Entehabu Berhe v. Security National Insurance Co./Monnex Insurance Mgmt. Inc., 2017 ONFSCDRS 200

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

Neutral Citation: 2017 ONFSCDRS 200

FSCO A14-009932

BETWEEN:

ENTEHABU BERHE

Applicant

and

SECURITY NATIONAL INSURANCE CO./MONNEX INSURANCE MGMT. INC.

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Paulina Gueller

Heard: By written submissions completed on May 17, 2017

Appearances:

Mr. George James, Lawyer, participated for Mr. Entehabu Berhe

Ms. Stefania Sdao, Lawyer, participated for Security National Insurance Co./Monnex Insurance Mgmt. Inc.

Issues:

The Applicant, Mr. Entehabu Berhe, was injured in a motor vehicle accident on February 27, 2012 and sought accident benefits from Security National Insurance Co./Monnex Insurance Mgmt. Inc. (“Security National”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Berhe, through his representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

The issues in this Preliminary Issue Hearing are:

Is Mr. Berhe precluded from proceeding to Arbitration regarding the non-earner benefits under section 56(1) of the Schedule?
Is either party responsible for the costs of the Preliminary Issue Hearing?

Result:

Mr. Berhe is not precluded from proceeding to Arbitration for his non-earner benefits claim.
I leave the decision on the expenses to the Hearing Arbitrator.

EVIDENCE AND ANALYSIS:

Insurer’s Position

The Insurer submits that:

a) The Insurer paid non-earner benefits at the rate of $185.00 per week from August 29, 2012 to November 2, 2012;

b) Non-earner benefits were terminated by letter, dated October 19, 2012, advising the Applicant that non-earner benefits would be stopped effective November 2, 2012 because “you do not suffer from a complete inability to carry on a normal life”;

c) Pursuant to section 54 of the Schedule, the letter, dated October 19, 2012, is a valid denial of benefits;

d) On February 13, 2014, the Applicant applied for mediation claiming non-earner benefits;

e) On December 20, 2014, the Applicant filed an Application for Arbitration for non-earner benefits;

f) The Applicant is statute-barred from proceeding to Arbitration as the two-year limitation period after the Insurer’s refusal or 90-day window after the Mediation Report was issued expired;

g) The test to determine what constitutes a clear and unequivocal denial is one of reasonableness, and the assessment should not involve subjective factors pertaining to the individual Insured;

h) The Insurer complied with the regulation by letter, dated October 12, 2012, which:

advised of its refusal to pay non-earner benefits beyond November 2, 2012;
stated clearly the reasons for termination of the non-earner benefits;
provided the Applicant the supporting medical reports;
“An Applicant’s Right to Dispute” form was provided to the Applicant advising of the two-year limitation period.

Case Law

The Insurer submits case law stating:

In my opinion, the insurer is required under s. 71 to inform the person of the dispute resolution process contained in ss. 279 to 283 of the Insurance Act in a straightforward and clear language directed towards an unsophisticated person … Without this basic information, it cannot be said that a valid refusal has been given.²

The Insurer also submits that Director’s Delegate Makepeace stated:

[…] the prevailing weight of FSCO decisions hold that the insurer’s written notice must be clear and unequivocal…³

I am not convinced that Mrs. Macera’s argument can withstand the decisions of Smith and Turner. These decisions lead me to conclude that the test is an objective one and the time limitation period commences to run once a clear and unequivocal refusal is communicated, accompanied by information regarding the dispute resolution process in straightforward and clear language, directed to an unsophisticated person.⁴

Applicant’s Position

The Applicant submits that:

a) The notice of termination delivered by the Insurer, dated October 12, 2012, was not a clear and unequivocal denial;

b) The letter, dated October 12, 2012, advised the Applicant that he was entitled to receive income replacement benefits, but no benefits would be paid due to his failure to deliver an OCF-10. The letter also purported to deny non-earner benefits, but advised that the election of benefits was not delivered and the Applicant was in non-compliance;

c) The Applicant was invited to submit the election of benefits form. Consequently, the Applicant submits that the Insurer, by inviting him to deliver the election of benefits form and advising that he was in non-compliance until the form was received, rendered its denial of non-earner benefits unclear and equivocal.

d) The letter, dated October 12, 2012, led the Applicant to believe that once the form was delivered, the non-compliance would be purged, and benefits would be paid;

e) The wording of the October 19, 2012 correspondence, “Please be advise the payment of the Non-Earner benefit (if elected-OCF-10 received in our office) will be stopped effective November 2, 2012”, led the Applicant to believe the letter and the limitation period would not start until the election form was received by the Insurer.

(emphasis added)

Case Law

The Applicant submitted the following statement from Director’s Delegate Makepeace:

In assessing whether a limitation period has run, first it is necessary to ask whether and when there was a refusal to pay benefits and second whether the Respondent may rely upon a limitation period that runs from the date of the refusal. For a refusal to trigger the running period, it must be clear, unequivocal and provide adequate information about the dispute resolution practice process.⁵

The Law

The relevant provisions are in s. 56 of the Schedule:

Time limit for proceedings

(1) A mediation proceeding or evaluation under section 280 or 280.1 of the Act or a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Act in respect of a benefit shall be commenced within two years after the insurer’s refusal to pay the amount claimed. O. Reg. 34/10, s. 56 (1).

(2) Despite subsection (1), a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Act may be commenced within 90 days after the mediator reports to the parties under subsection 280 (8) of the Act or within 30 days after the person performing the evaluation provides a report to the parties under section 280.1 of the Act, whichever is later. O. Reg. 34/10, s. 56 (2).

Analysis and Decision

The test is whether the Insurer’s letter, dated October 12, 2012, 1) stated a clear and unequivocal refusal to pay benefits, and 2) whether the Insurer may rely upon a limitation period that runs from the date of the refusal.

The Insurer’s letter, dated October 12, 2012, stated:

The assessors have reported the following:

You suffer a substantial inability to perform your pre-accident occupation as a consultant. Therefore, your Income Replacement Benefit would continue (if elected – OCF 10 received in our office).

You do not suffer from a complete inability to carry on a normal life.

Please be advised the payment of the Non-Earner benefit (if elected – OCF 10 received in our office) will be stopped effective: November 12, 2012 [sic].

(emphasis added)

The Insurer sent a letter, dated May 10, 2012, advising the Applicant that he was entitled to receive either an income replacement benefit or non-earner benefit, and that the Applicant had to complete and submit the enclosed election of benefits form (OCF-10) within 30 days after receiving the form. The Insurer also advised that “No benefits will be payable until we have received the properly completed form…”

I find that despite not having received an OCF-10 electing non-earner benefits, the Insurer started to pay non-earner benefits on August 29, 2012. The Insurer also conducted Insurer’s Examinations under section 44 of the Schedule.

The Insurer notified the Applicant that as a result of the section 44 Insurer’s Examinations, it concluded that the Applicant did not suffer from a complete inability to carry on a normal life. The letter, dated October 12, 2012, enclosed an OCF-10 form and stated: “Please be advised the payment of the Non-Earner benefit (if elected – OCF 10 received in our office) will be stopped effective: November 12, 2012”.

I find the letter, dated October 12, 2012, was a refusal of payment of the non-earner benefits.

However, I find the Insurer did not provide the information in a straight-forward and clear language directed to an unsophisticated person.

On one hand, the Insurer provided the Applicant with a copy of an OCF-10, requesting the Applicant make an election and return the form as soon as possible. On the other hand, the Insurer also enclosed the Applicant’s Right to Dispute the letter.

The Schedule sets out the limitation period to commence a court proceeding or an Arbitration. Section 56(1) states that a court proceeding or Arbitration shall be filed within the two years after the Insurer’s refusal to pay. The denial date cannot be ambiguous. It is well established law that two requirements must be met: 1) the refusal must be clear, unequivocal and include reasons, and 2) the insured person must be informed of his or her right to dispute the Insurer’s refusal to pay benefits. Failure to meet either test—i.e. the refusal is not clear or unequivocal, or the Insurer failed to explain the Insured’s right to dispute as set out in Smith v. Co-Operators—is sufficient grounds to invalidate the refusal. The onus is on the Insurer to demonstrate that its refusal met these requirements.

The Insurer had requested that the Applicant submit an OCF-10 making an election for benefits regarding income replacement benefits or non-earner benefits. I find that the Insurer’s letter, dated October 12, 2012, was not a straight-forward letter. It is not reasonable to expect that an unsophisticated person reading the letter would have a clear direction of what the Insurer was notifying. The content and wording of the letter is confusing. The letter was unclear as to whether it was a final denial or subject to the submission of an OCF-10. Therefore, it failed to comply with the Insurer’s obligations under the Schedule.

The Insurance Bureau of Canada’s Standards of Sound Marketplace Practice, dated March 6, 2006, states:

Standard 4, Fair Claims Settlement and Claims Handling, describes best practices that insurers should follow when adjusting a claim. In particular, Standard 4 directs that insurers should have internal policies and procedures that are well understood, fully in place and utilized to ensure “that claims are handled as expeditiously as possible and in accordance with any legal requirements, with fairness and transparency to the claimant”. In addition, insurer’s standards guidelines for dealing with claimants and policyholders should ensure “that similar claim situations are treated consistently, and that in all cases insurance contracts are interpreted in ways that are deemed to be in the spirit of fairness”.⁶

For all the aforesaid reasons, I find that the Applicant is not precluded from proceeding with this Arbitration matter.

EXPENSES:

I leave the matter of expenses to the Hearing Arbitrator.

July 17, 2017

Paulina Gueller Arbitrator

Date