Satnam Sandhu v. State Farm Mutual Automobile Insurance Company, 2018 ONFSCDRS 154

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2018 ONFSCDRS 154

Appeal P17-00077

OFFICE OF THE DIRECTOR OF ARBITRATIONS

SATNAM SANDHU Appellant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Respondent

BEFORE: Edward Lee

REPRESENTATIVES: Samia Alam for Mr. Sandhu Arthur R. Camporese for State Farm

HEARING DATE: September 14, 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:

1. the appeal is dismissed.

2. 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.

Edward Lee Director’s Delegate

November 26, 2018

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This matter involves the both the SABS–1996¹ (“the old SABS”) and the SABS-2010² (“the new SABS”).

This is an appeal of a decision by Arbitrator Morris (“the Arbitrator”) dated September 25, 2017 wherein she determined that Mr. Sandhu (the “Appellant”) was not entitled to $10,359.90, which is the balance of amounts sought for six catastrophic (CAT) assessments conducted pursuant to an OCF-18 dated April 28, 2015.

For reasons that follow, I am dismissing the appeal.

II. BACKGROUND

Mr. Sandhu was injured in a motor vehicle accident on May 25, 2006 and sought accident benefits from State Farm Mutual Insurance Company (“State Farm”) payable under the SABS. Disputes arose between the parties and Mr. Sandhu applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

At the time of his accident, the old SABS allowed an insured to obtain a rebuttal report and to recover the “reasonable” fees for the preparation of such reports.

The old SABS were amended, effective September 1, 2010. Under the new SABS, the provisions for rebuttal reports were eliminated, and the cost for an assessment or examination was capped at $2,000.00.

The Appellant submitted an OCF-18 dated April 28, 2015, wherein he sought $22,359.90 to pay for six assessments. State Farm paid him $12,000.00 for the assessments ($2,000.00 per assessment), in accordance with the new SABS.

At arbitration, the Appellant claimed the balance of $10,359.90. The Arbitrator determined that the $2,000.00 limit in the new SABS was applicable and dismissed his claim.

The Appellant now appeals that decision.

III. ANALYSIS

Did the Arbitrator err in applying section 25(5)(a) of the new SABS and in not awarding the balance for the rebuttal reports once she had determined that the right to a rebuttal report had vested in the Appellant?

The questions before the Arbitrator were whether the right to a rebuttal report had “vested,” and whether the new or old SABS applied given that the Appellant’s accident had occurred before the new SABS came into force on September 1, 2010.

Under the old SABS, the criteria for funding of rebuttal reports was set out in section 42.1:

(3) The insurer shall pay fees in accordance with this section for an assessment or examination of the insured person and for the preparation of a report of the assessment or examination if the following conditions are satisfied:

Section 24 of the old SABS also provided a ‘reasonable” limit for such reports:

(10) Reasonable fees and expenses in a accordance with section 42.1 that are charged in preparation for an assessment or examination of the insured person and the preparation of a report of the assessment or examination.

Both sections 42.1 and 24 of the old SABS were eliminated in the new SABS. Section 25(5)(a) of the new SABS sets a limit of $2,000.00 for any assessment:

25(5) Despite any other provision of this Regulation, an insurer shall not pay,

(a) more than a total of $2,000 in respect of fees and expenses for conducting any one assessment or examination and for preparing reports in connection with it, whether it is conducted at the instance of the insured person or the insurer; or

At arbitration, the Arbitrator held as follows:

I am inclined to agree that the right to reimbursement for a rebuttal report under the old SABS was a substantive vested right which survived the elimination of funding for rebuttal reports in the new SABS. The level of reimbursement was limited by reasonableness. The concept of “reasonableness”, however, is not a specific substantive benefit. It is a concept of general application to the costs of assessments. In enacting section 25(5)(a) of the new SABS, the legislature in my view, expressed a clear intention to cap the costs of assessment at $2,000.00 regardless of whether or not the amount was otherwise reasonable and regardless of whether the entitlement to funding for an assessment arose out of the old SABS or the new SABS.³ [Emphasis mine]

Thus, despite determining that the right to a rebuttal report under the old SABS had vested and survived the repeal of section 42.1, she ruled that the concept of “reasonableness” was not a specific substantive benefit. The Arbitrator then applied section 25(5)(a) of the new SABS rather than section 24 of the old SABS.

The Appellant now argues the Arbitrator erred in law by applying section 25(5)(a) of the new SABS. He submits that having determined the right to a rebuttal report had vested, the Arbitrator was required to apply section 24 of the old SABS, which did not contain a $2,000.00 cap on the cost of a report.

I reject the arguments of the Appellant for the following reasons.

First, any analysis of vested rights in accident benefits must be informed by section 268(1) of the Insurance Act:

268 (1) 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.

I agree with Delegate Rogers’ ruling in Motor Vehicle Accident Claims Fund and Barnes⁴ where he held the following concerning section 268(1):

The language is clear. The section establishes three principles. First, it displaces the concept of a motor vehicle liability policy as a private agreement between an insurer and its insured. The terms of the agreement are set by legislation. Second, it makes the Schedule a part of every policy. Third, it makes all amendments to the Schedule a part of every policy, including all terms, conditions, provisions, exclusions and limits.

Second, the transitional provisions in both the new and old SABS demonstrate that the $2,000.00 cap on examinations or assessments applies after September 1, 2010 regardless as to whether the accident occurred before September 1, 2010 (as in the present case).

Section 3 of the old SABS reads as follows:

(1.1) Subject to subsection (1.3), the benefits set out in this Regulation shall be provided under every contract evidenced by a motor vehicle liability policy in respect of accidents that occur on or after November 1, 1996 and before September 1, 2010.

(1.2) Section 24 and Parts X, XI, XII, XIII and XV do not apply after August 31, 2010.

(1.3) No amount referred to in this Regulation shall be paid after August 31, 2010.

(1.4) An amount that would, but for subsection (1.3), be paid under this Regulation after August 31, 2010 shall be paid under the New Regulation, but in the amount determined,

(a) under this Regulation, other than section 24; or

(b) under subsections 25 (1), (3), (4) and (5) of the New Regulation. [Emphasis mine]

Section 2(2) of the new SABS reads as follows:

2. (1) Except as otherwise provided in section 68, the benefits set out in this Regulation shall be provided under every contract evidenced by a motor vehicle liability policy in respect of accidents occurring on or after September 1, 2010. O. Reg. 34/10, s. 2 (1).

(2) Subsections 25 (1), (3), (4) and (5), Parts VIII and IX, other than subsections 50 (2) to (5), and Parts X, XI and XII 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 and, for that purpose, the following rules apply:

2. An amount that would, but for subsection 3 (1.3) of the Old Regulation, be paid under the Old Regulation after August 31, 2010 shall be paid under this Regulation in the amount determined,

i. under the Old Regulation, other than under section 24 of that Regulation, or

ii. under subsections 25 (1), (3), (4) and (5). [Emphasis mine]

Section 1.2 of the old SABS states that section 24 does not apply after August 31, 2010. Section 1.4(a) states that an amount that would have been paid under the old SABS shall be paid under the new SABS, but in the amount determined under section 25(5) of the new SABS. This is repeated in Section 2(2) of the new SABS.

This process leads to the same result reached by the Arbitrator in the instant case. Her analysis regarding vested rights was thus unnecessary. Ultimately, she made no error of law in applying section 25(5)(a) of the new SABS and determining the maximum payable for each examination was $2,000.00.

Nor am I convinced the Arbitrator erred in law because she was required to apply the “reasonableness” limit of the old SABS once she determined the right to a rebuttal report was a vested right.

It is unnecessary for me to delve too deeply into the Arbitrator’s analysis of vested substantive rights and “reasonableness” as a concept of general application, suffice to say her examination of those questions made no mention or discussion whatsoever of any of the relevant jurisprudential or statutory authorities, including section 268(1) of the Insurance Act (already cited above), or the FSCO appeal decisions of Federico⁵ (generally cited as the authority to the proposition that entitlement to accident benefits “vests” at the time of the accident), Barnes,⁶ Lehman,⁷ and decisions of the Divisional Court in Lehman,⁸ Dikranian v. A.G. Quebec⁹ in the Supreme Court of Canada, and Beattie¹⁰ (in the Court of Appeal of Ontario).

In this regard, I agree with and adopt the reasoning of Delegate Rogers in Barnes who determined the concept of vested contractual rights in accident benefits is inconsistent with section 268(1) of the Insurance Act and incompatible with the history of frequent amendments to the SABS, both incremental and wholesale.¹¹ I agree with Delegate Rogers who declared himself bound by the Divisional Court’s decision in Lehman (which upheld Delegate Draper who rejected the idea that rights to accident benefits arise from private contractual agreement and vest at the time of the accident), and adopt Delegate Roger’s observation that the ruling in Federico was obiter and unnecessary. Further, the judicial review of Federico in the Divisional Court upheld Delegate Blackman’s decision on interpretation of the legislation, but made no mention of the issue of vested rights.¹²

I am bound by the Court’s decision in Lehman concerning vested rights. The Arbitrator was also bound by that decision, as well as the decision in Barnes. The Arbitrator thus also erred in the preliminary part of her analysis where she determined that the right to a rebuttal report had vested in the Appellant. It would have been a further error in law to then apply section 24 of the old SABS.

The appeal is dismissed.

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.

Edward Lee Director’s Delegate

November 26, 2018

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, O. Reg. 403/96, as amended up to and including O. Reg. 35/10.
2. 2The Statutory Accidents Benefits Schedule—Effective September 1, 2010
3. 3Page 5 of decision
4. 4[2017] O.F.S.D. No. 99 at page 4
5. 5(FSCO A08-0011238, March 23, 2010; upheld on appeal; (FSCO P12-00022, March 25, 2013); application for judicial review dismissed (2014), 236 A.C.W.S. (3d) 202; 2014 ONSC 109 (Div. Ct.)
6. 6Motor Vehicle Accident Claims Fund v. Barnes, [2017] O.S.C.D No. 99
7. 7Gan Canada Insurance Company and Lehman (FSCO P97-00064, August 10, 1998), upheld on judicial review [2000] O.J. No 4902
8. 8Ibid at note 5
9. 92005 SCC 73, [2005] 3 S.C.R. 530 at para 51 and 52 (distinguishable because the Court determined the loan agreement between a student and his financial institution was a private contract where “the parties freely and on an informed basis, defined their rights and obligations,” and on other grounds)
10. 10Beattie v National Frontier Insurance Co. 2003 CanLII 2715 (ON CA), [2003] O. J. No 4258, another Court of Appeal decision where s. 268(1) was held to amend a policy purchased under the previous SABS
11. 11Ibid at page 7
12. 12State Farm Mutual Automobile Insurance Co. v. Federico 2014 ONSC 109 at paragraph 11