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

Neutral Citation: 2016 ONFSCDRS 86

FSCO A14-008358

BETWEEN:

BROOKE KIVELL

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

Before:

Arbitrator Marcel D. Mongeon

Heard:

In person at Chatham, Ontario on December 16, 2015

Appearances:

Ms. Brooke Kivell participated Mr. Jerry F. O’Brien participated for Ms. Brooke Kivell Mr. Matt Duffy participated for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Ms. Brooke Kivell, was injured in a motor vehicle accident on November 20, 2012 and sought accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”) payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Kivell, 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.

During the Pre-Hearing, the need for this Motion was identified.

The issues in this Motion were established by letter dated August 25, 2015, with three questions:

Did State Farm comply with the requirements of s. 33(4)3 of the Schedule with respect to an Examination Under Oath (“EUO”) of the Applicant, scheduled for April 4, 2014?
Did State Farm comply with the time requirements with respect to an EUO of the Applicant, scheduled for April 4, 2014?
Should State Farm provide a copy of the Applicant’s complete accident benefits file (“AB file”), redacted for privilege and reserves, up to the date of Application for Mediation, provided the Insurer provides a list of documents for which privilege is asserted together with its rationale for its claim of privilege?

For completeness, a fourth and fifth question have been added:

If State Farm has complied with the requirements in questions 1 and 2 and I Order that State Farm should provide the Applicant’s complete accident benefits file in question 3, what should be the relative timing of the production against any further EUO that State Farm may seek to conduct?
What should be the expenses disposition of this motion?

Result:

State Farm did comply with s. 33(4)3 of the Schedule for an EUO of the Applicant, scheduled for April 4, 2014.
State Farm did comply with the time requirements for an EUO of the Applicant, scheduled for April 4, 2014.
State Farm shall produce a copy of the Applicant’s complete accident benefits file, redacted for privilege and reserves, up to the date of Application for Mediation, provided the Insurer provides a list of documents for which privilege is asserted together with its rationale for its claim of privilege.
State Farm’s production of the Applicant’s complete accident benefits file as provided in the previous Order shall take place within 30 days of the date of this Order and prior to any EUO that State Farm may seek.
The question of expenses related to this Motion is deferred to the Hearing Arbitrator.

EVIDENCE AND ANALYSIS:

Chronology

The Applicant, age 17 at the time of the motor vehicle accident, was a passenger in a motor vehicle involved in a head-on high-speed collision with another motor vehicle in Chatham-Kent. The Applicant sustained serious injuries² which required a number of surgical interventions.

Correspondence between the representatives of the Insurer and the Applicant was exchanged through the end of 2013 and beginning of 2014 on the issue of scheduling the EUO. During the course of this correspondence, the Applicant’s representative’s position was consistent that he wanted the Insurer to provide its ‘reason or reasons’ for the need for an EUO failing which he would not have his client attend.³

I need not duplicate all of the correspondence. The most fulsome explanation of the need for the EUO is in a letter of March 26, 2014 to the Applicant’s representative. It includes the following explanation:⁴

Although it is my position that I have provided you with sufficient reasons for the EUO of Ms. Kivell, I reiterate that the examination pertains to the motor vehicle accident that occurred on November 20, 2012 and her entitlement to statutory accident benefits as a result of that motor vehicle accident. I can also advise that the scope of the examination will encompass but will not be limited to questions pertaining to her entitlement to medical and rehabilitation benefits, including facts surrounding her attendance at facilities where treatment and/or assessments occurred; her entitlement to income replacement benefits, including facts surrounding her employment history and current and prior levels of functioning and activities; questions pertaining to visitation expenses and, questions pertaining to her entitlement to attendant care benefits⁵ including the facts surrounding her current and prior level of functioning and activities.

An EUO was scheduled for April 4, 2014 at 9:00 a.m. in Chatham. The Applicant did not attend and a Certificate of Non-Attendance was obtained.⁶

Further correspondence of April 15, 2014 made the position of the Applicant’s representative clear.⁷ That position was that section 33(1.3)(3) of the Schedule⁸ required the Insurer to provide the “reason or reasons for the examination” before the Applicant was required to attend.

The Applicant’s representative in the same letter also questioned the timing of the EUO given that it was to occur after a number of the Schedule benefits had been paid to their maximum limits.

The Application for Arbitration was received by FSCO on October 17, 2014. Given the seriousness of the accident, the amounts in dispute in the Application are relatively modest. These include:

Income Replacement Benefits in the amount of $217.44 per week from April 9, 2014 to June 6, 2014 (i.e. for two months);
$2,452.79 for an Occupational Therapy Treatment Plan;
Mileage expenses in the amount of $953.50 and visitor's expenses in the amount of $1,030.24 submitted on an OCF-6 on January 2, 2014 and January 15, 2014;
Special Award; and
Interest.

The Application also included a request⁹ for:

A complete and unedited and un-redacted copy of the claims file, including the adjuster's log notes, any emails or electronic communications.

The Insurer’s Response to the Application was filed on November 10, 2014. The Response makes it clear that the Insurer’s failure to pay the benefits in the Application is as a result of the Applicant’s failure to attend the EUO.

The initial Pre-Hearing was conducted in June 2015. Initially, the issue of the EUO was proposed as a Preliminary Issue Hearing. Through July and August 2015, the parties and two different assigned Arbitrators dealt with the best way in which to advance the determination of the EUO issue. In late August 2015, it was determined that the matter should be dealt with by this Motion. The production issue of the Insurer’s complete accident benefits file was also added to the Motion at that time. By letter, dated August 25, 2015, this Motion Hearing was established with the first three questions noted above.

The Insurer is also the third party Insurer in a tort claim that the Applicant is advancing. By letter, dated April 15, 2014, to the Insurer,¹⁰ the Applicant’s representative made it clear that:

I also note that State Farm is also the insurer of the at fault vehicle that gave rise to the injuries on November 20, 2012. Accordingly, both my client and I are very suspicious that the real intention behind this EUO is for a collateral and inappropriate purpose to assist in the defence of that third party claim.

During the argument of this Motion, the Insurer has agreed that the Applicant is entitled to production of the AB file.

Submissions on the EUO

The Insurer submitted that its right to an EUO is absolute. There are no reported decisions on the issue of the sufficiency of reasons provided in a notice of EUO because it is only the barest of reasons that must be provided. Section 33(4) only provides for matters of form not of substance and, therefore, there is no substantive right to be provided with the reasons as to why the Insurer wishes to conduct an EUO.

The Deol¹¹ arbitral decision recognizes that the right to an EUO has no pre-conditions on the part of the Insurer. Although it may be unfair to the Applicant to require them to sustain what may be similar to a discovery process without the Applicant having a similar opportunity for examinations of the Insurer, the Insurer submits that this is how the Schedule is written.

In reply, the Applicant submits that the Baig decision of the Court of Appeal¹² requires an Insurer to demonstrate that an EUO has an objective and reasonable basis to explore. Insurers should not be able to “embark on fishing expeditions”. The Applicant also submits that a requirement to provide reasons for examinations is required by paragraph 33(4)3 of the Schedule; she submits that the requirement is substantive, not merely procedural.

Submissions on the Production of the Insurer’s File

The Insurer submits that it is prepared to produce the AB file but only after the conduct of the EUO. The Insurer points to the Deol¹³ case and notes in that case the Applicant was not able to defer its examination until the Insurer made productions required in the Pre-Hearing letter.

Analysis

In analyzing the issues in this Motion, they are related. Once the Applicant has the Insurer’s AB file – the relief sought in the third question of the Motion – she may have the reasons that the Insurer is seeking the EUO – which is the relief sought in the first two questions of the Motion. However, there is no guarantee that the information contained in the Insurer’s AB file actually gives insight into the Insurer’s reasons for conducting the EUO. Whether or not such information does exist in the AB file is irrelevant to my consideration of its disclosure.

I now consider the first three questions in this Motion.

Did the Insurer comply with s. 33(4)3 in seeking the EUO?

EUOs were first introduced in the predecessor of the Schedule in July 2003. Prior to that time, there was no mechanism for Insurers to conduct examinations of Applicants.

The EUO provided for in subsection 33(3) of the Schedule is one of a number of obligations of an Applicant found in section 33. Similar to the EUO required by the Statutory Conditions – Automobile Insurance¹⁴ which requires an ‘insured’ to attend to be examined on matters in question, the Schedule’s EUO requires the following:

33 (2) If requested by the insurer, an applicant shall submit to an examination under oath, but is not required,

(a) to submit to more than one examination under oath in respect of matters relating to the same accident; or

(b) to submit to an examination under oath during a period when the person is incapable of being examined under oath because of his or her physical, mental or psychological condition.

33 (3) An applicant is entitled to be represented at his or her own expense at an examination under oath by such counsel or other representative of his or her choice as the law permits.

33 (4) The insurer shall make reasonable efforts to schedule the examination under oath for a time and location that are convenient for the applicant and shall give the applicant reasonable advance notice of the following:

The date and location of the examination.

That the applicant is entitled to be represented in the manner described in subsection (3).

The reason or reasons for the examination.

That the scope of the examination will be limited to matters that are relevant to the applicant’s entitlement to benefits.

33 (5) The insurer shall limit the scope of the examination under oath to matters that are relevant to the applicant’s entitlement to benefits described in this Regulation.

33 (6) The insurer is not liable to pay a benefit in respect of any period during which the insured person fails to comply with subsection (1) or (2).

33 (7)Subsection (6) does not apply in respect of a non-compliance with subsection (2) if,

(a) the insurer fails to comply with subsection (4) or (5); or

(b) the insurer interferes with the applicant’s right to be represented as described in subsection (3).

33 (8) If an applicant who failed to comply with subsection (1) or (2) subsequently complies with that subsection, the insurer,

(a) shall resume payment of the benefit, if a benefit was being paid; and

(b) shall pay all amounts that were withheld during the period of non-compliance, if the applicant provides a reasonable explanation for the delay in complying with the subsection.

The heart of the Applicant’s objection in this case is found in paragraph 33(4)3. This is that the notice to be provided of the EUO shall include “the reason or reasons for the examination.” The Insurer submits that this is a mere formality. The Applicant submits that it is a substantive right and uses the Baig¹⁵ decision to support the proposition that the Insurer cannot conduct a “fishing expedition.”

I believe that Baig can be distinguished from this situation on its facts. In Baig, the issue in dispute was an appraisal report that the Insurer believed was fraudulent and alleged that the Insured had colluded in such a fraud. On this basis, the court upheld the right of the Insurer to conduct an EUO. Baig was also clouded by the request for the EUO coming after civil litigation had begun.

The reference in Baig to Insurers conducting fishing expeditions is not part of the ratio decidendi – the main reasoning – of the case. Rather it is an obiter dictum – a decision on a matter not required for the main issue in dispute – which addressed a suggestion made in argument that Insurers might “conduct baseless reviews of the underwriting of the insurance contract in an effort to find a basis to refuse claims.”¹⁶ That was not the basis for the ultimate reasoning in Baig nor is it present here. Accordingly, I am not following the decision.

In analyzing whether or not I consider the ‘reason or reasons’ requirement to be one of substance or only of form, I note other provisions of the Schedule which require action on the part of the Applicant. For example, section 37 requires Applicants to be prepared to submit new disability certificates but “not more often than is reasonably necessary”; section 44 requires the Applicant to submit to examinations by “regulated health professionals or who have expertise in vocational rehabilitation” “for the purposes of assisting an insurer to determine if a … person is or continues to be entitled to a benefit … but not more often than is reasonably necessary.”

In the case of an EUO, section 33(2) has no similar preconditions such as found in sections 37 or 44; the obligation within the provision is absolute: “an applicant shall submit to an examination” (my emphasis). Only later when the form of the notice is provided for in section 33(4) do we find that the notice shall include “the reason or reasons of the examination.”

Given that the provision is found in section 33(4) and not in 33(2), I find that the requirement to provide “the reason or reasons” is merely a matter of form, not one of substance. Accordingly, any wording that alerts the Applicant that questions will be asked about the matters giving rise to the claim is sufficient to comply with the requirement. The reason or reasons do not have to be detailed, they merely have to give the Applicant notice about the general type of questions that will be asked.

In this case, I find that the Insurer’s notice of EUO complied with the requirements of section 33(4)3 of the Schedule.

Did the Insurer comply with the timing requirements of the EUO?

I turn briefly to the issue of the timing of the EUO. The Applicant has argued that the EUO is being sought long after the accident. In addition, the EUO occurs after the Applicant has exhausted her entitlements of certain benefits available under the accident benefits regime and is reaching the limits on others. Finally, the Applicant notes that the Insurer is now likely the defendant in a third party action relating to the accident.

In my view, none of these matters are relevant to being able to conduct an EUO under section 33(2) of the Schedule. The section is clear: as long as the Applicant is fit, she shall submit to one (and only one) EUO. She is entitled to be represented by counsel¹⁷ and to only answer questions that are relevant to her entitlement to benefits.¹⁸ There is nothing in the provision that suggests the timing of when the EUO can take place and, therefore, in this case, the Insurer was within its rights to require the EUO.

With respect to any questions that might touch on issues relating to the third party action, I leave it to the Applicant’s counsel to object to any questions that they believe are outside of the scope of the EUO under subsection 33(5) of the Schedule. However, the fact that such questions could be asked is not sufficient for me to prevent the EUO.

Is the Applicant entitled to production of the Insurer’s accident benefits file?

During argument, the Insurer has submitted that clearly the Applicant has the right to be provided with the Insurer’s AB file up to the time of the Application for Mediation redacted for privilege and reserves.

What should the relative timing be between the production of the accident benefits file and any EUO that the Insurer conducts?

The only question that is left in dispute is the timing: should the production of the AB file take place before or after the EUO?¹⁹

As noted above, production of the Insurer’s AB file may give the Applicant insight into the reasons for wanting to conduct the EUO. As I have now also determined that the Insurer is not required to provide more fulsome reasons than it has, should I defer the production of the AB file by the Insurer until after the conduct of the EUO?

I take notice of the fact that the production of the Insurer’s AB file may be accomplished with some minor administrative effort. On the other hand, the scheduling and conduct of the Applicant’s EUO will likely take more than a minor effort. In terms of convenience to the parties, it is likely easier for the Insurer to comply with the production order than for the Applicant to submit to the EUO.

If I defer the production of the Insurer’s AB file until after the EUO, the Insurer is likely to enjoy a tactical advantage. The Applicant will continue to be “in the dark” as to what information the Insurer may have in the AB file. There may very well be some element of “surprise” in the Insurer’s questions at the EUO as a result.

If the Insurer is required to produce the AB file before the EUO, the Applicant will be more fully informed about the information the Insurer has and there will no longer likely be an element of “surprise.” Does this give the Applicant a tactical advantage?

I do not believe so.

Having information about the Insurer’s AB file is something that all Applicants can expect to access in the event of a dispute under the Schedule where a Special Award is an issue.²⁰ The timing of access to the information should not, in itself, be considered to be a ‘tactical advantage’.

In her submissions, the Applicant notes that under section 32 of the Dispute Resolution Practice Code (“DRPC”), the Insurer was required to provide the AB file even before the Pre-Hearing in this matter. On the other hand, the Insurer submits that even before the dispute arose, the Applicant should have attended the EUO. This is even more certain now that I have held that there was no defect in the notice provided by the Insurer to the Applicant for the EUO.

Part of section 32 of the DRPC reads as follows:

32.1 At least 10 days before the pre-hearing discussion, each party must:

(a) exchange all documents identified in the Application for Arbitration and the Response by Insurer, or explain why a document has not been provided; (emphasis added)

I note that the accident benefits file was clearly identified in Schedule B of the Application for Arbitration.

The Insurer also notes the Deol²¹ case. This held that an Applicant was not justified in failing to attend an EUO until the Insurer had provided certain productions ordered at the Pre-Hearing.

In reply, the Applicant has submitted that the requirement for disclosure of the AB file and the requirement for the EUO are separate obligations and should not be tied together. A simple solution might be for me to only answer the first three questions without additional direction on the order in which I expect the EUO and the production order to be executed.

If I were to do that, I would have failed in my duty to determine all issues in dispute as required by subsection 282(3) of the Insurance Act. Accordingly, even though the EUO and the AB file production are independent obligations, in this case, I have to answer the fourth question of the Motion which I have added to determine their respective order of execution.

In the case of the EUO, there is nothing which compels an Applicant to attend. Subsection 33(6) of the Schedule provides that the Insurer can suspend the payment of further benefits until it is conducted. However, there is nothing that suspends any production requirement. It is trite law that an Arbitrator has no power to compel a party to attend at an examination; any notion of compulsion in the Applicant arises from the Insurer suspending benefits, there is no direct power to force the Applicant to undergo the examination.

In the case of document production, an Arbitrator has more significant powers. For example, with respect to the production of an AB file, section 32 of the Schedule establishes an obligation to produce documents. Unlike attendance at an EUO, section 32.3 makes it clear that an Arbitrator may, at any time, order the production of documents.

Section 32.2 of the DRPC also provides a more general obligation on document production:

the parties have an ongoing responsibility to ensure the prompt and complete exchange of documents that are reasonably necessary to determine the issues being arbitrated, including updates to the information previously exchanged and any additional documents obtained.

Practice Note 4 on the Exchange of Documents under the DRPC also makes it clear:

Parties to an arbitration should exchange all documents necessary to decide the issues in dispute at the earliest possible stage. (emphasis added)

It is clear that the intention of the Schedule is to ensure document production is made promptly. There is no similar power or obligation relating to EUOs.

I distinguish the Deol case from the present case. In Deol, the Insurer was required to produce surveillance evidence. The Applicant argued that he should have the surveillance productions before the examination. Given that surveillance evidence only has to be produced in the event that the Insurer wishes to use it on the Hearing, production is not absolutely required at any time.

In this case, it is clear to me that if the EUO takes place prior to the production of the Insurer’s AB file, the Insurer would enjoy a tactical advantage. The inverse is not obvious to me. Section 32.2 of the DRPC makes it clear that the expectation is that productions are to take place promptly and completely. Based on all of these reasons and my foregoing analysis it is clear that the production of the Insurer’s AB file should take place prior to the conduct of the EUO. My Order reflects this.

EXPENSES:

The question of expenses related to this Motion is deferred to the Hearing Arbitrator.

March 18, 2016

Marcel D. Mongeon Arbitrator

Date