Court File and Parties

Court File No.: CV-16-00000894-0000 Date: 2023-07-24 Superior Court of Justice - Ontario

Re: Lucia Santos, Plaintiff And: State Farm Mutual Automobile Insurance, Defendant

Before: Kurz J.

Counsel: Jaspal Brar, for the Plaintiff Jonathan Schrieder, for the Defendant

Heard: July 18, 2023

Endorsement

Introduction

[1] The Plaintiff applies for leave to amend its statement of claim to include a claim for a declaration that she has sustained a catastrophic Impairment and to add punitive, aggravated and exemplary damages of $500,000. The Plaintiff also seeks an order compelling the Defendant to produce its redacted adjuster’s log notes up to date and continuing until trial, along with explanations for each redaction.

[2] The Defendant opposes the motion, arguing that it is barred by the April 1, 2016 amendment to the Insurance Act, R.S.O. 1990, c. I.8, s. 280, Schedule A (the “Act”). Under that provision (“s. 280”), as set out below, all claims to statutory accident benefits must be resolved at first instance before the provincial Licencing Appeal Tribunal (“LAT”). The pleading amendments are being sought long after s. 280 came into effect and amount to new claims barred by s. 280.

[3] The Defendant concedes that its counsel agreed in writing to produce the adjuster’s logs requested by the Plaintiff but failed to produce them. The Defendant produces no evidence to explain its failure to honour its undertaking.

[4] For the reasons cited below, I dismiss the request to amend the statement of claim and grant the request for the redacted adjuster’s log notes along with explanations for any redactions.

Background

[5] This action arises out of a motor vehicle accident which occurred on or about May 29, 2015. Following the accident, the Plaintiff applied for certain accident benefits.

[6] On October 2, 2015, the Defendant denied the Plaintiff’s claim to income replacement benefits under the Statutory Accident Benefits Schedule (SABS). It claimed that she did not suffer a substantial inability to perform the essential tasks of her employment. No further payments under the SABS have been made by the Defendant to the Plaintiff beyond October 3, 2015.

[7] Unhappy with the benefits that were denied to her, the Plaintiff applied for mediation with the Financial Services Commission on November 6, 2015. On December 22, 2015, the mediator reported that none of the issues were resolved.

[8] On March 18, 2016, the Plaintiff issued her statement of claim in this action. It was brief. The key relief that she sought in that pleading was:

1. payment of Income Replacement Benefits from May 29, 2015 to date and ongoing;
2. A declaration that her injuries/impairment(s) are not characterized as a minor injury and do not fall within the Financial Services Commission of Ontario’s Minor Injury Guideline – Superintendent’s Guideline No. 01/14 and therefore she is entitled to more than $3,500 worth of benefits for treatment and rehabilitation;
3. interest on all outstanding amounts at a rate of 1% per month, compounded monthly, as per section 51 of the SABS.

[9] The Plaintiff further pleaded that she sustained:

“a permanent serious impairment of important physical, mental and psychological functions including, but not limited to, injuries to her neck, back, shoulders and legs, together with a spraining, straining and tearing of the muscles, tendons, ligaments and nerves throughout her body. The injuries were accompanied by headaches, dizziness, shock, anxiety, depression, emotional trauma, chronic pain, insomnia, weakness, diminished energy and stiffness which continue to the present and will continue in the future.”

[10] The Plaintiff further pleaded that “[t]he Defendant has been provided with full particulars of the Plaintiff’s injuries, symptoms, treatment, functional restrictions and long-term prognosis.” She added that “the Defendant is obligated to pay accident benefits to the Plaintiff in accordance with the SABS.

Issues:

[11] This motion raises the following issues:

1. Is the Plaintiff barred from making the amendments she seeks to her statement of claim by operation of s. 280?
2. Must the Defendant produce its redacted adjuster’s log notes, and if so, must it explain any redactions?

Issue No. 1: Is the Plaintiff barred from making the amendments she seeks to her statement of claim by operation of s. 280?

Law

[12] Under Rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a court is presumptively required to allow a party to amend their pleadings at any stage of action “unless prejudice would result that could not be compensated for by costs or an adjournment”.

[13] The proposed amendment must be tenable at law: Miller v State Farm Mutual Automobile Insurance Company, 2018 ONSC 7150 at para. 22.

[14] Section 138 of the Courts of Justice Act, R.S.O. 1990, c. C.43, states that “[a]s far as possible, multiplicity of legal proceedings shall be avoided”. In at least one provision of the Courts of Justice Act, s. 109(6), the term, proceeding, is used broadly enough to encompass proceedings before a board or tribunal. [1]

[15] Section 280 (1) – (3) reads as follows:

Resolution of disputes

280 (1) This section applies with respect to the resolution of disputes in respect of an insured person’s entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled.

Application to Tribunal

(2) The insured person or the insurer may apply to the Licence Appeal Tribunal to resolve a dispute described in subsection (1).

Limit on court proceedings

(3) No person may bring a proceeding in any court with respect to a dispute described in subsection (1), other than an appeal from a decision of the Licence Appeal Tribunal or an application for judicial review.

[16] However, the transitional provisions that applied to s. 280 under O.Reg. 664 permit a proceeding that was commenced but not completed before April 1, 2016 to continue. The transition provision reads as follows:

21.(1) A proceeding described in subsection (2) that was commenced but not completed before the transition date is continued after that date.

(2) The proceedings referred to in subsection (1) are the following:

1. A mediation under section 280 of the pre-transition date Act.
2. A proceeding in a court of competent jurisdiction brought in accordance with clause 281(1)(a) of the pre-transition date Act.
3. An arbitration under section 282 of the pre-transition date Act.
4. An appeal under section 283 of the pre-transition date Act.
5. An application for a variation or revocation of an order under subsection 284 of the pre-transition date Act.

[17] In Charway v TD General Insurance Co., 2017 ONSC 4593, Master Sugunasiri [2], as she then was, considered the issue of an amendment of a statement of claim issued before April 1, 2016. The requested amendment included claims for a declaration that the plaintiff had suffered catastrophic injuries and that she was entitled to punitive and aggravated damages arising out of the defendant insurer’s handling of her claim for accident benefits. Master Sugunasari granted the amendment requested, finding at para. 21 that:

the Fresh Claim is a restatement and redrafting of the Original Claim, but for the declaration of catastrophic impairment and punitive damages. It is, in other words, not the commencement of a new claim.

[18] Looking to the claim regarding catastrophic injuries, Master Sugunasiri wrote at para. 22:

[22] Despite its absence in the prayer for relief in the original Claim, I find that catastrophic impairment is a part of it. In paragraph 5 of the original Claim, the Plaintiff pleads "The Plaintiff states that she sustained a catastrophic impairment as a result of both MVA1 and MVA2". The Defendant pleads against it in its defence. Further, the original Claim seeks $1,000,000.00 in attendant care. Both counsel agreed that under the SABS regime, this amount could only be recovered if there is a finding of catastrophic impairment.

[19] Regarding the issue of punitive and aggravated damages, Master Sugunasiri wrote at para. 23:

[23] With respect to aggravated and punitive damages, the Plaintiff alleges that the Defendant breached it [sic] duty of care of utmost good faith when processing the Plaintiff's various accident benefit claims that form the subject matter of the litigation. In my view, this issue is inextricably tied to the accident benefits that are the subject matter of the original Claim. The requested damages are to compensate the Plaintiff for an alleged breach of a duty of good faith in resolving the SAB claims. The plea in the original Claim that payment has been refused is part and parcel of assessing good faith, which is part and parcel of the claim for punitive damages.

[20] In Lucas-Logan v Certas Direct Insurance Company, 2017 ONSC 828, Thomas J. refused to allow an amendment to a statement of claim issued before the April 1, 2016 amendment to the Act. The Plaintiff had initiated an action based on a rejected dental claim. She had other issues with her insurer, which she originally mediated. When the mediation failed, she applied to arbitrate those issues. However, she withdrew her request for arbitration. Instead, she attempted, after the April 1, 2016 legislative amendments, to amend her statement of claim to include those additional issues.

[21] Considering those facts, Thomas J. refused to grant the requested pleading amendments, writing at para. 19 and 20:

[19] To allow her to amend her original statement of claim to include the failed issues from the March 2016 mediation would effectively circumvent the effect of the amendment and the law as it existed after April 1, 2016.

[20] Upon the withdrawal of the request to arbitrate, Lucas-Logan's only option if she wished to continue her dispute was to apply to the Licence Appeal Tribunal.

[22] In Miller v State Farm Mutual Automobile Insurance Co., 2018 ONSC 7150, Rady J. arrived at a similar result. The original statement of claim included a pleading requesting punitive and exemplary damages but not a declaration of catastrophic impairment. Rady J. looked to whether the amendments proposed after April 1, 2016 were “implicit in the original proceeding”: para. 40. Speaking of Charway, she observed at para. 41 that “the language used in the original claim clearly contemplated the claims that were simply being more fully particularized in the proposed amendment.”

[23] At para. 17, Rady J. explained the stakes involved in a finding of catastrophic impairment, writing:

[17] Further, a determination of CAT impairment is not a SAB. The designation is simply a prerequisite to eligibility for attendant care or medical and rehabilitation benefits at an enhanced level, as well as to housekeeping benefits. So, for example, a CAT designation enables an insured to access medical and rehabilitation in excess of $50,000, which, as noted above, are the non-CAT limits.

[24] Considering both Charway and Lucas-Logan, Rady J. agreed with the decision in both cases, writing:

[40] I agree with both decisions referenced above. In the Lucas-Logan, the proposed amendments very clearly advanced claims that arose after the amendment and they were in no way implicit in the original pleading.

[41] In contrast, in Charway, the language used in the original claim clearly contemplated the claims that were simply being more fully particularized in the proposed amendment.

[25] Looking to the amendments before her, Rady J. found at para. 42 that: “read with a generous eye, I conclude that the proposed amendments are simply a particularization of claims advanced in the original claim. They are not new disputes.”

[26] Among the reasons that Justice Rady reached that conclusion were the following:

1. The original claims for SAB’s “is sufficiently broadly worded to include post-amendment claims. And para. 1 makes it clear that the claim includes but is not limited to those articulated.”
2. The OCF-19 Application for Determination of Catastrophic Impairment was completed and submitted before the amendment to the Act. Thus the insurer had notice of that claim. But its assessments and denial did not occur until after the Act was amended, factors within the insurer’s control. Because of the delay, the insured could no longer dispute the insurer’s decision through mediation as that avenue was foreclosed by the statutory amendment. This factor was described as “more significant” by Justice Rady.
3. The original claim states that the full particulars of the claims are within the insurer's knowledge, with further particulars promised before or at trial. Rady J. found that “[t]he implication is that claims until the time of trial are contemplated. Therefore, it is reasonable to conclude that this pleading is sufficiently broad to include post-amendment claims.”

[27] In Stegenga v Economical Mutual Insurance Co., 2019 ONSC 615, the Court of Appeal of Ontario wrote of the broad jurisdiction granted to the LAT under the Act. Writing for the court, Zarnett J.A. stated:

[47] The jurisdiction given to the LAT includes making determinations about the manner in which an insurer has administered a claim for SABs. Subsection 280(4) states that the LAT shall resolve disputes in accordance with the SABs Schedule. The SABs Schedule gives the LAT the power, for the purpose of making an award of benefits, to deem an expense to have been incurred if that expense was not incurred because an insurer unreasonably withheld or delayed payment of benefits in respect of the expense: s. 3(8). Determining whether a benefit was unreasonably withheld or delayed necessarily involves determining both what benefits were due and when, and whether the insurer's conduct that led to it not providing the benefit or providing it later than it should have was unreasonable.

[48] Similarly, s. 280(5) and (6) of the Act contemplate the LAT exercising power under other regulations. Subsection 280(6) allows the regulations to authorize the LAT to award amounts beyond those for which the SABs Schedule provides. The regulations in turn allow the LAT to make, in addition to an award of the benefits and interest to which the insured is entitled under the SABs Schedule, an award (known as a "special award") of up to 50 per cent of the benefits to which the insured is otherwise entitled, and interest at a higher rate, if it finds the insurer unreasonably withheld or delayed the payment of benefits: Statutory Accident Benefits Schedule – Accidents on or after September 1, 2010, O. Reg. 34/10, s. 10. The LAT's powers contemplate an enquiry into and determination of what and when benefits should have been paid, and into whether any delay or failure to pay was reasonable, that is, into the manner in which the insurer has dealt with the claim and performed its SABs-related obligations.

[28] Further, an allegation of bad faith does not take the claim outside the purview of s. 280(3) of the Act and the LAT: Stegenga, at para. 56.

[29] In considering these authorities, I find that the task before me is to determine whether the proposed amendments represent permissible further iterations of the claims already made in the original statement of claim, which are only further particularized in the proposed amendments, or prohibited new claims.

[30] Here, and unlike the pleadings in Charway and Miller, the amendments sought, findings of catastrophic impairment and bad faith are not referred to or even implicit in the original pleadings. In Charway, the underlying facts leading to the findings sought in the amendments had already been pleaded. There was actually a reference to catastrophic injuries in the original statement of claim. There was a pleading for other relief only available with a finding of catastrophic impairment. The statement of defence responded to those claims. In Miller, Rady J. found that the proposed amendments did not amount to new disputes. The original pleading was “sufficiently broadly worded to include post-amendment claims”. Further, there had been an application for catastrophic benefits whose resolution delay could be placed at the feet of the insurer, which had clear knowledge of the claim.

[31] In contradistinction, the original pleading here was a narrow one. It requested a declaration only with regard to the Financial Services Commission of Ontario’s Minor Injury Guideline, not catastrophic injuries. It made no reference to facts that would support a claim of punitive damages. Arguably the facts that would support that claim arose after April 1, 2016, and thus fall outside the scope of pleading amendments available to the Plaintiff.

[32] In saying this, I recognize the arguments of counsel for the plaintiff that a finding such as the one I have made above will limit the options available to his client. But that was a policy choice made by the Ontario Legislature seven years ago: Stegenga, at para. 6. Even applying the “generous eye” utilized by Rady J. in Miller, I must find that the proposed amendments seek to raise new claims rather the iterations of ones previously pleaded. Thus, I dismiss that aspect of this motion.

Issue No. 2: Must the Defendant produce its redacted adjuster’s log notes, and if so, must it explain any redactions?

[33] As stated above, counsel for the Defendant admitted to the undertaking to produce the redacted adjuster’s notes. No argument or evidence placed before me would justify an attempt to resile from that undertaking. Counsel accepted that in the circumstances he and his client are bound by his undertaking. Further, those notes are relevant to the ongoing claim to income replacement benefits. Accordingly, I grant that relief.

[34] Considering the provisions of Rule 1.04, it makes sense to require the Defendant to explain any redactions at the time of the production, rather than await a discovery to do so. Accordingly, I grant that relief as well.

Costs

[35] As success is divided, I order no costs.

“Marvin Kurz J.” Electronic signature of Justice Marvin Kurz Date: July 24, 2023

Footnotes

[1] Regarding a notice of constitutional questions [2] Now Justice Sugunasiri of this court