Catania et al. v. Scottish & York Insurance Co. Limited et al.

[Indexed as: Catania v. Scottish & York Insurance Co. Ltd.]

53 O.R. (3d) 383

[2001] O.J. No. 651

Docket No. C33074

Court of Appeal for Ontario

Morden, Charron and Borins JJ.A.

February 28, 2001

Insurance--Automobile insurance--Statutory accident benefits --Settlement--Validity of notice--Insured and insurer settled insured's claim for accident benefits--Insurer delivered notice to insured in purported compliance with s. 9.1(2) of Regulation 664 under Insurance Act--Insured signed release--Notice did not comply with para. 5 of s. 9.1(2) in that it set out explanation of how proposed settlement amount was calculated but did not set forth insurer's estimate of commuted value of periodic income replacement payments under Statutory Accident Benefits Schedule--Notice did not comply with para. 1 of s. 9.1(2) in that statement of benefits did not state maximum benefits available to insured or any monetary limits which applied to any particular benefit--Insured not barred from withdrawing from settlement--Regulation 664, R.R.O. 1990 as amended by O. Reg. 780/93, s. 9.1(2).

The plaintiff was injured in a motor vehicle accident in January 1997. She made a claim against the defendant, her automobile insurer, for statutory accident benefits. The defendant paid income replacement benefits to her until May 1997. A dispute arose between the plaintiff and the defendant as to whether the plaintiff was entitled to further benefits. The dispute was mediated through the Ontario Insurance Commission. At the conclusion of the mediation, a settlement was reached in which it was agreed that the defendant would pay to the plaintiff the sum of $8,000 in exchange for a full and final release. The defendant sent to the plaintiff a release form to be signed by her to which was attached a written notice "as to the final settlement of entitlement to statutory accident benefits (accidents after November 1, 1996)". The plaintiff executed the release, delivered it to the defendant and received the settlement funds. In January 1999, the plaintiff commenced an action against the defendant seeking a declaration of entitlement to weekly income replacement benefits, medical and rehabilitation expenses and other expenses incurred. The defendant pleaded that it had paid to the plaintiff all the statutory accident benefits to which she was entitled and that she had released her claims. A motion by the defendant for summary judgment dismissing the plaintiff's action was granted. The motions judge rejected the plaintiff's submission that the notice given by the defendant did not comply with the requirement in para. 5 of s. 9.1(2) of Regulation 664 under the Insurance Act, R.S.O. 1990, c. I.8 that the insurer state its "estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value". The plaintiff appealed.

Held, the appeal should be allowed.

Under the heading "Estimate by the insurer of the commuted value of the benefits available to you", the notice set out: "Income Replacement Benefits $6,000" and "Medical Benefits $2,000". Under the heading "Explanation of determination of commuted value", the notice stated: "1. Income Replacement Benefits. Allowance for 26.08 weeks at $230.00/week = $6,000". 4. Medical Benefits. Allowance of $2,000 for medical, psychological, surgical, dental, optometric, hospital, chiropractic, nursing, ambulance, medication and physiotherapy expenses including the cost of medical and dental devices and transportation to and from treatment". The statement in the notice did not deal at all with what was required under para. 5 of s. 9.1(2). It set forth an explanation of how the proposed settlement amount itself was calculated. It did not set forth the defendant's "estimate" of the commuted value of the periodic income replacement payments under the Statutory Accident Benefits Schedule. Accordingly, it did not give the insured the opportunity to compare the proposed settlement amount with the real value of the period benefits.

The information in the notice also did not comply with para. 1 of s. 9.1(2), at least as far as the income replacement benefits were concerned. With respect to these, the notice said: "Income Replacement Benefits -- This benefit compensates an insured person for lost income due to an impairment sustained as a result of an accident". The statement of benefits in this case did not state "the maximum benefits available to the insured" or "any monetary limits which apply to any particular benefit".

Assuming that there may be gradations in the statements of information that will comply with the requirements of s. 9.1(2), it could not reasonably be said that the facts of this case showed even minimal compliance. Accordingly, there was no bar to the plaintiff withdrawing from the settlement.

APPEAL from a summary judgment dismissing a claim for statutory accident benefits.

Cases referred to King v. Wawanesa Mutual Insurance Co., unreported, January 31, 2000, FSCO A96-00060, Arbitrator Vanderbent; Opoku v. Pal (2000), 2000 CanLII 1539 (ON CA), 49 O.R. (3d) 97, 3 M.V.R. (4th) 203 (C.A.); Smyth v. Waterfall (2000), 2000 CanLII 16880 (ON CA), 50 O.R. (3d) 481 (C.A.); Thomas v. Transit Insurance Co. (1993), 1993 CanLII 8527 (ON SC), 12 O.R. (3d) 721 (Gen. Div.) Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, s. 279(2) Rules and regulations referred to Automobile Insurance Regulation, R.R.O. 1990, Reg. 664, s. 9.1 [as am. O. Reg. 780/93, s. 7] Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 20.06 Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96

Altor Shields, for appellant. Kenneth J. Coulson, for respondent.

The judgment of the court was delivered by

[1] MORDEN J.A:--The plaintiff, Patricia Catania, appeals from a summary judgment granted by Dambrot J. dismissing her claim for accident benefits under the Statutory Accidents Benefits Schedule, O. Reg. 403/96, on the basis that she released her claim in a document entitled "Full and Final Release" dated November 18, 1997. In reaching this conclusion, Dambrot J. rejected Ms. Catania's submission that the defendant Scottish & York Insurance Co. Limited was not entitled to rely upon the release because it had failed to comply with the written notice requirement in s. 9.1(2) of Regulation 664, R.R.O. 1990 as amended by O. Reg. 780/93 ("the regulation") made under the Insurance Act, R.S.O. 1990, c. I.8.

[2] The relevant facts may be stated briefly. The plaintiff was involved in a motor vehicle accident on January 9, 1997. She made a claim against the defendant, her automobile insurer, for statutory accidents benefits. The defendant paid income replacement benefits to her at the rate $208.41 a week from January 16, 1997 to May 27, 1997.

[3] A dispute then arose between the plaintiff and the defendant on whether she was entitled to further benefits. The dispute was mediated through the Ontario Insurance Commission on November 18, 1997. At the conclusion of the mediation, a settlement was reached in which it was agreed that the defendant would pay to the plaintiff the sum of $8000, plus the cost of medical reports totalling $399, in exchange for a full and final release. The plaintiff was represented by a law clerk employed by a law firm.

[4] Immediately following the mediation, the defendant sent to the plaintiff a release form to be signed by her to which was attached, as Schedule "A", a written notice by the insurer "as to final settlement of entitlement to statutory accidents benefits (accidents after November 1, 1996)". The contents of this notice are important and I shall set forth the relevant parts later in these reasons.

[5] On November 28, 1997, the plaintiff delivered to the defendant the release that she had executed. Following this, the defendant forwarded the settlement funds to her.

[6] On January 5, 1999, the plaintiff served the defendant with the statement of claim in this action in which she sought a declaration of entitlement to weekly income replacement benefits, medical and rehabilitation benefits, and to "other expenses incurred". The defendant responded with a statement of defence which pleaded that it had paid to the plaintiff all the statutory accident benefits to which she was entitled and that she had released her claims on November 18, 1997.

[7] As I have indicated, the plaintiff's entitlement turns on the application of the written notice requirement set forth in s. 9.1(2) of the regulation to the facts of this case. Dambrot J. concluded that the notice did comply.

[8] I first set forth the relevant legislation. The Insurance Act, R.S.O. 1990, c. I.8, s. 279(2), which is in the part of the Act that relates to the resolving of disputes respecting claims to statutory accident benefits, provides:

(2) Any restriction on a party's right to mediate, litigate, appeal or apply to vary an order as provided in sections 280 to 284, or on a party's right to arbitrate under section 282, is void except as provided in the regulations.

[9] Regulation 664, R.R.O. 1990, as amended by O. Reg. 780/ 93, provides in s. 9.1:

9.1(1) In this section, "settlement" means an agreement between an insurer and an insured person that finally disposes of a claim or dispute in respect of the insured person's entitlement to one or more benefits under the Statutory Accident Benefits Schedule.

(2) 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:

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.

2. A description of the impact of the settlement on the benefits described under paragraph 1, including a statement of the restrictions contained in the settlement on the insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act.

3. A statement that the insured person may rescind the settlement within two business days after the settlement is entered into by delivering a written notice to the insurer.

4. A statement that the tax implications of the settlement may be different from the tax implications of the benefits described under paragraph 1.

5. 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 280 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.

6. A statement advising the insured person to consider seeking independent legal, financial and medical advice before entering into the settlement.

(3) A settlement may be rescinded by the insured person, within two business days after the settlement is entered into, by delivering a written notice to the insurer.

(4) If the insurer did not comply with subsection (2), the insured person may rescind the settlement after the period mentioned in subsection (3) by delivering a written notice to the insurer.

(5) A restriction on an insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act is not void under subsection 279(2) of the Act if,

(a) the restriction is contained in a settlement; and

(b) the insurer complied with subsection (2).

[10] The material parts of the defendant's notice to the plaintiff are:

DESCRIPTION OF BENEFITS

The benefits available to you under the Statutory Accident Benefits Schedule--Accidents on or after November 1, 1996 are:

(i) Income Replacement Benefits -- This benefit compensates an insured person for lost income due to an impairment sustained as a result of an accident.

(iv) Medical and Rehabilitation Benefits -- This benefit pays for reasonable medical and rehabilitation expenses incurred because of an impairment suffered by an insured person as the result of an accident, up to a combined maximum of $100,000.00, unless the insured person has suffered a catastrophic impairment. These are expenses not covered under any other plan. If an optional benefit has been purchased the maximum benefit is $1,100,000.00 unless the person has suffered a catastrophic impairment.

2. IMPACT OF SETTLEMENT ON RIGHT TO CLAIM BENEFITS.

(i) The SETTLEMENT described in the FULL AND FINAL RELEASE which you are being asked to sign will finally and completely settle your claim for the benefits specified in that Release. You are forever giving up the right to claim such benefits. You will be unable to claim such benefits in the future, regardless of whether you remain disabled or incur further expenses.

(ii) IMPACT OF SETTLEMENT ON RIGHT TO MEDIATE, LITIGATE, ARBITRATE, APPEAL, APPLY TO VARY OR PROCEED TO JUDICIAL REVIEW.

The effect of the SETTLEMENT described in the FULL AND FINAL RELEASE is that you are permanently and forever giving up the right to mediate, litigate, arbitrate, appeal, apply to vary or proceed to Judicial Review in respect of the benefits specified in that Release.

3. YOU MAY RESCIND THE SETTLEMENT WITHIN TWO (2) BUSINESS DAYS AFTER THE FULL AND FINAL RELEASE IS SIGNED INTO BY DELIVERING A WRITTEN NOTICE TO THE INSURER, AT 2206 Eglinton Avenue East, Scarborough, Ontario, M1L 4S8.

4. THE TAX IMPLICATIONS OF THIS SETTLEMENT MAY BE DIFFERENT FROM THE TAX IMPLICATIONS OF THE BENEFITS DESCRIBED IN #1. ABOVE.

5. ESTIMATE OF COMMUTED VALUE OF BENEFIT AND EXPLANATION OF HOW THE COMMUTED VALUE WAS DETERMINED BY THE INSURER.

(i) The SETTLEMENT being proposed by the insurer provides for the payment of a lump sum in respect of benefits under the Statutory Accident Benefits Schedule--Accidents after November 1, 1996.

(ii) ESTIMATE BY THE INSURER OF THE COMMUTED VALUE OF THE BENEFITS AVAILABLE TO YOU.

1. Income Replacement Benefits $6,000.00

2. Non Earner Benefits $_______

3. Caregiver Benefits $_______

4. Medical Benefits $2,000.00

(iii) EXPLANATION OF DETERMINATION OF COMMUTED VALUE.

1. Income Replacement Benefits

Allowance for 26.08 weeks at $230.00/week = $6,000.00

4. Medical Benefits

Allowance of $2,000.00 for medical, psychological, surgical, dental, optometric, hospital, chiropractic, nursing, ambulance, medication and physiotherapy expenses including the cost of medical and dental devices and transportation to and from treatment.

[11] The plaintiff's major submission is that the notice does not comply with the requirement in para. 5 of s. 9.1(2) that the insurer state its "estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value". Because "the benefit" under the Statutory Accident Benefits Schedule respecting income replacement is a benefit paid periodically, and not as a lump sum, the lump sum payment of $6000 makes this paragraph applicable to the case.

[12] The plaintiff submitted before the motions judge that the non-compliance with para. 5 took the form of failing to state the elements of "commuted value" described by Spiegel J. in Opoku v. Pal (2000), 2000 CanLII 1539 (ON CA), 49 O.R. (3d) 97 at pp. 113-14, 3 M.V.R. (4th) 203 (C.A.): life expectancy, discount rate, and assumptions respecting payment out of benefits. The motions judge rejected this argument on the facts of this case. He said in para. 27 of his reasons:

Here the definition adopted and approach taken in Opoku v. Pal can have no meaningful application. The insurer here was not making a lump sum payment as of a specific date that was equal in value to one or more payments or a stream of payments that would be made at one or more specific times or during specific periods in the future. Rather, it was agreeing to pay the insured person $6,000 to cover income replacement benefits for a six month period in the past (May 17, 1997 to November 18, 1997), and $2,000 to cover very limited psychological treatment which it denied was required. In the circumstances, any reference to the insurer's estimate of Ms. Catania's life expectancy, and an appropriate discount rate in respect of periodic benefits would be quite irrelevant. I cannot conclude that in circumstances such as those prevailing here, the regulation requires that such information be provided, or that failing to provide the information makes the settlement void or voidable. In my view, the information included in the written notice provided in this case pursuant to s. 9.1 of the SABS adequately complies with s. 9.1(2).

[13] With respect, I do not think that the statement in the notice deals at all with what para. 5 requires. What it does do is set forth an "explanation" of how the proposed settlement amount itself was calculated. It does not set forth the defendant's "estimate" of the commuted value of the periodic income replacement payments under the Statutory Accident Benefit Schedule. Accordingly, it does not give the insured the opportunity to compare the proposed settlement amount with "the real value of the periodic benefits or . . . to make a comparison on an 'apples to apples basis'": Opoku v. Pal, supra, at p. 116 per Spiegel J.

[14] In relation to the foregoing, I should say that I agree with the following statement of Arbitrator Vanderbent in King v. Wawanesa Mutual Insurance Co., FSCO A96-00060, January 31, 2000 at p. 24:

I am unable to find a convincing rationale to support the proposition that the settlement regulation contemplates different methods of calculating and presenting the commuted value of a benefit, depending on the insurer's view of the insured person's entitlement. An insured person who is executing a final release of weekly income benefits, for example, is entitled to receive the same type of information respecting the potential value of the benefit, irrespective of whether the insurer believes there is no future entitlement, entitlement for a limited period only, or for the rest of the insured person's life. In each case, the insured person requires the same information respecting potential value, in order to meaningfully assess the sufficiency of the proposed lump sum settlement. In my view, if a benefit is subject to the commuted value requirement, then only the actuarial calculation inherent in the definition of the term "commuted value" can apply when disclosing the value of the benefit. Nothing in the regulation suggests that "commuted value" has more than one meaning, depending on the insurer's views on the merits of the insured person's claim.

[15] This court in Opoku v. Pal said in para. 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.

[16] On the appeal before us, the appellant also submitted that the information in the notice did not comply with para. 1 of s. 9.1(2), at least as far as the income replacement benefits were concerned. It will be recalled, with respect to these, that the notice said:

(i) Income Replacement Benefits--This benefit compensates an insured person for lost income due to an impairment sustained as a result of an accident.

[17] In Opoku v. Pal, supra, this court said in paras. 2 and 3:

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.

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. A96000601 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.

[18] Clearly, the statement of benefits in this case does not state "the maximum benefits available to the insured" or "any monetary limits which apply to any particular benefit".

Conclusion

[19] Under s. 279(2) of the Insurance Act, the restriction on the plaintiff's right to bring this action "is void except as provided in the regulations" and in s. 9.1(4) of the regulation, the plaintiff may rescind the settlement if the defendant "did not comply with subsection (2)". Further, in s. 9.1(5), it is provided that a restriction on an insurer's right to litigate is not void under s. 279(2) of the Insurance Act if,

(a) the restriction is contained in a settlement; and

(b) the insurer complied with subsection (2).

[20] Accepting that there may be gradations in the statements of information that will comply with the requirements of s. 9.1(2), I do not think it can reasonably be said that the facts of this case show even minimal compliance. I should say that the non-compliance with para. 5 is more serious than the non-compliance with para. 1 because it clearly frustrates any attempt to compare the proposed settlement with the commuted lump sum value of what was available under the Statutory Accident Benefits Schedule. Accordingly, there was no bar to the plaintiff withdrawing from the settlement.

[21] On the particular facts of this case, it may well be that the defendant's failure to comply with s. 9.1(2) had no bearing on the plaintiff's acceptance of the settlement offer. This, however, is not the test in a case such as this where there has not been even minimal compliance with the regulation. (It could be a factor to take into account in a case where there is some degree of compliance.) If it were the test it would, in many cases, be very difficult to apply with any degree of confidence or predictability. The test in s. 9.1(4) and (5), although its application may give rise to some unreasonable or unfair results, in some cases, has the virtue of relative ease of application. Furthermore, it is entirely within the hands of the insurance companies to see that there is compliance with s. 9.1(2).

[22] For these reasons, I would allow the appeal, with costs, set aside the judgment of Dambrot J., and make an order dismissing the defendant's motion with costs. Having regard to the unsettled nature of the law at the time the motion was made, I do not think that this is a proper case for costs on a solicitor and client basis under rule 20.06(1) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194]: Thomas v. Transit Insurance Co. (1993), 1993 CanLII 8527 (ON SC), 12 O.R. (3d) 721 (Gen. Div.) and Smyth v. Waterfall (2000), 2000 CanLII 16880 (ON CA), 50 O.R. (3d) 481 (C.A.).

Appeal allowed.