Court File and Parties

CITATION: State Farm Mutual Insurance Company v. Kulaveerasingam, 2019 ONSC 5223

COURT FILE NO.: DC-18-709-00JR

DATE: 2019-09-10

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: State Farm Mutual Automobile Insurance Company (Applicant) v. Kumuthakumary Kulaveerasingam and Financial Services Commission of Ontario (Respondents)

BEFORE: Backhouse, Kurke, and Ryan Bell JJ.

COUNSEL: Mr. Peter Yoo, for Applicant

Mr. David Wilson, for Respondent Kulaveerasingam

Ms. Kari Chan, for Respondent Financial Services Corporation of Ontario

HEARD at Toronto: September 9, 2019

ENDORSEMENT

[1] The applicant seeks judicial review and the setting aside of the decision of Director’s Delegate Edward Lee of May 30, 2018.

[2] At the hearing of this matter, we dismissed the review application with reasons to follow. These are those reasons.

[3] There is no dispute that the standard of review on this judicial review is reasonableness: Simser v. Aviva Canada Inc., [2015] O.J. No. 1919 (Div.Ct.), at para. 20.

[4] The respondent was in receipt of $400 per week in income replacement benefits (IRB) from the applicant after a ruling of arbitrator Pressman of the Financial Services Commission of Ontario (FSCO) of February 6, 2015. Subsequently, the respondent received notification on November 24, 2015 of her eligibility for CPP benefits, and she in turn notified the applicant on December 21, 2015.

[5] On January 26, 2016, February 16, 2016, and March 8, 2016 the applicant sent to the respondent “Explanation of Benefits (OCF-9)” notice letters, seeking repayment of IRB monies as a result of CPP payments that she had retroactively received.

[6] At the time, respondent’s counsel took exception to the notice provided to the respondent by each of those letters for various reasons. The respondent continues to dispute their validity. The parties agree that an invalid notice disentitles the applicant from clawing back overpayments received by the respondent. The applicant nevertheless resorted to s. 287 of the Insurance Act to start deducting amounts as repayment from its ongoing IRB payments to the respondent, even though that provision required the consent of the respondent or a favourable variation order from the FSCO to make such deductions, neither of which the applicant had received.

[7] The applicant applied to vary the decision of arbitrator Pressman. On the variation, Director’s Delegate Edward Lee reduced the amount of ongoing IRB payments taking into account CPP amounts that the respondent was receiving, but held the notice letters of the applicant to have been invalid. He ordered repayment to the respondent of monies that had been clawed back by the applicant, with interest.

[8] The applicant asserts that the test for validity of notice letters should be one of “substantial correctness” of the payment period at issue and the amount of the repayment sought. The applicant relies heavily on the summary judgment decision in Intact Insurance Company v. Marianayagam, 2016 ONSC 1479, a decision also referred to in the decision of Director’s Delegate Lee. In Marianayagam, Perell J. defined for himself a standard of “substantial correctness” as determining the validity of a notice letter with respect to the amount of a deduction from the recipient’s IRB payments: He stated: “Given that the amount of the deduction claimed is sometimes debatable, in my opinion, the amount claimed need not be perfectly correct, but it should be substantially correct”: Marianayagam, at para. 45.

[9] In the same decision, Perell J. cautioned insurers not to seek to exceed the 12-month cap on recovering overpayments set out in what is now s. 52(3) of the Statutory Accident Benefits Schedule, and to be cautious in their resort to s. 287 of the Insurance Act: Marianayagam, at para. 113. Perell J. also sought to circumscribe the persuasive authority of the decision by noting the “peculiar circumstances of the case” that was before him: Marianayagam, at para. 63.

[10] As to the January 26, 2016 notice, Director’s Delegate Lee found that it did not substantially correctly set out the total repayment claim. It sought repayment of an 18-month period of overpayment, when only 12 months could be reclaimed. It set an exorbitant overpayment of more than $9,200, all of which was to be deducted from the next payment. The notice was defective and invalid.

[11] The February 2016 notice again claimed entitlement to an 18-month period of repayment, and was likewise held to be defective.

[12] As to the March 8, 2016 notice, it still claimed entitlement to claw back 13.25 months of overpayment instead of twelve months. Director’s Delegate Lee was not persuaded that the decision in Marianayagam stood for the proposition that such a minor mis-step was close enough to be “substantially correct”. He also rejected the submission that the reference in this letter to the January 2016 notice could somehow create a valid notice out of multiple notices and backdate the notice to January 2016. He held that these errors invalidated the March 2016 notice.

[13] Since the notices were all defective, Director’s Delegate Lee held that the applicant was not entitled to claw back even twelve months of overpayments and had to refund to the respondent monies that it had already deducted from the respondent’s ongoing IRB payments.

[14] The applicant argues that Director’s Delegate Lee incorrectly applied the decision of Perell J. in Marianagayam, and incorrectly found that all the notices were deficient and invalid. At the hearing of this application, the applicant argued that s. 52(3) of the Schedule did not, as Director’s Delegate Lee (and Perell J.) held, create a 12-month cap on insurers in seeking repayment of overpayments, and that Director’s Delegate Lee was incorrect in so holding.

[15] In our view, on a reasonableness standard, Director’s Delegate Lee was entitled on the evidence, the authorities and in this legislative framework to find each of the applicant’s notices to the respondent to be insufficient and invalid, and to distinguish the ruling in Marianayagam. We cannot say that these determinations were unreasonable, particularly given that the repeated errors in three different notice letters from the applicant were made even as counsel for the respondent repeatedly sought to correct the applicant. No significant errors should have remained by the third letter, and it does not render the remaining errors “substantially correct” that they were less egregious than the ones that came before.

[16] The application to set aside the orders of Director’s Delegate Lee is dismissed, and the stay ordered by Myers J. on December 20, 2018, of repayment of monies deducted by the applicant from the respondent’s ongoing IRB entitlement, is lifted.

[17] As to costs, we are all of the view that fair and appropriate costs to the respondent of this application should be $7,000, inclusive of HST and disbursements, on a partial indemnity scale. With respect to the $3,500 in costs set by Myers J. for the stay application, we make no order.

N. Backhouse J.

A.D. Kurke J.

R. Ryan Bell J.

Date: September 10, 2019