Financial Services Commission of Ontario Commission des services financiers de l’Ontario

Neutral Citation: 2018 ONFSCDRS 43

FSCO A11-003586 A11-003590

BETWEEN:

ANANTH SANMUGARAJAH Applicant

and

NORDIC INSURANCE COMPANY OF CANADA Insurer

REASONS FOR DECISION

Before: Charles Matheson

Heard: By written submissions completed on February 12, 2018

Appearances: Mr. D. S. Wilson, lawyer, participated for Mr. Sanmugarajah Mr. P. Omeziri, lawyer, participated for Nordic Insurance Company of Canada

Issues:

The Applicant, Mr. Ananth Sanmugarajah, was injured in a motor vehicle accident on November 9, 2006 (the “First Motor Vehicle Accident”) and February 2, 2007 (the “Second Motor Vehicle Accident”). He applied for and received statutory accident benefits from Nordic Insurance Company of Canada (“Nordic”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Sanmugarajah, through his representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

The issues in this hearing are:

1. When is an Insurer required to pay an ordered benefit?

2. When does the interest start to accrue on a retroactively ordered benefit?

3. What is the quantum for the Applicant’s legal expenses in respect of the arbitration?

Result:

1. The Insurer is obligated to pay a deemed incurred expense immediately, or as soon as practicable, upon receipt of the arbitral award.

2. Interest starts to accrue on overdue benefits on the 31st day after the receipt of the valid application for a benefit. For further clarity and certainty, interest would begin to accrue as per s. 38(11) of the Old Schedule after 30 days of receipt of a proper application.

3. The Applicant is entitled to his reasonable expenses for the arbitration hearing and preparation, which is fixed in the amount of $81,919.84, inclusive of disbursements and taxes.

Background

The 15-day arbitration on the substantive issues began on April 22, 2014 and was completed on December 12, 2016. During this timeframe two motions were brought by the Applicant which required separate written decisions,² all of which did not have favourable outcomes for the Applicant.

The arbitration results of the substantive issues were as follows:

1. Mr. Sanmugarajah did not suffer a catastrophic impairment as a result of the accident which occurred on November 9, 2006.

2. Mr. Sanmugarajah did suffer a catastrophic impairment as a result of the accident which occurred on February 2, 2007.

3. Mr. Sanmugarajah is not entitled to attendant care benefits.

4. Mr. Sanmugarajah is not entitled to payments for housekeeping and home maintenance services in the amount of $100.00 per week from February 2, 2009 to date and on-going.

5. Mr. Sanmugarajah is entitled to payments for medical benefits as follows:

a. $5,784.25 — Occupational therapy and assistive devices provided by Tru-Path Occupational Therapy, denied on March 8, 2013;

b. $760.00 — TENS unit provided by ADL Home Health Care, denied on March 28, 2013;

c. $3,259.74 — Psychological treatment provided by Dr. Kanagaratnam pursuant to OCF-18 dated June 3, 2013.

6. Mr. Sanmugarajah is entitled to payments for the cost of examinations as follows:

a. $1,038.90 – Nutritional assessment provided by Tru-Path Occupational Therapy denied on March 8, 2013.

7. Mr. Sanmugarajah is entitled to a rehabilitation benefit as follows:

a. $2,486.25 — Rehabilitation consulting provided by Tru-Path Occupational Therapy, denied on March 8, 2013.

8. Nordic is not liable to pay a special award.

9. Nordic is liable to pay Mr. Sanmugarajah’s expenses in respect of the arbitration.

10. Mr. Sanmugarajah is entitled to interest in accordance with the Schedule for the overdue payments of benefits.

The Applicant has written to the Commission requesting two issues be decided, first the issue of interest and payment thereof, and second the issue of expenses. The Insurer has responded with its materials to these two issues.

As I have been assigned this file in order to bring it to a full and final conclusion, as the original arbitrator is no longer employed at the Commission, I shall render a decision on these two issues at the same time, as I accept my jurisdiction on these matters flow from my appointment but also from the parties and their respective submissions, as both issues require a decision to bring finality to this matter.

I note that on the day I finished writing this decision, Insurer’s counsel requested an in-person oral hearing be added to the written submissions process. Insurer’s counsel attached further case law that they wished for me to take into consideration during his oral submissions. Applicant’s counsel objected in writing the following day to the late request within the process and the attempt to inappropriately introduce new case law. Applicant’s counsel urged this arbitrator to treat the issue as closed and deny the requests for further submissions and an oral hearing. I agree with Applicant’s counsel, I shall not hear any more submissions on this matter.

When is an Insurer required to pay an ordered benefit? When does the interest start to accrue on a retroactively ordered benefit?

With respect to issues 1 and 2, the Applicant argues that the Hearing arbitrator ordered payments of the above listed medical-rehabilitation treatment plans and a cost of examination, and as such the Applicant relies on the Order to pay the amounts of those treatment plans.

The Applicant submits that the arbitrator, in making a standard arbitral order, was aware that he was ordering payment forthwith. If the arbitrator had wanted to impose conditions on the payment he would have done so. As a result of the payment order, the arbitrator also ordered that the Applicant be paid interest in accordance with the Schedule for overdue payments. The Applicant argues that had conditions been attached to the payment order the need for an interest order would not have been necessary, as it would have been redundant, as no obligation to pay had yet arisen.

The Applicant argues that in cases where there will not be an invoice and the Applicant has not been able to obtain treatment, interest of the treatment plan still commences, as the application process for the treatment has been satisfied by the Applicant. The Applicant submits that the interest begins to accrue pursuant to s. 38(8.1) of the Schedule, or 10 business days after the Insurer receives the application for the benefit. The Applicant relies on a series of cases which include Hejnowicz and Coachman Insurance Company (FSCO A03-000780, August 4, 2005), Coachman Insurance Company and Hejnowicz (FSCO P05-00024, August 3, 2006) and T.N. and Personal Insurance Company of Canada (FSCO A06-000399, November 20, 2014).

The Insurer agrees they are required to pay for the treatment plans that the arbitrator found to be reasonable and necessary, plus pay interest on any overdue amounts at the rate of 2% per month.

The Insurer argues that in the normal course of business within the Schedule, any payment of treatment is made 30 days after receipt of an invoice, and interest shall accrue thereafter on overdue amounts. The Insurer argues that in this case they have not received an invoice, and as such no interest can be accrued until after 30 days from the date the invoice has been received.

The Insurer argues that the decision of the arbitrator has the effect of finding that the Applicant is entitled to certain treatment plans. However, the decision does not override the normal rules of the Schedule that requires the Insurer pay for actual benefits and interest on those benefits.

The Insurer argues, in part, that both the Old (Accidents on or after November 1, 1996, Ontario Regulation 403/96) and the New (Accidents on or after September 1, 2010, Ontario Regulation 34/10) Schedules contemplate expenses to be paid are required to be incurred first and paid 30 days after the receipt of an invoice. At this juncture the Insurer argues that, as they have not received an invoice, they cannot pay for the treatment plan, and therefore, the interest has not started to accrue.

The Insurer relies on a series of cases including: MacPherson (guardian of) and Intact Insurance Company (FSCO A10-000470, October 7, 2010), Khamo and Economical Mutual Insurance Company (FSCO A10-001218, January 18, 2013) Tchouguianova and Trafalgar Insurance Company of Canada (FSCO A12-000883 February 23, 2015).

The Insurer argues, in part, that the Applicant’s interpretation of the Schedule would result in an absurdity, in that, should payment of a treatment plan without an invoice be allowed, the Applicant may spend the money and its interest on something else other than medical-rehabilitation services. This is why the Schedule only allows for payment of expenses that are “incurred”, and proof of that is the invoice. The Insurer implies that the payment of unincurred treatments would be a windfall to the Applicant and the monies would be used for something other than treatment.

In response to the Applicant’s case law arguments, the Insurer argues that the cases in which the Applicant relies are inapplicable as they relate to an interpretation of the Pre-Approved Framework, which is not at issue here. Furthermore the Applicant relies on an interpretation of s. 38 (17) and (18) of the pre-2003 version of the Schedule, which had been removed prior to this accident.

In reply, the Applicant submits that the Insurer is relying upon cases that are distinct scenarios from the present case, in that their cases all speak to approved or deemed approved treatment plans, rather than disputed cases found to be payable after an arbitrator’s orders, therefore, none of the relied upon cases have any similarities to the present matter.

The Applicant argues, in part, there is no absurdity in their interpretation of the Schedule as alleged by the Insurer, because any error in payment for not attending a treatment plan would trigger the Insurer’s right to be reimbursed for said error, or in the alternative seek reimbursement as a result of wilful misrepresentation or fraud on the part of the Applicant. Further, the Applicant argues that the normal course of business is that an Insurer only pays directly to service providers, which would prevent an Applicant from receiving any payment.

The Applicant’s reply argument, in part, relies upon Kennelly and Wawanesa Mutual Insurance Company (FSCO A99-000139, January 21, 2000). In this case the Insurer argued that at the hearing, it should not be obligated to pay for treatment (four and a half years after the application submission) the Applicant did not receive and can no longer obtain. Therefore the treatments cannot be deemed “incurred”. The Applicant argues that this parallels the Insurer’s arguments in this case, and that the relevant segments applicable in this case are found starting at page 11 of the decision. The Applicant admits that the arbitrator was dealing with an earlier version of the Schedule on an issue of a “pay pending dispute”, however the rationale of the arbitrator ought to be applicable in this matter as well.

The arbitrator found and stated the following on pages 11 and 12 of her decision as follows:

I agree with Wawanesa that in this sense these benefits are forever lost and can never be recouped.

This, however, does not mean the expenses were not incurred. Ms. Kennelly established necessity of these services, along with their amounts and properly presented them to Wawanesa.

While at first glance there is some logic to this argument, if allowed it would undermine the statutory goal of prompt and timely payment for necessary medical services. Insurers might deny payment of needed services with impunity, believing that an arbitrator will not later order them to pay for the treatments, however reasonable, because they can no longer be of benefit to the Applicant.

Nor am I persuaded that this amounts to a windfall for Ms. Kennelly. She was deprived of a service that she was entitled to by statute. The termination of therapeutic support delayed her recovery, increased her frustration over her impairments, and caused her to lose some of the gains she had made over the previous year. Moreover, the Insurer has had the benefit of these monies throughout the time that they should have been dispensed to Ms. Kennelly.

For all these reasons, I find that the expenses in question were incurred.

Decision

I note that the arbitration award comes nine-and a-half years after the treatment plan was submitted and subsequently denied. It is implied that the Applicant did not have the means to pay for the treatment at the time the treatment plans were submitted.

I agree with the parties that the case law provided to me does not speak directly to the issue at hand, however, in my view, the language used in the Old Schedule under s. 38(11) still imposes a requirement for the Insurer to pay a benefit within 30 days of receiving an invoice or a validly completed application for benefits to which the Applicant may be entitled. It is well–established jurisprudence that at this juncture the risk of delay or a non-payment shifts from the Applicant to the Insurer. In my view, this notional shift is consistent with the legislative mandate of the Schedule which is to provide reasonable and necessary treatment in a fast and effective manner in an effort to rehabilitate the Applicant as quickly as possible to his or her pre-accident level of functioning, if possible.

I agree with the Applicant that the issues argued within Kennelly are paralleled in this case. In my view, Arbitrator Baltman’s logic and reasoning still applies in this case. I note that the decision was not appealed or judicially reviewed. It is clear that the issue of incurred expenses has been installed in the various versions of the Schedule for a very long time and an arbitral order to pay a benefit has the meaning and effect of deeming the costs of a properly documented application to be incurred.

I agree with the Applicant that standard arbitral awards are made with the expectation of an immediate payment of that order, unless otherwise directed. I have no evidence to the contrary.

In the case at hand, there is no evidence of a contrary intention on the hearing arbitrator’s part. I note that there has not been any evidence before the hearing arbitrator that the application in this instance was not valid or was defective in any way.

In my view, the Old Schedule mandates that, subject to a determination of a disputed medical-rehabilitation or cost of examination benefits, an Insurer need not pay an expense claimed where the Insurer has concluded that the Applicant has no entitlement to it. However, once an arbitrator decides the Insurer is required to pay, it also follows that the Insurer is required to pay said benefit(s) as if they were paying them in a timely fashion upon receipt of the valid application, otherwise the need for interest to be applied and ordered would be redundant.

I have no evidence before me that suggests that the payment of disputed benefits after a lengthy dispute resolution process resets the payment schedule of a claimed benefit.

With regard to interest, I agree with Director’s Delegate Makepeace’s decision in the Hejnowicz appeal where she states on page 23 of her decision:

In my view, nothing in s. 38 justifies a departure from the well-established principles governing SABS interest: it is mandatory, compensatory, and flows from a finding that benefits were payable and were not paid on receipt of the required application documents. (Underlined for my Emphasis)

In my view, the above concepts and processes are consistent with the language used by the hearing arbitrator when he found pursuant to s. 14 or 15 under the Old Schedule the treatment plans were reasonable and necessary. The arbitrator assessed the Insurer’s decision in regard to the disputed benefits within the timeframe of the denial, and the information available to the Insurer at the time of the denial.

I also note the arbitrator was careful to list the denial dates, which are not disputed. This also brings me to the conclusion that the arbitrator has determined that the reasoning of the Insurer was flawed at that time it made its decision, thus he has deemed the expenses as incurred and now payable at the time of receipt of the arbitration decision being issued to the parties.

I agree with the Applicant that the payment of a benefit of the ordered medical-rehabilitation and cost of examination benefits starts with the receipt of the valid application, and in my view, is deemed overdue as of 31 days from the date of the valid application being properly presented to the Insurer, as noted above. In the context of this case, the payment of the disputed benefits are meant to be paid forthwith, as a valid application has already been received by the Insurer.

For the above reasons, I find that:

1. The Insurer is obligated to pay a deemed incurred expense immediately, or as soon as practicable, upon receipt of the arbitral award.

2. Interest starts to accrue on overdue benefits on the 31st day after receipt of the valid application for a benefit, as Delegate Makepease found in the Hejnowicz appeal. For further clarity and certainty, interest would begin to accrue as per s. 38(11) of the Old Schedule after 30 days of receipt of a proper application.

What is the quantum for the Applicant’s legal expenses in respect of the arbitration?

Arguments

The Applicant argues that the hearing arbitrator ordered that the Applicant be paid his expenses.

The arbitrator is quoted in his decision on page 23 as follows:

The Applicant enjoyed substantial success in this proceeding. He shall accordingly have his costs of the hearing in an amount to be agreed or assessed.

As the Applicant has been found to have enjoyed substantial success, he submitted a Bill of Costs showing total fees and disbursements, including taxes, to be $81,919.84.

The Applicant argues that the standardly accepted FSCO ratio for expenses is one hour of hearing time to four hours of preparation time. In this case the Applicant has recorded 121.05 hours for attendance at the hearing, leaving 264.2 hours for preparation time. The Applicant points out that this is a modest 2.18 to 1 ratio, far below the 4:1 ratio.

The Applicant compares his Bill of Costs to that of the Insurer’s Bill of Costs which shows a time expenditure of 594.5 hours, leaving 473 hours of preparation time or a 3.9:1 ratio. The Applicant argues that his time expenditure cannot be considered excessive.

The Insurer takes the position that they were the most successful party and as such they should be awarded their costs despite the arbitrator’s findings and order. The Insurer points out they were the most successful party because the numerous motions brought about by the Applicant were decided in favour of the Insurer, and they were also successful in dismissing the Attendant Care and Housekeeping benefits which amounted to a combined $490.000.00 retrospective entitlement of the Applicant, not including the future on-going claim for benefits. The Insurer was also successful in having the special award being dismissed.

The Insurer argues that the Applicant was only successful in obtaining $13,329.14 for some outstanding medical and rehabilitation treatment plans.

As a result of the above, the Insurer requests that it be entitled to its Bill of Costs which are adjusted by the Legal Aid tariffs in the amount of $70,682.19.

The Insurer argues that the relevant section of the Expense Regulation 664, Section 12 (2), reads in part, as follows:

(2) An arbitrator shall, under subsection 282 (11) of the Act (now appealed), consider only the following criteria for the purposes of awarding all or part of the expenses incurred in respect of an arbitration proceeding:

1. Each party’s degree of success in the outcome of the proceeding.

2. Any written offers to settle made in accordance with subsection (3).

3. Whether novel issues are raised in the proceeding.

4. The conduct of a party or a party’s representative that tended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings and orders.

5. Whether any aspect of the proceeding was improper, vexatious or unnecessary.

The Insurer argues that success at the hearing is the most important element and I should give the greatest weight to this element in making my decision. Further, the Insurer suggests that I take a broad-brush approach as opposed to a line-by-line assessment of the parties’ claimed expenses. Such an approach was used by Arbitrator Killoran in Cousineau and Zurich Insurance Co. (FSCO A98-001084, February 3, 2000).

In reply, the Applicant argues that the hearing arbitrator’s order precludes the Insurer from seeking their expenses as the arbitrator has already determined that the Applicant has been the successful party at the hearing. Further, the Insurer has not provided any authorities which would support their claims. The Applicant argues that the Insurer has ignored the fact that the Applicant was found to be catastrophic and was successful in being awarded the various treatment plans and the interest attached thereto. The Applicant argues that the Insurer is not entitled to its expenses and implies I should not vary the hearing arbitrator’s award. The Applicant now claims an additional $1,779.75 for costs of the Expense Hearing.

Decision

I remain unpersuaded that the Insurer is the successful party, and that I should disturb the hearing arbitrator’s findings and orders.

I agree with the Applicant that his expenses ratio is well within the accepted norm.

I note that the Insurer did not argue or disagree with any element of the Applicant’s Bill of Costs as being inappropriate, excessive, un-claimable or incorrect, and I cannot find any glaring inconsistencies with same.

Therefore, for the reasons above, the Applicant is entitled to their reasonable expenses for the arbitration hearing and preparation, which is fixed in the amount of $81,919.84 inclusive of disbursements and taxes.

February 27, 2018

Charles Matheson Arbitrator

Date

Financial Services Commission of Ontario Commission des services financiers de l’Ontario

Neutral Citation: 2018 ONFSCDRS 43

FSCO A11-003586 FSCO A11-003590

BETWEEN:

ANANTH SANMUGARAJAH Applicant

and

NORDIC INSURANCE COMPANY OF CANADA Insurer

ARBITRATION ORDER

Under section 282 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 Ontario Regulation 664, as amended, it is ordered that:

1. The Insurer is obligated to pay a deemed incurred expense immediately, or as soon as practicable, upon receipt of the arbitral award.

2. Interest shall start to accrue on overdue benefits on the 31st day after the receipt of the valid application for a benefit. Interest would begin to accrue as per s. 38 (11) of the Old Schedule after 30 days of receipt of a proper application.

3. The Applicant is entitled to his reasonable expenses for the arbitration hearing and preparation, which is fixed in the amount of $81,919.84, inclusive of disbursements and taxes.

February 27, 2018

Charles Matheson Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Dated June 9, 2015 and September 20, 2017