Pena v. Allstate Insurance Company of Canada, 2021 CanLII 117443

Released Date: 11/15/2021

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:

Ulysess Pena

Applicant

and

Allstate Insurance Company of Canada

Respondent

PRELIMINARY ISSUE DECISION AND ORDER

ADJUDICATOR:

Theresa McGee, Vice-Chair

APPEARANCES:

For the Applicant:

Eric Winkworth, Counsel

For the Respondent:

Jennifer J. Griffiths

HEARD:

By way of written submissions

BACKGROUND

1The applicant, Ulysess Pena, was involved in an automobile accident on August 5, 2014, and sought benefits from the respondent, Allstate Insurance Company of Canada, pursuant to the Statutory Accident Benefits Schedule - Effective September 1, 2010¹ (the “Schedule”).

2The applicant returned to work on August 7, 2014. He applied for accident benefits by way of an Application for Accident Benefits (OCF-1) dated August 25, 2017 and received by the respondent on September 5, 2014. The same day, the respondent issued an Explanation of Benefits stating that the applicant was not entitled to receive an income replacement benefit because he had returned to work during the seven-day waiting period.

3On November 12, 2014, the applicant submitted a Disability Certificate (OCF-3) indicating he did not suffer a substantial inability to perform the essential tasks of his employment. On December 6, 2014, the respondent issued an Explanation of Benefits upholding its denial of an income replacement benefit based on the OCF-3 and on the employer’s confirmation which stated that the applicant had returned to full duties effective September 27, 2014.

4The applicant continued to work until March 13, 2019. On June 4, 2019 he obtained an OCF-3 indicating he had a substantial inability to perform the essential tasks of his employment and a complete inability to carry on a normal life. On June 11, 2019, the respondent issued an Explanation of Benefits denying an income replacement benefit and stating that the claim was statute-barred for being made outside the two-year limitation period.

5The applicant applied to the Tribunal claiming an income replacement benefit, among other issues, on June 16, 2020.

6At the December 7, 2020 case conference, the respondent raised a preliminary issue that would dispose of the applicant’s claim for an income replacement benefit. This hearing is to consider that issue.

PRELIMINARY ISSUE

7The issue to be decided in the hearing is:

a. Is the applicant (the insured) barred from disputing his entitlement to an income replacement benefit pursuant to section 56 of the Schedule because he filed his application more than two years following the respondent’s refusal to pay the benefit?

RESULT

8The respondent has not established that the claim for an income replacement is barred under s. 56 of the Schedule. The claim for an income replacement benefit shall proceed to a full hearing before the Tribunal.

ANALYSIS

The principle of discoverability applies to income replacement benefit claims

9Section 56 of the Schedule provides that a proceeding under s. 280 of the [Insurance Act]² in respect of a benefit shall be commenced within two years after the insurer’s refusal to pay the amount claimed.

10The respondent submits that its September 5, 2014 Explanation of Benefits constituted a valid denial of a claim by the applicant for an income replacement benefit. It submits the denial complied with the requirements set out by the Supreme Court of Canada in Smith v. Co-Operators General Insurance Co. [Smith]³: it was communicated in straightforward and clear language, and it described the important points of the dispute resolution process including the timelines governing that process. It submits that the Explanation of Benefits triggered the two-year limitation period.

11Relying on Straus v. Aviva; Hanna v. Aviva; Dushenko v. Aviva; Messer v. Aviva; Larsen v. Aviva; Dexter v. Aviva [Straus],⁴ the respondent submits that as long as an insurer issues a valid refusal, the limitation period should be strictly applied. The reasons for the denial need not be legally correct for the limitation period to commence; the denial of a benefit starts the clock: Sietzema v. Economical Mutual Insurance Company [Sietzema].⁵

12The respondent acknowledges the Court of Appeal for Ontario’s holding in Tomec v. Economical Mutual Insurance Company [Tomec]⁶ that the common law doctrine of discoverability applies to the limitation period in s. 56 of the Schedule, but submits that Tomec dealt with claims for attendant care and housekeeping benefits and cannot be analogized to a claim for income replacement benefits.

13The respondent submits that in line with Bonilla v. Preszler [Bonilla],⁷ the limitation period in s. 56 of the Schedule is triggered by a single event, the refusal to pay an income replacement benefit claimed; there is no rolling limitation period.

14I concur with Vice-Chair Boyce’s remarks in M.L. v Unifund Assurance Company [M.L.]⁸ that the question of whether the discoverability principle applies to income replacement benefit claims remains unsettled. While the Court of Appeal in Bonilla rejected the argument that the common law rule of discoverability applied to a decision to terminate existing income replacement benefit claims, it is not clear that the court would have found discoverability inapplicable in circumstances where a quantum of income replacement benefits is claimed for the first time. Similarly, in Bonaccorso v. Optimum Insurance Company Inc. [Bonaccorso], the Court of Appeal rejected the argument that the termination of an income replacement benefit could be construed as premature, because “a claim had been made and benefits were received.” ⁹ That is not the case here.

15The Tomec court’s holding on whether discoverability applies to the limitation period in s. 56 of the Schedule is clear:

There is a single reasonable interpretation of s. 281.1(1) of the Insurance Act and s. 51(1) of the SABS. The limitation period contained in those sections is subject to the rule of discoverability because it is directly tied to the cause of action that an insured can assert when denied benefits. A hard limitation period is contrary to the purposes of the SABS and the Supreme Court's guidance in Pioneer. In addition, a hard limitation period in these circumstances would lead to absurd results and is not consistent with the policy rationales that underlie limitation periods.

[Emphasis mine.]

16Tomec reveals that the limitation period in s. 56 is subject to discoverability not by virtue of the specific provisions of the Schedule relevant to a claim for a particular benefit, but because it is directly tied to the cause of action that can be asserted when benefits are denied. Although the benefits at issue in Tomec were attendant care and housekeeping benefits contingent on a catastrophic impairment determination, the principles articulated in that case have broad application to s. 56 of the Schedule.

17I agree with the respondent’s submission that the Court of Appeal would not have overturned its prior rulings in Bonilla and Bonaccorso without a clear expression of its intention to do so and without the presence of a five-member panel. In my view, Bonilla and Bonaccorso can be read harmoniously with Tomec because those cases dealt with the termination of income replacement benefits claimed and received. I do not read Bonilla, Bonaccorso, or Sietzema as authority for the proposition that the doctrine of discoverability is ousted for all claims for income replacement benefits under the Schedule.

18I am persuaded by the applicant’s submission that he had not claimed an income replacement benefit before June 2019 because he was working and was therefore statutorily barred from claiming the benefit. He had not discovered his claim. As he submits, he would have been entitled to a quantum of $0.00. A plain reading of s. 56 is that the limitation period begins with an insurer’s refusal to pay “an amount claimed”. It is impossible to refuse to pay nothing when nothing is claimed. The September 5, 2014 was not a valid denial, not because it was unclear or failed to describe the dispute resolution process as required by Smith, but because it was premature. It did not deny an existing claim.

19While I am alive to the respondent’s submissions about the need for finality and certainty in litigation and the importance of limitation periods in furthering that objective, I am also sensitive to the consumer protection purposes of the Schedule. I agree with the applicant that it would be unreasonable and unfair to expect insured persons to make prophylactic claims based on a future contingency; where an insured person continues to work and mitigate their losses, it would be absurd to expect them to diligently dispute a denial of income replacement benefits premised on their return to work.

20Like Vice-Chair Boyce in M.L., I am alert to the hurdles the applicant may face in light of the eligibility requirements in s. 5(1) of the Schedule. However, the question of substantive entitlement has not been put directly to me and is best left to be adjudicated on a full evidentiary record.

21If I am wrong about the applicability of the discoverability principle to this claim, I find in the alternative that the circumstances of this case weigh in favour of the Tribunal exercising its discretion to extend the limitation period under s. 7 of the Licence Appeal Tribunal Act, 1999 and permit the income replacement benefit claim to proceed to a full hearing.

The Tribunal should exercise its discretion to extend the limitation period

22On June 15, 2021, after submissions on the preliminary issue were filed with the Tribunal, the Divisional Court rendered its decision in Fratarcangeli v. North Blenheim Mutual Insurance Company [North Blenheim].¹⁰ The decision settled the question of the Tribunal’s discretion to extend the limitation period set out in s. 56 of the Schedule pursuant to s. 7 of the Licence Appeal Tribunal Act, 1999.¹¹

23It is clear from the submissions filed on the preliminary issue that the possibility of a ruling in North Blenheim was contemplated by both parties. Neither party advanced a position that was wholly contingent on a particular outcome in the appeal proceeding. Because I have the benefit of submissions from both parties on whether the Tribunal should exercise the discretion to extend the limitation period, I need not seek further submissions on this point.

24 Section 7 of the Licence Appeal Tribunal Act, 1999 provides that the Tribunal may extend the time for giving notice under a limitation period if it is satisfied that there are reasonable grounds for applying the extension and for granting relief. In Manuel v. Registrar,¹² the Divisional Court set out four factors that should be considered when assessing a request for an extension of time to file an appeal:

a. The existence of a bona fide intention to appeal;

b. The length of the delay;

c. Prejudice to the other party; and

d. The merits of the appeal.

25I have considered the Manuel factors and find that the applicant’s grounds for requesting an extension to the limitation period are reasonable. Once he could no longer work in March 2019, he demonstrated diligence in pursuing a claim for an income replacement benefit (in June 2019) and, in commencing an application to dispute the denial of that claim a year later. In the time between his work stoppage and filing an application with the Tribunal, the applicant’s counsel corresponded with the respondent in January 2020 to request that the denial be reconsidered in light of Tomec. He received no response.

26I find that the length of the delay is reasonable considering the applicant’s circumstances. It is agreed that he continued to work for four and a half years after the accident. I am prepared to accept that the applicant’s employment during this period was marked by considerable difficulty and a gradual deterioration in his condition. The respondent has asked that I give no weight to the evidence tendered by the applicant on the merits of his claim. While I defer to the hearing adjudicator on the merits of the applicant’s claim, Manuel requires an assessment of the reasonableness of the applicant’s explanation for his delay in filing with the Tribunal, and of this I am satisfied.

27The respondent submits that it has been prejudiced by the delay because its ability to conduct contemporaneous assessments of the applicant’s condition has been hampered. The applicant submits that there is a plethora of evidence about the applicant’s condition around the time of his work stoppage, including a psycho-vocational assessment, a psychological progress report, and catastrophic impairment reports prepared within months of his work stoppage. I accept that this case is not one where an insurer is totally deprived of the ability to conduct s. 44 assessments in a timely manner. Further, I find that extending the limitation period does not deprive the respondent of the ability to advance a causation defence or a defence based on substantive entitlement under s. 5(1). On balance, the prejudice factor does not militate against extending the limitation period to permit the income replacement benefit claim to proceed.

28It is not for a preliminary hearing adjudicator to conduct a pre-hearing on the merits of the claim in issue when deciding whether to extend the limitation period. Rather, the task laid out in Manuel is to assess whether the ‘justice of the case’ requires the extension of time: North Blenheim at para. 102. Here, the application before the Tribunal raises serious issues as to the applicant’s accident-related impairments and his entitlement to benefits. Having considered all relevant factors, I find that there are reasonable grounds to have the income replacement benefit claim decided on the basis of a full evidentiary record. Again, the decision to extend the limitation period and permit this claim to proceed does not finally dispose of the issue and does not deprive the respondent of the other defences available to it.

29Even if the principle of discoverability does not apply to the applicant’s claim for an income replacement benefit, there are reasonable grounds to extend the limitation period and allow this claim to proceed to a full hearing.

CONCLUSION AND ORDER

30The respondent is unsuccessful on the preliminary issue. The claim for an income replacement benefit shall proceed to a full hearing along with the remaining issues in dispute as already scheduled by the Tribunal.

Released: November 15, 2021

Theresa McGee

Vice-Chair