Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2017 ONFSCDRS 154

Appeal P16-00073

SAMER MEHANNA Appellant

and

INTACT INSURANCE COMPANY Respondent

BEFORE: Delegate Jeffrey Rogers

REPRESENTATIVES: Mr. Raymond Murray, solicitor for Mr. Mehanna Ms. Janet Young, solicitor for Intact

HEARING DATE: On the record, by written submissions, completed on May 1, 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:

The appeal is allowed in part.
Intact shall pay Mr. Mehanna further interest on the Attendant Care and Housekeeping and Home Maintenance benefits it paid in August 2016. The further interest is to be calculated with overdue dates based upon when entitlement to the benefits accrued.
The Arbitrator’s order regarding expenses is rescinded.
The issue of entitlement to expenses of the motion is remitted for re-hearing by an Arbitrator.
If the parties cannot agree on the amount of interest to be paid, the issue is remitted for re-hearing by an Arbitrator.
The appeal is otherwise denied.
If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged before me in accordance with Rule 79 of the Dispute Resolution Practice Code.

June 5, 2017

Jeffrey Rogers Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Mr. Mehanna appeals the Arbitrator’s decision in which he found that Intact did not breach the terms of the Minutes of Settlement the parties executed. The Arbitrator therefore denied Mr. Mehanna’s request for an order requiring Intact to pay interest and a special award. Mr. Mehanna submits that the Arbitrator erred in interpreting the Minutes of Settlement to mean that he was required to provide evidence that he incurred ongoing expenses for attendant care (ACBs) and housekeeping (HK), before Intact was required to pay those benefits.

For the reasons that follow, I find that:

The Arbitrator did not err in ruling that Mr. Mehanna was required to provide proof of ongoing entitlement
The Arbitrator did not err in ruling that Mr. Mehanna was not entitled to a special award
The Arbitrator erred in his apparent conclusion that Mr. Mehanna was precluded from entitlement to interest
Because of the change in the result, the Arbitrator’s award of expenses to Intact must be rescinded

II. BACKGROUND

Mr. Mehanna was injured in a motor vehicle accident on August 13, 2010 and he sought accident benefits from Intact. He applied for arbitration after mediation did not resolve disputes that arose regarding his entitlement to certain benefits. The parties attended for an arbitration hearing on February 2, 2016, but they negotiated a settlement and executed Minutes of Settlement before the hearing started. The Minutes of Settlement required Intact to reinstate and pay Mr. Mehanna monthly ACBs and weekly HK, effective February 2016.

Intact did not immediately pay the benefits. In June 2016, Mr. Mehanna brought a motion seeking an order for payment of the benefits, plus interest, and a special award. The motion was heard on September 1, 2016. Intact paid the benefits plus some interest before the Arbitrator heard the motion. The issues of entitlement to further interest and a special award remained in dispute.

The Arbitrator found that the Minutes of Settlement incorporated the Schedule¹. He ruled that the Schedule does not require Intact to pay the benefits until it has received proof that the expenses were incurred. He found that Intact paid the benefits and interest, promptly upon receipt of proof. He found that the delay in payment resulted from Mr. Mehanna’s failure to submit the evidence to support the ongoing payments, not from any breach of the Minutes by Intact. He therefore denied Mr. Mehanna’s claim for a special award.

III. ANALYSIS

Fresh evidence

Mr. Mehanna sought to admit fresh evidence in the appeal. After the oral portion of the hearing was concluded, he asked the Arbitrator to consider the same affidavit he sought to admit in the appeal, but the Arbitrator refused. In the appeal, Mr. Mehanna submits that the Arbitrator’s refusal was an error. I find no error in the Arbitrator’s refusal and the request to file fresh evidence is denied.

At the hearing, Intact informed the Arbitrator that it had paid the benefits in dispute, plus interest. The details of the payments were not available at that time. The Arbitrator accepted a supplementary affidavit from Intact, setting out details of the payments. The Arbitrator did not accept a responding affidavit from Mr. Mehanna. This is the fresh evidence.

The payments speak for themselves. There is no dispute about what was paid. I find that the proposed evidence could not have impacted the Arbitrator’s factual findings. It certainly has no impact on the outcome of this appeal.

No right to benefits without supporting evidence

The parties settled Mr. Mehanna’s claims for ACBs and HK and they executed Minutes of Settlement, dated February 2, 2016. The Minutes contained terms requiring Mr. Mehanna to also execute a partial release and a Settlement Disclosure Notice. The additional documents were executed and provided to Intact in April 2016. Meanwhile, Intact had received new information that Mr. Mehanna’s need for ACBs was less than it had agreed to pay.

The Arbitrator did not refer to it in his reasons, but the uncontested evidence before him was that on February 11, 2016, Intact received a copy of an Assessment of Attendant Care Needs. This was an assessment Mr. Mehanna himself commissioned. It showed monthly ACB needs of about $250 less than Intact had agreed to pay. On March 29, 2016, Intact informed Mr. Mehanna that it required him to submit Expense Claim Forms regarding any incurred expenses for ACBs, before making any of the agreed payments.

Mr. Mehanna did not immediately provide the requested forms. He brought a motion seeking a finding that Intact breached the Minutes of Settlement, an order requiring Intact to pay ACBs and HK as agreed, and an order for payment of interest and a special award. Mr. Mehanna had submitted the forms and Intact had paid the benefits at the rate agreed, plus some interest, by the time the Arbitrator heard the motion.

The remaining issues before the Arbitrator were Mr. Mehanna’s claims for further interest and a special award. The first question to be answered in resolving these issues is whether Intact breached the Minutes of Settlement by requesting the Expense Claims Forms. There is no specific reference to this requirement in the Minutes of Settlement. The Arbitrator ruled that the Minutes incorporate the Schedule. He stated:

In my view, this means moving forward the applicant still has an obligation to trigger the SABS in the usual and normal manner and in due course.

To think otherwise that the insurer has allowed the applicant to opt out of the normal scheme of the SABS benefit claiming process without express language to do so, cannot be reasonably interpreted from this clause.

I agree with the Arbitrator’s conclusion. I reject Mr. Mehanna’s submission that the Minutes are a contract, to be interpreted without reference to the SABS. His right to ACBs and HK does not exist without reference to the SABS. His own actions erode the logic of his submission. In moving to interpret and enforce the Minutes, Mr. Mehanna sought payment of interest and a special award. Those rights derive from the SABS, but are not mentioned in the Minutes. So, Mr. Mehanna would have it both ways: he would rely on the SABS to enforce and enhance his rights under the Minutes, but he would exclude the SABS in defining his rights.

The Arbitrator’s conclusion is supported by jurisprudence on the issue of an insured person’s ongoing obligations, where an Arbitrator has ordered payment of ongoing benefits like ACBs. The jurisprudence holds that, even where there is an order for payment, ongoing entitlement is subject to ongoing need. This requirement was recently discussed in Veley and Motor Vehicle Accident Claims Fund ²:

The general principle regarding attendant care benefits was stated by Director’s Delegate Makepeace in Allstate Insurance Company of Canada and Da Rosa et al, (FSCO P04-00033, May 25, 2006): “Unlike weekly benefits, which are ongoing regular payments intended to compensate for disability and maintain an income stream, … attendant care benefits are provided on a claim by claim basis to pay for services the claimant needs as a result of the accident.”

Thus, the benefit payable for any given month depends on what expenses were incurred, and is subject to other limits and qualifications. ..

The discussion in Veley also negates Mr. Mehanna’s submission that the Veley approach does not apply in his case. He submits that Veley can be distinguished because Veley dealt with the new SABS containing a prescribed definition of “incurred”, while there is no definition of “incurred” in the version governing his accident. However, Veley relies on the earlier decision by Delegate Makepeace in Allstate Insurance Company of Canada and Da Rosa et al. There was also no definition of “incurred” in the SABS-1994, which was applied in Da Rosa.

Delegate Makepeace had earlier addressed the issue of proof of ongoing entitlement in Belair Insurance Company and McMichael.³ Mr. Mehanna concedes that McMichael confirms an insurer’s right to request evidence that expenses remain reasonable and necessary, as often as is reasonably necessary. He argues that Intact’s request was too soon after the settlement to be reasonable and necessary. I find that the request was reasonable because Intact had received new information regarding his ongoing needs. Intact did not have to give him a notice of stoppage, as Mr. Mehanna submits, because it did not terminate payment. It requested information to which it was entitled, as a condition of making payment.

Two final points: First, McMichael dealt with the same version of the SABS that applies in this case, further negating Mr. Mehanna’s submission that Veley can be distinguished. Second, Delegate Makepeace decided Da Rosa after deciding McMichael. In McMichael, it was ruled that in the circumstances of that case, the insured person was entitled to payment for ACBs, even though he had not received the services. It is often argued that this is a rule of general application. This argument is implicit in Mr. Mehanna’s position that he did not have to provide any evidence that he incurred ongoing expenses. However, that was not Delegate Makepeace’s intention. Despite the McMichael ruling, Delegate Makepeace still later ruled in Da Rosa that ongoing entitlement is subject to proving ongoing need.

No preclusion of interest

Section 46 of the SABS provides that an amount payable in respect of a benefit is overdue if an insurer fails to pay the benefit within the prescribed time. The section requires the insurer to pay interest if payment of a benefit is overdue. Jurisprudence has established limited circumstances in which an insurer may be excused from paying interest on a benefit which would otherwise be overdue.

The Arbitrator did not make an order as to interest. He dealt briefly with the issue. He noted that Intact paid $12.96 for interest on August 26, 2016. Although not stated in the Arbitrator’s reasons, the evidence was that Intact only paid interest for 4 days on the sum of $3,963, paid on August 24, 2016. The Arbitrator found that the delay in payment was “the fault of the applicant and the applicant alone.” So, it appears that the Arbitrator ruled that Mr. Mehanna’s conduct precluded entitlement to further interest. I find that he erred in doing so.

Insured persons are entitled to interest to compensate them for delay in payment. Preclusion of interest is a punitive remedy, granted only in unusual circumstances. The Arbitrator’s approach would make it routine. It is a rare case where an insured person supplies proof of incurred expenses for ACBs and HK, at the time that the payment is due.

In Wawanesa Mutual Insurance Company and Sorokin, Delegate Makepeace ruled that entitlement to interest does not await establishing entitlement to an insurer’s or an Arbitrator’s satisfaction. Interest is payable “even though the insurer has legitimate reasons for questioning the claim or requiring more information.” She wrote:

The Commission's approach to interest was reviewed most recently in Virk and Liberty Mutual Insurance Company of Canada, (FSCO P04-00027, July 5, 2005). In that decision, I reaffirmed that interest under the SABS:

is mandatory, compensatory, and flows from late payment of overdue benefits. There is no need for a finding of insurer misconduct. Accordingly, upon a finding of entitlement, interest flows even though the insurer had legitimate reasons for questioning the claim or requiring more information.

Though interest does not accrue until a payment becomes "overdue," this does not require the claim to be established to an insurer's or an arbitrator's satisfaction. Only where "the insured person acts in a manner that effectively prevents the insurer from assessing his or her entitlement," will interest accrual be delayed.⁴

The circumstances in this case were not at all unusual. Although Intact had legitimate reasons for requesting proof of ongoing entitlement, Mr. Mehanna supplied the proof without undue delay and without undue effort by Intact. It should have paid interest, calculated on the basis that payment became due as entitlement to the benefits accrued. I have therefore ordered Intact to pay further interest and I have remitted the matter to be determined by an Arbitrator, if the parties are unable to agree on the amount of interest.

No special award

Section 282(10) of the Insurance Act allows an Arbitrator to order payment of a special award upon finding that an insurer has unreasonably withheld or delayed payment of benefits. The Arbitrator’s denial of Mr. Mehanna’s claim for a special award was based upon his determination that Intact was entitled to request the Expense Claims Forms and paid promptly upon receiving them.

I have agreed with the Arbitrator regarding the Expense Claims Forms. But there is something the Arbitrator did not consider. There was no evidence before the Arbitrator that Intact requested proof of ongoing entitlement to HK. The request related to ACBs only. I find that Intact’s delay in payment was still not unreasonable for two reasons. First, the activities relevant to entitlement to ACBs and HK overlap. Second, the delay in payment was fairly brief. The settlement was not finalized until April and the payment was made in August.

In addition, my order for Intact to pay further interest changes the outcome of Mr. Mehanna’s motion, so its impact on his claim for a special award has to be considered. I find that it does not change the outcome regarding a special award. Intact’s position on interest was wrong, but it was not so completely without merit to be unreasonable.

IV. EXPENSES

The Arbitrator awarded Intact its expenses of the motion. Based upon the Mr. Mehanna’s partial success in the appeal, the Arbitrator’s order regarding expenses is rescinded. The issue is remitted for re-hearing by an Arbitrator.

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