Sabadash v. State Farm et al., 2019 ONSC 1121
CITATION: Sabadash v. State Farm et al., 2019 ONSC 1121
DIVISIONAL COURT FILE NO.: DC-17-2353 DATE: 20190215
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, THORBURN, and COPELAND JJ.
BETWEEN:
DANIEL SABADASH
Applicant
– and –
STATE FARM MUTUAL INSURANCE COMPANY and FINANCIAL SERVICES COMMISSION OF ONTARIO
Respondents
Gregory Gilhooly, for the Applicant, Daniel Sabadash
Todd McCarthy, for the Respondent State Farm Mutual Insurance Company
Martina Aswani, for the Respondent Financial Services Commission of Ontario
HEARD at Ottawa: November 19, 2018
THORBURN J.
REASONS FOR DECISION
OVERVIEW
[1] On March 3, 2011, the Applicant, Daniel Sabadash, suffered injuries in a motor vehicle accident.
[2] At the time of the accident, he had a number of pre-accident medical conditions. Early life events caused him to suffer anxiety, depression and fear, and in his late 20s, he was diagnosed with insulin dependent diabetes.
[3] There was evidence that he suffered a mild traumatic brain injury in the collision and that was the trigger for his ongoing symptoms. He reported having headaches, issues with his eyes tracking together, loud ringing in his ears, difficulty formulating thoughts, memory issues, dizziness and loss of balance. There was also evidence that other unrelated causes contributed to the persistence and severity of those symptoms.
[4] At the time of the accident, Mr. Sabadash had been working as a tool supply and repair shop manager. His employment was terminated approximately seven months after the accident because of his inability to complete the tasks expected of him.
[5] Mr. Sabadash applied for accident benefits pursuant to the Statutory Accident Benefits Schedule – Effective September 1, 2010, O. Reg. 34/10, (“SABS”) from his insurer, State Farm Mutual Automobile Insurance Company (“State Farm”), including Income Replacement Benefits (“IRBs”).
[6] “Accident” is defined in the SABS as “an incident in which the use or operation of an automobile directly causes an impairment or damage to any prescription eyewear, denture, hearing aid, prosthesis or other medical or dental device”. “Impairment” is defined as “a loss or abnormality of a psychological, physiological or anatomical structure or function”.
[7] The SABS provides that an insurer shall pay an income replacement benefit (“IRB”) to an insured person “who sustains an impairment as a result of an accident”, if the insured person “was employed at the time of the accident, and, as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of that employment…”
[8] Upon receiving Mr. Sabadash’s application for benefits, State Farm set up a series of medical assessments. On the basis of those assessments, State Farm took the position that the Applicant did not suffer a substantial inability to complete the essential tasks of his employment as a result of the collision. The Applicant disputed this finding and provided medical opinions to State Farm that indicated he was unable to work due to collision-related impairments.
[9] The Financial Services Commission of Ontario (“FSCO”) administers the dispute resolution regime established by the Insurance Act, R.S.O. 1990, c. I.8 concerning entitlement to SABs payable as a result of automobile accidents.
[10] Because State Farm refused the request for benefits, the matter proceeded before a FSCO arbitrator. Causation was the central issue.
[11] Arbitrator Smith (“the Arbitrator”) granted Mr. Sabadash’s request for IRBs and other benefits. He held that, “I cannot accept State Farm’s submission that the ‘but for’ test endorsed by the Courts in accident negligence cases is to be applied to a determination of causation in the statutory accident benefit context.” He concluded that accident benefits were warranted because, “the preponderance of the evidence leads to the conclusion that the subject accident was a material significant factor well beyond the de minimis range in the causation of Mr. Sabadash’s inability to work…”
[12] A party to a FSCO arbitration may appeal an arbitrator’s order to the Director or his/her delegate, on a question of law. The Director or Director’s Delegate may confirm, vary, or rescind the arbitration order, or substitute his or her order for that of the arbitrator.
[13] State Farm appealed the Arbitrator’s decision to the Director’s Delegate of the FSCO on the basis that the test applied by the Arbitrator was the wrong one and that rather than using the material significant factor standard, he should have applied the “but for” test to determine causation.
[14] Director’s Delegate Evans allowed the appeal on the basis that the Arbitrator had misdirected himself as to the proper test of causation and should have applied the “but for” test. In so doing, the Director’s Delegate articulated what he believed to be the correct test and analysis to be applied. The Director’s Delegate ordered a new hearing before a different Arbitrator.
[15] Mr. Sabadash seeks judicial review of the Director’s Delegate’s decision dated September 18, 2017.
THE POSITIONS OF THE PARTIES
[16] The parties agree that the test to be applied to determine entitlement to benefits is the “but for” test: Clements v. Clements, 2012 SCC 32, [2012] 2 S.C.R. 181.
[17] Given the confusion in the case law, both parties seek from this Court an articulation of the causation analysis to be applied in an accident benefit claim.
[18] The Applicant claims that although the Arbitrator mistakenly referred to the material contribution test instead of the “but for” test of causation, it is clear from his analysis and review of the evidence that the “but for” standard was, in substance and effect, satisfied. As such, the Arbitrator’s decision should be reinstated in its entirety.
[19] Moreover, the Applicant claims the Director’s Delegate also misinterpreted the legal test to be applied and incorrectly held at paragraph 33 of his decision that, “the injury arising from the accident must be enough to directly cause an impairment”. The case law refers only to a “necessary” cause of bringing about the injury, not one that can bring about the result on its own.
[20] In so finding, the Director’s Delegate altered the analysis and raised the standard applied by the Supreme Court of Canada in Athey v. Leonati, [1996] 3 S.C.R. 458, 1996 183 (SCC). The Athey analysis has also been applied in the accident benefit context: see Monks v. ING Insurance Co. of Canada (2008), 2008 ONCA 269, 90 O.R. (3d) 689 (C.A.).
[21] Thus, although the Director’s Delegate correctly noted that the Arbitrator mistakenly referred to the material contribution test and not the “but for” test, the Director’s Delegate himself made a mistake in explaining the test and thereby erred in law.
[22] The Respondents, the Financial Services Commission of Ontario (“FSCO”) and State Farm, note that the decision that is the subject of review is the Director’s Delegate’s decision on appeal of the Arbitrator’s decision, not the decision of the Arbitrator.
[23] In accordance with section 20(2) of the Insurance Act, decisions of the Director’s Delegate are protected by a privative clause, which provides that an arbitrator or a Director’s Delegate has “exclusive jurisdiction to exercise the powers conferred upon him or her under the Insurance Act and to determine all questions of fact or law that arise in any proceeding before him or her and, unless an appeal is provided for under this Act, his or her decision is final and conclusive for all purposes.” Accordingly, deference is owed.
[24] State Farm submits that the Director’s Delegate correctly found that the Arbitrator applied the wrong test of “material contribution” instead of the appropriate “but for” standard.
[25] State Farm further submits that the Director’s Delegate was correct in holding that “a sufficient cause means that the injury arising from the accident must be enough to directly cause an impairment”, as the words “directly causes an impairment” come from the SABS itself.
[26] Finally, State Farm notes that the Director’s Delegate did not decide the issue of entitlement on the merits but simply ordered a new hearing before a different arbitrator on the basis that the “but for” test must be applied.
THE STANDARD OF REVIEW
[27] The decision subject to judicial review is that of the Director’s Delegate.
[28] Reasonableness has been held to be the appropriate standard of review for a Director’s Delegate’s decision on the interpretation of SABs legislation: see Gordyukova v. Certas Direct Insurance, 2012 ONCA 563 at paras. 15-18; Aviva Canada Inc. v. Pastore, 2012 ONCA 642 at paras. 26, 59, 68; Security National Insurance v. Hodges, 2014 ONSC 3627 (Div. Ct.) at para. 13, leave to appeal to ONCA denied November 14, 2014; State Farm v. Federico, 2014 ONSC 109 (Div. Ct.) at para. 7, leave to appeal to ONCA denied May 21, 2014; and Agyapong v. Jevco Insurance Company et al, 2018 ONSC 878 (Div. Ct.) at paras. 11-13, leave to appeal to ONCA pending.
[29] However, in the present case, the Director’s Delegate was determining the appropriate test for causation by applying common law principles. Given that he focused on the law as developed by the courts in determining the test for causation, his decision is reviewable on a correctness standard (Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190).
[30] The appropriate standard of review of a conclusion that a legal test was not met on the facts of a particular case involves questions of mixed fact and law that attract a reasonableness standard of review. As well, a decision on remedy is subject to review on the standard of reasonableness.
ANALYSIS AND CONCLUSION
The Test to Determine Causation
[31] Both the Arbitrator and the Director’s Delegate looked to the jurisprudence of the courts to determine the appropriate test for causation. The decisions of the Supreme Court of Canada in Clements v. Clements, above, Athey v. Leonati, above and Resurfice Corp. v. Hanke, 2007 SCC 7, [2007] 1 S.C.R. 333 provide guidance in determining causation in a personal injury case. The Ontario Court of Appeal in Monks v. ING, above, held that the same analysis applies in the accident benefit context: see Monks at paragraphs 88 and 89. That analysis is as follows:
a. Causation is a factual determination made on a balance of probabilities: Clements at paragraph 46;
b. The test for establishing causation is the “but for” test;
c. The Supreme Court in Clements held that, “As a general rule, a plaintiff cannot succeed unless she shows as a matter of fact that she would not have suffered the loss “but for” the negligent act or acts of the defendant. A trial judge is to take a robust and pragmatic approach to determining if a plaintiff has established that the defendant’s negligence caused her loss. Scientific proof of causation is not required.” See Clements at paragraph 46;
d. “There is no indication in the SABS of a legislative intent that an insurer’s liability for the accident benefits in issue in this case should be subject to discount for apportionment of causation due to an insured’s pre-existing injuries … The SABS simply states, in clear and unambiguous language, that an insurer ‘shall pay an insured person who sustains an impairment as a result of an accident, medical, rehabilitation and attendant care benefits.’”: See Monks at paragraphs 94 to 96;
e. In exceptional circumstances, where (i) the plaintiff establishes that her loss would not have occurred “but for” the negligence of two or more tortfeasors, each of whom could be responsible for the loss; but (ii) the plaintiff is unable through no fault of her own, to show that one tortfeasor is the “but for” cause of her injuries because each tortfeasor can point to the other as the possible “but for” cause of the injury, a plaintiff may establish liability against one defendant if that defendant’s conduct materially contributed to the plaintiff’s risk of injury: See Clements at paragraph 46;
f. This is because public policy dictates that a defendant should not be permitted to escape liability by pointing the finger at another wrongdoer, thereby defeating a finding of causation on a balance of probabilities against anyone: See Clements at paragraphs 13 and 46;
g. A material contribution to the risk of impairment is one that falls outside the de minimis range: See Athey at paragraph 44.
Application of the Law in this Case
The Arbitrator’s Decision
[32] The Director’s Delegate determined that the Arbitrator erred in law by applying the wrong test to establish causation.
[33] I agree that the Arbitrator erred in law in holding that,
I cannot accept State Farm’s submission that the ‘but for’ test endorsed by the Courts in accident negligence cases is to be applied to a determination of causation in the statutory accident benefit context.
[I]t is still open to a trier of law to apply either the ‘but for’ test or ‘material contribution’ test depending on the facts of a statutory accident benefits dispute.
[34] The Arbitrator should have applied the “but for” test, as set out in Clements, and his failure to do so is an error of law.
The Director’s Delegate’s Decision on Appeal
[35] The Director’s Delegate was correct in finding that the test to be applied to establish causation is the “but for” test.
[36] The Director’s Delegate correctly noted at paras. 18, 36 and 38 of his decision that the Arbitrator erred in the following way:
[T]he Arbitrator … stated that he could not accept … that the ‘but for’ test endorsed by the courts in accident negligence cases is to be applied to a determination of causation in the statutory accident benefit context. Rather he found that the correct causation test in determining accident benefits is whether or not the subject accident is a material contributing factor in the causation of an applicant’s impairment.
Nonetheless, in Athey and as reaffirmed in Resurfice and even more in Clements, the primary causation test is the “but for” test, although a cause meeting that test need not be the major cause.
A proper understanding of Athey shows that it is not true that an adjudicator can simply choose between the “but for” test and a material contribution to risk test. Rather the “but for” test is paramount. Any de minimis consideration is only relevant once the “but for” test has been passed.
[37] However, the Director’s Delegate went on to say at paragraph 33 that,
[T]he material contribution test is only applicable in the rare circumstance where an accident alone could have been a sufficient cause, and a pre-existing condition alone could have been a sufficient cause of impairment… It is therefore not true that one can apply the material contribution test as a default test and ignore the “but for” test. The default test is “but for”, and only in rare situations will the material contribution test be relevant, and even then, both elements have to be sufficient causes… In the accident benefit context, a sufficient cause means that the injury arising from the accident must be enough to directly cause an impairment. [Emphasis added]
[38] “Accident” is defined in the SABs as “an incident in which the use or operation of an automobile directly causes an impairment or damage…”
[39] The highlighted sentence appears to suggest that the accident in issue must be sufficient in itself to have caused the impairment: that it must be “the cause” as opposed to “a necessary cause”. To the extent that the Director’s Delegate’s reasons suggest that the plaintiff must prove on a balance of probabilities that the accident alone could have caused the impairment, he was incorrect.
[40] The Director’s Delegate was also incorrect in holding at paragraph 24 of his reasons that: “I believe that, pursuant to Clements, the primary causation test is the ‘but for’ test. Even if it is appropriate to apply the ‘material contribution to risk’ test as discussed in Clements, the plaintiff or insured still has to pass the ‘but for’ test”. In light of the statement in Clements at paras. 13-15 that “but for” and “material contribution to risk of injury” are alternatives, “but for” need not be proven in a “material contribution to risk” case.
[41] Accordingly, both the Arbitrator and the Director’s Delegate erred in their approach to causation.
[42] This brings me to the appropriate remedy in this application for judicial review. The Director’s Delegate granted the appeal and ordered the matter be returned to arbitration for a fresh hearing before a different arbitrator.
[43] The Director’s Delegate did not deal with the other grounds of appeal brought by State Farm as this ground alone was, in his view, sufficient to allow the appeal. The other grounds raised by State Farm include allegations that the Arbitrator demonstrated bias, prejudged issues, improperly interfered with the cross-examination of witnesses, misapprehended evidence and failed to keep an open mind with respect to the determination of causation.
[44] These other grounds were not argued before us.
[45] The Applicant argues that the Arbitrator’s decision should be restored, as the Arbitrator’s analysis was the robust application of the “but for” test required by Clements. I disagree. The Director’s Delegate reasonably remitted the matter for rehearing so that the correct legal test for causation could be applied. He was correct in finding that the wrong test was articulated by the Arbitrator. However, although he identified the correct “but for” test, the Director’s Delegate did not correctly explain how the test works.
[46] As such, it is appropriate to remit the issue of causation to a different arbitrator to apply the correct test to the evidence. The Application for judicial review is dismissed.
[47] Given the divided success, there is no order of costs of this application for judicial review.
[48] FSCO has not sought nor is it awarded any costs.
___________________________ THORBURN J.
I agree
SWINTON J.
I agree
COPELAND J.
Date of Release: February 15, 2019
CITATION: Sabadash v. State Farm et al., 2019 ONSC 1121
DIVISIONAL COURT FILE NO.: DC-17-2353
DATE: 20190215
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, THORBURN and COPELAND JJ.
BETWEEN:
DANIEL SABADASH
Applicant
– and –
STATE FARM MUTUAL INSURANCE COMPANY and FINANCIAL SERVICES COMMISSION OF ONTARIO
Respondents
REASONS FOR DECISION
THORBURN J.
Date of Release: February 15, 2019