Van Galder v. Economical Mutual Insurance Company 2015 ONSC 3261

COURT FILE NO.: CV-14-61602

DATE: 2015/05/21

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Anna Marie Van Galder

Applicant

– and –

Economical Mutual Insurance Company

Respondents

Joseph Y. Obagi, for the Applicant

Christopher J. Schnarr and Tim Crljenica, for the Respondents

HEARD AT OTTAWA: January 29, 2015

REASONS FOR JUDGMENT

KERSHMAN J.

Introduction:

1The Applicant was badly injured in a motor vehicle accident on January 20, 2004. From August 1, 2005 to January 1, 2006, Economical Mutual Insurance Company paid for the Applicant’s Attendant Care and Housekeeping Benefits at the maximum payable amount for non-catastrophic cases, being $3,000.00 per month. On January 20, 2006, the Respondent insurer ceased paying these benefit, on the basis that the Applicant did not sustain a “catastrophic impairment” within the meaning of the Statutory Accident Benefits Schedule (SABS).

2The Applicant submitted four separate applications for determination of a catastrophic impairment. The fourth application resulted in the Respondent’s medical examiners evaluating the Applicant’s injuries. On July 9, 2013, reports from the Respondent’s medical examiners confirmed that the Applicant sustained: (a) a Whole Person Impairment of 60%; and, (b) a Class 4 Marked Impairment, as a result of the accident. On July 19, 2013, the Respondent conceded that the Applicant has sustained catastrophic impairment within the meaning of the SABS.

3This litigation is the result of the Respondent refusing to pay interest on the arrears of: (1) $2,407.47 in Attendant Care Benefits per month from August 1, 2005, through to January 1, 2006; and (2) $1,325.87 in Attendant Care Benefits and $100.00 per month in housekeeping benefits from January 20, 2006.

Applicant’s Position

4The Applicant contends that the Respondent failed to pay benefits due and owing to her in accordance with the SABS, and that the Respondent must now pay interest dating back to the first withheld payment. In particular, the Applicant seeks an Order that she is entitled to interest in respect of all amounts to which she was entitled for attendant care and housekeeping costs at a rate of two percent, in accordance with s. 46 of the SABS; she seeks interest on her Attendant Care Benefits from August 1, 2005, and on her Housekeeping Benefits from January 20, 2006. She also seeks the costs of this application.

Respondent’s Position

5The Respondent contends that interest is only an appropriate remedy under the SABS where an insurer has failed to pay an insured their accident benefits within the timelines (O. Reg. 34/10, effective September 1, 2010 [“2010 SABS”]). The Respondent submits that the Applicant was not entitled to statutory benefits until July 23, 2013 (the date of her catastrophic determination). Because the Respondent paid out within the required timelines pursuant to the SABS, they should not be required to pay interest as claimed.

6The Respondent submits that it paid the Applicant’s Attendant Care and Housekeeping Benefits in accordance with the Statutory Accident Benefits Schedule, O. Reg. 403/96 [“1996 SABS”]. Between January 20, 2004, and January 20, 2006, no applications for Determination of a Catastrophic Impairment were received by the Respondent. As such, the Applicant’s benefits were discontinued on January 20, 2004—104 weeks after the date of the accident—in accordance with the Applicant’s policy limits under the 1996 SABS.

7Subsequent to the Applicant’s examination by the Respondent’s medical examiner, on July 9, 2013, the Applicant was declared to have met the ss. 3(2)(f) and (g) catastrophic impairment sections of the 2010 SABS. In accordance with the 2010 SABS, the Respondent provided the reports and informed the Applicant of the results of her Catastrophic Determination on July 19, 2013.

8The Respondent then paid the Applicant: $133,244.05 in Attendant Care Benefits for the period between the January 20, 2006, and July 23, 2013; $802.23 in interest at a rate of two percent for the time between the date payment was required and the date payment occurred; $40,400 in Housekeeping Benefits for the period between January 20, 2006, and July 23, 2013; and $3,680.18 in interest for the period between the date the payment was required and the date the payment occurred.

9No interest has been paid for the period between the discontinuation of benefits on January 20, 2006, and the date of the Catastrophic Injury Determination and notification to the Applicant, being July 23, 2013.

Issue:

What is the amount of interest owing, if any, from the Respondent to the Applicant?

Analysis:

Amendments to the SABS

10There were a number of amendments to the SABS between 1990 and 2010. The Court of Appeal provided a summary of these changes in Zacharias v. Zurich Insurance Co.(2013), 2013 ONCA 482 (Ont. C.A.), explaining, at paras. 10-14:

In 1990, the Ontario legislature enacted the province's first extensive no-fault insurance plan: see Lento v. Castaldo (1993), 1993 3389 (ON CA), 15 O.R. (3d) 129 (Ont. C.A.). Known as the Ontario Motorist Protection Plan (the "OMPP"), the new regime introduced a threshold system whereby individuals could pursue remedies in tort for injuries sustained in motor vehicle accidents only where the injuries were physical, permanent and serious. In exchange for significantly restricting the scope of traditional tort rights, the OMPP provided for enhanced no-fault benefits and a structure to ensure prompt payment of those benefits. The details of the no-fault benefits regime are provided by regulation, commonly referred to as SABS.

As set out above, the focus of this appeal is the interpretation of s. 24(4) of SABS 1990. However, subsequent SABS, summarized in the next three paragraphs, provide context.

In 1994, the legislature amended aspects of the no-fault regime and a new benefits schedule came into force: see Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and Before November 1, 1996, O. Reg. 776/93 ("SABS 1994").Section 68 of SABS 1994, the provision relating to interest on overdue amounts owed to a claimant, is differently worded than s. 24(4) of SABS 1990.Section 68provides as follows:

If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly. [Emphasis added]

The interest provision in the next iteration of SABS contained the same language as that found in s. 68 of SABS 1994: see Statutory Accident Benefits Schedule — Accidents on or After November 1, 1996, O. Reg. 403/96, s. 46(2).

Section 51(2) of Statutory Accident Benefits Schedule — Effective September 1, 2010, O. Reg. 34/10, the most recent benefits schedule, contains the same language as the previous two SABS, with the exception of a reduction in the rate of interest from two per cent compounded monthly to one per cent per month, compounded monthly.

11In looking to the version of SABS in place at the time of the accident (being the version in effect from December 24, 2003, to June 12, 2005), s. 46(1) states:

46. (1) An amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this Part.

(2) If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.

12The version of SABS in place at the time that the Applicant was declared catastrophically injured (being the version in effect from June 1, 2012, to December 16, 2013) states:

51. (1) An amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this Regulation. O. Reg. 34/10, s. 51 (1).

(2) If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue until it is paid, at the rate of 1 per cent per month, compounded monthly. O. Reg. 34/10, s. 51 (2).

Overdue Interest

13The crux of the issue in this case is the proper definition of “overdue” within the SABS. The Applicant submits that the amounts were overdue in the sense that she was catastrophically injured since the time of the accident, and therefore any shortfall in the amounts received between August 1, 2005, and January 1, 2006, as well as the benefits that were terminated after January 20, 2006, were amounts due and owing—accruing interest at a rate of two percent. The Respondent submits that the Applicant was paid what she was owed as a non-catastrophically injured person for two years after the date of the accident, as well as the shortfall that became apparent upon her Catastrophic Injury Determination. The Respondent submits that it cannot be responsible for the interest on those amounts that were not overdue, in the sense that they were not owing absent a catastrophic injury application and determination.

14Both the Applicant and Respondent provided case law discussing the policy underlying SABS interest consequences for insurers. Attavar v. Allstate Insurance Co. of Canada (2003), 2003 7430 (ON CA), 63 O.R. (3d) 199, 119 A.C.W.S. (3d) 1009 (Ont. C.A.), involved an appeal of the trial judge’s order for the defendant insurer to pay interest fourteen days after receiving the insured plaintiff’s application for certain benefits. Justice Laskin stated, at paras 49-50:

Although the amount of interest provided for in s. 68 is above the bank rate, I, like several arbitrators, regard s. 68 as compensatory, not punitive. The provision is designed to compensate insureds for the time value of money and to encourage insurers to pay accident benefits promptly. Without a provision like s. 68, insurers would have an incentive to delay paying benefits properly owing, thus forcing insureds to litigate their claims. I agree with the comments of Arbitrator McMahon in Urquhart v. Zurich Insurance Co., [1998] O.I.C.D. No. 34 (Ont. Insurance Comm.) at para. 14:

In addition to the specific intent of compensating the insured for the delay in obtaining the benefit, it cannot be ignored that the interest provisions are part of a larger scheme designed to encourage Insurers to pay benefits in a prompt fashion. In many cases insured persons are not in a position to pay for supplementary treatments or services out of their own resources.

15And, with the similar comments of the Director's Delegate Naylor in Sebastian v. Canadian Surety Co., [1998] O.F.S.C.I.D. No. 130 (Ont. Insurance Comm.) at para. 31:

Canadian Surety characterised the interest rate as punitive, designed to punish insurers for reprehensible behaviour. In my view, the interest component in the benefits scheme should be seen as remedial. It is designed not only to compensate applicants for the value of money withheld but to further the system's fundamental goal of ensuring prompt payment of benefits for an injured person's medical and vocational rehabilitation, their care or their day-to-day financial support.

16In a subsequent decision, Grigorff v. Wawanesa, 2012 ONSC 5313, [2012] O.J. no. 4497, Justice Wilson relied on the comments of Justice Laskin in Attavar to justify the payment of interest on underpaid Attendant Care Benefits from the time the costs were incurred. Justice Wilson found that while the insurance company paid what was reasonable, it did not excuse them from paying interest on underpaid expenses. At paras. 17 to 20, Justice Wilson stated:

While Mr. Kirby submitted that Attavar is not applicable to the facts of the case before me, I do not agree. Justice Laskin considered the broader issue of whether it was fair that the insurer be required to pay interest pursuant to the Regulations when it had paid a reasonable amount for the benefit and could not have known what amount would be awarded by the trial judge at a later date. Justice Laskin rejected this argument, based on the wording of the SABS and the underlying policy and I agree with his analysis and comments.

If the intention of the legislators was that insurers would not be subject to the interest payments on amounts that were overdue if they had in good faith paid a different amount, that could have been specified in the SABS and it was not. In looking at the policy reasons, the situation in Attavar is not materially different than the situation before me. In both cases, payments were made by insurers and at a later date, findings were made that a higher amount ought to have been paid. The question then becomes whether the insurer ought to pay interest from the time stipulated in the Regulations even though the insurer had no way of knowing the payments they had made were not sufficient.

I concur with the view of Justice Laskin that the interest component in the Regulations was not intended to be punitive but rather to ensure that insureds are paid benefits promptly.

I agree with the submission of counsel for the Plaintiff that the situation with respect to interest on amounts the court finds due for accident benefits is no different than a damages claim an insurer must pay after a trial. Even though the insurer cannot know the correct amount of damages to pay until there is a decision of the court, the insurer is nevertheless required to pay interest from the date set out in the Courts of Justice Act, R.S.O. 1990, c. C.43, which date is many months or years prior to the court's decision. The fact that Wawanesa did not know the amount of the attendant care benefit being sought until the report of Ms. Liffshitz in February 2009 does not mean that is the date that the interest on the benefit commences to run. The provisions in the Regulations are clear that the interest runs from the day the payment became overdue.

17The policy cited by Justice Wilson and Justice Laskin is applicable to the case at hand. Payments were made by the Respondent and at a later date (at the time of the finding of a catastrophic injury), findings were made that a higher amount ought to have been paid. Given that the intent of the legislation is compensatory, it is irrelevant that the Respondent insurer paid less on a good faith basis.

18The Court of Appeal in Zacharais firmly stated, at para 38: “[t]here is no dispute over the legislative intent of the requirement that insurers pay interest on overdue amounts owed to insureds. That intent is to compensate insureds for the loss of the time value of money and to encourage insurers to pay accident benefits promptly.” In Zacharais, the court also rejected the argument that the 1990 SABS prevented interest from being treated as an “overdue” payment (see para 45). If interest were precluded from being considered part of an overdue amount this would lead to the illogical result of an insurer's interest obligations never become overdue. Moreover, this would undermine the obvious intent of the legislation.

19Based on the Court’s reading of the Attavar, the Court cannot accept the Respondent’s submissions on that case. While it is true that unlike in Attavar, the insurer in this case paid the proper amount of benefits owing following the receipt of the claimant’s application, the intention of the legislation was not that insurers would avoid interest payments on amounts that were overdue if they had in good faith paid a different amount or stopped payments in good faith; the regime is compensatory.

20While it is true that in Attavar and Grigorff, the claimants applied for a benefit within the prescribed time limit, which was rejected and subsequently accepted, the Court does not find that this fact renders the policy underlying those decisions inapplicable to this case.

21Once a benefit is applied for an insurer will become responsible for interest on amounts that are found to be overdue, despite any good faith payments made in the interim. This is reflected by the wording of section 40(3.1) of the 2003-2005 versions of the SABS, which states:

40. (1) An insured person who sustains an impairment as a result of an accident may apply to the insurer for a determination of whether the impairment is a catastrophic impairment.

(2) The insurer shall, within 30 days after it receives the application,

(a) determine that the impairment is a catastrophic impairment and give the insured person notice of the determination;

(b) determine that the impairment is not a catastrophic impairment and give the insured person notice of the determination, including the reasons for the determination; or

(3) If the insured person receives a notice under clause (2) (b) and the insured person disputes the insurer's determination, the insured person may require that he or she be assessed by a designated assessment centre in accordance with section 43. O. Reg. 403/96, s. 40 (3).

(3.1) Despite clause 19 (2) (a), if an application under subsection (1) is made within 104 weeks after the accident and a designated assessment is required under this section, the insurer shall continue to pay the insured person the attendant care benefit in the amount that was being paid before the notice under clause (2) (c) or subsection (3) was given, pending receipt of the report from the designated assessment centre.

22Section 40(3) of the 2010 versions of the SABS, states:

(3) If an application is made under this section not more than 104 weeks after the accident and, immediately before the application was made, the insured person was receiving attendant care benefits,

(a) the insurer shall continue to pay Attendant Care Benefits to the insured person during the period before the insurer makes a determination under this section; and (b) the amount of the Attendant Care Benefits for the period referred to in clause (a) shall be determined on the assumption that the insured person's impairment is a catastrophic impairment.

23Indeed, the aforementioned provisions indicate that there is an onus on the insured person to apply for a Catastrophic Injury Determination within the prescribed time limits.

24In evidence before the Court is a letter to the Applicant, dated December 22, 2005, informing her that her benefits will be terminated as of January 20, 2006. Between February 10, 2004, and November 30, 2005, the Applicant underwent nine assessments for coverage of her attendant care needs. Between January 20, 2006, and January 22, 2010, the Applicant underwent more assessments and submitted three separate catastrophic applications: two were withdrawn by the submitting physicians and one was declined by the Respondent for failing to meet the requirements set out in the SABS. In the 2009 application, it is first noted that the Applicant underwent surgery for the amputation of her ankle. One would expect that a great deal of the Applicant’s energy and resources went towards preparing for and recovering from this surgery. The fourth application to the insurer, submitted on September 6, 2012, was accepted by Economical, despite its errors. It is also worth noting that between 2004 to 2012, the Applicant was assigned eight different claim adjusters.

25One can see that during the relevant time period, the Applicant was rigorously undergoing medical assessments; all the while dealing with chronic pain and the amputation of a limb. She experienced many changes in doctors and insurance adjusters. When one is catastrophically injured, their focus is, quite appropriately, on dealing with their new health issues and finding a new way of life. It is easy to miss a deadline, or become confused about the purpose of so many medical assessments and applications.

26The Applicant in this case missed the 104 week deadline, of which she received less than a month’s warning, over the Christmas holidays, with no instruction regarding her right to apply for a Catastrophic Injury Determination or re-assessment from a designated assessment centre. These issues were compounded when the applications that were finally submitted were filled out incorrectly by numerous doctors, and or rejected by the insurer.

27On the facts of this case, the Court finds that it would be inequitable to deny the Applicant the interest on the costs she incurred as a result of her delayed Catastrophic Injury Determination. The intention of SABS interest regime is to compensate victims; it is not punitive. While the Respondent paid the amount they felt was owed in good faith, the Court finds that the Applicant’s subsequent Catastrophic Injury Determination rendered additional amounts overdue and owing to the Applicant in this case; this finding is specific to the Applicant in this case in light of her circumstances and the numerous applications that were rejected or withdrawn through no fault of her own. As such, these overdue amounts will attract interest.

28The Court acknowledges the Respondent’s submission that if interest were due and payable immediately upon a Catastrophic Determination, it would incentivise an insured persons to delay their catastrophic claim in order to accrue interest. The Court does not intend this. A catastrophic injury is a serious one; catastrophically injured people require assistance to perform their activities of everyday living and to cover medical expenses. The nature of these expenses are such that they cannot be forgone by a victim or denied by an insurer, with the aim of accruing or avoiding costs. This is why the interest regime is compensatory in nature, acknowledging that the costs are incurred no matter how they are paid.

29The Respondent also submitted that awarding interest immediately after a Catastrophic Injury Determination would create difficulty for insurers who seek to properly set aside appropriate reserves for claim files left open beyond the 104 week date. The Court does not see this as an issue, as this ruling is meant to apply only to the narrow factual situation before the Court; it is not to apply more broadly to allow any insured to obtain interest on amounts left unapplied for after 104 weeks. Nor is does it go so far as to say that interest will always be overdue immediately after a Catastrophic Injury Determination.

30For the aforesaid reasons, the Court finds that the Applicant succeeds. She is entitled to interest on the overdue Attendant Care Benefits as of August 1, 2005, at a rate of two percent. She is also entitled to interest on her Housekeeping Benefits from January 20, 2006, at a rate of two percent.

31The parties shall be given 14 days to attempt to resolve the issue of costs. If there is no agreement, the parties shall make an appointment with the Trial Coordinator to attend before the Court at 9:30 a.m. on an appropriate date. Each side will have 10 minutes to argue their position as to costs and shall provide Cost Outlines.

32Order accordingly.