Financial Services Commission of Ontario
Neutral Citation: 2017 ONFSCDRS 58
Appeal P16-00020
OFFICE OF THE DIRECTOR OF ARBITRATIONS
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Appellant
and
JODY FALCON (DMYTRYSHYN) Respondent
BEFORE: David Evans
REPRESENTATIVES: Philippa Samworth for State Farm Mutual Automobile Insurance Company No one appearing for Mr. Falcon (Dmytryshyn) Sandi Smith for the Non-Party Margaret A. Hoy and Margaret A. Hoy Professional Corporation
HEARING DATE: By written submissions received by June 20, 2016
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 of the Arbitrator’s order dated February 16, 2016, is allowed. Paragraph 1 thereof is rescinded and replaced with the following:
- Mr. Jody Falcon (Dmytryshyn)’s Application for Arbitration is dismissed as statute barred and he may not proceed to arbitration.
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.
February 16, 2017
David Evans Director’s Delegate
REASONS FOR DECISION
I. NATURE OF THE APPEAL
State Farm Mutual Automobile Insurance Company appeals Arbitrator Morris’s decision of February 16, 2016. She found the refusals of benefits that State Farm sent its insured, Mr. Jody Falcon, were inadequate, so his claims were not statute barred.
I find the Arbitrator erred because the refusals, both singly and in the aggregate, were proper.
II. BACKGROUND
The insured, Mr. Jody Falcon, was injured in a motor vehicle accident on May 11, 2008. He applied for accident benefits to his insurer State Farm under the SABS–1996.1 State Farm paid income replacement benefits until May 18, 2009. Following insurer examinations, it advised him of the termination of IRBs in two Explanations of Benefits, both dated April 17, 2009. OCF-9 A, as the Arbitrator called it, was accompanied by a letter explaining the rebuttal examination process, and OCF-9 B in turn referred to OCF-9 A while expanding upon the reasons for termination.
After reviewing a rebuttal examination, State Farm sent OCF-9 C, reiterating its position and referring back “to the previous Explanation of Benefits (OCF-9) dated April 17, 2009 wherein the benefit was denied or deemed not payable.”
Mr. Falcon applied for mediation regarding the termination. A Report of Mediator was issued June 27, 2012.
Pursuant to s. 281.1(2) of the Insurance Act, Mr. Falcon had 90 days from the date of the report to commence arbitration. The Application for Arbitration was filed long after the 90 days had passed, namely in December 2013.
Mr. Falcon claimed he did not receive the report, that his lawyer had filed an earlier Application for Arbitration, and in any event the refusals were not clear and unequivocal and did not properly inform him of the dispute resolution process.
The Arbitrator rejected Mr. Falcon’s submission that he had not received the Report of Mediator and that he had filed an earlier Application for Arbitration. However, the Arbitrator accepted his submission that State Farm never provided him with a clear and unequivocal refusal to pay a benefit, or informed him of all steps of the dispute resolution process as required by Smith v. Co‑operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129.
The Arbitrator found the OCF-9 B did not constitute a clear refusal of benefits, as it simply referred to OCF‑9 A for the refusal. (Indeed, State Farm concedes on appeal that OCF-9 B does not contain a denial, but notes that it did direct the insured to OCF-9 A.)
OCF-9 A advised Mr. Falcon that the IEs showed he could return to work, so it stated his “benefits will be discontinued effective 5/18/09 pursuant to s. 37 of the Statutory Accident Benefits Schedule,” given the IEs.
Since this sets out a refusal, and since the Arbitrator objected to this OCF-9 on other grounds than not containing a refusal, I find that implicitly she accepted this as a refusal.
Furthermore, as to the process for dispute, the Arbitrator summarized Part 6 of the form:
Part 6 of the OCF-9 form (true of both OCF-9 A and OCF-9 B) sets out the Applicant’s Rights to Dispute, the first step being: “Notify Your Insurer/Further Examination” followed by Step 2: “Mediation”, followed by Step 3: Arbitration, Lawsuit or Evaluation.” A warning with respect to the two year limitation is set out at the bottom of the page.
However, OCF-9 A also referred to the possibility of a rebuttal examination report, repeated in the accompanying letter. The Arbitrator found that the emphasis on the rebuttal process in OCF-9 A and the letter would suggest to an unsophisticated person that the refusal was not complete until the Insurer considered the rebuttal assessment.
A third OCF-9, OCF-9 C, was sent after the rebuttal assessment. The Arbitrator rejected it on two grounds. First, the Arbitrator stated that it is not reasonable to expect an insured person to piece together different OCF-9s of different dates to arrive at a valid refusal, citing Adami and Wawanesa Mutual Insurance Company, (FSCO A08-000172, October 8, 2008).
Second, she found it was equivocal as it referred to the previous “OCF-9 of April 17, 2009” when two were sent on that date.
Accordingly, the Arbitrator found that “the limitation period was not triggered with respect to income replacement benefits as the Insurer has not provided a clear and unequivocal refusal of that benefit and did not inform the Applicant of the dispute resolution process in straightforward and clear language, directed towards an unsophisticated person, as required.”
III. ANALYSIS
With respect to the validity of a refusal, Zeppieri and Royal Insurance Company of Canada, (OIC A-005237, February 17, 1994), confirmed on appeal (OIC P-005237, December 22, 1994), held that there is a two-step process in determining whether the limitation period applies in the circumstances of the case. First, one asks whether, and when, there was a refusal to pay benefits. Secondly, one determines whether the insurer can rely on a limitation period running from the refusal date. With respect to the refusal, Gonthier J. in Smith stated that at a minimum it
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.
I will deal with the Arbitrator’s points in reverse order. With respect to any possible confusion in the OCF-9 C, it actually stated “Please refer to the previous Explanation of Benefits (OCF-9) dated April 17, 2009 wherein the benefit was denied or deemed not payable.” The only OCF-9 on that date with a refusal was OCF-9 A, so it’s really not that confusing. But in any event, it repeats the denial and contains the same Part 6 as in the other OCFs, setting out the steps to be taken after a refusal. As discussed below, Part 6 meets the Smith requirements.
As for the Arbitrator’s statement that OCF-9s cannot be combined to arrive at a valid refusal, I find that statement is overbroad. The Arbitrator referred to Adami, where the Arbitrator found all the refusals invalid in the first place. Further, the arbitrator cited Yee and Lambton Mutual Insurance Company, (FSCO A02-001550, September 16, 2003) for the proposition that Zeppieri and Smith are not satisfied even if all the required information is in different refusals. However, in Yee I ruled as follows:
Finally, Mrs. Yee submitted that the only cure for a defective refusal is a further valid refusal. I find this meritorious, as it creates greater certainty. Requiring an applicant to piece together the information from scattered documents goes against the admonition of Gonthier J. [in Smith] that the insurer is required to inform the applicant of the dispute resolution process “in straightforward and clear language, directed towards an unsophisticated person.”
There is no comparison between Yee and this case. Yee did not involve multiple refusals but rather one invalid refusal and then information scattered in other documents. Thus, the initial refusal letter did not provide the basic information on the points in the process of dispute resolution. The related documentation the insurer tried to rely on was an Explanation of Benefits Payable that only mentioned the first step of mediation, a release that did not refer to the time limits related to the steps prohibited by the release, and a mediator’s letter that only referred to the time limit for commencing mediation. In this case, by way of contrast, there were tightly-linked OCFs, so the insured did not have “to piece together the information from scattered documents,” as happened in Yee.
Finally, I find the Arbitrator erred in paying too little attention to Part 6 of the OCF-9; while she had summarized it, she did not give it the effect it deserved. In both Bustamante v. The Guarantee Company of North America, 2015 ONCA 530, and Bonaccorso v. Optimum Insurance Company Inc., 2016 ONCA 34, the Court of Appeal found the language of the OCF-9, which was the same as in this case, more than adequate. As the Court stated in Bustamante:
[13] The OCF-9 explained the appellant’s right to dispute the insurer’s assessment of her claim and to have the claim addressed through mediation followed by arbitration, litigation or neutral evaluation. At the bottom of the page, under the heading, “WARNING: TWO YEAR TIME LIMIT”, it explained she had two years from the insurer’s refusal to pay a benefit, or from reduction of a benefit, to arbitrate or commence a lawsuit.
Similarly, in Bonaccorso, the Court found that the OCF-9 complied with Smith.
The Arbitrator rejected OCF-9 A only because she found that an unsophisticated person might think that the refusal was not complete until the rebuttal assessment was completed. However, I see no support for the proposition that a refusal is invalidated simply because it gives more information than might be necessary. OCF-9 A contained a refusal and a complete explanation of the process for pursuing the dispute, exactly as required by Smith, and I see no basis for finding that the Insurer cannot rely on it.
In conclusion, I find that the Arbitrator erred in not considering the totality of the OCFs in this case, which were tightly interlocked, and in any event, I find she erred in finding the first OCF did not meet the requirements of Smith.
Accordingly, the appeal is allowed, and Mr. Falcon is precluded from proceeding to arbitration.
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.
February 16, 2017
David Evans Director’s Delegate
Footnotes
- The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.