Thilorthaka Kanagalingam v. Economical Mutual Insurance Company, 2016 ONFSCDRS 323

Financial Services Commission of Ontario

Neutral Citation: 2016 ONFSCDRS 323 Appeal: P16-00049 Office of the Director of Arbitrations

Thilorthaka Kanagalingam, Appellant and Economical Mutual Insurance Company, Respondent

Before: Delegate Jeffrey Rogers

Representatives: Mr. Richard Levin, solicitor for Ms. Kanagalingam Mr. Nicholaus de Koning, solicitor for Economical

Hearing Date: Heard by written submissions, completed on November 4, 2016

Appeal Order

Under section 283 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 Regulation 664, R.R.O. 1990, as amended, it is ordered that:

1. The appeal is allowed and the Arbitrator’s decision is rescinded.
2. Ms. Kanagalingam may pursue her claim for income replacement benefits if she now re-elects to receive them.
3. Economical shall pay Ms. Kanagalingam her legal expenses of this appeal in the amount of $2,500.

November 30, 2016

Jeffrey Rogers Director’s Delegate

Reasons for Decision

I. Nature of the Appeal

Ms. Kanagalingam appeals the Arbitrator’s decision. The Arbitrator dismissed her application for arbitration of her claim for income replacement benefits (IRBs) as time barred because her application for mediation was filed more than two years after Economical gave her an Explanation of Benefits, terminating IRBs. Ms. Kanagalingam submits that the Arbitrator erred in finding that Economical gave her a valid denial.

The Arbitrator also ruled that Ms. Kanagalingam made an invalid election, when, being also eligible to receive IRBs, she chose to receive caregiver benefits (CGBs). That ruling is not appealed. The Arbitrator concluded that the arbitration must nevertheless be dismissed, because the invalid election did not trump the valid denial.

For the reasons that follow, I find that the Arbitrator was correct in finding that Ms. Kanagalingam applied for IRBs, but erred in finding that Economical gave her a valid denial of IRBs. Since Ms. Kanagalingam’s election to receive CGBs was also invalid, she may now pursue a claim for IRBs, upon re-electing to do so. This appeal is therefore allowed.

II. Background

Ms. Kanagalingam was injured in a motor vehicle accident on June 23, 2008 and she sought accident benefits from Economical. On June 27, 2008 she delivered an Application for Accident Benefits. The information contained in the Application showed that Ms. Kanagalingam might be eligible for both a CGB and an IRB. Economical sent Ms. Kanagalingam a letter, dated July 16, 2008, which advised she might be eligible for an IRB and a CGB.

The July 16, 2008 letter indicated that Ms. Kanagalingam needed to choose which of the benefits she wished to receive and she was to do so by completing the enclosed election of IRBs, CGBs or non-earner benefits. Ms. Kanagalingam then gave Economical an election which indicated that she had elected to receive a CGB.

After receipt of the election, Economical sent a letter dated July 23, 2008, confirming Ms. Kanagalingam’s election to receive a CGB. Enclosed was an Explanation of Benefits, also dated July 23, 2008, purporting to terminate IRBs. The Explanation stated: “you are not entitled to receive an income replacement benefit as you have elected to receive the caregiver benefit.” The Explanation set out the dispute resolution process and contained a warning with respect to the two-year limitation period.

Economical next sent Ms. Kanagalingam a further Explanation of Benefits, dated July 31, 2008. In this Explanation of Benefits, Economical informed Ms. Kanagalingam that she was eligible for an IRB. Economical paid CGBs until December 2008 and then terminated payment based upon an expert opinion.

Ms. Kanagalingam was involved in a further motor vehicle accident on August 16, 2008 and she was approved for benefits from the Insurer responsible for that claim almost immediately. Ms. Kanagalingam received CGBs as a result of the August 2008 accident until her younger child turned 16 in 2011.

On November 14, 2011, Ms. Kanagalingam’s lawyer wrote to Economical indicating that he was seeking IRBs on behalf of his client. Economical refused to pay. Ms. Kanagalingam then applied for mediation on the issue of IRBs. This was more than two years after the Explanation of July 23, 2008 which purported to terminate IRBs.

III. Analysis

This appeal concerns the intersection of the two-year limitation period contained in section 51 of the Schedule¹ with the breach of an insurer’s obligation to provide information on any possible elections relating to income replacement, non-earner and caregiver benefits, as required by section 32(2)(d).

The parties raised two issues before the Arbitrator:

1. Did Ms. Kanagalingam make a valid election to receive CGBs?
2. Did Economical give Ms. Kanagalingam a valid Notice of Stoppage of IRBs on July 23, 2008?

The Arbitrator ruled that the election Ms. Kanagalingam made was not valid, because Economical did not provide her with mandatory information. The Arbitrator then ruled that the Explanation of Benefits of July 23, 2008 was clear and unequivocal and the invalid election did not trump the running of the limitation period that Ms. Kanagalingam missed. Since Ms. Kanagalingam applied for mediation more than two years after both her election and the notice denying her IRBs, there was no option to re-elect. The Arbitrator therefore dismissed Ms. Kanagalingam’s application for arbitration.

The Arbitrator’s decision that the election is invalid is not disputed. Therefore, I will first set out why I find that the Arbitrator erred in ruling that the Explanation of Benefits of July 23, 2008 was clear and unequivocal. After that, I will determine the effect of the invalid election, in these circumstances.

Section 281(5) of the Insurance Act and section 51(1) of the Schedule require an insured person to apply for mediation within two years of an insurer’s refusal to pay a benefit claimed. It is now trite law that, in order to engage the running of the limitation period, an insurer must give a clear and unequivocal denial.² In addition, it is now well established that in submitting an Application for Accident Benefits, Ms. Kanagalingam claimed not only a CGB, but an IRB as well.³

Therefore, Economical could terminate IRBs by giving a valid notice, after receiving Ms. Kanagalingam’s Application for Accident Benefits.

Ms. Kanagalingam submits that the Arbitrator erred in many respects in concluding that the Explanation of Benefits of July 23, 2008 was a clear and unequivocal denial of her application for IRBs. I find it necessary to address only one.

In making her ruling, the Arbitrator focussed on the effect of the invalid election and on the information Economical gave Ms. Kanagalingam regarding her entitlement to IRBs, before giving her the Explanation of Benefits of July 23, 2008. The Arbitrator did not consider the effect of the Explanation of Benefits of July 31, 2008. Having told Ms. Kanagalingam on July 23, 2008 that she was not eligible for an IRB, Economical told her on July 31, 2008 that she was eligible. In light of the two contradictory Explanations, Economical’s position with regard to denying IRBs can be nothing but equivocal. I find that Economical’s denial of IRBs was not clear and unequivocal in the context of all of its communication with Ms. Kanagalingam.

I reject Economical’s submission that the Arbitrator’s ruling that it gave a clear and unequivocal denial is a finding of fact, which is not reversible on appeal. The Arbitrator determines the facts. Whether or not those facts support a determination that the denial is clear and unequivocal is a question of law. There are many appeal decisions that address this issue. I find that the Arbitrator erred in concluding that Economical gave Ms. Kanagalingam a clear and unequivocal denial of IRBs. It follows that the denial was not effective in engaging the 2-year limitation period set out in section 51 of the Schedule.

However, the section 51 limitation is not the only relevant time limit. Section 36(2) requires an insured person to elect between receiving an IRB and CGB within 30 days of being given notice by an insurer that he or she may qualify for both. The question remains, can Ms. Kanagalingam continue to assert a claim for IRBs in light of section 36(2)?

Ms. Kanagalingam’s positon is that she is not seeking to re-elect to claim IRBs. Rather, she first applied for IRBs in November 2011. But, as I earlier noted, the decision in Sietzema means that she applied for IRBs in 2008. Therefore, she is only able to pursue a claim for IRBs if she is now able to re-elect to claim IRBs.

Delegate Makepeace set out the circumstances in which a re-election is available, in the decision in RBC General Insurance Company and Antony.⁴ After reviewing the history of s. 36, Delegate Makepeace concluded that an insured person who makes a valid election may re-elect at any time within the 30-day period set out in s. 36(2). After that, where there has been a valid election, re-election might still be available if grounds exist for extending the time limit pursuant to section 31. That section provides that an insured person’s failure to comply with the time limit does not disentitle the person to a benefit, if there is a “reasonable explanation.”

However, in Antony, as in this case, the insured person made an election that was found to be invalid. Delegate Makepeace ruled that, in those circumstances, the time 30-day limit is extended, without consideration of an explanation. The Delegate stated:

If the right to re-elect is implicit in the right to elect, it follows that the same 30-day time limit applies to re-elections. Ms. Antony purported to re-elect about three months after her initial election. If RBC is prejudiced, it is prejudiced by her delay, not her re-election. Pursuant to s. 31, Ms. Antony is not disentitled from re-electing IRBs if she has “a reasonable explanation” for failing to comply with a time limit under Part X of the SABS. This decision requires consideration of a number of factors, including how much time passed between the initial election and purported re-election, the reasons for the delay, the insured person’s reason for seeking to re-elect, the effect of re-election on the amount and duration of benefits, and whether re-election would prejudice the insurer’s ability to investigate and assess the claim.

The parties agree that the Arbitrator should decide whether Ms. Antony may re-elect, considering the relevant factors. However, I need not remit the matter for a third preliminary issue hearing because I agree that Ms. Antony’s initial election was invalid. [Emphasis added]⁵

Antony means that, in the event of an invalid election, the 30-day time limit in s. 36(2) does not apply. As is the case with an invalid denial, the time limit is negated and time is indefinitely extended.

Therefore, in this case, the 30-day time limit is negated by the invalid election and the 2-year time limit is negated by the invalid denial. I conclude that, although an invalid election does not trump the 2-year limitation period, Ms. Kanagalingam may nevertheless pursue her claim for IRBs at this time, if she makes a re-election to do so.

IV. Expenses

Both parties sought their expenses of the appeal. I find that Ms. Kanagalingam is entitled to her expenses, based upon her success. Given the history of the appeal, including the fact that it was resolved without an oral hearing, I fix the quantum at $2,500.

November 30, 2016

Jeffrey Rogers Director’s Delegate

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Smith v. Co-operators General Insurance Company [2002] S.C.R. No. 129
3. 3Sietzema v. Economical Mutual Insurance Company 2014 ONCA 111
4. 4(FSCO P03-00023, July 22, 2004)
5. 5See footnote 4 supra, at pages 10-11