Financial Services Commission of Ontario
Neutral Citation: 2015 ONFSCDRS 60
Appeal P14-00046
OFFICE OF THE DIRECTOR OF ARBITRATIONS
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Appellant
and
DAVID JAZEY Respondent
BEFORE: Delegate Lawrence Blackman
REPRESENTATIVES: Mr. Robert S. Franklin for the Appellant, State Farm Mutual Automobile Insurance Company Ms. Rasha M. El-Tawil for the Respondent, Mr. David Jazey
HEARING DATE: Oral submissions heard March 9, 2015
PRELIMINARY APPEAL ORDER
Under subsection 283(6) of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
Paragraph 2(a), paragraph 2(d) to the extent of $11,547.35 and the special award of $32,852.07 in Arbitrator Henry’s December 9, 2014 Arbitration Order are stayed pending resolution of this appeal, subject to any further or other order of an appellate officer. The balance of the Arbitrator’s order is payable forthwith.
The question of the legal expenses of this preliminary appeal decision is deferred to the conclusion of this appeal, subject to any other or further order of an appellate officer.
March 24, 2015
Lawrence Blackman Director’s Delegate
REASONS FOR DECISION
I. BACKGROUND
The Respondent, Mr. David Jazey, was injured in a motor vehicle accident on September 9, 2008. As a result, he applied for statutory automobile accident benefits from his first party automobile insurer, the Appellant, State Farm Mutual Automobile Insurance Company of Canada, payable under the Schedule.1
The Respondent’s injuries included a diagnosis by Dr. C.S. Bailey, orthopaedic surgeon, of a spinal cord injury with disc herniation between C4-C5 and C6-C7. Due to the severity of his injuries, Dr. Bailey placed the Respondent on an urgent patient list for surgery. On October 16, 2009, Dr. Bailey performed an anterior cervical decompression as well as bone grafting and fusion using segments of bone from the Respondent’s hip.
The parties came before Arbitrator Henry (the “Arbitrator”) for a determination of the Respondent’s entitlement to payment of certain statutory accident benefits. The Arbitrator noted the Respondent’s evidence of continuing constant pain in his arms and shoulders as well as migraines. He also noted the Respondent’s severely compromised ability to manipulate his work instruments as a jeweller due to deterioration in his fine motor skills as well as tingling, numbness and reduced strength in his hands and fingers, leading to significant loss of income.
The Arbitrator’s December 9, 2014 decision ordered that the Appellant pay the following:
Attendant Care Benefits of $4,027.21 for services provided by Lauralee Bushan-Jazey and Dianne Jazey from October 20, 2009 to December 31, 2009.
Medical and rehabilitation benefits pursuant to the Schedule:
a. $15,931.90 for the purchase and installation of a hot tub pursuant to an OCF-18 prepared by Elizabeth Fox, dated January 24, 2011;
b. $1,500.64 and ongoing incurred sums for massage therapy pursuant to an OCF-18 dated February 14, 2012, prepared by Amy Buffone, subject to a deduction for Mr. Jazey’s wife’s workplace extended heath benefit plan;
c. $1,008.70 representing the outstanding balance for psychological counseling pursuant to an OCF-18 dated November 30, 2011 prepared by Dr. Jeffery McKillop;
d. $38,176.10 for occupational therapy treatment and the current cost of ergonomic equipment pursuant to a May 26, 2011 OCF-18 prepared by Nancy Gowan, OT.
Interest for the overdue payment of benefits pursuant to subsection 46(2) of the Schedule.
A special award of $32,852.07 under subsection 282(10) of the Insurance Act.
Mr. Jazey’s expenses in respect of the arbitration.
The Appellant appeals all of the Arbitrator’s orders. Its December 23, 2014 Notice of Appeal sought a stay of the Arbitrator’s orders, but with only very brief reasons provided in support. Further written submissions were received from both parties. Oral submissions were heard by telephone conference call on March 9, 2015.
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.
In Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), Delegate McMahon adopted the following criteria in determining whether a stay should be granted:
The bona fides of the appeal;
The substance of the grounds for appeal; and,
The hardship to the respective parties if the stay is granted or refused.
I will set out the parties’ general arguments and then address each of the Arbitrator’s benefit orders in turn.
II. ANALYSIS
(1) General Argument
The Appellant submits that it brings this appeal in good faith and that there are significant errors of law in the Arbitrator’s decision. It further submits that the Respondent has led no evidence of financial hardship or need, but rather has demonstrated his lack of financial need by paying for the purchase and installation of a hot tub.
The Appellant further argues that the Arbitrator erred in allowing the Respondent’s counsel to consistently ask leading questions throughout his examination-in-chief regarding matters in issue. It submits that the Arbitrator himself asked leading questions of the Respondent pertaining to proof of his loss of income.
The Appellant cites R. v. 20207000 Ontario Inc. [2009] O.J. No. 838, that ordered a new trial where “two instances of [the Justice of the Peace] not permitting leading questions in cross-examination may well have impacted on the course of the trial” [emphasis added]. The Appellant also argues that the Arbitrator erred in law in preferring viva voce evidence over written expert reports and in making findings of fact based on conjecture.
Subsection 283(1) of the Insurance Act restricts appeals from the order of an arbitrator to questions of law. The Respondent submits that most of the issues raised in the Notice of Appeal are questions of fact. He argues that the Arbitrator’s decision was well-supported by the oral and documentary evidence. Accordingly, the Respondent challenges the bona fides of the appeal.
The Respondent cites State Farm Mutual Automobile Insurance Company and P.B., (FSCO P13-00036 and P13-00037, February 14, 2014), that persuasive evidence of hardship on the party seeking a stay should outweigh the hardship to the party opposing the requested stay. He submits that it is the Appellant who has not provided any evidence of hardship if a stay is not granted.
Citing Armstrong, the Respondent argues that as a stay is the exception rather than the rule, the legislative drafters recognizing that an insurer is in a much better position than an insured person to bear the risks inherent in a stay order being granted or not granted. Citing P.B., the Respondent argues that the Appellant has not demonstrated why the risk in this case should fall on him.
The Respondent submits he has suffered hardship as a result of the Respondent’s “routine and continued denial of benefits.” He cites his testimony at arbitration as well as that of his wife and Ms. E. Fox, physiotherapist, regarding his drop in productivity and in income since the accident. The Respondent argues that he also has suffered a hardship in paying out of pocket for treatment unreasonably denied. Without the ergonomic equipment recommended to assist him in his work as a jeweller, he submits that he will continue to suffer a loss of income and that his condition will be at risk of further deterioration.
In Liberty Mutual Insurance Company and Young, (FSCO P03-00043, June 20, 2005), application for judicial review dismissed, 2006 CanLII 7286 (ON SCDC), Delegate Evans cited Delegate McMahon in Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01-00022, February 26, 2003):
…errors of law include findings of fact made in the complete absence of supporting evidence, made on the basis of conjecture, or made on the basis of a misapprehension of the evidence caused by a misdirection on a legal principle. The vital distinction is between a conclusion that there was “no evidence” to support a finding and a mere “insufficiency of evidence.”
Alleged errors such as allowing leading questions in examination-in-chief would seem to more likely go to the sufficiency of evidence rather than to there being “no evidence.”
In determining whether the exceptional remedy of a stay should be granted and specifically whether there is any hardship to a party if the stay is granted or refused, I note that the benefits in dispute go back as far as October 2009. The initial Application for Mediation is dated October 27, 2011. Mediation, required by Rule 19.1 of the Dispute Resolution Practice Code (Fourth Edition, Updated – January 2014) (the “Code”), to be concluded within sixty days of the filing of the completed Application for Mediation, took place December 6, 2012, more than a year later.
The Commission registered the Respondent’s Application for Arbitration on February 6, 2013. The pre-hearing discussion, expected under Timeline 8 of the Code to take place within six to eight weeks, was held August 22, 2013, more than six months later. The arbitration hearing, expected under the Code to take place within four to six months from the conclusion of the pre-hearing discussion, was initially scheduled for February 2014, but was put over to June (ten months after the pre-hearing) at the Respondent’s request. Submissions were received until October 3, 2014. The Arbitrator’s decision was issued December 9, 2014.
McIsaac v. Sun Life Assurance Company of Canada, 1999 BCCA 299, quoting from Thompson v. Zurich Insurance Co. (1984), 1984 CanLII 1843 (ON SC), held:
Few contracts could affect one’s personal interests more than a contract for medical and rehabilitation benefits. In my judgment, both insured and insurer would contemplate that a failure of the insurer to pay medical and rehabilitation accounts in a timely fashion will foreseeably occasion mental distress and emotional upset. The predominant, if not the sole object of the contract was to provide ease of mind to the insured that his medical accounts would be taken care of by timely payments during the period of rehabilitation.
In this case, there have been delays beyond the Appellant’s control. Nonetheless, cognizant of the exceptional nature of a stay, I note that it is now approaching three and a half years after the initial Application for Mediation. I now turn to the Arbitrator’s specific orders.
(2) Attendant Care
The Appellant submits that the amount in dispute regarding attendant care was $3,217.21, not the $4,027.21 the Arbitrator awarded.
The Appellant initially argued that the Arbitrator had ordered payment of Attendant Care benefits at a rate higher than had been claimed and mediated. However, the basis of the $810 difference between $3,217.21, and $4,027.21 was clarified in oral submissions as whether the $3,000 per month maximum for attendant care in non-catastrophic cases under paragraph 16(5)2i of the Schedule is to be prorated to a daily maximum.
The Appellant, which has the onus of establishing that a stay should be granted, provided no case law in support of its position. Nor do I see any case law or submissions in this regard in the six pages the Appellant devoted to Attendant Care in its August 12, 2014 arbitration submissions.
The Appellant further argues that the Arbitrator failed to consider the Respondent’s non-compliance with subsection 39(1) of the Schedule that an application for attendant care benefits be in the form of an Assessment of Attendant Care Needs. The Appellant submits that the Arbitrator confused OCF-6s (Expense Claim Forms) with Form 1s (Assessment of Attendant Care Needs), failed to address Part 2 of the OCF-6 that requires an explanation if a bill or receipt is not available and erred in finding that Ms. N.J. Gowan, the Occupational Therapist who prepared a May 30, 2011 attendant care assessment report, interviewed one of the care providers.
However, the Arbitrator does address, at pages 11 and 12 of his decision, subsection 39(1) and applicable case law. He states that “State Farm agrees that the failure of an Applicant to forward a Form 1 to the Insurer before the attendant care services are provided is not a complete bar to retroactively claiming attendant care.”
The Arbitrator further stated:
While there was a lack of definitive evidence by Ms. Gowan as to the specific frequency and duration of the attendant care services provided by Mr. Jazey’s wife and mother, the medical evidence supports her report to be credible and un-contradicted. I find that Mr. Jazey’s wife and mother cannot be penalized for not diarizing what care they provided to Mr. Jazey. State Farm did not provide me with any regulatory or legal requirement that detailed notes must be kept of what care was provided. Further, State Farm did not obtain and provide its own experts’ opinion to indicate that the Attendant Care Benefits sought by Mr. Jazey were unreasonable. State Farm had already paid for assistive devices which Mr. Jazey required for mobility and safety after his operation, yet it denied the requested Attendant Care Benefits. I find this contradiction in State Farm’s actions unfathomable.
At this juncture, I am not persuaded that there is no evidentiary basis to the Arbitrator’s decision regarding attendant care so as to constitute an error of law. I am not persuaded that the Arbitrator failed to consider subsection 39(1) of the Schedule. I am not persuaded that the risk of the exceptional remedy of a stay should fall on the Respondent. I am not persuaded that the hardship of payment by the Appellant outweighs the hardship of non-payment to the Respondent.
In conclusion, I am not persuaded to stay payment of this portion of the Arbitrator’s Order, including payment of accrued interest.
(3) The Hot Tub
Subsection 38(1.1) of the Schedule states:
An insurer is not liable to pay any expense in respect of medical benefits or rehabilitation benefits that was incurred before the insured person submits an application for the benefit that satisfies the requirements of subsection (2) unless the expense is for an ambulance or other goods or services provided on an emergency basis not more than five business days after the accident to which the application relates.
Regarding the Arbitrator’s award of the hot tub expense, the Appellant submits, in part, that the Arbitrator did not address its argument that the Respondent had failed to comply with subsection 38(1.1) in that the purchase and installation of the hot tub was incurred over a year prior to the submission of his OCF-18 (Treatment and Assessment Plan). The Appellant relies in this regard on Mostajo and Wawanesa Mutual Insurance Company, (FSCO A99-000984, January 16, 2001), upheld on appeal (FSCO P01-00011, October 25, 2002) and Bowler and Pafco Insurance Company, (FSCO A12-001507, December 3, 2013).
The Respondent submits that although both parties made submissions on this point, he cannot see that the Arbitrator addressed subsection 38(1.1) in his decision. The Appellant argues that its success on this issue on appeal would wipe out this specific benefit award.
The Respondent argues that the Appellant’s reliance on Mostajo is misguided; despite the contravention of the procedure in the Schedule, Arbitrator Leitch did allow recovery for treatment incurred before a treatment plan was submitted. The Respondent further argued in its written arbitration submissions the consumer protection goals of the legislation, relying on Hill and Coseco Insurance Co./HB Group/ Direct Protect, (FSCO A04-001991, November 11, 2006), upheld on appeal, (FSCO P06-00040, October 17, 2007), and McDonald and Aviva Canada Inc., (FSCO A12-000300, February 21, 2014).
At this juncture, I am persuaded that there is a bona fides, substantive basis, for this ground of appeal, namely, the argued failure of the Arbitrator to address a defence with the potential of eliminating this specific award. I am not persuaded that the hardship of delaying this award outweighs the substance of the ground of appeal. Accordingly, this order is stayed pending resolution of this appeal, subject to any further or other order of an appellate officer. Interest on this award will continue to accrue, as discussed below, but payment of that interest is also stayed pending the conclusion of this appeal, again, subject to any further or other order of an appellate officer.
(4) Massage Therapy
The Appellant submits that in determining the reasonableness and necessity of massage therapy for the Respondent’s neck symptoms, the Arbitrator erred in accepting the evidence of Dr. J.M. McKillop, a psychologist, on a subject on which he was not qualified to opine.
However, in addition to the evidence of Dr. McKillop and that of the Respondent himself, the Arbitrator’s decision also noted his reliance on the evidence of Dr. K. Sequeira, an expert in physical medicine and rehabilitation, and Dr. C. Baily, an orthopedic surgeon specializing in spinal cord injuries. The Appellant does not challenge the qualifications of these medical practitioners to opine on the question of massage therapy.
At this juncture, I am not persuaded that there is no evidentiary basis to the Arbitrator’s decision regarding massage therapy so as to amount to an error of law. I am not persuaded that the risk of the exceptional remedy of a stay of this benefit order should fall on the Respondent. I am not persuaded that the hardship of payment by the Appellant outweighs the hardship of non-payment to the Respondent. I am not persuaded to stay payment of this portion of the Arbitrator’s Order, including payment of accrued interest.
(5) Psychological Counselling
The Arbitrator found the balance of $1,008.70 for psychological counselling reasonable and necessary under the Schedule. The Arbitrator based this finding on the Respondent’s evidence as well as that of Dr. McKillop, his treating clinical psychologist who specializes in rehabilitation psychology. The Arbitrator noted that based on a review by Dr. P. Cobrin, the Appellant “only approved 50% of Dr. McKillop’s recommended treatment plan. State Farm provided no reasons for their decision.” He also noted that the Appellant did not call any witnesses.
The Appellant argued that Dr. McKillop testified that at the end of the eight approved sessions he “didn’t really want to submit another treatment plan” because “things were a little bit better” and Christmas was coming up, a busy time for the Respondent’s profession as a jeweller.
However, Dr. McKillop further testified that if the remaining seven sessions had been approved, he would have continued the treatment. It presently appears that Dr. McKillop’s evidence noted in the prior paragraph went not to the reasonableness or necessity of the remaining seven sessions of his November 30, 2011 OCF-18 but to resubmitting this plan for approval. It is not argued that resubmitting the same treatment plan was a prerequisite to payment.
The Appellant argues that, in any event, the disputed psychological treatment was not incurred and, therefore, is not payable.
In his written arbitration submissions, the Respondent cited Kennelly and Wawanesa Mutual Insurance Company, (FSCO A99-000139, January 21, 2000), that awarded a claimant the cost of treatment on the basis that not awarding the missed but necessary treatments would encourage insurers to “deny payment of needed services with impunity, believing that an arbitrator will not later order them to pay for the treatments, however reasonable, because they can no longer be of benefit to the applicant.” Arbitrator Baltman continued:
Nor am I persuaded that this amounts to a windfall for Ms. Kennelly. She was deprived of a service that she was entitled to by statute. The termination of therapeutic support delayed her recovery, increased her frustration over her impairments, and caused her to lose some of the gains she had made over the previous year. Moreover, the insurer has had the benefit of these monies throughout the time that they should have been dispensed to Ms. Kennelly.
At paragraph 142 of its arbitration submissions, the Appellant argued that the disputed psychological treatment had not been incurred, but without providing any case law in support of its position. The Appellant repeated its argument at paragraph 64 of its February 18, 2015 appeal submissions, but again without any case law in support.
At this juncture, I am not persuaded that there is no evidentiary basis to the Arbitrator’s decision that the disputed psychological counselling was reasonable and necessary so as to amount to an error of law. I am further not persuaded that the substance of this ground of appeal at this present time warrants the exceptional remedy of a stay of this portion of the Arbitrator’s Order, including payment of accrued interest.
(6) Occupational Therapy and Ergonomic Equipment
The Appellant argues that the Arbitrator erred in allowing the introduction of a new treatment plan dated May 29, 2014, served on the Appellant two days before the start of the arbitration hearing. It argues that the Arbitrator deprived it of the opportunity to assess whether the further OCF-18 was reasonable and necessary. Further, it circumvented the mandatory pre-requisite of mediation stipulated by section 280 of the Insurance Act.
The Respondent states that his earlier May 26, 2011 OCF-18 treatment plan for occupational therapy and the cost of ergonomic equipment was in the amount of $26,628.75. The treatment plan shows that amount as being inclusive of tax. The Respondent, however, submits that as shown in Exhibit 9, the 2011 cost was actually $26,728.10, plus a further $3,474.65 for HST, for a total of $30,202.75.
The Respondent’s May 29, 2014 OCF-19 is in the amount of $71,169.76. The Respondent states that part of this further treatment plan was for further equipment, the disposition of which was not before the Arbitrator. However, he submits that as set out in Exhibit 9, the sum of $8,695.12, inclusive of HST, was for the increased cost of equipment recommended in the initial May 26, 2011 OCF-18. This amount, added to $30,202.75, equals $38,897.87. However, Exhibit 9 shows the claimed expense as $38,176.10, which is the amount the Arbitrator ordered.
The Arbitrator references Exhibit 9 at page 16 of his decision. He notes that at the start of the arbitration hearing he made an order allowing the Respondent to claim the increased current cost of the ergonomic equipment and interventions. No reasons are provided in his decision for allowing the amendment. No oral reasons are provided in the transcript.
The Respondent submits that, at a minimum, an award of $26,728.10 should not be stayed. He argues that the Appellant had no evidence disputing the reasonableness and necessity of the May 26, 2011 treatment plan. The Respondent maintains that the Arbitrator found the treatment plan reasonable and necessary to allow him to increase his mobility, reduce pain and lead as normal a home and work life as possible. If this order is stayed, the Respondent argues that he will continue to suffer a loss of income and risk further deterioration in his condition.
The Appellant’s February 6, 2015 appeal submissions, at paragraph 34, state that the Respondent testified on cross-examination that he could not recall any of Ms. Gowan’s recommendations, had no knowledge of whether any of the items in question would assist him in the manner described in the report and had never tested the recommended equipment even though it could have been purchased and returned if he had wanted to try it out. The Appellant further submitted that the Respondent testified “that he does not want or need the newly recommended equipment, as all of his work equipment is in meticulous working order.”
The Appellant’s recitation does not appear to fairly reflect the Respondent’s evidence. At page 114 of the second volume of the transcript, referenced by the Appellant, the Respondent does not say that he does not need the recommended equipment. Rather, he only says that his existing equipment is “all very well kept and they’re in fine, functioning shape.”
Nor was the Respondent unable to remember any of the recommended equipment. At pages 128 to 132 of Volume 2 of the transcript, the Respondent notes his evidence from the prior day about getting “anything to get me in a more upright, ergonomically correct position is going to assist in any of my duties and tasks.” The prior day, the Respondent had testified, in part, at pages 125 to 126 of Volume 1 of the transcript, that Ms. Gowan:
… was in my shop for over two weeks, just assessing the shop and learning about the work, and her girl was with me for quite a while, and we were gathering the information with everybody who was involved. So it’s not all to do with my particular memory regarding it, as I was drugged up pretty good, and it has a lot to do with the people involved in it as well as what I could remember …
She – she was – she wasn’t in there eight hours a day for two weeks, but she was – she was taking measurements, she was taking pictures to see how – would come back the next day and ask more questions and pour over catalogues of what could be an assisting device, what could be useful, what is overkill, what is really more necessary things, then pouring over what she could do to improve my situation through mechanical means, as I was unable to at my work station work comfortably any more, and still am unable to work comfortably.
The Arbitrator noted weaknesses in the reports of the Appellant’s medical examiners, Ms. L. Hisey, an occupational therapist, and Dr. A. Kertesz, neurologist. He also noted that neither was called to give evidence.
The Arbitrator, in awarding the cost of occupational therapy and ergonomic equipment, relied on the evidence of Ms. Gowan, OT, as well as Dr. Sequeira, an expert in physical medicine and rehabilitation, who opined that if Ms. Gowan’s recommendations were not implemented the Respondent was at risk of quickly deteriorating. The Arbitrator also relied on the evidence of Ms. Fox, who had 18 years of experience as a physiotherapist with considerable experience working with complex orthopedic trauma victims, and Dr. Bailey, an orthopedic surgeon specializing in spinal cord injuries.
At this juncture, I am not persuaded that there is no evidentiary basis to the Arbitrator’s decision regarding the OCF-18 dated May 26, 2011 recommended occupational and ergonomic equipment totaling $26,628.75. I am not persuaded to stay this portion of the Arbitrator’s Order, including not staying accrued interest on this amount.
Pending the conclusion of this appeal and subject to any further or other order of an appellate officer, I am persuaded to stay payment of the difference of $11,547.35 between the May 26, 2011 OCF 18 and the $38,176.10 awarded. Part of this amount pertains to HST applicable to the original OCF-18 that may or may not have been already included. The balance pertains to the increased costs of suppliers. At this juncture there is a valid issue regarding notice.
Interest will continue to accrue on the stayed amount, but payment of that interest is also stayed pending the conclusion of this appeal, subject to any further or other order of an appellate officer.
(7) The Special Award
Entitlement to a special award is set out in subsection 282(10) of the Insurance Act:
If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.
The Appellant raised as a ground of appeal that the Respondent had failed to comply with the pre-hearing arbitrator order that he provide particulars of his claim for a special award prior to the arbitration hearing. However, the Appellant was unable to locate any such order.
The Appellant submits that the Arbitrator failed to consider the general principles guiding the inquiry into whether an insurer's conduct warrants a special award summarized in Brazier and RBC General Insurance Company, (FSCO A07-001290, May 28, 2009):
- an insurer is not held to a standard of perfection in responding to a claim, that an insurer’s claims decision is to be judged on the basis of the information available at the time, and not from hindsight, and that an insurer is not to be found unreasonable just because an arbitrator concludes its claims decision was wrong.
- A special award is not granted merely because the insurer incorrectly interpreted or failed to comply with a provision of the Schedule; if that were the case, a special award would be granted to every successful applicant. An insurer can come to the wrong conclusion without having acted unreasonably. To merit the granting of a special award, there must be something more - unreasonable conduct on the part of the insurer.
- the question of whether an insurer's delay or failure in paying a benefit is “unreasonable” is fact driven and highly dependent on the arbitrator's view of the evidence.
- unreasonable conduct does not need to amount to “bad faith” or “wilful misconduct.”
- in considering a special award, the conduct of both parties should be considered.
- the sort of conduct that would constitute “unreasonable” behaviour in withholding or delaying payments includes “excessive, imprudent, stubborn, inflexible, unyielding or immoderate” behaviour.
- an insurer’s failure to act promptly where there has been a change or clarification of the law has formed the basis for a special award.
After setting out subsection 282(10) of the Insurance Act, the Arbitrator states:
Pursuant to section 282(10) of the Insurance Act, I find that State Farm has unreasonably withheld or delayed payments to Mr. Jazey in denying treatments and withholding payments; State Farm accepted the opinions of its medical advisors to support its routine denials of benefits; and it should have been aware that these denials would cause Mr. Jazey undue stress and financial hardship and reduce the opportunity for him to recover from his injuries.
The Arbitrator then acknowledges the Respondent’s eight pages of written arbitration submissions detailing his claim for a special award, the maximum amount being $131,408.27 representing 50% of the benefits and applicable interest. After summarizing the Appellant’s submissions against a special award, the Arbitrator states:
Considering all the relevant factors in this matter, I agree with Mr. Jazey’s contention that State Farm has acted unreasonably and Mr. Jazey is entitled to a special award.
The Insurance Act states that an Arbitrator shall award a lump sum of up to 50% of the amount to which the person was entitled, etc. It does not set a quantum but leaves it to the Arbitrator to determine whether that amount should be one dollar or the maximum of 50%. In this matter, because State Farm has provided some benefits to Mr. Jazey and Mr. Jazey has been able to return to his self-employment, albeit to a limited degree compared to his pre-accident ability, and
Mr. Jazey has failed to provide some specific documentation to State Farm, I am fixing the special award at 25% of the amount to which he claims entitlement.
I hereby order that State Farm shall pay a lump sum to Mr. Jazey of 25% of the amount to which he is entitled, which amount shall be $32,852.07.
The Appellant submits that the Arbitrator “wholly ignores the principles of reasonableness as set out in Brazier” regarding Special Awards. It argues that the law on the issuance of a Special Award does not preclude insurers from relying on their own medical assessors. It also submits that the Arbitrator’s award is contrary to Liberty Mutual Insurance Company and Persofsky, (FSCO P00-00041, January 31, 2003), and other decisions, in failing to distinguish between those benefits found to have been unduly delayed and those that were simply owing.
The Respondent argues that he provided the Arbitrator with case law in Cowans and Motors Insurance Corporation, (FSCO A09-003237, October 15, 2010) that simply “papering” a termination by obtaining a compliant report from an assessor is not necessarily a protection against a special award if an insurer closes its mind to other information that might have cast its decision in doubt. The Respondent submits that “this authority was clearly accepted.”
As noted, a special award is a function of the benefits awarded as well both pre-judgment and the special award interest on those awards. This preliminary appeal decision has stayed two monetary portions, neither insignificant, of the Arbitrator’s benefit awards. I am persuaded that payment of the special award should be stayed pending resolution of this appeal, subject to any further or other order of an appellate officer.
However, I note that the Arbitrator awarded a 25% special award that converted, at the time of his decision, to a lump sum of $32,852.07. As noted, interest continues to accrue on those benefit orders that have been stayed. If the special award is upheld, there may be a question whether the 25% special award is to be applied against a higher amount.
(8) Interest
Subsection 283(6) of the Insurance Act allows the stay of the order of the arbitrator. It does not stay the accrual of pre-judgment interest under section 46 of the Schedule.
The Appellant submits that it has not unduly delayed this proceeding. Rather, it argues that the Arbitrator failed to consider the Respondent’s undue delay in failing to pursue his claims in a diligent and timely fashion, despite having the benefit of legal counsel.
However, “undue delay” is not the prerequisite of or a criterion to be considered regarding the payment of interest. Rather, the provision states:
46(1) An amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this Part.
(2) If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.
Accordingly, I am not persuaded I have the authority to stay the accrual of interest. I have, however, stayed, as noted above, the payment of interest in certain cases. However, in those cases, interest continues to accrue.
(9) Arbitration Legal Expenses
The Arbitrator held, regarding arbitration expenses:
I find that Mr. Jazey is entitled to his expenses in respect of this Arbitration. If the parties are unable to agree on the quantum they may make submissions to me within 30 days of the release of this decision.
The Appellant submits that as the Arbitrator erred in law regarding each of his benefit awards, his expense award is also an error of law.
Rule 75 of the Code sets out the criteria in awarding legal expenses. These include each party’s degree of success. The Respondent was completely successful at arbitration. I have not been persuaded to stay most of the Arbitrator’s awards. I am not persuaded to stay the Arbitrator’s expense entitlement award or his determination of the quantum of that award, if that is in issue. This is without prejudice to the Appellant’s right to continue its appeal of the Arbitrator’s expense entitlement award and of either party’s right to appeal the Arbitrator’s determination of the amount of legal expenses payable.
III. APPEAL LEGAL EXPENSES
The question of the legal expenses of this preliminary appeal decision is deferred to the conclusion of this appeal, subject to any other or further order of an appellate officer.
March 24, 2015
Lawrence Blackman Director’s Delegate