Mader v. South Easthope Mutual Insurance Company et al.

[Indexed as: Mader v. South Easthope Mutual Insurance Co.]

Ontario Reports

Court of Appeal for Ontario,

Weiler, Hourigan and Pardu JJ.A.

October 21, 2014

123 O.R. (3d) 120 | 2014 ONCA 714

Case Summary

Insurance — Automobile insurance — Statutory accident benefits — Plaintiff signing full and final release releasing insurer from any obligation to pay income replacement benefits in exchange for lump sum — Plaintiff subsequently bringing action against insurer for declaration that release was nullity, damages and order reinstating her income replacement benefits — Action statute-barred as plaintiff did not repay settlement funds and file for mediation prior to commencing litigation — Plaintiff's claims for conspiracy, mental distress and bad faith not independent causes of action but rather flowing from defendant's alleged breach of insurance policy. [page121]

The plaintiff applied for and received income replacement benefits under the Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96. The defendant insurer notified the plaintiff that it would be terminating her benefits as she was able to resume the duties of her pre-accident employment. The plaintiff disagreed and requested an assessment by a Designated Assessment Centre ("DAC"). The defendant stopped paying the benefits. Before a DAC assessment could take place, the plaintiff signed a full and final release which released the defendant from any obligation to pay accident benefits in exchange for a lump sum payment of $3,000. The plaintiff subsequently sued the defendant for a declaration that the release was a nullity, damages and an order reinstating her income replacement benefits. The defendant moved successfully for summary judgment dismissing the action. The plaintiff appealed.

Held, the appeal should be dismissed.

The action was statute-barred as the plaintiff did not repay the settlement funds and file for mediation prior to commencing the litigation. Section 281(2) of the Insurance Act, R.S.O. 1990, c. I.8 provides that no person may commence a court or arbitration proceeding unless he or she has first sought mediation and mediation has failed. Without mediation, the court had no jurisdiction to hear the plaintiff's claim. In order to rescind the settlement agreement, the plaintiff was required, pursuant to s. 9.1(7) of R.R.O. 1990, Reg. 664, to return any money received as consideration for the settlement. The plaintiff was prohibited, pursuant to s. 9.1(8), from commencing a mediation proceeding under s. 280 of the Act unless she had returned the money received as consideration for the settlement. The plaintiff's claims for damages for conspiracy, mental distress and bad faith were not independent causes of action which were not in respect of entitlement to or amounts of benefits, but rather flowed from the defendant's alleged breach of the insurance policy. At their essence, the claims amounted to nothing more than a claim that the plaintiff was wrongly denied benefits to which she was entitled. That was precisely the type of claim contemplated for resolution by the procedure in ss. 280 to 283 of the Insurance Act. The procedure in ss. 280 to 283 is not restricted solely to claims for benefits, but is also designed to include claims related to the manner in which benefits were administered.

Arsenault v. Dumfries Mutual Insurance Co. (2002), 2002 23580 (ON CA), 57 O.R. (3d) 625, [2002] O.J. No. 4, 152 O.A.C. 224, [2002] I.L.R. I-4086, 20 M.V.R. (4th) 165, 110 A.C.W.S. (3d) 1138 (C.A.), consd

Other cases referred to

Amorini v. Select Coffee Roasters Inc., 2001 62759 (ON SC), [2001] O.J. No. 581, 143 O.A.C. 363, 25 C.C.L.I. (3d) 236, [2001] I.L.R. I-3929, 103 A.C.W.S. (3d) 396 (Div. Ct.); Cole v. Hamilton (City) (2002), 2002 49359 (ON CA), 60 O.R. (3d) 284, [2002] O.J. No. 4688, 29 C.P.C. (5th) 49 (C.A.); Hurst v. Aviva Insurance (2012), 113 O.R. (3d) 331, [2012] O.J. No. 5602, 2012 ONCA 837, 16 C.C.L.I. (5th) 75, 40 M.V.R. (6th) 1, 299 O.A.C. 126, 356 D.L.R. (4th) 323, 221 A.C.W.S. (3d) 443; Hryniak v. Mauldin, [2014] 1 S.C.R. 87, [2014] S.C.J. No. 7, 2014 SCC 7, 314 O.A.C. 1, 453 N.R. 51, 2014EXP-319, J.E. 2014-162, EYB 2014-231951, 95 E.T.R. (3d) 1, 12 C.C.E.L. (4th) 1, 27 C.L.R. (4th) 1, 21 B.L.R. (5th) 248, 46 C.P.C. (7th) 217, 37 R.P.R. (5th) 1, 366 D.L.R. (4th) 641; Lindsay v. Martin, 2004 34432 (ON SC), [2004] O.J. No. 2302, [2004] O.T.C. 468, 131 A.C.W.S. (3d) 431 (S.C.J.); Prinzo v. Baycrest Centre for Geriatric Care (2002), 2002 45005 (ON CA), 60 O.R. (3d) 474, [2002] O.J. No. 2712, 215 D.L.R. (4th) 31, 161 O.A.C. 302, 17 C.C.E.L. (3d) 207, [2002] CLLC Â210-027, 115 A.C.W.S. (3d) 801 (C.A.); R. v. Nowegijick, 1983 18 (SCC), [1983] 1 S.C.R. 29, [1983] S.C.J. No. 5, 144 D.L.R. (3d) 193, 46 N.R. 41, [1983] 2 C.N.L.R. 89, [1983] C.T.C. 20, 83 D.T.C. 5041, 18 A.C.W.S. (2d) 2; [page122] Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, 2002 SCC 18, 209 D.L.R. (4th) 257, 283 N.R. 1, J.E. 2002-405, 156 O.A.C. 201, 20 B.L.R. (3d) 165, 35 C.C.L.I. (3d) 1, [2002] I.L.R. I-4048, REJB 2002-28036, 111 A.C.W.S. (3d) 935; Younis v. State Farm Mutual Automobile Insurance Co. (2012), 113 O.R. (3d) 344, [2012] O.J. No. 5603, 2012 ONCA 836, 300 O.A.C. 180, [2013] I.L.R. I-5374, 40 M.V.R. (6th) 18, 16 C.C.L.I. (5th) 319, 356 D.L.R. (4th) 318, 221 A.C.W.S. (3d) 442

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 6(2) [as am,], 19(1)(b) [as am.]

Insurance Act, R.S.O. 1990, c. I.8, ss. 279 [as am.], (1), 280 [as am.], 281, (1), (2) [as am.], (5), 282 [as am.], (10), 283 [as am.]

Rules and regulations referred to

R.R.O. 1990, Reg. 664 (Insurance Act), s. 9.1(7), (8)

Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, O. Reg. 403/96 [as am.], s. 42

APPEAL from the order of Nightingale J., [2013] O.J. No. 3329, 2013 ONSC 2821 (S.C.J.) dismissing an action.

Sean Oostdyk, for appellant.

Bruce Keay, for respondent South Easthope Mutual Insurance Company.

The judgment of the court was delivered by

HOURIGAN J.A.: —

Overview

[1] The appellant, Michelle Mader, appeals an order dismissing her motion for partial summary judgment and granting the motion of the respondent South Easthope Mutual Insurance Company for summary judgment dismissing her claim.

[2] For the reasons that follow, I would dismiss the appeal.

Facts

[3] On July 21, 2002, the appellant was involved in a single-vehicle motor vehicle accident. The appellant claimed that as a result of the accident, she sustained a broken ankle, a disc herniation, pain in her neck, shoulder and back, and an adjustment disorder with anxiety and depression. She also claimed she was no longer able to work at her job as a customer service representative.

[4] At the time of the accident, the appellant was insured by the respondent under a no-fault policy for accident benefits governed by the Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96 ("SABS"). On July 30, 2002, the appellant applied for accident benefits pursuant to [page123] the SABS. On August 1, 2002, she began receiving income replacement benefits at a rate of $175.45 per week.

[5] On April 24, 2003, the appellant received a notice of stoppage of weekly benefits and request for an assessment by a Designated Assessment Centre ("DAC") from the respondent. The notice stated that the respondent would be terminating the appellant's income replacement benefits as of May 6, 2003. The respondent claimed that the appellant was able to resume the duties of her pre-accident employment.

[6] The appellant disagreed with the stoppage and requested a DAC assessment in accordance with the SABS in order to assess her entitlement to income replacement benefits.

[7] On May 6, 2003, the respondent stopped paying income replacement benefits to the appellant.

[8] On or about July 14, 2003, before a DAC assessment could take place, the appellant signed a full and final release, which released the respondent from any obligation to pay accident benefits to the appellant. In exchange, the respondent made a lump sum payment of $3,000 to the appellant.

[9] The appellant and the respondent provided conflicting evidence regarding the circumstances surrounding the execution of the release.

[10] According to the appellant, the respondent's adjuster went to the appellant's apartment building and had a conversation with her in the hallway. The adjuster convinced the appellant to sign the full and final release in exchange for the $3,000 lump sum. The appellant alleged that, at the time, she felt that she had no other choice but to accept the settlement. The adjuster did not tell her that she did not have to sign the release or that she could continue to receive benefits from the insurer.

[11] According to the respondent, it was the appellant who first approached the respondent with a view to settling her claim due to her ongoing financial difficulties.

[12] On April 8, 2005, the appellant issued a statement of claim, naming the respondent as a defendant and seeking the following relief:

a declaration that the release signed by the appellant is a nullity;

-- $600,000 in damages for breach of contract;

-- $750,000 in damages for conspiracy;

-- $50,000 in damages for mental distress; [page124]

$100,000 in damages for breach of the duty to act in good faith;

-- $25,000 in aggravated damages; and

-- $2,500,000 in punitive and exemplary damages.

[13] The appellant claimed she was unable to lead a normal life and to work, and was therefore entitled to income replacement benefits for life, in addition to medical, rehabilitation, housekeeping and attendant care benefits. She alleged that the respondent breached its duty of good faith and caused her mental distress by unlawfully terminating these benefits.

[14] In a letter dated August 9, 2005, the respondent's counsel informed the appellant's counsel that the appellant had a statutory obligation to repay the settlement funds received and to file her dispute for mediation at the Financial Services Commission of Ontario ("FSCO") before commencing her action.

[15] The letter also indicated that the respondent was prepared to reopen the file and deal with the matter as if the settlement had not taken place. The respondent stated that it would reinstate the appellant's income replacement benefits and pay the arrears owing to date, provided the appellant described her activities and earnings since signing the release and agreed to undergo an independent medical examination pursuant to s. 42 of the SABS.

[16] The appellant did not respond to the letter and the respondent filed a statement of defence. The respondent pleaded that the appellant's claim should be dismissed because it did not disclose a reasonable cause of action and because the appellant did not provide documentary disclosure or satisfy the statutory prerequisites to litigation.

[17] To date, the appellant has not repaid her settlement funds or filed for mediation.

[18] The respondent has not arranged or requested a DAC assessment for the appellant. As of 2006, DAC assessment facilities no longer exist in Ontario.

[19] In January 2013, the appellant brought a motion for partial summary judgment and a declaration that she is entitled to income replacement benefits until the respondent complies with its alleged obligation to provide the requested DAC assessment.

[20] The respondent also brought a motion for summary judgment, seeking to dismiss the appellant's action on the grounds that it is statute-barred because the appellant did not repay her settlement funds and file for mediation prior to commencing litigation. [page125]

Decision Below

[21] The motion judge dismissed the appellant's motion for partial summary judgment and granted the respondent's motion for summary judgment dismissing the appellant's claim.

[22] The motion judge held that the appellant was obligated to repay the settlement funds and proceed to mediation before she could commence litigation. In particular, ss. 279(1) and 281(2) of the Insurance Act, R.S.O. 1990, c. I.8 (the "Act") together require an insured person to seek mediation of a dispute in respect of accident benefit entitlements or amounts before commencing a court proceeding. That person is also required, under s. 9.1(8) of the automobile insurance regulation, R.R.O. 1990, Reg. 664 (Insurance Act), to return any money received as consideration for a settlement before commencing mediation.

[23] The motion judge rejected the appellant's characterization of her claim as a stand-alone action not subject to these mediation requirements. The appellant had argued that she was not claiming payment of benefits, which would be covered by the mediation process. Rather, she was claiming damages and an order for reinstatement of her income replacement benefits since July 2003 due to the respondent's failure to arrange a DAC assessment, as then required by regulation.

[24] The motion judge found this to be a distinction without a difference. He characterized the appellant's claim as one concerning her entitlement, or lack thereof, to rescind the settlement agreement and to now claim accident benefits since the settlement date.

[25] Characterized in this way, the appellant's claim was subject to the mandatory mediation provisions. Since the appellant had denied the respondent its statutory right to have the matter proceed to mediation prior to commencing litigation, the motion judge dismissed the appellant's action by way of summary judgment.

[26] The motion judge also dismissed the appellant's claims for damages for mental distress and bad faith. The motion judge held that these claims were "in respect of" the appellant's entitlement to accident benefits under s. 279(1) of the Insurance Act, and were therefore subject to the mandatory mediation requirements found in ss. 280 to 283 of the Act.

[27] Additionally, the motion judge held that the claims of mental distress and bad faith were not independent causes of action. Rather, they flowed from the respondent's alleged breach of the insurance policy. Since the respondent had not been found in breach of its obligations and the appellant's claim for payment of [page126] income replacement benefits had accordingly been dismissed, there was no basis for the claims of mental distress and bad faith.

[28] Finally, the motion judge dismissed the appellant's motion for partial summary judgment. He found that summary judgment was not appropriate because unresolved questions of fact and law remained. In particular, the motion judge found that the evidence conflicted in terms of the appellant's ongoing disability and the details of her post-accident employment and income earned.

Issues

[29] This appeal raises the following issues:

(1) Did the motion judge err in granting the respondent's motion for summary judgment?

(2) Did the motion judge err in dismissing the appellant's motion for partial summary judgment?

Analysis

(1) The respondent's motion for summary judgment

[30] The Supreme Court of Canada made it clear in Hryniak v. Mauldin, [2014] 1 S.C.R. 87, [2014] S.C.J. No. 7, 2014 SCC 7, at para. 81, that, absent an error in law, the exercise of powers by a motion judge under the new summary judgment rule attracts deference. With respect to the motion judge's decision to grant the respondent's summary judgment motion, I see no basis for appellate interference.

[31] The starting point in the analysis is s. 279(1) of the Insurance Act, which provides:

279(1) Disputes in respect of any insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled shall be resolved in accordance with sections 280 to 283 and the Statutory Accident Benefits Schedule.

[32] Pursuant to s. 281(1), the appellant was permitted to choose between an action in the court system and an FSCO arbitration. However, the right to bring either type of proceeding is limited by s. 281(2), which states that no person may commence a court or arbitration proceeding unless he or she has first sought mediation and mediation has failed.

[33] Mediation is central to the statutory scheme for resolving disputes between insured persons and their insurers and is a statutory precondition to an insured bringing court proceedings: Hurst v. Aviva Insurance (2012), 113 O.R. (3d) 331, [2012] O.J. No. 5602, 2012 ONCA 837, 356 D.L.R. (4th) 323, at para. 25; [page127] Younis v. State Farm Mutual Automobile Insurance Co. (2012), 113 O.R. (3d) 344, [2012] O.J .No. 5603, 2012 ONCA 836, 356 D.L.R. (4th) 318, at para. 3.

[34] Without mediation, the court has no jurisdiction to hear the appellant's claim: Amorini v. Select Coffee Roasters Inc., 2001 62759 (ON SC), [2001] O.J. No. 581, 143 O.A.C. 363 (Div. Ct.), at para. 8.

[35] It is not disputed that the appellant has not sought mediation of her claim. She contends that her dispute would not be accepted for mediation at FSCO because its Dispute Resolution Practice Code (the "Code") requires a denial of benefits as a precondition to mediation and does not permit mediation where a settlement agreement is in place.

[36] In my view, the appellant's dispute is clearly contemplated by the Code's mediation procedure, which covers "any dispute about an insured person's entitlement to accident benefits or the amount of those benefits where a claim has been denied or the prescribed period for the insurer to respond to the claim has elapsed".

[37] The Code also permits mediation where a settlement agreement is in place in limited circumstances, including where the "claimant disputes the validity of the settlement, such as whether the insurer has complied with the requirements of the Settlement Regulation". The appellant submits that this exception is inapplicable because it is not her position that the full and final release did not comply with the Settlement Regulation, but that it was obtained through fraud and misrepresentation.

[38] There is no merit to this submission. Clearly, the exception applies in all circumstances where the claimant disputes the validity of the settlement. The reference to a challenge based on non-compliance with the Settlement Regulation is merely illustrative. Therefore, there is no valid reason for the appellant's failure to comply with the mediation requirement.

[39] In her claim, the appellant also purports to rescind the settlement agreement. In order to do so, she is required, pursuant to s. 9.1(7) of R.R.O. 1990, Reg. 664, to deliver a written notice to the office of the insurer or its representative and to return any money received by her as consideration for the settlement. In addition, the appellant is prohibited, pursuant to s. 9.1(8), from commencing a mediation proceeding under s. 280 of the Insurance Act unless she has returned the money received as consideration for the settlement.

[40] Therefore, the settlement funds must be repaid and mediation must fail before a court proceeding may be commenced: Lindsay v. Martin, 2004 34432 (ON SC), [2004] O.J. No. 2302, [2004] O.T.C. 468 (S.C.J.), at para. 12. [page128]

[41] No repayment of settlement funds has been made. In this regard, counsel for the appellant made a submission on the return of the motions that he had the money available for payment. Such an assertion is not evidence. The motion judge was correct to reject the submission as proof that the appellant had fulfilled her statutory obligation to repay the settlement funds.

[42] In my view, it is clear that the appellant has not fulfilled either of the statutory preconditions to the commencement of a court proceeding. The appellant submits, however, that she has sued not only for breach of contract, but for mental distress, breach of the duty to act in good faith and conspiracy. She submits that these latter three claims do not require an FSCO mediation before an action can be commenced.

[43] It is the appellant's position that her mental distress and bad faith claims are inextricably linked. She alleges that the respondent coerced her into signing the settlement and that by persisting in denying her benefits and refusing to set up a DAC assessment for seven years, the respondent acted in bad faith. The appellant further alleges that the respondent and two of its representatives conspired to injure her by closing her file.

[44] The appellant submits, therefore, that her claims result from the respondent's denial of her procedural rights, rather than the denial of benefits. In other words, her mental distress and bad faith claims are independent causes of action, which are not in respect of entitlement to or amounts of benefits. Accordingly, the appellant submits that she is not required to bring these claims to an FSCO mediation.

[45] In some instances, breach of an insurer's duty of good faith or intentional infliction of mental distress can constitute an independent cause of action: Whiten v. Pilot Inusrance Co., [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, 2002 SCC 18, at para. 82; Prinzo v. Baycrest Centre for Geriatric Care (2002), 2002 45005 (ON CA), 60 O.R. (3d) 474, [2002] O.J. No. 2712 (C.A.), at paras. 37-39, 64. However, neither is a separate actionable wrong in this case.

[46] The reasoning of this court in Arsenault v. Dumfries Mutual Insurance Co. (2002), 2002 23580 (ON CA), 57 O.R. (3d) 625, [2002] O.J. No. 4 (C.A.) is instructive on this point. The issue in that case was whether a claim for bad faith damages arising out of an insurer's termination of no-fault accident benefits was subject to the two-year limitation period set out in s. 281(5) of the Insurance Act. Answering this question necessitated a determination of whether bad faith claims were caught by s. 279(1) of the Act.

[47] Justice Abella noted that in s. 279, the legislature mandated that disputes "in respect of" any claim to no-fault benefits must be resolved in accordance with ss. 280 to 283 of the Act. [page129] Relying on the Supreme Court of Canada's decision in R. v. Nowegijick, 1983 18 (SCC), [1983] 1 S.C.R. 29, [1983] S.C.J. No. 5, Abella J.A. commented, at para. 16, that the use of the phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters. She determined, at para. 17, that "any and all disputes about an insurer's refusal to pay no-fault benefits, including disputes which allege the insurer's bad faith in connection with that refusal" were caught by the scheme in ss. 280 to 283.

[48] Abella J.A. went on to conclude, at paras. 19 and 21:

If I am wrong in concluding that bad faith claims in connection with no-fault benefits refusals are subject to the procedures and time limits set out in ss. 280 to 283 of the Insurance Act, I am nonetheless of the view, based on the pleadings, that this appellant's claim is not an independent, actionable wrong, but is in fact exactly the kind of dispute over no-fault benefits entitlements contemplated by the dispute resolution scheme in the Insurance Act . . . Moreover, had the dispute been arbitrated, it was open to the arbitrator under s. 282(10), if it was found that the insurer had "unreasonably withheld or delayed payments", to award an additional lump sum.

Ms. Arsenault's characterization of the insurer's refusal as bad faith conduct is merely an attempt to circumvent the mandatory requirements of the dispute resolution scheme in the Insurance Act through the guise of linguistic reformulation. Her allegations, distilled, are that the refusal was inappropriate in the circumstances, the very issue contemplated for resolution under the scheme, and a claim that is clearly subject to the two year limitation period set out in s. 281(5).

[49] This analysis applies in the present case. The claims asserted by the appellant all flow from the denial of benefits. At their essence, they amount to nothing more than a claim that the appellant was wrongly denied benefits to which she believes that she is entitled to receive. This is precisely the type of claim contemplated for resolution by the procedure in ss. 280 to 283 of the Insurance Act.

[50] Indeed, s. 282(10) of the Insurance Act provides that if the parties proceed to arbitration and the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator shall award, in addition to the benefits to which an insured person is entitled, a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award. This subsection makes clear that the procedure in ss. 280 to 283 is not restricted solely to claims for benefits, but is also designed to include claims related to the manner in which benefits were administered.

[51] The pleading of a conspiracy does not transform the appellant's claim into an independent actionable wrong. The [page130] facts underlying the appellant's conspiracy claim are the same as those underlying the rest of her claims. The object of the alleged conspiracy was to deny the appellant her benefits.

[52] In summary, the appellant has failed to establish that the motion judge made any error of law in his analysis. There is, therefore, no basis for appellate interference with the motion judge's decision to grant the respondent's motion for summary judgment dismissing the appellant's claim.

(2) The appellant's motion for summary judgment

[53] The appellant brought a motion for partial summary judgment, asserting that she was entitled to payment of benefits until the respondent complies with its obligations under the SABS to arrange the requested DAC assessment.

[54] DAC assessments have not been part of the statutory benefits regime since 2006. Therefore, the order sought by the appellant would be an order in perpetuity.

[55] The denial of the appellant's motion for partial summary judgment is an interlocutory order, from which an appeal lies to the Divisional Court, with leave: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 19(1)(b). Only if leave is obtained from the Divisional Court can the appeal be combined with an appeal that lies to Court of Appeal in the same proceeding under s. 6(2) of the Courts of Justice Act: Cole v. Hamilton (City) (2002), 2002 49359 (ON CA), 60 O.R. (3d) 284, [2002] O.J. No. 4688 (C.A.), at paras. 11, 15. Since no leave was obtained, this court has no jurisdiction to hear the appellant's appeal from the order dismissing her motion for summary judgment.

[56] Even if the appellant was in the right court, all of her claims, including the claim that was the subject of her motion for partial summary judgment, were properly dismissed on the respondent's summary judgment motion.

[57] It follows that the appellant's appeal of the dismissal of her motion for partial summary judgment must fail.

Disposition

[58] I would therefore dismiss the appeal.

[59] With respect to costs, the parties agreed that the sum of $6,000, all inclusive, is the appropriate award. Accordingly, I would order that the appellant pay the respondent $6,000 in costs, all inclusive.

Appeal dismissed.

End of Document