D.C. v. State Farm Mutual Automobile Insurance Company, 2017 CanLII 148900

Tribunal File Number: 16-003762/AABS

In the matter of an Application pursuant to subsection 280(2) of the Insurance Act, RSO 1990, c I.8, in relation to statutory accident benefits

Between:

D.C.

Applicant

and

State Farm Mutual Automobile Insurance Company

Respondent

PRELIMINARY HEARING DECISION

Adjudicator: Ian Maedel

Appearances: Hamoody Hassan, Counsel for the Applicant Roger Sawh, Counsel for the Respondent

Heard in writing on: March 15, 2017

OVERVIEW:

1The applicant was injured in a motor vehicle accident on March 7, 2012. She applied for benefits under the Statutory Accident Benefits Schedule – Effective after September 1, 2010 (the “Schedule”), including an income replacement benefit (“IRB”), medical and rehabilitation benefits.

2The respondent, State Farm Mutual Automobile Insurance Company (“State Farm”), initially took the position that the applicant’s injuries were minor as defined in the Schedule and denied any benefits outside of the Minor Injury Guideline (“MIG”). On July 22, 2014, State Farm removed the applicant from the MIG, and on July 23, 2014, the applicant withdrew her Application for Arbitration before the Financial Services Commission of Ontario (“FSCO”).

3The applicant filed an Application by an Injured Person for Auto Insurance Dispute Resolution under the Insurance Act to the Licence Appeal Tribunal (“LAT”) on November 9, 2016. Among the issues were the denied IRB, medical and rehabilitation benefits.

4This is a written hearing to determine a preliminary issue relating to the two year limitation period for an applicant to dispute an Insurer’s refusal or denial of a benefit. The applicant’s IRB and treatment plans for chiropractic, physiotherapy, massage and an occupational therapy assessment were denied in 2012 and 2013. The applicant applied to the LAT in 2016, which is past the two year limitation period for any of the denials.

5If the applicant is successful in this preliminary issue hearing, the matter will proceed to a hearing at a later date. If State Farm is successful in this preliminary issue hearing, the applicant will be statute-barred from proceeding before the LAT with her application for IRB, medical and rehabilitation benefits.

PRELIMINARY ISSUE:

6Is the applicant statute-barred from proceeding with her claim as she failed to apply to the LAT within two years of State Farm’s refusal to pay the amounts claimed, pursuant to section 56 of the Schedule?

RESULT:

7The applicant is statute-barred from proceeding with her claim before the LAT because her application was brought outside of the two year limitation period set out in section 56 of the Schedule.

8The parties are not entitled to costs.

FACTS:

9A proper understanding of the timeline in this matter is essential to address the limitation issue. The applicant was involved in a motor vehicle accident on March 7, 2012.The motor vehicle she was operating was struck by a vehicle at an intersection. As a result, she suffered neck, shoulder, groin and back pain and headaches following the accident.¹

10The applicant filed an Application for Benefits (OCF-1) dated March 26, 2012. The applicant applied under her spouse’s insurance policy. The OCF-1 indicated that the applicant was a student or recent graduate at the time of the accident.²

Income Replacement Benefits

11The applicant applied for income replacement benefits (IRB) despite the Disability Certificate (OCF-3) dated March 16, 2012 that also stated she was not working.³

12The applicant submitted an Election of Income Replacement, Non-Earner or Caregiver Benefits (OCF-10) dated February 11, 2013, electing to receive IRBs.⁴

13The applicant submitted a Disability Certificate (OCF-3) on February 13, 2013 that stated she was employed on a part-time basis at the time of the accident.⁵

14In an Explanation of Benefits (OCF-9) dated February 19, 2013, the applicant was advised by the insurer that she was not eligible to receive IRBs, as her Application for Accident Benefits (OCF-1) stated she was not working at the time of the accident.⁶

15The applicant was provided an Explanation of Benefits (OCF-9) dated October 18, 2013, following section 44 assessments conducted by the insurer. The insurer indicated that the applicant was not eligible to receive the IRBs, as she did not have a substantial inability to perform essential tasks of her employment.⁷

16State Farm provided two Explanations of Benefits (OCF-9’s) dated August 18, 2014 and August 27, 2014 which maintained the stoppage of the IRB, confirming the denial dated October 18, 2013.⁸ The two-year limitation for this benefit expired October 18, 2015.

17The applicant submitted a treatment plan (OCF-18) in the amount of $1,296.94, dated June 4, 2012 for physiotherapy recommended by C. Jesse, Physiotherapist. In correspondence dated June 12, 2012, the insurer partially approved the treatment plan in the amount of $855.00, based on amounts available within the MIG. This left an outstanding balance of $441.94.⁹ The two-year limitation period for this benefit expired June 12, 2014.

18The applicant submitted a treatment plan (OCF-18) in the amount of $1,496.94 dated July 12, 2012 for physiotherapy and massage therapy treatments recommended by C. Jesse, Physiotherapist. In correspondence dated July 24, 2012, the insurer denied payment of this treatment plan, due to the amount of funds available in the MIG as per section 18(1) of the Schedule.¹⁰ The two-year limitation period for this benefit expired July 24, 2012.

19The applicant submitted a treatment plan (OCF-18) in the amount of $1534.62 dated October 1, 2012 for physiotherapy and massage therapy treatments. On October 26, 2012, State Farm denied the treatment plan due to the funds available in the MIG as per section 18(1) of the Schedule.¹¹ The two-year limitation period for this benefit expired October 26, 2014.

20The applicant submitted a treatment plan (OCF-18) in the amount of $1,140.68 dated March 25, 2013, for an in-home assessment recommended by I. El-Assaad, Nurse Practitioner. In correspondence dated April 9, 2013, the insurer indicated that it was not prepared to fund the treatment plan, as attendant care benefits were only available for impairments outside of the MIG, as per section 14(2) of the Schedule.¹² The two-year limitation period for this benefit expired April 9, 2015.

21The applicant submitted a treatment plan in (OCF-18) in the amount of $1,656.40, dated April 3, 2013, for physiotherapy and massage therapy treatments recommended by C. Jesse, Physiotherapist. In correspondence dated April 19, 2013, the insurer partially approved the treatment plan (OCF-18) in the amount of $318.44 based on the amount remaining in the MIG as per section 18(1) of the Schedule.¹³ This left an outstanding balance of $1,337.96. The two-year limitation period for this benefit expired April 19, 2015.

22The applicant submitted a treatment plan (OCF-18) in the amount of $2,833.94, dated March 16, 2012, for physiotherapy and massage and chiropractic treatments recommended by C. Jesse, Physiotherapist. In correspondence dated May 23, 2012, the insurer denied the benefit stating it was not reasonable and necessary based on a section 44 insurer’s examination report.¹⁴ The two-year limitation period for this benefit expired May 23, 2014.

23The applicant submitted a treatment plan (OCF-13) in the amount of $1,457.28, dated April 19, 2013, for an occupational therapy and attendant care assessment recommended by K. Murphy, Occupational Therapist. In correspondence dated May 1, 2013, the insurer denied the benefit stating that it was not prepared to fund this benefit, as the applicant’s injuries fell within the MIG as per section 14(2) of the Schedule.¹⁵ The two-year limitation period for this benefit expired May 1, 2015.

24The applicant applied for mediation before FSCO on July 9, 2013. The matter was not resolved and a Report of Mediator was issued, dated September 16, 2013.

25The applicant applied for arbitration before FSCO on July 10, 2014. Prior to the arbitration, State Farm provided the applicant with an Explanation of Benefits (OCF-9) dated July 22, 2014. State Farm determined that the injury suffered was not predominantly minor in nature and the limit for medical and rehabilitation benefits was now $50,000.00.¹⁶

26On July 23, 2014, the applicant withdrew her Application for Arbitration before FSCO.¹⁷ An Application by an Injured Person for Auto Insurance Dispute Resolution under the Insurance Act, was filed with the LAT November 9, 2016.

27State Farm raised the preliminary issue and submits that the limitation period is a bar to the LAT application. The limitation period was triggered by clear and unequivocal denials that provided notice in straightforward, clear language and provided a description of the dispute resolution process. The applicant submits that the denials were unclear and the applicant relied upon the contract of insurance in good faith.

THE LAW:

28The limitation period to dispute an insurer’s refusal to pay a benefit is set out in the 2012 versions of the Insurance Act and the Schedule as applicable at the time of the accident.

29Section 281.1(1) of the Insurance Act states that a proceeding shall be commenced within two years after the insurer’s refusal to pay the benefit claimed. Under section 281.1(2)(b), if there is a mediation, the limitation period is extended for a period of ninety days following the report of the mediator.¹⁸

30Similarly, section 56 of the Schedule states that a court proceeding or arbitration under section 281(1)(a) or (b) of the Insurance Act regarding a benefit shall be commenced within two years after the insurer’s refusal to pay the amount claimed. Section 56 also allows a ninety day extension of the limitation period following the report of a mediator.¹⁹

31The two year limitation period begins when the insurer notifies the applicant of its stoppage or refusal to pay a benefit. The refusal must be in writing, clear, and unequivocal. The notice of a refusal to pay benefits must also contain, in straightforward and clear language a description of the dispute resolution process, such as the right to seek mediation, arbitration or litigate, and the relevant time limits governing the entire process. The Supreme Court of Canada provided guidance on the minimum scope of a written refusal in Smith v. Cooperators General Insurance Company.²⁰

APPLICATION OF THE LAW:

Clear and Unequivocal:

32The applicant submits that State Farm’s denials were unclear, arguing that the denials were “not clear and unfounded”.²¹ Yet, the applicant provides little argument to support such a statement, delving instead into substantive arguments to be heard at a hearing on the issues in dispute. The applicant did not address the wording of the denials but instead claimed that the necessity of the treatment plans was evident and the insurer failed to properly review the medical reports provided.²²

33After a thorough review of the documents, including the correspondence denying the treatment plans at issue, I conclude that the denials were clear and unequivocal as per the test in Smith and Co-operators.²³

34Each Explanation of Benefits (OCF-9) or denial letter conveyed in clear language that the benefit had been denied, provided notice of the two year limitation period and included information regarding the applicant’s right to dispute the insurer’s determination and how to do so.

35For example, the language used by State Farm in its October 18, 2013 OCF-9 satisfies the Smith criteria as it clearly indicates that the applicant’s benefit has been terminated, provides the applicable two year limitation period, and outlines the applicant’s right to arbitrate or commence an action in court:

If you wish to dispute State Farm’s decision regarding your further entitlement to these benefits you must initiate a mediation proceeding within 2 years of this notice or else your claim will be time barred. Please refer to part six of this form….

36Part 6 of the Explanation of Benefits (OCF-9) includes Part 6 Applicant’s Rights to Dispute, which takes an injured party through the steps of dispute resolution. Included at the end of said document is a warning:

*WARNING: TWO YEAR TIME LIMIT

You have TWO YEARS from the date off your insurer’s refusal to pay, or reduction of a benefit, to arbitrate or commence a lawsuit in court. You have longer than two years if the arbitration or lawsuit is commenced 90 days from the date the mediator provides his or her mediation report, or within 30 days from the date the neutral evaluator provides his or her report.²⁴

37This wording is clear and unequivocal. It is boilerplate text incorporated into the language of the forms themselves. It is designed to provide assistance to even the most lay person regarding the steps in the dispute resolution process and explicitly highlights the two-year limitation period.

The Limitation Period:

38The limitation period has expired with regard to the claim for IRB and the treatment plans in dispute as per section 56 of the Schedule. The treatment plans in dispute were denied by State Farm in 2012 and 2013. The denial date of some of these treatment plans is now more than five years distant.

39The treatment plans in dispute and limitation periods are:

i. Income replacement benefits at the rate of $29.31 per week and ongoing from April 12, 2012. Denied October 18, 2013. Limitation period expired October 18, 2015.

ii. Medical benefit: OCF-18 dated June 4, 2012 for $441.94. Denied June 12, 2012. Limitation period expired June 12, 2014.

iii. Medical benefit: OCF-18 dated July 12, 2012 for $1,496.94. Denied July 24, 2012. Limitation period expired July 24, 2014.

iv. Medical benefit: OCF-18 dated October 1, 2012 for $1,534.62. Denied October 26, 2012. Limitation period expired October 26, 2014.

v. Medical benefit: OCF-18 dated March 25, 2013 for $1,140.68. Denied April 9, 2013. Limitation period expired April 9, 2015.

vi. Medical benefit: OCF-18 dated April 3, 2013 for $1.337.96. Denied April 19, 2013. Limitation period expired April 19, 2015.

vii. Medical benefit: OCF-18 dated March 16, 2012 for $2,833.94. Denied May 23, 2012. Limitation period expired May 23, 2014.

viii. Rehabilitation benefit: OCF-18 dated April 19, 2013 for $1,457.28. Denied May 1, 2013. Limitation period expired May 1, 2015.

40From the dates of denial, the first treatment plan in dispute reached the two year limitation period on May 23, 2014 (treatment plan vii as listed above), the final treatment plan for IRB reached the limitation period on October 18, 2015 (treatment plan i).

41The FSCO Report of the Mediator was dated September 16, 2013. Even with the application of the ninety day extension as mandated in the Act and Schedule as it then applied, the ultimate limitation period expired December 16, 2015. Thus, the ninety day extension of the limitation period is of little assistance to the applicant.

42Following the applicant’s removal from the MIG and the withdrawal of the Application for Arbitration on July 23, 2014, there was no implied duty of the insurer to pay the treatment plans in dispute. At that point, the applicant had the onus of bringing an application before FSCO to argue that the treatment plans were reasonable and necessary pursuant to section 15 of the Schedule.

43No evidence has been submitted to illustrate the applicant did anything to preserve her rights with regard to the denied benefits in the intervening fourteen month period between the withdrawal of the FSCO Application for Arbitration on July 23, 2014 and the expiry of the limitation period for the final treatment plan on October 18, 2015.

44This is not an issue of the applicant being outside of the limitation period by a few days or even weeks. Rather, more than a year passed between the expiration of the final limitation period ending on October 18, 2015 and the filing of the LAT Application on November 9, 2016. No evidence has been proffered to suggest the applicant did anything in this twelve month period to preserve her rights against the limitation period.

45In total, more than fifteen months elapsed between the withdrawal of the FSCO Application for Arbitration on July 23, 2014 and the filing of the Application with the LAT on November 9, 2016. The first treatment plan in dispute was denied by the insurer on May 23, 2012.

46To preserve their rights, parties are required to bring an application within a maximum of two years from the date of a valid denial. Strict adherence to this timeline affords procedural fairness to all parties involved.

47To allow the applicant to adjudicate an application more than a year after the expiration of the limitation period would be contrary to one of the primary principles of the legislation – timely submission and resolution of claims for accident benefits.²⁵ In this matter, it would also present a patent unfairness to State Farm, as it denied some of these treatment plans more than five years ago.

Section 7 of the Licence Appeal Tribunal Act

48Although the parties did not raise it in their submissions, Section 7 of the Licence Appeal Tribunal Act, 1999,²⁶ states:

Despite any limitation of time fixed by or under any Act for the giving of any notice requiring a hearing by the Tribunal or an appeal from a decision or order of the Tribunal under section 11 or any other Act, if the Tribunal is satisfied that there are reasonable grounds for applying for the extension and for granting relief, it may,

a) extend the time for giving the notice either before or after the expiration of the limitation of time so limited; and

b) give the directions that it considers proper as a result of extending the time.

49Factors regarding section 7 of the Act were examined in Manuel v. Registrar, Motor Vehicle Dealers Act, 2002.²⁷ These four factors assist the Tribunal in determining whether justice is served in this case. They include:

a. The existence of a bona fide intention to appeal within the appeal period;

b. The length of the delay;

c. Prejudice to the other party; and

d. The merits of the appeal.

50The duty is on the Appellant to provide evidence that can support one or more of these factors. A weaker fact situation under one factor may be balanced by stronger fact situations under one or more of the remaining factors.

51In reviewing the submissions and applicable case law with regard to this matter, I am not satisfied that there are reasonable grounds upon which to exercise my discretion under section 7 of the Act. The applicant has done little, if anything, to preserve her rights prior to or since the expiration of the two year limitation period. To allow an appeal at this inordinately late date would present clear prejudice to the insurer and run contrary to the expeditious nature which claims under the Schedule are intended to be brought and resolved.

COSTS:

52The Licence Appeal Tribunal Rules of Practice and Procedure (the “Rules”) includes a provision in Rule 19.1 for parties to request costs of the proceeding if they believe the other party has acted unreasonably, frivolously, vexatiously, or in bad faith. Rule 19.4 sets out the requirements for that request, which must include the reasons for the request and the particulars of the alleged conduct.

53For a party to request costs, the alleged behaviour in question must take place as part of the proceeding. Rule 2.17 defines “proceeding’ as “the entire Tribunal process from the start of an appeal to the time a matter is finally resolved.”

54State Farm claims that this application is unreasonable and frivolous because it was filed outside of the “long expired” limitation period.²⁸ Indeed, the limitation period expired well in advance of the filing of this application in November 2016 and thus, outside of this “proceeding”.

55The applicant claims that the insurer’s denials were “improper, unfunded and unjust”.²⁹ The applicant relies on the contractual relationship between the parties to allege that the applicant’s health concerns and injuries were ignored by the State Farm.

56The applicant’s submissions go to the heart of the matter: had the applicant filed an application within the limitation period, she could have addressed her substantive concerns as part of a formalized hearing process. She did not.

57Instead, the applicant filed this application more than twelve months after the expiration of the final two year limitation period. Inaction on the part of the applicant has statute-barred her participation in the hearing process and ultimately prevented recovery of these benefits.

58The test for costs is a high bar. Both parties have failed to meet the threshold and requirements for costs set out in Rule 19. There is insufficient evidence of conduct that is unreasonable, frivolous, vexatious, or in bad faith before me, so I cannot make an order for costs in this matter. Therefore, no costs will be awarded.

CONCLUSION:

59For the reasons outlined above, I find that:

i. The applicant is statute-barred from proceeding with her claim before the LAT because her application was brought outside of the two year limitation period set out in section 56 of the Schedule.

ii. The parties are not entitled to costs.

Released: August 30, 2017

________________________

Ian Maedel

Adjudicator

APPENDIX “A”

Disputed Benefit

Date of Denial

Two Years from Date of Denial

Income Replacement Benefits $29.31 per week from April 12, 2012 to date and ongoing

October 18, 2013

October 18, 2015

Medical Benefit: OCF-18 dated June 4, 2012 for $441.94

June 12, 2012

June 12, 2014

Medical Benefit: OCF-18 dated July 12, 2012 for $1,496.94

July 24, 2012

July 24, 2014

Medical Benefit: OCF-18 dated October 1, 2012 for $1,534.62

October 26, 2012

October 26, 2014

Medical Benefit: OCF-18 dated March 25, 2013 for $1,140.68

April 9, 2013

April 9, 2015

Medical Benefit: OCF-18 dated April 3, 2013 for $1,337.96

April 19, 2013

April 19, 2015

Footnotes

1. 1Submissions of the Applicant, Tab 1.
2. 2Affidavit of Roger Sawh at Exhibit “A”.
3. 3Affidavit of Roger Sawh at Exhibit “B”.
4. 4Affidavit of Roger Sawh at Exhibit “D”.
5. 5Affidavit of Roger Sawh at Exhibit “E”.
6. 6Affidavit of Roger Sawh at Exhibit “F”.
7. 7Affidavit of Roger Sawh at Exhibit “L”.
8. 8Affidavit of Roger Sawh at Exhibits “M” and “N”.
9. 9Affidavit of Roger Sawh at Exhibit “R”.
10. 10Affidavit of Roger Sawh at Exhibit “U”.
11. 11Affidavit of Roger Sawh at Exhibit “W”.
12. 12Affidavit of Roger Sawh at Exhibit “Z”.
13. 13Affidavit of Roger Sawh at Exhibit “AA”.
14. 14Affidavit of Roger Sawh at Exhibit “P”.
15. 15Affidavit of Roger Sawh at Exhibit “CC”.
16. 16Affidavit of Roger Sawh at Exhibit “FF”.
17. 17Affidavit of Roger Sawh at Exhibit “GG”.
18. 18Insurance Act, R.S.O. 1990, c. I.8. at sections 281.1(1) and 281.1(2)(b).
19. 19O. Reg. 34/10: Statutory Accident Benefits Schedule – Effective September 1, 2010, at sections 56(1) and 56(2).
20. 20Smith v. Co-operators General Insurance Co., [2002] 2 S.C.R. 129, 2002 SCC 30 at para. 14.
21. 21Submissions of the Applicant, page 10, para. 23.
22. 22Submissions of the Applicant, page 8, para. 14.
23. 23Review of the documents included the thirteen tabs of documents and correspondence appended to the Submissions of the Applicant and the Insurer’s submissions including the Affidavit of Roger Sawh with documents appended from Tab A to Tab MM.
24. 24Affidavit of Roger Sawh at Exhibit “L”.
25. 25Sietzema and Economical Mutual Insurance Company, 2014 ONCA 111 CA at para. 16.
26. 26S.O. 1999, c. 12, Sched. G.
27. 27Manuel v. Registrar, Motor Vehicle Dealers Act, 2002, 2012 ONSC 1492 at para. 14.
28. 28Reply Submissions of the Respondent, page 5, para. 15.
29. 29Submissions of the Applicant, page 11, para. 26.