Tirbhawan Bharat v. State Farm Mutual Automobile Insurance Company, 2017 ONFSCDRS 168

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

Neutral Citation: 2017 ONFSCDRS 168

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BETWEEN:

TIRBHAWAN BHARAT

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Alan Mervin

Heard: March 30, 2016 at the Financial Services Commission of Ontario. Closing submissions received on June 28, 2016 and July 1, 2016.

Appearances: Cecil Jaipaul for Mr. Bharat

Arash Rowshanzamir for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Tirbhawan Bharat, was injured in a motor vehicle accident on March 26, 2010. He applied for and received statutory 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 Mr. Bharat applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issues are:

Is Mr. Bharat precluded from proceeding to arbitration because he failed to mediate the issues in dispute within two years of the Insurer’s refusal to the amounts claimed?
Is Mr. Bharat precluded from proceeding to arbitration by operation of s. 55(2) of the Schedule because he failed to attend an Insurer Examination under section 44 of the Schedule?

Result:

Mr. Bharat’s claim with respect to housekeeping and home maintenance is statute-barred. Mr. Bharat is precluded from proceeding to arbitration with respect to this issue.
The Notices of Examination given by State Farm for the medical assessments under s. 44 of the Schedule with respect to the two treatment plans in issue are not valid. Mr. Bharat can proceed to arbitration on those matters.

EVIDENCE AND ANALYSIS:

Is Mr. Bharat statute-barred from proceeding to arbitration?

The Insurer seeks an order precluding Mr. Bharat from proceeding to arbitration with respect to his Housekeeping and Home Maintenance claim. Because he did not mediate the issue within two years of the denial of the benefit, the Insurer submitted that Mr. Bharat is therefore statute-barred from proceeding to arbitration on this issue.

Following the accident of March 26, 2010, Mr. Bharat filed an application for accident benefits on April 12, 2010, claiming entitlement to several benefits, including claims for housekeeping and home maintenance, and payment for treatment in accordance with OCF-18 treatment plans he subsequently submitted.

He was examined by a physician on April 10, 2010, and obtained an OCF-3 Disability Certificate endorsing his eligibility for housekeeping and home maintenance benefits, because of accident- related soft tissue injuries which he claimed prevented him from performing pre-accident housekeeping tasks. According to the Disability Certificate, the injuries were expected to resolve within five to eight weeks.²

The Insurer then paid housekeeping benefits pursuant to the disability certificate, but notified Mr. Bharat by letter dated March 28, 2011,³ that it had scheduled an in home Insurer Examination (IE) with Occupational Therapist Kevin Cheng, for April 13, 2011. Mr. Cheng attended at Mr. Bharat’s home at the appointed time, and waited thirty minutes before he left, as the Applicant was not present, and no one answered the door when Mr. Cheng arrived. Mr. Bharat subsequently offered no explanation for his failure to attend. Since then, the Insurer has been unable to obtain an assessment as Mr. Bharat has not submitted to an IE for this benefit, and the Insurer has had to rely on the initial Disability Certificate to determine eligibility.

Following the April 13, 2011 non-attendance, the Insurer informed Mr. Bharat by letter dated July 20, 2011 that he was no longer entitled to housekeeping and home maintenance benefits because of his non-attendance at the IE.⁴ He then submitted an application to mediate the denial of housekeeping benefits dated March 5, 2014, which was received by the Insurer on March 12, 2014, some two years and 5 months after the termination.

The Insurer now seeks an order that Mr. Bharat is statute-barred from proceeding to arbitration on this issue as he has not mediated the denied benefit within two years of the termination, contrary to section 281.1 of the Insurance Act and section 51 of the Schedule.

THE LAW

Limitation Period

Section 281.1 of the Insurance Act⁵ states as follows:

281.1(1) A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed. 2002, c. 24, Sched. B, s. 39 (6).

In the leading case of Smith v. Co-operators General Insurance Company,⁶ the Court found that the two-year limitation period under s. 281(5) of the Insurance Act only begins to run upon the issuance by the insurer of a valid refusal. The Court found that the insurer had an obligation to inform insured persons of the entire dispute resolution process found in sections 279 to 283 of the Insurance Act in straightforward and clear language, directed towards an unsophisticated person.

The Court found that,

“At a minimum, the information should include a description of the most important points of the dispute resolution process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process”.

Without this basic information, it cannot be said that a valid refusal has been given.

In Smith, The Court found that the refusal only informed the insured person of the first step of the process, and was therefore not a valid refusal, and, as a result, the limitation period under s. 281(5) of the Insurance Act did not begin to run.

Since Smith, therefore, it is well settled law that the refusal must be in clear and unequivocal language, directed towards an unsophisticated person, and also must contain an explanation of all the steps necessary to dispute the refusal. The onus is on the Insurer to ensure the refusal complies with these requirements, and if it is clear that the refusal does not comply with these basic requirements, the limitation period will not be triggered.

Is the denial of housekeeping and home maintenance benefits valid?

The Insurer has submitted that the July 20, 2011 termination letter with respect to this claim was clear and unequivocal, in straightforward language, triggering the limitation period to apply for mediation and notified that payment of that benefit would be stopped as of April 13, 2011. If the denial is found to be valid, a plain reading of the statute requires that the mediation would have to be commenced by July 20, 2013, in accordance with the requirements of section 281 of the Insurance Act.

In the current case, mediation was not commenced until March 5, 2014, well outside of the two year limitation period, and the Insurer submits that the denial is valid, triggering the limitation period. The Insurer submits the Applicant is therefore statute-barred from proceeding to arbitration with respect to his housekeeping and home maintenance claim.

The Applicant submits that the denial is not valid and did not trigger the limitation period. The Applicant therefore submits that he is not barred from proceeding to arbitration. The Applicant has argued that the wording of the denial of the benefit was unclear and confusing.

In accordance with the principles in Smith, and as elaborated in Strauss v. Aviva Canada Inc.,⁷ a valid refusal of benefits must state a clear and unequivocal denial, provide the reasons therefore, including accompanying medical documentation if applicable, and provide a description of the dispute resolution process in straightforward and clear language, directed towards an unsophisticated person.

The OCF-9 letter dated July 20, 2011,⁸ sent to the Applicant, on which the Insurer relies upon and which purports to terminate the housekeeping and home maintenance benefit, reads as follows:

Housekeeping and Home Maintenance Expenses: We have been informed that you have failed or refused to attend the Insurer’s Examination on 04/13/11 with Kevin Cheng. Therefore, you are no longer entitled to Housekeeping and Home Maintenance benefits as of 04/13/11, pursuant to Section 37 (7) (b) of the Statutory Accident Benefits Schedule. Please contact us to reschedule this assessment. To be entitled to future Housekeeping and Home Maintenance Benefits, the assessment must be completed. You may be entitled to benefits that were withheld, if the assessment is completed and you provide a reasonable explanation for your non-compliance with Section 37 (7) (b) within 10 business days of 07/20/11.

According to the Insurer, the Applicant did not respond or provide an explanation for the non-compliance.

The Applicant takes issue with this denial, particularly the portion which reads, “you are no longer entitled to Housekeeping and Home Maintenance Benefits”, followed by “you may be entitled to benefits that are withheld”, submitting that this is confusing and unclear as to why the Insurer requires the Applicant to provide a reasonable explanation for his non-compliance, and argues that there is no provision in the Schedule for the Insurer to demand and rely on this statement to deny benefits because the Applicant did not contact the Insurer within 10 days.

The Applicant further submits that the OCF-9 is not a form approved by the Superintendent of Insurance, and relies on section 227 of the Insurance Act, and Section 66 of the Schedule in this regard.

In my view, there is nothing confusing with respect to the wording of this refusal. It is clear, straightforward and understandable. The explanation given as the reason for denial of his claim was the Applicant’s failure to attend an assessment. It also provided a detailed explanation of the steps involved in the dispute resolution process, should the Applicant wish to dispute the decision, and a warning that should the Applicant wish to dispute the Insurer’s refusal to pay, he could do so by completing an application for mediation within two years of the refusal. He did not do so.

Further, whether or not this denial is strictly legal (with regard to the submissions regarding the Insurer’s non-compliance with sections 44 and 37 of the Schedule) or correct in its requirement to respond within ten days is, in my view, inconsequential with respect to its validity, as, according to Strauss,⁹ “the Court of Appeal has repeatedly said that, so long as the insurer provides a valid refusal, the limitation period should be strictly applied. It does not matter if the reason provided for the refusal of the benefit is incorrect or inaccurate at law,” The Court cited the cases of Turner v. State Farm Mutual Automobile Insurance Company¹⁰ and Sietzma v. Economical Mutual Insurance Company¹¹ in support of this finding.

The refusal in the current case advised the Applicant that, should he provide a reasonable explanation for the non-attendance at the assessment and also complete a rescheduled assessment, the withheld benefits, as well as any future benefits may be payable.

The Applicant submitted that a suspension of benefits is different from a termination or refusal, and relies on Luther v Economical Mutual Insurance Company¹² in support of this argument. He submits that a document that first advises that benefits are suspended, and then proceeds to advise that the said benefit is terminated, confusing, and not clear and unequivocal.

In Luther, the Applicant, upon attending for a defence medical pursuant to a notice given, refused to sign a consent form, and the examination did not take place. Arbitrator Wilson found that the penalty set out in the Schedule for disobedience “is simply the suspension of benefits until such time as the person makes him or herself reasonably available for an examination”.

While in the current case, it may be argued that there was only a right to suspend or withhold benefits until such time as the Applicant complies with the request for the IE, I find that there is nothing confusing or equivocal with respect to the explanation of benefits given. The reasons were set out clearly, and in straightforward language that an ordinary person could understand, and the options available to the claimant and the penalty for non-compliance were clearly set out.

I am not bound by Luther. This issue was more recently dealt with in the case of Kanapathipillai v Personal.¹³ In that case, while the suspension of benefits was for a different reason, i.e. non-compliance with required production of certain documents, as opposed to non-attendance at an IE, the Arbitrator held that a limitation period holds even in the face of a suspension of benefits. I prefer the reasoning in Kanapathipillai, and in my view, that principle also applies here.

With regard to the objection relating to the Insurer’s use of the OCF-9 to convey the denial, the Insurer submits that this is the standard form used by the insurance industry to convey a decision regarding an insured’s entitlement of benefits, and its use has been well accepted by courts and Arbitrators.

The 2012 decision of Arbitrator Alves, in Do and Guarantee Company of North America,¹⁴ stated “the explanation of Benefit Form, the OCF-9, is the form insurers are required to use when benefits are refused”¹⁵, came well after the Superintendent’s Bulletin of June 16, 2010, on which the Applicant relies to challenge the use of the OCF-9. Further, the Insurer has submitted that in any event, Superintendent’s Bulletins are not binding.

While I am not bound by this decision, I agree with Arbitrator Alves and I am not prepared to find that the OCF-9 was not valid, nor is its use an unfair or deceptive act or practice as is submitted by the Applicant. Further, I am not bound by a Superintendent’s Bulletin, as these are meant to be used as guidelines and are not binding. The OCF-9 is still being commonly used throughout the industry, and while the standard practice of the industry, on its own, does not make it legal, the OCF-9 has been accepted over the years by Arbitrators and Courts. I am not aware of any case that has turned on the legality of the use of the OCF-9 form itself.

For these reasons, I find that the refusal of benefits dated July 20, 2011 was clear and unequivocal, contained the necessary ingredients as outlined in Smith, and elaborated on in Strauss and many other subsequent decisions, and acted to trigger the limitation period. As the applicant did not apply for mediation within the two years following the refusal, I find the Applicant is precluded from proceeding to Arbitration on this issue.

Should the arbitration regarding treatment plans for medical benefits be stayed because of non-attendance at scheduled Insurer’s Examinations?

The Insurer states in its factum that it seeks dismissal of the arbitration because of the Applicant’s non-attendance at Insurer’s Examinations (IEs). Alternatively, the Insurer seeks an order to stay the arbitration of the medical benefits until such time as the Applicant attends the IEs.

In this matter, the Application for Mediation was dated March 5, 2014, and received by the Insurer on March 12, 2014, with the mediation having been conducted March 4, 2014 to May 5, 2014. According to the Report of Mediator dated May 6, 2014, 3 medical benefits and a claim for Housekeeping and Home Maintenance benefits remained in dispute. Two of these medical benefits were subsequently identified as remaining in dispute at the pre-hearing, held on December 15, 2015.

The first OCF-18 dated January 9, 2012 remaining in dispute, requested $1,817.70 for massage therapy. It was subsequently denied by the Insurer on February 7, 2012, for failure or refusal to attend an IE with Dr. Lai-Feng on February 6, 2012.

The second OCF-18 dated February 6, 2012, in the amount of $760.40, (of which $333.25 remained outstanding), was denied in an OCF-9 dated March 21, 2012. The reason given for this denial was for “failing to attend an IE with the Chiropractor” on March 19, 2012.

At the outset, I note that in the joint factum of the Applicants, dated March 4, 2016,¹⁶ at paragraph 5 of the factum of the Applicant Tirbhawan Bharat, he states that he relies on a declaration contained at paragraph 3 in the Affidavit of Jonathan Tatner, ¹⁷ a lawyer at the Insurer’s firm, sworn February 19, 2016. That paragraph states as follows:

The accident benefits which are the subject matter of this hearing are medical/ rehabilitation benefits and housekeeping /home maintenance. However, the Respondent is only disputing that the Applicant’s claim for housekeeping/home maintenance is statute-barred as per section 281.1 (1) of the Insurance Act.

Because of this, I am not prepared to dismiss the claims at issue for medical benefits, but rather, only decide whether the arbitration should be stayed until the Applicant complies with the request for IE’s, should I find that the Applicant(s) failed or refused to attend.

The Insurer notified the Applicant that they required him to undergo an IE in order to assess him with respect to his entitlement to the medical benefits, and attempted to schedule an assessment with Dr. Greg Lai Fang. The Applicant was sent a letter dated January 11, 2012 informing him of the assessment, and a subsequent Notice of Examination dated January 27, 2012 indicating that an IE was scheduled with Dr. Greg Lai-Fang on February 6, 2012 with regard to the first treatment plan. The Applicant failed to attend the scheduled assessment, and was sent a denial letter dated February 7, 2012 terminating the requested benefit.

The Insurer then sent a letter to the Applicant dated February 9, 2012, informing him that an IE was scheduled for February 27, 2012, to assess whether the OCF-18 of February 6, 2012 was reasonable and necessary. The Applicant wrote the Insurer requesting it be rescheduled for any day after 6:30 pm, because of work obligations. The assessment was rescheduled to March 19, 2012. The Applicant did not attend the rescheduled assessment, and was sent a second termination letter dated March 21, 2012. Although the first treatment plan had already been denied by way of the OCF-9 dated February 9, 2012 the OCF-9 dated March 21, 2012, which was sent as a result of the Applicant’s non-attendance on March 19, 2012, denied both treatment plans for non-attendance at the scheduled IE on March 19, 2012.

Failure to comply with 44(5) of the Schedule:

Before it can be said that an insured failed or refused to attend an IE, the failure or refusal must be pursuant to a valid Notice of Examination given to the insured. That Notice must comply with the requirements of s. 44 of the Schedule.

Under s. 44(1) of the Schedule, an insurer is entitled to an IE for the purpose of assisting it “to determine if an insured person is or continues to be entitled to a benefit under this Regulation for which an application is made, but not more often than is reasonably necessary . . . .”

Under s. 44(5), an insurer who requires an IE must give the insured person a notice that sets out, among other things, “the medical and other reasons for the examination.”

State Farm’s Notice of Examination to the Applicant dated January 27, 2012 for an IE scheduled for February 6, 2012 indicated that “the purpose of this examination is to determine if the OCF‑18 dated 01/09/12 is reasonable and necessary as gaps in treatment without documented clinical explanation”.[sic]

Similarly, the Notice of Examination to the Applicant dated February 9, 2012 for an IE scheduled for February 27, 2012 indicated that “the purpose of this examination is to determine if OCF-18 02/06/12 is reasonable and medically necessary as gaps in treatment without documented clinical explanation”.[sic]

In my view, while the above may constitute “other reasons,” they are not medical reasons.

The Applicant has submitted that State Farm has “never provided a medical or other reasons for the examinations scheduled”.¹⁸

The Insurer submits that the notice is valid, and that the letter to the Applicant dated January 11, 2012, should be read together with the Notice of Examination and other past correspondence.

The Insurer submits that these documents articulate the need and basis for the IE and the medical reason for the proposed IE. That letter sets out that the Applicant will be assessed for the following: “TENS manipulation multiple regions exercise multiple regions documentation support activity for claim form.”

In Augustin and Unifund Assurance Company,¹⁹ Arbitrator Sapin stated the following with respect to the contents of an Insurer’s Notice of Examination:

Given the serious consequences to an insured person of refusing to attend an IE for which proper notice has been given – barred from commencing a mediation proceeding to dispute an insurer’s denial of medical treatment – the notice requirements set out in s. 44(5) should be strictly construed and the insurer’s notice should be closely examined to ensure it complies. The requirements are mandatory. [emphasis mine]. They are there to balance the naturally intrusive nature of an IE and to ensure fairness. The insured person is entitled to make an informed decision about whether they wish to pursue their claims and attend the IE, or not. The legislature has determined that, in fairness, an insured person is entitled to specific information, including medical reasons, about why they are being required to attend an IE.

The Schedule does not precisely define what constitutes a “medical reason”. However, I am not satisfied that the reason given in the notices, “is reasonable and necessary as gaps in treatment without documented clinical explanation” constitute medical reasons. That statement, in my view, is a statement of fact, and may constitute “other reasons”. However, I am not satisfied that it is a medical reason.

I agree with Arbitrator Sapin’s analysis in Augustin with respect to the notice requirements. They must be strictly construed with respect to the contents of the notice. In order to be a valid notice, those requirements are mandatory and must be contained within the notice given to the Insured. Section 44(5) of the Schdeule makes that clear as to what is to be contained in the notice. Whether past correspondence contains information that may constitute medical or other reasons, in my view, does not negate the requirements of s.44 for compliance. Both the medical and other reasons must be contained within the notice.

For these reasons, I find State Farm did not comply with s. 44(5). The Notices given are therefore not valid, and, having made that finding, I find that s. 55.2 does not apply. I am therefore not prepared to stay the proceedings on the basis of the Applicant’s non-attendance at the IE’s.

Other Issues

In its written closing submission, the Insurer commented that submitted portions of the affidavit of the Applicant in the Applicant factum, particularly with reference to paragraphs 8, 9 and 15 were improper.²⁰ The Insurer submitted that these paragraphs contain comments that constitute legal argument, and as such, should therefore be inadmissible. The Insurer relies on Strauss,²¹ in support of this proposition.

In that case Aviva argued that the affidavits of the plaintiffs contained paragraphs that were improper, and contained evidence that was submitted to be expert opinion evidence and legal argument, as well as medical evidence. The Court struck the affidavit, and in doing so, referred to Rule 4.06(2), of the Rules of Civil Procedure, which state that an affidavit, “shall be confined to the statement of facts within the personal knowledge of the deponent or to other evidence that the deponent could give if testifying as a witness in court.” (emphasis mine).

However, the Rules of Civil Procedure do not apply to arbitration hearings. An arbitrator has a wide discretion to allow evidence that might otherwise be inadmissible in a court of law, and, as such, Strauss is distinguishable on that point.

I am not prepared to strike the affidavit. I agree that the paragraphs cited do constitute argument, which should not be present in affidavit. An affidavit is a sworn document which presents facts. The arguments in the referenced paragraphs in Mr. Bharat’s affidavit are not facts, and I take this into account when assigning weight to the affidavit, While I find that the affidavit is admissible, I take this into account when assigning weight to those portions.

The parties raised several other issues in their respective oral argument and written submissions. However, my findings regarding the limitation issue with respect to the housekeeping claim, as well as my findings with respect to the alleged non-attendance at the medical benefit IE’s are determinative of the issues in this preliminary issue hearing. While I have considered the other arguments raised, having made those findings, I find it unnecessary to deal with the other issues raised by either party in their submissions.

EXPENSES:

I leave the issue of expenses of this preliminary issue hearing to the hearing arbitrator.

June 14, 2017

Alan Mervin Arbitrator

Date