Bustamante v. The Guarantee Company of North America

CITATION: 2014 ONSC 6978

COURT FILE NO.: 12-38399

DATE: 2014-12-04

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Angela Bustamante, plaintiff

AND: The Guarantee Company of North America

BEFORE: Mr Justice Ramsay

COUNSEL: Mr Sean Oostdyk for the plaintiff; Ms Caroline Thériault for the defendant

HEARD: 2014-12-02 at Hamilton

ENDORSEMENT

[1] The plaintiff is suing her accident benefits insurer for denying benefits. The defendant moves for summary judgment. The case is one of a series of cases in which clients of Ferro & Company were injured in car accidents, income replacement benefits were paid and non-earner benefits refused, and years later the insured asked for non-earner benefits, and when refused, went to mediation and then sued. The other cases are Sietzema v. Economical Insurance, 2014 ONCA 111, leave to appeal refused [2014] SCCA No. 172; Sagan v. Dominion of Canada General Insurance Co., 2014 ONCA 720; Bomberry v. Conseco Insurance Co., file CV-12-3409 an oral judgment of Carpenter-Gunn J. given November 10, 2014; Katanic v. State Farm Mutual Automobile Insurance Co., 2013 ONSC 5103; and Steele v. Intact Insurance Company, 2014 ONSC 6999. In these cases, the actions were dismissed on summary judgment on the ground that they had been filed after the expiry of the limitation period in the Insurance Act. The same result was reached after a trial in Blake v. Dominion of Canada General Insurance Co., 2013 ONSC 6069. In Blake, non-earner benefits were sought after caregiver benefits terminated.

[2] The plaintiff was injured in a motor vehicle accident on June 3, 2004. She was employed as a hairdresser. The defendant promptly gave notice to the defendant, which sent her the application package for accident benefits. On August 18, 2004, with the help of her lawyer, she filed an application for accident benefits (OCF-1), together with a disability certificate (OCF-3). The application does not specify whether the applicant is asking for income replacement, non-earner or caregiver benefits. The disability certificate deals with the criteria for all three.

[3] On the disability certificate, to the questions “Is the applicant substantially unable to perform the essential tasks of her employment at the time of the accident as a result of and within 104 weeks of the accident?” (the income replacement criterion) and “Does the applicant suffer a complete inability to carry on a normal life?” (the non-earner benefits criterion) the doctor answered “Yes.”

[4] Accordingly, the defendant, recognizing the possibility that the plaintiff could be entitled to more than one type of benefit, sent the plaintiff an election form, OCF-10. The plaintiff returned it on August 20, 2004, indicating her election of income replacement benefits. The income replacement benefit would pay her $344 a week. The non-earner benefit would have paid $185 a week.

[5] On September 1, 2004 the defendant wrote to the plaintiff to advise her that she would be given income replacement benefits. She was also told, “As you qualify for an income replacement benefit, you are not eligible to receive a non-earner benefit.” She was also informed of her right to dispute the refusal and the limitation period for doing so.

[6] In 2006 the plaintiff underwent further assessments in anticipation of the 104th week of payment. Under s.5(2) of the applicable Statutory Accident Benefits Schedule (O.Reg. 403/96), the insurer is not required to pay an income replacement benefit,

(b) for any period longer than 104 weeks of disability, unless, as a result of the accident, the insured person is suffering a complete inability to engage in any employment for which he or she is reasonably suited by education, training or experience.

[7] On July 26, 2006 the defendant discontinued income replacement benefits. Based on the results of the recent assessments it was of the view that the plaintiff did not meet the criterion for income replacement past 104 weeks. The plaintiff was so notified in writing, together with information about her right to dispute the discontinuation.

[8] The plaintiff returned to full time work in September 2006.

[9] On September 25, 2009 the plaintiff, through her lawyer, wrote to the defendant to apply for non-earner benefits. The defendant wrote back to request a disability certificate on November 13, 2009, December 4, 2009 and December 29, 2009. None came, although the defendant had three – her doctor, Dr Milio, had completed the original OCF-3 from 2004, and two more, one on September 28, 2005 and another on May 10, 2006. They all answered “Yes” to the criterion for non-earner benefits. The defendant denied the application on January 19, 2010, saying “As you have not complied with Sections 35(2) and 33(1) of the Statutory Accident Benefits Schedule, we have determined that you are not entitled to a non-earner benefit in accordance with Sections 33(2), 35(6) and 35(13) of [the Schedule].” The defendant at the same time included a notice with respect to her right to dispute the refusal.

[10] On June 6, 2011 the plaintiff got a disability certificate from Dr Bulanski. The criterion question for non-earner benefits was marked “Yes” and the doctor wrote in “cannot reach overhead, extended reach hairdressing, difficulty in small grip as well.” The plaintiff applied for mediation on June 17, 2011. The mediator’s report was issued August 30, 2012. The statement of claim was filed on November 28, 2012.

[11] The plaintiff claimed for breach of contract for refusing accident benefits and for mental distress caused by bad faith in the adjustment of the claim. The defendant moves for summary judgment on the contract claim on the ground that the limitation period has expired, and on the bad faith claims on the additional ground that there is no issue that requires a trial.

The limitation period for claiming non-earner benefits

[12] The Insurance Act, RSO 1990, c. I.8 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.

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

(2) Despite subsection (1), a proceeding or arbitration under clause 281 (1) (a) or (b) may be commenced,

(a) if there is an evaluation under section 280.1, within 30 days after the person performing the evaluation reports to the parties under clause 280.1 (4) (b);

(b) if mediation fails but there is no evaluation under section 280.1, within 90 days after the mediator reports to the parties under subsection 280 (8).

[13] The relevant accident benefits schedule for the accident in the case at bar is the one proclaimed by O.Reg. 403/96, which provides:

4. (1) The insurer shall pay an insured person who sustains an impairment as a result of an accident an income replacement benefit if the insured person meets any of the following qualifications:

5. 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.

6. The insured person,

i. was not employed at the time of the accident,

ii. was employed for at least 26 weeks during the 52 weeks before the accident or was receiving benefits under the Employment Insurance Act (Canada) at the time of the accident,

iii. was 16 years of age or more or was excused from attendance at school under the Education Act at the time of the accident, and

iv. as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of the employment in which the insured person spent the most time during the 52 weeks before the accident.

12. (1) The insurer shall pay an insured person who sustains an impairment as a result of an accident a non-earner benefit if the insured person meets any of the following qualifications:

13. The insured person suffers a complete inability to carry on a normal life as a result of and within 104 weeks after the accident and does not qualify for an income replacement benefit.

14. The insured person suffers a complete inability to carry on a normal life as a result of and within 104 weeks after the accident, received a caregiver benefit as a result of the accident and there is no longer a person in need of care.

15. The insured person suffers a complete inability to carry on a normal life as a result of and within 104 weeks after the accident and,

i. was enrolled on a full-time basis in elementary, secondary or post-secondary education at the time of the accident, or

ii. completed his or her education less than one year before the accident and was not employed, after completing his or her education and before the accident, in an employment that reflected his or her education and training.

13. (1) The insurer shall pay an insured person who sustains an impairment as a result of an accident a caregiver benefit if the insured person meets all of the following qualifications:

14. At the time of the accident,

i. the insured person was residing with a person in need of care, and

ii. the insured person was the primary caregiver for the person in need of care and did not receive any remuneration for engaging in caregiving activities.

2. As a result of and within 104 weeks after the accident, the insured person suffers a substantial inability to engage in the caregiving activities in which he or she engaged at the time of the accident.

3. (1) A person’s failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation.

(2) Subsection (1) does not apply to the time limits set out in section 51.

32. (1) A person shall notify the insurer of his or her intention to apply for a benefit under this Regulation.

(1.1) A person shall notify the insurer under subsection (1) no later than,

(a) the 30th day after the circumstances arose that gave rise to the entitlement to the benefit, or as soon as practicable after that day, if those circumstances arose as a result of an accident that occurred before October 1, 2003; or

(b) the seventh day after the circumstances arose that give rise to the entitlement to the benefit, or as soon as practicable after that day, if those circumstances arose as a result of an accident that occurred on or after October 1, 2003.

35. (1) In this section and section 37,

“specified benefit” means an income replacement benefit, non-earner benefit, caregiver benefit or a payment for housekeeping or home maintenance services under section 22.

(2) An insured person who applies for a specified benefit shall submit with the application a disability certificate completed no earlier than 10 business days before the date the application is submitted.

(6) An insurer may make a determination that an insured person is not entitled to a specified benefit if,

(a) the insured person failed or refused to submit the completed disability certificate required under subsection (2);

36. (1) Only one of the following benefits may be paid to a person in respect of a period of time:

37. An income replacement benefit.

38. A non-earner benefit.

39. A caregiver benefit.

(2) If a person’s application indicates that he or she may qualify for more than one of the benefits referred to in subsection (1), the insurer shall notify the person that he or she must elect within 30 days after receiving the notice which benefit he or she wishes to receive.

51. (1) A mediation proceeding or evaluation under section 280 or 280.1 of the Insurance Act or a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Act in respect of a benefit under this Regulation shall be commenced within two years after the insurer’s refusal to pay the amount claimed.

(2) Despite subsection (1), a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Insurance Act may be commenced within 90 days after the mediator reports to the parties under subsection 280 (8) of the Act or within 30 days after the person performing the evaluation provides a report to the parties under section 280.1 of the Act, whichever is later.

[14] The plaintiff’s argument is concisely and helpfully summarized by her counsel as follows:

Shortly before the time of the purported denial of the non-earner benefit (September 1, 2004) the plaintiff had elected to receive the income replacement benefit, an election that was required by the insurance company before they adjusted the weekly benefit. Therefore, there was no claim to the non-earner benefit at the time of the denial the defendant seeks to rely upon. Section 281.1 of the Insurance Act and section 51 of the SABS require a benefit to be claimed and then, and only then, can there be a denial of the benefit that triggers the statutory two year limitation period.

The non-earner benefit was claimed and adjusted on its merits in 2009 and 2010 at which time a valid denial was made that did trigger the limitation period and the plaintiff commenced her claim within 2 years of that denial.

[15] Section 281.1 of the Insurance Act starts the two-year limitation period running at the refusal of the benefit subject only to brief extensions to await reports from a mediator or evaluator. A clear and unequivocal refusal is all that is required: Turner v. State Farm Mutual Automobile Insurance Co. (2005), 2005 2551 (ON CA), 195 O.A.C. 61. An erroneous reason for refusing does not affect the validity of the refusal for the purpose of s.281.1 of the Insurance Act: Turner, supra; Sietzema v. Economical Insurance, 2014 ONCA 111, leave to appeal refused [2014] SCCA No. 172. The facts in Sietzema are not distinguishable from facts in the case at bar in any significant respect. The only differences are that in Sietzema, the disability certificate said “No” to the criterion for non-earner benefits, while here the certificate said “Yes” and secondly, it is not clear whether the election of benefits was made. That is not significant, because the Court of Appeal has made it clear that that it is the refusal that counts for the purposes of section 281.1, not what went before it: see Turner, supra; Sietzema, supra; and Sagan v. Dominion of Canada General Insurance Company, 2014 ONCA 720.

[16] In Sagan the insurer refused benefits because there was no disability certificate. The lack of a disability certificate was held not to affect the validity of the refusal. I do not see why an election or lack thereof would make any difference, either. I interpret the application as an application for any available benefit. The election form simply determines which one the applicant prefers to receive if she turns out to be eligible for more than one. But in any event it is the refusal that starts the limitation period running.

[17] The limitation period must have begun to run on September 1, 2004, when non-earner benefits were refused or July 26, 2006, when income replacement was discontinued. I think it is the former based on Haldenby v. Dominion of Canada General Insurance Co., 2001 16603 (ON CA), [2001] O.J. No. 3317 (CA), but it makes no difference to the plaintiff, who did not sue within two years of either date. Whether the limitation period expired in 2006 or 2008 she was not entitled to set the clock back by filing a new application in 2009: Sagan, supra. The action is statute barred and the defendant is therefore entitled to summary judgment.

[18] The plaintiff was not entitled to make a second application asking for non-earner benefits instead of income replacement in the circumstances. The Schedule (paragraph 12 2.) provides for replacement of caregiver benefits by non-earner benefits if there is no longer a person to care for, but it makes no other provision for replacement of one type of benefit by another in any circumstances.

Bad faith and mental distress

[19] The plaintiff pleads bad faith in administering the claim and resultant mental distress. In her affidavit she says that she suffered mental distress. She cites a few steps taken by the defendant that took too long, medical treatments that were refused and ultimately the refusal of non-earner benefits itself.

[20] The defendant refers to these claims as the extra-contractual claims and submits that they are not supported by the evidence.

[21] These claims strike me as claims that arise from the contract. They are not really extra-contractual. It is only because of the contract that the defendant owed the plaintiff the duty of utmost good faith. They are governed by the statutory accident benefits regime, including its limitation period: Arsenault v. Dumfries Mutual Insurance Co., 2002 23580 (ON CA), [2002] O.J. No. 4 (CA). Many of the impugned acts took place long after the plaintiff’s right to benefits was extinguished by s. 281.1.

[22] Quite apart from the limitation problem a trial is not necessary to decide that the claims will not succeed. It is plain and obvious. Taking the evidence at its highest, the defendant has not made out a case for bad faith or infliction of mental distress. The defendant administered the claim as one would expect a claim to be administered. It made its decisions based on the medical advice it received in the light of the law as it understood it. It even used an independent adjuster. It granted some requests for treatment and denied others. The facts do not permit me to infer that the defendant engaged in deliberate delaying tactics. The defendant is entitled to use its best judgment in refusing a claim. The evidence does not show that it did any more than that. If an insurer denies benefits that should have been paid, it can be corrected by the court or an arbitrator.

[23] In particular, the plaintiff claimed in a letter to the insurer from her lawyer that the adjuster steered her toward the income replacement benefit when she might have been better off with the non-earner benefit. In fact, the adjuster did not meet the plaintiff until after she filed her election.

[24] Furthermore, the plaintiff returned to full time work within two months of the discontinuation of income replacement, which raises a legitimate question as to how distressed she really was. On discovery she refused to answer questions about the extent of her mental distress. Using the power conferred by Rule 20.04(2.1) 3., I infer that she was not mentally distressed to any significant extent.

[25] Decision

[26] Summary judgment is granted. The action is dismissed. The parties may make written submissions to costs, the defendant by December 11 next, the plaintiff by December 18.

J.A. Ramsay J.

Date: 2014-12-04