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

Neutral Citation: 2016 ONFSCDRS 279

FSCO A15-005457

BETWEEN:

LYNDA FEDERICO

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

Before: David Snider

Heard: July 18, 19 and 20, 2016, at the offices of the Financial Services Commission of Ontario in Toronto

Appearances: David S. Wilson for Ms. Federico

Jonathan Schrieder for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Lynda Federico, was injured in a motor vehicle accident on December 22, 2007. She applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ State Farm denied payment for an Occupational Therapy assessment plan submitted February 23, 2015 and an Occupational Therapy treatment plan submitted September 24, 2015 (added on consent). The parties were unable to resolve their disputes through mediation, and Ms. Federico applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Is Ms. Federico entitled to a payment for the cost of an examination, in the amount of $2,013.92, for an Occupational Therapy Assessment recommended by Natalie Zaraska, O.T. on an OCF-18 dated February 23, 2015?
Is Ms. Federico entitled to a payment for the cost of Occupational Therapy Treatment, in the amount of $6,234.89, recommended by Natalie Zaraska, O.T. on an OCF-18 dated September 24, 2015?
Is State Farm liable to pay a special award because it unreasonably withheld or delayed payments to Ms. Federico?
Is State Farm liable to pay Ms. Federico’s expenses in respect of the Arbitration?
Is Ms. Federico liable to pay State Farm’s expenses in respect of the Arbitration?
Is Ms. Federico entitled to interest for the overdue payment of benefits?

Result:

Ms. Federico is entitled to full payment for the cost of an examination, in the amount of $2,013.92, for an Occupational Therapy Assessment recommended by Natalie Zaraska, O.T. on an OCF-18 dated February 23, 2015.
Ms. Federico is entitled to full payment for the cost of Occupational Therapy Treatment, in the amount of $6,234.89, recommended by Natalie Zaraska, O.T. on an OCF-18 dated September 24, 2015.
State Farm is liable to pay a special award, in the amount of $5,500.00, to Ms. Federico because it unreasonably withheld or delayed payments to her.
State Farm is liable to pay Ms. Federico’s expenses in respect of the Arbitration.
Ms. Federico is not liable to pay State Farm’s expenses in respect of the Arbitration.
Ms. Federico is entitled to interest, at the rate of 2% per month compounded monthly, for the overdue payment of benefits.

EVIDENCE AND ANALYSIS:

The Applicant’s counsel informed me, at the outset of this hearing, that just that morning the Insurer had first raised the argument with him that Ms. Federico was not entitled to what it characterized as double payment for the two treatment plans which form the substantive part of this Application for Arbitration. He quite rightly stated that as this was the first mention he had heard of this position being taken by State Farm he would clearly be taken at a disadvantage if I allowed the Insurer to rely upon this defence.

The Insurer did not deny that the first day of the hearing was the first time it had raised the defence, despite the many steps which had occurred leading up this arbitration hearing. Nonetheless, the Insurer pressed this defence and provided the Applicant’s counsel and myself with case law set out in a Brief of Authorities more than three weeks after the conclusion of the hearing itself.

I examined the OCF-9 denial forms delivered by State Farm to Ms. Federico which, interestingly, were different in the versions provided by State Farm and the Applicant in their exhibits. I found that even with the differences in the versions, which was not explained, there was no indication on the denials provided by State Farm to Ms. Federico and/or her counsel that they were relying on a double payment defence. This is significant, because these two treatment plans were submitted to State Farm by Ms. Federico within the first few months after the release of a decision by Arbitrator M. J. Huberman dated January 6, 2015 and were denied by State Farm shortly after they had paid out $58,312.75 (inclusive of interest) to Ms. Federico as a result of that order. The argument now raised by State Farm is that at least part of that amount paid to the Applicant was for two similar Occupational Therapy treatment plans which were dealt with in that previous hearing and order.

I permitted State Farm, as part of its cross-examination, to elicit an admission from Ms. Federico that she had not purchased the modalities set out in those previous treatment plans out of the proceeds of the amount paid to her as a consequence of that order by Arbitrator Huberman. She also stated, with some candor, that most of those funds had gone for legal expenses. Realistically, considering the number of steps taken by her very thorough counsel in the litigation concerning this MVA, I find this statement to be entirely plausible.

From all of this I find that State Farm’s argument fails with regard to the double payment issue for two entirely distinct reasons. First and foremost, they were simply barred from raising the defence when they did pursuant to Rules 32.2 and 39 of the Dispute Resolution Practice Code — and by an endless number of common law decisions and principles which deny “trial by ambush” techniques. Even if they had an argument to make, which - as I will set out below - they did not, they failed to make it in any sense of a timely manner, and I conclude that I have no option but to disregard it.

Secondly, and for the record as to my opinion of the merits of the defence, I do not think that there was a duplication or any concern that this arbitration could result in a double payment. I find that although State Farm was ordered by Arbitrator Huberman to pay Ms. Federico a certain sum of money which included, as part of its calculation, two Occupational Therapy treatment plans, it was not an order which would in any way fully settle or finally resolve or restrict Ms. Federico's claim(s) under the Schedule for Medical or Cost of Examination benefits and hence did not in any way preclude her from pursuing such claims. As well, by the time the February and September, 2015 Occupational Therapy treatment and assessment plans which form the subject of this hearing were prepared by different service providers and in different amounts from the first two and submitted to State Farm, almost 4 years had passed since the first two plans were denied. There was clearly the need for a fresh O.T. Assessment by February 2015 and a newly crafted treatment plan by September 2015. Accordingly, Ms. Federico was well within her rights to provide those new plans and they were to be dealt with in accordance with the Schedule by State Farm. This procedural requirement extends to embrace the entire mediation and arbitration process which the Schedule set out for the dispute(s) concerning these two specific plans and, accordingly, to my obligation to consider them upon their own merits and make a ruling as to whether State Farm is required to pay for them, plus interest and with the possibility of a special award. In short, I find that State Farm’s argument against double payment fails because, a) these are not the same treatment plans, b) Ms. Federico’s condition had very likely varied during the intervening years, and c) frankly there is no actual provision in the Schedule that specifies how, when or in what way the recipient of an award under the Schedule is required to utilize it. There is also no "failure to mitigate" argument available for State Farm to advance, both because they once again did not raise it and because it was their own actions which had prevented Ms. Federico from utilizing the two earlier Occupational Therapy plans. As a consequence, the case law provided after the hearing by State Farm is not in any way binding upon my decision in this case because I have not found that there was any actual double payment or double collection herein.

Turning now to the merits of the case at hand, I find that these two treatment plans were not assessed in an appropriate manner by the Insurer’s assessor, Angela Bertolo of D & D Disability Management. Without belabouring the point, State Farm’s assessor admitted on cross-examination that if she had been given all of the available information and had more carefully considered the O.T. in-home assessment report dated July 16, 2015 prepared by Theresa Rector and provided by Ms. Federico to State Farm, AND/OR if she had been informed by State Farm that Ms. Federico had not received any occupational therapy modalities whatsoever prior to submitting these two treatment plans in 2015, then her decision and recommendation(s) may/ would have been different. More telling than this, however, was the admission by State Farm in its final submissions that it conceded that the assessments were of no great value and that they would not be relying upon them.

This leaves me with very little more to decide. It is clear from the foregoing that the two OCF-18’s provided by Natalie Zaraska, O.T., dated February 23, 2015 and September 24, 2015 respectively, were reasonable and necessary.

Special Award:

Based upon the evidence received concerning the failure by State Farm to provide its O.T. Assessor with even the basic and obvious information required for her to determine that the Applicant had not, in fact, received any of the type of care set out in these treatment plans, it is clear that the two treatment plans subject to this arbitration were not properly denied or assessed. Therefore, I find that these two denials were unreasonable and the withholding of payment for these services was improper under the Schedule. Accordingly, I order a special award in the amount of $5,500.00, inclusive of interest, payable to the date of this order. This award is based upon the simple mathematics suggested by the Applicant’s counsel (and not specifically challenged by State Farm) which in my opinion results in an entirely appropriate calculation and avoids the delay inherent in the more usual approach of leaving the interest calculation to be determined after the fact by the Insurer’s accounting system. The calculation is as follows (for the rate of interest applied see below):

Assessment submitted February 23, 2015

$2,013.92

$1,006.96

Estimated interest

20 months @ 2% (compounded monthly)

$ 440.00

$6,234.89

$3,117.45

Estimated interest

13 months @ 2% (compounded monthly)

$ 850.00

TOTAL

$5,414.41

I rounded the number up to $5,500.00 to account for slight compounding errors in the estimated interest amounts calculated. I consider this fair, on balance, considering the counsel time, effort and accounting expenses involved in further narrowing it down. De Minimis Non Curat Lex

Interest:

The parties acknowledged that this date of loss occurred in the period when the Schedule set the interest rate for overdue payments at 2% per month, compounded monthly. The question of what interest rate should apply in the case at hand has been dealt with in prior decisions made under the Schedule in Kulaveerasingam and State Farm Mutual Insurance Company (FSCO A13-004423, February 6, 2015) and, significantly with regard to this same MVA, Federico and State Farm Mutual Insurance Company (FSCO A08-001138, June 22, 2012), varied on other grounds (FSCO P12-00022, June 22, 2012), judicial review denied [2014] O.J. No. 142, 2014 ONSC 109 (Ont. Div. Ct.), leave to appeal refused (May 21, 2014) M43359 (Ont. C.A.). The conclusion from all of the above was that there was no clear legislative intent in the Schedule to rebut the presumption against interference with vested rights. Accordingly, interest shall apply at the compounded 2% per month rate for all outstanding amounts ordered in this decision pursuant to the terms of the Schedule in force and effect on the date of loss, namely December 22, 2007.

EXPENSES:

If the parties require a ruling on expenses they may make arrangements for an expense hearing before me in a timely manner.

October 17, 2016

David Snider Arbitrator

Date