S.W. v. Pafco Insurance, 2019 CanLII 18324

Licence Appeal Tribunal

Date: February 5, 2019

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:

S.W.

Appellant

and

Pafco Insurance

Respondent

DECISION

ADJUDICATOR:

Christopher A. Ferguson

For the Applicant:

Michael Hazan

For the Respondent:

Linda Matthews

HEARD: In Writing

July 18, 2018

REASONS FOR DECISION

OVERVIEW

1S.W. was involved in an automobile accident on September 7, 2011, and sought benefits pursuant to the Statutory Accident Benefits Schedule – Effective September 1, 2010¹ (the ''Schedule''). He applied for dispute resolution services to the Licence Appeal Tribunal – Automobile Accident Benefits Service (the “Tribunal”) when Pafco denied his claims.

2Pafco has raised a preliminary issue that could prevent the Tribunal from hearing this appeal. It asserts that the applicant is statute-barred from appealing its refusal to pay claimed income replacement benefits (“IRBs”), because he failed to commence his appeal, as required by s. 56 of the Schedule, within two years of the date that his claim for benefits was denied.

3On June 15, 2018, the Tribunal directed the parties to make submissions on the preliminary issue for determination. It further directed that, following a decision on this issue, a case settlement conference be scheduled to deal with the substantive issues in dispute, which include IRBs and a medical benefit.

ISSUES

4The issue to be decided by the Tribunal is:

1. Is S.W. statute-barred from proceeding with his appeal of Pafco’s refusal to pay IRBs?

RESULT

5S.W.’s appeal shall proceed. I have granted an extension to the limitation period under s. 7 of the Licence Appeal Tribunal Act (LATA).²

6Pursuant to the Tribunal’s order of June 15, 2018, a case settlement conference shall be scheduled to deal with the substantive issues in dispute.

REASONS

7Under s. 56 of the Schedule, an appeal of an insurer’s denial of a benefit must be commenced within two years after the insurer’s refusal to pay the amount claimed. The two years is called the “limitation period.”

8If an appeal is not filed within the two-year limitation period prescribed by s. 56, then the Tribunal cannot hear it: the appeal is effectively dismissed without a hearing. The appeal is said to be “statute-barred.”

9In determining the preliminary issue, I am governed by the courts, which have made multiple rulings on this same two-year limitation period. The parties in this case cite, discuss, and apply these rulings in their submissions. These rulings include the following pronouncements:

i. Once a denial is issued, the two-year limitation period begins to run, even if the underlying reason for the denial is incorrect.³

ii. To qualify for IRBs under s. 5 of the Schedule beyond a period of 104 weeks, an insured must establish eligibility for the benefits within the first 104 weeks after the accident under s. 4(1) of the Schedule.⁴

iii. The insurer has an ongoing obligation to consider new information as it becomes available and, by implication, reconsider its previous decisions. This obligation exists even after a benefit has been denied.⁵

iv. There is no provision in the Insurance Act or Schedule allowing an insured person to reapply for further benefits after his benefits have been terminated by the insurer. The only remedy for the insured person is to appeal the termination of benefits within the two-year period.⁶

v. The limitation period for an IRB is not reset or extended by an insured person’s temporary return to work by a claimant.⁷ While the Schedule expressly permits an insured person to return to work without losing his or her entitlement to IRBs, the ability to work post-accident does not create more than one limitation period.⁸ A temporary return to work provision does not prevail over a limitation period.⁹

10It is important to this case to recall that the insurer’s obligation to pay IRBs, eligibility criteria, and the method of calculating benefit amounts are set out in ss. 4-10 of the Schedule. At s. 5 and s. 6, the Schedule defines the level of impairment which must be suffered by the applicant to be eligible for IRBs. These change over time after the accident. For this case, the relevant requirements are:

i. Within 104 weeks after the accident, the insured person suffers a “substantial inability to perform the essential tasks of his or her pre-accident employment…or self-employment.”

ii. “After the first 104 weeks of disability, the insured person is suffering a complete inability to engage in any employment or self-employment for which he or she is reasonably suited by education, training or experience.”

Chronology of Events

11The evolution of this dispute and appeal is undisputed. The argument is about how to interpret the law as it applies to the facts.

12Pafco discontinued IRB payments to S.W. effective January 29, 2013, because it determined that S.W. did not meet the prescribed eligibility criteria to receive them.

13Pafco’s explanation of benefits (“OCF-9”) is dated January 16, 2013. Pafco’s reason for denial is stated clearly: referencing IE reports from three physicians,¹⁰ Pafco told S.W. that “you do not suffer a substantial inability to perform your pre-accident employment as a result of the accident,” and “you are able to return to work on a full-time basis.”

14Following Pafco’s termination of IRBs, S.W. submitted an Application for Mediation to the Financial Services Commission of Ontario (FSCO). The mediation failed. The Report of Mediator was dated May 23, 2013.

15After the failed mediation, S.W. submitted an Application for Arbitration to FSCO, which Pafco received on August 19, 2013.

16On June 25, 2014, the parties attended a FSCO Pre-Hearing. They agreed to a partial settlement of the IRB, which included payment of IRBs as calculated until September 6, 2013 and/or up to the end of the 104 week mark.¹¹

17On June 25, 2014, the FSCO Arbitrator issued a letter stating that the Pre-Hearing occurred on the same day and that the parties reported having reached a settlement of their IRB dispute. The Arbitrator noted that FSCO intended to close the file in 20 days on the basis of the reported settlement. S.W. did not seek to stop the file closure to keep the matter open.

18S.W. signed a partial release dated July 14, 2014. The partial release does not state that S.W. is entitled to commence a claim for IRBs or that the limitation period beginning on January 29, 2013 was waived.

19S.W. returned to work in June 2013 and worked for 4½ years.

20On March 20, 2017, S.W.’s counsel wrote to Pafco requesting that an IRB for S.W. be “reinstated” as he had ceased working. He submitted an updated OCF-3¹² from his family physician, Dr. Sheilah Lamb, dated March 9, 2017.

21On May 2, 2017, Pafco wrote to S.W. and stated that it was maintaining its denial, as stated in the January 16, 2013 OCF-9, which it attached.

22Pafco took no steps to determine S.W.’s IRB eligibility in response to S.W.’s 2017 claim.

23S.W. filed his appeal with the Tribunal on March 23, 2018.

24Pafco’s position is as follows:

i. S.W.’s limitation period began on January 29, 2013 when his IRBs were terminated, and thus the limitation period ended on January 13, 2015.

ii. S.W.’s limitation period was unchanged by the FSCO mediation, arbitration and settlement agreement. The settlement agreement “did not in any way extend the limitation period.”

iii. It acknowledges its ongoing obligation to consider new information as it becomes available and, by implication, reconsider its previous decisions. But it argues that this has no effect on the initial limitation period.¹³

iv. S.W.’s limitation period was unchanged by the shift in eligibility from pre- to post-104 week eligibility criteria. S.W. does not have two claims – pre- and post-104 IRBs – there is only one claim. Pafco’s denial of IRBs in January 2013 covers S.W.’s entire IRB claim, as it told him in its letter of May 2, 2017. S.W. cannot reapply for a denied benefit.

25S.W.’s position is as follows:

i. The OCF-9 of January, 16, 2017 only applied to pre-104 week IRBs, because it only referenced S.W.’s substantial inability to work (the pre-104 test) with no reference to the post-104 test. As such, it was not a clear and unequivocal denial of post-104 IRBs and is, therefore, ineffective.

ii. The parties’ settlement agreement only covered his claim for IRBs up to 104 weeks after the accident. The settlement agreement did not apply to post-104 benefits. Post-104 benefits were not addressed in the agreement, nor did S.W. waive his claim to them. S.W. takes this as evidence – indeed an acknowledgement by Pafco – that the post-104 IRBs were not denied.

iii. In S.W.’s view, the May 2, 2017 letter from Pafco was the first denial of S.W.’s claim for post-104 benefits.

iv. As a result of the foregoing, S.W.’s limitation period began on May 2, 2017 when his request to recommence IRBs was denied by Pafco. His appeal was therefore filed well within the two-year limitation.

26I note that Pafco misstated the limitation period in this case. Under s. 281.1(2) of the Insurance Act,¹⁴ (“the Act”), which applied at the time of denial, the prescribed limitation period could be extended to a date 90 days after the date of the Report of Mediator on the results of mediation. This extended S.W.’s limitation period to August 23, 2015.

27After reviewing the parties’ arguments and submitted jurisprudence, I find that S.W.’s appeal was filed beyond the limitation period. This is because:

i. I find that the restrictive principles enumerated in paragraph 8 above apply to this case. Specifically, neither S.W.’s return to work nor the alleged change in his eligibility for IRBs can overcome or reset the limitation period started by Pafco’s denial (and extended by s. 281.1(2) of the Act).

ii. While there is an undisputed obligation on Pafco’s part to consider any new information or evidence pertaining to a claim, even a denied claim, I agree with Pafco that this obligation – and any alleged failure to meet it -- does not operate to extend or reset a limitation period for a properly denied claim.

iii. The OCF-9 of January, 16, 2017 was clear and unequivocal; this is evidenced in part by the fact that it triggered an appeal to FSCO by S.W. I do not agree with S.W. that its reference to “substantial” inability to work limits the denial to pre-104 benefits. The reference is made because it was the relevant test at the time of denial and there was no reason to contemplate or test against a “post-104” standard. In my opinion it beggars belief that a denial based on the “pre-104” should be construed as “leaving the door open” for a “post-104” claim, with a much more stringent eligibility criterion, years beyond the limitation period.

iv. I am persuaded by the reasoning of other adjudicators that IRBs constitute a single benefit, regardless in the shift of eligibility criteria, that a claim for post-104 IRB is not a claim for a new benefit,¹⁵ and that an applicant cannot re-apply for a benefit that has been denied.¹⁶

EXTENDING THE LIMITATION PERIOD

S.7 LATA

28Section 7 of LATA 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 s.11 or any other Act, if the Tribunal is satisfied that there are reasonable ground 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 time so limited […]

29There are four factors for determining whether an extension of limitation period should be granted:

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

2. the length of the delay and the explanation for it;

3. any prejudice to the responding party (in this case Pafco) caused or worsened by the delay;

4. the merits of the appeal.¹⁷

30These four factors act as a guideline – they are not elements that must be met before an extension can be granted, but they act as a guideline to determining the just decision in each case.¹⁸

The Settlement Agreement

31The settlement agreement and release dated July 14, 2014 adds a pivotal dimension to this case.

32In reading the covering letter from Pafco dated June 27, 2014 and the release itself, I find that:

i. The covering letter refers to the release as respecting “the settlement of the issue of entitlement to all income replacement benefits for up to 104 weeks, which accordingly resolves the current [emphasis mine] arbitration proceedings.” Pafco expressly states to S.W.’s counsel “we confirm that your client agreed to settle his claims for [IRBs] up to 104 weeks.”

ii. The language is crystal clear that the settlement covers all IRB “claims from the date of the accident up to 104 weeks at September 6, 2015”. This phrase is repeated for every element of the settlement: consideration, indemnification, discharge of liability and the agreement by S.W. to forgo any further appeals.

iii. There is no language in the documents to suggest that S.W. waived or that the agreement forecloses any future claim for post-104 week benefits (or indeed any other benefit). The language provides no evidence that any issue of post-104 benefits was contemplated by either party when the agreement was reached.

33After finding what I did in the agreement letter and release, I have concluded that:

i. The settlement was limited and restricted. It did not cover and hence did not appear to extinguish any and all future claims that S.W. might assert to post-104 IRBs.

ii. Accordingly, I find that S.W. had a bona fide belief, induced by the language of the settlement agreement with Pafco, that:

a. he was only settling his claim for IRBs up to 104 weeks after the accident without prejudice to any future claim for post-104 period;

b. his option to appeal a denial of post-104 IRBs remained open;

c. Pafco’s rejection letter of May 2, 2017 represented a denial from which he could appeal;

d. his appeal dated March 23, 2018 was filed within the limitation period.

iii. Because of belief induced by the language of the settlement agreement, Pafco cannot fairly characterize S.W. – nor can I – as having “sat on his rights and failed to diligently pursue his claim within two years of denial.” The language of the settlement agreement and the belief that it engendered is a reasonable explanation for S.W.’s not appealing the January 19, 2013 denial within the limitation period.

iv. As a result of the foregoing conclusions, I find that the first two criteria for extension are met.

34The merits of S.W.’s case for post-104 IRBs do not appear strong to me. S.W. claims that after working 4½ years, he has reached a point of complete inability to do his job or any job to which he is reasonably suited. To date, he has offered no explanation for this anomalous degradation in his condition: the OCF-3 from his family physician offers no clues. The OCF-3 cites vertigo and headaches as reasons for S.W.’s inability to work with no explanation as to the basis for its conclusions; furthermore, the OCF-3 indicates a substantial inability to perform his employment tasks and then indicates that he is unable to work on modified conditions.

35Despite the apparent weakness of its merits, I am not prepared to deny S.W.’s appeal by barring it on its superficial appearance of weakness. Pafco could have chosen to re-assess S.W.’s IRB claim, as it is obliged to do,¹⁹ but instead issued a perfunctory refusal to consider the claim, relying on its initial denial and the “simple fact” that S.W. was able to work past the 104 week period and “would therefore not meet the test of complete inability”. This prevented Pafco and ultimately the Tribunal from obtaining evidence on the true merits of S.W.’s case. In my view, Pafco’s dismissive reaction to S.W.’s claim persuades me that an adjudicator should be allowed to assess the merits of S.W.’s IRB claim in a full hearing.

36The prejudice to S.W. of imposing the statute bar is manifest. The prejudice to Pafco of proceeding is proportionally much lower, in financial terms, and minimal in terms of its ability to defend S.W.’s claim. It has insurer’s examinations in hand from its denial of S.W.’s initial IRB claim and could have easily arranged for fresh IEs or addenda to the originals. The “balance of prejudice” in this case favors allowing the appeal to proceed.

37My decision is that S.W.’s claim for IRBs may proceed.

CONCLUSION

38S.W.’s appeal is to proceed. I have granted an extension to the limitation period under s.7 of the LATA.

39Pursuant to the Tribunal’s order of June 15, 2018, a case settlement conference shall be scheduled to deal with the substantive issues in dispute, which include IRBs and a medical benefit.

Footnotes

1. 1O.Reg. 34/10
2. 2SO 1999, c.12, Sched.G
3. 3Turner v. State Farm, 2005 CanLII 2551
4. 4Wadhwani v. State Farm, 2013 ONCA 662 (“Wadhwani”)
5. 5Ramalingam v. State Farm, 2007 CarS.W.ellOnt. 5785 at para. 58
6. 6Haldenby v. Dominion of Canada General Insurance Company, 2001 CanLII 16603 (ON CA), [2001] O.J. No. 3317 (CA) at para.30. (“Haldenby”)
7. 7Wadhwani at pp. 14-15, see also Haldenby
8. 8Haldenby, para. 31-32
9. 9Bonaccorso v. Optimum Insurance Company Inc., 2016 ONCA 34, pp.16, 19
10. 10which it appended to the OCF-9
11. 11Meaning 104 weeks after the accident. At the 104 week mark, the eligibility criteria for IRBs changes.
12. 12i.e. Disability Certificate
13. 13Citing Zeppieri v. Royal Insurance Co. of Canada, [1994] 0.1.C.D. No. 13, at p. 3.
14. 14Insurance Act, RSO 1990, c.I.8
15. 15Ramalingam v. State Farm, FSCO, Appeal Order P05-00026, submitted by Pafco
16. 16G. P. v. Aviva, 16-000726/AABS [G. P.] at pp. 33-36, submitted by Pafco
17. 17Howard v. Martin 2014 ONCA 309 – submitted by both parties.
18. 18A.F. and North Blenheim Mutual Insurance Co. & N.L. and North Blenheim Mutual Insurance Co., 2017 CanLII 87446 (ON LAT), see also Howard v. Martin.
19. 19Butt v. Lombard General Insurance Company of Canada, 2009 CarS.W.ellOnt 1400, at pp. 2 – led by S.W. and uncontested by Pafco.