Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2018 ONFSCDRS 36

Appeal P17-00025

OFFICE OF THE DIRECTOR OF ARBITRATIONS

TAMMY HODGINS Appellant

and

CO-OPERATORS GENERAL INSURANCE COMPANY Respondent

BEFORE: Edward Lee

REPRESENTATIVES: Jay Rolston and Nicola Romano for Ms. Hodgins Jonathon Kahane-Rapport for Co-operators

HEARING DATE: January 17, 201

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 dismissed and the decision of the Arbitrator is affirmed.
If the parties are unable to agree on expenses of this appeal, they may request an expense hearing in accordance with the procedure set out in the Dispute Resolution Practice Code.

February 12, 2018

Edward Lee Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This matter involves the SABS–1996.¹

Ms. Tammy Hodgins, (“the Appellant”), appeals the preliminary issue decision of Arbitrator Mongeon (“the Arbitrator”), dated March 13, 2017, which held that the Explanation of Benefits form (‘the OCF-9”) sent to Ms. Hodgins by Co-operators General Insurance Company (“Co‑operators”) was valid and sufficient to trigger the two-year limitation period.

For reasons that follow, I find that the Arbitrator committed errors of law, addressed himself to the wrong question, and failed to consider whether the OCF-9 was, in and of itself, valid and sufficient to trigger the limitation period. Nevertheless, on my examination the OCF-9, I find it was valid and sufficient to trigger the limitation period. Accordingly, the decision of the arbitrator stands.

II. BACKGROUND

Ms. Tammy Hodgins, (“the Appellant”), was injured in an automobile accident on October 10, 2008. She applied for and received Income Replacement Benefits (“IRBs”) from Co-operators General Insurance Company (“Co-operators”). Her IRBs were later terminated when Co‑operators sent her an OCF-9 and letter dated June 2, 2009.

Ms. Hodgins did not apply for mediation until February 23, 2016 even though the OCF-9 she received informed her that she had two years from the date of her insurer’s refusal to pay a benefit to commence an arbitration or lawsuit. At mediation, the parties were unable to resolve their dispute, and Ms. Hodgins then applied for arbitration at the Financial Services Commission of Ontario.

At arbitration, a preliminary issue was raised by Co-operators: is Ms. Hodgins’ statute-barred from applying for mediation as per section 51 of the Schedule?

At the preliminary issue hearing, Co-operators argued that according to section 281.1(1) of the Insurance Act and the SABS, the Appellant had to have to applied for mediation no later than June 2, 2011, two years from the date of the issuance of the OCF-9 and letter of denial. Accordingly, her application for mediation and any subsequent application for arbitration were statute-barred and could not proceed.

In response, the Appellant argued the termination of her IRBs had been invalid from the start because the OCF-9 of June 2, 2009 did not conform to the Insurance Act, section 49 of the SABs, and the ruling in Smith v. Co-operators General Insurance Company² which require that any notice given in respect of a reduction or denial of a benefit must be clear, unequivocal, and at a minimum describe the important points of the dispute resolution process.

In his decision, the Arbitrator rejected the arguments of the Appellant and held that the OCF-9 was clear and unambiguous. He concluded as follows:

I also find that the denials sent by the insurer were clear and unequivocal in addition to the Applicant testifying she received them. I also find that these letters conform to the Supreme Court of Canada decision of Smith v. Co-operators. Despite the Applicant’s representative’s hardnosed opinion that “FSCO got it wrong” when creating the OCF-9 form, I believe, based on the evidence presented, the OCF-9 forms are correct and comply with the standard set in Smith v. Co-operators. As a result, based on the evidence presented, the Applicant is statute-barred from applying for IRBs.

III. ANALYSIS

(a) Did the Arbitrator commit errors of law in his consideration and assessment of the OCF-9?

The Appellant argued the termination of her benefit was invalid because the OCF-9 sent to her did not comply with the requirements set out in the Smith decision and section 49 of the SABs. Specifically, the Appellant impugned the following provisions in the OCF-9, commencing with the first paragraph at page 1:

We have reviewed your application for accident benefits or your ongoing entitlement to benefits. This review has included any information that you or your health care provider has submitted as well as the findings of an examination by a health care provider or providers if one was required by the insurer. This forms tells which benefits are approved, the amount payable and any benefits that have not been approved or are ending. If an examination was performed, a copy of the report of examination has been enclosed or has been sent to you separately. If you disagree with this determination, you have the right to dispute it according to the procedure described in Part 6 on page 3 of this form.

The Appellant also challenged these paragraphs at page 4 of the OCF-9:

Part 6 Applicant’s Rights to Dispute

YOUR RIGHT TO DISPUTE THE INSURER’S DETERMINATION OF YOUR CLAIM FOR STATUTORY ACCIDENT BENEFITS

Under the Insurance Act, if your claim for statutory accident benefits has been reduced or denied by your insurer, you have a right to dispute your insurer’s determination. There are a number of steps you can take to try and resolve the dispute.

STEP 1: NOTIFY YOUR INSURER/FURTHER EXAMINATION

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. [emphasis mine]

STEP 2: MEDIATION

If you are unable to resolve your dispute by speaking to your adjuster, you may apply to mediate your dispute through the Financial Services Commission of Ontario (FSCO) within two of your insurer’s refusal to pay, or reduction of benefit. [emphasis mine]

To begin the mediation process, you must complete an application for mediation.

According to the Appellant, the very first paragraph at page 1 informs an insured that he or she has the right to dispute “… according to the procedure described in part 6 at page 4.” As a result, this wording integrates the two steps enumerated on page 4 into the dispute resolution process.

The Appellant argued that Step 1, which directs an insured to “Notify your Insurer”, and Step 2, which requires an insured to speak “to … your adjuster,” are inaccurate and unnecessary additions to the dispute resolution process, not set out in the legislation. These mandatory and incorrect steps render the OCF-9 “confusing and unclear.” As a result, the OCF-9 is ambiguous and equivocal, and cannot trigger the two-year limitation period.

When presented with these arguments at the hearing, the Arbitrator conducted an analysis of the employment status of the witness, employed by Co-operators, who appeared before him. He concluded that she was only a “claims representative,” and not an “adjuster.” The Arbitrator determined the Appellant had indeed had conversations with this claims representative, but because she was not an adjuster, “… the Applicant never did Step 1 [of the OCF-9] to get to Step 2.”³ According to the Arbitrator, Step 2 of the OCF-9 was never engaged.

The Arbitrator also held there were no “extenuating circumstances preventing the [Appellant] from disputing the termination of her benefits.”⁴ She had received the OCF-9, spoke English well, and there were no barriers to her obtaining legal advice or legal aid in regard to her accident. The Arbitrator determined the claims representative had “explained the termination of benefits” to the Appellant, and that the Appellant had never notified the insurer that she had not been in agreement with the termination of her benefit. He even noted the Appellant had not bothered to read the sections in the OCF-9 relating to the disputing of the termination.

Further, he also determined that Co-operators had sent the Appellant five OCF-9s during the lifetime of the file and the Appellant had never questioned the wording or asked for clarifications about the forms.

I find the Arbitrator committed errors of law in his assessment and consideration of the OCF-9.

First and foremost, the argument raised before the Arbitrator was whether the OCF-9, on its face, was invalid because it incorporated additional, unnecessary, and improper steps into the dispute resolution process.

The Arbitrator misdirected himself on this point and did not address this question. Instead, he dealt extensively with the vive voce evidence of the claims representative to determine first that she was not an “adjuster”, and second, that she had “explained the termination of the benefits” to the Appellant.

It was unnecessary for the Arbitrator to undertake the analysis he did in regard to the witness’ employment status or how that affected the operation of Steps 1 and 2 of the OCF-9.

In Western Assurance Company and Burden,⁵ Delegate Evans made the following statement, relying on the Court of Appeal in Golic v. ING Insurance Company of Canada⁶ and the Supreme Court in Smith:

The Arbitrator was not required to consider circumstances beyond the insurer’s notice of refusal when determining whether the refusal was adequate

The court said in Golic that “the underpinning of the [consumer protection] rationale is the need to ensure that an insured is properly informed about the dispute resolution process at the time an insurer refuses to pay benefits” and it is not necessary to consider circumstances outside the refusal, like representation by counsel. [emphasis mine]

In the present case, I find the Arbitrator erred in law when he considered circumstances beyond the notice of termination to determine whether the refusal was adequate. The testimony of the claims representative was irrelevant, but even if it had been, the Arbitrator only determined that the claims representative had “explained the termination of benefits” to the Appellant. There is no suggestion in the decision that the claims representative explained the dispute resolution process. Nor was there any reason for the Arbitrator to have considered whether the Appellant could have retained legal counsel or had access to legal aid.

Further, I also find the Arbitrator erred in law when he reasoned “… the Applicant never did Step 1 in order to get to Step 2.”⁷ It was not necessary for the Appellant to prove how the problems in the OCF-9 adversely affected her. I again agree with Delegate Evans who made the following comment in the decision mentioned above:

Western submits that Mr. Burden should have provided evidence on how the problems with the OCF-17 adversely affected him. That submission was rejected in Ponnampalam and State Farm Mutual Automobile Insurance Company, (FSCO P12-00031C, December 11, 2013). As Delegate Blackman noted, the Supreme Court in Smith rejected that idea that the onus was on insureds to establish that shortcomings in the prescribed forms prevented them from engaging in the dispute resolution process: “Rather, the onus is on the insurer that it has provided the insured person a clear and unequivocal refusal to pay benefits.” Similarly, the onus is on the insurer to demonstrate that the notice informed the insured of the dispute resolution process, as discussed next. [emphasis mine]⁸

The Arbitrator erred in law by failing to address himself to the proper questions concerning the validity of the notice. This must be determined on the basis of the OCF-9 itself, and as I am well placed as any arbitrator to make this decision, I turn now to this analysis.

(b) Is the OCF-9 invalidated because it adds steps to the dispute resolution process that are not actually part of the dispute resolution process, as suggested by the Appellant?

To briefly resume the Appellant’s argument, the OCF-9 imposes mandatory, extraneous, and unnecessary steps into the dispute resolution process, thereby rendering the OCF-9 ambiguous, equivocal, and therefore invalid.

According to the Appellant, these extraneous steps are introduced in the very first paragraph of the OCF-9 which informs the insured that he or she has the right to dispute “… according to the procedure described in Part 6 at page 3 of this form.”⁹ This phrase makes STEPs 1 and 2 that follow “… mandatory and not optional and prerequisites to applying for mediation.”¹⁰

Continuing with the Appellant’s argument, STEP 1 requires an insured to notify the insurer of its intent to dispute the insurer’s decision, although the legislation does not require this of an insured. Nor is it necessary to contact the insurance adjuster.

STEP 2 then follows with the sentence, “If you’re unable to resolve your dispute by speaking to your adjuster…” According to the Appellant, this mandatory step directs the insured person to an “unrequired contact and a verbal discussion with an unidentified entity (an “adjuster”) to access the dispute resolution process.

For reasons that follow, I reject the Appellant’s arguments in regard to these steps and clauses in the OCF-9.

First, although these steps are not required in the dispute resolution process, I do not find they are made mandatory by the language of the OCF-9. Nor do I find that they have been incorporated into the process by the wording of the OCF-9.

Much of the Appellant’s argument is based on Burden. In that appeal, Delegate Evans upheld an arbitrator’s decision which examined the procedures for the stoppage of weekly benefits under the 1996 SABS regime. At the time of the stoppage, an insurer could terminate IRBs by sending out an OCF-17 specifying the stoppage date.

The arbitrator was required to determine whether the termination notice was invalidated because the notice required an insured to request an examination at a Designated Assessment Centre (DAC) as part of the dispute resolution process.

In her decision, the arbitrator noted that before Part 5, entitled “Applicant Request and Signature,” the form states in bold, “The rest of this form must be completed by the applicant and returned to the insurance company if the applicant disagrees with the stoppage of benefits.” [Emphasis mine].

The arbitrator went on to determine:

Together with the instructions that precede it (Part 5 must be completed if an applicant disagrees with the stoppage of benefits), Part 5 contains information that is contrary to s.37 of the Schedule and therefore misleading. Rather than describing the DAC as an option available to the insured person it tells an insured person that, if he or she does not sign the portion of the form requesting an assessment by a DAC, then he or she cannot continue on to mediation or more if she or he disagrees with the stoppage of benefits.

In the appeal, Delegate Evans approved the arbitrator’s decision and held as follows:

A valid refusal has to set out the dispute resolution process. The form in this case improperly indicates that, to even initiate the dispute resolution process, Mr. Buren had to request a DAC assessment. I agree with the Arbitrator that this failure to properly inform Mr. Burden about the dispute resolution process renders the refusal invalid, so the time limitation did not start to run.

I agree with Delegate Evans’ ruling, but I find the notice in the present case is clearly distinguishable from the one in Burden and cannot be characterized in the same manner.

In Burden, the language was explicitly mandatory, and an applicant who disagreed with the stoppage was required to sign a form requesting a DAC assessment: “The rest of this form must be completed by the applicant and returned to the insurance company if the applicant disagrees with the stoppage of benefits.”

In contrast, the notice in the present case does not require the insured to sign and complete a form requesting a discussion with an adjuster or the insurance company. Nor does it state that the insured cannot proceed with or continue to mediation without giving such a notice.

Instead, the last sentence of the first paragraph in the OCF-9 in question reads as follows: “There are a number of steps you can try to take and resolve the dispute.” This form clearly differentiates between mandatory and facultative steps that may be taken to resolve a dispute.

The permissive language of Step 1 suggests the insured “may” have the right to a further examination or assessment. The insured is asked to contact his or her “… insurance adjuster, health professional or legal representative for further information about [an] additional examination,” but no mandatory duty is imposed on the insured to do so. Unlike Burden, there are no negative consequences for not following Step 1.

Finally, the impugned clauses in Steps 1 and 2 in the present case are very similar to the clauses examined in Smith. In that decision, the Supreme Court considered what information needed to be provided in a proper notice of termination.

The Court ruled that it was insufficient to provide an insured with just information relating to the right to mediation, and stipulated that an insurer is required, at a minimum, to include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process.

It is noteworthy that the Court stated that these were minimum requirements. Importantly, the Court also scrutinized the following clause, which was part of the termination notice sent to the insured:

We have assessed your claim for accident benefits. This form tells you how we calculated your benefits. If you disagree with our assessment, please contact us immediately.

If we cannot settle the application to your satisfaction, you have the right to ask for mediation through the Ontario Insurance Commission. You can contact them in Toronto at (416) 250-6750 or toll free at 1-800-668-0128. [emphasis mine]¹¹

This clause, clearly set out as part of the dispute resolution process in that notice, was addressed by the Court at paragraph 20:

There is some doubt in my mind as to whether the notice given by the respondent in this case would even be considered a refusal in the non-technical sense, absent the refusal letter sent to the appellant’s solicitor. The notice says, inter alia, “If you disagree with our assessment, please contact us immediately. If we cannot settle the application to your satisfaction, you have the right to ask for mediation …” There is an equivocal sense of indeterminacy in the decision of the insurer giving the reader the impression that the insurer may very well change its stance if it is contacted for a discussion of the matter. The letter to the solicitor in this case removes any doubt by clearly stating, “Ms. Smith is no longer entitled to income replacement benefits.” However, if it were not for this letter, there might have been another ground, apart from the requirements of s. 71, on which this notice’s status as a refusal could be impugned. [Emphasis mine]

In my opinion, this clause in the Smith case is far more equivocal, ambiguous, and susceptible of creating a sense of indeterminacy than the two steps impugned in the present OCF-9. Neither Step 1 nor Step 2 says “please contact us immediately.” Nor do the Steps mention settling the matter “to your satisfaction”. Further and more importantly, the Court held that any deficiency in the notice created by this clause was cured by the letter sent to the insured’s solicitor “clearly stating” the insured was no longer entitled to the benefit in question.

In the present case, the Appellant also received a letter informing her clearly that she was no longer entitled to the benefit in question.¹² Given that the impugned steps 1 and 2 are even less indeterminate that the one in Smith, I find that their inclusion in the present OCF-9 does not render the OCF-9 ambiguous or equivocal. Further I do not find that a limitation period triggered by this form is invalid.

The appeal is dismissed.

V. EXPENSES

If the parties are unable to agree on expenses of this appeal, they may request an expense hearing in accordance with the procedure set out in the Dispute Resolution Practice Code.