Echelon General Insurance Company v. John Gilliland, 2017 ONFSCDRS 124

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2017 ONFSCDRS 124

Appeal P16-00064

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ECHELON GENERAL INSURANCE COMPANY

Appellant

and

JOHN GILLILAND

Respondent

BEFORE:

Delegate Jeffrey Rogers

REPRESENTATIVES:

Mr. Jamie Pollack, solicitor for Echelon

Mr. James May and Mr. Andrew Schleichkorn, solicitors for Mr. Gilliland

HEARING DATE:

April 10, 2017

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. The Arbitrator’s order is rescinded and replaced with the following: Mr. Gilliland is precluded from proceeding to arbitration and the arbitration is dismissed.

2. If the parties are unable to agree about expenses of the arbitration and of this appeal, an expense hearing may be arranged before me in accordance with Rule 79 of the Dispute Resolution Practice Code.

April 27, 2017

Jeffrey Rogers Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Echelon appeals the Arbitrator’s decision of August 16, 2016. The Arbitrator refused to dismiss Mr. Gilliland’s application for arbitration on the grounds that he failed to notify Echelon of the circumstances giving rise to his claim and he applied for arbitration without filing a Report of Mediator showing issues remaining in dispute.

For the reasons that follow, I conclude that the Arbitrator did not err in finding that Mr. Gilliland had a reasonable explanation for his failure to notify Echelon of the circumstances giving rise to his claim and in finding that mediation failed. However, to proceed to arbitration, Mr. Gilliland must also prove that the issues he seeks to arbitrate have been mediated. There is no evidence that this occurred. Mr. Gilliland is therefore precluded from proceeding to arbitration.

II. BACKGROUND

May 2, 2008 was a fine spring day. Mr. Gilliland owned a motorcycle, but he had let the insurance lapse over the winter. Nevertheless, he could not resist the temptation to get out for a ride. He was riding along the 16th Sideroad outside Strathroy when his front wheel hit a ridge or ripple in the roadway and he lost control. The motorcycle left the roadway and crashed through a ditch into the adjacent field.

Mr. Gilliland was ejected from the motorcycle. At some point his helmet came off. His evidence was that he suffered various impairments as a result of the accident, including loss of memory, neck pain and continuous headaches.

At the time of the accident, Mr. Gilliland also owned a 2002 Pontiac Sunfire automobile on which Echelon carried a valid insurance policy. He was unaware that he could claim accident benefits under that policy. He did not notify Echelon about a possible claim until August 2012, at the earliest. He testified that he did not discover that he could make a claim until July 2012, when he consulted a lawyer on a separate issue related to his injuries.

Mr. Gilliland’s first contact with Echelon regarding the accident was by way of a letter from his lawyer, dated August 15, 2015. The letter gave details of the accident, advised that Mr. Gilliland was not aware of the policy number, and purported to enclose an Application for Accident Benefits. His lawyers then sent another letter on April 18, 2013. This letter asserts that there had been no response from Echelon and states that a further copy of the Application for Accident Benefits is enclosed.

Echelon did not pay any benefits. Mr. Gilliland applied for arbitration on July 14, 2015. He did not file a Report of Mediator with his Application for Arbitration. Two preliminary issues came for hearing before the Arbitrator on January 28, 2016:

1. Is Mr. Gilliland precluded from applying for arbitration without a Report of Mediator showing items remaining in dispute?

2. Is Mr. Gilliland precluded from mediation because he failed to notify Echelon of the circumstances giving rise to his claim and failed to submit an application for benefits within the prescribed time?

Upon reviewing the documentary evidence and Mr. Gilliland’s oral evidence, the Arbitrator concluded that Mr. Gilliland applied for mediation and that, although mediation did not take place, mediation was deemed to have failed. Mr. Gilliland was therefore not required to file a Report of Mediator.

It was not disputed that Mr. Gilliland failed to notify Echelon of the circumstance giving rise to his claim within the prescribed time. However, the Arbitrator ruled that Mr. Gilliland was not precluded from proceeding to mediation because he had a reasonable explanation for the delay.

III. ANALYSIS

Fresh evidence

Mr. Gilliland sought to introduce fresh evidence at the appeal. I denied his request by letter dated January 26, 2017.

He sought to introduce the Application for Arbitration. Pursuant to Rule 56.4 of the Dispute Resolution Practice Code, this is already a part of the appeal record, even if it was not specifically introduced as evidence. He also sought to introduce an Application for Mediation, dated August 2014 and several other documents which were not introduced at the hearing because he did not serve them on Echelon at least 30 days before the hearing, as the Rules require.

The following criteria for admitting fresh evidence, as set out by the Supreme Court in The Queen v. Palmer,¹ have been adopted on appeal in cases such as Plows and Jevco Insurance Company,² and Budd and Personal Insurance Company of Canada.³

• The evidence should generally not be admitted if, by due diligence, it could have been adduced at trial;

• The evidence must be relevant in the sense that it bears upon a decisive or potentially decisive issue in the trial;

• The evidence must be credible, in the sense that it is reasonably capable of belief; and

• The evidence must be such that, if believed, it could reasonably, when taken with the other evidence adduced at trial, be expected to have affected the result.

In my letter of January 26, 2017, I ruled that the fresh evidence will not be admitted because it fails the first rule in Palmer. The evidence could clearly have been produced at arbitration, with due diligence.

Reasonable Explanation

I will deal with this issue briefly. Given my finding that Mr. Gilliland is precluded from proceeding to arbitration, the question of his explanation for the delay in notifying Echelon appears moot.

The issue arises from sections 31(1) and 32(1) of the Schedule,⁴ Section 32(1) requires notification of the insurer of the intention to apply for a benefit, no later than the seventh day after the circumstances arose that give rise to entitlement to the benefit, or as soon as practicable after that day. Section 31(1) allows for relief from the consequences of a breach of this time limit, if the person in breach has a reasonable explanation for their failure to comply.

There is no doubt that Mr. Gilliland breached the time requirement. The Arbitrator found that he had a reasonable explanation. Echelon submits that the Arbitrator erred in law. I find no error. In my view, Echelon is simply challenging the Arbitrator’s findings of fact.

The principles to be applied in deciding whether there is a reasonable explanation for the delay are summarized in Horvath and Allstate Insurance Company of Canada.⁵

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

• The onus is on the insured person 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 claimant and whether it is equitable to relieve against the consequences of the failure to comply with the time limit.

The Arbitrator did not cite Horvath, but he did not fail to apply its principles, as Echelon submits. The Arbitrator found that:

The applicant cannot be denied an opportunity to prove his case simply because, in the nature of his condition, he was unable to function at a level that would have allowed him to comply strictly with the Schedule or to obtain meaningful assistance, at an early date, to help him do so.⁶

That finding was amply supported by Mr. Gilliland’s testimony and the Arbitrator’s observation and assessment of his behaviour as a witness. The Arbitrator did not rely upon Mr. Gilliland’s ignorance of the law alone, as Echelon submits. The Arbitrator considered it as a relevant factor, as Horvath permits. The Arbitrator did not diagnose an accident-related brain injury. He found that Mr. Gilliland’s history was consistent with having sustained a brain injury. The Arbitrator could make that finding, without a medical opinion. The Arbitrator did not fail to consider prejudice to Echelon. There was no evidence of actual prejudice to Echelon, so the Arbitrator was not required to engage in a detailed analysis of relative prejudice.

No issues in dispute for arbitration

Section 281(2) of the [Insurance Act]⁷ prohibits referring issues in dispute to arbitration unless mediation was first sought and it failed to resolve the dispute. It reads:

No person may bring a proceeding in any court, refer the issues in dispute to an arbitrator under section 282 or agree to submit an issue for arbitration in accordance with the Arbitration Act, 1991 unless mediation was sought, mediation failed and, if the issues in dispute were referred for an evaluation under section 280.1, the report of the person who performed the evaluation has been given to the parties.

The Arbitrator found that mediation was sought and that mediation failed. The evidence before the Arbitrator supports that finding and I reject Echelon’s submission that the Arbitrator erred in this regard. The Arbitrator made no finding that there are issues in dispute to be referred to arbitration. There was no evidence before the Arbitrator to support a finding that issues remain in dispute. In fact, there were no issues in dispute when Mr. Gilliland purported to apply for mediation, and there still are none.

This is how the Arbitrator described the issue:

Is Mr. Gilliland precluded from applying for mediation [sic] without a Report of Mediator showing items remaining in dispute?

Mr. Gilliland did not file a Report of Mediator with his Application for Arbitration as is the usual practice, and he did not introduce one into evidence before the Arbitrator. The Arbitrator focussed entirely on the absence of the Report.

The Arbitrator noted that it would have been logical for Mr. Gilliland to tender a copy of the Application for Mediation. He then went on to say that this “is not the end of the matter”.⁸ He found that the other evidence before him proved that Mr. Gilliland had applied for mediation. I reject Echelon’s submission that the Arbitrator erred in this regard. That finding was an available inference from the e-mail Mr. Gilliland received from the Commission that “I did not realize until now that you had applied for Echelon last year”.

The Arbitrator went on to conclude that, based upon the exception established by the Court of Appeal in Hurst v. Aviva Insurance Company⁹, Mr. Gilliland could apply for arbitration without a Report of Mediator. That case established that, when mediation is deemed to have failed because it has not taken place within the 60 day time limit, the insured person can proceed to arbitration without a Report of Mediator. Those were the circumstances in this case.

The Arbitrator concluded that Mr. Gilliland could therefore proceed to arbitration. But the Arbitrator made no finding that there were issues in dispute to be arbitrated and there was no evidence that there were. As the Arbitrator noted, in the usual case, an Application for Mediation would have been produced. So, in the usual case, the question of what was deemed to have been mediated would be answered. This was not the usual case. Here, the Arbitrator had no Application for Mediation. But he had the Application for Arbitration which should have provided him with a clue. The Application for Arbitration does not make a claim for any specific accident benefits.

Before me, counsel for Mr. Gilliland conceded he has never claimed a specific accident benefit from Echelon. So Echelon has never refused to pay a claim and he could not have mediated any refusal. Counsel submitted that the arbitration is about whether Mr. Gilliland can claim medical benefits from Echelon. But he has never submitted a treatment plan.

I reject Mr. Gilliland’s submission that the question of whether there were issues in dispute for arbitration was not before the Arbitrator. “Items remaining in dispute” was part of the Arbitrator’s description of the question to be determined. If the hearing before the Arbitrator was only about whether a Report of Mediator was necessary, as Mr. Gilliland submits, a further hearing would nevertheless be required to address what was mediated. That defies logic.

I conclude that the Arbitrator erred in finding that Mr. Gilliland could proceed to arbitration, without finding that there were mediated issues remaining in dispute. I find that, since there are no issues in dispute which have failed at mediation, Mr. Gilliland is precluded from proceeding to arbitration. His arbitration must therefore be dismissed.

IV. EXPENSES

If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

April 27, 2017

Jeffrey Rogers Director’s Delegate

Date

Footnotes

1. 1[1980] l S.C.R. 759
2. 2(OIC P-000175, P-000588, May 22, 1992)
3. 3(FSCO P99-00032, January 8, 2000)
4. 4The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
5. 5FSCO A02-000482, June 9, 2003, at page 4
6. 6At page 9
7. 7R.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
8. 8At page 5
9. 92012 ONCA 837 (also indexed as Cornie v. Security National Insurance Co.)