Neutral Citation: 2015 ONFSCDRS 151 FSCO A14-006098

BETWEEN:

LUZ GOMEZ MURILLO Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

REASONS FOR DECISION

Before: Arbitrator Charles D. Matheson Heard: By written submissions due April 30, 2015 Appearances: Mr. Ovidiu Klein for Ms. Luz Gomez Murillo Ms. Mouna Hanna for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Ms. Luz Gomez Murillo, was injured in a motor vehicle accident on August 29, 2010. She applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.¹ State Farm continued to pay Non-Earner Benefits ("NEB"), as per the October 23, 2010 OCF-3 Disability Certificate, until November 30, 2011. State Farm issued an OCF-9 or Explanation of Benefits terminating the NEB on November 23, 2011. Ms. Luz Gomez Murillo then applied for mediation of this benefit dispute on March 13, 2014. The parties were unable to resolve their disputes through mediation, and Ms. Luz Gomez Murillo applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended on July 10, 2014.

The issues in this Preliminary Hearing are:

Is Ms. Luz Gomez Murillo statute barred from claiming further entitlements to Non-Earner Benefits at Arbitration?
Which party is liable to pay the expenses of the other party for this Preliminary Issue Hearing?

Result:

Ms. Luz Gomez Murillo is statute barred from proceeding to Arbitration for further Non-Earner Benefits.
Separate written submission with regards to expenses shall be heard, if the parties are unable to resolve this matter themselves, upon receipt of this award.

EVIDENCE AND ANALYSIS:

AUTHORITIES CONSIDERED

Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129;
Turner v. State Farm Mutual Automobile Insurance Co., 2005 CanLII 2551 (ONCA);
Klimitz and Allstate Insurance, FSCO Appeal P12-00026 (March 21, 2013);
Mangos and Aviva Canada Inc., FSCO A06-000847 (October 17, 2007);
Hayes and State Farm, FSCO A10-000968 (November 26, 2012);
Yogesvaran and State Farm, FSCO A08-00114 (November 26, 2009).

LEGISLATION CONSIDERED

Insurance Act, R.S.O. 1990, c. I.8, section 281 (1);
Statutory Accident Benefits Schedule, O. Reg. 403/96, section 36, 37 & 51;
Statutory Accident Benefits Schedule, O. Reg. 34/10, section 36 & 37.

BACKGROUND

The Applicant, while being represented by legal counsel, from November 2, 2010, applied for mediation on April 5, 2012, with respect to the disputed benefits of Caregiver, Attendant Care, Rehabilitation, Housekeeping and Home Maintenance Benefits and Cost of Examinations, along with interest. The issues on the Application for Arbitration, dated March 14, 2013, were resolved with two executed Full and Final Releases (including Settlement Disclosure Notices). Non-Earner Benefits were not listed as an issue in dispute in this Application for Arbitration.

HEARING

The Applicant's arguments for her continued entitlement for NEB, in part, are as follows:

The OCF-9, dated November 23, 2011, did not provide sufficient and correct information to constitute a valid refusal; therefore, the limitation period clock was not triggered.
The Insurer did not provide any information as to what legislation was being applied in regards to this specific benefit, as this is a transitional policy.
The Insurer used incorrect Statutory Accident Benefit Schedule ("SABS") sections within its explanations on the November 23, 2011 OCF-9, and as such, this error should invalidate the meaning of the OCF-9.
The Insurer incorrectly cited section 36 of the SABS and not section 37.

The Insurer argues and has evidenced, in part, the following:

The NEB was terminated on November 30, 2011, by way of letter of explanation or OCF-9, dated November 23, 2011.
The Applicant applied for mediation of this benefit on March 13, 2014.
The Application for Arbitration was dated July 10, 2014.
As found in Smith v. Co-operators, a limitation period cannot begin to run against an Insured without a clear and unequivocal denial or refusal of benefits by the Insurer. In order to rely on a limitation period defense, the Insurer must have issued:

a clear and unequivocal refusal of benefits, which sets out the applicant's right to engage the dispute resolution process in a clear and straightforward manner. This is an objective test to be applied without regard to what the insured might or might not have known following a termination of benefits.

When evaluating an Insurer's refusal to pay a benefit, Insurers are not held to the standard of perfection, but rather, the standard of sufficiency, as the overall purpose of the notice is to ensure that an Applicant has been provided with enough information to decide whether to dispute or accept the refusal.
The Insurer, in this case, has clearly conveyed to the Applicant that she is not eligible to receive Non-Earner Benefits and that no further benefits would be issued, all of which was done in a straight forward language so that an unsophisticated reader would understand the refusal to pay.
The limitation period ran out on November 23, 2013; however, the Applicant applied for mediation four months beyond this expiry date.
Arbitrators do not have the discretion to extend the time limits for commencing mediation.

The undisputed facts before me are as follows:

The Applicant received 26 weeks of NEBs post-accident (February 29, 2011 to November 30, 2011), which totaled $7,030.00, inclusive of any interest;
The Applicant did not raise any issue with the Insurer's noncompliance with any sections of the SABS, more specifically, section 36, 37 or 42 of the SABS under either of the Regulations;
The Applicant received the refusal which contained two reasons for the refusal to pay said benefit, including receipt of the Orthopaedic Assessment of November 4, 2011 as submitted by Dr. French, summarizing that she did not suffer a complete inability to carry on a normal life;
An OCF-9 was generated on November 23, 2011, which also addressed other benefits, and which reads in part, as follows:

i. Non earner benefits: Based on the enclosed reports, you do not suffer a complete inability to carry on a normal life. Therefore, you are not eligible to receive a non earner benefit pursuant to Section 36 of the Statutory Accident Benefits Schedule. Enclosed please find a draft in the amount of $2,893.88 of which $370.00 is your non earner benefit payable from November 17, 2011 through November 30, 2011. No further payments will be issued.

I shall first review the Statutory Accident Benefits Schedule, O. Reg. 403/96 and O. Reg. 34/10 in order to identify the appropriate sections that apply to this case, as the Applicant is stating that this is a transitional policy. The pertinent sections to this case are as follows:

ONTARIO REGULATION 403/96

Election of Income Replacement, Non-Earner or Caregiver Benefit

(1) Only one of the following benefits may be paid to a person in respect of a period of time:
An income replacement benefit.
A non-earner benefit.
A caregiver benefit. O. Reg. 403/96, s. 36 (1).

(2) If a person's application indicates that he or she may qualify for more than one of the benefits referred to in subsection (1), the insurer shall notify the person that he or she must elect within 30 days after receiving the notice which benefit he or she wishes to receive. O. Reg. 403/96, s. 36 (2).

(3) The insurer shall deliver the notice under subsection (2) within 10 business days after receiving the person's application. O. Reg. 403/96, s. 36 (3); O. Reg. 546/05, s. 10.

Determination of Continuing Entitlement to Specified Benefits

(1) If an insurer wishes to determine if an insured person is still entitled to a specified benefit, the insurer,

(a) shall request that the insured person submit within 15 business days a new disability certificate completed as of a date on or after the date of the request; and (b) may notify the insured person that the insurer requires the insured person to be examined under section 42. O. Reg. 546/05, s. 11.

Time Limit for Proceedings

(1) A mediation proceeding or evaluation under section 280 or 280.1 of the Insurance Act or a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Act in respect of a benefit under this Regulation shall be commenced within two years after the insurer's refusal to pay the amount claimed. O. Reg. 403/96, s. 51 (1).

(2) Despite subsection (1), a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Insurance 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. O. Reg. 403/96, s. 51 (2).

ONTARIO REGULATION 34/10

Determination of Continuing Entitlement to Specified Benefits

(6) Within 10 business days after receiving the report of an examination under section 44, the insurer shall provide the insured person with a notice of determination setting out,

(a) the specified benefits the insurer agrees to pay; (b) the specified benefits the insurer refuses to pay; (c) the medical and any other reasons for the insurer's decision; and (d) if the insurer determines that the insured person is not entitled to a specified benefit, the date that payment of the benefit will be stopped. O. Reg. 34/10, s. 37 (6).

I agree with the Respondent's position that the Supreme Court of Canada's decision in Smith v. Co-operators does provide that the limitation period clock begins to tick after the Insurer properly refuses to pay a benefit.

I agree with the Respondent's position that the Ontario Court of Appeal in the case of Turner v. State Farm upholds the fact that a reason or reasons given by the Insurer for a refusal to pay a benefit do not need to pass a legal test of correctness. It only needs to be informative in nature, as in this case, "to permit the insured to decide whether or not to challenge the cancellation". The relevant portion of this case is found on page 2, paragraph 8 and 9, and reads as follows:

[8] We also conclude that the Divisional Court erred in requiring that the reasons for cancelling the benefit must be legally correct. Section 24(8) of the Statutory Accident Benefits Scheme obliges the insurer to give the insured "the reasons for the refusal". It does not provide that the reasons must be legally correct. The purpose of the requirement to give reasons is to permit the insured to decide whether or not to challenge the cancellation. If the reasons given are legally wrong the insured will succeed in that challenge. Requiring that the reasons be legally correct goes beyond both the requirement in the relevant regulation, and the purpose of such a notice.

[9] The respondent argues that the notice is defective because it wrongly addresses the benefit that was never claimed. We do not agree. The notice clearly terminates the weekly benefit that the insured was receiving. While it offers as a reason that the legal test for another benefit is not met, that error neither renders the notice of termination less than clear and unequivocal nor breaches the obligation to give reasons. It simply gives a reason which the insured could, in a timely way, contest.

The Applicant makes arguments that the Insurer's reference of section 36 instead of section 37 gives a procedural noncompliance of the SABS, which makes the refusal invalid as it does not meet the legal test or the test of perfection. Further, the Applicant argues that Turner v. State Farm is not relevant in this case as this case is procedural in nature and not about substantive issues.

I disagree. There is no issue raised that the Insurer failed to comply with section 36 or 37 of the SABS of either of the Regulations. There are no issues raised by the Applicant that the Insurer did not provide the notice or the reasons for the refusal. Therefore, the focus of my analysis must be the refusal itself, which is an objective test, also upheld and found in Mangos and Aviva.

This case is about whether or not the reasons that were provided were informative enough for the unsophisticated reader to understand that the benefit is being refused and when it is terminated. It appears that the only issue with the refusal is that the Insurer cited the wrong section of the SABS. Turner v. State Farm is directly on point and correct: the standard of the test is "sufficiency" not "perfection".

Therefore, for the reasons above, I find the OCF-9 denying the Non-Earner Benefit to be proper. The Application for Mediation was made well beyond the specified limitation period. The Applicant is therefore statute barred from any further entitlement to the Non-Earner Benefit.

EXPENSES:

If the parties are unable to agree on the entitlement to, or quantum of, the expenses of this matter, the parties may request an appointment with me for determination of same in accordance with the Dispute Resolution Practice Code.

July 15, 2015

Charles D. Matheson Arbitrator

Financial Services Commission of Ontario