TD Home and Auto Insurance Company v. Ann Arulappu, 2015 ONFSCDRS 163

Financial Services Commission of Ontario

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

Neutral Citation: 2015 ONFSCDRS 163

FSCO P13-00025V

BETWEEN:

TD HOME AND AUTO INSURANCE COMPANY Applicant/Insurer

and

ANN ARULAPPU Respondent/Insured

Before: Arbitrator Deborah Pressman

Heard: By telephone conference call on December 4, 2013 and July 24, 2014, and by written submissions on March 4, 2014, April 4, 2014 and May 9, 2014.

Appearances: Pradeep Chandrashekhar for TD Home and Auto Insurance Company David Wilson for Ms. Arulappu

VARIATION ORDER

TD Home and Auto Insurance Company (TD) brought an Application for Variation of a Consent Order so that TD may deduct disability benefits received by Ms. Arulappu from her income replacement benefits. Under section 283 of the Insurance Act, R.S.O. 1990, c. I.8, as amended, it is ordered that the Arbitrator Nastasi’s order dated April 24, 2013 is varied to include the following additional provision:

1. TD is permitted to deduct disability benefits received by Ms. Arulappu from the income replacement benefits to which she is entitled, pursuant to the Schedule.

July 31, 2015

Deborah Pressman Arbitrator

Date

REASONS FOR DECISION

I. BACKGROUND AND THE NATURE OF THIS PROCEEDING

Ms. Arulappu was injured in a motor vehicle accident on August 10, 2008 and claimed statutory accident benefits from TD Home and Auto Insurance Company (TD) pursuant to the Schedule.¹

When TD denied Ms. Arulappu’s entitlement to the income replacement benefits (IRB), she applied for arbitration at the Financial Services Commission of Ontario.² But her case did not proceed to an arbitration hearing because the parties were able to reach a settlement.

Ms. Arulappu and TD came to an agreement with respect to her IRB claim on May 16, 2011. This agreement included a consent order to be signed by an arbitrator wherein TD agreed to pay Ms. Arulappu an ongoing IRB in the amount of $400.00 per week (Consent Order).

On May 4, 2012, about a year after the agreement, Ms. Arulappu notified TD that she was successful in her claim against Sunlife, her collateral benefits carrier, and that she was in receipt of disability benefits for the period up to and including December 31, 2011.³ As a result, TD adjusted Ms. Arulappu's IRB payment from $400.00 per week to $339.60 per week. TD also followed up with several letters in June and December of 2012 advising of an overpayment and requesting repayment from Ms. Arulappu, who objected to the quantum of the overpayment and did not repay.

In August 2013, TD applied for variation of the Consent Order pursuant to section s. 283(4) of the Insurance Act so it may deduct up to 20% of the amount of weekly IRB to account for an overpayment of $44,053.53. TD claims that this sum is deductible from the IRB that it had agreed to pay.

Ms. Arulappu objects to the variation and the deductibility of her Sunlife disability benefits. She also claims that the overpayment amount claimed by TD is incorrect and that she is entitled to set off the legal expenses she incurred in her Sunlife claim against any deductions to her IRB.

The parties agreed that the quantum issue, as well as TD’s claim for repayment, be determined by agreement (or by a separate proceeding).⁴

II. ISSUES

The issues in this proceeding are as follows:

1. Is TD entitled to a variation of the Consent Order?

2. Is TD entitled to deduct Ms. Arulappu's disability benefits from her IRB?

3. Is Ms. Arulappu entitled to credit for legal expenses incurred in her claim against Sunlife so it may be set off against any deductions to her IRB?

III. RESULT

1. TD is entitled to a variation of the Consent Order.

2. TD is entitled to deduct Ms. Arulappu's disability benefits from her IRB, as per the Schedule.

3. Ms. Arulappu is not entitled to credit for legal expenses incurred in her claim against Sunlife.

IV. ANALYSIS

Issue 1: TD’s entitlement to a variation

I find that TD is entitled to a variation of the Consent Order pursuant to subsection 284(3) of the Insurance Act,⁵ because there has been a material change in Ms. Arulappu’s circumstances and evidence not available on/at the arbitration has become available.

Typically, a variation takes place in the wake of an arbitration hearing or an arbitrator’s decision. In this case, it follows an agreement made between the parties on May 16, 2011 that included the Consent Order.

While the signed Consent Order was not delivered to the parties until April 24, 2013, their agreement to resolve their dispute by way of an arbitral order on consent brought Section 287 of the Insurance Act into play. It provides, in part, that an insurer shall not, after the order of an arbitrator, reduce benefits to an insured on the basis of an alleged change of circumstances, alleged new evidence or an alleged error, unless either the insured person agrees, or an adjudicator so orders (in a section 283 appeal or a section 284 variation proceeding).

In this case, I find that there has been a material change in Ms. Arulappu’s circumstances that occurred after her scheduled hearing and, specifically, after the parties came to an agreement. Ms. Arulappu’s entitlement to disability benefits from Sunlife is a significant and material change in her circumstances.

I also find that “evidence not available” as a pre-condition to a variation is satisfied because evidence related to Ms. Arulappu’s disability benefits (from Sunlife and CPP) was not in existence at the time of the hearing and/or settlement and is therefore the proper basis for a variation.

In my opinion, allowing TD to vary the Consent Order produces a reasonable and just outcome because the variation/revocation process is meant to deal with situations where information becomes available that would have influenced the outcome of a case. The information related to Ms. Arulappu’s receipt of/entitlement to disability benefits from Sunlife would likely have influenced TD’s agreement to pay the maximum available IRB. Therefore, I am compelled to agree with TD that this particular case warrants a variation.

Issue 2: TD’s entitlement to deduct disability benefits

I find that TD is entitled to deduct Ms. Arulappu’s disability benefits from her IRB claim because those benefits are deductible in accordance with the Schedule.

Pursuant to the Schedule, the amount received by an insured person for collateral payments is deductible from any amount payable for IRB. The provisions relevant to this issue are subsections 7(1)1 and 2(9) of the Schedule.

Subsection 7(1)1 provides that the weekly amount of IRB is reduced by the following:

7(1)1 i. net weekly payments for loss of income that are being received by the person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan, and

ii. net weekly payments for loss of income that are not being received by the person but are available to the person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan, unless the person has applied to receive the payments for loss of income.

Subsection 2(9) of the Schedule states that payments for loss of income under an income continuation plan shall be “deemed to include” certain payments. Relevant to Ms. Arulappu’s submissions is subsection 2(9)2. It includes the following payments:

2(9)2 Periodic payments of insurance, if the insurance,

i. is offered by the insurer only to persons who are employed at the time the contract for the insurance is entered into, and

ii. is offered by the insurer only on the basis that the maximum benefit payable is limited to an amount calculated with reference to the insured person’s income from employment. O. Reg. 482/01, s.1.

Ms. Arulappu submits that her Sunlife disability benefits are not payments for loss of income under an income continuation benefit plan because in contradiction to subparagraph 2(9)2(i), they extend to persons who become employed after the effective date of the Sunlife policy. She submits that since she was not employed on October 1, 1991 (the effective date of the Sunlife policy); her disability payments are not deductible. I disagree.

I do not find any ambiguity in the words “deemed to include” in subsection 2(9) and I am not persuaded that there is any gap in the Schedule necessitating the interpretation urged by Ms. Arulappu.

Significantly, I find that subparagraph 7(1)1(i) of the Schedule is not limited to the two examples set out in subsection 2(9)2. I agree with Arbitrator Leitch in Sharma-Singh⁶ in that:

In my view, these words [deemed to include] confirm that the purpose of the amendments [in subsection 2(9)] is not to exclude payments that might otherwise be covered by section 7(1). It is rather to include payments that might not otherwise be covered by section 7(1) and to ensure that other specified payments are covered by section 7(1).

In my opinion, the opening words “deemed to include” prevent subsection 2(9)2 from being read as excluding payments otherwise covered by section 7(1). Significantly Ms. Arulappu did not address the implications of section 7(1) in her submissions.

Determining whether the Sunlife policy is an income continuation benefit plan deductible under subparagraph 7(1)1(i) is not a difficult task. Arbitrators and judges have long accepted that long-term disability benefits are deductible because they are considered to be payments made (or received) under an income continuation benefits plan.⁷

Ms. Arulappu relies on Lee and Certas Direct Insurance Company (FSCO A03-000041, June 15, 2006). But, I find Lee to be distinguishable because the Arbitrator’s finding that the policy before her was not an income continuation plan was based on a number of reasons not relevant to this case.⁸

Given the hallmarks of the Sunlife policy as an income continuation benefit plan, I find that it complies with subsection 7(1)1(i) and TD can therefore deduct any payments received in accordance with the Sunlife policy from Ms. Arulappu’s IRB.

Issue 3: Ms. Arulappu’s entitlement to credit for her legal expenses incurred in the Sunlife claim

Subsection 7(1) of the Schedule provides that one deducts the “net weekly payments for loss of income that are being received” from an IRB.

Ms. Arulappu submits that the Sunlife disability payments she received should be net of the alleged considerable legal expense incurred in obtaining these payments. I disagree.

In my view, section 7 of the Schedule governs the determination of net weekly payment for loss of income, leaving little room for additional deductions such as legal expenses incurred to obtain these collateral payments.

Significantly, I find no reference to legal expense in section 7(1) of the Schedule and Ms. Arulappu did not direct me to any other authority to allow such consideration in calculating “net weekly payments”.⁹ In my opinion, had the Legislature intended legal expenses to be included in the calculation of deductions from an IRB, it could have expressly so provided.

Therefore, I find that Ms. Arulappu’s legal expenses incurred in pursuit of her claim against Sunlife are not to be considered or credited in calculating the deduction from her IRB.

V. CONCLUSION

Based on the reasons set out above, I find that Ms. Arulappu's receipt of disability benefits from Sunlife was evidence that was not available to TD on/at the arbitration (or settlement) that has become available and a material change in her circumstances.

Accordingly, I am varying Arbitrator Nastasi’s Order dated April 24, 2013 and adding an additional provision allowing TD to deduct the disability benefits from Ms. Arulappu's IRB in accordance with the Schedule.

The parties agree that the quantum issue, as well as TD’s claim for repayment is to be determined by agreement (or by a separate proceeding).

July 31, 2015

Deborah Pressman Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
3. 3She was also put back on claim at the rate of $993.72 per month, as per minutes of settlement dated April 20, 2012.
4. 4The parties agree that the TD will retain an accountant to assist in the quantification of the IRB deductions (CPP and Sunlife benefits) and overpayment.
5. 5Also Rule 61 of the Dispute Resolution Practice Code (Fourth Edition, Updated – January 2014).
6. 6Sharma-Singh and Co-operators General Insurance Company (FSCO A07-000588, February 26, 2010).
7. 7Bhola and Personal (FSCO A06 001473, September 17, 2007) and State Farm and Ramalingam [2009] O.J. No. 5971.
8. 8Including that it had been purchased by the insured and that the policy was not arranged by or contributed to by an employer.
9. 9Ms. Arulappu relied on several court cases which in my opinion do not lend support to her submission that an Arbitrator has the ability to credit legal expenses in calculating an IRB deduction. Anand v. Belanger 2010 ONSC 5356, [2010] O.J. No 4064, dealt with a tortfeasor reaping the benefits of the risk and expenses undertaken by a plaintiff commencing a legal proceeding. Ananthamoorthy v. Ellison, 2013 ONSC 4510 focused on a tortfeasor escaping the responsibility to indemnify the plaintiff and Gratton v. Corporation of the City of London, 1994 CanLII 7263 (ON CTGD), 18 O.R. (3d) 354 was a claim for damages paid to a welfare recipient.