Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2017 ONFSCDRS 96

FSCO A15-001899

BETWEEN:

MICHELLE HAGGARD

Applicant

and

STATE FARM MUTUAL AUTOMOBILE

INSURANCE COMPANY

Insurer

*Minor error on page 1 corrected on April 19, 2017 in accordance with the Dispute Resolution Practice Code and section 21.1 of the Statutory Powers Procedure Act.

Before: James Robinson

Heard: January 26, 2017, at the offices of the Financial Services Commission of Ontario in Toronto

Appearances: J. Douglas Wright for Ms. Haggard

Anna-Marie Musson for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Michelle Haggard, was injured in a motor vehicle accident on November 24, 2011. She applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ State Farm terminated Attendant Care benefits on September 26, 2012. The parties were unable to resolve their disputes through mediation, and Ms. Haggard 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 Ms. Haggard precluded from proceeding to arbitration with respect to her claims for Attendant Care benefit and the Cost of the In-home assessment dated June 7, 2012 in the amount of $2,899.69 under subsection 56 of the Schedule because the application is statute-barred?
Is State Farm liable to pay Ms. Haggard’s expenses in respect of the preliminary issue hearing?
Is Ms. Haggard liable to pay State Farm’s expenses in respect of the preliminary issue hearing?

Result:

Ms. Haggard is precluded from proceeding to arbitration with respect to her claims for Attendant Care benefit and the Cost of the In-home assessment dated June 7, 2012 in the amount of $2,899.69 under subsection 56 of the Schedule because the application is statute-barred.
Ms. Haggard is liable to pay State Farm’s expenses in respect of the preliminary issue hearing.

EVIDENCE AND ANALYSIS:

State Farm asserts that subsection 56(1) of the Schedule precludes this applicant from proceeding to arbitration. Section 56(1) provides as follows:

56(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.

Section 281.1(1) of the Insurance Act,² the enabling legislation, provides as follows:

281.1(1) A mediation proceeding or evaluation under s. 280 or 280.1 or a court proceeding or arbitration under s. 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.

State Farm will only succeed at this hearing if it can demonstrate that there was a clear and unequivocal refusal of benefits. The law provides that it is the insurer that bears the onus to prove that such clear and unequivocal refusal has been delivered.³

Claim for Attendant Care

The applicant submitted an Application for Accident Benefits (OCF-1) dated December 29, 2011 to State Farm through her legal counsel.

By letter dated August 7, 2012 her legal counsel submitted an Expenses Claim Form (OCF-6) (together with an invoice issued by Roger Haggard) claiming reimbursement in the amount of $10,383.93 for attendant care services.

State Farm responded with a denial dated August 13, 2012 on the basis that the applicant had not proven that the attendant care services had been incurred, as required by section 3(7) of the Schedule.

State Farm then retained J. Morton, O.T. to undertake a Section 44 Form 1 assessment. That assessment proceeded on August 31, 2012.

On September 19, 2012 State Farm issued an OCF-9 denying attendant care benefits.

On September 20, 2012 State Farm issued another OCF-9, amending and replacing the September 19 notice. It is this OCF-9 upon which State Farm relies for the purposes of the present hearing. It included the following explanation:

“Attendant Care Benefits: based on the Section 44 Assessment of Attendant Care Needs Form 1 dated August 31, 2012, you do not require Attendant Care. Therefore, State Farm will not consider these expenses beyond September 26, 2012. Please disregard the previous OCF-9 dated September 19, 2012, as it is incorrect.”

Subsequently, there was an attendance by the applicant to a Form 1 re-assessment arranged by her counsel. In due course State Farm initiated a paper review of that Form 1 re-assessment, after which the insurer’s assessor, J. Morton, O.T., re-iterated her opinion that the applicant did not require attendant care. On February 21, 2013 State Farm delivered a further OCF-9 which stated: “State Farm’s position with regard to this benefit remains unchanged.”

The following series of exchanges between State Farm and applicant and her counsel ensued:

March 17, 2014 Applicant’s counsel resubmitted attendant care invoices for the period from December, 2011 to August, 2012.

March 25, 2014 State Farm requested proof of economic loss with respect to those invoices.

April 1, 2014 Applicant’s counsel provided correspondence from client of applicant’s service provider.

April 8, 2014 State Farm requested financial information from applicant with respect to any collateral health coverage available to the applicant.

On October 30, 2014 the applicant filed an Application for Mediation to dispute the denial of attendant care benefits.

The argument of the applicant is that the insurer’s denial was faulty or inadequate.

The leading FSCO decision with respect to limitation periods is Zeppieri and Royal Insurance Company of Canada.⁴ In that decision, Arbitrator Naylor stated the following:

The refusal relied on must be clear and unequivocal, and must be communicated to the applicant…The onus is on the insurer to establish that an applicant has received the proper notice

In my view, a two-step process must determine whether the limitation period applies in the circumstances of this case. First, it is necessary to ask whether, and when, there was a refusal to pay benefits; and second, whether the insurer may rely on a limitation period that runs from the date of the refusal.

This approach has been universally adopted in subsequent cases.

The decision of Director’s Delegate Evans in Turner and State Farm Mutual Automobile Insurance Company⁵ confirmed that the test for sufficiency of the notice is an objective one:

There are…sound policy reasons for applying an objective test. It promotes certainty in ascertaining the date when time began to run, avoiding a factual enquiry into the parties’ dealings over an extended period of time. This encourages efficient use of adjudicative resources by reducing the number and scope of time limits disputes

FSCO adjudicators have not applied the doctrines of estoppel or waiver against insurers who have continued to communicate with the insured person or investigate the claim after giving clear and unequivocal notice of refusal. Nor does an insured person’s stated intention to apply for mediation and arbitration assist where the application was not filed in time.

It should be noted, by way of preliminary observation, that much of the argument of Applicant’s counsel resulted from his parsing of the Claims Adjustor’s log notes generated by the insurer in this matter and from his cross-examination of Ms. Varghese on her affidavit, filed on behalf of the insurer. With respect, I think such investigations are completely beside the point. The cases remit me solely to a consideration of the adequacy of the notice itself. I am satisfied on the authority of the Turner decision that the insurer’s actions in continuing to investigate the claim after delivery of the notice of September 20, 2012 did not and could not create an estoppel or waiver. In my view the decision in Lambropoulos and State Farm Mutual Automobile Insurance Company⁶ cited by applicant’s counsel, in support of his investigation of these extrinsic facts and circumstances, is superseded and overruled by the Turner decision.

Applicant’s counsel also submits that the failure to mention, in the Mediator’s Report dated December 31, 2014, the limitation issue (as it might relate to the issue of attendant care) is fatal to the insurer’s position. I do not see the force of that argument. Jurisdiction is the necessary pre-condition to the exercise of a statutory power of decision, irrespective of any other fact or circumstance. The test for the adequacy of the notice, and for the commencement of the limitation period, is an objective one. I do not agree with any suggestion that any failure to memorialize a jurisdictional argument in a Mediator’s Report can serve to contradict the clear wording of the Schedule and of the Insurance Act, nor do I see any such omission as creating an exception to or hairline crack in the objective test set forth in the Turner decision.

Turning to the notice dated September 20, 2012, applicant’s counsel makes three specific submissions that it is deficient on its face. First, he argues that the failure of the insurer to tick off the box on that notice which says “not payable” renders the notice less than clear and unequivocal. I disagree, upon the authority of the Turner decision. This oversight surely falls into the category of a minor technical defect. It is insubstantial. It does not in any way compromise the effectiveness of the notice.

Second, applicant’s counsel appears to argue that the content of the insurer’s in-home assessment report raises doubts about the notice itself. At paragraph 12 of his written submissions he notes as follows:

“Ms. Morton’s insurer’s in-home assessment report is dated September 11, 2012. It does not say that the Applicant did not require attendant care at an earlier time. She appears to say in Paragraph 1 that at least some of the assistance outlined on the Form 1 dated December 29, 2011 was reasonably necessary.”

At paragraph 13 of those written submissions, he notes:

“From Ms. Morton’s report it appears that she was asked the wrong question – ie. she was asked about a Form 1 dated July 6, 2012 that did not exist (I think someone likely misinterpreted 07/06/12 to be July).”

It is as if applicant’s counsel intends to suggest that the In-home assessment report should be deemed incorporated by reference into the notice itself, such that error or ambiguity in the report would serve to annul the notice. I do not believe that can be the law. I reiterate, it is the content of the notice itself that must be the focus of the analysis. The authority of the Turner decision binds me to resist any inquiry into the wider circumstances of the case.

Third, applicant’s counsel argues that the OCF-9 notice dated September 20, 2012 is ambiguous on its face. It provides that: “State Farm will not consider these expenses beyond September 26, 2012.” Applicant’s counsel suggests that this gives rise to a necessary inference that the insurer ‘…was prepared to consider the claim for attendant care for the period before September 26, 2012, provided it was satisfied that the expense had been “incurred.”’⁷

This branch of the applicant’s argument must also fail. The applicant’s submission invites the arbitrator to look beyond the objective test established by the Ontario Court of Appeal in Turner. I am not to conduct any broad inquiry into facts, events and circumstances extrinsic to the notice itself. Applicant’s counsel invites me to do so by asking me to refer to other communications between the parties with respect to the issue of economic loss.

Upon a review of the OCF-9 denial issued on September 20, 2012, I am satisfied that the two-part test set forth in the Zeppieri case has been satisfied by the insurer. The notice was communicated to the applicant, who at all relevant times was represented by legal counsel. It is a clear and unequivocal refusal to pay benefits: “…you do not require Attendant Care.”

I am not satisfied that the applicant or her counsel could claim to be misled or confused by the wording of this denial. The notice also met the requirements set forth by the Supreme Court of Canada in Smith v. Co-operators General Insurance Co.⁸ by outlining, in language comprehensible by an unsophisticated person, both the process and the relevant time limits and, in particular, by explaining the right to mediate and the right to arbitrate or litigate in the event mediation fails.

Similarly, on the authority of the Turner decision, I do not accept that any continuing dealings between the parties subsequent to the issuance of this denial can serve to create an estoppel. The insurer was obliged to continue to attempt to adjust the claim. By doing so, it did not and cannot be deemed to have created any expectation on the part of the applicant that the insurer was not relying upon its strict legal rights with respect to Subsection 56(1) of the Schedule.

I am satisfied that the insurer has met its burden of proof and that the denial issued by it on September 20, 2012 was of full force and effect. The limitation period set for in subsection 56(1) of the Schedule accordingly ran from that date.

The applicant’s Application for Mediation was filed on October 30, 2014. This was more than two years after the delivery of the denial dated September 20, 2012. The mediation was accordingly filed out of time, contrary to Subsection 56(1) of the Schedule and subsection 281.1(1) of the Insurance Act. There is no jurisdiction to hear the application for arbitration insofar as it relates to the applicant’s claim for attendant care.

Cost of the In-home Assessment Dated June 7, 2012

The applicant’s OCF-18 dated June 7, 2012 requested payment in the amount of $2,899.69 for the cost of an In-Home assessment.

By letter dated July 11, 2012, addressed to the applicant and copied to her legal counsel, the insurer issued its denial.

The grounds for the denial were that the request was a duplication of services insofar as the insurer had approved an in-home assessment on July 4, 2012.

The applicant did nothing further. Applicant’s counsel submits that the grounds for denial offered by the insurer were incorrect and unfair.

The facts of the case fall within the ambit of the Turner decision. Although decided under the pre-1996 regulation, the case deals authoritatively with the issue of the sufficiency of notice and is of specific relevance to the present case. The Ontario Court of Appeal stated:

Section 24(8) of the SABS obliges the insurer to give the insured “the reasons for the refusal”. It does not provide that the reasons must be legally correct. The purpose of the requirement to give reasons is to permit the insured to decide whether or not to challenge the cancellation. If the reasons given are legally wrong the insured will succeed in that challenge. Requiring that the reasons be legally correct goes beyond both the requirement in the relevant regulation, and the purpose of such a notice.⁹

In the present case, if the reasons given in the denial dated July 11, 2012 were in fact wrong, it could not and did not invalidate the notice itself.

Again, I am not satisfied that the applicant or her counsel could claim to be misled or confused by the wording of this denial. It outlined, in language comprehensible by an unsophisticated person, both the process and the relevant time limits and explained, in sufficient detail, the right to mediate and the right to arbitrate or litigate in the event mediation failed. The notice of denial was effective on the date delivered.

Accordingly, pursuant to Subsection 56(1) of the Schedule the applicant had two years to contest the denial. As previously noted, the applicant’s Application for Mediation was filed on October 30, 2014. I therefore find that the applicant’s claim for payment of the In-home assessment dated June 7, 2012 was commenced beyond the limitation period and is barred.

EXPENSES:

In view of its substantial success, State Farm shall have its expenses of this hearing. The parties may apply for an assessment of expenses if they cannot agree.

March 30, 2017

James Robinson Arbitrator

Date