Margaret Carroll v. Farmers Insurance Exchange, 2016 ONFSCDRS 141

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

Neutral Citation: 2016 ONFSCDRS 141

FSCO A14-008874

BETWEEN:

MARGARET CARROLL

Applicant

and

FARMERS INSURANCE EXCHANGE

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Arbitrator Lynda Tanaka

Heard:

In person at St. Catharines, Ontario on March 15 & 16, 2016

Appearances:

Mr. Ashley R. Gnys for Ms. Margaret Carroll

Mr. Joseph Dillon and Ms. Elizabeth Wilson for Farmers Insurance Exchange

Issues:

The Applicant, Ms. Margaret Carroll, was injured in a motor vehicle accident on June 1, 2008 and sought accident benefits from Farmers Insurance Exchange (“Farmers”)¹ payable under the Schedule.² The parties were unable to resolve their disputes through mediation, and the Applicant, through her representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended (“the Act”).

The Preliminary Issues to be determined are as stated in the Agreed Statement of Issues and Facts:³

1. Did the Applicant fail to comply with the time limit set out in section 32 of the Schedule?

2. If so, did the Applicant have a reasonable explanation pursuant to section 31 of the Schedule?

3. If not, should the Applicant’s Application for Accident Benefits be dismissed?

4. Did the Applicant make a valid election to receive NY⁴ [New York] benefits over Ontario benefits?

5. If so, is the Applicant barred from re-electing the Schedule?

6. Is Farmers entitled to a repayment, reduction or set off for NY benefits from the quantum of Income Replacement Benefits (“IRBs”) otherwise payable to the Applicant?

7. Is the Applicant entitled to interest on the IRBs, and if so, for what periods?

8. Is Farmers statute barred from claiming a credit or set-off in the amount of US$11,970.00 for an alleged overpayment of IRBs paid by Farmers to the Applicant?

9. Was AIG National Insurance (now known as Farmers Insurance) obligated to advise the Applicant as to her entitlement to Ontario Schedule benefits when AIG National Insurance first advised as to her entitlement of NY benefits?

By direction of the Pre-Hearing Arbitrator and on agreement of the parties, this Hearing to determine preliminary issues was established and the issues stated both under the Pre-Hearing letter of December 18, 2015 and on consent of the parties.

The Applicant agrees that the answer to Issue 6 is yes, Farmers is entitled to a repayment, reduction or set off for NY benefits from the quantum of IRBs otherwise payable to the Applicant. The parties have identified a further issue, being whether or not the payments received as income replacement under various social security and other plans paid by American government levels constitute collateral benefits for which Farmers is entitled to a credit under the Schedule. This issue is to be determined at a later stage in the proceedings.

Result:

1. The Applicant did not comply with the time limit in section 32 of the Schedule.

2. The Applicant has a reasonable explanation for not complying with the time limit as required under section 31 of the Schedule.

3. The Applicant’s Application for Accident Benefits under the Schedule should not be dismissed.

4. The Applicant made no valid election to accept NY benefits instead of benefits under the Schedule.

5. The Applicant is not barred by statute by reason of receiving NY benefits from receiving benefits under the Schedule.

6. On consent of the parties, Farmers is entitled to a repayment, reduction or set off for NY benefits from the quantum of IRBs otherwise payable to the Applicant.

7. The Applicant is entitled to interest on any balance outstanding. The parties should attempt to resolve the quantum owing and if they are unsuccessful, they are to contact ADR Chambers to arrange a re-attendance to have the issue determined.

8. Farmers is statute barred from claiming a credit or set-off in the amount of US$11,970.00 for an alleged overpayment of IRBs paid by Farmers to the Applicant.

9. Farmers was obligated to advise the Applicant as to her entitlement to benefits under the Schedule when it first advised as to her entitlement of NY benefits.

10. I defer the matter of expenses to the Hearing Arbitrator.

EVIDENCE AND ANALYSIS:

In addition to Exhibit 1, the Agreed Statement of Issues and Facts, the parties filed a Joint Document Brief.⁵ Mr. Gnys filed a brief of documents setting out references to the Applicant’s application for and receipt of Social Security Disability benefits (“SSD claims history”).⁶

The Applicant, a resident of the State of New York and citizen of the United States of America (“US”), worked full-time at a call centre. She was injured in a motor vehicle accident in Ontario on June 1, 2008. She contacted her Insurer on June 3, 2008 to report the accident. She has not returned to work during the relevant period.

Farmers had signed the Canadian Non-Resident Inter-Province Motor Vehicle Liability Insurance Card which allowed its Insureds to drive a motor vehicle in Ontario as properly insured under Ontario legislation.

Exhibit 3 includes the adjuster activity notes (Tab 7). The parties agree that the notes establish:

a) That the Applicant reported the accident and submitted the completed NY claims application NF-2 Form in June 2008;

b) That Farmers did not send the Applicant an application for Ontario Schedule benefits and did not advise her that she could elect Ontario Schedule benefits;

c) That Farmers staff were alert to recovery rights the Applicant might have in Ontario as early as June 3, 2008; and

d) That the Applicant told Farmers that she was recording her conversations with them to give to her lawyer as of July 15, 2008.

Farmers paid to the Applicant income replacement and other benefits until the $50,000.00 limit in the NY system was reached in October 2010. Farmers terminated the benefits on the basis that the limit had been reached. It is agreed that the Applicant did not dispute the termination of benefits or submit further claims under the NY system.⁷ Farmers closed its file in December 2010.

The Applicant also commenced a tort proceeding in the Ontario courts and retained an Ontario lawyer to represent her at some point between August 28, 2008, when she first contacted Mr. Gnys’ firm and October 6, 2008, when counsel sent a letter to Farmers advising of his retainer to act on all matters flowing from this accident. According to the adjuster notes, Farmers copied Mr. Gnys on all correspondence with the Applicant thereafter. In addition to the adjuster notes, the Joint Document Brief also includes a group of file memos from Mr. Gnys’ file documenting conversations with Farmers staff concerning the Applicant’s claims.⁸

In addition to the payments from Farmers, the Applicant received benefits under the income security system established at various levels of the US government, including municipal and state levels, after proving through the appropriate process that she was disabled and could not return to work.

The parties are agreed that the benefits under the Schedule are more generous than those under the NY system.

By letter from her lawyer, dated March 19, 2012, the Applicant requested retroactive payment of benefits in accordance with the Schedule, and in that letter stated:

As Margaret Carroll’s no fault insurer, your firm had the positive obligation to notify her as your insured, as to her rights to claim benefits under the Ontario Statutory Accident Benefit Schedule, which applies to Ontario insurers, due to the Power of Attorney and Undertaking which was no doubt, filed by your firm, as a foreign insurer… ⁹

The Applicant calculated the amount of the outstanding IRBs under the Schedule due to her for the period from February 25, 2010 to June 27, 2012 to be US$30,744.00. The Applicant also requested overdue interest of US$11,579.97.¹⁰ On July 16, 2012, Farmers agreed to pay the Applicant the US$30,744.00 calculated by her counsel. The agreement was made in settlement negotiations which continued from July 16, 2012 onward. Farmers retained legal counsel in Ontario in late August 2012. The Applicant was paid US$30,744.00 on November 5, 2012, and a payment of outstanding interest of US$3,509.17 was paid to her on February 8, 2013.¹¹

It is agreed that no Application for Accident Benefits (“OCF-1”) pursuant to s. 32 of the Schedule has been filed and Farmers has not asked the Applicant to do so. She has submitted a Disability Certificate (“OCF-3”), dated March 13, 2013, together with an election of Income Replacement Benefit (“OCF-10”).¹²

The Applicant filed her Application for Arbitration of her claim for benefits under the Schedule on November 4, 2014 following unsuccessful mediation.

Legislative and Common Law Framework

Insurance Act, s. 268(1)

Every contract evidenced by a motor vehicle liability policy, including every such contract in force when the Statutory Accident Benefits Schedule is made or amended, shall be deemed to provide for the statutory accident benefits set out in the Schedule and any amendments to the Schedule, subject to the terms, conditions, provisions, exclusions and limits set out in that Schedule.

Schedule

s. 31

(1) A person’s failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation.

s. 32

(1) A person shall notify the insurer of his or her intention to apply for a benefit under this Regulation.

(1.1) A person shall notify the insurer under subsection (1) no later than,

(b) the seventh day after the circumstances arose that give rise to the entitlement to the benefit, or as soon as practicable after that day, if those circumstances arose as a result of an accident that occurred on or after October 1, 2003.¹³

(2) The insurer shall promptly provide the person with,

(a) the appropriate application forms;

(b) a written explanation of the benefits available;

c) information to assist the person in applying for benefits; and

d) information on any possible election relating to income replacement, non-earner and caregiver benefits, if applicable.

(3) The applicant shall submit a signed application for benefits to the insurer within 30 days after receiving the application forms.¹⁴

(10) Despite any shorter time limit in the Regulation, if an applicant fails without a reasonable explanation to notify an insurer under subsection (1) within the time required under that subsection, the insurer may delay determining if the applicant is entitled to a benefit and may delay paying the benefit until the later of,

(a) 45 days after the day the insurer receives the competed and signed application; or

(b) 10 business days after the day the applicant complies with any request made by the insurer under subsection 33(1) or (2).

s. 47

(2) If a person is required to repay an amount to an insurer under this section,

(b) if the person is receiving an income replacement…benefit, the insurer may give the person notice that the insurer intends to collect the repayment by deducting up to 20 per cent of the amount of the benefit from each payment of the benefit.

(3) The obligation to repay a benefit does not apply unless the notice under subsection (2) is given within 12 months after the payment was made.

Power of Attorney and Undertaking (“PAU”) (denoting compliance with minimum coverage requirements and facilitating acceptance of service)¹⁵

Farmers Insurance of Columbus, Inc. aforesaid hereby undertakes:-

C. Not to set up any defence to any claim, action, or proceeding under a motor-vehicle liability insurance contract entered into by it, which might not be set up if the contract had been entered into in, and in accordance with the laws relating to motor vehicle liability insurance contracts or plan of automobile insurance of the Province…of Canada in which such action or proceeding may be instituted, and to satisfy any final judgement rendered against it or its insured by a Court in such Province…, in the claim, action or proceeding, in respect of any kind of class of coverage provided under the contract or plan and in respect of any kind or class of coverage required by law to be provided under a plan or contracts of automobile insurance entered into in such Province… up to the greater of

(a) the amount and limits for that kind or class of coverage or coverages provided in the contract or plan, or

(b) the minimum for that kind or class of coverage or coverages required by law to be provided under the plan or contracts of automobile insurance entered into in such Province…, exclusive of interest and costs and subject to any priorities as to bodily injury or property damage with respect to such minimum amounts and limits as may be required by the laws of the Province…”¹⁶

Farmers also provided 21 cases which it referred to in its written argument. I take from these cases the following propositions:

1. By signing the PAU, the Insurer has undertaken to comply with the Act and pay benefits under the Schedule when its Insured (not a resident of Ontario) is injured in a motor vehicle accident in Ontario.¹⁷

2. Limitation periods should be construed narrowly because insurance legislation is meant, in part at least, to protect consumers, but fairness dictates that a line needs to be drawn at which point an Applicant can no longer bring suit against an Insurer. Where an Applicant has discontinued a claim proceeding and seeks to refile, the discontinuance should only be set aside where special circumstances exist such as inadvertence, misapprehension or mistake. Where the Insurer has not communicated a clear unequivocal refusal of benefit or has engaged in conduct subsequent to a refusal that leads an Insured to believe that the limitation period has not yet begun to run, the limitation period on a claim does not run so as to bar a claim.¹⁸

3. An Insured, in seeking to file a claim late, must account for the failure to give notice within the statutory limits. The Insured must give a notice of the claim for a benefit and a reasonable explanation for the delay. The reasonableness of the explanation for the late filing must be assessed by addressing all the circumstances connected to the delay, including prejudice to the Insurer, hardship to the Insured, and whether or not it is equitable to relieve against the consequence of the failure to comply with the time limit.¹⁹

4. To be eligible for post-104 benefits, the Insured must establish eligibility for pre-104 benefits.²⁰

5. Where an Insured fails to move an action claiming Ontario Schedule benefits forward and fails to produce medical evidence of the claimed disability for seven years, the Insured prevents the Insurer from assessing the basis for and strength of the claim over time. The opportunity is lost forever and where no explanation for the delay is given, the claim will be dismissed.²¹

6. In applying the relief from forfeiture provisions of the Act where there has been imperfect compliance with a statutory condition as to proof of loss to be given by the Insured or other matter required to be done or omitted by the Insured, the court will take into account the conduct of the Insured, the hardship and prejudice to the Insured if relief is not granted, the prejudice to the Insurer if it is granted, and the absence of objectionable conduct on the part of the Insurer.²²

7. Where an action is dismissed for delay and a motion brought to set aside the dismissal, the abject failure to provide any explanation of the delay is a strong factor against setting aside the order. Other factors to be considered include whether or not the action had previously proceeded without any reasonable delay, whether or not there is evidence that the Insured intended to proceed with diligence, whether or not the delay was due to inadvertence, the promptness in moving to set aside the dismissal order, and the prejudice to the Insurer.²³

8. The principles that govern the interpretation of the words “reasonable explanation” in section 32(2) of the Schedule are:

• An explanation must be determined to be credible or worthy of belief before its reasonableness can be assessed.

• The onus is on the Insured to establish a “reasonable explanation”.

• Ignorance of the law alone is not a reasonable explanation. The test of reasonable explanation is both a subjective and objective test that should take account of both personal characteristics and a reasonable person standard.

• The lack of prejudice to the Insurer does not make an explanation automatically reasonable.

• An assessment of reasonableness includes a balancing of prejudice to the Insurer, hardship to the Insured, and whether or not it is equitable to relieve against the consequences of the failure to comply with the time limit.²⁴

Submissions of the Parties

Farmers has refused to pay the Applicant any benefits under the Schedule on the basis that she has already received her NY benefits and she cannot now switch to the Ontario Schedule benefits. Farmers relies on the fact that the Applicant was advised by an Ontario lawyer from 2008 on and therefore should be deemed to be aware of the differences between the NY benefits and those under the Schedule.

Farmers relies on a note of a conversation on February 24, 2009 between its adjuster staff and the lawyer representing the Applicant.²⁵ The note reads as follows:

Atty advised that his client my now opt for ON benefits as she had a negative IME and they can dispute same in ON. Atty advised that he his client was aware she had opted for the NY benefits when they retained her and she was fine with that. He did advise briefly the differences between ON and NY benefits…

-I advised that should she have opted for the ON benefits then NY would be denied as health ins would be primary…

Will wait to see if Atty submits letter disputing Ortho IME, request for HHH or letter

The corresponding notes taken by counsel for the Applicant on the same date are also provided. Both sets of notes contain references to the disputes concerning the medical assessments of the Applicant’s condition and benefits that she says she wants, and the submission of supporting material. With respect to the issue of opting for Ontario Schedule benefits, the relevant portions are the following from the 2 page memo:

-mentioned that since motor vehicle accident in Ontario, she can opt for Ontario no fault coverage

-if so, would have to be in writing

-at outset she opted for NY coverage

-sure, but she was not aware of Ont. Coverage at that time

-if Marg [Applicant] changes her mind, Michelle has to discuss with mgr…

-when she retained us there were no disputes so we left well enough alone and stayed with NY state no fault coverage

-we need to determine if letter to be sent opting for Ont. coverage…she needs to discuss this with her supervisor.²⁶

Farmers says that these notes are clear that both the Applicant and her lawyer knew that she could elect for Ontario benefits and that they failed to do that. She has delayed filing her application under the Schedule since February 2009 and all limitation periods under the Schedule run from that date. Therefore she now is barred from filing such a claim.

Farmers objects to the Applicant “double dipping” in her recovery of benefits. It has paid her the benefits it says are due under the NY system and the conduct after February 2009 shows a conscious election to take the NY system.

In addition, Farmers says that it has overpaid the Applicant for benefits and it claims repayment of the overpayment, and further that it is entitled to set-off or reduce any benefits that might be payable under the Schedule to the Applicant by what it has already paid to the Applicant. It submits that to do otherwise would be to unjustly enrich the Applicant. Farmers also submits that it did not supply the information required under the Schedule because the staff dealing with the claim were ignorant of the Schedule requirements.

Farmers also references s. 59 of the Schedule which deals with accidents outside Ontario. The legislative scheme deliberately deals only with accidents outside Ontario and addresses the situation of Ontario Insureds. It does not purport through the Schedule to address the rights of non-Ontario Insureds and I reject this section as a relevant element.

The Applicant submits that Farmers was obligated to comply with its obligations under the Schedule. These obligations included the obligation to inform the Applicant of her rights in accordance with s. 32(2) and providing the benefits under the Schedule. These obligations flow from the execution of the Canadian Non-Resident Inter-Province Motor Vehicle Liability Insurance Card.²⁷ In addition, by the PAU, Farmers is not entitled to rely on any defence to a claim under the Schedule that might not be set up in Ontario. The Applicant points out that the only election as such that is relevant would be an election under the Schedule to take IRBs rather than Non-Earner or Caregiver Benefits and that the taking of NY benefits does not constitute an election not to take the Ontario Schedule benefits.

The Applicant says that she did everything she could reasonably be expected to do. She was never asked to file an OCF-1 and there is no evidence that she did not comply with time limits. She explains her failure to file her Schedule application for benefits at an earlier date because Farmers never provided her with the application and documents as required under s. 32(2) of the Schedule. The Applicant says this is a reasonable explanation and Farmers cannot rely on its own failure and the passage of time to bar her claim. She denies that she was in any way obligated to get legal advice on the differences between her rights under the NY system and under the Schedule when she was not informed by Farmers that she had those alternatives. She admits that initially she “elected” NY benefits but that was because it was the only choice she was given. She denies that applying as she did for NY benefits constitutes a true election when she was ignorant of an alternative and she relies on s. 32(2) of the Schedule. If Farmers had provided the information as required under the Schedule, then the options would have been apparent to her and she could then have made an election. She denies that Farmers is entitled to rely on a deemed election, especially given the wording of the PAU.

The Applicant does not dispute the claim for set-off of the IRBs paid under the NY system to the Applicant but does say that Farmers is statute barred from claiming the set-off of $11,970.00 alleged by Farmers to be an overpayment.

The Applicant submits that Farmers is obliged by the wording of the PAU to provide the more generous of the benefits systems, the NY system or the Schedule to its Insureds. It is not entitled to rely on a defence that it has somehow compensated the Insured in some other way (in this case under the NY system) as a defence to paying in full the benefits due under the Schedule.

With respect to the delay in bringing forward the claims under the Schedule and the conclusions to be drawn from the telephone call in February 2009, the Applicant submits that this exchange flowed out of a discussion concerning a rebuttal report the Applicant wanted to an independent examination report which was unfavourable. The Applicant did not press forward because Farmers reinstated the IRBs and paid the balance outstanding so she was still getting her money. Farmers cannot say that it cured its failure to provide the information required under the Schedule through this telephone call.

Farmers relies on the gap of October 2010 to March 2012 as a period when the Applicant took no action and says that it is therefore prejudiced. The response of the Applicant is that the IRB test becomes more stringent at the point of 104 weeks after the accident (June 2010). There is then a two year period to mediate the issue. The Applicant says it is not unusual not to jump on an issue immediately. The Applicant was looking at surgical procedures to address her ongoing impairment and if those had been successful, there would perhaps have been no need to make the claim.

The Applicant says that Farmers is statute barred from claiming a set-off against the US$11,744.00 paid in 2012 as a retroactive payment on account of IRBs plus the interest payment. She says that s. 47(3) is a complete response, as there is no allegation of misrepresentation or fraud on her part. The twelve month period expired November 5, 2013. Prior to making the payment, Farmers obtained legal advice from Ontario counsel and made a payment over and above the $50,000.00 limit under the NY system and after it said it closed its file. It is unreasonable, in her submission, for Farmers to say it relied on her counsel for the calculation of the amount owing on IRBs.

With respect to Farmers’ allegation that the Applicant is trying to double dip, the Applicant says that it is Farmers who is trying to avoid its obligations under the PAU. Farmers’ arguments are a setting up of a defence that an Ontario Insurer could not use in Ontario, that is, that the Insurer has paid NY benefits. It is therefore not complying with the PAU.

Analysis

Issue 1: Did the Applicant fail to comply with the time limit set out in section 32 of the Schedule?

Issue 2: If so, did the Applicant have a reasonable explanation pursuant to section 31 of the Schedule?

Issue 3: If not, should the Applicant’s Application for Accident Benefits be dismissed?

I am dealing with these three issues together as they all deal with the compliance with s. 32 and the results that flow from the application of s. 32 and s. 31.

The answer to Issue 1 is yes. I find that the Applicant provided notice of a claim for benefits to which the Applicant was entitled under the NY system, but not a claim under the Schedule. She completed the written forms required under the NY system and made claims for those benefits, not the Ontario Schedule benefits.

The answer to Issue 2 is yes. In all the circumstances of this case, the Applicant has a reasonable explanation as required under s. 31.

Farmers has stated in argument that it should have sent out the notice that the Applicant had the option to claim the NY or Ontario benefits and that they failed to do so by oversight. Farmers therefore failed to fulfill its duty under s. 32(2) of the Schedule.

The Schedule and the Act are unambiguous in placing the obligation on Farmers to provide information to the Insured. This is consumer protection legislation with the assumption underlying it that the Insurer has an in depth understanding of the insurance benefits scheme and that the ordinary consumer does not ordinarily have that same understanding. The legislation provides the consumer with access to information needed for the consumer to make informed decisions without dependence on a lawyer.

Farmers submits that it is prejudiced in that there is a risk of double dipping by the Applicant and its failure was the result of oversight. Farmers cannot rely on a defence of oversight or ignorance of its staff in New York of the Schedule’s provisions to bar the Applicant’s claim here. There are clear references in the documents to Farmers’ staff being alert to a potential issue as to availability of Ontario benefits on June 3, 2008 when the Applicant called. If it failed to obtain Ontario legal advice on this situation until August 2012, that is its failure and the Applicant cannot be prejudiced by it.

Nor can Farmers rely on any “deemed” election by the Applicant for NY benefits, as the PAU is clear that the Applicant is entitled to the better of the two benefit systems.²⁸ It may well not be known which benefit system would have the best outcome for any applicant until the severity and extent of her impairments are clear.

Farmers relies on the passage of time as a prejudice. There is no doubt that as of February 2009, Farmers knew that the Applicant was unhappy with their determination of her entitlements for housekeeping as well as the medical assessments. They continued to adjust the file and made a payment for the period of February 25, 2010 to June 27, 2012 in the amount of US$30,744.00 plus a further interest payment in November 2012. This was not a quiet file that sat from the termination of benefits in 2010. Exhibit 3 contains the indices of the document books of documents from the Accident Benefits file of Farmers.²⁹ While the parties agreed the file was closed in December 2010, the index to the Accident Benefits file reveals claim forms dated in the first 6 months of 2011 and correspondence in December 2011, further correspondence and emails starting in March 2012 and continuing throughout that year. The index then stops.

When a file goes quiet, the Insurer may be able to show prejudice by lost opportunities for independent medical assessments and investigation, but in this case the parties continued to communicate.

Farmers submits that the delay in making the claim under the Schedule is not explained. The Applicant’s response is that things were going well under the NY system so they [the Applicant and counsel] left well enough alone. In addition, I find that the exchange of February 24 is not entirely clear as to who was to make the first move in pursuing the issue of Ontario benefits: was the adjuster to first speak to her manager to get information about the benefits and get back to the Applicant or was the expectation that the Applicant would first make a request for Ontario Schedule benefits? In any event, the obligations on the Insurer under the PAU and under s. 32(2) of the Schedule make such a debate moot.

The final element of double dipping alleged by Farmers is the relationship with the tort claim. Farmers argued that if the Applicant is allowed to claim both the NY and Ontario Schedule benefits then the settlement of the tort claim will go ahead without giving credit for the benefits paid. The issue of the settlement of the tort claim and the relationship with accident benefits is a matter addressed regularly by parties, and there are risks. In this case, the Applicant has agreed that Farmers is entitled to repayment, reduction or set-off for NY benefits for loss of income or revenue paid and received by the Applicant from the quantum of IRBs properly payable under the Schedule so the risk of overpayment as a result of the timing of the tort settlement is not due to the taking of benefits under the Schedule.

The prejudice to the Applicant is significant in this matter and the agreement to a “yes” answer to Issue 6 does much to overcome the prejudice to Farmers. In all the circumstances, it would be unfair and contrary to the PAU to allow Farmers to escape its obligations to pay Ontario Schedule benefits, and to impose the limits under the NY system on benefits available to the Applicant when that limit does not exist under the Schedule.

Issue 4: Did the Applicant make a valid election to receive NY benefits over Ontario benefits?

Issue 5: If so, is the Applicant barred from re-electing the Schedule?

The answer to Issue 4 is no, there was no valid election because, to make an election, one must be aware of the choices available. Because of the failure of Farmers to comply with its obligations under s. 32(2), the Applicant was unaware of her options and therefore had no choice.

Farmers seeks to rely on the access that the Applicant had to legal advice but the legislation puts the burden of informing the Insured squarely on the Insurer and does not include any exemption for Insureds with legal advice.

For the reasons set out above, the answer to Issue 5 is no. The Applicant is not barred from proceeding with her claim for benefits under the Schedule.

Issue 6: Is Farmers entitled to a repayment, reduction or set-off for NY benefits from the quantum of IRBs otherwise payable to the Applicant?

By agreement of the parties, the answer to this question is yes, Farmers is entitled to a repayment, reduction or set-off for NY benefits from the quantum of IRBs otherwise payable to the Applicant.

Issue 7: Is the Applicant entitled to interest on the IRBs, and if so, for what periods?

The Applicant argues that she is entitled to interest at 2% on the IRBs unpaid for the period prior to September 1, 2010 and 1% on unpaid IRBs for the period after September 1, 2010. So long as the payment of IRBs does not satisfy what was owed for the period prior to September 1, 2010, interest continues to run at 2% on that portion of what is outstanding.

In the ordinary course, the Applicant is entitled to interest on overdue payment of benefits. I am unable to answer this question specifically as the issue depends on the dates of payments and the amounts of payments, including the appropriate exchange rate, and whether or not Farmers agrees with the Applicant’s position on interest set out above. With the guidance of this order, the parties should attempt to resolve this issue themselves and if unsuccessful, they can contact ADR Chambers for a further attendance for a decision.

Issue 8: Is Farmers statute barred from claiming a credit or set-off in the amount of US$11,970.00 for an alleged overpayment of income benefits paid by Farmers to the Applicant?

Farmers takes the position that it overpaid benefits. The first issue is the receipt of other income that should be credited against the payments made. Farmers says that there was an obligation on the Applicant to advise, and she did not advise her Insurer, of her receipt of income under what is known as “SSDI”, that is income under the social security program provided by various levels of the government in the US. The Applicant’s response is that Exhibit 2 consists of documents spanning a period of August 2008 to December 2015 and including correspondence with the New York State Office of Temporary and Disability Assistance and other relevant forms, and the medical reports provided to Farmers where the doctor on the first page of each report updates the status of her SSDI claim. I find that Farmers did have relevant documents to alert it to this other source of income. The fact that the information was in medical reports does not mean it was in any way hidden from the adjuster.

The second issue is whether the number paid in 2012 for outstanding IRBs was the correct number and whether Farmers can now argue that a different number was owing. It submits that it relied on Applicant’s counsel with respect to the calculation of the payment agreed to in July 2012 for outstanding IRBs. If it chose to rely on the calculation by counsel for the Applicant, then that choice was theirs to make or not. It should be assumed to understand the risks in doing so.

The Applicant says that s. 47(3) of the Schedule is a complete answer to this issue. She references the correspondence and emails on the settlement discussions in the period from July to November 2012 in Exhibit 3. I have no evidence that Farmers gave the requisite notice under the section; or that its calculation of IRBs was net of the 20% permitted to be deducted under s. 47(2). Therefore Farmers is statute barred from claiming a set-off of this amount.

Issue 9: Was AIG National Insurance (now known as Farmers Insurance) obligated to advise the Applicant as to her entitlement to Ontario Schedule benefits when AIG National Insurance first advised as to her entitlement of NY benefits?

For the reasons set out above, the answer to Issue 9 is yes, if not at exactly the same moment, then within the timeframe required for a response by an Insurer under the Schedule. Therefore Farmers could have sent a separate letter, setting out the Schedule and other information required under the legislation on a different date but it should have been done in that early June 2008 timeframe.

Farmers argued that the defect from its failure to inform the Applicant was cured by her obtaining legal advice. In my view the obligation is not conditional on the Applicant not having legal advice. Nor can Farmers escape its obligations under the PAU by failing to inform an Insured.

I agree with the submissions of the Applicant that Farmers is attempting to rely on a defence that would not be available to an Ontario Insurer and that is not permitted under the PAU.

INTEREST

My findings that the Applicant is entitled to make her Application for Accident Benefits under the Schedule and that Farmers is entitled to set-off those benefits paid for income replacement under the NY benefits scheme requires that a calculation be made for which I do not have the necessary evidence. The parties are urged to come to an agreement as to when benefits were paid and how much was paid, how much would have been paid under the Schedule for IRBs at the relevant dates and then apply the appropriate exchange rate. The parties are capable of making these calculations and coming to an agreement, but if there is a disagreement that needs to be arbitrated, the parties should contact ADR Chambers to arrange an appointment for submissions to me on the matter.

EXPENSES:

The matter of expenses was not listed as an issue for me to determine. I defer the matter to the Hearing Arbitrator who will be in a better position to determine the appropriate order.

May 16, 2016

Lynda Tanaka Arbitrator

Date

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

FSCO A14-008874

BETWEEN:

MARGARET CARROLL

Applicant

and

FARMERS INSURANCE EXCHANGE

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as it read immediately before being amended by Schedule 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, and Ontario Regulation 664, as amended, it is ordered that:

1. The Applicant did not comply with the time limit in section 32 of the Schedule.

2. The Applicant has a reasonable explanation for not complying with the time limit as required under section 31 of the Schedule.

3. The Applicant’s Application for Accident Benefits under the Schedule should not be dismissed.

4. The Applicant made no valid election to accept NY benefits instead of benefits under the Schedule.

5. The Applicant is not barred by statute by reason of receiving NY benefits from receiving benefits under the Schedule.

6. On consent of the parties, Farmers is entitled to a repayment, reduction or set off for NY benefits from the quantum of IRBs otherwise payable to the Applicant.

7. The Applicant is entitled to interest on any balance outstanding. The parties should attempt to resolve the quantum owing and if they are unsuccessful, they are to contact ADR Chambers to arrange a re-attendance to have the issue determined.

8. Farmers is statute barred from claiming a credit or set-off in the amount of US$11,970.00 for an alleged overpayment of IRBs paid by Farmers to the Applicant.

9. Farmers was obligated to advise the Applicant as to her entitlement to benefits under the Schedule when it first advised as to her entitlement of NY benefits.

10. I defer the matter of expenses to the Hearing Arbitrator.

May 16, 2016

Lynda Tanaka Arbitrator

Date

Footnotes

1. 1The original Application for Arbitration referred to Farmers Insurance Group – Columbus, which is a successor company to the insurance company who issued the policy to the Applicant. I am advised that there have been a number of corporate successors and name changes and the parties are agreed that we should use the name I have included in the title to proceedings.
2. 2Effective September 1, 2010, the Statutory Accident Benefits Schedule – Effective September 1, 2010 (the “new SABS”) came into force. The transition rules in the new SABS provide that, subject to certain exceptions, benefits that would have been available pursuant to the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996 (the “old SABS”) shall be paid under the new SABS, but in amounts determined under the old SABS.
3. 3Exhibit 1, para. 2
4. 4“NY system” will be used for New York no fault benefits.
5. 5Exhibit 3.
6. 6Exhibit 2, “SSD claims history”.
7. 7Exhibit 1, paras. 17 to 19.
8. 8Exhibit 3, Tab 5, Counsel Notes of Ms. Ashley Gnys.
9. 9Exhibit 1, para. 20.
10. 10Supra, paras. 24 and 25.
11. 11Supra, paras. 26 to 30.
12. 12Supra, para. 32.
13. 13The statutory references provided in compiled form by counsel refer to the post-September 1, 2010 Schedule but the quote above is from the post-November 1996 Schedule that would have been referred to in 2008. The post-September 2010 Schedule provided that a person “who intends to apply for one or more benefits described in this Regulation shall notify the insurer of his or her intention no later than the seventh day after the circumstances arose that give rise to the entitlement to the benefit, or as soon as practicable after that day”.
14. 14Note that s. 68(1) requires that all notices under the Schedule except the s. 32(1) or (3.1) notices must be in writing. Section 69 requires that an application form referred to in s. 32(2)(a) must be in a form approved by the Superintendent but there is no reference to the application in s. 32(1) being in such a form.
15. 15Executed by foreign Insurers under the Canadian Non-Resident Inter-Province Motor Vehicle Liability Insurance Card to permit their Insureds to drive in Canada as properly insured.
16. 16Exhibit 3, Tab 2.
17. 17Insurance Corporation of British Columbia v. Royal Insurance Company of Canada, 1999 CanLII 818 (ON CA), 1999 CarswellOnt 1450, [1999] I.L.R. I-3705, [1999] O.J. No. 1668, 119 O.A.C. 360, at paras. 5 and 8; Healy v. Interboro Mutual Indemnity Insurance Company, 1998 CanLII 14851 (ON CTGD), 1999 CarswellOnt 2142, [1998] O.J. No. 2058, [1999] I.L.R. I-3636, 2 C.C.L.I. (3d) 281, at paras. 16 and 13.
18. 18Girao and Allstate Insurance Company of Canada, 2011 CarswellOnt 1050, [2011] O.F.S.C.D. No. 6 at paras. 9, 27, 34 to 35.
19. 19Carruthers and Royal & SunAlliance Insurance Company of Canada (A00-000923, P02-00015), 2003 CarswellOnt 5259, [2002] O.F.S.C.I.D. No. 80, paras. 38 to 41, appeal dismissed for reasons at 2003 CarswellOnt 5919, [2003] O.F.S.C.I.D. No. 58.
20. 20Wadhwani v. State Farm Mutual Automobile Insurance Company, 2013 ONCA 662; Compton v. State Farm Mutual Automobile Insurance Company, 2014 ONSC 2260 at para. 30.
21. 21Dynes v. Standard Life Assurance Company, 2012 ONCA 191, at paras. 12 and 13.
22. 22Cervo v. Raimondo, 2005 CarswellOnt 1783, [2005] O.J. No. 1781, [2005] O.T.C. 338, at paras. 51 to 53.
23. 23Haynes v. RBC Life Insurance Company, 2010 ONSC 2470, 2010 CarswellOnt 2711, [2010] O.J. No. 1800.
24. 24Horvath and Allstate Insurance Company of Canada (A02-000482), 2003 CarswellOnt 5651, [2003] O.F.S.C.I.D. No. 92, at para. 6.
25. 25Exhibit 3, Tab 7.
26. 26Supra, Tab 5.
27. 27Exhibit 3, Tab 2.
28. 28Exhibit 3, Tab 7, under adjuster note June 3, 2008: “Explained benefits and claim process. Advised seeing out nf2. Recovery: Unk recovery rights in Ontario CA. will need to confirm same with mgr. Canada not listed on AIG Matrix.”
29. 29Exhibit 3, Tab 9.