Walker v. Allstate Insurance Co.

[Indexed as: Walker v. Allstate Insurance Co.]

59 O.R. (3d) 636

[2002] O.J. No. 2140

Docket No. C36238

Court of Appeal for Ontario,

Catzman, Sharpe and Cronk JJ.A.

May 30, 2002

Insurance -- Automobile insurance -- Statutory accident benefits -- Section 9.1 of Automobile Insurance Regulation does not apply to settlements that occur after litigation has been commenced -- Automobile Insurance Regulation, R.R.O. 1990, Reg. 664, s. 9.1

The insurer paid the insured Statutory Accident Benefits ("SABs") until a dispute arose as to his entitlement to further benefits. The respondent commenced two actions against the respondent claiming SABs. The parties settled the actions at a private mediation, and orders were granted dismissing each action. The insured then retained new counsel and moved for a declaration that the settlement agreement had been rescinded and for an order setting aside the order dismissing the action, arguing that the insurer had failed to comply with its obligation under s. 9.1(2)5 of the Automobile Insurance Regulation to provide a statement of its estimate of the commuted value of the insured's supplementary medical and rehabilitation benefits and an explanation of how it determined the commuted value of those benefits. The motion was granted. The insurer appealed, arguing that the supplementary medical and rehabilitation benefits were lump sum benefits under the Statutory Accident Benefits Schedule and therefore were not subject to the insurer's obligation under s. 9.1(2)5 of the Regulation.

Held, the appeal should be allowed.

Section 9.1 of the regulation does not apply to settlements that occur after litigation has been commenced. The insured's claim was settled after litigation had been commenced. It was not reached as a result of the dispute resolution procedures mandated by the regulation, but was reached at a privately arranged mediation initiated by the parties themselves after the commencement of the action. Section 9.1 of the regulation did not apply in the circumstances of this case.

Although it was unnecessary to address this issue, the supplementary medical and rehabilitation benefits at issue in this case were not lump sum benefits. The characterization of benefits as lump sum or non-lump sum should be based on the legislative purpose of s. 9.1 of the regulation, which is to ensure that claimants have adequate information regarding the claims they are settling. Where, as in this case, the settlement involves a sum calculated to provide the claimant with the capital amount necessary to provide a stream of payments to meet specified recurring expenses, the calculation of that sum will depend upon certain assumptions and actuarial calculations. In such a case, the claimant is entitled to know how the insurer has commuted the value of a series of expenses to a single sum.

APPEAL by an insurer from an order setting aside a settlement agreement and setting aside an order dismissing the insured's action.

Igbokwe v. HB Group Insurance Management Ltd. (2001), 2001 3804 (ON CA), 55 O.R. (3d) 313, 204 D.L.R. (4th) 434, [2002] I.L.R. 1-4045, 20 M.V.R. (4th) 50 (C.A.), folld Other cases referred to King v. Wawanesa Mutual Insurance Co., F.S.C.O. A96-000601 (Arbitrator Vanderbent); Opoku v. Pal (2000), 2000 1539 (ON CA), 49 O.R. (3d) 97, 3 M.V.R. (4th) 203 (C.A.) Statutes referred to Insurance Act, R.S.O. 1990, c. I.8 Courts of Justice Act, R.S.O. 1990, c. C.43 [page637] Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 49 R.R.O. 1990, Reg. 664, s. 9.1 [as am. O.Reg 780/93]

Sheldon A. Gilbert, for appellant. David H. Sookram, for respondent.

The judgment of the court was delivered by

[1] SHARPE J.A: -- This appeal involves the procedural requirements of s. 9.1 of the Automobile Insurance Regulation, Reg. 664, R.R.O. 1990, as amended by O. Reg. 780/93 under the Insurance Act, R.S.O. 1990, c. I.8 (the "regulation").

Background

[2] The respondent Eric Walker was injured in a motor vehicle accident on February 13, 1994. The respondent's insurer, the appellant Allstate Insurance Company, paid the respondent Statutory Accident Benefits ("SABs") until April 1996, when a dispute arose regarding the respondent's entitlement to further SABs. The respondent commenced two actions against the appellant, claiming SABs. On November 1, 2000, the parties settled the actions at a private mediation. Under the parties' settlement agreement, the appellant was required to pay the respondent $122,500 for past and future SABs. The parties executed a Full and Final Release and Settlement Notice. The appellant brought two motions, each seeking an order dismissing one of the respondent's actions. The two motions came before different motions court judges on November 24, 2000: one before Justice Scott and one before Justice Jenkins. On consent of the parties, each motions court judge granted an order dismissing the relevant action.

[3] The respondent then retained new counsel. On November 27, 2000, the respondent's new counsel wrote to counsel for the appellant to advise that the respondent was rescinding the settlement agreement between the parties on the basis that the appellant had not complied with the regulation.

[4] The respondent moved for a declaration that the settlement agreement had been rescinded and for an order setting aside the order of Justice Scott dismissing the action on consent. The respondent had asserted a claim for regularly recurring supplementary [page638] medical and rehabilitation benefits. The respondent argued, inter alia, that the appellant had failed to comply with s. 9.1(2)5 of the regulation, which provides:

9.1(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:

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 [O. Reg. 776/93] 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.

[5] The motions court judge held that the appellant had not complied with its statutory obligation under s. 9.1(2)5 to provide a statement of its estimate of the commuted value of the respondent's supplementary medical and rehabilitation benefits and an explanation of how it determined the commuted value of those benefits. He set aside the parties' settlement agreement and the order of Justice Scott dismissing the respondent's action on consent.

[6] The appellant appeals to this court. The appellant's principal ground of appeal is that the supplementary medical and rehabilitation benefits are lump sum benefits under the Statutory Accident Benefits Schedule and therefore are not subject to the insurer's obligation under s. 9.1(2)5 of the regulation.

Analysis

[7] In my view, the decision of this court in Igbokwe v. HB Group Insurance Management Ltd. (2001), 2001 3804 (ON CA), 55 O.R. (3d) 313, 204 D.L.R. (4th) 434 (C.A.) (leave to appeal to the Supreme Court of Canada dismissed, [2001] S.C.C.A. No. 470) is dispositive of this appeal. In Igbokwe, this court held that s. 9.1 of the regulation does not apply to settlements that occur after litigation has been commenced. At pp. 319-20 O.R., Labrosse J.A. stated:

The settlements to which s. 9.1 is intended to apply are those arising out of the settlement regime contained in the regulation . . . In my view, s. 9.1 was intended to apply to an insured person, whether represented or not by counsel, as part of a scheme that deals with settlements which preceded court proceedings.

Section 9.1 is not concerned with offer, acceptance and cost consequences, but rather with the right of rescission within a cooling-off period once an agreement between the insurer and a claimant has been reached for benefits (SABs). [page639] Its purpose is to provide a claimant with adequate information prior to the commencement of an action in order to avoid a quick and uninformed decision as to the benefits the claimant is entitled to receive from the insurer. Once an action is commenced, any such relevant information would be available in the course of litigation, something an insured would not otherwise be entitled to receive but for the requirements of s. 9.1.

In my view, s. 279 [of the Insurance Act] and hence s. 9.1 of the regulations have no application once the parties are in litigation.

(Emphasis in original)

[8] The respondent submits that Igbokwe is limited to Rule 49 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] offers. I would reject that submission. In my view, it is clear from the passages quoted above that if litigation has been commenced, s. 9.1 of the regulation has no further effect.

[9] The decision in Igbokwe is directly applicable to this case. The respondent's claim was settled after litigation had been commenced. The settlement was not reached as a result of the dispute resolution procedures mandated by the regulation, but was reached at a privately arranged mediation initiated by the parties themselves after the commencement of the action. It follows that s. 9.1 of the regulation does not apply and that the appeal should be allowed.

[10] In fairness to the motions court judge, it should be noted that the decision in Igbokwe was not released until after the date of his endorsement and that the issue in Igbokwe was not raised in argument before him.

[11] Although the decision in Igbokwe is dispositive of this appeal, I propose to deal briefly with the appellant's principal ground of appeal: that supplementary medical and rehabilitation benefits are lump sum benefits under the Statutory Accident Benefits Schedule and therefore are not subject to s. 9.1(2)5 of the regulation. The appellant urges us to adopt a definition of "lump sum benefits" that includes benefits that the insured person receives on a periodic basis without having to re-establish entitlement for every payment. The appellant submits that we should classify supplementary medical and rehabilitation benefits as a series of lump sum payments since the insured is required to submit a claim for expenses for every item and to demonstrate an entitlement for every claim. See King v. Wawanesa Mutual Insurance Co., F.S.C.O. A96-000601 (Arbitrator Vanderbent) at p. 18.

[12] No doubt claims for supplementary medical and rehabilitation benefits will often be claims for lump sum benefits. However, [page640] in my view, not all supplementary medical and rehabilitation benefits should be so characterized. The characterization of benefits as lump sum or non-lump sum should be based on the legislative purpose of s. 9.1 of the regulation. As noted in Igbokwe and in Opoku v. Pal (2000), 2000 1539 (ON CA), 49 O.R. (3d) 97, 3 M.V.R. (4th) 203 (C.A.), the purpose of s. 9.1 is to ensure that claimants have adequate information regarding the claims they are settling. Where, as in this case, the settlement involves a sum calculated to provide the claimant with the capital amount necessary to provide a stream of payments to meet specified recurring expenses, the calculation of that sum will depend upon certain assumptions and actuarial calculations. In my view, in such a case, the claimant is entitled to know how the insurer has commuted the value of a series of expenses to a single sum. I would therefore hold that the supplementary medical and rehabilitation benefits at issue in this case are not lump sum benefits.

Disposition

[13] I would allow the appeal, set aside the order of the motions court judge and restore the order of Justice Scott dated November 24, 2000 dismissing the action on consent. The respondent is entitled to the settlement amount of $122,500, together with pre-judgment interest at the rate prescribed by the Courts of Justice Act, R.S.O. 1990, c. C.43 from the date that the respondent's solicitor returned the settlement funds to the appellant. The appellant is entitled to $4,500 in costs for the motion, the amount that the motions court judge determined would have been appropriate but for factors that are not relevant here. The appellant is also entitled to costs of the appeal, which I would fix at $5,000. The appellant is entitled to set off the costs of the motion and the appeal against the settlement funds.

Appeal allowed.