COURT FILE NO.: 12-55736

DATE: 2014/04/01

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: TAMMEN ROGER, Plaintiff

AND

THE PERSONAL INSURANCE COMPANY OF CANADA, Defendant

BEFORE: Aitken J.

COUNSEL:
J. Stephen Cavanagh, Counsel for the Plaintiff

Ashlee L. Barber, Counsel for the Defendant

HEARD: March 27, 2014

ENDORSEMENT

Nature of the Proceedings

[1] In this action by an insured against her insurer, the Plaintiff brings a motion for partial summary judgment under r. 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. More specifically, the Plaintiff seeks a ruling that this action is not statute-barred as a result of the limitation period in s. 281.1 of the Insurance Act, R.S.O. 1990, c. I.8. That provision reads as follows:

281.1(1) A mediation proceeding or evaluation under s. 280 or 280.1 or a court proceeding or arbitration under s. 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.

Background Facts

[2] On August 4, 2006, the Plaintiff was involved in a motor vehicle accident. She applied to her insurer, the Defendant, for statutory accident benefits on August 25, 2006. Her application for benefits was accompanied by an OCF-3 form (a disability certificate) signed by her physician. That certificate referred to “neck, head, shoulder, arm, nausea, headaches, pain being experienced to date, sleeplessness and exhaustion”, “neck strain”, “decreased strength and intermittent pins and needles in right hand”, and “minor neck strain followed by myofascial pain and need for physio”.

[3] The Defendant began to pay income replacement benefits to the Plaintiff as of August 9, 2006.

[4] After the passage of 104 weeks, and without asking the Plaintiff for a new disability certificate, the Defendant arranged, under s. 42 of the Statutory Accident Benefits Schedule, O.Reg. 403/96 (“SABS”), for the Plaintiff to be assessed by an occupational therapist, an orthopedic surgeon, and a neurologist, in order to determine whether she met the test for the continuation of her income replacement benefits. Notices of these examinations were sent to the Plaintiff and her lawyer on January 5, 2009. The examinations took place later that month. For the Plaintiff’s benefits to continue after the 104-week mark, she would have to have suffered a complete inability to engage in any employment for which she was reasonably suited by training, education or experience. All three experts concluded that the Plaintiff did not suffer from any such physical inability.

[5] On March 12, 2009, after having received the three insurer’s examination reports, the Defendant notified the Plaintiff that it was unable to make a determination, at that time, regarding her continuing eligibility to receive income replacement benefits beyond the 104-week mark because it had been recommended that she undergo a psychological evaluation. In fact, the orthopedic surgeon had advised that, although the Plaintiff did not suffer from a physiological or anatomical impairment that would limit her ability to be employed, his evaluation had not addressed the possible psychological impact of her accident and subsequent rehabilitation.

[6] On April 22, 2009, the Plaintiff was notified by the Defendant that she had to attend the offices of Dr. Peter Judge, a neuropsychologist, for a further examination under s. 42 of the SABS. The Plaintiff complied, and Dr. Judge issued a 13-page report, dated June 30, 2009, in which he concluded, on page 3, that “Ms. Roger does not suffer a complete psychological inability to engage in any employment for which she is reasonably suited by education, training or experience.”

[7] On July 14, 2009, the Defendant sent to the Plaintiff and to her lawyer, by way of courier, an Explanation of Benefits form (OCF-9) in which the box “Not Eligible/Stoppage of Benefit” was checked and the following statement given as the reasons for the termination of benefits:

Please see attached Insurer Examination report authored by Dr. Judge, dated June 30, 2009 indicating your [sic] do not meet the test to receive post 104 week Income Replacement Benefits. Also, please refer to our correspondence of March 12, 2009 and attached reports comepleted [sic] by Dr. Raynor, Stuart Joliffe & Dr. Halle.

[8] In this notice, the Plaintiff was advised that her income replacement benefits would be terminated effective August 13, 2009. On that date, the last income replacement benefit was sent to the Plaintiff.

[9] In August 2011, the Plaintiff served the Defendant with an Application for Mediation dated August 8, 2011, regarding the termination of her income replacement benefits. The parties attended mediation between June 14, 2012 and September 11, 2012, but no resolution was achieved. At mediation, the Defendant took the position that the mediation was statute-barred under s. 281.1(1) of the Insurance Act and s. 51 of the SABS. The mediator’s report was issued on September 11, 2012. This action was commenced by issuance of a statement of claim on October 15, 2012. If the mediation process was commenced within the limitation period set out in s. 281.1(1) of the Insurance Act, this action was commenced within the timelines set out in s. 281.1(2) of the Insurance Act and s. 51(2) of the SABS.

Motion for Summary Judgment

[10] The parties agree that the issues to be resolved regarding the limitation period can properly be considered on a motion for partial summary judgment under r. 20.04(2)(a). The evidence is clearly and fairly set out in an affidavit and in various documentary exhibits. It allows the court to make the necessary findings of fact, none of which are in dispute. On the summary judgment motion, counsel have the opportunity to fully argue the legal issues. All that remains is to apply the law to the facts. In this case, the motion for summary judgment is a proportionate, more expeditious, and less expensive means than a trial to achieve a just result. (See Hryniak v. Mauldin, 2014 SCC 7, 27 C.L.R. (4th) 1.)

Issues

[11] The three issues argued on this motion are the following:

• Do the Defendant’s admitted failures to comply with the procedural requirements under ss. 37 and 42 of the SABS in regard to insurer’s examinations invalidate its termination of the Plaintiff’s benefits?

• If the Defendant’s termination of benefits was rendered invalid, is the Defendant precluded from relying on the limitation period set out in s. 281.1 of the Insurance Act?

• Does the limitation period under s. 281.1 of the Insurance Act run from the effective date of the termination of benefits or from the date on which notice of termination was given?

Question One: Defendant’s Failure to Comply with s. 37

[12] The Plaintiff submits that the Defendant failed to comply with the procedure set out in ss. 37 and 42 of the SABS in five ways. The Defendant acknowledges that it failed to do so in regard to the first four instances of non-compliance identified by the Plaintiff, but it disputes that there was any non-compliance in regard to the fifth – the provision of reasons for the refusal.

First Non-compliance: s. 37(1)(a)

[13] Under s. 37(1)(a) of the SABS, if an insurer wishes to determine if an insured person is still entitled to a specified benefit, the insurer shall request that the insured person submit, within fifteen business days, a new disability certificate completed as of a date on or after the date of the request. The Defendant did not make any such request of the Plaintiff. Instead, it proceeded to require the Plaintiff to attend for insurer’s examinations under ss. 37(1)(b) and 42 of the SABS.

Second Non-compliance: s. 42(11)3ii

[14] Under s. 42(11)3ii of the SABS, a copy of Dr. Judge’s report had to be given to the Defendant not later than ten business days after the day the examination was completed. Dr. Judge’s report was completed on June 10, 2013 but was not provided to the Defendant until July 2, 2013, sixteen business days later.

Third and Fourth Non-compliances: s. 37(5)

[15] Under s. 37(5) of the SABS, within five business days after receiving the report of an examination under s. 42, the insurer shall give a copy of the report and of the insurer’s determination with respect to the specific benefit to the insured person and to the health practitioner who completed the disability certificate. In the case of Dr. Judge’s report, this provision was breached in two respects. Dr. Judge’s report was received by the Defendant on July 2, 2009 but was only given to the Plaintiff on July 14, 2009, nine business days later. That was the third non-compliance.

[16] As well, Dr. Judge’s report was not sent to any health practitioner who had completed the disability certificate because the Defendant had not requested a disability certificate from the Plaintiff prior to requiring her to submit to Dr. Judge’s examination. That was the fourth non-compliance.

Fifth Non-compliance: s. 37(6)(c)

[17] Under s. 37(6)(c) of the SABS, in the determination sent to the insured along with a copy of the insurer’s examination report, the insurer is obliged to provide reasons for the insurer’s decision regarding benefits. In the OCF-9 form dated July 14, 2009, that the Defendant sent to the Plaintiff along with a copy of Dr. Judge’s report, in the section where reasons for the stoppage of benefits are to be provided, the Defendant stated the following:

[18] The Plaintiff argues that what these supposed “reasons” did was to require the Plaintiff to read through Dr. Judge’s 13-page report to learn why Dr. Judge was of the opinion that she did not meet the test to receive benefits beyond the 104-week mark. That report did not address any physical disability on the part of the Plaintiff; it only addressed a possible psychiatric disability – something that the Plaintiff had never relied on in seeking income replacement benefits. The above quoted passage referred to the OCF-9 form, dated March 12, 2009, that had been sent to the Plaintiff along with the three earlier insurer’s examination reports that dealt with the Plaintiff’s physical condition. That earlier OCF-9 form had simply stated that: “We are unable to make a determination at this time with respect to your ongoing eleigibility [sic] to receive post 104 Income Replacement Benefits as it has been recommended you undergo a Psychological evaluation.” That form did not provide any reasons for a denial based on a physical inability to work because no refusal was issued at that time. The Plaintiff argues that it was not sufficient for the Defendant, in the subsequent July 14, 2009 OCF-9 form, to simply refer back to the three earlier insurer’s examination reports as the reasons for the refusal of her benefits based on a physical inability when the Defendant, itself, had not initially interpreted those reports as justifying such a refusal. Her argument was that she was placed in the position of having to read through 50 pages of medical reports in an effort to infer the Defendant’s reasons for the refusal.

Analysis Regarding Non-Compliance with ss. 37 and 42

[19] As the Plaintiff’s counsel readily acknowledged, the second and third examples of non-compliance with the mandatory provisions under ss. 37 and 42 were minor procedural irregularities involving the insurer not meeting the timelines set out in the SABS. Considered on their own, they fall into the category of errors which should not result in a final determination of rights in favour of the insured. See, for example, Gray v. Pilot Insurance Co. (2006), 2006 22118 (ON SC), 39 C.C.L.I. (4th) 223 (Ont. Sup. Ct. J.) where the court denied the insured’s claim for a declaration that the insurer could not dispute that she was catastrophically impaired in circumstances where the insurer had not complied with two timelines regarding notice under the SABS. Lederman J., at paras. 35-36, stated:

Timelines are important for the purpose to ensure that claims are dealt with expeditiously.

Errors, however, will inevitably occur. Whether they amount to mere procedural irregularities which should be relieved against, or matters of substance, must depend on the circumstances of each case.

[20] What needs to be noted, however, is that, on this motion, the insured is not seeking a final determination of rights in her favour based on the failure of the Defendant to meet various timelines. What she is seeking is a finding that the Defendant cannot get a final determination of rights in its favour in circumstances where the Defendant has not complied with the mandatory timelines.

[21] In this case, the delay of six days over the regulatory timeline for Dr. Judge to deliver his report to the Defendant, and the delay of four days over the regulatory timeline for the Defendant to deliver Dr. Judge’s report to the Plaintiff, are minor errors. There is no evidence that either error had any impact on the Plaintiff or on her ability to pursue her rights. Standing alone, these examples of non-compliance cannot support a finding in favour of the Plaintiff in regard to the limitation issue. That being said, they do illustrate sloppiness on the part of the Defendant in complying with the mandatory provisions in ss. 37 and 42 of the SABS, and that is of some relevance to the court’s consideration of what an appropriate response would be to the more significant examples of non-compliance raised by the Plaintiff.

[22] The most egregious non-compliance by the Defendant with the requirements under ss. 37 and 42 of the SABS was the first instance of non-compliance identified above; namely, the Defendant’s failure to request that the Plaintiff submit a new disability certificate prior to requiring the Plaintiff to submit to insurer’s examinations. Section 37(1) of the SABS reads:

37(1) If an insurer wishes to determine if an insured person is still entitled to a specified benefit, the insurer,

(a) shall request that the insured person submit within 15 business days a new disability certificate completed as of a date on or after the date of the request; and

(b) may notify the insured person that the insurer requires the insured person to be examined under section 42. [emphasis added]

[23] It was held in Yogesvaran v. State Farm Mutual Automobile Insurance Company (2009), FSCO A08-001142, decided by arbitrator Joyce Miller, that an insurer must request a new disability certificate before scheduling s. 42 insurer’s examinations, and that failure to do so invalidates any termination of benefits imposed on the insured. In arriving at this conclusion, Arbitrator Miller made the following observations:

[S]ubsection 37(1) is clear and unambiguous. …

[S]ubsection 37(1) states that an insurer cannot proceed to a section 42 insurer’s examination without first requesting a “new disability certificate”.

I believe the word “new” is in the legislation specifically to prevent an insurer from sitting on a disability certificate for however long it wishes before requesting an insurer’s examination. If there has been a material change in the insured’s medical condition since the last disability certificate and if the insurer does not request an up to date disability certificate, the insured is clearly put at a disadvantage in that the section 42 assessment would be arranged without regard to the material change and consideration as to whether the assessment was reasonable and necessary given the material change.

I find that by requiring Mrs. Yogesvaran to attend a section 42 insurer’s examination with an out dated disability certificate, it placed her in a clear disadvantage. Not only would the section 42 examiner not have the most up to date information from her medical practitioner, but had Mrs. Yogesvaran refused to attend the section 42 insurer’s examination on the basis that a new disability certificate had not been requested, State Farm pursuant to subsections 37(7) and (8) could refuse to pay the specified benefits until she attended the section 42 insurer’s examination. Moreover, an up to date disability certificate may have resulted in State Farm not requiring a section 42 insurer’s examination and Mrs. Yogesvaran would have avoided being subjected to an unnecessary invasive medical examination.

[24] This same reasoning applies in this case.

[25] This aspect of the decision of Arbitrator Miller, namely that s. 37(1)(a) of the SABS is a mandatory provision, was upheld by Delegate Lawrence Blackman on appeal on September 13, 2010 (Appeal PO9-00042).

[26] Arbitrator Miller, in the first instance, went on to decide that State Farm’s failure to properly terminate Mrs. Yogesvaran’s benefits meant that her benefits had not been terminated and that they continued to be owing until the insurer properly terminated such benefits pursuant to s. 37 of the SABS. On appeal, Delegate Blackman concluded that it was within the discretion of the Arbitrator, in the circumstances of that case, to have benefits continue to be paid on an interim basis. However, on the authority of Stranges v. Allstate Insurance Co. of Canada, 2010 ONCA 457, 103 O.R. (3d) 73, leave to appeal to S.C.C. refused, (2011), 284 O.A.C. 397 (note), which will be discussed shortly, Delegate Blackman decided that the insured was still obliged to establish on the merits, at a subsequent arbitration, that she was entitled to continuing benefits.

[27] Delegate Blackman believed that interpreting s. 37(1)(a) of the SABS as a mandatory provision and one which, if breached by the insurer, could lead to the continuation of benefits on an interim basis, was an outcome consistent with the mandate regarding statutory interpretation explained in Bapoo v. Co-operators General Insurance Co. (1997), 1997 6320 (ON CA), 36 O.R. (3d) 616 (C.A.). In that case, at para. 8, the Court of Appeal emphasized the importance of interpreting a legislative provision in its total context, and of adopting an “appropriate” interpretation that can be justified in terms of “(a) its plausibility, that is, its compliance with legislative text; (b) its efficacy, that is, its promotion of the legislative purpose; and (c) its acceptability, that is, the outcome is reasonable and just”, citing Ruth Sullivan & Elmer Driedger, Driedger on the Construction of Statutes, 3rd ed. (Toronto: Butterworths, 1994) at 131.

[28] The wording used in s. 37(1)(a) of the SABS makes it entirely plausible that requesting an up to date disability certificate is a mandatory requirement which acts as a precondition to an insurer terminating benefits under this section. Section 37(1)(a) uses the word “shall”, whereas s. 37(1)(b) uses the word “may”. The difference in this choice of language must mean something. In that one of the chief goals of insurance legislation is the protection of consumers, interpreting s. 37(1)(a) as being mandatory promotes its legislative purpose. Finally, the results that flow from making this provision mandatory are reasonable and just. As Delegate Blackman noted in Yogesvaran:

That an insured’s failure to provide a requested disability certificate would result, by itself, in termination of benefits [under ss. 37(7)], while an insurer turning a blind eye to this provision would have no consequences, would seem unjust and unacceptable and, as stated by the Arbitrator, render clause 37(1)(a) meaningless.

[29] Arbitrator Judith Killoran, in Browne v. Chubb Insurance Company of Canada (2011), FSCO A10-000197, arrived at the same conclusion in regard to the mandatory nature of s. 37(1)(a) of the SABS and the appropriateness of the continuation of benefits on an interim basis as a just and reasonable consequence of failure to comply with this provision.

[30] The next most serious instance of non-compliance with ss. 37 and 42 on the part of the Defendant was its not sending Dr. Judge’s report (and possibly the three other insurer’s examination reports) to the health practitioner who had provided the disability certificate. It did not do so for the simple reason that it had not requested a new disability certificate and therefore had no health practitioner to send the reports to. The provision in s. 37(5) of the SABS requiring the insurer to send a copy of the insurer’s examination reports to the health practitioner who completed the disability certificate is an important provision included in the SABS to provide the insured with additional support in deciding whether to challenge the insurer’s refusal of benefits. It exists for a purpose, and cannot be ignored by the insurer. As further explained by Delegate Blackman in Nadarajah v. RBC General Insurance Company (2013), FSCO Appeal P13-00010:

The importance of an insurer sending the IME reports and its determination to the health practitioner who completed the disability certificate is also linked to section 42.1 “rebuttal reports”. In brief, …, where an insurer conducted an IME and its determination is that the insured person is not entitled to benefits, the insurer shall pay, as provided, for an assessment or examination of the insured “by the original provider”. “Original provider” is defined as including the health professional who completed the disability certificate.

[31] In Nadarajah, Delegate Blackman found that the provisions in s. 37(5) are mandatory. They are clear and unambiguous. They exist to assist the insured in deciding how to respond to the insurer’s refusal of benefits. They cannot be ignored by the insurer. I agree with this assessment.

[32] As Delegate Blackman did in Nadarajah, I find that there was no proper termination of benefits in this case due to the Defendant’s failure to comply with the provisions in ss. 37(1)(c) and 37(5) of the SABS. Having arrived at this conclusion, I see no need to consider whether there was non-compliance with the provisions in s. 37(6)(c) of the SABS regarding the requirement for the insurer to provide reasons for the refusal of benefits.

Question Two: Whether the Limitation Period Started to Run

[33] In Smith v. Co-operators General Insurance Co., 2002, SCC 30, [2002] 2 S.C.R. 129, the Supreme Court emphasized, at para. 11, that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance. In that case, the Court determined that a refusal of benefits notice that did not clearly set out the dispute resolution provisions in the Insurance Act, as was required to be done under s. 71 of the SABS, resulted in the refusal not being proper. Gonthier J., for the majority, stated, at para. 15:

Given that s. 71 of the SABS imposes a requirement to inform the claimant of the dispute resolution process as discussed above, and given that the respondent only informed the appellant of the first step of this process, a proper refusal cannot be said to have been given. Since a proper refusal was not given, and since the limitation period under s. 281(5) [now s. 281.1(1)] of the Insurance Act only begins to run upon a refusal, that limitation period was not triggered by the notice sent … .

[34] In para. 1 of his reasons, Gonthier J. had already clarified that, in deciding that no proper refusal had been made, and therefore that the limitation period had not started to run, he was not coming to any conclusions as to the merits of the insured’s claim for benefits. That determination would have to be made by a trial judge hearing the action. This clarification implied that, although no termination had occurred for the purpose of triggering a limitation period, a termination may have occurred for the purpose of the subsequent hearing on the merits of the insured’s claim.

[35] This distinction was acknowledged in the subsequent case of Stranges. That case also involved the insurer sending a notice of termination of benefits to an insured using the form of notice found wanting in the Smith case. However, what was at issue in the Stranges case, unlike the Smith case, was the continuation of the insured’s benefits. No issue arose in the Stranges case relating to limitation periods. In Stranges, at the Court of Appeal, MacFarland J.A. emphasized that what she was dealing with was whether the insured was entitled to receive ongoing benefits as a result of the inadequacy in the refusal notice; she was not dealing with the question of whether that inadequacy meant that the refusal notice was insufficient to trigger the limitation period. She stated, at paras. 8-10:

Importantly, however, at para. 1 of the reasons [in Smith] Gonthier J. noted:

[T]here was no proper refusal made and the limitation period did not begin to run. The appellant is not barred from bringing her action. However, I make no conclusion about the merits of her claim, which a trial judge must assess. [Emphasis added by MacFarland J.A.]

The inadequate notice did not automatically entitle the insured to payment of benefits. She was still required, as the court acknowledged, to prove her claim.

That same reasoning applies to the facts of this case. The inadequacy of the refusal notice did not entitle the respondent to payment of benefits in perpetuity until proper notice was given or a proper DAC assessment was carried out. The respondent was still required to prove that she was entitled to the continued payment of IRBs because of her continued substantial inability to perform the essential tasks of her employment. Moreover in this case no question of an expired limitation period arises. [Emphasis added.]

[36] The case of Bisnath v. State Farm Mutual Automobile Insurance Co., 2011 ONSC 6316 (Div. Ct.) stands for the same proposition as Stranges; namely, that the failure of an insurer to comply with various requirements in the SABS before terminating benefits does not, in itself, entitle the insured to ongoing benefits before a hearing on the merits of her entitlement to such benefits. It does not speak to the impact such non-compliances have on triggering a limitation period.

[37] In my view, Smith stands for the general proposition that, where an insurer does not comply with the clear and unequivocal procedural requirements set out in ss. 37 and 42 of the SABS in regard to preconditions which, if ignored, place the insured at a disadvantage, the insurer cannot rely on its purported termination of benefits as triggering the commencement of the limitation period under s. 281.1(1).

[38] There is case law to the effect that the insurer may still rely on the purported refusal of benefits to terminate payment of such benefits, pending any mediation, arbitration, or court proceeding to finally determine entitlement to benefits; however, that is a different matter from the question of triggering a limitation period.

[39] In this case, since I have found that the Defendant’s notice of termination of benefits was not properly given due to the Defendant’s non-compliance with ss. 37(1)(a) and 37(5), it follows that the limitation period under s. 281.1(1) of the Insurance Act did not start to run when the Plaintiff received the OCF-9 form dated July 15, 2009. This is the same conclusion arrived at by Delegate Blackman in Nadarajah.

[40] Having arrived at this conclusion, there is no need for me to consider the Plaintiff’s alternate argument as to whether the limitation period in s. 281.1(1) of the Insurance Act starts to run from the date the insured receives notice of a future termination of benefits or whether it runs from the date when the benefits actually cease. In other words, there is no need for me to tackle the thorny question of what the term “the insurer’s refusal to pay the benefit claimed” in s. 281.1(1) of the Insurance Act actually means in the context of this case.

Disposition

[41] The Plaintiff’s motion for partial summary judgment is granted. This action was commenced within the time limit for doing so under s. 281.1 of the Insurance Act. If the parties cannot agree on costs, the Plaintiff shall have twenty days in which to make written submissions. The Defendant may respond within ten days thereafter. Submissions shall be no more than five pages in length.

Aitken J.

Date: April 1, 2014

ONTARIO

SUPERIOR COURT OF JUSTICE

RE: TAMMEN ROGER, Plaintiff,