Shaun Edwards v. Optimum Insurance Company Inc., 2017 ONFSCDRS 69

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2017 ONFSCDRS 69

Appeal P16-00008

Appellant

and

Respondent

BEFORE:

Delegate Jeffrey Rogers

Mr. David S. Wilson, solicitor for Mr. Edwards

Ms. Amanda Lennox, solicitor for Optimum

Oral hearing January 9, 2017, and written submissions completed on February 13, 2017

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The appeal is allowed and the Arbitrator’s order of January 4, 2016 is rescinded.
Optimum shall pay Mr. Edwards further interest on the housekeeping, caregiver and non-earner benefits it has paid. The dates payments became overdue shall be calculated pursuant to section 35 of the Schedule.
Optimum shall pay Mr. Edwards further interest on $273.55 paid for transportation expenses, from August 16, 2005 to June 7, 2013.
If the parties cannot agree, I remain seized of the issue of the amount of interest to be paid.
Mr. Edwards is not entitled to further interest on the amounts paid for attendant care and for medical or rehabilitation expenses, including prescriptions.
The issues of entitlement to a special award and expenses of the arbitration are remitted for re-hearing by a different Arbitrator.
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.

March 13, 2017

Jeffrey Rogers Director’s Delegate

Date

I. NATURE OF THE APPEAL

Mr. Edwards appeals the Arbitrator’s decision of January 4, 2016. The Arbitrator denied his claim for further interest and a special award, and he awarded Optimum its expenses of the arbitration. Mr. Edwards submits that the Arbitrator erred by:

Finding that unusual circumstances prevented Optimum from adjusting his claims, so he was not entitled to further interest on benefits which Optimum had paid
Finding that Optimum did not unreasonably delay or deny payment of benefits and interest, and he is therefore not entitled to a special award
Awarding Optimum its expenses of the arbitration, without receiving submissions.

For the reasons that follow, I conclude that:

The Arbitrator erred in finding that Mr. Edwards was not entitled to further interest because his conduct prevented Optimum from assessing his entitlement
Mr. Edwards is entitled to further interest on caregiver, housekeeping and non-earner benefits
Mr. Edwards is not entitled to further interest on attendant care and medical/rehabilitation benefits
The Arbitrator erred in finding that Mr. Edwards was not entitled to a special award and in awarding Optimum its expenses of the arbitration. Those issues must be re-heard.

II. BACKGROUND

The arbitration arises from a motor vehicle accident on March 12, 2003 in which Mr. Edwards was injured. He submitted an application for accident benefits to Optimum. He claimed caregiver benefits (CGBs), housekeeping and home maintenance benefits (HK), and medical benefits. Optimum terminated payment of CGBs and HK on August 17, 2003.

Following the termination, Mr. Edwards retained counsel and applied for mediation. The dispute was not resolved at mediation and, in September 2005, Mr. Edwards applied for arbitration of his claims for ongoing CGBs, HK and interest. Shortly after receiving the application Optimum initiated settlement discussions with counsel for Mr. Edwards. On October 4, 2005 the parties agreed to settle Mr. Edwards’ accident benefits claims on a full and final basis. The settlement required Optimum to pay $33,000, broken down as $19,426 for CGBs, $8,205 for HK (payment from termination to 2-yr mark), and $5,369 for medical benefits.

The decision in Aviva Canada Inc. and Parveen and Frederic¹ was released on December 18, 2012. The decision held that a Settlement Disclosure Notice in the same form that Mr. Edwards had executed in 2005 was defective because it did not provide the information regarding rescission, mandated by paragraph 9.1(3)3 of the Settlement Regulation. Upon the authority of that decision, Mr. Edwards was entitled to rescind the settlement.

As is required as a pre-condition to rescinding the settlement, Mr. Edwards repaid the funds Optimum had paid him, and he rescinded the settlement on June 7, 2013. In February 2014, the Commission reopened his arbitration file which had been closed on the basis of the settlement. In addition to his existing claims for CGBs and HK, Mr. Edwards now added new claims for attendant care benefits (ACBs), a non-earner benefit (NEB), medical or rehabilitation benefits, and a special award.

In June 2015, Optimum conceded entitlement to all of the benefits claimed. It also conceded that Mr. Edwards was entitled to ongoing NEBs, to which he became entitled when he no longer qualified for CGBs because his daughter turned 16. Optimum paid all of the benefits and interest. It generally paid interest starting from the date Mr. Edwards rescinded the settlement. The parties could not agree on the payment of further interest and entitlement to a special award.

The following issues proceeded to arbitration:

Does interest run from the date Mr. Edwards rescinded the settlement or from some earlier date? and
Is Mr. Edwards entitled to a special award?

The Arbitrator accepted Optimum’s position on interest, denied Mr. Edwards’ claim for a special award and awarded Optimum its expenses of the arbitration. Mr. Edwards appealed those rulings and requested a stay of the expense award. In a decision dated March 10, 2016, Delegate Blackman ordered a stay of the Arbitrator’s expense award.

III. ANALYSIS

Interest

Section 46 of the Schedule² 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. The Schedule provides specific rules for determining when payment 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.

Therefore, the issues that the Arbitrator had to decide were whether payment of the benefits that Optimum paid to Mr. Edwards on the eve of the hearing was due from the time that Optimum paid interest or from some earlier date, and, if payment was due from an earlier date, whether Mr. Edwards was precluded from entitlement to further interest.

Although different rules apply to determining when payment of the various benefits became overdue, the Arbitrator did not address the issue. The Arbitrator simply made a blanket determination that Mr. Edwards was precluded from entitlement to any additional interest.

The Arbitrator applied the exception established by the Court of Appeal in its decision in Attavar v. Allstate Insurance Company of Canada.³ The Court ruled that an insurer bears the consequence of a decision not to pay benefits later found to be owing, absent unusual circumstances “brought on by the complexity of the action and/or the applicant’s own behaviour”. The Arbitrator ruled that the main problem was Mr. Edwards’ behaviour. The Arbitrator found that Mr. Edwards failed to provide Optimum with information, thereby unfairly preventing Optimum from evaluating his claim. The critical time was the time of the settlement. The Arbitrator wrote:

With this file, in my opinion, there were numerous issues that unfairly prevented the Insurer from properly evaluating the claim on an ongoing basis, mainly the Applicant’s prior lawyer withholding information which would have brought new light to the Applicant’s case.⁴

Although he referred to “numerous issues”, the only issue the Arbitrator actually identified was Mr. Edwards’ failure to provide information. The Arbitrator found that Mr. Edwards failed to provide any requested medical records and files. He wrote:

At the time when the initial Application for Arbitration was filed, Optimum’s counsel had requested medical files and records both pre- and post-accident, the Applicant’s WSIB file and other related files in order to properly assess the claim. The Applicant’s counsel at the time failed to provide any of these medical records and files.⁵

The Arbitrator did not indicate how any information Mr. Edwards failed to provide had an impact on Optimum’s ability to evaluate his claim. Mr. Edwards’ WSIB file is the only information that the Arbitrator specifically identified as not being in Optimum’s possession. The record shows that Optimum did have extensive medical records at the time of the settlement. Further, as conceded at the hearing, Optimum also had a copy of Mr. Edwards’ WSIB file. Optimum further conceded that it is not possible to determine to what extent the Arbitrator’s misconception regarding the information Mr. Edwards provided influenced his determination that unusual circumstances justified preclusion of interest. Optimum therefore agreed that the Arbitrator’s decision cannot stand and, at a minimum, the issue of Mr. Edwards’ entitlement to further interest must be returned for re-hearing.

Mr. Edwards submitted that a re-hearing is not necessary. He argued that I should order payment of the additional interest he claims because there was no evidence before the Arbitrator upon which it could reasonably be found that there were unusual circumstances in this case.

Under s. 283(1) of the Insurance Act, appeals are limited to “a question of law”. The leading case on the interpretation of s. 283(1) is Lombardi and State Farm Mutual Automobile Insurance Company.⁶ As discussed in that case, an error of law is a finding of fact made in the complete absence of supporting evidence, based on conjecture, or arising from a misapprehension of the evidence that is caused by a misdirection on a legal principle.

If the Arbitrator made findings in the complete absence of supporting evidence, as Mr. Edwards submits, that is an error of law as set out in Lombardi. In its written submissions, Optimum took the position that the Arbitrator’s findings regarding unusual circumstances could not be challenged on appeal because they were findings of fact. At the hearing, Optimum conceded that the issue of whether the facts support a determination of unusual circumstances is a question of law.

As earlier noted, different rules apply to the determination of when payment of various benefits is overdue. I will therefore address Mr. Edwards’ claims, grouping the benefits according to when payment would normally be overdue.

Housekeeping, Caregiver and Non-Earner

As you recall, Mr. Edwards made a claim for HK and CGBs shortly after the accident. Optimum terminated payment of these benefits in August 2003. Mr. Edwards applied for mediation and then for arbitration. The parties agreed to settle his claims in October 2005. Mr. Edwards rescinded the settlement and repaid the settlement funds in June 2013. He then renewed his claims for HK and CGBs. He also claimed an NEB. Optimum conceded entitlement to all claims in June 2015. Optimum conceded that Mr. Edwards was entitled to CGBs until his daughter turned 16 and after that, he was entitled to an NEB instead, to present and ongoing. Optimum then paid these benefits, plus interest from the date of rescission.

There is no dispute that the usual triggering point for determining when payment of these benefits became overdue is the 10-day period set out in section 35 of the Schedule. These are benefits that are payable weekly, so the calculation normally runs from when the benefit should have been paid. Mr. Edwards claims interest calculated in this way. The Arbitrator found that payment was overdue but that unusual circumstances precluded Mr. Edwards’ entitlement. In doing so, the Arbitrator made the following findings:

Interest flows from an overdue benefit and for a benefit to be overdue, entitlement must first be established
Mr. Edwards’ failure to provide information effectively prevented Optimum from evaluating his claim
Using “common sense” interest should be calculated from the date of rescission because the only way for an insurer to know that it owes benefits is for a file to be active
Once rescission occurs the insurer is aware that the file is active and must be responsible for interest from that time moving forward

In my view, none of the above findings is supported by the evidence before the Arbitrator and the applicable jurisprudence. First, the jurisprudence states that entitlement to interest does not flow from establishing entitlement to the satisfaction of the insurer or an Arbitrator. Second, there was no evidence supporting the Arbitrator’s conclusion that Mr. Edwards’ conduct prevented Optimum from evaluating his claim. And third, the jurisprudence precludes consideration of the settlement as a factor in finding that unusual circumstances exist. These conclusions are explained below.

The Arbitrator misstated the law when he found that, for interest to accrue, entitlement must first be established. In fact, the jurisprudence says the opposite. 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.⁷

I have already explained that the Arbitrator did not analyze how any failure to provide information impacted Optimum’s ability to evaluate his claim and that the Arbitrator did not identify any information that Mr. Edwards in fact failed to provide. However, the record is clear with regard to the relevant facts. The parties provided the Arbitrator with a joint brief showing the information that Optimum had at the time of the settlement and the information it later received. The brief listed the following medical documents which were in existence when the claim was settled in October 2005, but which Optimum received later:

CT of lumbar spine, dated January 23, 2004
Soldiers Memorial Hospital Physiotherapy Progress Report/Discharge summary, dated April 14, 2004
MRI of lumbar spine, dated August 4, 2005
Operative report of Dr. Paul Muller, neurosurgeon, dated September 7, 2005
Consultation note from Dr. Paul Muller, neurosurgeon, to Dr. John Maher, dated September 12, 2005

There was no direct evidence to support the conclusion that Optimum did not have these documents as a result of misconduct by Mr. Edwards or his lawyer. In my view, one cannot infer misconduct, in light of the extensive records Mr. Edwards did provide and the fact that the majority of the missing records were created close to the date of settlement. The record shows that Mr. Edwards continued to provide other documents containing current information at the time of the settlement. More importantly, none of the information in the missing documents was new to Optimum.

The documents deal primarily with the condition of Mr. Edwards’ spine and the surgery to his spine which took place on September 7, 2005. Optimum knew of the scheduled surgery. It had a report from Dr. Muller dated June 7, 2005. In this report, Dr. Muller links the condition of Mr. Edwards’ spine to the accident and indicates that he has scheduled surgery for July. Dr. Muller in fact did the surgery in September 2005 and he authored the operative note and consultation note that Optimum later received. In my view, one cannot conclude that the absence of these later documents had the effect of preventing Optimum from assessing Mr. Edwards’ entitlement to benefits.

This view is reinforced by the fact that Optimum also had three reports from Claudia Maurice, an occupational therapist. Two reports are dated September 13, 2005, and the third is dated October 3, 2005. Following Ms. Maurice’s in person assessment, these reports gave Optimum detailed information on Mr. Edwards’ post-operative progress and his ongoing needs. The information Optimum later received could not have placed it in any better position to assess Mr. Edwards’ entitlement to benefits.

That leaves the Arbitrator’s findings regarding the impact of the settlement itself on Mr. Edwards’ entitlement to interest. There are two cases which specifically address an insured person’s entitlement to interest after rescinding a settlement. They both hold that interest accrues from the date benefits become overdue, and not from the date of rescission. The Arbitrator distinguished these cases and applied “common sense” instead. He erred in doing so.

In Mascitti v. Gore Mutual Insurance Company⁸ the insured person was paid CGBs following a 1994 accident and settled her claim on a full and final basis in 1996. She rescinded the settlement in 2002 and claimed further CGBs. As in this case, the insurer conceded entitlement to further benefits but disputed the claim for interest. The Court ruled that the remedy of rescission places the parties back in the position that they were in before the settlement was made. Since the settlement was rescinded, it was as if it had never existed. Accordingly, payment of CGBs should not have been interrupted in 1996 and were overdue from that time. The Court considered the Attavar exception and concluded that no unusual circumstances existed. In Black v. Dominion of Canada General Insurance Company⁹ the Court of Appeal approved the approach in Mascitti.

In distinguishing those cases the Arbitrator stated that the reason that interest was payable was “the fact that the insurance company in each case failed to disclose the benefits that each Applicant was foregoing in return for a full and final settlement” and “[I]n these two cases, there were deficient agreements in place with each file that allowed these two Applicants to receive interest.”¹⁰ However, there is nothing in the reasons of the Court to support the Arbitrator’s conclusions. Failure to disclose foregone benefits was the reason the settlement was void, not the reason for entitlement to interest. Furthermore, there was a deficient agreement in place in this case, as in those cases, so that is not a basis for distinguishing them.

Optimum submits that the real reason the Arbitrator distinguished Mascitti and Black was that the breach of the settlement requirements in this case was less egregious. That submission conflicts with the legal effect of rescission that the Courts applied in Mascitti and Black. The effect of rescission is that the parties are put in the position as though the settlement never existed. It is illogical to then look at the details of the settlement that never existed in order to determine whether there are unusual circumstances.

That submission is also rejected by reference to the decisions in Attavar and in Parveen. Key principles established in Attavar are that the payment of interest is compensatory, not punitive. Fault is irrelevant. Entitlement flows from the late payment of benefits and there is no need to show any misconduct on the part of the insurer. It is the insurer, not the insured, who must bear the consequences of a decision not to pay benefits that are later found to be owing.

Even if conduct is relevant, Parveen lays the blame squarely on the shoulders of Optimum. Parveen is the decision that found that the settlement in this case could be rescinded. Director’s Delegate Blackman rejected the insurer’s submission that it was blameless in the use of the impugned Settlement Disclosure Notice. The Delegate wrote:

The Appellant agrees that the SDN had to be approved, not created, by the Superintendent. I find that the use of an SDN required to be approved (under the legislation in question, not by the Commissioner, but) by the Superintendent, does not relieve the Appellant from compliance with the Settlement Regulation. I further find that the Appellant was not limited to that SDN, that it could seek the Superintendent’s approval of an amended SDN. The notice on the Commission’s website, reproduced at page four above, concurs.¹¹

As noted above, I conclude that the Arbitrator erred in distinguishing Mascitti and Black. He therefore erred in taking the settlement into account when determining that unusual circumstances existed. There was no legal basis for the determination that the settlement itself prevented the accrual of interest.

Since there was nothing in the record to support a conclusion that Mr. Edwards is precluded from entitlement to interest on HK, CGBs and NEBs, I find that he is entitled to interest on those benefits from the date payment became overdue as the benefits accrued. I have therefore rescinded the Arbitrator’s order in this regard and I have ordered payment. I remain seized of the issue, should the parties disagree on the amount to be paid.

Attendant Care

The Arbitrator did not deal specifically with Mr. Edwards’ claim for interest on ACBs. Mr. Edwards first made a claim for ACBs after he rescinded the settlement. He submitted an application on December 4, 2014. He claimed ACBs from the date of the accident to the two-year mark (March 12, 2003 to March 11, 2005). Optimum paid the benefit as claimed and paid interest from the date it received the application. Mr. Edwards claims interest from the date of the accident. I find that he is not entitled to further interest on this benefit.

Section 39 of the Schedule establishes the procedure for applying for ACBs. Section 39(1) requires that an application for ACBs “must be in the form of an assessment of attendant care”.

Section 39(4) directs the insurer to begin payment of ACBs “within 10 business days after receiving the assessment of attendant care needs”.

I have previously dealt with the issue of entitlement to interest on ACBs which are payable for a period before the delivery of an application. In my decision in Nadesu and Zurich Insurance Company Limited,¹² I held that the decision of the Divisional Court in Grigoroff v. Wawanesa Mutual Insurance Company¹³ precludes finding entitlement to interest before delivery of the application.

In Grigoroff, the insurer paid ACBs pursuant to an Assessment the plaintiff delivered shortly after the accident. About 7 years later, the plaintiff delivered a retroactive Assessment, claiming further ACBs. The insurer did not pay pursuant to the retroactive Assessment. At trial, the plaintiff was found to be entitled to further ACBs from a date preceding delivery of the retroactive Assessment and the trial Judge ordered payment of interest from the date of entitlement.

The insurer appealed the award of interest and the Divisional Court reversed the trial Judge’s decision. The Court concluded that delivery of the Assessment is critical to entitlement to interest. The Court noted that: “pursuant to s. 39(1), a claim for attendant care benefits must be (emphasis added) in the prescribed form of an assessment of attendant care needs…”¹⁴

The Court reasoned as follows:

In the case at bar, an insurer is not required to pay a claim for attendant care needs until 10 business days after it receives an assessment of attendant care needs. In the case of the disputed benefits, that did not happen until February of 2009, when a revised assessment of attendant care needs was filed for the period from January 20, 2002 to August 1, 2003. Under s. 46(1) of the SABS, a payment is not overdue unless “the insurer fails to pay the benefit within the time required” under s. 39, which is 10 business days after the receipt of an assessment of attendant care needs. Further, s. 39(3) specifically provides that an insurer is not required to pay attendant care benefits before “an assessment of attendant care needs that complies with subsection (1) is submitted to the insurer”.¹⁵

Mr. Edwards relies on the decision in Bradley Michael Mulhall v. Wawanesa Mutual Insurance Company¹⁶, a non-binding decision of the Superior Court, released after my decision in Nadesu.

In Mulhall the Court distinguished the binding decision in Grigoroff on the facts and on the applicable law. The Court found the facts to be different because Grigoroff did not address the many cases which award ACBs without an application being made. Those awards are made on the grounds that the insurer nevertheless had sufficient information to properly address the insured person’s entitlement, so the insured person is deemed to have applied. I do not agree that Grigoroff can be distinguished on this basis for two reasons. First, when one says that a binding decision is distinguished because the Court “did not consider” certain jurisprudence, what one is really saying is that the binding decision was wrongly decided.

Second, as I noted in Nadesu, the facts in Grigoroff rule out the “deemed application” approach, applied in Mulhall and other similar cases. In Grigoroff, the insured person had in fact delivered Assessments shortly after the accident and the Insurer had paid all invoices submitted. Therefore, the insurer undoubtedly knew of the need for ACBs and was able to adjust the claim. The insured person then delivered a retroactive Assessment seeking increased amounts. The decision of the Court must be seen to require delivery of an Assessment which puts the insurer on notice of the amount the insured person is claiming. The “deemed application” approach regarding interest puts an insured person who has not delivered an Assessment in a more favourable position than the insured person in Grigoroff, who delivered an Assessment and later claimed a higher amount.

The Court in Mulhall also distinguished Grigoroff on the grounds that a different version of the Schedule applied because the Mulhall accident was in 2001, while s.39 was amended in 2005. Before that, there was no requirement for an application for ACBs to be in the form of an Assessment of Attendant Care Needs. However, the Mulhall Court misapprehended the facts. The accident in Grigoroff was also in 2001. The same Schedule applied to both cases at the time of the accident, and in both cases the application for ACBs was made after the amendment. Therefore, although the decision does not specifically address the issue, Grigoroff must be interpreted to mean that the amendment has prospective application.

I conclude that the logic of Mulhall cannot be applied. I find that Grigoroff dictates that Mr. Edwards is not entitled to further payment of interest on ACBs. I have made an order accordingly.

Medical/Rehabilitation Benefits (including prescriptions)

The Arbitrator did not specifically address Mr. Edwards’ claims for interest on these benefits. Mr. Edwards claimed payment of further medical/rehabilitation benefits after rescinding the settlement. Optimum paid all of the claims, plus interest from the date they were submitted. With regard to treatment, Mr. Edwards claims interest from April 19, 2010, when he says that the need for some of his treatment was identified. He agrees that there is nothing in the record that would allow me to determine the amount to which additional interest would apply. Therefore, if he is entitled to further interest, a re-hearing of the issue would be required. With regard to prescriptions, Mr. Edwards claims interest from the dates he paid for them. He submits that those dates are established, so I am in a position to order payment. However, I find that he is not entitled to further interest on these benefits as well.

Like ACBs, entitlement to interest on medical and rehabilitation benefits is normally decided by reference to the date on which the insured person applied. Section 38 of the Schedule provides that an insurer is not liable to pay any expense in respect of medical or rehabilitation benefits that was incurred before the insured person submits an application that satisfies the requirements of the section. Section 38 (1.1) states:

An insurer is not liable to pay any expense in respect of medical benefits or rehabilitation benefits that was incurred before the insured person submits an application for the benefit that satisfies the requirements of subsection (2) unless the expense is for an ambulance or other goods or services provided on an emergency basis not more than five business days after the accident to which the application relates.

Mr. Edwards submits that he is entitled to additional interest because the settlement prevented him from applying as his need arose. However, with regard to med/rehab, the facts are different from the facts in Black and in Mascitti, so the logic of those cases does not apply. In those cases, the benefits had been claimed before there was a settlement. It was later determined that the insured person was entitled to further payment. Rescission put the parties in the position as though the settlement never occurred, so the benefits should not have been discontinued. Entitlement to interest flowed from these circumstances. The med/rehab claims at issue were not made until after Mr. Edwards rescinded the settlement.

It may well be that, following the strict approach of Grigoroff, the requirement for an application under s. 38(1.1) bars Mr. Edwards from entitlement to further interest. In any event, I reject Mr. Edwards’ submission that he is entitled to further interest on med/rehab because Optimum should not have settled his claim.

The Arbitrator addressed this question in dismissing Mr. Edwards’ claim for a special award. The Arbitrator found no misconduct by Optimum in engaging in settlement discussions with Mr. Edwards or in agreeing to settle. The Arbitrator stated:

At the time of Ms. Maurice’s report, the insurance company decided to reach out to the Applicant’s counsel to inquire if the Applicant was interested in settlement discussions. Applicant’s current counsel has made a point of highlighting Optimum’s interest in settling this claim back in 2005 as if it were an anomaly to be discussing full and final settlement at the time they did. In my opinion it was not. It is not unusual to have both parties try to settle a file at various stages of the process. The Applicant, through his lawyer, entered into settlement discussions and accepted a settlement on a full and final basis on approximately October 4, 2005. There was no obligation for the Applicant to accept the settlement of $33,000 in return for a full and final agreement to close his file. I am not convinced based on the evidence before me that at the time this settlement was unusual.

Mr. Edwards argues that Optimum owed him a duty of good faith, which includes not engaging him in settlement discussions when Optimum should have appreciated the possibility of an improvident settlement. However, I agree with the Arbitrator that Optimum’s duty of good faith does not include ensuring that Mr. Edwards is receiving the best legal advice from counsel of his choice. To hold otherwise would be to require Optimum to monitor the privileged communication between Mr. Edwards and his lawyer and to know Mr. Edwards’ personal reasons for engaging in the settlement discussions and for accepting Optimum’s offer.

In my view, Mr. Edwards’ theory can only succeed upon showing that Optimum breached some duty it owed him in negotiating the settlement. But the record does not support that finding.

There is no allegation that Optimum withheld any information from Mr. Edwards. There is no allegation that the settlement was unconscionable. There is no allegation of duress. The Arbitrator’s finding that there was nothing sinister in the timing of the settlement is supported by the evidence. But for the defect in the Settlement Disclosure Notice, Mr. Edwards’ claim for accident benefits would be extinguished.

For the sake of completeness, I note that s. 38(1.1) was amended in 2006, replacing a slightly different version which was in force at the time of Mr. Edwards’ accident. In my view, the amended version applies. This results from operation of section 268(1) of the Insurance Act, which incorporates the Schedule and any amendments to it, into every motor vehicle liability policy. The section states:

Every contract evidenced by a motor vehicle liability policy, including every such contract in force when the Statutory Accident Benefits Schedule is made or amended, shall be deemed to provide for the statutory accident benefits set out in the Schedule and any amendments to the Schedule, subject to the terms, conditions, provisions, exclusions and limits set out in that Schedule.

In support of this ruling I rely on the decision of the Court of Appeal in Beattie v. National Frontier Insurance Co.¹⁷ The Court ruled that “s. 268(1) has the effect of amending every motor vehicle liability policy in force when the Statutory Accident Benefits Schedule is amended… to provide for the statutory benefits set out in an amended Schedule.”¹⁸

For these reasons, I find no basis for Mr. Edwards’ claim for further interest on med/rehab benefits. His appeal in this regard is therefore dismissed.

Transportation

After rescinding the settlement, Mr. Edwards renewed a claim he made before the settlement for payment of transportation expenses in the amount of $273.55. Optimum had denied the claim on the grounds that it required more information about the purpose of the transportation.

Optimum paid this claim, plus interest from the date of rescission to the date of payment. Mr. Edwards sought interest from August 16, 2005, when he first submitted the claim. At the hearing, it became apparent that Optimum had the reports that it required to confirm entitlement to this benefit since before the settlement.¹⁹ Optimum therefore conceded that Mr. Edwards is entitled to further interest, from August 16, 2005 to June 7, 2013. I have made an order accordingly.

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 dismissed the claim. After quoting the authority of section 282(10), the Arbitrator stated the test for entitlement to a special award as requiring the insured person to prove a lack of good faith on the part of the insurer. The Arbitrator stated:

In essence, a claim for a Special Award must come down to the Applicant showing that an Insurer has not treated the Applicant to the best of their ability in good faith²⁰.

The Arbitrator then reviewed some of the evidence and concluded that Mr. Edwards did not prove entitlement to a special award. He stated:

Ultimately, the most important factor in denying the Applicant’s claim for interest and a Special Award is that the Applicant failed to prove his case with the evidence submitted at the Hearing.²¹

At the hearing, Optimum conceded that the Arbitrator incorrectly stated the test in denying the claim for a special award. The jurisprudence establishes that conduct less egregious than “bad faith” can nevertheless be found to be unreasonable.²² Optimum also conceded that, in reading the Arbitrator’s decision, there is no way to know that he applied the right test.

Mr. Edwards submitted that, rather than sending the issue back for re-hearing, I should determine that he is entitled to a special award. I decline to do so. Mr. Edwards proposed several theories regarding his entitlement to a special award. The Arbitrator only addressed the “improvident settlement” theory and found that Optimum’s conduct in that regard was not unreasonable. The Arbitrator made no findings of fact that could support a determination that Optimum’s conduct was unreasonable. Mr. Edwards submitted that I should make findings, based upon the record. However, that is not the function of appeals.

I have therefore remitted the issue of whether Mr. Edwards is entitled to a special award for re-hearing by a different Arbitrator.

Expenses

The Arbitrator awarded Optimum its expenses of the arbitration even though the parties made no submissions on expenses. Optimum concedes that the award cannot stand and submits that the issue should be remitted for re-hearing. Mr. Edwards argues that, since Optimum paid all of the benefits he claimed, plus interest, it is patently obvious that he is entitled to expenses of the arbitration. He therefore submits that I should make that award.

Mr. Edwards’ submission would be persuasive, if the issues in arbitration were finally resolved. However, I have remitted the issue of entitlement to a special award and his success on that issue is a relevant consideration in deciding entitlement to expenses of the arbitration, at least with respect to the amount recoverable. The issue of entitlement to expenses of the arbitration is therefore also remitted for re-hearing.

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.

March 13, 2017

Jeffrey Rogers Director’s Delegate

Date

Footnotes

(FSCO P12-00023 and P12-00024, December 18, 2012)
The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2003 CanLII 7430, at paragraph 42
FSCO A05-002085, at page 11
At page 12
(FSCO P01-00022, February 26, 2003
(FSCO P04-00008, August 9, 2005)
2005 CanLII 30876 (ON SC), [2005] O. J. No. 3668
2007 ONCA 719
At page 10
At page 11
(FSCO A09-001538, January 22, 2016)
2015 ONSC 3585
At paragraph 16
At paragraph 25
(2015) ONSC 7495
[2003] O.J. No 4825
At paragraph 23
Joint Arbitration Brief, Tab 3
At page 11
At page 13
See for instance Erickson and The Guarantee Company of North America (OIC A-000560, June 2, 1992)