Neutral Citation: 2015 ONFSCDRS 258

FSCO A14-000068

BETWEEN:

KAMLESH VERMA Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Ellen Fry

Heard: By written submissions completed on October 25, 2015

Appearances: Mr. Stephen Nadler for Mrs. Kamlesh Verma Mr. Richard Horst for Allstate Insurance Company of Canada

Issues:

The Applicant, Mrs. Kamlesh Verma, was injured in a motor vehicle accident on February 12, 2012 and sought accident benefits from Allstate Insurance Company of Canada (“Allstate”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Verma (the “Applicant”) applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

The issue in this Preliminary Issue Hearing is:

Whether the Applicant is prevented from proceeding with her claim for Non-Earner Benefits by virtue of section 56 of the Schedule.

Result:

The Applicant is not prevented from proceeding with her claim for Non-Earner Benefits by virtue of section 56 of the Schedule.

EVIDENCE AND ANALYSIS:

Evidence

The Insurer scheduled an appointment for the Applicant to attend an examination by a chiropractor on May 18, 2012. In scheduling this examination, the Insurer stated that the purpose of the examination was to obtain a second opinion on whether a specific treatment and assessment plan was reasonable and necessary.

However, in response to a question from the Insurer, one of the opinions in the chiropractor’s report was that the Applicant “does not suffer from a complete inability to carry on a normal life.”

The Insurer also scheduled an appointment for the Applicant to attend a physiatry examination on June 21, 2012. In scheduling this examination the Insurer stated that the purpose of the examination was to obtain a second opinion to determine the Applicant’s entitlement to Non-Earner and Medical/Rehabilitation Benefits.

Although the Applicant attended at the clinic for this assessment as scheduled, the doctor was not present to do the assessment. The Insurer did not reschedule this assessment despite an attempted communication from the office of the Applicant’s counsel to inform the Insurer of what had occurred.

On June 12, 2012, the Insurer issued an Explanation of Benefits that refused the Non-Earner Benefit based on the chiropractor’s report.

The Applicant filed an Application for Mediation on August 3, 2012. On May 16, 2013, the Applicant’s counsel sent a letter to the Financial Services Commission of Ontario (“FSCO”), with a copy to the Insurer, requesting consent to add several issues to the mediation, including the Applicant’s claim to a Non-Earner Benefit. The evidence indicates that using this process to add issues to a mediation, rather than filing an additional Application for Mediation, was a common practice at the relevant time. The evidence does not indicate that FSCO or the Insurer responded to the request to add issues.

The Applicant later filed with FSCO a Request for a Failed Report of Mediator Form, requesting a failed mediation due to the lapse of time since the filing of the Application for Mediation. The evidence does not indicate that FSCO or the Insurer responded to the request to include the May 16, 2013 issues in the mediation.

The Mediator issued a Failed Mediation Report on June 11, 2013. The Mediation Report identifies the issues covered by the mediation only by marking “X” in the relevant boxes. There is no “X” in any of the boxes for the issues in the May 16, 2013 letter. There is no text in the Report of Mediator to indicate that the Mediator addressed his mind to the question of whether to include these issues.

The Applicant’s counsel did not notice the omission of non-earner benefits from the Report of Mediator until the arbitration Pre-Hearing on July 30, 2014. At the Pre-Hearing, the Insurer’s counsel objected to the inclusion of non-earner benefits in the arbitration on the basis that this issue had not yet been mediated.

The Applicant filed an Application for Mediation that included Non-Earner Benefits on August 7, 2014.

Law

Section 56 of the Schedule provides that “[a] mediation proceeding... in respect of a benefit shall be commenced within two years after the insurer’s refusal to pay the amount claimed”.

Sections 37 and 44 of the Schedule set out a number of requirements applicable to Insurer Examinations. The relevant portions of these sections provide as follows:

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

(b) notify the insured person that the insurer requires an examination under section 44.

(2) An insurer shall not discontinue paying a specified benefit to an insured person unless,

(c) the insurer has received the report of the examination under section 44, if the insurer required an examination under that section, and has determined that the insured person is not entitled to the benefit;

(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,

(c) the medical and any other reasons for the insurer’s decision;

(5) If the insurer requires an examination under this section, the insurer shall arrange for the examination at its expense and shall give the insured person a notice setting out,

(a) the medical and any other reasons for the examination;

(9) The following rules apply in respect of the examination:

If the attendance of the insured person is required,

ii. the insured person and the insurer shall, not later than five business days before the day scheduled for the examination, provide to the person or persons conducting the examination such information and documents as are relevant or necessary for the review of the insured person’s medical condition.

Relevant provisions of the Dispute Resolution Practice Code (“the Code”) provide as follows:

12.2 A party who applies for mediation must file, in duplicate, a completed Application for Mediation in Form A.

12.3 If it appears that an Application for Mediation is incomplete...the [FSCO] Dispute Resolution Group will:

(a) deliver written notice of the ... deficiencies in the Application to the applicant and his or her representative; and

(b) hold the Application in abeyance for 20 days from the delivery of the notice.

12.4 Where the applicant does not ... rectify the deficiencies set out in the written notice within the 20 days provided under Rule 12.3(b), the Dispute Resolution Group may reject the Application.

1.1 These Rules will be broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute.

1.3 A defect in form or other technical breach will not make a proceeding invalid.

Argument

The Insurer argues that the Applicant did not commence the mediation proceeding for Non-Earner Benefits within the two year period established by section 56. This is because the Insurer considers that it’s Explanation of Benefits, dated June 12, 2012, refused the amount claimed, and that the Applicant did not commence a mediation proceeding until the Applicant filed an Application for Mediation on August 7, 2014. The Insurer argues that in determining whether the two year period has been complied with, it is not relevant to consider whether the denial of benefit was justified in the circumstances or even legally correct.

The Applicant argues that the Insurer did not provide proper notice of refusal of Non-Earner Benefits because

(1) In using the chiropractor’s report as the basis for refusal, in the circumstances, it did not comply with the requirements of section 37 and 44 in a number of respects; and

(2) In its refusal it did not provide “the medical and any other reasons for the insurer’s decision” as required by subsection 37(6)(c).

The Applicant also argues that in substance it did apply to mediate the Insurer’s refusal within two years of June 12, 2012, because it requested on May 16, 2013 that the claim for Non-Earner Benefits be added to its existing mediation.

Analysis

To determine whether the Applicant complied with the two year limitation period in section 56 of the Schedule, it is first necessary to determine if the Insurer’s refusal of benefits was sufficient to start the two year period running.

As argued by the Insurer, the case law is clear that in addressing this issue it is not relevant whether the refusal of the benefit was justified in the circumstances or even legally correct.² Accordingly, the Applicant’s arguments that the Insurer did not comply with the requirements of section 37 and 44 in using the chiropractor’s report as the basis for refusal are not relevant to the limitation period issue.

The question to determine is whether the Insurer provided “the medical and any other reasons for the insurer’s decision” as required by subsection 37(6)(c).

The June 12, 2012 Explanation of Benefits stated as follows in refusing the Non-Earner Benefit:

Non-Earner Benefit: Please find enclosed a copy of the section 44 Independent Chiropractic Examination, completed by Dr. Koromilos [the chiropractor] on May 18, 2012. As you will note, Dr. Koromilos is of the opinion that you do not suffer a complete inability to carry on a normal life. As such, there is no entitlement to the Non-Earner Benefit.

This was a clear statement of the reasons for the Insurer’s decision and it was accompanied by the chiropractor’s report that was cited by the Insurer as the source document that was the basis for the Insurer’s decision.

Accordingly, I consider that the Explanation of Benefits complied with subsection 37(6)(c) and that the limitation period in section 56 started running on June 12, 2012.

Secondly, it is necessary to determine whether the mediation proceeding was commenced within two years of June 12, 2012.

Section 12.2 of the Code requires the party applying for mediation to file an Application for Mediation, in Form A. The evidence indicates that this did not occur until August 7, 2014, approximately two months after the end of the limitation period.

However, as indicated above, Rule 1.1 provides that overall the Code is to be broadly interpreted to produce, among other things, the most just resolution, and Rule 1.3 provides that “a defect in form or other technical breach will not make a proceeding invalid”.

In addition, Rules 12.3 and 12.4, although they do not apply to this specific situation, can reasonably be understood to indicate that initial failure to comply with the format/technical requirements of the Application for Mediation Form is not intended to invalidate action to commence a mediation proceeding.

On May 16, 2013, well before the end of the limitation period, the Applicant filed a request to add the claim for Non-Earner Benefits to an existing mediation. The evidence indicates that this process was common practice in that timeframe. The Insurer was copied on the request to add the claim for Non-Earner Benefits and accordingly was aware that it had been made. However, neither FSCO nor the Insurer responded to the Applicant’s request.

Given the spirit of Rules 12.3 and 12.4, it would have been reasonable for the Applicant to expect that if its May 16, 2013 letter had been inadequate to add Non-Earner Benefits to the existing mediation, FSCO would have communicated this. If FSCO had done so, the Applicant would have had ample time to file an Application for Mediation Form before June 12, 2014.

It also would have been reasonable to expect that if the June 11, 2013 Report of Mediator for the existing (failed) mediation was being used to communicate a refusal to add Non-Earner Benefits, there would have been text in the Report of Mediator to say so. It is reasonable to interpret the Report of Mediator, in the circumstances, as indicating that the Mediator simply omitted to address his mind to whether the Non-Earner Benefits should be added. If the Report of Mediator had indicated that the May 16, 2013 letter was inadequate to add the issue, the Applicant would have had ample time to file an Application for Mediation Form before June 12, 2014.

Given the fact that the Insurer had notice of the claim for Non-Earner Benefits approximately a year before the end of the limitation period; that the May 16, 2013 letter reflected common practice at the time; and that it would have been reasonable for the Applicant to consider that FSCO had approved the addition of the claim, I conclude that this is a situation in which Rules 1.1 and 1.3 should apply. A just resolution in the circumstances, as contemplated by Rule 1.1, is to consider that the May 16, 2013 letter validly commenced mediation of the Non-Earner Benefits, despite the defect in form that the Application for Mediation Form was not filed at that time.

EXPENSES:

In awarding expenses, Rule 75.2 of the Code directs me to consider only seven specified criteria. Only one of these criteria is relevant in the current situation, namely each party’s degree of success in the outcome of the proceeding. Given the fact that the Applicant was wholly successful in the outcome of the hearing on this issue, I award expenses concerning the hearing of this preliminary issue to the Applicant. If the parties are unable to agree on the quantum of the expenses, the parties may request an appointment with me for determination of same in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

November 30, 2015

Ellen Fry Arbitrator

Date

Financial Services Commission of Ontario