Dewitt v. State Farm Mutual Automobile Insurance Co., 2019 ONSC 2349

2019 ONSC 2349

Court File and Parties

Court File No.: 07-CV-334333 PD2 Date: 20190415 Superior Court of Justice – Ontario

Re: VINCENT DEWITT, Plaintiff And: STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., Defendant

Before: Stinson J.

Counsel: Melissa Miller, for the Plaintiff Todd J. McCarthy and Sophia Chaudri, for the Defendant

Heard at Toronto: February 4, 5, 6, 7, 8, 11, 12, 14, 15, 22 and 25, 2019

Reasons for Decision

1These reasons address the interest payable to plaintiff in relation to his claim against defendant on account of unpaid Income Replacement Benefits (“IRBs”) under a policy of automobile insurance. Plaintiff seeks payment of interest pursuant to s. 46(2) of the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, O. Reg. 403/96, as amended (“SABS”). Defendant submits that plaintiff is limited to statutory pre-judgment interest under s. 128 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

Chronology

2To place the issues in context, it is useful to begin with a chronological history of the key events. They are summarized below:

Date Events December 27, 2002 Plaintiff breaks his back in a single snowmobile accident and sustains a burst fracture of the T12 vertebrae in his spine, which requires open reduction and internal fixation with hardware. Following his discharge from hospital, he develops sepsis arising from infection of the spinal hardware, resulting in bacterial endocarditis, requiring open heart surgery for mitral valve replacement. The sepsis also causes some brain damage due to mycotic aneurysms, resulting in cerebral abscesses. January 8, 2003 During his first hospitalization, plaintiff completes an Application for Accident Benefits (SABS Form OCF-1/59) and submits it to defendant. The OCF-1 is accompanied by an Employer's Confirmation of Income (OCF-2/59) and a Disability Certificate (OCF-3/59) completed by his family doctor, Dr. Richard Wiginton. In the latter document Dr. Wiginton certifies that plaintiff has no significant work ability and that his impairment is likely to be of several months’ duration. February 2003 Defendant begins to pay IRBs to plaintiff. Summer 2003 Plaintiff returns to light duties at his workplace, while his father and brother continue to operate the business. December 2003 Pursuant to s. 37(1)(a) of the SABS, defendant requests plaintiff to submit a new OCF-3 Disability Certificate. January 8, 2004 Based on incomplete information supplied by plaintiff, Dr. Wiginton submits to defendant an OCF-3 stating that plaintiff is "currently working normally at 100% capacity" and that he has "returned to basically normal lifestyle". February 4, 2004 Defendant sends to plaintiff a Notice of Stoppage of Weekly Benefits and Request for Assessment (OCF-17) informing plaintiff that, according to the Disability Certificate completed by Dr. Wiginton "you are no longer entitled to receive an ongoing disability benefit" because based on that report "you do not suffer from a substantial inability to perform the essential task [sic] of your employment". Shortly thereafter defendant stops paying IRBs to plaintiff. August 23, 2004 Defendant files an application for mediation with the Financial Services Commission of Ontario seeking repayment by plaintiff of an alleged overpayment of IRBs. January 18, 2005 Plaintiff submits an Application for Determination of Catastrophic Impairment (OCF-9) signed by Dr. Ogilvie-Harris and accompanied by Dr. Ogilvie-Harris's report dated January 21, 2005. This leads to a series of multidisciplinary assessments carried out on behalf of defendant during the summer of 2006 by Remark-Med Inc. and rebuttal assessments carried out on behalf of plaintiff during the fall of 2006 by Omega Medical Associates. March 15, 2006 and March 13, 2007 A mediation is conducted by the Financial Services Commission of Ontario in relation to four issues: (1) determination of whether plaintiff has suffered catastrophic impairment; (2) the entitlement of plaintiff to IRBs pursuant to Part II of the SABS from February 20, 2004 and ongoing (pre-and post-104 weeks); (3) an alleged overpayment of IRBs of approximately $9,500 claimed by defendant from plaintiff; and (4) interest on overdue payments claimed by plaintiff pursuant to s. 46(2) of the SABS. March 13, 2007 June 7, 2007 FSCO mediator reports that the parties were unable to resolve any issues. Plaintiff issues a Notice of Action claiming, among other things"judgment for accident benefits owing under the policy of insurance and applicable statutory benefits schedule." July 7, 2007 Plaintiff files a Statement of Claim, claiming "judgment for all accident benefits owing under the policy of insurance and of the SABS." In both the Notice of Action and the Statement of Claim, plaintiff also seeks "prejudgment and post-judgment interest pursuant to ss. 128 and 129 of the Courts of Justice Act" and "such further and other relief as this Honourable Court may deem just." Defendant counterclaims for an alleged overpayment of IRBs, but abandons that counterclaim at trial. March 27, 2010 Dr. Wiginton writes to plaintiff's then-counsel advising that Mr. DeWitt had demonstrated a clear pattern of underreporting his problems and stating that he did not feel that the Disability Certificate he signed on January 8, 2004 was an accurate report of Mr. DeWitt's true status. It is unclear when this information was relayed to State Farm. January 13, 2012 Plaintiff's then-counsel submits an OCF-18 Treatment Plan to defendant's counsel. This OCF-18 is prepared by Dr. Wiginton and states that the impairments identified affect plaintiff's ability to carry out his tasks of employment, that he has subjective memory problems, and that he can only work one half the amount of his pre-accident level. No response is received from defendant. May 22, 2018 Further Treatment Plans are submitted on behalf of plaintiff by Total Healthcare. These are declined on the basis that plaintiff does not meet the definition of catastrophic impairment. February 4, 2019 Jury trial begins in relation to plaintiff's claim for unpaid IRBs. February 15, 2019 Jury returns verdict finding that plaintiff was substantially unable to perform the essential tasks of his self-employment between December 27, 2002 and December 27, 2004 and that plaintiff was completely unable to engage in any employment or self-employment for which he was reasonably suited by education, training or experience from December 27, 2004 to the present.

3Based on the jury's verdict, plaintiff is entitled to be paid by defendant the net sum due on account of IRBs from February 2004 to February 15, 2019, some 15 years. The precise amount payable will depend on a calculation of the net sum due after subtracting the income that plaintiff was able to generate during those years. The parties have agreed to attempt to resolve that issue. Failing resolution, they will return to me for a determination of the correct amount.

4The parties disagree, however, in relation to what interest should be payable by defendant to plaintiff in respect of the amount found to be owing. Plaintiff claims that interest should be calculated and payable pursuant to s. 46(2) of the SABS. The defendant disagrees and submits that plaintiff is limited to interest pursuant to the Courts of Justice Act, as claimed in the Notice of Action and Statement of Claim.

5The interest issue was raised before the start of the trial, when plaintiff brought a motion to amend the Statement of Claim to address various housekeeping issues. Most of those amendments were on consent. However, plaintiff sought to add an express claim for interest under s. 46(2) of the SABS, an amendment that was opposed by defendant. By agreement of counsel, argument concerning this further amendment was deferred until the jury verdict was received. This ruling addresses those submissions.

6From a monetary standpoint, this is a very significant issue, in light of the interest provisions of the SABS. Section 46 of the SABS provides as follows:

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.

7By contrast, statutory pre-judgment interest under s.128 of the Courts of Justice Act in this case (since it was commenced in the second quarter of 2007) would be calculated at the rate of 4.5 per cent per year on IRB payments outstanding from time to time, on a non-compounded basis.

Positions of the Parties

Plaintiff

8Plaintiff submits that the amendment is unnecessary, but is sought out of an abundance of caution. Plaintiff submits that it put defendant on notice that all sums payable under the SABS were being sought, including interest: (1) by claiming judgment for accident benefits owing under the policy and applicable SABS (as plaintiff did in the Notice of Action and Statement of Claim); (2) by asserting that defendant failed to make payment of the IRBs to which plaintiff is entitled under the policy and SABS, defendant breached its statutory and contractual duties; and (3) by pleading and relying upon the Insurance Act and the SABS. Now that the jury has determined that plaintiff was entitled to IRBs from the date of the accident forward, there has been a factual determination of plaintiff's entitlement and a corresponding determination that defendant failed to pay the sums due. As such, interest pursuant to s. 46(2) of the SABS should be payable.

Defendant

9Defendant concedes that plaintiff is entitled to interest pursuant to the Courts of Justice Act, as claimed in the Notice of Action and Statement of Claim. Defendant submits, however, that plaintiff's claim for interest under the SABS is a substantive claim that is statute barred because it was not included in the Statement of Claim, which was issued more than 11 years ago. As such, any limitation period in respect of that claim for interest is statute barred. In the result, no amendment should be permitted.

10In the alternative, defendant argues that for s. 46(2) SABS interest to be payable on IRBs, they must be overdue. Plaintiff submitted an OCF-1 in January 2003, and received IRBs pursuant to that application. The next OCF-3 submitted by plaintiff in January 2004 indicated that he was back at 100% capacity. No further OCF-3 was filed and thus defendant was not in breach of any of its obligations to pay. As a result, no interest is payable under s. 46(2) because no amounts were overdue. Defendant further submits that the facts of this case establish that, until the jury rendered its verdict on February 15, 2019, there were no unpaid IRBs payable to plaintiff. Only once the jury delivered its verdict, the argument continues, was any amount payable on which interest under s. 46(2) could run.

Issues and Analysis

11Based on the submissions of the parties, three issues arise for consideration, as follows:

(1) As initially pleaded, do the Notice of Action and the Statement of Claim include a claim for SABS interest? (2) If the answer to Issue (1) is “No”, should an amendment be permitted or is such a claim statute barred? (3) If a claim for SABS interest may properly be made under Issue (1) or Issue (2), were any amounts “overdue” within s. 46(2) of the SABS before the jury rendered its verdict such that interest under that provision became payable?

Issue (1) - As initially pleaded, do the Notice of Action and the Statement of Claim include a claim for SABS interest?

12The first question to address is whether a claim for SABS interest was included in plaintiff’s claim, as originally pleaded. If so, no amendment is necessary and no issue of the expiry of a limitation period arises, since defendant concedes that the action was commenced on time, that is, within 90 days following the date of the delivery of the report of the mediator on March 13, 2007.

13While I agree that there was no express reference to s. 46(2) of the SABS in either the Notice of Action or the Statement of Claim, there can be no doubt that plaintiff was advancing a claim for payment of IRBs that, he asserted, defendant had improperly failed to pay. In paragraph 1 of the Statement of Claim, plaintiff claimed the following relief:

1. The plaintiff claims: (d) a declaration that the plaintiff is continuously disabled from performing the essential tasks of his employment and from engaging in any other employment to which he might be suited by education, training and experience, as a result of the snowmobile accident of December 27, 2002 and that State Farm was, is and shall continue to be liable to pay the plaintiff weekly income benefits pursuant to the SABS from January 3, 2003 onwards; (e) a declaration that the defendants are to pay the plaintiff the amounts set out below; (f) damages in the sum of $500,000; (g) judgment for all accident benefits owing under the policy of insurance and the SABS; (j) pre-judgment and post-judgment interest pursuant to sections 128 and 129 of the Courts of Justice Act, … ; (l) such further and other relief as this Honourable Court may deem just.

14In paragraphs 6 through 13 of the Statement of Claim plaintiff pleaded that he was disabled and defendant had wrongly failed or refused to pay IRBs that were due to him.

15In addition, paragraph 17 of the Statement of Claim made express reference to and relied upon the Insurance Act and the SABS, as follows:

The plaintiffs [sic] plead and rely upon the relevant provisions of the Insurance Act, R.S.O. 1990, c. I.8, as amended and the Statutory Accident Benefits Schedule – Accidents On or After November 1, 1996, O.Reg. 403/96, as amended.

16By its very terms, the SABS regime pleaded and relied upon by plaintiff in the Statement of Claim provides for interest to be payable on unpaid IRBs as calculated in a specific fashion under s. 46(2). It is fair to say that s. 46(2) is a “relevant provision” of the SABS.

17As a major provider of automobile insurance in Ontario, defendant is undoubtedly fully aware of and familiar with the workings of the SABS and IRBs and in particular the interest provisions of s. 46. Indeed, unlike the discretion conferred on the court under s. 130 of the CJA to vary or disallow pre-judgment interest, the payment of interest under s. 46(2) is mandatory and automatic. Defendant would therefore have understood its statutory liability for s. 46(2) interest for unpaid amounts, even without the initiation of a claim by plaintiff or an express reference to s. 46(2) in the Statement of Claim.

18In my view, therefore, the Statement of Claim, as drafted, encompassed a claim for interest on unpaid sums as provided for in the SABS. I therefore answer “Yes” in response to Issue (1).

Issue (2) - If the answer to Issue (1) is “No”, should an amendment be permitted or is such a claim statute barred?

19In the alternative, if I am in error that the SABS interest claim was included in the Notice of Action and Statement of Claim, I turn to the availability of the requested amendment. Plaintiff relies on rule 26.01 of the Rules of Civil Procedure, which provides that amendments to pleadings shall be granted unless they will cause prejudice to the opposing party that cannot be compensated for by costs or an adjournment. Amendments may be allowed at any stage of the proceeding. An amendment that would defeat a limitation defence presumptively qualifies as such prejudice, and therefore will not be permitted. Steele J. summarized the law on this point in Gracey v. Thomson Newspapers Corp. (1991), 82 D.L.R. (4th) 244 (Ont. Gen. Div.) at 250:

Limitations periods cannot be ignored. The expiry of a period creates some presumption of prejudice to the defendant. The onus is upon the plaintiff to show that there is no prejudice. Every case must be considered on its own merits: see Deaville v. Boegeman (1984), 14 D.L.R. (4th) 81, 47 C.P.C. 285, 48 O.R. (2d) 725 (C.A.). A limitation period should not be waived to allow the addition of a cause of action, except under special circumstances: see Basarsky v. Quinlan (1971), 24 D.L.R. (3d) 720, [1972] S.C.R. 380.

20Defendant argues that a claim for interest is a substantive claim. Defendant relies on the Court of Appeal decision in Somers v. Fournier (2002), 60 O.R. (3d) 225 (C.A.) in which, in a conflict of laws context, that court held as a matter of law, interest is a substantive claim. Defendant was unable, however, to offer any legal authority for the proposition that in a case such as ours, SABS interest amounted to a substantive claim or had to be expressly claimed.

21For his part, plaintiff relies on two decisions in which amendments to claim interest were permitted. The first is a decision by Justice Dambrot in Mele v. Thorne Riddell (1997), 32 O.R. (3d) 459 and the other a 2005 decision by Justice Heeney in Kitchenham v. AXA Insurance (Canada), [2005] O.J. No. 1973. In the former case, Justice Dambrot allowed an interest claim to be advanced despite it not having been pleaded, noting that he would have permitted an amendment to advance an interest claim if necessary. Justice Heeney cited Mele in dealing specifically with SABS interest. He too would have allowed the amendment.

22I note that granting the amendment sought by plaintiff is consistent with the decisions of Justice Dambrot and Justice Heeney in the cases I have mentioned.

23Defendant submits that the Somers case identifying interest as a substantive claim overrides both of the other decisions. In my view, for the reasons that follow, whether interest is classified as a substantive claim is of no moment given the manner in which this case was originally pleaded.

24The issue here is the same as that addressed by Nordheimer J. (as he then was) in Farmers Oil and Gas Inc. v. Ontario, 2016 ONSC 6359 (Div. Ct.) at para. 14: “whether the proposed amendments give greater clarity or particularity to the existing claim, or whether they advance new claims.” In considering that question, Nordheimer J. reviewed the decisions of Lauwers J. (as he then was) in 1309489 Ontario Inc. v. BMO Bank of Montreal, 2011 ONSC 5505, and Sweda Farms Ltd. v. Ontario Egg Producers, 2011 ONSC 6146. Nordheimer J. concluded at para. 31 of Farmers Oil and Gas that amendments arising out of the same factual matrix that was pleaded in the original statement of claim ought to be permitted:

In the end result, the requirement to read a pleading generously, and the concomitant requirement to allow amendments unless they will inflict non-compensable prejudice, means that the presumption is that any amendment, that can reasonably be seen as falling within the four corners of the existing claim, ought to be permitted.

25In Farmers Oil and Gas, Nordheimer J. also expressed agreement with the sentiments of Master Short in Brand Name Marketing Inc. v. Rogers Communications Inc., 2010 ONSC 2892 at para. 84:

I believe that equity dictates that if a defendant knows that the “finger of litigation” is pointing in its direction, and an action is commenced on a timely basis based on specific actions, this court ought to take appropriate steps to ensure that the true lis between the parties is addressed, rather than permitting one party to perhaps escape its possible liability by relying upon a technical Limitations Act defence.

26In the current case, the claim for interest under the SABS arises from the same specific factual matrix that underlies the claim for unpaid IRBs. In fact, the claimed SABS interest must be calculated based on the balance of unpaid IRBs. The interest claim thus stands or falls based on the underlying IRB claim, of which defendant has had ample notice and has defended vigorously. Defendant cannot reasonably assert that, after mounting its vigorous defence of the determining issue, it would have conducted itself differently had the proposed amendments been pleaded from the beginning.

27The proposed amendments give greater clarity and particularity to the facts already pleaded, including the statutory provisions of which defendant had notice from the outset. The proposed amendments are not prejudicial because defendant would not have acted differently. I therefore conclude that they should be allowed.

Issue (3) – If a claim for SABS interest may properly be made under Issue (1) or Issue (2), were any amounts “overdue” within s. 46(2) of the SABS before the jury rendered its verdict such that interest under that provision became payable?

28I now turn to the alternate line of argument advanced by defendant, namely, that prior to the jury verdict on February 15, 2019, no amounts were payable under Part X of the SABS and thus the language in s. 46(2) that triggers the accumulation of compound interest was not engaged.

29For ease of reference, I again reproduce s. 46 of the SABS:

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.

30Defendant submits that the facts of this case establish that, until the jury rendered its verdict, there were no unpaid statutory accident benefits payable to plaintiff. Only once the jury reached that verdict, the argument continues, was any amount payable on which interest under s. 46(2) could run. Prior to that time, defendant received and responded to the most recent OCF-3 – the one signed by Dr. Wiginton in January 2004. On the basis of that Certificate of Disability, defendant properly concluded that plaintiff was no longer disabled and it issued a Notice of Stoppage of Benefits accordingly. Up until the jury verdict, that OCF-3 governed, since it was never supplanted by anything that would trigger an obligation to pay. Absent such obligation, the argument concludes, there were no IRBs payable upon which s. 46(2) interest could accrue.

31Plaintiff submits that defendant's argument is circular and that, if accepted, it would have the effect of gutting s. 46(2) of its consumer protection effect. If an insurer is able to deny a claim and only be exposed to interest once its denial has been shown to be wrongful, then s. 46(2) would have no impact whatsoever. This, plaintiff argues, cannot be a proper interpretation.

32Before I deal with the question of interpretation, I will address a preliminary issue raised by defendant. Defendant submits that, for purposes of my decision in relation to interest, I cannot have regard to the jury verdict. Defendant argues that the jury verdict was rendered only to determine plaintiff's level of disability, for purposes of the dispute under Part II of the SABS, and not for purposes of Part X. Rather, defendant submits, I should look at the record for purposes of deciding for myself whether IRBs were payable prior to the jury verdict. In effect, defendant argues that Part II and Part X of the SABS regulation should be treated as separate “silos”. Because the jury was concerned only with Part II liability, i.e. IRB issues, the argument continues, its conclusions are irrelevant for purposes of any issues arising under Part X. For the reasons that follow, I do not accept that submission.

33Part II of the SABS regulation is entitled “Income Replacement Benefit”. Part II addresses such matters as eligibility criteria, period of benefit, amount of benefit, and so on, all in relation to IRBs. As for the other Parts of the SABS (and as the titles of those various Parts indicate), Part III of the SABS regulation is concerned with Non-Earner Benefits; Part IV with Caregiver Benefits; Part V with Medical, Rehabilitation and Attendant Care Benefits; Part VII with Death and Funeral Benefits; Part VII with Optional Benefits; and Part IX with General Exclusions. Thus Parts II through IX of the regulation each deal with the various categories of available benefits.

34Part X of the SABS regulation is entitled “Procedures for Claiming Benefits”. Part X addresses such topics as notice and application for benefits, pre-claim examination, duty of applicant to provide information, determination of catastrophic impairment, assessment or examination after denial of benefits, method of payment, overdue payments (including payment of interest), right to dispute, and time limit for proceedings, etc. Thus, Part X sets out the mechanics of how applications are processed in relation to the various categories of benefits available, how payments are made, and how disputes are governed. These provisions are applicable to all categories of benefits. Part X is thus an integral element and interconnected with the other Parts of the regulation.

35There is no provision in the SABS or elsewhere that suggests that, when determining issues under Part X, the court should have no regard for the factual determination by the jury. Nowhere is it contemplated that a separate and parallel fact finding exercise should be conducted. To the contrary, and especially in light of the inter-relationship between Part X and the other Parts of the regulation, there is no apparent reason that a jury verdict should be disregarded. The delineation that defendant seeks to draw between Part II and Part X of the SABS regulation is, in my respectful view, an artificial one.

36The effect and result of the jury verdict is that the plaintiff was entitled to be paid IRBs throughout the period from one week after the accident up until February 15, 2019. That issue has been in play for many years, as was evidenced by the March 13, 2007 report of the mediator. It would be illogical, in my respectful view, to ignore the determination made by the triers of fact that the plaintiff has been disabled since the date of his accident.

37I therefore do not accept defendant's submission that I should re-examine the evidence and find fresh facts to determine whether plaintiff was entitled to receive IRBs. Rather, I conclude that I should deal with the interest issues in compliance with the jury's findings. Based upon those findings, I conclude that plaintiff’s level of disability was such that he qualified to receive IRBs throughout.

38I turn now to defendant’s substantive argument that the interest provisions of the SABS were not triggered. It is useful to begin by quoting the applicable portions of the SABS regulation that address the insurer’s payment obligations. The first of these is s. 35 (3) - (5), which deal with timing of payments of benefits:

35. (3) Within 10 business days after the insurer receives the application and completed disability certificate, the insurer shall, (a) pay the specified benefit; (b) send a request to the insured person under subsection 33 (1) or (1.1) [to provide additional information or submit to an examination under oath]; or (c) notify the insured person that the insurer requires the insured person to be examined under section 42 [insurer’s medical examination]. (4) If the insurer sends a request to the insured person under subsection 33 (1) or (1.1) [to provide additional information or submit to an examination under oath], the insurer shall, within 10 business days after the insured person complies with the request, (a) pay the specified benefit; or (b) notify the insured person that the insurer requires the insured person to be examined under section 42 [insurer’s medical examination]. (5) Every income replacement benefit, non-earner benefit or caregiver benefit shall be paid at least once every second week, subject to any prepayment of the benefit by the insurer.

39Section 37(1) of the SABS regulation deals with determination of a claimant’s continuing entitlement to benefits:

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. [insurer’s medical examination]. .

37Section 37(2) of the SABS regulation contains a prohibition against discontinuance of benefits, subject to certain enumerated exceptions [I quote only the potentially applicable ones]:

37. (2) An insurer shall not discontinue paying a specified benefit to an insured person unless, (a) the insured person fails or refuses to submit a completed disability certificate as required under clause (1) (a); (b) the insurer has received the report of the examination under section 42, if the insurer required the insured person to be examined under that section; (c) the insurer is entitled under subsection (7) [failure of insured to attend insurer’s medical examination] to refuse to pay the specified benefit; (d) the insured person has resumed his or her pre-accident employment duties; (e) the insurer is no longer required to pay the specified benefit by reason of clause 5 (2) (d) or (e) [inapplicable], subsection 22 (3) [inapplicable], or 33 (2) [failure to provide information] or section 55 [failure to obtain treatment] or 56 [failure to seek out replacement employment]; or (f) the insured person is not entitled to the specified benefit for a reason unrelated to whether he or she has an impairment that entitles the insured person to receive the specified benefit.

40Thus, in general terms, the scheme of the regulation is that, where an insured submits a claim, the insurer is obliged to pay it within 10 business days, unless the insurer’s obligation to pay is suspended or extended by reason of a request for further information or an insurer’s medical examination (or for other reasons set out above). Once those requirements are fulfilled by the insured, the insurer’s payment obligation again arises or resumes. The obligation to pay continues until one of the conditions in s. 37(2) arises. While the obligation to pay is ongoing, pursuant to s. 46(1), payments become overdue if the insurer fails to pay the benefit within the various time periods specified under Part X. Under s. 46(2) if a payment is overdue, compound interest accrues on the overdue amount.

41Simply put, defendant’s argument is that s. 46(2) interest is only triggered where “payment of a benefit under this Regulation is overdue” under s. 46(1). The only way that a payment is overdue is if, as stated in s. 46(1) “the insurer fails to pay the benefit within the time required under this Part”. Defendant submits that at no time did it fail to make a payment within the time limits required under Part X, nor did it wrongfully discontinue payment of plaintiff’s IRBs. Based upon the documents provided to it by plaintiff, and in particular Dr. Wiginton’s January 8, 2004 Certificate of Disability, defendant submits that it had no ongoing obligation to pay.

42As noted above, plaintiff submits that defendant's argument is circular. Plaintiff argues that a jury finding that establishes that a claimant was disabled, must serve to trigger s. 46(2) interest from the date the insurer wrongly failed to pay the claimant, based on that finding. To hold otherwise, plaintiff submits, would deprive s. 46 of any effect and allow an insurer to deny claims with impunity. The proper result in the present case, the argument continues, is that s. 46(2) interest should accumulate from the date the plaintiff stopped receiving benefits, since he remained disabled at that time and the discontinuance was in breach of the insurer’s obligations.

43In my view, there is some merit to the arguments of each side.

44I begin with an analysis the language upon which defendant’s argument is based. The principles of statutory interpretation were recently discussed by Chief Justice Strathy in Belwood Lake Cottagers Association Inc. v. Ontario (Environment and Climate Change), 2019 ONCA 70, at paras. 39 and following, as follows:

39The modern approach to statutory interpretation requires a court to consider the words of a statute “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: Montréal (City) v. 2952-1366 Québec Inc., 2005 SCC 62, [2005] 3 S.C.R. 141, at paras. 9-12, citing Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21.

The grammatical and ordinary sense of the words

40Both parties rely on the leading text by Ruth Sullivan, Sullivan on the Construction of Statutes, 6th ed. (Markham: LexisNexis Canada, 2014), who summarizes the “ordinary meaning” rule at §3.6:

It is presumed that the ordinary meaning of a legislative text is the meaning intended by the legislature. In the absence of a reason to reject it, the ordinary meaning prevails.

Even if the ordinary meaning is plain, courts must take into account the full range of relevant contextual considerations, including purpose, related provisions in the same or other Acts, legislative drafting conventions, presumptions of legislative intent, absurdities to be avoided and the like.

In light of these considerations, the court may adopt an interpretation that modifies or departs from the ordinary meaning, provided the interpretation is plausible and the reasons for adopting it are sufficient to justify the departure from ordinary meaning.

41Sullivan notes that ordinary meaning is not the end of the process of statutory interpretation, it is simply the beginning. She refers to the observations of Iacobucci J. in Chieu v. Canada (Minister of Citizenship and Immigration), 2002 SCC 3, [2002] 1 S.C.R. 84, at para. 34, in connection with the interpretation of the Immigration Act:

The grammatical and ordinary sense of the words employed in s. 70(1)(b) is not determinative, however, as this Court has long rejected a literal approach to statutory interpretation. Instead, s. 70(1)(b) must be read in its entire context. This inquiry involves examining the history of the provision at issue, its place in the overall scheme of the Act, the object of the Act itself, and Parliament's intent both in enacting the Act as a whole, and in enacting the particular provision at issue.

42Thus, the plain meaning of the words of the statute is only one aspect of the “modern approach”. … .

45Dealing first with the plain meaning of the words, I note the SABS regulation is silent on the impact of a finding of fact – whether by an arbitrator or a court - that establishes that an insured was entitled to payment of a benefit that was not paid by an insurer. As defendant correctly points out, the payment and interest provisions in s. 46(1) and (2) refer only to the timing imposed for a payment under Part X, and not one arising under a verdict or otherwise. Arguably, therefore, s. 46(2) interest does not apply to sums ordered to be paid by an arbitrator or a court.

46In my view, however, it would be illogical to interpret the section in that fashion, and an overly narrow interpretation of the regulation. It makes no sense to create a dispute resolution mechanism that provides for arbitrators and courts to determine insureds’ entitlement to unpaid benefits, yet to exempt those determinations from the application of s. 46(2) interest. This would deprive insureds of s. 46(2) interest where they have not received payments to which they are entitled. Indeed, to accept defendant’s submission would mean that no s. 46(2) interest would ever accrue on an arbitrator- or court-ordered payment, even after an award or judgment, since non-payment of such an obligation would never qualify as an overdue payment of a benefit under Part X of the regulation.

47I therefore turn to “contextual considerations”, including examining the place of s. 46 in the overall scheme of the SABS regulation and the Insurance Act. At the relevant time, disputes over payment of SABS entitlement were resolvable by arbitration or court proceedings. See the Insurance Act, R.S.O. 1990 c. I.8, ss. 280 to 284 prior to the 2016 amendments. The insured’s right to dispute an insurer’s refusal to pay benefits was and is expressly referenced in the SABS regulation, at ss. 49 – 51, which are included in Part X. In my view, this means that a decision made in a dispute constituted under the SABS scheme to award an unpaid benefit, amounts to a determination under Part X. It follows that a decision by an arbitrator or a court that the insurer has failed to pay the insured a benefit amounts to a determination under Part X that “the insurer [failed] to pay the benefit within the time required” under Part X. As such, s. 46(2) is engaged and interest is payable under that provision.

48To summarize my analysis:

(a) the SABS dispute resolution system is included in and forms part of Part X of the SABS regulation and in ss. 280 and following of the Insurance Act; (b) a judicial or arbitral determination in favour of an insured, pursuant to that dispute resolution system, amounts to a finding that the insurer has failed to pay a benefit within the time required under Part X; and (c) as a result, such a determination triggers the application of s. 46(2).

49I am fortified in these conclusions by the decision of Laskin J.A. in Attavar v. Allstate Insurance Co. of Canada (2003), 63 O.R. (3d) 199 (C.A.). One of the issues in that case was whether interest calculated under the applicable SABS regulation should run from the date on which a benefit was first payable or from the date of the trial judge’s decision. The insurer argued that no payment was due up until the trial judge issued the decision, and that as a result no payment was “overdue” at the time the trial judge considered the interest question. Laskin J.A. rejected this argument and quoted with approval at para. 42 of the appeal decision from the ruling of the trial judge, McGarry J., on this point, as follows:

In reviewing the case law which is that of various arbitration awards, it is clear that the precedents establish that failing unusual circumstances brought on by the complexity of the action and/or the applicant's own behaviour "it is the insurer not the insured who must bear the consequences of a decision not to pay benefits that are found later to be owing", Canadian Surety Company v. Sebastian [[1998] O.F.S.C.I.D. No. 130] decision of Susan Naylor, Director's Delegate. In this case there are no unusual circumstances and consequently, I agree with the policy established by the Director's Delegate requiring that interest be paid in accordance with the calculations contained in Attachment A.

50In the present case, the jury found that plaintiff has been disabled from any employment since the date of the accident. It follows that defendant should have paid him appropriate IRBs on a bi-weekly basis (as provided by Part X) throughout. Since defendant stopped paying IRBs in February 2004, it is obliged to pay all arrears.

51It further follows that when each of those bi-weekly payments was not made, they became overdue, consistent with the Court of Appeal’s decision in Attavar. The result, subject to one important qualification, is that interest calculated pursuant to s. 46(2) is payable on those amounts.

52I am mindful of the fact that defendant relied upon the second Disability Certificate (the OCF-3 signed by Dr. Wiginton on January 8, 2004) to conclude that IRBs were no longer payable. Based on the contents of that document, defendant served a Notice of Stoppage and stopped paying accordingly. No further Disability Certificate was forthcoming from plaintiff. Thus, from defendant’s perspective, the stoppage of plaintiff’s IRBs was justified. Defendant therefore argues that it should not be exposed to any s. 46(2) interest.

53While para. 42 of Attavar stands for the proposition that an insurer must bear the consequences of a decision not to pay benefits later found to be owing, it also carves out an exception to that rule where there are “unusual circumstances brought on by … the applicant's own behaviour”. This exception has been applied by both the Superior Court and the Financial Services Commission of Ontario. See for example: Gill v. Royal and Sunalliance Insurance Co., [2009] O.J. No. 1036 (S.C.J.); J.C. v. Progressive Casualty Insurance Co., [2005] O.F.S.C.D. No. 14 (F.S.C. App.).

54In the present case, plaintiff’s assertion that benefits continued to be payable was contrary to the second Disability Certificate that he submitted. Thus plaintiff created unusual circumstances that, for a time, justified defendant’s decision not to pay IRBs.

55However, after defendant filed an application for mediation with FSCO in August 2004 seeking repayment by plaintiff of an alleged overpayment of IRBs, a number of issues came to be disputed on both sides. These included plaintiff’s level of disability and his entitlement to IRBs. In turn, this lead to the mediation heard March 15, 2006 and March 13, 2007. As confirmed by the March 13, 2007 report of the mediator, the issues in dispute in the mediation included plaintiff’s entitlement to IRBs from February 20, 2004 onward.

56It follows that, while defendant may have believed in February 2004 it had cause to discontinue paying IRBs, by March 2006 defendant was aware that plaintiff was disputing that discontinuance. Indeed, as early as January 2005 plaintiff was seeking a determination that he was catastrophically impaired. As a result, defendant conducted a comprehensive assessment of plaintiff’s condition during the summer of 2006.

57In summary, although the effect of the jury’s finding is that plaintiff was entitled to ongoing payment of IRBs from February 20, 2004 forward, defendant’s decision to stop payment was based on information provided by plaintiff and his doctor. On its face, that information supported defendant’s decision. By March 15, 2006 (the first mediation date) however, defendant was aware that plaintiff was contesting the discontinuance of benefits. He proceeded to submit himself to a comprehensive medical assessment conducted on defendant’s behalf.

58In the circumstances, it would be unfair to visit on defendant the high interest rate set out in s. 46(2) for the period between February 20, 2004 and March 15, 2006, the date of the first mediation hearing. For that period, I would award pre-judgment interest under the Courts of Justice Act, only. However, after that date (if not sooner), defendant was on notice that plaintiff was again asserting an entitlement to IRBs, and thus any argument of unfairness ceases to be supportable.

59Pursuant to s. 35(3) of the SABS regulation, payments of benefits are to be made “[w]ithin 10 business days after the insurer receives the application and completed disability certificate”. Section 46(2) interest accrues on any overdue amount from the date the amount became overdue. I would therefore fix March 30, 2006 (the date that was 11 business days after March 15, 2006) as the date from which plaintiff’s IRB payments became overdue and the date from which s. 46(2) interest should accrue.

Conclusion and Disposition

60For these reasons, I declare as follows:

(a) for the period between February 20, 2004 and March 29, 2006, simple (i.e. non-compound) interest is to be calculated on the bi-weekly sums due to plaintiff, from the date each payment was due, at the applicable rate for pre-judgment interest under the Courts of Justice Act; (b) starting on March 30, 2006, the total principal due as of that date and the accumulated interest calculated under (a) shall bear interest calculated pursuant to s. 46(2) of the SABS regulation; (c) starting on March 30, 2006, the further bi-weekly sums due to plaintiff shall bear interest calculated pursuant to s. 46(2) of the SABS regulation.

Stinson J.