SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-13-375516

DATE: 20140919

RE: JEVCO INSURANCE COMPANY, Applicant

AND:

GORE MUTUAL INSURANCE COMPANY, Defendant

BEFORE: STEWART J.

COUNSEL:
Darrell March, for the Applicant

David Raposo, for the Respondent

HEARD: February 11, 2014

ENDORSEMENT

Nature of the Appeal

[1] This is an application by way of an appeal brought by Jevco Insurance Company (“Jevco”) from the decision of Arbitrator Shari Novick dated February 11, 2013 concerning a dispute between Jevco and Gore Mutual Insurance Company (“Gore”) over Gore’s obligation to indemnify Jevco for Statutory Accident Benefits paid to its insured.

[2] Jevco’s insured, Wayne Roloson (“Roloson”), was seriously injured in an accident that occurred on August 1, 2001 while operating his motorcycle. The accident was caused by the fault of Gore’s insured, Edna Watkins (“Watkins”).

[3] Roloson sued Watkins for damages as a result of the injuries suffered by him in the accident.

[4] In 2009, Gore settled Roloson’s action on Watkins’ behalf by payment to Roloson of $470,000.

[5] In addition to funds received from Gore to settle the tort action, Roloson received Statutory Accident Benefits paid by Jevco. On November 6, 2008, Jevco paid Roloson $60,714.65 for partial settlement of his Statutory Accident Benefits claim. This amount represented $60,000.00 for past income replacement benefits and $1,714.65 for travel expenses.

[6] On June 16, 2009 Roloson’s claim for Statutory Accident Benefits was fully and finally settled by Jevco in return for a payment to him of an additional $250,000.00. This amount consisted of $42,500.00 for medical benefits, $42,500.00 for rehabilitation benefits, $150,000.00 for income replacement benefits and $15,000.00 for costs.

[7] Accordingly, Jevco requested reimbursement from Gore of those amounts as provided under s. 275 of the Insurance Act, R.S.O. 1990, C. I.8.

[8] Gore does not dispute the fact that Watkins was at fault for the accident and that Gore is liable to reimburse Jevco for accident benefits pursuant to the loss transfer provisions of s. 275 of the Insurance Act. However, Gore takes issue with the appropriateness of the quantum of accident benefits that Jevco paid to Roloson and further maintains that Jevco grossly mishandled the file.

[9] Gore maintained these arguments in the arbitration hearing before Arbitrator Novick. On February 11, 2013, Arbitrator Novick released her decision. In her reasons, she found that there were many examples of conduct by Jevco that put this case over the threshold of “gross mishandling”. She ordered Gore to pay to Jevco the sum of $125,000, an amount considerably less than the amount that Jevco had paid to Roloson to settle his Statutory Accident Benefits claim.

[10] Pursuant to the parties’ Arbitration Agreement dated June 11, 2012, either party may appeal the Arbitrator’s decision on a point of law, or a point of mixed fact and law, to a judge of the Ontario Superior Court of Justice without leave of the Court. Jevco appealed.

Roloson’s Injuries

[11] Jevco relied upon certain medical information and opinions concerning Roloson’s injuries and their effect in determining payment of Statutory Accident Benefits to him. Among these were the following.

[12] After the accident, Roloson was taken by ambulance to Campbellford Memorial Hospital. The Ambulance Call Report indicates that Roloson was conscious but oriented to name only.

[13] After release from hospital, Roloson sought treatment at the Pickering Rehabilitation & Treatment Clinic.

[14] Dr. Bryan Temple, a neurologist, concluded in his July 16, 2003 report that Roloson was suffering from dizziness as a result of the accident. Dr. Temple concluded that Roloson’s chronic lumbar and left leg pain would cause him difficulty with any heavy or demanding physical activities.

[15] Dr. Dana Wilson, an orthopaedic surgeon, concluded in a February 4, 2004 report that Roloson would continue to experience fatigue and would require assistance with physically challenging activities.

[16] Dr. Wilson expressed the further opinion in a supplementary report dated January 2005 that Roloson’s disabled state resulted from the accident and that he had been left at a competitive disadvantage in the workforce as a result of the accident.

[17] Dr. Hugh Cameron, an orthopaedic surgeon, noted in his report of September 12, 2005 that Roloson had sustained a permanent and serious physical injury in the accident.

[18] Dr. Irvin I. Wolkoff, a psychiatrist, concluded in his September 25, 2004 report that Roloson suffered from major depressive disorder with psychotic features. Dr. Wolkoff was of the opinion that Roloson’s psychiatric condition was the direct consequence of the accident.

[19] Dr. K. Lawson, a psychologist, expressed the opinion that Roloson had suffered a mild to moderate psychological impairment as a direct result of the accident. Dr. Lawson diagnosed Roloson as having a cognitive disorder and a pain disorder.

[20] Dr. Soliman Sonbol, a psychiatrist, diagnosed Roloson as having primary delusional disorder and a personality disorder with symptoms of depression.

[21] Dr. Mathoo, a physiatrist, in a report dated October 15, 2008 concluded that Roloson had suffered soft tissue injuries to his low back area superimposed on a longstanding history of mechanical low back pain. Dr. Mathoo concluded that Roloson’s mechanical low back pain would affect his ability to repetitively engage in activities requiring heavy lifting, bending, pushing and pulling.

[22] Roloson attended the Arbitration hearing on June 12, 2012 and gave viva voce evidence regarding his condition since the accident. Roloson testified that he was still in significant pain and could not work as a result of the injuries that he suffered in the accident. He confirmed that he has been receiving regular psychological treatment since the accident. Roloson also confirmed that his application for Canada Pension Plan disability benefits had been approved in March, 2011 and that such benefits had been awarded retroactively to May, 2008.

Gore’s Position

[23] At the arbitration hearing, however, Gore challenged the appropriateness of the quantum of Statutory Accident Benefits paid to Roloson and criticized many features of Jevco’s handling of the assessment of his injuries and the management of his claim.

[24] In particular, Gore pointed to the following:

(a) Jevco had retained the services of O’Hearn Insurance Adjusters Inc. to assist with the handling of Roloson’s Accident Benefits file. As early as August 20, 2001, less than 3 weeks post-accident, O’Hearn was recommending that an insurer examination take place on Roloson, but this was not done.

(b) Roloson had submitted only 4 Treatment Plans which ranged from August 24, 2001 to December 28, 2001.

(c) Jevco was in possession of medical documentation confirming that Roloson suffered from several pre-existing medical conditions.

(d) By way of a report dated March 4, 2005, an independent adjuster, Grant Seppanen, recommended that Jevco review Roloson’s entitlement to benefits. Jevco ignored this recommendation.

(e) Jevco was aware as early as April 11, 2005 that Roloson’s counsel had requested that his client undergo retraining and had repeatedly asked for Jevco to assign a vocational specialist. Jevco did not at any point offer to organize, authorize or fund retraining for Roloson.

(f) In her case management report dated April 15, 2005, Laura Raynor recommended to Jevco that an insurer examination of Roloson should take place. This was not done.

(g) Indeed, the first insurer examination of Roloson did not occur until late 2008. At that time, Roloson was examined by an assessment team composed of Dr. Mathoo, Dr. Lawson, Mr. Yip, and Ms. Perreras. It was the overall opinion of the assessment team that Roloson did not meet the post-104 week income replacement benefits test of “complete inability to engage in any employment for which he is reasonably suited by education, training or experience”. Despite this collective opinion, Jevco settled Roloson’s Statutory Accident Benefits claim by means of a payment toward further income replacement benefits in the amount of $150,000.00.

Findings of the Arbitrator

[25] As noted, Arbitrator Novick agreed with Gore’s submission that Jevco had acted unreasonably in its assessment and payment of Statutory Accident Benefits. Further, she found that Jevco’s conduct amounted to a gross mishandling of the file.

[26] In particular, Arbitrator Novick found that Jevco had failed to follow the recommendations of its own independent adjusters to arrange insurer examinations within one month post-accident. Further, Jevco had issued payment of benefits not covered by the statutory regime, including payment of case manager services for a “non-catastrophic” claimant.

[27] Arbitrator Novick found that Jevco had failed to follow the advice of its case manager to schedule a prompt insurer examination, despite having knowledge at the time that Roloson was not working. Jevco therefore failed to mitigate its exposure to income replacement benefits by not arranging an insurer examination within a reasonable period of time. Insurer examinations were not scheduled until 2008, more than 7 years post-accident. Had Jevco arranged insurer examinations and adjusted the file properly based on the recommendations of its own independent adjusters and case manager, Arbitrator Novick considered that Jevco’s exposure to payment of various benefits would have been significantly reduced.

[28] She also considered that Jevco had acted unreasonably in failing to suspend benefits for non-compliance by Roloson with statutory requirements. Further, she was of the view that Jevco’s payment of medical and rehabilitation benefits in the amount of $85,000.00, when there was only two years left on the policy limits, was excessive in light of the prior “burn rate” and the fact that Roloson had only submitted a total of 4 Treatment Plans in the entire history of the claim.

[29] Arbitrator Novick further found that Jevco had failed to take reasonable steps to assist Roloson in his vocational rehabilitation. Despite the requests of Roloson’s counsel that Jevco arrange for a vocational specialist to be appointed, Jevco failed to assist Roloson in his vocational retraining and return to some level of employment, thereby significantly increasing its exposure.

[30] As a result of these findings, Arbitrator Novick significantly reduced the amount that Gore would otherwise have been required to reimburse Jevco under the Insurance Act.

Should Arbitrator Novick’s decision be set aside?

[31] The parties agree that the standard of review for any arbitrator’s decision as under the Insurance Act is correctness on an issue of law and reasonableness on an issue of fact or mixed fact and law (see: Zurich Insurance Co. v. Personal Insurance Co. [2009] I.L.R. I-4836).

[32] In a case involving mixed fact and law more akin to a factual determination, and given the special expertise of arbitrators in evaluating facts for a determination of dependency for purposes of determining entitlement to Statutory Accident Benefits, an arbitrator’s decision is entitled to deference unless it is unreasonable (see: Oxford Mutual Insurance Company v. Co-Operators General Insurance Company (2006), 2006 37956 (ON CA), 83 O.R. (3d) 591 (Ont. C.A.)).

[33] When a second party insurer from whom reimbursement is sought under the Loss Transfer provisions alleges that the payments made to a claimant by the first insurer were unreasonable, the onus is on the second party insurer to prove that is so. The onus is a strict one, and the second party insurer must demonstrate that the first insurer either acted in bad faith or grossly mishandled the claim such that the amounts paid out that it is seeking to recover are grossly unreasonable (see: Progressive Casualty Insurance v. Market Insurance (Arbitrator Malach, May 13, 1997); Jevco Insurance v. Guardian Insurance (Arbitrator Malach, August 28, 2000); Dominion of Canada v. Royal and Sunalliance (Arbitrator Malach, August 20, 2001); Jevco v. AXA Insurance (Arbitrator Malach, March 9, 2004); Primmum v. Aviva (Arbitrator Jones, March 24, 2008)). It is clear that this situation is to be very much the exception to the normal operation of the reimbursement provision of the Act.

[34] The parties agree that the above is an accurate statement of the legal principles applicable to the issue between them. In my view, these are precisely the legal principles which Arbitrator Novick applied to the facts in evidence before her.

[35] I consider that there was ample evidence before Arbitrator Novick to support the findings she made. In particular, Arbitrator Novick reviewed and considered the evidence before her, and concluded in lengthy and detailed reasons as follows:

There may conceivably be circumstances in which that unusual pattern of payment by an insurer is justified. However, I find that in this case the $310,000 paid out by Jevco in 2008 and 2009 to settle Mr. Roloson’s accident benefits claim was unreasonable. In my view, there are many examples of actions taken by Jevco, and often glaring inaction, that puts this case over the threshold of “gross mishandling”. The most obvious one is the fact that no Insurer Examinations were conducted until late 2008, more than seven years after the Claimant’s application was submitted. The examiners assessed Mr. Roloson at that point against the “post-104 week test” in the Schedule, despite the fact that the two-year point had passed over five years earlier, and his counsel had been consistently requesting since early 2003 that his entitlement to IRB’s be reviewed.

It is not clear why no IE assessments were conducted earlier. The log notes and correspondence between the Jevco representatives and outside advisors such as the IA and case manager contain many recommendations that assessments be conducted, but these were never acted upon. No evidence was called by Jevco to explain or justify these decisions, and I can therefore only conclude that no such evidence exists.

Equally compelling is the fact that numerous requests were made by Mr. Neinstein, counsel to the Claimant, that retraining assistance be provided to Mr. Roloson. Mr. Roloson had dropped out of school in sixth grade and had only performed very heavy types of work before the accident. He had worked successfully as a subcontractor to large companies, and by all accounts, was motivated to work. Jevco had an obligation under the Schedule to facilitate is reintegration into the labour market, which it ignored, despite repeated requests from his counsel to do so.

One may only speculate what the outcome of a structured retraining program would have been. There was some evidence to suggest that Mr. Roloson would have been able to transition to a lighter type of employment with the right support. More germane to this dispute, however, is the fact that if retraining support had been provided by Jevco and had resulted in Mr. Roloson returning to some form of work, his entitlement to IRB’s would certainly have been reduced.

When Ms. Alexander was asked what factors she had taken into account when she instructed her counsel to settle the case for the large amounts set out above, she referred both to experts retained by the Claimant’s counsel, such as David Antflick, as well as some of the assessors who had conducted the IE assessments and noted various limitations experienced by Mr. Roloson. I agree with counsel for Gore’s contention that having chosen to ignore the recommendations made by experts retained by the Claimant’s counsel all along, Jevco should not be permitted to benefit at this late date from referring to and relying on those opinions and recommendations.

I might also be more inclined to consider Jevco’s argument that the $210,000 it paid to settle the Claimant’s IRB claim does not amount to gross mishandling, if the IE assessors had concluded that Mr. Roloson met the “complete inability” test. In fact, none of the four assessors reached this conclusion. Similarly, if the CAT assessments arranged by the insurer that were conducted in late 2008 had determined that the Claimant was catastrophically impaired within the meaning of the Schedule, I would understand Jevco’s interest in settling the IRB claim for over $200,000. In the absence of those findings, however, I can only conclude that the main reason that the Jevco representative decided to pay that amount was because she was aware that the claim had been mishandled for several years, and that Jevco faced significant exposure at the upcoming FSCO arbitration that would likely result in a large award to Mr. Roloson, with significant interest owing and a “special award” potentially added to that.

In addition, I find that the $85,000 paid by Jevco to settle the Claimant’s medical/rehabilitation claims was clearly unreasonable and meets the threshold of “gross mishandling”. While the evidence was not clear and how much treatment was funded by the insurer, it appears that less than $10,000 in treatment costs were submitted by the Claimant from August 2001 to mid-2008. Ms. Alexander confirmed that no amounts were owing for past treatment incurred by Mr. Roloson when she was negotiating the settlement of his claim.

Consequently the $85,000 paid out - $42,500 for medical benefits, and $42,500 for rehabilitation benefits – was all meant to address future treatment needs. Given that the Claimant was not found to be catastrophically impaired, Jevco faced just over two years of exposure to further claims for treatment at the time of the settlement. Ms. Alexander testified that she only considered Mr. Roloson’s future treatment needs in relation to his back injury, and did not consider any treatment he may have required to address his head injury, or psychological needs. In my view, that figure is well beyond the range of “reasonableness” when all of the circumstances are taken into account. A settlement in the range of $20-$25,000 would have been much more in keeping with the evidence known at that time.

[36] I am of the view that these determinations made by Arbitrator Novick are ones of mixed fact and law, trending closer to factual findings. As such, these conclusions are entitled to considerable deference by this Court unless they are shown to be unreasonable (see: Oxford, supra). That onus has not been met in this case.

[37] There have been several cases in which benefits in the loss transfer context have been reduced. Further, one of the questions posed to Arbitrator Novick in the parties’ Arbitration Agreement is: “What is the appropriate indemnity amount, if any, owing to the Applicant?”. It was therefore within the Arbitrator’s jurisdiction to award an adjusted amount for indemnity following the hearing.

[38] Arbitrator Novick was also entitled to find as a fact that Jevco faced possible exposure to a “special award” and its settlement was influenced by this issue created by its own conduct. Arbitrator Novick reviewed all of the documents filed and the witnesses’ evidence tendered at the hearing against this legal backdrop. Hers was an available inference permitted to be drawn from all of the evidence before her.

[39] In summary, there was ample evidence before Arbitrator Novick to support her findings and conclusions which were not unreasonable in the circumstances. Accordingly, there is no basis upon which this Court should interfere with the result on appeal.

Conclusion

[40] For these reasons the application is dismissed.

Costs

[41] If the parties cannot agree on costs, written submissions on that subject may be delivered by the Respondent within 20 days of today’s date, and by the Applicant within 15 days thereafter.

STEWART J.

Date: September 19, 2014