Dispute Resolution Services de Règlement

Services des Différends

Neutral Citation: 2020 ONFSCDRS 8

FSCO A12-005384

BETWEEN:

LYNDA FEDERICO

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before: Isabel Stramwasser

Heard: In person on October 23, 2018 at the offices of the Financial Services Commission of Ontario in Toronto. Written submissions completed on November 14, 2019.

Appearances: David S. Wilson for Ms. Federico Jonathan Schrieder for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Lynda Federico, was injured in a motor vehicle accident on December 22, 2007. She applied for, and received, statutory accident benefits from State Farm under the Schedule.¹ Disputes arose between the parties, which they were unable to resolve through mediation. Ms. Federico applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Ms. Federico appeared before Arbitrator Marvin Huberman in the summer and fall of 2014 and claimed entitlement to two treatment plans and a special award. In a decision dated January 6, 2015, Arbitrator Huberman determined that Ms. Federico was entitled to both treatment plans, but not the special award. After setting out the law and the parties’ positions on the special award, Arbitrator Huberman made the following findings:

Based on the evidence before me, I find that State Farm has not unreasonably withheld or delayed payments to Ms. Federico within the meaning of subsection 282(1) of the Insurance Act. I am unable to find that State Farm, and its representatives, breached a duty of good faith in the circumstances of this case. I find that State Farm’s behaviour was not unreasonable: it did not go beyond what is reasonable and equitable nor did it fail to be guided by or listen to reason. Its conduct was not excessive, imprudent, stubborn, inflexible, unyielding, or immoderate in respect of withholding or delaying payments to Ms. Federico in respect of the subject OCF-18s.

I am unable to find that State Farm ignored all other evidence, and concentrated only on its own reports. I am not persuaded that State Farm improperly failed to consider the totality of the evidence.

I do not agree with the submission of counsel for Ms. Federico that [the current claims representative] Mr. Kope’s evidence speaks volumes with respect to the intransigence and inflexibility of State Farm, nor do I accept the argument of Ms. Federico that she got no fairness, objectivity, or good faith from Mr. Kope, his predecessor, or from State Farm. I reject these arguments.

Ms. Federico successfully appealed Arbitrator Huberman’s decision on the matter of the special award (FSCO P15-00010, January 21, 2016). Director’s Delegate David Evans sent back the matter of the special award to arbitration for redetermination and he did not overturn or modify any other part of Arbitrator Huberman’s decision. Delegate Evans ruled as follows (at page 3):

Accordingly, paragraph 3 of the Arbitrator’s decision dismissing Ms. Federico’s claim for a special award is rescinded. The issue of entitlement to and, depending on that determination, the amount of a special award is returned to arbitration for redetermination.

Delegate Evans allowed the appeal because he considered Arbitrator Huberman’s reasons to be “conclusory” and “boilerplate” and therefore insufficient. At pages 2 and 3 of his decision, Delegate Evans explained:

Conclusory reasons are conclusions without explanations for them: R. v. M. (Y.) (2004), 2004 CanLII 39045 (ON CA), 71 O.R. (3d) 388 (C.A.). I find the Arbitrator’s reasons to be conclusory because he did not explain how the evidence lead to his conclusion. He simply stated that, based on the evidence before him, Ms. Federico failed to meet the test for a special award.

Both at arbitration and on appeal, Ms. Federico set out a number of reasons why she feels the evidence warranted a special award. For instance, she submits that State Farm uncritically relied on Ms. Morse’s report. However, the Arbitrator did not deal with any of that evidence specifically but gave boilerplate reasons that could apply equally to any case.

Furthermore, it is not possible to see from the context of the decision why a special award would be denied without more discussion. In that regard, I note that the Arbitrator stated that the “overwhelming weight of the medical and non‑medical evidence supports a conclusion that at the time of the submissions of the OCF-18s, dated October 25, 2010 and October 25, 2011, Ms. Federico had not returned to her pre-accident status and she was in need of Rehabilitation Benefits, including occupational therapy, as a result of her accident-related injuries.” It is difficult to square that finding with the finding that State Farm did not improperly fail to consider the totality of the evidence.

Accordingly, the issue of entitlement and possibly quantum of a special award was returned to arbitration. Arbitrator Lynda Tanaka heard the matter and, on October 3, 2016, also decided that Ms. Federico was not entitled to a special award.

Ms. Federico also successfully appealed Arbitrator Tanaka’s decision. Director’s Delegate Edward Lee rescinded Arbitrator Tanaka’s order in its entirety and ordered a re-hearing (FSCO P16-00081, May 30, 2018).

Delegate Lee allowed the appeal because he found that Arbitrator Tanaka had erred in law by making findings of fact outside the narrow jurisdiction conferred to her by Delegate Evans. At page 3, Delegate Lee wrote:

Arbitrator Tanaka appeared to recognize that she was bound by Arbitrator Huberman’s decision that the two treatment plans were reasonable and necessary, but she also stated that she had jurisdiction to make findings of fact needed to deal with the special award claim [at page 8 of the Tanaka decision].

In this regard, I find that Arbitrator Tanaka could validly make findings in regard to whether the insurer had unreasonably withheld or delayed the payment of a benefit, but she was bound by all other findings of fact made by Arbitrator Huberman in his decision, and not just Arbitrator Huberman’s conclusions in regard to the two treatment plans. Those factual findings of Arbitrator Huberman were neither overturned nor modified by Delegate Evans. Delegate Evans did not direct Arbitrator Tanaka to undertake a re-hearing of all the issues that had been before Arbitrator Huberman. Apart from the narrow issue of the special award, Arbitrator Huberman’s findings were res judicata, and Arbitrator Tanaka had no authority to modify or overturn them.

Delegate Lee also found that Arbitrator Tanaka had erred in law by making findings of fact that were unsupported by the evidence or based on her own speculation. He found that Arbitrator Tanaka repeatedly erred in law by attributing her own thought processes and concerns to State Farm in the absence of evidence that the insurer held the same considerations (at pages 5, 6, 8 and 9 of Delegate Lee’s reasons).

Consequently, the matter of the special award was sent back to arbitration and assigned to Arbitrator Alan Mervin. He received the parties’ submissions on the following dates:

1. At an oral hearing on October 23, 2018;

2. Ms. Federico’s written submissions dated October 31, 2018 and received November 6, 2018;

3. State Farm’s written submissions dated and received December 4, 2018 (in which it advised that it was also relying on its written submissions filed before the other Arbitrators on October 31, 2014 and July 11, 2016); and,

4. Ms. Federico’s reply submissions received December 11, 2018.

Arbitrator Mervin passed away in summer 2019 before making a decision on the special award and I was assigned as the fourth arbitrator to hear this issue.

The parties provided their consent on September 10, 2019 to proceed on the record. I ordered the transcripts of the hearing before Arbitrator Mervin and, upon receiving them, asked the parties for further submissions. Ms. Federico made submissions, but State Farm did not. Ms. Federico’s submissions were received after 4:45 p.m. on Wednesday, November 13, 2019 and were considered received on the next working day, pursuant to Rule 8.1(c) of the Dispute Resolution Practice Code (Fourth Edition - Updated January 2014).

I heard no new evidence. I reviewed the exhibits filed before Arbitrator Huberman and the transcripts of his hearing, which included the testimony of Ms. Federico and State Farm’s adjuster.

I am tasked to determine nothing other than entitlement to a special award and the amount of that award, if any. My jurisdiction to rehear this matter is circumscribed by the order of Delegate Evans. The particulars of my jurisdiction are clarified in the decision of Delegate Lee.

Accordingly, I must decide the following issue:

1. Is State Farm liable to pay a special award, pursuant to subsection 282(10) of the Insurance Act, because it unreasonably withheld or delayed payments to Ms. Federico?

Result:

1. State Farm is liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Ms. Federico. The decision on the amount of the special award is deferred for 30 days to allow the parties an opportunity to make submissions.

2. If the parties are unable to agree on the legal expenses of this hearing, they may request a determination of them within 30 days of this decision by referring to the criteria in the Expense Regulation.

REASONS

Facts not in dispute

The following facts are not in dispute. Arbitrator Huberman made these findings and they were not overturned on appeal. His findings are final in this proceeding and binding on me.

At page 17, Arbitrator Huberman found that Ms. Federico was a credible witness and that State Farm’s submissions to the contrary were “not accurate, fair, or supported by the weight of the evidence.”

I accept the substance of the evidence given by Ms. Federico. She testified in a straightforward manner and her demeanor carried the conviction of the truth. I find that her evidence was in harmony with the preponderance of the probabilities disclosed by the facts and circumstances of the present case.

I do not accept State Farm’s contention that Ms. Federico’s evidence does not have credibility and that her evidence is largely suspect. To the contrary, I find that the attack on Ms. Federico’s credibility is largely based on collateral and immaterial facts which are not inconsistent with Ms. Federico’s evidence, and with respect to which she was not cross-examined by State Farm in this proceeding.

I reject State Farm’s argument that Ms. Federico’s presentations during examinations are highly suspect; that outrageous claims have been made by her during assessments; that she simply does not take the process seriously and has shown continual disregard for the need to be truthful and honest; that she has inconsistently reported her status with respect to prescription medication; that her embellishments also include over-reporting during psychological assessments; and that she has not been truthful with respect to her prior medical history. I find that these contentions are not accurate, fair, or supported by the weight of the evidence.

At pages 18-19, Arbitrator Huberman found that the “overwhelming” weight of the evidence supported acceptance of the disputed treatment. In particular, the evidence overwhelmingly supported a conclusion, at the time Ms. Federico asked for the treatment, that she had not returned to her pre-accident status and that she needed the treatment because of the accident.

I find that the overwhelming weight of the medical and non-medical evidence supports a conclusion that at the time of the submissions of the OCF-18s, dated October 25, 2010 and October 25, 2011, Ms. Federico had not returned to her pre‑accident status and she was in need of Rehabilitation Benefits, including occupational therapy, as a result of her accident-related injuries. This evidence includes the records/evidence of Dr. Rae Lake, Family Physician, Paramount Rehabilitation Centre Inc., Mr. Atila Balaban, Exercise Physiologist, Dr. Joseph Wong, Physiatrist, Dr. Knolly Hill, Psychologist, Dr. Julie Hill, Psychologist, Dr. Donna Ouchterlony, Ms. Natalie Zaraska, occupational therapist, St. Michael’s Hospital, Ms. Sandy Sarkissian, occupational therapist, of Tru-Path, and Dr. Elaine McKinnon, Psychologist. I accept this evidence and give it considerable weight.

At page 19 of his reasons, the Arbitrator found that State Farm’s characterizations of certain facts were not supported by the evidence. In particular, the Arbitrator found that State Farm’s characterizations of medical evidence and reports from Ms. Federico were unsupported.

I do not accept State Farm’s contentions that Ms. Federico’s own assessors noted that she possessed no cognitive impairments; that by 2009 she had reported returning to most of her pre-accident employment; that Dr. Lake, Ms. Federico’s family physician, routinely noted a return to pre-accident status and a lack of objective findings, and that she had returned to work. I find that the preponderance of the evidence, taken in context and in its entirety, does not support these submissions.

Arbitrator Huberman also found that, contrary to State Farm’s argument (at para. 15 of its 2014 submissions) that the Balaban report showed Ms. Federico “clearly” returned to her pre-accident status, “This report does not clearly suggest that Ms. Federico has returned to her pre-accident status” (page 20 Huberman reasons, supra).

In addition, the Arbitrator found that, contrary to State Farm’s argument that the Morse report was “strong” (at para. 19 of its 2014 submissions), the Morse report was in fact “not strong.” The Arbitrator also rejected State Farm’s argument (at para. 19 of its 2014 submissions) that the Morse report showed that Ms. Federico had “clearly returned to pre-accident medical status and that the proposed OCF-18 is not reasonable and necessary.”

The evidence in this case does not support a conclusion, as contended by State Farm, that the Occupational Therapy in-Home Assessment Report of Ms. Marlene Morse, dated February 25, 2011, is strong and shows that Ms. Federico has clearly returned to pre-accident medical status, and that the proposed OCF-18 is not reasonable and necessary. I reject that argument (page 20).

Then, at pages 20 to 22 of his reasons, the Arbitrator went through the Morse report in detail to show that it did not even support its own conclusions or those of State Farm.

In fact, in her report, Ms. Morse states:

“Prior to the motor vehicle accident, Mrs. Federico stated that she enjoyed entertaining, dinner parties, (BBQs, parties), biking, ice-skating, going for walks, shopping, dancing, reading, going out, movies, gardening, traveling, swimming, and playing tennis. Mrs. Federico indicated that she has returned to the following activities: shopping, walking but not much, reading on occasion, and gardening (a little bit on a good day).

Self-Care

Mrs. Federico reported that she was independent in the performance of all aspects of self-care prior to the accident and reportedly continues to be independent with all personal care tasks albeit the tasks are completed slowly and with pain.

Homemaking

Prior to the accident, Mrs. Federico reported that she was the primary homemaker for all aspects of homemaking and did not receive any outside assistance. At this time, the claimant completes all of her housekeeping on good days, but feels overwhelmed with all that is needed to be completed on a good day, as she is unable to do things when she is having a bad day.

At this time, Mrs. Federico stated that she has returned to the TDSB as an Educational Assistant/Special Needs Assistant working between approximately 3 hours to 20 hours/week, and to her husband’s plumbing business (5 hours to 20 hours). After further clarification, the claimant explained that she probably does work 20 hours a week on her husband’s work, but if she has had a poor week she will end up doing all the work on one good day causing more pain on the following day. Whereas, if she is having a good week, she will spread the work out over a number of days.

…The claimant reported her main issue was just being overwhelmed with all the piles of “paper work” and “stuff” that “needs to be dealt with”. Mrs. Federico has reported that she has difficulties dealing with the back log of incomplete tasks and is unsure where to begin to tackle all that is needed to be completed.

…Mrs. Federico reported that she is able to independently complete all of her pre-accident personal care, house-keeping/home maintenance and employment tasks if she is having a “good day” or “good week”. Mrs. Federico has received education in pacing and work simplification from Paramount Rehabilitation Centre Inc. after her motor vehicle accident, and I reviewed some of her key concepts during this assessment. The use of proper body mechanics, energy conservation, and task modification techniques is encouraged. As far as the goal of pain reduction, I am unsure of what Ms. Duffus was hoping to complete to assist with pain reduction due to the limited explanation on her treatment plan.”

In my view, Ms. Morse’s report does not support a conclusion, as contended by State Farm, that Ms. Federico returned to her pre-accident medical status, her normal activities, her personal care tasks, or her employment, when she is having a bad day or a bad week. I find that the past/pertinent medical history, the relevant medical documentation, and the observations and findings contained in Ms. Morse’s report do not support her conclusion that “the OCF-18 in question is not considered reasonable or necessary as the goals for the treatment plan are for pain reduction and return to activities of normal living.” I disagree with Ms. Morse’s conclusion and give it little weight.

At page 22, Arbitrator Huberman found that both disputed treatment plans were reasonable.

I find that the goals stated in the OCF-18s, dated October 25, 2010 and October 25, 2011, namely, pain reduction and return to activities of normal living, are reasonable; that these goals would be met to a reasonable degree with the provision of the goods and services, as claimed; and that the overall cost of achieving these goals is reasonable taking into consideration both the degree of success and the availability of other treatment alternatives.

The Arbitrator accepted Dr. McKinnon’s opinion at page 22.

I accept Dr. McKinnon’s opinion, and find that Ms. Federico will benefit from the support and involvement of an occupational therapist to work with her in developing and implementing strategies to more effectively organize and manage her time and addressing some of her persisting issues with organization and inattentiveness, and that coordinating with an occupational therapist would also benefit Ms. Federico in terms of devising strategies for better managing her pain symptoms with respect to environmental (e.g., ergonomic chair and work station), physical (e.g., purchase of a new bed), and personal (e.g., relaxation techniques, investigating suitable recreational activities, such as yoga) accommodations.

At page 23, the Arbitrator rejected State Farm’s argument that the recommended treatment would be duplicative and accepted the report of occupational therapist Sandy Sarkissian in this regard.

I am unable to accept the argument of State Farm that this medical treatment would likely have been duplicative since Ms. Federico already received assistive devices and in-home education. I agree with Ms. Sandy Sarkissian, occupational therapist, and find, that while the education provided by Ms. Morse and Paramount Rehabilitation Centre Inc. was intended to be beneficial to Ms. Federico, such benefit, if any, would reasonably be short-lived, as simply reviewing education/strategies via one session often does not reasonably stand to encourage/best enable clients’ need to consistently and effectively implement these strategies within their daily activities. A discussion of such strategies coupled with demonstration and repeated practice to implement the same over multiple sessions, along with the provision of assistive aids tailored to the client’s specific difficulties, would better serve the client’s interest.

I further accept Ms. Sarkissian’s opinion and find that the subject treatment plan submitted by Lisa Duffus regarding occupational therapy for M. Federico is reasonably required.

Arbitrator Huberman found State Farm to have made speculative arguments that had little to do with the matter to be decided.

I agree with counsel for Ms. Federico that, although there is no indication that individuals such as Dr. Ouchterlony were informed of this treatment, and if they had been informed, their views on the proposed treatment could have been altered, this is speculative and has little to do with the fact that some three years later, Ms. Federico attended with this physician who supported occupational therapy treatments for Ms. Federico (page 23).

At pages 23 and 24 of his reasons, the Arbitrator explained how State Farm’s characterization of what Ms. Federico had reported was contrary to the actual reports. While State Farm submitted that Ms. Federico had admitted returning to her employment status (at para. 26 of its 2014 submissions), the Arbitrator found that she did not actually admit this.

Contrary to the submission of State Farm, Ms. Federico did not admit that she had returned to her employment status. I find that although Ms. Federico returned to employment at the TDSB and the plumbing business, she was unable to properly perform her employment responsibilities without pain and feeling overwhelmed. I accept Ms. Federico’s evidence, and find, that her inability to perform tasks in a regularized and consistent manner resulted in the massive back log in respect of which she testified. That Ms. Federico made no mention of feeling overwhelmed to Mr. Balaban, whom she saw on November 27, 2008, over two years before the assessment with Ms. Morse, is of no consequence.

I accept the evidence of Dr. McKinnon, and find, that Ms. Federico was “presently struggling with chronic pain and emotional adjustment issues as well as persisting neurocognitive sequelae as a direct result of injury sustained in the subject accident”. State Farm did not challenge this evidence by cross-examination. As this evidence is not inherently improbable, and is un-contradicted, the failure to cross-examine invites its acceptance [Arbitrator Huberman here cited Nguyen and State Farm Mutual Automobile Insurance Company, (FSCO A05-000305, December 22, 2005), at p. 14].

On page 24, the Arbitrator declined to find that travel amounts in the plan were unreasonable.

I am unable to find on the evidence before me that the amount requested for mileage/travel ($7,536.24) is not reasonable, as contended by State Farm. There is no evidence that State Farm questioned these mileage charges. Ms. Morse did not challenge the mileage/travel charges nor did State Farm cross-examine Ms. Duffus or Ms. Sarkissian in regards to this amount requested. Furthermore, the amount of $2,767.63 was paid by State Farm in respect of this OCF-18, dated October 25, 2010, leaving the sum of $15,035.07 in dispute.

At page 24, Arbitrator Huberman again found that State Farm had incorrectly described the evidence. State Farm argued (at para. 34 of its 2014 submissions) that Ms. Federico’s job no longer existed, when this was not the case. In addition, State Farm submitted that the treatment plan was trying to get Ms. Federico back to her pre-accident job, when that was not its goal.

I do not accept the submission of State Farm that this OCF-18, dated October 25, 2010, is not reasonable and necessary given that it was trying to get the Applicant back to a job that did not exist anymore. A goal of this OCF-18 was to return to activities of normal living, not to a pre-accident job. Moreover, the evidence does not support the contention that Ms. Federico’s job did not exist anymore. To the contrary, the evidence supports a finding that Ms. Federico had ongoing work activities at Federico Plumbing.

The Arbitrator found, at 24, that “[a] Psychological Paper File Review Report of Dr. G. Challis, Psychologist, forms the basis of State Farm’s position that the OCF-18, dated October 25, 2011, is not reasonable or necessary.”

Arbitrator Huberman gave little weight to the Challis report, for the following reasons. The Challis report was inconsistent with the preponderance of probabilities and unreasonable in the circumstances. Dr. Challis was a psychologist commenting on occupational therapy. He based his conclusions on his incorrect restatement of the evidence. Dr. Challis’ opinion was not persuasive when contrasted with the “voluminous” evidence in the proceeding.

I do not accept Dr. Challis’ opinion that the OCF-18, dated October 25, 2011, is not reasonable or necessary. I give his evidence little weight. His evidence is inconsistent with the preponderance of probabilities and is unreasonable in the circumstances of this case. Dr. Challis is a psychologist, not an occupational therapist. His expert opinion was not founded on a factual foundation which was proved to my satisfaction according to the appropriate standard of proof, as indicated above. He misquoted Ms. Morse and reached his conclusions based on his incorrectly edited version of her report. His evidence is not persuasive when compared and contrasted with the testimony of Ms. Federico and the voluminous medical evidence presented in this proceeding (page 25).

Positions of the Parties

The case for Ms. Federico is that she is entitled to a special award because State Farm unreasonably denied her the benefits that were in dispute at arbitration.

The case for State Farm is that, although it did not pay Ms. Federico the benefits in dispute, it paid many other benefits. State Farm also relies on the fact that two other arbitrators carefully reviewed the same evidence that is before me now and they both denied Ms. Federico’s claim for a special award. In addition, State Farm argues that there was a “vast amount of contradictory medical documentation” in this case and that, therefore, “it’s not at all clear that the insurer was unreasonable” in denying the disputed treatment (at page 4 of its 2018 submissions).

Law

It is trite law that the burden of proof rests with the claimant. Accordingly, Ms. Federico must prove on a balance of probabilities that she is entitled to a special award.

An arbitrator “shall” order a special award upon finding that the insurer has unreasonably withheld or delayed payments. There is no discretion. Subsection 282(10) of the Insurance Act reads as follows:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule. R.S.O. 1990, c. I.8, s. 282 (10); 1993, c. 10, s. 1.

Under this provision, I am obligated to award Ms. Federico a special lump sum payment if I find that State Farm “unreasonably withheld or delayed payments” of the two treatment plans in dispute.

Whether an insurer has “unreasonably withheld or delayed payments” is fact-driven and “highly dependent on the arbitrator’s view of the evidence”: Maas and State Farm Insurance (Appeal, P96-00080, December 8, 1997, per Director’s Delegate Draper at page 7).

The first case on a special award, Erickson and Guarantee (OIC A-000560, June 2, 1992, per Senior Arbitrator Rotter) adopted the definition of “unreasonable” from the Oxford English Dictionary, at pages 8-9:

1. Going beyond the limits of what is reasonable or equitable;

2. Not guided by or listening to reason.

In the context of accident benefits, reasonableness demands that an insurer “make every effort” to re-consider the insured person’s claim before proceeding with litigation:

A reasonable insurer would satisfy itself that its position was still correct, and make every effort to evaluate the merits of the insured’s position before proceeding to a hearing (Erickson at page 11).

The type of conduct that is deemed unreasonable includes conduct that is “excessive, imprudent, stubborn, inflexible, unyielding or immoderate”: Plowright and Wellington (OIC A‑003985: October 29, 1993, per Arbitrator Palmer at page 17).

The failure of an insurer to re-evaluate its position in light of new evidence will give rise to a special award: Fimiani and Liberty Mutual Automobile Insurance Company (FSCO A97‑001518, January 11, 2000, per Arbitrator Muir). In particular, it has been found unreasonable for an insurer to uncritically accept the reports of its own medical examiners without questioning them or without regard to evidence supporting the claim (see, for example, Fimiani, supra, and J.W. and Canadian General Insurance Group, (FSCO A96-001646, January 28, 1999), per Arbitrator Makepeace).

In Melchiorre and Wawanesa (A05-000491 and A05-000492, December 22, 2006, at page 25), Arbitrator Feldman provided examples of the insurer’s duty to act in a reasonable and fair manner when responding to a claim for accident benefits:

• Approach the claim with an open mind, treating the insured person in a fair manner and not as a potential adversary;

• Carefully consider all of the available information, giving appropriate weight to that information in a fair and even-handed manner;

• reassess the validity of the claim as new information is received.

The proper approach to special awards under s. 282(10) of the Insurance Act is set out in the appeal decision of Liberty Mutual Insurance Company and Persofsky (FSCO P00-00041, January 31, 2003, at pages 17-18), per Director Draper, as follows:

1. Determine the benefits owing to the insured person, including interest calculated under the applicable version of the SABS;

2. Decide whether the insurer unreasonably withheld or delayed the payment of these benefits. If so, the insurer will be ordered to pay a lump sum amount in addition to the benefits and interest calculated in #1;

3. If the insurer did not act unreasonably in respect of all the benefits owing under #1, determine the amount of the benefits that were unreasonably withheld or delayed, and the interest payable on these benefits under the applicable version of the SABS.

4. Determine the maximum special award that can be awarded under s. 282(10), or at least a reasonable approximation. This is done by taking the amount in #1 or #3, whichever is applicable, and adding the additional interest component in s. 282(10) -- two per cent per month, compounded monthly. To be clear, this calculation includes interest on the unpaid SABS interest. The maximum special award is 50 per cent of this total.

Expressed as a formula, the calculation is as follows:

Maximum special award = 50% x (benefits that were unreasonably withheld or delayed + interest on these benefits calculated under the SABS + compound interest calculated according to s. 282(10))

5. Consider all relevant factors (discussed below) to determine an appropriate lump sum special award, not a percentage, that responds to the facts of the case and bears a reasonable relationship to other special awards, and does not exceed the maximum.

6. Provide reasons for concluding that the special award is payable, and for the amount of the award.

7. In the order, express the special award as a specific, lump sum amount. No interest is payable on this amount, except as part of the enforcement process.

Analysis

State Farm paid Ms. Federico other benefits

State Farm argues that a special award is not payable because it paid Ms. Federico benefits other than those in dispute.

However, the law on special award is clear. Special awards only apply to benefits in dispute. Step one of the Persofsky analysis is to “determine the benefits owing to the insured person” (page 17).

Consequently, I find State Farm’s point irrelevant. The matter of this hearing concerns the benefits that were owing. Whether State Farm paid any other benefits is of no consequence.

Arbitrators Huberman and Tanaka both denied a special award

State Farm also argues that a special award is not payable because two other arbitrators already reviewed the evidence in this case and denied Ms. Federico a special award.

I find this argument either ignorant of the legal effect of an appeal or disingenuous. The decisions of Arbitrators Huberman and Tanaka on the special award in this case were overturned on appeal. Their decisions have no bearing on the matter before me.

Did the evidence clearly support the disputed treatment plans?

The bulk of State Farm’s argument is that there was a vast amount of contradictory evidence in this case and that, consequently, the evidence did not clearly support the reasonableness or necessity of the two treatment plans in question.

This argument ignores the final and binding determinations of Arbitrator Huberman. The arbitrator found that the evidence overwhelmingly supported the reasonableness and necessity of the two plans.

In particular, despite those findings of fact, State Farm appears to argue at page 3 of its 2018 submissions that Dr. Yee, Ms. Reich, Dr. Prendergast and Ms. Morse “clearly did not” believe that the disputed treatment plans were reasonable and necessary. Yet, the disputed treatment plans were submitted in 2010 and 2011 and Dr. Yee, Ms. Reich and Dr. Prendergast all gave their evidence in 2008, two or three years before. To be clear, it was impossible for those three assessors to have any opinion on the disputed treatment plans. As for Marlene Morse’s Occupational Therapy In-Home Assessment Report dated February 25, 2011, Arbitrator Huberman rejected State Farm’s argument that this report showed that Ms. Federico had “clearly returned to pre-accident medical status and that the proposed OCF-18 is not reasonable and necessary” (at page 20 of his reasons). At pages 20 to 22 of his reasons, the Arbitrator went through the Morse report in detail to show that it did not support either its own conclusions or those of State Farm.

Despite the findings of Arbitrator Huberman, State Farm also submits that it did not unreasonably deny the disputed plans because it reviewed the reports of Dr. Knolly Hill, Mr. Balaban, Dr. Challis and Ms. Reich. However, at page 19 of his reasons, Arbitrator Huberman accepted and gave considerable weight to the evidence of Dr. Knolly Hill and Mr. Balaban and found that their evidence supported the reasonableness and necessity of the treatment in dispute. In addition, at page 20, Arbitrator Huberman found that the Balaban report “does not clearly suggest that Ms. Federico has returned to her pre-accident status.” In addition, Arbitrator Huberman gave little weight to Dr. G. Challis’ Psychological Paper File Review Report of December 6, 2011 and found it inconsistent with the preponderance of probabilities and unreasonable in the circumstances. The Arbitrator found it unreasonable that Dr. Challis was a psychologist commenting on occupational therapy. Arbitrator Huberman found that Dr. Challis based his conclusions on his incorrect restatement of the evidence. The arbitrator also found that Dr. Challis’ opinion was not persuasive when contrasted with the “voluminous” evidence in the proceeding.

Further, in the face of the findings of Arbitrator Huberman to the contrary, State Farm argues (at page 10 of its 2018 submissions) that the evidence of Ms. Zaraska, Dr. Julie Hill and Dr. Ouchterlony did not support the reasonableness and necessity of the requested treatment. Yet, the arbitrator accepted and gave considerable weight to the evidence of Ms. Zaraska, Dr. Julie Hill and Dr. Ouchterlony and found it to support the reasonableness and necessity of the treatment plans (page 19 Huberman reasons). State Farm repeats the arguments that Arbitrator Huberman had rejected regarding whether these individuals knew that Ms. Federico had received prior training and treatment: the arbitrator found these arguments were speculative and had little to do with whether the treatment was reasonable and necessary.

Findings on special award

I find that State Farm’s decision to withhold benefits in this case was unreasonable for the three following reasons, any of which I consider sufficient to justify a special award.

1. The medical evidence “overwhelmingly” supported the treatment plans

First, at the time State Farm denied both treatment plans in dispute, it had strong medical evidence to support them. Arbitrator Huberman described the evidence in support of the plans as “overwhelming” at that particular time. I agree and adopt that finding as my own.

I find that State Farm acted unreasonably in this case because it did not give due regard to what Arbitrator Huberman described as the “voluminous” evidence in support of the two treatment plans in dispute. When adjusting a claim, an insurer does not have to agree with the majority of medical opinions. However, it must duly consider those medical opinions. The evidence does not show that State Farm took steps to reconsider the requests for treatment after receiving overwhelming evidence that the requested treatment plans were reasonable and necessary.

2. State Farm relied on two unreliable reports

Second, State Farm relied on two reports that a reasonable, unbiased adjuster would have considered unreliable. It relied on the Morse report to deny the October 2010 treatment plan and relied on the Challis report to deny the October 2011 treatment plan. However, the Morse report did not support its own conclusions and the Challis report misquoted the Morse report on a material matter. Arbitrator Huberman provided detailed explanations of the problems with both reports. I agree with those explanations and adopt them as my own.

State Farm acted unreasonably in this case because it based its denials on the error-ridden medical opinions of Morse and Challis. A close reading of the Morse and Challis reports would have enabled a reasonable adjuster to conclude that they had errors. A reasonable adjuster critically reviews the insurer’s own medical reports and does not simply adopt their conclusions. A reasonable adjuster also looks at a report’s reasons and assesses whether they support its conclusions.

3. State Farm did not reconsider its decision in light of new information

Third, it was unreasonable for State Farm to continue to deny the claim without assessing new information as it was received. The evidence compels the conclusion that, once State Farm received the Morse and Challis opinions denying the two claims, it chose to remain indifferent to whatever further evidence it received. State Farm seems to have proceeded selectively, taking the favourable elements from the Morse and Challis reports and ignoring what Arbitrator Huberman described as the “voluminous” evidence not supportive of its position.

In particular, State Farm did not reconsider the validity of the claim after receiving the report of Ms. Sandy Sarkissian on November 22, 2013. Although Ms. Sarkissian pointed out errors and omissions in the Morse report, State Farm apparently had no second thoughts. Ms. Sarkissian’s report did not provoke State Farm to any further medical or occupational evaluation of Ms. Federico’s capabilities.

State Farm maintained its position even after Ms. Federico filed this application for arbitration and the insurer heard her arguments at mediation and in the arbitration proceedings. Unlike, for example, the claims adjuster in the Erickson case (Erickson at page 5), the adjuster who testified in this case did not indicate that, based on the evidence at the hearing, the insurer was no longer disputing the treatment plans. I agree with Senior Arbitrator Rotter in Erickson that “[a] reasonable insurer would satisfy itself that its position was still correct, and make every effort to evaluate the merits of the insured’s position before proceeding to a hearing” (at 11). State Farm did not meet that standard of reasonableness in this case. Indeed, State Farm did not change its mind until it was compelled to do so by the decision of Arbitrator Huberman.

I conclude that withholding the two treatment plans was unreasonable, not because State Farm should have allowed the benefits, but because it did not properly adjust the claim. This case is by no means an example of how to properly adjust accident benefits. Rather, I find State Farm’s conduct in adjusting the two disputed benefits stubborn, immoderate, imprudent and inflexible. By this conduct, State Farm put itself in the position of being unable to make a reasoned decision about the two requests for benefits.

CONCLUSION:

The evidence leads me to conclude that State Farm unreasonably withheld payments to Ms. Federico of the two treatment plans in dispute, contrary to s.282(10) of the Insurance Act, and that, as a result, the insurer must pay a special award on both benefits claimed.

As neither party made submissions on the expenses of this hearing on entitlement to a special award, I make no decision in that regard.

The parties may make written submissions on the quantum of the special award as follows:

1. Each submission is limited to 20 pages, double-spaced, 12 point font, not including calculations.

2. The submissions shall include the information required by Persofsky (1. confirming the amount paid under the Huberman order for both treatment plans and section 46 interest; 4. providing the maximum special award for each treatment plan using the same dates the parties used to calculate section 46 interest on the treatment plans payable under the Huberman order; and, 5. addressing relevant factors, including the six headings at pages 32‑33 of Persofsky: amount; delay; obligations, including pay-pending-dispute provisions; other factors; mitigating factors; and, other penalties).

3. Argument shall reference amounts awarded in other cases. An average of the amounts of all special awards would be a helpful baseline for the analysis.

4. Ms. Federico may make her submissions within 14 days of this decision.

5. State Farm may reply within 8 days of receiving Ms. Federico’s submissions.

6. Ms. Federico has a right of reply for 8 days after receiving State Farm’s argument.

Given that the tribunal is closing in June 2020, the parties may make submissions on the expenses of the hearings before me on entitlement and quantum of the special award at the same time as they make their substantive submissions on quantum of the special award. If the parties choose to make submissions on expenses, they shall address the criteria in the Expense Regulation (except regarding degree of success in the outcome of the hearing). To be clear, the same time limits apply for submissions on expenses as for submissions on quantum of the special award, but expense submissions are not included in the 20-page limit for quantum submissions.

May 1, 2020

Isabel Stramwasser Arbitrator

Date

Dispute Resolution Services de Règlement

Services des Différends

Neutral Citation: 2020 ONFSCDRS 8

FSCO A12-005384

BETWEEN:

LYNDA FEDERICO

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

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 Regulation 664, as amended, it is ordered that:

1. State Farm is liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Ms. Federico. The decision on the amount of the special award is deferred for 30 days to allow the parties an opportunity to make submissions.

2. If the parties are unable to agree on the legal expenses of this hearing, they may request a determination of them within 30 days of this decision by referring to the criteria in the Expense Regulation.

May 1, 2020

Isabel Stramwasser Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.