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

Neutral Citation: 2014 ONFSCDRS 191

FSCO A10-003724

BETWEEN:

NIRMALADEVI NADARAJAH

Applicant

and

RBC GENERAL INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

and

DECISION ON A MOTION FOR INTERIM BENEFITS

Before: Richard Feldman

Heard: October 3, 2014

Appearances: David Wilson for the Applicant Pamela Brownlee for the Insurer

Nature of Preliminary Issue and Motion:

As a preliminary issue, the Insurer is seeking an order declaring that the Applicant is statute-barred from claiming housekeeping and home maintenance benefits. The Applicant has brought a motion seeking interim income replacement benefits.

Background:

The Applicant claims that she was involved in a motor vehicle accident on August 24, 2005. Shortly thereafter, the Applicant sought medical attention, retained legal representation, provided information to the Insurer concerning this incident and made claims to the Insurer for various accident benefits. Disputes arose between the parties concerning the Applicant's entitlement to certain benefits. In particular, the Insurer purported, on November 9, 2005, to deny her entitlement to any housekeeping and home maintenance benefits. The Insurer also purported to deny the Applicant's entitlement to ongoing income replacement benefits, effective April 6, 2006. It was not until 2010 that the Applicant challenged either of these decisions by the Insurer.

In or about 2010, the Applicant retained new legal representation and commenced an application for mediation concerning the Insurer's denial of housekeeping and home maintenance benefits. The report of mediator concerning this issue is dated November 18, 2010. On November 25, 2010, the Applicant commenced an application for arbitration concerning her claim for housekeeping and home maintenance benefits (plus interest, expenses and a special award). The first pre-hearing conference (of many) was held on July 8, 2011 and a hearing of the merits of this application was originally set for May 2012.

In July 2011, the Insurer requested a preliminary hearing to determine whether the Applicant was statute-barred from proceeding with her claim for housekeeping and home maintenance benefits (i.e., whether she had waited too long to challenge the Insurer's denial of these benefits and was now precluded from pursuing these claims as a result of the expiration of the relevant limitation period).¹

Within two months (i.e., by September 2011), the Applicant responded by:

seeking for the first time to mediate the issue of her entitlement to income replacement benefits (the benefits that the Insurer had purported to terminate in April 2006);
seeking to add the claim for income replacement benefits to this arbitration proceeding (once a report of mediator was issued);
requesting an adjournment of the hearing of the merits of the Applicant's claims set for May 2012; and
requesting that, at the hearing of the Insurer's preliminary issue (concerning its limitation defence), there also be heard a motion by the Applicant for interim housekeeping and home maintenance benefits and interim income replacement benefits.

The Insurer responded, in turn, by expanding its preliminary issue to include a limitation defence with respect to income replacement benefits (in addition to a similar defence being raised by the Insurer with respect to housekeeping and home maintenance benefits).

The preliminary issues raised by the Insurer and the Applicant's motion for interim benefits were heard by Arbitrator John Wilson. In a decision dated January 29, 2013, Arbitrator Wilson found that the Applicant is precluded from proceeding to arbitration on her claims (for both housekeeping benefits and income replacement benefits) because her application for arbitration was filed beyond the two-year limitation period set out in the Insurance Act and subsection 51(1) of the Schedule.² Given this determination, Arbitrator Wilson found the issue of the Applicant's claim for interim benefits to be moot.

The Applicant challenged this decision by way of an appeal to a Director's Delegate. That appeal was heard by Delegate Blackman who, on December 11, 2013, issued a decision:

rescinding the decision of Arbitrator Wilson;
finding that the Applicant is not barred from claiming income replacement benefits by reason of the limitation period under subsection 281.1(1) of the Insurance Act; and
ordering a new hearing of the issues of the housekeeping limitation defence and interim benefits.

It is this last part of Delegate Blackman's order that brought the parties before me on October 3, 2014 to re-argue the issue of whether the Applicant is statute-barred from claiming housekeeping and home maintenance benefits and whether the Applicant is entitled to interim benefits pending a determination of the merits of her claims.

Prior to coming before me, however, the Insurer challenged Delegate Blackman's decision by way of judicial review application to the Superior Court. Notwithstanding that pending judicial review application, both parties have advised me that the Court has declined to stay the FSCO proceedings and both parties urged me to proceed with the hearing of these issues.

On October 3, 2014, I heard oral submissions on behalf of both parties and I had the following written material available to me:

Written submissions on behalf of the Applicant from April 2012
Applicant's brief of authorities and supplemental brief of authorities
Affidavit of Heidi Buchanan, sworn December 2, 2011
Affidavit of the Applicant, sworn August 29, 2014
Written submissions of the Insurer from September 2014
Factum of Insurer from December 2011
Affidavit of Stephen Macaulay, sworn April 30, 2012
Insurer's brief of authorities

Issues:

The parties agree that the issues currently before me are as follows:

Is the Applicant barred from claiming housekeeping and home maintenance benefits by reason of the limitation period under subsection 281.1(1) of the Insurance Act, R.S.O. 1990, c. I.8?
Is the Applicant entitled to interim income replacement benefits³ at the rate of $202.14 per week from April 7, 2006 to date (plus interest at the rate of 2% per month compounded monthly) plus ongoing interim income replacement benefits at the rate of $202.14 per week hereafter until there is a final determination as to the Applicant's entitlement to income replacement benefits (or until further or other order of the Financial Services Commission of Ontario).

Result:

The Applicant is barred from claiming housekeeping and home maintenance benefits by reason of the limitation period under subsection 281.1(1) of the Insurance Act, R.S.O. 1990, c. I.8.
The Applicant's motion for interim income replacement benefits is denied.

DISCUSSION

Issue 1: Limitation Issue (housekeeping and home maintenance benefits)

Pursuant to subsection 281.1(1) of the Insurance Act, a mediation proceeding under section 280 must be commenced within two years after the insurer's refusal to pay the benefit claimed. Since the Supreme Court of Canada's decision in Smith v. Co-operators,⁴ case law makes it clear that in order to rely upon such a limitation defence, an insurer must establish:

When (and how) the insurer refused to pay the benefits; and
That the insurer is entitled to rely upon that refusal.

The Applicant makes two alternative arguments. First, it is submitted that the Applicant never actually made a claim for housekeeping and home maintenance benefits so the Insurer had no right to purport to refuse to pay such benefits. In the alternative, it is submitted on behalf of the Applicant that the wording of the Insurer’s refusal was not clear and unequivocal. I reject both arguments.

In this case, the relevant sequence of events does not appear to be in dispute. The Applicant claims to have been involved in a motor vehicle accident on August 24, 2005. By September 8, 2005, the Applicant had retained the law firm of Mazin & Rooz to represent her. On September 8, 2005, this firm sent to the Insurer an Application for Accident Benefits (Form OCF-1) and an Activities of Normal Life form (OCF-12). The Form OCF-12 indicated that the Applicant, since the accident, could not do her usual shopping, cleaning, laundry or meal preparation.

On September 8, 2005, the Insurer requested that the Applicant provide it with a disability certificate (completed by her family doctor) as well as a completed Statutory Declaration.

On September 13, 2005, the Insurer notified the Applicant that it had arranged for an in-home assessment (to be conducted on September 20, 2005 by Laurie Taylor, O.T.) for the purposes of assisting with the assessment of the Applicant's entitlement to, amongst other things, housekeeping and home maintenance benefits. The in-home assessment proceeded as scheduled and, on or about September 29, 2005, Laurie Taylor issued her report based on this assessment. Ms. Taylor recommended for the Applicant, amongst other things, housekeeping assistance of 4 hours and 35 minutes per week, with a proposal for reassessment in 4-6 weeks.

On September 29, 2005, the Insurer issued an Explanation of Benefits Payable by Insurance Company (Form OCF-9) explaining that there would be no payment of benefits for any period of non-compliance (i.e., until the requested Disability Certificate had been provided). On or about September 30, 2005, the Applicant, through her lawyers, provided the Insurer with a Disability Certificate from a chiropractor at Downsview Health Recovery Centre, Dr. Dimitrios Limos (dated August 25, 2005). In this Disability Certificate, Dr. Limos indicates that the Applicant suffers a substantial inability to perform the housekeeping and home maintenance services that she normally performed before the accident and that the anticipated duration of this disability is 9-12 weeks. He also indicates that the onset of this disability (viz. housekeeping) is August 24, 2005 (the date of the motor vehicle accident).

Consistent with the recommendation contained in Ms. Taylor's first report, the Insurer scheduled a follow-up in-home assessment, to take place on October 26, 2005, for the purposes of assisting with the assessment of the Applicant's ongoing entitlement to housekeeping and home maintenance benefits (as well as her entitlement to attendant care and caregiver benefits). Ms. Taylor issued her report on November 4, 2005. In this report, Ms. Taylor concluded that the Applicant no longer required any assistance with housekeeping and home maintenance. The report states (in part), "Ms. Nabarajah [sic] currently demonstrates adequate range of motion and sufficient functional abilities to perform all pre-accident housekeeping tasks with use of pacing and assistive devices safely and independently."

On November 9, 2005, the Insurer sent to the Applicant a new Form OCF-9 in which it indicated that $0 would be paid for housekeeping and home maintenance expenses. The reason given is as follows:

Based on the report prepared by Laurie Taylor, O.T. from Functional Rehabilitation (see enclosed) following her examination, which was conducted on October 26/05 it was determined that you do not require assistance for the housekeeping activities that you performed prior to the accident.

Part 6 of this form contains standard information concerning the Applicant's right to dispute the Insurer's assessment, the processes for making such a challenge and a warning about the two year time limit in which to initiate such a process.

The Insurer takes the position that this is a clear and unequivocal refusal to pay housekeeping and home maintenance benefits as of November 9, 2005. It argues that the Form OCF-9 dated November 9, 2005 contains sufficient information to satisfy the requirements set out in Smith v. Co-operators. Finally, the Insurer points out that it is undisputed that an application for mediation concerning the issue of housekeeping and home maintenance benefits was not filed until February 2010 (more than four years after delivery of the Form OCF-9).

According to the Affidavit of the Applicant, following the accident she was unable to perform any housekeeping and had a friend, Nirmala Kanapathippillai, perform housekeeping (and attendant care) for the Applicant in exchange for the promise to pay her no less than $100.00 per week. By November 9, 2005 (the date of the Insurer's refusal to pay housekeeping and home maintenance benefits), no formal demand for payment of housekeeping benefits had been submitted by the Applicant to the Insurer; the Applicant takes the position that the Insurer had no right to refuse to pay benefits that had not yet been claimed.

Whether or not a “claim” has been made for a particular benefit depends upon all of the facts and circumstances. The failure of an applicant to submit an Expense Form (Form OCF-6), for instance, is not necessarily determinative of whether, in fact, a claim had been made for a specified benefit.

In this case, in addition to her Application for Accident Benefits, the Applicant submitted to the Insurer an Activities of Normal Life form and a Disability Certificate, both of which indicated that, commencing on the date of the accident, the Applicant had sustained a substantial inability to perform her usual pre-accident housekeeping activities. In the face of such information, it seems reasonable to me that the Insurer chose to explore this issue further in order to ascertain the Applicant’s entitlement to housekeeping and home maintenance benefits.

The Applicant was advised of the purpose of the initial in-home assessment. There is no evidence that she or her lawyers objected to this assessment or ever suggested that all or part of this assessment was not necessary since she was not advancing a claim for housekeeping benefits. The report that resulted from that assessment actually supported the Applicant's need for assistance with housekeeping chores and, once again, there was no suggestion from the Applicant or her representatives that the report ought to be ignored by the Insurer because the Applicant was not claiming housekeeping benefits. When the Insurer arranged a follow-up assessment by the same occupational therapist, there is no evidence of any objection by the Applicant or her legal representatives or evidence that the Applicant ever suggested that Ms. Taylor need not bother assessing the Applicant's ability to do housekeeping chores (as one might have expected her to do if she was taking the position that she was not advancing a claim for housekeeping and home maintenance benefits).

In the circumstances of this case, I find the conduct of the Applicant sufficient to justify the Insurer concluding that a claim was being advanced for housekeeping and home maintenance benefits.

I also find the wording of the Form OCF-9 dated November 9, 2005 to be clear and unequivocal. This form explained, in simple terms, the reason why the Insurer was refusing to pay any housekeeping and home maintenance benefits. It enclosed the report of Ms. Taylor so that the Applicant could gain further insight into this decision and it provided the Applicant with adequate information about her right to challenge the insurer's decision and explained the dispute resolution process in straightforward and clear language, including a warning about the two year limitation period.

I reject the submission of Applicant's counsel that the Insurer's refusal was somehow made ambiguous by the absence of a statement from the adjuster specifically stating that the adjuster had accepted the opinion of Ms. Taylor.

The Applicant was advised as to the reason the Insurer was refusing to pay any housekeeping and home maintenance benefits (as of November 9, 2005) and she was advised that she had two years in which to challenge that decision by filing an application for mediation. She failed to file such an application within this time limit.

I therefore find that the Applicant is barred from claiming housekeeping and home maintenance benefits by reason of the limitation period under subsection 281.1(1) of the Insurance Act, R.S.O. 1990, c. I.8

Issue 2: Interim Income Replacement Benefits

Subsection 15(2) of the Insurance Act grants to arbitrators the power to make interim orders. Arbitrators have interpreted this power to include the ability, in appropriate circumstances, to award interim benefits. Such power has always been understood to be discretionary. In exercising that discretion (as to whether to grant such relief and the amount and duration of any such relief), arbitrators have traditionally considered factors such as: the relative strength of the Applicant's case; the potential prejudice to each party in granting or denying the motion, including evidence of urgent financial need on the part of the Applicant; and, where there has been a breach of the Schedule by the insurer, the nature and significance of that breach. In Ananthamoorthy,⁵ I explain why the granting of interim benefits is an exceptional remedy.

In this case, the Applicant submits that she is entitled to interim benefits solely on the basis that the Insurer failed to properly terminate income replacement benefits by failing to strictly comply with the provisions of section 37 of the Schedule. It is argued on behalf of the Applicant that, in such circumstances, interim benefits must be ordered. In the alternative, it is submitted that the Applicant urgently requires the interim benefits being sought on this motion.

The relevant facts are not in dispute.

Within a month of receiving the Applicant's application for accident benefits, the Insurer advised the Applicant that she needed to elect between caregiver benefits and income replacement benefits. The Insurer had to repeat this demand several times. Finally, on December 5, 2005, the Applicant elected to claim income replacement benefits. The Insurer then paid to the Applicant income replacement benefits at the rate of $202.14 per week (plus interest) from August 31, 2005 through January 18, 2006 and advised the Applicant that it had arranged for her to undergo three assessments: a functional capacity evaluation, an orthopaedic assessment and a psychological evaluation. The Applicant underwent these three assessments in February 2006.

On April 6, 2006, the Insurer delivered to the Applicant a Form OCF-9 that purported to terminate income replacement benefits on basis of the findings of the psychological and orthopaedic assessments. Together with this Form OCF-9, the Insurer provided to the Applicant copies of the reports from the psychological and orthopaedic assessments.

Delegate Blackman found that this was not a proper termination because, contrary to subsection 37(5) of the Schedule, the Insurer failed to provide copies of the three reports to the health practitioner who completed the disability certificate. As a result of this breach, Delegate Blackman ruled that this was not a valid refusal and, consequently, the limitation period did not begin to run as of April 6, 2006. Therefore, Delegate Blackman found that the Applicant is not statute-barred from proceeding with her claim for income replacement benefits. Of course, Delegate Blackman's decision is currently awaiting judicial review but, for the purposes of this hearing, I am bound by his decision.

In addition to the breach of subsection 37(5) of the Schedule, it also appears from the evidence before me that the Insurer failed, contrary to subsection 37(9), to provide to the Applicant a copy of the report from the functional capacity evaluation ("FCE") at the time it purported to terminate payment of income replacement benefits. This is especially troubling since the report that resulted from the FCE was, arguably, far more favourable to the Applicant than the results from the other two assessments.

As a consequence of these breaches, it has been held that the Insurer is deprived of the ability to rely upon a limitation defence. If, following a hearing of the merits of the Applicant's claims, it is determined that the Applicant is entitled to income replacement benefits, a further consequence of these breaches will be that the Insurer will have to pay substantial interest on the amounts that ought to have been paid and, if it is found that the Insurer unreasonably withheld payment of income replacement benefits, the Insurer may also be found liable to pay what could be a substantial special award.

The Applicant submits, however, that there is one other consequence that flows from the Insurer's failure to comply with the provisions of section 37. It is submitted on behalf of the Applicant that the other consequence that flows from these breaches is that the Insurer must pay interim income replacement benefits from the date of termination (April 6, 2006) to the present (plus interest) and ongoing interim income replacement benefits until there is a final determination as to the Applicant's entitlement to income replacement benefits (or until further or other order of the Financial Services Commission of Ontario).

Section 37 provides for the steps that an insurer must take before discontinuing payment of a benefit. Several of the provisions of section 37 use language such as "an insurer shall not discontinue paying a specified benefit to an insured person unless ..." (subsection 37(2), emphasis added). Similarly, subsection 37(9), provides that "the insurer shall not stop payment of the specified benefit unless it has provided to the insured person a copy of the report of the examination and its determination under this section" (emphasis added).

Counsel for the Applicant submits that all of the provisions of section 37 are equally important and that failure to comply with any of the provisions means that the insurer is obliged to continue to pay the benefit in question, at least on an interim basis, until there is a determination on the merits of the claim. Only in this way, it is submitted, can insurers be made to comply with section 37 and only in this way can the words "shall not stop/discontinue payment" be given effect. It is also submitted that such a result is required by Delegate Blackman's decision in Yogesvaran.⁶

Counsel for the Applicant argues that, upon a correct interpretation of Delegate Blackman's decision in Yogesvaran, a motion for interim benefits must automatically be granted upon the finding of a breach by an insurer of section 37 of the Schedule and that, in such cases, other factors⁷ that have traditionally been considered on motions for interim benefits are irrelevant. In the alternative, if urgency is a relevant consideration, it is submitted that the Applicant feels there is urgent need because she finds it to be "unfair and unreasonable" that she has been "forced to rely upon [her] husband's income" since April 2006.

Counsel for the Insurer points out that the Insurer has already suffered consequences from its breaches of section 37 (in being deprived of its limitation defence) and may well face further consequences (substantial interest and a special award). It is submitted that the automatic granting of interim benefits in every case of a breach of section 37 is neither required by law nor is it necessary from the aspect of any perceived need for deterrence. Counsel for the Insurer argues that, according to Yogesvaran, while I have the power to grant interim benefits as a result of a breach of section 37, it remains a discretionary remedy. It is submitted on behalf of the Insurer that the real issue is not whether I can grant interim income replacement benefits to the Applicant but whether I should do so on the evidence before me; on this point, I agree with the Insurer.

There is nothing in Yogesvaran that suggests to me that the granting of interim benefits is mandatory whenever there has been a breach of section 37 of the Schedule. Interim benefits have always been considered to be discretionary relief and this is explicitly recognized by Delegate Blackman in Yogesvaran when he states (at page 13), "An adjudicator exercising his or her discretion to make an interim award of benefits in the circumstances of this case, subject to a final determination of entitlement, would be consistent with Stranges" (emphasis added).

In Yogesvaran, Delegate Blackman was faced with a case in which the Arbitrator at first instance (Arbitrator Miller) determined that, as a result of the insurer failing to request a new disability certificate before terminating payment of specified benefits (as required by s. 37), the insurer was required to pay all past specified benefits and to continue to pay weekly benefits until the insurer properly complied with the requirements of section 37. Delegate Blackman determined that such an order was contrary to the Court of Appeal's decision in Stranges⁸ as it could potentially result in a windfall to an applicant who might not otherwise be entitled to the benefits in question.

On the other hand, Delegate Blackman was faced with a situation in which substantial funds had already been paid to Ms. Yogesvaran by the insurer pursuant to the earlier decision of Arbitrator Miller. Although the insurer did not specifically request repayment of those funds, Delegate Blackman may have been concerned that overturning Arbitrator Miller's order could result in substantial financial hardship to the applicant.

It is in this context that Delegate Blackman, apparently on his own initiative, converted Arbitrator Miller's order into an order for the payment of interim benefits (which, presumably, left it open to the insurer to seek repayment of some or all of those interim benefits if the applicant ultimately failed to prove entitlement to the entire amount that had been paid). Delegate Blackman said that the granting of interim benefits in such circumstances would constitute a proper exercise of discretion as it would further the goal of the quick and efficient delivery of benefits, protect the integrity of the Schedule and safeguard a procedural protection for the benefit of insured persons. He did not state that the granting of interim benefits was mandatory in every case of a breach of section 37.

If, as I believe, the granting of interim benefits remains a discretionary remedy, what considerations are relevant to the exercise of this discretion (not only with respect to whether to grant relief but also with respect to the amount and duration of any interim award⁹)? Yogesvaran provides no guidance in this regard. Over twenty years of case law, however, suggests that the same criteria that have always been considered on such motions remain relevant.

The parties made no submissions as to the strength of the Applicant's claim for income replacement benefits. I will assume that she has made out a prima facie case but, surely, that cannot be enough. It would be extremely rare for a person not to advance at least some evidence to support their claims which, if considered on its own and without regard to any evidence from the insurer, would be sufficient to establish a prima facie case. If this were the only consideration, interim benefits would have to be awarded in virtually every case and there would be no room for the exercise of discretion on such motions.

As for the nature of the breaches by the Insurer in this case, it is impossible on the evidence before me to ascertain how serious they were in terms of whether they were inadvertent or deliberate, what impact the breaches may have had upon the Applicant and whether or when there was any effort to rectify (or mitigate) these breaches. These issues are not addressed by the Applicant in her affidavit or in any of the other affidavits filed for my consideration. Unlike the situation in Browne and Chubb,¹⁰ there is no evidence in this case, and no submissions made, that the Applicant has suffered irreparable harm (such as the lack of ability to gather evidence during the relevant period) as a result of the Insurer's failure to comply with section 37.¹¹ Upon the evidence before me, I cannot make any conclusions concerning the breaches of section 37 other than that there is no dispute that the Insurer failed to comply with subsections 37(5) and 37(9) at the time it delivered the Form OCF-9 to the Applicant on April 6, 2006.

Historically, where interim awards have been granted, there is usually evidence of some urgency or significant prejudice that will be suffered by the Applicant if such an order is not made. In the absence of any objective evidence (such as financial records) and in the absence of any particulars of alleged financial need, the Applicant's bald assertion (at paragraph 11 of her affidavit) that she considers her financial circumstances and her need for income replacement benefits at the present time to be urgent is insufficient on a motion such as this. There is no other evidence of urgency in this case.

The Applicant waited over five years to challenge the Insurer's denial of income replacement benefits. She has not explained this delay.

When, during a teleconference with counsel for both parties on September 17, 2014, I offered to order an expedited hearing (within a few months) of all issues, including the merits of the Applicant's claims so that she would not have to wait until the summer of 2015 (or later) for such a hearing, counsel for the Applicant rejected my offer both because he doubted that he could find time in his schedule and because he was still in the process of gathering evidence to bolster the Applicant's case (i.e., he plans on obtaining new medical reports). Bear in mind that this case was originally supposed to be heard on its merits in May 2012; nevertheless, the Applicant is apparently not yet ready to proceed to hearing.

Thus, on the facts before me, I am unable to conclude that there is any real urgency or evidence of any significant prejudice that will be suffered by the Applicant if she is not awarded interim benefits at this time. In all the circumstances of this case, I am not persuaded that it is appropriate to exercise my discretion by awarding to the Applicant the interim income replacement benefits she has requested.

Conclusion

For all of the foregoing reasons:

on the preliminary issues raised by the Insurer, I find the Applicant is barred from claiming housekeeping and home maintenance benefits by reason of the limitation period under subsection 281.1(1) of the Insurance Act, R.S.O. 1990, c. I.8; and
the Applicant's motion for interim income replacement benefits is denied.

December 16, 2014

Richard Feldman Arbitrator

Date

Financial Services Commission of Ontario