State Farm Mutual Automobile Insurance Company v. P. B., 2014 ONFSCDRS 25

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2014 ONFSCDRS 25

Appeals P13-00036 and P13-00037

OFFICE OF THE DIRECTOR OF ARBITRATIONS

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Appellant / Cross-Respondent

and

P. B.

Respondent / Cross-Appellant

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Mr. K. Bruce B. Chambers for State Farm Mutual Automobile Insurance Company

Mr. David E. Preszler for Mrs. B.

HEARING DATE:

February 7, 2014 by telephone conference call, following written submissions received by January 20, 2014

Appeal stay order released February 12, 2014

PRELIMINARY ISSUE APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Subject to any further or other order of an appellate officer, paragraph 2 of Arbitrator Fadel’s November 5, 2013 decision (that Mrs. B. is entitled to an income replacement benefit ongoing from August 18, 2008) is stayed solely to the extent of child benefits paid under the Canada Pension Plan received by Mrs. B. for periods subsequent to August 18, 2008 and the applicable interest under the Schedule that would have accrued but for her receipt of such benefits, on condition of State Farm Mutual Automobile Insurance Company’s payment forthwith of the balance of the Arbitrator’s November 5, 2013 award, if not already paid.

2. The legal expenses of this preliminary issue appeal decision are deferred to the conclusion of this appeal, subject to any further or other order of an appellate officer.

February 14, 2014

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND

Mrs. B. was injured in an August 18, 2005 motor vehicle accident. As a result, she sought statutory accident benefits under the Schedule¹ from her first-party automobile insurer, State Farm Mutual Automobile Insurance Company (“State Farm”).

Both parties appeal the November 5, 2013 decision of Arbitrator Fadel (the “Arbitrator”). Mrs. B. appeals the Arbitrator’s finding she is not catastrophically impaired as a result of the accident. State Farm appeals the Arbitrator’s orders that Mrs. B. is entitled to payment of income replacement benefits (“IRBs”) ongoing from August 18, 2008 and $3,000 a month in attendant care benefits from May 7, 2006 to August 15, 2007. State Farm also appeals Arbitrator Killoran’s January 19, 2012 preliminary issue decision regarding IRB quantum and the deductibility of child benefits under the Canada Pension Plan (“CPP”).

I have combined these two appeal proceedings, applying Rule 30 of the Dispute Resolution Practice Code (Fourth Edition, Updated - August 2011) (the “Code”), because there are issues or questions of law, fact or policy in common and the application of the Rule would result in the most just, quickest and least expensive means to deal with these applications.

This preliminary issue appeal decision pertains to State Farm’s request for a stay of paragraphs two and three of the Arbitrator’s decision ordering payment of IRBs and attendant care benefits.

II. STAY

Subsection 283(6) of the Insurance Act, R.S.O. 1990, c I.8, provides that an appeal does not stay the order of an arbitrator, unless decided otherwise. Delegate McMahon in Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), adopted the following criteria in determining whether a stay should be granted:

1. The bona fides of the appeal;

2. The substance of the grounds for appeal; and,

3. The hardship to the respective parties if the stay is granted or refused.

State Farm argues in favour of the stay on the basis:

1. There is nothing to suggest its appeal has not been brought in good faith.

2. The appeal raises substantial and legitimate issues. The Arbitrator did not say whether Mrs. B.’s benefit entitlement was based on her back injury, conversion disorder or both. The Arbitrator expressly found (albeit, the Appellant submits, incorrectly) that the accident caused Mrs. B.’s disc herniations. The Arbitrator did not, however, address whether Mrs. B.’s conversion disorder was causally connected to the accident. State Farm argues that there is no medical opinion establishing a causal connection between the conversion disorder and the accident.

3. Mrs. B. is currently receiving CPP disability benefits that would leave her only a nominal IRB payment, if any. Mrs. B. has not established she is currently suffering any undue financial hardship as a result of not receiving IRBs. As her attendant care entitlement ended almost seven years ago, there is no continuing entitlement upon which any hardship could be based.

4. The Arbitrator’s order requires that State Farm pay substantial sums that may be found on appeal not to be payable. State Farm has concerns about recovering these funds. Canadian Home Assurance Company and Scavuzzo, (OIC P-000626, May 18, 1992), balanced the parties’ interests by staying the payment of arrears while ordering payment of ongoing benefits, and that only because of evidence of ongoing hardship.

Mrs. B. argues against a stay of the Arbitrator’s payment orders because:

1. State Farm is appealing findings of fact rather than questions of law.

2. Mrs. B. has not received IRBs since August 15, 2008. CPP disability benefits are her sole source of income. Outstanding IRBs plus interest amount to $87,000. Attendant care benefits have not been paid since August 18, 2005. Inclusive of interest, they amount to $230,000. Staying the Arbitrator’s orders would cause great hardship to Mrs. B. whereas little hardship would accrue to State Farm.

Mrs. B. submits, in the alternative, that if a stay is to be ordered, only IRB payments should be stayed pending determination of the issue of law regarding the deductibility of CPP child benefits.

I am not persuaded to exercise my discretion to order a complete stay of the Arbitrator’s IRB and attendant care benefits orders, for the following reasons:

1. Delegate McMahon confirmed in Armstrong that a stay of an arbitration order under subsection 283(6) of the Insurance Act is the exception rather than the rule. The onus, therefore, is on the moving party that a stay should be granted. I thus disagree with State Farm’s submission that “without persuasive evidence of hardship” it is inappropriate to grant a stay. Rather, if anything, “persuasive evidence of hardship” on the party seeking a stay should outweigh the hardship to the party opposing the requested stay.

Mediation in this case failed on November 18, 2009. Mrs. B. accessed arbitration the next month. The July 13, 2010 pre-hearing set a four-day arbitration hearing for February 2011.

Instead, a preliminary arbitration issue was first addressed, with written submissions completed by May 2011. Arbitrator Murray’s July 26, 2011 decision held that Mrs. B. was precluded from proceeding to arbitration on housekeeping but not on attendant care benefits.

A further preliminary issue hearing was held in November 2011. Arbitrator Killoran’s January 19, 2012 decision held, in part, that the subsection 2(9) of the Schedule deduction of “payments of disability pension benefits under the Canada Pension Plan” did not include the CPP “child's benefit.” Arbitrator Killoran adjourned the arbitration hearing to June 2012, when it proceeded before Arbitrator Fadel. The hearing continued in November 2012. Written submissions were received by April 2, 2013.

It is now more than four years since Mrs. B. applied for arbitration. As held in State Farm Mutual Automobile Insurance Company and Mujku, (FSCO P13-00008, April 10, 2013), such a time frame is inconsistent with the legislative intent of a speedy determination of entitlement and delivery of payable benefits.

It is not disputed that attendant care benefits and interest thereon total $230,000. Paragraph 16(2)(a) provides that the attendant care benefits shall pay for all reasonable and necessary expenses incurred by or on behalf of the insured person as a result of the accident for services provided by an aide or attendant. The Arbitrator’s decision notes that Mrs. B. gave evidence that following her acute episode in May 2006, prior to her first surgery in June 2006, she was essentially couch bound.

The Arbitrator found that Mrs. B. had not worked since May 6, 2006. IRBs were in dispute from August 15, 2008.

I am persuaded that a stay of the Arbitrator’s payment orders would compound the delays in speedy justice in this case. I am not persuaded that State Farm’s assumption that recovery of funds may be difficult, should it be successful on appeal, outweighs the hardship to Mrs. B. of further delaying any recovery in her longstanding claims.

I also note that Delegate Richardson’s discussion in Scavuzzo, addressing the possibility of an insurer being unable to obtain repayment of any overpayment, cited Digiammatteo v. Leblanc, (1989), 1989 CanLII 4076 (ON CA), 71 O.R. (2d) 130 (C.A.). In that court case, a stay was not the exception. Rather, there was an automatic stay pending appeal that the Respondent was applying to have lifted. Even in the very different context of the Rules of Civil Procedure, the Court of Appeal stated:

In any event, there is always a risk of non-recovery in any litigation, even when successful, and I can see no reason why all of that risk should fall on the respondent in this case.

2. As Mrs. B. submits, subsection 283(1) of the Insurance Act restricts appeals from the order of an arbitrator to questions of law. Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01-00022, February 26, 2003), held that a finding of fact made in the complete absence of supporting evidence is mere conjecture and amounts to an error of law.

The Divisional Court in Kanareitsev and TTC Insurance Company Limited et al., (Court File No.: DC-060081917-00, February 6, 2008), held:

Particularly when results turn on the first instance decision maker's view of the credibility of witnesses and involves a fact-driven analysis, appellate review must take "proper account of the distinct advantage" of the first-instance decision maker's assessments. The appeal judge must not try the case de novo or simply substitute his or her views for those of the trial judge: R. v. G.W. 1996 CanLII 427 (ON CA), [1996] O.J. 3075 (C.A.) at paras.18 and 57.

State Farm itself submits, the “arbitration proceeded over six days, followed by extensive written submissions and arguments. The arbitration involved multiple and complex issues of fact and law, particularly regarding the issue of causation. The evidence included widely conflicting medical opinions and diagnoses.”

In his 34-page decision the Arbitrator held, with regard to IRBs:

I find that the applicant is entitled to an ongoing income replacement benefit as claimed. Based on the evidence, the applicant is disabled and incapable of engaging successfully in the workplace, even in sedentary-type employment. The applicant attempted to mitigate by making an effort to return to the workplace and this was a failed attempt. I believe the applicant, that despite her disability she was motivated to work and would like nothing more than to return to some form of employment but that she is unable to do so as a result of the accident-related impairments.

Regarding attendant care benefits, the Arbitrator held, in part:

Based on the evidence before me and my finding on causality, I find that the attendant care recommended by Ms. Bancroft in her Form 1 dated November 12, 2006 is reasonable and necessary. … it seems clear to me that if $5,916.90 was reasonable in November 2006, it was also reasonable in the more acute periods. Since this benefit is limited to $3,000.00 per month, I find that the applicant is entitled to $3,000.00 per month from May 7, 2006 up to August 18, 2007, including applicable interest. There was evidence before me that the applicant was hospitalized for almost 4 weeks from May 7, 2006. No evidence was provided that she required any additional care beyond that supplied by the hospital. There is therefore no entitlement to an attendant care benefit for this period.

The Arbitrator, following six pages of discussion, concluded there was convincing medical evidence supporting a chain of causation between the motor vehicle accident and Mrs. B.’s disc herniations. In the next four pages of his decision, the Arbitrator addressed Mrs. B.’s conversion disorder. He describes this to be a psychiatric disorder, where the problem appears to be neurological but there is an inadequate neurological explanation for the symptoms involved.

The Arbitrator, noting specifically the opinion evidence of Dr. H. Rosenblatt, psychiatrist, and Dr. A. Cancelliere, psychologist, found there was sufficient evidence to support that Mrs. B. had a conversion disorder. Dr. Rosenblatt testified that Mrs. B.’s pre-accident history highly pre-disposed her to such a disorder. Dr. Cancelliere opined that Mrs. B. may have been underestimating her difficulties. He found there was likely a valid profile that featured a prominent conversion or somatoform disorder profile.

I am not persuaded to stay the Arbitrator’s payment orders based on the present bare allegation there was a complete absence of evidence regarding a causative link between this accident and Mrs. B.’s conversion disorder.

Rule 51.2(c) of the Code states that an appeal may be rejected if it is from a preliminary or interim order that does not finally decide the issues in dispute. My April 27, 2012 preliminary appeal order exercised my discretion to reject, at that time, State Farm’s appeal from Arbitrator Killoran’s January 19, 2012 preliminary issue arbitration decision, without prejudice to any appeal upon all of the issues in dispute in the arbitration having been finally decided.

My decision was based in significant measure on allowing the matter to proceed to the scheduled June 2012 arbitration hearing dates, cognizant of Delegate Makepeace’s decision in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), that the purpose of Rule 51.2(c) was to “facilitate the most cost-effective resolution of disputes by minimizing the time and money spent on procedural or collateral matters.”

The parties do not disagree that Mrs. B.’s weekly IRB, before deducting the CPP child’s benefit, is $84.79. The Arbitrator marked as Exhibit 19 a May 21, 2011 letter from Human Resources Development Canada. The letter notes payment of a $218.50 monthly child’s benefit. The parties agree that equates to $50.42 a week. The letter notes CPP child benefit payments of $4,098.68 from 2009 to 2011. IRBs, however, were in dispute in this proceeding from August 13, 2008. The parties advise that monthly CPP child benefits (that are subject to a modest yearly cost of living increase) continue to be received.

A final disposition of the substantive issues in dispute has now occurred in arbitration. Dates for the exchange of written and oral submissions in appeal have been agreed, as set out below, to conclude within a little more than four months. The disputed quantum regarding CPP child benefit payments represents approximately 15% or less of the Arbitrator’s total award.

I am persuaded that the issue of CPP deductibility is a legitimate, novel and substantive question of law. The bona fides of that ground of appeal is not questioned. In the specific circumstances of this case, I am persuaded that the exercise of my discretion in rejecting State Farm’s earlier appeal should be balanced by my exercise of discretion allowing the following partial stay of the Arbitrator’s November 5, 2013 order:

Subject to any further or other order of an appellate officer, paragraph 2 of Arbitrator Fadel’s November 5, 2013 decision (that Mrs. B. is entitled to an income replacement benefit ongoing from August 18, 2008) is stayed solely to the extent of child benefits paid under the Canada Pension Plan received by Mrs. B. for periods subsequent to August 18, 2008 and the applicable interest under the Schedule that would have accrued but for her receipt of such benefits, on condition of State Farm Mutual Automobile Insurance Company’s payment forthwith of the balance of the Arbitrator’s November 5, 2013 award, if not already paid.

As the stay is limited to the child benefits Mrs. B. actually receives, while still representing a hardship to her, represents a lesser hardship. As well, the benefits stayed continue to accrue interest at the rate payable under the Schedule, a rate considerably higher than the prime interest rate.

As confirmed orally on February 7, 2014, the following time line was set, on consent, regarding the balance of this appeal proceeding:

1. Both parties will have until Monday, March 10, 2014 to serve and file (with a Statement of Service) their written submissions on their respective appeals.

2. Both parties will have until Monday, April 7, 2014 to deliver their responding written submissions on the other party’s appeal.

3. Both parties will have until Monday, May 5, 2014 to deliver their reply written submissions regarding their own appeal.

4. Oral submissions will be heard at the Commission on Friday, June 27, 2014.

IV. EXPENSES

The legal expenses of this preliminary issue appeal decision are deferred to the conclusion of this appeal, subject to any further or other order of an appellate officer.

February 14, 2014

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.