Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2015 ONFSCDRS 68
Appeal P15-00009
OFFICE OF THE DIRECTOR OF ARBITRATIONS
ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA
Appellant
and
NICLAS OLSEN
Respondent
BEFORE:
Delegate Lawrence Blackman
REPRESENTATIVES:
Mr. Thomas R. Hughes for the Appellant, Royal & SunAlliance Insurance Company of Canada
Mr. Andrew Bergel for the Respondent, Mr. Niclas Olsen
HEARING DATE:
March 18, 2015
PRELIMINARY APPEAL ORDER
Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
Exercising my discretion under Rules 50.2 and 51.2(c) of the Dispute Resolution Practice Code (Fourth Edition – Updated January 2014), I presently reject this appeal from the Arbitrator’s December 30, 2014 decision without prejudice to the Appellant to renew its appeal upon the issuance of a final arbitration decision on the entitlement and quantum issues in dispute.
An appeal expense hearing of this preliminary appeal decision shall be requested, as set out below, within thirty days of the date of this decision.
April 2, 2015
Lawrence Blackman Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE PRELIMINARY ISSUE
Rule 50.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated – January 2014) (the “Code) provides that a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute have been finally decided, unless ordered otherwise. Rule 51.2(c) 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.
On December 30, 2014, Arbitrator Robinson (the “Arbitrator”) issued a preliminary issue decision holding that the Appellant, Royal & SunAlliance Insurance Company of Canada, had waived its right to dispute that the April 15, 2011 incident involving the Respondent, Mr. Olsen, was not an accident within the meaning of the Schedule.1
The Arbitrator specifically held:
The insurer issued an OCF-9 on April 13, 2012 in which it confirmed to the applicant that it had completed its investigation and that it was accepting the applicant’s claim for income replacement benefits. The confirmation was not a clerical oversight nor was it qualified in any way. The issue was identified by the insurer at a very early date and the insurer’s claims adjuster had the benefit of legal advice at all material times prior to issuing the OCF-9. There was a conscious intention on the part of the insurer to waive rights of which it was fully apprised. Its communication was clear and unambiguous. The insurer cannot now resile from that commitment.
The Appellant asks that leave be granted to accept at this time this appeal from the Arbitrator’s preliminary arbitration order.
Delegate Makepeace, in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), held that the purpose of the present Rule 50.2 of the Code is to:
… facilitate the most cost-effective resolution of disputes by minimizing the time and money spent on procedural or collateral matters. The decision whether to hear an appeal of a preliminary order is discretionary … the over-arching principle guiding the exercise of the discretion is that the rule “should be broadly interpreted to produce the quickest, most just and least expensive resolution of the dispute.” The criteria to be considered include the apparent strength of the appeal, the importance or novelty of the issue raised, and whether rejecting the appeal or hearing it will prejudice either party.
Security National Insurance Co./Monnex Insurance Mgmt. Inc. and Hodges, (FSCO P12-00029, August 13, 2012), set out the following criteria to be considered under Rule 50.2:
As set out in Allstate Insurance Company of Canada and Tesfay, (FSCO P99-00023, June 21, 1999), Allstate Insurance Company of Canada and Al-Obaidi, (FSCO P99-00009, May 2, 2000) and Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), the decision whether to hear an appeal from a preliminary or interim order is discretionary. The relevant criteria include:
(a) the apparent strength of the appeal;
(b) the importance or novelty of the issue(s) raised;
(c) whether rejecting or hearing the appeal will prejudice either party;
(d) the preference of the parties;
(e) whether the arbitration decision represents a departure from prior cases; and,
(f) whether rejecting or hearing the appeal would provide the quickest, most just and least expensive way of disposing of the issues between the parties.
II. BACKGROUND AND SUBMISSIONS
The Arbitrator found that the Respondent was an independent owner-operator of a transport truck insured by the Appellant under a commercial policy. On April 15, 2011 the Appellant was engaged in transporting a trailer-load of scrap metal to the premises of Triple M. Metal LP (“Triple M”), which he had done many times in the past. After an initial radiation test was conducted of his load, the yard attendant directed him to a designated unloading area where the Respondent awaited the foreman’s further instructions. The Respondent was required by Triple M to remain in his vehicle until the truck ahead of him had discharged its load.
While sitting in his truck cab, the Respondent was struck in the head and injured by a piece of scrap metal that had been propelled out of the pit at a high speed. The Respondent testified that he has not worked since the date of this incident. The Respondent applied to the Appellant, his first-party automobile insurer, for statutory accident benefits under the Schedule after learning he did not qualify for WSIB benefits.
From October 2011 until April 2012 the Appellant investigated whether the Respondent’s claim met the Schedule definition of “accident.” On April 13, 2012 the Appellant delivered an OCF-9 (Explanation of Benefits) stating, in part, “Please be advised that our investigation is complete and we are accepting your claim for accident benefits.”
As stated by the Arbitrator, over the next year the Appellant made certain minor payments to the Respondent. However, the parties could not agree on the quantum of income replacement benefit (“IRB”) payable. Then, on April 12, 2013, the Appellant sent a further OCF-9 to the Respondent stating, in part, “We are terminating your benefits because the incident giving rise to your injuries is not an ‘accident’ as defined in Sect 2 (1) of the Statutory Accident Benefits Schedule.”
The Respondent applied for Mediation at the Commission. The September 12, 2012 Report of Mediator states that the parties were unable to resolve their dispute. On November 14, 2012, the Commission acknowledged the October 17, 2012 Application for Arbitration. The September 4, 2013 pre-hearing discussion set June 25, 2014 for a preliminary issue hearing of whether the April 15, 2011 incident was an accident within the meaning of the Schedule.
The June 10, 2014 pre-hearing resumption adjourned the preliminary issue hearing to September 16 and 17, 2014. The Respondent added the further preliminary issues of whether the Appellant had waived or was estoppel from relying on the defence that there was not an accident as defined under the Schedule.
The Arbitrator held that it was not necessary to consider the issue of estoppel or whether the incident in question was an accident, as defined. Rather, the Arbitrator only addressed the question of waiver, applying the definition used by then Arbitrator Evans in McDonald and Guarantee Company of North America, (FSCO A01-000399, October 29, 2002):
(1) A party must knowingly forego reliance upon some known right or defect: one should not be able to waive rights of which one was not fully aware or apprised;
(2) The conduct purporting to be a waiver must be express and unequivocal; and
(3) What must be ascertained is a conscious intention to abandon a known right.
The Arbitrator held that the Appellant had a conscious intention to waive rights of which it was fully apprised and that its “communication was clear and unambiguous.” He found that this matter had been assigned to Mr. A. Hissa, a very experienced claims adjuster, who had exclusive carriage of this matter from September 19, 2011. From the redacted adjuster’s log notes it was evident to the Arbitrator that Mr. Hissa had obtained legal advice on a number of occasions during 2011 and early 2012 regarding this file.
In the Arbitrator’s view, the Respondent had suffered what might conceivably be a catastrophic impairment. The claim was a matter of the greatest importance to all concerned. On April 13, 2012, which on the evidence of the redacted adjuster’s notes was the last occasion he sought legal advice, Mr. Hissa confirmed to the Respondent that his investigation was “complete.”
The Arbitrator found that this experienced adjuster was refusing to admit liability on behalf of the Appellant for a period of many months until he had satisfied himself, supported by the advice of counsel, that the Respondent’s injury occurred as a result of an accident. The Arbitrator found that this was “not a clerical oversight nor was it qualified in any way.” Rather, the Appellant proceeded to negotiate with Respondent’s counsel for many months regarding the evidence required to prove the quantum of IRBs to which the Respondent was entitled. The Arbitrator noted that the Appellant had not paid any IRBs to date.
The Arbitrator concluded:
I find that the OCF-9 dated April 13, 2012 represented a waiver on the issue of “accident” made with conscious intention, in full knowledge of the insurer’s rights and that it was express and unequivocal. At that point the door was closed and the insurer cannot now reopen the issue.
III. SUBMISSIONS
As stated, the Appellant seeks leave to appeal the Arbitrator’s preliminary decision. In the alternative, it seeks “a direction from the Director’s Delegate to compel the arbitrator to make a determination on the other two issues that were before him.” However, the Appellant did not provide any authority as to my jurisdiction to give such direction at this preliminary stage of the appeal prior to any finding of an error of law.
The Appellant argues that the Arbitrator’s decision is inconsistent, that he found that the Appellant did not know about the facts of the loss until August 2012 yet held that the Appellant’s April 2012 letter constituted waiver.
However, at page seven of his decision, the Arbitrator only states that the Appellant’s counsel “maintains that I should accept the testimony of Mr. Hissa that he did not ‘know about the nature of the loss’ until after August 2012.” The Appellant submits that as the Arbitrator did not explicitly reject this evidence, he is deemed to have accepted it. However, the Arbitrator stated, again on page seven of his decision, that he wholly rejected these submissions.
The Appellant argues that, in any event, the equitable doctrine of waiver has been misapplied to create coverage for an incident it maintains was not an accident and is not covered by the Schedule. The effect of the Arbitrator’s decision, the Appellant submits, is not a “shield” creating equitable relief, but rather a “sword” creating a windfall for the Respondent.
In oral submissions, the Appellant cited section 131 of the Insurance Act:
Waiver of term or condition
- (1) No term or condition of a contract shall be deemed to be waived by the insurer in whole or in part unless the waiver is stated in writing and signed by a person authorized for that purpose by the insurer.
Idem
(3) Neither the insurer nor the insured shall be deemed to have waived any term or condition of a contract by any act relating to the appraisal of the amount of loss or to the delivery and completion of proofs or to the investigation or adjustment of any claim under the contract.
I do not see that the Appellant referenced this provision in its September 17, 2014 arbitration written submissions, nor in its written appeal submissions of January 20 and February 23, 2015.
The Appellant concedes that its April 13, 2012 OCF-9 was in writing. It concedes it was signed. It argues that the Arbitrator erred in reading into that OCF-9 that the Appellant was waiving its rights. However, more fundamentally, the Appellant says that the principles of waiver and estoppel are irrelevant to this case, that the insured person must still establish that there is an accident for there to be coverage, that equity cannot be used to create coverage.
The Appellant argues that this appeal should be accepted at this time for the following reasons:
- There is strength to this appeal. The Arbitrator found that waiver had been established without giving consideration to and/or failing to give reasons for his finding for two of the three branches of the three-part test: (1) whether the Appellant was fully aware or apprised of the rights and defects with the file, and (2) whether the Appellant’s conduct purporting to be a waiver was express.
The Appellant submits that the Arbitrator’s decision was only clear that he found the April 13, 2012 OCF-9 to be a conscious intention to abandon a known right.
The Arbitrator’s decision represents a departure from prior cases, there being no precedent where an arbitrator found that an insurer’s conduct amounted to waiver. Accordingly, this decision has broad and significant implications respecting the implications of an insurer’s communication in the ordinary course of adjusting a file.
Neither party is prejudiced by this appeal being heard at this time as it will effectively decide all of the issues in dispute in this proceeding. In any event, part of any delay in this matter is the fault of the Respondent in adjourning the initial date for the preliminary issue hearing. Further, if the Respondent wanted to be covered, he should have taken out Worker’s Compensation Insurance.
The Appellant thus argues that hearing this appeal at this time will result in the quickest, most just and least expensive way of disposing of the issues between the parties. If this appeal is rejected, the parties will be forced to a hearing on the merits of the case. Only after those entitlement issues have been addressed will there be a full right of appeal. Yet, even at that point two of the three preliminary issues put before the Arbitrator will not yet have been adjudicated.
The Respondent asks that this appeal be rejected for the following reasons:
The appeal is without merit. Appeals from the decision of an Arbitrator are limited to questions of law. The Appellant is challenging the Arbitrator’s finding of fact that it accepted that the Respondent was involved in an accident as defined and had waived its right to later challenge same. In any event, the Arbitrator, in a clear, extensive and well-reasoned decision, addressed all three branches of the test for waiver and correctly applied the law. Further, his decision was overwhelmingly supported by the evidence.
Regarding the first branch of the waiver test, the Arbitrator found that the Appellant’s adjuster, Mr. Hissa, had “availed himself of the opportunity to take legal advice on a number of occasions prior to issuing his OCF-9 dated April 13, 2012 in which he accepted the claim and confirmed that his investigation was “complete.’”
Regarding the second branch, the Arbitrator cited the Appellant’s three notices it sent the Respondent between October 2011 and April 2012 stating it would not accept the Respondent’s benefits claim until it had completed its investigation. The Arbitrator found that the Appellant’s April 13, 2012 OCF-9 was a confirmation it had satisfied itself that the Respondent was in an accident and that its investigation was complete.
The case is fact specific. Accordingly, the matter is not novel and its importance is confined to the parties. While there is no prior case where waiver was found, that is only because no other insurer has taken such an unreasonable position.
Hearing this appeal will prejudice the Respondent. This adjudicative system was intended to resolve disputes in a timely manner. Almost four years have passed since the incident and the Appellant has paid virtually no benefits notwithstanding the Respondent sustained significant injuries including a traumatic brain injury and the inability to return to any employment. Accepting this appeal would only add time and expense.
IV. ANALYSIS
Both parties agree that this preliminary appeal decision determines only when this appeal will be received, not that the Appellant is barred from renewing this appeal at a later date.
Applying the criteria set out in Torok and the cases noted above, it is first obvious that the parties are strongly divided on whether this appeal should be heard at this time.
Second, the issue of waiver is not new at the Commission.
The Appellant’s written appeal submissions argued that the Arbitrator erred in failing to apply the correct test of waiver in Budd and Personal Insurance Company of Canada, (FSCO P99-00032, January 8, 2000). The Appellant’s own written submissions at arbitration, however, cited the test for waiver in McDonald and failed to include Budd in its Brief of Cases. In oral appeal submissions the Appellant conceded that the test for waiver in McDonald and Budd were the same. I agree with the Respondent that the departure from prior Commission cases is not based on applying a different definition of waiver.
Turning to the apparent strength of the appeal, the Appellant argues vehemently that the crucial issue in this case is whether the Respondent was injured in an accident as defined under the Schedule. The Arbitrator did not determine that question. Subsection 3(1) of the Schedule states:
“accident” means an incident in which the use or operation of an automobile directly causes an impairment or directly causes damage to any prescription eyewear, denture, hearing aid, prosthesis or other medical or dental device;
As noted above, on April 13, 2012 the Appellant delivered an OCF-9 expressly and unequivocally stating:
Please be advised that our investigation is complete and we are accepting your claim for accident benefits.
This was not a hasty, impulsive, ill-considered decision. Rather, the Arbitrator found as fact:
The Appellant investigated for seven months, from September 2011 to April 2012, specifically whether the Respondent’s claim met the definition of accident, as defined. It sent letters dated October 18 and October 24, 2011 and February 7, 2012 to the Respondent stating it was still investigating the claim.
The Appellant’s adjuster, Mr. Hissa, “availed himself of the opportunity to take legal advice on a number of occasions prior to issuing his OCF-9 dated April 13, 2012 in which he accepted the claim and confirmed that his investigation was “complete.”
The Appellant arranged an Examination under Oath for April 17, 2012. By letter dated April 9, 2012, the Appellant’s then legal counsel cancelled the scheduled examination under oath.
For the next year the Appellant discussed with the Respondent the quantum of benefits payable.
The Appellant states that only in August 2012 did it discover for the first time that the Respondent had been struck by a piece of scrap metal propelled out of the pit. It argues that until that time it did not know the source of the object. The Respondent responds that Triple M, the owner of the premises where the incident took place, knew from the date of the incident how the injury took place. In any event, the Arbitrator did not accept Mr. Hissa’s testimony.
Further, the Appellant concedes there is no evidence before me as to why, after its submitted discovery of crucial new information in August 2012, it then took eight months to advise the Respondent, in April 2013, of its changed position regarding whether there was an “accident.”
The Appellant’s own actions and past concessions in this matter combined with the Arbitrator’s findings regarding Mr. Hissa’s credibility, at this juncture, cause pause as to the strength of their position on this issue.
I note that the January 20, 2015 Notice of Appeal states that the arbitration transcript would be ordered and available in thirty days. At arbitration, evidence was heard on September 16, 2014 and submissions were provided the next day. Only on March 25, 2015, after both written and oral submissions on this preliminary appeal issue were heard, did the Appellant provide a copy of the arbitration transcript, but only for September 17, 2014. The Appellant’s letter did not request a further opportunity to provide submissions. The Appellant did not indicate it would be providing a transcript of the actual evidence received at arbitration on September 16, 2014.
However, in deciding whether to accept this appeal at this time, I find the most important criterion is whether rejecting or hearing the appeal would provide the quickest, most just and least expensive way of disposing of the issues between the parties.
The Respondent was injured April 15, 2011. The Commission acknowledged the Application for Arbitration on November 14, 2012.
The Code states that pre-hearing dates should be available six to eight weeks from the registration of a completed Application for Arbitration. The pre-hearing discussion was held ten months later, on September 4, 2013. The Code states that hearing dates should be available four to six months from the pre-hearing discussion. The pre-hearing arbitrator set a preliminary issue hearing date of June 25, 2014, nine months later.
That hearing date was subsequently adjourned to September 16 and 17, 2014. The reasons for the adjournment included the parties not having completed their document exchange, the parties being unable to agree on a statement of facts and an extra day being needed for the hearing. The Arbitrator issued his decision on December 30, 2014. The decision did not decide whether the Respondent was injured in an accident as defined in the Schedule.
The Appellant states that the arbitration hearing was bifurcated and the preliminary issues dealt with initially and separately because the determination of those issues could be dispositive of the entire arbitration, leading to an expedited, simplified and cost-effective resolution of this matter. I asked how that was working out. Evidently, not so well.
It is now approaching two and a half years since the Respondent commenced arbitration.
If I accept this appeal at this time, the matter will proceed through this internal appeal system with a probable application for judicial review whichever way I decide, and then as likely as not, to further appeal. The Appellant is confident that the Divisional Court will have disposed of this matter by the middle of 2016 with the implicitly expected result that the matter would go back to arbitration for a determination of whether the Respondent was injured in a motor vehicle accident as defined.
If, however, the Respondent is ultimately successful regarding these preliminary issues, he would then return to arbitration for a determination of his substantive claims. Whether a decision in that regard may be forthcoming four, five or more years after the Respondent initially accessed arbitration is a matter of speculation.
I noted to the Respondent that if he proceeds straight to a hearing on the substantive issues, he may still have to ultimately return to a determination of whether there was an accident as defined. The Respondent stated that he was prepared to take that risk. Although not specifically referenced by either party, I do note section 287 of the Insurance Act:
An insurer shall not, after an order of the Director or of an arbitrator appointed by the Director, reduce benefits to an insured person on the basis of an alleged change of circumstances, alleged new evidence or an alleged error, unless the insured person agrees or unless the Director or an arbitrator so orders in a variation or appeal proceeding under section 283 or 284.
As well, subsection 283(6) of the Insurance Act states that an “appeal does not stay the order of the arbitrator unless the Director decides otherwise.”
The February 2014 Final Report of the Ontario Automobile Dispute System Review, commissioned by the Provincial Legislature, specifically addressed the question of timeliness in the dispute resolution system:
Timeliness
Every stakeholder agreed that timeliness is an important principle in the DRS. The parties need to be able to access a system that can resolve disputes expeditiously.
It was noted there are many timelines already prescribed in the Dispute Resolution Practice Code that apply to both DRS users and dispute resolution staff at FSCO. Unfortunately, these timelines are not being applied in all cases. Setting out statutory timelines with penalties when they are not met without good cause appears to have broad support. In addition, most stakeholders were supportive of compressing the timelines as long as what is being proposed is realistic.
The Final Report concluded that “All in-person hearings should take place within 90 days following the receipt of a completed application.”
At oral submissions I noted the Final Report’s emphasis on timeliness. I raised the possibility of the arbitration and this appeal (and any subsequent application for judicial review) moving in tandem. The Appellant objected to a determination of the substantive arbitration issues prior to it having exhausted all of its appeal options regarding the determination of its preliminary issue as to whether the incident on April 15, 2011 was an accident within the meaning of the Schedule.
The onus is on an appellant to establish that it should be allowed to appeal a preliminary or interim order of an arbitrator that does not decide all of the issues in dispute. I am not persuaded that hearing this appeal at this time would provide the quickest, most just and least expensive way of disposing of the issues between the parties.
Accordingly, exercising my discretion under Rules 50.2 and 51.2(c) of the Code, I presently reject this appeal from the Arbitrator’s December 30, 2014 decision without prejudice to the Appellant to renew its appeal upon the issuance of a final arbitration decision on the entitlement and quantum issues in dispute.
V. EXPENSES
If the parties cannot agree on the legal expenses of this preliminary issue appeal hearing, in accordance with Rule 79.1 of the Code either party may request an appeal expense hearing within thirty days of the date of this decision.
The request for an appeal expense hearing shall be accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, as well as submissions on such entitlement and/or quantum expense issues as are in dispute.
April 2, 2015
Lawrence Blackman Director’s Delegate
Date
Footnotes
- The Statutory Accident Benefits Schedule, Ontario Regulation 34/10, as amended.