Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2016 ONFSCDRS 134

FSCO A09-001861

BETWEEN:

THERESA KEHOE

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

Before: Dana M. Hirsh

Heard: Written submissions received by July 3, 2015

Appearances: Arthur R. Camporese for Ms. Kehoe

Ian D. Kirby for Allstate Insurance Company of Canada

Issue:

The Applicant, Theresa Kehoe, claims to have been involved in a motor vehicle accident on October 19, 2002. She applied for and received statutory accident benefits from Allstate Insurance Company of Canada (“Allstate”), payable under the Schedule.¹ Disputes arose between the parties concerning the Applicant’s entitlement to certain benefits. The parties were unable to resolve their disputes through mediation, and Ms. Kehoe applied for arbitration at the Financial Services Commission of Ontario (“FSCO”) under the Insurance Act, R.S.O. 1990, c. I.8, as amended (“Insurance Act”).

The preliminary issue in this matter is:

Whether Ms. Kehoe is precluded from proceeding to arbitration with her non-earner benefit claim because her application for arbitration was filed more than two years after the Insurer’s refusal to pay the benefit claimed, contrary to subsection 51(1) of the Schedule, and subsection 281.1(1) (formerly subsection 281(5)) of the Insurance Act.

Result:

Ms. Kehoe’s claim for non-earner benefits is not precluded by subsection 51(1) of the Schedule, and subsection 281.1(1) (formerly s.281(5)) of the Insurance Act from proceeding to arbitration.

EVIDENCE AND ANALYSIS:

Factual Background:

The relevant facts are not in dispute.

At some point after the motor vehicle accident of October 19, 2002, Allstate sent a letter to the Applicant, along with a booklet entitled “What You Need to Know about Accident Benefits Coverage”. The document contained a description of various benefits to which Ms. Kehoe may be entitled, including, but not limited to, caregiver and non-earner benefits.²

On October 28, 2002, the Applicant submitted an Application for Accident Benefits to Allstate (OCF-1). The Application noted, among other things, that at the time of the accident, Ms. Kehoe was 38 years old, unemployed, and the caregiver to her three children, ages 10, 11 and 16.³

A Disability Certificate dated October 28, 2002 was completed by a family physician, Dr. John Michiels.⁴

On October 30, 2002, Allstate sent the Applicant an Explanation of Benefits (“OCF-9 dated October 30, 2002”).⁵ The Insurer addressed the weekly benefits as follows:

Part 2 – Income Replacement Benefits: The boxes stating “eligible” and “not eligible” were left blank. The Explanation stated: “N/A. The Claimant was not employed at the time of the accident, and did not work 26 out of 52 weeks prior to the accident.”

Part 3 – Non-Earner Benefit Expenses: The boxes stating “eligible” and “not eligible” were left blank. Under the “Explanation why you are not eligible for non-earner benefit” it stated: “N/A. Mandatory 26-week waiting period. There has to be a complete inability to carry on [a] normal life to qualify for this benefit.”

Part 4 – Caregiver Benefits: The boxes stating “eligible” and “not eligible” were left blank. Under “Amount Claimed” and “Amount Payable”, it said $0.00. The reason why expenses were not payable was: “No expense has been incurred/submitted to date.”

The OCF-9 dated October 30, 2002 did not contain separate correspondence from Allstate to Ms. Kehoe.⁶ It was not accompanied by a written notice concerning the Applicant’s right to dispute or an explanation of the dispute resolution process.

The Applicant was never provided with a Notice of Election of Weekly Benefits from the Insurer.⁷

On November 25, 2002, the Insurer sent an Explanation of Benefits to the Applicant, and provided payment for caregiver benefits, for the period from October 19, 2002 to November 25, 2002.⁸ Allstate subsequently had the Applicant undergo Insurer Examinations. Based on the findings of those examinations, the Insurer decided to terminate caregiver benefits. On June 16, 2003, Allstate sent the Applicant and her solicitor, among other things, an OCF-9, indicating that Allstate intended to cease the payment of caregiver benefits effective July 1, 2003.⁹ This was accompanied by a separate notice explaining the right to dispute and the dispute resolution process.

On or about February 18, 2009, the Applicant filed an Application for Mediation for, among other things, caregiver benefits from July 1, 2003 to October 19, 2004.¹⁰

On or about November 1, 2009, the Applicant filed an Application for Arbitration for, among other things, caregiver benefits, from October 19, 2002 to date and ongoing.¹¹

On March 12, 2010, Arbitrator Sampliner issued a pre-hearing letter wherein he listed non-earner benefits as an issue in dispute for the arbitration hearing. Specifically, non-earner benefits were being claimed at a rate of $185.00 per week, from July 16, 2008 to date and ongoing, since the Applicant’s youngest child turned 16 on July 15, 2008.¹² Allstate raised a preliminary issue that Ms. Kehoe was precluded from proceeding to arbitration with her caregiver benefit claim. That preliminary issue hearing was heard by Arbitrator Lee. In his November 22, 2011 preliminary issue decision,¹³ Arbitrator Lee held, among other things, that Ms. Kehoe was precluded from proceeding to arbitration with her caregiver benefit claim because it was started beyond the two-year limitation period provided for in subsection 51(1) of the Schedule, and what was subsection 281(5) of the Insurance Act. Of particular importance to his decision was that based on the evidence, he was persuaded that Allstate had sent Ms. Kehoe a Right to Dispute form with its caregiver benefit denial, and that the form fulfilled the requirements in Smith v. Co-operators General Insurance Company.¹⁴ Specifically, the Right to Dispute form was written in clear and straightforward language directed toward an unsophisticated person, informing the insured of the dispute resolution process, and describing the important points of that process. On November 30, 2012, Delegate Blackman confirmed Arbitrator Lee’s holding that Ms. Kehoe’s claim for caregiver benefits was precluded from proceeding to arbitration.¹⁵

On July 25, 2013, after the issuance of Arbitrator Lee’s decision precluding Ms. Kehoe from proceeding to arbitration on the claim for caregiver benefits, the Applicant submitted an Application for Mediation to FSCO listing non-earner benefits as an issue in dispute in relation to both initial entitlement and entitlement to benefits past 104 weeks. The Application for Mediation does not specify the exact dates for which the Applicant is seeking non-earner benefits. The Application for Mediation listed October 19, 2002 as the date Ms. Kehoe submitted her request to the Insurer, and that there was no denial provided by the Insurer.¹⁶

The crux of this preliminary issue hearing is whether or not the Applicant’s claim for non-earner benefits is statute-barred because it was made more than two years after a proper refusal by Allstate to pay non-earner benefits.

Insurer’s Position:

The Insurer acknowledged that the Applicant never submitted a Notice of Election of Benefits, and that the Insurer did not subsequently require one from the Applicant. Nonetheless, it takes the position that it was not required to provide the Applicant with an opportunity to make an election because, according to the Insurer, it was clear that the Applicant was ineligible for non-earner and income replacement benefits.

The Insurer takes the position that the explanation it provided under Part 3 of the OCF-9 dated October 30, 2002 constituted a clear and unequivocal denial of non-earner benefits.

The Insurer submits that given that the Applicant is barred from pursuing her claim for caregiver benefits because of the two year limitation period imposed by subsection 281.1(1) of the Insurance Act, and the issue of non-earner benefits wasn’t raised until March 12, 2010, that the limitation period also applies to the non-earner benefit claim.¹⁷

Applicant’s Position:

The Applicant submits that in order for an insurer to rely on the limitation period to defeat an Applicant’s claim, it must establish on a balance of probabilities that it provided a clear, unequivocal and valid refusal of the benefit claimed, in which case the time limit begins to run as of the date of the refusal.

The Applicant submits that Allstate cannot rely on the limitation period prescribed by subsection 51(1) of the Schedule and subsection 281.1(1) of the Insurance Act, because the purported denial in the OCF-9 dated October 30, 2002 did not constitute a valid refusal to pay non-earner benefits so as to trigger the commencement of a limitation period against the Applicant.

The Applicant submits that subsection 35(9) of the Schedule mandates that where the insurer makes a determination that an insured person is not entitled to a weekly benefit, the insurer shall set out the benefit it refuses to pay and the reasons for its decision.

The Applicant submits that “this is not a case of insufficient reasons, or reasons that are not legally correct. This is a case of “total absence of reasons.”¹⁸

The Applicant further submits that section 49 of the Schedule provides that if an insurer refuses to pay a benefit under the Schedule, the insurer must provide the person with a written notice concerning the person’s right to dispute. The Applicant states that the OCF-9 dated October 30, 2002 does not meet the Insurer’s obligations set out in Smith, in that it failed to provide a description of the dispute resolution process. ¹⁹

The Applicant submits that the denial of non-earner benefits must be assessed independently from the denial of caregiver benefits, and that in each instance, the Insurer must comply with its obligations set out in Smith. Moreover, the Applicant submits that the Insurer failed to provide the Applicant with a notice of election within 10 business days after receipt of the application, contrary to subsection 36(3) of the Schedule, and that the Insurer cannot rely upon a technical defence if it is in breach of the mandatory notice provisions of the Schedule.

Limitation Period – Was there a Proper Refusal?

Subsection 281.1(1) of the Insurance Act and subsection 51(1) of the Schedule establish a two-year limitation period for the commencement of litigation or arbitration after the insurer’s refusal to pay a benefit claimed. In Smith, the Supreme Court of Canada set out the factors required for insurers to be able to rely on the limitation period. As previously stated, insurers must provide a valid refusal of benefits, which must provide a clear and unequivocal denial, give the reasons for the denial, and provide a description of the dispute resolution process. Section 49 of the Schedule provides that if an insurer refuses to pay a benefit, it shall provide the insured person with a written notice concerning the person’s right to dispute the refusal. Although Smith was decided under a prior version of the Schedule (Bill 164), the wording of the relevant sections (section 71 in Bill 164 and section 49 in the Schedule) is almost identical. Furthermore, the guiding principles have not changed. The Supreme Court of Canada held in Smith that one of the main objectives of insurance law is consumer protection, particularly in the field of no fault accident benefits.

I have reviewed the OCF-9 dated October 30, 2002 provided by Allstate to Ms. Kehoe. I find that the Explanation of Benefits did not provide a clear and unequivocal denial of non-earner benefits. Specifically, the document failed to indicate that Ms. Kehoe was “not eligible” for non-earner benefits. Rather, both boxes stating “eligible” and “not eligible” were left blank. It is not clear that this is a refusal. It seems to state that it is too early to assess the claim since it is not payable until approximately six months later. Moreover, I find that the Insurer simply restated the information regarding non-earner benefit eligibility provided in the Schedule to Ms. Kehoe under the explanation portion, as opposed to providing clear reasons for the denial of her non-earner benefits. The term “N/A” is vague in this instance and could be interpreted to mean that the Applicant simply had to wait 26 weeks before qualifying for the non-earner benefit, as compared to the Insurer providing an outright denial of the non-earner benefit. The Insurer also said that there has to be a complete inability to carry on a normal life to qualify for the benefit, but did not relate it specifically to Ms. Kehoe. Rather, at no time in the OCF-9 does the Insurer clearly state that Ms. Kehoe was being denied non-earner benefits. While I appreciate that the Disability Certificate and subsequent DAC report relating to Ms. Kehoe’s caregiver benefits addressed some of Ms. Kehoe’s functional abilities, I am dealing solely with respect to the limitation period, and not the merits of her claim for non-earner benefits.

In order to assert the limitation period, the Insurer bears the onus of establishing that it has 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. In addition to the lack of denial, there was no accompanying letter setting out the process by which the Applicant could dispute the Insurer’s denial of benefits. The documents sent by Allstate on October 30, 2002 did not provide a clear and unequivocal denial of non-earner benefits and did not comply with section 49 of the Schedule. Any subsequent OCF-9s provided by the Insurer to the Applicant that are included in the Insurer’s Document Brief make no mention of non-earner benefits.

The Insurer relies on the case of Sietzema v. Economical Mutual Insurance Company,²⁰ however, I find that Sietzema differs on its facts. In Sietzema, the OCF-9 form indicated that the claimant was not eligible for non-earner benefits because she was employed at the time of the accident.²¹ In the present matter, Allstate’s OCF-9 left the “not eligible” box blank, and did not specifically mention Ms. Kehoe in its explanation. In Sietzema, the Court of Appeal cited its decision in Turner v. State Farm Mutual Automobile Insurance Co.²² that “clear and unequivocal notice given by the insurer, cancelling the insured’s benefits, was sufficient to trigger the limitation period, notwithstanding the insurer gave legally incorrect reasons for cancelling the benefit.”²³ In the current matter, I agree with the Applicant that this is not a case of insufficient reasons, or reasons that are not legally correct. Rather, this is a case where there is a complete absence of reasons by the Insurer.

In Sietzema, the Court of Appeal also found that the OCF-9 sent to Ms. Sietzema clearly stated that she had been approved for Income Replacement Benefits, which would terminate on March 2, 2006, and that the Insurer had determined that she was not eligible for non-earner benefits. The form gave her clear notice of her rights to mediation, followed by arbitration, litigation or neutral evaluation if she wished to dispute the two year limitation period.²⁴ This differs substantially from the OCF-9 provided to Ms. Kehoe on October 30, 2002 which lacked notice of her rights to the dispute resolution process.

Ms. Kehoe’s claim for non-earner benefits came many years after the motor vehicle accident and after caregiver benefits were terminated. The Insurer takes issue with the Applicant advancing a claim for non-earner benefits after such a lengthy delay. The sole issue that I have been asked to adjudicate, however, is whether or not Ms. Kehoe is precluded from proceeding to arbitration with her non-earner benefit claim because her application was filed more than two years after the Insurer’s refusal to pay the benefit claimed, contrary to subsection 51(1) of the Schedule, and subsection 281.1(1) of the Insurance Act. On that issue, I find in favour of the Applicant. Any other issues arising out of the delay by the Applicant in advancing a claim for non-earner benefits can be dealt with at the arbitration hearing.

The Insurer has failed to meet the onus of establishing, on balance of probabilities, that it issued a clear and unequivocal refusal of non-earner benefits. As such, I find that the limitation period regarding non-earner benefits never began to run.

EXPENSES:

The parties made no submissions as to expenses incurred in this preliminary issue hearing. I defer that issue to the arbitrator at the completion of the arbitration hearing.

May 2, 2016

Dana M. Hirsh Arbitrator

Date