ACCIDENT BENEFITS NEWSLETTER - MARCH 2006

Catherine Zingg

Lee (by her guardian of property Wai Ching Lee) and State Farm Mutual Automobile Insurance Company, A03-000181, February 3, 2006 - On August 21, 2000 the applicant was a passenger in a vehicle driven by her husband. At the arbitration hearing, Mr. Lee testified that he was travelling at approximately 20-30 km an hour when he struck the car in front of him. His wife was taken to the hospital by ambulance and was discharged that day. The dispute between the parties centred on the issue of causation. It was argued on behalf of Mrs. Lee that she suffered a catastrophic impairment as a result of the accident and was entitled to post 104 week attendant care, income replacement benefits and housekeeping benefits. State Farm took the position that the motor vehicle accident did not cause or materially contribute to the applicant’s condition.

Arbitrator Ashby found the family and friends of Mrs. Lee to be credible witnesses. The arbitrator preferred and accepted the opinions of Mrs. Lee’s treating doctors, Dr. Yip (family physician), Dr. Shulman (pain management) and Dr. Wallani (treating psychiatrist since August 22, 2001) and the assessment of Dr. van Reekum (qualified as an expert in psychiatry and neuropsychiatry) to that of Dr. Hershberg, who was also qualified as an expert in psychiatry and neuropsychiatry). The arbitrator found that Dr. Hershberg’s opinion that Mrs. Lee’s mental disorder was either unrelated or minimally related to the motor vehicle accident, was based on his belief that prior to the accident Mrs. Lee exhibited passive dependent personality traits, suffered from a pain disorder, substance abuse, or dependence and that the development of her disorder was temporally unrelated to the accident (p.10). Based on the evidence before her, the arbitrator rejected Dr. Hershberg’s opinion, finding that Mrs. Lee had a functioning marriage and there were no indicia of clinically significant psychological dysfunction prior to the accident (p.13).

After considering the evidence of Mrs. Lee’s husband and daughter, her treating physicians, the medical assessments and employment file, the arbitrator found that there was an identifiable chronological progression from the accident on August 21, 2000 to the regressed state described by Dr. Tafler. Mrs. Lee was awarded an attendant care benefit from June 15, 2002 to August 21, 2002 at the rate of $3,000.00 per month. A Form 1 had been submitted was signed by Mr. Lee which did not meet the requirements of s.39(1)(b) of the SABS, a defect which the arbitrator found could not be cured by a Certificate for Attendant Care signed by a designated health professional. State Farm had waived the strict construction of the provisions of s.39 and had paid Mrs. Lee’s attendant care claim at the non-catastrophic monthly rate of $3,000.00 to June 15, 2002. The arbitrator found that between August 22, 2002, the date upon which the post 104 week period began and April 1, 2003, the date upon which Mrs. Lee was deemed to have been catastrophically impaired, attendant care was required but not payable as a consequence of a lacuna in the legislation (p.27). Mrs. Lee was awarded attendant care at the monthly rate of $5,226.06 commencing April 1, 2003 a rate based on the findings of an attendant care DAC. Income replacement benefits at the weekly rate of $400.00 were awarded from September 1, 2001 to October 6, 2001 and post 104 income replacement benefits pursuant to s.5(2)(b) were awarded in the amount of $290.20 a week. Housekeeping in the amount of $100.00 was awarded from April 1, 2003 and ongoing pursuant to s.22 of the Schedule.

Kavanaugh v. ING Insurance Company of Canada, Calise & Associates Legal Services Inc. and Marcello Calise, Court File No. 46,537/04, December 9, 2005, O.S.C., Walters J. - The defendant ING brought a motion for summary judgement dismissing all claims against it, submitting that there was no genuine basis for trial. The plaintiff took no position on the motion. The defendant Calise & Associates Legal Services Inc. and Mr. Calise opposed the motion and asked that it be dismissed with costs. The Court found in favour of ING.

Ms. Kavanaugh had been injured in a motor vehicle accident on September 5, 2002. On September 17, 2002 Mr. Calise advised ING that he had been retained with respect to the claim for accident benefits and specifically directed ING not to contact the plaintiff under any circumstances and correspond only with him (p.2). On January 10, 2003, the plaintiff executed a full and final release and initialled each page. These documents were sent to ING on January 13, 2002. The plaintiff did not rescind the offer within the two day cooling off period and ING sent a cheque in the amount of $20,025.96 in accordance with the terms of the settlement (p3).

The defendant Calise alleged that ING breached its contractual duty of good faith with the plaintiff. The Court found that any duty of good faith was owed to the plaintiff, not to the defendant Calise and the defendant’s standing to assert or raise this issue was questionable (p.4). It was found that the duty of good faith is a contractual duty between the insurer and its insured. Calise further argued that the claim was settled at a significant discount, but the Court found no evidence before it to support this claim. It was further argued that the plaintiff’s medical condition had not stabilized, but the Court observed that it was the defendant Calise who first approached ING with respect to a full and final settlement. It was also found that an insurer is not required to resist settlement until such time as further and better information is available pursuant to the reasons in Opoku v. Pal (2000), 49, O.R. (3d) 97, O.C.A. In response to Calise’s argument that the insurer’s own medical assessment indicated that the plaintiff was significantly disabled three weeks before the claim was settled, the Court noted that the defendant shared all medical information they had with the plaintiff. It was further argued that ING took no steps to obtain the clinical notes and records of the plaintiff’s treating physician. The Court found it of interest that Calise had not yet obtained those records himself (p.5).

Varatharajah and TTC Insurance Company Limited, A05-001257, February 2, 2006 - Arbitrator Murray ordered the insured to produce to the TTC a copy of the basis for his application for welfare, as well as the medical documents and Ontario Drug Benefits information contained in his welfare file from one year prior to the accident and ongoing. He was also ordered to produce employment records from WOW Thermo -Printing from one year prior to the accident and ongoing which described his job duties and hours of employment. He was not required to produce his 2004 and 2005 income tax returns. The TTC submitted that the documents were relevant to Mr. Varatharajah’s credibility as it alleged that he had worked at WOW Thermo Printing while collecting welfare. The arbitrator, however, found that the test for production of a document is relevance, subject to the doctrine of privilege. It was found that credibility alone is not a sufficient basis upon which to order the production of documents. Given that the welfare application could have information with respect to the insured’s disability, if any, and the Ontario Drug Benefits information would show medications that Mr. Varatharajah was taking , it was found that these documents were relevant to the claim for medical benefits. The employment records were found to be relevant with respect to Mr. Varatharajah’s ability to perform housekeeping. The income tax returns were denied as they would only establish whether or not he earned income from employment and would not provide any information with respect to his physical capabilities.

Mohamed and Liberty International of Canada, A04-0026760, February 16, 2006 - The parties request for a consent dismissal order was rejected as the materials were deficient. Arbitrator Feldman noted that the consent did not confirm that no party to the proceeding was under a disability, no signed settlement disclosure was filed and the parties did not file a written agreement explicitly stating that the consent order was final and would not be subject to appeal, variations/revocation or judicial review. In addition, the parties failed to confirm that they had complied with the Settlement Regulation or to explain why the Settlement Regulation did not apply in this particular case. The arbitrator found that the larger issue was that the applicant was a minor and the parties had not complied with Rule 10.7 of the Code (i.e the settlement had not been approved by a judge in accordance with Rule 7.08 of the Rules of Civil Procedure). Accordingly, the motion brought by Liberty’s counsel for an order dismissing the action was denied without prejudice to the right of the parties to bring a new motion for a dismissal order once they had complied with the relevant provisions of the Code (including Rule 10.7).

State Farm Insurance Company v. Dominion of Canada General Insurance Company, December 22, 2005, Docket No. C43653, O.C.A. - The issue to be determined on appeal was whether the limitation period for arbitrating a dispute between insurers over indemnification under s.275 of the Insurance Act, R.S.O. 1990, c.I.-8 commences with the first benefit paid for which indemnification can be claimed, or whether a new limitation period arises with each subsequent payment. The Court allowed the appeal from the decision of Judge Backhouse and reversed the finding of Arbitrator Jones that the indemnification claim before him was time barred. In making this decision, the Court referred to s.275 and stated:

The section also leaves a clear implication that a cause of action arises with every payment for which indemnification can be claimed. It is an entitlement that arises in relation to each benefit paid, not just the first one. Hence, the conclusion we have reached is supported by the clear language of the statute.

Moreover, there is a persuasive policy reason favouring that conclusion. If a limitation period runs only from the first payment, then any dispute between insurers about the quantum of any payment for which indemnification is provided that is made more than six years later, could not be resolved by arbitration. This is contrary to the intent of s.275(4) which contemplates that any indemnification dispute under s.275 between the involved insurers shall be resolved though arbitration (p.2).

Allstate Insurance Company of Canada and Gurney, P05-00005, January 27, 2006 - Director’s Delegate Evans allowed Allstate’s appeal of an arbitration order finding that Mr. Gurney’s supplementary medical and rehabilitation benefits were not time limited. In making her decision, the arbitrator had treated brochures as interpretive aids, using them to distinguish the appeal decision of the Director’s Delegate in L.F. and State Farm Mutual Automobile Insurance Company, P02-00026, June 3, 2004 which reversed the decision of the arbitrator and found that the 104 week maximum for non catastrophic attendant care benefits applied. In L.F., the arbitrator was faced with a situation where the application of s.70(3) to attendant care benefits was problematic because it did not provide any increase in the maximum of $72,000.00 for attendant care benefits to compensate for the changes imposed by the SABS /96. Director’s Delegate Evans’s found that the case did not assist Mr. Gurney, stating:

Since the durational limit for supplementary medical and rehabilitation benefits is ten years, not 104 weeks, the comparison with attendant care benefits falls. The arbitrator’s error with respect to the durational limit - an error that is fundamental to the decision - completely undermines her point that the increased amount is of no meaningful effect. There are many situations where the additional funds would have a meaningful effect for an insured over the course of 10 years.

Furthermore, the arbitrator’s decision in L.F. was overturned on appeal, and pursuant to Vo and Maplex General Insurance Company and Insurance Bureau of Canada, appeals are binding on arbitrators.

...

It is only when genuine ambiguity arises between two or more plausible readings, each equally in accordance with the intentions of the statute, that the courts need to resort to external interpretive aids (including other principles of interpretation). Accordingly, there was no necessity to resort to the brochures as external interpretive aids, and the arbitrator erred in doing so (p.5).

Thus, Mr. Gurney was not entitled to supplementary medical rehabilitation benefits beyond ten years after the accident.