant was assessed by the Insurer’s psychiatrist, Dr. Hines in 2006, her family doctor, and several other doctors during this period, the issue of capacity was never raised, by any of the doctors or by the Applicant’s counsel. The Insurer submits that the first time this issue was raised was by the Applicant’s counsel was at the pre-hearing discussion which took place on November 17, 2011.

Does Counsel make a difference?

One must question why this issue was not raised by the Applicant until November 2011 when the Applicant was continuously represented by essentially the same law firm since the time of the accident in 2004 to the present. Had there been any concerns with the Applicant’s capacity to instruct counsel over the years, one would expect to have seen somewhere in the medicals, some reference or comment with respect to the Applicant’s capacity or lack thereof; or some indication from her representative that there was an issue or concern with respect to the Applicant’s capacity to give them instructions with respect to her claims against State Farm. One might also ask, “Why, if capacity was an issue at the time and counsel could not get instructions, were no steps taken by counsel to protect the rights of the Applicant?”

The fact that an assessment of capacity was never requested by anyone, or ordered, or even noted as an issue in any of the reports or dealings with her counsel raises questions, in my view, and is one factor I have considered in arriving at my decision.

The Insurer, in its written submission, points out the following:

• The Applicant gave instructions to Counsel to commence an action in Superior Court by way of Statement of Claim issued on February 9, 2006;

• The Applicant instructed Counsel to proceed with mediation during the period in which she is now claiming that she was not capable to instruct counsel;

• The Applicant participated in Examinations for Discovery in her tort action in December of 2009;

• Nothing in her tort court file in Ontario Superior Court suggested that the Applicant brought a motion to Appoint a Litigation Guardian in the tort proceedings;

• There is no evidence in these or the tort proceedings that the Applicant’s Counsel took any steps to determine whether or not the Applicant had capacity to proceed.

It is open to inference that since nothing was done in this regard, the Applicant’s capacity or lack thereof was not seen as an issue.

Analysis of the evidence regarding lack of capacity

The Applicant was first examined by Dr. Lionel Gerber, a psychiatrist, at the request of the Applicant’s counsel, on October 6, 2011, for an assessment and opinion on whether or not J. C. was catastrophically impaired. Dr. Gerber issued his report on October 27, 2011, finding that J. C. was catastrophically impaired. Dr. Gerber signed an OCF-19 Application for a Determination of Catastrophic Impairment on December 8, 2011, with his report attached thereto.

In his report of October 27, 2011, there was nothing to suggest that Dr. Gerber assessed the Applicant’s capacity, nor did he comment on that issue at that time. It was not until Dr. Gerber was requested to opine on this issue, that the Applicant’s capacity to instruct counsel was discussed in his report dated March 12, 2012.

With respect to her ability to instruct counsel between January 2007 and January 2010, Dr. Gerber stated in his report dated March 11, 2012, that “[J. C.] was thus clearly extremely limited in her ability to adequately weigh up the pros and the cons of the various decisions confronting her at the time, and therefore my assessment of [J. C.] is that from late 2006 until she stopped abusing the heroin in 2010, she likely was significantly compromised in her ability to instruct counsel because of the cumulative and significant effect of these multiple factors on her.”[emphasis mine]

Dr. Gerber concluded as a result of the accident, J. C. developed cognitive difficulties, traumatic brain injury, loss of consciousness and concentration problems, difficulties with executive functioning, depression, chronic pain, post-traumatic stress disorder, and substance abuse soon after the accident with no history she was having cognitive difficulties prior to the accident.³⁰

He diagnosed her with Adjustment Disorder with Depressed Mood.³¹

The Insurer submits that Dr. Gerber at no time, in either his report dated March 11, 2012, or his report dated July 11, 2012, opined that the Applicant was incapable of instructing counsel during the relevant period.

He does not say that, in his opinion, she was unable to instruct counsel at any time from late 2006 until 2010, because in my view, based on the differing historical reports, and numerous contradictions, he cannot make that statement with any certainty.

Further, one can infer that Dr. Gerber concluded that daily use of OxyContin, cocaine, Percocet, etc. to 2007 and heroin thereafter played a major role in the Applicant’s purported compromised capacity. However, one has to take into account that Dr. Gerber is relying to a great extent on information as reported to him by the Applicant, as well as having reviewed the medical file given to him.

In my view, having read the various medical reports, notes and assessments, and having noted the inconsistencies in her historical recounting to her various assessors, particularly with regard to her drug usage pre- and post-accident, it would be extremely difficult to determine with any accuracy the periods when she was compromised to the degree that she would have been unable to instruct her counsel.

It would appear, if one was to accept the reports of the various assessors, that she presented relatively normally, answered questions, dressed appropriately, at least part of the time during the relevant period.

Certainly, if one was to accept Dr. Hine’s reports of her presentation as accurate in 2006, or that of Ms. Goodfield in her psycho-vocational assessment in 2007 (during the period when J. C. testified she was using cocaine, etc. daily), she did not present as under the influence at that time; she dressed appropriately, answered questions, her mood and affect were unremarkable.

Dr. Hines stated in his testimony that, “if one was going to make a determination as to whether she was capable of instructing counsel, that she would have to have a proper capacity assessment done.”³²

Multiple other assessors and treating professionals’ notes and reports were considered, both pre-accident and post-accident. None of those notes or reports, however, raised the issue of capacity; in fact, the capacity issue was not raised at all until the pre-hearing at FSCO in November 2011.

Dr. Hines first assessed J. C. on December 18, 2006, during the relevant time period under consideration in this application. Dr. Hines had access to, and reviewed, multiple records of prior assessors and treating professionals. In none of those records, nor in his report, did the issue of capacity, or ability to instruct counsel, arise.

Dr. Hines testified that, in his opinion, he was in the best position to provide an opinion regarding the Applicant’s capacity to instruct counsel, since he assessed the Applicant during the relevant time period. He stated that, “I guess the issue is, though, that if you look at the fact that nobody had done sort of a capacity assessment on her, then the best you can do is look at, you know, who did assess her closest to the time when this is being judged, and I believe that my initial psychiatric report and also the vocational report by Ms. Goodfield were the two reports that were done closest in proximity to the time in question, and then you make your best informed decision I guess, from those reports at those times.”³³

Dr. Gerber admitted that capacity is time-specific and someone can be incapable during one period of time and capable for another.³⁴

He also stated, during his testimony on July 26, 2012, that the problem in this case was that even though he had assessed her, the assessment was completed after the time period in issue.³⁵

He further stated that, “I think that one has to be very careful, because I am not examining her at that time. I am examining her years later, so I am careful about the language I use.”³⁶

The evidence of the assessors who assessed the Applicant closest in time to the relevant period, specifically Dr. Hines (on December 18, 2006), reported that during his assessment, he found the applicant’s hygiene, grooming and dress were all appropriate, that she was fully oriented and speech was clear and coherent; that there was no disorder of thought processes or thought content with respect to the way she interacted with him; that in speaking to her, she presented as a “normal” person; that she responded appropriately and understood his questions; that he found no difficulty with her memory or concentration; and that he found that her mental status was normal. He did not identify any objective evidence of any psychiatric illness or diagnosis.

Dr. Hines assessed her for a second time on May 16, 2012, (which is outside the relevant periods where capacity to instruct counsel is in issue), and testified that he found her mental status examination was normal, and, comparing his second assessment to his prior assessment, his opinion was that she presented much the same way or similar to how she had presented during the first assessment.

She was also assessed by psychologist Cindi Goodfield for a psycho-vocational assessment, on May 28, 2007.³⁷

In her report dated June 11, 2007, ³⁸ regarding J. C.’s presentation at the assessment, she reports that:

J. C. arrived promptly for her scheduled appointment. She presented as an appropriately attired and groomed individual of stated age. Rapport was easily established and she was cooperative throughout the assessment. She demonstrated excellent conversational English skills.

Ms. Goodfield also noted that the Applicant worked at an adequate pace and appeared to put forth a good effort. She readily understood and followed instructions.

Dr. Hines testified that he did not see any indication in either the Applicant or the records that would cause him to question the Applicant’s capacity.

Dr. Gerber first saw the Applicant, and was asked for his opinion on October 6, 2011, and issued a report dated October 27, 2011, years after the accident, and after the time period that incapacity is alleged.

Putting it all together

There is little doubt that drug addiction, residual physical injuries and resultant pain, possible closed head injury, as well as cognitive deficits observed by the assessors, could have had some effect on the Applicant’s ability to instruct counsel. It is impossible, however, on the evidence before mem, to determine during exactly which time periods she may have been impaired and the extent of any such impairment (depending on whether she had been under the effect of drugs or not).

I also note that, while testifying at this preliminary issue hearing, the Applicant appeared well groomed and appropriately and neatly dressed; there did not appear to be anything unusual about her response to the questions asked. While this hearing commenced in 2012, when J. C. was supposedly not using drugs for some time, her presentation appeared much the same as described by the various assessors during the relevant periods.

There is a general presumption of capacity (Rule 10, Dispute Resolution Practice Code and section 2 of the Substitute Decisions Act).³⁹ The burden to set aside this presumption rests on the party alleging incapacity. The test for capacity is time and situation specific. ⁴⁰

In L.G. and Lombard⁴¹, Arbitrator Wilson states that “the onus in any matter rests upon the person alleging incapacity. No-one is obliged to prove their own capacity. Indeed, section 4 of the Substitute Decisions Act (SDA) provides for a presumption of capacity, albeit one that is rebuttable.”

The Applicant, in her written submissions, refers to Dr. Hines’ testimony, wherein he testified that the Claimant was incompetent mentally when abusing illicit substances, and that if she were intoxicated, then certainly at that time her judgement would be impaired.

The Applicant submits that Dr. Hines failed to canvas from her that her illicit drug use and potent prescription drug use was daily and prolonged for years such that her period of incapacity extended throughout the relevant time period.⁴²

However, as stated, J. C.’s accounts of her drug usage, with respect to extent, usage and periods of using, are inconsistent and unreliable. I do not see what difference this would make.

Having reviewed the evidence of the Applicant and the various reports, because of the many inconsistencies, discrepancies and contradictions contained in her evidence, I find I cannot rely on her evidence; as has been stated, she is an unreliable historian, and it is difficult to ascertain which version of the facts is correct.

Similarly, the opinions of the medical experts and practitioners relied upon by the Applicant are, in my view, of little value in determining this issue because those reports were largely based on facts reported by her, which differed greatly as illustrated above, from report to report.

I simply cannot make a finding on the evidence before me that J. C. was a daily user of drugs of one kind or another from 2006 through late 2010. Similarly it is difficult to ascertain if she was under the influence of drugs during any of her multiple assessments, and if so, what effect would that have on the validity of the report and opinions of the various practitioners.

The impact of her alleged daily drug use is submitted by the Applicant to having contributed greatly with respect to the extent and degree of her impairments. However, I am not able to find as a fact that she was in fact a daily drug user of serious intoxicating drugs from 2001 to 2010, especially from 2006 to 2010 as was submitted by the Applicant.

Accordingly, from the evidence adduced, I cannot find that the Applicant has shown that she was continuously lacking capacity to instruct counsel from late 2006 until 2010, and has therefore not overcome the general presumption of capacity.

I therefore find that J. C. is precluded to proceed to arbitration on the housekeeping and home maintenance issue.

INCOME REPLACEMENT BENEFITS

Capacity:

Please refer to the portion of this decision dealing with the issue of the Applicant’s alleged lack of capacity as it relates to the dispute regarding housekeeping and home maintenance benefits.

My findings are also applicable to the issue of IRBs as they relate to capacity to instruct counsel.

I therefore find that the Applicant has not proven, on a balance of probabilities, that she lacked capacity to instruct counsel from late 2006 to 2010.

Clear and Unequivocal Denial of Benefits by the Insurer:

The Applicant applied for and received income replacement benefits until June 27, 2007, when benefits were stopped by the Insurer.

On June 13, 2007, State Farm sent an OCF-9 to the Applicant. The first paragraph of the cover letter of that date stated, "I have provided you with a copy of the Independent Medical Examination and an OCF 9, Explanation of Benefits which is the insurer’s determination notifying you of the reduction of Income Replacement Benefits." [emphasis mine]

The last paragraph of the letter states, "You are only eligible to have one assessment or examination in response to the reduction of Income Replacement Benefits." [emphasis mine]

The attached OCF-9 of the same date has a check mark in part 2B, box headed “Not Eligible /Stoppage of Benefit.”⁴³

That box contains this wording:

Based on the information contained in the Orthopedic Assessment report dated 01/05/07, the FAE Assessment Report dated 01/10/07 and the Psycho-Vocational/Transferable Skill Analysis Report dated 06/11/07, it appears that you do not suffer a complete inability to engage in any employment reasonable suite [sic] to you based on education, training or experience. As it appears you do not satisfy the test to qualify for further Income Replacement Benefits, this benefit will cease as of 06/27/07. We have enclosed payment of this benefit from 06/14/07 to 06/27/07 ($414.92). If you disagree with State Farm’s decision you may submit a rebuttal report. Please see the attached correspondence regarding time limitations and procedures for the Rebuttal Assessment Report. [emphasis mine]

On June 20, 2007, a further OCF-9 and cover letter of same date were sent to the Applicant. The cover letter contained the phrase "regarding your client’s entitlement of further Income Replacement Benefits."

The OCF-9, Part 2B, headed “Not Eligible/Stoppage of Benefit”, contained a checkmark, and below the checkmark, it contained the following explanation:

We have enclosed copies of the Addendum reports all dated 06/13/07 regarding the Orthopedic assessment with Dr. Jaroszynski, the Psychiatric Assessment with Dr. Hines and the Functional Capacity Evaluation with Nathaniel Dkar. Based on the addendums, your entitlement to an Income Replacement Benefit remains unchanged as it does not appear the [sic] you suffer a complete inability to engage in any employment you are reasonably suited by education, training or experience given the injuries you sustained in this accident. Please see our letter dated 06/13/07 and the accompanying Explanation of Benefit regarding your right to dispute the discontinuation of this benefit. ⁴⁴[emphasis mine]

The Applicant’s Submission

The Applicant submits that, in the Insurer’s June 13, 2007, denial of benefits, the phrase “reduction of Income Replacement Benefits” is repeated twice in the cover letter. [emphasis mine]

The Applicant submits that the use of the word “reduction” alone is sufficient on both an objective and subjective (given the Applicant’s impairments and substance abuse at the time) to make the denial unclear and equivocal, as the meaning of reduction is to lower, as opposed to cancel the benefit, and adds confusion to the interpretation of the actual denial.

The Applicant also takes issue with part 2B of the OCF-9, containing the phrase “As it appears you do not satisfy the test to qualify for further Income Replacement Benefits.” The Applicant submits that the word “appears”, which is repeated twice in the explanation, adds further confusion to the denial. [emphasis mine]

Similarly, the second OCF-9, dated June 20, 2007, sent to the Applicant also states that, “based on the addendums, your entitlement to an Income Replacement Benefit remains unchanged as it does not appear that you suffer a complete inability to engage in any employment you are reasonably suited by education, training or experience given the injuries you sustained in this accident.” [emphasis mine]

The Applicant submits the words “remains unchanged” are unclear and confusing on an objective basis, and even more so on a subjective basis taking into account the Applicant’s impairments, as it is unclear whether those words, standing alone, refer to the benefit amount that the Claimant had been receiving, some other amount, or no amount.

In support of this submission, the Applicant relies on Dr. Gerber’s testimony that, given J. C.’s cognitive difficulties, she would have difficulties understanding the meaning of “remains unchanged.”⁴⁵

The Applicant submits that, without reference to additional documentation, the meaning of those words is unclear, and cites case law in support of the proposition that a claimant is not required to refer to other documents in order to determine the Insurer’s intent in the Notice of Denial;⁴⁶ that the Insurer, when aware it is dealing with an unsophisticated applicant with cognitive problems and serious orthopedic and psychological injuries, is required to make sure the explanation is clear and unequivocal;⁴⁷ and that the position of the Insurer must be ascertained from an objective reading of the Notice itself independent of any prior communication between the parties.⁴⁸

The Applicant has submitted that the Insurer’s denials of J. C.’s income replacement benefits were not clear and unequivocal, both from an objective perspective and from J. C.’s subjective reaction, and as such, the Insurer cannot rely on same in order to commence the limitation period running.

The Insurer’s submissions

The Insurer submits that the Notices given are clear and unequivocal; and that the Applicant was consistently represented by the same law firm from the submission of the application for accident benefits in 2004 until the present. Further, that limitations are important in providing certainty, and that arbitrators have no authority to extend the limitation periods.

The Insurer has cited Katanic v. State Farm in support of its position, ⁴⁹ and quotes Justice Milanetti who states:

Limitations are important. They provide certainty; ensure evidence is maintained; and ensure that plaintiffs do not sleep on their rights. This is particularly so when they are represented by counsel.

In the case before me, the denial was made, an explanation was given in clear and straightforward language, and dispute mechanisms and timeframes were provided. The plaintiff appears to have had legal representation at the time of these events.

The Insurer has also submitted that the Applicant was continuously represented; The Applicant has submitted that the issue of representation is essentially a “red herring” and the denial must stand or fall on its face.

THE LAW

Section 56 of the Schedule provides:

56. (1) A mediation proceeding or evaluation under section 280 of 280.1 of the Act or a court proceeding or arbitration under clause 281(1)(a) or (b) of the Act in respect of a benefit shall be commenced within two years after the insurer’s refusal to pay the amount claimed.

(2) Despite subsection (1), a court proceeding or arbitration under clause 281 (1)

(a) or (b) of the Act may be commenced within 90 days after the mediator reports to the parties under subsection 280 (8) of the Act or within 30 days after the person performing the evaluation provides a report to the parties under section 280.1 of the Act, whichever is later.

The Insurer terminated IRBs effective June 27, 2007. The Applicant filed an Application for Mediation on November 12, 2009. Mediation took place on November 2, 2010, and a Report of Mediator was issued with the same date.

On April 8, 2011, the Applicant submitted an undated Application for Arbitration which was received by FSCO April 8, 2011.

It is not disputed that the mediation was not commenced within two years after the insurer’s refusal. Similarly, it is not disputed that the Application for Arbitration was not filed within the statutory timeline. The position of the Applicant is that the two year limitation period did not commence running because the IRB denials were not clear or unequivocal.

The leading case on this issue is Smith v. Cooperators, which sets out the criteria for what constitutes a clear and unequivocal denial. ⁵⁰

An Insurer’s written notice of refusal to pay benefits must provide:

1. A clear and unequivocal refusal;

2. Reasons for the insurer’s determination; and,

3. An adequate explanation of the right of the insured person to dispute the refusal and the process for doing so.

In order for the denial to commence the running of the limitation period, the notice must describe “in straight forward and clear language directed towards an unsophisticated person,” the essential elements of the dispute resolution process.⁵¹

Arbitrator Muzzi, in the case of Mohammed-Amin and RBC, restated the well-established rules relevant to determining the validity of the insurer’s refusal to pay.

It is well established that arbitrators do not have the discretion to extend the time limits for commencing mediation and arbitration proceedings that are prescribed in the Insurance Act. However, it is also recognized that the limitation period defence must be strictly construed because the result is to deny an applicant the opportunity to have his or her claim adjudicated. Section 51 of the Schedule requires that a mediation proceeding be commenced within two years after the insurer’s refusal to pay the amount claimed. As an arbitrator does not have the discretion to extend the time limits, cases like this one are generally decided on the basis of the validity of the refusal. If the insurer’s refusal is not valid, the limitation period does not begin to run. The following are the well-established principles relevant to determining the validity of the insurer’s refusal to pay in this case:

• the insurer’s refusal itself must be in writing and must be clear and unequivocal notice of the insurer’s refusal to pay the benefits in issue;

• the refusal must provide sufficient or complete reasons for the refusal to pay;

• a proper refusal must also inform the insured of the dispute resolution process; and

• ongoing negotiations or requests for further information between an insured and the insurer do not extend the time limits for disputing an otherwise clear and unequivocal refusal. ⁵²

Analysis

In determining whether the notice was clear and unequivocal, I must look at it from both an objective perspective, and subjective reaction of the Applicant. Given the consumer protection nature of the relevant provisions, the Supreme Court of Canada has held that the fact that an insured person is represented by a lawyer is irrelevant to this analysis.⁵³

The Insurer submits that IQ can be irrelevant with respect to the capacity issue. Dr. Hines testified that, “you can’t assume anything with respect to capacity based upon an IQ, unless its extremely low, like five or 10, and then you know that you have a severely mentally retarded person.” [emphasis mine]⁵⁴

While that may or may not be true with respect to capacity, it does not automatically follow that that the extremely low IQ of the Applicant would not affect her ability to comprehend written language.

If the notice, objectively considered, is not entirely clear and unequivocal, the subjective reaction to it of the party receiving notice must be considered. The Applicant submits that J. C.’s subjective reaction was severely impaired by her cognitive impairments outlined, and cites Dachner in support. ⁵⁵

The Applicant also cites Hayes. In that case, the OCF-9 stated, “At this time, you do not qualify for this benefit.”⁵⁶ [emphasis in original] In Hayes, Arbitrator Miller found as a fact that it could not be said “that a reasonable lay person, let alone a cognitively impaired Applicant, would readily read this sentence as a final determination of their claim for a weekly benefit.”

During the cross-examination of Dr. Hines, he was referred to IQ testing performed on the Applicant by Dr. Lawrence Tuff, the Insurer’s neuropsychologist, in December 2012, at a time when the evidence suggests she was no longer using drugs, and in any event, after the relevant period in this application. J. C. was found to score in what was formerly referred to as the “mentally retarded” range, scoring in the fifth percentile or lower, or the bottom five percent of the population, with respect to Cognitive Ability, Verbal Cognitive Abilities, and various other subtests; and that her “full scale IQ is borderline fourth percentile⁵⁷; that her verbal comprehension index is extremely low, first percentile.

In a test of word reading, J. C. was assessed to fall within the extremely low range, 0.1 percentile.

Dr. Hines agreed that this result is not only in the mentally retarded range, but at the very bottom of the mentally retarded range.

I also note that Dr. Hines agreed that her scores would be even lower if she was testing while she was using drugs.

While I could not determine as to what periods or to what extent, if any, J. C. lacked capacity from 2006-2010, based on Dr. Hines testimony, one can infer that her scores on the testing would be at similarly low levels, or lower during that time if she was using drugs.

In taking into account the unchallenged Insurer diagnosis of extremely low, severely retarded, range, scoring at the bottom of the IQ scale, in the 5^th-10^th percentile, I cannot see how this would not be relevant when considering the subjective reaction to a Notice of Denial.

While insurers are not held to a standard of perfection with respect to Notices of Denial, an Insurer must ensure that the Notice of Denial contains nothing that might be construed as unclear or unequivocal if it intends to rely on its OCF-9 to terminate benefits and commence the running of the limitation period.

I find the use of the words, “it appears you do not satisfy the test”, and the words “reduction of Income Replacement Benefits” in the first OCF-9 and accompanying letter, and the wording, “your entitlement to an income replacement benefit remains unchanged” in the second OCF-9 and accompanying letter, confusing and are not clear and unequivocal [emphasis mine].

Although the stoppage boxes were checked on the OCF-9s, the additional wording in the document and cover letters, in my view, confuse the issue to the extent that it cannot be said that a reasonable lay person, let alone a cognitively impaired Applicant with IQ in the lower mentally retarded range, would not have difficulty in understanding the meaning of the documents. The addition of the words referred to confuse the issue sufficiently to the extent that one cannot be certain that these sentences were a final determination of the claim for IRBs

I therefore find that the OCF-9s, in totality are not clear and unequivocal, and therefore, do not operate to start the limitation period running.

I therefore find that J. C. can proceed to arbitration on the IRB issue.

EXPENSES:

As each party was partially successful with respect to the outcome of this preliminary issue hearing, each party shall bear her/ its own expenses.

December 15, 2014

Alan Mervin

Arbitrator

Date

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2014 ONFSCDRS 189

FSCO A11-001148

BETWEEN:

J. C.

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. J. C. is not precluded from proceeding to arbitration with respect to her claim for income replacement benefits.

2. J. C. is precluded from proceeding to arbitration with respect to her claim for housekeeping and home maintenance benefits.

3. Each party shall bear their own expenses of the preliminary issue hearing

December 15, 2014

Alan Mervin

Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Guiliani v. Halton (Regional Municipality), 2010 ONSC 4630, p. 2, para. 2 and p. 17.
3. 3Bisoukis v. Brampton (City) (1999), 1999 CanLII 3825 (ON CA), 46 OR (3d) 417 (Ont. C.A.).
4. 4Transcript July 9, 2013, p.19, l .20-35.
5. 5Transcript July 9, 2013, p. 20,l. 8.
6. 6Transcript July 9, 2013, pp. 26-27.
7. 7Transcript July 9, 2013, p. 37, ll. 17-23.
8. 8Transcript July 9, 2013, p. 40, l. 10.
9. 9Transcript July 26, 2012, p. 80, l. 10 and p. 86, l. 20.
10. 10Transcript July 26, 2012, p. 85, l. 20.
11. 11Transcript July 26, 2012, p.19, ll. 20-28 and p. 82, ll. 15-20.
12. 12Transcript July 26, 2012, p. 82, l. 25.
13. 13Insurer's Written Submissions, Tab 8.
14. 14Exhibit 1.
15. 15Exhibit 1, Tab 3; p. 1.
16. 16Exhibit 9, Tab 1, p. 15, l. 1.
17. 17Insurer's Written Submissions, Tab 12.
18. 18Exhibit 4, Tab 4.
19. 19Transcript July 26, 2012, p. 80, l. 10 and p. 86, l. 20.
20. 20Transcript July 26, 2012, p. 85, ll. 20-25.
21. 21Exhibit 6, Tab 10, p. 3.
22. 22Exhibit 6, Tab 9, p. 3, l. 12.
23. 23Exhibit 6, Tab 11, p. 5, paras. 3, 6.
24. 24Exhibit 6, Tab 12, p. 1, para. 4.
25. 25Exhibit 4 at hearing, Tab 4, p. 10, l. 2.
26. 26Transcript July 9, 2013, p. 38, ll. 8-16.
27. 27Exhibit 2, p. 14, para. 3.
28. 28Exhibit 6, Tab 13.
29. 29Transcript, January 18, 2013, p. 113, l. 4 and p. 116, l. 19.
30. 30Transcript July 26, 2012, p. 30, l. 10-11.
31. 31Transcript July 26, 2012, p.38, ll. 6-30.
32. 32Transcript July 9, 2013, p. 69, ll. 19-23
33. 33Transcript July 9, 2013, p. 68, ll. 5-9.
34. 34Transcript January 18, 2013, p. 124, ll. 13-17.
35. 35Transcript July 26, 2012, p. 50, ll. 20-25 and p. 51, ll. 1-20.
36. 36Transcript January 18, 2013, pp. 124-125, l. 19.
37. 37Exhibit 6, Tab 11.
38. 38Exhibit 6, Tab 11, p. 9.
39. 39Sets out a general presumption of capacity which requires compelling evidence to override the presumption of capacity found in section 2(2) of the SDA.
40. 40L.G. and Lombard General Insurance Company of Canada, (FSCO A09-00531, January 28, 2010)
41. 41Ibid.
42. 42Transcript, July 9, 2013, p. 67, ll. 10-19.
43. 43Exhibit 8 at hearing, Tab 22.
44. 44Exhibit 8 at hearing, Tab 23.
45. 45Transcript July 26 2012, p. 93, ll. 1-16 and p. 94, l. 1 to p. 95, l. 26.
46. 46Baker and Aviva Canada Inc., [2012] CarswellOnt 5836 (FSCO); Claimant's Book of Authorities 1,Tab 1, p. 4 para. 12.
47. 47Hayes and State Farm Mutual Automobile Insurance Company, (FSCO A10-000968, November 26, 2012), Claimant's Book of Authorities 1, Tab 6, p. 6, para. 34.
48. 48Talany and Royal Insurance Company of Canada (FSCO A10-002509, April 20, 2010), Tab 7, p. 3, para. 13.
49. 49Katanic v. State Farm Mutual Automobile Insurance Company, 2013 ONSC 5103, Insurer’s Written Submissions, Tab 20, p. 6, paras. 25-26.
50. 50Smith v. Cooperators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129.
51. 51Smith, supra p. 7; Nahsari and Belair Insurance Company Inc., (FSCO P02-00002, September 9, 2002, p. 11, appeal); Finlayson and Allstate Insurance Company of Canada, (FSCO A04-002133, November 6, 2006).
52. 52Mohammed-Amin and RBC General Insurance Company, (FSCO A06-002188, June 25, 2007).
53. 53Smith, supra.
54. 54Transcript July 9, 2013, p. 48, l. 21.
55. 55Dachner Investments Ltd. v Laurentian Pacific Insurance Co. [1989] CarswellBC 63 (B.C. C.A.) – (Applicant’s Book of Authorities 1, Tab 3, pp. 6-7, paras. 29-30).
56. 56Hayes, supra.
57. 57Transcript July 9, 2013, p. 136, ll.16-20.