Court File and Parties

COURT FILE NO.: 11-25909 and 12-38604 DATE: 2016-08-31 ONTARIO SUPERIOR COURT OF JUSTICE

Court File No. 11-25909

B E T W E E N:

TIMOTHY WATKINS Plaintiff Andrew Rudder, for the Plaintiff

- and -

WESTERN ASSURANCE COMPANY Defendant Danielle Lecours, for the Defendant

Court File No. 12-38604

B E T W E E N:

TIMOTHY WATKINS Plaintiff Andrew Rudder, for the Plaintiff

- and -

WESTERN ASSURANCE COMPANY Defendant Danielle Lecours, for the Defendant

HEARD: April 13 and 14, 2016

Amended Corrected Decision: 11-12909 has been corrected in paragraph 63 to indicate 11-25909 on September 23, 2016.

Corrected Decision: The Court File No.: 11-12909 has been corrected to indicate 11-25909 on September 8, 2016. No change to the content has been made.

The Honourable Justice C.D. Braid

REASONS FOR JUDGMENT

I. OVERVIEW

[1] In 2003, Timothy Watkins’ mother was involved in a car accident. Watkins was 15 years old at the time of the accident.

[2] In 2011 and 2012, Watkins brought two actions against Western Assurance Company, his mother’s insurer. The 2012 action claims accident benefits and extra-contractual damages, which I shall refer to as “the accident benefits claim”. The 2011 action claims damages arising out of Western’s handling of the mother’s accident benefits, which I shall refer to as “the derivative claim”. Western has brought two separate motions in which it seeks to bring an end to these actions for different reasons. I shall address the summary judgment motion in the accident benefits claim first, followed by the motion to strike the derivative claim.

[3] The issues to be determined on these motions are as follows:

1. On the motion for summary judgment in the accident benefits claim: A. Does Western’s failure to provide a written explanation of benefits to Watkins stop the time requirements for submitting an application for accident benefits and/or the limitation period? B. If not, does Watkins have a reasonable explanation for the delay in submitting an application for non-earner benefits? C. If not, should Watkins be granted relief from forfeiture? D. Finally, is there a genuine issue requiring a trial?

2. On the motion to strike the derivative claim: A. Does the Statement of Claim disclose a reasonable cause of action?

[4] For the reasons that follow, I find that there is no genuine issue for trial on the accident benefits claim. Summary judgment is granted and the accident benefits claim is dismissed. I further find that it is not plain and obvious that the derivative claim is certain to fail, and therefore dismiss the motion to strike the claim.

II. FACTS

[5] In March of 2003, Watkins’ mother, Deborah Stuckless, was a passenger in a motor vehicle that was struck by another vehicle. Watkins was not in the vehicle at the time of the accident. Stuckless held a valid policy of automobile insurance with Western. Neither party has provided sworn evidence regarding the content of the application package that Western may have provided to Stuckless following the accident.

[6] Stuckless applied for, and received, various accident benefits from Western. A dispute arose between Stuckless and Western when her weekly income replacement benefits were terminated. Stuckless retained counsel, Mr. Lou Ferro, a specialist in the litigation of motor vehicle accident insurance claims. In 2005, Stuckless sued Western for various accident benefits. That action was settled in 2007.

[7] Watkins reached the age of majority on July 14, 2005. In May of 2010, Mr. Ferro sent a letter to Western on behalf of Watkins. The letter stated that, as a result of Western’s failure to pay non-earner benefits to Stuckless, Watkins was unable to succeed in school, and went astray from his course as a successful student. Mr. Ferro stated that he was going to advise Watkins that he had the right to apply for statutory accident benefits as a member of Stuckless’ household. Ferro stated that Watkins would be making that application shortly.

[8] Watkins has never submitted an application for accident benefits to Western. He has not provided any medical evidence to support that, as a result of and within 104 weeks of the accident, he suffered a complete inability to carry on a normal life.

III. ANALYSIS

1. ACCIDENT BENEFITS CLAIM

[9] The 2012 accident benefits claim seeks non-earner benefits of $185/week from September 13, 2003 to March 13, 2005 and then $320/week from March 13, 2005 to present. The claim also seeks damages for wrongful infliction of mental distress by the use of unlawful claims practices; bad faith for unreasonable conduct in the claims process; and aggravated, punitive and exemplary damages.

A. Does Western’s Failure to Provide a Written Explanation of Benefits Stop the Time Requirements?

[10] Watkins argues that Western did not comply with its obligation to provide a written explanation of the benefits available to him under the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996. Watkins states that, because the insurance company failed to comply with this informational requirement, Walker was not required to notify the insurance company that he intended to apply for benefits within 30 days; to file an application for benefits within 30 days; and/or to commence a claim within two years. For the reasons set out below, I reject this argument.

[11] The Statutory Accident Benefits Schedule sets out a three-step procedure for claiming accident benefits:

i. A person shall notify the insurer of his intention to apply for a benefit no later than 30 days after the circumstances arose that gave rise to the entitlement to the benefit, or as soon as practicable after that day. In this case, Western agrees that this time did not run when Watkins was a minor. ii. The insurer shall promptly provide the insured person with the appropriate forms and a written explanation of the benefits available under the Regulation. iii. The person shall submit a signed application for the benefit to the insurer within 30 days after receiving the materials described in the preceding paragraph.

[12] There is no evidence that Watkins or Stuckless specifically told the insurer that Watkins intended to apply for a benefit. However, an assessment form received by the insurer in 2003 stated that Stuckless had a 15 year old son living with her. Watkins argues that this was sufficient notice to Western that he was a dependent covered by the insurance policy. Therefore, he should have been provided with a written explanation of benefits available to him under the policy.

[13] In her affidavit on this motion, Stuckless stated “They [Western] knew that I was worried about him [Watkins] and that I felt he needed benefits as well.” Stuckless does not say that she told a representative at Western that Watkins needed benefits or that she was worried about her son. It is improper for her to comment on the state of mind of others, especially without providing any basis for such comment. I give this evidence little weight. Even if Watkins can prove that he suffered harm as a result of his mother’s car accident, there is no evidence that Western was told of any harm suffered by Watkins, or that he needed benefits.

[14] The threshold for establishing a right to non-earner benefits is fairly high. A person is entitled to non-earner benefits if they suffer a complete inability to carry on a normal life within two years of an accident. Further, the test for entitlement to benefits after three years is whether the person sustained an impairment that continuously prevents them from engaging in substantially all of the activities in which they ordinarily engaged before the accident: s.12(1) of the Statutory Accident Benefits Schedule; Heath v. Economical Mutual Insurance Company, 2009 ONCA 391, 95 O.R. (3d) 785.

[15] It is a rare case when a minor dependent, who was not present at the time of an accident, suffers harm as a result of that accident, which makes him eligible for statutory accident benefits. In these circumstances, the informational requirement is only triggered when the insurer is told that the minor dependent has suffered harm as a result of an accident and/or that the minor dependent intends to apply for accident benefits. It is an absurd interpretation of the legislation to suggest that an insurer must provide an explanation of benefits to every dependent of a policyholder when the dependent was not present at the accident.

[16] One of the main objectives of insurance law and the Statutory Accident Benefits Schedule is consumer protection: Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129. Another important objective is the timely submission and resolution of accident benefits: Sietzema v. Economical Mutual Insurance Company, 2014 ONCA 111, [2015] O.J. No. 3704; Sagan v. Dominion of Canada General Insurance Co., 2014 ONCA 720, 123 O.R. (3d) 314.

[17] If the court accepted Watkins’ argument, it would mean that the time requirements for filing an application for benefits and the limitation period in the action never began to run. This would defeat one of the primary purposes of the statutory accidents benefits regime, namely, to ensure the timely submission and resolution of claims for accident benefits: Sietzema; Bustamante v. Guarantee Company of North America, 2015 ONCA 530, [2015] O.J. No. 3704, at para. 20.

[18] Limitation periods play an important role in the administration of justice by encouraging the timely resolution of legal issues and the competing interests of potential claimants, potential defendants and society at large. Limitation periods provide finality and certainty; they ensure that evidence is maintained; and they provide an incentive for plaintiffs to act in a timely fashion: Haldenby v. Dominion of Canada General Insurance Co., (2001), 55 O.R. (3d) 470 (C.A.).

[19] Limitation periods ensure that plaintiffs do not sleep on their rights, particularly when represented by counsel: Katanic v. State Farm Mutual Automobile Insurance Co., 2013 ONSC 5103, [2013] O.J. No. 3605 (S.C.).

[20] Statutory time requirements and limitation periods cannot be extended indefinitely. There must be some finality to the process. To suggest that failure to provide a description of all benefits creates an unfettered right to bring a claim at any time, defeats the mandate of facilitating the quick resolution of claims and the need for finality, certainty and the principle of diligence.

[21] The Statutory Accident Benefits Schedule states that an insured person has an obligation to notify the insurance company of his intention to apply for benefits and/or make an application for benefits within 30 days. I find that those time requirements began to run when Watkins reached the age of majority on July 14, 2005. He was required to notify the insurance company of his intention to apply for benefits by August 14, 2005. He failed to do so.

[22] The application for benefits and disability certificate are basic prerequisites to a claim for non-earner benefits: s.35(2) of the Statutory Accident Benefits Schedule. I find that Watkins failed to notify the insurer of the circumstances giving rise to the claim. He also failed to submit an application for non-earner benefits, together with a disability certificate, within the times prescribed by the Statutory Accident Benefits Schedule.

[23] In addition to the failure to comply with statutory timelines for the filing of an application for benefits, I also find that this action was brought outside of the limitation period. This action is subject to the two-year general limitation period under the Limitations Act, 2002. That limitation period began to run when Watkins reached the age of majority and expired on July 14, 2007.

B. Does Watkins Have a Reasonable Explanation for the Delay in Submitting an Application for Non-Earner Benefits?

[24] Failure to comply with a time limit set out in the Statutory Accident Benefits Schedule does not disentitle a person from a benefit if they have a reasonable explanation for failing to comply with the time limit: s.31 of the Statutory Accident Benefits Schedule. The onus is on Watkins to establish a reasonable excuse. Ignorance of the law alone is not a reasonable excuse.

[25] Watkins states that he and Stuckless did not know that he could apply for statutory accident benefits, and complains that he was never told what a non-earner benefit was. It is worth noting that, as Watkins’ guardian, Stuckless was represented by Mr. Ferro. Stuckless litigated her own claim for accident benefits before settling her case in 2007. In May of 2010, Mr. Ferro sent a letter on Watkins’ behalf. By May of 2010, if not before, Watkins knew that he had to apply for non-earner benefits if he wished to receive those benefits.

[26] In considering the reasonableness of an explanation, the court must take into account possible prejudice to the insurer: White v. Intact Insurance Co., 2013 ONSC 4178, [2013] O.J. No. 3114 (S.C.). More than ten years have passed since Watkins reached the age of majority. The failure to file an application in a timely basis has prejudiced the insurer’s ability to adequately defend the claim. The Statutory Accident Benefits Schedule mandates investigations by an insurer; examinations of the insured under oath; and production of medical records and medical examination to determine whether an insured is entitled to non-earner benefits. In this case, Western is no longer able to exercise its statutory rights of investigation due to the passage of time that was entirely under the control of Watkins and his counsel.

[27] I find that no reasonable explanation has been given for the delay pursuant to s.31 of the Statutory Accident Benefits Schedule. This is not a situation where Watkins has provided an explanation for the delay in filing the application for benefits: he simply never filed one.

C. Should Watkins be Granted Relief from Forfeiture?

[28] Watkins argues that he is entitled to relief from forfeiture, which is the court’s discretionary power to protect a person from losing an interest or right. The remedy is equitable in nature. Where there has been imperfect compliance with a statutory condition, the court may relieve against the forfeiture on such terms as it considers just.

[29] The factors to be considered by the court in the exercise of its discretion are the conduct of the applicant, the gravity of the breaches, and the disparity between the value of the property forfeited and the damage caused by the breach: Saskatchewan River Bungalows v. Maritime Life, [1994] 2 S.C.R. 490; Nguyen v. SSQ Life Insurance Company Inc., 2014 ONSC 6405, [2014] O.J. No. 5253.

[30] I am mindful of the fact that, if relief from forfeiture is not granted, Watkins will not be able to receive non-earner benefits. However, Watkins has never made an actual application for benefits. His conduct does not entitle him to relief from forfeiture.

[31] This is not simply a matter of an insured person missing a deadline. Instead of imperfect compliance, this was non-compliance. Even though eleven years have passed since Watkins reached the age of majority, he has not submitted an application for non-earner benefits nor a disability certificate. I am not prepared to grant relief from forfeiture in the circumstances.

D. Is There a Genuine Issue Requiring a Trial?

[32] The court shall only grant summary judgment if it is satisfied that there is no genuine issue requiring a trial. Pursuant to rules 20.04(2)(a) and (2.1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the court shall consider the evidence submitted by the parties and may exercise any of the following powers for the purpose of determining whether there is a genuine issue requiring a trial, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.
2. Evaluating the credibility of a deponent.
3. Drawing any reasonable inference from the evidence.

[33] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada clarified the test to apply on a summary judgment motion. There will be no genuine issue requiring a trial if the evidence permits the court to make a fair and just determination on the merits. This will be the case when a motion for summary judgment (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[34] What is fair and just depends on the nature of the issues, and the nature and strength of the evidence. There is an obligation on each party to “put its best foot forward.”

[35] Rule 20 remains a means of avoiding protracted and expensive litigation when there is no requirement for a trial, because there is no genuine issue of fact. The summary judgment rule, properly applied, shall be liberally construed to secure the most expeditious and least expensive determination of the civil proceeding on its merits: Irving Ungerman Ltd. v. Galanis, [1991] O.J. No. 1478 (C.A.) at paras. 19 and 20.

[36] The change in the Rules and the interpretation of those rules by the Supreme Court of Canada permits a more meaningful review of the paper record, and expressly overrules jurisprudence that prevented motions judges from making evidentiary determinations. As a result, cases or issues need not proceed to trial unless a trial is genuinely required: Cuthbert v. TD Canada Trust, 2010 ONSC 830, [2010] O.J. No. 630 at para. 10.

[37] The rule for summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 at para. 5.

[38] On a motion for summary judgment, a party’s evidence must set out coherent evidence of specific facts, showing that there is a genuine issue requiring a trial. A responding party to a motion for summary judgment is obliged to put his or her best position forward and, in that context, must do more than simply assert uncorroborated facts: Canadian Imperial Bank of Commerce v. Mitchell, 2010 ONSC 2227, [2010] O.J. No. 1502 at para. 18.

[39] In this case, I find that there is no genuine issue requiring a trial.

[40] Watkins has not provided an explanation as to why he has never applied for non-earner benefits. The lack of adequate explanation as to why no application was filed and no claim commenced within two years is a relevant factor on this motion. The accident benefits claim was brought well outside the limitation period and is therefore statute barred.

[41] The claims for additional extra-contractual damages also cannot stand. Since Watkins never filed an application for benefits, there is no basis to support claims for wrongful infliction of mental distress by the use of unlawful claims practices; bad faith for unreasonable conduct in the claims process; and aggravated, punitive and exemplary damages. There was no opportunity for Western to knowingly abuse or mishandle the non-existent claim. These corollary claims are dismissed.

2. THE DERIVATIVE CLAIM

[42] The 2011 derivative claim alleges that, as a result of Stuckless’ claim for statutory accident benefits being denied, Watkins was deprived of his mother’s care, guidance and companionship, which ultimately led to Watkins’ inability to acquire a post-secondary degree, achieve his pre-accident goals, maintain relationships and integrate into society. The derivative claim seeks two types of damages:

a) Damages for wrongful infliction of mental distress upon Watkins by the use of unlawful claims practices; bad faith for unreasonable conduct in the claims process; and aggravated, punitive and exemplary damages. b) In the alternative, Watkins claims pecuniary damages under the Family Law Act for loss of earning capacity and loss of income for Western’s negligent administration of accident benefits to Stuckless.

A. Does the Statement of Claim Disclose a Reasonable Cause of Action?

[43] Western has brought a motion seeking to strike out the derivative claim on the basis that it does not disclose a reasonable cause of action.

[44] A claim will only be struck if it is "plain and obvious" that the pleading discloses no reasonable prospect of success. The novelty of the cause of action should not prevent the plaintiff from proceeding: Hunt v. Carey, [1990] 2 S.C.R. 959; R. v. Imperial Tobacco Canada, 2011 SCC 42, [2011] 3 S.C.R. 45.

[45] My inquiry on this motion is confined to the pleadings. No evidence is admissible: Rule 21.01(2)(b).

[46] On this motion, I must assume that the facts pleaded are true. For purposes of this motion, Western admits the following facts:

i. Western mishandled Stuckless’ insurance claim; ii. Stuckless was wrongfully denied income replacement benefits; iii. Stuckless was dealt with in bad faith which caused her mental distress; and iv. The denial of accident benefits to Stuckless adversely impacted Watkins, causing him mental distress and sabotaging his chance for a bright and productive future.

(a) Breach of Contract

[47] The definition of “insured person” includes any dependent of the named insured who is not involved in the accident but suffers psychological or mental injury as a result of an accident that results in physical injury to his parent: s.2(1) of the Statutory Accident Benefits Schedule.

[48] “Insured” is defined in s.224 of the Insurance Act as a person insured by the contract of automobile insurance, “whether named or not.” The rights of the unnamed insured are set out in s.270 of the Insurance Act. This states that any person insured by (but not named in) a contract may recover under the contract, in the same manner and to the same extent as if named therein as the insured. The unnamed insured shall be deemed to be a party to the contract and to have given consideration therefor.

[49] The contract of insurance is a contract for peace of mind: McQueen v. Echelon General Insurance Company, 2011 ONCA 649, [2011] 107 O.R. (3d) 780.

[50] In McQueen, the plaintiff applied for statutory accident benefits from her insurer after being injured in a motor vehicle accident. Shepherdson (McQueen’s husband) purchased the insurance, but McQueen was an insured person under the policy. Even though she was an unnamed insured, she successfully sued the insurer for wrongful infliction of mental distress by the use of unlawful claims practices: McQueen v. Echelon General Insurance Company, 2011 ONCA 649, [2011] 107 O.R. (3d) 780.

[51] The Ontario Court of Appeal held that damages for mental distress may be awarded to a person who is insured under a standard motor vehicle insurance policy, whether the policy names that person or not. Mental distress to anyone insured under the policy, upon breach, would be in the reasonable contemplation of the insurer and insured; therefore, those damages are recoverable. People purchase motor vehicle insurance to protect themselves from financial and emotional stress. An object of these contracts is to secure peace of mind, a psychological benefit that brought the prospect of mental distress upon breach within the reasonable contemplation of the parties: McQueen.

[52] In a separate action, McQueen’s husband (Shepherdson) sued for pecuniary loss and psychiatric injury that he had suffered because the insurance company administered his wife’s claim for statutory accident benefits in bad faith. The motions court judge in Shepherdson found that the harm was foreseeable; the relationship between the parties was sufficiently proximate and there were no residual policy reasons for negating the duty of care. This was recognized to be a novel cause of action: Sheperdson v. Echelon, October 5, 2011 unreported SCJ ruling on motion.

[53] On an application for leave to appeal, the court stated that, as far as the breach of contract claim is concerned, there is no reason to doubt the correctness of the motion judge’s decision. The court declined to grant leave to appeal: Sheperdson v. Echelon 2012 ONSC 1433 (SCJ decision denying leave to appeal to Div.Ct.).

[54] Western seeks to rely on the decision in Mujagic v. State Farm (2009), 97 O.R. (3d) 474. However, the decision in McQueen must be taken to have overruled Mujagic, at least with respect to its reasoning regarding damages for breach of contract.

[55] Even though Watkins was unnamed, he was insured under the contract and is entitled to recover in the same manner as if named as the insured. Watkins is therefore in the same position as the husband was in the Shepherdson case. I agree with and adopt the reasoning in the decision denying leave to appeal: Sheperdson v. Echelon 2012 ONSC 1433.

[56] This is a novel cause of action. If the allegations can be proven, the statement of claim describes contractual claims for which a court may grant some form of relief.

(b) Bad Faith, Negligence and Family Law Act Claims

[57] Watkins pleads that Western negligently or maliciously denied benefits to the mother, and that this caused the mother's psychiatric illness, which in turn caused Watkins to lose his mother's care and guidance. Western could owe Watkins a duty of care not to cause harm, if their relationship was sufficiently proximate; if the harm was foreseeable; and if there are no residual policy reasons negating the duty of care: Cooper v. Hobart, 2001 SCC 79, [2001] 3 SCR 537.

[58] I have concerns about whether harm to Watkins was foreseeable and whether the relationship of the parties was sufficiently proximate. I also have concerns that there are residual policy reasons for negating a duty of care.

[59] The relationship between insured and insurer is contractual in nature: 702535 Ontario Inc. v. Non-Marine Underwriters, [2000] O.J. No. 866 (C.A.). There is arguable policy reason to negate the claims in tort and under the Family Law Act.

[60] The legislature considers it a matter of public policy to define and limit the liability of automobile insurers. Restricting the insured to whatever remedy the statute and contract permit may be better public policy. Arguably, the Insurance Act itself precludes liability in tort by exhaustively listing the remedies that an insured person may pursue. The same arguments would apply to the Family Law Act claim.

[61] Despite my concerns regarding the strength of the non-contractual damages sought, the same evidence will be heard at trial on both contractual and non-contractual issues. It would not prejudice anyone for these matters to proceed together, so that these points of law can be determined after a full record has been created.

IV. CONCLUSION

[62] In the result, the motion for summary judgment is granted and the accident benefits claim (action 12-38604) is summarily dismissed in its entirety.

[63] It is not plain and obvious that the derivative claim (action 11-25909) is certain to fail. The motion to strike the derivative claim is dismissed.

[64] In light of the mixed success of the parties, there shall be no costs of these motions.

______ “C.D. Braid”______ Braid, J.

Released: August 31, 2016