Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2018 ONFSCDRS 124
Appeal P17-00047 and P17-00048
OFFICE OF THE DIRECTOR OF ARBITRATIONS
RAJWANTIE BHARAT and TIRBHAWAN BHARAT
Appellants
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Respondent
BEFORE:
David Evans
REPRESENTATIVES:
Cecil Jaipaul for Ms.Rajwantie Bharat and Mr. Tirbhawan Bharat
Brenda Cuneo for State Farm Mutual Automobile Insurance Company
HEARING DATE:
April 5, 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 of the Arbitrator’s decision dated June 14, 2017 is allowed. Paragraph 1 is rescinded and replaced by the following:
Mr. Tirbhawan Bharat’s claim for Housekeeping and Home Maintenance benefits is not statute-barred. He may proceed to arbitration with respect to this claim.
The appeal of the Arbitrator’s decision dated June 15, 2017 is allowed. Paragraph 1 is rescinded and replaced by the following:
Ms. Rajwantie Bharat’s claim for Housekeeping and Home Maintenance benefits is not statute-barred. She may proceed to arbitration with respect to this claim.
If the parties are unable to agree about the legal expenses of this appeal, they may arrange an expense hearing in accordance with Rule 79 of the Dispute Resolution Practice Code.
July 5, 2018
David Evans Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL
Ms. Rajwantie Bharat and Mr. Tirbhawan Bharat appeal the Arbitrator’s orders of June 14 and June 15, 2017 that they are out of time to seek arbitration of their housekeeping and home maintenance claims denied by their insurer, State Farm Mutual Automobile Insurance Company.
The Arbitrator found that the denial forms State Farm sent the Bharats were valid. Since the Bharats filed for mediation more than two years after receiving the denial forms, they could not proceed to arbitration.
However, the denials were OCF-9 Explanation of Benefits claims forms. At the time State Farm sent these forms, they were no longer claims forms approved by the Superintendent. Further, the forms referred to a step in the dispute resolution process that no longer existed, namely a rebuttal medical report.
The denials were thus invalid for failure to describe the dispute resolution process after a denial, and so the limitation period never began to run. Therefore, Ms. Rajwantie Bharat and Mr. Tirbhawan Bharat may proceed to arbitration on their housekeeping and home maintenance claims.
II. BACKGROUND AND ANALYSIS
Ms. Rajwantie Bharat and her husband Mr. Tirbhawan Bharat suffered injuries in a motor vehicle accident on March 26, 2010. They claimed accident benefits from State Farm, including housekeeping and home maintenance. State Farm started paying the benefits.
In 2011, after the SABS–20101 came into force, State Farm wished the Bharats to attend insurer examinations and sent them notices requiring their attendance at IEs.
However, the new SABS changed the SABS scheme in effect since November 1, 1996. (The version adopted in 2010 applies for purposes of the present appeal.) The changes mean that the new Regulation’s Parts VIII and IX govern the procedures for claiming and paying benefits, respectively.2 Thus, Part VIII’s s. 44 sets out the ability of an insurer to request an IE, and Part IX’s s. 55 the mandatory compliance with an IE request before commencing mediation.
In a corollary fashion, s. 3(1.2) of the old SABS provides that the equivalent parts dealing with the procedures for paying and claiming benefits no longer apply after August 31, 2010, and s. 3(1.5)12 provides that there can be no request for an IE under s. 42 of the old SABS thereafter.
In this case, the Bharats failed to attend the IEs. State Farm therefore sent each of them a claims form, an Explanation of Benefits, advising them that their benefits were being stopped for that failure, pursuant to s. 37(7)(b) of the new SABS. The claims forms also set out the alleged steps they had to follow to dispute the stoppage, and warned them they had two years from the stoppage to arbitrate. They filed for mediation more than two years after State Farm sent the denials, and State Farm moved for dismissal of the claims for failure to meet the time limit.
However, the claims forms State Farm used were OCF-9s, claims forms that the Superintendent approved in March 2006 for the old SABS but had disapproved for the new SABS. The Superintendent mandates claims forms for insurers to use under s. 227(1) of the Insurance Act: “An insurer shall not use a form of any of the following documents in respect of automobile insurance unless the form has been approved by the Superintendent: … 3. A claims form.”
Approved claims forms may reflect procedures under the SABS. For instance, there used to be the right after a denial to a rebuttal examination, as set out in Part X of the old SABS. Part X no longer applies: s. 3(1.2) of the old SABS.
The OCF-9 approved by the Superintendent reflected the rebuttal procedure. Since a rebuttal no longer existed under the new SABS, the Superintendent issued Bulletin No. A-13/10 dated June 16, 2010, entitled “Revised Accident Benefit Claims Forms and New Attendant Care Hourly Rate Guideline,” to address the deletion. The Bulletin stated that the changes to the claims forms effective September 1, 2010 included deleting both references to the rebuttal examination and approval of the OCF-9.
Therefore, in sending the OCF-9s to the Bharats in 2011, State Farm was in breach of s. 227(1) of the Act, as it was not using approved forms.
The dismissal motion came before the Arbitrator. The Arbitrator noted that, pursuant to s. 281.1(1) of the Insurance Act, the mediation proceeding had to be commenced within two years after the insurer’s refusal to pay the benefit claimed. The Arbitrator correctly stated that in Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129, the Supreme Court found that the two-year limitation period only begins to run upon the issuance by the insurer of a valid refusal. The Court found that the insurer had an obligation to inform insured persons of the entire dispute resolution process in straightforward and clear language, directed towards an unsophisticated person. The Arbitrator noted that in Smith, the Court found that the refusal only informed the insured person of the first step of the process. It was therefore not a valid refusal and the limitation period did not begin to run as a result.
The Arbitrator then found that the refusals in the OCF-9s were valid because they provided a detailed explanation of the steps involved in the dispute resolution process.
However, “STEP 1: NOTIFY YOUR INSURER/FURTHER EXAMINATION” on p. 3 read:
Notify your insurer that you dispute the insurer’s decision. You may have the right to a further examination or assessment in respect of the insurer’s decision by your health professional or, in certain circumstances, another health professional, paid for by your insurer. Please contact your insurance adjuster, health professional or legal representative for further information about this additional examination.
Thus, most of step 1 in the OCF-9 referred to the nonexistent rebuttal process. In the context of 2011 and the abolition of that process, I find this is a Smith-type error: in Smith, the insured was only informed of the first step in the dispute resolution process; here, the insureds were informed of a nonexistent step. In neither case was the dispute resolution process accurately described.
The Arbitrator then accepted State Farm’s submission that this is the standard form used by the insurance industry to convey a decision regarding an insured’s entitlement of benefits, and courts and arbitrators accept its use. However, industry practice cannot overrule statutory language: Chartis Insurance Company of Canada and Tipu et al., (FSCO P14-00009, May 22, 2015).
The Arbitrator also relied on the statement in Do and Guarantee Company of North America, (FSCO A11-000718, November 6, 2012) that the OCF-9 is the form insurers are required to use for benefit refusals. However, that statement was accurate only because the OCF-9 in question was sent in 2007 when it was an approved form, unlike in 2011.
Further, the Arbitrator stated he was not bound by a Superintendent’s Bulletin, “as these are meant to be used as guidelines and are not binding.” However, State Farm was bound by the Bulletin, as the Act specifically provides that insurers shall not use unapproved claims forms. I do not believe that Arbitrators have the power to waive those mandatory requirements.
In conclusion, I find that the Arbitrator erred in finding that the OCF-9s delivered to the Bharats validly denied them benefits. The unapproved OCF-9s did not accurately describe the steps in the dispute resolution process in 2011 but referred to a nonexistent rebuttal process.
Since the denial notices were invalid, it follows that the limitation period had not started to run, so the applications for mediation were not filed out of time.
The appeal is therefore allowed.
III. EXPENSES
If the parties are unable to agree about the legal expenses of this appeal, they may arrange an expense hearing in accordance with Rule 79 of the Dispute Resolution Practice Code.
July 5, 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.
- Subsection 2(2) of the new SABS provides, inter alia, that Parts VIII and IX apply “with such modifications as are necessary in respect of benefits provided under the Old Regulation with respect to accidents that occurred on or after November 1, 1996 and before September 1, 2010.”