Opoku et al. v. Pal et al. [Indexed as: Opoku v. Pal]

49 O.R. (3d) 97

[2000] O.J. No. 1700

2000 1539

No. C32296

Court of Appeal for Ontario

Morden, Doherty and Laskin JJ.A.

May 19, 2000

[Quicklaw note: In the paper version, the decisions of the Ontario Superior Court of Justice and the Ontario Court of Appeal were published together at 49 O.R. (3d) 97. The two decisions have been separated in the online version to enable linking to citators. The trial decision begins at page 1999 19913 (ON SC), 49 O.R. (3d) 100. The following headnote was published on the combined case and applies to both decisions.]

Insurance -- Automobile insurance -- Statutory accident benefits -- Settlement -- Description of maximum statutory accident benefits available to insured not constituting commuted value of those benefits for purposes of s. 9.1(2) of settlement regulation -- Automobile Insurance Regulation, R.R.O. 1990, Reg. 664, s. 9.1(2).

The plaintiff was very seriously injured when he was run down by a motor vehicle owned and operated by the defendant. The plaintiff's solicitor instructed the defendant's automobile insurer that the plaintiff was prepared to settle the tort claim against the defendant and the plaintiff's claim for statutory accident benefits ("SABs"). The insurer accepted the offer subject to the conditions that the statutory requirements for settlement of the SABs claim be complied with; that the settlement of the tort claim was contingent on the settlement of the SABs claim; and that there would be no settlement until the plaintiff had executed the insurer's written notice pursuant to s. 9.1(2) of Reg. 664, R.R.O. 1990 ("the settlement regulation") and the two-day cooling-off period had expired. The solicitors for the parties agreed "as a matter of administrative convenience" that the settlement would be allocated as follows: the sum of $700,000 in the form of a structure to be allocated to the SABs settlement and $1 mill ion to be allocated to the settlement of the tort claim. The solicitor representing the insurer forwarded to the plaintiff's solicitor a set of draft documents which included a form of the written notice pursuant to s. 9.1(2) of the settlement regulation ("the written notice"). All documents were executed by the plaintiff on April 15, 1998 and delivered to the solicitor for the insurer on April 16. The documents included a full and final release executed by the plaintiff of all claims for SABs "in consideration of the payment of $700,000 to purchase an annuity". The release contained an acknowledgment of receipt of the written notice required by s. 9.1 of the regulation. On April 20, the solicitor for the plaintiff delivered a letter to the solicitor for the insurer stating that he was advised by the plaintiff on Sunday, April 19 that he wished to revoke the settlement in its entirety. By letter dated June 16, 1998, the plaintiff's new solicitor wrote to the insurer stating that he treated the April 20 letter of the previous solicitor as a notice of rescission as required by the settlement regulation but that his letter should be taken as further notice to the insurer that the settlement was rescinded pursuant to s. 9.1(4) of the regulation.

The plaintiff brought an action against the defendant for damages and against the defendant's automobile insurer for a declaration respecting the plaintiff's entitlement to SABs. The defendants alleged that both the tort claims and the SABs claim were settled and brought a motion for summary judgment in accordance with the minutes of settlement and final release. The plaintiff brought a cross-motion for a declaration that the settlement documentation was null and void. The principal issue was whether the SABs claim was void or voidable. Section 9.1(2), para. 5 of the settlement regulation provides that before a settlement is entered into between an insurer and an insured person, the insurer shall give the insured person a written notice that contains the following: "If the settlement provides for the payment of a lump sum in an amount offered by the insurer and, with respect to a benefit under the Statutory Accident Benefits Schedule that is not a lump sum benefit, the settlement contains a restriction on the insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 240 to 284 of the Act, a statement of the insurer's estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value". Section 9.1(4) provides that if the insurer does not comply with s-s. (2), the insured person may rescind the settlement within two business days by delivering written notice to the insurer.

The motions judge found that the insurer failed to give the plaintiff a written notice that satisfied the commuted value requirement ("CVR") contained in para. 5 of s. 9.1(2) and that the plaintiff was entitled to exercise his right to rescind pursuant to s. 9.1(4). Interpreting the phrase "commuted value", the motions judge held it does not mean "maximum dollar value" of the benefits. "Commuted value" means the present value of a stream of future payments. In order to comply with the CVR, the insurer was obliged to provide an explanation which included the following: the plaintiff's life expectancy; the appropriate discount rate in respect of each of the periodic benefits; the insurer's assumptions concerning the rate at which medical and rehabilitation benefits would be paid out of the available lifetime fund of $1 million and the date at which that fund would likely be exhausted, if such date occurred before the expiration of the plaintiff's estimated life expectancy; the insurer's assumptions concerning the rate at which attendant care benefits would be paid out of the available lifetime fund of $1 million and the date at which the lifetime benefit would be exhausted, if such date occurred before the expiration of the plaintiff's life expectancy. The defendants' motion for judgment in accordance with the minutes of settlement and release was dismissed and the declaratory relief sought by the plaintiff was granted.

The defendants appealed.

Held, the appeal should be dismissed.

The motions judge did not err in finding that a description of the maximum statutory accident benefits available to the insured does not constitute a commuted value of those benefits or in his interpretation of commuted value. Nothing in the notice provided by the insurer constituted a commuted value.

APPEAL from judgment of Spiegel J. (reported p. 100 post) dismissing a motion by the defendants for judgment in accordance with the minutes of settlement and release and granting a motion by the plaintiff for a declaration that the settlement is null and void.

Cases referred to King v. Wawanesa Mutual Insurance Co., Arbitrator Vanderbent, F.S.C.O. A96-000601 (unreported) Rules and regulations referred to Automobile Insurance Regulation, R.R.O. 1990, Reg. 664 (Insurance Act), s. 9.1(2) (en. O. Reg. 780/93, s. 7)

Timothy S.B. Danson and Alexander M. Voudouris, for appellants. Hillel David and James R. Howie, for respondent.

[1] BY THE COURT: -- We are in substantial agreement with the careful and detailed reasons of Spiegel J. and, accordingly, dismiss this appeal.

[2] Our agreement with Spiegel J. that a description of the maximum statutory accident benefits available to the insured does not constitute a commuted value of those benefits should not be taken as an indication that a statement of the maximum benefits available to the insured need not be included in the notice provided by the insurer pursuant to s. 9.1(2) of the "settlement regulation" (R.R.O. 1990, Reg. 664, as amended O. Reg. 780/93, s. 7). Paragraph 1 of the settlement regulation requires:

1. A description of the benefits that may be available to the insured person under the statutory accident benefits schedule and any other benefits that may be available to the insured person under a contract of automobile insurance.

[3] In our view, a description of the benefits available requires a statement of any monetary limits which apply to any particular benefit: King v. Wawanesa Mutual Insurance Co., F.S.C.O. A96-000601 at p. 10 (Arbitrator Vanderbent). The information provided by the appellant as a commuted value was in reality a description of the benefits available under the policy and not a commuted value. The description of the maximum benefits provided by the appellant complied with the requirement of para. 1 of the settlement regulation and not para. 5.

[4] Paragraphs 1 and 5 of the settlement regulation relate to different informational requirements. The two (maximum benefits available under the policy and commuted value of certain benefits) taken together provide the insured with information that will assist the insured in determining whether the settlement should be accepted. We agree with Spiegel J.'s interpretation of commuted value as that term is used in para. 5 and with his conclusion that nothing in the notice provided by the appellant constituted a commuted value.

[5] Paragraph 5 of the settlement regulation requires a commuted value of those statutory accident benefits that are "not a lump sum benefit". Spiegel J. assumed that all of the statutory accidents benefits constituted benefits that were "not a lump sum benefit" and, therefore, subject to the commuted value requirement in para. 5 of the settlement regulation. No issue was taken with that assumption before Spiegel J. or in this court, presumably because the arguments made before Spiegel J. did not turn on whether all of the statutory accident benefits were properly characterized as "not lump sum benefits". In King v. Wawanesa Mutual Insurance Co., supra, at pp. 10-11, Arbitrator Vanderbent concluded that not all statutory accident benefits can be properly characterized as "not a lump sum benefit" and that some, e.g., medical benefits, are more properly viewed as a series of lump sum payments for which the insured must establish entitlement before the payment is made.

[6] The meaning of the phrase "not a lump sum benefit" in para. 5 of the settlement regulation is far from clear (as are other parts of the settlement regulation). We would not want to determine the meaning to be given to that phrase in a case where the issue is not raised. The meaning to be given to the phrase "not a lump sum benefit" must await a case where the issue is fully argued.

[7] Finally, we cannot agree with one observation made by Spiegel J. After outlining the approach to be taken to the determination of commuted value for the purposes of para. 5 of the settlement regulation, Spiegel J. went on to hold that if an insurer did not have sufficient information to provide a commuted value, it was obliged to delay a final settlement of the statutory accident benefits claim until it had sufficient information. We do not think that the requirements of para. 5 of the settlement regulation place the insurer in that position. Under para. 5, the insurer must provide "an explanation of how the insurer determined the commuted value." The insurer can make that determination only on the basis of the information available to it. As long as the assessment is made in good faith and the explanation clearly indicates the factual assumptions relied on to determine the commuted value, we do not think that the insurer can be said to have failed to comply with para. 5 of the settlement regulation bec ause it did not resist settlement until further and better information was available.

The appeal is dismissed with costs.

Appeal dismissed.