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

Neutral Citation: 2017 ONFSCDRS 259

FSCO A16-004668

BETWEEN:

JENNA DELANEY

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

Before: Arbitrator Paulina Gueller

Heard: In person at Alliston, Ontario on July 19, 2017

Appearances: Mr. Kevin Kemp, legal counsel, and Nick Romano, licensed paralegal, for the Applicant Mr. Craig Michie, on behalf of the Insurer Mr. Cary Schneider, legal counsel, for the Insurer

Issues:

The Applicant, Ms. Jenna Delaney, was injured in a motor vehicle accident on October 11, 2011, 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. Delaney, 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.

The issues in this Hearing are:

Is State Farm entitled to withhold Non-Earner benefits from August 11, 2015 to September 25, 2016 as a result of the Applicant’s refusal to attend Section 44 examinations that were scheduled to assess Non-Earner benefits?
Is State Farm liable to pay a Special Award because it unreasonably withheld or delayed payments to Ms. Delaney?
Is State Farm Liable to pay Ms. Delaney’s expenses in respect of the arbitration?
Is Ms. Delany liable to pay State Farm’s expenses in respect of the arbitration?
Is Ms. Delaney entitled to interest for the overdue payment of benefits?

Result:

State Farm is not entitled to withhold Non-Earner benefits from August 11, 2015 to September 25, 2016.
Ms. Delaney is entitled to receive payments for Non-Earner benefits from August 11, 2015 to September 25, 2016.
Ms. Delaney is not entitled to a Special Award.
Each party shall bear its own expenses for this Hearing.
The Insurer shall pay Ms. Delaney interest on the overdue amount pursuant to Section 51 of the Schedule.

EVIDENCE:

Preliminary Motion to Call a Witness

At the outset of the Hearing, the Applicant brought a motion to call the Insurer’s representative, Mr. Michie, as a witness. Mr. Michie was present at the Hearing. The Applicant submitted that notice to the Insurer was served 30 days before the Hearing advising the intention to call one adjuster, but provided the names of Mr. Mike Foster or Mr. Fared. The Applicant submitted that no response from the Insurer was received, so no Summons to Witness would be required, and that the examination of Mr. Michie would be helpful because of the Applicant’s Special Award claim.

The Insurer opposed the motion, submitting that: a) the Applicant did not subpoena anyone; b) Mr. Foster was on vacation; c) Mr. Fared was no longer employed with the Insurer; and d) Mr. Michie was not the adjuster on file, he was covering for Mr. Foster (who was on vacation) and had not been notified according to Rule 41.2 of the Dispute Resolution Practice Code (“DRPC”).

Rule 41.2 of the DRPC states “Every party must notify a potential witness of the intention to call him or her to give evidence at the hearing at least 30 days before the first day of the hearing.”

Practice Note 8 states “A failure to provide proper notice to a potential witness may result in the arbitrator excusing the witness from attending at the hearing ... The summons must be delivered to the witness in person not less than 5 business days before the first day of hearing.”

I ruled that the Applicant could not call Mr. Michie as a witness. The Applicant had ample time to deliver the notice up to 5 days before the first day of the Hearing. Also, Mr. Foster was the adjuster on the file and Mr. Michie was only covering for him. Therefore, the Applicant’s motion was denied.

Applicant’s Position

The Applicant submitted that on October 11, 2011, when she was 13 years old, an automobile knocked her to the ground and proceeded to drive over her legs when she was walking across a pedestrian intersection. As a result of her orthopedic injuries, she had two surgical procedures, suffers from a panic disorder with agoraphobia, and simple phobia.

The Applicant submitted that on November 2, 2011, the Applicant’s family physician completed an OCF-3² indicating she suffered a complete inability to carry on a normal life and that the anticipated duration of disability would be greater than 12 weeks. As a consequence, the OCF-3 triggered her entitlement to Non-Earner benefits (“NEB”). Consequently, the Insurer ought to have commenced payments upon the Applicant turning 16 years old.

The Applicant submitted that by an Explanation of Benefits (OCF-9) dated November 14, 2011, the Insurer advised the Applicant that NEB “is only payable to a person who has attained 16 years of age per Section 12(4)(b) of the Statutory Accidents Benefits Schedule”, but it was silent on whether the Applicant needed to apply upon turning 16 years old. The Insurer also allegedly did not comply with section 54 of the Schedule, by failing to provide the Applicant with written notice advising of the right to dispute the refusal.

The Applicant submitted that she turned 16 years of age in November 2013, but the Insurer; a) did not begin to pay the NEB; b) made no effort to request another Disability Certificate; and c) did not schedule any Insurer Examination (“IE”). Consequently, the Insurer was obligated to pay since the day the Applicant turned 16 years of age, because the Disability Certificate (OCF-3) dated November 11, 2011 triggered the Applicant’s entitlement to the NEB.

The Applicant submitted that more than 20 months after her sixteenth birthday and despite not receiving the benefit, the Insurer sent three letters, dated July 29, 2015, indicating that she had to attend three different IEs to assess her entitlement to NEB.

The Applicant submitted that in each of the three letters State Farm acknowledged that NEB ought to have been paid, as the Insurer advised “If you do not attend this appointment, we may not be required to continue paying the benefit outlined above.” [sic]

The Applicant also submitted that she declined to attend the IEs because a) the first IE was with a psychiatrist, which is an extremely intrusive assessment in nature and the Insurer should had considered the impact on her emotional growth; b) she had never received the benefit, contrary to what was stated in the Insurer’s letter; and c) the file was not adjusted in a timely manner.

The Applicant submitted that on August 14, 2015, the Insurer advised her through an OCF-9 that she was in non-compliance for the NEB as a result of her refusal to attend the assessments.

The Applicant referred to Augustin and Unifund,³ where the Arbitrator stated:

As there is nothing in the Schedule to indicate Ms. Augustin is required to re-submit a claim for an NEB after the 26-week waiting period, I find, in this case, because her health practitioner indicated she met the non-earner test when the OCF-3 was filed, the initial OCF-1 and OCF-3 trigger the Insurer’s obligation under Section 37 to determine Ms. Augustin’s continuing entitlement to the NEB at the 26-week mark. Section 37 requires an insurer to do one of the three things if it wishes to determine continuing entitlement: a) request an updated disability certificate; notify Ms. Augustin that it required and insurer’s examination (IE) under s. 44; or c) do both. Unifund did none of these things.

This interpretation is consistent with the overall purpose of the Schedule, which is to determine claims promptly…

…There is nothing in the Schedule that either requires Ms. Augustin to reapply for the benefit, or that entitles Unifund to simply sit back and do nothing, just because the NEB is subject to a 26-week waiting period … the positive obligations imposed on insurers to take steps to promptly determine initial and continuing entitlement to specified benefits and the tools provided for them to do so under sections 36 and 37.

Insurer’s Position

The Insurer submitted that it sent three letters dated July 29, 2015 requesting the Applicant attend IEs with three different assessors to assess whether she was entitled to NEB. Because the Applicant refused to attend the IEs, State Farm advised through an OCF-9 dated August 14, 2015 that the Applicant was in non-compliance by refusing to attend the IEs. The Applicant attended the IEs in September 2016, and because she was found to have entitlement to NEB, State Farm retroactively paid the NEB from the date she turned 16 years old, with interest. However, through an OCF-9 dated November 10, 2016, the Insurer advised the Applicant that the NEB was not paid from August 11, 2015 to September 26, 2016 because of the Applicant’s refusal to attend the original IEs.

The Insurer submitted that section 37(8) of the Schedule states that an insurer is not required to pay benefits withheld during a period that the applicant refused to attend IEs, unless the applicant can provide a reasonable explanation, which the Applicant had not done.

The Insurer submitted that the notices to the Applicant were sufficient, quite detailed and clear, with no deficiencies. The Applicant also had to provide a reasonable explanation why she would not attend the IEs within 10 days of receiving notice, which she did not do, nor did she try to reschedule the IEs.

The Insurer also submitted that the IE attendance letters dated July 29, 2015 provided the medical reasons as required per section 44 of the Schedule. Further, the letter was not misleading in stating “continue paying”; that language could have been a typo.

The Insurer submitted that by a letter dated August 15, 2016, the Applicant explained for the first time her non-attendance to the IEs, but did not say why the Insurer’s IE attendance notices were deficient.

The Insurer submitted that after it advised that it would be requesting a stay in the Arbitration proceeding, the Applicant agreed to attend the IEs.

The Law

Section 12 of the Schedule states, in relevant part:

(1) The insurer shall pay a non-earner benefit to an insured person who sustains an impairment as a result of an accident if the insured person satisfies any of the following conditions:

The insured person suffers a complete inability to carry on a normal life as a result of and within 104 weeks after the accident and,

i. was enrolled on a full-time basis in elementary, secondary or post-secondary education at the time of the accident,

(4) The insurer is not required to pay a non-earner benefit,

(a) for the first 26 weeks after the onset of the complete inability to carry on a normal life;

(b) before the insured person is 16 years of age;

Section 44 of the Schedule states, in relevant part:

(1) For the purposes of assisting an insurer 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, an insurer may require an insured person to be examined under this section by one or more persons chosen by the insurer who are regulated health professionals or who have expertise in vocational rehabilitation.

(5) If the insurer requires an examination under this section, the insurer shall arrange for the examination at its expense and shall give the insured person a notice setting out,

(a) the medical and any other reasons for the examination;

(b) whether the attendance of the insured person is required at the examination;

(c) the name of the person or persons who will conduct the examination, any regulated health profession to which they belong and their titles and designations indicating their specialization, if any, in their professions; and

(d) if the attendance of the insured person is required at the examination, the day, time and location of the examination and, if the examination will require more than one day, the same information for the subsequent days.

(6) If the attendance of the insured person is required at the examination, the insurer shall give the notice required under subsection (5) not less than five business days before the examination, unless the insured person and the insurer mutually agree otherwise. …

(8) A notice under subsection (5) or (7) may be verbal if a written confirmation is given as soon as practicable afterwards.

(9) The following rules apply in respect of the examination:

If the attendance of the insured person is required,

i. the insurer shall make reasonable efforts to schedule the examination for a day, time and location that are convenient for the insured person,

Section 37 of the Schedule states, in relevant part:

(7) If the insured person fails or refuses to comply with subsection 44 (9), the insurer may,

(a) make a determination that the insured person is no longer entitled to the specified benefit; and

(b) refuse to pay specified benefits relating to the period after the insured person failed or refused to comply with that subsection and before the insured person complies with that subsection.

(8) If the insured person subsequently complies with subsection 44 (9), the insurer shall,

(a) reconsider the insured person’s entitlement to the specified benefit; and

(b) if the insurer determines that the insured person is still entitled to the specified benefit,

(i) resume payment of the specified benefit, and

(ii) pay all amounts, if any, that were withheld during the period of non- compliance if the insured person provides not later than the 10th business day after the failure or refusal to comply, or as soon as practicable after that day, a reasonable explanation for not complying with that subsection.

Section 54 of the Schedule states:

If an insurer refuses to pay a benefit or reduces the amount of a benefit that a person is receiving, the insurer shall provide the person with a written notice advising the person of his or her right to dispute the refusal or reduction.

ANALYSIS:

The Insurer did not start to pay NEBs when the Applicant turned 16 years of age. The Insurer scheduled the IEs 20 months after the Applicant’s 16^th^ birthday and started to pay the benefit after September 2016.

Section 44 of the Schedule sets out that the insurer is entitled to give notice requiring an examination to assist the Insurer in determining if the insured is entitled to a benefit.

Section 37(7) of the Schedule allows the insurer to refuse the payment of the benefit if the insured does not attend the IEs.

Section 37(8) of the Schedule states that if the insured person subsequently attends the IEs, the insurer shall pay all the amounts that were “withheld during the period of non-compliance if the insured person provides not later than the 10th business day after the failure or refusal to comply, or as soon as practicable after that day, a reasonable explanation for not complying with that subsection.”

The Insurer advised that it would not continue paying the benefits if the Applicant failed to attend the IEs. However, the Insurer was not paying any NEB at the time. The letters should not have been misleading. The insured person must be clearly and unequivocally informed about her right regarding entitlement to benefits. As stated in Smith v. Co-Operators General Insurance Company, “… the goal of insurance law is, in many respects, geared towards protection of the consumer. This approach obliges the courts to impose bright-line boundaries between the permissible and the impermissible without undue solicitude for particular circumstances that might operate against claimants in certain cases”.⁴

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”.⁵

I find that the Insurer’s July 29, 2015 letters were inaccurate. It is unreasonable to expect that an unsophisticated person reading the letters would have a clear understanding of what the Insurer was notifying, as the letters were misleading and confusing. I find the three Insurer’s letters dated July 29, 2015 failed to comply with its obligations under the Schedule.

Furthermore, I find that the Applicant advised by letter dated August 7, 2015,⁶ that she would not attend the IEs because they were “unilaterally scheduled”. I am persuaded that the Applicant provided a reasonable justification for her non-attendance to the IEs in this letter, as required by Section 37(8) of the Schedule.

Moreover, the Insurer never rescheduled the multidisciplinary IE, it simply held the Applicant in non-compliance for not attending a unilaterally-scheduled IE. The Insurer was aware that the Applicant was a minor; I find it should have been more careful and should have had more consideration when adjusting this file. The Insurer should have made more reasonable efforts to try to reschedule the IEs. By not doing so, the Insurer failed to comply with Section 44(9) of the Schedule by not making reasonable efforts to accommodate and reschedule the examinations for a day, time and location, convenient for the Applicant.

Therefore, I find that the Insurer shall pay the Applicant the NEB from August 11, 2015 to September 25, 2016.

Interest

The Insurer shall pay interest on the overdue amount pursuant Section 51 of the Schedule.

Special Award

The Insurer would be liable to pay a special award if I find that it unreasonably withheld or delayed payments of benefits owed pursuant to the former s. 282(10) of the Insurance Act, that states:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

Director’s Delegate Feldman, in the case State Farm Mutual Automobile Insurance Company and Ansari,⁷ stated:

To be successful on this type of claim, an applicant must prove not just an insurer was wrong to have withheld or delayed a payment to which an applicant was entitled – an applicant must prove that an insurer has unreasonably withheld or delayed payments ...

The Applicant was represented by a qualified representative. Even if I accept that the Insurer waited 20 months to schedule the IEs, I am also convinced that the Applicant’s counsel did nothing for the same 20-month period, aggravated by the lack of cooperation with the Insurer to reschedule the IEs after the notice was received.

My analysis respecting a special award is limited to whether the Insurer unreasonably withheld the payments for the period August 11, 2015 to September 25, 2016—and not for the 20-month delay in scheduling the IEs, which was a time period privately resolved between the parties.

The Applicant submitted that the Insurer threatened her with a stay of the Hearing. However, neither she nor her representative helped accelerate the Insurer’s right to assess her, which could have resulted in a stay of the Hearing or in a Preliminary Issue Hearing based on s. 44 of the Schedule.

Both parties contributed to the delay in the payment of the NEB—the Applicant by refusing to attend the IEs, and the Insurer by not contacting the Applicant to try to reschedule the IEs. The Insurer had a reasonable reason to request the Applicant to attend IEs. The law sets out that NEB is payable when the insured person turns 16 years of age, but does not provide a timeframe for the Insurer to schedule the IEs. However, as soon as the IEs concluded, the Insurer paid the NEB retroactively with interest.

The Applicant failed to prove that the Insurer unreasonably withheld her NEB payments. Therefore, I do not find that a Special Award is warranted.

EXPENSES:

Both parties requested expenses of the Hearing. The Applicant was successful in her claim for NEB, but the Insurer was successful on the Motion to call the witness and the Special Award. Consequently, I find that the claims for legal expenses tend to offset each other.

Therefore, I have decided that each party shall bear its own expenses of this Hearing.

October 10, 2017

Paulina Gueller Arbitrator

Date