Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2018 ONFSCDRS 121
Appeal P18-00002 and P18-00004
OFFICE OF THE DIRECTOR OF ARBITRATIONS
TD GENERAL INSURANCE COMPANY
Appellant
and
ALI MADINEI and MARYAM ALIZADEH-EBADI
Respondents
BEFORE:
David Evans
REPRESENTATIVES:
Ali Madinei and Maryam Alizadeh-Ebadi did not appear
Tricia J. McAvoy for TD General Insurance Company
HEARING DATE:
On the record, by written submissions received by March 12, 2018
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 is allowed. Paragraphs 1 and 2 under the heading “For the Insurer” of the Arbitrator’s decision dated November 27, 2017 are rescinded and replaced by the following:
TD General Insurance Company is entitled to repayment of monies for benefits paid to Mr. Ali Madinei.
TD General Insurance Company is entitled to repayment of monies for benefits paid to Mrs. Maryam Alizadeh-Ebadi.
The matter is returned to arbitration for a determination of the amounts repayable and of the arbitration expenses.
TD General may file its claim for appeal expenses without further notice to Mr. Madinei and Mrs. Alizadeh-Ebadi within 30 days of the date of this decision
June 26, 2018
David Evans Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL
Mr. Ali Madinei and Mrs. Maryam Alizadeh-Ebadi staged the accident for which they claimed and received accident benefits.
TD General Insurance Company appeals Arbitrator Winer’s decision of November 27, 2017, in which he held that TD General was nonetheless not entitled to repayment of benefits paid to Mr. Madinei and Mrs. Alizadeh-Ebadi. He held no repayment was due because there was no evidence that the benefits themselves had been paid due to fraud or wilful misrepresentation.
However, if the fraud or wilful misrepresentation by insureds relates to the fundamental facts of the accident itself, then the insureds are required to repay all benefits that were paid to them because they received the accident benefits as a result of fraud or wilful misrepresentation.
The appeal is therefore allowed.
II. BACKGROUND AND ANALYSIS
Mr. Ali Madinei and Mrs. Maryam Alizadeh-Ebadi were involved in an incident involving a motor vehicle collision on July 23, 2010.
Arbitrator Kelly found in his decision dated August 14, 2015 that the collision was staged.
However, the Arbitrator went on to state that since the accident was staged and not “accidental,” he concluded that the incident was not a “legitimate accident” for the purposes of claiming accident benefits under the 2010 SABS.1 On that basis, he found the insureds were not in an “accident.”
The definition of “accident” in s. 2(1) of the 1996 SABS and s. 3(1) of the 2010 SABS broadly defines “accident” as meaning “an incident in which the use or operation of an automobile directly causes an impairment…”
Mr. Madinei and Mrs. Alizadeh-Ebadi appealed. As I noted in my appeal decision dated February 10, 2017, I found no error in the Arbitrator’s finding that the accident was staged.
However, with respect to whether or not the incident was an accident, I found that, even though the insureds staged the collision, it was still an accident under the broader SABS definition.
I also went on to state the following:
As for policy grounds to find otherwise, s. 53 of the 2010 SABS provides that an insurer may terminate the payment of benefits to or on behalf of an insured person, if the insured person has wilfully misrepresented material facts with respect to the application for the benefit and if the insurer provides the insured person with a notice setting out the reasons for the termination. As discussed in Szabo and CAA Insurance Company (Ontario), (FSCO P03-00015, March 31, 2004), s. 53 (and its equivalent under the previous SABS, s. 48) is a powerful anti-fraud tool: it is intended to impose a penalty beyond repayment in cases of wilful material misrepresentation, the penalty being the denial of benefits, even if no benefits were ever paid. [Emphasis added.]
The repayment provision I referred to is s. 52 of the 2010 SABS, set out below.
The matter then came before Arbitrator Winer. At page 4, he set out the $34,964.38 in benefits that was paid to or on behalf of Mr. Madinei and the $43,848.78 that was paid to or on behalf of Mrs. Alizadeh-Ebadi. He dismissed the additional claims of the Applicants because, although they were present at the arbitration hearing, they elected not to give evidence or participate in the hearing.
However, Arbitrator Winer refused TD General’s claim for repayment under s. 52 of the SABS. He cited the relevant portions of s. 52, with the emphasis added by the Arbitrator:
52(1) Subject to subsection (3), a person is liable to repay the insurer,
(a) any benefit described in this Regulation that is paid to the person ... or as a result of wilful misrepresentation or fraud.
(2) If a person is liable to repay an amount to an insurer under this section,
(a) the insurer shall give the person notice of the amount that is required to be repaid;
(3) If the notice required under subsection (2) is not given within 12 months after the payment, of the amount that is to be repaid, the person...ceases to be liable to repay the amount unless it was originally paid...as a result of wilful misrepresentation or fraud.
The Arbitrator found that a person involved in a fraudulent (staged) accident can nevertheless be entitled to statutory accident benefits because it is necessary for the insurer to establish wilful misrepresentation or fraud with respect to the injuries, treatment and expenses themselves in order to be entitled to repayment of those benefits:
The question that arises is whether the payments of the benefits were made as a result of wilful misrepresentation or fraud. As indicated by the many attempts in this case, the staging of a car collision is fraught with danger, and can result in serious injuries. The Insurer contends that because the crash was fraudulent, then all benefits paid, even if the injuries may have been legitimate, are not recoverable, as a result of this section. I disagree. It certainly would be suspicious, but it is quite conceivable that a person could plot a crash for the purpose of making a fraudulent injury claim, but, unluckily for him or her, sustain serious legitimate injuries, and thus be entitled to benefits, because the person was in an “accident” as defined in the legislation. No evidence of wilful misrepresentation or fraud was provided by the Insurer as to the legitimacy of the injuries, treatments, and expenses with regard for the benefits claimed. [Footnote omitted.]
The Arbitrator went on to hold that my comments regarding the “powerful anti-fraud tool” of s. 53 were obiter because the case before him was about repayment under s. 52, so my comments did not assist TD General. He again noted that no evidence of fraud or misrepresentation in the claiming of the benefits had been provided.
The Arbitrator erred. First, my comments were not obiter but were central to the logic of my finding. If a fraudulent accident does not invoke s. 53 (and s. 52), regardless of whether injuries were sustained, then the insurer has no remedy and the anti-fraud tools are without power.
I had also referred to the repayment provisions, albeit without reciting s. 52 itself. I noted that according to Szabo, s. 53 is intended to impose a remedy beyond repayment in cases of wilful misrepresentation. Thus, if the fraud or misrepresentation did not relate to the fundamental facts of the accident itself but, say, the amount of the income replacement benefit, then the repayment provision in s. 52 (s. 47 under the old SABS) allows repayment of the difference between IRBs paid and actually owed. Section 53 (s. 48 under the old SABS) then allows the insurer an additional remedy beyond repayment – termination of the payment of the benefit entirely.
However, it has long been the case at the Commission where, if the fraud or misrepresentation related to the fundamental facts of the accident itself, then the insured is required to repay all benefits that were paid to them because they received the accident benefits as a result of wilful misrepresentation or fraud.
For instance, in Addae and Dominion of Canada General Insurance Company, (FSCO A06‑000202, November 9, 2007), Arbitrator Feldman ordered repayment of benefits where he had found that Mr. Addae made deliberate and material misrepresentations about the alleged accident. Arbitrator Bujold reached the same conclusion in Abdulkadir and Economical Mutual Insurance Company, (FSCO A11-001975, A11-001977, A11-001978 and A12-005066, October 30, 2014). Arbitrators have reached the same conclusion in numerous other cases.
I agree with these cases and find that it is not necessary to prove fraud or wilful misrepresentation with respect to each benefit paid to the insured in order to seek repayment, where the fraud or wilful misrepresentation related to the fundamental facts of the accident itself.
The appeal is therefore allowed, and TD General may therefore seek repayment of the benefits paid to the Respondents.
That being said, there is a limitation to the repayment of benefits, namely to those actually paid to the insured, as discussed in both Addae and Abdulkadir. Those cases dealt with the repayment provision in the old SABS, s. 47, which provided in s. 47(1)(a) that a person shall repay to the insurer “any benefit under this Regulation that is paid to the person … as a result of wilful misrepresentation or fraud.” Paragraph 52(1)(a) is essentially identical, providing that, subject to notice, a person is liable to repay to the insurer “any benefit described in this Regulation that is paid to the person … as a result of wilful misrepresentation or fraud.” I agree with the Arbitrators in those cases that the phrase “paid to the person” is clear and unambiguous, that it would have been simple for the drafters of the SABS to have added the phrase “or on behalf of an insured person,” and that provisions with punitive consequences should be read strictly.
TD General submits that there is a line of cases holding that in cases of misrepresentation or fraud, an insurer is entitled to repayment of all benefits, paid either to the claimant or on behalf of the claimant. However, none of those cases considered the specific language of s. 52.
With respect to repayment, then, I do not know which benefits were paid to the insureds. Accordingly, the matter is returned to arbitration to determine which benefits were paid to the insureds, entitling TD General to repayment of those benefits. The expenses of the arbitration can also be determined at that time.
III. EXPENSES
Mr. Ali Madinei and Mrs. Maryam Alizadeh-Ebadi did not participate in this appeal hearing in any manner. They did not file Responses.
I wrote to them on March 15, 2018, advising that, if I did not receive written submissions by April 6, 2018, I would proceed on the record. They did not provide any written submissions.
Rule 58.2 of the Dispute Resolution Practice Code provides that, where a Notice of Appeal Hearing has been delivered to a party and the party does not attend, the Director or delegate may proceed with the oral submissions or the hearing in the absence of the party, and the party is not entitled to any further notice in the proceeding.
I find that, by analogy, and pursuant to Rule 1.2, the failure of the Respondents to participate in this hearing on the record also disentitles them to any further notice in the proceeding.
Therefore, TD General may file its claim for appeal expenses without further notice to Mr. Madinei and Mrs. Alizadeh-Ebadi within 30 days of the date of this decision.
June 26, 2018
David Evans Director’s Delegate
Date
Footnotes
- Effective September 1, 2010, the Statutory Accident Benefits Schedule – Effective September 1, 2010 (the “new SABS”) came into force. Although the incident occurred before then, the transition rules in the new SABS provide that, subject to certain exceptions, benefits that would have been available pursuant to the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996 (the “old SABS”) shall be paid under the new SABS, but in amounts determined under the old SABS. As a result, both the old SABS and the new SABS are applicable to accidents that occurred on or after November 1, 1996 and before September 1, 2010 and both should be considered.